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 March 31, 2004

                                       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 [  ]

Indicate by check mark whether the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes [X] No [  ]

As of April 30,  2004,  98,999,706  shares of the  registrant's  common stock
were outstanding.

                                                          Page 1 of 31 pages.


<PAGE>



           THE READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES

                             Index to Form 10-Q
                                 (unaudited)

                               March 31, 2004


                                                                        Page No.

Part I - Financial Information:

Item 1.  Financial Statements

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

  Consolidated Condensed Statements of Income
   for the three-month and nine-month periods ended March 31, 2004
   and 2003                                                                 3

  Consolidated Condensed Balance Sheets
   as of March 31, 2004 and June 30, 2003                                   4

  Consolidated Condensed Statements of Cash Flows
   for the nine-month periods ended March 31, 2004 and 2003                 5

  Notes to Consolidated Condensed Financial Statements                      6

Item 2.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                       16

Item 4.   Controls and Procedures                                          29


Part II - Other Information                                                30

Item 6.   Exhibits and Reports on Form 8-K                                 30



<TABLE>

                     The Reader's Digest Association, Inc. and Subsidiaries
                              Consolidated Condensed Statements of Income
                  Three-month and nine-month periods ended March 31, 2004 and 2003
                                 (In millions, except per share data)
                                            (unaudited)

                                            Three-month period ended    Nine-month period ended
                                                     March 31,                 March 31,
                                                  2004       2003         2004          2003

<S>                                            <C>        <C>          <C>          <C>
Revenues                                       $   561.0  $   563.5    $   1,852.1  $   1,911.2

Product, distribution and editorial expenses      (234.9)    (236.4)        (753.3)      (765.5)
Promotion, marketing and administrative
  expenses                                        (307.0)    (314.5)        (970.1)      (987.3)
Other operating items, net                            --      (16.1)          (9.1)       (13.3)
                                               ---------  ---------    -----------  -----------

  Operating profit (loss)                           19.1       (3.5)         119.6        145.1

Other (expense) income, net                        (17.5)      (5.1)         (35.1)       (28.3)
                                               ---------  ---------    -----------  -----------

  Income (loss) before provision for
    income taxes                                     1.6       (8.6)          84.5        116.8

Benefit (provision) for income taxes                 0.6        4.0          (29.3)       (42.4)
                                               ---------  ---------    -----------  -----------

  Net income (loss)                            $     2.2  $    (4.6)   $      55.2  $      74.4
                                               =========  =========    ===========  ===========

Basic earnings (loss) per share:
  Weighted average common shares
    outstanding                                     97.1       96.8           97.0         98.4
                                               =========  =========    ===========  ===========

  Basic earnings (loss) per share              $    0.02  $   (0.05)   $      0.56  $      0.75
                                               =========  =========    ===========  ===========

Diluted earnings (loss) per share:
  Adjusted weighted average common
   shares outstanding                               99.4       96.8           99.2         99.6
                                               =========  =========    ===========  ===========

  Diluted earnings (loss) per share            $    0.02  $   (0.05)   $      0.55  $      0.74
                                               =========  =========    ===========  ===========

Dividends per common share                     $    0.05  $    0.05    $      0.15  $      0.15
                                               =========  =========    ===========  ===========

</TABLE>




See accompanying Notes to Consolidated Condensed Financial Statements.



<PAGE>


            The Reader's Digest Association, Inc. and Subsidiaries
                     Consolidated Condensed Balance Sheets
                    As of March 31, 2004 and June 30, 2003
                                 (In millions)
                                  (unaudited)





                                                  March 31,    June 30,
                                                     2004        2003

Assets

  Cash and cash equivalents                       $   56.8     $   51.3
  Accounts receivable, net                           259.2        256.5
  Inventories                                        167.4        155.7
  Prepaid and deferred promotion costs               126.1        132.7
  Prepaid expenses and other current assets          166.3        191.8
                                                  --------     --------
Total current assets                                 775.8        788.0

  Property, plant and equipment, net                 160.0        162.5
  Goodwill                                         1,009.4      1,009.4
  Other intangible assets, net                       183.9        212.3
  Other noncurrent assets                            415.4        427.3
                                                  --------     --------
Total assets                                      $2,544.5     $2,599.5
                                                  ========     ========

Liabilities and stockholders' equity
  Loans and notes payable                         $    4.4     $   31.3
  Accounts payable                                   106.9         97.5
  Accrued expenses                                   267.8        281.4
  Income taxes payable                                21.9         36.5
  Unearned revenue                                   444.0        414.8
  Other current liabilities                           19.0         19.7
                                                  --------     --------
Total current liabilities                            864.0        881.2

  Long-term debt                                     732.3        834.7
  Unearned revenue                                   138.8        127.6
  Other noncurrent liabilities                       354.1        355.7
                                                  --------     --------
Total liabilities                                  2,089.2      2,199.2

  Capital stock                                       15.2         17.6
  Paid-in capital                                    210.0        215.0
  Retained earnings                                1,341.3      1,301.6
  Accumulated other comprehensive loss              (104.7)      (109.2)
  Treasury stock, at cost                         (1,006.5)    (1,024.7)
                                                  --------     --------
Total stockholders' equity                           455.3        400.3
                                                  --------     --------
Total liabilities and stockholders' equity        $2,544.5     $2,599.5
                                                  ========     ========



See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>

<TABLE>

                       The Reader's Digest Association, Inc. and Subsidiaries
                          Consolidated Condensed Statements of Cash Flows
                          Nine-month periods ended March 31, 2004 and 2003
                                            (In millions)
                                              (unaudited)

                                                                       Nine-month period ended
                                                                               March 31,
                                                                            2004      2003

<S>                                                                      <C>       <C>
Cash flows from operating activities

  Net income                                                             $   55.2  $   74.4
 Depreciation and amortization                                               47.7      48.0
  Asset impairments                                                           0.8        --
  Stock-based compensation                                                    7.8       4.9
  Net gain on the sales of businesses, certain assets, investments
   and contract terminations                                                 (3.8)     (7.1)
  Changes in current assets and liabilities, net of effects of
   acquisitions and dispositions:
   Accounts receivable, net                                                   6.9      15.8
   Inventories                                                               (8.2)    (24.2)
   Unearned revenue                                                          23.1      26.4
   Accounts payable and accrued expenses                                    (15.6)    (18.9)
   Other, net                                                                22.1      (8.1)
  Changes in noncurrent assets and liabilities, net of effects of
   acquisitions and dispositions                                             25.4      20.7
                                                                         --------  --------
Net change in cash due to operating activities                              161.4     131.9
                                                                         --------  --------

Cash flows from investing activities
  Proceeds from maturities and sales of short-term investments and
   marketable securities                                                      0.8       5.2
  Purchases of investments and marketable securities                         (1.3)     (7.5)
  Proceeds from other long-term investments, net and sale of a
   business                                                                   3.0        --
  Proceeds from sales of property, plant and equipment                        0.6       3.7
  Capital expenditures                                                      (12.3)     (9.8)
                                                                         --------  --------
Net change in cash due to investing activities                               (9.2)     (8.4)
                                                                         --------  --------

Cash flows from financing activities
  Repayments of revolving credit and other facilities, net                   (0.7)       --
  Repayments of term loan                                                  (428.6)    (34.5)
  Proceeds from senior notes offering                                       300.0        --
  Payments of debt financing fees                                            (6.5)       --
  Dividends paid                                                            (15.5)    (15.8)
  Common stock repurchased                                                     --    (101.7)
  Proceeds from employee stock purchase plan and exercise                     1.4       1.8
   of stock options
  Other, net                                                                  0.6       0.4
                                                                         --------  --------
Net change in cash due to financing activities                             (149.3)   (149.8)
                                                                         --------  --------
Effect of exchange rate changes on cash                                       2.6      (0.3)
                                                                         --------  --------
Net change in cash and cash equivalents                                       5.5     (26.6)

Cash and cash equivalents at beginning of period                             51.3     107.6
                                                                         --------  --------
Cash and cash equivalents at end of period                               $   56.8  $   81.0
                                                                         ========  ========

</TABLE>


See accompanying Notes to Consolidated Condensed Financial Statements


<PAGE>


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



Unless indicated otherwise, references in Notes to Consolidated Condensed
Financial Statements to "we", "us" and "our" are to The Reader's Digest
Association, Inc. and Subsidiaries.  All references to 2004, 2003 and 2002,
unless otherwise indicated, are to fiscal 2004, fiscal 2003 and fiscal 2002,
respectively.  Our fiscal year is the period from July 1 through June 30.


(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 majority-owned
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 accounting principles generally accepted in the United
States applying certain assumptions and estimates, including all adjustments
considered necessary to present such information fairly.  All such
adjustments are of a normal recurring nature.  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 that begins July 1.  The three-month periods ended
March 31, 2004 and 2003 are the third fiscal quarters of 2004 and 2003,
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 reclassifications have been made to the prior year financial
statements to conform with the current year presentation.

New Accounting Standards

In May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.  SFAS No. 150 established standards for
classifying certain financial instruments that represent obligations yet
also have characteristics similar to equity instruments.  Specifically,
SFAS No. 150 addresses the accounting for instruments such as mandatorily
redeemable securities, certain option contracts and obligations to be
settled in shares.  SFAS No. 150 is effective for interim periods
beginning after June 15, 2003 (for us, effective fiscal 2004 and
thereafter).  In November 2003, the FASB indefinitely delayed the
effective date of the classification and measurement provisions that
relate to noncontrolling interests in limited life entities.

In December 2003, the FASB issued FASB Interpretation (FIN) No. 46R, a
revision to FIN No. 46, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51.  FIN No. 46
introduced a new consolidation model with respect to variable interest
entities.  The new model required that the determination of control
should be based on the potential variability in gains and losses of the
variable interest entity being evaluated.  The entity with the majority
of the variability in gains and losses is deemed to control the variable
interest entity and is required to consolidate it.  FIN No. 46R revised
the effective dates for different types of entities.  FIN No. 46R must be
applied to all entities considered special purpose entities for the
period ending after December 15, 2003 (the second quarter of 2004 for
us).  However, FIN No. 46R is effective for the first reporting period
that ends after March 15, 2004 (the third quarter of 2004 for us) for all
other types of variable interest entities.

In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits.  The statement
revises the financial statement disclosures required for pension and
postretirement obligations.  Additional disclosures include descriptions of
plan assets and the investment strategy employed.  In addition to these
annual disclosures, SFAS No. 132 also requires interim disclosures such as
the components of net periodic pension cost.  The statement does not change
the recognition or measurement of benefit plan obligations.  The annual
disclosure requirements are effective for fiscal years ending after December
15, 2003 (fiscal 2004 for us).  The interim disclosure requirements are
effective for interim periods beginning after December 15, 2003 (the third
quarter of 2004 for us).

Adoption of SFAS No. 150, FIN No. 46R and the revision to SFAS No. 132
did not have any impact on our operating results or financial position.

On January 12, 2004, the FASB issued FASB Staff Position (FSP) 106-1,
Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003.  FSP 106-1 relates to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 Act
(the Act) signed into law by President Bush on December 8, 2003.  The Act
introduces a prescription drug benefit under Medicare Part D (Part D) and a
federal subsidy for sponsors of retiree health care benefit plans that
provide a benefit that is at least "actuarially equivalent" to Part D.  Based
on the level of benefits provided under our retiree health care plans, we
believe they are at least "actuarially equivalent" to those provided by Part
D.  In accordance with the provisions of FSP 106-1, we have elected not to
defer the effect of the Act on our accumulated postretirement benefit
obligation.  We will reflect an $11.2 benefit as an unrecognized gain on our
measurement date, March 31, 2004.  This gain will be amortized as a component
of net periodic postretirement (benefit) cost in future periods.  The FASB
will issue final authoritative guidance on this topic, which could require us
to re-evaluate the impact of the Act.


(2)   Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss)
less preferred stock dividend requirements by the weighted average number of
common shares outstanding during the period. The preferred stock dividend
requirements were $0.3 for each of the three-month periods ended March 31,
2004 and 2003 and $1.0 for each of the nine-month periods ended March 31,
2004 and 2003.

Diluted earnings (loss) 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 and vesting of certain restricted
stock.  For the three-month period ended March 31, 2004, the assumed
exercise, conversion and vesting were 2.3 million shares.  For the comparable
period ended March 31, 2003, including these shares in our calculation of
loss per share results in a smaller loss per share; therefore, these shares
are considered anti-dilutive and excluded from the computation of diluted
loss per share.  Accordingly, our loss per share for the three-month period
ended March 31, 2003 is calculated using the basic number of shares.  For the
nine-month period ended March 31, 2004, the assumed exercise, conversion and
vesting were 2.2 million shares; for the comparable period ended March 31,
2003, there were 1.2 million shares.

For the three- and nine-month periods ended March 31, 2004, 11.0 million
shares were not included in the calculation of earnings per share.  The
effect would have been anti-dilutive and/or the exercise prices of these
options were greater than the average market price of the stock during the
period.  For the three- and nine-month periods ended March 31, 2003, 13.8
million shares and 12.6 million shares, respectively, were not included in
the calculation of loss per share because the exercise prices of these
options were greater than the average market price of the stock during the
period.


(3)   Stock-Based Compensation

The table below shows our net income (loss) and basic and diluted earnings
(loss) per share as reported on our income statements for the respective
periods and adjusts these amounts to include the pro forma impact of using
the fair value based method to calculate stock compensation expense as
prescribed under SFAS No. 123, Accounting for Stock-Based Compensation.  The
fair value of our options on the date of grant was calculated using the
Black-Scholes option-pricing model.  The pro forma stock compensation would
result in an additional $(2.6) and $(8.2) of expense, net of tax, for the
three- and nine-month periods ended March 31, 2004, respectively.  For the
three- and nine-month periods ended March 31, 2003, such amounts would be
$(3.1) and $(10.0), net of tax, respectively.


<PAGE>



                              Three-month period ended   Nine-month period ended
                                       March 31,              March 31,
                                    2004      2003        2004       2003

Net income (loss), as
  reported                       $   2.2    $  (4.6)      $   55.2    $   74.4
                                 =======    =======       ========    ========

Less:  stock-based
  compensation expense
  determined using the fair
  value based method, net of
  tax                               (2.6)      (3.1)          (8.2)      (10.0)
                                 -------    -------       --------    --------

Net income (loss), pro forma     $  (0.4)   $  (7.7)      $   47.0    $   64.4
                                 =======    =======       ========    ========
Basic earnings (loss) per
  share, as reported             $  0.02    $ (0.05)      $   0.56    $   0.75
                                 =======    =======       ========    ========
Basic earnings (loss) per
  share, pro forma               $ (0.01)   $ (0.08)      $   0.48    $   0.65
                                 =======    =======       ========    ========
Diluted earnings (loss) per
  share, as reported             $  0.02    $ (0.05)      $   0.55    $   0.74
                                 =======    =======       ========    ========
Diluted earnings (loss) per
  share, pro forma               $ (0.01)   $ (0.08)      $   0.46    $   0.64
                                 =======    =======       ========    ========


For the three- and nine-month periods ended March 31, 2004, $1.4 and $5.1,
net of tax, respectively, of expenses related to restricted stock are
included in our net income (loss) and earnings (loss) per share, as
reported.  For the three- and nine-months periods ended March 31, 2003, those
amounts were approximately $1.0 and $3.0, net of tax, respectively.


(4)Revenues and Operating Profit (Loss) by Reportable Segment

We modified our reportable segments during the fourth quarter of 2003 to
reflect our new internal management organization.  The three reportable
segments are Reader's Digest North America, International Businesses and
Consumer Business Services.  We have restated segment results of operations
for prior periods to conform to our new reportable segments.

Reportable segments are based on our method of internal reporting.  We
present our segment revenues as if the transactions were with third parties.
Revenues and expenses attributable to intercompany transactions are
eliminated (under the intercompany eliminations caption below) to reconcile
our reportable segment amounts to consolidated amounts, as reported in our
income statements.  We separately report Corporate Unallocated expenses,
which include the cost of governance and centrally managed expenses, as well
as the accounting for U.S. pension plans, post-retirement healthcare costs,
and executive compensation programs that are not allocated to the operating
segments.  Governance and centrally managed expenses include costs for
departments such as corporate finance, general corporate management, investor
relations, legal, public relations and treasury and for related information
technology and facility costs incurred by these departments.

The accounting policies of our segments are the same as those described in
Note 1 to the Consolidated Financial Statements included in our 2003 Annual
Report to Stockholders.


<PAGE>


<TABLE>

                                 Three-month period ended   Nine-month period ended
                                          March 31,                 March 31,
                                       2004      2003            2004      2003
<S>                                 <C>       <C>            <C>         <C>
Revenues
  Reader's Digest North America     $  197.5  $  203.2       $    632.5  $    645.1
  International Businesses             238.7     236.2            730.0       756.1
  Consumer Business Services           129.2     128.5            513.2       531.2
  Intercompany eliminations             (4.4)     (4.4)           (23.6)      (21.2)
                                    --------  --------       ----------  ----------
Total revenues                      $  561.0  $  563.5       $  1,852.1  $  1,911.2
                                    ========  ========       ==========  ==========

Operating profit (loss)
  Reader's Digest North America     $   11.3  $    9.0       $     54.6  $     47.2
  International Businesses              13.9       4.3             36.3        34.3
  Consumer Business Services             4.1       2.8             71.1        91.4
  Corporate Unallocated                (10.2)     (3.5)           (33.3)      (14.5)
  Other operating items, net              --     (16.1)            (9.1)      (13.3)
                                    --------  --------       ----------  ----------
Operating profit (loss)             $   19.1  $   (3.5)      $    119.6  $    145.1
                                    ========  ========       ==========  ==========

Intercompany eliminations
  Reader's Digest North America     $   (0.2) $   (1.0)      $     (0.8) $     (3.8)
  International Businesses              (0.9)     (0.1)            (2.2)       (2.4)
  Consumer Business Services            (3.3)     (3.3)           (20.6)      (15.0)
                                    --------  --------       ----------  ----------
Total intercompany eliminations     $   (4.4) $   (4.4)      $    (23.6) $    (21.2)
                                    ========  ========       ==========  ==========

</TABLE>



(5)  Comprehensive (Loss) Income

Accumulated other comprehensive income as reported in our balance sheets
primarily represents foreign currency translation adjustments.  The
components of comprehensive income, net of related tax, for the three- and
nine-month periods ended March 31, 2004 and 2003 were as follows:

<TABLE>

                                                Three-month period ended    Nine-month period ended
                                                         March 31,                   March 31,
                                                     2004       2003             2004       2003

<S>                                                 <C>     <C>                <C>      <C>
Net income (loss)                                   $  2.2  $ (4.6)            $  55.2  $  74.4
Change in:
  Foreign currency translation adjustments            (3.5)    6.1                 4.0      8.6
  Net unrealized gains on certain
    investments (1)                                     --     0.2                 0.2       --
  Reclassification adjustments for gains that
   are included in net income (2)                       --    (1.3)               (0.5)    (3.3)
  Net unrealized gains (losses) on certain
   derivative transactions (3)                        (0.1)   (0.1)               (0.1)    (1.1)
  Reclassification adjustments for losses
   that are included in net income (4)                 1.0      --                 1.0       --
                                                    ------  ------             -------  -------
Total comprehensive (loss) income                   $ (0.4) $  0.3             $  59.8  $  78.6
                                                    ======  ======             =======  =======

</TABLE>


(1)Net unrealized gains on certain investments, net of related tax, principally
   represents our investment in the voting common shares of LookSmart, Ltd.
   For the three- and nine-month periods ended March 31, 2004, these amounts
   are net of deferred taxes of zero and a deferred tax liability of $(0.1),
   respectively.  For the three- and nine-month periods ended March 31, 2003,
   these amounts are net of deferred tax liabilities of $(0.1) and zero,
   respectively.

(2)Reclassification adjustments for gains that are included in net income are
   net of deferred taxes of zero and a deferred tax asset of $0.3 for the
   three- and nine-month periods ended March 31, 2004, respectively.  For each
   of the three- and nine-month periods ended March 31, 2003, these amounts
   were $0.7 and $1.8, respectively.

(3)Net unrealized (losses) gains on certain derivative transactions in 2004,
   net of related tax, principally represents gains and losses on the value of
   our interest rate caps.  For each of the three- and nine-month periods ended
   March 31, 2004, these amounts are net of nominal deferred tax liabilities.
   For the three- and nine-month periods ended March 31, 2003, these amounts
   are net of deferred tax assets of $0.1 and $0.6, respectively.  See Note
   11, Derivative Instruments, for additional information.

(4)Reclassification adjustments for losses that are included in net income in
   2004, net of related tax, principally represents amortization of the premium
   paid to consummate the interest rate caps.  For each of the three- and
   nine-month periods ended March 31, 2004, these amounts are net of deferred
   tax liabilities of $(0.5).


(6) Other Operating Items, Net

During the three-month period ended March 31, 2004, we recorded charges of
$(1.7) in other operating items, net.  These charges related to severance of
$(0.6), and asset impairments and costs associated with closing our Norway
location totaling $(1.1).  The severance charges relate to efforts to
streamline certain domestic businesses.  These charges were offset by $1.7 of
reversals of charges recorded in previous periods that are no longer
necessary.  We generally review our restructuring charges quarterly to
determine the appropriateness of existing reserves in light of current
circumstances.  Accordingly, these charges, principally consisting of
severance, were reversed because of the occurrence of events that affected
our original plans.

For the nine-month period ended March 31, 2004, we recorded other operating
items, net, of $(9.1).  The charges comprised $(6.5), net, for severance and
$(2.6), net, for contract terminations, asset impairments and costs
associated with closing our Norway location.  The severance charges relate to
integrating Reiman's customer service department with our outsource provider
and streamlining operations in certain European markets and corporate
departments.  As a result of these actions, approximately 140 employees are
expected to be terminated during the fourth quarter of 2004 and the first
half of fiscal 2005.

For the nine-month period ended March 31, 2003, we recorded an expense of
$(13.3) under other operating items, net.  This amount comprised expenses of
$(16.1) recorded in the third quarter of 2003 (primarily related to severance
costs associated with staff eliminations in overhead areas across the
company, primarily in international locations, and asset impairments in the
United States), and income of $2.8 recorded in the first quarter of 2003.
The $2.8 consisted primarily of net adjustments to litigation-related accrual
balances, established in previous years, following settlement of a lawsuit in
the first quarter of 2003.

Other operating items recorded in previous periods also represent charges
related to the streamlining of our organizational structure and the strategic
repositioning of certain businesses.  The components of these charges,
included in accrued expenses on the balance sheets, are described in further
detail below:

-  Severance Costs - These accruals represent the cost to separate
   employees from our operations as a result of actions taken and plans
   developed to streamline the organizational structure.  This separation is
   accomplished through a combination of voluntary and involuntary severance
   programs.  The positions to be separated were identified when the charge
   was recorded.

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

-  Impairment Losses - As a result of streamlining activities, we have
   previously incurred charges related to the carrying value of certain
   long-lived assets, computer hardware and software, and property, plant and
   equipment no longer used in our operations.



<PAGE>


The table below reflects changes for the three-month period ended March 31,
2004 to accruals recorded in the current and previous periods.  A majority of
the reserves remaining and spending to date relate to severance costs.  Of
the approximately 700 positions identified to be separated under the charges
recorded in the third and fourth quarters of 2003 and in the second and third
quarters of 2004, approximately 75% had been separated as of March 31, 2004.

<TABLE>

   Initial year         Balance at       Adjustments/                   Balance at
    of charge       December 31, 2003      Accruals      Spending     March 31, 2004

<S>                     <C>                <C>            <C>             <C>
  2002 & prior          $   4.4            $ (0.5)        $ (0.6)         $   3.3
  2003                     12.3              (0.1)          (3.0)             9.2
  2004                      8.9               1.6           (2.2)             8.3
                        -------            ------         ------          -------
     Total              $  25.6            $  1.0         $ (5.8)         $  20.8
                        =======            ======         ======          =======

</TABLE>


For the nine-month period ended March 31, 2004, spending charged against
reserves recorded in the current and previous periods amounted to $(24.0)
primarily related to severance and costs incurred to restructure business
processes in certain corporate departments.

<TABLE>

   Initial year         Balance at     Adjustments/                   Balance at
    of charge         June 30, 2003      Accruals      Spending     March 31, 2004

<S>                      <C>             <C>            <C>            <C>
  2002 & prior           $   7.0         $ (0.5)        $ (3.2)        $   3.3
  2003                      27.7           (0.1)         (18.4)            9.2
  2004                        --           10.7           (2.4)            8.3
                         -------         ------         ------         -------
     Total               $  34.7         $ 10.1         $(24.0)        $  20.8
                         =======         ======         ======         =======

</TABLE>


(7)   Inventories

                                             March 31,       June 30,
                                                2004           2003

Raw materials                                 $  10.5        $   9.3
Work-in-progress                                  2.8            6.2
Finished goods                                  154.1          140.2
                                                -----          -----
Total inventories                             $ 167.4        $ 155.7
                                              =======        =======

As of March 31, 2004 and 2003, we held $167.4 and $182.8 in inventories,
respectively.  During both of these periods, we used the first-in, first-out
(FIFO) method to value our inventories.


(8)   Investments

Marketable securities previously included in other noncurrent assets on the
balance sheets primarily represented the fair market value (based on quoted
market prices) of our investment in LookSmart, Ltd. These securities were
accounted for and classified as available-for-sale securities.  As of March
31, 2004, we had sold all of our remaining shares (as of June 30, 2003, the
market value of these shares totaled $0.6).

During the nine-month period ended March 31, 2004, we sold 0.2 million shares
of LookSmart and recorded a pre-tax gain of $0.8 in other (expense) income,
net on the income statements.  During the three- and nine-month periods ended
March 31, 2003, we sold 0.7 million and 2.7 million shares of LookSmart,
respectively, and recorded pre-tax gains of $2.0 and $5.1, respectively, in
other (expense) income, net on the income statements.




<PAGE>


(9)   Goodwill and Intangible Assets, Net

There were no changes in the carrying amount of goodwill during the
three-month period ended March 31, 2004.  The carrying amount of goodwill as
of March 31, 2004 was $1,009.4, of which $686.4 was attributable to Reader's
Digest North America and $323.0 was attributable to Consumer Business
Services.  We tested our goodwill for impairment in the third quarter of 2004
(our designated annual period) and determined that no impairment existed with
respect to our holdings at that time.

The following categories of acquired intangible assets are included in other
intangible assets, net, on the balance sheets, as of March 31, 2004 and June
30, 2003:

<TABLE>

                                             March 31, 2004       June 30, 2003
                                             Gross       Net     Gross      Net

<S>                                        <C>        <C>       <C>       <C>
Intangible assets with indefinite lives:
  Trade names                              $   89.7   $  89.7   $  89.7   $  89.7

Intangible assets with finite lives:
  Licensing agreements                         56.1      38.0      54.8      41.0
  Customer lists                              137.8      56.2     137.8      81.6
  Other trade names and
    noncompete agreements                       3.0        --       3.0        --
                                           --------   -------   -------   -------
Total intangible assets                    $  286.6   $ 183.9   $ 285.3   $ 212.3
                                           ========   =======   =======   =======

</TABLE>


Amortization related to intangible assets with finite lives amounted to
$(9.9) and $(29.7) for the three- and nine-month periods ended March 31,
2004, respectively.  For the three- and nine-month periods ended March 31,
2003, amortization amounted to $(9.9) and $(29.7), respectively.  Our most
significant licensing agreement (discussed below) is principally amortized
over the initial 10-year contract term, with a portion being amortized over
the remaining 17-year term of our amended agreement.  Customer lists are
being amortized principally between three and six years.  Estimated fiscal
year amortization expense for intangible assets with finite lives is as
follows:  fiscal 2004 - $39.9; fiscal 2005 - $36.8; fiscal 2006 - $15.9;
fiscal 2007 - $10.5 and fiscal 2008 - $5.8.

Licensing Agreement

In May 2000, QSP, Inc. entered into a long-term licensing agreement with
World's Finest Chocolate, Inc.  The cost associated with the agreement was
assigned to licensing agreements and is included in other intangible assets,
net on the balance sheets.  In September 2002, this agreement was amended to
extend the term of the original agreement by 10 years, reduce the annual
minimum tonnage purchase requirements, favorably adjust pricing and permit
QSP to sell World's Finest Chocolate products through marketing channels
other than fundraising, under specified circumstances.  In connection with
these amended terms, QSP paid World's Finest Chocolate $10.5 in 2003.  The
amount paid in May 2000 to consummate the initial agreement is being
amortized over the original 10-year license term.  Amounts paid to amend the
agreement have been assigned various amortization periods ranging from 7 to
17 years (the remaining period of the amended agreement).

The approximate annual minimum purchase amounts under the amended agreement
are: fiscal 2004 - $55.0; fiscal 2005 - $59.0; fiscal 2006 - $61.0; fiscal
2007 - $62.0; and approximately $69.0 per year from fiscal 2008 to fiscal
2020.  The amounts are estimates based on minimum tonnage requirements and
nominal price increases as stipulated in the amended agreement.  We continue
to monitor our performance under this contract and, although sales related to
this agreement are higher, we currently do not anticipate meeting the minimum
purchase requirements for 2004.  Accordingly, we have recorded an estimated
penalty of approximately $0.8 in accrued expenses on the balance sheet.  For
the nine-month period ended March 31, 2003, we had accrued a penalty of
$2.0.


(10) Debt

As described in Note 11 to the Consolidated Financial Statements included in
our 2003 Annual Report to Stockholders, our borrowings (collectively referred
to as the 2002 Credit Agreements) consist principally of proceeds from the
Term Loan Agreement (Term Loan) and our Five-Year Revolving Credit and
Competitive Advance Facility Agreement (Five-Year Facility).  The maximum
borrowing allowed under the Five-Year Facility is $192.5.  The 2002 Credit
Agreements are secured by substantially all of our assets and are subject to
various financial and non-financial covenants.

On March 3, 2004, we completed a private placement, with registration rights,
of $300.0 of 6.5% senior unsecured notes due in 2011 (Senior Notes) in order
to refinance amounts outstanding under the Term Loan.  The proceeds from this
offering were used to repay $294.0 of principal outstanding under the Term
Loan, with the remainder used to pay a portion of the financing costs.  Total
financing fees of approximately $7.6 related to the offering have been
deferred and will be amortized on a straight-line basis over the life of the
Senior Notes.  Concurrently with the refinancing, we amended the 2002 Credit
Agreements to allow us to repurchase shares, pay cash dividends and make
certain other restricted payments, in any combination thereof, up to $50.0
each fiscal year.

During the nine-month period ended March 31, 2004, we also repaid $134.6 of
principal outstanding under the Term Loan (consisting of $15.8 in mandatory
repayments, $10.8 in additional mandatory repayments pursuant to an excess
cash flow calculation performed annually, and $108.0 in voluntary
prepayments), excluding amounts that were refinanced.  The amount of
scheduled repayments is continually adjusted to the extent that we continue
to make voluntary repayments and additional mandatory repayments.  As a
result, after all Term Loan repayments described above, scheduled principal
repayments under the Term Loan are $1.1 per quarter until fiscal 2007 and
$105.6 per quarter in fiscal 2008.  We are required to perform a calculation
in the first quarter of every fiscal year (based on an excess cash flow
calculation outlined in the Term Loan) to determine any potential additional
mandatory repayments.  As of March 31, 2004, we had $436.7 of borrowings
outstanding under the Term Loan, $300.0 outstanding under the Senior Notes
and zero outstanding under the Five-Year Facility.  These amounts are
included in long-term debt and in loans and notes payable on the balance
sheets.

Interest expense for the three- and nine-month periods ended March 31, 2004
was $(18.2) and $(42.6), respectively (for the three- and nine-month periods
ended March 31, 2003, interest expense was $(10.5) and $(36.0),
respectively).  As a result of the refinancing described above, we wrote off
$(5.2) of deferred financing fees for the portion of the Term Loan that was
refinanced.  Such amount was recognized in interest expense.  In addition, we
terminated interest rate caps with a notional amount of $250.0, which
resulted in accelerated amortization of $(1.3) of the premium paid for these
instruments.  Such amount is included in interest expense.  Interest income
on cash balances was $1.2 and $3.7 for the three- and nine-month periods
ended March 31, 2004, respectively ($0.7 and $4.1 for the three- and
nine-month periods ended March 31, 2003, respectively).  The weighted average
interest rate charged by our lenders on our borrowings for the nine-month
periods ended March 31, 2004 and 2003 was 4.2% and 4.1%, respectively.


(11) Derivative Instruments

Risk Management and Objectives

In the 2002 Credit Agreements (referred to in Note 10, Debt), we are required
to enter into interest rate protection agreements to fix or limit the
interest cost with respect to at least one-third of the outstanding
borrowings under the Term Loan.  Accordingly, in July 2002 we entered into
agreements to cap at 6% the LIBOR interest rate component of $400.0 of our
borrowings for a period of three years.  Our interest rate cap agreements
qualify as cash flow hedges, the effect of which is described below.

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.  We purchase foreign currency option and forward
contracts to minimize the effect of fluctuating foreign currencies on
significant known transactions.

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.

Cash Flow Hedges - For the nine-month period ended March 31, 2004, the fair
value of our interest rate caps decreased by a nominal amount, net of
deferred taxes; for the three-month period ended March 31, 2004, the fair
value of our interest rate caps decreased $(0.1), net of deferred taxes.  For
the three- and nine-month periods ended March 31, 2003, the fair value of our
interest rate caps decreased, resulting in a loss of $(0.1) and $(1.1),
respectively, net of deferred tax assets of $0.1 and $0.6, respectively.
These changes are reported in accumulated other comprehensive loss included
in stockholders' equity on the balance sheets.  The gains and losses are
deferred until the underlying transaction is recognized in earnings.

As described in Note 10, Debt, in the third quarter of 2004 we refinanced a
portion of our borrowings outstanding under the Term Loan.  As a result, the
total amount of outstanding borrowings under the Term Loan, and the total
notional amount of related interest rate caps required, declined.
Accordingly, in the third quarter we terminated interest rate caps with a
notional value of $250.0 and recognized the remaining unamortized premium on
those instruments, $1.3, in interest expense.  We currently maintain interest
rate caps with a notional amount of $150.0.  There were no cash flow hedges
discontinued during the three- and nine-month periods ended March 31, 2003.


(12) Pension Information

In December 2003, the FASB issued a revision to SFAS No. 132.  The statement
revised the financial statement disclosures required for pension and
postretirement obligations, including new interim disclosures.  We sponsor
various pension plans including those for employees in the United States,
international employees and excess plans for executives.  The largest plan,
covering substantially all employees in the United States, is a cash balance
plan.

The table below details the components of our net periodic pension (benefit)
cost for the three- and nine-month periods ended March 31, 2004 and 2003.

<TABLE>

                                            Three-month period ended    Nine-month period ended
                                                    March 31,                  March 31,
                                                  2004     2003              2004     2003

<S>                                             <C>      <C>               <C>      <C>
Service cost                                    $   5.0  $   3.8           $  14.5  $  11.4
Interest cost                                      11.5     11.6              33.7     34.7
Expected return on plan assets                    (16.3)   (20.0)            (48.1)   (59.8)
Amortization                                       (0.1)    (0.2)             (0.4)    (0.6)
Recognized actuarial gain                           1.4     (0.5)              4.1     (1.5)
Curtailments, settlements and other items            --      0.1                --      0.7
                                                -------  -------           -------  -------
Net periodic pension (benefit) cost             $   1.5  $  (5.2)          $   3.8  $ (15.1)
                                                =======  =======           =======  =======

</TABLE>


For the three- and nine-month periods ended March 31, 2004, approximately
$2.8 and $7.3, respectively was contributed to our pension plans.  For 2004,
total contributions are expected to be $9.6.

The table below details the components of our net periodic postretirement
(benefit) cost for the three- and nine-month periods ended March 31, 2004 and
2003.

<TABLE>

                                    Three-month period ended   Nine-month period ended
                                            March 31,                 March 31,
                                          2004    2003               2004   2003

<S>                                      <C>     <C>               <C>     <C>
Service cost                             $  0.3  $  0.2            $  0.9  $  0.7
Interest cost                               1.6     1.3               4.7     3.7
Amortization of prior service cost         (0.2)   (0.1)             (0.4)   (0.3)
Recognized actuarial gain                    --    (0.5)               --    (1.6)
                                         ------  ------            ------  ------
Net periodic postretirement cost         $  1.7  $  0.9            $  5.2  $  2.5
                                         ======  ======            ======  ======

</TABLE>


(13) Share Repurchase Authorization

As of March 31, 2004, under various share repurchase authorizations
(announced during 2000, 2001 and 2002), we have repurchased 8.6 million
shares of our Class A Nonvoting Common Stock for approximately $231.7 in
previous periods.  In May 2001 we announced a $250.0 share repurchase
authorization, of which $186.0 remains as of March 31, 2004.  Under the 2002
Credit Agreements, we were prohibited from repurchasing our Common Stock
until our credit ratings are investment grade.  However, because of the
amendment described in Note 10, Debt, we are allowed to repurchase shares,
pay cash dividends and make certain other restricted payments, in any
combination, up to $50.0 each fiscal year.

In addition, on December 13, 2002 we repurchased 4.6 million shares for
approximately $100.0, plus capitalizable acquisition costs of $1.7, in
connection with the recapitalization transactions described in Note 12 to the
Consolidated Financial Statements included in our 2003 Annual Report to
Stockholders.



<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)
                                  (unaudited)

Unless otherwise indicated, reference in Management's Discussion and Analysis
to "we", "us" and "our" are to The Reader's Digest Association, Inc. and its
Subsidiaries.  All references to 2004 and 2003, unless otherwise indicated,
are to fiscal 2004 and fiscal 2003, respectively.  Our fiscal year represents
the period from July 1 through June 30.

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 foreign currency translation, except as specifically noted otherwise.
This discussion should be read in conjunction with the Consolidated Condensed
Financial Statements and related notes.  Certain amounts and percentages do
not recalculate due to rounding.  Operating results for any interim period
are not necessarily indicative of the results for an entire year due to the
seasonality of our business.


Three-Month Period Ended March 31, 2004, Compared With Three-Month Period
Ended March 31, 2003

Results of Operations:  Company-Wide

Overview

The second half of the fiscal year is generally not as significant as the
first half because it usually represents less than half of our annual
revenues and a minor portion of our operating profit.  The second quarter is
our most significant in terms of revenues and operating profit.  In 2004, the
third quarter results were a distinct improvement over the year-ago quarter,
and we are making progress toward our plan, which calls for sustainable
revenue and profit growth by fiscal 2005.  In fact, all three of our
reportable segments reported significant year-over-year profit improvements.
The most significant profit improvement was in International Businesses.
However, revenues declined in two of our three reportable segments.

In the third quarter of 2004, we refinanced a portion of borrowings
outstanding by issuing 6.5% senior unsecured notes due in 2011.  This
transaction gave us more operating flexibility by extending the maturities on
a portion of our existing debt.


Revenues

Revenues for the third quarter of 2004 decreased to $561, compared with $563
for the third quarter of 2003.  Excluding the effect of foreign currency
translation, revenues declined 6%.  While revenues for International
Businesses and Reader's Digest North America were lower, revenues for
Consumer Business Services were relatively flat.

We anticipated a decline in revenues for International Businesses because
weak conditions persist in most of the markets in which we operate.  In
addition, our decisions to scale back promotional mailings and to exit
marginally profitable businesses in certain markets adversely affected
revenues.  Response rates to promotional mailings have generally stabilized
although our active customer base has continued to shrink as a result of
fewer mailings.  The most significant revenue declines were in the United
Kingdom, Switzerland, Germany, and Asia.

Revenues for Reader's Digest North America declined because of continued
lower circulation revenues for Reader's Digest magazine, in response to our
January 2004 reduction in the rate base, and lower revenues from annual book
products at Reiman.  Lower sales of Books and Home Entertainment products,
due to the elimination of an illustrated series business, contributed to the
decline.

Consumer Business Services revenues were relatively flat when compared with
the third quarter of 2003.  We had less revenue from Books Are Fun because of
lower corporate event sales.  Increased sales of series and other products in
Trade Publishing and Young Families through direct mail and retail channels
offset much of the revenue decline.  In addition, revenues at QSP improved
slightly.

Operating Profit

Operating results for the third quarter of 2004 increased to a profit of $19
from a loss of $(3) in the same quarter of 2003.  The significant improvement
was largely attributable to the fact that there were no restructuring charges
in the third quarter of 2004 and because all of our reportable segments
generated increased profits, especially International Businesses.  However,
overall improvements were partially offset by higher non-cash corporate
expenses.

We attribute the improvement in International Businesses profits principally
to active management of costs in most markets, improved execution and the
realization of the benefits of cost-reduction initiatives.  The countries
with the most significant increases in profits were France and Australia,
where prior year profits were adversely affected by our transition to new
outsource vendors.  The resolution of these issues and improved payment rates
in these markets drove the profit improvement this year.  Profits in other
markets, including Benelux, Poland and Mexico, improved due to lower product
and promotion costs.

Profits for Reader's Digest North America increased because of lower
promotion and fulfillment costs for Reader's Digest magazine and lower
overall overhead costs.  However, profits declined at Reiman because of lower
book revenues and investments in new business initiatives.

Consumer Business Services had higher profits as a result of increased sales
for Trade Publishing and Young Families.  Increased product costs at Books
Are Fun and increased investments in the sales force at QSP partially offset
this improvement.

Corporate Unallocated expenses reflect the cost of governance and centrally
managed expenses, as well as the accounting for U.S. pension plans,
post-retirement healthcare costs, and executive compensation programs that
are not allocated to the reportable segments.  For the third quarter of 2004,
these costs increased $(7) when compared with the third quarter of 2003.  The
increase was because of a $(5) decrease in net pension income (from our
over-funded U.S. pension plan), a $(1) increase in compensation expense due
to a greater mix of restricted stock versus stock options and a $(1) increase
associated with post-retirement healthcare costs.


Other (Expense) Income, Net

Other (expense) income, net for the third quarter of 2004 increased to $(18),
compared with $(5) for the third quarter of 2003.  The primary reason for the
increase was the write-off of deferred financing fees because we refinanced a
portion of our existing debt and we terminated some of our interest rate caps
that were no longer required.  These two transactions resulted in additional
non-cash interest expense of $(6.5).  Other factors affecting comparability
include:

  -   Income of $3 in the third quarter of 2003, related to an insurance
      recovery of costs associated with the recapitalization transactions that
      were completed during the second quarter of 2003.
  -   Gains on sales of shares of LookSmart, Ltd. of $2 in the third quarter
      of 2003 (we completely liquidated our remaining investment in LookSmart
      in the first quarter of 2004).
  -   The write-off of $(2) in the third quarter of 2004 of foreign currency
      translation losses associated with the closure of our business in
      Norway.


Income Taxes

The effective income tax rate for the third quarter of 2004, a benefit of
34.8%, was affected by two significant factors.  In the third quarter we
reversed a $3 valuation allowance related to deferred tax assets in an
international market.  This was partially offset by a total of $2 from
non-deductible expenses related to the dissolution of our Norway subsidiary
and reduced tax benefits resulting from certain international transactions.
For the third quarter of 2003, our effective tax rate was a benefit of
46.5%.  This included the recovery from our insurance company of expenses
associated with the recapitalization.  Excluding this income item, our
effective tax rate for the third quarter of 2003 was a benefit of 35.4%.


Net Income (Loss) and Earnings (Loss) Per Share

For the third quarter of 2004, net income was $2, or $0.02 per share for both
basic and diluted earnings per share.  In the prior year period, we reported
a net loss of $(5), or $(0.05) per share for both basic and diluted loss per
share.


Results of Operations:  Reportable Segments

The following chart details our revenues, profit and other operating items,
net.


                                        Three-month period ended
                                                March 31,
                                            2004       2003

Revenues
  Reader's Digest North America            $ 197      $ 203
  International Businesses                   239        236
  Consumer Business Services                 129        128
  Intercompany eliminations                   (4)        (4)
                                           -----      -----
Total revenues                             $ 561      $ 563
                                           =====      =====

Operating profit (loss)
  Reader's Digest North America            $  11      $   9
  International Businesses                    14          4
  Consumer Business Services                   4          3
  Corporate Unallocated(1)                   (10)        (3)
  Other operating items, net(2)               --        (16)
                                           -----      -----
Operating profit (loss)                    $  19      $  (3)
                                           =====      =====

Intercompany eliminations
  Reader's Digest North America            $  --      $  (1)
  International Businesses                    (1)        --
  Consumer Business Services                  (3)        (3)
                                           -----      -----
Total intercompany eliminations            $  (4)     $  (4)
                                           =====      =====

   (1) Corporate Unallocated includes expenses for the cost of governance and
       centrally managed expenses, as well as the accounting for U.S. pension
       plans, post-retirement healthcare costs, and executive
       compensation programs that are not allocated to the reportable
       segments.  Governance and centrally managed expenses include
       costs for departments such as corporate finance, general
       corporate management, investor relations, legal, public
       relations and treasury and for related information technology
       and facility costs incurred by these departments.

   (2) Other operating items, net in 2003 consists primarily of severance and
       other charges taken to streamline our operations.  The charge related
       to: 2% to Reader's Digest North America, 64% to International
       Businesses, 12% to Consumer Business Services and 22% to
       corporate departments that benefit the entire organization.


Reader's Digest North America

Revenues for Reader's Digest North America for the third quarter of 2004
decreased 3% to $197, compared with $203 for the third quarter of 2003.
Excluding the effect of foreign currency translation, revenues declined 5%.
The decline was due primarily to lower circulation revenues for Reader's
Digest magazine, lower sales of book products at Reiman and lower revenues
for U.S. Books and Home Entertainment products.

Circulation revenues for Reader's Digest magazine were down due to a decline
in renewal pools and fewer agent subscriptions, due to the January 2004
reduction in the rate base, partially offset by the addition of new
subscribers at lower introductory rates.  We expected a decline in revenues
for Reader's Digest magazine because of the January 2004 rate base reduction
that was executed to enhance the profitability of the magazine.

Revenues for Reiman declined because of increased return rates for annual
book products and lower renewal rates for certain magazines.  Increased
revenues from new products partially offset these declines.

U.S. Books and Home Entertainment revenues declined primarily because we
discontinued part of our illustrated series business.

Revenues from new products partially offset these declines.  In particular,
we had increased revenues due to Backyard Living (a magazine combining Reiman
and Reader's Digest content) and Our Canada (a Reiman-inspired magazine in
Canada).  We launched these magazines in the third quarter of 2004.

Operating profit for this segment for the third quarter of 2004 increased 26%
to $11, compared with $9 for the third quarter of 2003.  Excluding the effect
of foreign currency translation, profits increased 22%.  Improved
profitability due to a lesser reliance on subscriptions generated by agents
and lower promotion and fulfillment costs for Reader's Digest magazine, due
in part to the January 2004 reduction in the rate base, were the primary
drivers of this improvement.  Another driver was lower overhead costs from
cost-reduction initiatives.  Lower profits from Reiman, because of reduced
revenue and increased costs associated with new magazine launches, partially
offset these profit improvements.


International Businesses

Revenues for International Businesses for the third quarter of 2004 increased
1% to $239, compared with $236 for the third quarter of 2003.  Excluding the
effect of foreign currency translation, revenues decreased 11%.
International Businesses has been faced with several issues influencing the
revenue decline, principally: lower response rates to promotional mailings in
some markets (however, response rates in many markets have begun to
stabilize), and weak economic conditions in many of our markets.

To mitigate these factors, we reduced mail quantities and the frequency of
our mailings.  While these reductions reduce the risk of unprofitable
mailings and mailing intensity, thereby increasing profits, they also
decrease the number of active promotable customers, thereby lowering
revenues.

The most significant revenue declines were in the United Kingdom,
Switzerland, Germany and Asia.  Revenues in Spain declined as we discontinued
certain significant lines of business in that market.  In addition, revenues
in our Nordic region declined as we consolidated our businesses in this
region to enhance profitability.

Increased revenues in Russia partially offset other revenue declines. The
improvements in Russia came from increased sales of general books and other
products.

Operating profit for this segment for the third quarter of 2004 increased to
$14, compared with $4 for the third quarter of 2003.  Excluding the effect of
foreign currency translation, profits increased $8.  Active management of
costs in most markets, improved execution and the impact of cost-reduction
initiatives were the key drivers of the increase in profits.  Lower promotion
and product costs, which came from lower overall sales volumes in certain
markets, partially offset the improvement.  Increased promotion spending to
test new products and expand into new markets was another partially
offsetting factor to the overall profit improvement.  The countries that
showed largest improvements in profit were France, Australia, Benelux, Poland
and Mexico.


Consumer Business Services

Revenues for Consumer Business Services for the third quarter of 2004 were
flat compared with the third quarter of 2003.  Trade Publishing and Young
Families and, to a lesser extent, QSP, had increased revenues, yet revenue
declines at Books Are Fun offset those improvements.

The 2% decline in revenues for Books Are Fun resulted from lower corporate
event sales and fewer events held.  We attribute the decline in average sales
per event to weaker product selection.  We held fewer events primarily
because of turnover in the sales force earlier in the year.

Trade Publishing and Young Families had a 9% increase in revenues driven by
increased sales of certain products through retail channels for Trade
Publishing and additional series mailings for Young Families.  At the same
time, we discontinued certain unprofitable mailings in Young Families,
lowering revenues.

We attribute the 1% increase in revenues for QSP to increased sales of food
products and the finalization of fall marketing and selling programs.  In
addition, revenues for QSP Canada also increased.  However, lower
same-account sales and fewer accounts launched in the third quarter of 2004
when compared with the third quarter of 2003 resulted in lower sales volumes
for magazines and gifts.  The chief drivers of the decline in accounts
launched and in sales volumes for magazines and gifts were turnover in the
sales force in certain territories, increased competition for fundraising
dollars and a soft economy.

Because of our efforts to grow the sales force, we now have more sales
representatives to serve new and existing markets for both QSP and Books Are
Fun.  However, because of the time required to develop territories, the
additional sales representatives did not make a significant impact in the
third quarter.

Operating profit for this segment for the third quarter of 2004 increased 46%
to $4.  While improved performance for Trade Publishing and Young Families
(as explained above) were the key drivers of the improved profits, there were
other partially offsetting factors.  QSP made investments in its sales force
and Books Are Fun had increased commission rates and increased costs for
freight and warehousing.  Moreover, lower average selling prices further
deteriorated margins at Books Are Fun.

During the year we estimate the quantity of products we will purchase from
World's Finest Chocolate (WFC).  Although we expect purchases in 2004 to be
15% higher than in 2003, this level of purchases will not meet our minimum
tonnage commitment.  Instead of buying additional inventory at the end of
2004 to compensate for this shortfall, we have accrued a penalty that we
expect to pay WFC.  The estimated penalty for 2004 of $1 is comparable to the
penalty accrued in the third quarter of 2003.


Nine-Month Period Ended March 31, 2004, Compared With Nine-Month Period Ended
March 31, 2003

Results of Operations:  Company-Wide

Overview

The first nine months of the fiscal year represent the vast majority of our
revenues and operating profit for the fiscal year.  This is because the
second quarter is our most significant in terms of revenues and operating
profit.  In 2004, the third quarter marked an important period in our
two-year plan to achieve sustainable revenue and profit growth by fiscal
2005.  International Businesses exhibited the most significant profit
improvement.  Profits for International Businesses increased 6% for the
nine-month period ended March 31, 2004 when compared with the comparable
period in the previous year.  This compares with a 25% decline in profit for
the six-month period ended December 31, 2003, when compared with the
six-month period ended December 31, 2002.  In addition, profits for Reader's
Digest North America improved in response to our efforts to improve
circulation profitability.

In the third quarter of 2004, we refinanced a portion of borrowings
outstanding by issuing 6.5% senior unsecured notes due in 2011.  This
transaction gave us more operating flexibility by extending the maturities on
a portion of our existing debt.


Revenues

Revenues for the nine-month period ended March 31, 2004 decreased 3% to
$1,852, compared with $1,911 for the nine-month period ended March 31, 2003.
Excluding the effect of foreign currency translation, revenues decreased 8%.
We attribute the revenue decline primarily to lower sales for International
Businesses and secondarily, to lower sales for Reader's Digest North America
and Consumer Business Services.

Revenues for International Businesses declined because of fewer active
promotable customers, lower response rates to promotional mailings and lower
membership in certain series products.  Weak economic conditions in many of
our markets contributed to the decline.  Due to these factors, we
strategically reduced promotional mailings, which further lowered revenues.
The most significant revenue declines were in the United Kingdom, France,
Germany, Asia and Switzerland.

The decline in revenues for Reader's Digest North America was evident in
almost all of the businesses in this segment.  Reader's Digest magazine had
the most significant decline, in part due to the January 2003 and 2004
reductions in the rate base, but there were also declines for U.S. Books and
Home Entertainment and at Reiman.

Revenues for Consumer Business Services declined due to weaker sales for QSP
and Books Are Fun.  These declines were principally a result of turnover in
the sales force earlier in the year.  Improved performance for Trade
Publishing and Young Families partially offset these declines.

Operating Profit

Operating profit for the nine-month period ended March 31, 2004 decreased 18%
to $120, compared with $145 for the nine-month period ended March 31, 2003.
Excluding the effect of foreign currency translation, profits decreased 22%.
We had lower profits because we had higher corporate expenses during this
period in 2004 than the same period in 2003.  In addition, weaker results for
Consumer Business Services (primarily in the second quarter of 2004) and, to
a lesser extent, International Businesses contributed to the lower profits.
Increased profits from Reader's Digest North America and a smaller
restructuring charge partially offset the decline.

Corporate Unallocated expenses reflect the cost of governance and centrally
managed expenses, as well as the accounting for U.S. pension plans,
post-retirement healthcare costs, and executive compensation programs that
are not allocated to the reportable segments.  For the nine-month period
ended March 31, 2004, these costs increased $(19) when compared with the
comparable period in the prior year.  The increase was because of a $(13)
decrease in net pension income (from our over-funded U.S. pension plan), a
$(3) increase in compensation expense due to a greater mix of restricted
stock versus stock options and a $(3) increase associated with
post-retirement healthcare costs.

Profits for Consumer Business Services declined because of lower overall
revenues, principally in the second quarter of 2004.  Investments in the
sales force at QSP and increased selling and product costs at Books Are Fun
contributed to the decline.

The decline in profits for International Businesses was the result of lower
overall revenues.  Lower promotion costs and the effect of cost-reduction
initiatives partially offset the declines.  The most significant profit
improvement was in Australia.

Profits for Reader's Digest North America increased principally due to lower
product, promotion and fulfillment costs.


Other (Expense) Income, Net

Other (expense) income, net for the nine-month period ended March 31, 2004
increased to $(35), compared with $(28) for the nine-month period ended March
31, 2003.  The primary reason for the increase was the write-off of deferred
financing fees because we refinanced a portion of our existing debt and we
terminated some of our interest rate caps that were no longer required.
These two transactions resulted in additional interest expense of $(6.5).
Other factors affecting comparability include:

  -   A gain of $3 from proceeds received in exchange for our interest in
      Schoolpop, Inc., which merged into an unrelated third party in the first
      quarter of 2004 (we had written this investment down to zero in the
      fourth quarter of fiscal 2002).
  -   The write-off of $(2) in the third quarter of 2004 in foreign currency
      translation losses associated with the closure of our business in Norway.
  -   Lower gains on sales of shares of LookSmart, Ltd. of $5.  In the first
      quarter of 2004, we completely liquidated our remaining investment in
      LookSmart.
  -   Expenses of $(3) incurred in 2003 connection with our recapitalization
      transactions.
  -   A gain of $2 from the sale of a building in Australia in the second
      quarter of 2003.


Income Taxes

The effective income tax rate for the nine-month periods ended March 31, 2004
and 2003 was 34.7% and 36.3%, respectively.  The effective tax rate for the
nine-month period ended March 31, 2004 includes the reversal of a $3
valuation allowance related to deferred tax assets in an international
market.  The effective tax rate for the nine-month period ended March 31,
2003 includes expenses associated with the recapitalization transactions that
were not tax deductible.  Excluding these items, our effective tax rates for
the nine-month periods ended March 31, 2004 and 2003 were 38.2% and 35.3%,
respectively.  The higher rate in 2004 was principally due to certain non-
deductible charges in 2004 and a reduction in the benefit
related to certain international transactions.


Net Income and Earnings Per Share

For the nine-month period ended March 31, 2004, net income was $55, or $0.55
per share on a diluted-earnings basis ($0.56 per share for basic earnings per
share).  In the prior year period, net income was $74, or $0.74 per share on
a diluted-earnings basis ($0.75 per share for basic earnings per share).


Results of Operations:  Reportable Segments

The following chart details our revenues, profit and other operating items,
net.


                                            Nine-month period ended
                                                   March 31,
                                              2004           2003

 Revenues
   Reader's Digest North America            $   633         $   645
   International Businesses                     730             756
   Consumer Business Services                   513             531
   Intercompany eliminations                    (24)            (21)
                                            -------         -------
 Total revenues                             $ 1,852         $ 1,911
                                            =======         =======

 Operating profit
   Reader's Digest North America            $    55         $    47
   International Businesses                      36              34
   Consumer Business Services                    71              91
   Corporate Unallocated(1)                     (33)            (14)
   Other operating items, net(2)                 (9)            (13)
                                            -------         -------
 Operating profit                           $   120         $   145
                                            =======         =======
  Intercompany eliminations
   Reader's Digest North America            $    (1)        $    (4)
   International Businesses                      (2)             (2)
   Consumer Business Services                   (21)            (15)
                                            -------         -------
 Total intercompany eliminations            $   (24)        $   (21)
                                            =======         =======

   (1) Corporate Unallocated includes expenses for the cost of governance and
       centrally managed expenses, as well as the accounting for U.S. pension
       plans, post-retirement healthcare costs, and executive
       compensation programs that are not allocated to the reportable
       segments.  Governance and centrally managed expenses include
       costs for departments such as corporate finance, general
       corporate management, investor relations, legal, public
       relations and treasury and for related information technology
       and facility costs incurred by these departments.

   (2) Other operating items, net in 2004 consists primarily of severance and
       other charges taken to streamline our operations.  This charge
       related to: 6% to Reader's Digest North America, 71% to
       International Businesses, 22% to Consumer Business Services and
       1% to corporate departments that benefit the entire
       organization and amounts that are not allocable.  Other
       operating items, net in 2003 consists primarily of severance
       and other charges taken to streamline our operations.  This
       charge related to: 8% to Reader's Digest North America, 76% to
       International Businesses, 9% to Consumer Business Services and
       8% to corporate departments that benefit the entire
       organization and amounts that are not allocable.


Reader's Digest North America

Revenues for Reader's Digest North America for the nine-month period ended
March 31, 2004 decreased 2% to $633, compared with $645 for the nine-month
period ended March 31, 2003.  Excluding the effect of foreign currency
translation, revenues declined 4%.  Lower revenues for Reader's Digest
magazine, U.S. Books and Home Entertainment, and Reiman were partially offset
by increased revenues from new magazines.

The decline in revenues for Reader's Digest magazine was attributable to
lower circulation and advertising revenues, due to the January 2003 and 2004
reductions in the rate base.  Circulation revenues continued to be adversely
affected by a decline in renewal pools, partially offset by the introduction
of new subscribers at lower introductory rates.  In addition, newsstand sales
declined due to softness in the overall market, although this trend showed
signs of stabilizing in the third quarter of 2004.  Although advertising
revenues declined due to a lower rate per page, because of the January 2003
and 2004 reductions in the rate base for Reader's Digest magazine, the number
of advertising pages sold increased.

Revenues for U.S. Books and Home Entertainment declined because of lower
membership in Select Editions and the discontinuance of certain marginally
profitable series products.  At the same time, increased promotional mailings
for single sales products and, increased payment rates and higher prices for
Select Editions, partially offset the decline.

Revenues for Reiman declined due to higher return rates for certain annual
book products and lower renewals for certain magazines.  At the same time,
revenues from new book products and from investments in new customer
acquisition partially offset these declines.

Along with these declines in revenues for Reader's Digest North America there
were also increases from the introduction of new products, including RD
Specials (introduced in the third quarter of 2003), Backyard Living, in the
United States, and Our Canada, in Canada (launched in the third quarter of
2004).  Furthermore, advertising and circulation revenues for Selecciones
increased due to an increase in the rate base.

Operating profit for this segment for the nine-month period ended March 31,
2004 increased 15% to $55, compared with $47 for the nine-month period ended
March 31, 2003.  The main driver for the increase in profit was due to a
lesser reliance on subscriptions generated by agents (due to the January 2003
and 2004 reductions in the rate base) and lower product, fulfillment and
promotion costs for Reader's Digest magazine and U.S. Books and Home
Entertainment.  Secondarily, the benefits of cost-reduction initiatives
contributed to the improvement.

These improvements were partially offset by lower profits at Reiman due to
investments in new customer acquisition for Taste of Home magazine and the
launch of two new magazines, Backyard Living and Our Canada.


International Businesses

Revenues for International Businesses for the nine-month period ended March
31, 2004 decreased 3% to $730, compared with $756 for the nine-month period
ended March 31, 2003.  Excluding the effect of foreign currency translation,
revenues declined 14%.  The decline in revenues in this segment was driven by
lower response rates to promotional mailings and lower series membership in
many markets.  In addition, weaker economic conditions in our markets
contributed to the decline.

To mitigate these factors we reduced mail quantities and the frequency of our
mailings.  While these reductions reduce the risk of unprofitable mailings
and mailing intensity, they also reduce the number of active promotable
customers, thereby lowering revenues.  However, in certain markets, response
rates have begun to stabilize in the third quarter of 2004.

The most significant declines were in the United Kingdom, France, Germany,
Asia and Switzerland.  Revenues also declined in Spain as we discontinued
certain significant lines of business in that market.  In addition, revenues
declined in our Nordic region as we consolidated our businesses in this
region to enhance profitability.

Revenue increases in Russia partially offset declines elsewhere.  Results
have improved in Russia as we have increased promotional mailings for single
sales products to drive revenue growth.

Operating profit for this segment for the nine-month period ended March 31,
2004 increased 6% to $36, compared with $34 for the nine-month period ended
March 31, 2003.  Excluding the effect of foreign currency translation,
profits declined 6%.  The most significant declines in profit were in
Germany, Switzerland and the United Kingdom.  Lower overall revenues drove
these declines.  However, profits improved in a number of markets, including
Australia, Mexico, Poland and France; these improvements were principally due
to lower promotion costs and the effect of cost-reduction initiatives.  The
most significant increase in profits was in Australia.  In 2003, issues
associated with our transition to new outsource vendors adversely affected
profits there.  The resolution of these issues and improved payment rates
drove the profit improvement.


Consumer Business Services

Revenues for Consumer Business Services for the nine-month period ended March
31, 2004 decreased 3% to $513, compared with $531 for the nine-month period
ended March 31, 2003.  Excluding the effect of foreign currency translation,
revenues declined 4%.  This decline was driven by lower revenues for QSP and
Books Are Fun, principally in the second quarter of 2004.  Increased revenues
for Trade Publishing and Young Families partially offset the decline.

Revenues for QSP declined 7% due to lower same-account sales and fewer
accounts launched in the relevant reporting periods.  This resulted in lower
sales volumes of magazines and gifts.  The decline in accounts launched and
in sales volumes of magazines and gifts resulted from turnover in the sales
force in certain territories, increased competition for fundraising dollars
and a soft economy.  Increased account incentives contributed to the
decline.  Increased sales of food products (particularly WFC) and slightly
higher pricing for magazine and gift products partially offset the other
declines in revenues.

Revenues for Books Are Fun declined 6% due to lower average sales per event
and fewer events held.  We attribute the weaker average sales per event to
shortages of strong selling products in the second quarter of 2004, which was
an unforeseen side effect of aggressively managing our inventory, and to
weaker product selection.  The decline in the number of events held was
primarily due to turnover in the sales force earlier in the year.

Because of our efforts to grow the sales force, we now have more sales
representatives to serve new and existing markets for both QSP and Books Are
Fun.  However, because of the time required to develop territories, the
additional sales representatives did not make a significant impact for the
nine-month period ended March 31, 2004.

Trade Publishing and Young Families had a 15% increase in revenues that
partially offset the overall revenue decline in Consumer Business Services.
Trade Publishing sales increased because of improved sales of certain
products through retail channels, and Young Families generated more revenues
because of additional series mailings.  At the same time, we discontinued
certain unprofitable products in Young Families, lowering revenues.

Operating profit for this segment for the nine-month period ended March 31,
2004 decreased 22% to $71, compared with $91 for the nine-month period ended
March 31, 2003.  The main drivers of this decline in profits were the revenue
changes described above and investments in the sales force for both QSP and
Books Are Fun.  Increased commission rates and higher freight and warehousing
costs at Books Are Fun contributed to the decline.




<PAGE>


Forward-Looking Information

Fiscal 2004 Results

Through the first three quarters of 2004, we remained on track with 12 of our
15 investment metrics for growth, operating performance, cost reduction and
investment, which were identified as part of the two-year plan.  We
strategically reduced marketing activity in international markets, while
implementing cost-reduction efforts and incremental investment spending.  As
expected, these moves contributed to soft results in the first half and have
begun to show improved results in the second half.

Most notably, with one quarter remaining in 2004 we were at or close to
achieving our cash and debt targets.  In addition, through the first three
quarters, we have achieved the low end of our full-year earnings per share
guidance.

In the fourth quarter, we expect the following: International Businesses and
Reader's Digest North America profits to continue to improve, driving
double-digit full-year operating profit growth within these reportable
segments; somewhat weaker performance at Consumer Business Services on
slightly lower revenues (QSP records a seasonal loss during the fourth
quarter); and higher non-cash corporate unallocated expenses consistent with
the first three quarters of 2004.  As a result, we expect full-year earnings
per share near the middle of our previous guidance of $0.65 to $0.75 per
share.  This range excludes any potential restructuring charges and one-time
items.


Liquidity and Capital Resources

                                                               Nine-month
                                                              period ended
                                                             March 31, 2004

Cash and cash equivalents at June 30, 2003                        $  51

Net change in cash due to:
  Operating activities                                              161
  Investing activities                                               (9)
  Financing activities                                             (149)
  Effect of exchange rate changes on cash and cash equivalents        3
Net change in cash and cash equivalents                               6
                                                                  -----
Cash and cash equivalents at March 31, 2004                       $  57
                                                                  =====

Cash and cash equivalents increased 11% to $57 as of March 31, 2004, compared
with $51 as of June 30, 2003.  Positive cash flow consists of net income,
depreciation and amortization, and advances received for new subscriptions
and other products.  These increases were partially offset by cash payments
related to our restructuring charges.  Uses of cash, principally related to
financing, were repayments of $135, net of principal related to the Term
Loan, and cash payments for dividends of $16.

Debt

As described in Note 11 to the Consolidated Financial Statements included in
our 2003 Annual Report to Stockholders, our borrowings principally comprised
the $950 Term Loan Agreement (Term Loan) and the Five-Year Revolving Credit
and Competitive Advance Facility Agreement (Five-Year Facility) (collectively
referred to as the 2002 Credit Agreements).  The maximum borrowing allowed
under the Five-Year Facility is $193.  As of March 31, 2004, there were no
outstanding borrowings under the Five-Year Facility and $437 outstanding
under the Term Loan.

In March 2004, we completed a private placement, with registration rights, of
$300 of 6.5% senior unsecured notes due in 2011 (Senior Notes) in order to
refinance amounts outstanding under the Term Loan.  The net proceeds from
these notes were used to refinance $294 of principal related to the Term Loan
in complete repayment of amounts outstanding under Tranche A and a portion of
amounts outstanding under Tranche B.  The remaining proceeds were used to pay
financing costs.  The total estimated financing fees of $8 related to the
offering have been deferred and will be amortized on a straight-line basis
over the life of the Senior Notes.  As a result of this transaction, we wrote
off $5 of the unamortized portion of deferred financing fees for the portion
of the Term Loan that was refinanced.  Such amount was recognized in interest
expense in the third quarter of 2004.  Concurrently with the refinancing, we
amended the 2002 Credit Agreements to allow us to repurchase shares, pay cash
dividends and make certain other restricted payments, in any combination
thereof, up to $50 each fiscal year.

During the nine-month period ended March 31, 2004, excluding amounts that
were refinanced, we repaid $135 of principal related to the Term Loan
(consisting of $16 in scheduled mandatory repayments, $11 in additional
mandatory repayments pursuant to an excess cash flow calculation performed
annually and $108 in voluntary prepayments).  The Term Loan requires us to
make scheduled principal repayments of $1 per quarter until the end of fiscal
2007 and $106 per quarter during fiscal 2008.  The amount of scheduled
repayments is continually adjusted to the extent that we continue to make
voluntary repayments and additional mandatory repayments.  In addition, we
are required to perform a calculation in the first quarter of every fiscal
year (based on an excess cash flow calculation outlined in the Term Loan) to
determine any potential additional mandatory repayments.

The weighted average interest rate charged by our lenders on our borrowings
for the nine-month periods ended March 31, 2004 and 2003 was 4.2% and 4.1%,
respectively (4.5% and 3.8%, for the three-month periods ended March 31, 2004
and 2003, respectively).  In the fourth quarter of 2004, we expect to
negotiate to reduce the interest rate under the Term Loan to reflect current
market rates.

Under the 2002 Credit Agreements, we are required to hedge at least one-third
of borrowings outstanding under the Term Loan.  In July 2003, we entered into
agreements to cap at 6% the LIBOR interest rate component of $400 of our
borrowings under the Term Loan for a period of three years.  As a result of
the refinancing described above, the total amount of outstanding borrowings
under the Term Loan, and the total notional amount of interest rate caps
required, decreased.  As a result, in the third quarter we terminated
interest rate caps with a notional amount of $250 and recorded additional
interest expense of $1 related to these instruments.  We currently maintain
interest rate caps with a notional amount of $150.


Recent Accounting Standards

In May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity.  SFAS No. 150 established standards for
classifying certain financial instruments that represent obligations yet
also have characteristics similar to equity instruments.  Specifically,
SFAS No. 150 addresses the accounting for instruments such as mandatorily
redeemable securities, certain option contracts and obligations to be
settled in shares.  SFAS No. 150 is effective for interim periods
beginning after June 15, 2003 (for us, effective fiscal 2004 and
thereafter).  In November 2003, the FASB indefinitely delayed the
effective date of the classification and measurement provisions that
relate to noncontrolling interests in limited life entities.

In December 2003, the FASB issued FASB Interpretation (FIN) No. 46R, a
revision to FIN No. 46, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51.  FIN No. 46
introduced a new consolidation model with respect to variable interest
entities.  The new model required that the determination of control
should be based on the potential variability in gains and losses of the
variable interest entity being evaluated.  The entity with the majority
of the variability in gains and losses is deemed to control the variable
interest entity and is required to consolidate it.  FIN No. 46R revised
the effective dates for different types of entities.  FIN No. 46R must be
applied to all entities considered special purpose entities for the
period ending after December 15, 2003 (the second quarter of 2004 for
us).  However, FIN No. 46R is effective for the first reporting period
that ends after March 15, 2004 (the third quarter of 2004 for us) for all
other types of variable interest entities.

In December 2003, the FASB issued a revision to SFAS No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits.  The statement
revises the financial statement disclosures required for pension and
postretirement obligations.  Additional disclosures include descriptions of
plan assets and the investment strategy employed.  In addition to these
annual disclosures, SFAS No. 132 also requires interim disclosures such as
the components of net periodic pension cost.  The statement does not change
the recognition or measurement of benefit plan obligations.  The annual
disclosure requirements are effective for fiscal years ending after December
15, 2003 (fiscal 2004 for us).  The interim disclosure requirements are
effective for interim periods beginning after December 15, 2003 (the third
quarter of 2004 for us).

Adoption of SFAS No. 150, FIN No. 46R and the revision to SFAS No. 132
did not have any impact on our operating results or financial position.

On January 12, 2004, the FASB issued FASB Staff Position (FSP) 106-1,
Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003.  FSP 106-1 relates to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 Act
(the Act) signed into law by President Bush on December 8, 2003.  The Act
introduces a prescription drug benefit under Medicare Part D (Part D) and a
federal subsidy for sponsors of retiree health care benefit plans that
provide a benefit that is at least "actuarially equivalent" to Part D.  Based
on the level of benefits provided under our retiree health care plans, we
believe they are at least "actuarially equivalent" to those provided by Part
D.  In accordance with the provisions of FSP 106-1, we have elected not to
defer the effect of the Act on our accumulated postretirement benefit
obligation.  We will reflect an $11 benefit as an unrecognized gain on our
measurement date, March 31, 2004.  This gain will be amortized as a component
of net periodic postretirement (benefit) cost in future periods.  The FASB
will issue final authoritative guidance on this topic, which could require us
to re-evaluate the impact of the Act.

                                     *****

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;
-  the effects of modified and varied promotions;
-  our ability to identify customer trends;
-  our ability to continue to create and acquire a broadly appealing mix of
   new products;
-  our ability to attract and retain new and younger magazine subscribers
   and product customers in view of the maturing of an important portion of
   our customer base;
-  our ability to attract and retain subscribers and customers in an
   economically efficient manner;
-  the effects of selective adjustments in pricing;
-  our ability to expand and more effectively utilize our customer database;
-  our ability to expand into new international markets and to introduce
   new product lines into new and existing markets;
-  our ability to expand into new channels of distribution;
-  our ability to negotiate and implement productive acquisitions,
   strategic alliances and joint ventures;
-  our ability to successfully integrate newly acquired and newly formed
   businesses (including the Reiman business);
-  the strength of relationships of newly acquired and newly formed
   businesses (including the Reiman business) with their employees, suppliers
   and customers;
-  the accuracy of the basis of forecasts relating to newly acquired and
   newly formed businesses (including the Reiman business);
-  our ability to achieve financial savings related to restructuring
   programs;
-  our ability to contain and reduce costs, especially through global
   efficiencies;
-  the cost and effectiveness of our re-engineering of business processes
   and operations;
-  the accuracy of our management's assessment of the current status of our
   business;
-  the evolution of our organizational and structural capabilities;
-  our ability to respond to competitive pressures within and outside the
   direct marketing and direct sales industries, including the Internet;
-  our ability to recruit, train and retain effective sales personnel;
-  the effects of worldwide paper and postage costs;
-  the effects of possible postal disruptions on deliveries of promotions,
   products and payments;
-  the effects of foreign currency fluctuations;
-  the accuracy of our management's assessment of the future effective tax
   rate and the effects of initiatives to reduce the rate;
-  the adequacy of our financial resources;
-  the effects of the terms of, and increased leverage resulting from
   additional borrowings under, our credit facilities;
-  the effects of interest rate fluctuations;
-  the effects of downgrades of our credit ratings;
-  the effects of economic and political changes in the markets where we
   compete;
-  the effects of weather in limiting access to consumers; and
-  the economic effects of terrorist activity and related events,
   especially those limiting access to consumers and otherwise affecting the
   direct marketing and direct sales industries.

   We do not undertake to update any forward-looking statements.



<PAGE>



Item 4.    CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, under the supervision
of our Chief Executive Officer and Chief Financial Officer, we evaluated our
disclosure controls and procedures (as defined in rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934).  Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were sufficient to provide
reasonable assurances that the information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.

There have been no significant changes in our internal controls or in other
factors that could significantly affect those internal controls subsequent to
the date of our evaluation thereof.



<PAGE>


PART II.  OTHER INFORMATION


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

(a)   Exhibits

      31.1  Certification of Chief Executive Officer of The Reader's Digest
            Association, Inc. pursuant to rule 13a-14(a)/15d-14(a) of the
            Securties Exchange Act of 1934.

      31.2  Certification of Chief Financial Officer of The Reader's Digest
            Association, Inc. pursuant to rule 13a-14(a)/15d-14(a) of the
            Securties Exchange Act of 1934.

      32    Certifications of Chief Executive Officer and Chief Financial
            Officer of The Reader's Digest Association, Inc. pursuant to rule
            13a-14(b)/15d-14(b) of the Securties Exchange Act of 1934.


(b)   Reports on Form 8-K

      During the three months ended March 31, 2004, we filed the following
      reports on Form 8-K:

        -  Current Report on Form 8-K dated January 28, 2004, Items 7, 9 and 12.

        -  Current Report on Form 8-K dated February 18, 2004, Items 7 and 9

        -  Current Report on Form 8-K dated February 23, 2004, Item 5

        -  Current Report on Form 8-K dated March 1, 2004, Items 7 and 9.

        -  Current Report on Form 8-K dated March 3, 2004, Items 5, 7 and 9.




<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:  May 7, 2004                  By:  /s/THOMAS D. BARRY
                                         Thomas D. Barry
                                         Vice President and Corporate Controller
                                        (chief accounting officer and authorized
                                         signatory)