SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                   FORM 10-Q



                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


      For Quarter Ended: September 28, 1997  Commission File Number: 1-7911
--------------------------------------------------------------------------------
                           

 

                             FORT JAMES CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



              Virginia                              54-0848173
--------------------------------------------------------------------------------
(State or other jurisdiction of         (I.R.S.Employer Identification No.
 incorporation or organization)




     120 Tredegar Street, Richmond, VA                         23219
--------------------------------------------------------------------------------
(Address of  principal  executive  offices)                 (Zip Code)  


       Registrant's telephone number, including area code: (804) 644-5411
--------------------------------------------------------------------------------


                                 Not Applicable
--------------------------------------------------------------------------------
             (Former name, former address, and former fiscal year,
                          if changed since lastreport)


     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,  and (2) has been subject to such
     filing requirements for the past 90 days.
                                           

                                                    Yes X         No 


Number of shares of $.10 par value common stock outstanding as of 
October 31, 1997: 

                               208,803,885 shares
<PAGE>


                             FORT JAMES CORPORATION

                          QUARTERLY REPORT ON FORM 10-Q
                               September 28, 1997


                                TABLE OF CONTENTS

                                                                       Page No.
PART I.  FINANCIAL INFORMATION:

         ITEM 1.  Financial Statements:

                  Consolidated Balance Sheets as of
                  September 28, 1997 and December 29, 1996               3

                  Consolidated Statements of Operations for the quarters
                  and nine months ended September 28, 1997 and
                  September 29, 1996                                     5

                  Consolidated Statements of Cash Flows for the
                  nine months ended September 28, 1997 and
                  September 29, 1996                                     6

                  Notes to Consolidated Financial Statements             7

         ITEM 2.  Management's Discussion and Analysis of
                  Results of Operations and Financial Condition         14


PART II.  OTHER INFORMATION:

         ITEM 1.  Legal Proceedings                                     19

         ITEM 2.  Changes in Securities                                 19

         ITEM 3.  Defaults Upon Senior Securities                       19

         ITEM 4.  Submission of Matters to a Vote of
                  Security Holders                                      19

         ITEM 5.  Other Information                                     19

         ITEM 6.  Exhibits and Reports on Form 8-K                      20

         SIGNATURES                                                     23
<PAGE>

PART I.    FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                            FORT JAMES CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                     September 28, 1997 and December 29, 1996
                         (in millions except share data)

                                                                                               September             December
                                                                                                    1997                 1996
------------------------------------------------------------------------------------------------------------------------------
ASSETS

Current assets:
<S>                                                                                                  <C>                  <C>
  Cash and cash equivalents                                                                          $34.6                $34.6
  Accounts receivable                                                                                813.5                781.3
  Inventories                                                                                        843.0                801.6
  Prepaid expenses and other current assets                                                           29.1                 52.6
  Deferred income taxes                                                                              106.0                138.5
------------------------------------------------------------------------------------------------------------------------------

    Total current assets                                                                           1,826.2              1,808.6
------------------------------------------------------------------------------------------------------------------------------

Property, plant and equipment                                                                      7,860.5              7,924.7
Accumulated depreciation                                                                          (3,139.6)            (2,925.4)
------------------------------------------------------------------------------------------------------------------------------

    Net property, plant and equipment                                                              4,720.9              4,999.3

Investments in affiliates                                                                            163.5                154.6

Other assets                                                                                         471.4                464.4

Goodwill                                                                                             650.2                730.0
------------------------------------------------------------------------------------------------------------------------------

    Total assets                                                                                  $7,832.2             $8,156.9
==============================================================================================================================


                   The accompanying notes are an integral part
                    of the consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                             FORT JAMES CORPORATION
                     CONSOLIDATED BALANCE SHEETS, Continued
                        (in millions, except share data)
                                                                                               September             December
                                                                                                    1997                 1996
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
<S>                                                                                                 <C>                  <C>
  Accounts payable                                                                                  $643.6               $607.3
  Accrued liabilities                                                                                732.8                805.8
  Current portion of long-term debt                                                                  139.2                128.9
------------------------------------------------------------------------------------------------------------------------------

    Total current liabilities                                                                      1,515.6              1,542.0
------------------------------------------------------------------------------------------------------------------------------

Long-term debt                                                                                     3,879.9              4,305.3
Accrued postretirement benefits
  other than pensions                                                                                475.1                475.9
Deferred income taxes                                                                                725.7                690.5
Other long-term liabilities                                                                          254.8                291.7
------------------------------------------------------------------------------------------------------------------------------

  Total liabilities                                                                                6,851.1              7,305.4
------------------------------------------------------------------------------------------------------------------------------

Preferred stock, $10 par value, 5 million shares authorized, issuable in series;
  shares outstanding, September 28, 1997 - 3.5 million and December 29, 1996 -
  3.6 million                                                                                        450.4                738.4

Common stock, $.10 par value, 500 million shares authorized; shares outstanding,
  September 28, 1997 -- 208.3 million and
  December 29, 1996 -- 188.5 million                                                                  20.8                 18.9

Additional paid-in capital                                                                         2,770.8              2,407.0
Retained deficit                                                                                  (2,260.9)            (2,312.8)
------------------------------------------------------------------------------------------------------------------------------

    Total shareholders' equity                                                                       981.1                851.5
------------------------------------------------------------------------------------------------------------------------------

    Total liabilities and shareholders' equity                                                    $7,832.2             $8,156.9
==============================================================================================================================

                   The accompanying notes are an integral part
                    of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             FORT JAMES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          For the Quarters (13 Weeks) and Nine Months (39 weeks) Ended
                    September 28, 1997 and September 29, 1996
                      (in millions, except per share data)

                                                                 Third Quarter         Nine Months
                                                ------------------------------------------------------------------------------------
                                                           1997                 1996                 1997                 1996
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                     <C>                  <C>                  <C>                  <C>
Net sales                                               $1,825.4             $1,925.9             $5,497.5             $5,921.5
Cost of goods sold                                       1,270.4              1,358.8              3,834.6              4,258.4
Selling and administrative expenses                        277.1                302.5                848.3                954.0
Restructure and other unusual items (income) expense        53.9                (30.3)                (3.8)                  .1
------------------------------------------------------------------------------------------------------------------------------------

    Income from operations                                 224.0                294.9                818.4                709.0

Interest expense                                            87.3                102.2                277.6                327.3
Other income, net                                           11.1                  5.0                 22.3                 12.4
------------------------------------------------------------------------------------------------------------------------------------

    Income before income taxes, minority interests
      and extraordinary item                               147.8                197.7                563.1                394.1

Income tax expense                                          77.3                 83.6                244.9                163.2
------------------------------------------------------------------------------------------------------------------------------------

    Income before minority interests and extraordinary item 70.5                114.1                318.2                230.9

Minority interests                                          (1.8)                 (.1)                (2.6)                (2.6)
------------------------------------------------------------------------------------------------------------------------------------

    Income before extraordinary item                        68.7                114.0                315.6                228.3
------------------------------------------------------------------------------------------------------------------------------------

Extraordinary loss on early extinguishment of debt,
  net of taxes                                             (45.2)                                    (47.1)                (3.3)
------------------------------------------------------------------------------------------------------------------------------------

     Net income                                            $23.5               $114.0               $268.5               $225.0
====================================================================================================================================

Preferred dividend requirements                             (8.1)                (8.1)               (24.4)               (43.9)
------------------------------------------------------------------------------------------------------------------------------------

    Net income applicable to common shares                 $15.4               $105.9               $244.1               $181.1
====================================================================================================================================

Net income per common share:
   Before extraordinary item                                $.29                 $.52                $1.41                $1.02
   Extraordinary loss on early extinguishment of debt       (.22)                                     (.23)                (.02)
------------------------------------------------------------------------------------------------------------------------------------

          Net income per share                              $.07                 $.52                $1.18                $1.00
====================================================================================================================================

Cash dividends per common share                             $.15                 $.15                 $.45                 $.45

Weighted average number of common shares
   and common share equivalents                            209.4                204.1                207.7                181.1
====================================================================================================================================

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

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             FORT JAMES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      For the Nine Months (39 weeks) Ended
                    September 28, 1997 and September 29, 1996
                                  (in millions)

<S>                                                                                                               <C>        <C>
                                                                                                                    1997        1996
------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities:
  Net income                                                                                                      $268.5     $225.0
  Depreciation expense and cost of timber harvested                                                                358.7      379.9
  Amortization of goodwill                                                                                          15.1       15.8
  Deferred income tax provision                                                                                     78.3       58.1
  Restructure and other unusual items                                                                               (3.8)        .1
  Loss on early extinguishment of debt, net of taxes                                                                47.1        3.3
  Undistributed earnings of unconsolidated affiliates                                                                1.4        4.2
  Change in current assets and liabilities:
    Accounts receivable                                                                                           (109.4)       7.9
    Inventories                                                                                                    (63.4)     103.6
    Prepaid expenses and other current assets                                                                       30.8        6.6
    Accounts payable and accrued liabilities                                                                        13.8       25.6
  Foreign currency hedge                                                                                           (31.5)
  Other, net                                                                                                       (41.1)     (26.2)
------------------------------------------------------------------------------------------------------------------------------------

      Cash provided by operating activities                                                                        564.5      803.9
------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investing activities:
  Expenditures for property, plant and equipment                                                                  (313.5)    (328.7)
  Cash received from sale of assets                                                                                144.3      440.9
  Cash paid for acquisitions, net                                                                                            (199.9)
  Other, net                                                                                                        13.2        5.9
------------------------------------------------------------------------------------------------------------------------------------

      Cash used for investing activities                                                                          (156.0)     (81.8)
------------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities:
  Additions to long-term debt                                                                                      633.4        3.4
  Payments of long-term debt                                                                                      (982.3)    (865.1)
  Common stock issued, net of offering costs                                                                                  205.1
  Common and preferred stock cash dividends paid                                                                   (82.4)     (69.9)
  Premiums paid on early extinguishment of debt                                                                    (45.5)
  Common stock issued on exercise of stock options                                                                  68.3        3.9
  Other, net                                                                                                                   (3.4)
------------------------------------------------------------------------------------------------------------------------------------

      Cash used for financing activities                                                                          (408.5)    (726.0)
------------------------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents                                                                               (3.9)
Cash and cash equivalents, beginning of period                                                                      34.6       67.0
------------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                                                           $34.6      $63.1
====================================================================================================================================

                   The accompanying notes are an integral part
                    of the consolidated financial statements.
</TABLE>
<PAGE>


                                                             
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Significant Accounting Policies

         Basis of Presentation:

         All financial  information for Fort James Corporation  ("Fort James" or
the  "Company")  includes  the  results of James River  Corporation  of Virginia
("James  River") and Fort Howard  Corporation  ("Fort  Howard")  for all periods
presented giving  retroactive  effect to the merger on August 13, 1997 (See Note
2). In the  opinion  of  management,  the  accompanying  unaudited  consolidated
financial  statements of Fort James contain all adjustments  (consisting of only
normal  and  necessary  accruals)  necessary  to present  fairly  the  Company's
consolidated  financial  position as of September  28, 1997,  and its results of
operations and cash flows for the quarters (13 weeks) and nine months (39 weeks)
ended  September  28, 1997,  and  September  29, 1996.  The balance  sheet as of
December 29, 1996,  was derived from  audited  financial  statements  as of that
date.  The results of operations  for the nine months ended  September 28, 1997,
are not necessarily indicative of the results to be expected for the full year.

         Derivative Financial Instruments:

         The Company's debt structure and international  operations give rise to
exposure to market  risks from  changes in interest  rates and foreign  currency
exchange rates. To manage these risks,  derivative financial  instruments may be
utilized by the Company  including  interest rate swaps, caps and options on its
long-term debt and foreign exchange  contracts on certain of its net investments
in foreign operations.  The Company does not hold or issue financial instruments
for trading  purposes.  Occasionally,  the Company  may  terminate a  derivative
financial  instrument.  If an interest rate swap, cap or an option is terminated
because  related  debt no longer  exists,  any gain or loss is  recognized  into
income  immediately;  otherwise,  the gain or loss is deferred and  amortized to
interest expense over the remaining periods originally covered by the derivative
contract.  If a foreign  exchange  contract is  terminated,  the gain or loss is
recognized in a separate  component of equity,  net of tax,  consistent with the
accounting treatment of the hedged item.

         Reclassifications:

         Certain  amounts in the prior  year's  financial  statements  have been
reclassified  to  conform  to  the  current  year's  presentation   including  a
reclassification  of customer  freight  charges from net sales to cost of sales.
Reportable  segments for all periods have been  reconfigured to include bleached
board operations  (formerly in the North American  Consumer Products segment) in
the Packaging  segment and to include the foodwrap  operations  (formerly in the
Packaging segment) in the North American Consumer Products segment.

         Adoption of Accounting Pronouncements:

         In June 1997, the Financial Accounting Standards Board issued Statement
No. 130,  "Reporting  Comprehensive  Income" ("SFAS 130") which is effective for
periods beginning after December 15, 1996,  including interim periods.  SFAS 130
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements,  either in the
statement of operations or a separate statement. Additionally, SFAS 130 requires
the display of the accumulated balance of other  comprehensive  income. On a pro
forma basis,  for the quarters and nine months  ended  September  28, 1997,  and
September 29, 1996, comprehensive income is as follows (in millions):


<PAGE>
<TABLE>
<CAPTION>

                                                                               Third Quarter                        Nine Months
                                                               ---------------------------------------------------------------------
                                                                           1997            1996                 1997           1996
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>            <C>                  <C>            <C>   
Net income                                                                $23.5          $114.0               $268.5         $225.0

Other comprehensive income, net of tax:
     Foreign currency translation                                         (21.0)           (2.3)              (135.9)         (27.2)
     Unrealized gain (loss) on securities                                                   9.5                 13.9            8.9
------------------------------------------------------------------------------------------------------------------------------------
           Other comprehensive income                                     (21.0)            7.2               (122.0)         (18.3)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                                       $2.5          $121.2               $146.5         $206.7
====================================================================================================================================
</TABLE>




         In June 1997,  the  Financial  Accounting  Standards  Board also issued
Statement No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  ("SFAS  131")  which is  effective  for  periods  beginning  after
December 15, 1997, including interim periods after the year of initial adoption.
SFAS 131 establishes  standards for the way public companies report  information
about  operating  segments  in both  interim  and annual  financial  statements,
including related disclosures about products and services, geographic areas, and
major  customers.  The Company has not determined  what, if any, impact SFAS 131
will have on the operating  segments  reported nor the impact SFAS 131 will have
on the related disclosures.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement No. 128,  "Earnings  per Share"  ("SFAS 128"),  which is effective for
periods  ending after December 15, 1997,  including  interim  periods.  SFAS 128
establishes standards for computing and presenting earnings per share ("EPS") by
replacing  primary EPS with the  presentation  of basic EPS and  requiring  dual
presentation of basic and diluted EPS on the face of the income statement.  On a
pro forma basis,  for the quarters and nine months ended September 28, 1997, and
September 29, 1996, EPS as reported would have been:

                                     Third Quarter               Nine Months
                                  ---------------------------------------------
                                   1997       1996             1997       1996
-------------------------------------------------------------------------------

Basic earnings per share           $.08       $.53            $1.21      $1.01
Diluted earnings per share          .07        .52             1.18       1.00

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

2.       Acquisitions and Dispositions

         Effective  August 13, 1997, in connection with the merger,  the Company
issued 104.8 million shares of its common stock for all the  outstanding  common
stock of Fort Howard. The merger qualified as a tax-free  reorganization and has
been  accounted  for as a  pooling  of  interests.  Accordingly,  the  Company's
consolidated  financial  statements  have been restated for all periods prior to
the  business  combination  to include the combined  financial  results of James
River and Fort  Howard.  Net sales,  income  before  extraordinary  item and net
income for the individual  companies reported prior to the merger are as follows
(in millions):


<PAGE>
<TABLE>
<CAPTION>

                                                      Second Quarter                              Six Months
                                        -------------------------------------------------------------------------------------
                                               1997                  1996                 1997                  1996
                                        -------------------   -------------------  --------------------  --------------------
<S>                                                 <C>                   <C>                   <C>                  <C>     

Net sales
  James River                                       $1,412.4              $1,570.2              $2,794.3             $3,125.6
  Fort Howard                                          411.4                 402.4                 812.2                788.1
  Reclassifications                                     30.5                  42.0                  65.6                 81.9
                                        -------------------   -------------------  --------------------  --------------------
         Total                                      $1,854.3              $2,014.6              $3,672.1             $3,995.6
                                        ===================   ===================  ====================  ====================

Income before extraordinary item
  James River                                          $90.8                 $30.5                $138.3                $51.0
  Fort Howard                                           58.9                  36.4                 108.6                 63.3
                                        -------------------   -------------------  --------------------  --------------------
         Total                                        $149.7                 $66.9                $246.9               $114.3
                                        ===================   ===================  ====================  ====================

Net Income
  James River                                          $90.8                 $30.5                $138.3                $51.0
  Fort Howard                                           58.3                  33.1                 106.7                 60.0
                                        -------------------   -------------------  --------------------  --------------------
         Total                                        $149.1                 $63.6                $245.0               $111.0
                                        ===================   ===================  ====================  ====================
</TABLE>



         The  consolidated   financial   information  presented  above  reflects
reclassifications  of customer  freight expenses and certain trade promotions to
conform  the  classifications  of  Fort  Howard  to  those  of Fort  James.  The
conforming of the accounting practices of Fort James and Fort Howard resulted in
no adjustments to net income or shareholders'  equity. There were no significant
intercompany transactions between Fort James and Fort Howard.

         During the third quarter, the Company expensed merger transaction costs
of $53.9 million in  restructure  and other unusual items as required  under the
pooling-of-interests   accounting  method.   Fort  James  anticipates  that  the
integration of James River and Fort Howard will result in restructuring  charges
which will be reflected in the  consolidated  statements  of  operations  of the
Company in the fourth quarter of 1997.  The range of restructure  charges cannot
be reasonably  estimated  until an analysis of the newly combined  operations is
complete and a detailed restructure plan is developed.

         As a part of the Company's ongoing program of timberland  divestitures,
on April 29, 1997,  pursuant to an offering memorandum dated September 12, 1996,
Fort James  completed  the sale of  approximately  95,000  acres of  timberlands
located in Alabama  and  Mississippi  for cash  proceeds  of $111  million.  The
Company  recorded a gain of $57.7 million ($35.2  million net of taxes,  or $.17
per share) in restructure and other unusual items.

3.       Income Taxes

         The Company's  effective  income tax rate was 43.5% for the nine months
ended  September 28, 1997,  compared to 41.4% for the first nine months of 1996.
The increase in the  effective tax rate from the prior year was primarily due to
certain non-tax-deductible merger transaction costs in 1997, partially offset by
the reduced relative size of non-tax-deductible  permanent differences to pretax
income.



<PAGE>


4.       Inventories

         The components of inventories were as follows as of September 28, 1997,
and December 29, 1996 (in millions):
<TABLE>
<CAPTION>

                                                                       September         December
                                                                            1997             1996
----------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>   
Raw materials                                                               $174.5           $177.0
Finished goods and work in process                                           546.6            498.8
Stores and supplies                                                          161.0            160.9
----------------------------------------------------------------------------------------------------
                                                                             882.1            836.7
Reduction to state certain inventories
  at last-in, first-out cost                                                 (39.1)           (35.1)
----------------------------------------------------------------------------------------------------

    Total inventories                                                       $843.0           $801.6
====================================================================================================
</TABLE>



5.       Financial Instruments

         The Company held $1,138 million and $1,286  million in notional  amount
of interest rate swaps with fair value liabilities of $8 million and $15 million
as of September  28, 1997,  and  December 29, 1996,  respectively.  In the third
quarter of 1997,  the Company  entered into $500  million in notional  amount of
interest  rate swaps to hedge the New Credit  Facility  (See Note 6). During the
first quarter of 1997, the Company  effectively unwound $648 million in notional
amount of interest rate swaps at a cost of approximately $8 million. The cost of
unwinding the interest rate swaps is being amortized to interest expense through
January  1999.  The  Company  is also  party to  LIBOR-based  interest  rate cap
agreements  which limit the  interest  cost to the Company  with respect to $500
million of floating rate obligations. The fair value of these cap agreements was
$.1 million compared to a carrying value of $5 million as of September 28, 1997.

         During the first quarter of 1997, the Company  unwound all $470 million
in notional  amount of foreign  exchange  contracts,  along with  interest  rate
agreements,  at a cost of $31 million, net of tax benefits. The foreign exchange
contracts were designated as hedges of a portion of the Company's net investment
in its  European  Consumer  Products  Business.  The net  termination  cost  was
recorded as a component of equity.  The Company  terminated such contracts prior
to their original expiration in September 1998.

         The fair  value of the  Company's  debt was $4,194  million  and $4,586
million as of September  28, 1997,  and  December  29, 1996,  respectively.  The
estimated  fair  values of the  Company's  financial  instruments  were based on
quoted market prices of comparable  instruments  and current  market rates as of
September 28, 1997, and December 29, 1996, respectively.



<PAGE>


 6.       Indebtedness

         In connection  with the merger,  Fort James undertook a plan (the "Debt
Refinancing  Plan")  designed to  refinance an  aggregate  of  approximately  $2
billion  principal  amount  of debt of Fort  James  and  Fort  Howard.  The Debt
Refinancing  Plan is expected to result in a  reduction  of interest  expense of
approximately  $50 million  annually.  In connection  with the Debt  Refinancing
Plan, the Company incurred a $47.1 million, net of taxes, extraordinary loss for
prepayment  penalties.  An additional  extraordinary charge of approximately $80
million,  net of taxes,  is  anticipated to be recorded in the fourth quarter on
completion of the Debt Refinancing Plan.

                  At the  time of the  merger,  as the  first  step in the  Debt
Refinancing  Plan,  Fort James and Fort Howard  entered  into a new $2.5 billion
bank credit  facility  (the "New Credit  Facility")  and  borrowed  $666 million
thereunder to replace  certain of the pre-merger bank credit  facilities.  As of
September  28,  1997,  the Company had $661  million  outstanding  under the New
Credit Facility. Additionally, on August 13, 1997, prior to the effectiveness of
the  merger,  Fort James  repurchased  and  retired  $200  million in  aggregate
principal  amount of its 9.77% Senior Notes due 2014 with proceeds from previous
divestitures  and excess  cash from  operations.  As the second step in the Debt
Refinancing Plan, on September 8, 1997, Fort Howard commenced cash tender offers
for approximately  $1.47 billion of its outstanding  public debt securities and,
upon expiration of the tender offers in the fourth quarter, purchased a total of
$1.28 billion of such debt  securities  as follows:  (i) $89.9 million of 8 1/4%
Senior  Notes due 2002,  (ii) $395.0  million of 9 1/4%  Senior  Notes due 2001,
(iii) $559.3  million of 9% Senior  Subordinated  Notes due 2006 and (iv) $234.2
million of 10%  Subordinated  Notes due 2003.  The  tender  offers  were  funded
through a  combination  of  borrowings  under the New  Credit  Facility  and the
issuance of $720 million aggregate  principal amount of notes.  These notes were
issued subsequent to the end of the quarter,  on September 29, 1997, as follows:
(i) $100  million 6 1/2%  Senior  Notes due 2002,  (ii) $320  million 6?% Senior
Notes due 2004 and (iii) $300 million 6?% Senior Notes due 2007.


7.          Preferred Stock

         During  the  third  quarter  of 1997,  all  outstanding  shares  of the
Company's  Series P 9% Cumulative  Convertible  Preferred  Stock,  having a face
value of $287.5 million,  were converted into  approximately 15.3 million shares
of Common Stock. On October 1, 1997, subsequent to the end of the third quarter,
the Company  redeemed all outstanding  shares of its Series O 8 1/4 % Cumulative
Preferred Stock for a redemption  price of  approximately  $98.1 million.  These
actions  will reduce  aggregate  cash  dividends  by  approximately  $25 million
annually.

     8.   Commitments and Contingent Liabilities

         Environmental Matters:

         Like its competitors,  Fort James is subject to extensive regulation by
various federal,  state,  provincial,  and local agencies concerning  compliance
with  environmental  control statutes and regulations.  These regulations impose
limitations  on the  discharge  of  materials  into the  environment,  including
effluent and emission limitations,  as well as require the Company to obtain and
operate in  compliance  with the  conditions  of permits and other  governmental
authorizations.  Future  regulations  could  materially  increase the  Company's
capital requirements and certain operating expenses in future years.

         In December  1993,  the U.S.  Environmental  Protection  Agency ("EPA")
published  draft rules which contain  proposed  regulations  affecting  pulp and
paper  industry  discharges  of  wastewater  and  gaseous  emissions,  generally
referred to as "Cluster Rules". The final rules are likely to be issued in 1997,
with a nominal  compliance  date of 2000.  These rules may  require  significant
changes in the pulping and/or bleaching process presently used in some U.S. pulp
mills,  including several of Fort James' mills. The  implementation of the rules
could increase the Company's capital  expenditures  between 1998 and 2001. Based
on its evaluation of the rules as they are currently  expected to be issued, the
Company believes that capital  expenditures of approximately $100 million may be
required to bring Fort James'  facilities into  compliance.  This estimate could
change,  depending  on  several  factors,  including  changes  to  the  proposed
regulations, new developments in control and process technology, and inflation.

         In  addition,   Fort  James  has  been   identified  as  a  potentially
responsible  party  ("PRP"),  along  with  others,  at  various  EPA  designated
Superfund  sites and is involved in remedial  investigations  and actions  under
federal and state laws.  Among these sites,  the  Company,  along with six other
current and former operators of pulp and paper  facilities,  has been identified
as a PRP by the U.S.  Fish and  Wildlife  Service  and other  state and  federal
agencies, including the EPA, and tribal entities, regarding contamination of the
lower  Fox  River  by  hazardous  substances.   The  agencies  and  tribes  seek
restoration  of the river and  natural  resources  damages.  At this  time,  the
Company,  in  conjunction  with other  PRPs,  has agreed to  participate  in the
funding of remedial studies and a natural  resources  damages  assessment and is
engaged in  negotiations  with federal and state  agencies and tribes to resolve
outstanding claims.

         It is  Fort  James'  policy  to  accrue  remediation  costs  when it is
probable  that such  costs  will be  incurred  and when  they can be  reasonably
estimated.  As of  September  28,  1997,  the  Company's  accrued  environmental
liabilities,  including  remediation and landfill  closure costs,  totaled $58.3
million. The Company periodically reviews the status of all significant existing
or  potential  environmental  issues  and  adjusts  its  accrual  as  necessary.
Estimates of costs for future  remediation  are  necessarily  imprecise  due to,
among other things,  the  identification of presently unknown  remediation sites
and the allocation of costs among PRP's.  The Company believes that its share of
the costs of cleanup for its current  remediation sites will not have a material
adverse impact on its consolidated financial position, but could have a material
effect on  consolidated  results of operations in a given quarter or year. As is
the case  with  most  manufacturing  and many  other  entities,  there can be no
assurance that the Company will not be named as a PRP at additional sites in the
future or that the costs  associated  with such  additional  sites  would not be
material.

         Litigation:

         In 1994,  Fort  James was sued in Morgan  County,  Alabama,  in a class
action and in Bridgeport, Connecticut, by certain former holders of Fort James's
10 3/4% Debentures due October 1, 2018. Most of these Debentures were retired by
means of a tender offer to all holders,  which  commenced on September 18, 1992.
The remainder was redeemed on November 2, 1992. Merrill Lynch & Co., which acted
as Fort James' dealer  manager for the tender,  was also named as a defendant in
the Alabama case. In general,  the complaints  alleged  violations of a covenant
prohibiting  use of lower cost borrowed  funds to redeem the  Debentures  before
October 1, 1998, and of various  disclosure  obligations,  and sought damages in
excess of $50  million  plus  punitive  damages in excess of $500  million.  The
Alabama  case was  certified  as a class  action and  holders of  slightly  over
one-half of the  Debentures  elected not to be part of the class.  In June 1997,
the Alabama  court  granted  Fort James  summary  judgement  on the claims,  and
dismissed the action. The plaintiffs have appealed to the Alabama Supreme Court.
Fort James believes that the Alabama case is without merit and intends to defend
it  vigorously.  Most of the  holders  electing  out of the  Alabama  class were
plaintiffs in the Connecticut case. In May 1996, Fort James settled the claim of
an institutional  holder of approximately  16.54% of the Debentures for $425,000
plus  reimbursement  of attorney's fees, and in October 1997, Fort James settled
all of  the  claims  of  the  Connecticut  plaintiffs,  representing  39% of the
Debentures for approximately $980,000 plus reimbursement of attorney's fees.

         In May 1997, the Attorney General of the State of Florida filed a civil
action in the  Gainesville  Division of the United States District Court for the
Northern  District of Florida against the Company and eight other  manufacturers
of sanitary paper products  alleging  violations of federal and state  antitrust
and unfair competition laws. The complaint seeks civil penalty under Florida law
of $1 million for each alleged violation against each defendant,  an unspecified
amount of treble damages and injunctive  relief.  Additional civil class actions
have been filed in various  federal and state courts against the same defendants
alleging  violations of federal and state antitrust  statutes and seeking treble
damages and injunctive relief.  The Judicial Panel for Multidistrict  Litigation
has  ordered  the cases  consolidated  in the United  States  District  Court at
Gainesville,  Florida.  State court  actions in California  and  Tennessee  with
similar  allegations may proceed  separately.  The litigation is in its earliest
stages.  The Company  believes that these cases are without merit and intends to
defend the litigation vigorously.
<PAGE>

         Although  the  ultimate  disposition  of legal  proceedings  cannot  be
predicted with certainty, it is the opinion of the Company's management that the
outcome of any claim which is pending or threatened, either individually or on a
combined basis,  will not have a materially  adverse effect on the  consolidated
financial  condition  of Fort  James but could  materially  affect  consolidated
results of operations in a given quarter or year.

9.       Segment Information

         Fort James' net sales and income from  operations  by business  segment
were as follows for the quarters and nine months ended  September 28, 1997,  and
September 29, 1996 (in millions):
<TABLE>
<CAPTION>

                                             Consumer Products                           
                                         -----------------------                         Communi-        Intersegment
                                               North                                      cations        elimination/
                                             America         Europe      Packaging        Papers           Corporate           Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>            <C>           <C>                 <C>          <C>     
Quarter ended September 1997
Net sales                                   $1,109.2         $438.5         $200.0        $117.8              $(40.1)      $1,825.4
Segment results before restructure
 and other unusual items                       219.9           48.3           22.7          11.0               (24.0)         277.9
Restructure and other unusual items
  income (expense)                                                                                             (53.9)         (53.9)
                                              _______        _______        _______       _______             _______        _______
Income from operations                         219.9           48.3           22.7          11.0               (77.9)         224.0

------------------------------------------------------------------------------------------------------------------------------------
Quarter ended September 1996
Net sales                                   $1,086.2         $491.6         $280.0        $116.2              $(48.1)      $1,925.9
Segment results before restructure
  and other unusual items                      217.8           54.5           22.9           4.8               (35.4)         264.6
Restructure and other unusual items
  income (expense)                              (5.8)          (4.7)          40.9                               (.1)          30.3
                                              _______        _______        _______       _______             _______        _______
Income from operations                         212.0           49.8           63.8           4.8               (35.5)         294.9

------------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 1997
Net sales                                   $3,313.8       $1,376.5         $595.0        $349.1             $(136.9)      $5,497.5
Segment results before restructure
  and other unusual items                      655.6          153.6           67.7           7.8               (70.1)         814.6
Restructure and other unusual items
  income (expense)                              57.7                                                           (53.9)           3.8
                                              _______        _______        _______       _______             _______        _______
Income from operations                         713.3          153.6           67.7           7.8              (124.0)         818.4

------------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 1996
Net sales                                   $3,322.5       $1,498.7         $941.1        $342.2             $(183.0)      $5,921.5
Segment results before restructure
  and other unusual items                      579.6          134.4           76.7          12.2               (93.8)         709.1
Restructure and other unusual items
  income (expense)                             (31.8)          (4.7)          37.6                              (1.2)          (0.1)
                                              _______        _______        _______       _______             _______        _______
Income from operations                         547.8          129.7          114.3          12.2               (95.0)         709.0

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


 </TABLE>
<PAGE>



Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
         AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

Overview

         Fort James reported net income of $23.5 million, or $.07 per share, for
the third quarter ended  September 28, 1997,  compared with $114.0  million,  or
$.52 per share for the same  quarter of the prior year.  Net sales for the third
quarter were $1,825  million,  compared to $1,926 million in the prior year. For
the nine months ended  September  28, 1997,  net income was $268.5  million,  or
$1.18 per share,  compared with $225.0 million,  or $1.00 per share in 1996. Net
sales for the first nine months of 1997 were $5,498  million  compared to $5,922
million in 1996.  Fort James net sales and income  from  operations  by business
segment is presented in Note 9 of Notes to  Consolidated  Financial  Statements.
The  comparability  of these  results  was  impacted  by  nonrecurring  charges,
extraordinary loss on early extinguishment of debt, the 1996 divestitures of the
Flexible Packaging and related Inks divisions, as well as several small domestic
Consumer  Products  facilities,  and the  estimated  impact of foreign  currency
translation.

Items Affecting Comparability

         Nonrecurring  charges for the quarters and nine months ended  September
28, 1997, and September 29, 1996, were as follows (in millions, except per share
amounts):
<TABLE>
<CAPTION>

                                                              September 28, 1997                September 29, 1996
                                                         ------------------------------  ----------------------------------
                                                                      Net                                Net
                                                                     Income     Per                    Income       Per
                                                           Gross     Impact    Share        Gross      Impact      Share
---------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>        <C>        <C>        <C>         <C>         <C>   
Quarters ended:
  Severance costs and asset
       write-downs                                                                          $16.6       $10.4       $.05
  Transaction costs                                       $53.9      $53.9      $.25
  Net gain on asset divestitures                                                            (46.9)      (24.2)      (.12)
---------------------------------------------------------------------------------------------------------------------------
     Total (income) expense                               $53.9      $53.9      $.25       ($30.3)     ($13.8)     ($.07)
===========================================================================================================================
Nine months ended:
  Severance costs and asset
       write-downs                                                                          $47.0       $28.9       $.16
  Transaction costs                                       $53.9      $53.9      $.25
  Net gain on asset divestitures                          (57.7)     (35.2)     (.17)       (46.9)      (24.2)      (.14)
---------------------------------------------------------------------------------------------------------------------------
     Total (income) expense                               ($3.8)     $18.7      $.08          $.1        $4.7       $.02
===========================================================================================================================
</TABLE>



         Net income for the quarters and nine months ended  September  28, 1997,
excluding  nonrecurring items and extraordinary loss on early  extinguishment of
debt, was $122.6  million or $.54 per share,  and $334.3  million,  or $1.49 per
share, respectively, compared with $100.2 million, or $.45 per share, and $233.0
million, or $1.04 per share in the same periods of 1996. Net sales for the third
quarter and nine months,  excluding divested operations and the estimated impact
of foreign currency translation, were $1,880 million and $5,611 million in 1997,
respectively, compared with $1,850 million and $5,537 million for the comparable
periods in 1996.



<PAGE>


North American Consumer Products Business

         Operating  profits before  restructure  and other unusual items for the
North American Consumer Products Business,  excluding results from divestitures,
increased  by 1%,  from  $218.1  million in the third  quarter of 1996 to $219.9
million in the current  quarter.  Net sales for the  quarters  increased  by 2%,
excluding revenues from divested operations, at $1,109 million in 1997, compared
to $1,086  million  in 1996.  Third  quarter  results  reflect  volume  gains of
approximately  2% in the  away-from-home  tissue  markets  and  benefits of cost
reduction  initiatives,   partially  offset  by  commercial  foodservice  volume
declines.   The   more   competitive  pricing  environment  experienced  by  the
Company in the retail tissue  markets is expected to continue for the near term.
For the nine months ended  September  28,  1997,  operating  profits,  excluding
divestitures,  were $655.6 million,  an increase of 13% over the comparable nine
months in 1996.  Excluding  divestitures,  revenues for the first nine months of
1997  increased 1% over the prior year.  The increase in  profitability  for the
first nine months of 1997 as compared to the prior year was also attributable to
strong sales  volumes,  and reduced wood costs,  combined  with  continued  cost
reduction benefits.

European Consumer Products Business

         Operating  profits  decreased  11% for the European  Consumer  Products
Business to $48.3  million,  compared to $54.5  million in the third  quarter of
1996 due to the effect of foreign  currency  translation.  Without  the  foreign
currency  effect,  operating  profits were  comparable to prior year  reflecting
increased price competition offset by cost reduction benefits. Operating profits
of $153.6  million for this  business  for the nine months ended  September  28,
1997,  were 14% above the  $134.4  million  reported  in the  prior  year.  This
improvement in the European  Consumer Products  Business'  operating profits for
the first nine  months of 1997 was  attributable  to a  combination  of stronger
finished  goods  volumes of  approximately  2% and lower raw material  costs and
other cost reductions,  partially offset by the strengthening of the U.S. dollar
and lower average pricing. The net impact of foreign currency translation to the
U.S.  dollar for the nine months ended  September  28, 1997,  was a reduction in
profits of  approximately  8%.  Net sales  adjusted  for the  effects of foreign
currency  translation  were  comparable  in both the third quarter and the first
nine months of 1997 and 1996.  While  finished  product sales  volumes  improved
compared to the first nine months of 1996,  revenues  continued to be negatively
impacted  by the  strengthening  of the U.S.  dollar  and a decline  in  average
pricing.

Packaging Business

         Excluding the results  attributable to the divested Flexible  Packaging
and Inks  divisions in 1996,  operating  profits  before  restructure  and other
unusual items for the Packaging Business decreased by 8% to $22.7 million in the
current  quarter from $24.8  million in the third  quarter of 1996 while profits
for the first  nine  months  decreased  4% to $67.7  million  in 1997 from $70.7
million in the prior year.  Net sales,  adjusted for the Flexible  Packaging and
Inks transactions, were relatively flat in the third quarters at $200 million in
1997 compared to $204 million in the prior year and for the first nine months at
$595 million in 1997 compared to $613 million in 1996. The current quarter's and
nine months' results reflected benefits of increased volumes for folding cartons
and  paperboard and cost  reductions,  offset by lower average  selling  prices,
increased  wastepaper costs and transition costs incurred in connection with new
customers.

Communications Papers Business

         Operating profits for the  Communications  Papers Business increased to
$11.0  million in the current  quarter from $4.8 million in the third quarter of
1996. The operating  profits for the nine months  decreased to $7.8 million from
$12.2 million for the same period in 1996.  Net sales for the third quarter were
similar at $118  million in 1997 and $116  million in 1996,  while net sales for
the nine months improved 2% to $349 million from $342 million in the prior year.
The current quarter's profits reflected increased volumes,  lower wood costs and
cost reduction initiatives, partially offset by lower average selling prices.






<PAGE>


Other Income and Expense Items

         General corporate expenses, before restructure and other unusual items,
totaled  $24.0  million  and $70.1  million in the third  quarter and first nine
months of 1997,  respectively,  compared to $35.4  million and $93.8 million for
the same periods in the prior year.  The majority of the decrease was related to
reductions in spending on new  integrated  management  information  systems,  as
design and installation  projects are completed and systems become  operational.
Interest  expense  decreased from $327.3  million to $277.6 million  between the
first nine months of 1996 and the first nine months of 1997.  This  decrease was
attributable  to the  reduction in average  outstanding  debt  combined with the
initial benefits from the Company's debt  refinancing  activities in 1997. Other
income  increased  to  $22.3  million  in  1997  from  $12.4  million  in  1996,
principally due to improved earnings of  unconsolidated  affiliates and gains on
sales of assets.  The change in the  effective tax rate for 1997 is discussed in
Note 4 of Notes to Consolidated Financial Statements.  The extraordinary loss on
early extinguishment of debt of $47.1 million, net of taxes, for the nine months
ended  September  28,  1997,  primarily  relates  to the  debt  refinancings  as
described in Note 6 of Notes to Consolidated Financial Statements.

Adoption of Accounting Pronouncement

         In June 1997, the Financial Accounting Standards Board issued Statement
No. 130,  "Reporting  Comprehensive  Income" ("SFAS 130") which is effective for
periods beginning after December 15, 1997,  including interim periods.  SFAS 130
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements,  either in the
statement of operations or a separate statement. Additionally, SFAS 130 requires
the display of the accumulated balance of other comprehensive  income. Note 1 of
Notes to  Consolidated  Financial  Statements  describes the pro forma impact of
SFAS  130 for the  quarters  and nine  months  ended  September  28,  1997,  and
September 29, 1996.

         In June 1997,  the  Financial  Accounting  Standards  Board also issued
Statement No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  ("SFAS  131")  which is  effective  for  periods  beginning  after
December 15, 1997, including interim periods after the year of initial adoption.
SFAS 131 established  standards for the way public companies report  information
about  operating  segments  in both  interim  and annual  financial  statements,
including related disclosures about products and services, geographic areas, and
major  customers.  The Company has not determined  what, if any, impact SFAS 131
will have on the operating  segments  reported nor the impact SFAS 131 will have
on the related disclosures.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement No. 128,  "Earnings  per Share"  ("SFAS 128"),  which is effective for
periods  ending after December 15, 1997,  including  interim  periods.  SFAS 128
establishes standards for computing and presenting earnings per share ("EPS") by
replacing  primary EPS with the  presentation  of basic EPS and  requiring  dual
presentation of basic and diluted EPS on the face of the income statement.  Note
1 of Notes to Consolidated  Financial  Statements describes the pro forma impact
of SFAS 128 for the  quarters  and nine months ended  September  28,  1997,  and
September 29, 1996.

Year 2000

         The  Company  has  developed  plans to address  the  possible  exposure
related to the impact on its computer  systems of the Year 2000.  Key  financial
information  and operational  systems have been assessed,  and the Company is in
the process of executing the plans to modify systems prior to December 31, 1999.
The financial  impact of making the required  system changes has not been and is
not expected to be material to the Company's  consolidated financial position or
results of operations.



<PAGE>


FINANCIAL CONDITION

         Cash provided by operating  activities  totaled  $564.5  million in the
first nine  months of 1997,  compared  with the $803.9  million  provided in the
prior year. This decrease in cash provided by operating activities resulted from
a payment for the unwinding of the Company's  foreign currency hedge (See Note 5
of Notes  to  Consolidated  Financial  Statements)  and  increases  in  accounts
receivable and inventory.  Inventory  increases  occurred in anticipation of the
possible  retirement  of  older,  less  efficient   machines,   which  is  being
considered.  The Company's  current ratio was 1.2 as of September 28, 1997,  and
December 29, 1996. Capital expenditures decreased to $313.5 million for the nine
months ended September 28, 1997, from $328.7 million in the first nine months of
1996 due to  divested  operations  partially  offset by spending on a new tissue
machine at the  Savannah,  Georgia mill  scheduled for  completion in 1999.  The
Company  currently  anticipates 1997 annual capital spending to approximate $500
million.

         Total indebtedness  decreased by $415 million from $4,434 million as of
December 29, 1996,  to $4,019  million as of September 28, 1997. As of September
28, 1997, the Company had outstanding  borrowings of approximately  $885 million
supported by revolving credit facilities. These borrowings included $793 million
outstanding  under such  facilities,  $69  million of  commercial  paper and $23
million of money market notes.  Total outstanding debt as of September 28, 1997,
included  approximately  $1,042  million  of fixed  rate and  $2,977  million of
floating rate obligations.  Note 5 of Notes to Consolidated Financial Statements
describes the Company's interest rate swap agreements.

         In connection  with the merger,  Fort James undertook a plan (the "Debt
Refinancing  Plan")  designed to  refinance an  aggregate  of  approximately  $2
billion  principal  amount  of debt of Fort  James  and  Fort  Howard.  The Debt
Refinancing  Plan is expected to result in a  reduction  of interest  expense of
approximately  $50 million  annually.  In connection  with the Debt  Refinancing
Plan, the Company incurred a $47.1 million, net of taxes, extraordinary loss for
prepayment  penalties.  An additional  extraordinary charge of approximately $80
million,  net of taxes,  is  anticipated to be recorded in the fourth quarter on
completion of the Debt Refinancing Plan.

                  At the  time of the  merger,  as the  first  step in the  Debt
Refinancing  Plan,  Fort James and Fort Howard  entered  into a new $2.5 billion
bank credit  facility  (the "New Credit  Facility")  and  borrowed  $666 million
thereunder to replace  certain of the pre-merger bank credit  facilities.  As of
September  28,  1997,  the Company had $661  million  outstanding  under the New
Credit Facility. Additionally, on August 13, 1997, prior to the effectiveness of
the  merger,  Fort James  repurchased  and  retired  $200  million in  aggregate
principal  amount of its 9.77% Senior Notes due 2014 with proceeds from previous
divestitures  and excess  cash from  operations.  As the second step in the Debt
Refinancing Plan, on September 8, 1997, Fort Howard commenced cash tender offers
for approximately  $1.47 billion of its outstanding  public debt securities and,
upon expiration of the tender offers in the fourth quarter, purchased a total of
$1.28 billion of such debt  securities  as follows:  (i) $89.9 million of 8 1/4%
Senior  Notes due 2002,  (ii) $395.0  million of 9 1/4%  Senior  Notes due 2001,
(iii) $559.3  million of 9% Senior  Subordinated  Notes due 2006 and (iv) $234.2
million of 10%  Subordinated  Notes due 2003.  The  tender  offers  were  funded
through a  combination  of  borrowings  under the New  Credit  Facility  and the
issuance of $720 million aggregate  principal amount of notes.  These notes were
issued subsequent to the end of the quarter,  on September 29, 1997, as follows:
(i) $100  million 6 1/2%  Senior  Notes due 2002,  (ii) $320  million 6?% Senior
Notes due 2004 and (iii) $300 million 6?% Senior Notes due 2007.

         During  the  third  quarter  of 1997,  all  outstanding  shares  of the
Company's  Series P 9% Cumulative  Convertible  Preferred  Stock,  having a face
value of $287.5 million,  were converted into  approximately 15.3 million shares
of Common Stock. On October 1, 1997, subsequent to the end of the third quarter,
the Company  redeemed all outstanding  shares of its Series O 8 1/4 % Cumulative
Preferred Stock for a redemption  price of  approximately  $98.1 million.  These
actions  will reduce  aggregate  cash  dividends  by  approximately  $25 million
annually.

         As part of the Company's ongoing program of timberland divestitures, on
April 29, 1997,  pursuant to an offering  memorandum  dated  September 12, 1996,
Fort James  completed  the sale of  approximately  95,000  acres of  timberlands
located in Alabama  and  Mississippi  for cash  proceeds  of $111  million.  The
Company recorded a second quarter after-tax gain of $35.2 million on this sale.

         Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities  Litigation Reform Act of 1995. Such
forward-looking  statements  are not  guarantees of future  performance  and are
subject to risks and  uncertainties  that could cause actual results and Company
plans and objectives to differ  materially from those projected.  Such risks and
uncertainties  include,  but are not limited to,  general  business and economic
conditions; competitive pricing pressures for the Company's products; changes in
raw material, energy and other costs; opportunities that may be presented to and
pursued  by  the  Company;   determinations   by  regulatory  and   governmental
authorities;  the ability to successfully  integrate James River and Fort Howard
businesses; and the ability to achieve synergistic and other cost reductions and
efficiencies.




<PAGE>


PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.

         None.

Item 2.  CHANGES IN SECURITIES.

         None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         A  Special  Meeting  of  Shareholders  was  held on  August  12,  1997.
Shareholders  of  record  of the  Company's  Common  Stock  and its  Series P 9%
Cumulative  Convertible  Preferred  Stock at the close of  business  on June 30,
1997, were entitled to vote at the meeting.

         The  Shareholders  approved i) the  issuance of shares of common  stock
pursuant to the merger with Fort Howard  Corporation,  ii) the  amendment to the
Articles of Incorporation to increase the number of authorized  common shares to
500 million and to change the corporate name to "Fort James  Corporation",  iii)
the amendment of the Bylaws of the Company to increase the fixed number of board
members to 15 and iv) the amendment to the James River 1996 Stock Incentive Plan
to increase the number of shares  available for issuance by eight million and to
provide  performance-based  awards  under  such  plan.  The  votes  were cast as
follows:
<TABLE>
<CAPTION>

                                                          Voted         Voted    Vote Withheld         Broker
                                                            For       Against     or Abstained      Non-Votes
------------------------------------------------ --------------- ------------- ---------------- --------------

<S>                                                  <C>              <C>              <C>          <C>
   i) Share issuance                                 80,341,887       592,687          316,742
  ii) Amendment of Articles of Incorporation         79,660,881     1,144,423          446,012
 iii) Amendment of Bylaws                            79,996,235       789,854          465,227
 iv) Amendment of Incentive Plan                     74,308,525     6,195,415          747,376

</TABLE>

Item 5.  OTHER INFORMATION.

         None.



<PAGE>


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits:

                  The exhibits  listed below are filed as part of this quarterly
                  report.  Each  exhibit  is  listed  according  to  the  number
                  assigned to it in the Exhibit  Table of Item 601 of Regulation
                  S-K.

                  Exhibit                                                Starts
                  Number                                                 on Page
--------------------------------------------------------------------------------
                  3(a) James River  Corporation  of Virginia  Amended and
                         Restated  Articles of Incorporation as amended 
                         effective January 4, 1990 - filed herewith.        E-1

                  3(b) James River  Corporation of Virginia  Articles of
                       Amendment to the Amended and Restated Articles of
                       Incorporation  Designating  the  Series  O 8-1/4%
                       Cumulative  Preferred  Stock  ($10.00 par value),
                       effective October 1, 1992 - filed herewith.          E-2

                  3(c) Articles of Amendment to the Amended and Restated
                       Articles   of   Incorporation   of  James   River
                       Corporation of Virginia  Designating the Series P
                       9% Cumulative Convertible Preferred Stock ($10.00
                       par value)- filed herewith.                          E-3

                  3(d) Articles of  Amendment to Amended and  Restated  
                         Articles of  Incorporation as of August 13, 1997 
                         - filed herewith.                                  E-4

                  3(e) Amended and Restated Bylaws of Fort James 
                         Corporation as of August 13, 1997 - 
                         filed herewith.                                    E-5

                 10(a) Stockholders Agreement dated as of August 13, 1997 
                         - filed herewith.                                  E-6

                 10(b) Registration Rights Agreement dated as of 
                         August 13,  1997  -  filed herewith.               E-7

                 10(c) Amended and Restated Employment Agreement,  dated
                       as of June 10, 1997 between James River and Miles
                       Marsh  (incorporated by reference to Exhibit 10.3
                       to the  Company's  filing of Form S-4 dated  June
                       26, 1997).

                 10(d) Amended and Restated Employment Agreement,  dated
                       as of June  10,  1997  between  James  River  and
                       Michael T. Riordan  (incorporated by reference to
                       Exhibit 10.4 to the Company's  filing of Form S-4
                       dated June 26, 1997).

                 10(e) Form  of   Employment   Agreement   between   the
                       Registrant and executive  officers of Fort Howard
                       (incorporated by reference to Exhibit 10.5 to the
                       Company's  filing  of Form  S-4  dated  June  26,
                       1997).

                 10(f) Form  of   Employment   Agreement   between   the
                       Registrant   and   executive   officers   of  the
                       Registrant  (incorporated by reference to Exhibit
                       10.5 to the  Company's  filing  of Form S-4 dated
                       June 26, 1997).
<PAGE>

                  Exhibit                                                Starts
                  Number                  Description                    on Page
--------------------------------------------------------------------------------

                 10(g) Fort  James  Corporation   $2,500,000,000  Credit
                       Agreement  dated as of August 13,  1997,  amended
                       and restated October 31, 1997 - filed herewith.      E-8

                  11   Computation of Earnings per Share - filed herewith.  E-9

                  12   Computation of Ratio of Earnings to Fixed Charges - 
                         filed herewith.                                   E-10

                 27(a) Financial  Data  Schedules  for the nine months  
                         ended September 28, 1997(filed electronically only).

                 27(b) Financial  Data  Schedules  restated for the nine
                       months ended September 29, 1996 (filed
                       electronically only).

<TABLE>
<CAPTION>

         (b)        Reports on Form 8-K:

                  During the quarter ended  September 28, 1997,  and  subsequent
                  thereto,  the Company filed the following  Current  Reports on
                  Form 8-K:

                  Date of Report                                           Event Reported
-------------------------------------------------------------------------------------------------------------------------
                    <S>                     <C>                                                                          
                   July 2,  1997             The  Company  filed a  Registration  Statement on Form S-4 relating to the 
                                             proposed merger with Fort Howard Corporation.  

                   July 24, 1997             The Company  published a press release  announcing its results of operations
                                             for the second quarter and six months ended June 29, 1997.

                  August 7, 1997             The Company  published a press release  announcing  that the Department of 
                                             Justice has completed its regulatory review of the merger of James River 
                                             and Fort Howard and will take no action.

                  August 8, 1997             The Company  filed pro forma  condensed  combined  financial  information  for
                                             James River and Fort Howard for the six months ended June 29,  1997,  and June
                                             30, 1996, as well as a condensed combined balance sheet as of June 29, 1997.

                  August 12, 1997            The Company published a press release  announcing the shareholder  approval of
                                             the merger with Fort Howard Corporation.

                  August 13, 1997            The Company filed Fort Howard Corporation  consolidated  financial  statements
                                             as of December 31, 1996,  and December 31, 1995,  and for each of the years in
                                             the  three-year  period ended  December 31, 1996, and as of June 30, 1997, and
                                             1996, and for the quarters and six months then ended.


</TABLE>
<PAGE>
     
<TABLE>
                    <S>                     <C>    
                  Date of Report                            Event Reported
--------------------------------------------------------------------------------------------------------------------------

                   August 13, 1997          The Company  filed a press  release  announcing  the  completion of the merger
                                            with  Fort  Howard   Corporation  and  filed  pro  forma  condensed   combined
                                            financial   information  for  Fort  James  Corporation  for  the  years  ended
                                            December 29, 1996,  December 31, 1995,  and December 25, 1994, and for the six
                                            months  ended  June  29,  1997,  and  June 30,  1996,  as well as a  condensed
                                            combined balance sheet as of June 29, 1997.

                  August 13, 1997           The Company  filed  supplemental  consolidated  financial  statements  of Fort
                                            James  Corporation  as of December 29, 1996,  December 31, 1995,  and June 28,
                                            1997,  and for each of the years in the  three-year  period ended December 29,
                                            1996,  and for the quarters  and six months ended June 29, 1997,  and June 30,
                                            1996.

                  September 15,  1997       The  Company  filed  the consent of  Arthur  Anderson  LLP relating to the  
                                            audited  financial statements of Fort Howard Corporation.

                  October 23, 1997          The Company  published a press  release  announcing  its results of operations
                                            for the third quarter and nine months ended September 28, 1997.


</TABLE>

<PAGE>



                                                        SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             FORT JAMES CORPORATION


                            By:/s/William A. Paterson
                               William A. Paterson
                               Senior Vice President & Controller
                               (Principal Accounting Officer)


                             By:/s/Ernst A. Haberli
                                Ernst A. Haberli
                                Chief Financial Officer
                                (Principal Financial Officer)



Date:  November 6, 1997