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SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
(Name of Registrant as Specified in Its Charter)

________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box): [x]

[x] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:

________________________________________________________________________________

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

________________________________________________________________________________

(4) Proposed maximum aggregate value of transaction:

________________________________________________________________________________

(5) Total fee paid:

________________________________________________________________________________

[ ] Fee paid previously with preliminary materials.
________________________________________________________________________________

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

________________________________________________________________________________

(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________

(3) Filing Party:
________________________________________________________________________________

(4) Date Filed:

________________________________________________________________________________
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[POPE RESOURCES LETTERHEAD]

To the Partners of Pope Resources:

A meeting of the Partners of Pope Resources, A Delaware Limited Partnership
(the "Partnership"), will be held on Friday, February 14, 1997, at 1:00 p.m.,
local time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington (the "Partnership Meeting").

At the Partnership Meeting, you will be asked to consider and vote upon the
approval and adoption of certain amendments to the Limited Partnership Agreement
of the Partnership, dated as of November 7, 1985, as amended as of December 16,
1986. The proposed amendments would amend the Limited Partnership Agreement to:

(i) permit the Partnership to engage in a new business enterprise
involving the location, acquisition, management and/or development of land
and related resources directly or through acquisition of land-holding
entities, primarily or exclusively for the account of individuals and/or
entities who are not otherwise Affiliates of the Partnership (the "Investor
Portfolio Management Business"); and

(ii) authorize an incremental, sliding-scale allocation of net income
derived from the Investor Portfolio Management Business between the
Partnership and the Managing General Partner,

all as more particularly described in the accompanying Proxy Statement.

You will also be asked to consider and vote upon a waiver (the "Waiver") of
the application of an age-related eligibility requirement for service on the
Board of Directors of the Managing General Partner (the "MGP Board") set forth
in the Shareholders Agreement of the Managing General Partner (the "Shareholders
Agreement") to Adolphus Andrews, Jr., an existing member of the MGP Board. The
Waiver would permit Mr. Andrews to continue to serve on the MGP Board for two
(2) years beyond the age of 75. The MGP Board believes that Mr. Andrews'
continued service on the MGP Board is valuable to the Managing General Partner
and to the Partnership in that he will provide continuity to the MGP Board in
the oversight and evaluation of the Investor Portfolio Management Business as
the Partnership enters into this new business enterprise.

THE PROPOSED AMENDMENTS AND THE WAIVER HAVE BEEN CAREFULLY CONSIDERED AND
APPROVED BY THE MGP BOARD AS BEING IN THE BEST INTERESTS OF THE PARTNERS AND THE
PARTNERSHIP (MR. ANDREWS ABSTAINED FROM VOTING ON THE WAIVER). THE MANAGING
GENERAL PARTNER RECOMMENDS YOUR APPROVAL OF THE PROPOSED AMENDMENTS AND THE
WAIVER.

In the material accompanying this letter, you will find a Notice of
Partnership Meeting, a Proxy Statement relating to the actions to be taken by
the Partners at the Partnership Meeting, and a proxy card. The Proxy Statement
more fully describes the proposed amendments and Waiver.

All Partners are cordially invited to attend the Partnership Meeting in
person. However, whether or not you plan to attend the Partnership Meeting,
please complete, sign, date and return your proxy or proxies in the enclosed
postage paid envelope. If you attend the Partnership Meeting, you may vote in
person if you wish, even though you have previously returned your proxy. It is
important that your Units be represented and voted at the Partnership Meeting.
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I look forward to seeing you at the Partnership Meeting.

Sincerely,

---------------------------------
Gary F. Tucker, President and CEO
Pope MGP, Inc., Managing General Partner

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POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
19245 10TH AVE. NE
POULSBO, WA 98370

NOTICE OF PARTNERSHIP MEETING

TO BE HELD ON FEBRUARY 14, 1997

1. To consider and vote upon amendments (the "Amendments") to the Limited
Partnership Agreement of the Partnership, dated as of November 7, 1985,
as amended as of December 16, 1986 (the "Partnership Agreement"), to:

(a) permit the Partnership to engage in a new business
enterprise, the Investor Portfolio Management Business,
specifically the business of the Partnership, its Affiliates,
and/or related businesses, involving the location,
acquisition, management and/or development of land and related
resources directly or through acquisition of land-holding
entities, including, but not limited to, timberlands and lands
with development potential for residential or commercial use,
within and without the United States, primarily or exclusively
for the account of individuals and/or entities who are not
otherwise Affiliates of the Partnership; and

(b) authorize an annual incremental, sliding-scale
allocation of the net income derived from the Investor
Portfolio Management Business between a subsidiary of the
Partnership and the Managing General Partner, beginning at 80%
for the new subsidiary and 20% for the Managing General
Partner and adjusting gradually to 50% each when net income
exceeds $7 million in a fiscal year.

2. To consider and vote upon a waiver (the "Waiver") of the application of
an age-related eligibility requirement for service on the Board of
Directors of the Managing General Partner (the "MGP Board") set forth
in the Shareholders Agreement of the Managing General Partner (the
"Shareholders Agreement") to Adolphus Andrews, Jr., an existing member
of the MGP Board, that would permit Mr. Andrews to continue to serve on
the MGP Board for two (2) years beyond the age of 75.

3. To transact such other business as may properly come before the
Partnership Meeting or any continuance(s) or adjournment(s) thereof.

The foregoing proposals are more particularly described in the accompanying
Proxy Statement.

Only Partners of record at the close of business on January 10, 1997 are
entitled to receive notice of and to vote at the Partnership Meeting, or at any
continuance(s) or adjournment(s) thereof. ADOPTION OF THE AMENDMENTS AND
APPROVAL OF THE WAIVER EACH REQUIRE THE AFFIRMATIVE VOTE OF THE PARTNERS OF
RECORD HOLDING MORE THAN FIFTY PERCENT (50%) OF THE UNITS HELD BY ALL
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PARTNERS OF RECORD (A "MAJORITY INTEREST"), AS WELL AS THE SEPARATE APPROVAL OF
THE MANAGING GENERAL PARTNER. The Managing General Partner has approved the
Amendments and the Waiver. Because of their integral relationship, the
Amendments are to be considered and voted on by the Partners as a single
proposal.

By Order of the Board of Directors of Pope MGP,
Inc., Managing General Partner

-------------------------------------
Gary F. Tucker, President and CEO

Poulsbo, Washington
January __, 1997

================================================================================
IMPORTANT: Even if you plan to be present at the meeting, please fill in, date,
sign and promptly mail the enclosed proxy or proxies in the postage paid
envelope provided to ensure that your Units are represented at the Partnership
Meeting. If you attend the Partnership Meeting, you may vote in person if you
wish to do so even though you have previously sent in your proxy or proxies.
================================================================================

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PROXY STATEMENT
OF
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
FOR A MEETING OF PARTNERS
TO BE HELD ON FEBRUARY 14, 1997

This Proxy Statement is being furnished to all of the Partners (as that
term is defined in the Partnership Agreement referred to below) of Pope
Resources, A Delaware Limited Partnership (the "Partnership"), formed pursuant
to the Limited Partnership Agreement of the Partnership, dated as of November 7,
1985, as amended as of December 16, 1986 (the "Partnership Agreement"), in
connection with the solicitation of proxies by Pope MGP, Inc., as Managing
General Partner of the Partnership ("MGP" or the "Managing General Partner"),
for use at the Meeting of Partners to be held on Wednesday, February 14, 1997,
at 1:00 p.m., local time, at the Four Seasons Olympic Hotel, 411 University
Street, Seattle, Washington (the "Partnership Meeting"), and at any
continuance(s) or adjournment(s) thereof. This Proxy Statement is first being
mailed to Partners on or about January __, 1997.

At the Partnership Meeting, Partners will be asked to authorize certain
amendments (the "Amendments") to the Partnership Agreement to (i) permit the
Partnership to engage in a new business enterprise (the "Investor Portfolio
Management Business"), specifically the business of the Partnership, its
Affiliates, and/or related businesses, involving the location, acquisition,
management and/or development of land and related resources directly or through
acquisition of land-holding entities, including, but not limited to, timberlands
and lands with development potential for residential or commercial use, within
and without the United States, primarily or exclusively for the account of
individuals and/or entities who are not otherwise Affiliates of the Partnership
("Third Party Investors") and to further permit the Partnership to engage in the
Investor Portfolio Management Business through one or more entities
(collectively, the "Portfolio Business Affiliate") wholly-owned and controlled,
directly or indirectly, by the Partnership or by the Partnership and the
Managing General Partner; and (ii) authorize an annual incremental,
sliding-scale allocation of the net income derived from the Investor Portfolio
Management Business (the "IPMB Net Income") between a new subsidiary of the
Partnership (the "New Partnership Subsidiary") and the Managing General Partner
(the "IPMB Income Allocation"), beginning at 80% for the New Partnership
Subsidiary and 20% for the Managing General Partner and adjusting gradually to
50% each when IPMB Net Income exceeds $7 million in a fiscal year, all as more
particularly described in the this Proxy Statement. See "Background and Reasons
for the Amendments - Conduct of Investor Portfolio Management Business,"
"Background and Reasons for the Amendments - The ORM/LLC Operating Agreement,"
"Background and Reasons for the Amendments - Net Income Distribution" and "The
Amendments." In addition, Partners will be asked to consider and vote upon a
waiver (the "Waiver") of the application of an age-related eligibility
requirement for service on the Board of Directors of the Managing General
Partner (the "MGP Board"), as set forth in the Shareholders Agreement entered
into in 1985 among the Partnership, Pope & Talbot, Inc., Pope EGP, Inc. (the
equity general partner of the Partnership), the Shareholders of MGP, and the
members of the MGP Board (the "Shareholders Agreement") to Adolphus Andrews,
Jr., an existing member of the MGP Board. The Waiver would permit Mr. Andrews to
continue to serve on the MGP Board for two (2) years beyond the age of 75. See
"Background and Reasons for the Waiver."

THE MANAGING GENERAL PARTNER, BY THE UNANIMOUS APPROVAL OF ITS BOARD OF
DIRECTORS (BASED UPON THE UNANIMOUS RECOMMENDATION OF A BOARD COMMITTEE COMPOSED
OF INDEPENDENT DIRECTORS) HAS APPROVED THE AMENDMENTS, AND BY THE UNANIMOUS
APPROVAL OF ITS BOARD OF DIRECTORS (MR. ANDREWS NOT VOTING) HAS APPROVED THE
WAIVER, AND RECOMMENDS THAT THE PARTNERS VOTE FOR APPROVAL AND ADOPTION OF THE
AMENDMENTS AND APPROVAL OF THE WAIVER. SUCH APPROVAL OF THE AMENDMENTS BY THE
MANAGING GENERAL PARTNER IS SPECIFICALLY CONDITIONED ON APPROVAL OF THE
AMENDMENTS BY THE LIMITED PARTNERS AS A SINGLE PROPOSAL.

The date of this Proxy Statement is January ___, 1997

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TABLE OF CONTENTS

SUMMARY.................................................................. 3
General............................................................. 3
The Meeting of Partners............................................. 3
Background.......................................................... 4
The Amendments...................................................... 4
The Waiver.......................................................... 5

THE MEETING OF THE PARTNERS.............................................. 5
General............................................................. 5
Matters to be Considered at the Meeting............................. 5
Record Date; Partnership Units Entitled to Vote; Vote Required...... 5
Proxies; Proxy Solicitation......................................... 6

BACKGROUND AND REASONS FOR THE AMENDMENTS................................ 7
Historical Business................................................. 7
Consideration of Investor Portfolio Management Business............. 7
Conduct of Investor Portfolio Management Business................... 8
The ORM/LLC Operating Agreement..................................... 10
Net Income Distribution............................................. 10
Management Incentive Program........................................ 11
Factors Considered by MGP Board..................................... 11
Recommendations and Opinion of Financial Advisor.................... 13
Federal Income Tax Considerations................................... 14

THE AMENDMENTS........................................................... 16
General............................................................. 16
Amendment of "Purpose" of the Partnership........................... 16
Allocation of IPMB Net Income to Managing General Partner........... 16

INTEREST OF CERTAIN PERSONS IN THE AMENDMENTS............................ 18
General............................................................. 18
Managing General Partner............................................ 18
Shareholders and Directors of the Managing General Partner.......... 18

BACKGROUND AND REASONS FOR THE WAIVER.................................... 20
Background.......................................................... 20
Reasons for the Waiver.............................................. 20
Consequences of the Waiver.......................................... 21

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 21

AVAILABLE INFORMATION.................................................... 23

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SUMMARY

Certain significant matters discussed in this Proxy Statement are
summarized below. This summary is not intended to be complete and is qualified
in all respects by reference to the more detailed information appearing or
incorporated by reference in this Proxy Statement (including the Appendices
hereto).

This Proxy Statement contains forward-looking statements regarding future
events relating to the Partnership that involve significant risks and
uncertainties. Parties are advised that such statements are predictions and
beliefs of the Partnership, and the Partnership's actual results may differ
materially from those discussed herein.

GENERAL

This Proxy Statement relates to certain proposed amendments to the
Partnership Agreement to (i) expand the purpose of the Partnership to permit the
Partnership to engage in the Investor Portfolio Management Business, and (ii)
authorize the annual incremental, sliding-scale allocation of IPMB Net Income
between the New Partnership Subsidiary and the Managing General Partner (the
"Amendments"). A copy of the Amendments is attached hereto as Appendix I.

This Proxy Statement also relates to a proposed waiver (the "Waiver") of
the application of one of the provisions of the Shareholders Agreement of the
Managing General Partner to permit an existing director of the Managing General
Partner, Adolphus Andrews, Jr., to continue to serve on the MGP Board for two
(2) years beyond the age of 75.

A glossary of defined terms as used in this Proxy Statement is attached
hereto as Appendix II.

THE MEETING OF PARTNERS

Date, Time, Place and Purpose of the Meeting. The Meeting of Partners is to
be held on Friday, February 14, 1997, at 1:00 p.m., local time, at the Four
Seasons Olympic Hotel, 411 University Street, Seattle, Washington (the
"Partnership Meeting"). At the Partnership Meeting, Partners will consider and
vote upon the Amendments and the Waiver described herein.

Record Date. Only partners of record of the Partnership at the close of
business on January 10, 1997 (the "Partners") are entitled to receive notice of
and to vote at the Partnership Meeting, or at any continuance(s) or
adjournment(s) thereof.

Vote Required. The affirmative vote of Partners holding more than fifty
percent (50%) of the Units held by all Partners (a "Majority Interest"),
together with the separate approval of the Managing General Partner, is required
for the approval and adoption of the Amendments and for approval of the Waiver.
See "Meeting of Partners - Record Date; Units Entitled to Vote; Vote Required."
The Managing General Partner has approved the Amendments, but such approval was
conditioned on the approval of both of the Amendments by the Limited Partners as
a single proposal. The Managing General Partner and the shareholders of the
Managing General Partner have also approved the Waiver. As of the Record Date,
there were ___________ Units with voting rights outstanding, of which the
Managing General Partner, Pope EGP, Inc., the Equity General Partner of the
Partnership, and the directors, executive officers and shareholders of the
Managing General Partner or the Partnership, as the case may be held 162,789
Units. See "Security Ownership of Certain Beneficial Owners and Management."

Principal Executive Office. The principal executive office of the
Partnership is located at 19245 10th Avenue N.E., Poulsbo, Washington 98370.

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BACKGROUND

The Partnership was formed in 1985 as a result of a split-off of certain
timberland resources and property development operations of Pope & Talbot, Inc.
and its subsidiaries. Since its formation, the Partnership has operated its
timberland resources and property development businesses. See "Historical
Business."

In late 1995, as part of the Partnership's long-range planning for
continued growth, the MGP Board began to consider the development of expanded
lines of business that would build upon those lines of business historically
pursued by the Partnership. In early 1996, the MGP Board concluded that the
timber and real estate management experience gained by the Partnership in the
operation of its historical businesses, combined with the specific prior
experience of Gary F. Tucker, the Partnership's newly-hired Chief Executive
Officer, in developing and managing timber investment portfolios for large
institutional investors, could be leveraged into expanded lines of business that
have the potential for bolstering the Partnership's long-term growth. In
addition, the MFG Board concluded that these expanded lines of business could
provide investment opportunities for the Partnership. Beginning in early 1996,
the MGP Board began analyzing the feasibility and advisability of establishing
the Investor Portfolio Management Business. During this process, the MGP Board
considered a variety of factors, including the amount and structure of fees that
could reasonably be charged to Third Party Investors in connection with the
Investor Portfolio Management Business, the potential costs involved in
establishing the Investor Portfolio Management Business, potential staffing and
management requirements, projected returns, the risks and liabilities associated
with engaging in the Investor Portfolio Management Business, the possible
opportunity for the Partnership to gain equity participation in the properties
acquired and managed through the Investor Portfolio Management Business and the
risks and liabilities associated therewith, and various other business, legal,
accounting and tax issues relating to the establishment and operation of the
Investor Portfolio Management Business. See "Background And Reasons For The
Amendments - Factors Considered by MGP Board" and "The Amendments." In December
of 1996, the MGP Board resolved to authorize the establishment of the Investor
Portfolio Management Business subject to requisite approval by the Partners of
the Amendments to the Partnership Agreement described in this Proxy Statement.

THE AMENDMENTS

The Partners are being asked to approve a proposal to amend certain
provisions of the Partnership Agreement. The proposed Amendments would permit
the Partnership to engage in the Investor Portfolio Management Business and to
do so through the Portfolio Business Affiliate in which the Partnership,
initially through the New Partnership Subsidiary, and the Managing General
Partner are the sole equity owners, and to authorize a sliding-scale allocation
of the IPMB Net Income between the New Partnership Subsidiary and the Managing
General Partner. See "The Amendments."

The Managing General Partner, through the MGP Board, and based upon the
unanimous recommendation of a committee of the MGP Board composed of independent
directors (the "Board Committee"), has determined that the Amendments are fair
and in the best interests of the Partners and the Partnership, has approved the
Amendments, and recommends that the Partners approve the Amendments. In
considering whether to approve and adopt the Amendments, Partners should
consider the information set forth under the captions "Background and Reasons
for the Amendments" and "Interest of Certain Persons in the Amendments."

If the amendments are not duly adopted in the manner set forth in this
Proxy Statement, the Partnership will not pursue the Investor Portfolio
Management Business, and one or more principals of the Managing General Partner
may separately pursue such a business through other entities.

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THE WAIVER

The Partners are also being asked to approve a proposal to waive a
provision of the Shareholders Agreement which limits eligibility for membership
on the MGP Board to persons who are not in excess of 75 years of age, so as to
permit an existing member of the MGP Board, Adolphus Andrews, Jr., to continue
to serve on the MGP Board for two (2) years beyond the mandatory retirement age
of 75 years set forth in the Shareholders Agreement.

The Managing General Partner, through the MGP Board (Mr. Andrews not
voting), has determined that the Waiver is in the best interests of the Partners
and the Partnership, has approved the Waiver, and recommends that the Partners
approve the Waiver. In considering whether to approve the Waiver, Partners
should consider the information set forth under the caption "Background and
Reasons for the Waiver."

THE MEETING OF THE PARTNERS

GENERAL

This Proxy Statement is being furnished to the Partners in connection with
the solicitation of proxies by the Managing General Partner for use at the
Partnership Meeting to be held on Friday, February 14, 1997, at 1:00 p.m., local
time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington, and at any continuance(s) or adjournment(s) thereof. This Proxy
Statement and the accompanying form of proxy are first being mailed to Partners
on or about January __, 1997.

MATTERS TO BE CONSIDERED AT THE MEETING

At the Partnership Meeting, Partners of record as of the Record Date will
consider and vote upon proposals to approve and adopt the Amendments and to
approve the Waiver. See "The Amendments" and "The Waiver."

THE MANAGING GENERAL PARTNER, BASED UPON THE UNANIMOUS RECOMMENDATION OF
THE BOARD COMMITTEE, HAS APPROVED THE AMENDMENTS, AND THE MANAGING GENERAL
PARTNER (MR. ANDREWS NOT VOTING) HAS APPROVED THE WAIVER, AND THE MANAGING
GENERAL PARTNER RECOMMENDS THAT THE PARTNERS VOTE "FOR" APPROVAL AND ADOPTION OF
THE AMENDMENTS AND APPROVAL OF THE WAIVER. See "Background and Reasons for the
Amendments," "Interest of Certain Persons in the Amendments," "Background and
Reasons for the Waiver," and "Interest of Certain Persons in the Waiver."

RECORD DATE; PARTNERSHIP UNITS ENTITLED TO VOTE; VOTE REQUIRED

The close of business on January 10, 1997 has been fixed as the record date
for determining Limited Partners who are entitled to notice of and to vote at
the Partnership Meeting (the "Record Date"). As of the Record Date, there were
_____________ Units outstanding and entitled to vote. In accordance with the
Partnership Agreement, only those holders of record of Limited Partners' Units
who have previously been admitted as Limited Partners pursuant to the
Partnership Agreement ("Limited Partners") are entitled to vote at the
Partnership Meeting. The Partnership Agreement requires the presence in person
or by proxy of Partners holding a Majority Interest to constitute a quorum for
the transaction of business at the Partnership Meeting. Under the Partnership
Agreement, the affirmative vote of Partners representing a Majority Interest is
required for approval of the Amendments, in addition to the separate approval of
the Managing General Partner, which approval has been obtained. Similarly, the
affirmative vote of Partners representing a Majority Interest is required for
approval of the Waiver, in addition to the separate approval of the Managing
General Partner, which approval has been obtained. Approval of the Waiver has
the additional requirement of the approval of the other parties to the
Shareholder Agreement, which approval has also been obtained. As of the Record
Date, Peter T. Pope, a director of the Managing General Partner, and Emily T.
Andrews, the spouse of Adolphus

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Andrews, Jr. a director of the Managing General Partner, beneficially owned
162,289 Units, or ___% of the outstanding Units entitled to vote on the
Amendments and the Waiver. It is the intention of Peter T. Pope and Emily T.
Andrews to vote these units in favor of approval and adoption of the Amendments
and approval of the Waiver.

Because approval and adoption of the Amendments and approval of the Waiver
require approval by a Majority Interest, abstentions from voting and failures to
vote in person or by proxy will have the practical effect of voting against the
approval and adoption of the Amendments and approval of the Waiver.

PROXIES; PROXY SOLICITATION

Limited Partners' Units held of record by Limited Partners which are
represented by properly executed proxies received at or prior to the Partnership
Meeting that have not been revoked will be voted at the Partnership Meeting (and
at any continuance(s) or adjournment(s) thereof) in accordance with the
instructions contained therein. Limited Partners' Units held of record by
Limited Partners which are represented by properly executed proxies for which no
instruction is given will be voted "FOR" approval and adoption of the Amendments
and approval of the Waiver. Limited Partners are urged to complete, sign, date,
and return promptly the enclosed proxy card in the postage prepaid return
envelope provided to ensure that their Limited Partners' Units are voted. A
Limited Partner may revoke a proxy by submitting at any time prior to the vote
on the Amendments and the Waiver written notice to the Managing General Partner
or by attending the Partnership Meeting and voting in person. Mere attendance at
the Partnership Meeting will not in and of itself revoke a proxy.

If the Partnership Meeting is postponed, continued, or adjourned for any
reason, at any subsequent reconvening of the Partnership Meeting all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Partnership Meeting (except for any proxies that have
theretofore effectively been revoked), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.

The costs of soliciting proxies will be borne by the Partnership. In
addition to solicitations by mail, officers, directors and regular employees of
the Managing General Partner and the Partnership may solicit proxies personally
or by telephone without additional compensation. The Partnership will also
employ Georgeson & Company Inc., at a cost of approximately $10,000, to solicit
proxies.

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BACKGROUND AND REASONS FOR THE AMENDMENTS

HISTORICAL BUSINESS

The Partnership was organized in December 1985 as a result of a split-off
by Pope & Talbot, Inc. ("P&T") of certain of its assets. The Partnership is a
successor to Pope & Talbot Development, Inc. and other P&T affiliates. The
Partnership currently has three corporate subsidiaries, Ludlow Water Company,
Gamble Village Water & Sewer Company, and Ludlow Bay Realty, Inc., and a 50%
general partnership interest in Ludlow Associates, a Washington general
partnership that owns the Inn at Ludlow Bay.

The Partnership's current operations ("Historical Business") are classified
into two segments: (i) timberland resources and (ii) property development. The
Partnership's largest segment, timberland resources, encompasses the growing and
harvesting of timber and leasing of the timberlands for mineral extraction and
communications towers. The bulk of the Partnership's land ownership (totalling
approximately 76,000 acres) is allocated to this segment. Its principal
operations consist of the sale of logs in export and domestic markets and sales
of standing timber to buyers who log it under the terms of purchase contracts.
This segment produced 73%, 63%, and 76% of the Partnership's consolidated gross
revenues in 1995, 1994, and 1993, respectively.

The Partnership's other segment, property development, consists of
residential development and income properties. Residential development involves
the sale of single-family homes, finished lots, and undeveloped acreage. Income
properties consist of utilities providing water and sewer services to properties
in the Port Ludlow and Port Gamble, Washington area; a marina, golf course,
commercial shopping center, and RV park operated by the Partnership; certain
property leased to Pope & Talbot, Inc.; a restaurant/lounge and related
facilities leased to and operated by Village Resorts, Inc.; and a 50% general
partnership interest in a 36-room inn. This segment produced 27%, 37%, and 24%
of the Partnership's consolidated gross revenues in 1995, 1994, and 1993,
respectively.

CONSIDERATION OF INVESTOR PORTFOLIO MANAGEMENT BUSINESS

In late 1995, as part of the Partnership's long-range planning for
continued growth, the MGP Board began to consider the development of expanded
lines of business that would build upon those lines of business historically
pursued by the Partnership. In early 1996, the MGP Board concluded that the
timber and real estate management experience gained by the Partnership in the
operation of its historical businesses, combined with the specific prior
experience of Gary F. Tucker, the Partnership's newly-hired Chief Executive
Officer, in developing and managing timber investment portfolios for large
institutional investors, could be leveraged into expanded lines of business that
have the potential for bolstering the Partnership's long-term growth. The MGP
Board thereupon began analyzing the feasibility and advisability of establishing
the Investor Portfolio Management Business. During this process, the MGP Board
considered a variety of factors, including the amount and structure of fees that
could reasonably be charged to Third Party Investors in connection with the
Investor Portfolio Management Business, the potential costs involved in
establishing the Investor Portfolio Management Business, potential staffing and
management requirements, projected returns, the risks and liabilities associated
with engaging in the Investor Portfolio Management Business, the possible
opportunity for the Partnership to gain equity participation in the properties
acquired and managed through the Investor Portfolio Management Business and the
risks and liabilities associated therewith, and various other business, legal,
accounting and tax issues relating to the creation and operation of the Investor
Portfolio Management Business. See "- Factors Considered by MGP Board." In
December, 1996, the MGP Board, based upon the unanimous recommendation of the
Board Committee, resolved to authorize the establishment of the Investor
Portfolio Management Business subject to requisite approval by the Partners of
the Amendments to the Partnership Agreement described in this Proxy Statement.

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CONDUCT OF INVESTOR PORTFOLIO MANAGEMENT BUSINESS

If the Amendments discussed herein are duly approved, the Partnership will
be authorized to engage in the Investor Portfolio Management Business and to do
so through the Portfolio Business Affiliate. Although the Amendments do not
specify the form of entity that the Portfolio Business Affiliate will take, the
Partnership intends that the Investor Portfolio Management Business will
initially be managed by a Washington limited liability company, Olympic Resource
Management LLC ("ORM/LLC"). Moreover, the Partnership will form a new corporate
subsidiary, ORM, Inc. ("ORMI") to hold the Partnership's member interest in
ORM/LLC. The other member of ORM/LLC will be the Managing General Partner. For
the foreseeable future, ORM/LLC and ORMI will collectively constitute the
Portfolio Business Affiliate and ORMI will be the New Partnership Subsidiary.
The Amendments are designed to give the Partnership the flexibility to hold the
member interest in ORM/LLC directly, to change the form of ORMI to a
non-corporate entity, or otherwise to change the form of the Portfolio Business
Affiliate if business, legal and/or tax considerations make any such change
necessary or desirable in the future.

The Partnership, through ORMI, is expected to provide essentially all of
the funding required for the start-up phase of ORM/LLC, as capital contributions
or as loans. It is currently anticipated that approximately $2,000,000 will be
required in 1997, which will be in the form of a capital contribution. It is
possible, but not currently expected, that some additional capital contributions
and/or loans from the Partnership through ORMI will be required after 1997.
There can be no assurance that the amounts estimated by the Partnership for
capital required by ORM/LLC in 1997 and beyond will be sufficient. To the extent
that revenues from the Investor Portfolio Management Business are not sufficient
to fund the expenses of the Investor Portfolio Management Business, the
Partnership expects that it will contribute additional capital.

As presently contemplated, ORM/LLC will be the manager of new general or
limited partnerships, joint ventures, limited liability companies, or other new
entities (each individually an "Investment Entity" and collectively the
"Investment Entities") to be formed with one or more Third Party Investors. It
is anticipated that, ORMI, utilizing its share of the income from the Investor
Portfolio Management Business and other assets contributed by the Partnership,
will be an equity participant in a number of the Investment Entities with
participating Third Party Investors. Such investment decisions will be made on a
case-by-case basis by the ORMI Board with the consent of the Third Party
Investors involved. It is expected that ORM/LLC will have primary management
responsibility and authority for the Investment Entities. The Investment
Entities will be organized to acquire (either directly or through the
acquisition of land-holding entities), manage, and operate natural resource and
other real estate-based assets consistent with the investment goals of the Third
Party Investors. The Partnership expects that multiple Investment Entities will
be created, each with a very limited number of Third Party Investors (including,
in some cases, a single Third Party Investor).

A chart summarizing the structure of the new organization is set forth
below:

There follows an organizational diagram under the heading "New Business
Organizational Structure." Centered at the top of the diagram is a triangle
labeled "Pope Resources." To the left of this "Pope Resources" triangle, joined
by a line, is a square labeled "Limited Partners." To the right of the "Pope
Resources" triangle, in each case joined by a line, is one square labeled "Pope
EGP" and another square labeled "Pope MGP." Underneath the "Pope Resources"
triangle, joined by a line, is a square labeled "ORMI." Underneath the "ORMI"
square and the "Pope MGP" square, joined by a line from each such square, is a
rectangle labeled "ORM/LLC." Underneath the "ORM/LLC" rectangle, joined by a
line, is a hexagon labeled "Investment Entity." To the left of the "Investment
Entity," joined by a line, is a square labeled "Third Party Investor." Beneath
the "Investment Entity" hexagon is a circle labeled "Property."

The Managing General Partner believes that favorable opportunities exist
for acquisition of land and related resources, especially timberlands. On-going
forest products industry restructuring, fluctuating product prices,

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14
restricted timber supply, and market demand have created a current opportunity
for acquisition and investment. Timber and timberland investments compare
favorably to other investments in terms of rates of return and risk factors. As
such, they are believed to be a useful means of diversifying portfolio exposure
and return. This should be attractive to Third Party Investors that can accept
the relative allocated involved and possess well-diversified portfolios. The
Managing General Partner believes that the Partnership is favorably positioned
to pursue these opportunities based upon its unique heritage and experience.

The Partnership expects that ORM/LLC will focus initially on identifying
and seeking to attract potential Third Party Investors for the Investor
Portfolio Management Business and on identifying timber and other natural
resource and real estate assets throughout the United States and the rest of
North America that represent potentially attractive investment opportunities.
ORM/LLC will target potential Third Party Investors who have a minimum of
$100,000,000 to commit to the acquisition of real estate assets in connection
with the Investor Portfolio Management Business. The assets most likely to be
targeted for investment will be large timberland properties. However, it is not
anticipated that Investment Entities will own or operate forest products
manufacturing or conversion facilities for any sustained period of time. Other
assets that may be acquired include other real property containing marketable
natural resources, large commercial properties, and large development properties
suitable for large-scale residential, commercial and mixed use development.
Acquisitions may be made directly or through the acquisition of landholding
entities.

As currently contemplated, ORM/LLC will enter into portfolio development
agreements with Third Party Investors. The Partnership expects that pursuant to
a portfolio development agreement, a Third Party Investor will appoint ORM/LLC
to acquire and manage, for development, sale or other investment purposes, a
variety of real estate assets that meet predetermined investment objectives.
Once a portfolio development agreement has been entered into, ORM/LLC will
search for and identify real estate assets and, subject to the approval of the
Third Party Investors, will negotiate for the purchase of assets, undertake due
diligence, hire necessary experts and professional advisors, and purchase and
manage acquired assets on behalf of the Third Party Investor. The Partnership
expects that the Portfolio Business Affiliate and Third Party Investors will
form Investment Entities for the purpose of purchasing and holding portfolio
assets. More than one Third Party Investor may invest in portfolio assets, in
which case they would all be equity owners of the Investment Entities.

In some cases, and with the consent of the Third Party Investor involved,
ORMI may invest as an equity owner in an Investment Entity, thereby leveraging
the amount of funds the Partnership is capable of committing through ORMI with
potentially more significant amounts committed by Third Party Investors and also
resulting in more asset diversification for the Partnership. It is not expected
that ORMI's position in any Investment Entity will represent more than a small
percentage of the outstanding equity interests in the Investment Entity. Such
equity investments will likely be made from ORMI's distributed share of income
from the Investor Portfolio Management Business and from other assets
contributed by the Partnership. The Managing General Partner will set the
general parameters for such investments by ORMI, and each individual investment
will be approved by the ORMI Board.

Under the portfolio development agreements, ORM/LLC will be entitled to
certain fees. The fees payable by the Investment Entities will be calculated
against the value of the assets held or acquired, and will usually consist of
the following (collectively the "Portfolio Management Revenue"): (1) an
Investment Acquisition Fee applied against the cost of assets located and
acquired on behalf of an Investment Entity at the time the assets are acquired;
(2) an annual Management Fee for management of the assets acquired on behalf of
and held in each Investment Entity; (3) a Portfolio Development Fee, applied on
a one-time basis for services performed by ORM/LLC in developing the investment
portfolios of Third Party Investors; and (4) an Incentive Fee based on asset
and/or portfolio performance and ORM/LLC's success in increasing the value of
and producing a return on the properties owned by Investment Entities. The
Partnership expects that the fees charged by ORM/LLC will be competitive with
those charged by others performing similar services.

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ORM/LLC's costs in carrying out and administering the Investor Portfolio
Management Business are expected to consist, among other things, of salaries,
benefits and other compensation costs, professional fees (accounting, legal,
consulting), travel and related expenses, public relations, marketing and
facilities and equipment expenses (collectively the "Portfolio Management
Costs"). It is possible that the Partnership, ORMI, and/or ORM/LLC will utilize
the same facilities and some of the same employees, who will be involved in
management of the Historical Business as well as the Investor Portfolio
Management Business. Accordingly, to the extent that facilities and/or employees
are shared, costs and expenses relating to the Historical Business and the
Investor Portfolio Management Business will be allocated among these entities on
a fair and arm's-length basis.

THE ORM/LLC OPERATING AGREEMENT

The relationship between ORMI and the Managing General Partner will
initially be governed by the Olympic Resource Management LLC Limited Liability
Company Agreement attached hereto as Appendix III (the "ORM/LLC Operating
Agreement"). In the event that ORMI and the Managing General Partner determine
to change the form of ORM/LLC for business, legal or tax reasons, ORMI and the
Managing General Partner will enter into an appropriate agreement relating to
their respective management and economic interests having terms substantially
similar to those set forth in the ORM/LLC Operating Agreement. The following
summary of the proposed ORM/LLC Operating Agreement is not intended to be
complete and is qualified in its entirety by reference to the complete ORM/LLC
Operating Agreement.

The Managing General Partner will be the Managing Member of ORM/LLC. As
such, the Managing General Partner will have the responsibility and authority to
conduct the business of ORM/LLC, which will be carried out under the direction
of the MGP Board. Certain major decisions with respect to the conduct of
ORM/LLC's business are reserved to the members of ORM/LLC and will require the
unanimous approval of ORMI and the Managing General Partner.

Once ORM/LLC has been organized, it is expected that a number of the
existing employees of the Partnership will become employees of ORM/LLC, most of
whom will be employed in the management and operation of the Investment
Portfolio Management Business. The Partnership expects that a substantial
percentage of its current employee base will be employed on a full-time
equivalent basis exclusively in the management and operation of the Investor
Portfolio Management Business. During the initial start-up period for the
Investor Portfolio Management Business (expected to be approximately two years)
ORM/LLC will likely need to hire additional management and employees to operate
the Investor Portfolio Management Business. During the first year, ORM/LLC's
start-up and operational costs, currently estimated to be approximately
$2,000,000 in 1997, will be financed by capital contributions from the
Partnership through ORMI. Thereafter, additional funds that are necessary may be
acquired through additional capital contributions from the Partnership through
ORMI or through loans from the Partnership through ORMI. Pursuant to the ORM/LLC
Operating Agreement, any capital contributions in excess of a total of
$2,000,000 require the approval of ORMI and the Managing General Partner. After
the start-up period, management expects that ORM/LLC's operational costs will be
financed from ORM/LLC's own revenues. There can be no assurance, however, that
ORM/LLC will generate revenues at any time that are sufficient, without the
financial support of the Partnership, to finance its operations.

NET INCOME DISTRIBUTION

Pursuant to the ORM/LLC Operating Agreement, IPMB Net Income will be
divided between ORMI and the Managing General Partner and distributed on an
annual basis. IPMB Net Income is defined in the ORM/LLC Operating Agreement as
Portfolio Management Revenue less Portfolio Management Costs. The allocation of
IPMB Net Income will be on an annual incremental basis as follows, without
taking into account any loss in a prior year:

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IPMB ORMI MGP
NET INCOME PERCENTAGE PERCENTAGE

Up to $3 million 80% 20%
$3-5 million 70% 30%
$5-7 million 60% 40%
More than $7 million 50% 50%

Because it is contemplated that the Partnership's interest in ORM/LLC will
be held indirectly through ORMI, the Partnership's share of IPMB Net Income will
be allocated and distributed to ORMI. Although ORMI will be a wholly-owned
subsidiary of the Partnership, there will be no requirement for ORMI to make
distributions of cash in the form of dividends to the Partnership on any
established schedule. It is possible that some or all of ORMI's share of the
IPMB Net Income for a particular year will be invested in Investment Entities
rather than distributed to the Partnership. Moreover, since ORMI's allocable
share of net income from the Investor Portfolio Management Business will be
subject to federal income tax, ORMI will retain out of IPMB Net Income enough
cash to satisfy its income tax liabilities prior to any distribution of IPMB Net
Income to the Partnership. See "- Federal Income Tax Considerations." Payment of
dividends by ORMI to the Partnership will also be subject to the requirements of
the Washington Business Corporation Act relating to permissibility of corporate
dividends.

MANAGEMENT INCENTIVE PROGRAM

A Management Incentive Program (the "MIP") related to the Investment
Portfolio Management Business will be implemented concurrent with the
commencement of the Investor Portfolio Management Business. The goal of the MIP
will be to provide financial incentives to the management group that are
directly aligned with the goals and the best interests of the Partnership and
its Limited Partners and will be paid out of the share of the IPMB Net Income to
be allocated to MGP (the "MGP Allocation") and not out of the ORMI share of IPMB
Net Income. A Board Incentive Plan (the "BIP") with similar goals may be
implemented for the members of the MGP Board, also to be paid out of the MGP
Allocation and not out of the ORMI share of IPMB Net Income.

FACTORS CONSIDERED BY MGP BOARD

At the December 18, 1996 meeting of the MGP Board, the Managing General
Partner, upon the unanimous recommendation of the Board Committee, unanimously
adopted and approved the Amendments. In reaching its conclusion, the Board
Committee and the MGP Board considered the following factors:

1. The potential long-term benefits of pursuing the Investor Portfolio
Management Business. The MGP Board believes that the Investor Portfolio
Management Business presents a current portfolio risk diversification and an
opportunity for geographic and business diversification that will potentially
bolster long-term growth and increase interest in the Partnership's
publicly-traded Units. The MGP Board believes that the establishment and
operation of the Investor Portfolio Management Business will benefit the
Partnership's Historical Business as a result of sharing of resources brought to
bear by the Investor Portfolio Management Business, including additional
management expertise, market information, new business opportunities and the
possible reduction of costs of the Historical Business. In addition, the MGP
Board believes, although there can be no assurance, that the Investor Portfolio
Management Business will generate additional revenues and cash flows for the
Partnership, enabling the Partnership to increase the rate of its asset growth
without the need for significant debt or dilutive equity financing. Further, the
MGP Board believes, although there can be no assurance, that the Investor
Portfolio Management Business will provide opportunities for equity
participation by ORMI in large-scale real estate and timber investment
acquisitions that would be out of reach financially for the Partnership acting
alone

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and to do so at attractive prices based on the large size of the acquisitions
and the buying power provided by the funds received from Third Party Investors.

2. The potential increased return to holders of Limited Partner Units. The
MGP Board believes that the Investor Portfolio Management Business represents a
significant new business opportunity that has the potential to increase
diversification of the Partnership's business and assets, accelerate asset
growth, and generate additional returns for the Partnership. The MGP Board
believes that if ORM/LLC successfully develops and maintains the Investor
Portfolio Management Business, the overall return to holders of the Limited
Partners' Units will be increased over the rates of return historically
generated as a result of the Partnership's operation of its Historical Business,
both from fees generated by the Investor Portfolio Management Business and from
possible equity participation of ORMI in the Investment Entities. There can be
no assurance, however, that ORM/LLC will be successful in implementing its
business strategy for the Investor Portfolio Management Business or achieving or
maintaining profitability for the Investor Portfolio Management Business.

3. The risks associated with the Investor Portfolio Management Business.
The MGP Board identified a number of risks associated with establishing and
operating the Investor Portfolio Management Business. The establishment and
operation of the Investor Portfolio Management Business will involve additional
business and legal risks to the Partnership and the Portfolio Business Affiliate
that the Partnership does not currently face in the operation of its Historical
Business. In particular, while the Partnership and the Managing General Partner
have significant relevant experience, including the prior experience of the
Partnership's current Chief Executive Officer in managing timber-based
portfolios on behalf of large institutional investors, the Partnership as a
whole, the Portfolio Business Affiliate, and the Managing General Partner all
lack a proven track record to market to investors who may be potential customers
of the Investor Portfolio Management Business and to manage large real estate
portfolios on behalf of Third Party Investors. Additionally, the actual costs of
establishing and operating the Investor Portfolio Management Business may exceed
the actual revenues from the Investor Portfolio Management Business. The failure
of the Investor Portfolio Management Business to generate positive returns could
have a negative impact on the market price of the Partnership's Units and upon
the earnings of the Partnership and, consequently, the returns to the Partners.
Further, the success of the Investor Portfolio Management Business will be
dependent upon ORM/LLC's ability to secure engagements from large institutions
or very high net worth individuals and to locate attractive real estate
investment opportunities for Third Party Investors, and there can be no
assurance either that ORM/LLC will be successful in securing such engagements or
that attractive investment opportunities will be available at the outset or in
the future. Finally, engaging in the Investor Portfolio Management Business is
likely to present additional liability exposure to the Partnership and/or to the
Portfolio Management Affiliate, including without limitation potential liability
to Third Party Investors in the event that returns to such investors do not meet
expectations, potential liability for environmental problems, and other risks
inherent in managing and operating real estate assets. Although a key purpose
for the formation of ORMI is to assist the Partnership in segmenting and
isolating various risks associated with the Investor Portfolio Management
Business, it is unlikely that the Partnership can eliminate its exposure to all
of the risks associated with the Investor Portfolio Management Business.

4. The recommendation of the financial advisor with respect to allocation
of profits to the Managing General Partner for managing the Investor Portfolio
Management Business and the fairness opinion of the financial advisor regarding
the IPMB Income Allocation ultimately approved by the MGP Board. As contemplated
by the Amendments, the Managing General Partner will not receive any additional
fee from the Partnership for managing the Investor Portfolio Management Business
but will be entitled to receive the MGP Income Allocation. See "-
Recommendations and Opinion of Financial Advisor," "The Amendments - Allocation
of IPMB Net Income to Managing General Partner" and "Interest of Certain Persons
in the Amendments." The terms of the IPMB Income Allocation between the
Partnership and MGP were based upon recommendations of Houlihan Lokey Howard &
Zukin ("Houlihan Lokey"), the financial advisor engaged on behalf of the
Partnership. The MGP Board determined that the IPMB Income Allocation is
reasonable in light of compensation and other financial arrangements pertaining
to managing general partners of other comparable

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publicly-traded partnerships. In approving the Amendments and recommending that
the Partners approve the Amendments, the MGP Board took into account the opinion
of Houlihan Lokey that the IPMB Income Allocation as set forth in the Amendments
is fair, from a financial point of view, to the holders of Limited Partners'
Units. See "- Opinion of Financial Advisor."

RECOMMENDATIONS AND OPINION OF FINANCIAL ADVISOR

Houlihan Lokey, a nationally-recognized specialty investment banking firm,
was retained by the Partnership to advise the MGP Board with regard to possible
financial arrangements between the Partnership and the Managing General Partner
that would appropriately reward the Managing General Partner for its management
of the Investor Portfolio Management Business and to render an opinion to as to
the fairness, from a financial point of view, of the terms of the IPMB Income
Allocation ultimately approved by the MGP Board. Houlihan Lokey was selected on
the basis of its qualifications, expertise and reputation. After its engagement
in July, 1996, Houlihan Lokey worked with the MGP Board to identify a number of
possible alternative structures for the IPMB Income Allocation and related
arrangements. In November, 1996, Houlihan Lokey proposed the structure of the
IPMB Income Allocation reflected in the proposed Amendments set forth in this
Proxy Statement and presented its analysis of this proposed structure and
materials supporting its analysis. Those materials included Houlihan Lokey's
summary of certain benefits and risks of the Partnership engaging in the
Investor Portfolio Management Business and proposed arrangements to be made on
behalf of the Managing General Partner, an overview of compensation arrangements
for certain publicly-traded partnerships it deemed relevant to its
recommendations, and internal rate of return, yield and total return analyses
which applied the recommended IPMB Income Allocation to certain preliminary base
case financial projections for the Investor Portfolio Management Business
provided by management of the Partnership.

The MGP Board relied in part on the final recommendations of Houlihan Lokey
in determining the final terms of the proposed IPMB Income Allocation. In
addition, the MGP Board considered the incremental risk being undertaken by the
Managing General Partner, which is ultimately liable for all debts and
liabilities of the Partnership (although the Managing General Partner is
entitled to indemnification under the terms of the Partnership Agreement), the
fact that a review of financial and compensation arrangements in other
publicly-traded limited partnerships deemed relevant by Houlihan Lokey indicated
that the current management fee payable to the Managing General Partner
($150,000 per year) is significantly below the level of compensation
arrangements in comparable publicly-traded partnerships, and the MGP Board's
assumption that the Investor Portfolio Management Business could legally be
pursued by the shareholders, officers and other affiliates of the Managing
General Partner without the involvement of the Partnership. Based upon these and
other factors, the MGP Board determined to approve the terms of the IPMB Income
Allocation described under the caption entitled "The Amendments - Allocation of
IPMB Net Income to Managing General Partner," subject to the receipt by the
Partnership of a fairness opinion of Houlihan Lokey.

At the December 18, 1996 meeting, Houlihan Lokey delivered its written
opinion that the terms of the IPMB Income Allocation are fair, from a financial
point of view, to the holders of Limited Partners' Units. The complete text of
that opinion is attached as Appendix IV to this Proxy Statement and should be
read carefully in its entirety.

The Houlihan Lokey opinion does not constitute a recommendation to any
Partner as to how such Partner should vote at the Partnership Meeting. Houlihan
Lokey was not requested to, and did not, opine as to the underlying business
decision to proceed with establishment of the Investor Portfolio Management
Business or the implementation of the IPMB Income Allocation, nor was it
requested nor did it initiate discussions with any third parties with respect to
possible alternatives to the terms of the IPMB Income Allocation.

In arriving at its opinion, Houlihan Lokey reviewed, among other things,
(i) the Partnership's Annual Reports to Partners and Forms 10-K for the fiscal
years ended December 31, 1991 to December 31, 1995 and

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10-Q for the period ended September 30, 1996, (ii) certain confidential internal
planning and financial information regarding the Partnership and the Investor
Portfolio Management Business, (iii) the Partnership Agreement, as amended to
date, (iv) the proposed Amendments, (v) certain financial and trading data and
partnership agreements of other publicly-traded limited partnerships deemed by
Houlihan Lokey to be relevant to its analysis; (vi) certain historical trading
data of the Partnership's Units, and (vii) such other information, studies,
analyses and inquiries as Houlihan Lokey deemed appropriate. Houlihan Lokey also
engaged in discussions with management of the Partnership regarding the
financial condition, current operating results and business outlook of the
Partnership.

In reaching its conclusion as to the fairness of the terms of the IPMB
Income Allocation and in its presentation to the MGP Board, Houlihan Lokey did
not rely on any single analysis or factor described above or make any
conclusions as to how the results of any given analysis, taken alone, supported
its fairness opinion. The preparation of a fairness opinion is a complex
process. Houlihan Lokey stressed that its analysis must be considered as a
whole, and that considering portions of the analysis, without considering all
aspects of the analysis, would create a misleading view of the processes
underlying its opinion. No other partnership or management arrangement used in
the analysis is exactly comparable to the Partnership or the IPMB Income
Allocation relating to the Investor Portfolio Management Business. Accordingly,
an analysis of the results is not entirely mathematical.

For purposes of its opinion, Houlihan Lokey relied upon and assumed the
accuracy, completeness and fairness of the financial and other information made
available to it by the Partnership's management and did not attempt
independently to verify such information. Houlihan Lokey relied upon
management's assurance that the estimates provided by the Partnership were the
most accurate estimates available and that they were not aware of any material
fact that would make the information provided to Houlihan Lokey incomplete or
misleading. Houlihan expressed no opinion as to the prices at which the
Partnership's Units have traded historically or will trade in the future, nor
did Houlihan Lokey conduct any physical inspection or independent appraisal of
the Partnership's properties. The Houlihan Lokey opinion is based upon
information available to Houlihan Lokey and the facts and circumstances as they
existed and were subject to evaluation on the date of the Houlihan Lokey
opinion. Events occurring after such date could materially affect the
assumptions used in preparing that opinion. Houlihan Lokey did not receive any
instruction or limitations on what it could consider for purposes of rendering
its opinion.

For Houlihan Lokey's services as financial advisor, the Partnership will
pay Houlihan Lokey a fee of $65,000. The Partnership has also agreed to
reimburse Houlihan Lokey for all of its out-of-pocket expenses incurred in
connection with its role as financial advisor and to indemnify Houlihan Lokey
and its officers, directors, employees and controlling persons for liabilities
under applicable federal and state laws arising from actions or omissions of the
Partnership or actions or omissions of Houlihan Lokey taken in conformity with
the Partnership's consent or instructions, unless involving gross negligence,
willful misconduct or bad faith.

FEDERAL INCOME TAX CONSIDERATIONS

The Partnership believes that it has structured the Investor Portfolio
Management Business to achieve the most efficient risk management, marketing,
and tax structure available. The Partnership intends to participate in the
Investor Portfolio Management Business through ORMI and ORM/LLC and undertake
equity investments in the Investment Entities through ORMI. The Partnership
believes that participation by the Partnership in the Investor Portfolio
Management Business through ORMI and ORM/LLC and equity investment in the
Investment Entities through ORMI will accomplish the Partnership's business
objectives of minimizing the legal and economic exposure to the Partnership
associated with its participation in the Investor Portfolio Management Business
and the equity investments in Investment Entities, and serve as a vehicle for
creating an identity separate and apart from the Partnership for the marketing
and conduct of the Investor Portfolio Management Business. The economic cost of
participating in the Investor Portfolio Management Business through ORMI

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and ORM/LLC and the anticipated equity investments in Investment Entities
through ORMI is that the Partnership's portion of the net income of those
activities will be taxed once at the ORMI corporate subsidiary level before ORMI
distributes cash in the form of a dividend to the Partnership. This dividend is
not deductible to ORMI. As with all Partnership income, dividends paid by ORMI
to the Partnership out of its share of the net income of the Investor Portfolio
Management Business will be subject to tax again in the hands of the Partners,
thereby subjecting that income to double taxation.

The role of ORMI in the Partnership's participation in the Investor
Portfolio Management Business will also serve to ensure that these activities do
not jeopardize the status of the Partnership as a partnership for federal income
tax purposes. If the Partnership were to be allocated Investor Portfolio
Management Business income directly, it would potentially jeopardize the overall
treatment of the Partnership as a partnership for federal tax purposes. Under
the "90-10 Qualifying Income Test," at least 90 percent of the gross income of
publicly traded limited partnerships such as the Partnership must consist of
"qualifying income," which generally includes interest, dividends, real property
rents (other than rents received by the partnership from related entities), gain
from the sale or other disposition of real property, income and gain derived
from the development, processing, or marketing of natural resources (including
timber), and certain other passive-type income described in the Internal Revenue
Code (the "Code"), in order for the partnership to maintain its status as a
partnership for federal income tax purposes. This requirement must be satisfied
in each year in which the partnership is subject to the 90-10 Qualifying Income
Test. If a partnership fails to satisfy the 90-10 Qualifying Income Test in a
particular taxable year, it will from and after the first day of that taxable
year be taxed as a corporation for federal income tax purposes (and, as a
result, income of the Partnership would be taxed first to the Partnership at
corporate tax rates and again to the Partners when distributed to the Partners
as dividends or liquidating distributions). There is a significant risk that
income allocated directly to the Partnership from the Investor Portfolio
Management Business, rather than through ORMI, would constitute non-qualifying
income, which could potentially jeopardize the Partnership's continuing status
as a partnership for federal income tax purposes.

Under a "grandfather" rule contained in the Code, certain partnerships,
such as the Partnership, which were publicly traded prior to December 18, 1987,
will continue to be treated as partnerships for federal income tax purposes
without regard to satisfaction of the 90-10 Qualifying Income Test, described
above. This favorable grandfather status will expire for all publicly traded
partnership's in their first taxable year commencing in 1998, after which time
each partnership must satisfy the 90-10 Qualifying Income Test in order to
retain its classification as a partnership for federal income tax purposes. In
addition, a qualifying publicly traded partnership will cease to be eligible for
continued grandfather status prior to the expiration of those rules in the year
in which it adds a "substantial new line of business."

Under applicable Treasury regulations, a new line of business is considered
"substantial" as of the earlier of the taxable year of the partnership in which
it derives more than 15 percent of its gross income from that line of business
or directly uses in that line of business more than 15 percent (by value) of its
total assets. A new line of business is any business activity of the partnership
not closely related to a pre-existing business of the partnership to the extent
that the activity generates income other than "qualifying income."

An activity conducted by a corporation controlled by a grandfathered
partnership may be treated as an activity of the grandfathered partnership if,
based on all facts and circumstances, the effect of the arrangement is to permit
that partnership to engage in an activity that would constitute a new line of
business, the income of which is not subject to a corporate-level tax. The
Treasury regulations establish a safe harbor pursuant to which activities
conducted through wholly-owned corporations, such as ORMI, will not be treated
as a new line of business of the controlling partnership unless more than 10
percent of the gross income the partnership derives from that corporation is
"recharacterized income." Recharacterized income potentially includes any
qualifying income (such as interest) received by the grandfathered partnership
from the corporation that is deductible by the corporation.

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The Partnership does not anticipate that the Partnership's participation in
the Investor Portfolio Management Business through ORMI and ORM/LLC and the
anticipated investments by ORMI in Investment Entities will cause the
Partnership to lose its favorable grandfather status under the foregoing rules.

The Partnership has not requested and does not intend to request a ruling
from the Internal Revenue Service (the "IRS") regarding the effect of the
Partnership's participation in the Investor Portfolio Management Business
through ORMI and ORM/LLC and investment in the Investment Entities through ORMI
on the status of the Partnership as a partnership for federal income tax
purposes. In compliance with Section 6.9 of the Partnership Agreement, the
Partnership has obtained a favorable written opinion of Davis Wright Tremaine,
tax counsel to the Partnership ("Counsel"), based upon information provided to
Counsel by the Partnership and certain assumptions contained in such opinion, to
the effect that it is more likely than not that the Partnership's participation
in the Investor Portfolio Management Business through ORMI and ORM/LLC and the
anticipated equity investments by ORMI in Investment Entities, if conducted in
the manner described above, will not jeopardize the status of the Partnership as
a partnership under applicable tax laws and regulations. It should be noted,
however, that Counsel's opinion is based upon existing law, which is subject to
interpretation and to change either prospectively or retroactively. Furthermore,
Counsel's opinion represents merely Counsel's considered legal judgment and has
no binding effect or official status. Accordingly, no assurance can be give that
the IRS will not challenge the opinion of counsel, nor can there be any
certainty that a challenge by the IRS would not be sustained by a court.

THE AMENDMENTS

GENERAL

The Amendments are submitted with a view to enabling the Partnership to
pursue the Investor Portfolio Management Business through the Portfolio Business
Affiliate and allocating the IPMB Net Income between ORMI and the Managing
General Partner. Each of the proposed Amendments is further described below. A
copy of the Amendments is attached as Appendix I to this Proxy Statement and
should be reviewed carefully.

Under the Partnership Agreement, the Amendments must be approved by a
Majority Interest and separately approved by the Managing General Partner. The
Managing General Partner, based upon the unanimous recommendation of the Board
Committee, has separately approved the Amendments, and recommends that the
Amendments be adopted by the Partners. A condition to the MGP Board's approval
of the Amendments is that they must be considered by the partners as a single
proposal.

AMENDMENT OF "PURPOSE" OF THE PARTNERSHIP

Section 2.3 of the Partnership Agreement, setting forth the purpose of the
Partnership, will be amended to specifically authorize the Investor Portfolio
Management Business.

ALLOCATION OF IPMB NET INCOME TO MANAGING GENERAL PARTNER

Section 4.1(C) of the Partnership Agreement currently provides that the
General Partners will be paid an annual fee of $150,000, to be allocated between
the General Partners in such manner as they agree.

Pursuant to the Amendment, the Partnership Agreement would provide the
Managing General Partner an annual incentive-based allocation of the IPMB Net
Income. The MGP Allocation will be calculated each fiscal year as an
incrementally escalating percentage of the IPMB Net Income.

There may also be shared expense issues in determining profit and cash flow
from the Investor Portfolio Management Business, to the extent the same
employees work on the Historical Business and the Investor

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Portfolio Management Business. The Partnership's accountants will be responsible
for reviewing allocations of the shared expenses for fairness, based on time and
effort expended by particular individuals, the value of the business matters
being worked on, and other relevant factors.

IPMB Net Income will be divided between ORMI and the Managing General
Partner on an annual basis. This IPMB Income Allocation will be on an annual
incremental basis as follows, without taking into account any loss in a prior
year:

IPMB ORMI MGP
NET INCOME PERCENTAGE PERCENTAGE

Up to $3 million 80% 20%
$3-5 million 70% 30%
$5-7 million 60% 40%
More than $7 million 50% 50%

Under this arrangement, the Managing General Partner will receive no direct
compensation from the Partnership for managing the Investor Portfolio Management
Business. Instead, the Managing General Partner will be allocated a share of the
IPMB Net Income and receive related distributions.

The cash flow from the Investor Portfolio Management Business distributed
to ORMI (the "ORMI Net Cash Flow") may be distributed to the Partnership by ORMI
to the extent determined by the Board of Directors of ORMI (which Board shall be
subject to selection by the Managing General Partner) in its sole discretion,
subject to applicable corporate law restrictions on permissibility of corporate
dividends. In such case, such ORMI Net Cash Flow could be distributed to the
Partners pursuant and subject to the distribution provisions of Article 10 of
the Partnership Agreement, as amended by the Amendment. However, the Board of
ORMI, in conjunction with the MGP Board, could determine in its discretion to
retain some or all of its share of IPMB Net Income in ORMI to fund investments
in Investment Entities or the expansion of ORM/LLC's activities in operating the
Investor Portfolio Management Business.

In addition to the MGP Allocation, the Managing General Partner will
continue to receive an annual flat fee of $150,000 for managing the
Partnership's Historical Business. MGP will also continue to receive its share
of the net income and cash distributions from the Partnership, including that
attributable to the Historical Business and that attributable to the Investor
Portfolio Management Business, as the holder of 1,200 units in the Partnership.

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INTEREST OF CERTAIN PERSONS IN THE AMENDMENTS

GENERAL

In considering the recommendation of the Managing General Partner with
respect to the Amendments, Limited Partners voting on the Amendments should be
aware that the entities and persons described below, including certain members
of the MGP Board, have certain interests described below that may present them
with potential or actual conflicts of interest in connection with the
Amendments. The MGP Board, in determining whether or not to approve the
Amendments and recommend them for adoption and approval by the Partners, was
aware of these interests and set up the Board Committee to study and make a
recommendation to the MGP Board with respect to the Amendments.

MANAGING GENERAL PARTNER

Pursuant to the existing terms of the Partnership Agreement, the General
Partners are paid a flat fee of $150,000 per year for managing the Partnership.
If the Amendments are duly adopted and approved by the Partners at the
Partnership Meeting, the Partnership Agreement will be amended to include the
opportunity for MGP to receive the MGP Allocation. Pursuant to the structure of
the IPMB Income Allocation, MGP will realize a share of the financial benefits
resulting from conduct of the Investor Portfolio Management Business to the
extent that the Investor Portfolio Management Business generates net income and
distributable cash flow. While the MGP Board believes that the financial
interest of the Managing General Partner in the Investor Portfolio Management
Business is incentive-based and therefore aligned with the interests of the
Limited Partners, Limited Partners should note that the terms of the IPMB Income
Allocation mean that the Managing General Partner's relative share of the
rewards from the Investor Portfolio Management Business will increase as the
Investor Portfolio Management Business becomes more successful. In addition,
decisions with respect to contributions and/or loans by the Partnership to
defray start-up costs of the Investor Portfolio Management Business, and
participation by ORMI in Investment Entities may be affected by the Managing
General Partner or by members of the MGP Board, and such decisions could affect
the success of the Investor Portfolio Management Business, and accordingly the
MGP Allocation.

SHAREHOLDERS AND DIRECTORS OF THE MANAGING GENERAL PARTNER

All of the capital stock of the Managing General Partner is owned by Peter
T. Pope and Emily T. Andrews. As a result of their ownership of the capital
stock of the Managing General Partner, Mr. Pope and Mrs. Andrews will ultimately
benefit from the financial arrangements made between the Partnership and the
Managing General Partner. Mr. Pope and Mrs. Andrews beneficially own Limited
Partners' Units representing approximately ___% of the Limited Partners' Units
entitled to vote at the Partnership Meeting and have indicated that they will
vote in favor of the Amendments. Mr. Pope and Adolphus Andrews, Jr., the spouse
of Mrs. Andrews, are members of the MGP Board.

Because of Mr. Pope's and Mrs. Andrews' ownership of the stock of the
Managing General Partner, the MGP Board set up the Board Committee composed of
Douglas Norberg, Gary F. Tucker, and Marco Vitulli, directors with no ownership
interest in the Managing General Partner. The Board Committee, after reviewing
the relevant information with respect to the Investor Portfolio Management
Business, and the Amendments, and after consulting with Houlihan Lokey,
unanimously recommended to the MGP Board approval of the Amendments.

The MIP related to the Investment Portfolio Management Business will be
implemented concurrent with the commencement of the Investor Portfolio
Management Business. The goal of the MIP will be to provide financial incentives
to the management group that are directly aligned with the goals and the best
interests of the Partnership and its Limited Partners and will be paid out of
the MGP Allocation and not out of the ORMI

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share of IPMB Net Income. A BIP with similar goals may be implemented for the
members of the MGP Board, also to be paid out of the MGP Allocation and not out
of the ORMI share of IPMB Net Income. To the extent that the MIP and the BIP are
adopted, management and the members of the MGP Board will benefit from the
adoption of the Amendments and the establishment of the Investor Portfolio
Management Business

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25
BACKGROUND AND REASONS FOR THE WAIVER

BACKGROUND

One member of the MGP Board, Adolphus Andrews, Jr., will reach the age of
75 in March of 1997. Pursuant to the terms of the Shareholders Agreement, no
member of the MGP Board may be older than 75 years of age. Thus, unless the age
provision of the Shareholders Agreement is amended or waived, Mr. Andrews will
be required to cease serving as a member of the MGP Board in March of 1997.

Each of the two shareholders of MGP has the right to designate a person to
serve as a member of the MGP Board. Emily T. Andrews is currently the "Andrews
General Partner Shareholder" as defined in the Shareholders Agreement. She has
designated Mr. Andrews for service on the MGP Board. When Mr. Andrews ceases to
serve on the MGP Board, Mrs. Andrews or her successor as the Andrews General
Partner Shareholder has, pursuant to the Shareholders Agreement, the right and
obligation to designate a successor. Mrs. Andrews has informed the MGP Board
that she intends to designate Mr. and Mrs. Andrews' son, Gordon Andrews, as the
successor to Adolphus Andrews, Jr. on the MGP Board at such time as Adolphus
Andrews, Jr. no longer serves on the MGP Board.

The provisions of the Shareholders Agreement can be amended or waived only
by the unanimous agreement of the parties thereto and the affirmative vote of a
Majority Interest.

REASONS FOR THE WAIVER

Mr. Andrews has served on the MGP Board since its inception and since the
split-off of the Partnership from Pope & Talbot, Inc. He has extensive knowledge
of the activities and operating history of the Partnership. In particular, Mr.
Andrews has been directly involved in the decision to authorize the commencement
of the Investor Portfolio Management Business and in the evaluation and analysis
underlying that decision. It is the unanimous conclusion of the other members of
the MGP Board and the Shareholders of MGP that the Partnership will benefit from
continuity on the MGP Board during the next two years as the Partnership
implements the decision to undertake the Investor Portfolio Management Business
and the MGP Board continues to evaluate the status and progress of this new
business enterprise during its critical start-up phase. Consequently, both the
MGP Board and the Shareholders have unanimously approved (Mr. Andrews did not
participate in the vote by the MGP Board), and recommend to the Partners, the
Waiver of the retirement age for Mr. Andrews for a period of two years.

The Waiver has been proposed in preference to a permanent amendment to the
Shareholders Agreement because it is the opinion of the MGP Board and the
Shareholders of MGP that the age restriction set forth in the Shareholders
Agreement remains reasonable and appropriate as a general rule. Such parties
believe it is desirable to make the limited and specific exception represented
by the Waiver because of the particular benefit that appears likely to be
derived from Mr. Andrews' continued service on the Board during the next two
years while the Board evaluates the performance of the Investor Portfolio
Management Business on a detailed and continuing basis. The members of the MGP
Board, including Mr. Andrews, are in the unique position of comparing the
performance of the Investor Portfolio Management Business against the
expectations of the Board and the issues, risks, and opportunities that the
Board explored in its deliberations leading to the Board's decision to go
forward and to request the approval of the Partners to do so. Thus, it appears
to the MGP Board and to the Shareholders of MGP that it is in the best interests
of the Partnership to approve the Waiver. Mr. Andrews has stated his willingness
to continue to serve if the Waiver is approved.

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26
CONSEQUENCES OF THE WAIVER

If the Waiver is approved, no change will be made to the text of the
Partnership Agreement or the Shareholders Agreement. For a limited period of two
(2) years, the application of the provision of the Shareholders Agreement that
limits service on the MGP Board to persons 75 years of age or younger will be
suspended as applied to Mr. Andrews only. In March of 1999, on Mr. Andrews' 77th
birthday, the Waiver will expire and cease to be effective and the Andrews
General Partner Shareholder will be required to designate a new director to
serve as such Shareholder's designee on the MGP Board.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information as of the Record Date
with respect to the beneficial ownership of Units by (i) all persons known to
the Partnership to be the beneficial owners of more than 5% of all outstanding
Units, (ii) the Managing General Partner, (iii) Pope EGP, Inc., as the equity
general partner of the Partnership (the "Equity General Partner," and together
with the Managing General Partner, the "General Partners"), (iv) the directors
and executive officers of the each of the General Partners, (v) the executive
officers of the Partnership, and (vi) the Managing General Partner, the Equity
General Partner, and all officers and directors of the General Partners and the
Partnership as a group.

Name & Address of Amount & Nature of Percent
Beneficial Owner Beneficial Ownership (1) Of Class

Greater than 5% holders:

Private Capital Management, Inc. 250,274 (2) 27.7%
3003 Tamiami Trail North
Naples, FL 33940

Emily T. Andrews 111,420 (3) 12.3%
600 Montgomery Street, 35th Floor
San Francisco, CA 94111

Adolphus Andrews, Jr. 111,420 (4) 12.3%
600 Montgomery Street, 35th Floor
San Francisco, CA 94111

Peter T. Pope 62,869 (5) 7.0%
1500 SW First Avenue
Portland, OR 97201

James F. Miller 61,000 (6) 6.7%
700 Park Avenue
New York, NY 10021-4930

Peter B. Cannell & Co., Inc. 46,775 (7) 5.2%
919 Third Avenue
New York, NY 10022

Other management holders:

Pope EGP, Inc. 10,800 (8) 1.2%

Pope MGP, Inc. 1,200 (9) 0.1%

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27

Name & Address of Amount & Nature of Percent
Beneficial Owner Beneficial Ownership (1) Of Class

Douglas Norberg 200(10) *

Marco Vitulli 200(11) *

Thomas M. Ringo 100(12) *

(1) Each beneficial owner has sole voting and investment power unless otherwise
indicated.

(2) Private Capital Management, Inc. (PCM) is an investment adviser shown
registered under the Investment Act of 1940. Units are held in various
accounts managed by PCM which shares dispositive powers as to those units.

(3) Includes 218 units owned by her husband, Adolphus Andrews, Jr. as to which
she disclaims beneficial ownership. Also includes a total of 12,000 units
held by Pope MGP, Inc. and Pope EGP, Inc., as to which she shares voting
and investment power.

(4) Includes 99,202 owned by his wife, Emily T. Andrews, units as to which he
shares investment and voting power. Also includes a total of 12,000 units
held by Pope, MGP, Inc. and Pope, EGP, Inc., as to all of which he
disclaims beneficial ownership. See footnote (3).

(5) Includes 10,684 units held in trust for his children. Also includes a total
of 12,000 units held by Pope MGP, Inc. and Pope EGP, Inc., as to which he
shares investment and voting power.

(6) James F. Miller is an investment adviser shown registered under the
Investment Act of 1940. Units are held in various accounts managed by Mr.
Miller who shares dispositive powers as to those units.

(7) Peter B. Cannell & Co., Inc. (PBCC) is an investment adviser shown
registered under the Investment Act of 1940. PBCC is a wholly-owned
subsidiary of Eberstadt Fleming, Inc., a broker-dealer registered under the
Securities Exchange Act of 1934.

(8) Equity General Partner.

(9) Managing General Partner.

(10) Director, Pope MGP, Inc.

(11) Director, Pope MGP, Inc.

(12) Senior Vice President Finance & Client Relations, Pope MGP, Inc. & the
Partnership

* Less than .1%.

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AVAILABLE INFORMATION

The Partnership is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and information may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington
D.C. 20549, and at certain regional offices of the Commission located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such information can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

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APPENDIX I

AMENDMENTS TO PARTNERSHIP AGREEMENT

I. Definitions. The following new definitions shall be added to Article 1:

"IPMB Net Income" means net income of the Portfolio Business Affiliate
derived from the Investor Portfolio Management Business, as determined
by deducting Portfolio Management Costs from Portfolio Management
Revenue.

"Investment Entities" means new general or limited partnerships, joint
ventures, limited liability companies, or other new entities to be
formed with one or more individuals and/or entities who are not
otherwise Affiliates of the Partnership.

"Investor Portfolio Management Business" means the business of the
Partnership, its Affiliates, and/or related businesses, involving the
location, acquisition, management and/or development of land and
related resources directly or through acquisition of land-holding
entities, including, but not limited to, timberlands and lands with
development potential for residential or commercial use, within and
without the United States, primarily or exclusively for the account of
individuals and/or entities who are not otherwise Affiliates of the
Partnership.

"Portfolio Business Affiliate" means one or more entities wholly-owned
and controlled, directly or indirectly, by the Partnership or by the
Partnership and the Managing General Partner.

"Portfolio Management Costs" means the costs of carrying out and
administering the Investor Portfolio Management Business, including
salaries, benefits and other compensation costs, professional fees
(accounting, legal, consulting), travel and related expenses, public
relations, marketing and facilities, and equipment expenses.

"Portfolio Management Revenue" means the fees payable by the Investment
Entities to the Portfolio Business Affiliate.

II. Purpose of Partnership. Section 2.3 of the Partnership Agreement shall be
amended by adding the following words immediately after the words "transplant
nurseries,":

"participating in the Investor Portfolio Management Business,"

III. Compensation of the General Partnership. Section 4.1 (C) shall be deleted
and replaced in its entirety by the following:

(C) (1) The Partnership shall pay an annual fee to
the General Partners of $150,000 to be allocated between the
General Partners as the General Partners shall agree.

(2) Investor Portfolio Management Business.
For management of the Investor Portfolio Management Business,
MGP shall be entitled to participate in the IPMB Net Income in
accordance with the terms of Section 4.3 of this Agreement.
30
IV. Net Income Sharing from Investor Portfolio Management Business. A new
Section 4.3 shall be added to the Agreement as follows:

4.3 Net Income Sharing From Investor Portfolio Management
Business. MGP shall be entitled to share in the IPMB Net Income in an
amount equal to the following percentages, to be applied incrementally
in each full fiscal year:

IPMB Net Income MGP Share
--------------- ---------

up to $3 Million 20%

$3-5 million 30%

$5-7 million 40%

More than $7 million 50%

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APPENDIX II

Glossary of Defined Terms

"Amendments" means amendments to the Partnership Agreement which would
1) permit the Partnership to engage in the Investor Portfolio Management
Business and 2) authorize a sliding-scale allocation of the Portfolio Business
Net Income between the New Partnership Subsidiary and the Managing General
Partner.

"BIP" means the Board Incentive Program.

"Board Committee" means a committee of the MGP Board composed of
independent directors without any equity interest in the Managing General
Partner.

"Commission" means the Securities and Exchange Commission.

"Equity General Partner" means the equity general partner of the
Partnership, Pope EGP, Inc., a Delaware corporation.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"General Partners" means the Equity General Partner and the Managing
General Partner.

"Historical Business" means the Partnership's current operations.

"Houlihan Lokey" means Houlihan Lokey Howard & Zukin.

"Investment Entities" means new general or limited partnerships, joint
ventures, limited liability companies, or other new entities to be formed with
one or more Third Party Investors.

"Investor Portfolio Management Business" means a new business
enterprise of the Partnership, its Affiliates, and/or related businesses,
involving the location, acquisition, management and/or development of land and
related resources directly or through acquisition of land-holding entities,
including, but not limited to, timberlands and lands with development potential
for residential or commercial use, within and without the United States,
primarily or exclusively for the account of individuals and/or entities who are
not otherwise Affiliates of the Partnership.

"IPMB Net Income" means net income of the Portfolio Business Affiliate
derived from the Investor Portfolio Management Business (Portfolio Management
Revenue less Portfolio Management Costs).

"IPMB Income Allocation" means the annual incremental, sliding-scale
allocation of the IPMB Net Income between the New Partnership Subsidiary and the
Managing General Partner.

"Limited Partners" means holders of record of Limited Partners' Units
who have previously been admitted as Limited Partners pursuant to the
Partnership Agreement.

32
"Majority Interest" means Partners of Record holding more than fifty
percent (50%) of the Units held by all Partners of Record.

"Managing General Partner" means the Managing General Partner of the
Partnership (Pope MGP, Inc.).

"MGP" means Pope MGP, Inc., a Delaware corporation.

"MGP Board" means the Board of Directors of the Managing General
Partner.

"MGP Allocation" means the share of the IPMB Net Revenue to be
allocated to the Managing General Partner pursuant to the Amendments.

"MIP" means the Management Incentive Program.

"New Partnership Subsidiary" means a new subsidiary of the Partnership.

"ORMI" means ORM, Inc., a new corporate subsidiary to hold the
Partnership's member interest in ORM/LLC.

"ORMI Net Cash Flow" means the cash flow from the Investor Portfolio
Management Business distributed to ORMI.

"ORM/LLC" means Olympic Resource Management LLC, a Washington limited
liability company.

"P&T" means Pope & Talbot, Inc.

"Partnership" means Pope Resources, A Delaware Limited Partnership.

"Partnership Agreement" means the Limited Partnership Agreement of the
Partnership as dated November 7, 1985 and as amended December 16, 1986.

"Partnership Meeting" means the meeting of the Partnership held on
Friday, February 14, 1997, at 1:00 p.m., local time, at the Four Seasons Olympic
Hotel, 411 University Street, Seattle, Washington.

"Portfolio Business Affiliate" means one or more entities wholly-owned
and controlled, directly or indirectly, by the Partnership or by the Partnership
and the Managing General Partner.

"Portfolio Management Costs" means the costs of carrying out and
administering the Investor Portfolio Management Business, including salaries,
benefits and other compensation costs, professional fees (accounting, legal,
consulting), travel and related expenses, public relations, marketing and
facilities, and equipment expenses.

"Portfolio Management Revenue" means the fees payable by the Investment
Entities (calculated against the value of the assets they hold).

"Record Date" means the record date for determining Limited Partners
who are entitled to notice of and to vote at the Partnership Meeting (close of
business on January 3, 1997).

"Shareholders Agreement" means the Shareholders Agreement entered into
in 1985 among the Partnership, P&T, Pope EGP, Inc. (the equity general partner
of the Partnership), the Shareholders of the

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Managing General Partner, and the members of the MGP Board.

"Third Party Investors" means individuals and/or entities who are not
Affiliates of the Partnership beyond involvement in the Investor Portfolio
Management Business.

"Waiver" means waiver for two years of an age-related board of
directors eligibility requirement, as set forth in the Shareholders Agreement of
the Managing General Partner, to Adolphus Andrews, Jr.

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APPENDIX III

LIMITED LIABILITY COMPANY AGREEMENT

OLYMPIC RESOURCE MANAGEMENT LLC

(A WASHINGTON LIMITED LIABILITY COMPANY)

DATED AND EFFECTIVE

AS OF

____________________, 1997
35
TABLE OF CONTENTS

ARTICLE 1 -- FORMATION....................................................... 1
1.1 Certificate of Formation................................... 1
1.2 Name....................................................... 1
1.3 Purpose.................................................... 1
1.4 Term....................................................... 1
1.5 Principal Place of Business................................ 1
1.6 Registered Office and Registered Agent..................... 1

ARTICLE 2 -- DEFINITIONS..................................................... 1

ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS............................ 3
3.1 Members Names, Addresses and Percentages................... 3
3.2 Additional Members......................................... 3
3.3 Initial Contributions...................................... 3
3.4 Additional Contributions................................... 3
3.5 No Interest On or Withdrawal of Capital.................... 3
3.6 Capital Accounts........................................... 3
3.7 Restriction on Withdrawal or Transfer of Member's Interest. 4

ARTICLE 4 -- MEETINGS OF MEMBERS............................................. 4
4.1 Meetings................................................... 4
4.2 Place of Meetings.......................................... 4
4.3 Notice of Meetings......................................... 4
4.4 Record Date................................................ 5
4.5 Quorum..................................................... 5
4.6 Manner of Acting........................................... 5
4.7 Proxies.................................................... 5
4.8 Waiver of Notice........................................... 5
4.9 Action Without Meeting..................................... 5
4.10 Meetings by Telephone, Etc................................. 5

ARTICLE 5 -- MANAGEMENT...................................................... 5
5.1 Management................................................. 5
5.2 Major Decisions............................................ 6
5.3 Agents; Administrative Functions........................... 6
5.4 Right to Rely on the Managing Member....................... 6

ARTICLE 6 -- ACCOUNTING AND RECORDS.......................................... 6
6.1 Books of Account........................................... 6
6.2 Fiscal Year................................................ 7
6.3 Accounting Reports......................................... 7
6.4 Tax Returns................................................ 7
6.5 Tax Matters Member......................................... 7

ARTICLE 7 -- ALLOCATIONS AND DISTRIBUTIONS................................... 7
7.1 Allocation of Net Profit and Loss - In General............. 7
7.2 Special Allocations........................................ 8
7.3 Corrective Allocations..................................... 8
7.4 Other Allocation Rules..................................... 9

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7.5 Determination of Net Profit or Loss........................ 9
7.6 Mandatory Tax Allocations Under Code Section 704(c)........ 9
7.7 Distributions.............................................. 10

ARTICLE 8 -- DISSOLUTION AND LIQUIDATION.................................... 10
8.1 Events of Dissolution...................................... 10
8.2 Liquidation Upon Dissolution and Winding Up................ 11
8.3 No Obligation to Restore Negative Capital Account Balance
on Liquidation............. ............................... 11

ARTICLE 9 -- LIMITATION OF LIABILITY; INDEMNIFICATION........................ 11
9.1 Limitation of Liability.................................... 11
9.2 Indemnification............................................ 11

ARTICLE 10 -- MISCELLANEOUS.................................................. 12
10.1 Notices.................................................... 12
10.2 Governing Law.............................................. 12
10.3 Amendments................................................. 12
10.4 Construction............................................... 12
10.5 Headings................................................... 12
10.6 Waivers.................................................... 12
10.7 Remedies................................................... 12
10.8 Severability............................................... 13
10.9 Heirs, Successors and Assigns.............................. 13
10.10 Creditors.................................................. 13
10.11 Counterparts............................................... 13

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LIMITED LIABILITY COMPANY AGREEMENT

OLYMPIC RESOURCE MANAGEMENT LLC

(A WASHINGTON LIMITED LIABILITY COMPANY)

THIS LIMITED LIABILITY COMPANY AGREEMENT, dated the ____ day of
________, 1997, is made and entered into by and between Pope MGP, Inc., a
Delaware corporation ("MGP") and ORM, Inc., a Washington corporation ("ORMI").

ARTICLE 1 -- FORMATION

1.1 CERTIFICATE OF FORMATION. A Certificate of Formation was filed on
_______________, 1997, stated to be effective _______________, 1997, the date on
which the term of the Company shall begin.

1.2 NAME. The name of the limited liability company is "Olympic
Resource Management LLC."

1.3 PURPOSE. The principal purpose and business of the Company is the
location, acquisition, management and/or development of land (or interests in
entities with land assets) and related resources, including, but not limited to,
timberlands and lands with development potential for residential or commercial
use, within and without the United States, primarily or exclusively for the
account of individuals and/or entities, and to exercise all other powers
necessary or reasonably connected or incidental to such purpose and business
that may be legally exercised by the Company.

1.4 TERM. The term of the Company shall continue for a period of thirty
years from the effective date of the Certificate of Formation, unless the
Company is earlier dissolved in accordance with Article 8.

1.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be 19245 Tenth Avenue N.E., Poulsbo, Washington 98370. The
Managing Member may relocate the principal place of business or establish
additional offices from time to time.

1.6 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial
registered agent and the address of its initial registered office are as
follows:

Name Address

Craig L. Jones 19245 Tenth Avenue N.E.
Poulsbo, Washington 98370

The registered office and registered agent may be changed by the Managing Member
from time to time by filing a statement of change in accordance with RCW
25.15.020.

ARTICLE 2 -- DEFINITIONS

The following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
38
"ACT" means the Washington Limited Liability Company Act (RCW Ch.
25.15).

"AGREEMENT" means this limited liability company agreement, as
originally executed and as amended from time to time.

"ALLOCABLE INCOME" means the IPMB Net Income for a fiscal period,
increased by amounts accrued under the Company's Management Incentive Plan for
such fiscal period.

"CAPITAL ACCOUNT" has the meaning defined in Section 3.6.

"CODE" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue laws.

"COMPANY" means the limited liability company governed by this
Agreement.

"DEFICIT CAPITAL ACCOUNT" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:

(i) credit to such Capital Account any amount that such Member is
obligated to restore to the Company under Regulation Section
1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to
last sentences of Regulation Sections 1.704-2(g)(1) and (i)(5); and

(ii) debit to such Capital Account the items described in
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

This definition is intended to comply with the provisions of Regulation Sections
1.704-1(b)(2)(ii)(d) and 1.704-2, and shall be interpreted consistently with
those provisions.

"IPMB NET INCOME" means that portion of the net profit of the Company,
as determined pursuant to Section 7.5, derived from the Investor Portfolio
Management Business, as determined by deducting Portfolio Management Costs from
Portfolio Management Revenue.

"INVESTMENT ENTITIES" means new general or limited partnerships, joint
ventures, limited liability companies, or other new entities to be formed with
one or more individuals and/or entities who are not otherwise affiliates of the
Company or its Members.

"INVESTOR PORTFOLIO MANAGEMENT BUSINESS" means the business of the
Company involving the location, acquisition, management and/or development of
land and related resources directly or through acquisition of land-holding
entities, including, but not limited to, timberlands and lands with development
potential for residential or commercial use, within and without the United
States, primarily or exclusively for the account of individuals and/or entities
who are not otherwise affiliates of the Company or any of its Members.

"MANAGEMENT INCENTIVE PROGRAM" means the incentive program implemented
to provide financial incentives to the management group of the Company that are
directly aligned with the goals and best interests of the Company, which
incentive program is adopted by the Members pursuant to Section 5.2.

"MANAGING MEMBER" means MGP and any successor managing member appointed
pursuant to Section 8.1(d).

"MEMBER" means each of MGP and ORMI and each person who may hereafter
be admitted to the Company as an additional or substituted Member and who
executes a counterpart of this Agreement.

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"PORTFOLIO MANAGEMENT COSTS" means the costs of carrying out and
administering the Investor Portfolio Management Business, including salaries,
benefits and other compensation costs, professional fees (accounting, legal,
consulting), travel and related expenses, public relations, marketing and
facilities, and equipment expenses properly allocable thereto.

"PORTFOLIO MANAGEMENT REVENUE" means the fees payable by the Investment
Entities to the Company.

"REGULATION" includes temporary and final Treasury regulations
promulgated under the Code and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.

"REGULATION EFFECTIVE DATE" means the effective date of final
Regulations promulgated under Code Section 7701 that eliminate the
characteristics of limited liability, centralized management, free
transferability of interests, and continuity of life as criteria for determining
the classification of unincorporated business entities for federal tax purposes.

ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS

3.1 MEMBERS NAMES, ADDRESSES AND PERCENTAGES. The names and addresses
of the Members, and their Percentage Interests are set forth on attached
Schedule 1, as amended from time to time.

3.2 ADDITIONAL MEMBERS. Additional Members shall be admitted only upon
the consent of all Members.

3.3 INITIAL CONTRIBUTIONS.

3.3.1 MGP. MGP shall receive its interest in the Company,
which represents an interest in the future profits of the Company only, and not
a capital interest in the Company of any kind, in consideration for services to
be rendered to the Company in MGP's capacity as Managing Member. MGP shall not
be required to make an initial capital contribution to the Company, and MGP's
initial Capital Account balance shall be zero (0).

3.3.2 ORMI. Upon the call of the Managing Member, ORMI shall
contribute to the capital of the Company an aggregate amount not to exceed Two
Million Dollars ($2,000,000).

3.4 ADDITIONAL CONTRIBUTIONS. Subject to the following provisions of
this Section 3.4 and the provisions of Section 5.2, the Managing Member shall
have the right to call for additional capital contributions when and as MGP
determines additional capital is necessary or desirable. MGP shall have no
obligation to contribute capital to the Company. ORMI shall not be required to
contribute capital in excess of its initial contribution under Section 3.3.2
unless the call for additional capital contributions is approved in accordance
with Section 5.2.

3.5 NO INTEREST ON OR WITHDRAWAL OF CAPITAL. No interest shall be paid
on capital contributions and no Member shall have the right to withdraw its
capital contribution.

3.6 CAPITAL ACCOUNTS. A capital account ("Capital Account") shall be
determined and maintained for each Member in accordance with the principles of
Regulation Section 1.704-1(b) at all times throughout the full term of the
Company. In the event of a permitted sale or assignment of all or any part of a
Member's interest in the Company, the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the
transferred Company interest.

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40
In the discretion of the Managing Member, the book value of all Company
properties may be adjusted to equal their respective gross fair market values,
as determined by the Managing Member as of the following times: (1) in
connection with the acquisition of an interest in the Company by a new or
existing Member for more than a de minimis capital contribution; (2) in
connection with the liquidation of the Company as defined in Regulation Section
1.704-(1)(b)(2)(ii)(g); or (3) in connection with a more than de minimis
distribution to a retiring or a continuing Member as consideration for all or a
portion of its interest in the Company. In the event of a revaluation of any
Company assets hereunder, the Capital Accounts of the Members shall be adjusted,
including continuing adjustments for depreciation, to the extent provided in
Regulation Section 1.704-(1)(b)(2)(iv)(f).

3.7 RESTRICTION ON WITHDRAWAL OR TRANSFER OF MEMBER'S INTEREST.

3.7.1 RESTRICTIONS ON WITHDRAWAL. No Member shall voluntarily
withdraw from the Company without the consent of all the other Members. A
withdrawal in violation of this Section 3.7.1 shall constitute a breach of this
Agreement for which the Company and other Members shall have the remedies
provided under applicable law.

3.7.2 PRE-REGULATION EFFECTIVE DATE RESTRICTIONS ON TRANSFER
OF A MEMBER'S INTEREST. In any period prior to the Regulation Effective Date, no
Member shall assign, encumber, sell or otherwise transfer (collectively, a
"transfer") all or any portion of the Member's interest in the Company, or enter
into any agreement as a result of which any person shall become interested with
the Member in the Company. Any transfer by MGP or ORMI in violation of this
Section 3.7.2 shall constitute an event of dissolution of the Company under
Section 8.1(c) and shall also constitute a breach of this Agreement for which
the Company and other Members shall have the remedies provided under applicable
law. The Members acknowledge and agree that this Section 3.7.2 is a reasonable
restraint on the alienation of their interests in the Company in view of the
paramount objective of the Members that the Company be treated as a partnership
for federal income tax purposes.

3.7.3 POST-REGULATION EFFECTIVE DATE RESTRICTIONS ON TRANSFER
OF A MEMBER'S INTEREST. Notwithstanding Section 3.7.2, from and after the
Regulation Effective Date, the following restrictions on the transferability of
a Member's interest in the Company shall apply. Without the consent of the non-
transferring Members, which consent may be withheld for any reason or for no
reason, no Member shall assign, encumber, sell or otherwise transfer all or any
portion of the Member's interest in the Company, or enter into any agreement or
transaction as a result of which any person shall acquire an economic or
beneficial interest in the Company or the Member's interest in the Company.

ARTICLE 4 -- MEETINGS OF MEMBERS

4.1 MEETINGS. Meetings of Members are not required, but may be called
by any Member. No business shall be transacted at any meeting of Members except
as is specified in the notice calling such meeting.

4.2 PLACE OF MEETINGS. The Members may designate any place, either
within or outside the State of Washington, as the place of meeting for any
meeting of the Members. If no designation is made, the place of meeting shall be
the principal office of the Company specified in Section 1.5.

4.3 NOTICE OF MEETINGS. Written notice stating the place, day and time
of the meeting and the purpose for which the meeting is called shall be
delivered not less than ten (10) nor more than fifty (50) days before the date
of the meeting, either personally or by mail, by or at the direction of the
Members calling the meeting, to each Member entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered three (3) calendar days
after being deposited in the United States Mail, addressed to the Member at its
address as it appears on the records of the Company, postage prepaid.

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4.4 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to any distribution, the date on which notice of the meeting is
first delivered or mailed, or the date on which a resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 4.4, such
determination shall apply to any adjournment thereof.

4.5 QUORUM. The presence of all of the Members, represented in person
or by proxy, shall be required to constitute a quorum at any meeting of Members.
In the absence of a quorum at any such meeting, a majority of the Members so
represented may adjourn the meeting from time to time for a period not to exceed
sixty (60) days without further notice. However, if the adjournment is for more
than sixty (60) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given to each
Member. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed.

4.6 MANNER OF ACTING. If a quorum is present, the unanimous vote of the
Members shall be the act of the Members, except as otherwise provided in
Sections 3.7 and 8.1.

4.7 PROXIES. At all meetings of Members, a Member may vote in person or
by proxy executed in writing by the Member or by the Member's attorney-in-fact
or agent appointed in writing. Such proxy or appointment shall be filed with the
Company before or at the time of the meeting. No proxy or appointment shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy or appointment.

4.8 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Member entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance at a meeting shall
constitute waiver of notice of the meeting unless the Member at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting.

4.9 ACTION WITHOUT MEETING. Any action required or permitted to be
taken by the Members at a meeting may be taken without a meeting if a consent in
writing, describing the action taken, is signed by all of the Members. Such
action shall be included in the minutes of the Company's meetings.

4.10 MEETINGS BY TELEPHONE, ETC. Meetings of the Members may be held by
conference telephone or by any other means of communication by which all
participants can hear each other simultaneously during the meeting, and such
participation shall constitute presence in person at the meeting.

ARTICLE 5 -- MANAGEMENT

5.1 MANAGEMENT. The business and affairs of the Company shall be
managed by the Managing Member. MGP shall be the Managing Member and shall serve
in that capacity throughout the term of the Company, unless and until MGP is the
subject of an event of bankruptcy or insolvency described in Section 8.1(d)(i)
or is removed as Managing Member for "cause" upon the affirmative vote of all of
the other Members. For this purpose, "cause" shall mean (a) the material breach
of this Agreement by the Managing Member or (b) the taking of actions, or the
failure to act, by the Managing Member that constitutes the breach by the
Managing Member of the fiduciary duties it owes to the other Members and the
Company.

Except as provided in Section 5.2 or otherwise expressly provided in
this Agreement, the Managing Member shall, to the full extent permitted by the
Act, have complete authority, power and discretion to manage and control the
business, affairs and properties of the Company, to make all decisions regarding

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42
those matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.

Unless authorized to do so by this Agreement or by the Managing Member,
no Member, employee or other agent of the Company shall have any power or
authority to bind the Company in any way, to pledge its credit or to render it
liable for any purpose.

5.2 MAJOR DECISIONS. Major Decisions (as hereinafter defined) of the
Company shall be made only in accordance with this Section 5.2. Neither the
Managing Member nor any other Member shall have authority to do any of the
following ("Major Decisions") without the unanimous approval of the Members:

(a) approval of a call for additional capital contributions by
the Managing Member pursuant to Section 3.4;

(b) approval of the sale or other disposition of all or
substantially all of the assets of the Company (other than in the ordinary
course of business);

(d) approval of the amount and timing of any distributions by
the Company to its Members pursuant to Section 7.7.

Major Decisions shall be made at meetings of the Members called and held in
accordance with Article 4.

5.3 AGENTS; ADMINISTRATIVE FUNCTIONS. The Managing Member may
authorize, in writing, one or more agents or officers (each, an "Administrator")
to implement the management decisions of the Company and to handle the
day-to-day operational matters of the Company. Such authority may be general or
limited to specific instances. The Managing Member shall determine the duties,
compensation, term of service and other matters relating to any Administrator.
The Managing Member may remove an Administrator at any time. The Administrator's
expenses incurred on behalf of the Company shall be paid by, or reimbursed by,
the Company, subject to compliance with any rules, procedures, and requirements
established by the Managing Member.

5.4 RIGHT TO RELY ON THE MANAGING MEMBER. Any person dealing with the
Company may rely (without duty of further inquiry) upon a certificate signed by
the Managing Member as to the identity and authority of the Managing Member or
other person to act on behalf of the Company.

ARTICLE 6 -- ACCOUNTING AND RECORDS

6.1 BOOKS OF ACCOUNT. The Company shall maintain records and accounts
of all of its operations and expenditures. At a minimum the Company shall keep
at its principal place of business the following records:

(a) a current list and past list, setting forth the full name
and last known mailing address of each Member and Managing Member;

(b) a copy of the Certificate of Formation and all amendments
thereto;

(c) copies of this Agreement and all amendments hereto, and a
copy of any prior limited liability company agreements no longer in effect;

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43
(d) copies of the Company's federal, state, and local tax
returns and reports, if any, for the three (3) most recent years;

(e) minutes of every meeting of the Members and any written
consents obtained from Members for actions taken by Members without a meeting;
and

(f) copies of the Company's financial statements for the three
(3) most recent years.

6.2 FISCAL YEAR. The fiscal year of the Company shall be the calendar
year.

6.3 ACCOUNTING REPORTS. Within forty-five (45) days after the close of
each fiscal year, each Member shall receive an audited financial report of the
activities of the Company for the preceding fiscal year, including the balance
sheet of the Company as of the end of such year and a statement of income or
loss for such year.

6.4 TAX RETURNS. The Company shall prepare and timely file all required
federal and state income tax returns. Within forty-five (45) days after the end
of each fiscal year, each Member shall be furnished a statement suitable for use
in the preparation of the Member's income tax return.

6.5 TAX MATTERS MEMBER. For purposes of the Code and any comparable
provisions of state law, the "Tax Matters Partner" shall be MGP, or such other
Member as the Members shall determine from time to time, by unanimous agreement
of the Members.

ARTICLE 7 -- ALLOCATIONS AND DISTRIBUTIONS

7.1 ALLOCATION OF NET PROFIT AND LOSS - IN GENERAL.

7.1.1 ALLOCATION OF NET PROFIT OR LOSS. After giving effect to
the special allocations set forth in Sections 7.2 and 7.3, the net profit of the
Company for any fiscal year shall be allocated between the Members in accordance
with the following formula:

(a) ORMI ALLOCABLE INCOME ALLOCATION. ORMI shall be allocated
an amount of net profit equal to the following percentages (applied on an
incremental basis) of the Company's Allocable Income for the fiscal year:

Allocable Income ORMI Percentage

$0-3 Million 80%

$3-5 Million 70%

$5-7 Million 60%

Over $7 Million 50%

(b) MGP ALLOCABLE INCOME ALLOCATION. All remaining Allocable
Income of the Company for the fiscal year shall be allocated to MGP.

(c) ORMI RESIDUAL NET PROFIT ALLOCATION. The net profit of the
Company, if any, that is not properly included in Allocable Income shall be
allocated entirely to ORMI.

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7.1.2 ALLOCATION OF NET LOSS.

(a) IN GENERAL. The net loss of the Company, if any,
for any fiscal year shall be allocated between the Members in accordance with
their respective capital contributions to the Company.

(b) LIMITATION. The net loss allocated to each Member
for any Company fiscal year pursuant to Section 7.1.2(a) and this Section
7.1.2(b) shall not exceed the maximum amount of net loss that can be so
allocated without causing such Member to have a Deficit Capital Account at the
end of the fiscal year. All net losses in excess of the limitation set forth in
this Section 7.1.2(b) shall be allocated to the other Members who do not have
Deficit Capital Accounts in proportion to their respective capital contributions
to the Company.

7.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made for any fiscal year of the Company in the following order:

7.2.1 MINIMUM GAIN CHARGEBACK. If there is a decrease in the
Company's "partnership minimum gain," as defined in and determined under
Regulation Sections 1.704-2(b)(2) and 1.704-2(d), the minimum gain chargeback
provisions of Regulation Section 1.704-2(f), which are hereby incorporated into
this Agreement by this reference, shall be applied.

7.2.2 MEMBER MINIMUM GAIN CHARGEBACK. If there is a decrease
in any Member's share of "partner nonrecourse debt minimum gain," as defined in
and determined under Regulation Section 1.704- 2(i), the partner nonrecourse
debt minimum gain chargeback provisions of Regulation Section 1.704-2(i)(4),
which are hereby incorporated into this Agreement by this reference, shall be
applied.

7.2.3 QUALIFIED INCOME OFFSET. In the event that any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company
income and gain shall be specially allocated to such Member in accordance with
Regulation Section 1.704-(1)(b)(2)(ii)(d).

7.2.4 NONRECOURSE DEDUCTIONS. "Nonrecourse deductions," as
defined in and determined under Regulation Sections 1.704-2(b)(1) and (c), shall
be allocated among the Members in accordance with Section 7.1.2(a).

7.2.5 MEMBER NONRECOURSE DEDUCTIONS. "Partner nonrecourse
deductions," as defined in and determined under Regulation Sections
1.704-2(i)(1) and (2), shall be specially allocated among the Members in
accordance with Regulation Section 1.704-2(i).

7.3 CORRECTIVE ALLOCATIONS. The allocations set forth in Section
7.1.2(b) and Section 7.2 are intended to comply with certain regulatory
requirements under Code Section 704(b). The Members intend that, to the extent
possible, all allocations made pursuant to such Sections will, over the term of
the Company, be offset either with other allocations pursuant to Section 7.2 or
with special allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section 7.3. Accordingly, the Managing Member is
hereby authorized and directed to make offsetting allocations of Company income,
gain, loss or deduction under this Section 7.3 in whatever manner the Managing
Member determines is appropriate so that, after such offsetting special
allocations are made (and taking into account the reasonably anticipated future
allocations of income and gain pursuant to Sections 7.2.1 and 7.2.2), the
Capital Accounts of the Members are, to the extent possible, equal to the
Capital Accounts each would have if the provisions of Section 7.2 were not
contained in this Agreement and all income, gain, loss and deduction of the
Company were instead allocated pursuant to Section 7.1 and Section 7.1.2(a).

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7.4 OTHER ALLOCATION RULES.

7.4.1 GENERAL. Except as otherwise provided in this Agreement,
all items of Company income, gain, loss, deduction, credit, and any other
allocations not otherwise provided for shall be divided among the Members in
accordance with their Percentage Interests, or as otherwise may be required
under the Code and the Regulations thereunder.

7.4.2 ALLOCATION OF RECAPTURE ITEMS. In making any allocation
among the Members of income or gain from the sale or other disposition of a
Company asset, the ordinary income portion, if any, of such income and gain
resulting from the recapture of cost recovery or other deductions shall be
allocated among those Members who were previously allocated (or whose
predecessors-in-interest were previously allocated) the cost recovery deductions
or other deductions resulting in the recapture items, in proportion to the
amount of such cost recovery deductions or other deductions previously allocated
to them.

7.4.3 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for
purposes of determining a Member's proportionate share of the "excess
nonrecourse liabilities" of the Company within the meaning of Regulation Section
1.752-3(a)(3), the Members' interests in the Company's profits shall be as set
forth in Section 7.1.1.

7.4.4 ALLOCATIONS IN CONNECTION WITH VARYING INTERESTS. If,
during a Company fiscal year, there is (i) a permitted transfer of all or a part
of a Member's interest in the Company, or (ii) the admission or withdrawal of a
Member, net profit, net loss, each item thereof, and all other tax items of the
Company for such fiscal year shall be divided and allocated among the Members by
taking into account their varying interests during such fiscal year in
accordance with Code Section 706(d) and using any conventions permitted by law
and selected by the Managing Member.

7.5 DETERMINATION OF NET PROFIT OR LOSS.

7.5.1 COMPUTATION OF NET PROFIT OR LOSS. The net profit or net
loss of the Company, for each fiscal year or other period, shall be an amount
equal to the Company's taxable income or loss for such period, determined in
accordance with Code Section 703(a) (and, for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1), including income and gain exempt from federal income tax,
shall be included in taxable income or loss).

7.5.2 ADJUSTMENTS TO NET PROFIT OR LOSS. For purposes of
computing taxable income or loss on the disposition of an item of Company
property or for purposes of determining the cost recovery, depreciation, or
amortization deduction with respect to any property, the Company shall use such
property's book value determined in accordance with Regulation Section
1.704-1(b).

7.5.3 ITEMS SPECIALLY ALLOCATED. Notwithstanding any other
provision of this Section 7.5, any items that are specially allocated pursuant
to Section 7.2 or Section 7.3 shall not be taken into account in computing the
Company's net profit or net loss.

7.6 MANDATORY TAX ALLOCATIONS UNDER CODE SECTION 704(C). In accordance
with Code Section 704(c) and Regulation Section 1.704-3, income, gain, loss and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial book value computed in
accordance with Section 7.5.2. Prior to the contribution of any property to the
Company that has a fair market value that differs from its adjusted tax basis in
the hands of the contributing Member on the date of contribution, the
contributing Member and the non-contributing Members shall agree upon the
allocation method to be applied with respect to that property under Regulation
Section 1.704-3, which allocation method shall be set forth on attached Schedule
2, as

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46
amended from time to time. The same procedure shall apply to any revaluation of
Company property as permitted under Regulation Section 1.704-2(b)(iv)(f);
provided, however, that all decisions regarding valuation of assets and
allocation methods shall be made by the Managing Member..

Allocations pursuant to this Section 7.6 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of net profit,
net loss, or other items as computed for book purposes, or distributions
pursuant to any provision of this Agreement.

7.7 DISTRIBUTIONS. Upon approval of the Members in accordance with
Section 5.2(d), the Company may make distributions to the Members from time to
time, to the extent permitted by the Act.

7.7.1 DISTRIBUTIONS ATTRIBUTABLE TO INVESTOR PORTFOLIO
MANAGEMENT BUSINESS. Each distribution of distributable funds derived from the
Investor Portfolio Management Business shall be made to all Members, and divided
among the Members in proportion to their respective shares, determined in
accordance with Section 7.1.1, of the Allocable Income to which the distribution
relates. For these purposes, distributions shall be applied against each
Member's share of the Allocable Income of the Company in the chronological order
in which that Allocable Income was earned by the Company. For example,
distributions shall be first applied against the Allocable Income earned by the
Company in the first year in which it had Allocable Income until each Member has
received distributions equal to such Member's share of the Allocable Income of
the Company in such year, and shall be subsequently applied against the
Allocable Income earned by the Company in each succeeding year, in the same
fashion.

7.7.2 DISTRIBUTIONS ATTRIBUTABLE TO OTHER ACTIVITIES. Each
distribution of distributable funds derived from activities of the Company other
than the Investor Portfolio Management Business shall be made entirely to ORMI.

ARTICLE 8 -- DISSOLUTION AND LIQUIDATION

8.1 EVENTS OF DISSOLUTION. Except as otherwise provided in this
Agreement, the Company shall dissolve upon the earlier of:

(a) expiration of the term specified in Section 1.4;

(b) the written agreement of all of the Members;

(d) The occurrence, with respect to the Managing Member, of
any of the following events unless the business of the Company is continued and
a successor Managing Member is appointed with the consent of all of the
remaining Members (determined without regard to the Managing Member) within
ninety (90) days following such event:

(i) an event of voluntary or involuntary insolvency
or a bankruptcy proceeding as specified in RCW 25.15.130(1)(d)
or (e); or

(ii) the removal of the Managing Member in accordance
with Section 5.1;

(e) subject to Section 8.1(c), the occurrence of any event
which causes the Company to have fewer than two (2) Members unless, within
ninety (90) days following the event of dissociation as a

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result of which the number of Members is reduced below two (2), one or more
additional Members are admitted so that there are at least two (2) Members.

8.2 LIQUIDATION UPON DISSOLUTION AND WINDING UP. Upon the dissolution
of the Company, the Managing Member (or, if there is no Managing Member, the
remaining Members) shall wind up the affairs of the Company. A full account of
the assets and liabilities of the Company shall be taken. The assets shall be
promptly liquidated and the proceeds thereof applied as required by the Act.
Upon discharging all debts and liabilities of the Company, all remaining assets
shall be distributed to the Members or their representatives by the end of the
taxable year in which the liquidation occurs (or, if later, within ninety (90)
days after the date of such liquidation) in proportion to the positive balances
of their respective Capital Accounts, as determined after taking into account
all Capital Account adjustments for the taxable year during which the
liquidation occurs (other than those made pursuant to this Section 8.2). With
the approval of the Members, the Company may, in the process of winding up the
Company, distribute property in kind, in which case the Members' Capital Account
balances shall be adjusted in accordance with Regulation Section
1.704-1(b)(2)(iv)(e).

8.3 NO OBLIGATION TO RESTORE NEGATIVE CAPITAL ACCOUNT BALANCE ON
LIQUIDATION. No Member shall have any obligation to make any capital
contribution to the Company to eliminate the negative balance, if any, of such
Member's Capital Account upon a liquidation of the Company within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g) or liquidation of such Member's interest
in the Company, and any such negative balance shall not be considered a debt
owed by such Member to the Company or to any other person for any purpose
whatsoever.

ARTICLE 9 -- LIMITATION OF LIABILITY; INDEMNIFICATION

9.1 LIMITATION OF LIABILITY. No Member, Managing Member, or director,
officer, partner, member, Administrator, or other employee or agent thereof
(each, a "Covered Person") shall be liable, responsible or accountable in
damages or otherwise to the Company or the Members for any act or omission by
such Covered Person performed in good faith pursuant to the authority granted to
such Covered Person by this Agreement or in accordance with its provisions, and
in a manner reasonably believed by the Covered Person to be within the scope of
its authority and in the best interest of the Company; provided, however, that
such act or omission did not involve a breach of this Agreement, intentional
misconduct, fraud, a knowing violation of law, conduct violating RCW 25.15.235,
or any transaction from which the Covered Person has personally received a
benefit in money, property or services to which the Covered Person was not
legally entitled. If the Act is hereafter amended to authorize Company action
further limiting the personal liability of Covered Persons, then the liability
of each Covered Person shall be eliminated or limited to the full extent
permitted by the Act, as so amended. No repeal or modification of the Act or
this Section 9.1 shall adversely affect any right or protection of a Covered
Person existing at the time of such repeal or modification for or with respect
to an act or omission of such Covered Person occurring prior to such repeal or
modification.

9.2 INDEMNIFICATION. The Company shall indemnify each Covered Person
from and against any judgments, settlements, penalties, fines or expenses
incurred by them on behalf of the Company or in furtherance of the Company's
interests; provided, however, that a Covered Person shall not be indemnified
from or on account of acts or omissions of the Covered Person finally
adjudicated to be a breach of this Agreement, intentional misconduct, fraud, a
knowing violation of law by such Covered Person, conduct of the Covered Person
adjudged to be in violation of RCW 25.15.235, or involving any transaction with
respect to which it was finally adjudged that such Covered Person received a
benefit in money, property or services to which such Covered Person was not
legally entitled.

Any indemnification required to be made by the Company shall be made
promptly following the fixing of the liability, loss, damage, cost or expense
incurred or suffered by a final judgment of any court,

11
48
settlement, contract or otherwise. In addition, the Company may advance funds to
a person claiming indemnification under this Section 9.2 for legal expenses and
other costs incurred as a result of a legal action brought against such Covered
Person only if (i) the legal action relates to the performance of duties or
services by the Covered Person on behalf of the Company, (ii) the legal action
is initiated by a party other than a Member, and (iii) such Covered Person
undertakes to repay the advanced funds to the Company if it is determined that
such person is not entitled to indemnification pursuant to the terms of this
Agreement. The right to indemnification and payment of expenses incurred in
defending a proceeding conferred in this Section 9.2 shall not be exclusive of
any other right any Covered Person may have or hereafter acquire under any
statute, this Agreement, vote of Members or otherwise.

No repeal or modification of the Act or this Section 9.2 shall
adversely affect any right of a Covered Person to indemnification existing at
the time of such repeal or modification for or with respect to indemnification
related to an act or omission of such Covered Person occurring prior to such
repeal or modification.

No Member shall have any personal liability with respect to the satisfaction
of any required indemnification of the above-mentioned Covered Persons.

ARTICLE 10 -- MISCELLANEOUS

10.1 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be deemed to have been duly given if delivered
personally to the party to whom directed or, if mailed, by registered or
certified mail, postage and charges prepaid, addressed (a) if to a Member, to
the Member's address specified on attached Schedule 1, and (b) if to the
Company, to the Company's address specified in Section 1.5. Any such notice
shall be deemed to be given when personally delivered or, if mailed, two (2)
business days after the date of mailing. A Member or the Company may change its
address for purposes of notices hereunder by giving notice specifying such
changed address in the manner specified in this Section 10.1.

10.2 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Washington, including without
limitation, the Act.

10.3 AMENDMENTS. This Agreement may not be amended except by the
unanimous written agreement of all of the Members.

10.4 CONSTRUCTION. Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.

10.5 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not affect the interpretation of this Agreement.

10.6 WAIVERS. The failure of any person to seek redress for violation
of or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.

10.7 REMEDIES. The rights and remedies of the parties hereunder shall
not be mutually exclusive, and the exercise of any one right or remedy shall not
preclude or waive the right to exercise any other remedies. Said rights and
remedies are in addition to any other rights the parties may have by law or
otherwise.

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49
10.8 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement and the application
thereof shall not be affected and shall be enforceable to the fullest extent
permitted by law.

10.9 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.

10.10 CREDITORS. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Company.

10.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.

Executed as of the date first above written by the undersigned.

POPE MGP, INC., a Delaware
corporation

By
____________________________________
____________________________________
Its __________________________

ORM, INC., a Washington
corporation

By
____________________________________
____________________________________
Its __________________________

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50
SCHEDULE 1

LIMITED LIABILITY COMPANY AGREEMENT

OLYMPIC RESOURCE MANAGEMENT LLC

Names and Addresses of Members

Pope MGP, Inc.
19425 Tenth Avenue NE
PO Box 1780
Poulsbo, WA 98370

ORM, Inc.
19425 Tenth Avenue NE
PO Box 1780
Poulsbo, WA 98370

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51
SCHEDULE 2

LIMITED LIABILITY COMPANY AGREEMENT

OLYMPIC RESOURCE MANAGEMENT LLC

Mandatory Tax Allocations Under Code Section 704(c)

No property will be contributed to the Company upon its formation that will be
subject to the mandatory tax allocation rules of Code Section 704(c).

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52
APPENDIX IV

HOULIHAN LOKEY HOWARD & ZUKIN

A SPECIALTY INVESTMENT BANKING FIRM

December 16, 1996

The Board of Directors
Pope Resources
Post Office Box 1780
Poulsbo, Washington 98370

RE: GENERAL PARTNER - COMPENSATION ADJUSTMENT

Dear Board Members:

We understand that Pope Resources ("Partnership"), is considering forming a
wholly-owned subsidiary to be named Olympic Resource Management, Inc. ("ORMI"),
which will become a member of a newly formed limited liability company
(hereinafter "LLC"). The LLC will be engaged in the acquisition and management
of properties, and related entities on behalf of third parties for which it will
earn various fees ("Investor Portfolio Management Business"). In connection
therewith, Pope MGP, Inc., the managing general partner ("General Partner") of
the Partnership has proposed that it be compensated for managing the LLC based
on the financial performance of the LLC. We further understand that providing
additional compensation to Pope MGP in this fashion requires an amendment to the
terms of the Partnership Agreement (hereafter "Compensation Adjustment").

You have requested our opinion (the "Opinion") as to the fairness to the Limited
Partners of the Partnership ("Limited Partners"), from a financial point of
view, of the Compensation Adjustment. The Opinion does not address the
Partnership's underlying business decision to enter into the Investor Portfolio
Management Business.

In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:

1. reviewed the Partnership's annual reports to shareholders and
Form 10-Ks for the fiscal years ended December 31, 1991 to
December 31, 1995 and 10-Q for the period ended September 30,
1996, which the Partnership's management has identified as the
most current financial information available;

2. reviewed financial models based upon the Investor Portfolio
Management Business plan for the Partnership and LLC which
were prepared by the General Partner for the fiscal years
ended 1997 through 2001;

3. reviewed the Limited Partnership Agreement of Pope Resources,
dated as of November 7, 1985, and the amendments thereto
approved December 16, 1986;
53

The Board of Directors Page 2
Pope Resources
December 16, 1996

4. spoke with certain members of the General Partner regarding
the current operations, financial condition and future
prospects of the Partnership and the LLC;

5. reviewed the historical market prices and trading volume for
the Partnership's publicly traded securities;

6. reviewed publicly available financial data and partnership
agreements of other publicly traded limited partnerships; and

7. conducted such other studies, analyses and inquiries as we
have deemed appropriate.

We were requested by the Board of Directors of the Partnership to identify
possible incentive compensation structures. In connection with this analysis we:
(i) reviewed compensation arrangements for certain publicly-traded partnerships
we deemed comparable to the Partnership; (ii) reviewed the rights and privileges
of the Limited Partners and the General Partner, including the ability of
officers and other affiliates of the General Partner to pursue the activities of
the LLC without the involvement of the Partnership; and (iii) calculated yield
and total return to the Limited Partners and General Partner using varying
allocations of net cashflow. We presented a possible incentive compensation
structure to the Board of Directors and, at its request, analyzed certain
modifications to the proposed structure.

We have relied upon and assumed, without independent verification, that the
financial information provided to us have been reasonably prepared and reflect
the best currently available estimates of the future financial results and
condition of the Partnership and LLC, and that there has been no material change
in the assets, financial condition, business or prospects of the Partnership
since the date of the most recent financial statements made available to us.

We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Partnership and LLC and do not
assume any responsibility with respect to it. We have not made any physical
inspection or independent appraisal of any of the properties or assets of the
Partnership and/or LLC. Our opinion is necessarily based on business, economic,
market and other conditions as they exist and can be evaluated by us at the date
of this letter.

Based on the foregoing, and in reliance thereon, it is our opinion that the
Compensation Adjustment more fully set forth in the proxy statement, to which
this Opinion is attached, is fair to the Limited from a financial point of view.

HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.

/s/ Houlihan, Lokey, Howard & Zukin, Inc.
- ------------------------------------------
54
PROXY

POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
19245 10TH AVE. N.E., POULSBO, WA 98370

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF POPE MGP, INC., AS MANAGING GENERAL PARTNER

The undersigned hereby appoints Gary F. Tucker and Peter T. Pope, and each of
them, with full power of substitution, the proxies of the undersigned to vote
all units of Partnership interest ("Units") of Pope Resources, A Delaware
Limited Partnership (the "Partnership") which the undersigned is entitled to
vote at a meeting of the Partnership to be held at The Four Seasons Olympic
Hotel, 411 University Street, Seattle, Washington on February 14, 1997, at 1:00
p.m., and any adjournments or postponements thereof.

This proxy may be revoked at any time before it is exercised.

This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned. DISCRETIONARY AUTHORITY IS HEREBY GRANTED AS TO THE MATTERS
SET FORTH BELOW. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF
PROPOSAL 1 AND PROPOSAL 2.

1. PROPOSAL TO AMEND THE PARTNERSHIP AGREEMENT to (i) permit the Partnership to
engage in a new business enterprise involving the location, acquisition,
management and/or development of land and related resources directly or through
acquisition of land-holding entities, primarily or exclusively for the account
of individuals and/or entities who are not otherwise Affiliates of the
Partnership (the "Investor Portfolio Management Business"); and (ii) authorize
an incremental, sliding-scale allocation of net income derived from the Investor
Portfolio Management Business between the Partnership and the Managing General
Partner.

__ FOR __ AGAINST __ ABSTAIN

2. PROPOSAL TO WAIVE THE APPLICATION OF MANDATORY RETIREMENT AGE set forth in
the Shareholders Agreement of the Managing General Partner to permit Adolphus
Andrews, Jr. to serve on the Board of Directors of the Managing General Partner
for a period of two years after his 75th birthday.

__ FOR __ AGAINST __ ABSTAIN
55
Please sign exactly as name appears below. When Units are held by joint tenants,
both should sign. When signing as an attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, partnership or
other entity, please sign in full corporate name by authorized person.

Dated: _______________, 1997

____________________________
Signature

____________________________
Signature (if held jointly)

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.