PLUM CREEK TIMBER CO L P - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10239

PLUM CREEK TIMBER COMPANY, L.P.
(Exact name of registrant as specified in its charter)

999 Third Avenue, Seattle, Washington 98104-4096
Telephone: (206) 467-3600

Organized in the State of Delaware I.R.S. Employer Identification No.91-1443693

Securities registered pursuant to Section 12(b) of the Act:
Depositary Units, Representing Limited Partner Interests

The above securities are registered on the New York Stock Exchange.

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sections 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of Units held by non-affiliates based on the closing
sales price on January 31, 1996 was approximately $1,042,643,891. For this
calculation, all executive officers and directors have been deemed affiliates.
Such determination should not be deemed an admission that such executive
officers and directors are, in fact, affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: None.

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PLUM CREEK TIMBER COMPANY, L.P.

TABLE OF CONTENTS

ITEM NO. CAPTION PAGE
- -------- ------- ----
PART I
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1. Business 4
Segment Information 4
Resources Segment 4
Manufacturing Segment 7
Seasonality 10
Federal and State Regulations 10
Income Tax Considerations 14
Encumbrances 15
Competition 15
Employees 16

2. Properties 17

3. Legal Proceedings 17

4. Submission of Matters to a Vote of Security Holders 17

PART II
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5. Market for the Registrant's Common Equity

and Related Unitholder Matters 18

6. Selected Financial Data 19

7. Management's Discussion and Analysis of

Financial Condition and Results of Operations 20

8. Financial Statements and Supplementary 27
Financial Information

9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 45

PART III
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10. & 11. Directors and Executive Officers of the Registrant
and Executive Compensation 45

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12. Security Ownership of Certain Beneficial Owners
and Management 45

13. Certain Relationships and Related Transactions 45

PART IV
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14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 45

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PART I

ITEM 1. BUSINESS

GENERAL

Plum Creek Timber Company, L.P. (the "Partnership"), a Delaware limited
partnership organized in 1989, Plum Creek Manufacturing, L.P. ("Manufacturing"),
and Plum Creek Marketing, Inc. ("Marketing"), own, manage, and operate 2.0
million acres of timberland and ten wood products conversion facilities in
Montana, Washington and Idaho. The Partnership owns 98 percent of Manufacturing,
and 96 percent of Marketing. Plum Creek Management Company, L.P., (the "General
Partner"), manages the businesses of the Partnership, Manufacturing and
Marketing and owns the remaining two percent and four percent of Manufacturing
and Marketing, respectively. As used herein, "Company" refers to the combined
entities of the Partnership, Manufacturing and Marketing.

SEGMENT INFORMATION

As used herein, "Resources Segment" refers to the combined timber and
land management business of the Partnership. "Manufacturing Segment" refers to
the combined business of Manufacturing and Marketing. Certain financial
information for each business segment is included in Note 12 of Notes to
Combined Financial Statements.

RESOURCES SEGMENT

GENERAL. The Resources Segment consists of approximately 2.0 million
acres of timberland in the Pacific Northwest (the "Timberlands"). The
Timberlands are geographically segregated into two regions, the Cascade Region
in western Washington, and the Rocky Mountain Region in western Montana,
northern Idaho and eastern Washington. At December 31, 1995, the 2.0 million
acres of Timberland contained an estimated timber inventory of 10.1 billion
board feet ("BBF") of standing timber of which 2.2 BBF and 7.9 BBF were located
in the Cascade and Rocky Mountain Regions, respectively.

The Resources Segment grows and harvests timber for sale in export and
domestic markets and sells, on an opportunistic basis, land which is designated
as having a higher and better use than for forest management.

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The following summarizes the major components of the Resources
Segment's operating income:

(In thousands) 1995 1994 1993
---- ---- ----

Export Logs $ 33,500 $ 38,973 $ 41,448

Domestic Logs $ 95,778 $ 109,053 $ 85,594

Operating income from export log sales decreased primarily due to a
decrease in sales volume. The decrease in sales volume was due to shifting lower
quality export logs to domestic markets, as a result of a weaker Japanese
economy, and a planned decrease in harvest levels. Export log revenues
represented approximately 10%, 12% and 14% of combined revenues for 1995, 1994
and 1993, respectively. Operating income from domestic log sales decreased in
1995 due to a decrease in sales prices resulting primarily from weaker lumber
markets. Operating income in 1994 from domestic log sales increased from 1993
primarily due to increased sales volume and higher prices. The increase in sales
volume was due to higher harvest levels as a result of the Montana Timberland
Acquisition (see below). Higher prices in 1994 were attributed to timber supply
constraints as well as increased wood product demand. Domestic log revenues
represented approximately 21%, 22% and 19% of combined revenues for 1995, 1994
and 1993, respectively. In 1995, the Partnership implemented an in-woods
chipping operation, which utilizes the small tops of trees and small trees from
thinning operations, due to the strength of the pulp markets. Pulp log and wood
chip sales contributed an additional $7.0 million to operating income in 1995.
Prior to 1995, operating income from pulp log sales was insignificant. Land
sales contributed $1.6 million, $1.9 million and $7.7 million to operating
income in 1995, 1994 and 1993, respectively. Land sales have declined,
primarily due to the Partnership's strategy of deferring land sales until the
completion of state and county growth management processes.

CASCADE REGION. The Cascade Region consists of approximately 330,000
acres of timberland. Approximately 38% of the total timber harvest in the
Cascade Region (compared to 47% and 49% in 1994 and 1993) was sold for export to
Pacific Rim countries, principally Japan. Logs not sold for export were sold to
domestic mills owned by third parties, as the Company does not own mills in the
Cascade Region. Logs sold for export are generally of higher quality than logs
sold into the domestic market. Sales of export logs decreased as a relative
percentage of total sales in 1995, as compared to 1994, due to the shifting of
lower quality export logs into domestic markets as a result of a weaker export
market.

ROCKY MOUNTAIN REGION. The Rocky Mountain Region consists of
approximately 1,712,000 acres of timberland. During 1995, 59% of the total
timber harvest in the Rocky Mountain Region was sold to the Manufacturing
Segment (compared to 58% and 59% in 1994 and 1993, respectively), with the
remainder sold to third-party domestic mills.

On November 1, 1993, the Partnership purchased approximately 865,000
acres of timberland and other timber related assets (the "Montana Timberland
Acquisition") from Champion International Corporation for approximately $260
million. These timberlands are located in western Montana in close proximity to
existing Company assets. Management believes the Montana

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Timberland Acquisition provides operating flexibility by allowing Manufacturing
to be more self-sufficient from a raw material standpoint.

Simultaneous to the Montana Timberland Acquisition, the Partnership
entered into a log sourcing agreement with Stimson Lumber Company ("Stimson") to
supply Stimson's Montana mills with 950 million board feet ("MMBF") of logs, at
prevailing market prices, over a ten year period ending in 2003. At December 31,
1995, the Partnership had a remaining commitment of approximately 703 MMBF.

TIMBER MANAGEMENT STRATEGY. The Partnership's resource operations
involve timber management and harvesting operations, which include road
construction and reforestation, as well as wildlife and watershed management.
These activities are based on data concerning tree species, site productivity
indices as to the type and number of trees by size and age classification,
classification of soils, stocking per acre, and information on forest management
costs. From this data, coupled with current economic and market conditions, the
Partnership develops its annual harvesting plan based upon silvicultural
considerations, balancing ecological demands of the forest with a view toward
maximizing the value of its timber and timberland assets.

The Partnership employs a number of traditional and newly developed
harvesting techniques on its lands based on site specific characteristics and
other considerations. The Partnership practices "Environmental Forestry" on 100%
of its Timberlands. Environmental Forestry attempts to better protect and
maintain the ecosystem while providing for a reasonable harvest. As a part of
this, the Partnership has adopted a technique, used on a portion of the
Timberlands, which prescribes retention of a mix of green and dead trees at the
harvest site, including some large trees, snags and downed logs to enrich and
protect the soil for successive generations of trees, and to provide habitat for
a variety of wildlife species. The Partnership intends to continue to expand as
appropriate, this component of Environmental Forestry.

The Partnership's forestry operations encompass a variety of climatic
conditions, topographic features and vegetation types. Particular forestry
practices vary by geographic region and depend upon factors such as soil
productivity, tree size, age and stocking. For instance, harvesting on steep
slopes or during wet seasons is often done using cable yarding systems to
prevent damage to soils. Harvesting methods include a variety of partial
removals such as seed trees, shelterwood, overstory removal and selective
harvests, as well as sometimes clear-cutting. The method chosen depends on tree
species, terrain, visual concerns and regeneration objectives. Forest stands may
be thinned periodically to improve growth and stand quality until they are
harvested. Environmental factors, such as length of growing season, also affect
the period of time between harvest. This period, called rotation, can be as
short as 40 years in the Cascade Region and as long as 80 years in the Rocky
Mountain Region.

Different areas within a forest may be planted or seeded in successive
years to provide a variety of age classes within the forest. A variety of age
classes tends to provide a regular source of cash flow as the various timber
stands within the forest reach harvestable age. The timing of harvests of
merchantable timber depends in part on maturity cycles and in part on economic
conditions. The Partnership will continue to develop its forest management
operations to take

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advantage of technological, biological and genetic advances to improve timber
yields to the greatest extent possible. The Partnership's forestry practices now
include thinning of some timber stands, controlled burning, fertilization of
timber plantations where cost effective, disease and pest control and
reforestation.

It is the Partnership's policy to ensure that every acre harvested is
promptly reforested. Based on the geographic and climatic conditions of the
harvest site, harvested areas may be regenerated naturally by leaving mature
trees to reseed the area. Natural regeneration methods are widely used in the
Rocky Mountain Region. During 1995, the Partnership planted over 4.7 million
seedlings, mostly in the Cascade Region where about 95% of the reforestation is
done by planting. Seedlings, which are from one to three years old when planted,
are obtained partially from Plum Creek's nursery in Pablo, Montana.

The Partnership manages its forest inventory with the use of a
computerized timber inventory system. The timber inventory is calculated using
statistical information obtained by physical measurements, site maps and
photo-types. In addition, the system incorporates estimates related to growth
which considers species, topographical information, soil types, and other
factors, as well as specifications on merchantability. During 1993, 1994 and
1995, the Partnership implemented Geographical Information Systems ("GIS") to
further enhance timber management activities. The GIS stores spatial and
attribute data related to the Timberlands and provide a wide array of mapping
and analytical tools. Various data bases include geographic information,
species, volume and diameter specifications for each site.

Forests are subject to a number of natural hazards, including damage by
fire, insects and diseases. Severe weather conditions and other natural
disasters can also reduce the productivity of forest lands and can interfere
with the processing and delivery of forest products. However, damage from
natural causes is typically localized and would only affect a portion of the
Timberlands at any given time. Nevertheless, such hazards are to a large extent
unpredictable and there can be no assurance that losses will be so limited. The
size, species, diversity and checker-board ownership of the Timberlands, as well
as the Partnership's forest management practices, should help to minimize these
risks. Consistent with the practices of other large timber companies, the
Partnership does not maintain insurance against loss to standing timber on the
Timberlands, but maintains insurance for loss of logs due to fire and other
occurrences following harvesting.

MANUFACTURING SEGMENT

GENERAL. The Manufacturing Segment consists of four lumber mills, two
plywood plants, a lumber remanufacturing facility and a medium density
fiberboard ("MDF") facility in western Montana and a lumber mill and a wood chip
plant in Washington, collectively known as the "Conversion Facilities". The
Conversion Facilities produce a wide variety of lumber, plywood and MDF products
that are sold to Marketing which markets and sells the products. Marketing
targets the products to retail home centers and various specialty niche markets
which are less cyclical than the traditional housing related markets. In
addition, in order to enhance customer service and

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provide prompt deliveries, Marketing has established a network of 39 independent
warehouses located strategically throughout the United States.

The lumber remanufacturing facility was constructed in 1994. This
plant produces finger-jointed lumber for the home center market.
Finger-jointing is an engineered process which produces usable lumber by
connecting short pieces of lumber formerly sold as lower value lumber products
or relegated to the wood chipper and sold as a lower valued by-product.

RAW MATERIALS. Manufacturing obtains the majority of its raw logs from
the Partnership's Timberlands. The Resources Segment provided 73%, 63%, and 51%
of Manufacturing's raw log needs in 1995, 1994 and 1993, respectively. The
increase in sourcing from the Resources Segment was primarily due to increased
harvest levels as a result of the Montana Timberland Acquisition. The price of
logs obtained from the Partnership is determined quarterly based upon estimated
market prices and terms in effect at the time.

Manufacturing has and will continue to purchase stumpage and logs from
external sources, which include the United States Forest Service ("USFS"),
Bureau of Indian Affairs ("BIA"), Bureau of Land Management ("BLM") and state
and private timberland owners. At December 31, 1995 and 1994, Manufacturing had
75 MMBF and 100 MMBF, respectively, of timber under contract from external
sources which may be harvested over the next three years. The USFS harvest plan,
which includes volume from the recent salvage legislation, is expected to
provide for a 1996 harvest of 350 MMBF in the geographic area of the Conversion
Facilities. However, due in part to legal challenges and changes in public
policy, the USFS will most likely sell less than that volume. Manufacturing is
permitted to bid on up to approximately fifty percent annually of this USFS
volume, with the remainder set aside for small businesses. In addition,
approximately 545 MMBF of timber is expected to be made available annually from
other sources. The geographic area in which the Conversion Facilities operate
may expand or contract from year to year as the cost of logs and value of
manufactured products fluctuate. (For further discussion of other timber supply
issues see "Federal and State Regulations".)

PRODUCTS AND MARKETS

LUMBER. Manufacturing produces a diverse line of lumber products,
including boards and studs which are manufactured at two studmills, three
random-length lumber mills and a lumber remanufacturing plant. For the years
ended December 31, 1995, 1994 and 1993 these mills produced 433 MMBF, 388 MMBF,
and 352 MMBF of lumber, respectively. Production increased in 1995 and 1994 due
to the addition of the lumber remanufacturing plant, which began operations in
late November 1994, higher productivity due to improved log merchandising
specifications and capital improvements, and additional production shifts.
Lumber product revenues represented approximately 38% of combined revenues for
1995, 1994 and 1993.

The Manufacturing Segment targets its lumber sales towards domestic
lumber retailers, such as retail home center chains, for use in repair and
remodeling projects. Value-added products such as consumer appearance boards,
pull-to-length boards, premium furring strips, premium studs and pattern boards,
aimed at retail and other specialty markets, have made the Manufacturing Segment

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less dependent on the cyclical housing related market. In 1995, 61% of
Manufacturing's lumber products were sold into retail markets, 18% to industrial
and remanufactured product markets, 17% to stocking distributors and 4% to
export markets. These amounts compare to 62%, 20%, 12% and 6% for these same
markets, respectively, in 1994.

PLYWOOD. Manufacturing produces high-grade plywood which is primarily
sold into specialized industrial markets. Plywood products are manufactured at
the Company's two plywood facilities. For the years ended December 31, 1995,
1994 and 1993 the plywood plants produced 294 million square feet ("MMSF") (3/8"
basis), 290 MMSF, and 289 MMSF of plywood, respectively. Plywood product
revenues represented 18%, 17% and 18% of combined revenues in 1995, 1994 and
1993, respectively. During 1995, capital improvements were made that expanded
production to include medium-density overlay plywood and scarfed (joined
together) plywood to produce longer lengths for specialty products. During 1993
and 1994, automated layup lines were installed in the plywood plants. These
lines have increased productivity, enhanced wood recovery and produced a
superior product for the industrial markets served.

During 1995 and 1994, 71% and 80%, respectively, of Manufacturing's
plywood products were sold in specialty industrial markets, including carpet
strip, recreational boat, recreational vehicle and fiberglass-reinforced panel
markets. The decrease in sales to industrial markets was the result of relative
weakness in the industrial markets as a result of high field inventory levels
and extended downtime in the recreational vehicle and recreational boat markets
during model year changes. Manufacturing's plywood products are generally of
higher quality and value than commodity construction grade products, which makes
them more valuable in these specialty niche markets.

MEDIUM DENSITY FIBERBOARD. Manufacturing produces MDF products which
are primarily sold to distributors, commercial store fixture producers,
furniture manufacturers and molding manufacturers. During 1995, the
manufacturing process was redesigned to produce MDF2, a higher quality MDF
product that can be machined and finished more efficiently. For the years ended
December 31, 1995, 1994 and 1993 the plant produced 102 MMSF (3/4" basis), 123
MMSF, and 106 MMSF of MDF, respectively. The decrease in production in 1995 was
the result of downtime associated with issues encountered during the start-up of
new high-energy refiners for our new MDF2 product and deterioration in demand.
The increased production volume in 1994 was due to improvements in the
production process. The 1993 production was down slightly due to a February fire
at the plant which caused production delays.

The Manufacturing Segment supplies high quality MDF to markets
primarily in North America and Pacific Rim countries. In 1995, the Manufacturing
Segment sold approximately 50% of its MDF directly to domestic industrial
manufacturers or fabricators, 30% to stocking distributors, 14% into overseas
export markets, primarily Pacific Rim countries, and 6% to retail and other
markets. These amounts compare to 47%, 32%, 17% and 4% to the same markets,
respectively, in 1994.

CHIPS. Manufacturing's lumber and plywood mills produce residual wood
chips as a by-product from the conversion of raw logs into finished products.
These wood chips are sold to regional paper and pulp mills. The Company's lumber
and plywood facilities produced 297 thousand

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bone dry tons ("MBDT"), 288 MBDT and 257 MBDT of chips in 1995, 1994 and 1993,
respectively. Residual wood chip sales volume has increased annually due to
increased lumber and plywood production and increased chip recoveries.

Manufacturing also produces wood chips at its Cle Elum, Washington chip
plant. The chip plant produced 38 MBDT, 54 MBDT and 76 MBDT in 1995, 1994 and
1993, respectively. The decrease in production in 1995 resulted from production
curtailments for approximately five months due to log supply shortages. The
decrease in production in 1994 was caused by halting production for three months
due to log supply shortages in the chip market.

SEASONALITY

Domestic log sales volumes are typically at their lowest point in the
second quarter of each year during spring break-up, when warming weather thaws
and softens roadbeds, restricting access to logging sites. Revenues from export
log sales are affected in part by variations in inventory in the countries where
such logs are sold as well as by weather conditions. Winter logging activity in
the Pacific Northwest takes place at lower elevations, where predominantly
second growth logs are found, affecting the volume of higher quality export logs
sold during this time of the year.

Demand for manufactured products is generally lower in the fall and
winter quarters when activity in the construction, industrial and repair and
remodeling markets is slower, and higher in the spring and summer quarters when
these markets are more active. Working capital varies with seasonal
fluctuations. Log inventories increase going into the winter season to prepare
for reduced harvest during spring break-up.

FEDERAL AND STATE REGULATIONS

GENERAL. The activities of the Company are subject to various federal
and state environmental laws and regulations which impose limitations on the
discharge of pollutants into the air and water and which also establish
standards for the treatment, storage and disposal of solid and hazardous waste,
and govern the discharge of runoff stormwater and wastewater. The General
Partner believes that the Company is in substantial compliance with such laws
and regulations. (See Item 3. Legal Proceedings.)

The activities of the Company are also subject to federal and state
regulations regarding natural resources and forestry operations and the
requirements of the federal Occupational Safety and Health Act and comparable
state statutes relating to the health and safety of the Company's employees. The
General Partner believes that the Company is in substantial compliance with such
laws and regulations.

The Company conducts operations in or near significant environmentally
sensitive areas which include the habitats of numerous species including a
number of threatened or endangered species. As a result, the Company's
activities in such areas may be subject to restrictions relating to the
harvesting of timber and the construction of roads.

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THREATENED AND ENDANGERED SPECIES. In July 1990, the United States Fish
and Wildlife Service ("USFWS") listed the Northern Spotted Owl ("Owl") as a
threatened species throughout its range in Washington, Oregon and California
under the federal Endangered Species Act ("ESA").

At the time of the listing, the USFWS issued suggested guidelines
("Guidelines") to be followed by landowners in order to comply with the ESA's
prohibition against harming or harassing Owls. These Guidelines were rescinded
in response to an industry lawsuit, but continue to serve as the basis for USFWS
enforcement of the ESA. The Guidelines impose several requirements, including
the restriction and preclusion of harvest activities in areas within a 1.8 mile
radius (approximately 6,600 acres) of known nest sites or activity centers for
pairs of Owls or territorial single Owls ("Activity Areas"). Under the
Guidelines, at least 40% in the aggregate of the area within Activity Areas has
to be maintained as suitable Owl habitat. In addition, 70 acres immediately
around nest sites have to be preserved.

In June 1992, the Washington State Forest Practices Board (the "Board")
adopted temporary regulations related to all forest practice applications
("FPAs") which require that FPAs comply with the Washington State
Environmental Policy Act ("SEPA") for all activities within the 500 acres of
habitat surrounding nest sites or activity centers. In November 1995, the Forest
Practices Board adopted a final Owl rule that will take effect in July 1996.
Until the final rule takes effect, the temporary rule will govern. Under the
final rule, restrictions substantially similar to those contained in the
Guidelines would apply in designated Owl special emphasis areas ("SEAs").
Outside of SEAs, only 70 acres surrounding Activity Areas would be protected
during the breeding season only. As a result, the final rule will result in the
same level of regulation on areas within SEAs and fewer restrictions on the
Partnership's activities in areas outside of SEAs due to the Owl. Approximately
60% of the Partnership's lands in the Cascade Region are within SEAs.

In February 1995, the USFWS announced that it is proposing to draft a
special rule ("Special Rule") to redefine private landowner obligations with
regard to Owls under the ESA. The final Washington state Owl rule is expected to
form the basis for the Special Rule in Washington state.

On July 16, 1993, the Clinton Administration proposed a new forest
policy (the "Forest Plan") that would substantially reduce harvest from public
lands in Owl forests and provide for the conservation of the Owl and numerous
other species. In December 1994, the Forest Plan was approved by a Federal
District Court.

IMPACT OF REGULATIONS ON PARTNERSHIP. Under the Guidelines issued by
the USFWS in 1990, approximately 111,000 acres of the 330,000 acres in the
Partnership's Cascade Region lie within Activity Areas. Compliance with the ESA
and SEPA is causing delays and in some cases modification of Partnership FPAs
in Owl Activity Areas and may cause denials of future Partnership FPAs.

In October 1995, the Partnership formally applied for a multi-species,
50 year permit under the ESA from the USFWS and the National Marine Fisheries
Service ("NMFS") that would cover the Partnership's forest management on 170,000
acres within SEAs in the Cascade Region (the "Planning Area"). As a part of the
permit application, the Partnership prepared a habitat

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conservation plan ("HCP") that would govern the Partnership's management
activities in the Planning Area. The Partnership expects to receive the permit
in the second quarter of 1996, following completion of the public review
process. There are, however, no assurances that the permit will ultimately be
issued by the USFWS and NMFS.

The permit, if issued, would authorize the incidental take in the
Planning Area of the Owl, Marbled Murrelet, Grizzly Bear and Gray Wolf, which
are currently listed under the ESA, as well as numerous other species should
they become listed during the term of the permit. In addition, as an incentive
to the Partnership to create additional wildlife habitat in the Planning Area,
the permit may extend for an additional 50 years if wildlife habitat exceeds
levels authorized in the HCP. The permit thus would provide long-term certainty
and predictability to the Partnership's harvest activities. Under the ESA, the
permit may allow impacts on species incidental to normal management activities
in exchange for mitigating measures agreed to by the landowner in the HCP. The
restrictions in the HCP would replace restrictions for Owls under the final
Washington state Owl rule, the Guidelines, the Special Rule, if adopted, and
SEPA.

The ESA also prohibits the federal government from causing jeopardy to
species listed under the ESA or from destroying or adversely modifying their
designated critical habitat. Private landowners are potentially affected by this
restriction if a private activity requires federal action, such as the granting
of access or federal funding. Where there is such a federal connection, the
federal agency involved must consult with the USFWS or NMFS, in the case of
anadromous fish, to determine that the proposed activity would not cause
jeopardy to the listed species or cause direct or indirect adverse modification
of its designated critical habitat. If the landowner's proposed activity would
cause jeopardy, the USFWS or NMFS must propose, where possible, alternatives or
modifications to the proposed activity. The Partnership's Timberlands are often
intermingled with federal land in or near areas that include the habitats of a
number of threatened or endangered species such as the Owl and the Grizzly Bear.
Thus, access across federal lands to certain of the Partnership's Timberlands in
such areas has been, and is likely to continue to be, delayed by the
administrative process and legal challenges and may be subjected to restriction
under the ESA.

In December 1995, the Company entered into a Grizzly Bear Conservation
Agreement with the USFWS, the USFS, and the state of Montana covering 370,000
acres in the Swan Valley in western Montana. Under this agreement, the Company
has received a permit that authorizes incidental take of Grizzly Bears in the
Swan Valley. Moreover the agreement will facilitate future consultations with
the USFWS over road access projects and land exchanges in the Swan Valley.

The ultimate impact of the Owl listing, as well as listings of
additional species under the ESA, on the Partnership will depend on (i) the
number of Activity Areas actually found on or near Partnership Timberlands, (ii)
the availability and amount of suitable habitat within individual Activity
Areas, (iii) the outcome of the Clinton Administration's forest policy, (iv)
future regulations and restrictions placed on private and public lands, (v)
promulgation, interpretation and application of wildlife regulations by both the
USFWS (including the proposed Special Rule) and the Washington State Department
of Natural Resources, (vi) the outcome of the Partnership's efforts to obtain a
multi-species permit from the USFWS and NMFS, (vii) the impact of reduced
harvests upon stumpage prices, and (viii) the outcome of litigation.

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Although the continuing uncertainty surrounding efforts to conserve the
Owl make it difficult to assess the future impact of the Owl listing on the
Partnership, at this time the General Partner does not believe that federal and
state laws and regulations related to the Owl will have a materially adverse
effect on the financial position of the Company, its results of operations or
liquidity. There can be no assurances, however, that (i) future interpretation
or administration of current laws and regulations, (ii) changes in laws or
regulations, (iii) increases in the number of Owls on or near Partnership lands,
or (iv) decreases in suitable habitat adjacent to Partnership lands will not
adversely affect the operations, financial position or liquidity of the Company.

The General Partner anticipates that increasingly strict laws and
regulations relating to the environment, natural resources, forestry operations,
and health and safety matters, as well as increased social concern over
environmental issues, may result in additional restrictions on the Company
causing increased costs, additional capital expenditures and reduced operating
flexibility.

LEGISLATION RESTRICTING LOG EXPORTS. Federal legislation currently
prohibits the sale of unprocessed logs harvested from federal lands located in
the western half of the U.S. if such logs will be exported from the U.S. by the
purchaser thereof, or if such logs will be used by the purchaser thereof, as a
substitute for timber from private lands which is exported by such purchaser. In
order to enforce this substitution prohibition, the legislation requires persons
who export private logs and who wish to purchase federal timber to obtain an
approved federal timber "sourcing area". To win approval it must be shown that
the desired federal timber sourcing area is economically and geographically
separate from the area from which such person exports private logs. In 1991, the
Company applied for and obtained an approved sourcing area for the Partnership's
conversion facilities. Under the legislation, sourcing areas are subject to
review and renewal at least every five years. The Partnership's sourcing area
may, therefore, be reviewed in 1996.

In October 1995, the USFS issued final regulations implementing the
1990 legislation that could have made it more difficult to obtain sourcing
areas. These regulations, however, have been temporarily withdrawn pursuant to
Congressional action to allow time for further public comment and for Congress
to consider modifications to the export law. Revisions to the law and
regulations have not yet been proposed. Although the uncertainty surrounding the
export regulations makes it difficult to predict the timing or the outcome of a
review, the Company believes that its sourcing area meets the current statutory
test and should be renewed.

In addition, federal legislation prohibits the export of unprocessed
logs harvested from certain state lands. Initially, Washington and Oregon
prohibited the export of all logs harvested from state lands. The legislation
provided, however, that the ban in Washington state on the export of state logs
would become a partial ban beginning January 1, 1996. Pending finalization of
the rules, the full ban is being maintained. Proposals have also been made from
time to time, but to date have been unsuccessful, to either ban or tax the
export of unprocessed logs harvested from private lands.

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INCOME TAX CONSIDERATIONS

PARTNERSHIP STATUS. The Partnership is not a taxable entity and incurs
no federal income tax liability. Each partner is required to take into account
in computing his or her federal income tax liability, his or her allocable share
of income, gains, losses, deductions and credits of the Partnership, regardless
of whether cash distributions are made. Distributions by the Partnership to a
partner are generally not taxable.

Publicly traded partnerships will, as a general rule, be taxed as
corporations. However, an exception (the "Qualifying Income Exception") exists
with respect to publicly traded partnerships of which 90% or more of the gross
income for every taxable year consists of qualifying income. Qualifying income
includes income from the processing, refining, marketing or transportation of
timber. The Partnership's principal sources of income include income from the
sale of timber, the transportation of timber, the operation of sawmills and the
production of plywood and MDF. The Internal Revenue Service ("IRS") has issued
two rulings to the Partnership that income from the operation of sawmills and
the production of plywood and MDF is qualified for this purpose.

SECTION 754 ELECTION. The Partnership has made the election permitted
by Section 754 of the Internal Revenue Code (the "Code"). The election requires
a purchaser of depositary units representing limited partner interests ("Units")
to adjust his or her share of the basis in the Partnership's properties ("Inside
Basis") pursuant to Section 743(b) of the Code to fair market value (as
reflected by his or her Unit cost). A Unitholder's allocable share of
Partnership income, gains, losses and deductions is determined in accordance
with the Unitholder's unique basis under this election. Such election is
irrevocable and may not be changed without the consent of the IRS. The Section
743(b) adjustment is attributed solely to a purchaser of Units and is not added
to the basis of the Partnership's assets associated with all of the Unitholders.

FEDERAL INCOME TAXATION - GENERAL. Marketing, organized as a separate
corporation, reports all of its income, gains, losses, deductions and credits
arising from its operations on its own tax return and pays a corporate tax on
any resulting net income. Under current law, Marketing's net income is subject
to federal income tax at rates of up to 35%. Losses realized by Marketing do not
flow through to the Partnership, but are carried back and forward, within
certain limitations, to offset taxable income of Marketing in past or future
years. Distributions, if any, received by the Partnership from Marketing
generally would be characterized as either taxable dividends of current or
accumulated earnings and profits or in the absence of earnings and profits, as a
nontaxable return of capital (to the extent of the Partnership's tax basis in
Marketing's stock) or as taxable capital gain (after the Partnership's basis in
such stock is reduced to zero).

STATE TAX INFORMATION. The Partnership conducts operations in three
states, two of which (Idaho and Montana) have a state income tax. To simplify
the Unitholders' state filing requirements, the Partnership files composite
returns in each of those states and pays the state income tax due for
non-resident Unitholders. Marketing conducts operations in approximately 25
states for which it pays state corporate income taxes.

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TAX-EXEMPT ENTITIES. Certain entities otherwise generally exempt from
federal income taxes (such as individual retirement accounts ("IRAs"), employee
benefit plans and other charitable or exempt organizations) may be subject to
federal income tax if their share of Unrelated Business Taxable Income ("UBTI")
exceeds $1,000. For years prior to 1994, all income derived from publicly traded
partnerships was classified as UBTI. For years after 1993, income is classified
as UBTI dependent upon source. Most of the Partnership's income continues to be
classified as UBTI. Regulated investment companies are required to derive 90% or
more of their gross income from qualified sources, such as interest or security
trading income; gross income from the Partnership is not qualifying income for
purposes of this test.

TIMBER INCOME. Section 631 of the Code provides special rules by which
gains from the sale of timber or cut logs, which would otherwise be taxable as
ordinary income, are treated in whole or in part as capital gains from the sale
of property used in a trade or business. The Partnership has elected to apply
the provisions of Section 631. Substantially all of the Partnership's 1995
taxable income is expected to qualify for capital gains treatment.

ENCUMBRANCES

Under the terms of the Senior Notes due 2007, the Senior Notes due 2009
and the Lines of Credit, the Partnership has agreed not to pledge, assign or
transfer the Timberlands, except under limited circumstances. Under the terms of
the First Mortgage Notes of Manufacturing, the holders of these notes have a
first mortgage lien on substantially all of the Conversion Facilities. In
addition, the Partnership guarantees the First Mortgage Notes of Manufacturing.

The Partnership's title to the timberlands acquired during the
formation of the Company on June 8, 1989 includes the related hard rock mineral
interests. However, the Partnership did not obtain the hard rock mineral
interests to the 865,000 acres of timberland purchased in the Montana Timberland
Acquisition. In addition, the Partnership does not own oil and gas interests to
any of its Timberlands. The title to the Timberlands is subject to presently
existing easements, rights of way, flowage and flooding rights, servitudes,
cemeteries, camping sites, hunting and other leases, licenses and permits, none
of which materially adversely affect the value of the Timberlands or materially
restrict the harvesting of timber or other operations of the Partnership.

COMPETITION

RESOURCES SEGMENT. In export log markets, the Partnership competes with
other U.S. companies, Chile, New Zealand, Russia, Canada and Scandinavia, all of
which have abundant timber resources. Competitive factors generally will include
price, species and grade and ability to meet delivery requirements.

In domestic log markets, the Partnership competes with numerous private
land and timber owners in the Northwestern U.S. and the states of Idaho,
Montana, Oregon and Washington, as well as lesser amounts of foreign imports,
primarily from Chile and New Zealand. In addition, the Partnership competes with
the U.S. Government, principally the USFS and the BLM, and the BIA.

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Timber supplied from the U.S. Government, Washington and Oregon land is
restricted from export, and is sold solely into domestic markets. (See Federal
and State Regulations.)

Domestic wood and fiber consuming facilities tend to purchase raw
materials within relatively small geographic areas, generally within a 200 mile
radius, due to log transportation costs. Competitive factors within a market
area generally will include price, species and grade, proximity to wood
consuming facilities and ability to meet delivery requirements.

MANUFACTURING SEGMENT. Markets for forest products are highly
competitive in terms of price and quality. The Manufacturing Segment competes in
domestic lumber markets primarily with other U.S. and Canadian companies.
Canadian lumber producers have increased their penetration into the U.S. market
due to their low cost advantage and favorable exchange rates. The U.S. and
Canadian governments are currently negotiating a timber trade agreement which
may result in less favorable exporting conditions for Canadian producers. The
lumber market is also subject to competition from substitute products, primarily
in shelving, window and door markets. The Manufacturing Segment competes in the
Japanese lumber market primarily with Japanese, Canadian, Russian and
Scandinavian companies. The domestic plywood market is characterized by numerous
large and small producers and is subject to competition from oriented strand
board and waferboard, which are less expensive, but generally lower quality
substitutes. Significant capacity expansion of oriented strand board production
is planned in 1996. The Manufacturing Segment competes in domestic MDF markets
primarily with other U.S. and Canadian companies that produce high quality MDF.
Significant MDF capacity expansion is planned in this market in 1996.
Competition in export markets primarily consists of Japanese, Korean and
Malaysian companies.

Competition in the markets for commodity-grade lumber and plywood is
primarily based on pricing strategies. Sales in specialty niche industrial
markets and retail markets are strongly influenced by product quality, customer
service, efficiency of distribution and the ability to supply products in the
future, in addition to price. The ability to provide companion products and a
variety of substitute products is also used as a marketing strategy for certain
products. MDF producers typically compete on a global scale. Accordingly, sales
are generally determined by price, product quality and level of customized
services the producer can provide, rather than by geographic location.

EMPLOYEES

The Company currently has approximately 350 salaried and 1,500 hourly
employees, including employees of the General Partner that manage the businesses
of the Company. The Company believes that its employee relations are good. The
Company's wage scale and benefits are generally competitive with other forest
products companies. The Company's employees are not unionized. The harvesting
and delivery of logs are conducted by independent contractors who are not
employees of the Company.

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ITEM 2. PROPERTIES

The Company believes that its Timberlands and Conversion Facilities are
suitable and adequate for current operations. The Conversion Facilities are
modern, state of the art operations maintained through on-going capital
investments, regular maintenance and equipment upgrades. The Company owns
substantially all of the Conversion Facilities. All of the Conversion Facilities
are operated at near maximum capacity levels year round. See Item 1. Business
for discussion of the location and description of properties and encumbrances
related to properties.

ITEM 3. LEGAL PROCEEDINGS

On June 7, 1995, the Company received a Compliance Order ("Order") from
the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order
alleges that the installation in 1990 of a boiler at the Company's Pablo sawmill
did not undergo new source performance review. Work on the boiler project
commenced in March of 1989, when the applicable regulation did not require a
review. Prior to final installation of the boiler, however, new rules were
proposed that required such review. The EPA has taken the position that the new
rules applied, and is seeking compliance with the new source performance
standards. To help resolve this issue, Plum Creek voluntarily installed both a
pollution control device on the boiler and an opacity monitor in December 1995
and is in full compliance with the Order.

There is no pending litigation, and to the knowledge of the General
Partner there is no threatened litigation involving the Company which would have
a material adverse effect on the financial position, the results of operations
or liquidity of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED UNITHOLDER MATTERS

The Partnership's Units are traded on the New York Stock Exchange. As
of January 31, 1996, there were approximately 53,400 beneficial owners of
40,608,300 outstanding Units.

Trading price data, as reported by the New York Stock Exchange, and
declared cash distribution information for 1995 and 1994 are as follows:

1995 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ---- -------- -------- -------- --------

High $ 24 $ 26-1/8 $ 26-5/8 $ 25-1/4

Low 19-7/8 21-7/8 23-5/8 21-7/8

Cash Distribution per Unit $ 0.49 $ 0.49 $ 0.49 $ 0.49

1994 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ---- -------- -------- -------- --------

High $ 32-1/2 $ 28-5/8 $ 26-1/2 $ 24-3/4

Low 23 21-1/2 22-5/8 19-5/8

Cash Distribution per Unit $0.38 $0.43 $0.43 $0.43

Cash distributions are paid from available cash as defined by the
Partnership's partnership agreement. It is the Company's intention to maintain
the distribution into the foreseeable future; however, there can be no
guarantee. In addition, the Company's debt agreements have certain restrictive
covenants limiting the amount of cash distributions.

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ITEM 6. SELECTED FINANCIAL DATA

1995 1994 1993(2) 1992(5) 1991
---- ---- ------- ------- ----

For the year:
(In millions, except per Unit):
Revenues (1) $ 585.1 $ 578.7 $ 501.0 $ 439.9 $ 389.8
Depreciation, Depletion and
Amortization 54.1 54.1 38.8 39.0 43.0
Operating Income 159.0 164.1 126.6 97.8 55.7
Net Income 110.7 112.2 91.4 64.2 18.7
Capital Expenditures (4) 30.7 25.8 284.6 25.6 11.4
Net Cash Provided by Operations 165.2 155.1 115.3 78.0 62.1
Net Income per Unit (3) 2.17 2.36 1.92 1.34 0.37
Cash Distributions Declared
per Unit (3) 1.96 1.67 1.38 1.17 1.07
At year end (in millions):
Working Capital 111.5 90.5 51.0 99.7 73.1
Total Assets 826.1 826.2 818.7 587.0 581.5
Total Long-Term Debt 531.4 544.4 569.9 318.5 325.0
Partners' Capital $ 233.9 $ 223.0 $ 192.6 $ 225.3 $ 211.7

Operating Data:
Fee Timber Harvested (MMBF) (1) 562 559 458 469 563
Non-Fee Timber Harvested (MMBF) 116 71 77 117 76
Lumber Production (MMBF) 433 388 352 395 409
Plywood Production (MMSF)
(3/8" basis) 294 290 289 294 279
MDF Production (MMSF)
(3/4" basis) 102 123 106 109 103

(1) Revenues and fee timber harvest increased in 1995 and 1994 in part due to
the November 1993 Montana Timberland Acquisition.

(2) During 1993, the Company elected to change its method for valuing
inventories from average cost to the last-in, first-out ("LIFO") method. This
change in accounting lowered 1993 earnings by $8.0 million or $0.18 per Unit.
The cumulative effect of the accounting change and pro forma effects on prior
years' earnings have not been included because such effects are not reasonably
determinable. In addition, on August 30, 1993, the Partnership redeemed the 1.25
million DPIs (on a pre-Unit split basis) for $63.0 million.

(3) Per Unit amounts have been restated for the December 6, 1993 three-for-one
Unit split.

(4) Included in 1993 capital expenditures was $255.3 million paid for the
timberlands acquired as part of the Montana Timberland Acquisition.

(5) Included in 1992 results of operations was the sale of the 164,000 acre
Gallatin Unit, together with the Belgrade sawmill for $23 million plus the value
of inventory. The sale resulted in a net gain of $15.6 million.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

Plum Creek Timber Company, L.P. (the "Partnership"), a Delaware limited
partnership, Plum Creek Manufacturing, L.P. ("Manufacturing"), and Plum Creek
Marketing, Inc., ("Marketing"), own, manage, and operate 2.0 million acres of
timberland and ten wood products conversion facilities in Montana, Washington
and Idaho. The Partnership owns 98 percent of Manufacturing and 96 percent of
Marketing. Plum Creek Management Company, L.P., (the "General Partner"), manages
the businesses of the Partnership, Manufacturing and Marketing and owns the
remaining two percent and four percent of Manufacturing and Marketing,
respectively. As used herein, "Company" refers to the combined entities of the
Partnership, Manufacturing and Marketing. "Resources Segment" refers to the
combined timber and land management business of the Partnership. "Manufacturing
Segment" refers to the combined business of Manufacturing and Marketing.

EVENTS AND TRENDS AFFECTING OPERATING RESULTS

MARKET FORCES. The demand for logs and manufactured wood products
depends upon international and domestic market conditions, the value of the U.S.
dollar in foreign exchange markets, competition, the availability of substitute
products and other factors. In particular, the demand for logs, lumber, plywood
and MDF is affected by residential and industrial construction, and repair and
remodel activity. These activities are subject to fluctuations due to changes in
economic conditions, tariffs, interest rates, population growth and other
economic, demographic and environmental factors.

CURRENT MARKET CONDITIONS. Prices for domestic logs in the Cascade
Region for 1995 increased from levels experienced in 1994, primarily as a result
of strong pulp and paper markets competing for logs in the domestic market
during the first three quarters of the year and the diverting of export quality
logs to the domestic market during the second half of the year as a result of a
weakening Japanese market. At year-end 1995, Douglas-fir prices were holding
steady due to a lack of supply, and whitewood prices were declining as a result
of falling chip prices. Domestic log prices in the Rockies Region were lower
than prices experienced in 1994, as a result of weaker lumber markets,
aggressive competition from Canadian lumber producers and a fourth quarter
decline in both commodity plywood prices and chip prices. Export log prices for
1995 increased slightly over 1994 prices as a result of the diversion of lower
quality export logs to the domestic market and near record high price levels in
the first quarter of 1995 due to low inventory levels in Japan and the U.S. west
coast. At year end, there was upward price pressure on export logs due to the
short supply of logs in both Japan and the U.S. west coast.

Industry composite indices for lumber commodity prices were 18% lower
in 1995 than in 1994. The decrease in prices was primarily due to relative
weakness in the housing market, aggressive pricing and competition from Canadian
lumber producers, and increased competition from substitutes. Industry composite
indices for plywood commodity prices and prices for MDF

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in 1995 approximately equaled levels experienced in 1994. Commodity plywood
prices began declining during the fourth quarter due to a slowing housing market
and the significant oriented strand board capacity expansion projected in 1996.
MDF prices have fallen significantly as compared to price levels at year-end
1994 due to a decline in demand for ready-to-assemble furniture as a result of
lower repair & modeling activity, high end-user inventories, and capacity
expansion by Pacific Rim manufacturers. Prices for pulp logs and chips improved
significantly during the first and second quarter of 1995 due to strong pulp and
paper markets. Prices peaked during the summer and have since retreated due to
the oversupply of logs and chips that was brought on by these higher prices.

FINANCIAL CONDITION AND LIQUIDITY

Net cash provided by operating activities was $165.2 million, $155.1
million and $115.3 million for 1995, 1994 and 1993, respectively. In 1994,
operating cash flow was reduced by $9.2 million, net of expense, for the funding
of certain employee benefit plans. There was no such funding in 1995. Future
funding of these benefit plans is contingent on meeting targets as defined in
the plans. For further discussion of these benefit plans, see Note 10 of Notes
to Combined Financial Statements. On December 31, 1995, the Company had $87.6
million of cash and cash equivalents.

The Partnership has two unsecured revolving lines of credit ("Lines of
Credit") with a group of banks that permit the Partnership to borrow up to $135
million for general corporate purposes, including up to $5 million of standby
letters of credit issued on behalf of the Partnership or Manufacturing. The
Lines of Credit bear a floating rate of interest. One line of credit allows the
Partnership to borrow $100 million through October 31, 2000, of which $82.5
million was outstanding at December 31, 1995. The other line of credit allows
the Partnership to borrow $35 million through October 28, 1996 (any borrowings
outstanding at that time are payable in quarterly installments, at the option of
the Partnership, due January 1997 through October 1998), of which $15 million
was outstanding at December 31, 1995. As of December 31, 1995, there were
letters of credit outstanding in the amount of $0.8 million. Borrowings on the
Lines of Credit fluctuate daily based on cash needs. As of January 4, 1996, all
borrowings on the Lines of Credit were repaid.

The Company's long-term debt agreements and Lines of Credit contain
certain restrictive covenants, including limitations on harvest levels, sale of
assets, cash distributions and the amount of future indebtedness. The Company
was in compliance with such covenants as of December 31, 1995 and 1994. The
First Mortgage Notes limit distributions from the Manufacturing Segment to the
Partnership.

The Partnership will distribute $0.49 per Unit for the fourth quarter
of 1995. The distribution will equal $25.9 million (including $6.0 million to
the General Partner), and will be paid on March 1, 1996 to Unitholders of record
on February 15, 1996. The computation of cash available for distribution
includes a required reserve for the payment of principal and interest, as well
as other reserves established at the discretion of the General Partner, for
working capital, capital expenditures or future cash distributions.

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Cash required to meet the Partnership's quarterly cash distributions,
capital expenditures and to satisfy interest and principal payments on the
Company's debt will be significant. The General Partner expects that all debt
service will be funded from cash generated by operations. The Partnership
expects to make cash distributions from current funds and cash generated from
operations. It is anticipated that future capital expenditures will be funded
from current funds and cash generated from operations.

The Company is involved in certain environmental and regulatory
proceedings and other related matters. Although it is possible that new
information or future developments could require the Company to reassess its
potential exposure related to these matters, the Company believes, based upon
available information, that the resolution of these issues will not have a
materially adverse effect on its results of operations, financial position or
liquidity.

CAPITAL EXPENDITURES

Capital expenditures for the Resources Segment were $8.5 million, $7.1
million and $260.5 million for 1995, 1994 and 1993, respectively. Resources
Segment capital expenditures included the construction of logging roads and
reforestation. Resources Segment capital expenditures for 1993 included $255.3
million of timberlands purchased as part of the Montana Timberland Acquisition,
as well as construction of logging roads and reforestation. Capital expenditures
for the Manufacturing Segment were $22.2 million, $18.7 million and $24.1
million for 1995, 1994 and 1993, respectively. Manufacturing Segment capital
expenditures in 1995 included a project in the MDF plant to produce
Super-Refined MDF2, a higher quality MDF product that can be machined and
finished more efficiently, adding significant value to the MDF product line, air
quality pollution control equipment at the MDF plant, various lumber and plywood
value-added projects, and equipment upgrades to meet environmental requirements.

Planned capital expenditures for the Resources Segment in 1996 are $9
million, primarily for logging roads and reforestation. The Manufacturing
Segment's 1996 planned capital expenditures are $11 million which includes the
purchase and installation of various lumber and plywood optimization projects,
as well as replacements and upgrades of other equipment in several of the
Conversion Facilities.

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RESULTS OF OPERATIONS

The following table compares operating income by segment for the years
ended December 31, 1995, 1994 and 1993.

Operating Income by Segment
(In Thousands)

1995 1994 1993
---- ---- ----

Resources .......... $ 139,192 $ 150,730 $ 135,238
Manufacturing ...... 35,567 32,175 11,471
Other & Eliminations (15,783) (18,771) (20,152)
--------- --------- ---------
Total .............. $ 158,976 $ 164,134 $ 126,557
--------- --------- ---------

1995 COMPARED TO 1994

Resources Segment revenues were $327.0 million and $324.4 million for
the years ended 1995 and 1994, respectively. Revenues were $2.6 million higher
in 1995, primarily due to a $21.7 million increase in revenues from pulpwood and
chip sales offset in part by lower export log sales volume and lower domestic
log prices. The increase in pulpwood and chip revenues was due to the addition
of in-woods chipping operations, which utilize small tops of trees and small
trees from thinning operations, and a significant increase in pulp log prices
and sales volume as compared to 1994 due to strong pulp and paper markets.
Export log sales volume decreased by 18%, as compared to 1994, due to the
shifting of lower quality export logs to the domestic market as a result of a
weaker Japanese economy and a planned reduction in harvest levels. Domestic log
prices, as compared to 1994, decreased by 8%. The decrease was attributable
entirely to the Rockies Region and was due to weak lumber markets and aggressive
competition from Canadian lumber producers.

Resources Segment costs and expenses were $187.8 million and $173.7
million for the years ended 1995 and 1994, respectively. Costs and expenses were
$14.1 million higher in 1995 primarily due to the costs relating to higher
volumes of pulpwood and chip sales.

Manufacturing Segment revenues were $375.7 million and $372.2 million
for the years ended 1995 and 1994, respectively. Revenues were $3.5 million
higher in 1995 due to an increase in lumber sales volume and a 60% increase in
revenues from residual chip sales, offset in part by lower lumber prices and
lower MDF sales volume. Lumber sales volume increased by 8% in 1995, as compared
to 1994, due to increased production as a result of the new lumber
remanufacturing facility, higher productivity due to improved log merchandising
specifications and capital improvements, and additional production shifts.
Lumber prices decreased by 13% as compared to 1994 due to a weaker housing
market as a result of generally slower economic conditions, and increased
competition from both Canadian imports and substitute products. While our lumber
prices

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are influenced by commodity prices, we are able to maintain sales volume
due to our high concentration of sales in the repair & remodel and industrial
markets, which are less impacted by the slow housing market. MDF sales volume
decreased by 15% as a result of production downtime associated with weak market
conditions and issues encountered during the start-up of new high-energy
refiners for our new MDF2 product. Residual chip revenues increased due to a
substantial increase in prices over 1994 due to strong pulp and paper markets.

Manufacturing Segment costs and expenses were $340.1 million for the
years ended 1995 and 1994. Increased costs due to increased lumber sales volumes
were offset by lower log costs (14% and 4% lower for lumber and plywood,
respectively) and lower MDF production costs as a result of downtime.

Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $3.0 million less in 1995 as compared to 1994. The
variance was primarily due to lower intercompany profit elimination, offset in
part by an increase in the intercompany LIFO elimination. On a combined basis,
the Resources Segment's profit on intercompany log sales is deferred until
Manufacturing converts existing log inventories into finished products and sells
them to third parties. The 1995 intercompany profit elimination was lower than
the prior year's due to a decrease in log inventory levels, and a lower log
transfer price as a result of a weaker domestic log market. On a combined basis,
the LIFO impact related to price fluctuations on the sale of intercompany logs
is eliminated. The 1995 intercompany LIFO elimination was greater than the prior
year's due to a lower log transfer price, which resulted in a greater decrement
in Manufacturing's separate company LIFO reserve as compared to the combined
LIFO reserve.

Net other expense decreased by $2.6 million in 1995 as compared to 1994
primarily due to a decrease in fixed asset retirements, a charge in 1994 for the
write-off of capitalized debt issue costs as a result of refinancing the lines
of credit, and a decrease in the expense for state taxes payable on behalf of
non-resident Unitholders.

The income allocated to the General Partner increased by $6.2 million
during 1995 compared to 1994 as a result of higher quarterly distributions to
the Unitholders which increased the incentive distribution paid to the General
Partner. Net income is allocated to the General Partner based on two percent of
the Company's net income (adjusted for the incentive distribution paid), plus
the incentive distribution. The incentive distribution is based on a percentage
of the quarterly distribution paid which totaled $1.90 per Unit for the year
ended 1995, compared to $1.62 per Unit in 1994.

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1994 COMPARED TO 1993

Resources Segment revenues were $324.4 million and $266.1 million for
the years ended 1994 and 1993, respectively. Revenues were $58.3 million higher
in 1994, primarily due to increased sales volumes and higher prices for domestic
logs, offset in part by lower export log sales volumes and lower land sales.
Domestic log sales volume increased by 24% as compared to 1993 primarily due to
increased harvest levels. The Company's 1994 fee timber harvest was 559 MMBF
which was 101 MMBF higher than 1993, primarily as a result of the Montana
Timberland Acquisition. Domestic log prices increased in 1994 by 8% as compared
to 1993. The higher prices were primarily the result of increased demand for
wood products as well as from log shortages in the Northwest caused in part by
legal challenges to federal timber sales and changes in federal timber policy.
In addition, 1994 land sales were $6.4 million lower than 1993. Land sales
declined in 1994, primarily due to the Partnership's strategy of deferring land
sales until the completion of state and county growth management processes.

Resources Segment costs and expenses were $173.7 million and $130.9
million for the years ended 1994 and 1993, respectively. Costs and expenses were
$42.8 million higher in 1994 primarily due to the increase in the production
volumes of domestic logs, higher log and haul costs resulting from longer
hauling distances and higher road amortization and timber depletion rates
resulting from the additional roads and timber obtained in the Montana
Timberland Acquisition.

Manufacturing Segment revenues were $372.2 million and $324.6 million
for the years ended 1994 and 1993, respectively. Revenues were $47.6 million
higher in 1994 due to sales volume increases and higher prices in all product
lines. Lumber, plywood, and MDF prices increased in 1994 by 7%, 7% and 22%,
respectively, over 1993. The higher prices were the result of improved domestic
wood product demand and the impact of the log supply shortage. Lumber sales
volumes were 7% higher in 1994 as compared to 1993, primarily due to increased
production. MDF sales volumes increased by 15% in 1994 due to increased
production as a result of production improvements.

Manufacturing Segment costs and expenses were $340.1 million and $313.1
million for the years ended 1994 and 1993, respectively. The $27.0 million of
higher costs and expenses were primarily due to increased lumber and MDF
production volumes and higher log costs (14% and 15% higher for lumber and
plywood, respectively) which were the result of improving demand for finished
wood products and the log supply shortage.

Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased by $1.4 million for the year ended 1994 as compared to 1993, primarily
due to a decrease in the cost of employee benefit plans and a decrease in
executive incentive compensation paid by the Partnership. Profit resulting from
intercompany log sales is deferred until the Manufacturing Segment converts
existing log inventories into finished products and sells them to third parties.

Interest expense increased by $10.7 million in 1994 as compared to 1993
due to an increase in average debt outstanding in 1994, as a result of
borrowings in November 1993 to finance the Montana Timberlands Acquisition. Net
other expense increased by $4 million in 1994 as compared

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to 1993 primarily due to an increase in the minority interest elimination as a
result of an increase in net income in the Manufacturing Segment, an increase in
fixed asset retirements and an increase in the expense for state taxes payable
on behalf of non-resident Unitholders.

The income allocated to the General Partner increased by $7.5 million
during 1994 compared to 1993 as a result of higher net income and higher
quarterly distributions to the Unitholders which increased the incentive
distribution paid to the General Partner. Net income is allocated to the General
Partner based on two percent of the Company's net income (adjusted for the
incentive distribution paid), plus the incentive distribution. The incentive
distribution is based on a percentage of the quarterly distribution paid which
totaled $1.62 per Unit for the year ended 1994, compared to $1.30 per Unit in
1993 (1993 per Unit amounts were restated for the December 6, 1993 three-for-
one Unit split).

EXPORT SALES

The Company sells logs and finished wood products for export. These
sales are denominated in U.S. dollars and are generally sold to Pacific Rim
countries, principally Japan, and to Canada. Combined export revenues as a
percentage of total revenues were 13%, 15% and 17% for 1995, 1994, and 1993,
respectively.

EFFECT OF INFLATION

During recent years the Company has generally experienced increased
costs due to the effect of inflation, particularly in the Manufacturing Segment,
on the cost of raw materials, labor, supplies and energy. However, the Company
utilizes the LIFO inventory valuation method for its raw materials,
work-in-process and finished goods inventory which generally matches current
costs to current revenues and thus, tends to reflect the impact of inflation on
cost of goods sold.

OTHER MATTERS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"). FAS 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. If impairment has
occurred, an impairment loss must be recognized. Implementation of FAS 121 is
required in 1996. The impact of the adoption of this standard is not expected to
be material to the financial position, results of operations, or liquidity of
the Company.

In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). FAS 123 establishes a fair value based
method of accounting for stock-based compensation plans and encourages entities
to adopt that method in place of the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"). The Company intends to continue to apply the
provisions of APB 25 in recognizing compensation expense related to Unit-based
compensation plans.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION

PLUM CREEK TIMBER COMPANY, L. P.
COMBINED STATEMENT OF INCOME

Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
(In Thousands, Except Per Unit)

Revenues ................................................ $ 585,074 $ 578,657 $ 501,006
--------- --------- ---------

Costs and Expenses:
Cost of Goods Sold ................ 388,450 375,782 338,759
Selling, General and Administrative 37,648 38,741 35,690
--------- --------- ---------
Total Costs and Expenses ........ 426,098 414,523 374,449
--------- --------- ---------

Operating Income ........................................ 158,976 164,134 126,557

Interest Expense ........................................ (46,836) (47,410) (36,737)
Interest Income ......................................... 1,073 889 2,203
Other Expense - Net ..................................... (1,910) (4,477) (474)
--------- --------- ---------

Income before Income Taxes .............................. 111,303 113,136 91,549
Provision for Income Taxes .............................. 572 924 105
--------- --------- ---------

Net Income .............................................. $ 110,731 $ 112,212 $ 91,444

General Partner Interest ................................ 22,487 16,325 8,837
--------- --------- ---------

Net Income Allocable to Unitholders ..................... $ 88,244 $ 95,887 $ 82,607
--------- --------- ---------

Net Income per Unit ..................................... $ 2.17 $ 2.36 $ 1.92
--------- --------- ---------

See accompanying Notes to Combined Financial Statements.

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PLUM CREEK TIMBER COMPANY, L. P.
COMBINED BALANCE SHEET

December 31,
----------------------------
1995 1994
---- ----
(In Thousands)

ASSETS
Current Assets:
Cash and Cash Equivalents ................ $ 87,604 $ 60,942
Accounts Receivable ...................... 31,750 26,866
Inventories .............................. 47,366 54,685
Timber Contract Deposits ................. 2,320 2,823
Other Current Assets ..................... 4,949 4,013
---------- ----------
173,989 149,329

Timber and Timberlands - Net .......................... 467,992 495,462
Property, Plant and Equipment - Net .................. 166,152 162,017
Other Assets ........................................... 17,953 19,412
---------- ----------
Total Assets ........................................... $ 826,086 $ 826,220
---------- ----------
LIABILITIES
Current Liabilities:

Current Portion of Long-Term Debt ........ $ 14,100 $ 13,000
Accounts Payable ......................... 15,771 13,231
Interest Payable ......................... 7,543 7,681
Wages Payable ............................ 11,513 9,424
Taxes Payable ............................ 5,122 6,094
Workers' Compensation Liabilities ........ 2,318 2,610
Other Current Liabilities ................ 6,081 6,778
---------- ----------
62,448 58,818

Long-Term Debt ......................................... 419,800 433,900
Lines of Credit ........................................ 97,500 97,500
Workers' Compensation Liabilities ...................... 8,405 9,367
Other Liabilities ...................................... 4,065 3,658
---------- ----------
Total Liabilities ...................................... 592,218 603,243
---------- ----------
Commitments and Contingencies

PARTNERS' CAPITAL

Limited Partners' Units ................................ 234,117 223,028
General Partner ........................................ (249) (51)
---------- ----------
Total Partners' Capital ................................ 233,868 222,977
---------- ----------
Total Liabilities and Partners' Capital ................ $ 826,086 $ 826,220
---------- ----------

See accompanying Notes to Combined Financial Statements.

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PLUM CREEK TIMBER COMPANY, L. P.
COMBINED STATEMENT OF CASH FLOWS

Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
(In Thousands)

Cash Flows From Operating Activities:
Net Income ........................................................ $ 110,731 $ 112,212 $ 91,444
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization ............ 54,097 54,143 38,806
Gain on Property Dispositions - Net ................. (2,986) (419) (7,708)
Working Capital Changes:
Accounts Receivable .................... (4,884) 1,845 (14,183)
Inventories ............................ 7,319 (6,583) 1,946
Timber Contract Deposits ............... 503 164 (510)
Other Current Assets ................... (936) 1,386 (3,662)
Accounts Payable ....................... 2,540 193 3,657
Interest Payable ....................... (138) 4,676 742
Wages Payable .......................... 2,089 (645) 2,674
Taxes Payable .......................... (972) 446 2,039
Workers' Compensation Liabilities ...... (292) (72)
Other Current Liabilities .............. (697) (1,560) 3,620
Funding of Benefit Plans - Net ...................... 2,411 (9,198)
Other ............................................... (3,571) (1,545) (3,452)
------------- ------------ --------------
Net Cash Provided By Operating Activities ......................... 165,214 155,115 115,341
------------- ------------ --------------
Cash Flows From Investing Activities:
Additions to Properties ........................................... (30,683) (25,837) (284,612)
Proceeds from Property Dispositions ............................... 6,777 4,472 6,496
Other ............................................................. (1,806) 458
------------- ------------ --------------
Net Cash Used In Investing Activities ............................. (25,712) (20,907) (278,116)
------------- ------------ --------------

Cash Flows From Financing Activities:
Cash Distributions ................................................ (99,840) (81,790) (61,164)
Borrowings on Lines of Credit ..................................... 399,000 368,345 260,000
Payments on Lines of Credit ....................................... (399,000) (530,846)
Issuance of Long-Term Debt ........................................ 150,000
Retirement of Long-Term Debt ...................................... (13,000) (13,000) (8,600)
Redemption of Deferred Participation Interests .................... (63,018)
------------- ------------ --------------
Net Cash Provided By (Used In)
Financing Activities ............................................ (112,840) (107,291) 127,218
------------- ------------ --------------
Increase (Decrease) in Cash
and Cash Equivalents ................................................. 26,662 26,917 (35,557)
Cash and Cash Equivalents:
Beginning of Year ................................................. 60,942 34,025 69,582
------------- ------------ --------------

End of Year ....................................................... $ 87,604 $ 60,942 $ 34,025
------------- ------------ --------------

Supplementary Cash Flow Information
- -----------------------------------
Interest Paid ..................................................... $ 46,904 $ 42,734 $ 35,995
Income Taxes Paid - Net ........................................... $ 952 $ 973 $ 197

See accompanying Notes to Combined Financial Statements.

29

30
PLUM CREEK TIMBER COMPANY, L. P.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

BASIS OF PRESENTATION. Plum Creek Timber Company, L.P. (the
"Partnership"), a Delaware limited partnership, Plum Creek Manufacturing, L.P.
("Manufacturing"), and Plum Creek Marketing, Inc. ("Marketing"), own, manage and
operate 2.0 million acres of timberland and ten wood products conversion
facilities in Montana, Washington and Idaho. The Partnership owns 98 percent of
Manufacturing and 96 percent of Marketing. Plum Creek Management Company, L.P.
(the "General Partner"), manages the businesses of the Partnership,
Manufacturing and Marketing and owns the remaining two percent general partner
interest of Manufacturing and four percent of Marketing. As used herein,
"Company" refers to the combined entities of the Partnership, Manufacturing and
Marketing. "Resources Segment" refers to the timber and land management business
of the Partnership, and "Manufacturing Segment" refers to the combined
businesses of Manufacturing and Marketing.

The Resources Segment grows and harvests timber for sale in export
markets, primarily Pacific Rim countries, and domestic markets, primarily in
Washington, Idaho and Montana. The Manufacturing Segment produces a wide variety
of lumber, plywood and medium density fiberboard ("MDF") products. The
Manufacturing Segment targets these products to retail home centers and various
specialty niche markets which are less cyclical than the traditional housing
related markets. The principal markets for lumber and plywood products are in
the United States. MDF markets primarily consist of North America and, to a
lesser extent, Pacific Rim countries.

The combined financial statements of the Company include all the
accounts of the Partnership, Manufacturing and Marketing. All significant
intercompany transactions have been eliminated in combination. Certain financial
statement reclassifications have been made to the 1994 and 1993 amounts
presented for comparability purposes and have no impact on net income.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NET INCOME PER UNIT. Net income per Unit is calculated using the
weighted average number of Units outstanding, net of redeemed Units, plus, in
1993, any unredeemed Deferred Participation Interests ("DPIs") divided into the
combined Partnership net income, after adjusting for the General Partner
Interest. The weighted average number of Units outstanding was 40,608,300,
40,608,300, and 43,084,327 for the years ended December 31, 1995, 1994 and 1993,
respectively.

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31
REVENUE RECOGNITION. Revenues received from the sale of logs, wood
products and by-products, primarily wood chips, are generally recorded as
revenue at the time of shipment. Sales are denominated in U.S. dollars.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

INVENTORIES. Logs, work-in-process, and finished goods inventories are
stated at the lower of cost or market on the last- in, first-out ("LIFO")
method. Cost for manufactured inventories includes raw materials, labor,
supplies, energy, depreciation and production overhead. Cost of log inventories
includes timber depletion, stumpage, associated logging and harvesting costs,
road costs and production overhead. The average cost method is used to value the
Company's supplies inventories.

TIMBER AND TIMBERLANDS. Timber and timberlands, including logging
roads, are stated at cost less depletion for timber previously harvested and
accumulated amortization. Cost of the Partnership's timber harvested is
determined based on the volume of timber harvested in relation to the amount of
estimated recoverable timber. The Partnership estimates its timber inventory
using statistical information and data obtained from physical measurements, site
maps, photo-types and other information gathering techniques. The cost of
logging roads is amortized over the estimated useful life on a straight-line
basis.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated
at cost. Improvements and replacements are capitalized. Depreciation is provided
for on a straight-line basis for buildings and on a unit-of-production basis for
machinery and equipment, which approximates a straight-line basis. Maintenance
and repairs necessary to maintain properties in operating condition are expensed
as incurred. The cost and related accumulated depreciation of property sold or
retired are removed from the accounts and any gain or loss is recorded.

INCOME TAXES. The Partnership and Manufacturing are not subject to
federal income tax and their income or loss is included in the tax returns of
individual Unitholders. The Partnership files composite returns in the states in
which it does business, paying taxes for nonresident Unitholders. Taxes paid for
nonresident Unitholders are included in other expense. Marketing, as a separate
taxable corporation, provides for income taxes on a separate company basis.
Marketing provides for deferred taxes in order to reflect the tax consequences
in future years of the difference between the financial statement and tax basis
of assets and liabilities at year-end.

UNIT-BASED COMPENSATION PLANS. The Company accounts for Unit-based
compensation plans under the provisions of Accounting Principles Board Opinion
No. 25 ("APB 25"). In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("FAS 123"), which is effective for years
beginning after December 15, 1995. FAS 123 establishes a fair value based method
of accounting for stock-based compensation plans and encourages entities to
adopt that method in place

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of the provisions of APB 25. The Company intends to continue to apply the
provisions of APB 25 in recognizing compensation expense related to Unit-based
compensation plans and disclose in the footnotes in 1996 the impact on net
income had FAS 123 been adopted for expense recognition purposes. See Note 10 to
Notes to Combined Financial Statements for discussion of the above referenced
plans.

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable were presented net of allowances for doubtful
accounts of $1,316,000 and $1,160,000 at December 31, 1995 and 1994,
respectively.

NOTE 3. INVENTORIES

Inventories consisted of the following at December 31 (in thousands):

1995 1994
---- ----

Raw materials (logs) . . . . . . . . . . . . . . . $ 18,967 $ 25,908
Work-in-process . . . . . . . . . . . . . . . . . 5,798 5,349
Export logs . . . . . . . . . . . . . . . . . . . 420 1,274
Finished goods . . . . . . . . . . . . . . . . . . 16,012 16,485
---------- ----------
41,197 49,016
Supplies . . . . . . . . . . . . . . . . . . . . . 6,169 5,669
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 47,366 $ 54,685
---------- ----------

Excluding supplies, which are valued at average cost, the cost of the
LIFO inventories valued at the lower of average cost or market (which
approximates current cost) at December 31, 1995 and 1994 was $46.3 million and
$54.9 million, respectively.

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33
NOTE 4. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT

Timber and timberlands consisted of the following at December 31 (in
thousands):

1995 1994
---- ----

Timber and logging roads - net . . . . . . . . . $ 423,475 $ 450,956
Timberlands . . . . . . . . . . . . . . . . . . . 44,517 44,506
---------- ----------
Timber and Timberlands - net . . . . . . . . . . . $ 467,992 $ 495,462
---------- ----------

Property, plant and equipment consisted of the following at
December 31 (in thousands):

1995 1994
---- ----

Land, buildings and improvements . . . . . . . . $ 50,056 $ 47,429
Machinery and equipment . . . . . . . . . . . . . 227,598 208,085
---------- ----------
277,654 255,514

Accumulated depreciation . . . . . . . . . . . . . (111,502) (93,497)
---------- ----------
Property, Plant and Equipment - net . . . . . . . $ 166,152 $ 162,017
---------- ----------

NOTE 5. BORROWINGS

Long-term debt consisted of the following at December 31 (in
thousands):

1995 1994
---- ----

Senior Notes due 2007 . . . . . . . . . . . $ 145,200 $ 151,800
Senior Notes due 2009. . . . . . . . . . . . 150,000 150,000
First Mortgage Notes . . . . . . . . . . . 138,700 145,100
Lines of Credit . . . . . . . . . . . . . . . . 97,500 97,500
--------- ----------
Total Long-term Debt . . . . . . . . . . . 531,400 544,400
Less: Current Portion . . . . . . . . . . (14,100) (13,000)
--------- ----------
Long-Term Portion . . . . . . . . . . . . $ 517,300 $ 531,400
--------- ----------

On August 1, 1994, the Partnership issued $150 million of senior notes
due in full on August 1, 2009 (the "Senior Notes due 2009") which bear interest
at 8.73%, payable semi-annually. The proceeds obtained from the issuance of the
Senior Notes due 2009 were used to refinance a portion of the $260 million Line
of Credit incurred to finance the November 1, 1993 Montana Timberland
Acquisition.

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34
The Senior Notes due 2007 and the First Mortgage Notes bear interest of
11.125%, payable semi-annually. The Senior Notes due 2007, the Senior Notes due
2009 and the First Mortgage Notes (collectively, the "Note Agreements") are
redeemable prior to maturity subject to a premium on redemption, which is based
upon interest rates of U.S. Treasury securities having similar average maturity
as the Note Agreements. At December 31, 1995 and 1994, the premium that would
have been due upon early retirement would have approximated $119 million and $57
million, respectively. The two series of senior notes are unsecured. The
First Mortgage Notes are collateralized by the property, plant and equipment of
Manufacturing and are guaranteed by the Partnership.

The Partnership has two unsecured revolving lines of credit ("Lines of
Credit") with a group of banks that permit the Partnership to borrow up to $135
million for general corporate purposes, including up to $5 million of standby
letters of credit issued on behalf of the Partnership or Manufacturing. The
Lines of Credit bear a floating rate of interest (6.5% and 6.9% as of December
31, 1995 and 1994, respectively). One line of credit allows the Partnership to
borrow $100 million through October 31, 2000, of which $82.5 million was
outstanding at December 31, 1995. The other line of credit allows the
Partnership to borrow $35 million through October 28, 1996 (any borrowings
outstanding at that time are payable in quarterly installments, at the option of
the Partnership, due January 1997 through October 1998), of which $15 million
was outstanding at December 31, 1995. The $15 million was classified as
long-term debt due in 2000 due to the Company's intent and ability to finance
these borrowings on a long-term basis. As of December 31, 1995, there were
letters of credit outstanding in the amount of $0.8 million. As of January 4,
1996, all borrowings on the Lines of Credit were repaid.

The annual principal payments on the Note Agreements and mandatory
principal payments under the Lines of Credit are as follows (in thousands):

Note Lines of
Agreements Credit
---------- --------

1996 $ 14,100
1997 17,400
1998 18,400
1999 18,400
2000 26,950 $ 97,500
2001 through 2007 26,950
2009 150,000

All principal and interest payments due under the Note Agreements and
Lines of Credit are nonrecourse to the General Partner.

The Note Agreements and the Lines of Credit contain certain restrictive
covenants, including limitations of harvest levels, sale of assets, cash
distributions and the amount of future indebtedness.

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The Company was in compliance with such covenants at December 31, 1995
and 1994. The First Mortgage Notes limit distributions from the Manufacturing
Segment to the Partnership.

NOTE 6. FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents approximate fair
value due to the short-term maturities of these instruments. The estimated fair
value of the Company's debt, based on current interest rates for similar
obligations with like maturities, was approximately $615 million and $570
million and was carried at $531 million and $544 million as of December 31, 1995
and 1994, respectively.

NOTE 7. PARTNERS' CAPITAL

The changes in Partners' Capital were as follows (in thousands):

Limited General
Partners DPIs Partner Total
-------- ---- ------- -----

January 1, 1993 $ 211,127 $ 15,000 $ (834) $ 225,293
Net Income 82,607 8,837 91,444
Cash Distributions (52,791) (8,373) (61,164)
Redemption of DPIs (48,018) (15,000) (63,018)
--------- -------- ---------- ---------
December 31, 1993 192,925 (370) 192,555
Net Income 95,887 16,325 112,212
Cash Distributions (65,784) (16,006) (81,790)
--------- ---------- ---------
December 31, 1994 223,028 (51) 222,977
Net Income 88,244 22,487 110,731
Cash Distributions (77,155) (22,685) (99,840)
--------- -------- ---------- ---------
December 31, 1995 $ 234,117 $ $ (249) $ 233,868
--------- -------- ---------- ---------

The total number of Units outstanding at December 31, 1995 and 1994 was
40,608,300. At January 1, 1993 there were 1.25 million DPIs (prior to the 1993
three-for-one Unit split) outstanding. The DPIs were redeemed on August 30,
1993.

In accordance with the Partnership Agreement, the General Partner is
authorized to make quarterly cash distributions. For the years ended December
31, 1995, 1994 and 1993, the General Partner declared $1.96, $1.67 and $1.38 per
Unit, respectively, to be paid to the Partnership's Unitholders. If quarterly
cash distributions exceed $0.21-2/3 per Unit, the General Partner is provided
with an incentive distribution. See Note 10 to Notes to Combined Financial
Statements.

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NOTE 8. INCOME TAXES

The provision for income taxes was as follows (in thousands):

Year Ended December 31,
1995 1994 1993
---- ---- ----

Current Federal . . . . . . . $ 464 $ 829 $ 49
Current State . . . . . . . . 108 95 56
---- ---- ----
Total . . . . . . . . . . . . $ 572 $ 924 $ 105
---- ---- ----

Reconciliation of the federal statutory rate to the effective income
tax rate was as follows:

1995 1994 1993
---- ---- ----

Statutory tax rate . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
State tax net of federal tax benefit . . . . . . . . . . 0.1 0.1 0.1
Nontaxable partnership income . . . . . . . . . . . . . . (34.1) (33.6) (34.3)
Net operating loss carryforward . . . . . . . . . . . . . 0.0 (0.7) (0.7)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) 0.0 0.0
---- ---- ----
Effective tax rate . . . . . . . . . . . . . . . . . . . 0.5% 0.8% 0.1%
---- ---- ----

NOTE 9. EMPLOYEE PENSION AND RETIREMENT PLANS

PENSION PLAN. The Company's pension plan is a non-contributory defined
benefit plan covering substantially all employees. The salaried employee
benefits are based on years of credited service and the highest five-year
average compensation levels, and the hourly employee benefits are based on years
of service. Contributions to the plan are based upon the Projected Unit Credit
actuarial funding method and are limited to amounts that are currently
deductible for tax purposes. The Company's pension expense was $1.2 million,
$1.9 million and $2.1 million for 1995, 1994 and 1993, respectively.

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The following table sets forth the funded status of the Company's
pension plan at December 31 (in thousands):

1995 1994
---- ----

Actuarial present value of benefit obligations:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,431 $ 27,256
Non-vested . . . . . . . . . . . . . . . . . . . . . . . . 926 608
-------- ---------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . $ 37,357 $ 27,864
-------- ---------

Projected benefit obligation . . . . . . . . . . . . . . . . . $ 46,979 $ 34,113
Plan assets, primarily marketable equity and debt
securities, at fair market value . . . . . . . . . . . . . . 40,576 32,800
-------- ---------
Projected benefit obligation in excess of plan assets . . . . . (6,403) (1,313)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . 12,554 4,807
Prior service cost not yet recognized . . . . . . . . . . . . . (78) 346
-------- ---------
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . $ 6,073 $ 3,840
-------- ---------

The components of the Company's pension cost were as follows (in thousands):

Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----

Service cost . . . . . . . . . . . . . . . . . . . $ 1,277 $ 1,441 $ 1,374
Interest cost on projected benefit obligation . . . . 2,886 2,709 2,573
Actual return on plan assets . . . . . . . . . . . . (6,210) 432 (3,578)
Net amortization and deferral . . . . . . . . . . . . 3,273 (2,715) 1,763
------- -------- -------
Net pension cost . . . . . . . . . . . . . . . . . . $ 1,226 $ 1,867 $ 2,132
------- -------- -------

The following assumptions were used in the accounting for the
Company's pension plan as of December 31:

1995 1994 1993
---- ---- ----

Weighted average discount rate . . . . . . . . . . . . . 7.0% 8.5% 7.5%
Rate of increase in compensation levels . . . . . . . . 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets . . . . 8.5% 8.0% 8.0%

The Company adopted two nonqualified defined benefit pension plans for
executives and key management employees effective January 1, 1993 and January 1,
1994, respectively. The projected benefit obligation for these plans was $4.4
million and $2.7 million as of December 31, 1995 and

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1994, respectively. The Company's pension expense for these plans was $0.6
million, $0.8 million and $0.4 million for 1995, 1994 and 1993, respectively.

THRIFT AND PROFIT SHARING PLAN. The Company sponsors an employee thrift
and profit sharing plan under section 401 of the Internal Revenue Code. This
plan covers substantially all full-time employees. The Company matches employee
contributions of up to six percent of compensation at rates ranging from 35 to
75 percent, depending upon the Company's financial performance. Amounts charged
to expense were $2.7 million, $2.0 million and $2.3 million during 1995, 1994
and 1993, respectively.

OTHER BENEFIT PLANS. Certain executives and key employees of the
General Partner participate in incentive benefit plans established by the
General Partner which provide for the granting of Units and/or cash bonuses upon
meeting performance objectives. See Note 10 to Notes to Combined Financial
Statements.

NOTE 10. RELATED-PARTY TRANSACTIONS

The General Partner is responsible for all decisions related to the
management of the Company. The General Partner has a two percent general partner
interest in the income and cash distributions of the Partnership, subject to
certain adjustments, and owns two percent and four percent interests in
Manufacturing and Marketing, respectively. The Company reimburses the General
Partner for the actual cost of administering its businesses. Amounts reimbursed
to the General Partner for such costs were $5.6 million and $5.0 million for the
years ended December 31, 1995 and 1994, respectively. During 1993, the Company
directly paid the costs associated with administering the businesses.

Effective October 1, 1993, the General Partner established a Long-Term
Incentive Plan ("LTIP") which provides for granting Unit Appreciation Rights
("UARs") to certain executives of the General Partner. When any of five Unit
Value Targets ("UVTs") established by the LTIP are met through a combination of
Unit market appreciation plus Partnership cash distributions, a percentage of
the UARs is triggered and Units are credited to the executives' accounts. The
performance period under the LTIP during which UVTs may be met ends December 31,
1998, at which time any earned Units will be distributed. Costs incurred by the
General Partner in administering and funding the LTIP are borne by the
Partnership.

The General Partner has granted 1,330,000 UARs, net of forfeitures,
which could result in a total of 668,802 Units being earned under the LTIP if
all UVTs are met. Units in the executives' accounts will earn additional Units
equal to the amount of any subsequent Partnership cash distributions. As of
December 31, 1995, two UVTs have been achieved and 167,200 Units have been
allocated to the executives' accounts. Total compensation expense with respect
to the achievement of these two UVTs will be approximately $4.5 million, of
which $1.0 million and $0.8 million was recognized in 1995 and 1994,
respectively. The remaining compensation expense will be recognized

38
39
over the remaining performance period ending December 31, 1998.

Effective January 1, 1994, the General Partner established a Key
Employee Long-Term Incentive Plan ("KLTIP") for certain of its other key
employees. The KLTIP provisions are similar to the LTIP described above. The
General Partner has granted 380,000 UARs, net of forfeitures, which could result
in a total of 191,086 Units being earned under the KLTIP if all UVTs are met.
Units in the participants' accounts will earn additional Units equal to the
amount of any subsequent Partnership cash distributions. As of December 31,
1995, two UVTs have been achieved and 47,772 Units have been allocated to the
key employees' accounts. Total compensation expense with respect to the
achievement of these two UVTs will be approximately $1.2 million, of which $0.5
million was recognized in 1995. The remaining compensation expense will be
recognized over the remaining performance period ending December 31, 1998. Costs
incurred by the General Partner in administering and funding the plan are borne
by the Partnership.

The Partnership is required under the Partnership agreement to
reimburse the General Partner for compensation costs related to the management
of the Partnership, including the purchase of Units associated with these
benefit plans. During 1994, the Partnership paid the General Partner for its
purchase of 496,800 Units at a total cost of $12.8 million, of which $10.5
million was funded from current operations and $2.3 million from funds held by
an employee benefit trust of the Partnership.

Effective January 1, 1994, the General Partner established a Management
Incentive Plan ("MIP") for certain executives of the General Partner. An annual
bonus of up to 100% of the respective executive's base salary may be awarded if
certain performance objectives established by the General Partner are met by the
Company and by the executive. One-half of the bonus will be paid annually in
cash and the remaining half will be converted into Units at fair market value
and will be distributed at the end of three years. Units in executives' accounts
will earn additional Units equal to the amount of any subsequent Partnership
cash distributions. Costs incurred in administering and funding the plan are
borne by the General Partner.

Net income is allocated to the General Partner based on two percent of
the Company's combined net income (adjusted for the incentive distribution),
plus the incentive distribution, as provided by the Partnership Agreement. The
incentive distributions paid in 1995, 1994 and 1993 were approximately $20.7
million, $14.4 million and $7.2 million, respectively.

Certain conflicts of interest could arise as a result of the
relationships described above. The Board of Directors and management of the
General Partner have a duty to manage the Company in the best interests of the
Unitholders and, consequently, must exercise good faith and integrity in
handling the assets and affairs of the Company. Related non-interest bearing
receivables and payables between the General Partner and the Company are settled
in the ordinary course of business. As of December 31, 1995, the Company had a
payable to the General Partner of $42,000. As of December 31, 1994, the Company
had a receivable from the General Partner of $176,000.

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40
NOTE 11. COMMITMENTS AND CONTINGENCIES

A portion of the Company's log requirements is acquired through
contracts with public and private sources. Except for required deposits, no
amounts are recorded until such time as the Company harvests the timber. At
December 31, 1995 and 1994, the unrecorded amounts of those contract commitments
were approximately $21.5 million and $30.4 million, respectively. During 1993,
the Partnership entered into a log sourcing contract to sell approximately 950
million board feet ("MMBF") of logs to a customer over a ten-year period ending
in 2003, at prevailing market rates. At December 31, 1995, the Partnership had a
remaining commitment of approximately 703 MMBF.

There are no contingent liabilities which would have a materially
adverse effect on the financial position, the results of operations or liquidity
of the Company.

The Company is subject to regulations regarding harvest practices and
is involved in various legal proceedings, including environmental matters,
incidental to its business. While administration of current regulations and any
new regulations or proceedings have elements of uncertainty, the General Partner
believes that none of the pending legal proceedings or regulatory matters will
have a materially adverse effect on the financial position, the results of
operations or liquidity of the Company.

The Company leases buildings and equipment under non-cancelable
operating lease agreements. The Company's operating lease expense was $2.2
million, $1.8 million and $1.9 million for 1995, 1994 and 1993, respectively.
The following summarizes the future minimum lease payments (in thousands):

1996 . . . . . . . . . . . $ 1,997
1997 . . . . . . . . . . . 1,730
1998 . . . . . . . . . . . 1,442
1999 . . . . . . . . . . . 773
2000 . . . . . . . . . . . 680
Thereafter . . . . . . . . 1,887
-----
Total . . . . . . . . . . $ 8,509
-----

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NOTE 12. SEGMENT INFORMATION

YEAR ENDED DECEMBER 31,
(In Thousands)
Revenues 1995 1994 1993
---- ---- ----

Resources $ 327,043 $ 324,426 $ 266,084
Manufacturing 375,677 372,248 324,625
Eliminations (117,646) (118,017) (89,703)
----------- ---------- ----------
$ 585,074 $ 578,657 $ 501,006
----------- ---------- ----------
Operating Income
Resources $ 139,192 $ 150,730 $ 135,238
Manufacturing 35,567 32,175 11,471
Other and Eliminations (15,783) (18,771) (20,152)
----------- ---------- ----------
$ 158,976 $ 164,134 $ 126,557
----------- ---------- ----------
Depreciation, Depletion and Amortization
Resources $ 35,394 $ 36,782 $ 22,570
Manufacturing 18,703 17,361 16,236
----------- ---------- ----------
$ 54,097 $ 54,143 $ 38,806
----------- ---------- ----------
Identifiable Assets
Resources $ 604,510 $ 617,934 $ 615,791
Manufacturing 244,877 247,415 238,851
Eliminations (23,301) (39,129) (35,888)
----------- ---------- ----------
$ 826,086 $ 826,220 $ 818,754
----------- ---------- ----------
Capital Expenditures
Resources $ 8,481 $ 7,139 $ 260,534
Manufacturing 22,202 18,698 24,078
----------- ---------- ----------
$ 30,683 $ 25,837 $ 284,612
----------- ---------- ----------

Revenues include both sales to unaffiliated customers and intersegment
sales. Intersegment sales prices are determined quarterly, based upon estimated
market prices and terms in effect at that time and are eliminated in
combination. Intersegment sales from the Resources Segment to the Manufacturing
Segment were $117.6 million, $118.0 million and $89.7 million for 1995, 1994 and
1993, respectively.

Operating income from the Resources Segment includes land sales of $1.6
million, $1.9 million and $7.7 million, for 1995, 1994 and 1993, respectively.
Combined export revenues, primarily to Pacific Rim countries, as a percentage of
total revenues were 13%, 15% and 17%, for 1995, 1994 and 1993, respectively.

During 1995 and 1994, net sales to one Resources Segment customer were
approximately 10% and 11% of combined revenues, respectively.

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NOTE 13. SUBSEQUENT EVENT

On January 23, 1996, the Board of Directors of the General Partner
authorized the Partnership to make a distribution of $0.49 per Unit for the
fourth quarter of 1995. Total distributions will approximate $25.9 million
(including $6.0 million to the General Partner) and will be paid on March 1,
1996 to Unitholders of record on February 15, 1996.

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Unitholders and Directors of the General Partner of Plum Creek Timber
Company, L.P.

We have audited the accompanying combined balance sheet of Plum Creek Timber
Company, L.P. as of December 31, 1995 and 1994, and the related combined
statements of income and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 combined financial position of Plum Creek Timber
Company, L.P. at December 31, 1995 and 1994, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

/s/ COOPERS & LYBRAND L.L.P.

Coopers & Lybrand L.L.P.
Seattle, Washington
January 23, 1996

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SUPPLEMENTARY FINANCIAL INFORMATION

Combined Quarterly Information
(Unaudited)
(In Thousands, Except per Unit)

1995 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
- ---- ------- ------- ------- -------

Revenues $ 144,094 $ 139,372 $ 152,296 $ 149,312
Operating Income 40,958 36,655 42,382 38,981
Net Income 28,392 24,534 30,173 27,632
Net Income Allocable
to Unitholders 23,751 18,644 24,170 21,679
Net Income per Unit $ 0.58 $ 0.46 $ 0.60 $ 0.53

1994 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
- ---- ------- ------- ------- -------

Revenues $ 142,457 $ 135,659 $ 147,387 $ 153,154
Operating Income 43,421 35,947 39,799 44,967
Net Income 30,651 23,798 26,755 31,008
Net Income Allocable
to Unitholders 27,071 20,354 22,147 26,315
Net Income per Unit $ 0.67 $ 0.50 $ 0.54 $ 0.65

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

Items 10. and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
and EXECUTIVE COMPENSATION, Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT and Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS will be filed by amendment to this Form 10-K on Form 10-K/A.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K

(A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:

(1) FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION

The following combined financial statements of the Company are included
in Part II, Item 8 of this Form 10-K:

Combined Statement of Income . . . . . . . . . . . . . . 27
Combined Balance Sheet . . . . . . . . . . . . . . . . . 28
Combined Statement of Cash Flows . . . . . . . . . . . . 29
Notes to Combined Financial Statements . . . . . . . . . 30
Report of Independent Accountants . . . . . . . . . . . . 43
Supplementary Financial Information . . . . . . . . . . . 44

(2) FINANCIAL STATEMENT SCHEDULES

Not applicable.

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(3) LIST OF EXHIBITS

Each exhibit set forth below in the Index to Exhibits is filed
as a part of this report. Exhibits not incorporated by
reference to a prior filing are designated by an asterisk
("*"); all exhibits not so designated are incorporated herein
by reference to a prior filing as indicated. Exhibits
designated by a positive sign ("+") indicates management
contracts or compensatory plans or arrangements required to be
filed as an exhibit to this report.

INDEX TO EXHIBITS

Exhibit
Designation Nature of Exhibit
- ----------- -----------------

3A Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company, L.P. dated June 8, 1989, as
amended and restated through October 17, 1995 (Form 10-Q, No. 1-10239, filed November 1995).

3B Certificate of Limited Partnership of Plum Creek Timber Company, L.P., as filed with the Secretary of State of the
state of Delaware on April 12, 1989 (Form S-1, Regis. No. 33-28094, filed May 1989).

4A Form of Deposit Agreement by and among Plum Creek Timber Company, L.P. and The First National Bank of Boston, dated
as of May 1989, (Form S-1, Regis. No. 33-28094, filed May 1989).

4B Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May 1989).

4C.1 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company,
L. P. (Form 10-Q, No. 1-10239, filed August 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to
Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company,
L.P. (Form 8 Amendment No. 1, filed April 1991). Amendment No. 2, consent and waiver dated September 1, 1993 to
the Senior Note Agreement (Form 10-K/A, Amendment No. 1, filed April 1994). Amendment No. 3, Senior Note Agreement
Amendment dated May 20, 1994 (Form 10-Q, No. 1-10239, filed November 1995).

4C.2 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc. (Form 10-Q, No. 1-10239, filed August 1989). Amendment No. 1, consent and waiver dated January
1, 1991 to Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum
Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form 8 Amendment No. 1, filed April 1991).
Amendment No. 2, consent and waiver dated September 1, 1993 to the Mortgage Note Agreement (Form 10-K/A, Amendment
No. 1, filed April 1994). Amendment No. 3, Mortgage Note Agreement Amendment dated May 20, 1994 (Form 10-K/A,
Amendment No. 1, filed April 1995). Amendment to Mortgage Note Agreement dated June 15, 1995 (Form 10-Q, No.
1-10239, filed November 1995).

4C.3* Senior Note Agreement, dated August 1, 1994, 8.73% Senior Notes due August 1, 2009,

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Plum Creek Timber Company, L.P. (Form 10-K/A, Amendment No. 1, filed April 1995). Senior Note Agreement Amendment
dated as of October 15, 1995. See attached exhibit.

10A.1 $100 million Amended and Restated Credit Agreement by and between Plum Creek Timber Company, L.P., Bank of America
National Trust and Savings Association as Agent, ABN AMRO Bank N.V. as Co-agent and the Other Financial
Institutions Party Thereto, dated as of November 15, 1994 (Form 10-K/A, Amendment No. 1, filed April 1995). First
Amendment to Amended and Restated Credit Agreement, dated as of October 27, 1995 (Form 10-Q, No. 1-10239, filed
November 1995).

10A.2 $35 million Credit Agreement by and between Plum Creek Timber Company, L.P., Bank of America National Trust and
Savings Association as Agent, ABN AMRO Bank N.V. as Co-agent and the Other Financial Institutions Party Thereto,
dated as of November 15, 1994 (Form 10-K/A, Amendment No. 1, filed April 1995). First Amendment to Credit
Agreement, dated as of October 27, 1995 (Form 10-Q, No. 1-10239, filed November 1995).

10B.1+ Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment No. 1, filed April 1995). First Amendment to the
Plum Creek Supplemental Benefits Plan (Form 10-Q, No. 1-10239, filed November 1995).

10B.2+ Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, filed April 1994).
First Amendment to the Plum Creek Management Company, L.P. Long-Term Incentive Plan (Form 10-Q, No. 1-10239, filed
November 1995).

10B.3+ Management Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, filed April 1994).

10B.4+ Executive and Key Employee Salary and Incentive Compensation Deferral Plan, Plum Creek Management Company, L.P.
(Form 10-K/A, Amendment No. 1, filed April 1995).

10B.5+ Deferred Compensation Plan for Directors, PC Advisory Corp. I (Form 10-K/A, Amendment No. 1, filed April 1995).

21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, filed April 1991).

27A* Restated Financial Data Schedule for the period ended September 30, 1994. See attached exhibit.

27B* Restated Financial Data Schedule for the period ended December 31, 1994. See attached exhibit.

27C* Restated Financial Data Schedule for the period ended March 31, 1995. See attached exhibit.

27D* Restated Financial Data Schedule for the period ended June 30, 1995. See attached exhibit.

27E* Restated Financial Data Schedule for the period ended September 30, 1995. See attached exhibit.

27F* Financial Data Schedule for the period ended December 31, 1995. See attached exhibit.

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(B) REPORTS ON FORM 8-K

None.

48
49
SIGNATURES

Pursuant to the requirements of Section 13 (or 15(d)) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

PLUM CREEK TIMBER COMPANY, L. P.

(Registrant)

By: Plum Creek Management Company, L.P.
as General Partner

BY: /s/ RICK R. HOLLEY
----------------------------
Rick R. Holley
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons, in the capacities and on the
dates indicated, on behalf of, as applicable, Plum Creek Management Company,
L.P., the registrant's general partner, and/or PC Advisory Corp. I, the general
partner of the managing general partner of the registrant's general partner.

By /s/ DAVID D. LELAND Chairman of the Board of January 23, 1996
--------------------------- Directors, PC Advisory Corp. I
David D. Leland

By /s/ IAN B. DAVIDSON Director, PC Advisory Corp. I January 23, 1996
---------------------------
Ian B. Davidson

By /s/ GEORGE M. DENNISON Director, PC Advisory Corp. I January 23, 1996
---------------------------
George M. Dennison

By /s/ CHARLES P. GRENIER Executive Vice President, Plum January 23, 1996
--------------------------- Creek Management Co., L.P.
Charles P. Grenier Director, PC Advisory Corp. I

By /s/ RICK R. HOLLEY President and Chief Executive January 23, 1996
--------------------------- Officer, Plum Creek Management
Rick R. Holley Co., L.P.
Director, PC Advisory Corp. I

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50

By /s/ WILLIAM E. OBERNDORF Director, PC Advisory Corp. I January 23, 1996
----------------------------
William E. Oberndorf

By /s/ WILLIAM J. PATTERSON Director, PC Advisory Corp. I January 23, 1996
----------------------------
William J. Patterson

By /s/ JOHN H. SCULLY Director, PC Advisory Corp. I January 23, 1996
----------------------------
John H. Scully

By /s/ DIANE M. IRVINE Vice President and Chief Financial January 23, 1996
---------------------------- Officer, Plum Creek Management
Diane M. Irvine Co., L.P.
(Principal Financial and Accounting
Officer)

50