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
                                 
                                       OR
[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                               
                     For the fiscal year ended March 31,1997
                                       OR
[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934
                               
For the transition period from  . . . . . . . . . to . . . . . . . . . .

Commission file number. . . . . 1-12874 . . . . . . . . . . . .

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

                                 Not Applicable
                 (Translation of Registrant's name into English)

                               Republic of Liberia
                 (Jurisdiction of incorporation or organization)

                 Tradewinds Building, Fifth Floor, Bay Street,
                     P.O. Box SS-6293, Nassau, 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          Name of each exchange on which registered
        -------------------          -----------------------------------------
 Common Stock, no par value per share      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.
               9 5/8% First Preferred Ship Mortgage Notes due 2003
               8.32% First Preferred Ship Mortgage Notes due 2008
                                (Title of Class)

         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.

         28,326,996 shares of Common Stock, no par value

         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.

         Yes  X   No

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

         Item 17       Item 18  X


<PAGE>
                                                     TEEKAY SHIPPING CORPORATION
                                                    INDEX TO REPORT ON FORM 20-F
<TABLE>
<CAPTION>
PART I.                                                                                                                       Page
<S>                                                                                                                           <C>

         Item 1.    Description of Business.....................................................................................1

         Item 2.    Description of Property.....................................................................................7

         Item 3.    Legal Proceedings...........................................................................................9

         Item 4.    Control of Registrant......................................................................................10

         Item 5.    Nature of Trading Market...................................................................................10

         Item 6.    Exchange Controls and Other Limitations Affecting Security Holders.........................................11

         Item 7.    Taxation...................................................................................................11

         Item 8.    Selected Financial Data....................................................................................12

         Item 9.    Management's Discussion and Analysis of Financial Condition and Results of Operations......................14

         Item 10.   Directors and Officers of the Registrant...................................................................17

         Item 11.   Compensation of Directors and Officers.....................................................................19

         Item 12.   Options to Purchase Securities From Registrant or Subsidiaries.............................................19

         Item 13.   Interest of Management in Certain Transactions.............................................................19

PART II.

         Item 14.   Description of Securities to be Registered.....................................................Not applicable

PART III.

         Item 15.   Defaults Upon Senior Securities................................................................Not applicable

         Item 16.   Changes in Securities and Changes in Security for Registered Securities........................Not applicable

PART IV.

         Item 17.   Financial Statements...........................................................................Not applicable

         Item 18.   Financial Statements.......................................................................................20

         Item 19.   Financial Statements and Exhibits..........................................................................21

Signatures.....................................................................................................................24
</TABLE>

<PAGE>


                                     PART I
Item 1.  DESCRIPTION OF BUSINESS

The Company

Teekay Shipping  Corporation  ("Teekay"),  together with its  subsidiaries  (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. The Company's modern fleet provides such transportation services to
major oil companies,  major oil traders and government agencies,  principally in
the region  spanning from the Red Sea to the U.S. West Coast (the  "Indo-Pacific
Basin").

The Company pursues an intensively  customer- and  operations-oriented  business
strategy,  emphasizing  market  concentration  and  service  quality  to achieve
superior  operating  results.   The  Company  believes  that  it  has  four  key
competitive advantages:  (i) geographic market concentration in the Indo-Pacific
Basin, which facilitates comprehensive coverage of charterer requirements,  (ii)
a uniform-size  fleet of Aframax (75,000 - 115,000 dwt) tankers  containing many
sister ships, which affords scheduling  flexibility and permits greater capacity
utilization,  (iii) a modern, well-maintained fleet that operates with high fuel
efficiency  and low  maintenance  costs and  affords  greater  acceptance  among
charterers with high quality standards,  and (iv) a full-service ship management
and chartering  capability which affords a focused marketing effort,  tight cost
controls,  and effective  operational and safety monitoring.  As a result of its
business strategy,  the Company has achieved  consistently higher operating cash
flow per ship per day than other public bulk  shipping  companies.  Although the
Company's  business  strategy has been, and in the  foreseeable  future will be,
primarily focused on providing  services via Aframax tankers in the Indo-Pacific
Basin,  management  intends to closely  monitor the  evolution  of the  shipping
industry and to adapt its strategy  according to changing market  dynamics.  The
Company intends to consider strategic  opportunities that may arise from time to
time, including joint ventures and business acquisitions.

The  Company's  fleet  consists  of 42  tankers:  39  Aframax  oil  tankers  and
oil/bulk/ore  carriers  ("OBOs"),  two smaller oil  tankers,  and one Very Large
Crude Carrier ("VLCC"). An additional newbuilding  double-hull Aframax tanker is
scheduled  for  delivery  on June 17,  1997.  The  Company's  vessels are all of
Liberian or Bahamian registry. The Company's fleet has a total cargo capacity of
approximately 4.2 million tonnes and its Aframax vessels represent approximately
7.3%  of  the  total  tonnage  of the  world  Aframax  fleet.  While  its  fleet
modernization program is effectively  complete,  the Company intends to continue
selective purchases of modern,  predominantly second-hand,  high-quality tankers
should such vessels become available.

The  Company's  fleet is one of the most modern  fleets in the world,  having an
average age of approximately 8.2 years, compared to an average age for the world
oil tanker fleet of  approximately  13.7 years and for the world Aframax  tanker
fleet of  approximately  12.5 years.  A substantial  portion of the world tanker
fleet  will  reach  20  years  of  age  in  the  next  three  years,   including
approximately  31% of  Aframax  tankers.  In  addition,  the  Company  has  been
recognized by customers and rating services for safety,  quality and service. In
each of the last seven years,  Tanker Advisory Center, Inc. (New York) has rated
the Company's  fleet a "meritorious  tanker fleet," a designation  which, in the
latest  publication  (March  1997),  placed  it in the  top  quarter  of  fleets
containing 10 or more tankers.  Given the age profile of the world tanker fleet,
the  increasing  emphasis  among  customers  on quality as a result of stringent
environmental  regulations,  and  heightened  concerns  about  liability for oil
pollution,  the  Company  believes  that its modern  fleet and its  emphasis  on
quality and safety provide it with a favorable competitive profile.

Through  wholly-owned  subsidiaries  located  worldwide,  the  Company  provides
substantially  all of  the  operations,  ship  maintenance,  crewing,  technical
support,  shipyard  supervision,  insurance  and financial  management  services
necessary to support its fleet.  While certain ship  management  and  commercial
operations  services  are  contracted  out, the Company  believes  that it could
obtain a replacement provider of these services, or could provide these services
internally, without any negative impact on its operations.



                                        1

<PAGE>



The Company has a worldwide chartering staff located in Vancouver, Tokyo, London
and Singapore.  Each office serves the Company's  clients  headquartered in such
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.
Approximately  78% of the Company's  net voyage  revenues were derived from spot
voyages during fiscal 1997.

The Teekay organization was founded in 1973 by J. Torben Karlshoej to manage and
operate oil tankers.  Mr.  Karlshoej  died in October 1992 and was  succeeded as
Chief  Executive  Officer by Captain  James Hood,  who has been with the Company
since 1977. Prior to 1985, the Company  chartered-in most of the tonnage that it
subsequently  provided to its transportation  customers.  As the availability of
acceptable  chartered-in tonnage declined,  management began an expansion of its
owned fleet.  Since 1985, the Company has significantly  expanded and modernized
its owned fleet by taking delivery of 38 new vessels and acquiring 28 vessels in
the  second-hand  market,  as well as disposing of 13 older  (mid-1970's  built)
tankers over the past four years.

Teekay is  incorporated  under the laws of the Republic of Liberia and maintains
its principal executive  headquarters at the Tradewinds  Building,  Fifth Floor,
Bay Street, P.O. Box SS-6293, Nassau, Commonwealth of The Bahamas. Its telephone
number at such address is (242)  322-8020.  The  Company's  principal  operating
offices are located at 200 Burrard Street, Vancouver,  British Columbia, Canada,
V6C 3L6. Its telephone number at such address is (604) 683-3529.

Competition

International seaborne oil and petroleum products tanker transportation services
are provided by two main types of operators:  major oil company  captive  fleets
(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 use such
vessels not only to transport their own oil, but also to transport oil for third
party charterers in direct  competition with independent owners and operators in
the tanker charter market. Competition for charters is intense and is based upon
price,  location,  size, age,  condition and acceptability of the vessel and its
manager to charterers.  Competition  in the Aframax  segment is also affected by
the  availability  of other  size  vessels to compete in the trades in which the
Company  engages.  Suezmax  (115,000  to  200,000  dwt) size  vessels as well as
Panamax  (50,000 to 75,000  dwt) size  vessels  can compete for many of the same
charters for which the Company  competes.  Ultra Large Crude Carriers  (320,000+
dwt) ("ULCCs"),  and VLCCs (200,000 to 320,000 dwt) 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 heighten
the already intense competition.

The Company  competes  principally  with other Aframax owners through the global
tanker charter market, comprised of tanker broker companies which 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.  Management  estimates  that  the  Company
transacts  approximately  one-third of its spot voyages from market cargoes, the
remainder  being either private  cargoes or direct cargoes  transacted  directly
with charterers outside this market.

Other large operators of Aframax tonnage include Shell  International  Marine, a
subsidiary of Royal Dutch/Shell  Petroleum  Corporation,  with  approximately 26
vessels  trading  globally  (eight  of  which  are on  time-charter  from  Sanko
Steamship Co. Ltd., an independent  Japanese shipping company, and nine of which
are on  time-charter  from various other  companies),  Neptune Orient Lines Ltd.
(owned partially by the Singapore  government),  with  approximately 13 vessels,
and Bona  Shipholding  Limited,  which controls  approximately  23 vessels.  The
Company believes that it has competitive advantages in the Aframax tanker market
as a result of the age,  quality,  type and  dimensions  of its  vessels and its
large market share in the Indo-Pacific  Basin.  Some competitors of the Company,
however,  may have greater  financial  strength and capital  resources  than the
Company.




                                        2

<PAGE>



Regulation

The  business  of the Company and the  operation  of its vessels are  materially
affected by  government  regulation  in the form of  international  conventions,
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 the impact thereof on the resale price or useful life of
its   vessels.   The   Company  is   required   by  various   governmental   and
quasi-governmental agencies to obtain certain 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 upon a number of factors,  the
Company  believes  that it has  been  and will be able 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 impose 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  which  set  forth  new  and  upgraded
requirements for pollution prevention for tankers. These regulations, which went
into effect on July 6, 1995 in most  jurisdictions in which the Company's tanker
fleet  operates,  provide that (i) 25 year-old  tankers  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 bottom
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) 30 year-old  tankers  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.

Under the current regulations,  the vessels of the Company's existing fleet will
be able to operate for  substantially  all of their  respective  economic  lives
before  being  required  to have  double-hulls.  Although  six of the  Company's
vessels are 15 years or older,  the oldest of such vessels are only 17 years old
and,  therefore,  the  requirements  currently  in  effect  regarding  25 and 30
year-old  tankers  will not  affect  the  Company's  fleet  in the near  future.
However,  compliance  with  the new  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
the  Company's  operations  due to  uncertainty  of  interpretation  of the  IMO
regulations.

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 the two hundred  nautical mile exclusive
economic zone of the United States.

Under OPA 90, vessel owners, operators and bareboat (or "demise") charterers are
"potential  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 oil spill  containment  and clean-up  costs
and other damages  arising from oil spills  pertaining to 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 potential  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 were  proximately  caused by
violation of applicable United States federal safety,  construction or operating
regulations  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

                                        3

<PAGE>



removal  activities.  The Company  currently insures and plans to insure each of
its vessels with pollution  liability insurance in the amount of $700 million. A
catastrophic spill could exceed the insurance coverage available, in which event
there could be a material adverse effect on the Company.

Under OPA 90, with  certain  limited  exceptions,  all newly built or  converted
tankers operating in United States waters must be built with  double-hulls,  and
existing  vessels which do not comply with the double-hull  requirement  must be
phased out over a 25-year  period  (1990-2015)  based on size,  age and place of
discharge,  unless retrofitted with double-hulls.  Notwithstanding  the phase-in
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
off-shore.

OPA 90  expands  the  pre-existing  financial  responsibility  requirements  for
vessels  operating in United States waters and requires  owners and operators of
vessels to establish and maintain with the United States Coast Guard (the "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 OPA 90. In December 1994, the Coast Guard enacted  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 more than one
tanker will be required only to demonstrate evidence of financial responsibility
for the tanker having the greatest maximum liability under OPA 90.

The   Coast   Guard's   regulations   concerning   certificates   of   financial
responsibility provide, in accordance with OPA 90, that claimants may bring suit
directly  against  an  insurer  or  guarantor  that  furnishes  certificates  of
financial  responsibility;  and, in the event that such  insurer or guarantor is
sued directly,  it is prohibited from asserting any 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  insurance
organizations, which typically provide certificates of financial responsibility,
including the major  protection  and indemnity  organizations  which the Company
would normally  expect to provide a certificate of financial  responsibility  on
its behalf,  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  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  evidence of sufficient
self-insurance.

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.
Also,  under OPA 90 the  liability  of  responsible  parties,  United  States or
foreign, with regard to oil pollution damage in the United States is not subject
to any international convention.

Owners or operators of tankers  operating in United  States waters were required
to file vessel  response  plans with the Coast  Guard,  and their  tankers  were
required to be operating in compliance  with their Coast Guard approved plans by
August 18, 1993.  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 filed vessel  response  plans with the Coast Guard for the
tankers  owned by the Company and has  received  approval for all vessels in its
fleet to operate in United States waters.

Outside the United States, many countries have ratified and follow the liability
scheme  set out in the  International  Convention  on  Civil  Liability  for Oil
Pollution Damage 1969 ("CLC"). Under the CLC, a vessel's registered owner is

                                        4

<PAGE>



strictly  liable for  pollution  damage  caused on the  territorial  waters of a
contracting  state by a discharge of persistent oil, subject to certain complete
defenses.  Liability  currently  is  limited  to  approximately  $188 per  gross
registered  ton,  with the exact  amount tied to a unit of account  which varies
according to a basket of currencies.  The right to limit  liability is forfeited
only  where the spill is caused by the  owner's  actual  fault or the fault of a
third party with whom the owner has a direct contractual  relationship.  Vessels
trading to contracting  states must establish 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.

Environmental   Regulation--Other   Environmental   Initiatives.   The  European
Community  ("EC") is considering  legislation  that will affect the operation of
oil tankers and the liability of owners for oil  pollution.  It is impossible to
predict  what  legislation,  if any, may be  promulgated  by the EC or any other
country or authority.

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. Any such event
may result in loss of revenues or increased costs.

The Company carries  insurance 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.  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. In
particular,  more stringent environmental regulations have resulted 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

The  operations  of the Company are  primarily  conducted  outside of the United
States and, therefore,  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
fiscal 1997,  the Company  derived 97% of its total revenues from its operations
in the  Indo-Pacific  Basin. In the past,  political  conflicts in such regions,
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
such regions have also been subject to, in limited instances,  acts of terrorism
and piracy.  Future  hostilities  or other  political  instability in the region
could affect the Company's  trade  patterns and  adversely  affect the Company's
operations and performance.

Crewing and Staff

The Company employs approximately 270 captains, chief engineers,  chief officers
and  first  engineers,  approximately  1,200  additional  personnel  at sea  and
approximately 126 personnel ashore.

The Company places great emphasis on attracting,  through its recruiting offices
in Manila,  Glasgow,  and Mumbai  qualified  crew members for  employment on the
Company's  tankers.  Recruiting  has become an  increasingly  difficult task for
operators in the tanker industry.  The Company pays competitive  salaries to its
personnel  and  tries to  promote,  when  possible,  from  within  their  ranks.
Management  believes  that the well  maintained  quarters  and  equipment on the
Company's  vessels help to attract and retain motivated and qualified seamen and
officers.  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), which covers  substantially
all of the  Company's  junior  officers and seamen.  The  Collective  Bargaining
Agreement  resulted  in a small  increase in wages and  benefits  for the vessel
crews.


                                        5

<PAGE>



The Company has a cadet training  program,  the purpose of which is to develop a
cadre of future senior  officers for the Company,  with two  specially  equipped
vessels that are staffed with instructors and trainees. In addition to the basic
training that all seamen are required to undergo to achieve  certification,  the
Company provides additional training of as much as one month for all newly hired
seamen and junior  officers at training  facilities in the  Philippines.  Safety
procedures are a critical element of this training and continue to be emphasized
through the Company's  onboard training program.  Management  believes that high
quality manning and training  policies will play an increasingly  important role
in distinguishing  larger  independent  tanker companies which have in-house (or
affiliate)  capabilities,  from smaller companies that must rely on outside ship
managers and crewing agents.

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 Aframax trade.  The Company had one charterer
(an  international  oil company)  during fiscal 1997 from which voyage  revenues
exceeded 10% of the Company's  consolidated voyage revenues. The voyage revenues
from such  charterer  amounted to  $48,686,000.  No other  single  customer  has
accounted for more than 10% of the Company's  consolidated  voyage  revenues and
net income in any of the last three fiscal years.

Taxation of the Company

The  legal  jurisdictions  of  the  countries  in  which  the  Company  and  its
subsidiaries are  incorporated do not impose income taxes upon  shipping-related
activities.


                                        6

<PAGE>



Item 2.  DESCRIPTION OF PROPERTY

The Company's Fleet

The  following  fleet list  provides  information  with respect to the Company's
vessels as at May 31, 1997:
<TABLE>
<CAPTION>

                                                     Year                                            %
                                        Series/Yard   Built   Type     Dwt-MT        Flag          Ownership
Aframax Tankers (40)
<S>                                     <C>          <C>       <C>     <C>          <C>             <C>

HAMANE SPIRIT*......................     Onomichi    1997       DH      98,600       Bahamain       100%
POUL SPIRIT.........................     Onomichi    1995       DH      98,600       Liberian       100%
TORBEN SPIRIT.......................     Onomichi    1994       DH      98,500       Bahamian       100%
SAMAR SPIRIT........................     Onomichi    1992       DH      98,640       Bahamian       100%
LEYTE SPIRIT........................     Onomichi    1992       DH      98,744       Bahamian       100%
LUZON SPIRIT........................     Onomichi    1992       DH      98,629       Bahamian       100%
MAYON SPIRIT........................     Onomichi    1992       DH      98,507       Bahamian       100%
TEEKAY SPIRIT.............. ........     Onomichi    1991       SH     100,336       Bahamian       100%
PALMSTAR LOTUS......................     Onomichi    1991       SH     100,314       Bahamian       100%
PALMSTAR THISTLE....................     Onomichi    1991       SH     100,289       Bahamian       100%
PALMSTAR ROSE.......................     Onomichi    1990       SH     100,202       Bahamian       100%
PALMSTAR POPPY......................     Onomichi    1990       SH     100,031       Bahamian       100%
ONOZO SPIRIT........................     Onomichi    1990       SH     100,020       Bahamian       100%
PALMSTAR CHERRY.....................     Onomichi    1990       SH     100,024       Bahamian       100%
PALMSTAR ORCHID.....................     Onomichi    1989       SH     100,047       Bahamian       100%
VICTORIA SPIRIT (OBO)...............     Hyundai     1993       DH     103,153       Bahamian       100%
VANCOUVER SPIRIT (OBO)..............     Hyundai     1992       DH     103,203       Bahamian       100%
SHILLA SPIRIT.......................     Hyundai     1990       SH     106,677       Liberian       100%
ULSAN SPIRIT........................     Hyundai     1990       SH     106,679       Liberian       100%
NAMSAN SPIRIT.......................     Hyundai     1988       SH     106,670       Liberian       100%
PACIFIC SPIRIT......................     Hyundai     1988       SH     106,665       Liberian       100%
PIONEER SPIRIT......................     Hyundai     1988       SH     106,671       Liberian       100%
FRONTIER SPIRIT.....................     Hyundai     1988       SH     106,668       Liberian       100%
SENANG SPIRIT.......................     Imabari     1994       DH      95,649       Bahamian       100%
SEBAROK SPIRIT......................     Imabari     1993       DH      95,700       Liberian       100%
SERAYA SPIRIT.......................     Imabari     1992       DS      97,119       Bahamian       100%
SENTOSA SPIRIT......................     Imabari     1989       DS      97,163       Liberian       100%
ALLIANCE SPIRIT.....................     Imabari     1989       DS      97,088       Bahamian       100%
SEMAKAU SPIRIT......................     Imabari     1988       DS      97,172       Liberian       100%
SUDONG SPIRIT.......................     Imabari     1987       DS      98,215       Liberian       100%
SINGAPORE SPIRIT....................     Imabari     1987       DS      96,960       Liberian       100%
KYUSHU SPIRIT.......................     Mitsubishi  1991       DS      95,562       Bahamian       100%
KOYAGI SPIRIT.......................     Mitsubishi  1989       SH      95,987       Liberian       100%
OPPAMA SPIRIT.......................     Sumitomo    1980       SH      90,333       Bahamian       100%
MAGELLAN SPIRIT.....................     Hitachi     1985       DS      95,000       Liberian       100%
PALM MONARCH........................     Mitsui      1981       SH      89,922       Liberian       100%
SEABRIDGE**.........................     Namura      1996       DH     105,154       Liberian         0%
MENDANA SPIRIT......................     Namura      1980       SH      81,657       Bahamian       100%
HONSHU SPIRIT.......................     Tsuneishi   1979       SH      88,250       Bahamian       100%
TASMAN SPIRIT***....................     Onomichi    1979       SH      87,588       Liberian       100%

Other Tankers (3)

MUSASHI SPIRIT......................     Sasebo      1993       SH     280,654       Bahamian       100%
SCOTLAND............................     Mitsubishi  1982       DS      40,794       Bahamian       100%
CHIBA SPIRIT........................     Mitsui      1980       DB      60,874       Bahamian       100%
                                                                     ---------
                                                                     4,324,710
                                                                     =========
</TABLE>
------------------------------------

DH  Double-hull  tanker  
DB  Double-bottom  tanker  
DS  Double-sided  tanker  
SH  Single-hull  tanker  OBO  Oil/Bulk/Ore  carrier 
*   Newbuilding presently under construction. Scheduled for delivery on June 17,
    1997.
**  Vessel time-chartered-in  for one year  commencing  April 1997.  
*** Pre-MARPOL  vessel,i.e., non-segregated ballast tanks.

                                        7

<PAGE>





Many  of  the  Company's   vessels  have  been  designed  and   constructed   as
substantially  identical sister ships. Such 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.

During  fiscal  1997,  the Company  acquired a 1988-built  double-sided  Aframax
tanker,  the  SEMAKAU  SPIRIT,  and a  1987-built  double-sided  Aframax  tanker
previously  on  time-charter,  renaming it SINGAPORE  SPIRIT.  In addition,  the
Company  entered into an agreement in April 1997 for a one-year  time-charter of
the SEABRIDGE, a modern, secondhand Aframax tanker, and expects to take delivery
of a newbuilding  double-hull Aframax on order from a Japanese shipyard, on June
17, 1997.

The AMERSHAM, a 1981-built Aframax tanker owned by the Company's 50%-owned joint
venture,  Viking Consolidated  Shipping Corp. ("VCSC"),  was sold in March 1997.
VCSC is 50%-directly-owned by Teekay and 50%- owned by a company associated with
Mr. Thomas Kuo-Yuen Hsu, a director of Teekay.

See note 5 to the Consolidated Financial Statements for information with respect
to major encumbrances against vessels of the Company.

Classification and Inspection

All of the  Company's  vessels have been  certified as being "in class" by their
respective classification  societies:  Nippon Kaiji Kyokai, Lloyds Register, 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 may also be required, as part of
the  Intermediate  Survey  process,  to be dry-docked  every 24 to 30 months for
inspection  of the  underwater  parts of the  vessel  and for  necessary  repair
related to such  inspection.  Many of the Company's  vessels have qualified with
their respective  classification  societies for drydocking only 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 such 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 the major oil companies,  regularly inspect the Company's vessels as a
precondition  to chartering  voyages on such vessels.  In each of the last seven
years,  Tanker Advisory Center,  Inc. (New York) has rated the Company's fleet a
"meritorious  tanker  fleet," a  designation  which,  in the latest  publication
(March  1997),  placed it in the top  quarter  of fleets  containing  10 or more
tankers.  Management believes that the Company's  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.

The  Company  has   obtained   through  Det  Norske   Veritas,   the   Norwegian
classification  society, a certificate of compliance with the ISO 9000 standards
of total quality management. ISO 9000 is a series of international standards for
quality systems, which includes ISO 9002, the standard most commonly used in the
shipping  industry.  The Company has also  retained  Det Norske  Veritas for the
audit and  implementation  of the  International  Safety  Management (ISM) code,
which are required by the IMO to be completed  before July 1, 1998. To date, the
Company has completed the audit and implementation of the ISM code for 17 of its
vessels  and it  expects  to  complete  the  audit  and  implementation  for its
remaining vessels by December 31, 1997.

Company employees perform much of the necessary  ordinary course maintenance and
regularly  inspect  all of the  Company's  vessels,  both at sea and  while  the
vessels  are in port.  Vessels  are  inspected  two to four 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, maintenance, safety and crew welfare.


                                        8

<PAGE>



Item 3.  LEGAL PROCEEDINGS

General

The Company is party,  as plaintiff or  defendant,  to a variety of lawsuits for
damages arising  principally from personal injury and property  casualty claims.
Such  claims  are  covered  by  insurance,  subject  to  customary  deductibles.
Management  believes that such claims will not have a material adverse effect on
the financial position, results of operations or liquidity of the Company.

Nagasaki Spirit

On September 20, 1992,  the Nagasaki  Spirit,  a vessel capital leased by one of
the wholly owned shipowning  subsidiaries of Teekay, was struck by another ship,
the Ocean Blessing,  in the Strait of Malacca,  between  Malaysia and Indonesia.
The  Nagasaki  Spirit  was towed to  Singapore  where  after  inspection  it was
declared a  constructive  total loss.  The Company  received  approximately  $53
million in insurance proceeds from the hull underwriters of the Nagasaki Spirit,
a portion of which was used to repay  indebtedness  on the  vessel.  A number of
claims have arisen as a result of the collision,  including  proceedings  before
the High Court of Singapore in order to determine  liability  for the  collision
and the amount of damages  recoverable.  Most of such claims, to the extent they
involve  potential  liability  to the  Company,  have been  settled or otherwise
satisfied for amounts not material to the Company.  Management believes that any
such remaining claims will be fully covered by insurance.

Litigation against the Estate of the Company's Founder

In January 1997, the plaintiff in a lawsuit against, among others, the estate of
the Company's  founder,  the Company and certain of the Company's  subsidiaries,
shareholders  and  officers and  directors,  as more fully  described  under the
heading  "Litigation  Against the Estate of the Company's  Founder" in Item 3 of
the  Company's  Report on Form 20-F for the fiscal  year ended  March 31,  1996,
agreed to  dismiss  the  action  and to  release  all of her  alleged  claims in
exchange for a cash payment by, or on behalf of, the defendants. The amount paid
by the Company in connection with such release was not material to the Company's
operations.

                                        9

<PAGE>



Item 4.  Control of Registrant

Principal Shareholders

(a)  The Company is not directly or  indirectly  owned or  controlled by another
     corporation or by any foreign government.

(b)  The following table sets forth certain information  regarding (i) ownership
     of  Teekay's  common  stock as of March 31,  1997 by all  persons  known to
     Teekay to own more than 10 percent  of the common  stock and (ii) the total
     amount of capital  stock owned by all officers and directors of Teekay as a
     group as of such date:

                 Identity of Person
 Title of Class       or Group           Amount Owned        Percent of Class
 --------------       --------           ------------        ----------------

Common Stock,      Cirrus Trust          18,433,181 shares         65.1%
 no par value      JTK Trust              2,858,082 shares         10.1%
                   All officers and             *                    *
                   directors as a group
                   (17 persons)

(c)  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.


--------------------
         *    Less than one percent of outstanding shares.

Item 5.  NATURE OF TRADING MARKET

On July 19, 1995, the Company's  common stock listed for trading on the New York
Stock Exchange  (NYSE- TK). The following  table shows sales prices for the four
quarters of fiscal 1997 and the two full quarters in fiscal 1996 that the shares
have been listed on the NYSE.  The figures have been compiled from Bloomberg and
are in US dollars.

              
              1st Q            2nd Q              3rd Q              4th Q
Fiscal 1997   4/1-6/30/96      7/1-9/30/96        10/1-12/31/96      1/1-3/31/97
              -----------      -----------        -------------      -----------
High          28               30 5/8             33 1/8             34 1/4
Low           25               26 1/2             28 7/8             26 1/2

                                                                     
              
              3rd Q            4th Q
Fiscal 1996   10/1-12/31/95    1/1-3/31/96
              -------------    -----------
High          24 7/8           27
Low           23               23 1/4

Approximately  25% of all outstanding  shares at March 31, 1997 were held in the
United States.

There is not an active  public  market  within or outside the United  States for
Teekay's 9 5/8% First  Preferred Ship Mortgage Notes due 2003.  These Notes have
been  registered  under the Securities  Exchange Act of 1934 and Teekay does not
intend to list them on any securities exchange or to seek approval for quotation
through any automated quotation system.


                                       10

<PAGE>



Teekay's  8.32%  First  Preferred  Ship  Mortgage  Notes due 2008 are listed for
trading on the New York Stock  Exchange.  These Notes were first  offered on the
market January 19, 1996. No active trading market exists for these Notes.


Item 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

(a)      The  Company  is  not  aware  of  any  governmental  laws,  decrees  or
         regulations in the Company's  country of organization 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 nonresident holders of the Company's securities.

(b)      The Company is not aware of any limitations on the right of nonresident
         or foreign owners to hold or vote  securities of the Company imposed by
         foreign  law or by the  charter or other  constituent  document  of the
         Company.

Item 7.  TAXATION

Since (i) Teekay Shipping Corporation is and intends to maintain its status as a
"non-resident  Liberian  entity" under the Liberian  Internal Revenue Code, (ii)
the Company is not now  carrying  on, and in the future does not expect to carry
on, any  operations  within the Republic of Liberia,  and (iii)  Teekay's 9 5/8%
First  Preferred  Ship Mortgage  Notes and 8.32% First  Preferred  Ship Mortgage
Notes and all documentation related to these Notes and to the public offering of
Teekay's  common stock were  executed  outside of the  Republic of Liberia,  and
assuming  the holders of these  Notes and the common  stock  neither  reside in,
maintain an office in, nor engage in business in, the Republic of Liberia, under
current  Liberian law, no taxes or  withholdings  are imposed by the Republic of
Liberia on payments to be made in respect of the Notes or on distributions  made
in respect of the common stock.  Furthermore,  no stamp,  capital gains or other
taxes will be imposed by the Republic of Liberia on the ownership or disposition
of the common stock by holders thereof.

                                                        11

<PAGE>



Item 8.  SELECTED FINANCIAL DATA

Set forth  below  are  selected  consolidated  financial  and other  data of the
Company  for the five  fiscal  periods  ended  March 31,  1997,  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  Ernst  &  Young,   independent   Chartered
Accountants, with respect to the statements for the fiscal years ended March 31,
1997,  1996 and 1995,  and  "Management's  Discussion  and Analysis of Financial
Condition and Results of  Operations."  The Company  changed its fiscal year end
from April 30 to March 31,  effective  March 31,  1994,  in order to  facilitate
comparison of the Company's operating results to those of other companies within
the transportation industry on a calendar quarter basis.

<TABLE>
<CAPTION>

                                                                                      11 Month         Fiscal
                                                                                    Period Ended     Year Ended
                                                    Fiscal Year Ended March 31,        March 31,      April 30,
                                                    1997        1996       1995         1994(1)         1993
                                                    ----        ----       ----         -------         ----
                                        (U.S. Dollars in thousands, except per share and per day data and ratios)
<S>                                             <C>         <C>         <C>          <C>            <C>
Statement of Income Data:
Voyage revenues.............................    $ 382,249   $ 336,320   $ 319,966    $  317,742     $ 336,994
Voyage expenses.............................      102,037      90,575      84,957        81,052       108,805
Net voyage revenues.........................      280,212     245,745     235,009       236,690       228,189
Income from vessel operations...............       94,258      76,279      52,816        60,777        37,310
Interest expense ...........................      (60,810)    (62,910)    (66,304)      (49,713)      (47,769)
Interest income. ...........................        6,358       6,471       5,904         2,904         1,156
Other income ...............................        3,050       9,895      11,848        11,777        37,862
Income from continuing operations before
  foreign exchange gain (loss)..............       42,856      29,735       4,264        25,745        28,559
Foreign exchange gain (loss)(2).............         (226)       (665)        991        (1,532)      (77,917)
Net income (loss) from continuing operations       42,630      29,070       5,255        24,213       (49,358)
Net income from discontinued operations.....         -            -           -           5,945         1,890
Cumulative effect of change in accounting for
  marketable securities.....................         -            -         1,113           -             -
Net income (loss)...........................       42,630      29,070       6,368        30,158       (47,468)

Per Share Data:
Net income (loss) from continuing operations        $1.52      $ 1.17      $ 0.29        $ 1.35       $ (2.74)
Cumulative effect of change in accounting for
  marketable securities.....................          -           -          0.06           -             -
Net income (loss)...........................         1.52        1.17        0.35          1.68         (2.64)
Cash dividends declared per share...........         0.86        0.48         -             -             -
Weighted average shares outstanding
  (thousands)...............................       28,138      24,837      18,000        18,000        18,000

Balance Sheet Data (at end of period):
Cash and marketable securities..............   $  117,523  $  101,780  $   85,739     $ 107,246      $ 48,770
Total assets................................    1,372,838   1,355,301   1,306,474     1,405,147     1,368,966
Total debt..................................      699,726     725,842     842,874       945,611       884,813
Total stockholders' equity..................      629,815     599,395     439,066       433,180       403,022

Other Financial Data:
EBITDA (3)..................................   $  191,632   $ 166,233   $ 146,775     $ 151,364      $136,123
EBITDA to interest expense (3) (4)..........         3.22x       2.69x       2.28x         3.04x         2.59x
Total debt to EBITDA (1) (3)................         3.65        4.37        5.74          5.83          6.50
Total debt to total capitalization..........         52.6%       54.8%       65.7%         68.6%         68.7%
Net debt to capitalization (5)..............         48.0        51.0        63.3          65.9          67.5
Capital expenditures:
  Vessel purchases, gross...................    $  65,104   $ 123,843    $  7,465     $ 163,509     $ 334,733
  Drydocking................................       23,124      11,641      11,917        13,296        16,440

Fleet Data:
Average number of ships (6).................           41          39          42            45            50
Average age of Company's fleet
  (in  years) (7)...........................          8.2         7.4         7.1           7.6           7.9
TCE per ship per day (6)(8).................     $ 20,356    $ 18,438    $ 16,552      $ 17,431      $ 13,722
Vessel operating expenses per ship per
  day (6)(9)................................        4,922       4,787       4,748         4,879         4,276
Operating cash flow per ship per day (10)...       11,819      10,613       8,944         9,133         6,511
 (Footnotes on following page)
</TABLE>
                                       12

<PAGE>





(Footnotes for previous page)

(1)    For the 12 months  ended  March 31,  1994,  voyage  revenues  were $345.0
       million;  income from vessel operations was $64.4 million; net income was
       $320.0  million;  and  EBITDA was $162.3  million.  For the  eleven-month
       period  ended March 31,  1994,  EBITDA for the 12 months  ended March 31,
       1994 was used for purposes of computing total debt to EBITDA, in order to
       facilitate comparisons to other periods.

(2)    Prior to fiscal 1993, a  significant  portion of the  Company's  debt was
       denominated  in Japanese Yen. In fiscal 1993,  the Company  experienced a
       foreign exchange  translation  loss of $77.9 million.  Because all of the
       Company's    Yen-denominated    debt   has   been   converted   to   U.S.
       Dollar-denominated  debt,  and because a large  portion of the  Company's
       revenues and costs are denominated in U.S. Dollars, the Company's foreign
       exchange rate risk has been substantially eliminated.

(3)    EBITDA  represents net income from continuing  operations before interest
       expense, income tax expense,  depreciation expense, amortization expense,
       minority  interest,  and gains or losses  arising from  foreign  exchange
       translation and disposal 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  generally  accepted  accounting
       principles  and should not be considered as an  alternative to net income
       or any other indicator of the Company's performance required by generally
       accepted accounting principles.

(4)    For purposes of computing  EBITDA to interest  expense,  interest expense
       includes capitalized interest but excludes amortization of loan costs.

(5)    Net debt represents  total debt less cash,  cash  equivalents and 
       marketable securities.

(6)    Excludes vessels of discontinued operations and the joint venture.

(7)    Average age of  Company's  fleet is the average age, at the end of the
       relevant  period,  of all the  vessels  owned or leased by the Company
       (excluding  vessels of  discontinued  operations  but  including  joint
       venture vessels).

(8)    TCE  (or  "time  charter   equivalent")  is  a  measure  of  the  revenue
       performance  of a vessel,  which,  on a per voyage  basis,  is  generally
       determined  by Clarkson  Research  Studies  Ltd.  ("Clarkson")  and other
       industry data sources by subtracting voyage expenses (except commissions)
       which are incurred in transporting  cargo  (primarily  bunker fuel, canal
       tolls and port fees)  from gross  revenue  per  voyage and  dividing  the
       remaining revenue by the total number of days required for the round-trip
       voyage.  For purposes of  calculating  the Company's  average TCE for the
       year, TCE has been  calculated  consistent  with  Clarkson's  method,  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 year.

(9)    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 miscellaneous
       expenses, including communications. Voyage expenses comprise all expenses
       relating to particular voyages,  including bunker fuel expense, port fees
       and canal tolls.  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.

(10)   Operating  cash flow  represents  income  from  vessel  operations,  plus
       depreciation and amortization  expense,  less drydock expense.  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.
       Operating  cash flow is not  required by  generally  accepted  accounting
       principles  and should not be considered as an  alternative to net income
       or any other indicator of the Company's performance required by generally
       accepted accounting principles.

                                                        13

<PAGE>



Item 9. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The  Company is a leading  provider  of  international  crude oil and  petroleum
product transportation  services to major oil companies,  major oil traders, and
government agencies,  principally in the region spanning from the Red Sea to the
U.S.  West Coast.  The  Company's  fleet  consists of 42 tankers,  including  39
Aframax oil tankers and  oil/bulk/ore  carriers,  two smaller  tankers,  and one
VLCC, for a total  cargo-carrying  capacity of approximately 4.2 million tonnes.
An additional  double-hull  newbuilding Aframax tanker is scheduled for delivery
on June 17, 1997.

Approximately  78% of the Company's net voyage revenue is currently 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 by  contracts  of  affreightment,  whereby the Company
carries an agreed  quantity of cargo for a customer over a specified trade route
over  a  specified  period  of  time.  In  aggregate,  approximately  86% of the
Company's  net voyage  revenue is  currently  derived  from spot voyages or spot
market-related  contracts.  This dependence on the spot market,  which is within
industry  norms,  contributes to the volatility of the Company's  revenue,  cash
flow from operations, and net income. Management believes that the Company has a
competitive advantage over other tanker owners in the Aframax spot market.

Historically, the tanker industry has been cyclical,  experiencing volatility in
profitability  resulting  from  changes in the supply of and demand for tankers.
Additionally,  tanker  markets have  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  winter
weather patterns which tend to disrupt vessel scheduling.

Results of Operations

Bulk shipping  industry  freight  rates are commonly  measured at the net voyage
revenue level in terms of "time charter equivalent" (or "TCE") rates, defined as
voyage  revenues  less  voyage  expenses  (excluding  commissions),  divided  by
revenue-generating  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 revenue
and TCE rates.

Fiscal 1997, Fiscal 1996, and Fiscal 1995

The Company's net income was $42.6 million  ($1.52 per share) in fiscal 1997, up
from $29.1 million ($1.17 per share) in fiscal 1996, and $6.4 million ($0.35 per
share) in fiscal  1995,  reflecting  improvement  in the tanker  charter  market
accompanied by a relatively stable cost environment.

The Company sold its  remaining  eight  mid-1970s-built  tankers in fiscal years
1995 and 1996, and acquired a total of six newer Aframax tankers in fiscal years
1996 and 1997. As a result,  the Company's  average fleet size increased by 4.6%
in fiscal 1997 following a decrease of 7.1% from fiscal 1995 to 1996.

Net voyage  revenue  grew 14.0% to $280.2  million  in fiscal  1997 from  $245.7
million in fiscal  1996,  and 4.6% in fiscal 1996 from $235.0  million in fiscal
1995,  reflecting  improving tanker charter market  conditions and the effect of
changes in the size of the fleet. The Company's  average TCE rate in fiscal 1997
was up 10.4% to $20,356 from $18,438 in fiscal 1996,  after an increase of 11.4%
in fiscal 1996 from $16,552 in fiscal 1995.

Vessel  operating  expenses  increased 7.0% to $72.6 million in fiscal 1997 from
$67.8  million in fiscal  1996,  and  decreased  6.7% in fiscal  1996 from $72.7
million in fiscal 1995, mainly reflecting changes in fleet size.

Depreciation and amortization expense increased 10.1% to $90.7 million in fiscal
1997 from $82.4  million in fiscal  1996,  as a result of an increase in average
fleet  size,   and  a  higher  than  usual  number  of  scheduled   drydockings.
Depreciation and amortization  expense decreased 12.8% in fiscal 1996 from $94.5
million in fiscal  1995,  as a result of a decrease in average  fleet size and a
revision to estimates of residual values of the Company's vessels as at April 1,
1995. The revision  effectively  reduced  depreciation  expense by approximately
$9.4  million  in fiscal  1996 as  compared  to fiscal  1995.  Depreciation  and
amortization expense included  amortization of drydocking costs of $10.9 million
in fiscal 1997, $8.6 million in fiscal 1996 and $10.3 million in fiscal 1995.

                                       14

<PAGE>



General and  administrative  expenses rose 14.7% to $19.2 million in fiscal 1997
from $16.8  million in fiscal 1996,  and 11.5% in fiscal 1996 from $15.0 million
in fiscal 1995,  as the result of increases in senior  management  compensation,
the cost of compliance with increasingly  stringent tanker industry regulations,
and  greater  administrative  costs  subsequent  to the  acquisition  of  Teekay
Shipping Limited in March 1995.

Interest  expense  decreased by 3.3% to $60.8  million in fiscal 1997 from $62.9
million in fiscal 1996,  and by 5.1% in fiscal 1996 from $66.3 million in fiscal
1995. The decreases resulted primarily from a continued decline in the Company's
total debt,  partially  offset by higher interest rates resulting from the issue
of $225 million  8.32% First  Preferred  Ship  Mortgage  Notes in January  1996.
Interest income of $6.4 million in fiscal 1997, $6.5 million in fiscal 1996, and
$5.9 million in fiscal 1995,  largely reflected  increasing cash balances offset
in fiscal 1997 by lower interest rates.

Other  income of $2.8  million in fiscal  1997 and $9.2  million in fiscal  1996
consisted  primarily  of gains on the sale of a 50%-owned  tanker in fiscal 1997
and two vessels in fiscal  1996.  Other  income of $12.8  million in fiscal 1995
included an $18.2 million gain on the sale of six vessels,  partially  offset by
$4.3  million  in losses on  available-for-sale  securities  and a $2.1  million
equity loss from the Company's 50% investment in VCSC.

The following table illustrates the relationship between fleet size (measured in
ship-days),  time charter  equivalent  ("TCE") per  revenue-generating  ship-day
performance, and operating results per calendar ship-day:



                                            Year Ended   Year Ended  Year Ended
                                            March 31/97  March 31/96 March 31/95

------------------------------------------------------ ----------- ------------
Total calendar ship-days                        14,937      14,310       15,315
Non-revenue days                                   866         698          822
------------------------------------------------------ ----------- ------------
Revenue-generating ship-days (A)                14,071      13,612       14,493
------------------------------------------------------ ----------- ------------
Net voyage revenue before 
commissions (B) (000s)                        $286,429    $250,981     $239,888
------------------------------------------------------ ----------- ------------
Time charter equivalent (TCE) (B/A)            $20,356     $18,438      $16,552
------------------------------------------------------ ----------- ------------
Operating results per 
calendar ship-day:
     Net voyage revenue                        $18,760     $17,173      $15,345
     Vessel operating expense                    4,922       4,787        4,748
     General and administrative expense          1,286       1,171          981
     Drydocking expense                            733         602          672
------------------------------------------------------ ----------- ------------
Operating cash flow per calendar ship-day      $11,819     $10,613       $8,944
------------------------------------------------------ ----------- ------------


Liquidity and Capital Resources

The Company's total  liquidity,  including  cash,  cash  equivalents and undrawn
long-term  lines of credit,  was $258.6  million as at March 31,  1997,  up from
$197.3  million as at March 31, 1996, and $85.7 million as at March 31, 1995, as
a result of internally generated cash flow and debt refinancings.  Net cash flow
from operating  activities  rose to $139.2  million in fiscal 1997,  compared to
$98.4  million and $90.0  million in fiscal  years 1996 and 1995,  respectively,
reflecting an improvement in tanker charter market conditions.

The Company's  scheduled debt  repayments were $16.0 million during fiscal 1997,
down significantly from $57.9 million in fiscal 1996 and $87.6 million in fiscal
1995, as a result of debt refinancings which have lengthened repayment terms. In
October 1996, the Company completed two new term loan facilities (the "Term Loan
Facilities"),  with seven  commercial  banks providing  borrowings of up to $210
million in order to refinance existing debt at improved rates and credit terms.

                                       15

<PAGE>



The Term Loan Facilities also provided an additional $49 million of liquidity to
the Company.

Dividend payments during fiscal 1997 were $24.1 million,  or 86 cents per share,
of which $13.5  million was paid in cash and $10.6  million was paid in the form
of common shares issued under the Company's dividend reinvestment plan.

During fiscal 1997, the Company  incurred  capital  expenditures for vessels and
equipment of $65.1 million, mainly as a result of the acquisition of two modern,
second-hand  Aframax  tankers,  the  SEMAKAU  SPIRIT  and the  SINGAPORE  SPIRIT
(formerly the GALAXY RIVER).  These  acquisitions were financed through the Term
Loan  Facilities  completed in October  1996.  As a result of a larger number of
scheduled  drydockings in fiscal 1997, capital  expenditures for drydocking were
$16.6 million in fiscal 1997,  compared to $7.4 million in fiscal 1996 and $14.4
million in fiscal 1995.

A double-hull  newbuilding  Aframax tanker is scheduled for delivery on June 17,
1997 for a total cost of $44.5  million.  At March 31,  1997,  payments  of $8.9
million had been made  towards this  commitment  and a $35.6  million  long-term
financing arrangement exists for the remaining unpaid cost of this vessel.

FORWARD-LOOKING STATEMENTS

The Company's  Annual Report to Shareholders  for 1997 and this Annual Report on
Form 20-F for the  fiscal  year ended  March 31,  1997  contain  forward-looking
statements (as defined in Section 21E of the Securities Exchange Act of 1934, as
amended) which reflect  management's current views with respect to future events
and financial performance, in particular the statements regarding an improvement
in the tanker market  conditions and the Company's return on invested capital in
fiscal  years 1998 and 1999;  the  Company's  competitive  advantage  over other
tanker owners in the Aframax spot market; the number of mid-1970s-built  tankers
in the market that will be phased out over the next three years; the increase in
tanker  demand in 1997 and 1998;  and the  balance  of supply  and demand in the
tanker  market.  The  following  factors are among those that could cause actual
results to differ materially from the forward-looking statements and that should
be  considered  in evaluating  any such  statement:  changes in production of or
demand  for  oil and  petroleum  products,  either  generally  or in  particular
regions;  greater than anticipated  levels of tanker  newbuilding orders or less
than  anticipated  rates  of  tanker  scrapping;  changes  in  trading  patterns
significantly  impacting  overall  tanker tonnage  requirements;  changes in the
typical seasonal  variations in tanker charter rates;  unanticipated  changes in
laws and regulations  and the Company's  ability to comply with all existing and
future laws and regulations; changes in demand for modern, high quality vessels;
risks  incident  to vessel  operation,  including  pollution;  and  other  risks
detailed from time to time in the Company's periodic reports filed with the U.S.
Securities and Exchange Commission.  The Company may issue additional written or
oral  forward-looking  statements from time to time which are qualified in their
entirety by the  cautionary  statement  contained in this paragraph and in other
reports  hereafter  filed by the Company with the U.S.  Securities  and Exchange
Commission.





                                       16

<PAGE>



Item 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

Management

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

Name                      Age                   Position
----                      ---                   --------

Karlshoej, Axel           56     Director and Chairman of the Board
Hood, James N.            62     Director, President and Chief Executive
                                   Officer
Coady, Arthur F.          63     Director, EVP and General Counsel
Dingman, Michael D.       65     Director
Feder, Morris L.          80     Director
Hsu, Steve G. K.          63     Director
Hsu, Thomas Kuo-Yuen      50     Director

Alsleben, Veronica A. E.  46     Managing Director (London)
Antturi, Peter S.         38     Controller (Vancouver)
Chad, Greg                45     VP, Corporate Services (Vancouver)
Gibson, Esther E.         42     Secretary (Nassau)
Glendinning, David        43     VP, Marine and Commercial Operations
                                   (Vancouver)
Gurnee, Anthony           37     Chief Financial Officer, Treasurer and VP,
                                   Business Development (Vancouver)
Meldgaard, Mads T.        32     Managing Director (Singapore)
Moller, Bjorn             39     Chief Operating Officer (Vancouver)
Nagao, Yoshio             50     Managing Director (Tokyo)
Patwardhan, Vinay S.      55     SVP, Marine Operations (Vancouver)

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

VERONICA A. E. ALSLEBEN has been  employed in ship  chartering  since 1973.  She
joined the Company in 1989 as Chartering  Manager and was subsequently  promoted
to her  current  position as Managing  Director  (London).  Prior to joining the
Company,  Ms.  Alsleben  served as Vice  President of a chartering  office of an
international tanker company in New York City for five years.

PETER S. ANTTURI joined the Company in September 1991 as Manager, Accounting and
was  promoted to his  current  position of  Controller  in March 1992.  Prior to
joining the Company,  Mr.  Antturi held various  accounting and finance roles in
the shipping industry since 1985.

ARTHUR F. COADY is an Executive  Vice  President and the General  Counsel of the
Company. He has served as a Director of Teekay since 1989. He joined the Company
after 30 years  in  private  law  practice  in  Canada,  having  specialized  in
corporate  and  commercial  law.  In July 1995,  Mr.  Coady was  appointed  as a
Director of the Bahamas Maritime Authority.

GREG CHAD  joined  the  Company in August  1991 as  Manager,  Personnel.  He was
promoted in June 1993 to  Director,  Personnel  and in March 1995 to his current
position of Vice President,  Corporate  Services.  Mr. Chad has held a number of
senior  human  resources  and  administration  roles in the  transportation  and
communication industries since 1976.

MICHAEL D.  DINGMAN is a private  investor,  industrial  company  executive  and
corporate  director.  He was elected as a Director of Teekay in May 1995.  He is
Chairman  and  Chief  Executive  Officer  of  The  Shipston  Group  Limited,   a
diversified   international  holding  company,  Chairman  of  Fisher  Scientific
International  Inc.,  and a Director  of Ford Motor  Company.  He also serves as
Director/Executive to a number of other industrial concerns.



                                       17

<PAGE>



MORRIS L. FEDER is currently President of Worldwide Cargo Inc., a New York based
chartering firm. Mr. Feder has been employed in the shipping  industry in excess
of 48 years,  of which 43 were spent with Maritime  Overseas  Corporation,  from
which he retired as Executive  Vice  President and Director in December 1991. He
has also served as Senior Vice  President  and Director of Overseas  Shipholding
Group Inc.  and was a member of the Finance  and  Development  Committee  of the
Board of Directors of such company.  He has served as a Director of Teekay since
June  1993.  Mr.  Feder is a member  of the  American  Bureau of  Shipping,  the
Connecticut  Maritime  Association and the Association of Shipbrokers and Agents
USA Inc. as well as being a member of the Board of Directors of American  Marine
Advisors, Inc..

ESTHER E. GIBSON joined the Company in June 1988. In 1991,  she was appointed to
the position of Secretary.

CAPTAIN  DAVID  GLENDINNING  joined the  Chartering  Department of the Company's
London office in January  1987.  Since then, he has worked in a number of senior
positions  within  the  organization  including,   Vice  President,   Commercial
Operations, a position he held for two years prior to his January 1995 promotion
to the position of Vice  President,  Marine and Commercial  Operations.  Captain
Glendinning  has 18 years' sea service on oil tankers of various types and sizes
and is a Master  Mariner  with  British  Class 1 Foreign  Going  Certificate  of
Competency.

ANTHONY GURNEE joined the Company in May 1992, as General  Manager,  Finance and
served in that capacity until October 1992, at which time he was promoted to the
position of Vice President, Finance & Accounting. In January 1995, his title was
changed to Vice President, Treasurer and Chief Financial Officer. In March 1997,
Mr. Gurnee was given corporate planning and development responsibilities,  which
are reflected in his current title - Chief Financial Officer, Treasurer and Vice
President,  Business Development.  Mr. Gurnee is a graduate of the United States
Naval Academy and served six years with the United States Navy. Prior to joining
the Company, he was a shipping banker with Citibank,  N.A. for four years. He is
a Member of the Institute of Chartered Shipbrokers (MICS).

CAPTAIN  JAMES N. HOOD has held a number of senior  positions  with the  Company
since joining the  organization  in 1977.  He was appointed  President and Chief
Executive Officer of the Company in October 1992. He has served as a Director of
Teekay since June 1993. Captain Hood's qualifications  include an Extra Master's
Certificate  of  Competency.  He is a  Fellow  of  the  Institute  of  Chartered
Shipbrokers  (FICS), a Fellow of the Nautical  Institute (FNI) and a director of
Britannia Steam Ship Insurance  Association Limited. In addition to his 25 years
of shore service in various senior management positions, Captain Hood has served
at sea for 19 years, including four years of command experience.

STEVE G. K.  HSU is  Chairman  of Oak  Maritime  (H.K.)  Inc.,  Limited,  a ship
management  company  based in Hong Kong.  Mr.  Hsu is a member of the  Executive
Committee of Hong Kong Shipowners  Association,  a member of the American Bureau
of Shipping,  and a council  member of the  International  General  Committee of
Bureau Veritas. He has served as a Director of Teekay since June 1993.

THOMAS  KUO-YUEN  HSU has  served  25 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 six vessels,  ranging in size from 80,000 dwt
to 280,000  dwt. He has been a Committee  Director of the  Britannia  Steam Ship
Insurance  Association  Limited since 1988,  and a Lloyd's  Underwriting  Member
since 1983. He has served as a Director of Teekay since June 1993.

AXEL  KARLSHOEJ  is  President  of  Nordic  Industries,   a  California  general
construction firm with whom he has served for the past 25 years. He is the older
brother of the late J.  Torben  Karlshoej,  the founder of the  Company.  He has
served as a Director and Chairman of the Board of Teekay since June 1993.

MADS T. MELDGAARD joined the Company's Chartering Department in January 1986 and
served in the European and Singapore  offices until December  1991,  when he was
appointed Chartering Manager in the Vancouver office. Mr. Meldgaard was promoted
in January 1994 to General Manager,  Chartering,  and again in September 1995 to
his current position as Managing Director (Singapore).



                                       18

<PAGE>



BJORN MOLLER spent three years in the  Company's  European  office  before being
promoted to the position of Vice  President,  Chartering,  in 1988.  Mr.  Moller
served in this capacity for six years until his January 1994  appointment to the
position of Vice President,  Planning and  Development,  later being promoted in
January 1995 to the position of Vice  President,  Group  Chartering and Business
Development.  In January 1997, Mr. Moller was appointed Chief Operating Officer.
Prior to joining  the  Company,  Mr.  Moller  spent 10 years  with East  Asiatic
Company, including four years in tanker chartering and operations.

YOSHIO NAGAO has been  employed in the  shipping  industry for the past 30 years
and is qualified as a Chief Engineer. He joined the Company from Sanko Steamship
Co. Ltd., a Japanese  ship owning  company,  where he served as Manager of their
Technical  Department.  Mr. Nagao has served as Managing  Director (Tokyo) since
joining the Company in 1985.

CAPTAIN VINAY S.  PATWARDHAN  has held senior  positions  with the Company since
joining the organization in 1981, including Vice President,  Ship Management,  a
position he held from January 1986 through January 1995, when he was promoted to
his  current  position:  Senior  Vice  President,  Marine  Operations.   Captain
Patwardhan  has been  employed in the  shipping  industry for the past 37 years,
having experience in crude tanker,  product carrier, OBO, ore oiler,  container,
general cargo and bulk carrier operations,  with 11 years of command experience.
Captain  Patwardhan  is a Master  Mariner  with  Foreign  Going  Certificate  of
Competency.

Directors are elected annually for one-year terms.

Item 11.  COMPENSATION OF DIRECTORS AND OFFICERS

The aggregate annual  compensation paid to the 12 executive  officers and senior
managers  listed in Item 10 above was  $2,957,036  for fiscal 1997, 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.
Currently,  the  non-employee  directors of Teekay  receive,  in the  aggregate,
approximately   $100,000  for  their   services  and   reimbursement   of  their
out-of-pocket  expenses in each fiscal year during  which they are  directors of
Teekay.  In  fiscal  1997,  the  Company  contributed  an  aggregate  amount  of
approximately  $77,000  to  provide  pension  and  similar  benefits  for the 12
executive officers and senior managers listed above.

Item 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

Teekay's 1995 Stock Option Plan (the "Plan") entitles certain eligible officers,
key  employees  (including  senior sea staff),  and  directors of the Company to
receive options to acquire common stock of Teekay.  A total of 2,076,862  shares
of common stock has been  reserved for  issuance  under the Plan.  As of May 12,
1997,  options to purchase a total of 1,053,508  shares of Teekay's common stock
were  outstanding,  with  options to  purchase a total of  515,977  shares  then
exercisable  and with the  directors  and the 12  executive  officers and senior
managers  listed in Item 10 above holding options to purchase a total of 688,750
shares. The options are exercisable at prices ranging from $21.50 to $27.375 per
share and expire  between  July 19, 2005 and May 28,  2006,  ten years after the
date of grant.

Item 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

Approximately  75% of the issued and outstanding  shares of Teekay voting common
stock are owned by affiliated  trusts, the activities of which are supervised by
Messrs. Coady, Karlshoej, and Thomas Hsu, directors of Teekay, and Mr.
Shigeru  Matsui,  President of Matsui & Company,  a Tokyo-based  ship  brokerage
firm.

Mr. Thomas Hsu, a director of Teekay,  is associated  with the company that owns
the  other  50% of VCSC.  Certain  directors  of Teekay  are also  officers  and
directors of VCSC.

In April  1993,  Teekay  acquired  all of the issued and  outstanding  shares of
common  stock of Palm  Shipping  Inc.  from an affiliate of Teekay for a nominal
purchase  price,  plus an amount to be paid at a later  date (up to a maximum of
$5.0 million plus accrued interest),  contingent upon certain future events. The
payment of such purchase  price by Teekay is not required to be made until after
the 9 5/8% First Preferred Ship Mortgage Notes have been paid in full.

                                       19

<PAGE>





                                     PART II



Item 14.   DESCRIPTION OF SECURITIES TO BE REGISTERED

Not applicable.



                                    PART III



Item 15.   DEFAULTS UPON SENIOR SECURITIES

Not applicable.



Item 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES

Not applicable.



                                     PART IV



Item 17.   FINANCIAL STATEMENTS

Not applicable.



Item 18.   FINANCIAL STATEMENTS

See item 19(a) below.



                                       20

<PAGE>





Item 19.   FINANCIAL STATEMENTS AND EXHIBITS

(a)  The following financial statements and schedules,  together with the report
     of Ernst & Young thereon, are filed as part of this Annual Report:



                                                                         Page
                                                                         ----
Report of Independent Public Accountants..................................F-1

Consolidated Financial Statements
  Consolidated Statements of Income and Retained Earnings.................F-2
  Consolidated Balance Sheets.............................................F-3
  Consolidated Statements of Cash Flows...................................F-4
  Notes to the Consolidated Financial Statements..........................F-5
  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.

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


         *2.1 Articles of Incorporation of Teekay, with all amendments thereto.
        **2.2 Bylaws of Teekay, with all amendments thereto.
         +2.3 Indenture  dated as of July 15, 1993 among Teekay,  VSSI Sun Inc.,
              Diamond Spirit Inc.,  VSSI Deepsea Inc.,  VSSI Bulkers Inc.,  VSSI
              Star Inc.,  VSSI Ulsan Inc. and United States Trust Company of New
              York, as Trustee.
         +2.4 Registration  Rights  Agreement  dated July 15, 1993 among Teekay,
              VSSI Sun Inc.,  Diamond  Spirit  Inc.,  VSSI  Deepsea  Inc.,  VSSI
              Bulkers Inc.,  VSSI Star Inc., VSSI Ulsan Inc., and Morgan Stanley
              & Co. Incorporated, as Placement Agent.
         +2.5 Specimen of Teekay's 9 5/8% First Preferred Ship Mortgage Note due
              2003.
       +++2.6 First Preferred Ship Mortgage dated July 15, 1993 by VSSI Sun Inc.
              to United States Trust Company of New York, as Trustee.
       +++2.7 Assignment of Time Charter dated as of July 15, 1993 from VSSI Sun
              Inc. to United States Trust Company of New York, as Trustee.
       +++2.8 Assignment of Insurance dated July 15, 1993 from VSSI Sun Inc. to
              United States Trust Company of New York, as Trustee.
         +2.9 Pledge Agreement and Irrevocable Proxy dated July 15, 1993 made by
              Teekay in favor of United  States  Trust  Company of New York,  as
              Trustee.
      +++2.10 Guarantee dated as of July 15, 1993 by VSSI Sun Inc. in favor of
              United States Trust Company of New York, as Trustee.
      +++2.11 Assignment of Freights and Hires dated July 15, 1993 from VSSI Sun
              Inc. to United States Trust Company of New York, as Trustee.
      +++2.12 Cash Collateral Account Agreement dated July 15, 1993 between VSSI
              Sun Inc. and United States Trust Company of New York, as Trustee.
        +2.13 Investment  Account  Agreement  dated July 15, 1993 between Teekay
              and United States Trust Company of New York, as Trustee.
        +2.14 Assumption  Agreement  dated August 13, 1993 between United States
              Trust Company of New York, as Trustee, and Sebarok Spirit Inc.


                                       21

<PAGE>




        +2.15 Pledge Agreement and Irrevocable  Proxy dated August 13, 1993 made
              by Teekay in favor of United  States Trust Company of New York, as
              Trustee.
       **2.16 Registration Rights Agreement among Teekay, Tradewinds Trust Co. 
              Ltd., as Trustee for the Cirrus Trust, and Worldwide Trust
              Services Ltd., as Trustee for the JTK Trust.
       **2.17 Specimen of Teekay Common Stock Certificate.
       ##2.18 Indenture  dated January 29, 1996 among Teekay,  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.
       ##2.19 Specimen of Teekay's First Preferred Ship Mortgage Notes Due 2008.
     ##++2.20 Bahamian Statutory Ship Mortgage dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York.
     ##++2.21 Deed of Covenants dated January 29, 1996 by Nassau Spirit Inc. to
              United States Trust Company of New York.
       ##2.22 First Preferred Ship Mortgage dated January 29, 1996 by VSSI
              Oceans Inc. to United States Trust Company of New York, as
              Trustee.
     ##++2.23 Assignment of Time Charter dated January 29, 1996 by Nassau Spirit
              Inc. to United States Trust Company of New York, as Trustee.
     ##++2.24 Assignment of Insurance dated January 29, 1996 by Nassau Spirit
              Inc. to United States Trust Company of New York, as Trustee.
       ##2.25 Pledge  Agreement and Irrevocable  Proxy dated January 29, 1996 by
              Teekay in favor of United  States  Trust  Company of New York,  as
              Trustee.
     ##++2.26 Guarantee dated January 29, 1996 by Nassau Spirit Inc. in favor of
              United States Trust Company of New York, as Trustee.
     ##++2.27 Assignment of Freights and Hires dated January 29, 1996 by Nassau
              Spirit Inc. to United States Trust Company of New York, as
              Trustee.
     ##++2.28 Cash Collateral Account Agreement dated January 29, 1996 between
              Nassau Spirit Inc. and United States Trust Company of New York,
              as Trustee.
       ##2.29 Investment Account Agreement dated January 29, 1996 between Teekay
              and United States Trust Company of New York, as Trustee.
       **2.30 1995 Stock Option Plan.
       **2.31 Form of Indemnification Agreement between Teekay and each of its 
              officers and directors.
       **2.32 Reducing  Revolving  Credit Facility  Agreement dated June 6, 1995
              between Chiba Spirit Inc.,  VSSI Sun Inc.,  VSSI Gemini Inc., VSSI
              Carriers  Inc.,  Mendana Spirit Inc.,  Musashi  Spirit Inc.,  VSSI
              Condor Inc.,  Palm Monarch Inc., VSSI Drake Inc., VSSI Tokyo Inc.,
              VSSI Marine Inc.,  Tasman Spirit Inc.,  Vancouver  Spirit Inc. and
              Elcano  Spirit Inc.  and Den norske Bank AS,  Christiania  Bank og
              Kreditkasse,  acting through its New York Branch,  and Nederlandse
              Scheepshypotheskbank N.V.
        +2.33 Charter Party, as amended, dated September 21, 1989 between Palm
              Shipping Inc. and BP Shipping Limited.
        +2.34 Time Charter, as amended, dated August 14, 1986 between VSSI Sun
              Inc. and Palm Shipping Inc.
        +2.35 Time Charter, as amended, dated April 1, 1989 between Diamond
              Spirit Inc. and Palm Shipping Inc.
        +2.36 Time Charter, as amended, dated August 14, 1986 between VSSI
              Deepsea Inc. and Palm Shipping Inc.
        +2.37 Time Charter, as amended, dated August 14, 1986 between VSSI
              Bulkers Inc. and Palm Shipping Inc.
        +2.38 Time Charter, as amended, dated August 14, 1986 between VSSI Star
              Inc. and Palm Shipping Inc.
        +2.39 Time Charter, as amended, dated January 15, 1990 between VSSI
              Ulsan Inc. and Palm Shipping Inc.
        +2.40 Time Charter, as amended, dated June 1, 1993 between Sebarok
              Spirit Inc. and Palm Shipping Inc.


                                       22

<PAGE>




        #2.41 Time Charter, as amended, dated July 3, 1995 between VSSI Oceans
              Inc. and Palm Shipping Inc.
        #2.42 Time Charter, as amended, dated January 4, 1994 between VSSI
              Atlantic Inc. and Palm Shipping Inc.
        #2.43 Time Charter, as amended, dated February 1, 1992 between VSSI
              Appian Inc. and Palm Shipping Inc.
        #2.44 Time Charter, as amended, dated December 1, 1993 between Senang
              Spirit Inc. and Palm Shipping Inc.
        #2.45 Time Charter, as amended, dated August 1, 1992 between Exuma
              Spirit Inc. and Palm Shipping Inc.
        #2.46 Time Charter, as amended, dated May 1, 1992 between Nassau Spirit
              Inc. and Palm Shipping Inc.
        #2.47 Time Charter, as amended, dated November 1, 1992 between Andros
              Spirit Inc. and Palm Shipping Inc.
      #++2.48 Management Agreement, as amended, dated June 1, 1992 between
              Teekay Shipping Limited and Nassau Spirit Inc.
         2.49 Amendment No. 1, dated October 7, 1996, to Reducing  Revolving
              Credit Facility Agreement dated June 5, 1995 between Chiba Spirit
              Inc.,  VSSI Sun Inc.,  VSSI  Gemini  Inc.,  VSSI  Carriers  Inc.,
              Mendana Spirit Inc.,  Musashi Spirit Inc., VSSI Condor Inc., Palm
              Monarch Inc., VSSI Drake Inc., VSSI Tokyo Inc., VSSI Marine Inc.,
              Tasman Spirit Inc.,  Vancouver Spirit Inc. and Elcano Spirit Inc.
              and Den norske Bank AS,  Christiania Bank og Kreditkasse,  acting
              through its New York Branch, and Nederlandse Scheepshypotheskbank
              N.V.
         2.50 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.
         2.51 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.
         27   Financial Data Schedule
----------

*   Previously  filed as an exhibit to the Company's  Registration  Statement on
    Form S-8, filed with the Securities and Exchange  Commission  (the "SEC") on
    October 27, 1995, and hereby  incorporated by reference to such Registration
    Statement.

**  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.

+   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.

++  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.

#   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.

##  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.

                                       23

<PAGE>




                                    SIGNATURE
                                    ---------

Pursuant to the  requirements  of Section 12 of the  Securities  Exchange Act of
1934, the Registrant  certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused  this Annual  Report to be signed on its behalf
by the undersigned, thereunto duly authorized.



                              TEEKAY SHIPPING CORPORATION

                             By: /s/ Anthony Gurnee
                                 ---------------------------------------------
                                 Anthony Gurnee
                                 Vice President and Chief Financial Officer
                                (Principal Financial and Accounting Officer)

Dated: June 11, 1997

                                       24

<PAGE>

                                AUDITORS' REPORT




To the Shareholders of
Teekay Shipping Corporation

We have audited the accompanying  consolidated balance sheets of Teekay Shipping
Corporation  and  subsidiaries  as of March 31,  1997 and 1996,  and the related
consolidated  statements of income and retained earnings and cash flows for each
of the three years in the period ended March 31, 1997.  Our audits also included
the financial statement schedule listed in the Index Item 19[a]. 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 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,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Teekay Shipping
Corporation and  subsidiaries  at March 31, 1997 and 1996, and the  consolidated
results of their  operations and their cash flows for each of the three years in
the period  ended March 31,  1997,  in  conformity  with  accounting  principles
generally  accepted in the United  States.  Also,  in our  opinion,  the related
financial statement schedule, when considered in relation to the basic financial
statements  taken  as a whole,  presents  fairly  in all  material  aspects  the
information set forth therein.




Nassau, Bahamas,
May 7, 1997.                                              Chartered Accountants


<PAGE>

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                              AND RETAINED EARNINGS
            (in thousands of U.S. dollars, except per share amounts)

<TABLE>
<CAPTION>
                                                           Year Ended        Year Ended          Year Ended
                                                            March 31,         March 31,           March 31,
                                                           ----------        ----------          ----------
                                                              1997              1996                1995
                                                                $                 $                   $
<S>                                                         <C>              <C>                   <C>

NET VOYAGE REVENUES
Voyage revenues                                               382,249          336,320              319,966
Voyage expenses                                               102,037           90,575               84,957
-----------------------------------------------------------------------------------------------------------
Net voyage revenues                                           280,212          245,745              235,009
-----------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
Vessel operating expenses                                      72,586           67,841               72,723
Time charter hire expense                                       3,461            2,503
Depreciation and amortization                                  90,698           82,372               94,452
General and administrative (note 3)                            19,209           16,750               15,018
-----------------------------------------------------------------------------------------------------------
                                                              185,954          169,466              182,193
-----------------------------------------------------------------------------------------------------------
Income from vessel operations                                  94,258           76,279               52,816
-----------------------------------------------------------------------------------------------------------

OTHER ITEMS
Interest expense                                              (60,810)         (62,910)             (66,304)
Interest income                                                 6,358            6,471                5,904
Other income (note 10)                                          2,824            9,230               12,839
-----------------------------------------------------------------------------------------------------------
                                                              (51,628)         (47,209)             (47,561)
-----------------------------------------------------------------------------------------------------------
Net income before cumulative effect of accounting change       42,630           29,070                5,255
Cumulative effect of change in accounting for
  marketable securities (note 1 )                                                                     1,113
-----------------------------------------------------------------------------------------------------------
NET INCOME                                                     42,630           29,070                6,368
Retained earnings, beginning of the year                      363,690          406,547              400,179
-----------------------------------------------------------------------------------------------------------
                                                              406,320          435,617              406,547
Exchange of redeemable preferred stock (note 8)                                (60,000)
Dividends declared and paid                                   (24,142)         (11,927)
-----------------------------------------------------------------------------------------------------------
Retained earnings, end of the year                            382,178          363,690              406,547
===========================================================================================================
Earnings per share amounts (note 1)
   Net income before cumulative effect of accounting change     $1.52               $1.17             $0.29
   Cumulative effect of change in accounting for
      marketable securities                                                                            0.06
   Net income                                                    1.52                1.17              0.35
Weighted average number of common shares
   outstanding                                             28,138,187       24,837,109           18,000,000
===========================================================================================================
</TABLE>

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

                                      F-2
<PAGE>

                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                         (in thousands of U.S. dollars)


                                                            As at       As at
                                                           March 31,   March 31,
                                                           ---------   ---------
                                                             1997         1996
                                                               $            $

ASSETS
Current
Cash and cash equivalents                                   117,523      101,780
Accounts receivable
  -trade                                                     25,745       22,213
  -other                                                      1,066        2,725
Prepaid expenses and other assets                            14,666       15,331
--------------------------------------------------------------------------------
Total current assets                                        159,000      142,049
--------------------------------------------------------------------------------
Vessels and equipment (notes 1,5 and 9)
At cost, less accumulated depreciation of $457,779
  (1996 - $377,105)                                       1,187,399    1,193,557
Advances on vessels                                           8,938        5,250
--------------------------------------------------------------------------------
Total vessels and equipment                               1,196,337    1,198,807
--------------------------------------------------------------------------------
Investment                                                    6,335        1,624
Other assets                                                 11,166       12,821
--------------------------------------------------------------------------------
                                                          1,372,838    1,355,301
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable                                             16,315       11,761
Accrued liabilities (note 4)                                 26,982       18,303
Current portion of long-term debt (note 5)                   36,283       19,102
--------------------------------------------------------------------------------
Total current liabilities                                    79,580       49,166
--------------------------------------------------------------------------------
Long-term debt (note 5)                                     663,443      706,740
--------------------------------------------------------------------------------
Total liabilities                                           743,023      755,906
--------------------------------------------------------------------------------

Stockholders' equity
Capital stock (note 8)                                      247,637      235,705
Retained earnings                                           382,178      363,690
--------------------------------------------------------------------------------
Total stockholders' equity                                  629,815      599,395
--------------------------------------------------------------------------------
                                                          1,372,838    1,355,301
================================================================================

Commitments and contingencies (notes 5, 6 and 9)

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

                                      F-3
<PAGE>


                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                             Year Ended        Year Ended          Year Ended
                                                              March 31,         March 31,           March 31,
                                                              ---------         ---------           ---------
                                                                1997              1996                1995
                                                                  $                 $                   $
<S>                                                         <C>              <C>                   <C>

Cash and cash equivalents provided by (used for)

OPERATING ACTIVITIES
Net income from operating activities                           42,630           29,070                5,255
Add (deduct) charges to operations not requiring
  a payment of cash and cash equivalents:
    Depreciation and amortization                              90,698           82,372               94,452
    Gain on disposition of assets                                               (8,784)             (18,245)
    Loss (gain) on available-for-sale securities                                   (55)               4,303
    Equity loss (income) (net of dividend received:
       March 31, 1997 - $282)                                  (2,414)          (1,139)               2,089
    Other - net                                                 2,785            2,507                  914
 Change in non-cash working capital items related to
  operating activities (note 11)                                5,459           (5,556)               1,251
-----------------------------------------------------------------------------------------------------------
Net cash flow from operating activities                       139,158           98,415               90,019
-----------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds from long-term debt                                  240,000          448,000
Scheduled repayments of long-term debt                        (16,038)         (57,850)             (87,570)
Prepayments of long-term debt                                (250,078)        (505,962)             (15,033)
Scheduled payments on capital lease obligations                                 (1,527)
Prepayments of capital lease obligations                                       (43,023)
Net proceeds from issuance of Common Stock                      1,283          137,872
Cash dividends paid                                           (13,493)          (7,094)
Capitalized loan costs                                         (1,130)          (5,965)             (1,565)
-----------------------------------------------------------------------------------------------------------
Net cash flow from financing activities                       (39,456)         (35,549)           (104,168)
-----------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Expenditures for vessels and equipment (net of
  capital lease financing of: (March 31, 1997 - $NIL;
  March 31, 1996 - $44,550; March 31, 1995 - $NIL)            (65,104)         (79,293)              (7,465)
Expenditures for drydocking                                   (16,559)          (7,405)             (14,431)
Proceeds from disposition of assets                                             28,428               16,817
Net cash flow from investment                                  (2,296)           3,273                2,650
Proceeds on sale of available-for-sale securities                              111,770              110,806
Purchases of available-for-sale securities                                     (41,993)            (115,085)
Other                                                                                                    39
-----------------------------------------------------------------------------------------------------------
Net cash flow from investing activities                       (83,959)          14,780               (6,669)
-----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents               15,743           77,646              (20,818)
Cash and cash equivalents, beginning of the year              101,780           24,134               44,952
-----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year                    117,523          101,780               24,134
===========================================================================================================
</TABLE>

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

                                      F-4
<PAGE>
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (all tabular amounts stated in thousands of U.S. dollars)
1.  Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements are 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
Liberia)  and its  wholly  owned or  controlled  subsidiaries  (the  "Company").
Significant  intercompany  items  and  transactions  have been  eliminated  upon
consolidation.

On March 31,  1995,  Teekay  acquired  100% of the  outstanding  stock of Teekay
Shipping  Limited  ("TSL"),  an affiliated  company,  for cash  consideration of
$776,000 representing the net book value of TSL at March 31, 1995. The impact of
this  transaction on the financial  position and results of operations of Teekay
is not  considered  significant.  The  assets and  liabilities  of TSL have been
combined  with those of Teekay  effective  March 31, 1995.  Teekay's  results of
operations  include those of TSL  subsequent to that date. As a result,  certain
voyage  expenses  which were paid to TSL have been  reclassified  to general and
administrative  expenses,  in order to  conform  with the  presentation  adopted
subsequent to March 31, 1995.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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.

Investment

The Company's 50% interest in Viking  Consolidated  Shipping  Corp.  ("VCSC") is
carried  at the  Company's  original  cost plus its  proportionate  share of the
undistributed  net income.  On March 12, 1997, VCSC entered into an agreement to
sell its one  remaining  vessel  and it is not  anticipated  that the  operating
companies of VCSC will have active  operations in the near future.  The disposal
of this  vessel  and the  related  gain on sale  has  been  reflected  in  these
consolidated financial statements (see Note 10 - Other Income).

Operating revenues and expenses

Voyage  revenues and expenses are  recognized  on the  percentage  of completion
method of  accounting.  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 applicable to 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 and lubes, and
miscellaneous expenses including communications.

Marketable securities

The Company  adopted the  Statement  of  Financial  Accounting  Standards  Board
Statement  No.  115,  "Accounting  for  Certain  Investments  in Debt and Equity
Securities"  ("FAS 115") for the year ended March 31, 1995. In applying FAS 115,
investments in marketable  securities (disposed of during fiscal 1996) have been
classified  by management as  available-for-sale  securities  and are carried at
fair value. Net unrealized gains or losses on available-for-sale  securities are
reported as a separate component of stockholders'  equity. The cumulative effect
on  opening  retained  earnings  from  application  of this  Statement  has been
reflected separately as an adjustment to net income for the year ended March 31,
1995. 1. Summary of Significant Accounting Policies - (cont'd)

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,  estimated by the Company to be twenty years from the date a vessel
is initially placed in service.

Effective  April 1, 1995,  the Company  revised its  estimates  of the  residual
values of its vessels.  The effect of this change in estimated  residual  values
was to reduce depreciation  expense for the years ended March 31, 1997 and March
31, 1996 by $9.2 million (or $0.33 per common  share) and $9.4 million (or $0.38
per common share), respectively.

Interest  costs  capitalized  to vessels and equipment for the years ended March
31,  1997,  1996  and  1995  aggregated   $232,000,   $106,000,   and  $151,000,
respectively.

Expenditures  incurred  during  drydocking  are  capitalized  and amortized on a
straight-line basis over the period until the next anticipated drydocking.  When
significant  drydocking  expenditures  recur prior to the expiry of this period,
the remaining balance of the original drydocking is expensed in the month of the
subsequent  drydocking.  Drydocking expenses amortized for the years ended March
31, 1997, 1996 and 1995 aggregated  $10,941,000,  $8,617,000,  and  $10,281,000,
respectively.

Vessels acquired  pursuant to bareboat hire purchase  agreements are capitalized
as capital  leases  and are  amortized  over the  estimated  useful  life of the
acquired vessel.

Other assets

Loan costs,  including fees, commissions and legal expenses, are capitalized and
amortized  over the term of the  relevant  loan.  Amortization  of loan costs is
included in interest expense.

Interest rate swap and cap agreements

The  differential to be paid or received is accrued as interest rates change and
is recognized as an adjustment to interest  expense.  Premiums paid for interest
rate cap  agreements  are recorded at cost.  Premiums and receipts,  if any, are
recognized as adjustments  to interest  expense over the lives of the individual
contracts.

Forward contracts

The Company enters into forward  contracts as a hedge against changes in foreign
exchange rates. Market value gains and losses are deferred and recognized in the
period when the hedged transaction is recorded in the accounts.

Cash flows

Cash interest paid during the years ended March 31, 1997, 1996 and 1995 totalled
$57,400,000, $59,021,000, and $65,368,000, respectively.

The Company  classifies  all highly liquid  investments  with a maturity date of
three months or less when purchased as cash and cash equivalents.




1.  Summary of Significant Accounting Policies - (cont'd)

Income taxes

The legal  jurisdictions  of the countries in which Teekay and its  subsidiaries
are incorporated do not impose income taxes upon shipping-related activities.

Earnings per share

Earnings per share amounts are based upon the weighted  average number of common
shares  outstanding  during  each  period,  after  giving  effect to the 1 for 2
reverse  stock split (see Note 8 - Capital  Stock).  Stock options have not been
included in the computation of the earnings per share amounts since their effect
thereon would not be material.

Accounting for Stock-Based Compensation

Effective April 1, 1996, the Company adopted  Statement of Financial  Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based  Compensation." SFAS
123 requires expanded disclosures of stock-based compensation  arrangements with
employees and encourages (but does not require) companies 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"  and has
disclosed  the  required pro forma effect on net income and net income per share
as if the fair value method of  accounting  as  prescribed  in SFAS 123 had been
applied (see Note 8 - Capital Stock).

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.

The Company had one charterer (an  international oil company) during fiscal 1997
from  which  voyage  revenues  exceeded  10% of total  voyage  revenues.  Voyage
revenues from such charterer amounted to $48,696,000.

3.  Contractual Relationships

Prior to the acquisition of TSL, (see Note 1 - Basis of  presentation),  TSL and
its affiliated companies rendered administrative,  operating and ship management
services  to the Company in return for a monthly  fee and  commissions  at rates
considered usual and customary to the industry.  Fees and commissions  incurred,
included in general and  administrative  expenses,  for the year ended March 31,
1995   aggregated   $11,826,000.   Commissions   incurred,   related  to  vessel
dispositions, for the year ended March 31, 1995 aggregated $295,000.

4.  Accrued Liabilities


<PAGE>



                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (all tabular amounts stated in thousands of U.S. dollars)

                                                      March 31,        March 31,
                                                      ---------        ---------
                                                         1997            1996
                                                           $               $

Voyage and vessel                                       15,458           9,053
Interest                                                 9,294           7,789
Payroll and benefits                                     2,230           1,461
                                                        ------          ------
                                                        26,982          18,303
                                                        ======          ======




<PAGE>


5.  Long-Term Debt
                                                 March 31,   March 31,
                                                 ---------   ---------
                                                   1997        1996
                                                     $           $

Revolving Credit Facility                                      118,000
First Preferred Ship Mortgage Notes (8.32%)
    U.S. dollar debt due through 2008             225,000      225,000
First Preferred Ship Mortgage Notes (9 5/8%)
   U.S. dollar debt due through 2004              151,200      151,200
Floating rate (LIBOR + 0.65% to 1 1/2%)
   U.S. dollar debt due through 2006              323,526      231,642
                                                  -------      -------
                                                  699,726      725,842
Less current portion                               36,283       19,102
                                                  -------      -------
                                                  663,443      706,740
                                                  =======      =======

As at March 31, 1997, the Revolving  Credit Facility (the  "Revolver")  provided
for borrowings of up to $141.1 million (the "commitment  amount") on a revolving
credit basis. The commitment amount reduces by $6.9 million  semi-annually  each
June and December together with a final balloon reduction in June 2003. Interest
payments are based on LIBOR plus a margin ranging from 0.80% to 1.25%, depending
on the  financial  leverage of the Company.  The Revolver is  collateralized  by
first  priority  mortgages  granted  on ten of the  Company's  Aframax  tankers,
together with certain other related collateral, and a guarantee from the Company
for all amounts outstanding under the Revolver.

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 March 31,  1997,  the fair value of these net assets
approximated  $278 million.  The 8.32% Notes are also subject to a sinking fund,
which  will  retire  $45  million  principal  amount of the 8.32%  Notes on each
February 1, commencing 2004.

Upon the 8.32% Notes  achieving  Investment  Grade Status 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 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.





<PAGE>


5.  Long-Term Debt (cont'd)

The 9 5/8% First  Preferred  Ship Mortgage  Notes due July 15, 2003 (the "9 5/8%
Notes") are collateralized by first preferred  mortgages on six of the Company's
Aframax  tankers,  together  with  certain  other  related  collateral,  and are
guaranteed by six subsidiaries of Teekay that own the mortgaged  vessels (the "9
5/8%  Notes  Guarantor  Subsidiaries")  to a maximum of 95% of the fair value of
their net  assets.  As at March 31,  1997,  the fair  value of these net  assets
approximated $191 million.  The 9 5/8% Notes are also subject to a sinking fund,
which will retire $25 million principal amount of the 9 5/8% Notes, on each July
15,  commencing July 15, 1997.  During first quarter of fiscal 1996, the Company
retired $23.8  million of the 9 5/8% Notes,  which will be applied to reduce the
July 15, 1997 sinking fund  requirement.  The 9 5/8% Notes are redeemable at the
option of the  Company,  in whole or in part,  on or after July 15,  1998 at the
following redemption prices expressed as a percentage of principal:

                           July 15               Redemption Price
                           -------               ----------------
                           1998                          104.813%
                           1999                          102.406%
                           2000                          100.000%

Upon a Change of Control  each 9 5/8% Note  holder and 8.32% Note holder has the
right,  unless the Company elects to redeem these Notes,  to require the Company
to purchase these Notes at 101% of their principal amount plus accrued interest.

Condensed  financial  information  regarding  the  Company,  the  9  5/8%  Notes
Guarantor Subsidiaries, the 8.32% Notes Guarantor Subsidiaries and non-guarantor
subsidiaries  of the  Company  is set out in  Schedule  A of these  consolidated
financial statements.  

All other floating rate loans are collateralized by first preferred mortgages on
the vessels to which the loans relate,  together with certain other  collateral,
and guarantees from the parent Company.  In certain  instances  second preferred
mortgages have been recorded against specific vessels.

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 additional debt and 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 March 31,
1997, to $58.7 million.

As at March 31, 1997,  the Company was  committed  to a series of interest  rate
swap  agreements  whereby $150 million of the  Company's  floating rate debt was
swapped with fixed rate  obligations  having an average  remaining  term of 19.5
months. The swap agreements expire between October 1998 and December 1998. These
arrangements  effectively  change the  Company's  interest rate exposure on $150
million  of debt from a floating  LIBOR rate to an average  fixed rate of 5.86%.
The  Company is exposed to credit  loss in the event of  non-performance  by the
counter parties to the interest rate swap agreements;  however, the Company does
not anticipate non-performance by any of the counter parties.








<PAGE>





                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
            (all tabular amounts stated in thousands of U.S. dollars)
5.  Long-Term Debt (cont'd)

The aggregate annual long-term debt principal repayments required to be made for
the five  fiscal  years  subsequent  to March 31, 1997 are  $36,283,000  (fiscal
1998), $69,093,000 (fiscal 1999 - 2001), and $80,324,000 (fiscal 2002).

6.  Leases

Charters-out

Time  charters to third  parties of the  Company's  vessels are accounted for as
operating  leases.  The minimum future  revenues to be received on time charters
currently in place are $34,893,000 (fiscal 1998) and $3,875,000 (fiscal 1999).

The minimum  future  revenues  should not be construed to reflect  total charter
hire revenues for any of the years.

7.  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.

Interest  rate swap and cap  agreements - The fair value of interest rate swaps,
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 and the current  credit  worthiness of the swap
counter parties. The fair value of interest rate cap agreements is the estimated
amount that the Company  would  receive  from  selling the  contracts  as at the
reporting date.

The estimated fair value of the Company's financial instruments is as follows:
<TABLE>
<CAPTION>
                                                 March 31, 1997                March 31, 1996
                                                 --------------                --------------
                                               Carrying     Fair             Carrying      Fair  
                                                Amount      Value             Amount       Value
                                                   $          $                 $            $  
                                                ------      -----             ------       -----
<S>                                             <C>        <C>                <C>         <C>
Cash and cash equivalents                       117,523    117,523            101,780     101,780
Long-term debt                                  699,726    695,265            725,842     723,056
Interest rate swap agreements
    - net receivable (payable) position                      1,154                            (60)
Interest rate cap agreements                                                      618          10
</TABLE>

The Company  transacts with investment  grade rated financial  institutions  and
requires no collateral from these institutions.




<PAGE>


8.  Capital Stock

Authorized
 25,000,000   Preferred Stock with a par value of $1 per share
125,000,000   Common Stock with no par value

<TABLE>
<CAPTION>
                                                   Common                Preferred
                                                    Stock    Thousands      Stock     Thousands
                                                      $      of shares        $       of shares
                                                  ---------  ---------    ---------   ---------
<S>                                                <C>        <C>             <C>        <C>
Issued and outstanding
Balance March 31, 1994 and 1995                     33,000      36,000          1         600
May 15, 1995 1-for-2 Reverse Common Stock Split                (18,000)
July 19, 1995 Initial Public Offering 6,900,000
   shares at $21.50 per share of Common Stock
   (net of share issue costs)                      137,613       6,900
July 19, 1995 Exchange of Redeemable Preferred
   Stock for 2,790,698 shares of Common Stock       60,000       2,791         (1)       (600)
Reinvested Dividends                                 4,833         201
Exercise of Stock Options                              259          12
                                                  ---------  ---------    ---------   ---------
Balance March 31, 1996                             235,705      27,904          0           0
Reinvested Dividends                                10,649         364
Exercise of Stock Options                            1,283          60
                                                  ---------  ---------    ---------   ---------
Balance March 31, 1997                             247,637      28,328          0           0
                                                  =========  =========    =========   =========
</TABLE>

The Company has reserved  2,076,862  shares of Common  Stock for  issuance  upon
exercise of options  granted  pursuant to the  Company's  1995 Stock Option Plan
(the "Plan").

During  fiscal 1997 and 1996,  the  Company  granted  options  under the Plan to
acquire  up to  343,250  and  796,750  shares of Common  Stock  (the  "Grants"),
respectively,  to certain eligible officers, key employees (including senior sea
staff), and directors of the Company. The options have a 10-year term and follow
a graded-vesting  schedule.  The options granted during fiscal 1997 vest equally
over four years from the date of grant.  Three  quarters of the options  granted
during fiscal 1996 have vested and the remaining quarter will vest during fiscal
1998.




<PAGE>


8. Capital Stock (cont'd)

A summary of the Company's stock option  activity,  and related  information for
the years ended March 31 follows:
<TABLE>
<CAPTION>
                                          Fiscal 1997                     Fiscal 1996
                                          -----------                     -----------
                                    Options      Weighted-Average    Options    Weighted-Average
                                    (`000s)       Exercise Price     (`000s)     Exercise Price
                                    -------       --------------     -------     --------------
<S>                                  <C>                  <C>          <C>              <C>
Outstanding-beginning of year          779                $21.50          0              $21.50
Granted                                343                 27.38        797               21.50
Exercised                             (60)                 21.50       (12)               21.50
Forfeited                              (6)                 24.00        (6)               21.50
                                     -----                 -----       ----               -----
Outstanding-end of year              1,056                $23.40        779              $21.50
                                    ===========================================================
Exercisable at end of year             519                $21.50        383              $21.50
                                    ===========================================================
</TABLE>
<TABLE>
<S>                                          <C>                             <C> 
Weighted-average fair value of options 
granted during the year (per option)         $6.72                            $5.16
</TABLE>

Exercise  prices for the  options  outstanding  as of March 31, 1997 ranged from
$21.50 to $27.38 and have a weighted-average  remaining contractual life of 8.57
years.

The Company  applies APB 25,  "Accounting  for Stock  Issued to  Employees"  and
related Interpretations in accounting for its employee stock options (see Note 1
- Accounting for Stock-Based  Compensation).  Under APB 25, because 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.

Had the Company recognized compensation costs for the Grants consistent with the
methods  recommended  by SFAS  123  (see  Note 1 -  Accounting  for  Stock-Based
Compensation), the Company's net income and net income per share for those years
ended would have been stated at the pro forma amounts as follows:

                                           Year Ended         Year Ended
                                         March 31, 1997     March 31, 1996
                                               $                    $
                                           ---------           ----------
NET INCOME:
As reported                                 $42,630             $29,070
 Pro forma                                   40,679              26,842
NET INCOME PER COMMON SHARE:
As reported                                    1.52                1.17
 Pro forma                                     1.45                1.08
                                                        
The fair  values of the 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 6.44% and 6.14% for  fiscal  1997 and  fiscal  1996,
respectively,  dividend yield of 3.0%;  expected volatility of 25%; and expected
lives of 5 years.




<PAGE>


9. Commitments and Contingencies

As at March 31, 1997,  the Company was committed to foreign  exchange  contracts
for the forward purchase of approximately Japanese Yen 100 million and Singapore
dollars  16,478,650 for U.S. dollars,  at an average rate of Japanese Yen 122.12
per U.S. dollar and Singapore dollar 1.41 per U.S. dollar, respectively, for the
purpose of hedging accounts payable and accrued liabilities.

As at March 31,  1997,  the  Company was  committed  to the  construction  of an
Aframax vessel for a cost of $44.5 million, scheduled for delivery in June 1997.
At March  31,  1997,  payments  of $8.9  million  had  been  made  towards  this
commitment and a $35.6 million long-term  financing  arrangement  exists for the
remaining unpaid cost of this vessel.


10. Other Income

                                             Year Ended  Year Ended  Year Ended
                                              March 31,   March 31,   March 31,
                                                1997        1996        1995
                                                  $           $           $
                                             ----------  ----------  ----------
Gain on disposition of assets                   8,784      18,245
Gain (loss) on available-for-sale securities       55      (4,303)
Equity in results of 50% owned company          2,696       1,139      (2,089)
Foreign currency exchange gain (loss)            (226)       (665)        991
Miscellaneous - net                               354         (83)         (5)
                                             ----------  ----------  ----------
                                                2,824       9,230      12,839
                                             ==========  ==========  ==========

For the year ended March 31,  1997,  Equity in results of the 50% owned  company
includes a $2,732,000 gain on a vessel sale.

Gross  realized  gains on sales of  available-for-sale  securities for the years
ended March 31, 1996 and 1995 aggregated $1,787,000 and $691,000,  respectively.
Gross realized  losses on sales of  available-for-sale  securities for the years
ended  March  31,  1996  and  1995   aggregated   $1,732,000   and   $4,994,000,
respectively.


11. Change in Non-Cash Working Capital Items Related to Operating Activities


                                       Year Ended   Year Ended   Year Ended
                                        March 31,    March 31,    March 31,
                                         1997          1996         1995
                                           $             $            $
                                       ----------   ----------   ----------
Accounts receivable                     (1,873)      (4,792)       3,585
Prepaid expenses and other assets          665       (2,058)      (1,597)
Accounts payable                         4,554          281         (310)
Accrued liabilities                      2,113        1,013         (427)
                                       ----------   ----------   ----------
                                         5,459       (5,556)       1,251
                                       ==========   ==========   ==========

12. Comparative Figures

Certain of the  comparative  figures have been  reclassified to conform with the
presentation adopted in the current period.
<PAGE>
                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                                                                      SCHEDULE A
              CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
                         (in thousands of U.S. dollars)


<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1997
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>           <C>           <C>            <C>
                                                                                                                    
Net voyage revenues                                               30,553       35,960      411,216       (197,517)       280,212
Operating expenses                                    494         22,588       34,254      326,135       (197,517)       185,954
                                              -------------------------------------------------------------------------------------
   Income (loss) from vessel operations              (494)         7,965        1,706       85,081                        94,258
Net interest income (expense)                     (34,420)           114          210      (20,356)                      (54,452)
Equity in net income of subsidiaries               77,352                                                 (74,656)         2,696
Other income (loss)                                   192                                   12,707        (12,771)           128
                                              -------------------------------------------------------------------------------------
Net income                                         42,630          8,079        1,916       77,432        (87,427)        42,630
Retained earnings (deficit),
    beginning of the year                         363,690         17,377       (1,245)      66,693        (82,825)       363,690
Dividends declared and paid                       (24,142)       (14,400)     (18,795)                     33,195        (24,142)
                                              -------------------------------------------------------------------------------------
Retained earnings (deficit),
    end of the year                               382,178         11,056      (18,124)     144,125       (137,057)       382,178
                                              =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1996
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>           <C>           <C>            <C>
                                                                                                                    
Net voyage revenues                                               29,755       49,402      390,450       (223,862)       245,745
Operating expenses                                    835         20,681       31,861      339,951       (223,862)       169,466
                                              -------------------------------------------------------------------------------------
   Income (loss) from vessel operations              (835)         9,074       17,541       50,499                        76,279
Net interest income (expense)                     (18,397)           394      (13,759)     (24,677)                      (56,439)
Equity in net income of subsidiaries               47,043                                                 (45,904)         1,139
Other income                                        1,259                                   15,940         (9,108)         8,091
                                              -------------------------------------------------------------------------------------
Net income                                         29,070          9,468        3,782       41,762        (55,012)        29,070
Retained earnings (deficit),
    beginning of year                             406,547         22,309       (5,027)      89,301       (106,583)       406,547
Exchange of redeemable preferred stock            (60,000)                                                               (60,000)
Dividends declared and paid                       (11,927)       (14,400)                  (64,370)        78,770        (11,927)
                                              -------------------------------------------------------------------------------------
Retained earnings (deficit), end of the year      363,690         17,377       (1,245)      66,693        (82,825)       363,690 
                                              =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1995
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>           <C>           <C>            <C>
                                                                                                                    
Net voyage revenues                                               32,687       47,593      400,844       (246,115)       235,009
Operating expenses                                    660         24,410       29,434      373,897       (246,208)       182,193
                                              -------------------------------------------------------------------------------------
   Income (loss) from vessel operations              (660)         8,277       18,159       26,947             93         52,816
Net interest income (expense)                     (18,302)           491      (13,736)     (28,853)                      (60,400)
Equity in net income (loss) of subsidiaries        24,161                                                 (26,250)        (2,089)
Other income                                           56              1                    14,871                        14,928
                                              -------------------------------------------------------------------------------------
Net income from continuing operations               5,255          8,769        4,423       12,965        (26,157)         5,255
Cumulative effect of change in accounting                                                                           
   for marketable securities                        1,113                                                                  1,113
                                              -------------------------------------------------------------------------------------
Net income                                          6,368          8,769        4,423       12,965        (26,157)         6,368
Retained earnings (deficit),
    beginning of year                             400,179         46,735       (9,450)      90,396       (127,681)       400,179
Dividends declared and paid                                      (25,266)                  (21,989)        47,255   
                                              -------------------------------------------------------------------------------------
Retained earnings (deficit), end of the year      406,547         30,238       (5,027)      81,372       (106,583)       406,547
                                              =====================================================================================
</TABLE>
(See Note 5)




                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES
                                                                      SCHEDULE A


                            CONDENSED BALANCE SHEETS
                         (in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                            As at March 31, 1997
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                Teekay        Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                           <C>              <C>            <C>         <C>         <C>              <C>
                                                                                                                    
   ASSETS                                                                                                           
Cash and cash equivalents                              32          9,248        8,732       99,511                       117,523
Other current assets                                  128            667          755       40,009            (82)        41,477
                                              -------------------------------------------------------------------------------------
   Total current assets                               160          9,915        9,487      139,520            (82)       159,000
Vessels and equipment (net)                                      137,486      344,315      714,536                     1,196,337
Advances due from subsidiaries                    362,704                                                (362,704)  
Other assets (principally                                                                                           
   investments in subsidiaries)                   649,337                                   11,171       (643,007)        17,501
                                              -------------------------------------------------------------------------------------
                                                1,012,201        147,401      353,802      865,227     (1,005,793)     1,372,838

   LIABILITIES & STOCKHOLDERS'                                                                                      
   EQUITY                                                                                                           
Current liabilities                                 7,386          4,573        2,581       65,122            (82)        79,580
Long-term debt                                    375,000                                  288,443                       663,443
Due to parent                                                        (56)          15      356,656       (356,615)  
                                              -------------------------------------------------------------------------------------
   Total liabilities                              382,386          4,517        2,596      710,221       (356,697)       743,023
                                              -------------------------------------------------------------------------------------
Stockholders' Equity                                                                                                
Capital stock                                     247,637             10           23        5,933         (5,966)       247,637
Contributed capital                                              131,818      369,307        4,948       (506,073)  
Retained earnings (deficit)                       382,178         11,056      (18,124)     144,125       (137,057)       382,178
                                              -------------------------------------------------------------------------------------
   Total stockholders' equity                     629,815        142,884      351,206      155,006       (649,096)       629,815
                                              -------------------------------------------------------------------------------------
                                                1,012,201        147,401      353,802      865,227     (1,005,793)     1,372,838
                                              =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                            As at March 31, 1996
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                Teekay        Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                           <C>              <C>            <C>         <C>          <C>             <C>
                                                                                                                    
   ASSETS                                                                                                           
Cash and cash equivalents                              28          8,613        5,210       87,929                       101,780
Other current assets                                  293          1,475        1,064       37,527            (90)        40,269
                                              -------------------------------------------------------------------------------------
   Total current assets                               321         10,088        6,274      125,456            (90)       142,049
Vessels and equipment (net)                                      139,652      362,424      696,731                     1,198,807
Advances due from subsidiaries                    372,233                                                (372,233)  
Other assets (principally                                                                                           
   investments in subsidiaries)                   606,269                                   12,826       (604,650)        14,445
                                              -------------------------------------------------------------------------------------
                                                  978,823        149,740      368,698      835,013       (976,973)     1,355,301
                                              -------------------------------------------------------------------------------------
   LIABILITIES & STOCKHOLDERS'                                                                                      
   EQUITY                                                                                                           
Current liabilities                                 3,228            539          613       44,876            (90)        49,166
Long-term debt                                    376,200                                  330,540                       706,740
Due to parent                                                         (4)                  382,023       (382,019)  
                                              -------------------------------------------------------------------------------------
   Total liabilities                              379,428            535          613      757,439       (382,109)       755,906
                                              -------------------------------------------------------------------------------------
Stockholders' Equity                                                                                                
Capital stock                                     235,705             10           23        5,933         (5,966)       235,705
Contributed capital                                              131,818      369,307        4,948       (506,073)  
Retained earnings (deficit)                       363,690         17,377       (1,245)      66,693        (82,825)       363,690
                                              -------------------------------------------------------------------------------------
   Total stockholders' equity                     599,395        149,205      368,085       77,574       (594,864)       599,395
                                              -------------------------------------------------------------------------------------
                                                  978,823        149,740      368,698      835,013       (976,973)     1,355,301
                                              =====================================================================================
</TABLE>
(See Note 5)




                  TEEKAY SHIPPING CORPORATION AND SUBSIDIARIES

                                                                      SCHEDULE A
                       CONDENSED STATEMENTS OF CASH FLOWS
                         (in thousands of U.S. dollars)



<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1997
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay     
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $        
                                              -------------------------------------------------------------------------------------
<S>                                             <C>             <C>          <C>          <C>          <C>            <C>

                                                                                                                    
Cash and cash equivalents provided by (used for)                                                                    
OPERATING ACTIVITIES                                                                                                
                                              -------------------------------------------------------------------------------------
   Net cash flow from operating activities        (30,553)        20,018       23,161      126,532                       139,158   
                                              -------------------------------------------------------------------------------------
                                                                                                                    
FINANCING ACTIVITIES                                                                                                
Proceeds from long-term debt                                                               240,000                       240,000   
Repayments of long-term debt                                                              (266,116)                     (266,116)  
Net proceeds from issuance of Common Stock          1,283                                                                  1,283
Other                                              29,003        (14,456)     (18,780)     (10,390)                      (14,623)  
                                              -------------------------------------------------------------------------------------
   Net cash flow from financing activities         30,286        (14,456)     (18,780)     (36,506)                      (39,456)  
                                              -------------------------------------------------------------------------------------
                                                                                                                    
INVESTING ACTIVITIES                                                                                                
Expenditures for vessels and equipment                            (4,927)        (859)     (75,877)                      (81,663)  
Other                                                 272                                   (2,568)                       (2,296)  
                                              -------------------------------------------------------------------------------------
   Net cash flow from investing activities            272         (4,927)        (859)     (78,445)                      (83,959)  
                                              -------------------------------------------------------------------------------------
Increase in cash and cash equivalents                   4            635        3,522       11,581                        15,743   
Cash and cash equivalents,
     beginning of the year                             28          8,613        5,210       87,929                       101,780   
                                              -------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year             32          9,248        8,732       99,510                       117,523   
                                              =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1996
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                             <C>             <C>          <C>          <C>          <C>            <C>

Cash and cash equivalents provided by (used for)                                                                    
OPERATING ACTIVITIES                                                                                                
                                              -------------------------------------------------------------------------------------
   Net cash flow from operating activities        (23,772)        17,284       22,798       82,105                        98,415
                                              -------------------------------------------------------------------------------------
                                                                                                                    
FINANCING ACTIVITIES                                                                                                
Proceeds from long-term debt                      225,000                                  223,000                       448,000
Repayments of long-term debt                      (22,580)                   (208,964)    (332,268)                     (563,812)
Repayments of capital lease obligations                                       (44,550)                                   (44,550)
Net proceeds from issuance of Common Stock        137,872                                                                137,872
Other                                             (29,879)       (14,400)    (133,234)     164,454                       (13,059)
                                              -------------------------------------------------------------------------------------
   Net cash flow from financing activities        310,413        (14,400)    (386,748)      55,186                       (35,549)
                                              -------------------------------------------------------------------------------------
                                                                                                                    
INVESTING ACTIVITIES                                                                                                
Expenditures for vessels and equipment                              (656)      (3,223)     (82,819)                      (86,698)
Proceeds from disposition of assets                                                         28,428                        28,428
Other                                            (286,710)           499      369,307      (10,046)                       73,050
                                              -------------------------------------------------------------------------------------
   Net cash flow from investing activities       (286,710)          (157)     366,084      (64,437)                       14,780
                                              -------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents      (69)         2,727        2,134       72,854                        77,646
Cash and cash equivalents,
     beginning of the year                             97          5,886        3,076       15,075                        24,134
                                              -------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year             28          8,613        5,210       87,929                       101,780
                                              =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                            Year Ended March 31, 1995
                                              -------------------------------------------------------------------------------------
                                                             9 5/8% Notes 8.32% Notes                                   Teekay
                                                 Teekay       Guarantor    Guarantor   Non-Guarantor                 Shipping Corp.
                                              Shipping Corp  Subsidiaries Subsidiaries Subsidiaries   Eliminations   & Subsidiaries
                                                   $              $            $            $              $              $
                                              -------------------------------------------------------------------------------------
<S>                                             <C>             <C>          <C>          <C>          <C>            <C>
                                                                                                                    
Cash and cash equivalents provided by (used for)                                                                    
OPERATING ACTIVITIES                                                                                                
                                              -------------------------------------------------------------------------------------
   Net cash flow from operating activities        (40,919)        19,403       23,110       88,425                        90,019
                                              -------------------------------------------------------------------------------------
                                                                                                                    
FINANCING ACTIVITIES                                                                                                
Repayments of long-term debt                                                  (21,854)     (80,749)                     (102,603)
Other                                             (31,518)       (25,263)        (188)      55,404                        (1,565)
                                              -------------------------------------------------------------------------------------
   Net cash flow from financing activities        (31,518)       (25,263)     (22,042)     (25,345)                     (104,168)
                                              -------------------------------------------------------------------------------------
                                                                                                                    
INVESTING ACTIVITIES                                                                                                
Expenditures for vessels and equipment                            (1,039)      (3,197)     (17,660)                      (21,896)
Proceeds from disposition of assets                                                         16,817                        16,817
Other                                              72,776             19            1      (74,386)                       (1,590)
                                              -------------------------------------------------------------------------------------
   Net cash flow from investing activities         72,776         (1,020)      (3,196)     (75,229)                       (6,669)
                                              -------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents      339         (6,880)      (2,128)     (12,149)                      (20,818)
Cash and cash equivalents, beginning of the year     (242)        13,736        5,204       26,254                        44,952
                                              -------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year             97          6,856        3,076       14,105                        24,134
                                              =====================================================================================
</TABLE>
(See Note 5)