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: June 28, 1998           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
   incorporation or organization)                  Identification No.)


  1650 Lake Cook Road, Deerfield, IL                  60015-4753
------------------------------------------------------------------------------
(Address of principal executive offices)              (Zip Code)


      Registrant's telephone number, including area code: (847) 317-5000
------------------------------------------------------------------------------


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

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 July 31, 1998:

                               220,578,642 shares


<PAGE>



                             FORT JAMES CORPORATION
                          QUARTERLY REPORT ON FORM 10-Q
                                  June 28, 1998


                                TABLE OF CONTENTS

                                                                       Page No.
PART I.  FINANCIAL INFORMATION:

      ITEM 1. Financial Statements:

              Consolidated Balance Sheets as of June 28, 1998 
                and December 28, 1997                                         3

              Consolidated  Statements  of  Operations  for the 
                quarters and six months ended June 28, 1998 and 
                June 29, 1997                                                 5

              Consolidated Statements of Cash Flows for the six 
                months ended June 28, 1998 and June 29, 1997                  6

              Notes to Consolidated Financial Statements                      7

      ITEM 2. Management's Discussion and Analysis of Financial
               Condition and Results of Operations                           13

      ITEM 3. Quantitative  and Qualitative  Disclosures  About Market
               Risk                                                          17


PART II.  OTHER INFORMATION:

      ITEM 1.  Legal Proceedings                                             18

      ITEM 2.  Changes in Securities                                         18

      ITEM 3.  Defaults Upon Senior Securities                               18

      ITEM 4.  Submission of Matters to a Vote of Security Holders           18

      ITEM 5.  Other Information                                             18

      ITEM 6.  Exhibits and Reports on Form 8-K                              18

      SIGNATURES                                                             19


                                        2


<PAGE>





PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                             FORT JAMES CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                       June 28, 1998 and December 28, 1997
                        (in millions, except share data)



                                                  June    December
                                                   1998      1997
-----------------------------------------------------------------
ASSETS:

Current assets:
   Cash and cash equivalents                       $ 6.0    $ 33.6
   Accounts receivable                             916.7     787.8
   Inventories                                     854.7     854.3
   Deferred income taxes                           191.0     214.4
   Prepaid expenses and other current assets        23.3      26.4
-----------------------------------------------------------------

     Total current assets                        1,991.7   1,916.5
-----------------------------------------------------------------

Property, plant and equipment                    7,913.7   7,784.1
Accumulated depreciation                        (3,374.6) (3,218.8)
-----------------------------------------------------------------

   Net property, plant and equipment             4,539.1   4,565.3

Goodwill                                           619.9     636.9

Other assets                                       604.1     614.5
-----------------------------------------------------------------
     Total assets                              $ 7,754.8 $ 7,733.2
=================================================================

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

                                       3

<PAGE>



                             FORT JAMES CORPORATION
                     CONSOLIDATED BALANCE SHEETS, Continued
                        (in millions, except share data)

<TABLE>
<CAPTION>


                                                                            June         December
                                                                            1998           1997
-------------------------------------------------------------------------------------------------

<S> <C>

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
    Accounts payable                                                       $ 641.8        $ 636.5
    Accrued liabilities                                                      799.6          913.0
    Current portion of long-term debt                                         39.1           34.4
-------------------------------------------------------------------------------------------------

       Total current liabilities                                           1,480.5        1,583.9
-------------------------------------------------------------------------------------------------

Long-term debt                                                             4,064.7        4,155.5
Deferred income taxes                                                        717.3          650.8
Accrued postretirement benefits
    other than pensions                                                      467.8          474.8
Other long-term liabilities                                                  263.8          283.9
-------------------------------------------------------------------------------------------------

       Total liabilities                                                   6,994.1        7,148.9
-------------------------------------------------------------------------------------------------

Preferred stock, $10 par value, 5.0 million
    shares authorized, issuable in series;
    3.3 million shares outstanding December 28, 1997                            -           352.7

Common stock, $.10 par value, 500.0 million
    shares authorized; shares outstanding,
    June 28, 1998 -- 220.5 million and
    December 28, 1997 -- 209.3 million                                        22.1           20.9
Additional paid-in capital                                                 3,185.0        2,807.9
Accumulated comprehensive loss                                              (168.6)        (137.6)
Accumulated deficit                                                       (2,277.8)      (2,459.6)
-------------------------------------------------------------------------------------------------

       Total shareholders' equity                                            760.7          584.3
-------------------------------------------------------------------------------------------------

       Total liabilities and shareholders' equity                        $ 7,754.8      $ 7,733.2
=================================================================================================

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

</TABLE>

                                       4

<PAGE>




                             FORT JAMES CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS 
           For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
                         June 28, 1998 and June 29, 1997
                     (in millions, except per share amounts)

<TABLE>
<CAPTION>



                                                                                 Quarter                       Six months
                                                                        -----------------------------  -----------------------------
                                                                            1998           1997             1998          1997
-----------------------------------------------------------------------------------------------------------------------------------

<S> <C>


Net sales                                                                $ 1,857.0      $ 1,854.3        $ 3,652.6     $ 3,672.1
Cost of goods sold                                                         1,268.0        1,286.1          2,511.1       2,564.2
Selling and administrative expenses                                          284.8          282.3            568.6         571.2
Restructure and other unusual items                                            9.7          (57.7)            17.2         (57.7)
--------------------------------------------------------------------------------------------------------------------------------
    Income from operations                                                   294.5          343.6            555.7         594.4

Interest expense                                                              73.9           94.5            148.9         190.3
Other income (expense), net                                                   (6.3)           4.1              2.5          11.2
--------------------------------------------------------------------------------------------------------------------------------
    Income before income taxes and extraordinary item                        214.3          253.2            409.3         415.3

Income tax expense                                                            78.1          103.5            155.5         168.4
--------------------------------------------------------------------------------------------------------------------------------
     Income before extraordinary item                                        136.2          149.7            253.8         246.9

Extraordinary loss on early extinguishment of debt, net of taxes               -             (0.6)            (2.6)         (1.9)
--------------------------------------------------------------------------------------------------------------------------------
     Net income                                                              136.2          149.1            251.2         245.0

Preferred dividend requirements                                                -            (14.6)            (5.2)        (29.2)
--------------------------------------------------------------------------------------------------------------------------------
    Net income available to common stockholders                            $ 136.2        $ 134.5          $ 246.0       $ 215.8
================================================================================================================================


Basic earnings per share:
    Income before extraordinary item                                         $ 0.63         $ 0.71          $ 1.16       $  1.14
    Extraordinary loss on early extinguishment of debt                         -              -              (0.01)         -
--------------------------------------------------------------------------------------------------------------------------------
         Net income                                                          $ 0.63         $ 0.71          $ 1.15       $  1.14
--------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding                                    217.6          189.1           213.1         188.5
================================================================================================================================


Diluted earnings per share:
    Income before extraordinary item                                         $ 0.62         $ 0.68           $ 1.15      $  1.11
    Extraordinary loss on early extinguishment of debt                         -              -               (0.01)         -
--------------------------------------------------------------------------------------------------------------------------------
         Net income                                                          $ 0.62         $ 0.68           $ 1.14      $  1.11
--------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and
     common share equivalents outstanding                                     220.3          216.3            215.6        206.2
================================================================================================================================


Cash dividends per common share                                              $ 0.15         $ 0.15           $ 0.30      $  0.30
================================================================================================================================

</TABLE>


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


                                       5

<PAGE>



                             FORT JAMES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       For the Six Months (26 Weeks) Ended
                         June 28, 1998 and June 29, 1997
                                  (in millions)

<TABLE>
<CAPTION>


                                                                                     1998          1997
-------------------------------------------------------------------------------------------------------

<S> <C>

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
  Net income                                                                       $ 251.2       $ 245.0
  Depreciation expense and cost of timber harvested                                  232.7         242.2
  Amortization of goodwill                                                             9.7          10.2
  Deferred income tax provision                                                      103.1          77.6
  Restructure and other unusual items                                                 17.2         (57.7)
  Loss on early extinguishment of debt, net of tax                                     2.6           1.9
  Change in current assets and liabilities:
     Accounts receivable                                                            (133.8)        (46.1)
     Inventories                                                                       0.1         (46.7)
     Prepaid expenses and other current assets                                         1.9          15.5
     Accounts payable and accrued liabilities                                         (4.6)        (24.4)
     Restructure and integration payments                                            (95.9)        (13.3)
  Foreign currency hedge                                                               -           (31.5)
  Retirement benefits expense in excess of funding                                   (21.1)         (4.6)
  Other, net                                                                         (21.6)        (26.0)
--------------------------------------------------------------------------------------------------------

      Cash provided by operating activities                                          341.5         342.1
--------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
  Expenditures for property, plant and equipment                                    (238.8)       (178.1)
  Proceeds from sale of assets                                                        10.2         113.3
  Other, net                                                                          (1.6)          7.9
--------------------------------------------------------------------------------------------------------

      Cash used for investing activities                                            (230.2)        (56.9)
--------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
  Additions to long-term debt                                                        384.8          75.2
  Payments of long-term debt                                                        (464.0)       (170.1)
  Common and preferred stock cash dividends paid                                     (73.4)        (54.8)
  Redemption of preferred stock                                                       (6.6)          -
  Proceeds from exercise of stock options                                             23.6          47.1
  Other, net                                                                          (3.3)          -
--------------------------------------------------------------------------------------------------------

      Cash used for financing activities                                            (138.9)       (102.6)
--------------------------------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     (27.6)        182.6
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        33.6          34.6
--------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $   6.0       $ 217.2
========================================================================================================

</TABLE>


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

                                       6

<PAGE>




                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Significant Accounting Policies

      Basis of Presentation:

      The consolidated financial statements of Fort James Corporation (the
"Company" or "Fort James") have been prepared to give retroactive effect to the
merger of a wholly-owned subsidiary of James River Corporation of Virginia
("James River") with and into Fort Howard Corporation ("Fort Howard") on August
13, 1997, which was accounted for as a pooling of interests. In connection with
the merger, James River was renamed Fort James Corporation. 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. In the opinion of management, the accompanying
unaudited consolidated financial statements of Fort James contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of June 28, 1998, its
results of operations for the quarters (13 weeks) and six months (26 weeks)
ended June 28, 1998, and June 29, 1997, and its cash flows for the six months
(26 weeks) ended June 28, 1998 and June 29, 1997. The balance sheet as of
December 28, 1997, was derived from audited financial statements as of that
date. The results of operations for the quarter and six months ended June 28,
1998, are not necessarily indicative of the results to be expected for the full
year.

      Certain amounts in the financial statements and supporting footnote
disclosures have been reclassified to conform to the current year's
classification.

      Adoption of Accounting Pronouncements:

      In 1998, the Company adopted Financial Accounting Standards Board ("FASB")
Statement No. 130, "Reporting Comprehensive Income." Comprehensive income for
the six months ended June 28, 1998, and June 29, 1997, was $220.2 million and
$144.0 million, respectively. The difference between net income and
comprehensive income is primarily due to unrealized foreign currency translation
losses and unrealized holding gains and losses on available-for-sale securities.

      In 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for the way
public companies report information about operating segments, including related
disclosure about products and services, geographic areas and major customers.
The Company has not determined what, if any, impact Statement No. 131 will have
on its reported operating segments and the related disclosures. Statement No.
131 is effective for periods ending after December 15, 1998.

      In  February  1998,  the FASB  issued  Statement  No.  132,  "Employer's
Disclosures about Pensions and Other Postretirement  Benefits--an  amendment to
FASB  Statements  No. 87, No. 88, and No. 106" which will  require the Company
to revise  disclosures about pension and other  postretirement  benefit plans.
Statement No. 132 is effective for fiscal years  beginning  after December 15,
1997.

      In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement requires the
recognition of all derivatives in the statement of financial position as either
assets or liabilities and their measurement at fair value. Depending upon the
nature of the derivative, changes in fair value are either recognized in other
comprehensive income or in earnings. 

                                       7

<PAGE>


The Company has not determined what, if any, impact Statement No. 133 will have 
on the Company's results or financial position. Statement No. 133 is effective 
for fiscal years beginning after June 15, 1998.

2.     Restructure and Other Unusual Items

      Results for the quarter and six months ended June 28, 1998 included
restructure and other unusual costs of $9.7 million ($5.9 million net of taxes,
or $0.03 per diluted share) and $17.2 million ($10.5 million net of taxes, or
$0.05 per diluted share), respectively. The Company recorded charges of
approximately $43 million and $50 million for the quarter and six months,
respectively, for severance, relocation and other merger-related costs which
were not accruable in 1997 under generally accepted accounting principles. Such
costs were partially offset by contract terminations on terms more favorable
than anticipated in the restructure plan.

      Since December 28, 1997, accruals for restructure costs have been reduced
by approximately $135.2 million for charges related to facility closures and
asset write-downs, severance, contract terminations, and other restructure
costs. Payments for restructure related expenses, including merger-related costs
which were not accruable in 1997, totaled $95.9 million for the six months ended
June 28, 1998.

      In the second quarter of 1997, the Company realized a gain of $57.7
million ($35.2 million net of taxes, or $0.16 per diluted share) on the sale of
southern timberlands.

3.     Net Income Per Common Share and Common Share Equivalent

      Income and share information used in determining earnings per share for
the quarters and six months ended June 28, 1998, and June 29, 1997, were
calculated as follows (in millions):

<TABLE>
<CAPTION>

                                                                              1998                     1997
                                                                     -----------------------------------------------
                                                                       Income       Shares      Income     Shares
--------------------------------------------------------------------------------------------------------------------

<S> <C>

QUARTER:
Income before extraordinary item                                      $ 136.2                  $ 149.7
Less:  Preferred stock dividends                                          -                      (14.6)
--------------------------------------------------------------------------------------------------------------------
Amounts used to compute basic earnings per share                        136.2        217.6       135.1      189.1
Effect of dilutive securities:
   Options                                                                             2.7                    2.3
   Convertible preferred stock                                                         -          12.6       24.9
--------------------------------------------------------------------------------------------------------------------
Amounts used to compute diluted earnings per share                    $ 136.2        220.3     $ 147.7      216.3
====================================================================================================================


SIX MONTHS:
Income before extraordinary item                                      $ 253.8                  $ 246.9
Less:   Preferred stock dividends                                        (5.2)                   (29.2)
--------------------------------------------------------------------------------------------------------------------
Amounts used to compute basic earnings per share                        248.6        213.1       217.7      188.5
Effect of dilutive securities:
   Options                                                                             2.5                    2.4
   Convertible preferred stock                                                         -          12.9       15.3
--------------------------------------------------------------------------------------------------------------------
Amounts used to compute diluted earnings per share                    $ 248.6        215.6     $ 230.6      206.2
====================================================================================================================

</TABLE>


      Series K, L and N preferred stocks were antidilutive for all periods
presented. An immaterial number of outstanding options to purchase shares of
common stock for which the exercise price of the option was greater than the
average market price of the common shares were excluded from the computation of
diluted earnings per share.

                                       8

<PAGE>



4.    Other Income (Expense)

      The components of other income (expense) were as follows for the quarter
and six months ended June 28, 1998, and June 29, 1997 (in millions):

<TABLE>
<CAPTION>


                                                                             Quarter                        Six months
                                                                  -----------------------------------------------------------------
                                                                       1998           1997              1998            1997
-----------------------------------------------------------------------------------------------------------------------------------

<S> <C>

Interest and investment income                                        $ 0.5           $ 3.2             $ 1.4           $ 4.9
Equity in (loss) earnings of unconsolidated affiliates                 (2.1)            1.0              (2.3)            4.0
Gain on sale of assets                                                  0.8             0.5               2.8             2.6
Minority interests                                                     (0.7)           (0.1)             (1.8)            -
Foreign currency exchange gain (loss)                                  (5.1)           (0.1)              0.2            (0.4)
Other, net                                                              0.3            (0.4)              2.2             0.1
-----------------------------------------------------------------------------------------------------------------------------------

    Total other income (expense)                                     $ (6.3)          $ 4.1             $ 2.5          $ 11.2
===================================================================================================================================

</TABLE>


5.    Income Taxes

     The Company's effective income tax rate, excluding tax effects of
restructure and other unusual items, was 38% for the six months ended June 28,
1998, compared to 40.8% for the first six months of 1997. The decrease in the
effective tax rate from the prior year was primarily the result of the benefits
of tax planning actions.

6.     Inventories

      The components of inventories were as follows as of June 28, 1998, and
December 28, 1997 (in millions):

<TABLE>
<CAPTION>


                                                              June           December
                                                              1998             1997
-------------------------------------------------------------------------------------

<S> <C>

Raw materials                                                 $ 176.9          $ 184.3
Finished goods and work in process                              549.5            550.2
Stores and supplies                                             165.6            159.4
--------------------------------------------------------------------------------------
                                                                892.0            893.9
Reduction to state certain inventories
  at last-in, first-out cost                                    (37.3)           (39.6)
--------------------------------------------------------------------------------------

    Total inventories                                         $ 854.7          $ 854.3
======================================================================================

</TABLE>

                                       9

<PAGE>



7.    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, including effluent and emission limitations, on the discharge of
materials into the environment 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.

      Fort James has been identified as a potentially responsible party ("PRP"),
along with others, at various U.S. Environmental Protection Agency ("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. These agencies and
tribes seek primary restoration of the river and natural resources damages. The
Company, in conjunction with other PRPs, is engaged in negotiations with federal
and state agencies and tribes to resolve outstanding claims.

      It is Fort James' policy to accrue remediation costs on an undiscounted
basis when it is probable that such costs will be incurred and when a range of
loss can be reasonably estimated. As of June 28, 1998, Fort James' accrued
environmental liabilities, including remediation and landfill closure costs,
totaled $53.8 million. The Company periodically reviews the status of all
significant existing or potential environmental issues and adjusts its accruals
as necessary. The accruals do not reflect any possible future insurance
recoveries. 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 PRPs. 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:

     During 1994, James River was sued in Morgan County, Alabama, in a class
action and in Bridgeport, Connecticut, by certain former holders of James
River's 10-3/4% Debentures due October 1, 2018 (the "Debentures"), all of which
were retired by means of a tender offer to all holders or redeemed on November
2, 1992. 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. In 1996 and 1997, the
Company settled the claims of an institutional holder and the Connecticut
plaintiffs, representing approximately 55 percent of the Debentures, for a total
of $1.4 million plus reimbursement of attorney's fees. In June 1997, the Alabama
court granted James River summary judgment on the claims and dismissed the
action. The plaintiffs appealed to the Alabama Supreme Court, which in a
decision dated June 19, 1998, affirmed the dismissal. The time within which the
plaintiffs could apply for further relief has expired. The Company has no
further liability in this matter.

                                       10

<PAGE>


      In May 1997, the Attorney General of the State of Florida filed a civil
action in the United States District Court for the Northern District of Florida
at Gainesville (The "Florida District Court"), against the Company and seven
other manufacturers of sanitary commercial paper products alleging violations of
federal and state antitrust and unfair competition laws. The complaint seeks
damages on behalf of the state under Florida law of $1 million for each
violation against each defendant, unspecified treble damages and injunctive
relief. That filing was followed by numerous other filings in federal courts on
behalf of an alleged class of direct purchasers, all seeking similar damages for
similar alleged violations. The class actions were consolidated in the Florida
District Court, and in July 1998, the Court conditionally certified the class.
State class actions also have been filed in certain states, on behalf of an
alleged class of indirect purchasers, seeking similar damages for similar
alleged violations under state law. The Company believes that these cases are
without merit and is vigorously defending both the federal and state actions.

     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 material adverse effect on the consolidated
financial condition of Fort James but could have a material effect on
consolidated results of operations in a given quarter or year.


                                       11

<PAGE>




8.    Segment Information

      Fort James' net sales and income from operations by business segment were
as follows for the quarters and six months ended June 28, 1998, and June 29,
1997 (in millions):

<TABLE>
<CAPTION>


                                                        Consumer Products
                                                   ---------------------------               Communi-     Intersegment
                                                       North                                 cations      elimination/
                                                      America       Europe     Packaging      Papers        Corporate         Total
-----------------------------------------------------------------------------------------------------------------------------------

<S> <C>

QUARTER ENDED JUNE 1998
Net sales                                         $ 1,133.3     $ 466.2     $ 185.9        $ 118.2         $ (46.6)      $ 1,857.0
Segment results before restructure
  and other unusual items                             245.4        57.4        14.6            8.0           (21.2)          304.2
Restructure and other unusual items                   (12.4)       (1.2)       (0.8)           -               4.7            (9.7)
----------------------------------------------------------------------------------------------------------------------------------
Income from operations                            $   233.0     $  56.2     $  13.8        $   8.0         $ (16.5)      $   294.5
==================================================================================================================================

QUARTER ENDED JUNE 1997
Net sales                                         $ 1,127.2     $ 465.4     $ 198.3        $ 112.0         $ (48.6)      $ 1,854.3
Segment results before restructure
  and other unusual items                             231.1        52.9        23.8            0.4           (22.3)          285.9
Restructure and other unusual items                    57.7         -           -              -               -              57.7
----------------------------------------------------------------------------------------------------------------------------------
Income from operations                            $   288.8     $  52.9     $  23.8        $   0.4         $ (22.3)      $   343.6
==================================================================================================================================

SIX MONTHS ENDED JUNE 1998
Net sales                                         $ 2,206.7     $ 924.2     $ 366.3        $ 245.1         $ (89.7)      $ 3,652.6
Segment results before restructure
  and other unusual items                             459.8       113.1        24.9           18.9           (43.8)          572.9
Restructure and other unusual items                   (15.0)       (1.2)       (1.8)           -               0.8           (17.2)
----------------------------------------------------------------------------------------------------------------------------------
Income from operations                            $   444.8     $ 111.9     $  23.1        $  18.9         $ (43.0)      $   555.7
==================================================================================================================================

SIX MONTHS ENDED JUNE 1997
Net sales                                         $ 2,204.6     $ 938.0     $ 395.0        $ 231.3         $ (96.8)      $ 3,672.1
Segment results before restructure
  and other unusual items                             435.7       105.3        45.0           (3.2)          (46.1)          536.7
Restructure and other unusual items                    57.7         -           -              -               -              57.7
----------------------------------------------------------------------------------------------------------------------------------
Income from operations                            $   493.4     $ 105.3     $  45.0        $  (3.2)        $ (46.1)      $   594.4
==================================================================================================================================

</TABLE>

                                       12


<PAGE>



 9.   Fort James Operating Company

      Fort James Operating Company ("FJOC") is an obligor of certain securities
registered under the Securities Act of 1933, thus subjecting them to reporting
requirements under Section 13 or 15 (d) of the Securities Exchange Act of 1934.
In accordance with Staff Accounting Bulletin No. 53, the following condensed
financial information for FJOC is presented in lieu of consolidated financial
statements because the securities are fully and unconditionally guaranteed by
Fort James and management has determined that such information is not material
to the holders of the securities (in millions):

<TABLE>
<CAPTION>


                                                                             Quarter ended                     Six months ended
                                                                    ----------------------------------  ----------------------------
                                                                       June 1998        June 1997          June 1998       June 1997
------------------------------------------------------------------------------------------------------------------------------------

<S> <C>

CONDENSED INCOME STATEMENT INFORMATION:
Net sales                                                             $ 1,245.8        $ 1,243.7         $ 2,439.2        $ 2,448.2
Gross profit                                                              387.9            380.3             748.4            727.0
Income before extraordinary item                                           54.5             74.9              97.7            119.7
Income before extraordinary item and nonrecurring
   and other unusual items                                                 58.0             74.9             105.8            119.7
Net income                                                                 54.5             74.3              95.1            117.8
====================================================================================================================================

</TABLE>


<TABLE>
<CAPTION>


                                                                          June           December
                                                                          1998             1997
------------------------------------------------------------------------------------------------

<S> <C>

CONDENSED BALANCE SHEET INFORMATION:
Current assets                                                          $ 981.0          $ 928.4
Noncurrent assets                                                       3,483.1          3,292.8
Current liabilities                                                       725.3            861.1
Noncurrent liabilities                                                  5,106.0          4,989.3
Deficit                                                                (1,367.2)        (1,629.2)
================================================================================================

</TABLE>


10.   Preferred Stock Redemption:

      In April 1998, the Company completed the redemption and conversion of its
 Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock, its Series
 L $14.00 Cumulative Convertible Exchangeable Preferred Stock and its Series N
 $14.00 Cumulative Convertible Exchangeable Preferred Stock (the "Preferred
 Stock"). Substantially all of the outstanding Preferred Stock was converted
 into 9.5 million shares of common stock with the balance redeemed for $1.8
 million in cash. The conversion will reduce annual dividend payments by $18.7
 million.

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

RESULTS OF OPERATIONS

Overview

      Fort James reported net income of $136.2 million, or $0.62 per diluted
share, for the quarter ended June 28, 1998, compared with $149.1 million, or
$0.68 per diluted share for the same quarter of the prior year. For the six
months ended June 28, 1998, net income was $251.2 million, or $1.14 per diluted
share, compared with $245.0 million, or $1.11 per share in 1997. Net sales for
the second quarter were $1,857.0 million, compared to $1,854.3 million in the
prior year. Net sales for the first six months of 1998 were 

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<PAGE>


$3,652.6 million compared to $3,672.1 million in 1997. The comparability of
these results was impacted by nonrecurring charges in the first six months of
1998.

Items Affecting Comparability

      Results for the second quarter included restructure and other unusual
costs of $9.7 million ($5.9 million net of taxes, or $0.03 per diluted share),
which could not be accrued in 1997 under applicable accounting principles. In
the second quarter of 1997, the Company realized a gain of $57.7 million ($35.2
million net of taxes, or $0.16 per diluted share) on the sale of southern
timberlands and an extraordinary loss of $1.0 million ($0.6 million net of
taxes) on the early extinguishment of debt. For the six months ended June 28,
1998, the Company recorded charges for restructure and other unusual costs of
$17.2 million ($10.5 million net of taxes, or $0.05 per diluted share) and an
extraordinary loss on the early extinguishment of debt of $4.2 million ($2.6
million net of taxes, or $0.01 per diluted share).

      Excluding non-recurring items, income from operations for the second
quarter increased 6.4 percent to $304.2 million from $285.9 million in the prior
year, and net income increased 24.1 percent to $142.1 million or $0.65 per
diluted share from $114.5 million or $0.52 per diluted share in 1997. Excluding
the estimated impact of foreign currency translation and the effect of
divestitures, sales and operating income would have increased by 1.5 percent and
7.6 percent, respectively. For the first six months of 1998, excluding
non-recurring items, income from operations increased 6.7 percent to $572.9
million from $536.7 million in the prior year, and net income increased 24.8
percent to $264.3 million or $1.20 per diluted share from $211.7 million or
$0.95 per diluted share in 1997.

North American Consumer Products Business

      The North American Consumer Products Business posted operating profits
before restructure and unusual items of $245.4 million in the current quarter
compared to $231.1 million reported in the second quarter of 1997. Sales were
comparable at $1,133.3 million in 1998 versus $1,127.2 million in 1997. For the
six months ended June 28, 1998, operating results, before restructure and
unusual items, were $459.8 million, an increase of 6% over the comparable six
months in 1997. Net sales for the six months ended June 28, 1998 of $2,206.7
million were comparable to prior year sales of $2,204.6 million.


      The improvement in profitability was primarily driven by reduced
manufacturing costs resulting from merger synergies and other cost reductions
and higher average prices and volume for retail tissue products, partially
offset by raw material cost inflation. In the away-from-home tissue business,
volumes declined modestly compared to exceptionally strong 1997 volumes. Tissue
volumes were impacted by the transition of volume from the Ashland and Carthage
mills, which were closed in the spring of 1998, to the remaining mill system.
Competitive conditions eroded the benefits of announced away-from-home tissue
price increases and only modest pricing gains were realized. The Dixie cup and
plate business also posted lower year-over-year volumes, principally due to
product rationalization activities in the commercial foodservice area; however,
improved average pricing and ongoing cost reduction benefits led to margin
improvements.

European Consumer Products Business

      The European Consumer Products Business reported operating profits before
restructure charges of $57.4 million in the second quarter of 1998, a 9%
improvement over the $52.9 million reported in the prior year. Sales for the
second quarter at $466.2 million were comparable to $465.4 million in 1997.

                                       14

<PAGE>


      For the six months ended June 28, 1998, operating profits before
restructure charges of $113.1 million were 7% above the $105.3 million reported
in the prior year. Net sales of $924.2 million were comparable to the same
six-month period in 1997.

      Changes in foreign currency translation associated with the strengthening
of the dollar impacted both sales and operating profits. Absent this change,
sales would have increased 3% for both the current quarter and six months, and
operating profits would have increased 11% and 12%, respectively, compared to
the prior year. The improvement in profits, particularly for the six months,
resulted primarily from increased finished goods volumes.


Packaging Business

      The Packaging Business reported second quarter 1998 profits of $14.6
million before restructure charges on sales of $185.9 million, compared to $23.8
million of profits on $198.3 million of sales in the prior year. Operating
results, before restructure charges, declined to $24.9 million from $45.0
million in the first six months of 1997. Net sales decreased 7% to $366.3
million from $395.0 million for the same period in 1997. Results for the
Packaging Business declined from prior year levels due to a combination of lower
folding carton volumes associated with a turnover in its customer base and lower
average carton and paperboard pricing. However, profits increased from the first
quarter 1998 level of $10.3 million, as the business continued to replace
volume.

Communications Papers Business

      Operating profits for the Communications Papers Business increased to $8.0
million in the current quarter, compared to $0.4 million in 1997. Sales
increased by 6%, to $118.2 million in 1998 compared to $112.0 million in 1997.
For the six months ended June 28, 1998, operating profits improved from a loss
of $3.2 million in 1997 to a profit of $18.9 million in 1998. Net sales
increased 6% to $245.1 million over 1997 sales. The increased profitability for
both the quarter and six months was principally the result of improved pricing
for both uncoated free sheet and uncoated groundwood papers, partially offset by
higher wood costs and lower volumes.

Other Income and Expense Items

      Interest expense declined by $20.6 million, or 22%, to $73.9 million for
the first quarter of 1998. Interest expense decreased from $190.3 million to
$148.9 million between the first six months of 1997 and the first six months of
1998. The decrease was attributable to debt refinancing activities in 1997 and
1998, which reduced average outstanding debt and lowered average interest rates.

      The Company reported other, non-operating expenses of $6.3 million in the
current quarter, compared to other income of $4.1 million in 1997. For the six
months ended June 28, 1998, other income decreased from $11.2 million in 1997 to
$2.5 million in 1998. Foreign currency translation losses and additional
expenses associated with the Company's investment in a Chinese tissue plant
joint venture accounted for the majority of the change in other income.

     The effective tax rate, excluding tax effects of restructure and other
unusual items, for the six months declined to 38% in 1998, from 40.5% in 1997,
principally as a result of the benefits of tax planning actions.


                                       15

<PAGE>



Effect of New Accounting Standards

      In 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for the way
public companies report information about operating segments, including related
disclosure about products and services, geographic areas and major customers.
The Company has not determined what, if any, impact Statement No. 131 will have
on its reported operating segments and the related disclosures. Statement No.
131 is effective for periods ending after December 15, 1998.

      In  February  1998,  the FASB  issued  Statement  No.  132,  "Employer's
Disclosures  about Pensions and Other  Postretirement  Benefits -- an amendment
to FASB  Statements  No.  87, No. 88,  and No.  106"  which will  require  the
Company to revise disclosures about pension and other  postretirement  benefit
plans.  Statement  No. 132 is  effective  for  fiscal  years  beginning  after
December 15, 1997.

      In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement requires the
recognition of all derivatives in the statement of financial position as either
assets or liabilities and their measurement at fair value. Depending upon the
nature of the derivative, changes in fair value are either recognized in other
comprehensive income or in earnings. The Company has not determined what, if
any, impact Statement No. 133 will have on the Company's results or financial
position. Statement No. 133 is effective for fiscal years beginning after June
15, 1998.

Year 2000 Date Conversion

     In 1997, the Company commenced an enterprise-wide Year 2000 date conversion
project to address all necessary code conversion, software replacement, testing
and implementation, as well as contingency planning. The project includes review
of the Company's customers, suppliers and other stakeholders, and of computer
technology used in the following general categories: mainframe, midrange,
desktop, manufacturing/process control, communications, research and development
and infrastructure. In 1997 and for the six months ended June 28, 1998, the
Company spent approximately $8 million and $15 million, respectively, on the
Year 2000 project. The Company currently estimates total spending of
approximately $50 million to $75 million to make the required Year 2000 system
modifications and replacements. Included in such amounts is accelerated spending
for planned capital projects to replace systems which are not Year 2000
compliant. The financial impact of such spending has not been and is not
expected to be material to the Company's consolidated financial position or
results of operations. The Company expects its Year 2000 conversion to be
completed on a timely basis; however, due to the interdependent nature of
computer systems there can be no assurance that the systems of other entities on
which the Company's systems rely will also be timely converted or that any such
failure to convert by another entity would not have an adverse effect on the
Company's systems. In order to minimize this risk, the Company is actively
addressing its exposure within its extended value chain by surveying customers,
suppliers, and other stakeholders to assess their Year 2000 readiness and, where
necessary, adopt appropriate contingency plans.

FINANCIAL CONDITION

      Cash provided by operating activities totaled $341.5 million in the first
half of 1998, compared with $342.1 million provided in the prior year. In the
first half of 1998, the Company spent $95.9 million, excluding tax benefits, on
restructure-related items and achieved estimated synergy and cost related
savings of approximately $120 million. The Company anticipates that
substantially all restructure-related spending will be completed in 1998. The
Company's current ratio was 1.3 as of June 28, 1998, and 1.2 as of December 28,
1997, while working capital increased to $511.2 million from $332.6 million for
the same 

                                       16

<PAGE>



periods primarily due to higher accounts receivable. The increase was
primarily due to seasonally higher sales. Capital expenditures were $238.8
million for the six months ended June 28, 1998, compared to $178.1 million in
the prior year. The increase in capital expenditures is primarily attributable
to construction of a new paper machine at the Savannah Mill.

      Total indebtedness decreased by $86.1 million from $4,189.9 million as of
December 28, 1997, to $4,103.8 million as of June 28, 1998. As of June 28, 1998,
the Company had outstanding borrowings of approximately $1,346 million supported
by revolving credit facilities compared to $1,732 million as of December 28,
1997. In March 1998, the Company issued $300 million of 6.234% notes and used
the proceeds to reduce borrowings under revolving credit facilities. As of June
28, 1998, total outstanding debt (including the effect of interest rate swaps)
included approximately $2,193 million of fixed rate and $1,911 million of
floating rate obligations compared to $2,266 million and $1,924 million,
respectively, as of December 28, 1997. As of June 28, 1998, under the most
restrictive provisions of the Company's debt agreements, Fort James had
additional borrowing capacity of approximately $1,803 million.

      In April 1998, the Company completed the redemption and conversion of its
Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock, its Series
L $14.00 Cumulative Convertible Exchangeable Preferred Stock and its Series N
$14.00 Cumulative Convertible Exchangeable Preferred Stock (the "Preferred
Stock"). Substantially all of the outstanding Preferred Stock was converted into
9.5 million shares of common stock with the balance redeemed for $1.8 million in
cash. The conversion will reduce annual dividend payments by $18.7 million.

      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; and opportunities that may be presented to
and pursued by the Company; determinations by regulatory and governmental
authorities; the ability to successfully integrate the former James River and
Fort Howard businesses; and the ability to achieve synergistic and other cost
reductions and efficiencies.

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          None


                                       17

<PAGE>


PART II.  OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS.

     In the fourth quarter of 1997, Fort James received a notice of violation
from the Maine Department of Environmental Protection concerning alleged air
emission license violations between 1991 and 1997. The agency proposed a penalty
of approximately $130,000. The Company is currently negotiating a settlement.

     See footnote 7 to the financial statements for additional litigation.

Item 2.   CHANGES IN SECURITIES.

          None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

          None

Item 5.   OTHER INFORMATION.

          None.

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

                10    Fort  James  Corporation  Supplemental  Retirement  Plan
                      for Miles L. Marsh

                10(a) Separation Agreement and Mutual Release

                27    Financial  Data  Schedules  for the six  months  ended 
                      June 28, 1998 (filed electronically only)


          (b)   Reports on Form 8-K:

                No reports on Form 8-K were filed by the Company during the 
                quarter ended June 28, 1998, and subsequent thereto.


                                       18


<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 and Controller
                                       (Principal Accounting Officer)





Date:  August 7, 1998

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