FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

               [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2000

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                For the transition period from _______ to _______

                         Commission file number: 1-10434


                      THE READER'S DIGEST ASSOCIATION, INC.
              (Exact name of registrant as specified in its charter)


                       Delaware                        13-1726769


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

               Pleasantville, New York                 10570-7000


       (Address of principal executive offices)        (Zip Code)

                                 (914) 238-1000

               (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

As of October 31, 2000, the following  shares of the  registrant's  common stock
were outstanding:

Class A Nonvoting Common Stock, $0.01 par value:90,256,645 shares
Class B Voting Common Stock, $0.01 par value:   12,432,164 shares

                                                               Page   1  of   18
pages.

<PAGE>



              THE READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES

                               Index to Form 10-Q

                               September 30, 2000


Part I - Financial Information                                        Page No.
================================================================================

The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Financial Statements (unaudited):

  Consolidated Condensed Statements of Income
   for the three-month periods ended September 30, 2000 and 1999             3

  Consolidated Condensed Balance Sheets
   as of September 30, 2000 and June 30, 2000                                4

  Consolidated Condensed Statements of Cash Flows
   for the three-month periods ended September 30, 2000 and 1999             5

  Notes to Consolidated Condensed Financial Statements                       6


Management's Discussion and Analysis
  of Financial Condition and Results of Operations                          11


Part II - Other Information                                                 16
================================================================================


               The Reader's Digest Association, Inc. and Subsidiaries
                   Consolidated Condensed Statements of Income
              Three-month  periods  ended   September  30,  2000  and  1999
                      (In millions, except per share data)
                                   (unaudited)





                                                         Three-month periods
                                                                ended
                                                            September 30,
                                                          2000         1999


Revenues                                                $ 559.7      $ 519.2

Product, distribution and editorial expenses              210.5        192.4
Promotion, marketing and administrative expenses          304.9        288.0
                                                        -------      -------

  Operating profit                                         44.3         38.8

Other income, net                                           4.1          7.0
                                                        -------      -------

  Income before provision for income taxes                 48.4         45.8

Provision for income taxes                                 18.4         17.2
                                                        -------      -------
  Net income                                             $ 30.0       $ 28.6
                                                        =======      =======


Basic and diluted earnings per share

Basic earnings per share
  Weighted average common shares outstanding              102.9        107.4

  Basic earnings per share                               $ 0.29       $ 0.26
                                                         ======       ======

Diluted earnings per share
  Adjusted weighted average common shares outstanding     104.2        108.5

  Diluted earnings per share                             $ 0.28       $ 0.26
                                                         ======       ======

Dividends per common share                               $ 0.05       $ 0.05
                                                         ======       ======



See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>


               The Reader's Digest Association, Inc. and Subsidiaries
                      Consolidated Condensed Balance Sheets
                     As of September 30, 2000 and June 30, 2000
                                  (In millions)
                                   (unaudited)





                                                  September 30,    June 30,
                                                       2000          2000
Assets
  Cash and cash equivalents                        $     51.7   $     49.7
  Receivables, net                                      432.1        285.3
  Inventories, net                                      169.5        120.3
  Prepaid and deferred promotion costs                  127.1        115.5
  Prepaid expenses and other current assets             215.8        201.7
                                                     --------     --------
 Total current assets                                   996.2        772.5

Marketable securities                                   105.6        173.5
Property, plant and equipment, net                      153.1        152.4
Intangible assets, net                                  432.9        438.8
Other noncurrent assets                                 298.7        221.6
                                                     --------     --------

Total assets                                       $  1,986.5   $  1,758.8
                                                     ========     ========

Liabilities and stockholders' equity
  Loans and notes payable                          $    249.8   $     89.4
  Accounts payable                                      162.5        146.4
  Accrued expenses                                      276.7        309.6
  Income taxes payable                                   87.4         38.7
  Unearned revenue                                      345.7        289.4
  Other current liabilities                              28.5         30.9
                                                     --------     --------

Total current liabilities                             1,150.6        904.4

Other noncurrent liabilities                            366.2        350.1
                                                     --------     --------

Total liabilities                                     1,516.8      1,254.5

  Capital stock                                          29.2         28.9
  Paid-in capital                                       223.4        223.1
  Retained earnings                                   1,131.1      1,106.6
  Accumulated other comprehensive (loss) income         (23.4)        31.0
  Treasury stock, at cost                              (890.6)      (885.3)
                                                     --------     --------

Total stockholders' equity                              469.7        504.3
                                                     --------     --------

Total liabilities and stockholders' equity         $  1,986.5   $  1,758.8
                                                    =========    =========



See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>


               The Reader's Digest Association, Inc. and Subsidiaries
                  Consolidated Condensed Statements of Cash Flows
               Three-month periods ended September 30, 2000 and 1999
                                  (In millions)
                                   (unaudited)





                                                       Three-month periods ended
                                                              September 30,
                                                           2000           1999
Cash flows from operating activities

  Net income                                            $  30.0         $  28.6
  Depreciation and amortization                            11.5             8.9
  Gains on the sales of a business, certain assets
   and certain investments                                 (3.9)           (7.5)
  Changes in assets and liabilities, net                 (156.0)          (23.8)
                                                        -------         -------
Net change in cash due to operating activities           (118.4)            6.2
                                                        -------         -------
Cash flows from investing activities

  Proceeds from maturities and sales of short-term
   investments and marketable securities                    4.0             2.3
  Purchases of investments and marketable securities      (20.0)           (3.9)
  Proceeds from sales of a business and other
   long-term   investments, net                             4.9            10.8
  Proceeds from sales of property, plant and
   equipment                                                0.3             2.2
  Capital expenditures                                    (10.6)           (4.0)
  Other, net                                               (0.5)           (0.8)
                                                        -------         -------
Net change in cash due to investing activities            (21.9)            6.6
                                                        -------         -------
Cash flows from financing activities

  Short-term borrowings, net                              160.5             2.0
  Dividends paid                                           (5.5)           (5.7)
  Common stock repurchased                                 (3.6)             --
  Other, net                                               (1.7)            3.4
                                                        -------         -------
Net change in cash due to financing activities            149.7            (0.3)
                                                        -------         -------
Effect of exchange rate changes on cash                    (7.4)            4.7
                                                        -------         -------
Net change in cash and cash equivalents                     2.0            17.2

Cash and cash equivalents at beginning of period           49.7           413.4
                                                        -------         -------
Cash and cash equivalents at end of period              $  51.7        $  430.6
                                                        =======        ========


See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>



               The Reader's Digest Association, Inc. and Subsidiaries
                Notes to Consolidated Condensed Financial Statements
                      (In millions, except per share data)
                                   (unaudited)

Unless  indicated  otherwise,  references  in  Notes to  Consolidated  Condensed
Financial  Statements  to  "we",  "our"  and  "us"  are to The  Reader's  Digest
Association, Inc. and its subsidiaries.  All references to 2001 and 2000, unless
specifically identified, are to fiscal 2001 and fiscal 2000, respectively.

(1)   Basis of Presentation and Use of Estimates

The  accompanying   consolidated  condensed  financial  statements  include  the
accounts of The Reader's Digest Association, Inc. and its U.S. and international
subsidiaries.  All significant  intercompany accounts and transactions have been
eliminated in  consolidation.  These statements and accompanying  notes have not
been audited but, in the opinion of management, have been prepared in conformity
with generally accepted  accounting  principles applying certain assumptions and
estimates,  including  all  adjustments  considered  necessary  to present  such
information fairly. Although these estimates are based on management's knowledge
of current  events and  actions  that we may  undertake  in the  future,  actual
results may ultimately differ from those estimates.

We report on a fiscal  year  beginning  July 1. The  three-month  periods  ended
September  30,  2000 and 1999 are the first  fiscal  quarters  of 2001 and 2000,
respectively.  Operating  results  for any  interim  period are not  necessarily
indicative  of the  results  for an entire  year due to the  seasonality  of our
business.

Certain prior period amounts have been restated to conform to the current period
presentation.  Customer service costs in 2000 have been  reclassified to reflect
these  costs as a component  of product,  distribution  and  editorial  expenses
rather than promotion, marketing and administrative expenses.

(2)   Basic and Diluted Earnings Per Share

Basic earnings per share is computed by dividing net income less preferred stock
dividend  requirements ($0.3 for each of the three-month periods ended September
30, 2000 and 1999) by the weighted  average number of common shares  outstanding
during the  period.  Diluted  earnings  per share is computed in the same manner
except that the weighted average number of common shares outstanding assumes the
exercise and  conversion  of certain  stock  options  (1.3 million  shares as of
September 30, 2000 and 1.1 million shares as of September 30, 1999.

For the three-month  period ended September 30, 2000, basic and diluted earnings
per share were $0.29 and $0.28,  respectively.  For the three-month period ended
September 30, 1999, basic and diluted earnings per share were both $0.26.

(3)   Revenues and Operating Profit by Operating Segments

Reportable  segments  are  based  on  our  method  of  internal  reporting.  The
accounting policies of our segments are the same as those described in Note 1 of
our  consolidated  financial  statements  included in our 2000 Annual  Report to
Stockholders.  In addition,  we allocate all corporate  administrative  costs to
operating segments.
                                                      Three-month periods ended
                                                             September 30,
                                                         2000             1999

Revenues
  Global Books and Home Entertainment                  $ 358.3          $ 319.7
  U.S. Magazines                                         127.3            118.0
  International Magazines                                 67.7             72.6
  Other Businesses                                         6.4              8.9
                                                       -------          -------

Total revenues                                         $ 559.7          $ 519.2
                                                       =======          =======


<PAGE>



                                                     Three-month periods ended
                                                            September 30,
                                                        2000             1999

Operating Profit (Loss)
  Global Books and Home Entertainment                 $ 54.1           $ 40.9
  U.S. Magazines                                        (2.1)             3.4
  International Magazines                               (0.8)             0.8
  Other Businesses                                      (6.9)            (6.3)
                                                       -----            -----
Total operating profit                                $ 44.3           $ 38.8
                                                      ======           ======

(4)    Comprehensive (Loss) Income

Accumulated other  comprehensive  (loss) income as reported in the balance sheet
as of September  30, 2000 and June 30,  2000,  represents  primarily  unrealized
gains/losses   on  certain   investments   and  foreign   currency   translation
adjustments.  The components of comprehensive (loss) income, net of related tax,
for the three-month periods ended September 30, 2000 and 1999 were as follows:

                                                     Three-month periods ended
                                                            September 30,
                                                        2000             1999

Net income                                           $   30.0           $  28.6
Change in:
  Foreign currency translation adjustments              (11.3)              5.7
  Net unrealized (losses) gains on certain
   investments, net of deferred taxes of $32.2
   and $80.3, respectively                              (44.1)            133.9
  Net unrealized gains on certain derivative
   transactions, net of deferred taxes of $0.6            1.0                --
                                                     --------           -------
Total comprehensive (loss) income                    $  (24.4)          $ 168.2
                                                     =========          =======

Net  unrealized  (losses)  gains on certain  investments,  net of  related  tax,
principally  represent our  investment in the voting common shares of LookSmart,
Ltd.

(5)      Other Operating Items

Other operating items represent charges related primarily to the streamlining of
our  organizational   structure  and  the  strategic  repositioning  of  certain
businesses.  The  components of other  operating  items are described in further
detail below:

-  Employee  Retirement and Severance  Benefits - For each reporting  period, we
   have identified employees who would be separated as a result of actions taken
   to streamline the organizational structure through a combination of voluntary
   and involuntary severance programs.

-  Contract   Terminations  -  These  charges  represent  anticipated  costs  to
   terminate contractual obligations in connection with streamlining activities.

-  Impairment  Losses - As a result of  restructuring  activities,  we  incurred
   charges  related to the  carrying  value of certain  leasehold  improvements,
   computer hardware and software and, to a lesser extent,  property,  plant and
   equipment no longer used in our operations.

Note 3 of our  consolidated  financial  statements  included  in our 2000 Annual
Report to  Stockholders  describes  the nature and magnitude of the charges that
were recorded in  conjunction  with these  components  for the past three fiscal
years.  At June 30, 2000,  we had accruals  for other  operating  items of $19.7
primarily  for  employee   retirement   and  severance   benefits.   During  the
three-months  ended September 30, 2000, we made payments totaling $4.3, of which
$3.0 related to employee  retirement  and severance  benefits.  At September 30,
2000,  the remaining  balance of accruals for other  operating  items,  composed
primarily of employee retirement and severance benefits, was $15.4.


(6)   Inventories

                                                   September 30,       June 30,
                                                      2000               2000

Raw materials                                        $  12.9           $  13.4
Work-in-progress                                        17.2              21.1
Finished goods                                         139.4              85.8
                                                     -------           -------
Total inventories                                    $ 169.5           $ 120.3
                                                     =======           =======

(7)   Investments

Available for Sale Marketable Securities

Marketable  securities on the balance sheet primarily represents the fair market
value (based on quoted market prices) of our investments in LookSmart,  Ltd. and
WebMD  Corporation.  These  securities  are  accounted  for  and  classified  as
available-for-sale securities. As of September 30, 2000, the market value of the
remaining  shares totaled $98.4 for LookSmart and $6.6 for WebMD.  As of October
31, 2000,  our  investments  in LookSmart and WebMD have a market value of $62.2
and $4.9, respectively.

Net unrealized gains on these investments, net of deferred taxes, is included in
accumulated  other  comprehensive  (loss) income in stockholders'  equity on the
balance sheet and amounted to $59.8 as of September 30, 2000. In September 2000,
we sold 200,000 shares of LookSmart and recorded a pre-tax gain of $2.6 in other
income, net on the income statement.

Investments, at Cost

In October 1999, we entered into an agreement with BrandDirect Marketing,  Inc.,
an  affinity,  membership-based,  direct  marketing  company,  to acquire an 18%
equity  interest  in  BrandDirect  Marketing,  Inc.  In  July  2000,  we made an
additional payment of $20.0 in accordance with the agreement, thereby increasing
our  investment in  BrandDirect  Marketing,  Inc. to $50.0.  The agreement  also
permits us to acquire additional equity in BrandDirect  Marketing,  Inc. through
the exercise of warrants and other rights. The investment is being accounted for
using the cost method and is included in other noncurrent  assets on the balance
sheet. In addition, we are working with BrandDirect  Marketing,  Inc. to develop
and market Reader's Digest-branded membership clubs.

We hold several other  investments,  at cost,  totaling $13.7. These investments
are included in other noncurrent assets on the balance sheet.

Licensing Agreement

In May 2000, we entered into a long-term licensing agreement with World's Finest
Chocolate,  Inc.  The  cost of  entering  into the  agreement  was  assigned  to
distribution  rights,  included in intangible assets on the balance sheet. These
rights are being  amortized  using the  straight-line  method  over the  initial
period of the agreement (10 years). Under the terms of the agreement,  QSP, Inc.
(our wholly owned  subsidiary)  has a long-term  commitment to purchase  World's
Finest  Chocolate,  Inc. products and the exclusive right to sell those products
for  fundraising  purposes.  Our purchase  commitment is based on annual minimum
tonnage amounts.

(8)   Derivative Instruments

On July 1, 2000, we adopted Statement of Financial  Accounting  Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS
No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain Hedging
Activities,  an  amendment of SFAS No. 133." These  statements  standardize  the
accounting for derivative instruments,  including certain derivative instruments
embedded  in  other  contracts.   We  are  required  to  record  all  derivative
instruments  on our  balance  sheet  at fair  value.  Derivatives  that  are not
classified  as hedges are adjusted to fair value  through  earnings.  Changes in
fair  value of the  derivatives  that we have  designated  and that  qualify  as
effective hedges are recorded in either other comprehensive  income or earnings.
The  ineffective  portion of our  derivatives  that are classified as hedges is
immediately recognized in earnings.  The cumulative effect of change in
accounting principles recorded on July 1, 2000 was not material to our results
of operations, financial position or cash flows.

Risk Management and Objectives

In the normal  course of  business we are exposed to market risk from the effect
of foreign  exchange rate  fluctuations  on the U.S. dollar value of our foreign
subsidiaries'  results of  operations  and  financial  condition.  A significant
portion of our risk is associated with foreign exchange rate fluctuations of the
euro and  British  pound.  We  purchase  foreign  currency  option  and  forward
contracts  to  minimize  the effect of  fluctuating  foreign  currencies  on our
subsidiaries' earnings and specifically  identifiable anticipated  transactions.
In  addition,  we enter  into  forward  contracts  to  minimize  the  effect  of
fluctuating   foreign  currency  exchange  rates  on  certain  foreign  currency
denominated  assets and  liabilities.  Generally,  we purchase  foreign currency
option and forward  contracts over periods ranging up to 12 months.  As a matter
of policy,  we do not  speculate in financial  markets,  and therefore we do not
hold financial  instruments for trading purposes. We continually monitor foreign
currency risk and the use of derivative instruments.

Strategies and Description of Derivative Instruments

The following is a brief description of our derivative transactions.

-  We enter into option contracts  to hedge  against the foreign  currency  risk
   associated  with  intercompany  royalty  fees  paid  to us by  our  foreign
   subsidiaries. The contract amounts of these options are based on forecasted
   future  revenues earned by our  subsidiaries.  These contracts are designated
   and qualify for cash flow hedge accounting.

-  Similarly,  option  contracts are used to economically  hedge against foreign
   currency  risk   associated   with   operating  cash  flows  of  our  foreign
   subsidiaries. The contract amounts of these options are based on forecasted
   cash  flows from  operating  profit  recognized  by our  subsidiaries.  These
   contracts  do not qualify  for hedge  accounting  treatment.

-  We utilize foreign currency forward  contracts to economically  hedge against
   foreign currency risk associated with anticipated or forecasted transactions,
   as well as foreign  currency  denominated  loans due to and from our  foreign
   subsidiaries.  These transactions do not qualify for hedge accounting
   treatment under the new standards.

Quantitative Disclosures of Derivative Instruments


<PAGE>


Cash  Flow  Hedges  --  Changes  in the  spot  value of the  foreign  currencies
associated with option  contracts  designated and qualifying as cash flow hedges
of  forecasted  royalty  payments  amounting  to $1.0 (net of taxes of $0.6) are
reported  in  accumulated   other   comprehensive   (loss)  income  included  in
stockholders'  equity on the balance  sheet.  The gains and losses are  deferred
until the  underlying  transaction  is recognized in earnings.  The  ineffective
portion of the change in market value of these option  contracts,  specifically,
the time-value  component of $0.7, was recognized as a loss in other income, net
on the  income  statement.  The fair value of the  option  contracts  of $1.7 is
included in prepaid expenses and other current assets on the balance sheet.

We  anticipate  that the net gains in  accumulated  other  comprehensive  (loss)
income relating to foreign currency option  contracts  existing at September 30,
2000  will  be  recognized  as  gain  (loss)  on  foreign  exchange  during  the
twelve-months   ended  September  30,  2001.  As  of  September  30,  2000,  the
approximate  length  of time  over  which  we will  hedge  our  exposure  to the
variability  in future  cash flows  associated  with  foreign  currency  royalty
payments is 12 months.  No cash flow hedges were discontinued during the three-
months ended September 30, 2000.

Non-Hedging  Derivatives  - Changes in the spot value of the foreign  currencies
and contract settlements  associated with option and forward contracts amounting
to $9.8 are  reported  in gain  (loss) on  foreign  exchange  included  in other
income,  net on the income  statement.  This effect would generally be offset by
the translation of the assets, liabilities and future operating cash flows being
hedged.  The fair value of the option and forward contracts of $13.4 is included
in prepaid expenses and other current assets on the balance sheet.

(9)   Debt

As described in Note 10 of our consolidated financial statements included in our
2000 Annual Report to Stockholders,  we are a party to a Competitive Advance and
Revolving  Credit  Facility  Agreement (the Credit  Agreement) that provides for
borrowings of up to $300.0 and expires on October 31, 2001. The Credit Agreement
contains  covenants to maintain  minimum levels of  consolidated  assets and net
worth and a maximum level of leverage.  At September 30, 2000, we had borrowings
of $249.1  outstanding under the Credit Agreement and we were in compliance with
all covenants. This amount is included in loans and notes payable on the balance
sheet. It is our intent to repay the  outstanding  amount within the next fiscal
year.

(10) Share Exchange

In September 1999, we executed a share exchange with the DeWitt Wallace-Reader's
Digest Fund and the Lila  Wallace-Reader's  Digest Fund (the  Funds).  Under the
terms of the exchange,  the Funds exchanged  approximately 9.3 million shares of
Class B voting common stock (Class B) for  approximately  8.0 million  shares of
Class A nonvoting  common stock (Class A), at an exchange ratio of 0.865 Class A
shares for each Class B share. As a result, we exchanged Class A treasury shares
at a cost of $164.9 and a market value of $239.9, for Class B shares,  resulting
in additional paid-in capital of $75.0.

(11) Share Repurchase Authorization

In January 2000, we announced authorization to repurchase up to 5 million shares
or about 5 percent of our  outstanding  Class A stock. As of September 30, 2000,
we had purchased  approximately  4.2 million shares totaling $140.2 (0.2 million
shares  totaling $6.7 during the  three-months  ended  September  30, 2000).  In
October 2000, we announced  authorization  to repurchase an additional 5 million
shares of our outstanding Class A stock.

<PAGE>



               The Reader's Digest Association, Inc. and Subsidiaries
                      Management's Discussion and Analysis
                  of Financial Condition and Results of Operations
                    (Dollars in millions, except per share data)


Unless indicated otherwise,  references in Management's  Discussion and Analysis
to "we",  "our"  and "us"  are to The  Reader's  Digest  Association,  Inc.  and
Subsidiaries.  All references to 2001 and 2000, unless specifically  identified,
are to fiscal 2001 and fiscal 2000, respectively.

The following  discussion and analysis  provides  information that we believe is
relevant to an  assessment  and  understanding  of our  consolidated  results of
operations and financial  condition and has been written excluding the effect of
fluctuations in foreign currency  exchange rates. This discussion should be read
in conjunction with the Consolidated  Condensed Financial Statements and related
notes.

Three-Month Period Ended September 30, 2000, Compared With Three-Month Period
Ended September 30, 1999

Results of Operations:  Company-Wide

Revenues/Operating Profit

Revenues for the first quarter of 2001 increased 8% to $560,  compared with $519
in the first quarter of 2000. Excluding the adverse effect of changes in foreign
currency  exchange rates,  revenues  increased 13%. The increase in revenues was
primarily  attributable  to the acquisition of Books Are Fun, Ltd. (BAF) in the
second quarter of 2000, increased sales at QSP, Inc. resulting from the addition
of the sales force of World's Finest  Chocolate,  Inc. and revenue growth in the
international  markets  of Global  Books and Home  Entertainment.  We  increased
mailings in Germany,  France,  Latin America,  Asia and Russia,  which increased
revenues in these  markets.  We also achieved  higher  response rates in certain
markets  because  of  better-targeted  mailings.  On  a  global  basis,  revenue
increases  were realized for all Global Books and Home  Entertainment  products,
especially series and general books.  Worldwide  advertising  revenues increased
for Reader's Digest magazine. In the United States the average rate per page and
the number of advertising  pages sold was higher,  and in international  markets
the  number of  advertising  pages  sold was  higher.  This  revenue  growth was
slightly  offset by the loss of revenue from the sale of the  subscription  list
for American  Health  magazine,  which ended  publication  with the October 2000
issue.

Operating  profit for the first quarter of 2001  increased 14% to $44,  compared
with $39 in the first quarter of 2000.  Excluding the adverse  effect of foreign
currency  translation,  operating profit increased 30%.  Operating profit growth
was driven by the increases in revenues for Global Books and Home  Entertainment
products.  In addition,  promotion  costs were lower as a result of reduced mail
quantities and better-targeted  mailings.  Offsetting a portion of this increase
in  operating  profit were  operating  profit  declines for U.S.  Magazines  and
International  Magazines.  For both U.S. Magazines and International  Magazines,
investment  spending  was  increased  slightly  to  develop  new  marketing  and
distribution channels and, for U.S. Magazines,  we incurred costs related to the
World's Finest  Chocolate,  Inc.  transaction and conversion to a new outsourced
fulfillment vendor.

Other Income, Net

Other income,  net  decreased  41% to $4 in the first quarter of 2001,  compared
with $7 in the first quarter of 2000.  This decrease was primarily  because of a
gain from the sale of  American  Health  magazine  of $7  realized  in the first
quarter  of 2000,  higher  interest  expense  in the first  quarter of 2001 as a
result of additional short-term debt and lower interest income from reduced cash
balances.  These amounts were  partially  offset by gains from foreign  exchange
hedging transactions and a gain on the sale of a small portion of our investment
in LookSmart, Ltd. during the current period.

Income Taxes

The effective tax rate for the first quarter of 2001 was 38.0%,  compared with a
rate of 37.5% for the first quarter of 2000.

Net Income and Earnings Per Share

For the first  quarter  of 2001,  net  income  was $30,  or $0.28 per share on a
diluted-earnings  basis ($0.29 per share for basic  earnings per share).  In the
prior year  period,  net income was $29, or $0.26 per share on both a basic- and
diluted-earnings basis.


Results of Operations:  Operating Segments

Global Books and Home Entertainment

Revenues  for Global  Books and Home  Entertainment  increased  12% in the first
quarter  of 2001 to $358,  compared  with  $320 in the  first  quarter  of 2000.
Excluding  the adverse  effect of changes in foreign  currency  exchange  rates,
revenues increased 19%. The acquisition of BAF in the second quarter of 2000 and
revenue growth for all products sold  internationally  were the primary  reasons
for the increase in revenues.  The acquisition of BAF was a significant  portion
of the revenue increase in the United States;  however,  revenues  increased for
other products sold in the United States.  Specifically,  revenues increased for
Young  Families  products  as a result of  increased  promotion,  and for series
products  because of higher  payment  rates and  increased  pricing.  A shift in
promotion  efforts  from video to music  products  resulted  in an  increase  in
revenues for music rather than video products.

The increase in revenue in international  markets was mostly from general books,
video products and Select  Editions.  Revenue  increases were especially high in
Germany, Mexico, Brazil, Russia, France and Australia. Revenue for general books
increased in certain markets  because of improved  response rates resulting from
better promotion techniques and stronger products,  especially in Russia, France
and  Mexico.  Sales of video  products  were  higher  as a result  of  increased
promotion efforts, especially in Germany, and improved response rates in Mexico.
Revenues  increased  for Select  Editions  primarily  in  Australia,  Brazil and
Germany as a result of improved membership in series products.

Operating  profit for Global Books and Home  Entertainment  increased 32% in the
first  quarter of 2001 to $54,  compared  with $41 in the first quarter of 2000.
Excluding the adverse effect of foreign currency  translation,  operating profit
increased 47%. Although profit  improvements were realized in most markets,  the
increase  was  primarily  from  improved  profitability  in the  United  States,
Germany,  Australia and Brazil. Profit increases were realized for all products,
especially  for series books,  general books and music  products.  In the United
States,  operating profit improved as a result of revenue growth and to a lesser
extent  as a  result  of lower  promotion  costs as a  result  of  reduced  mail
quantities and better-targeted  mailings.  Significant  improvement in operating
profit for the  international  markets  cited  above was driven by profits  from
higher  revenues for series,  general books,  video and music products and lower
promotion costs in certain markets.

U.S. Magazines

Revenues for U.S.  Magazines  increased 8% in the first quarter of 2001 to $127,
compared  with $118 in the first  quarter of 2000.  The increase in revenues was
attributable  to increased sales of QSP, Inc. as a result of the addition of the
sales force of World's  Finest  Chocolate,  Inc. In May 2000, we entered into an
agreement to purchase  products  and acquire  sales  representatives  of World's
Finest  Chocolate,  Inc. In addition,  advertising  revenues for Reader's Digest
magazine  increased from more  advertising  pages sold and a higher average rate
per page.  These  increases  in  revenues  were  slightly  offset by the loss of
revenue from the sale of the  subscription  list for American  Health  magazine,
which ended  publication  with the October  2000  issue,  and by slightly  lower
circulation revenues for Reader's Digest magazine.

Operating profit for U.S. Magazines  decreased in the first quarter of 2001 to a
loss of $(2),  compared  with a profit of $3 in the first  quarter of 2000.  The
decrease  was  primarily  the result of costs  related to the  transaction  with
World's Finest Chocolate,  Inc.,  investment in the development of new marketing
channels and conversion to a new outsourced fulfillment vendor.
International Magazines

Revenues for International  Magazines  decreased 7% in the first quarter of 2001
to $68,  compared with $73 in the first  quarter of 2000.  Excluding the adverse
effect of changes in foreign  currency  exchange rates,  revenues  increased 1%.
Higher advertising  revenues in Canada,  Mexico, the United Kingdom and Asia and
increased  newsstand  sales,  primarily  in Latin  America,  were the  principal
reasons for the increase. These increases were slightly offset by the decline in
circulation   revenues  of  Reader's  Digest  magazine  from  certain  strategic
reductions in local circulation rates and the sale of our Italian  operations in
the fourth quarter of 2000.

Operating profit declined to a loss of $(1) in the first quarter of 2001 from an
operating  profit of $1 in the first  quarter of 2000,  primarily as a result of
investment  in new  marketing  channels  and  increased  promotion  from  higher
mailings in a few markets. This decline was partially offset by the increases in
advertising  revenues  and  newsstand  sales,  and by cost  savings in paper and
printing  costs  from  the  use  of  global  contracts  to  facilitate  magazine
fulfillment.

Other Businesses

Revenues from Other Businesses decreased 28% to $6 in the first quarter of 2001,
compared with $9 in the first quarter of 2000,  primarily from lower revenues of
gifts.com,  Inc. as a result of reduced catalog promotions,  partially offset by
additional revenues from expansion of our insurance alliances.

Operating  losses from Other  Businesses  increased  by 10% to $(7) in the first
quarter of 2001,  compared with operating losses of $(6) in the first quarter of
2000,  primarily from planned  start-up costs for new  businesses.  These losses
were  substantially  offset  by  reduced  marketing  and  development  costs  of
gifts.com, Inc. and higher profits from expansion of our insurance alliances.

Forward-Looking Information

Fiscal 2001 Results

We expect  continued  improvement  in both  revenues and  operating  profit.  We
anticipate  that our revenue  growth rate for fiscal 2001 will approach the high
single or low double digits. We expect that year-over-year operating profit will
continue  to increase in double  digits,  but at a somewhat  slower rate than in
2000, based in part on our growing revenue base.

Liquidity and Capital Resources

                                                               Three-month
                                                               period ended
                                                            September 30, 2000


Cash and cash equivalents at June 30, 2000                        $  50
Net change in cash due to:
  Operating activities                                             (118)
  Investing activities                                              (22)
  Financing activities                                              150
  Effect of exchange rate changes on cash and cash
   equivalents                                                       (8)
Net change in cash and cash equivalents                               2
                                                                  -----
Cash and cash equivalents at September 30, 2000                   $  52
                                                                  =====

Cash and cash  equivalents  increased 4% to $52 at September 30, 2000,  compared
with $50 at June 30, 2000. Short-term borrowings increased by $160 to $250 as of
September 30, 2000 to finance additional  receivables from higher sales, as well
as additional inventory of BAF during the three-month period.

As  described  in  Note  10 to our  2000  Annual  Report,  we are a  party  to a
Competitive   Advance  and  Revolving  Credit  Facility  Agreement  (the  Credit
Agreement) that expires on October 31, 2001 and provides for borrowings of up to
$300.  The Credit  Agreement  contains  covenants to maintain  minimum levels of
consolidated assets and net worth and a maximum level of leverage.  At September
30, 2000, we had borrowings of $249 outstanding under the Credit  Agreement.  It
is our intent to repay the outstanding amount within the next fiscal year.

In January 2000, we announced authorization to repurchase up to 5 million shares
or about 5 percent of our outstanding  Class A nonvoting common stock (Class A).
As of September  30, 2000,  we had purchased  approximately  4.2 million  shares
totaling  $140 (0.2 million  shares  totaling $7 during the  three-months  ended
September 30, 2000). In October 2000, we announced  authorization  to repurchase
an additional 5 million shares of our outstanding Class A stock.

We believe  that our  liquidity,  capital  resources,  cash flows and  borrowing
capacity are sufficient to fund normal  capital  expenditures,  working  capital
requirements,  the payment of dividends,  the execution of our share  repurchase
program and the implementation of our strategic initiatives.

Currency Risk Management

In the normal  course of  business,  we are  exposed  to the  effects of foreign
exchange rate fluctuations on the U.S. dollar value of our foreign subsidiaries'
results of operations  and financial  condition.  We purchase  foreign  currency
option and forward  contracts  to  minimize  the effect of  fluctuating  foreign
currency   exchange  rates  on  our  earnings  and   specifically   identifiable
anticipated  transactions.  In  addition,  we enter into  forward  contracts  to
minimize the effect of fluctuating  foreign  currency  exchange rates on certain
foreign currency denominated assets and liabilities.

At September 30, 2000, our primary foreign  currency market  exposures  included
the euro and the British  pound.  We estimate  that the results of a uniform 10%
weakening and 10%  strengthening in the value of the U.S. dollar relative to the
currencies in which the option and forward  contracts are denominated,  with all
other variables held constant, would have the following effect:

                                        Effect of a  10%    Effect of a 10%
                                           Weakening         Strengthening
                                           of the U.S.         of the U.S.
                                             Dollar              Dollar

Option Contracts                            $   (9.6)             $ 13.3
Forward Contracts                           $  (12.8)             $ 10.5

These  estimates  represent  changes to the fair value of the option and forward
contracts on a stand-alone basis. Such changes would be substantially  offset by
the related  impact on the  assets,  liabilities  and  operating  profits  being
hedged.  Also, this calculation  assumes that each exchange rate would change in
the same direction  relative to the U.S.  dollar.  Changes in exchange rates not
only affect the U.S.  dollar value of the fair value of these  derivatives,  but
also  affect  the  underlying  foreign  subsidiaries'  income.  Our  sensitivity
analysis as described above does not consider  potential  changes in local sales
levels,  local currency prices,  or the mitigating  effects of option or forward
contracts.

Impact of the Euro Conversion

On  January  1,  1999,  11 of the 15  member  countries  of the  European  Union
established fixed conversion rates between their existing  sovereign  currencies
(legacy currencies) and a single currency called the euro. The legacy currencies
are  scheduled to remain legal  tender as  denominations  of the euro during the
transition  period from January 1, 1999 to December 31, 2001.  Beginning January
1,  2002,  euro-denominated  bills and coins will be  introduced  and by July 1,
2002, legacy currencies will no longer be legal tender.

We  performed an internal  analysis  regarding  the business and systems  issues
related to the euro conversion and developed a strategic plan to ensure that all
necessary  modifications  would be made on a timely  basis.  Our  operations  in
markets that have adopted the euro are able to accept payments and pay suppliers
in euros,  and are able to indicate the euro  equivalent of pricing on invoices.
During the transition period, we are monitoring customer and competitor reaction
to the euro and updating the strategic plan as needed.

To date, the transition to the euro has not significantly affected our marketing
strategy.  In addition, we believe that the conversion to the euro will not have
a significant impact on the marketing strategy of our European operations in the
future.  We do not anticipate the need to synchronize  prices between markets in
the future,  primarily  because the editorial content of our products varies. In
addition,  products are published in local  languages  and are sold  principally
through  direct  mail  rather  than retail  channels.  These  factors  result in
products that tend to be unique to each market and do not easily lend themselves
to price comparisons across borders. The estimated costs to convert all affected
systems to the euro are not  expected to have a material  adverse  effect on our
results of operations, financial position or cash flow.

                                       *****

This report includes "forward-looking statements" within the meaning of the U.S.
federal securities laws.  Forward-looking statements include any statements that
address  future  results  or  occurrences.   These  forward-looking   statements
inherently  involve  risks and  uncertainties  that could  cause  actual  future
results  and  occurrences  to  differ   materially   from  the   forward-looking
statements.  Except as required by those laws,  we have no  obligation to update
publicly any forward-looking statements and we have no intention to update them.

Some of these risks and uncertainties include factors relating to the:

-     effects of potentially more restrictive privacy and other governmental
      regulation relating to our marketing methods;
-     effects of modified and varied promotions;
-     ability to identify customer trends;
-     ability to continue to create a broadly appealing mix of new products;
-     ability to attract and retain new and younger magazine subscribers and
      product customers in view of the maturing of an important portion of our
      U.S. customer base;
-     ability to attract and retain subscribers and customers in an economically
      efficient manner;
-     effect of selective adjustments in pricing;
-     ability to expand and more effectively utilize our customer database;
-     ability to expand into new international markets and to introduce new
      product lines into new and existing markets;
-     ability to expand into new channels of distribution;
-     ability to negotiate and implement productive acquisitions, strategic
      alliances and joint ventures;
-     ability to integrate newly acquired and newly formed businesses
      successfully;
-     strength of relationships of newly acquired and newly formed businesses
      with their employees, suppliers and customers;
-     accuracy of the basis of forecasts relating to newly acquired and newly
      formed businesses;
-     ability to contain and reduce costs, especially through global
      efficiencies;
-     cost and effectiveness of re-engineering of business processes and
      operations;
-     accuracy of  management's  assessment of the current  status of our
      business;
-     evolution of our organizational and structural  capabilities;
-     ability we have to respond to competitive pressures within and outside the
      direct marketing industry, including the Internet;
-     effect of worldwide paper and postage costs;
-     effect of possible postal disruptions on deliveries;
-     effect of foreign currency fluctuations;
-     accuracy of management's assessment of the future effective tax rate and
      the effect of initiatives to reduce the rate;
-     effect of the transition to the euro;
-     effect and pace of our stock repurchase program; and
-     effect of general economic conditions.



<PAGE>


                           PART II. OTHER INFORMATION


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


(a)   Exhibits

      27    Financial Data Schedule



(b)   Reports on Form 8-K

      During the three-months ended September 30, 2000, the company did not file
      any reports on Form 8-K.



<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.






                                           The Reader's Digest Association, Inc.
                                           -------------------------------------
                                                (Registrant)



Date:  November 6, 2000                   By:   /s/GEORGE S. SCIMONE
                                                ------------------------------
                                                George S. Scimone
                                                Senior Vice President and
                                                Chief Financial Officer
                                                (and authorized signatory)




<PAGE>





                                  EXHIBIT INDEX



 Exhibit                                                                    Page

    27    Financial Data Schedule