<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
 
                              WASHINGTON, DC 20549
 
                                   FORM 10-Q
 
                     QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
<TABLE>
<CAPTION>
    For Quarter Ended September 30, 1997               Commission file number:1-8859
<S>                                            <C>
</TABLE>
 
                              IP TIMBERLANDS, LTD.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<CAPTION>
TEXAS                                            13 3259241
<S>                                            <C>
(State or other jurisdiction of                (I.R.S.Employer
incorporation or organization)                 Identification No.)

Two Manhattanville Road, Purchase, NY             10577
(Address of principal executive offices)       (Zip Code)
</TABLE>
 
        Registrant's telephone number, including area code: 914-397-1500
 
    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_
 
      Class A Depositary Units outstanding on October 31, 1997: 46,445,729
<PAGE>
                              IP TIMBERLANDS, LTD.
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                                        PAGE NO.
                                                                                                       -----------
<S>         <C>                                                                                        <C>
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements.....................................................................           3

            Consolidated Statement of Earnings -
            Three Months and Nine Months Ended
            September 30, 1997 and 1996..............................................................           4

            Consolidated Balance Sheet -
            September 30, 1997 and December 31, 1996.................................................           5

            Consolidated Statement of Cash Flows -
            Nine Months Ended September 30, 1997 and 1996............................................           6

            Notes to Consolidated Financial Statements...............................................      7 - 10

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations....     11 - 14

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS........................................................................           *

ITEM 2.     CHANGES IN SECURITIES....................................................................           *

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES..........................................................           *

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

ITEM 5.     OTHER INFORMATION........................................................................           *

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.........................................................          15

SIGNATURES..                                                                                                   16
</TABLE>
 
* Omitted since no answer is called for, answer is in the negative or
inapplicable.
 
                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
The accompanying unaudited financial statements have been prepared in
conformity with current Securities and Exchange Commission regulations governing
interim financial reporting. In the opinion of the managing general partner of
IP Timberlands, Ltd. (the "Registrant"), a Texas limited partnership, the
accompanying unaudited financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the financial
position of the Registrant as of September 30, 1997, and the results of
operations for the quarter and nine months ended September 30, 1997. It is
suggested that these interim financial statements be read in conjunction with
the audited financial statements and notes thereto incorporated by reference in
the Registrant's Form 10-K for the year ended December 31, 1996, which has been
previously filed with the Commission.
 
The results for the interim period covered by this report are not
necessarily indicative of what the results will be for the remainder of the
year.
 
                                       3
<PAGE>
                              IP TIMBERLANDS, LTD.
 
                       CONSOLIDATED STATEMENT OF EARNINGS
                      (IN THOUSANDS--EXCEPT PER UNIT DATA)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                        SEPTEMBER 30,          SEPTEMBER 30,
                                                                     --------------------  ----------------------
                                                                       1997       1996        1997        1996
                                                                     ---------  ---------  ----------  ----------
<S>                                                                  <C>        <C>        <C>         <C>
REVENUES
Stumpage sales
  International Paper..............................................  $  45,962  $  26,455  $  101,449  $   89,712
  Unaffiliated parties.............................................     37,302     46,050     108,004     108,931
Forestland sales...................................................        714        449       1,975       6,421
Other income, net..................................................     11,210     10,345      16,914      16,142
                                                                     ---------  ---------  ----------  ----------
Total revenues.....................................................     95,188     83,299     228,342     221,206
                                                                     ---------  ---------  ----------  ----------
OPERATING COSTS AND EXPENSES
Depletion
  International Paper..............................................      5,381      2,261      10,034       6,455
  Unaffiliated parties.............................................      5,782      5,029      19,226      12,165
Cost of forestlands sold...........................................         85         15         207         383
Amortization of roads..............................................        422        410       1,295       1,393
Forest operations..................................................     12,241     11,046      35,483      32,982
General and administrative.........................................      4,642      4,505      13,880      14,129
Property and severance taxes.......................................      3,251      3,086       9,731       9,909
                                                                     ---------  ---------  ----------  ----------
Total operating costs and expenses.................................     31,804     26,352      89,856      77,416
                                                                     ---------  ---------  ----------  ----------
                                                                        63,384     56,947     138,486     143,790
Gains on Sales of Partnership Interests............................     37,009                 52,009     656,654
                                                                     ---------  ---------  ----------  ----------
OPERATING EARNINGS.................................................    100,393     56,947     190,495     800,444
INTEREST INCOME....................................................      7,553      4,125      20,832      15,696
INTEREST EXPENSE...................................................     (9,657)    (3,096)    (26,616)    (14,465)
GENERAL PARTNERS' INTEREST IN IPTO.................................     (1,029)      (562)     (1,983)     (1,568)
                                                                     ---------  ---------  ----------  ----------
NET PARTNERSHIP EARNINGS...........................................  $  97,260  $  57,414  $  182,728  $  800,107
                                                                     ---------  ---------  ----------  ----------
                                                                     ---------  ---------  ----------  ----------
EARNINGS PER CLASS A UNIT (NOTE 7).................................  $    1.61  $    1.23  $     3.67  $     7.87
                                                                     ---------  ---------  ----------  ----------
                                                                     ---------  ---------  ----------  ----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       4
<PAGE>
                              IP TIMBERLANDS, LTD.
 
                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,  DECEMBER 31,
                                                                                          1997           1996
                                                                                      -------------  ------------
<S>                                                                                   <C>            <C>
ASSETS
CURRENT ASSETS
  Cash and temporary investments....................................................   $     9,692    $    7,843
  Notes receivable--International Paper.............................................       371,467       259,351
  Due from International Paper......................................................         7,128        15,071
  Accounts and notes receivable.....................................................        24,287         8,228
                                                                                      -------------  ------------
  Total current assets..............................................................       412,574       290,493
NOTES RECEIVABLE....................................................................           430            42
FORESTLANDS.........................................................................       781,168       660,369
ROADS, net of accumulated amortization of $33,283 (1997) and $31,994 (1996).........        27,153        25,144
                                                                                      -------------  ------------
Total Assets........................................................................   $ 1,221,325    $  976,048
                                                                                      -------------  ------------
                                                                                      -------------  ------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
  Accounts payable and accrued liabilities..........................................   $     4,417    $    6,719
  Accrued interest..................................................................         6,376         3,541
  Accrued property and severance taxes..............................................         6,835         5,550
  Customer advance payments.........................................................         5,405         3,266
                                                                                      -------------  ------------
  Total current liabilities.........................................................        23,033        19,076
LONG-TERM DEBT......................................................................       450,000       450,000
LEASE OBLIGATIONS...................................................................         1,182         1,241
SERIES A PREFERENCE UNITS IN IPTO...................................................       130,744
GENERAL PARTNERS' INTEREST IN IPTO..................................................        31,778        30,536
PARTNERS' CAPITAL
  General partners..................................................................        27,701        26,607
  Limited partners..................................................................       556,887       448,588
                                                                                      -------------  ------------
Total Liabilities and Partners' Capital.............................................   $ 1,221,325    $  976,048
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       5
<PAGE>
                              IP TIMBERLANDS, LTD.
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                               SEPTEMBER 30,
                                                                                           ----------------------
                                                                                              1997        1996
                                                                                           ----------  ----------
<S>                                                                                        <C>         <C>
OPERATING ACTIVITIES
Net Partnership earnings.................................................................  $  182,728  $  800,107
Noncash items
  Depletion..............................................................................      29,260      18,620
  Cost of forestlands sold...............................................................         207         383
  Amortization of roads..................................................................       1,295       1,393
  Gain on sale of partnership interest...................................................                (638,205)
  Other, net.............................................................................       6,049       6,085
Changes in current assets and liabilities
  Accounts and notes receivable..........................................................     (16,447)     13,716
  Due from International Paper...........................................................       7,943      17,880
  Customer advance payments..............................................................       2,139        (291)
  Accrued interest payable...............................................................       2,835      (5,983)
  Other, net.............................................................................      (1,475)    (13,500)
                                                                                           ----------  ----------
  Cash provided by operations............................................................     214,534     200,205
                                                                                           ----------  ----------
INVESTMENT ACTIVITIES
Investment in forestlands and roads......................................................     (26,493)    (26,285)
Loans to International Paper.............................................................    (270,949)   (637,081)
Repayment of loans by International Paper................................................     158,833   1,023,847
                                                                                           ----------  ----------
  Cash (used for) provided by investment activities......................................    (138,609)    360,481
                                                                                           ----------  ----------
FINANCING ACTIVITIES
Distributions to partners of IPT and IPTO................................................     (74,076)   (564,822)
                                                                                           ----------  ----------
CHANGE IN CASH AND TEMPORARY INVESTMENTS.................................................       1,849      (4,136)
CASH AND TEMPORARY INVESTMENTS
  Beginning of the period................................................................       7,843      11,899
                                                                                           ----------  ----------
  End of the period......................................................................  $    9,692  $    7,763
                                                                                           ----------  ----------
                                                                                           ----------  ----------
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       6
<PAGE>
                              IP TIMBERLANDS, LTD.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
1. ORGANIZATION
 
   IP Timberlands, Ltd. (the "Registrant" or "IPT"), is a Texas limited
   partnership. IP Forest Resources Company ("IPFR"), a wholly owned subsidiary
   of International Paper, is the managing general partner of the Registrant and
   International Paper is the special general partner.

   The Registrant operates through IP Timberlands Operating Company, Ltd. 
   ("IPTO"), a Texas limited partnership, in which the Registrant holds a 99% 
   limited partner's interest, and IPFR and International Paper together hold 
   a 1% general partners' interest. IPFR is also the managing general partner 
   of IPTO, and International Paper is the special general partner.
 
2. TRANSACTIONS WITH INTERNATIONAL PAPER

   The Registrant reimburses IPFR and International Paper for both direct and 
   indirect costs and expenses associated with the management and operations 
   of the Partnerships. Charges from International Paper for indirect 
   expenses for the quarters ended September 30, 1997 and 1996 were $2.3 
   million and $2.2 million, respectively and for the nine-month periods 
   ended September 30, 1997 and 1996 were $7.0 million and $7.4 million, 
   respectively. The interim period charges are based upon estimates of the 
   total charges for the year.
 
   Interest income from notes receivable from International Paper for the 
   quarters ended September 30, 1997 and 1996 was $5.0 million and $1.4 
   million, respectively, and for the nine-month periods ended September 30, 
   1997 and 1996 was $13.3 million and $10.4 million, respectively. The 
   increase in third quarter interest income was due to higher average loan 
   balances. Interest expense included $2.5 million and $5.3 million for the 
   quarter and nine-month periods ended September 30, 1997, respectively, of 
   preferred return payments to Federal Paper Board Company, a wholly owned 
   Subsidiary of International Paper, relating to Series A Preference Units 
   (see note 5). Interest expense in the 1996 third quarter included $3.1 
   million of interest on notes payable to International Paper.

3. TEMPORARY INVESTMENTS

   Temporary investments with a maturity of three months or less are treated as
   cash equivalents and are stated at cost. Temporary investments at 
   September 30, 1997 and December 31, 1996 were $6.4 million and $6.9 
   million, respectively.


                                       7
<PAGE>


4. RECEIVABLES
 
   The major classifications of current receivables are shown below. No
   allowance for doubtful accounts was considered necessary.
 
<TABLE>
<CAPTION>
                                                                                         SEPTEMBER 30,  DECEMBER 31,
                                                                                             1997           1996
                                                                                         -------------  -------------
<S>                                                                                     <C>            <C>
                                                                                                (IN THOUSANDS)
   Notes receivable--trade.............................................................    $  20,178      $   2,763
   Accounts receivable--trade..........................................................        1,648            965
   Accrued interest and other receivables..............................................        2,461          4,500
                                                                                         -------------       ------
                                                                                           $  24,287      $   8,228
                                                                                         -------------       ------
                                                                                         -------------       ------
</TABLE>

   Notes receivable--trade at September 31, 1997 included $10.8 million of
   short-term notes from sales in late March.

5. SERIES A PREFERENCE UNITS

   In March 1997, IPTO issued 13,074 Series A Preference Units with an 
   agreed value of $130.7 million to Federal Paper Board Company ("Federal"), 
   a wholly owned subsidiary of International Paper, in connection with the 
   purchase from Federal of a timber deed covering approximately 116,000 
   acres. These units, which may be redeemed by IPTO at any time, require 
   quarterly preferred return payments, based on an annual rate of 7.5% of 
   the agreed value, that must be paid before distributions can be made to 
   the Partnership's Class A or Class B unitholders. Preferred return 
   payments of $2.5 million and $5.3 million were included in interest 
   expense for the quarter and nine-month period ended September 30, 1997, 
   respectively.

   Since it is expected that all of the acres under the timber deed will be 
   harvested prior to the end of the Initial Term, payment of the $130.7 
   million redemption (or $2.81 per Class A Unit) will be made from the 
   Primary Account.
 
6. GAINS ON SALES OF PARTNERSHIP INTERESTS

   On March 29, 1996, a subsidiary partnership of IPT completed the sale of 
   a 98% general partnership interest to R-H Timber Co. As a result of this 
   transaction, IPT recognized a book gain of approximately $638 million, 
   approximately $203 million or $4.37 per unit of which was allocated to the 
   Class A Units. IPT retained a 1% interest in the partnership as well as a 
   preferred interest. Class A unitholders have approximately a 30% share of 
   the retained preferred interest, equal to about $.90 per Class A Unit.
 
   In September 1997, the Partnership completed the first in a series of 
   transactions relating to the sale of a subsidiary partnership interest in 
   approximately 175,000 acres of forestlands in Pennsylvania and New York. 
   This initial transaction, covering approximately 25,000 acres, resulted in 
   a gain of approximately $37 million. Approximately 7% of the earnings from 
   this sale were attributed to the Primary Account.

                                       8
<PAGE>

   In February 1997, the Partnership completed the sale of a special 
   partnership interest relating to 14,539 acres of pine plantations in 
   Arkansas and Texas. As a result of this sale, IPT recognized a gain of 
   approximately $15 million. Approximately 12 % of the earnings from this 
   sale were attributed to the Primary Account.

   In June 1996, the Partnership completed a sale of a special partnership 
   interest relating to 20,000 acres of pine plantations in the South. As a 
   result of this sale, IPT recognized a gain of approximately $18 million. 
   Essentially all of the earnings from this transaction were attributable to 
   the Secondary Account.

7. COMPUTATION OF EARNINGS PER CLASS A UNIT

   The Partnership Agreement provides for the allocation of Partnership 
   earnings among the general and limited partners. The following table 
   presents the computation of earnings per Class A Unit (in thousands, 
   except per unit data):
 
<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED       NINE MONTHS ENDED
                                                                          SEPTEMBER 30,           SEPTEMBER 30,
                                                                      ---------------------  -----------------------
                                                                        1997        1996         1997        1996
                                                                      ---------  ----------  ------------  ---------
<S>                                                                  <C>        <C>         <C>           <C>
   Allocation to Primary Account....................................  $  77,940  $   60,398  $    179,466  $ 366,718
   Allocation to Secondary Account..................................     19,320      (2,984)        3,262    433,389
                                                                      ---------  ----------  ------------  ---------
   Net Partnership Earnings.........................................     97,260      57,414       182,728    800,107
                                                                      ---------  ----------  ------------  ---------
   95% of the Primary Account(1)                                         74,042      57,378       170,492    348,382
   4% of the Secondary Account(1)                                           774        (119)          131     17,336
                                                                      ---------  ----------  ------------  ---------
   Earnings Allocated to
      Class A Limited Partners......................................  $  74,816  $   57,259  $    170,623  $365,718(2)
                                                                      ---------  ----------  ------------  ---------
                                                                      ---------  ----------  ------------  ---------
   Weighted Average Class A
     Units Outstanding..............................................     46,446      46,446        46,446     46,446
                                                                      ---------  ----------  ------------  ---------
                                                                      ---------  ----------  ------------  ---------
   Earnings Per Class A Unit........................................  $    1.61  $     1.23  $       3.67      7.87(2)
                                                                      ---------  ----------  ------------  ---------
                                                                      ---------  ----------  ------------  ---------
</TABLE>
 
(1)  Class B units are allocated 4% of Primary Account and 95% of Secondary
     Account earnings.The general partnersare allocated 1% of each account.

(2)  Includes $203 million, or $4.37 per Class A Unit, from the sale of a
     subsidiary partnership interest.

                                       9
<PAGE>

8. PARTNERS' CAPITAL

   The following tables present an analysis of the activity in Partners' 
   Capital (in thousands):
 
<TABLE>
<CAPTION>
                                                                                            PARTNERS' CAPITAL
                                                                                    ---------------------------------
                                                                                     GENERAL    LIMITED
                                                                                    PARTNERS    PARTNERS     TOTAL
                                                                                    ---------  ----------  ----------
<S>                                                                                <C>        <C>         <C>
   Nine Months Ended September 30, 1997
     Balance--January 1, 1997.....................................................  $  26,607  $  448,588  $  475,195
     Net earnings for the period..................................................      1,827     180,901     182,728
     Partner distributions........................................................       (733)    (72,602)    (73,335)
                                                                                    ---------  ----------  ----------
       Balance--September 30, 1997................................................  $  27,701  $  556,887  $  584,588
                                                                                    ---------  ----------  ----------
                                                                                    ---------  ----------  ----------
   Nine Months Ended September 30, 1996
     Balance--January 1, 1996.....................................................  $  25,786  $  367,264  $  393,050
     Net earnings for the period..................................................      8,001     792,106     800,107
     Partner distributions........................................................     (5,608)   (555,163)   (560,771)
                                                                                    ---------  ----------  ----------
       Balance--September 30, 1996................................................  $  28,179  $  604,207  $  632,386
                                                                                    ---------  ----------  ----------
                                                                                    ---------  ----------  ----------
</TABLE>

   The authorized and outstanding Class A and B Depositary Units at 
   September 30, 1997 and 1996, which represent the limited partnership 
   interests of IPT, are presented below. The Class B Units are 100% owned by 
   International Paper and affiliates.
 
<TABLE>
<CAPTION>
                                                                CLASS A DEPOSITARY UNITS OUTSTANDING
                                                               ---------------------------------------    CLASS B
                                                               INTERNATIONAL UNAFFILIATED                DEPOSITARY
                                                                PAPER AND       THIRD                      UNITS
                                                                AFFILIATES     PARTIES       TOTAL      OUTSTANDING
                                                               ------------  -----------  ------------  ------------
<S>                                                            <C>           <C>          <C>           <C>
   Number of Units...........................................   39,146,229    7,299,500     46,445,729    50,976,480
   Percentage of total.......................................           84%          16%           100%          100%
</TABLE>

   Under the terms of the Partnership Agreement, International Paper has 
   the right to purchase, at any time, all outstanding Class A Units at a 
   price equal to 133% of the market price at that time.

                                    10

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS
 
RESULTS OF OPERATIONS
 
Total Partnership revenues for the third quarter of 1997 were $95.2 million
compared with $83.3 million for the same period of 1996. Revenues from stumpage
sales were $83.3 million in the third quarter of 1997 compared with $72.5
million in 1996. Although harvest volumes were relatively flat with levels for
the same period last year, higher average prices led to a 15% increase in
stumpage sales revenues in the 1997 third quarter. Net Partnership earnings for
the 1997 third quarter were $97.3 million, including a gain of $37.0 million
from the sale of a subsidiary partnership interest, compared with $57.4 million
for the same period of 1996. Earnings as a percent of revenues, before the gain,
were lower in 1997 than in 1996 due to higher depletion costs on timber acquired
from Federal Paper Board Company and higher interest expense.
 
In the South, third quarter stumpage sales revenues in 1997 were 19% higher
than for the comparable period of 1996 due to 3% higher harvest volumes and 15%
higher average prices. Operating results in this region benefited from
favorable, dry weather logging conditions and continued strong markets. In the
Northeast, harvest volumes were 20% below 1996 third quarter levels. Stumpage
sales revenues were 30% below levels for the comparable period of 1996 due to
lower sales of higher value sawlogs reflecting a decrease in purchases by
Canadian sawmills.
 
Forestland sales were minimal in both the 1997 and 1996 periods.

In September 1997, the Partnership completed the first in a series of 
transactions relating to the sale of a subsidiary partnership interest in 
approximately 175,000 acres of forestlands in Pennsylvania and New York. 
This initial transaction, covering approximately 25,000 acres, resulted in a 
gain of approximately $37 million. A second transaction is expected to close 
in the fourth quarter of 1997, with the remaining transactions closing in 
1998.

Amounts attributable to the Primary and Secondary Accounts for major 
categories in the statement of earnings were (in thousands):
 
<TABLE>
<CAPTION>
                                                                            
                                                                      THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                         SEPTEMBER 30,          SEPTEMBER 30,
                                                                     --------------------  ----------------------
                                                                       1997       1996        1997        1996
                                                                     ---------  ---------  ----------  ----------
<S>                                                                  <C>        <C>        <C>         <C>
Stumpage Sales
  Primary Account..................................................  $  83,249  $  64,716  $  209,438  $  190,854
  Secondary Account................................................         15      7,789          15       7,789
                                                                     ---------  ---------  ----------  ----------
                                                                     $  83,264  $  72,505  $  209,453  $  198,643
                                                                     ---------  ---------  ----------  ----------
                                                                     ---------  ---------  ----------  ----------
Forestland Sales
  Primary Account..................................................  $     254  $     103  $      659  $      753
  Secondary Account................................................        460        346       1,316       5,668
                                                                     ---------  ---------  ----------  ----------
                                                                     $     714  $     449  $    1,975  $    6,421
                                                                     ---------  ---------  ----------  ----------
                                                                     ---------  ---------  ----------  ----------
Operating Costs and Expenses
  Primary Account..................................................  $  19,944  $  14,580  $   54,876  $   45,352
  Secondary Account................................................     11,860     11,772      34,980      32,064
                                                                     ---------  ---------  ----------  ----------
                                                                     $  31,804  $  26,352  $   89,856  $   77,416
                                                                     ---------  ---------  ----------  ----------
                                                                     ---------  ---------  ----------  ----------
</TABLE>

                                   11

<PAGE>

Stumpage sales attributed to the Secondary Account in 1996 related to a bulk
sale in the third quarter that included timber not scheduled to be harvested
until after the end of the Initial Term.

Operating costs and expenses by category are shown in the consolidated
statement of earnings on page 4. The increase in Primary Account expenses in the
third quarter of 1997 is due to increased depletion charges from higher stumpage
sales.
 
Sales volumes attributable to timber sales were (in thousand cunits):
 
<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED    NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,         SEPTEMBER 30,
                                                                                  --------------------  --------------------
                                                                                    1997       1996       1997       1996
                                                                                  ---------  ---------  ---------  ---------
<S>                                                                               <C>        <C>        <C>        <C>
Used by International Paper facilities..........................................        430        295        971        735
Resold by International Paper...................................................         84        146        231        360
Sold to unaffiliated parties....................................................        546        594      1,573      1,569
                                                                                  ---------  ---------  ---------  ---------
                                                                                      1,060      1,035      2,775      2,664
                                                                                  ---------  ---------  ---------  ---------
                                                                                  ---------  ---------  ---------  ---------
</TABLE>
 
Total annual sales volumes for 1997 are expected to remain approximately the
same as in 1996.
 
Depletion as a percent of stumpage sales increased in the 1997 third quarter
due to sales of higher cost timber acquired from Federal Paper Board Company.
 
Interest expense for the third quarter of 1997 included $7.1 million related
to $450 million of long-term debt and $2.5 million as a preferred return on the
Series A Preference Units issued to Federal Paper Board Company in March 1997.

LIQUIDITY AND CAPITAL RESOURCES
IPT had cash and temporary investments of $9.7 million, a current receivable
from International Paper of $7.1 million, and notes receivable from
International Paper of $371.5 million, giving the Partnership $388.3 million in
liquid assets at September 30, 1997. Cash is either invested in temporary
investments or loaned to International Paper at market rates. The breakdown of
liquid assets between the Primary and Secondary Accounts was (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      SEPTEMBER 30,  DECEMBER 31,
                                                                                          1997           1996
                                                                                      -------------  ------------
<S>                                                                                   <C>            <C>
Cash, temporary investments and current receivables
  Primary Account...................................................................   $   291,885    $  171,508
  Secondary Account.................................................................        96,402       110,757
                                                                                      -------------  ------------
                                                                                       $   388,287    $  282,265
                                                                                      -------------  ------------
                                                                                      -------------  ------------
Total per Class A Unit..............................................................   $      6.05    $     3.61
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
In addition, current assets at September 30, 1997 and December 31, 1996, 
included $4.1 million and $5.5 million, respectively, of accounts receivable,
and $20.2 million and $2.7 million, respectively, of notes receivable, from
parties other than International Paper, due within the next 12 months.

                                       12

<PAGE>

In March 1997, IPTO issued 13,074 Series A Preference Units, with an agreed
value of $130.7 million, to Federal Paper Board Company in exchange for a timber
deed on approximately 116,000 acres. These units, which may be redeemed by IPTO
at any time, require quarterly preferred return payments, based on an annual
rate of 7.5% of the agreed value, that must be paid before distributions can be
made to the Partnership's Class A or Class B unitholders. Since it is expected
that the harvest from this timber deed will be prior to the end of the Initial
Term, payment of the $130.7 million redemption value (or $2.81 per Class A Unit)
will be made from the Primary Account.
 
The following table reflects cash flow from operations, after capital
expenditures, attributable to the Class A Units (in thousands).
 
<TABLE>
<CAPTION>
                                                                                PRIMARY    SECONDARY      IPT
                                                                                ACCOUNT     ACCOUNT      TOTAL
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
Nine Months Ended September 30, 1997
Cash provided by operations..................................................  $  191,956  $   22,578  $  214,534
Investment in forestlands and roads..........................................        (166)    (26,327)    (26,493)
IPTO general partners' interest in above.....................................      (1,918)         37      (1,881)
                                                                               ----------  ----------  ----------
Cash flow after capital expenditures.........................................     189,872      (3,712) $  186,160
Class A Unit allocation factor...............................................          95%          4%
                                                                               ----------  ----------  ----------
Class A Unit cash flow after capital expenditures............................  $  180,378  $     (148) $  180,230
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
Distributions declared for Class A Units.....................................  $   69,669              $   69,669
                                                                               ----------              ----------
                                                                               ----------              ----------
Nine Months Ended September 30, 1996
Cash provided by operations..................................................  $  193,800  $    6,405  $  200,205
Investment in forestlands and roads..........................................      (1,769)    (24,516)    (26,285)
IPTO general partners' interest in above.....................................      (1,920)        181      (1,739)
                                                                               ----------  ----------  ----------
Cash flow after capital expenditures.........................................     190,111     (17,930) $  172,181
Class A Unit allocation factor...............................................          95%          4%
                                                                               ----------  ----------  ----------
Class A Unit cash flow after capital expenditures............................  $  180,605  $     (717) $  179,888
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
Distributions declared for Class A Units.....................................  $  522,515              $  522,515
                                                                               ----------              ----------
                                                                               ----------              ----------
</TABLE>
 
In October 1997, IPT declared a regular quarterly cash distribution of $.50
per Class A Unit for the third calendar quarter of 1997. This distribution is
payable on November 14, 1997 to holders of record as of October 31, 1997.
 
In April 1996, IPT had declared a regular $.50 per Class A Unit distribution
and a $9.75 per Class A Unit special distribution. The payment of this
distribution was the result of management's evaluation that remaining cash
balances and projected future cash flows would be adequate for future asset
acquisition and operating requirements.

                                  13

<PAGE>

Capital expenditures, including expenditures for reforestation of harvested 
forestland, acquisition of capitalized leases and road construction, are 
expected to be approximately $170 million for 1997, including the issuance of 
$131 million in preferred units in March 1997 for the Federal timber deed 
acquisition.

                                   14

<PAGE>

PART II. Other Information
 
Item 6. Exhibits and Reports on Form 8-K.
 
    (a) Exhibits 
        (27) Financial Data Schedule
 
    (b) No Current Reports on Form 8-K have been filed during the quarter for 
        which this report is filed.
 
                                       15
<PAGE>

                                   SIGNATURES
 
    Pursuant to the requirements 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.


                                    IP Timberlands, Ltd. 
                                    By: IP Forest Resources Company
                                    Managing General Partner
                                        (Registrant) 

Date: November 14, 1997       By:   /s/ James W. Guedry 
                                    --------------------
                                    James W. Guedry
                                    Vice President and Secretary 

Date: November 14, 1997       By:   /s/ Frederick L. Bleier
                                    ------------------------
                                    Frederick L. Bleier 
                                    Treasurer and Controller 
                                    and Chief Financial and 
                                    Accounting Officer
 
                                       16