<PAGE>   1
             FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

          (As last amended in Exch Act Rel No. 312905, eff. 4/26/93.)

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998.
                               -------------
                               

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from                      to                     . 
                               --------------------    --------------------
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)

Commission File Number:      0-16289      .
                        -----------------

                             Repap Enterprises Inc.                            
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Canada                                  98-0178526             
-------------------------------------   ---------------------------------------
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                  Identification No.)

    300 Atlantic Street, Suite 200                  Stamford, CT, 06901        
-------------------------------------------------------------------------------
(Address of principal executive offices)          (City, State, Zip Code)

                                  203 964-6160                                 
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                                                            
-------------------------------------------------------------------------------
              (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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.                   [X]Yes      [ ]No 

743,460,637 shares of the registrant's Common Stock, no par value, were
outstanding as of the close of business on June 30, 1998.
 
<PAGE>   2
                             REPAP ENTERPRISES INC.

                                     INDEX

EXCHANGE RATES

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

        Consolidated Interim Balance Sheet
        Consolidated Interim Statements of Operations
        Condensed Consolidated Interim Statements of Changes in Financial
        Position
        Notes to Consolidated Interim Financial Statements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Item 2. Changes in Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

Item 4. Submission of Matters to a Vote of Security Holders.

Item 5. Other Information.

Item 6. Exhibits and Reports on Form 8-K.

SIGNATURES


                                       2
<PAGE>   3
                                 EXCHANGE RATES

Repap Enterprises Inc. (the "Company") publishes its consolidated financial
statements in Canadian dollars. In this quarterly report, unless otherwise
specified or the context otherwise requires, all dollar amounts are expressed in
Canadian dollars ("$", "C$", "dollars, or "Cdn. dollars").

The following table sets forth the exchange rates to the Canadian dollar to the
U.S. dollar at the end of the year ended December 31, 1998 and the end of the
six months ended June 30, 1998 and 1997 (such rates, which are expressed in
dollars, being the noon buying rates in New York City for cable transfer in U.S.
dollars as certified for customs purposes by the Federal Reserve Bank of New
York). On June 30, 1998, US$1.00 equaled C$1.4717.


<TABLE>
<CAPTION>
                                   Six Months         
                                 Ended June 30,       Year Ended           
                              --------------------   December 31,            
                                 1998      1997         1997                    
                              ---------- ---------   ------------
                                         (C$ per US$)
<S>                             <C>       <C>           <C>
High..........................  1.4075    1.3357        1.3357
Low...........................  1.4710    1.3995        1.4398
Average(1)....................  1.4386    1.3732        1.3849
At End of Period(2)...........  1.4717    1.3810        1.4288

<FN>
---------------------
(1) The average of the daily buying rates during the applicable period.
(2) Noon buying rate on last banking day.
</FN>
</TABLE>


                                       3
<PAGE>   4
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.


                            REPAP ENTERPRISES INC.
                     Incorporated under the laws of Canada

                CONSOLIDATED INTERIM BALANCE SHEET (SEE NOTE 1)
                        (Unaudited as at June 30, 1998)
                             (dollars in millions)

<TABLE>
<CAPTION>
                                               June 30,      December 31,
                                                 1998           1997
                                                ------         ------
<S>                                         <C>              <C>
ASSETS         
Current assets
Cash and short term deposits...............   $    8.6         $   43.3
Accounts receivable........................       72.3             79.9
Inventories................................       64.4             65.9
                                              --------         --------
                                                 145.3            189.1
                                              --------         --------
Fixed assets, net..........................      992.3          1,008.7
Investment tax credits receivable..........        0.3             35.5
Investments................................       16.2             16.2
Other assets...............................      159.7            148.4
                                              --------         --------
                                              $1,313.8         $1,397.9
                                              ========         ========
LIABILITIES         
Current liabilities
Accounts payable and accrued liabilities...   $  110.8         $  129.0
Current portion of long-term debt 
  and repayable grants.....................        7.4             75.7
Revolving credit facility..................         --             97.5
                                              --------         --------
                                                 118.2            302.2
                                              --------         --------
Revolving credit facility..................       88.3               --
Long-term debt.............................    1,042.6            901.3 
Repayable grants and other liabilities.....       22.3             25.6 
                                              --------         --------
                                               1,271.4          1,229.1
                                              --------         --------
CAPITAL SOURCES          
Non-controlling interest...................         --             14.3 
Investment tax credits.....................      110.8            148.0 
Grants--non-repayable......................       23.3             23.8
                                              --------         --------
                                                 134.1            186.1 
                                              --------         --------
SHAREHOLDERS' EQUITY (DEFICIENCY)       
Preferred shares...........................       16.0             16.0 
Common shares..............................      640.3            640.4 
Deficit....................................     (763.1)          (745.3)
Other paid-in capital......................       15.2             71.7 
Translation adjustment.....................       (0.1)            (0.1)
                                              --------         --------
                                                 (91.7)           (17.3)
                                              --------         --------
                                              $1,313.8         $1,397.9 
                                              ========         ========
</TABLE>
                            See accompanying notes


                                       4


<PAGE>   5

                            REPAP ENTERPRISES INC.
                     Incorporated under the laws of Canada
          
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (SEE NOTE 1)
                                  (Unaudited)
                             (dollars in millions)
          
          
<TABLE>
<CAPTION>
                                                                  Second                       Six months
                                                                  Quarter                     ended June 30,
                                                           --------------------          ------------------------
                                                            1998           1997            1998            1997
                                                            ----           ----            ----            ---- 
<S>                                                        <C>            <C>             <C>          <C>
Revenues from continuing operations.....................   $168.8         $149.3          $332.1          $ 290.2
Effects of currency hedging.............................      1.7            1.7             2.9              2.9
                                                          -------        -------         -------          -------
Net revenues............................................    167.1          147.6           329.2            287.3
                                                          -------        -------         -------          -------
 Net sales from continuing operations..................     151.2          133.7           298.1            257.4
 Cost of sales before depreciation
 and amortization......................................      99.4          102.7           194.4            211.5 
Selling, administrative and
 research expenses.....................................       8.6           10.5            16.5             20.1
                                                          
Depreciation and amortization...........................     15.0           14.6            31.1             26.8
                                                          -------        -------         -------          -------
Operating profit (loss).................................     28.2            5.9            56.1             (1.0)
Interest expense........................................     27.0           31.5            53.5             61.4
Miscellaneous (income) expenses.........................      1.8            0.2             1.6             (0.2)
                                                          -------        -------         -------          -------
Income (loss) before the undernoted.....................     (0.6)         (25.8)            1.0            (62.2)
                                         
Provision for income taxes..............................      0.5            0.5             1.3              1.2
                                                          -------        -------         -------          -------
Income (loss) from continuing operations................     (1.1)         (26.3)           (0.3)           (63.4)
                                
Unusual charges.........................................     46.3             --            46.3               --

Income (loss) from discontinued operations..............     (0.3)         (20.8)           17.8           (104.6)
                                                          -------        -------         -------          -------
Net income (loss).......................................    (47.7)         (47.1)          (28.8)          (168.0)
Provision for accretion of other paid-in capital........      1.3            5.1             2.9             10.1
                                                          -------        -------         -------          -------
Net income (loss) attributable to common shareholders...  $ (49.0)       $ (52.2)        $ (31.7)         $(178.1)

Average common shares outstanding (millions)............    742.5          123.4           742.5            123.4(

Loss) per share:
   Continuing operations................................  $ (0.07)       $ (0.25)        $ (0.07)         $ (0.60)
   Discontinued operations..............................       --          (0.17)           0.02            (0.84)
                                                          -------        -------         -------          -------
     Total..............................................  $ (0.07)       $ (0.42)        $ (0.05)         $ (1.44)
                                                          =======        =======         =======          =======
</TABLE>
               
                             See accompanying notes
               
                                       5
               
               
<PAGE>   6

                            REPAP ENTERPRISES INC.
                     Incorporated under the laws of Canada

           CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
                                 (SEE NOTE 1)
                                  (Unaudited)
                             (dollars in millions)

<TABLE>
<CAPTION>
                                                  Second              Six months
                                                  Quarter           ended June 30,
                                              ----------------     -----------------
                                                 1998     1997       1998      1997
                                                 ----     ----       ----      ----
<S>                                          <C>         <C>       <C>       <C>
OPERATING ACTIVITIES          
Loss from continuing operations.............  $ (47.4)   $(26.3)   $ (46.6)   $(63.4)
Add items not affecting cash:
  Depreciation and amortization.............     15.0      14.6       31.2      26.8 
  Effects of currency hedging...............      1.7       1.7        2.9       2.9
  Other.....................................     48.7       0.1       47.0       0.2
                                              -------    ------    -------     ----- 
    Cash flow before net changes in 
    non-cash working capital................     18.0      (9.9)      34.5     (33.5)
   Non-cash working capital changes.........     (4.2)     26.1      (20.0)     45.1
                                              -------    ------    -------     -----    
    Cash provided by continuing 
    operations..............................     13.8      16.2       14.5      11.6
                                              -------    ------    -------     -----    
INVESTING ACTIVITIES          
   Additions to fixed assets................     (5.5)     (2.1)      (8.2)     (2.7)
   Deferred charges and other assets........    (20.9)     (2.1)     (18.2)     (2.2)
                                              -------    ------    -------     -----    
   Cash used in investing activities........    (26.4)     (4.2)     (26.4)     (4.9)
                                              -------    ------    -------     -----    
FINANCING ACTIVITIES
   Additions to debt........................    516.4      33.7      521.8      52.8
   Repayment of debt........................   (434.4)     (3.4)    (458.7)    (10.9)
   Redemption of debentures.................    (75.0)       --      (75.0)       --
   Revolving credit facility, net change....      4.5     (12.2)     (11.4)    (17.5)
   Other....................................    (17.6)      0.3      (17.2)      0.4
                                              -------    ------    -------     -----    
     Cash provided by (used in)  
     financing activities...................     (6.1)     18.4      (40.5)     24.8
                                              -------    ------    -------     -----    
     Cash provided by (used in) 
     discontinued operations................      0.6     (34.3)      17.7     (38.1)
                                              -------    ------    -------     -----    
Net decrease in cash........................    (18.1)     (3.9)     (34.7)     (6.6)
Cash position at beginning of period........     26.7      20.8       43.3      23.5
                                              -------    ------    -------     -----    
Cash position at end of period..............  $   8.6    $ 16.9    $   8.6     $16.9
                                              =======    ======    =======     =====
Represented by:
Cash position and short-term deposits.......  $   8.6    $ 16.9    $   8.6     $16.9
                                              =======    ======    =======     =====
</TABLE>
                            See accompanying notes


                                       6




<PAGE>   7

                             REPAP ENTERPRISES INC.
________________________________________________________________________________
               
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                    SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                  (UNAUDITED)
                             (DOLLARS IN MILLIONS)

1.    FINANCIAL STATEMENT PRESENTATION

     These condensed consolidated interim financial statements of Repap
Enterprises Inc. ("Repap Enterprises") have been prepared by management in
accordance with accounting principles generally accepted in Canada ("Canadian
GAAP"). These condensed consolidated interim financial statements are the
responsibility of management and, in its opinion, include all the adjustments,
which are of a normal recurring nature, necessary to a fair statement of the
results for the interim periods presented.

     Reference is made to the Notes to the Consolidated Financial Statements
which appear in the Repap Enterprises 1997 Consolidated Financial Statements,
including Note 1 on "Financial Statement Presentation". The significant
accounting policies disclosed therein apply to these condensed consolidated
interim financial statements.

     As further described in Note 3, the accounting policies followed by Repap
Enterprises differ in certain respects from those that would have been followed
had these condensed consolidated interim financial statements been prepared in
conformity with the accounting principles generally accepted in the United
States ("U.S. GAAP") and the accounting principles and practices required by the
United States Securities and Exchange Commission ("SEC").

BASIS OF FINANCIAL STATEMENT PRESENTATION AND GOING CONCERN ASSUMPTION

     These condensed consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles on a going
concern basis which presumes the realization of assets and discharge of
liabilities in the normal course of business for the foreseeable future. Repap
Enterprises' ability to continue as a going concern is dependent upon its
ability to achieve profitable operations 

                                       7


<PAGE>   8
and generate positive cash-flow on a sustained basis (See Note 1 to the 1997
Consolidated Financial Statements). The outcome of these matters cannot be
predicted at this time. These condensed consolidated interim financial
statements do not include any adjustments to the amounts and classifications of
assets and liabilities that might be necessary should Repap Enterprises be
unable to continue in business.

2.   INVENTORIES

<TABLE>
<CAPTION>
                                               June 30,      December 31,
                                                 1998           1997
                                                ------         ------
<S>                                            <C>             <C>

Raw materials and supplies..................   $ 38.5          $ 45.7
Work in process.............................      1.0             1.0
Finished goods..............................     24.9            19.2
                                               ------          ------
                                               $ 64.4          $ 65.9
                                               ======          ======

</TABLE>

     Raw materials include chemicals, chips and logs used in the production of
pulp, paper, and lumber. Work in process and finished goods include pulp, paper
and lumber.

3.   GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES

     The condensed consolidated interim financial statements have been prepared
in accordance with accounting principles generally accepted in Canada. The
following summary sets out the material adjustments to Repap Enterprises'
reported net income (loss) which would be made in order to conform with
accounting principles generally accepted in the United States and the accounting
principles and practices required by the SEC. For information on the nature of
these adjustments, refer to Note 23 of Repap Enterprises' 1997 Consolidated
Financial Statements.
     
<TABLE>
<CAPTION>
                                                                   Six Months
                                                                     ended
Statement of Operations components:                                 June 30,
                                                                ----------------    
                                                                1998       1997
                                                                -----     -----
<S>                                                             <C>       <C>

Income (loss) from continuing operations before
provision for accretion in paid-in capital in accordance
with Canadian GAAP...........................................  $(46.6)   $(63.4)
EARNINGS ADJUSTMENTS:
ADD (DEDUCT):
     Reversal of revenue-stream hedge                             2.9       2.9
     Unrealized gain (loss) on translation of long-term debt..  (24.2)     (5.3)
     Interest expense on convertible debentures...............   (2.9)    (10.1)
     Reversal of amortization of investment tax credits.......     --      (2.6)
     Adjustments (net of applicable income taxes).............             
     Cost of early redemption of long-term debt...............   46.3        --
                                                                -----     -----

</TABLE>

                                       8
<PAGE>   9
<TABLE>
<S>                                                           <C>       <C>
Income (loss) from continuing operations before
extraordinary items in accordance with US GAAP............     (24.5)     (78.5)
                                                              --------   -------
Extraordinary items, net of related income taxes..........     (23.7)        --
Income (loss) from discontinued operations in accordance
with US GAAP..............................................      17.7      (38.0)
                                                              ------    -------
Net income (loss).........................................    $ 30.5    $(116.5)
                                                              ======    =======
</TABLE>

   Under U.S. GAAP, amounts that remain contingently payable to the Province
of New Brunswick as described in Note 4 of Repap Enterprises' 1997 Consolidated
Financial Statements should continue to be recorded as liabilities until the
related contingencies are resolved. As a result, the gain on settlement of debt
included in discontinued operations is restricted to the amount by which the
carrying value of the debt exceeds the total amount contingently payable.

<TABLE>
<CAPTION>
                                                1998               1997
                                            In accordance      In accordance
                                            with GAAP in       with GAAP in
                                            ----------------------------------
                                            Canada    U.S.     Canada    U.S.
                                            ------   ------    ------   ------
<S>                                         <C>      <C>        <C>     <C>
Balance Sheet components:
Other assets..............................  $159.7   $ 71.2     $148.4  $ 53.8
Investment tax credits recoverable........     0.3       --       35.5      --
Current portion of long-term debt 
and repayable grants......................     7.4      7.4       75.7    72.4
Convertible debentures....................      --     71.2         --    75.0
Long-term portion of repayable 
grants and other liabilities                  22.3     39.1       25.6    25.6
Investment tax credits....................   110.8    144.2      148.0   146.2
Shareholders' equity (deficiency).........   (91.7)  (246.6)     (17.3)  (217.3)
</TABLE>


                                       9
<PAGE>   10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.


FINANCIAL REVIEW (IN CANADIAN DOLLARS UNLESS OTHERWISE NOTED)

RESULTS OF OPERATIONS

Repap Enterprises Inc. reported results for the second quarter ended June 30,
1998. Including the losses from discontinued operations and unusual items, Repap
recorded a loss of $49.0 million ($0.07 per share) compared with a loss of $52.2
million ($0.42 per share) in the second quarter of 1997.

Excluding discontinued operations and unusual items, Repap's loss from
continuing operations was $2.4 million for the second quarter of 1998 compared
with a loss from continuing operations of $31.4 million in the second quarter of
1997.

The second quarter of 1998 included a loss from discontinued operations of $0.3
million and a loss from unusual items of $46.3 million, reflecting one-time
costs associated with the refinancing of Repap New Brunswick's US$300 million
First Priority Senior Secured Notes due 2000 ("the Notes"). The unusual costs
included the non-cash write-off of deferred foreign exchange losses and deferred
financing costs ($28.3 million) and the costs of early redemption and certain
consent payments ($18.0 million) related to the Notes. During this second
quarter of 1997, a loss of $20.8 million from discontinued operations was
recorded, reflecting mainly operating losses incurred during that period related
to discontinued operations.

Revenues from continuing operations for the second quarter of 1998 were $168.8
million, up 13.1% from revenues of $149.3 million in the second quarter of 1997
and up 3.4% from revenues of $163.3 million in the first quarter of 1998.

[ ]  Revenues from coated paper were $148.0 million, up $26.9 million or 22.2%
     over the second quarter of 1997 revenues of $121.1 million, reflecting
     mainly increased pricing, the benefit of a weaker Canadian dollar compared
     to the U.S. dollar, and to a lesser extent, increased shipments.
 
[ ]  Revenues from pulp for the second quarter of 1998 were $14.7 million, down
     by $5.1 million or 25.8% from the second quarter of 1997 revenues of $19.8
     million, reflecting lower shipments, while prices remained essentially
     flat.


                                       10
<PAGE>   11
[ ]  Revenues from lumber were $6.1 million in the second quarter of 1998
     compared to $8.4 million in the same period of 1997, a decrease of $2.3
     million or 26.6%, reflecting lower pricing.

Cost of sales decreased by $3.3 million to $99.4 million in the second quarter
of 1998 from $102.7 million in the second quarter of 1997. The decrease in cost
of sales reflects primarily the impact of increased productivity and continuing
reductions in costs.

Selling, general and administrative expenses decreased by $1.9 million to $8.6
million in the second quarter of 1998 from $10.5 million in the second quarter
of 1997, reflecting mainly the benefits of downsizing of the corporate office
and on-going cost reduction efforts.

Repap's operating profit from continuing operations, excluding non-cash hedged
foreign exchange adjustments, ("EBITDA") was $44.9 million for the second
quarter of 1998 compared to an EBITDA of $22.2 million in the second quarter of
1997 and to an EBITDA of $45.2 million in the first quarter of 1998. This
significant improvement in EBITDA over the second quarter of 1997 is due
primarily to higher prices and shipments for coated paper and lower
administrative costs.

Depreciation and amortization increased by $0.5 million to $15.0 million in the
second quarter of 1998 from $14.5 million in the corresponding quarter of 1997.
The increase is due primarily to higher amortization of deferred foreign
exchange losses on long-term debt.

Interest expense in the second quarter of 1998 decreased by $4.6 million to
$27.0 million from $31.6 million in the second quarter of 1997, reflecting lower
borrowings at the holding company level, offset in part by the effects of a
weaker Canadian dollar. The provision for accretion in paid- in capital
decreased by $3.8 million to $1.3 million in the second quarter of 1998 from
$5.1 million in the same quarter of 1997. The reduction reflects the August 1997
conversion of convertible debentures into common shares of Repap.

Revenues for the six months ended June 30, 1998 were $332.1 million up 14.4%
from the $290.2 million reported for the corresponding period in 1997,
reflecting higher coated paper prices. EBITDA for the six months of 1998 was
$90.1 million compared to $28.7 million for the same period in 1997. Repap
recorded a loss of $31.7 million ($0.05 per share) in the first 

                                       11
<PAGE>   12
six months compared to a loss of $178.1 million ($1.44 per share) last year.
Excluding discontinued operations and unusual charges, the loss for the first
half of 1998 was $3.2 million compared to a loss of $73.5 million in the first
half of 1997.

LIQUIDITY AND CAPITAL RESOURCES

Repap generated $18.0 million in cash from operations in the second quarter of
1998 compared to a cash utilization of $9.9 million in the same quarter of 1997,
while non-cash working capital changes utilized cash of $4.2 million compared
with a cash generation of $26.1 million in 1997. The cash generated from
operations after working capital in the quarter was used primarily to finance
capital expenditures of $5.5 million. Borrowings under the revolving credit
facility increased by $4.5 million to cover certain fees related to the US$320
million refinancing. At June 30, 1998, borrowings under Repap New Brunswick's
revolving credit facility totaled $88.3 million and unutilized availability was
approximately $5.0 million.

Repap Enterprises also had cash on hand of $8.6 million at June 30, 1998 down
from $26.7 million at March 31, 1998. Cash of $15 million was used during the
quarter as part of the repayment of principal and accrued interest on the $75
million convertible debenture maturing June 30, 1998. In addition, $3 million
was advanced to Repap New Brunswick for general liquidity purposes.

Although total available liquidity, including cash on hand, was $13.6 million at
June 30, 1998, it is important to note that liquidity in the first half of the
year was impacted by catch-up payments on payables and other liabilities
totaling approximately $25.0 million. These payments are now behind us and
liquidity in the second half of the year will not be impacted by such payments.

REFINANCING PROGRAM COMPLETED

During the second quarter of 1998, Repap completed a major recapitalization
which included the following elements:

1.   The issue by Repap Enterprises of US$45 million, 6%, Convertible Debentures
     due 2005 to Enron Capital and Trade Resources Corp. ("Enron"). The
     proceeds, along with cash on hand, were used to repay in full the $75
     million, 9%, debentures maturing in June 1998.

                                       12
<PAGE>   13
2.   Along with this investment, Repap New Brunswick entered into a product
     price hedging program with Enron designed to partially protect the company
     against the volatility of commodity prices.

     A five-year energy advisory agreement was also signed with Enron, whereby
     Enron will work with the operations to review and analyze all energy
     related activities and develop a cost savings program in which both Repap
     New Brunswick and Enron will share in any realized savings.

     Finally, Enron has also taken on the pulp marketing agency function for
     Repap New Brunswick and is responsible for the marketing, sales and
     customer service functions related to pulp.

3.   During the second quarter, Repap New Brunswick successfully completed a
     US$320 million financing comprised of US$200 million, 9%, First Priority
     Fixed Rate Senior Secured Notes due 2004 and US$120 million Floating Rate
     Senior Secured Loans due 2004. The proceeds of the issue were used to repay
     or redeem the existing first priority fixed and floating rate notes due
     2000, including premiums on redemption. The refinancing increased financial
     flexibility through the extension of maturity dates and elimination of
     mandatory fixed principal repayments, while maintaining flexibility in
     repayment of debt through the floating rate tranche. Repap New Brunswick
     also completed the renewal of a $120 million operating credit facility
     maturing in October 1999 and received consents to amalgamate with Repap
     Enterprises in January of 1999.

OUTLOOK

Pulp markets were weak in the second quarter as was pricing. Significant
downtime by major producers has resulted in a decrease in NORSCAN inventories.
The US$60 per metric ton price increase announced for June 1998 by producers of
northern bleached softwood kraft pulp has not been fully implemented.

The markets for lightweight coated paper were solid in the second quarter;
however, an attempt to raise prices 5% was unsuccessful.

Repap's inventory of coated paper was 20,300 tons at June 30, 1998, up slightly
from 18,700 tons at March 31, 1998, but still well below the 57,000 ton peak
reached in 1996.

                                       13

<PAGE>   14
Industry Mill inventories for coated groundwood paper have increased from
December 31, 1997 through May 1998 by 65,000 tons to 169,000 tons, but are still
below May 1997 levels by 13,000 tons. The same is true for reported consumer
inventories as of the end of May, up by 15% since December 31, 1997 and 8% from
1 year ago.

While total inventories are well below earlier peaks, the rising trend through
May is not favorable and bears close watching over the next few months.

Of the three major consumers of lightweight coated paper ("LWC"): magazines,
catalogs and commercial printing, magazines continue as strong consumers of LWC
with shipments up 13.5% for the first 5 months of 1998. Estimates for the second
half remain good. The other two categories have been weaker and it would appear
that grade substitution, rather than soft business conditions have affected
these two areas.

It should also be noted that imports of coated paper continue to rise.

                                       14

<PAGE>   15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.

        N/A

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

        Except as herein disclosed, there are no material legal proceedings and
there are no proceedings under any environmental protection laws, which are
pending or, to the Company's knowledge, threatened, against the Company. The
Company and its wholly owned subsidiary, Repap New Brunswick Inc. ("RNB") have
been named Respondents in a petition filed in the Superior Court of Quebec by
George S. Petty Management Ltd., George S. Petty Management II Ltd. and 1211421
Ontario Inc. Silverton International Fund Limited and Paloma Partners L.L.C.
have been joined as "mis-en-cause". The Petitioners are the owners of all of
REI's issued and outstanding Series C and Series F Preferred Shares and claim
that the proposed amalgamation of the Company and RNB is oppressive, unfairly
prejudicial and unfairly disregards the Petitioners as owners of those
preferred shares. The Petitioners seek, among other things, an order requiring
the Company and RNB to permanently terminate any proceedings with respect to
the proposed amalgamation and an order Liquidating and dissolving the Company.
The Company intends to defend the Petition. The matter is returnable on
August 28, 1998 at which time a timetable for future steps in the litigation
will be ordered.

Item 2. Changes in Securities and Use of Proceeds.
        No material changes to the constituent instruments defining the rights
of the holders of any class of registered securities have been made during the
second quarter of fiscal 1998.

Item 3. Defaults Upon Senior Securities.
        No material defaults upon senior securities have been made during the
second quarter of fiscal 1998.

Item 4. Submission of Matters to a Vote of Security Holders.
        No matters were submitted to a vote of security holders during the
second quarter of fiscal 1998.


                                       15
<PAGE>   16
Item 5. Other Information.
        Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

        a) Exhibits

|--------------------------|--------------------------------------------------|
|           No.            |                 Description                      | 
|--------------------------|--------------------------------------------------|
|           11             |  Statement re Computation of per Share Earnings  |
|--------------------------|--------------------------------------------------|
|           27             |  Financial Data Schedule                         |
|--------------------------|--------------------------------------------------|

        b) Reports on Form 8-K.

        No Current Report on Form 8-K was filed by the Company during the
second quarter of fiscal 1998. 

                                       16
<PAGE>   17
                                  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.

<TABLE>                                 
<S>                                     <C>
                                        Repap Enterprises Inc.
                                        Registrant


_______________________                 /s/ Terry W. McBride
Date: August 13, 1998                   Terry W. McBride
                                        Vice President & General Counsel



_______________________                 /s/ Michelle A. Cormier
Date: August 13, 1998                   Michelle A. Cormier
                                        Vice President, Finance

</TABLE>



Form 10Q.doc

                                       17
<PAGE>   18
                                 EXHIBIT INDEX

Exh. 11.1      Statement Re: Computation of per Share Earnings
Exh. 27.       Financial Data Schedule