CHAMPION INTERNATIONAL CORP, 10-K405, 1995-03-30

CHAMPION INTERNATIONAL CORP
10-K405, 1995-03-30
PAPER MILLS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NO. 1-3053

CHAMPION INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEW YORK 13-1427390
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

ONE CHAMPION PLAZA 06921
STAMFORD, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 358-7000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE
4 7/8% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE APRIL 1, 1997
6 1/2% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE APRIL 15, 2011
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X . NO .

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]

THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF FEBRUARY 28, 1995 WAS APPROXIMATELY $4,160,000,000.

AS OF FEBRUARY 28, 1995, 93,408,849 SHARES OF COMMON STOCK OF THE REGISTRANT
WERE OUTSTANDING.

PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1994 ARE INCORPORATED BY REFERENCE IN PARTS I, II AND
IV HEREOF. PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS SCHEDULED TO BE HELD ON MAY 18, 1995 ARE
INCORPORATED BY REFERENCE IN PART III HEREOF.

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PART I

ITEM 1. BUSINESS

GENERAL

Champion International Corporation was incorporated under the laws of the
State of New York on April 28, 1937. References to the "Company" include
Champion International Corporation and its subsidiaries at December 31, 1994,
unless the context otherwise requires.

The Company is one of the leading domestic manufacturers of paper for
business communications, commercial printing, publications and newspapers. In
addition, the Company has significant plywood and lumber manufacturing
operations and owns or controls approximately 5,070,000 acres of timberlands in
the United States. The Company's Canadian and Brazilian subsidiaries also own
or control significant timber resources supporting their operations.

The Company's business segments are paper and wood products. See Note 14 of
Notes to Financial Statements on pages 37 and 38 of the Company's Annual Report
to Shareholders for the fiscal year ended December 31, 1994 (the "Company's 1994
Annual Report"), which Note is incorporated by reference herein, for information
concerning the Company's business segments and operations in different
geographic areas for 1992, 1993 and 1994.

PAPER

See the Net Sales table on page 18 of the Company's 1994 Annual Report, which
table is incorporated by reference herein, for information concerning the net
sales to unaffiliated customers of the various products of the paper business
for 1992, 1993 and 1994.

PRINTING AND WRITING PAPERS

The printing and writing papers business manufactures and sells printing and
writing papers, bleached paperboard and pulp. The principal domestic
manufacturing properties of this operation consist of integrated pulp and paper
mills at Courtland, Alabama; Canton, North Carolina; and Pensacola, Florida; and
a paper mill at Hamilton, Ohio. As of December 31, 1994, these mills had an
annual capacity of approximately 1,901,000 tons of pulp and 2,058,000 tons of
printing and writing papers and bleached paperboard.

Most of the pulp produced by the printing and writing papers business is used
in its own paper mills; approximately 9%, produced at the Pensacola and
Courtland mills, was sold in the open market in 1994. A portion of the fiber
requirements of this business also is supplied by other Company pulp mills, and
approximately 2% of its fiber requirements in 1994 were purchased from third-
party suppliers.

Uncoated papers produced by the printing and writing papers business are used
for computer forms, copier paper and envelope papers. Coated papers are used in
catalogs, magazines, brochures, labels and annual reports.

In 1994, 62% of this operation's bleached paperboard production was used by
the Company's DairyPak unit, which converts polyethylene-coated paperboard into
milk and juice cartons and ovenable packaging. The balance either was sold to
independent purchasers, primarily for conversion to cups, or was exported.

The Company leases substantial portions of the Courtland mill under 10 long-
term net leases which expire between 1997 and 2029. Each of these leases
provides for rental payments over its term sufficient to pay interest on and to
retire the industrial development or pollution control revenue bonds issued in
connection with the financing of the property subject to such lease. The
Company is required to purchase, or has the option to purchase, the property
subject to each such lease for a nominal sum at the time the related bonds are
retired.

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The Company leases a printing facility at the Athens, Georgia DairyPak plant
until 2015. The lease provides for rental payments over its term sufficient to
pay interest on and to retire the industrial development revenue bonds issued to
finance the acquisition of that facility. The Company has the option to
purchase the facility for a nominal sum at the time the bonds are retired.

The domestic printing and writing papers business and the publication papers
business jointly maintain 15 sales offices in various parts of the United
States, as well as an order services office in Hamilton, Ohio, for the sale of
their products to direct purchasers and through paper merchants. Certain of
these sales offices are shared with the newsprint and kraft operations.

Champion Papel e Celulose Ltda., a 99%-owned subsidiary ("Champion Papel"),
is a major integrated manufacturer of pulp and printing and writing papers in
Brazil with net sales to unaffiliated customers of (U.S.) $253,771,000 in 1994.
As of December 31, 1994, this mill had an annual capacity of approximately
336,000 tons of pulp and 374,000 tons of paper. In addition to being a leading
supplier of printing and writing papers in Brazil, Champion Papel exports a
substantial portion of its paper production.

PUBLICATION PAPERS

The publication papers business manufactures and sells coated and uncoated
publication papers and pulp. The manufacturing properties of this operation
consist of integrated pulp and paper mills at Bucksport, Maine; Deferiet, New
York; Quinnesec, Michigan; and Sartell, Minnesota. As of December 31, 1994,
these mills had an annual capacity of approximately 826,000 tons of pulp and
1,273,000 tons of publication papers.

A significant portion of the fiber requirements of the publication papers
business is supplied by its own mills. In addition, a portion of its fiber
requirements is supplied by other Company pulp mills, and approximately 25% of
its fiber requirements in 1994 were purchased from third-party suppliers.

The Company manufactures pulp for sale in the open market at the Quinnesec
mill. In 1994, approximately 65% of the pulp production of this mill, or
244,000 tons, was sold in the open market through the Company's headquarters in
Stamford, Connecticut, as well as a sales office in Appleton, Wisconsin. The
balance was used in the production of paper at the Quinnesec mill and at the
Company's printing and writing papers mills.

The Company's publication papers are used primarily for consumer magazines,
direct mail catalogs, directories, textbooks and coupons. Sales are made to
direct purchasers and through paper merchants and brokers from the 15 sales
offices jointly maintained by the publication papers operation and the printing
and writing papers operation, and from the Hamilton, Ohio order services office.

The Company leases the building which houses one of the paper machines at the
Sartell mill until 2008. Thereafter, the Company has options to renew the lease
for five terms of five years each. The Company also has the option to purchase
the building at its then-current market value at the end of the initial term in
2008 or at the end of each five-year renewal term.

NEWSPRINT

The newsprint business manufactures pulp and manufactures and sells
newsprint, directory paper and groundwood specialties. The manufacturing
properties of this operation consist of integrated pulp and paper mills at
Lufkin and Sheldon, Texas. As of December 31, 1994, these mills had an annual
capacity of approximately 1,043,000 tons of pulp (which includes 151,000 tons of
recycled pulp) and 948,000 tons of newsprint, directory paper and groundwood
specialties.

Virtually all of the newsprint operation's pulp production is used in its own
paper mills; approximately 2% was sold in the open market in 1994.

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Most of the newsprint produced by the Company is sold in the Southwest,
Southeast and Midwest. In general, sales are made directly to publishers and
printers through four sales offices, three of which are shared with the printing
and writing papers and publication papers operations, and one order services
office.

PULP

For information concerning market pulp produced at the Pensacola and
Courtland mills, see the section captioned Printing and Writing Papers above,
and for information concerning market pulp produced at the Quinnesec mill, see
the section captioned Publication Papers above.

Weldwood of Canada Limited, a Canadian subsidiary in which the Company has
approximately 84% ownership ("Weldwood"), manufactures bleached softwood kraft
pulp at its mill in Hinton, Alberta, Canada. As of December 31, 1994, this mill
had an annual capacity of approximately 424,000 tons. In 1994, approximately
29% of the mill's pulp production was used in the Company's own publication
papers and printing and writing papers mills. The balance was sold in the open
market through the Company's headquarters in Stamford, Connecticut, a Company
sales office in Appleton, Wisconsin and a Weldwood sales office in Bad Homburg,
Germany.

Cariboo Pulp & Paper Company, a joint venture owned equally by Weldwood and
Daishowa-Marubeni International Limited, operates a bleached softwood kraft pulp
mill in Quesnel, British Columbia, Canada. As of December 31, 1994, this mill
had an annual capacity of approximately 340,000 tons. In 1994, approximately
23% of Weldwood's 50% share of the mill's pulp production was used in the
Company's own publication papers and printing and writing papers mills. The
balance of Weldwood's share was sold in the open market through the Company's
headquarters in Stamford, Connecticut, a Company sales office in Appleton,
Wisconsin and a Weldwood sales office in Bad Homburg, Germany.

While certain of the Company's mills purchase pulp in the open market, the
Company and Weldwood overall are net sellers of pulp. In 1994, the Company and
Weldwood in the aggregate produced approximately 830,000 tons of pulp for sale
to unaffiliated purchasers, while the Company used approximately 268,000 tons of
pulp purchased from third-party suppliers, resulting in net market pulp of
approximately 562,000 tons.

KRAFT

The Company produces pulp, unbleached linerboard and kraft paper for
multiwall and grocery bags at its mill in Roanoke Rapids, North Carolina. As of
December 31, 1994, this mill had an annual capacity to produce approximately
495,000 tons of pulp, 403,000 tons of linerboard and 116,000 tons of kraft
paper. All of this mill's pulp production is used at the mill. In addition,
approximately 8% of its fiber requirements in 1994 were purchased from third-
party suppliers. The linerboard and kraft paper produced at the Roanoke Rapids
mill are sold to converters through three sales offices, two of which are shared
with the printing and writing papers and publication papers operations, and one
order services office.

PAPER DISTRIBUTION OPERATION

Nationwide Papers, a unit of the Company, is a distributor of paper and paper
products. Its marketing operations are carried out through 29 wholesale
warehouse facilities in 18 states. In addition, Nationwide Papers operates a
facility which converts rolls of bleached paperboard into sheets for sale
primarily to textile, apparel and furniture producers. In 1994, approximately
83% of its sales were attributable to merchandise purchased from numerous
manufacturers other than the Company. However, Nationwide Papers is not
dependent on any single supplier for such merchandise.

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WOOD PRODUCTS

The Company is a major producer of plywood and lumber. The Company's wood
products business is conducted through its domestic wood products operations and
through the wood products operations of Weldwood.

The principal wood products manufacturing facilities operated by the Company
and by Weldwood are summarized under Item 2 of this Report. As of December 31,
1994, the Company had approximate annual capacities of 843 million square feet
(3/8" basis) of softwood plywood and 416 million board feet of softwood lumber.
As of December 31, 1994, Weldwood had approximate annual capacities of 425
million square feet (3/8" basis) of plywood (principally softwood), 762 million
board feet of softwood lumber and 160 million square feet (3/8" basis) of
waferboard.

In February 1995, Weldwood sold its two coastal British Columbia sawmills and
related timber-cutting rights to International Forest Products Limited for (Cdn)
$140,000,000 plus an additional amount for inventories. The two sawmills have a
combined annual capacity of 185 million board feet of softwood lumber, which is
not included in the capacity information set forth in this section. In
addition, Weldwood is negotiating with the Hancock Timber Resource Group to sell
approximately 32,000 acres of Weldwood's fee-owned timberlands in coastal
British Columbia.

The Company sells lumber and plywood through four sales offices to
wholesalers, dealers, industrial users and retailers. Weldwood sells wood
products within Canada through a 50%-owned building materials distribution
company which serves all major markets in that country. In addition, Weldwood
exports substantial portions of its products directly. In 1994, Weldwood had
net sales to unaffiliated customers of (U.S.) $694,104,000, of which (U.S.)
$540,924,000 was attributable to the wood products portion of its business.

See the Net Sales table on page 20 of the Company's 1994 Annual Report, which
table is incorporated by reference herein, for information concerning the net
sales to unaffiliated customers of the various products of the wood products
business for 1992, 1993 and 1994.

TIMBER PROPERTIES

The Company owns 4,492,139 acres and controls 578,130 acres of timberlands in
the United States. The Company's owned and controlled timberlands contain in
the aggregate approximately 17,620,000 cunits (one cunit equals one hundred
cubic feet of solid wood) of merchantable sawtimber and approximately 35,645,000
cunits of pulpwood. In 1994, the Company harvested approximately 33% of its
domestic fiber requirements from its owned and controlled timberlands. A
portion of the fiber harvested by the Company is sold in the domestic open
market and in the export market.

Broken down by region, the Company's domestic timber acreage and volume are
as follows: In the State of Washington, the Company owns 296,995 acres and
controls 476 acres of timberlands. These timberlands contain in the aggregate
approximately 8,404,000 cunits of merchantable sawtimber and approximately
597,000 cunits of pulpwood. In the South, primarily in Texas, North Carolina,
South Carolina, Alabama, Georgia, Florida, Tennessee and Virginia, the Company
owns 2,590,015 acres and controls 570,251 acres of timberlands containing in the
aggregate approximately 4,968,000 cunits of merchantable sawtimber and
approximately 20,483,000 cunits of pulpwood. The Company owns 1,605,129 acres
and controls 7,403 acres of timberlands in the North, primarily in Maine,
Michigan, New Hampshire, New York and Vermont. These timberlands contain in the
aggregate approximately 4,248,000 cunits of merchantable sawtimber and
approximately 14,565,000 cunits of pulpwood.

The Company's domestic log and pulpwood requirements are procured from its
owned and controlled lands, as described above, as well as from open market
purchases, short-term timber purchase contracts with independent timber owners
and agencies of the United States and various state governments, and supply
agreements with other companies. In the opinion of management, these sources
will provide an adequate supply of logs and pulpwood to meet the Company's
principal raw materials requirements for the foreseeable future. It is expected
that the proportion of fiber derived from the Company's owned and controlled
lands will decline until the middle to late 1990s but will increase thereafter
as more of the Company's plantations, primarily in the South, reach maturity.

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Supplementing the Company's domestic timberlands are its several seed
orchards and nursery operations. These facilities will enable the Company to
produce most of the trees which it plans to plant in the United States in the
future, including the approximately 61 million trees planned for planting in
1995.

Weldwood obtains raw materials for its wood products manufacturing operations
primarily from sustained-yield, long-term licenses which grant cutting rights on
government-owned timberlands and from long-term agreements with other companies
based on their harvesting licenses. Weldwood has rights to harvest
approximately 573,000 cunits of merchantable sawtimber from long-term licenses
annually and, during the balance of the current terms of such licenses, has
rights to harvest an aggregate of approximately 8,026,000 cunits. In addition,
Weldwood has rights to obtain approximately 129,000 cunits of merchantable
sawtimber on an annual basis from supply agreements with other companies.
Weldwood believes that these sources will provide a substantial portion of the
raw materials required by its wood products manufacturing operations for the
foreseeable future, with the balance to be obtained from other third-party
suppliers. The timber volume information set forth in this paragraph does not
include the timber-cutting rights sold by Weldwood in February 1995 or the
approximately 32,000 acres of fee-owned timberlands which Weldwood is
negotiating to sell, as discussed above in the section captioned Wood Products.

In addition, in Alberta, Canada, Weldwood has cutting rights through June 15,
2008 with respect to approximately 2,461,000 acres of timberlands pursuant to an
agreement with the Provincial Government of Alberta. This agreement is
renewable at Weldwood's option for successive 20-year periods as long as the
Hinton, Alberta pulp mill remains in operation. Weldwood has the right to
harvest approximately 671,000 cunits of pulpwood annually under this agreement.

Cariboo Pulp & Paper Company holds certain rights to harvest up to 533,000
cunits of pulpwood annually from approximately 3,900,000 acres of government-
owned timberlands in British Columbia pursuant to a long-term license. Weldwood
believes that this source of pulpwood, as well as supplies of wood chips from
sawmills and plywood plants in the area, will satisfy the raw materials
requirements of Cariboo's pulp mill for the foreseeable future. Babine Forest
Products Company, a joint venture in which Weldwood has an indirect 58%
interest, operates a sawmill in British Columbia and is beneficially entitled to
harvest approximately 184,000 cunits of merchantable sawtimber annually pursuant
to long-term licenses. Houston Forest Products Company, a joint venture in
which Weldwood and Eurocan Pulp and Paper Company are equal participants,
operates a sawmill in British Columbia and is beneficially entitled to cut
approximately 229,000 cunits of merchantable sawtimber annually pursuant to a
long-term license.

Champion Papel owns or controls 228,524 acres of timberlands in Brazil, which
are not in or near the Amazon Basin.

Certain of the Company's land holdings have a value substantially in excess
of that of land primarily used for fiber supply purposes. The Company has sold
or contributed to its wholly owned real estate subsidiaries, net of land
repurchased by the Company, an aggregate of approximately 230,000 acres of such
land. These subsidiaries have sold approximately 175,600 acres, of which
approximately 10,100 acres were sold during 1994, for residential, recreational,
commercial or industrial purposes. The balance is being held for similar sale
or long-term appreciation. A substantial portion of the land held by the
Company's real estate subsidiaries is located near Houston, Texas and
Jacksonville, Florida.

MINERAL, OIL AND GAS RESOURCES

The Company owns or controls various mineral, oil and gas rights with respect
to approximately half of the timberlands owned or controlled by the Company in
the United States. The Company has conducted a general review of its domestic
mineral, oil and gas rights and presently is not aware of any significant
reserves or deposits except as discussed below.

The Company has oil and gas interests in fields located in Florida, Alabama,
Texas, Louisiana and Mississippi. Drilling operations are conducted by others
pursuant to leases and other agreements with the Company. The Company

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estimates that proved reserves attributable to the Company's interests in such
fields aggregate approximately 1,216,000 barrels of oil and 4,244,000 Mcf
(thousand cubic feet) of natural gas as of December 31, 1994. The Company's
share of production from such fields was approximately 489,000 barrels of oil,
1,524,000 Mcf of natural gas and 2,031,000 gallons of gas products in 1994.

Proved oil and gas reserves attributable to the Company's non-operating
royalty interests and/or operating interests in the oil and gas fields described
above are based primarily upon estimates furnished by the operators of those
fields. The Company's share of production from such fields during each calendar
year is based on monthly production information received from the operators,
showing the application of such interests of the Company to actual production
volumes for such month.

The Company owns the surface rights and full or partial mineral rights to
considerable timberlands in Texas which overlay lignite deposits. The Company
estimates that it owns approximately 350,000,000 tons of lignite reserves in
Texas, of which 80% is estimated to be recoverable. These lignite reserves
presently are not being mined due to current market conditions.

CAPITAL PROGRAM

With the completion of the Company's extensive capital improvement program in
1993, capital spending has been reduced to levels required for routine capital
replacements, environmental compliance and incremental improvements. The
Company presently anticipates that capital spending will be approximately $390
million in 1995.

COMPETITION

The markets in which the Company sells its products are highly competitive.
The Company faces numerous competitors within the forest products industry in
each of its major markets and also competes with suppliers of milk and juice
cartons and kraft paper substitutes made from plastics. Competition in all
markets is based primarily on price. The Company is one of the largest domestic
producers and suppliers of printing and writing papers, publication papers,
newsprint, lumber, plywood, milk and juice cartons, and hardwood market pulp.
Weldwood is the largest producer of plywood and one of the largest producers of
lumber and softwood market pulp in Canada. Champion Papel is one of the largest
producers and suppliers of printing and writing papers in Brazil.

FOREIGN OPERATIONS

Net sales to unaffiliated customers by the Company's foreign subsidiaries for
1994 were (U.S.) $947,875,000, accounting for 17.8% of consolidated net sales of
the Company. Income from operations of the foreign subsidiaries for 1994 was
(U.S.) $188,027,000 which, reflecting the weak overall results of the Company's
domestic operations, accounted for 70.7% of the consolidated income from
operations of the Company. Net income (after minority interest) of the foreign
subsidiaries for 1994 was (U.S.) $132,088,000, which accounted for all of the
consolidated income of the Company.

The major foreign operations, which are discussed above under their
respective business segment headings, are in Canada and Brazil. The Company
believes that the risks associated with its foreign operations are somewhat
greater than those associated with its domestic operations. Weldwood exports
substantial portions of its products and, as a result, is affected significantly
by currency fluctuations. Champion Papel, the Company's Brazilian subsidiary,
is subject to that country's continuing inflation and currency fluctuations,
which have moderated as the result of various governmental actions in the last
year. Tight monetary and fiscal policies, including high interest rates,
imposed in recent years in an attempt to control Brazil's high inflation rate,
remain in effect. (See Note 14 of Notes to Financial Statements on page 38 of
the Company's 1994 Annual Report, which Note is incorporated by reference
herein, for further information as to foreign operations.)

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EMPLOYEES

The Company had 24,615 employees at December 31, 1994. Of these, 18,220 were
domestic employees, 54% of whom were covered by contracts with labor unions.
Overall, 63% of the Company's employees were covered by contracts with labor
unions.

Union contracts covering domestic operations will expire as follows: 1995 -
the Bucksport, Maine and Sartell, Minnesota publication papers mills, and the
Courtland, Alabama printing and writing papers mill; 1996 - the Pensacola,
Florida printing and writing papers mill; 1997 - the Florida, Maine and Georgia
wood products operations; 1998 - the Deferiet, New York publication papers mill
and the Canton, North Carolina and Hamilton, Ohio printing and writing papers
mills; 1999 - the Roanoke Rapids, North Carolina kraft mill and the Lufkin and
Sheldon, Texas newsprint mills.

The Quinnesec, Michigan publication papers mill is a non-union facility.

At Weldwood, union contracts covering the Hinton, Alberta pulp mill and
timberlands operation and the joint venture pulp mill at Quesnel, British
Columbia expired in 1994. These facilities presently are operating under the
terms of their respective expired contracts while efforts to reach settlements
continue. Union contracts covering all of the wood products facilities except
the Longlac, Ontario plants and the Hinton timberlands operation will expire in
1997. The union contract covering the waferboard plant and specialty hardwood
plywood plant in Longlac will expire in 1996.

The union contract which covers the paper industry in Brazil, including
Champion Papel, is renegotiated each year.

THE ENVIRONMENT

For information regarding environmental capital expenditures, hazardous
substance cleanup, environmental legal proceedings and other environmental
matters affecting the Company, see Management's Discussion and Analysis of
Financial Condition and Results of Operations, incorporated by reference in Item
7 of this Report from the Company's 1994 Annual Report.

ENERGY REQUIREMENTS

The Company believes that it will be able to meet its energy needs for the
foreseeable future. Wood wastes and pulping liquors, which are by-products from
the manufacture of wood products and pulp, provide a reliable and relatively
low-cost source of energy for the Company's primary manufacturing facilities.
The Company's domestic wood products manufacturing facilities and domestic pulp,
paper and kraft mills satisfy approximately half of their energy requirements
from such wood wastes and pulping liquors.

The Company's foreseeable needs for purchased energy have been anticipated,
and the Company believes that it has arranged for adequate sources of supply.

ITEM 2. PROPERTIES

In 1994, the overall operating rate for the Company's domestic and foreign
manufacturing facilities exceeded 99% of capacity in the paper segment, 88% of
capacity for lumber and studs, and 97% of capacity for panelboard (plywood and
waferboard). Production curtailments in the Company's paper segment were
attributable primarily to scheduled maintenance. Production curtailments in the
wood products segment were attributable primarily to log supply shortages
resulting from the scarcity of timber and scheduled modernization projects.

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Reference is made to Item 1 of this Report for information concerning the
general character, adequacy and capacity of the principal plants, timber
properties and other materially important physical properties of the Company.
The following lists show the location, nature and ownership of the Company's
principal plants. Except as indicated, none of these plants is subject to a
mortgage and all are owned in fee.

PAPER

PRINTING AND WRITING PAPERS

(a) Integrated pulp and printing and writing papers mills:

(i) Courtland, Alabama/1/;
(ii) Canton, North Carolina;
(iii) Pensacola, Florida; and
(iv) Mogi Guacu, Brazil.

(b) The Company operates a printing and writing papers mill in Hamilton,
Ohio.

(c) The Company operates a plant in Waynesville, North Carolina which
applies polyethylene coating to bleached paperboard and which also converts roll
stock into cut-size paper.

(d) The Company operates five plants which convert polyethylene-coated
paperboard into milk and juice cartons and one plant which converts
polyethylene-coated paperboard into ovenable packaging. All of these plants are
located in the United States./2/

PUBLICATION PAPERS

(e) Integrated pulp and publication papers mills:

(i) Bucksport, Maine;
(ii) Deferiet, New York;
(iii) Quinnesec, Michigan; and
(iv) Sartell, Minnesota/3/.

NEWSPRINT

(f) Integrated pulp and newsprint mills:

(i) Lufkin, Texas; and
(ii) Sheldon, Texas.

PULP

(g) The Company's printing and writing papers mills in Pensacola, Florida
and Courtland, Alabama and publication papers mill in Quinnesec, Michigan also
produce market pulp.

_________________________

/1/For Courtland, Alabama mill lease information, see Item 1 - Paper of this
Report.
/2/For lease information regarding one of these plants, located in Athens,
Georgia, see Item 1 - Paper of this Report.
/3/For Sartell, Minnesota mill lease information, see Item 1 - Paper of this
Report.

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(h) Weldwood operates a pulp mill in Hinton, Alberta, Canada and owns 50% of
a joint venture which operates a pulp mill in Quesnel, British Columbia, Canada.

KRAFT

(i) The Company operates an integrated pulp, unbleached linerboard and
kraft paper mill in Roanoke Rapids, North Carolina.

WOOD PRODUCTS

(a) The Company operates three softwood plywood plants in the United States.

(b) Weldwood operates two softwood plywood plants and one specialty hardwood
plywood plant in Canada. One of these plants is located on leased land.

(d) Weldwood operates three softwood lumber mills in Canada. One of these
mills is located on leased land.

(e) Each of Babine Forest Products Company and Houston Forest Products
Company, joint ventures in which Weldwood has an interest, operates a mill for
the production of softwood lumber in Canada. One of these mills is located on
leased land.

(f) Weldwood operates one waferboard plant in Canada.

ITEM 3. LEGAL PROCEEDINGS

On January 4, 1991, a class action was brought against the Company in state
court in Tennessee. The class consisted of all Tennessee residents who own or
lease land around Douglas Lake or along the Pigeon River. Subsequently, the
case was transferred to the United States District Court for the Eastern
District of Tennessee. While the original complaint sought $5 billion in
compensatory and punitive damages, immediately prior to trial the plaintiffs
reduced their demand to $367.9 million. The plaintiffs originally claimed
damages for both personal injury and property damage, but the personal injury
claims were dismissed. The case proceeded to trial on plaintiffs' theory that
discharges of hazardous materials, including dioxin, from the Company's Canton,
North Carolina mill had decreased property values along the river and the lake.
On October 16, 1992, a mistrial was declared when the jury was unable to reach a
unanimous verdict. On May 3, 1993, the court approved a settlement of the
action providing for the payment of $6.5 million by the Company. On June 1,
1993, the court's approval of the settlement was appealed, and on September 20,
1994, the appeal was dismissed by the United States Court of Appeals for the
Sixth Circuit. On November 7, 1994, a motion for rehearing was denied. The
time has expired for any further appeal of the court's approval of the
settlement and, accordingly, the settlement is final.

On November 9, 1992, an action was brought against the Company in the Circuit
Court for Baldwin County, Alabama, on behalf of a class consisting of all
persons who own land along Perdido Bay in Florida and Alabama. The action
originally sought $500 million in compensatory and punitive damages for personal
injury, intentional infliction of emotional distress and diminution in property
value allegedly resulting from the purported discharge of hazardous substances,
including dioxin, from the Company's Pensacola, Florida mill into Eleven Mile
Creek, which flows into Perdido Bay. However, in February 1994, the plaintiffs
reduced their demand to not more than $50,000 for each class member, and in June
1994, the personal injury claims were dismissed. It is anticipated that the
class, which was certified by the court in June 1994, will consist of
approximately 2,000 members. The parties currently are engaged in discovery.

9
<PAGE>

In February 1994, the Company received a notice of violation from the Texas
Natural Resources Conservation Commission ("TNRCC") alleging unauthorized air
emissions from the Company's Sheldon, Texas mill. The notice of violation
alleged several violations, all but two of which have been resolved without
penalty. With respect to the two remaining alleged violations, it is expected
that the TNRCC will seek penalties, although the Company is unable at this time
to estimate the amount of penalties which may be sought or finally assessed.

The Company is vigorously defending each of the pending actions described
above.

The Company also is involved in other legal and administrative proceedings
and claims of various types. While any litigation contains an element of
uncertainty, management, based upon the opinion of the Company's General
Counsel, presently believes that the outcome of each such proceeding or claim
which is pending or known to be threatened (including the actions described
above), or all of them combined, will not have a material adverse effect on the
Company.

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

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT/1/

John A. Ball (age 66) is a Senior Vice President of the Company, a position
which he has held since March 1983. He has responsibility for corporate and
marketing communications, governmental affairs, public affairs and facilities
services.

L. Scott Barnard (age 52) is an Executive Vice President of the Company, a
position which he has held since August 1992. He has responsibility for sales
and marketing for the printing and writing papers and publication papers
businesses. From February 1989 to August 1992, he was Vice President-Sales and
Marketing for the printing and writing papers and publication papers businesses.

William H. Burchfield (age 59) is an Executive Vice President of the Company,
a position which he has held since November 1982. He has responsibility for the
domestic printing and writing papers business.

Mark V. Childers (age 42) is Senior Vice President-Organizational Development
and Human Resources of the Company, a position which he has held since August
1992. From June 1991 to August 1992, he was Vice President-Organizational
Development Project of the Company. From August 1988 to June 1991, he was
Manager-Organizational Development at the Lufkin, Texas mill.

Richard J. Diforio, Jr. (age 59) is a Senior Vice President of the Company, a
position which he has held since November 1992. He has responsibility for
environmental, health and safety affairs. From September 1990 to November 1992,
he was Vice President-Environment, Health and Safety of the Company. From
September 1986 to September 1990, he was Vice President-Environmental Affairs of
the Company.

Joe K. Donald (age 52) is an Executive Vice President of the Company, a
position which he has held since August 1989. He has responsibility for the
publication papers business.

Mark A. Fuller, Jr. (age 62) is an Executive Vice President of the Company, a
position which he has held since August 1980. He has responsibility for the
Company's overall marketing program as well as for Nationwide Papers, Champion
Export, pulp sales, and sales of wood chemicals and by-products.

_______________________________

/1/The term of office for each executive officer expires at the Annual Meeting
of the Board of Directors of the Company scheduled to be held on May 18, 1995.

10
<PAGE>

Marvin H. Ginsky (age 64) is Senior Vice President and General Counsel of the
Company. He was elected a Senior Vice President in May 1981. He has been the
General Counsel since 1973.

L.C. Heist (age 63) is President and Chief Operating Officer and a director
of the Company, positions which he has held since December 1987.

Frank Kneisel (age 57) was elected Senior Vice President-Finance effective
January 1, 1995. He had been Treasurer since 1975 and a Vice President since
1981.

Burton G. MacArthur, Jr. (age 48) is an Executive Vice President of the
Company, a position which he has held since January 1990. He has responsibility
for the newsprint and kraft operations.

Kenwood C. Nichols (age 55) is Vice Chairman and a director of the Company,
positions which he has held since August 1989. He has been the principal
accounting officer of the Company since July 1983. He also has responsibility
for internal audit, corporate analysis, tax affairs, management information
services, mineral resources, corporate security and the Company's real estate
subsidiaries.

Richard E. Olson (age 57) is an Executive Vice President of the Company, a
position which he has held since December 1987. He has responsibility for
engineering, technology, manufacturing support and major projects.

Richard L. Porterfield (age 48) is an Executive Vice President of the
Company, a position which he has held since August 1992. He heads the forest
products unit, which consists of domestic timberlands operations and the
domestic wood products business. From January 1990 to August 1992, he was
Senior Vice President-Organizational Development and Human Resources of the
Company.

Andrew C. Sigler (age 63) is Chairman of the Board of Directors and Chief
Executive Officer of the Company. He was elected Chairman of the Board
effective January 1, 1979. He has served as Chief Executive Officer since 1974
and has been a director since 1973.

PART II

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

The Company had 21,936 record holders of its Common Stock as of February 28,
1995.

The Company's Common Stock is traded on the New York Stock Exchange.

Restrictions on the ability of the Company to pay cash dividends are included
in several of the Company's debt instruments and the Company's Restated
Certificate of Incorporation. At December 31, 1994, the most restrictive of
these limitations required the Company to maintain tangible net worth (as
defined below) of at least $2.770 billion. As a result of this requirement,
such amount is unavailable for the payment of dividends. Approximately $464
million of tangible net worth at December 31, 1994 was free of such
restrictions. Tangible net worth is defined as shareholders' equity plus the
Company's $92.50 Cumulative Convertible Preference Stock minus goodwill,
unamortized debt discount and other like intangibles, all determined on a
consolidated basis for the Company.

For information concerning the high and low sales prices of the Company's
Common Stock for each quarterly period during the last two years and the amount
of dividends paid on the Company's Common Stock in each quarterly period during
the last two years, see the section on the inside back cover of the Company's
1994 Annual Report captioned Common Stock Prices and Dividends Paid. Said
section is incorporated by reference herein.

ITEM 6. SELECTED FINANCIAL DATA

There is incorporated by reference herein the table on pages 48 and 49 of the
Company's 1994 Annual Report

11
<PAGE>

captioned Eleven-Year Selected Financial Data.

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

There is incorporated by reference herein the section on pages 42 to 47 of
the Company's 1994 Annual Report captioned Management's Discussion and Analysis
of Financial Condition and Results of Operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

There is incorporated by reference herein the sections of the Company's 1994
Annual Report captioned Consolidated Income, Consolidated Retained Earnings,
Consolidated Balance Sheet, Consolidated Cash Flows, Notes to Financial
Statements and Report of Independent Public Accountants, which sections are on
pages 23, 24, 25, 26, 27 to 40, and 41, respectively, of the Company's 1994
Annual Report.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See the section captioned Executive Officers of the Registrant under Part I
of this Report for information concerning the Company's executive officers.

For information concerning the directors of the Company, see the sections
therein captioned The Board of Directors-The Nominees, Information on the
Nominees and Directors, and Committees in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 18,
1995. Said sections are incorporated by reference herein.

ITEM 11. EXECUTIVE COMPENSATION

There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 18,
1995 the sections therein captioned The Board of Directors-Directors'
Compensation; and Executive Compensation-Summary Compensation Table, Option/SAR
Grant Table, Option/SAR Exercise and Year-End Values Table, Pension Plan Table,
and Employment and Severance Agreements.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 18,
1995 the section therein captioned Transactions.

12
<PAGE>

PART IV

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

(a) FINANCIAL STATEMENTS. The following Consolidated Financial Statements
of Champion International Corporation and Subsidiaries, Notes to Financial
Statements, and Report of Independent Public Accountants are incorporated by
reference herein from the Company's 1994 Annual Report:

CAPTION IN COMPANY'S
DESCRIPTION 1994 ANNUAL REPORT (PAGE NUMBER)
--------------------------- --------------------------------

Consolidated Statements of Income for
each of the three years in the period
ended December 31, 1994...........................Consolidated Income (page 23)

Consolidated Statements of Retained
Earnings for each of the three years
in the period ended December 31, 1994...Consolidated Retained Earnings (page 24)

Consolidated Balance Sheets at
December 31, 1994 and 1993..................Consolidated Balance Sheet (page 25)

Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1994.................Consolidated Cash Flows (page 26)

Notes to Financial Statements.....Notes to Financial Statements (pages 27 to 40)

Report of Independent Public
Accountants with respect to the
financial statements listed above......Report of Independent Public Accountants
(page 41)

(b) FINANCIAL STATEMENT SCHEDULES. All Financial Statement Schedules
have been omitted since the information is not applicable, is not required or is
included in the Consolidated Financial Statements or Notes to Financial
Statements listed under section (a) of this Item 14.

(c) EXHIBITS. Each Exhibit is listed according to the number assigned to
it in the Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers
preceded by an asterisk (*) indicate Exhibits physically filed with this Annual
Report on Form 10-K. All other Exhibit numbers indicate Exhibits filed by
incorporation by reference herein. Exhibit numbers 10.1 through 10.33, which
are preceded by a plus sign (+), are management contracts or compensatory plans
or arrangements.

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

3.1 Restated Certificate of Incorporation of the Company, filed in
the State of New York on October 20, 1986 (filed by incorporation
by reference to Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended December 31, 1986, Commission File No. 1-3053).

3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on July 18, 1988
(filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).

3.3 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 6,
1989 (filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 8-K dated December 14, 1989, Commission File No.
1-3053).

3.4 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed

13
<PAGE>

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

in the State of New York on December 21, 1989 (filed by
incorporation by reference to Exhibit 3.4 to the Company's Form
10-K for the fiscal year ended December 31, 1989, Commission File
No. 1-3053).

3.5 By-Laws of the Company (filed by incorporation by reference to
Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended
March 31, 1993, Commission File No. 1-3053).

4.1 Letter agreement dated March 29, 1991 of the Company to furnish
to the Commission upon request copies of certain instruments with
respect to long-term debt (filed by incorporation by reference to
Exhibit 4 to the Company's Form 10-K for the fiscal year ended
December 31, 1990, Commission File No. 1-3053).

4.2 Agreement dated February 2, 1994 between the Company and Loews
Corporation (filed by incorporation by reference to Exhibit 4.7
to the Company's Registration Statement on Form S-3, Commission
Registration No. 33-52123).

+10.1 Champion International Corporation 1986 Management Incentive
Program, consisting of the 1986 Stock Option Plan and the 1986
Contingent Compensation Plan (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1986, Commission File No. 1-3053).

+10.2 Amendment to Champion International Corporation 1986 Management
Incentive Program (filed by incorporation by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ended March 31,
1993, Commission File No. 1-3053).

+10.3 Champion International Corporation Management Incentive Program,
as amended, consisting of the Amended 1976 Incentive Stock Option
Plan and the Contingent Compensation Plan (filed by incorporation
by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Commission Registration No. 2-77129).

+10.4 Resolutions of the Board of Directors of the Company adopted on
August 16, 1984 amending the Amended 1976 Incentive Stock Option
Plan (filed by incorporation by reference to Exhibit 10(b) to the
Company's Registration Statement on Form S-14, Commission
Registration No. 2-94030).

+10.5 Champion International Corporation Supplemental Retirement Income
Plan (filed by incorporation by reference to Exhibit 10.7 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).

*+10.6 Amendment dated as of January 1, 1994 to Champion International
Corporation Supplemental Retirement Income Plan.

+10.7 Champion International Corporation Nonqualified Supplemental
Savings Plan (filed by incorporation by reference to Exhibit 10.2
to the Company's Form 10-Q for the quarter ended September 30,
1994, Commission File No. 1-3053).

+10.8 Supplemental Retirement and Death Payments Agreement dated as of
August 1, 1964, as amended by letter agreement dated January 9,
1965, between the Company and Mr. Sigler (filed by incorporation
by reference to Exhibit 10.8 to the Company's Form 10-K for the
fiscal year ended December 31, 1990, Commission File No. 1-3053).

14
<PAGE>

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

+10.9 Restated Agreement between the Company and Mr. Sigler, as amended
as of February 19, 1987, providing certain employment, severance
and retirement arrangements (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1987, Commission File No. 1-3053).

+10.10 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Sigler providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 19.2 to
the Company's Form 10-Q for the quarter ended June 30, 1987,
Commission File No. 1-3053).

+10.11 Amendment dated as of April 21, 1988 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 19.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).

+10.12 Amendment dated as of August 18, 1988 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.10 to the
Company's Form 10-K for the fiscal year ended December 31, 1988,
Commission File No. 1-3053).

+10.13 Amendment dated as of August 18, 1988 to Agreement Relating to
Legal Expenses dated February 19, 1987 between the Company and
Mr. Sigler (filed by incorporation by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).

+10.14 Amendment dated as of September 19, 1991 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.12 to the
Company's Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).

*+10.15 Amendment dated as of November 17, 1994 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987.

*+10.16 Agreement dated November 17, 1994 between the Company and Mr.
Sigler relating to post-employment consulting services.

+10.17 Agreement dated as of August 18, 1988 between the Company and Mr.
Heist providing certain employment, severance and retirement
arrangements (filed by incorporation by reference to Exhibit
10.17 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).

+10.18 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Heist providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).

+10.19 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Heist (filed by
incorporation by reference to Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).

+10.20 Agreement dated as of October 18, 1990 between the Company and
Mr. Nichols providing certain employment, severance and
retirement arrangements (filed by incorporation by

15
<PAGE>

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

reference to Exhibit 10.16 to the Company's Form 10-K for the
fiscal year ended December 31, 1990, Commission File No. 1-3053).

+10.21 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Nichols providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.17 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).

+10.22 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Nichols (filed by
incorporation by reference to Exhibit 10.18 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).

+10.23 Agreement dated as of February 19, 1987 between the Company and
Mr. Burchfield providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended December 31, 1987, Commission File
No. 1-3053).

+10.24 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Burchfield providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.16 to
the Company's Form 10-K for the fiscal year ended December 31,
1987, Commission File No. 1-3053).

+10.25 Amendment dated as of April 21, 1988 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit 19.5 to the Company's
Form 10-Q for the quarter ended June 30, 1988, Commission File
No. 1-3053).

+10.26 Amendment dated as of September 19, 1991 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit 10.22 to the Company's
Form 10-K for the fiscal year ended December 31, 1991, Commission
File No. 1-3053).

+10.27 Agreement dated as of August 18, 1988 between the Company and Mr.
Olson providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.23 to the Company's Form
10-K for the fiscal year ended December 31, 1990, Commission File
No. 1-3053).

+10.28 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Olson providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.24 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).

+10.29 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Olson (filed by
incorporation by reference to Exhibit 10.28 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).

16
<PAGE>

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

by incorporation by reference to Exhibit 19.11 to the Company's
Form 10-Q for the quarter ended June 30, 1987, Commission File
No. 1-3053).

+10.31 Amendment dated as of August 18, 1988 to Trust Agreement dated as
of February 19, 1987 between the Company and Shawmut Bank
Connecticut, N.A. (filed by incorporation by reference to Exhibit
10.29 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).

+10.32 Champion International Corporation Executive Life Insurance Plan
(filed by incorporation by reference to Exhibit 10.27 to the
Company's Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-3053).

*+10.33 Amendment dated as of January 1, 1994 to Champion International
Corporation Executive Life Insurance Plan.

10.34 Extract from the minutes of the meeting of the Board of
Directors of the Company held on October 18, 1979 relating to the
$50,000 of group term life insurance provided by the Company for
non-employee directors (filed by incorporation by reference to
Exhibit 10.28 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).

10.35 Resolutions of the Board of Directors of the Company adopted on
September 19, 1991 relating to the compensation of directors
(filed by incorporation by reference to Exhibit 19 to the
Company's Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-3053).

10.36 Resolutions of the Board of Directors of the Company adopted on
August 18, 1994 relating to the compensation of directors (filed
by incorporation by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended September 30, 1994, Commission
File No. 1-3053).

10.37 Retirement Plan for Outside Directors (filed by incorporation by
reference to Exhibit 19 to the Company's Form 10-Q for the
quarter ended September 30, 1992, Commission File No. 1-3053).

*11 Schedule showing calculation of primary earnings per common share
and fully diluted earnings per common share.

*13 Portions of the Company's 1994 Annual Report which are
specifically incorporated by reference herein.

*21 List of significant subsidiaries of the Company.

*23.1 Opinion and Consent of the Senior Vice President and General
Counsel of the Company.

*23.2 Consent of Arthur Andersen LLP.

*24 Power of Attorney relating to the execution and filing of this
Annual Report on Form 10-K and all amendments hereto.

*27 Financial Data Schedule.

17
<PAGE>

(d) REPORTS ON FORM 8-K. The Company filed a Current Report on Form
8-K dated October 13, 1994 reporting the issuance of a press release announcing
certain unaudited consolidated financial results of the Company for the three
months and nine months ended September 30, 1994, with the consolidated statement
of income for the three months and nine months ended September 30, 1994 and
September 30, 1993 and consolidated balance sheet as of September 30, 1994 and
December 31, 1993 as exhibits thereto.

18
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 30TH DAY OF MARCH,
1995.

CHAMPION INTERNATIONAL CORPORATION
(Registrant)

By Lawrence A. Fox
---------------------------------
(LAWRENCE A. FOX)
VICE PRESIDENT AND SECRETARY

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

Andrew C. Sigler* Chairman of the Board, March 30, 1995
------------------------- Chief Executive Officer
(ANDREW C. SIGLER) and Director (Principal
Executive Officer)

Kenwood C. Nichols* Vice Chairman and March 30, 1995
------------------------- Director (Principal
(KENWOOD C. NICHOLS) Accounting Officer)

Frank Kneisel* Senior Vice President- March 30, 1995
------------------------- Finance (Principal
(FRANK KNEISEL) Financial Officer)

Robert A. Charpie* Director March 30, 1995
-------------------------
(ROBERT A. CHARPIE)

Alice F. Emerson* Director March 30, 1995
-------------------------
(ALICE F. EMERSON)

Allan E. Gotlieb* Director March 30, 1995
-------------------------
(ALLAN E. GOTLIEB)

L.C. Heist* Director March 30, 1995
-------------------------
(L.C. HEIST)

Sybil C. Mobley* Director March 30, 1995
-------------------------
(SYBIL C. MOBLEY)

19
<PAGE>

SIGNATURE TITLE DATE
--------- ----- ----

Director
-------------------------
(H. BARCLAY MORLEY)

Lawrence G. Rawl* Director March 30, 1995
-------------------------
(LAWRENCE G. RAWL)

Walter V. Shipley* Director March 30, 1995
-------------------------
(WALTER V. SHIPLEY)

James S. Tisch* Director March 30, 1995
-------------------------
(JAMES S. TISCH)

Richard E. Walton* Director March 30, 1995
-------------------------
(RICHARD E. WALTON)

John L. Weinberg* Director March 30, 1995
-------------------------
(JOHN L. WEINBERG)

*By Lawrence A. Fox March 30, 1995
--------------------
(LAWRENCE A. FOX)

A POWER OF ATTORNEY AUTHORIZING LAWRENCE A. FOX, MARVIN H. GINSKY AND ANDREW
C. SIGLER AND EACH OF THEM TO SIGN THIS REPORT AND ALL AMENDMENTS HERETO AS
ATTORNEYS-IN-FACT FOR OFFICERS AND DIRECTORS OF THE REGISTRANT IS FILED AS
EXHIBIT 24 HERETO.

20
<PAGE>

EXHIBIT INDEX

Each Exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers preceded by an
asterisk (*) indicate Exhibits physically filed with this Annual Report on Form
10-K. All other Exhibit numbers indicate Exhibits filed by incorporation by
reference herein. Exhibit numbers 10.1 through 10.33, which are preceded by a
plus sign (+), are management contracts or compensatory plans or arrangements.

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

3.4 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 21,
1989 (filed by incorporation by reference to Exhibit 3.4 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).

3.5 By-Laws of the Company (filed by incorporation by reference to
Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended
March 31, 1993, Commission File No. 1-3053).

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

Registration Statement on Form S-8, Commission Registration No.
2-77129).

*+10.6 Amendment dated as of January 1, 1994 to Champion International
Corporation Supplemental Retirement Income Plan.

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

1991, Commission File No. 1-3053).

*+10.15 Amendment dated as of November 17, 1994 to Restated Agreement
between the Company and Mr. Sigler, as amended as of February 19,
1987.

*+10.16 Agreement dated November 17, 1994 between the Company and Mr.
Sigler relating to post-employment consulting services.

+10.20 Agreement dated as of October 18, 1990 between the Company and
Mr. Nichols providing certain employment, severance and
retirement arrangements (filed by incorporation by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).

+10.25 Amendment dated as of April 21, 1988 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit
<PAGE>

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

19.5 to the Company's Form 10-Q for the quarter ended June 30,
1988, Commission File No. 1-3053).

+10.30 Trust Agreement dated as of February 19, 1987 between the Company
and Shawmut Bank Connecticut, N.A. securing certain payments
under the contracts listed as Exhibit Numbers 10.9 through 10.29,
among others, following a change in control of the Company (filed
by incorporation by reference to Exhibit 19.11 to the Company's
Form 10-Q for the quarter ended June 30, 1987, Commission File
No. 1-3053).

*+10.33 Amendment dated as of January 1, 1994 to Champion International
Corporation Executive Life Insurance Plan.

10.37 Retirement Plan for Outside Directors (filed by incorporation by
reference to Exhibit 19 to the Company's Form 10-Q for the
quarter ended September 30, 1992, Commission File No. 1-3053).

*11 Schedule showing calculation of primary earnings per common share
and fully diluted earnings per common share.

*13 Portions of the Company's Annual Report which are specifically
incorporated by reference herein.

*21 List of significant subsidiaries of the Company.

*23.1 Opinion and Consent of the Senior Vice President and General
Counsel of the Company.

*23.2 Consent of Arthur Andersen LLP.

*24 Power of Attorney relating to the execution and filing of this
Annual Report on Form 10-K and all amendments hereto.

*27 Financial Data Schedule.

<PAGE>

EXHIBIT 10.6

FIRST AMENDMENT
TO
CHAMPION INTERNATIONAL CORPORATION
SUPPLEMENTAL RETIREMENT INCOME PLAN
-----------------------------------

Pursuant to Section 5.1 of the Champion International Corporation
Supplemental Retirement Income Plan ("Plan"), the Plan is hereby amended,
effective as of January 1, 1994, by changing Subsection 2.1(a) in the following
respects:

(a) the word "and" immediately after Paragraph (3) is deleted and
reinserted after the semicolon at the end of Paragraph (4); and

(b) new Paragraph (5) is added to read as follows:
"(5) with respect only to those Executives elected by the Board of
Directors of the Employer as officers of the Employer on or from time to time
after May 19, 1994, and with respect to the President and Managing Director of
Champion Papel e Celulose, Ltda. in office on December 20, 1994, without giving
effect to the 30-year limit on Years of Credited Service taken into account
under the components of the benefit formula expressed in Subsections 4.2(a)(1)
and (2) of the Retirement Plan, and by substituting 'three (3) consecutive Plan
Years' for 'five (5) consecutive Plan Years' each time this phrase appears in
the definition of 'Average Earnings' in Section 2.7 of the Retirement Plan;".

IN WITNESS WHEREOF, the Chairman of the Pension and Employee Benefits
Committee of Champion International Corporation, on behalf of said Committee,
has executed this First Amendment as evidence of its adoption and the Chief
Executive Officer of Champion International Corporation has subscribed his
written approval of this First Amendment effective as of January 1, 1994.

/s/Gerald J. Beiser
-------------------------------
Chairman - Pension and Employee
Benefits Committee

/s/Andrew C. Sigler
-------------------------------
Chief Executive Officer

<PAGE>

EXHIBIT 10.15

AMENDMENT EFFECTIVE AS OF NOVEMBER 17, 1994
TO FEBRUARY 19, 1987 RESTATED AGREEMENT
---------------------------------------------

This Agreement between Champion International Corporation, a New York
corporation (the "Company"), and Andrew C. Sigler (the "Executive") is effective
as of November 17, 1994.

WHEREAS, the Company and the Executive entered into a Restated Agreement
as amended February 19, 1987 and as further amended as of April 21, 1988, August
18, 1988 and September 19, 1991 (the "Restated Agreement") providing for the
continuance of the Executive in the employ of the Company upon the terms and
conditions set forth therein; and

WHEREAS, the Restated Agreement provides a certain annual retirement
benefit, and the Executive fully vested in such benefit on September 30, 1989;
and

WHEREAS, in recognition of the Executive's services as Chairman of the
Board of Directors and Chief Executive Officer since September 30, 1989, the
Company wishes to enhance the annual retirement benefit provided in the Restated
Agreement;

NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:

1. Subparagraph 8(a)(iv) of the Restated Agreement is hereby amended by
deleting therefrom the words "in the amounts that he and she would have received
pursuant to such subparagraph 9(b)(i) and (ii) without regard to the offsets set
forth in subparagraph 9(b)(iii) below, had he continued in the employ of the
Company through September 30, 1989,".

2. The heading of subparagraph 9(b) of the Restated Agreement is hereby
amended in its entirety to read "Retirement".

3. The first sentence of subparagraph 9(b)(i) of the Restated Agreement
is hereby amended in its entirety to read:

"Effective November 17, 1994, the Executive is indefeasibly
vested, subject to subparagraph 9(b)(iv) and paragraph 10, in a monthly
retirement allowance, subject to any reduction required by subparagraph
9(b)(iii), equal to one-twelfth (1/12) of seventy percent (70%) of the
Executive's Average Annual Compensation, as hereafter defined, less one-
twelfth (1/12) of fifty percent (50%) of the Executive's annual Social
Security Benefits".

4. Clause (II) at the end of subparagraph 9(b)(ii) of the Restated
Agreement is hereby amended in its entirety to read:

"(II) in the case of clause (b)(ii)(B) above, sixty percent (60%)
of the monthly

<PAGE>

retirement allowance that would have been payable to the Executive under
subparagraph (b)(i) immediately above (prior to any reduction required by
subparagraph (b)(iii) immediately below) had the Executive retired on the
day before his death."

5. The paragraph titled "Retirement" under the heading of "For Active
Employees" in Exhibit G to the Restated Agreement is hereby amended by deleting
therefrom the words "as if the Executive had continued in the employ of the
Company through September 30, 1989,".

6. The Company and the Executive understand and agree that all
references in the Restated Agreement to the provisions thereof that are amended
hereby shall be deemed to be references to such provisions as amended hereby.

7. Except as amended hereby, all of the terms and conditions set forth
in the Restated Agreement shall continue in full force and effect without
change.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereto, and the Executive has executed this
Agreement, all as of November 17, 1994.

CHAMPION INTERNATIONAL CORPORATION

By /s/ LAWRENCE G. RAWL
------------------------------------------
Chairman of the Compensation and Stock
Option Committee
Attest:

/s/ LAWRENCE A. FOX
--------------------------------
Vice President and Secretary

/s/ ANDREW C. SIGLER
-----------------------------------------
Andrew C. Sigler

<PAGE>

EXHIBIT 10.16

CHAMPION INTERNATIONAL CORPORATION
ONE CHAMPION PLAZA
STAMFORD, CONNECTICUT 06921

November 17, 1994

Mr. Andrew C. Sigler
Chairman and Chief Executive Officer
Champion International Corporation
One Champion Plaza
Stamford, Connecticut 06921

Dear Andy:

The Board of Directors has determined that, upon your retirement, it is in the
best interests of Champion to obtain your services as an advisor and consultant
in order to have the benefit of your extensive experience and expertise relative
to Champion.

Therefore, you are hereby engaged, as of the date of your retirement, as a
general advisor and consultant to Champion on matters relating to the business
of the Company, its subsidiaries and affiliates including, but not limited to,
matters relating to the transition in its management following your retirement.

Your engagement as a general advisor and consultant is for a period of five
years from the date of your retirement. During this period, you will perform
such advisory and consulting services from time to time as may reasonably be
requested by Champion's Board of Directors or its chief executive officer.

In consideration for the performance of the duties of advisor and consultant,
you will be compensated at an annual rate of $200,000 for a period of five years
from the date of your retirement; you also will be provided, for a period of ten
years from the date of your retirement, with suitable office accommodations,
appropriate secretarial and chauffeur services, and all telephone, fax and other
customary administrative support services that you may require. Each annual
payment of $200,000 will be made in a single lump sum on the anniversary of the
date of your retirement. You also will be entitled to reimbursement for all
reasonable expenses incurred in the performance of your duties as advisor and
consultant.
<PAGE>
Mr. Andrew C. Sigler
November 17, 1994
Page 2

It is understood that, in performing advisory and consulting services, you will
be an independent contractor and that nothing herein shall affect any benefits
or compensation to which you are and in the future will be entitled from the
Company, including without limitation retirement benefits.

If this letter is acceptable to you, please sign the acknowledgement on both
copies of this letter, whereupon it will constitute a binding agreement between
you and the Company. Please keep one copy for your files and return the other
copy to Lawrence W. Wellspeak, Manager - Executive Programs Administration.

Sincerely,

/s/ LAWRENCE G. RAWL
-----------------------------
Chairman of the Compensation and
Stock Option Committee

Confirmed and Agreed to:

/s/ ANDREW C. SIGLER
-------------------------------
Andrew C. Sigler

<PAGE>

EXHIBIT 10.33

FIRST AMENDMENT

TO THE

CHAMPION INTERNATIONAL CORPORATION

EXECUTIVE LIFE INSURANCE PLAN #700

Pursuant to Section M of the Champion International Corporation Executive
Life Insurance Plan #700 ("PLAN"), Section B.7 of the Plan is hereby amended,
effective as of January 1, 1994 as follows:

"B-7 'Final Average Earnings' means:

(a) the average of the five highest consecutive years of Earnings out
of the last ten years of such Earnings; or

(b) with respect only to those executives elected by the Board of
Directors of the Company as officers of the Company on or after May
19, 1994, and with respect to the President and Managing Director of
Champion Papel e Cellulose, Ltda. in office on December 20, 1994 the
average of the three highest consecutive years of Earnings out of the
last ten years of such earnings."

IN WITNESS WHEREOF, the Chairman of the Pension and Employee Benefits
Committee of Champion International Corporation on behalf of said Committee, has
executed this First Amendment as evidence of its adoption, and the Chief
Executive Officer of Champion International Corporation has subscribed his
written approval of this First Amendment as of the 1st day of January, 1994.

/s/Gerald J. Beiser
-----------------------------------------
Chairman - Pension and Employee
Benefits Committee

/s/Andrew C. Sigler
---------------------------------------
Chief Executive Officer

<PAGE>

EXHIBIT 11

CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES

CALCULATION OF PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND FULLY DILUTED
EARNINGS (LOSS) PER COMMON SHARE

<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------
1994 1993 1992
------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Primary earnings (loss) per common share (1):
Net income (loss) $ 63,305 $ (156,243) $ (440,394)
Dividends on preference shares 27,750 27,750 27,750
------------ ------------ ------------

Net income (loss) applicable to common stock $ 35,555 $ (183,993) $ (468,144)
============ ============ ============

Average number of common shares outstanding 93,061 92,788 92,639
============ ============ ============

Per share $ .38 $ (1.98) $ (5.05)
------------ ------------ ------------

Fully diluted earnings (loss) per common share (2):
Net income (loss) applicable to common stock $ 35,555 $ (183,993) $ (468,144)
Add income effect, assuming conversion of
dilutive convertible securities
--- --- ---
------------ ------------ ------------
Net income (loss) on a fully diluted basis $ 35,555 $ (183,993) $ (468,144)
============ ============ ============

Average number of common shares outstanding 93,061 92,788 92,639

Add common share effect, assuming conversion
of dilutive convertible securities --- --- ---
------------ ------------ ------------

Average number of common shares outstanding
on a fully diluted basis 93,061 92,788 92,639
============ ============ ============
Per share $ .38 $ (1.98) $ (5.05)
============ ============ ============
</TABLE>

_______________________________________________
Notes:
(1) Common stock equivalents have not been included in the above
calculation since their effect is insignificant.
(2) The computation of fully diluted earnings per share assumes that the
average number of common shares outstanding during the year is
increased by the conversion of securities having a dilutive effect,
and that net income applicable to common stock is increased by
dividends and after-tax interest on such securities.

<PAGE>

EXHIBIT 13

Paper
--------------------------------------------------------------------------------

Years Ended December 31

Net Sales (in millions of dollars) 1994 % 1993 % 1992 %
------------------------------------ ------ --- ------ --- ------ ---

<S> <C> <C> <C> <C> <C> <C>
Product Category:

Printing and writing papers......... $2,042 48 $1,830 48 $1,795 47
Publication papers.................. 867 21 801 21 785 20
Bleached kraft market pulp.......... 369 9 289 7 374 10
Newsprint........................... 352 8 342 9 318 8
Milk cartons........................ 248 6 267 7 268 7
Paperboard and kraft paper.......... 235 5 192 5 194 5
Industrial products................. 74 2 69 2 70 2
Miscellaneous products.............. 30 1 28 1 31 1
------ --- ------ --- ------ ---
$4,217 100 $3,818 100 $3,835 100
====== === ====== === ====== ===
</TABLE>

1
<PAGE>

Wood Products
--------------------------------------------------------------------------------

Years Ended December 31

Net Sales (in millions of dollars) 1994 % 1993 % 1992 %
-------------------------------------- ------ --- ------ --- ------ ---

<S> <C> <C> <C> <C> <C> <C>
Product Category:

Lumber................................ $ 481 44 $ 480 38 $ 368 34
Softwood plywood and waferboard....... 264 24 333 27 301 28
Logs and stumpage..................... 253 23 272 22 257 23
Sidings and industrial plywood........ 47 4 85 7 80 7
Hardwood plywood, related sheet
and hardboard....................... 32 3 32 2 30 3
Miscellaneous products................ 24 2 49 4 56 5
------ --- ------ --- ------ ---
$1,101 100 $1,251 100 $1,092 100
====== === ====== === ====== ===
</TABLE>

2
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Consolidated Income (in thousands, except per share amounts)

<TABLE>
<CAPTION>
Years Ended December 31 1994 1993 1992
-------------------------------------------- ---------- ---------- ----------

<S> <C> <C> <C>
Net Sales................................... $5,318,192 $5,068,833 $4,926,471

Cost of products sold....................... 4,752,926 4,709,757 4,564,637
Selling, general and administrative
expenses.................................. 299,266 292,684 288,463
---------- ---------- ----------
Income from Operations...................... 266,000 66,392 73,371

Interest and debt expense (Notes 3 and 6)... 235,086 224,658 206,295
Other (income) expense - net (Note 11)...... (57,342) 7,410 (142,516)
---------- ---------- ----------
Income (Loss) before Income Taxes,
Extraordinary Item and Cumulative Effect of
Accounting Changes......................... 88,256 (165,676) 9,592

Income Taxes (Benefit) (Note 12)............. 24,951 (31,222) (4,328)
---------- ---------- ----------
Income (Loss) before Extraordinary Item and
Cumulative Effect of Accounting Changes.... 63,305 (134,454) 13,920

Extraordinary Item - Loss on Early Retirement
of Debt, Net of Taxes...................... --- (14,266) ---

Cumulative Effect of Accounting Changes,
Net of Taxes (Notes 1, 12 and 13)......... --- (7,523) (454,314)
---------- ---------- ----------
Net Income (Loss)........................... $ 63,305 $ (156,243) $ (440,394)
========== ========== ==========

Dividends on Preference Stock (Note 8)...... 27,750 27,750 27,750
---------- ---------- ----------
Net Income (Loss) Applicable to Common Stock $ 35,555 $ (183,993) $ (468,144)
========== ========== ==========

Average Number of Common Shares Outstanding. 93,061 92,788 92,639
========== ========== ==========

Earnings (Loss) Per Common Share:
Income (Loss) before Extraordinary Item and $ .38 $ (1.75) $ (.15)
Cumulative Effect of Accounting Changes...
Extraordinary Item - Loss on Early --- (.15) ---
Retirement of Debt........................ --- (.08) (4.90)
Cumulative Effect of Accounting Changes..... ---------- ---------- -----------
Net Income (Loss)........................... $ .38 $ (1.98) $ (5.05)
========== ========== ===========
</TABLE>

The accompanying notes are an integral part of this statement.

3
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Consolidated Retained Earnings (in thousands, except per share amounts)

<TABLE>
<CAPTION>
Years Ended December 31 1994 1993 1992
-------------------------------------------- ---------- ---------- ----------

<S> <C> <C> <C>
Beginning Balance........................... $1,861,535 $2,064,120 $2,550,836

Net Income (Loss)........................... 63,305 (156,243) (440,394)

Cash Dividends Declared:
$92.50 Convertible Preference Stock - $92.50
per share in 1994, 1993 and 1992.......... (27,750) (27,750) (27,750)
Common Stock - $.20 per share in 1994, 1993
and 1992.................................. (18,614) (18,592) (18,572)
---------- ---------- ----------

Ending Balance.............................. $1,878,476 $1,861,535 $2,064,120
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

4
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------

Consolidated Balance Sheet (in thousands of dollars)

Assets December 31 1994 1993
------------------------------------------------------ ---------- ----------

<S> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 90,948 $ 55,653
Short-term investments................................ --- 7,197
Receivables........................................... 562,085 494,426
Inventories (Note 2).................................. 441,430 469,269
Prepaid expenses...................................... 23,286 22,818
Deferred income taxes (Note 12)....................... 61,032 65,064
---------- ----------
Total Current Assets................................ 1,178,781 1,114,427
---------- ----------

Timber and Timberlands, at cost - less cost of timber
harvested........................................... 1,846,823 1,838,550
---------- ----------

Property, Plant and Equipment, at cost
(Notes 3, 6 and 7).................................. 8,579,254 8,467,756
Less - Accumulated depreciation....................... 2,976,640 2,665,720
---------- ----------
5,602,614 5,802,036
---------- ----------

Other Assets and Deferred Charges..................... 335,410 387,756
---------- ----------

$8,963,628 $9,142,769
========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

5
<PAGE>

Champion International Corporation and Subsidiaries

Consolidated Balance Sheet (in thousands of dollars)

Liabilities and Shareholders' Equity December 31 1994 1993
------------------------------------------------------ ---------- ----------

<S> <C> <C>
Current Liabilities:
Current installments of long-term debt (Note 6)........ $ 308,922 $ 88,052
Short-term bank borrowings (Note 6).................... 90,184 88,258
Accounts payable and accrued liabilities (Note 5)...... 592,033 591,153
Income taxes (Note 12)................................. 43,273 4,841
---------- ----------
Total Current Liabilities............................ 1,034,412 772,304
---------- ----------

Long-Term Debt (Note 6)................................ 2,889,252 3,316,165
---------- ----------
Other Liabilities (Notes 13 and 16).................... 670,761 672,788
---------- ----------
Deferred Income Taxes (Note 12)........................ 1,039,927 1,077,234
---------- ----------
Minority Interest in Subsidiaries...................... 68,531 54,160
---------- ----------
Commitments and Contingent Liabilities
(Notes 7, 16 and 17)................................. --- ---

Preference Stock, $1.00 par value, $92.50 Cumulative
Convertible Series; 300,000 shares issued and
outstanding (redeemable at maturity for $300,000) 300,000 300,000
(Note 8)............................................. ---------- ----------

Shareholders' Equity:
Capital Shares (Notes 8 and 9):
Preference Stock, 8,231,431 shares authorized but
unissued........................................... --- ---
Common stock, $.50 par value: 250,000,000 authorized
shares; 96,786,039 and 96,367,755 issued shares.... 48,393 48,184
Capital surplus...................................... 1,175,008 1,163,555
Retained earnings (Note 6)............................. 1,878,476 1,861,535
---------- ----------
3,101,877 3,073,274

Treasury shares, at cost (Note 8)...................... (100,308) (100,233)
Cumulative translation adjustment...................... (40,824) (22,923)
---------- ----------

2,960,745 2,950,118
---------- ----------

$8,963,628 $9,142,769
========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

6
<PAGE>

Champion International Corporation and Subsidiaries

Consolidated Cash Flows (in thousands of dollars)

<TABLE>
<CAPTION>
Years Ended December 31 1994 1993 1992
------------------------------------- ----------- ----------- ----------

<S> <C> <C> <C>
Cash flows from operating activities:
Net Income (Loss).................... $ 63,305 $ (156,243) $ (440,394)

Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Extraordinary item................. --- 14,266 ---
Cumulative effect of accounting
changes.......................... --- 7,523 454,314
Depreciation expense............... 379,386 360,240 338,004
Cost of timber harvested........... 79,311 83,194 72,496
(Gain) loss on sale of assets...... (10,651) (9,973) (103,778)
(Increase) in receivables.......... (70,938) (28,235) (11,274)
(Increase) decrease in inventories. 21,755 (13,529) (4,830)
(Increase) decrease in prepaid
expenses......................... (989) (2,789) 5,091
Increase (decrease) in accounts
payable and accrued liabilities.. 4,975 (61,296) (10,263)
Increase (decrease) in income taxes
payable.......................... 38,707 (3,032) (1,517)
Increase (decrease) in other
liabilities...................... (7,250) 21,164 (2,027)
(Decrease) in deferred income taxes (26,746) (26,843) (11,904)
All other - net.................... 62,486 16,348 (26,143)
----------- ----------- ----------
Net cash provided by operating 533,351 200,795 257,775
activities......................... ----------- ----------- ----------

Cash flows from investing activities:
Expenditures for property, plant
and equipment.................... (225,042) (475,633) (622,976)
Timber and timberlands
expenditures..................... (103,830) (130,147) (95,313)
Purchase of investments............ (28,902) (123,978) (203,424)
Proceeds from sales and redemptions
of investments................... 61,893 230,561 145,461
Proceeds from sales of property,
plant and equipment and timber
and timberlands.................. 38,723 304,773 174,417
All other - net.................... (4,796) (17,448) (9,096)
----------- ----------- ----------
Net cash used in investing activities (261,954) (211,872) (610,931)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................. 424,857 1,382,715 770,052
Payments of current installments of
long-term debt and long-term
debt............................. (621,769) (1,307,909) (439,646)
Cash dividends paid................ (46,351) (46,334) (46,326)
All other - net.................... 7,161 1,580 (6,942)
----------- ----------- ----------
Net cash provided by (used in)
financing activities................ (236,102) 30,052 277,138
----------- ----------- ----------
Increase (decrease) in cash and cash
equivalents........................ 35,295 18,975 (76,018)

Cash and cash equivalents:
Beginning of period................ 55,653 36,678 112,696
----------- ----------- ----------
End of period...................... $ 90,948 $ 55,653 $ 36,678
=========== =========== ==========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest (net of capitalized
amounts)....................... $ 236,481 $ 225,764 $ 201,925
Income taxes (net of refunds)
(Note 12)...................... 1,051 11,867 15,181
</TABLE>

The accompanying notes are an integral part of this statement.

7
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies

A. Consolidation

The consolidated financial statements include the accounts of the company and
all of its domestic and foreign subsidiaries. Affiliates which are 20% to 50%
owned are reflected using the equity method of accounting, with the related
investments included in Other Assets and Deferred Charges. All significant
intercompany transactions have been eliminated.

Certain amounts have been reclassified to conform to the current year's
presentation.

B. Cash and Cash Equivalents

Cash and cash equivalents includes all highly liquid investments with original
maturities of three months or less. Short-term investments are investments
which mature within twelve months but which do not meet the criteria of cash
equivalents.

C. Inventories

Inventories are generally stated at the lower of average cost or market (market
approximates net realizable value), except for certain inventories of the paper
segment which are stated on the last-in, first-out (LIFO) method.

D. Capitalization and Amortization of Certain Costs

Pre-operating expenses and start-up costs incurred in connection with the
construction of major properties are deferred until such properties become
operational. These expenses and costs are then amortized over a five-year
period. No pre-operating expenses and start-up costs were deferred during 1994.

E. Fixed Assets

Property, Plant and Equipment, which includes capitalized leases, is stated at
cost. Timber and Timberlands, which includes original costs, road construction
costs, and reforestation costs, such as site preparation and planting costs, is
stated at unamortized cost. Property taxes, surveying, fire control and other
forest management expenses are charged to expense as incurred. When fixed
assets are sold or retired, cost and accumulated depreciation are eliminated
from the accounts and gains or losses are recorded in income.

For financial reporting purposes, plant and equipment are depreciated using the
straight-line method over the estimated service lives of the individual assets.
Machinery and equipment lives range from 3 to 35 years, buildings from 10 to 40
years and land improvements from 5 to 24 years. Leasehold improvements are
amortized over the shorter of the lives of the leases or estimated service
lives. Cost of timber harvested is based on the estimated quantity of timber
available during the growth cycle and is credited directly to the asset accounts
(Notes 3, 6 and 7).

8
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

F. Revenue Recognition

The company recognizes revenues as products are shipped.

G. Earnings Per Common Share

Primary earnings per common share are computed by dividing net income, after
deducting dividends on preference shares, by the average number of common shares
and dilutive common share equivalents outstanding during the year. The
computation of fully diluted earnings per common share assumes that the average
number of common shares and dilutive common share equivalents outstanding is
increased by the conversion of securities having a dilutive effect and that net
income applicable to common stock is increased by dividends and after-tax
interest on such securities.

H. Foreign Currency Translation

The assets and liabilities of the company's Canadian subsidiary are translated
into U.S. dollars using year-end exchange rates. The resulting translation
gains or losses are included with the cumulative translation adjustment in the
Shareholders' Equity section of the balance sheet.

Due to the high inflation rate in Brazil, the company's Brazilian subsidiary
uses the U.S. dollar as its functional currency. Except for certain items
translated at historical exchange rates, assets and liabilities are translated
using year-end exchange rates. Gains or losses from balance sheet translation
are included in net income.

Gains or losses resulting from foreign currency transactions are included in net
income.

I. Derivative Financial Instruments

The company occasionally enters into interest rate swap agreements to hedge the
impact of changes in interest rates on the company's outstanding variable rate
debt. In addition, the company occasionally enters into foreign exchange
contracts to mitigate the risks associated with its exposure to fluctuations in
foreign currency exchange rates. The swap agreements and foreign exchange
contracts are held for purposes other than trading. At December 31, 1994, the
company had no foreign exchange contracts and had one interest rate swap
agreement, maturing in March 1995, covering $10 million of debt.

J. Accounting Changes

During the fourth quarter of 1993, the company adopted, retroactive to January
1, 1993, Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Postemployment Benefits" (Note 13).

During the fourth quarter of 1992, the company adopted, retroactive to January
1, 1992, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions" (Note 13) and SFAS No. 109, "Accounting for Income Taxes" (Note
12).

9
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 2. Inventories

December 31 (in thousands of dollars) 1994 1993
-------------------------------------------------- -------- --------

<S> <C> <C>
Paper, pulp and packaging products................ $150,249 $182,569
Wood products..................................... 44,509 35,495
Logs.............................................. 69,491 65,603
Pulpwood.......................................... 19,369 17,152
Raw materials, parts and supplies................. 157,812 168,450
-------- --------

$441,430 $469,269
======== ========
</TABLE>

At December 31, 1994 and 1993, inventories stated using the last-in, first-out
(LIFO) method, representing approximately 12% and 22% of total inventories, were
$54,601,000 and $102,339,000, respectively. If the lower of average cost or
market method (which approximates current cost) had been utilized for
inventories carried at LIFO, inventory balances would have been increased by
$64,920,000 and $59,961,000 at December 31, 1994 and 1993, respectively.

The LIFO inventory reduction in 1994 resulted in a liquidation of LIFO inventory
layers carried at lower costs which prevailed in prior years. The effect of
this liquidation was to decrease cost of products sold by $3.9 million and to
increase net income by $2.4 million or $.03 per share.

10
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 3. Property, Plant and Equipment

December 31 (in thousands of dollars) 1994 1993
------------------------------------- ----------- -----------

<S> <C> <C>
Land and land improvements........... $ 310,393 $ 303,591
Buildings and leasehold improvements 905,205 902,814
Machinery and equipment.............. 7,176,025 7,065,628
Construction in progress............. 187,631 195,723
----------- -----------

8,579,254 8,467,756

Accumulated depreciation............. (2,976,640) (2,665,720)
----------- -----------

$ 5,602,614 $ 5,802,036
=========== ===========
</TABLE>

Interest capitalized into construction in progress during 1994, 1993 and 1992
was $7,926,000, $33,784,000 and $39,628,000, respectively.

Depreciation expense includes the following components:

Years Ended December 31 (in thousands of dollars) 1994 1993 1992
--------------------------------------------------- -------- -------- --------

<S> <C> <C> <C>
Land improvements.................................. $ 15,295 $ 14,041 $ 8,472
Buildings and leasehold improvements............... 26,773 26,270 24,034
Machinery and equipment............................ 337,318 319,929 305,498
-------- -------- --------

$379,386 $360,240 $338,004
======== ======== ========
</TABLE>

11
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 4. Lines of Credit

At December 31, 1994, the company had unused U.S. lines of credit of
approximately $1,035 million ($382 million of which supported short-term
borrowings classified as long-term debt as discussed in Note 6) and unused
foreign lines of credit of approximately $179 million. At December 31, 1994,
interest rates on the U.S. and foreign lines were no higher than the prime rate
or its equivalent. Commitment fees of .15% are required on the $1,100 million
U.S. lines of credit, which are available to November 15, 1999 on a revolving
basis, at which time amounts owed, if any, become payable. Commitment fees of
no more than .25% are required on the $203 million foreign lines of credit.
Commitments under the credit agreements cannot be withdrawn provided the company
continues to meet required conditions.

12
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 5. Accounts Payable and Accrued Liabilities

December 31 (in thousands of dollars) 1994 1993
----------------------------------------------------- -------- --------

<S> <C> <C>
Accounts payable..................................... $259,158 $243,920
-------- --------
Dividends payable.................................... 4,668 4,654
-------- --------
Accrued liabilities:
Payrolls and commissions........................... 117,364 104,520
Employee benefits.................................. 59,212 50,668
Interest........................................... 47,496 49,611
Taxes, other than income taxes..................... 30,376 25,462
Other.............................................. 73,759 112,318
-------- --------

Total accrued liabilities..................... 328,207 342,579
-------- --------

$592,033 $591,153
======== ========
</TABLE>

13
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 6. Indebtedness

December 31 (in thousands of dollars) 1994 1993
----------------------------------------------------- ---------- ----------

<S> <C> <C>
Secured debt, 9.8% average rate, payable
through 2007 (a)................................... $ 2,812 $ 41,375
Unsecured debt, 7.4% average rate, payable through
2028 (b)........................................... 2,951,084 3,115,570
Lease obligations, 6.9% average rate, payable
through 2029....................................... 236,598 237,666
Other contractual obligations, 5.9% average rate,
payable through 1998............................... 7,680 9,606
---------- ----------
Total Debt.................................... 3,198,174 3,404,217
Less: Current installments of long-term debt........ 308,922 88,052
---------- ----------
Long-term debt (c)................................... $2,889,252 $3,316,165
========== ==========
Short-term bank borrowings (d)....................... $ 90,184 $ 88,258
========== ==========
</TABLE>

(a) Such debt is secured by certain assets with a net book value at December
31, 1994 of approximately $12 million.

(b) Unsecured debt includes borrowings payable in less than one year. The
company has the ability to refinance these borrowings under the credit
agreements discussed in Note 4. At December 31, 1994, $332 million of U.S.
commercial paper and $50 million of U.S. short-term obligations have been
classified as long-term debt since the company intends to renew or
refinance these obligations through 1995 and into future periods.

Unsecured debt at December 31, 1994 and 1993 includes $150 million of the
company's 6 1/2% convertible subordinated debentures due April 15, 2011.
The conversion rate for these debentures is 28.777 shares of the company's
common stock for each $1,000 principal amount of debentures.

(c) The annual principal payment requirements under the terms of all long-term
debt agreements for the years 1995 through 1999 are $309 million, $102
million, $245 million, $386 million and $738 million, respectively.

(d) Weighted average interest rates on outstanding balances for 1994 and 1993
were 6.3% and 4.7%, respectively. These rates exclude book cash overdrafts
of $81 million and $62 million, respectively, at December 31, 1994 and
1993.

The indentures and agreements relating to long-term debt arrangements, as well
as the company's Certificate of Incorporation, contain restrictions on the
payment of cash dividends. Under the most restrictive of these provisions,
approximately $464 million of consolidated retained earnings at December 31,
1994 is free of such restrictions.

14
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 7. Commitments

<TABLE>
<CAPTION>
Future Minimum Lease Payments
----------------------------------

Capitalized Non-Cancelable
Period (in thousands of dollars) Leases Operating Leases
--------------------------------------------- ----------- ----------------

<S> <C> <C>
1995......................................... $ 16,589 $ 23,248
1996......................................... 16,568 21,095
1997......................................... 16,547 19,363
1998......................................... 16,525 17,387
1999......................................... 16,504 21,183
Thereafter................................... 556,975 238,177
-------- --------

Total payments............................... 639,708 340,453
-------- --------

Less: Sublease rental income................ --- 71,265
--------

Net operating lease payments................. --- $269,188
========

Less: Amount representing interest.......... 399,918
--------

Present value of capitalized lease payments
($350 current; $239,440 long-term)......... $239,790
========
</TABLE>

The following schedule shows the composition of total rental expense for all
operating leases:

Years Ended December 31 (in thousands of dollars) 1994 1993 1992
--------------------------------------------------- ------- ------- -------

<S> <C> <C> <C>
Minimum rentals.................................... $25,120 $25,204 $26,082
Less: Sublease rental income...................... 619 573 970
------- ------- -------

$24,501 $24,631 $25,112
======= ======= =======
</TABLE>

15
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 8. Capital Shares

Redeemable Preference Stock
---------------------------

On December 6, 1989, the company issued 300,000 shares of Preference Stock,
$92.50 Cumulative Convertible Series, $1.00 par value ("$92.50 Preference
Stock"). In preference to shares of common stock, each share is entitled to
cumulative cash dividends of $92.50 per year and $1,000 upon liquidation. Each
share is convertible into approximately 26.3 shares of common stock and has
approximately 26.3 votes on all matters submitted to shareholders. In the event
of arrearages in $92.50 Preference Stock dividends, the company is prohibited
from declaring or paying any cash dividends on its common stock. The company
has the right, except in certain circumstances, to redeem all the shares at any
time at $1,150 per share plus accrued dividends. On December 6, 1999, all
outstanding shares must be redeemed at $1,000 per share plus accrued dividends.

Except under certain circumstances, the company has the right to purchase any
securities, including common stock, owned by the original holders of the $92.50
Preference Stock before such securities are sold to third parties.

Unissued Preference Stock
-------------------------

At December 31, 1994 and 1993, 6,731,431 preference shares for which no series
has been designated were authorized and unissued. At December 31, 1994 and 1993,
1,500,000 additional authorized and unissued shares were designated and reserved
for the issuance of the company's Preference Stock, Participating Cumulative
Series or Participating Cumulative Series B, $1.00 par value.

16
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Common Stock
------------

Changes in common shares during the three years ended December 31, 1994 are as
follows:

(In shares and thousands of dollars)

<TABLE>
<CAPTION>
Treasury Shares
Issued Shares (at cost)
------------------------------- -----------------------
Par Capital
Shares Value Surplus Shares Amount
---------- ------- ---------- ---------- ---------

<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992.... 96,089,717 $48,045 $1,156,639 (3,169,982) $(100,147)

Exercise of stock options..... 40,750 20 962 --- ---
Compensation plans............ 20,368 10 550 (107,563) (54)
Other......................... 6,277 4 (1) --- ---
---------- ------- ---------- ---------- ---------

Balance at December 31, 1992.. 96,157,112 48,079 1,158,150 (3,277,545) (100,201)

Exercise of stock options..... 182,950 91 4,751 --- ---
Compensation plans............ 23,078 12 639 (63,810) (32)
Other......................... 4,615 2 15 --- ---
---------- ------- ---------- ---------- ---------

Balance at December 31, 1993.. 96,367,755 48,184 1,163,555 (3,341,355) (100,233)

Exercise of stock options..... 396,300 198 10,881 --- ---
Compensation plans............ 18,824 10 573 (150,925) (75)
Other......................... 3,160 1 (1) --- ---
---------- ------- ---------- ---------- ---------

Balance at December 31, 1994.. 96,786,039 $48,393 $1,175,008 (3,492,280) $(100,308)
========== ======= ========== ========== =========
</TABLE>

At December 31, 1994, common shares of the company were reserved for issue as
follows:

<TABLE>

<S> <C>
$92.50 Preference Stock............................................. 7,894,737
Stock options granted or available for grant........................ 7,900,050
Conversion of long-term debt........................................ 4,318,695
Compensation plans.................................................. 2,675,022
----------
22,788,504
==========
</TABLE>

17
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 9. Stock Options

The company has granted to officers and key employees options to purchase common
shares at the market price of the shares on the date of grant. Certain options
granted to officers and to key employees are accompanied by stock appreciation
rights. The options expire ten years or ten years and 31 days from the date of
grant and generally become exercisable subsequent to a period of 12 calendar
months from date of grant.

Transactions under the plans are summarized below:

<TABLE>
<CAPTION>
Options Option Price
---------- ------------------

<S> <C> <C>
Balance at January 1, 1992................ 3,352,725 $17.50 to $38.25
Granted.............................. 606,600 27.50
Exercised............................ (78,525) 17.50 to 28.13
Surrendered or canceled.............. (96,300) 17.50 to 38.25
---------

Balance at December 31, 1992.............. 3,784,500 18.88 to 38.25
Granted.............................. 598,200 31.00
Exercised............................ (266,300) 22.13 to 31.50
Surrendered or canceled.............. (103,400) 24.00 to 38.25
---------

Balance at December 31, 1993.............. 4,013,000 18.88 to 38.25
Granted.............................. 582,400 30.13
Exercised............................ (565,000) 18.88 to 38.25
Surrendered or canceled.............. (65,600) 24.13 to 38.25
---------

Balance at December 31, 1994.............. 3,964,800 $22.13 to $38.25
========= =================

Options exercisable at December 31, 1994.. 3,388,800
</TABLE>

At December 31, 1994, the stock options had an aggregate option price of
$117,808,000.

18
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 10. Fair Value of Financial Instruments

<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
December 31 Carrying Fair Carrying Fair
(in thousands of dollars) Amount Value Amount Value
--------------------------- ----------- ------------ ----------- -----------

Assets (Liabilities):
Short-term investments..... $ --- $ --- $ 7,197 $ 7,197
Long-term debt, excluding
lease obligations........ (2,961,576) (2,968,339) (3,166,551) (3,408,342)
$92.50 Preference Stock.... (300,000) (345,000) (300,000) (345,000)
</TABLE>

The fair value of the company's short-term investments is based on quoted market
prices at the reporting date for those or similar investments. The fair value
of the company's long-term debt, which includes current installments, is
estimated using discounted cash flow analyses, based on the company's
incremental borrowing rates for similar types of borrowings. The fair value of
the company's $92.50 Preference Stock is estimated to be the amount at which
(together with accrued dividends) the company has the right, except in certain
circumstances, to redeem the shares. On December 6, 1999, all outstanding
shares of $92.50 Preference Stock must be redeemed at the carrying amount plus
accrued dividends.

The carrying amounts reported in the balance sheet for cash and cash
equivalents, receivables, short-term bank borrowings, and accounts payable and
accrued liabilities approximate fair values due to the short maturity of those
instruments.

19
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 11. Other (Income) Expense -- Net

Years Ended December 31
(in thousands of dollars) 1994 1993 1992
------------------------------------- --------- --------- ---------

<S> <C> <C> <C>
Interest income...................... $ (31,107) $ (30,135) $ (23,825)
Foreign currency losses -- net....... 10,725 24,717 5,116
Minority interest in income of
subsidiaries....................... 18,243 7,288 2,856
Equity in net income of affiliates... (337) (463) (972)
Royalty, rental and commission
income............................. (13,031) (8,276) (13,950)
Net gain on disposal of fixed assets,
timberlands and investments (a).... (14,151) (9,973) (103,778)
Miscellaneous -- net (b)............. (27,684) 24,252 (7,963)
--------- --------- ---------
$ (57,342) $ 7,410 $(142,516)
========= ========= =========
</TABLE>

(a) 1994 included a gain of $16 million from the sale of the company's interest
in a Swedish linerboard mill. 1992 included a gain of $107 million from
sales of portions of the company's West Coast timberlands, including the
sale of its wood products facility in Roseburg, Oregon.

(b) 1994 included income of $19 million from a refund due on countervailing
duties on lumber exports from Canada into the United States in prior years.
1992 included income of $30 million from the favorable resolution of
certain issues in Brazil.

20
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 12. Income Taxes

The provision for income taxes includes the following components:

Years Ended December 31 (in thousands of dollars) 1994 1993 1992
------------------------------------------------- --------- --------- ---------

<S> <C> <C> <C>
Provision for income taxes currently
payable (receivable):
Federal........................................ $ (2,920) $ (15,206) $ ---
State and local................................ 2,100 1,680 1,820
Foreign........................................ 52,517 9,147 5,756
--------- --------- ---------
51,697 (4,379) 7,576
--------- --------- ---------
Provision for deferred income taxes:
Federal........................................ (36,274) (34,005) (40,233)
State and local................................ (4,667) (8,821) (2,071)
Foreign........................................ 14,195 15,983 30,400
--------- --------- ---------
(26,746) (26,843) (11,904)
--------- --------- ---------
$ 24,951 $ (31,222) $ (4,328)
========= ========= =========
</TABLE>

Domestic and foreign income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes are as follows:

Years Ended December 31 (in thousands of dollars) 1994 1993 1992
------------------------------------------------- --------- --------- ---------

<S> <C> <C> <C>
Domestic......................................... $(110,544) $(250,755) $(114,450)
Foreign.......................................... 198,800 85,079 124,042
--------- --------- ---------
Total income before income taxes, extraordinary
item and cumulative effect of accounting
changes........................................ $ 88,256 $(165,676) $ 9,592
========= ========= =========
</TABLE>

<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Principal reasons for the variation between the effective rate and the statutory
federal income tax rate are as follows:

Years Ended December 31 1994 1993 1992
-------------------------------------------------- ------ ------ ------

<S> <C> <C> <C>
Statutory rate -- provision (benefit)............. 35.0 % (35.0)% 34.0 %
Rate difference -- foreign subsidiaries........... (3.9) (1.0) 28.5
Foreign dividends................................. 8.2 1.3 45.7
State and local taxes, net of federal tax effect.. (1.9) (2.8) (1.7)
Adjustment to prior years' income taxes........... (5.6) 4.4 (103.1)
Adjustment of purchase accounting liabilities..... --- (0.4) (63.7)
Statutory rate change adjustments................. --- 14.1 ---
All other -- net.................................. (3.5) 0.6 15.2
------ ------ ------
Effective income tax rate......................... 28.3 % (18.8)% (45.1)%
====== ====== ======
</TABLE>

Deferred tax liabilities (assets) are composed of the following:

Years Ended December 31 (in thousands of dollars) 1994 1993
-------------------------------------------------- ---------- ----------

<S> <C> <C>
Depreciation and cost of timber harvested......... $1,677,529 $1,671,507
Capitalization of interest and deferral of
pre-operating and start-up costs (net)........... 44,940 52,362
Other............................................. 45,544 44,696
---------- ----------
Gross Liabilities........................... 1,768,013 1,768,565
---------- ----------
Loss and other carryforwards...................... (404,668) (388,780)
Accrued liabilities and reserves.................. (174,116) (181,932)
Postretirement benefits other than pensions....... (151,175) (144,044)
Other............................................. (93,166) (83,930)
---------- ----------
Gross Assets................................ (823,125) (798,686)
---------- ----------
Valuation allowance............................... 34,007 42,291
---------- ----------
$ 978,895 $1,012,170
========== ==========
</TABLE>

22
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Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

As of December 31, 1994, the company had available, for U.S. income tax return
purposes, general business credit carryforwards of $51,900,000, which expire
from 1999 through 2008; net operating loss carryforwards of $654,700,000, which
expire from 2006 through 2009; and alternative minimum tax credit carryforwards
of $99,600,000, which do not expire.

It is the company's intention to reinvest undistributed earnings of certain of
its foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for income taxes on undistributed
earnings of $800,900,000 at December 31, 1994. Computation of the potential
deferred tax liability associated with these undistributed earnings is not
practicable.

The valuation allowance primarily relates to general business credit
carryforwards. The decrease in the valuation allowance of $8,284,000 for 1994 is
primarily due to the resolution of issues with respect to the utilization of
such carryforwards.

In the fourth quarter of 1992, the company adopted, retroactive to January 1,
1992, SFAS No. 109. The adoption of SFAS No. 109 changed the company's method of
accounting for income taxes from the deferred method to an asset and liability
approach. The company adopted the standard using a cumulative effect adjustment
and recorded a charge to 1992 net income of $242 million ($2.61 per share)
principally as the result of changes to the tax provision for years prior to
1988.

The effect of the adoption on 1992 results, after recording the cumulative
effect for the years prior to 1992, was to record additional pre-tax expense of
approximately $27 million, primarily as the result of an increase in
depreciation expense, and a reduction to net income of approximately $9 million.

Note 13. Pension and Other Benefit Plans

The company and its subsidiaries have a number of noncontributory pension plans
covering substantially all employees. The plans covering salaried employees
provide pension benefits that generally are based on the employee's compensation
during the 60 months before retirement. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service. The
company bases domestic pension contributions on funding standards established by
the Employee Retirement Income Security Act of 1974.

The net periodic pension cost of these plans in 1994, 1993 and 1992 included the
following:

<TABLE>
<CAPTION>
(in thousands of dollars) 1994 1993 1992
------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period.. $ 25,301 $ 25,256 $ 24,257
Interest cost on projected benefit obligation.... 95,461 98,667 96,248
Actual return on plan assets..................... (4,883) (208,714) (105,909)
Net amortization and deferral.................... (128,456) 90,806 (3,662)
--------- --------- ---------
Net periodic pension cost (income)............... $ (12,577) $ 6,015 $ 10,934
========= ========= =========
----------------------------------------------------------------------------------
Assumptions used in determining 1994, 1993 and
1992 net periodic pension cost were:

Expected long-term rate of return on assets...... 10.0% 10.0% 10.0%
Discount rate.................................... 7.3% 8.3% 8.5%
Long-term rate of increase in compensation levels 4.3% 5.3% 5.5%
----------------------------------------------------------------------------------
</TABLE>

23
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

The accrued pension cost at December 31, 1994 and 1993 for defined benefit plans
is shown below. The measurement dates used to determine the funded status were
September 30, 1994 and 1993. Benefit obligations for 1994 and 1993 were
determined using an assumed discount rate of 8.0% and 7.25%, respectively, and
an assumed average long-term rate of increase in compensation levels of 5.0% and
4.25%, respectively. Plan assets consist primarily of listed stocks and bonds.

<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
----------------------------------
1994 1993
---------- ----------

<S> <C> <C>
(in thousands of dollars)
-------------------------

Actuarial present value of benefit obligations:
Vested benefit obligation.................. $1,158,733 $1,179,538
========== ==========

Accumulated benefit obligation............. $1,195,890 $1,214,997
========== ==========

Projected benefit obligation............... $1,295,767 $1,330,228

Plan assets at fair value...................... 1,290,416 1,362,952
---------- ----------

Plan assets in excess of (less than) the
projected benefit obligation................. (5,351) 32,724

Unrecognized net (gain) loss................... 8,425 (43,014)

Prior service cost not yet recognized in net
periodic pension cost........................ 28,361 23,437

Unrecognized net transitional (asset).......... (16,929) (18,369)
---------- ----------

Pension asset (liability)...................... $ 14,506 $ (5,222)
========== ==========
</TABLE>

24
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Other Retiree Benefits
----------------------

The company provides certain health care and life insurance benefits to eligible
retired employees. Employees are generally eligible for benefits upon retirement
and completion of a specified number of years of service. These benefit plans
are unfunded.

Summary information on the company's plans providing postretirement benefits
other than pensions is as follows:

December 31 (in thousands of dollars) 1994 1993
---------------------------------------------- -------- --------

<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................... $270,100 $308,000
Fully eligible, active plan participants.... 29,300 42,100
Other active plan participants.............. 53,600 53,500
-------- --------

Accumulated postretirement benefit obligation 353,000 403,600
Unrecognized prior service (cost) benefit..... 28,400 30,400
Unrecognized net (loss)....................... (1,700) (57,600)
-------- --------

Accrued postretirement benefit obligation..... $379,700 $376,400
======== ========
</TABLE>

Net periodic postretirement benefit cost for 1994, 1993 and 1992 includes the
following components:

(in thousands of dollars) 1994 1993 1992
------------------------------------------- -------- -------- --------

<S> <C> <C> <C>
Service cost............................... $ 4,300 $ 4,800 $ 4,300
Interest cost on accumulated postretirement
benefit obligation....................... 29,100 32,700 30,500
Net amortization and deferral.............. (900) --- ---
------- ------- -------

Net periodic postretirement benefit cost... $32,500 $37,500 $34,800
======= ======= =======
</TABLE>

The accumulated postretirement benefit obligation at December 31, 1994 and 1993
was determined using an assumed discount rate of 8.25% and 7.5%, respectively.
The assumed health care cost trend rate used for measurement purposes was 9.2%
for 1995, declining ratably to an ultimate rate of 5% over a period of seven
years.

If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of December 31, 1994 would be
increased by approximately 10%. The effect of this change on the aggregate of
service and interest cost for 1994 would be an increase of approximately 10%.

25
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

In the fourth quarter of 1992, the company adopted, retroactive to January 1,
1992, SFAS No. 106. This statement requires that the cost of retiree benefits
other than pensions be recognized in the financial statements during the
employee's working career. The company's previous practice was generally to
expense the cost of these benefits as they were paid.

The cumulative effect of adopting SFAS No. 106 as of January 1, 1992 resulted in
an after-tax charge of $213 million ($2.30 per share) to 1992 earnings, after
reduction of approximately $126 million for income tax effects.

The effect of adoption on 1992 results, after recording the cumulative effect
for the years prior to 1992, was to recognize additional pre-tax expense of
approximately $13 million.

Postemployment Benefits
-----------------------

In the fourth quarter of 1993, the company adopted, retroactive to January 1,
1993, SFAS No. 112. The standard requires an accrual method of accounting for
postemployment benefits. Prior to adoption, the company was on a cash basis of
accounting for certain of these postemployment benefits. The cumulative effect
of adopting SFAS No. 112 as of January 1, 1993 resulted in an after-tax charge
of $7.5 million ($.08 per share) to 1993 earnings after reduction of
approximately $4.7 million for income taxes. The effect of adoption on 1993
results, after recording the cumulative effect, was not material.

26
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 14. Business Segments

Information about the company's operations in different businesses for the three
years ended December 31, 1994 is as follows:

<TABLE>
<CAPTION>
Timber,
Timberlands
and Wood Corporate Consolidated
(in thousands of dollars) Paper Products and Other Total
--------------------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>

Net Sales to
Unaffiliated Customers:

1994................. $4,216,795 $1,101,397 $ --- $5,318,192
1993................. 3,817,579 1,251,254 --- 5,068,833
1992................. 3,834,585 1,091,886 --- 4,926,471

Income from Operations:

1994................. $ 70,887 $ 242,285 $ (47,172) $ 266,000
1993................. (133,774) 247,989 (47,823) 66,392
1992................. (7,490) 125,071 (44,210) 73,371

Identifiable Assets:

1994................. $6,377,202 $2,170,850 $ 415,576 $8,963,628
1993................. 6,563,263 2,148,921 430,585 9,142,769
1992................. 6,556,177 2,344,257 480,998 9,381,432

Capital Expenditures:

1994................. $ 198,499 $ 123,225 $ 7,148 $ 328,872
1993................. 417,407 182,785 5,588 605,780
1992................. 614,795 95,993 7,501 718,289

Depreciation Expense and
Cost of Timber Harvested:

1994................. $ 387,628 $ 57,346 $ 13,723 $ 458,697
1993................. 358,294 72,513 12,627 443,434
1992................. 324,010 72,562 13,928 410,500
</TABLE>

The company's domestic and Canadian timber and timberlands assets and related
capital expenditures support both business segments but were not allocated to
the paper segment because identification of the specific timber and timberlands
assets associated with either segment is impossible. The timber that has been
harvested has been included at cost in the results of the business segments.

27
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Information about the company's operations in different geographic areas for the
three years ended December 31, 1994 is as follows:

<TABLE>
<CAPTION>
Corporate Consolidated
(in thousands of dollars) U.S. Canada Brazil and Other Total
--------------------------- ----------- -------- -------- ---------- ------------

<S> <C> <C> <C> <C> <C>
Net Sales to
Unaffiliated Customers:

1994..................... $4,370,317 $694,104 $253,771 $ --- $5,318,192
1993..................... 4,185,388 610,947 272,498 --- 5,068,833
1992..................... 4,114,609 532,623 279,239 --- 4,926,471

Income from Operations:

1994..................... $ 125,145 $133,930 $ 54,097 $ (47,172) $ 266,000
1993..................... (18,063) 53,674 78,604 (47,823) 66,392
1992..................... (11,418) 37,778 91,221 (44,210) 73,371

Identifiable Assets:

1994..................... $7,254,363 $747,225 $546,464 $ 415,576 $8,963,628
1993..................... 7,454,454 744,631 513,099 430,585 9,142,769
1992..................... 7,588,478 718,695 593,261 480,998 9,381,432

Capital Expenditures:

1994..................... $ 258,899 $ 14,029 $ 48,796 $ 7,148 $ 328,872
1993..................... 486,074 65,035 49,083 5,588 605,780
1992..................... 638,392 16,974 55,422 7,501 718,289

Depreciation Expense and
Cost of Timber Harvested:

1994..................... $ 387,483 $ 32,338 $ 25,153 $ 13,723 $ 458,697
1993..................... 376,456 32,513 21,838 12,627 443,434
1992..................... 342,769 33,366 20,437 13,928 410,500
</TABLE>

For the year ended December 31, 1994, net export sales to foreign countries
totaled $544 million.

As of December 31, 1994, net assets located outside of the United States
included in the consolidated financial statements were approximately $849
million. Of this amount, $492 million, which includes $51 million of cash and
cash equivalents, is owned by the company's Brazilian subsidiary.

28
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 15. Quarterly Results of Operations (Unaudited)

(in millions of dollars, except per share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

March 31 June 30 September 30 December 31
--------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Net Sales 1994 $1,226.1 $1,242.0 $1,384.7 $1,465.4
1993 1,267.0 1,256.3 1,245.3 1,300.2

Gross Profit 1994 $ 83.4 $ 80.5 $ 161.8 $ 239.6
1993 103.8 92.5 68.7 94.1

Income Taxes
(Benefit) (a) 1994 $ (9.0) $ (15.0) $ 8.8 $ 40.2
1993 (18.7) (14.9) 4.7 (2.3)

Income (Loss) before
Extraordinary Item
and Cumulative
Effect of Accounting
Changes (b) 1994 $ (31.0) $ (31.1) $ 23.1 $ 102.3
1993 (28.1) (22.3) (53.5) (30.6)

Net Income (Loss) (c) 1994 $ (31.0) $ (31.1) $ 23.1 $ 102.3
1993 (35.6) (22.3) (53.5) (44.8)

Earnings (Loss) Per
Common Share before
Extraordinary Item
and Cumulative
Effect of
Accounting Changes 1994 $ (.41) $ (.41) $ .18 $ 1.02
1993 (.38) (.31) (.65) (.41)

Earnings (Loss)
Per Common Share (c) 1994 $ (.41) $ (.41) $ .18 $ 1.02
1993 (.46) (.31) (.65) (.56)
</TABLE>

(a) Income taxes (benefit) for the three month period ended December 31, 1994
included a benefit of $7 million to reflect one-time adjustments to the
company's deferred tax liability. The three-month periods ended September
30 and December 31, 1993 included provisions of $23 million and $11
million, respectively, to reflect one-time adjustments to the company's
deferred tax liability.

(b) Other (income) expense - net included non-recurring pre-tax income of $34
million for the three month period ended December 31, 1994 and $10 million
for the three month period ended December 31, 1993.

29
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

(c) Net income (loss) and earnings (loss) per common share for the three month
period ended March 31, 1993 included the one-time charge for the cumulative
effect of an accounting change of $8 million, or $.08 per share,
respectively, for the adoption as of January 1, 1993 of SFAS No. 112 (Note
13).

Net income (loss) and earnings (loss) per common share for the three month
period ended December 31, 1993 included an after-tax charge of $14 million,
or $.15 per share, respectively, for a loss on early retirement of debt.

30
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 16. Environmental Liabilities

The company has been designated as a potentially responsible party by the U.S.
Environmental Protection Agency (the "EPA") under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and by certain
states under applicable state laws, with respect to the cleanup of hazardous
substances at a number of sites. In the case of many of these sites, other
potentially responsible parties also have been so designated. In addition, the
company and, in certain instances, other responsible parties have entered into
agreements with the EPA and certain states regarding the cleanup of hazardous
substances at various other locations. Also, the company is involved in the
remediation of certain other sites which are not the subject of investigation by
federal or state agencies.

Although the company's probable liabilities have been accrued for currently,
hazardous substance cleanup expenditures generally are paid over an extended
period of time, in some cases possibly more than 30 years. Annual cleanup
expenditures during the period from 1992 through 1994 were approximately $6.6
million, $6.9 million and $4.3 million, respectively.

31
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Financial Statements

Note 17. Legal Proceedings

The company was a defendant in a class action which originally sought $5 billion
in damages allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the company's Canton, North Carolina, mill
into the Pigeon River. In October 1992, a mistrial was declared after the jury
was unable to reach a unanimous verdict. In May 1993, the court approved a
settlement of the action providing for the payment of $6.5 million by the
company. In June 1993, the court's approval of the settlement was appealed and,
in September 1994, the appeal was dismissed. In November 1994, a motion for
rehearing was denied. The time has expired for any further appeal of the court's
approval of the settlement and, accordingly, the settlement is final.

The company is a defendant in a class action which originally sought $500
million in damages allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the company's Pensacola, Florida, mill into
Eleven Mile Creek, which flows into Perdido Bay. The plaintiffs now are seeking
not more than $50,000 for each class member. It is anticipated that the class,
which was certified in June 1994, will consist of approximately 2,000 members.
The company is vigorously defending this action.

The company is also involved in other legal and administrative proceedings and
claims of various types. While any litigation contains an element of
uncertainty, management, based upon the opinion of the company's General
Counsel, presently believes that the outcome of each such proceeding or claim
which is pending or known to be threatened (including the actions described
above), or all of them combined, will not have a material adverse effect on the
company.

32
<PAGE>

Report of Independent Public Accountants
--------------------------------------------------------------------------------

To the Shareholders and Board of Directors
of Champion International Corporation:

We have audited the accompanying consolidated balance sheet of Champion
International Corporation (a New York corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Champion International
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.

As explained in Notes 1, 12 and 13 of Notes to Financial Statements, the
company adopted new accounting standards promulgated by the Financial Accounting
Standards Board, changing its methods of accounting for income taxes and for
postretirement benefits other than pensions, effective January 1, 1992, and
changing its method of accounting for postemployment benefits, effective January
1, 1993.

Arthur Andersen LLP

New York, N.Y.
January 17, 1995

33
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

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

Results of Operations
---------------------

Overall Annual Results
----------------------

Results for 1994 improved significantly from both 1993 and 1992. In 1994, net
income was $63 million or 38 cents per share. This compared with a loss of $156
million or $1.98 per share in 1993 and a loss of $440 million or $5.05 per share
in 1992. The improvement from 1993 reflected substantially higher operating
income in the paper segment, while the improvement from 1992 reflected
substantially higher operating income in both the paper and wood products
segments.

Non-recurring items benefited 1994 results but adversely affected results for
1993 and 1992. Excluding non-recurring income and expense items, an
extraordinary item and the cumulative effect of the adoption of certain new
accounting standards, as described below, net income was $36 million or nine
cents per share in 1994, compared with a loss of $106 million or $1.44 per share
in 1993 and a loss of $95 million or $1.33 per share in 1992.

Results for 1994 included several non-recurring income and expense items,
principally the sale of the company's 25 percent interest in a Swedish
linerboard mill, a refund due on countervailing duties on lumber exports from
Canada into the United States in prior years and certain one-time adjustments to
the company's deferred tax liability. The net effect of all such items was to
increase net income by approximately $27 million or 29 cents per share.

Results for 1993 included several non-recurring income and expense items,
primarily a one-time adjustment to the company's deferred tax liability to
reflect the impact of changes during the year in the corporate income tax rates
in the United States and Canada. The net effect of all such items was to reduce
net income by approximately $28 million or 31 cents per share. Results for 1993
also included an extraordinary charge to earnings of $14 million or 15 cents per
share in connection with the redemption of certain debt. In addition, in 1993
the company adopted a new accounting standard relating to postemployment
benefits, the cumulative effect of which resulted in a charge to earnings of $8
million or eight cents per share.

Results for 1992 included several non-recurring income and expense items,
principally sales of timberlands, the net effect of which was to increase net
income by approximately $109 million or $1.18 per share. Also in 1992, the
company adopted two new accounting standards relating to income taxes and
postretirement benefits other than pensions, the cumulative effect of which
resulted in a charge to earnings of $454 million or $4.90 per share.

Significant Line Item Changes
-----------------------------

Net sales for 1994 of $5.3 billion improved from $5.1 billion in 1993 and $4.9
billion in 1992. Operating income also was up from both prior years. These
improvements reflected increased shipments of paper and, to a lesser extent,
higher prices for wood products and certain of the company's pulp and paper
grades.

34
<PAGE>

Shipments of wood products declined as the result of the sale and the closure of
various wood products facilities. The aggregate cost of products sold rose from
1993 and 1992, mainly due to the increased paper shipments.

The decrease in long-term debt reflected the payment of certain debt as well as
the classification of certain debt payable in 1995 as current installments of
long-term debt. Although long-term debt declined from 1993 and 1992, interest
and debt expense increased somewhat, reflecting higher interest rates and less
capitalization of interest related to capital projects. Other (income) expense-
net was substantially higher than in 1993, principally due to lower foreign
currency translation expenses recorded by the company's Brazilian subsidiary,
Champion Papel e Celulose Ltda., as the result of reduced inflation in Brazil,
as well as the sale of the company's interest in a Swedish linerboard mill and
the refund due on countervailing duties on lumber exports referred to above.
Compared to 1992, other (income) expense - net declined significantly, primarily
reflecting gains from the sales of timberlands in 1992 referred to above. The
income tax provision was impacted favorably in 1994 and adversely in 1993 by
one-time adjustments to the company's deferred tax liability.

Quarterly Results
-----------------

Excluding non-recurring items in each quarter, earnings per share of 73 cents in
the fourth quarter of 1994 improved considerably from the per-share loss of 35
cents in the fourth quarter of 1993 and earnings per share of 18 cents in the
third quarter of 1994. The improvement from both prior periods principally
reflected substantially higher operating income in the paper segment.

Paper Segment
-------------

For the company's paper segment, operating income of $71 million in 1994
compared with losses of $134 million in 1993 and $7 million in 1992. Fourth
quarter 1994 operating income of $113 million compared with a loss of $24
million in the fourth quarter of 1993 and operating income of $36 million in the
third quarter of 1994.

In general, the paper business tends to follow overall economic trends. The
improvement in paper segment earnings in the second half of 1994 reflected
increased demand attributable to strengthening economies in the United States
and Europe. In addition, on the supply side, there were few capacity increases
in the industry during the year. This favorable demand/supply relationship
resulted in strong markets and substantial price increases for all of the
company's principal pulp and paper grades in the second half of 1994.

Results for the domestic printing and writing papers business, while a loss,
improved substantially from the loss in 1993 and moderately from the loss in
1992. Volumes were significantly above 1993 and 1992 levels for uncoated papers,
mainly due to the start-up of the No. 35 paper machine at the Courtland,
Alabama, mill in the third quarter of 1993; volumes for coated papers increased
slightly from the two prior years. Average prices for coated papers were lower
than in 1993 and 1992, while average prices for uncoated papers were about the
same as in the two prior years. Fourth quarter 1994 earnings represented a
significant improvement from the loss in the fourth quarter of 1993 and the
break-even results of the third quarter of 1994.

35
<PAGE>

The improvement was due principally to price increases for both coated and
uncoated papers and increased volumes for uncoated papers. Additional price
increases for coated and uncoated grades were effective in January 1995, and
further increases were announced for February.

At the company's Brazilian subsidiary, which produces uncoated printing and
writing papers, net income (excluding non-recurring items) increased from 1993
and 1992. However, operating income declined from the two prior years. Average
prices were higher than in 1993 but lower than in 1992. Volumes were slightly
higher than in both prior years. The decline in operating income from both prior
years reflected the impact of lower inflation on recorded sales prices and was
approximately offset by a favorable adjustment to the foreign currency
translation expenses included in other (income) expense - net, as discussed
above. Reflecting higher overall operating income at the company's U.S. and
Canadian operations and lower operating income at the Brazilian subsidiary,
approximately 17% of the company's 1994 consolidated operating income, before
general corporate expense, was attributable to the Brazilian subsidiary. Fourth
quarter 1994 net income (excluding non-recurring items) and operating income
improved from the prior and year-ago quarters, primarily due to higher domestic
and export prices. Domestic and export prices continued to strengthen early in
1995.

Earnings for the publication papers business declined from 1993 but improved
significantly from the loss in 1992. The decline from last year was due to lower
average prices for coated groundwood papers and increased purchased pulp costs.
The improvement from 1992 was attributable mainly to higher volumes and prices
for coated groundwood and coated free sheet papers. Fourth quarter 1994 results
improved from the fourth quarter of 1993 and the third quarter of 1994 due to
higher prices for all publication paper grades. Additional price increases for
certain grades were effective in January 1995, and increases for certain other
grades were announced for February.

Operating income for the U.S. and Canadian market pulp operations improved
substantially from the loss in 1993 and moderately from the earnings level in
1992. Results reflected higher prices for almost all grades of pulp, which more
than offset lower shipments attributable to increased consumption of pulp by the
company following the start-up of the No. 35 paper machine in Courtland,
Alabama. Operating income in the fourth quarter of 1994 improved considerably
from the loss in the fourth quarter of 1993 and slightly from the earnings level
in the third quarter of 1994. The improvement was due to price increases for all
pulp grades, which more than offset lower shipments caused by maintenance
outages at all of the market pulp mills in the fourth quarter of 1994.
Additional price increases for all grades of pulp were effective in January
1995. Since the company is a net seller of pulp, overall profits benefit from
higher pulp prices; however, the company's publication papers mills and the
printing and writing papers mills in Hamilton, Ohio, and Canton, North Carolina,
purchase pulp from outside suppliers and are adversely affected by higher pulp
prices.

Results for the newsprint operation, while a loss, represented a significant
improvement from the losses in 1993 and 1992 due to higher volumes and prices.
The small loss in the fourth quarter of 1994 was a considerable improvement from
the losses of the prior and year-ago quarters due to higher prices. Additional
price increases were announced for March and May 1995.

36
<PAGE>

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

Earnings for the packaging business were significantly above the levels in 1993
and 1992, primarily due to higher prices for kraft paper and linerboard. Fourth
quarter 1994 results were up from the fourth quarter of 1993 and the third
quarter of 1994 due to higher prices for both products. Additional price
increases for kraft paper and most grades of linerboard were effective in
January 1995.

Wood Products Segment
---------------------

For the company's wood products segment, which includes the wood-related
operations of the Canadian subsidiary, Weldwood of Canada Limited, income from
operations of $242 million in 1994 declined slightly from $248 million in 1993
but improved substantially from $125 million in 1992. Fourth quarter 1994
operating income of $61 million was up from $57 million in the fourth quarter of
1993 and even with the third quarter of 1994.

The earnings of the wood products segment have been strong in recent years, due
primarily to supply factors such as industry timber shortages in the United
States attributable to environmental considerations. In addition, demand has
improved as housing starts in the United States returned to relatively high
levels in 1993 and 1994. Domestic housing markets appeared to be weakening
somewhat at the beginning of 1995, reflecting higher mortgage rates.

Average prices for lumber and plywood were higher than in 1993 and significantly
higher than in 1992. Volumes for lumber and plywood were substantially lower
than in 1993 and 1992, due to the sale in the third quarter of 1992 of the
Roseburg, Oregon, facility, the fourth quarter 1993 sales of the Lumber City,
Georgia, and Bonner and Libby, Montana, facilities, and the closure of the
Klickitat, Washington, lumber mill in the third quarter of 1994. Timber stumpage
prices were higher, while volumes were lower, than in 1993 and 1992. Results for
Weldwood's wood-related operations were adversely affected in 1994 by increased
stumpage costs for wood cut on government-owned timberlands in British Columbia.

Prices for lumber declined somewhat in the fourth quarter of 1994 and in early
1995. Prices for plywood increased during most of the fourth quarter of 1994 but
declined late in the quarter and in early 1995.

Labor Contracts
---------------

The company has labor agreements, which expire between 1995 and 1999, at ten of
its eleven domestic paper mills. Facilities at which labor agreements expire in
1995 include the Courtland, Alabama, printing and writing papers mill and the
Bucksport, Maine, and Sartell, Minnesota, publication papers mills. The
Quinnesec, Michigan, publication papers mill is a non-union facility.

The labor agreement that covers the paper industry in Brazil, including the
company's Brazilian subsidiary, is renegotiated each year.

At Weldwood of Canada, labor agreements covering the Hinton, Alberta, pulp mill
and timberlands operation and the joint venture pulp mill in Quesnel, British
Columbia, expired in 1994. These facilities presently are operating under the
terms of their respective expired contracts while efforts to reach new
agreements continue.

37
<PAGE>
--------------------------------------------------------------------------------

Financial Condition
-------------------

General
-------

The company's current ratio was 1.1 to 1 at year-end 1994, as compared to 1.4 to
1 at year-end 1993 and 1.5 to 1 at year-end 1992. Total debt to total
capitalization was 43% at year-end 1994, as compared to 44% at year-end 1993 and
42% at year-end 1992.

Reflecting improved results and reduced capital spending, in 1994 the company's
net cash provided by operating activities exceeded the requirements of its
investing activities (principally capital expenditures). The approximate excess
was used to pay dividends as well as a portion of the company's long-term debt
and to increase cash and cash equivalents. In 1994, long-term debt (including
current installments) declined by $206 million, and cash and cash equivalents
increased by $35 million.

In each of 1993 and 1992, the company's net cash provided by operating
activities was not sufficient to meet the requirements of its investing
activities (principally capital expenditures) and its financing activities
(principally debt payments and cash dividends). Each year the approximate
difference was financed through borrowings and, in 1992, through the use of cash
and cash equivalents. In 1993, net borrowings generated cash proceeds of $75
million, while cash and cash equivalents increased by $19 million. In 1992, net
borrowings generated cash proceeds of $330 million, and cash and cash
equivalents decreased by $76 million.

Operating Activities
--------------------

Net cash provided by operating activities of $533 million improved from $201
million in 1993 and $258 million in 1992. The increase was due primarily to
significantly higher earnings and changes in certain components of working
capital.

Investing Activities
--------------------

Net cash used in investing activities of $262 million increased from $212
million in 1993 and declined from $611 million in 1992. The increase from 1993
was due to reduced net proceeds from asset sales and sales of investments in
marketable securities, which more than offset the substantial decline in capital
expenditures. The decrease from 1992 was due to significantly lower capital
expenditures and higher net proceeds from sales of investments in marketable
securities, which more than offset reduced asset sale proceeds.

In 1994, the company received net proceeds of $39 million from sales of
timberlands and fixed assets. In addition, the company received net proceeds of
$33 million from sales of investments, including $25 million from the sale of
the company's 25 percent interest in a Swedish linerboard mill. In 1993, the
company received net proceeds of $305 million from sales of timberlands and
fixed assets principally located in Montana. In addition, the company received
net proceeds of $107 million from sales of investments in marketable securities.
In 1992, the company received net proceeds of $174 million from sales of
timberlands and fixed assets primarily located on the West Coast. The company
had net expenditures of $58 million for investments in marketable securities in
1992.

38
<PAGE>
--------------------------------------------------------------------------------

In February 1995, Weldwood of Canada sold its two coastal British Columbia
sawmills and related timber-cutting rights to International Forest Products
Limited for (Cdn) $140 million plus an additional amount for inventories. The
two sawmills have a combined annual capacity of 185 million board feet of
lumber. In addition, Weldwood is negotiating with the Hancock Timber Resource
Group to sell approximately 32,000 acres of Weldwood's fee-owned timberlands in
coastal British Columbia.

Financing Activities
--------------------

Net cash used in financing activities of $236 million compared with net cash
provided by financing activities of $30 million in 1993 and $277 million in
1992. This was due primarily to the reduction of debt in 1994, reflecting the
improved results and lower capital expenditures discussed above, as compared to
the increase in debt in each of the two prior years.

At December 31, 1994, the company had $382 million of U.S. commercial paper and
other short-term obligations outstanding, all of which are classified as long-
term debt, down from $559 million at year-end 1993 and $721 million at year-end
1992. In addition, at December 31, 1994, the company had $65 million of notes
outstanding under its U.S. bank lines of credit, down from $224 million at year-
end 1993 and $178 million at year-end 1992. Domestically, at December 31, 1994,
$382 million of the company's unused bank lines of credit of $1,035 million
supported the classification of commercial paper and other short-term
obligations as long-term debt. At December 31, 1994, Weldwood of Canada had
unused bank lines of credit of approximately $179 million.

During 1994, the company issued $230 million of variable rate notes due in 1998
and 1999 and borrowed $88 million through the issuance of long-term tax-exempt
bonds.

The annual principal payment requirements under the terms of all long-term debt
agreements for the years 1995 through 1999 are $309 million, $102 million, $245
million, $386 million and $738 million, respectively.

Capital Expenditures
--------------------

With the completion of the company's extensive capital improvement program in
1993, capital spending has been reduced to levels required for routine capital
replacements, environmental compliance and incremental improvements.

Capital spending of $268 million in 1994 declined substantially from $491
million in 1993 and $611 million in 1992. The company presently anticipates that
capital spending will be approximately $390 million in 1995, all of which is
expected to be financed through internally generated funds. The anticipated
increase in capital spending in 1995 is attributable in part to environmental-
related projects.

39
<PAGE>
--------------------------------------------------------------------------------

The Environment
---------------

Environmental Capital Expenditures

The company is subject to various federal, state and local laws and regulations
relating to the discharge of materials into the environment and to the disposal
of solid wastes. These laws and regulations require the company to obtain
permits and licenses from appropriate governmental authorities with respect to
its properties and to operate its properties in compliance with such permits and
licenses.

In order to meet the standards established by the various federal, state and
local environmental laws and regulations to which the company is subject, the
company is required to invest substantial amounts in pollution abatement
facilities. During the period from 1990 through 1994, the company spent
approximately $338 million in its domestic operations to purchase and install
systems to control the discharge of pollutants into air and water and to dispose
of solid wastes; in addition, the company spent approximately $280 million on
the environmental improvement and modernization project at the Canton, North
Carolina, mill. In 1994, capital expenditures incurred for environmental
purposes were $31 million. In view of changing environmental laws and
regulations and their interpretation, as well as the uncertainties and variables
inherent in business planning, it is not possible for the company to predict
with certainty the amount of capital expenditures to be incurred for
environmental purposes in the future. However, the company estimates that
capital expenditures for air and water pollution control systems and solid waste
disposal systems in the United States will be approximately $90 million in 1995
and $46 million in 1996. In carrying forward its environmental program, the
company will commit additional amounts for environmental purposes in years
subsequent to 1996. Preliminary estimates indicate that for the period from 1997
through 1999 capital expenditures for air and water pollution control facilities
and solid waste disposal facilities in the United States will aggregate
approximately $217 million. The environmental capital expenditures described in
this paragraph are included in the respective past and estimated 1995 capital
spending amounts set forth above under "Capital Expenditures."

Although some pollution abatement and solid waste disposal facilities produce
improvements in operating efficiency, most increase product costs without
enhancing capacity or operating efficiency. However, since other paper and
forest products companies also are subject to environmental laws and
regulations, the company does not believe that compliance with such laws and
regulations will have a material adverse effect on its competitive position.

Proposed EPA Air and Water Regulations

In December 1993, the United States Environmental Protection Agency (the "EPA")
proposed regulations pursuant to the federal Clean Air Act Amendments of 1990
(the "Clean Air Act") and the federal Water Pollution Control Act (the "Clean
Water Act"). Certain additional Clean Air Act regulations are expected to be
proposed in 1995. It is anticipated that all of these regulations will become
final in 1996, with compliance required no later than 1999.

40
<PAGE>
--------------------------------------------------------------------------------

As previously reported, trace amounts of dioxin were found in the pulp, sludge
and effluent at some bleached kraft mills in the United States and Canada,
including certain of the company's mills. The proposed regulations under the
Clean Water Act are based upon the use of oxygen delignification and chlorine
dioxide substitution as the preferred technology option to reduce the potential
for the formation of dioxin in the pulp bleaching process. The company has
implemented and is continuing to implement this technology at its bleached kraft
mills. If the final regulations continue to designate oxygen delignification and
chlorine dioxide substitution as the preferred technology option, the company
presently anticipates that it will incur capital expenditures to meet the
requirements of the Clean Water Act regulations, additional to those set forth
above under "Capital Expenditures" and "Environmental Capital Expenditures," of
approximately $15 million during 1995 and 1996.

Assuming that the Clean Air Act regulations expected to be proposed in 1995 use
a range of standards currently anticipated by the company and that all of the
regulations pursuant to the Clean Air Act are adopted as proposed, the company
presently expects that it will incur capital expenditures to meet the
requirements of the Clean Air Act and state air toxics regulations, additional
to those set forth above under "Environmental Capital Expenditures," of
approximately $300 million over the period of approximately 1996 to 1999.

Great Lakes Initiative

The company may incur capital expenditures, additional to those set forth above
under "Capital Expenditures" and "Environmental Capital Expenditures," in order
to meet the requirements of the Great Lakes Water Quality Agreement of 1978 and
the Great Lakes Critical Programs Act of 1990. Pursuant thereto, in April 1993,
the EPA issued proposed guidance to the states regarding water quality standards
for the waters of the Great Lakes and their tributaries. The company is awaiting
the issuance of implementing regulations by the environmental agencies of the
affected states in order to determine the extent of any additional costs and the
period over which they will be incurred. As a result, the company is not yet in
a position to provide a meaningful estimate of any such costs.

Federal Executive Order

In October 1993, President Clinton issued an executive order covering the
purchase of uncoated printing and writing papers by the federal government. The
order establishes a minimum post-consumer recycled content for such paper
purchased by federal agencies of 20% commencing at the end of 1994, increasing
to 30% at the end of 1998. In addition, for certain types of such paper, the
order requires a minimum content of 50% recovered materials.

Although the federal government purchases less than 2% of the paper produced in
the United States, federal government procurement standards sometimes are
adopted by state and local governments and private industry. The sale of
uncoated printing and writing papers by the company to the federal government
accounts for an immaterial portion of total company sales. However, the sale of
domestic uncoated printing and writing papers by the company to all customers
accounted for approximately 17% of total company sales in 1994.

41
<PAGE>
--------------------------------------------------------------------------------

The company is continuing to review the possible implications of the executive
order, including the extent to which additional facilities would be required to
meet its standards and the extent to which purchasers other than the federal
government are likely to adopt similar standards. The company may incur capital
expenditures, additional to those set forth above under "Capital Expenditures"
and "Environmental Capital Expenditures," to meet the recycled content
requirements of the executive order and of the marketplace generally. However,
in view of the uncertainties, the company is not yet in a position to provide a
meaningful estimate of any such costs or of the impact of the executive order on
demand for virgin market pulp produced by the company.

Hazardous Substance Cleanup

The company has been designated as a potentially responsible party by the EPA
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, and by certain states under applicable state laws, with respect to the
cleanup of hazardous substances at a number of sites. In the case of many of
these sites, other potentially responsible parties also have been so designated.
In addition, the company and, in certain instances, other responsible parties
have entered into agreements with the EPA and certain states regarding the
cleanup of hazardous substances at various other locations. Also, the company is
involved in the remediation of certain other sites which are not the subject of
investigation by federal or state agencies. The cost of all such cleanups is not
capitalized and, accordingly, is not included in the capital expenditure
information set forth above under "Capital Expenditures" and "Environmental
Capital Expenditures."

The company cannot predict with certainty the total cost of such cleanups, the
company's share of the total cost of multiparty cleanups or the extent to which
contribution will be available from other parties, or the amount of time
necessary to accomplish such cleanups. However, based upon, among other things,
its previous experience with respect to the cleanup of hazardous substances as
well as the regular detailed review of known hazardous waste sites by the
company, the company has developed an estimate of its probable cleanup
liabilities. This estimate includes remediation and legal costs with respect to
properties presently or formerly owned or operated by the company or its
predecessors as well as properties, such as municipal or county landfills, owned
and operated by third parties to which the company or its contractor sent waste
material. The company has accrued $77 million at December 31, 1994, on a non-
discounted basis, which represents its current estimate of the probable cleanup
liabilities at all known sites. This accrual does not reflect any possible
insurance recoveries, which are not expected to be significant, but does reflect
a reasonable estimate of cost-sharing at multiparty sites.

42
<PAGE>
--------------------------------------------------------------------------------

Environmental Legal Proceedings

The company was a defendant in a class action which originally sought $5 billion
in damages allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the company's Canton, North Carolina mill
into the Pigeon River. In October 1992, a mistrial was declared after the jury
was unable to reach a unanimous verdict. In May 1993, the court approved a
settlement of the action providing for the payment of $6.5 million by the
company. In June 1993, the court's approval of the settlement was appealed and,
in September 1994, the appeal was dismissed. In November 1994, a motion for
rehearing was denied. The time has expired for any further appeal of the court's
approval of the settlement and, accordingly, the settlement is final.

In February 1994, the company received a notice of violation from the Texas
Natural Resources Conservation Commission ("TNRCC") alleging unauthorized air
emissions from the company's Sheldon, Texas, mill. The notice of violation
alleged several violations, all but two of which have been resolved without
penalty. With respect to the two remaining alleged violations, it is expected
that the TNRCC will seek penalties, although the company is unable at this time
to estimate the amount of penalties which may be sought or finally assessed.

The company is vigorously defending each of the pending actions described above.

While any litigation contains an element of uncertainty, management, based upon
the opinion of the company's General Counsel, presently believes that the
outcome of these actions will not have a material adverse effect on the company.

Other
-----

The industry in which the company operates is capital intensive. Due to
inflation, the company's property, plant and equipment and timber and
timberlands could not be replaced for the historical cost value at which they
are reflected in the company's financial statements. On a current cost basis,
depreciation expense and cost of timber harvested would be greater than reported
on a historical cost basis.

43
<PAGE>

Champion International Corporation and Subsidiaries
--------------------------------------------------------------------------------

Eleven - Year Selected Financial Data
(in millions, except per share amounts and ratio data)

<TABLE>
<CAPTION>
1994 1993 1992 1991
----------------------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings:
Net sales...................................................... $5,318 $5,069 $4,926 $4,786
Depreciation expense and cost of timber harvested.............. 459 443 411 342
Provision for wood products restructuring...................... --- --- --- ---
Gross profit................................................... 565 359 362 454
Income from operations......................................... 266 66 73 179
Interest and debt expense...................................... 235 224 206 211
Other (income) expense -- net.................................. (57) 7 (143) (110)
Income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes...................... 88 (165) 10 78
Income taxes (benefit)......................................... 25 (31) (4) 38
Income (loss) before extraordinary item and cumulative effect
of accounting changes....................................... 63 (134) 14 40
Extraordinary item, net of taxes............................... --- (14) --- ---
Cumulative effect of accounting changes, net of taxes.......... --- (8) (454) ---
Net income (loss).............................................. 63 (156) (440) 40

Per Common Share: *
Primary earnings (loss)...................................... $ .38 $(1.98) $(5.05) $ .14
Fully diluted earnings (loss)................................ .38 (1.98) (5.05) .14
Cash dividends declared...................................... .20 .20 .20 .20
Cash dividends paid.......................................... .20 .20 .20 .425
Shareholders' equity......................................... 31.25 31.23 33.53 39.02

Financial Position:
Current assets............................................... $1,179 $1,114 $1,142 $1,162
Timber and timberlands -- net................................ 1,847 1,839 2,012 1,666
Property, plant and equipment -- net......................... 5,603 5,802 5,763 5,386
Other assets and deferred charges............................ 335 388 464 442
------ ------ ------ ------
Total assets............................................. $8,964 $9,143 $9,381 $8,656
====== ====== ====== ======

Current liabilities.......................................... $1,034 $ 772 $ 786 $ 794
Long-term debt and other liabilities......................... 3,560 3,990 3,928 3,162
Deferred income taxes........................................ 1,040 1,077 1,159 678
Minority interest in subsidiaries............................ 69 54 49 51
$92.50 convertible preference stock.......................... 300 300 300 300
Shareholders' equity......................................... 2,961 2,950 3,159 3,671
------ ------ ------ ------
Total liabilities and shareholders' equity............... $8,964 $9,143 $9,381 $8,656
====== ====== ====== ======

Other Statistics:
Expenditures for property, plant and equipment............... $ 225 $ 476 $ 623 $ 604
Timber and timberlands expenditures.......................... $ 104 $ 130 $ 95 $ 58
U.S. timber acreage owned or controlled...................... 5.1 5.1 6.0 6.2
Common shares outstanding at year-end........................ 93 93 93 93
Dividends declared on preference shares...................... $ 28 $ 28 $ 28 $ 28
Dividends declared on common shares.......................... $ 19 $ 19 $ 19 $ 19
Current ratio................................................ 1.1 1.4 1.5 1.5
Ratio of total debt to total capitalization.................. .43:1 .44:1 .42:1 .40:1
Return on average shareholders' equity and $92.50 convertible
preference stock before extraordinary item and cumulative
effect of accounting changes............................... 2.0% (4.0)% 0.4% 1.0%
</TABLE>

* Primary and fully diluted earnings (loss) per share for 1993 include the
cumulative effect of an accounting change of $(.08) and extraordinary item
for early retirement of debt of $(.15).

Primary and fully diluted earnings (loss) per share for 1992 include the
cumulative effect of accounting changes of $(4.90).

44
<PAGE>
--------------------------------------------------------------------------------

1990 1989 1988 1987 1986 1985 1984
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$5,090 $5,163 $5,129 $4,615 $4,388 $5,770 $5,121
323 279 260 252 270 263 204
--- --- --- --- --- --- 220
800 1,048 1,141 872 798 903 585
491 769 861 598 438 364 82
156 136 161 177 170 171 102
(85) (93) (30) (198) (45) (52) ---

420 726 730 619 313 245 (20)
197 294 274 237 112 82 (14)

223 432 456 382 201 163 (6)
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
223 432 456 382 201 163 (6)

$ 2.11 $ 4.56 $ 4.80 $ 4.03 $ 2.08 $ 1.59 (.36)
2.08 4.43 4.65 3.92 2.05 1.59 (.36)
1.10 1.10 .95 .72 .52 .46 .40
1.10 1.075 .90 .65 .52 .43 .40
39.10 38.12 35.06 30.82 27.52 26.08 25.27

$1,104 $1,074 $ 986 $ 896 $ 811 $1,041 $1,681
1,645 1,613 1,581 1,554 1,555 1,569 1,527
5,117 4,404 3,702 3,340 3,309 3,143 3,287
485 440 431 389 432 345 320
------ ------ ------ ------ ------ ------ ------
$8,351 $7,531 $6,700 $6,179 $6,107 $6,098 $6,815
====== ====== ====== ====== ====== ====== ======

$801 $ 804 $ 699 $ 657 $ 734 $1,118 $1,904
2,864 2,175 2,133 2,120 2,462 2,057 2,169
651 605 474 415 281 290 197
56 58 49 51 38 34 48
300 300 --- --- --- --- ---
3,679 3,589 3,345 2,936 2,592 2,599 2,497
------ ------ ------ ------ ------ ------ ------
$8,351 $7,531 $6,700 $6,179 $6,107 $6,098 $6,815
====== ====== ====== ====== ====== ====== ======

$ 959 $ 916 $ 585 $ 340 $ 446 $ 443 $ 405
$ 88 $ 78 $ 88 $ 62 $ 53 $ 43 $ 34
6.4 6.4 6.4 6.5 6.5 6.5 6.8
93 93 95 95 94 93 93
$ 28 $ 2 $ --- $ --- $ 6 $ 15 $ 15
$ 102 $ 104 $ 91 $ 69 $ 49 $ 43 $ 26
1.4 1.3 1.4 1.4 1.1 .9 .9
.38:1 .32:1 .34:1 .36:1 .44:1 .42:1 .50:1

5.6% 12.2% 14.5% 13.8% 7.8% 6.4% (0.3)%
</TABLE>

45
<PAGE>

Common Stock
Prices and
Dividends Paid Quarterly sales prices for the company's common stock as
reported on the New York Stock Exchange composite tape,
and quarterly dividends paid, in 1994 and 1993 were:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>

1994
----
High $36 $34 1/2 $40 $40
Low 28 3/4 28 32 5/8 32 3/4
Dividends Paid .05 .05 .05 .05
----------------------------------------------------------------------------

1993
----
High $33 $34 5/8 $34 1/8 $34
Low 27 1/8 29 7/8 29 1/4 28 5/8
Dividends Paid .05 .05 .05 .05

</TABLE>

<PAGE>

EXHIBIT 21

LIST OF SIGNIFICANT SUBSIDIARIES
--------------------------------

<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
<S> <C>
Champion Papel e Celulose Ltda.................................................................Brazil
Weldwood of Canada Limited...........................................................British Columbia
</TABLE>

_________________________________

All subsidiaries of the Company other than those listed above, considered
in the aggregate as a single subsidiary, do not constitute a significant
subsidiary as of December 31, 1994.

<PAGE>

EXHIBIT 23.1

CHAMPION INTERNATIONAL CORPORATION
One Champion Plaza
Stamford, CT 06921

March 30, 1995

Champion International Corporation
One Champion Plaza
Stamford, CT 06921

Dear Sirs:

As Senior Vice President and General Counsel of Champion International
Corporation (the "Company"), I advise you as follows in connection with legal
and administrative claims and proceedings which are pending or known to be
threatened against the Company.

I call your attention to the fact that, as Senior Vice President and
General Counsel of the Company, I have general supervision of the Company's
legal affairs. In such capacity, I have reviewed litigation and claims
threatened or asserted involving the Company and have consulted with outside
legal counsel with respect thereto where I have deemed it appropriate.

On January 4, 1991, a class action was brought against the Company in state
court in Tennessee. The class consisted of all Tennessee residents who own or
lease land around Douglas Lake or along the Pigeon River. Subsequently, the
case was transferred to the United States District Court for the Eastern
District of Tennessee. While the original complaint sought $5 billion in
compensatory and punitive damages, immediately prior to trial the plaintiffs
reduced their demand to $367.9 million. The plaintiffs originally claimed
damages for both personal injury and property damage, but the personal injury
claims were dismissed. The case proceeded to trial on plaintiffs' theory that
discharges of hazardous materials, including dioxin, from the Company's
Canton, North Carolina mill had decreased property values along the river and
the lake. The trial began on September 14, 1992 and ended in a mistrial on
October 16, 1992, when the jury was unable to reach a unanimous verdict. On May
3, 1993, the court approved a settlement of the action providing for the payment
of $6.5 million by the Company. On June 1, 1993, the court's approval of the
settlement was appealed, and on September 20, 1994 the appeal was dismissed by
the United States Court of Appeals for the Sixth Circuit. On November 7, 1994,
a motion for rehearing was denied. The time has expired for any further appeal
of the court's approval of the settlement and, accordingly, the settlement is
final.
<PAGE>

March 30, 1995
Page 2

On November 9, 1992, an action was brought against the Company in the
Circuit Court for Baldwin County, Alabama, on behalf of a class consisting of
all persons who own land along Perdido Bay in Florida and Alabama. The action
originally sought $500 million in compensatory and punitive damages for personal
injury, intentional infliction of emotional distress and diminution in property
value allegedly resulting from the purported discharge of hazardous substances,
including dioxin, from the Company's Pensacola, Florida mill into Eleven Mile
Creek, which flows into Perdido Bay. However, in February 1994, the plaintiffs
reduced their demand to not more than $50,000 for each class member and in June
1994, the personal injury claims were dismissed. It is anticipated that the
class, which was certified by the court in June 1994, will consist of
approximately 2,000 members. The parties are currently engaged in discovery.

In February 1994, the Company received a notice of violation from the
Texas Natural Resources Conservation Commission ("TNRCC") alleging unauthorized
air emissions from the Company's Sheldon, Texas mill. The notice of violation
alleged several violations, all but two of which have been resolved without
penalty. With respect to the two remaining alleged violations, it is expected
that the TNRCC will seek penalties, although the Company is unable at this time
to estimate the amount of penalties which may be sought or finally assessed.

The Company is vigorously defending each of the pending actions described
above.

While any litigation contains an element of uncertainty, subject to the
foregoing, it is my opinion that the outcome of each such proceeding or claim
which is now pending or known to be threatened, or all of them combined,
including the actions described above, will not have a material adverse effect
on the Company.

I hereby consent to the reference to this opinion in the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1994, and in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994
(the "Form 10-K"), and to the filing of this opinion as an exhibit to the Form
10-K.

Very truly yours,

Marvin H. Ginsky
Senior Vice President
and General Counsel
MHG/col

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
of our report dated January 17, 1995 incorporated by reference in this Form 10-K
into the Company's previously filed Registration Statements on Form S-3
(Registration No. 33-51217 and No. 33-52123) and on Form S-8 (Registration No.
33-63126).

ARTHUR ANDERSEN LLP

New York, N.Y.
March 30, 1995

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY
-----------------

Each of the undersigned Directors and Officers of CHAMPION INTERNATIONAL
CORPORATION (the "Company") hereby constitutes and appoints LAWRENCE A. FOX,
MARVIN H. GINSKY and ANDREW C. SIGLER his or her true and lawful attorneys-in-
fact and agents, each of them with full power to act without the others, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 and any and all amendments and other documents relating thereto, and to
file such Annual Report on Form 10-K and such amendments with all exhibits
thereto, and any and all other information and documents in connection
therewith, with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
30th day of March, 1995.

ANDREW C. SIGLER KENWOOD C. NICHOLS
------------------------------------- -----------------------------------
Andrew C. Sigler Kenwood C. Nichols
Chairman of the Board, Chief Vice Chairman and Director
Executive Officer, and Director (Principal Accounting Officer)
(Principal Executive Officer)

FRANK KNEISEL
-----------------------------------
Frank Kneisel
Senior Vice President - Finance
(Principal Financial Officer)
<PAGE>

<TABLE>
<S> <C>
ROBERT A. CHARPIE
------------------------------------------- ---------------------------------------------------
Robert A. Charpie, Director H. Barclay Morley, Director

ALICE F. EMERSON LAWRENCE G. RAWL
------------------------------------------- ---------------------------------------------------
Alice F. Emerson, Director Lawrence G. Rawl, Director

ALLAN E. GOTLIEB WALTER V. SHIPLEY
------------------------------------------- ---------------------------------------------------
Allan E. Gotlieb, Director Walter V. Shipley, Director

L. C. HEIST JAMES S. TISCH
------------------------------------------- ---------------------------------------------------
L. C. Heist, Director James S. Tisch, Director

SYBIL C. MOBLEY RICHARD E. WALTON
------------------------------------------- ---------------------------------------------------
Sybil C. Mobley, Director Richard E. Walton, Director

JOHN L. WEINBERG
---------------------------------------------------
John L. Weinberg, Director
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994, AND THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 90,948
<SECURITIES> 0
<RECEIVABLES> 574,252
<ALLOWANCES> 12,167
<INVENTORY> 441,430
<CURRENT-ASSETS> 1,178,781
<PP&E> 10,426,077<F1>
<DEPRECIATION> 2,976,640
<TOTAL-ASSETS> 8,963,628
<CURRENT-LIABILITIES> 1,034,412
<BONDS> 2,889,252
<COMMON> 48,393
300,000
0
<OTHER-SE> 2,912,352
<TOTAL-LIABILITY-AND-EQUITY> 8,963,628
<SALES> 5,318,192
<TOTAL-REVENUES> 5,318,192
<CGS> 4,752,926
<TOTAL-COSTS> 4,752,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235,086
<INCOME-PRETAX> 88,256
<INCOME-TAX> 24,951
<INCOME-CONTINUING> 63,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,305
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
<FN>
<F1> INCLUDES TIMBER AND TIMBERLANDS
</FN>

</TABLE>