----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**THE      READER'S DIGEST ASSOCIATION, INC.**

|   | **Delaware**                                                                                |   | **13-1726769**                                                    |   |
|--------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|   |                                                                                        |   |                                                              |   |
|   | (State                or other jurisdiction ofincorporation                or organization) |   | (I.R.S.                EmployerIdentification                No.) |   |
|   |                                                                                        |   |                                                              |   |
|   | **Pleasantville,                New York**                                                  |   | **10570-7000**                                                    |   |
|   | (Address                of principal executive offices)                                     |   | (Zip                Code)                                         |   |

|   | **(914)                238-1000**                                   |   |
|--------|---------------------------------------------------------------------|--------|
|   | (Registrant's                telephone number, including area code) |   |
|   |                                                                |   |

----

----

----

**THE      READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES**

**Index      to Form 10-Q**

**September      30, 2006**

|                                                                                                                                                                     | **Page                No.** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                                                     |                        |
| **Part                I - Financial Information:**                                                                                                                       |                        |
|                                                                                                                                                                     |                        |
| **Item                1.** **Financial                Statements**                                                                                                  |                        |
|                                                                                                                                                                     |                        |
| **The                Reader's Digest Association, Inc. and Subsidiaries****Consolidated                Condensed Financial Statements (unaudited):**                     |                        |
|                                                                                                                                                                     |                        |
| ConsolidatedCondensed                Statements of                Operations  for                the three-month periods ended September 30, 2006 and 2005     |  3                     |
|                                                                                                                                                                     |                        |
| ConsolidatedCondensed                Balance Sheetsas                of September 30, 2006 and June 30, 2006                                                             |  4                     |
|                                                                                                                                                                     |                        |
| ConsolidatedCondensed                Statements of Cash                Flowsfor                the three-month periods ended September 30, 2006 and 2005                 |  5                     |
|                                                                                                                                                                     |                        |
| Notesto                Consolidated Condensed Financial                Statements                                                                                        | 6                           |
|                                                                                                                                                                     |                        |
| **Item                2.** **Management'sDiscussion                and Analysis of Financial                Condition****and                Results of Operations** |  13                    |
|                                                                                                                                                                     |                        |
| **Item                4.** **Controls                and Procedures**                                                                                               | 20                          |
|                                                                                                                                                                     |                        |
|                                                                                                                                                                     |                        |
| **Part                II - Other Information:**                                                                                                                          |                        |
|                                                                                                                                                                     |                        |
| **Item                2.** **Unregistered                Sales of Equity Securities and Use of Proceeds**                                                           | 21                          |
|                                                                                                                                                                     |                        |
| **Item                6.** **Exhibits**                                                                                                                             | 21                          |

----

**The      Reader's Digest Association, Inc. and Subsidiaries**

**Consolidated      Condensed Statements of      Operations**

*(In      millions, except per share data)*

*(unaudited)*

|                                                            |   | **Three-month                period ended** |       |
|-----------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                            |   | **September                30,**            |       |
|                                                            |   | **2006**                                    |       | **2005** |   |
|                                                            |   |                                        |       |   |   |
| **Revenues**                                                    |   | **$**                                       | **517.1**  |   | **$** | **516.4** |   |
| Product,                distribution and editorial expenses     |   |                                        | **(225.4** | **)** |   | (221.0 | ) |
| Promotion,                marketing and administrative expenses |   |                                        | **(321.3** | **)** |   | (304.8 | ) |
| Other              operating items, net                         |   |                                        | ---   |   |   | 2.6  |   |
| **                   Operating loss**            |   |                                        | **(29.6**  | **)** |   | **(6.8** | **)** |
| Other                (expense) income, net                      |   |                                        | **(13.7**  | **)** |   | (9.3 | ) |
| **Loss                before income tax benefit**               |   |                                        | **(43.3**  | **)** |   | **(16.1** | **)** |
| Income                tax benefit                               |   |                                        | **16.6**   |   |   | 7.9 |   |
| **Net                loss**                                     |   | **$**                                       | **(26.7**  | **)** | **$** | **(8.2** | **)** |
| **Basic                and diluted loss per share:**            |   |                                        |       |   |   |   |   |
| Weighted                average common shares outstanding       |   |                                        | **94.2**   |   |   | 97.4 |   |
|  **Basic                and diluted loss per share**       |   | **$**                                       | **(0.29**  | **)** | **$** | **(0.09** | **)** |
|                                                            |   |                                        |       |   |   |   |   |
| **Dividends                per common share**                   |   | **$**                                       | **0.10**   |   | **$** | **0.10** |   |

*See      accompanying Notes to Consolidated Condensed Financial      Statements.*

----

**The      Reader's Digest Association, Inc. and Subsidiaries**

**ConsolidatedCondensed      Balance Sheets**

*(In      millions, except share data)*

|                                                                                                                                                                                                                                                                                                                                                               |   | **September                30,** |         | **June                30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                               |   | **2006***(unaudited)*            |         | **2006**                    |   |
| **Assets**                                                                                                                                                                                                                                                                                                                                                         |   |                             |         |                        |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                           |   | **$**                            | **45.4**     |                        | $      | 34.7 |   |
| Accounts                receivable, net                                                                                                                                                                                                                                                                                                                            |   |                             | **300.4**    |                        |   | 261.9 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                                        |   |                             | **215.4**    |                        |   | 172.3 |   |
| Prepaid                and deferred promotion costs                                                                                                                                                                                                                                                                                                                |   |                             | **63.4**     |                        |   | 62.3 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                                                                                                                                           |   |                             | **199.5**    |                        |   | 173.1 |   |
| **Total                current assets**                                                                                                                                                                                                                                                                                                                            |   |                             | **824.1**    |                        |   | **704.3** |   |
| Property,                plant and equipment, net                                                                                                                                                                                                                                                                                                                  |   |                             | **118.9**    |                        |   | 119.3 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                           |   |                             | **744.1**    |                        |   | 744.1 |   |
| Other                intangible assets, net                                                                                                                                                                                                                                                                                                                        |   |                             | **131.0**    |                        |   | 134.4 |   |
| Prepaid                pension assets                                                                                                                                                                                                                                                                                                                              |   |                             | **328.8**    |                        |   | 324.6 |   |
| Other                noncurrent assets                                                                                                                                                                                                                                                                                                                             |   |                             | **103.0**    |                        |   | 95.4 |   |
| **Total                assets**                                                                                                                                                                                                                                                                                                                                    |   | **$**                            | **2,249.9**  |                        | **$**  | **2,122.1** |   |
| **Liabilities                and stockholders' equity**                                                                                                                                                                                                                                                                                                            |   |                             |         |                        |   |   |   |
| Accounts                payable                                                                                                                                                                                                                                                                                                                                    |   | **$**                            | **173.7**    |                        | $      | 128.2 |   |
| Loans                and notes payable                                                                                                                                                                                                                                                                                                                             |   |                             | **2.0**      |                        |   | --- |   |
| Accrued                expenses                                                                                                                                                                                                                                                                                                                                    |   |                             | **252.6**    |                        |   | 257.3 |   |
| Income                taxes payable                                                                                                                                                                                                                                                                                                                                |   |                             | **42.7**     |                        |   | 40.6 |   |
| Unearned                revenues                                                                                                                                                                                                                                                                                                                                   |   |                             | **415.8**    |                        |   | 394.1 |   |
| Other                current liabilities                                                                                                                                                                                                                                                                                                                           |   |                             | **12.2**     |                        |   | 9.8 |   |
| **Total                current liabilities**                                                                                                                                                                                                                                                                                                                       |   |                             | **899.0**    |                        |   | **830.0** |   |
| Long-term                debt                                                                                                                                                                                                                                                                                                                                      |   |                             | **776.3**    |                        |   | 695.0 |   |
| Unearned                revenues                                                                                                                                                                                                                                                                                                                                   |   |                             | **144.8**    |                        |   | 131.2 |   |
| Accrued                pension                                                                                                                                                                                                                                                                                                                                     |   |                             | **109.2**    |                        |   | 108.7 |   |
| Postretirement                and postemployment benefits other than pensions                                                                                                                                                                                                                                                                                      |   |                             | **93.1**     |                        |   | 94.2 |   |
| Other                noncurrent liabilities                                                                                                                                                                                                                                                                                                                        |   |                             | **89.2**     |                        |   | 87.9 |   |
|                                                                                                                                                                                                                                                                                                                                                               |   |                             |         |                        |   |   |   |
| **Total                liabilities**                                                                                                                                                                                                                                                                                                                               |   |                             | **2,111.6**  |                        |   | **1,947.0** |   |
|                                                                                                                                                                                                                                                                                                                                                               |   |                             |         |                        |   |   |   |
| Preferred                stock                                                                                                                                                                                                                                                                                                                                     |   |                             | **28.8**     |                        |   | 28.8 |   |
| Common                stock (par value $0.01 per share; authorized 200,000,000                shares; 145,922,062 issued at September 30, 2006 and     June                30,  2006;                95,000,610 and 95,047,776 outstanding at September 30, 2006 and June                30,                2006, respectively) |   |                             | **1.5**      |                        |   | 1.5 |   |
| Paid-in                capital                                                                                                                                                                                                                                                                                                                                     |   |                             | **206.3**    |                        |   | 208.1 |   |
| Retained                earnings                                                                                                                                                                                                                                                                                                                                   |   |                             | **1,027.8**  |                        |   | 1,064.3 |   |
| Accumulated                other comprehensive loss                                                                                                                                                                                                                                                                                                                |   |                             | **(66.8**    | **)**                       |   | (67.4 | ) |
| Treasury                stock, at cost (50,921,452 and 50,874,286 shares at September 30,                2006 and                June 30, 2006, respectively)                                                                                                                                                                                                      |   |                             | **(1,059.3** | **)**                       |   | (1,060.2 | ) |
| **Total                stockholders' equity**                                                                                                                                                                                                                                                                                                                      |   |                             | **138.3**    |                        |   | **175.1** |   |
| **Total                liabilities and stockholders' equity**                                                                                                                                                                                                                                                                                                      |   | **$**                            | **2,249.9**  |                        | **$**  | **2,122.1** |   |

*See      accompanying Notes to Consolidated Condensed Financial      Statements.*

----

**The      Reader's Digest Association, Inc. and Subsidiaries**

**ConsolidatedCondensed      Statements of Cash      Flows**

*(In      millions)*

*(unaudited)*

|                                                                                                              |   | **Three-month                period ended** |      |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|-----------|
|                                                                                                              |   | **September                30,**            |      |
|                                                                                                              |   | **2006**                                    |      | **2005** |   |
| **Cash                flows from operating activities**                                                           |   |                                        |      |   |   |
| Net                loss                                                                                           |   | **$**                                       | **(26.7** | **)** | $ | (8.2 | ) |
| Depreciation                and amortization                                                                      |   |                                        | **8.7**   |   |   | 9.4 |   |
| Amortization                of debt issue costs                                                                   |   |                                        | **0.4**   |   |   | 0.4 |   |
| Stock-based                compensation                                                                           |   |                                        | **2.3**   |   |   | 3.5 |   |
| Net                gains on sales of long-term assets                                                             |   |                                        | **---**   |   |   | (2.5 | ) |
| Changes                in assets and liabilities, net of effects of acquisitions and                dispositions: |   |                                        |      |   |   |   |   |
| Accounts                receivable, net                                                                           |   |                                        | **(38.1** | **)** |   | (50.7 | ) |
| Inventories                                                                                                       |   |                                        | **(42.9** | **)** |   | (53.0 | ) |
| Prepaid                and deferred promotion costs                                                               |   |                                        | **(1.1**  | **)** |   | (6.5 | ) |
| Other                assets                                                                                       |   |                                        | **(11.7** | **)** |   | (26.3 | ) |
| Unearned                revenues                                                                                  |   |                                        | **35.2**  |   |   | 42.8 |   |
| Income                and deferred taxes, net                                                                     |   |                                        | **(22.0** | **)** |   | (11.7 | ) |
| Accounts                payable and accrued expenses                                                              |   |                                        | **41.4**  |   |   | 10.7 |   |
| Other                liabilities                                                                                  |   |                                        | **0.1**   |   |   | (0.7 | ) |
|                                                                                                              |   |                                        |      |   |   |   |   |
| **Net                change in cash due to operating activities**                                                 |   |                                        | **(54.4** | **)** |   | **(92.8** | **)** |
|                                                                                                              |   |                                        |      |   |   |   |   |
| **Cash                flows from investing activities**                                                           |   |                                        |      |   |   |   |   |
| Proceeds                from sales of property, plant and equipment                                               |   |                                        | **0.1**   |   |   | 3.4 |   |
| Payments                for Allrecipes.com acquisition                                                            |   |                                        | **(0.4**  | **)** |   | **---** |   |
| Purchase                of intangible assets                                                                      |   |                                        | **---**   |   |   | (0.5 | ) |
| Capital                expenditures                                                                               |   |                                        | **(5.1**  | **)** |   | (6.3 | ) |
|                                                                                                              |   |                                        |      |   |   |   |   |
| **Net                change in cash due to investing activities**                                                 |   |                                        | **(5.4**  | **)** |   | **(3.4** | **)** |
|                                                                                                              |   |                                        |      |   |   |   |   |
| **Cash                flows from financing activities**                                                           |   |                                        |      |   |   |   |   |
| Proceeds                from borrowings, net                                                                      |   |                                        | **83.3**  |   |   | 135.8 |   |
| Dividends                paid                                                                                     |   |                                        | **(9.8**  | **)** |   | (10.1 | ) |
| Cash                paid for financing fees                                                                       |   |                                        | **(0.6**  | **)** |   | --- |   |
| Treasury                stock repurchases                                                                         |   |                                        | **---**   |   |   | (9.4 | ) |
| Proceeds                from employee stock purchase plan and exerciseof                stock options             |   |                                        | **0.3**   |   |   | 0.6 |   |
| Other,                net                                                                                         |   |                                        | **(3.6**  | **)** |   | (3.7 | ) |
| **Net                change in cash due to financing activities**                                                 |   |                                        | **69.6**  |   |   | **113.2** |   |
| Effect                of exchange rate changes on cash                                                            |   |                                        | **0.9**   |   |   | **0.5** |   |
| **Net                change in cash and cash equivalents**                                                        |   |                                        | **10.7**  |   |   | **17.5** |   |
| Cash                and cash equivalents at beginning of period                                                   |   |                                        | **34.7**  |   |   | 37.7 |   |
| **Cash                and cash equivalents at end of period**                                                     |   | **$**                                       | **45.4**  |   | **$** | **55.2** |   |

*See      accompanying Notes to Consolidated Condensed Financial      Statements.*

----

**The      Reader's Digest Association, Inc. and Subsidiaries**

**Notesto      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 2007 and 2006, unless otherwise indicated,      are to fiscal 2007 and fiscal 2006, respectively. Our fiscal year is the period      from July 1 through June 30.*

**(1)**
**Basis      of Presentation and Use of Estimates**

**Recent      Accounting Standards**

----

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

**(3)**
**Stock-Based      Compensation**

*Stock      Options*

----

|                                                          |   | **Three-month                period ended September 30,** |                          |
|---------------------------------------------------------------|--------|-----------------------------------------------------------|-------------------------------|
|                                                          |   | **2006**                                                  |                          | 2005 |   |
| Risk-free                interest rate                        |   |                                                      | **4.9**                       | **%** |   | 4.2 | % |
| Expected                life                                  |   |                                                      | **6.25                years** |   |   | 6.25                years |   |
| Expected                volatility                            |   |                                                      | **29.1**                      | **%** |   | 31.8 | % |
| Expected                dividend yield                        |   |                                                      | **2.7**                       | **%** |   | 2.6 | % |
| Weighted-average                fair value of options granted |   | **$**                                                     | **3.42**                      |   | $ | 4.38 |   |

*Restricted      Stock and Deferred Stock *

**Restricted      Stock**

**Deferred      Stock**
** **

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

----

|                                               |   | **Three-month                period ended** |      |
|----------------------------------------------------|--------|---------------------------------------------|-----------|
|                                               |   | **September                30,**            |      |
|                                               |   | **2006**                                    |      | **2005** |   |
| **Revenues**                                       |   |                                        |      |   |   |
| Reader’s                Digest North America |   | **$**                                       | **229.2** |   | $ | 227.7 |   |
| Reader’s                Digest International |   |                                        | **241.0** |   |   | 235.0 |   |
| Consumer                Business Services          |   |                                        | **53.4**  |   |   | 59.8 |   |
| Intercompany                eliminations           |   |                                        | **(6.5**  | **)** |   | (6.1 | ) |
|                                               |   |                                        |      |   |   |   |   |
| **Total                revenues**                  |   |                                        | **517.1** |   |   | **516.4** |   |
|                                               |   |                                        |      |   |   |   |   |
| **Operating                profit (loss)**         |   |                                        |      |   |   |   |   |
| Reader’s                Digest North America |   |                                        | **8.6**   |   |   | 16.0 |   |
| Reader’s                Digest International |   |                                        | **(9.0**  | **)** |   | 1.4 |   |
| Consumer                Business Services          |   |                                        | **(19.0** | **)** |   | (18.0 | ) |
| Corporate                Unallocated(1)       |   |                                        | **(10.2** | **)** |   | (8.8 | ) |
| Other                operating items, net(2)       |   |                                        | **---**   |   |   | 2.6 |   |
|                                               |   |                                        |      |   |   |   |   |
| **Operating                loss**                  |   |                                        | **(29.6** | **)** |   | **(6.8** | **)** |
|                                               |   |                                        |      |   |   |   |   |
| **Intercompany                eliminations**       |   |                                        |      |   |   |   |   |
| Reader’s                Digest North America |   |                                        | **(3.7**  | **)** |   | (4.2 | ) |
| Reader’s                Digest International |   |                                        | **(2.3**  | **)** |   | (1.5 | ) |
| Consumer                Business Services          |   |                                        | **(0.5**  | **)** |   | (0.4 | ) |
|                                               |   |                                        |      |   |   |   |   |
| **Total                intercompany eliminations** |   | **$**                                       | **(6.5**  | **)** | **$** | **(6.1** | **)** |

| (1)   | Corporate                Unallocated includes expenses for the cost of governance and centrally                managed expenses, as well as the accounting for U.S. pension plans,                postretirement healthcare costs, and stock 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, include gains on sales of certain non-strategic                assets and, therefore, are not included in segment results reviewed                by our                chief operating decision maker. See Note 6, Other Operating Items,                Net,                for further information. In previous periods, sales of certain                non-strategic assets were included in other expense, net, and have                been                reclassified to other operating items, net, to conform to the current                period presentation. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**(5)**
**Comprehensive      (Loss) Income**

|                                                       |   | **Three-month                period ended** |      |
|------------------------------------------------------------|--------|---------------------------------------------|-----------|
|                                                       |   | **September                30,**            |      |
|                                                       |   | **2006**                                    |      | **2005** |   |
| Net                loss                                    |   | **$**                                       | **(26.7** | **)** | $ | (8.2 | ) |
| Change                in:                                  |   |                                        |      |   |   |   |   |
| Foreign                currency translation adjustments    |   |                                        | **0.6**   |   |   | 3.3 |   |
|  **Total                comprehensive (loss) income** |   | **$**                                       | **(26.1** | **)** | **$** | **(4.9** | **)** |

----

**(6)**
**Other      Operating Items, Net **

| **Initial                year****of                charge** |   | **Balance                at****June                30, 2006** |    |  **Spending** |   | **Balance                at****September                30, 2006** |   |
|-------------------------------------------------------------|--------|---------------------------------------------------------------|---------|--------------------|--------|--------------------------------------------------------------------|--------|
|                                                        |   |                                                          |    |               |   |                                                               |   |
| 2005                & prior                             |   | $                                                             | 3.2     |               | $      | (0.8                                                               | )      | $ | 2.4 |   |
| 2006                                                        |   |                                                          | 6.5     |               |   | (1.9                                                               | )      |   | 4.6 |   |
| **Total**                                                   |   | **$**                                                         | **9.7** |               | **$**  | **(2.7**                                                           | **)**  | **$** | **7.0** |   |

**(7)**
**Inventories**

|                                 |   | **September                30,****2006** |      | **June                30,****2006** |   | **September                30,****2005** |   |
|--------------------------------------|--------|------------------------------------------|-----------|-------------------------------------|--------|------------------------------------------|--------|
|                                 |   |                                     |      |                                |   |                                     |   |
|                                 |   |                                     |      |                                |   |                                     |   |
| Raw                materials         |   | **$**                                    | **10.6**  |                                | $      | 12.4                                     |   | $ | 12.7 |   |
| Work-in-progress                     |   |                                     | **6.0**   |                                |   | 7.2                                      |   |   | 3.9 |   |
| Finished                goods        |   |                                     | **198.8** |                                |   | 152.7                                    |   |   | 199.2 |   |
| **Total                inventories** |   | **$**                                    | **215.4** |                                | **$**  | **172.3**                                |   | **$** | **215.8** |   |

----

**(8)**
**Other      Intangible Assets, Net**

|                                                                     |   | **September                30, 2006** |      | **June                30, 2006** |   |
|--------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------------------------------|--------|
|                                                                     |   | **Gross**                             |      | **Net**                          |   | **Gross** |   | **Net** |   |
|                                                                     |   |                                  |      |                             |   |   |   |   |   |
| **Intangible                assets with indefinite lives:**              |   |                                  |      |                             |   |   |   |
| Tradenames                                                               |   | **$**                                 | **93.3**  |                             | **$**  | **93.3** |   | $ | 93.3 |   | $ | 93.3 |   |
|                                                                     |   |                                  |      |                             |   |   |   |   |   |   |   |   |   |
| **Intangible                assets with finite lives:**                  |   |                                  |      |                             |   |   |   |   |   |
| Licensing                agreements                                      |   |                                  | **60.0**  |                             |   | **26.6** |   |   | 60.0 |   |   | 28.2 |   |
| Customer                lists                                            |   |                                  | **138.3** |                             |   | **4.7** |   |   | 138.3 |   |   | 6.1 |   |
| Other                tradenames and noncompete                agreements |   |                                  | **9.2**   |                             |   | **6.4** |   |   | 9.2 |   |   | 6.8 |   |
| **Total                intangible assets**                               |   | **$**                                 | **300.8** |                             | **$**  | **131.0** |   | **$** | **300.8** |   | **$** | **134.4** |   |

**(9)**
**Debt**

**(10)**
**Pension      Information**

----

|                                                         |   | **Three-month                period ended** |      |
|--------------------------------------------------------------|--------|---------------------------------------------|-----------|
|                                                         |   | **September                30,**            |      |
|                                                         |   | **2006**                                    |      | **2005** |   |
| Service                cost                                  |   | **$**                                       | **4.3**   |   | $ | 4.1 |   |
| Interest                cost                                 |   |                                        | **11.6**  |   |   | 11.1 |   |
| Expected                return on plan assets                |   |                                        | **(17.9** | **)** |   | (17.3 | ) |
| Amortization                of prior service cost            |   |                                        | **(0.2**  | **)** |   | (0.3 | ) |
| Recognized                actuarial loss                     |   |                                        | **2.3**   |   |   | 1.8 |   |
| Curtailments,                etc.                            |   |                                        | **(0.1**  | **)** |   | --- |   |
|  **Net                periodic pension (benefit) cost** |   | **$**                                       | **---**   |   | **$** | **(0.6** | **)** |

|                                                      |   | **Three-month                period ended** |     |
|-----------------------------------------------------------|--------|---------------------------------------------|----------|
|                                                      |   | **September                30,**            |     |
|                                                      |   | **2006**                                    |     | **2005** |   |
| Service                cost                               |   | **$**                                       | **0.2**  |   | $ | 0.2 |   |
| Interest                cost                              |   |                                        | **0.9**  |   |   | 1.1 |   |
| Amortization                of prior service cost         |   |                                        | **(0.8** | **)** |   | (0.7 | ) |
| Recognized                actuarial gain                  |   |                                        | **(0.3** | **)** |   | --- |   |
|  **Net                periodic postretirement cost** |   | **$**                                       | **---**  |   | **$** | **0.6** |   |

**(11)**
**Income      Taxes**

----

**The      Reader's Digest Association, Inc. and Subsidiaries**

**Management'sDiscussion      and Analysis**

**of      Financial Condition and Results of Operations**

*(Dollars      in millions, except per share data)*

*Unless      otherwise indicated, reference in Management’s Discussion and Analysis to “we,”“us” and “our” are to The Reader’s Digest Association, Inc. and subsidiaries.      All references to 2007 and 2006, unless otherwise indicated, are to fiscal      2007      and fiscal 2006, respectively. Our fiscal year is 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 September 30, 2006, Compared With Three-Month Period Ended      September 30, 2005**

**Results      of Operations: Company-Wide**

**Overview**

*Every      Day with Rachael Ray*
*.      *

**Revenues**

----

*Every      Day with Rachael Ray;*
* *
*      Taste of Home Cookbook. *

**Operating      Loss **

**Other      Expense, Net**

**Income      Taxes**

**Net      Loss and Loss Per Share**

----

**Results      of Operations: Reportable Segments**

|                                                         |   | **Three-month                    period ended** |    |
|--------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                         |   | **September                    30,**            |    |
|                                                         |   | **2006**                                        |    | **2005** |   |
| **Revenues**                                                 |   |                                            |    |   |   |
| Reader’s                    Digest North America       |   | **$**                                           | **229** |   | $ | 228 |   |
| Reader’s                    Digest International       |   |                                            | **241** |   |   | 235 |   |
| Consumer                    Business Services                |   |                                            | **53**  |   |   | 60 |   |
| Intercompany                    eliminations                 |   |                                            | **(6**  | **)** |   | (7 | ) |
|  **Total                    revenues**                  |   | **$**                                           | **517** |   | **$** | **516** |   |
|  **Operating                    profit (loss)**         |   |                                            |    |   |   |   |   |
| Reader’s                    Digest North America       |   | **$**                                           | **9**   |   | $ | 16 |   |
| Reader’s                    Digest International       |   |                                            | **(9**  | **)** |   | 1 |   |
| Consumer                    Business Services                |   |                                            | **(19** | **)** |   | (18 | ) |
| Corporate                    Unallocated(1)                  |   |                                            | **(11** | **)** |   | (9 | ) |
| Other                    operating items, net(2)             |   |                                            | **---** |   |   | 3 |   |
|  **Operating                    loss**                  |   | **$**                                           | **(30** | **)** | **$** | **(7** | **)** |
|  **Intercompany                    eliminations**       |   |                                            |    |   |   |   |   |
| Reader’s                    Digest North America       |   | **$**                                           | **(4**  | **)** | $ | (5 | ) |
| Reader’s                    Digest International       |   |                                            | **(2**  | **)** |   | (2 | ) |
| Consumer                    Business Services                |   |                                            | **---** |   |   | --- |   |
|  **Total                    intercompany eliminations** |   | **$**                                           | **(6**  | **)** | **$** | **(7** | **)** |

| (1)   | Corporate                Unallocated includes expenses for the cost of governance and centrally                managed expenses, as well as the accounting for U.S. pension plans,                postretirement healthcare costs, and stock 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, include gains on sales of certain non-strategic                assets and, therefore, are not included in segment results reviewed                by our                chief operating decision maker. See Note 6, Other Operating Items,                Net,                for further information. In previous periods, sales of certain                non-strategic assets were included in other expense, net, and have                been                reclassified to other operating items, net, to conform to the current                period presentation. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Reader’s      Digest North America**

*Every      Day with Rachael Ray*
*Taste      of Home Cookbook*

*Reader’s      Digest*

----

* *
*Every      Day with Rachael Ray *
*.*

**Reader’s      Digest International**

**Consumer      Business Services**

**Liquidity      and Capital Resources**

|                                                                        |   | **Three-month****period                ended** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                        |   | **September                30, 2006**          |   |
|                                                                        |   |                                           |   |
| **Cash                and cash equivalents at June 30, 2006**               |   | **$**                                          | **35** |   |
| *Net                change in cash due to:*                                 |   |                                           |   |   |
| Operating                activities                                         |   |                                           | (54    | ) |
| Investing                activities                                         |   |                                           | (5     | ) |
| Financing                activities                                         |   |                                           | 69     |   |
| Effect                of exchange rate changes on cash and cash equivalents |   |                                           | ---    |   |
| **Net                change in cash and cash equivalents**                  |   |                                           | **10** |   |
|                                                                        |   |                                           |   |   |
| **Cash                and cash equivalents at September 30, 2006**          |   | **$**                                          | **45** |   |

----

*Debt*

**Recent      Accounting Standards**

----

**Forward-Looking      Information**

| ·   | Accelerating                growth from newly launched initiatives including businesses in new                international markets, the magazine*Every Day with Rachael Ray*                and Taste of Home Entertaining. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Further                strengthening Reader's Digest North America, Reader's Digest International                and QSP. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | Returning                Books Are Fun to profitability through a five-part plan that includes                new                management, cost reduction, strengthening the sales force, focusing                on the                core book and gift businesses, and improving the business model.                The goals                of the plan are to maintain and expand Books Are Fun's leading position                in                the display marketing business, improve operating profit margins                and                position the business for long-term revenue                growth. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Expanding                our digital presence by integrating our existing food and Web activities                with* *Allrecipes.com,                the recently acquired leading home cooks                website. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total                company revenues to grow mid-single                digits. |
|--------------------|---------------------------------------------------------------------------------|

| ·   | Total                company profitability to improve significantly, although partially                offset                by increased legal expenses, as we move our Books Are Fun lawsuits                to                trial, and the absence of certain gains recorded in 2006, including                the                reversal of a legal accrual and lower management                compensation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Earnings                per share in the range of $0.88 to $0.98 per share, excluding                restructuring charges and other items that cannot be forecasted at                this                time. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | the                strength of relationships of newly acquired and newly formed businesses                with their employees, suppliers and                customers; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                accuracy of the basis of forecasts relating to newly acquired and                newly                formed businesses; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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 reengineering 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 our access to consumers;                and |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | the                economic effects of terrorist activity and related events, especially                those limiting our access to consumers and otherwise affecting the                direct                marketing and direct sales                industries. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      4.**
**CONTROLS      AND PROCEDURES**

----

**PART      II. OTHER INFORMATION**

**Item      2.**
**UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

|      **Period**  |   |  **(a)                Total Number of Shares (or Units) Purchased****(1)** |    |   **(b)                Average Price Paid per Share (or Unit)** |   | **(c)                Total Number of Shares (or Units) Purchased as Part of Publicly Announced                Plans or Programs** |   | **(d)                Maximum Number (or Approximate Dollar Value) of Shares (or Units)                that May                Yet Be Purchased Under the Plans or Programs****(2)** |   |
|-------------------------------------------|--------|---------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                      |   |                                                                            |    |                                                                      |   |                                                                                                                              |   |                                                                                                                                                                                |   |
| **July                1 - 31, 2006**      |   |                                                                            | 251,941 |                                                                      | $      | 13.80                                                                                                                             |   |                                                                                                                                                                                | ---    |   | $ | 30,066,759 |   |
| **August                1 - 31, 2006**    |   |                                                                            | ---     |                                                                      |   | ---                                                                                                                               |   |                                                                                                                                                                                | ---    |   | $ | 30,066,759 |   |
| **September                1 - 30, 2006** |   |                                                                            | 942     |                                                                      | $      | 12.83                                                                                                                             |   |                                                                                                                                                                                | ---    |   | $ | 30,066,759 |   |
| **Total**                                 |   |                                                                            | 252,883 |                                                                      | $      | 13.79                                                                                                                             |   |                                                                                                                                                                                | ---    |   |   |   |   |

| (1)   | The                shares purchased in July and September 2006 include 251,941 and 942                shares, respectively, of the Company's Common Stock surrendered to                the                Company by employees in order to fulfill tax withholding obligations                of                employees upon vesting of restricted                stock. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | On                April 28, 2005, we                announced our intention to repurchase of up to $100.0 million of                our                Common Stock over the succeeding two                years. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      6.**
**EXHIBITS.      **

|   | 10.49 | Second                Amendment and Consent, dated as of September 28, 2006 to the Five-Year                Revolving Credit Agreement dated as of April 14, 2005 among The Reader’s                Digest Association, Inc., as Borrower and Guarantor, the Borrowing                Subsidiaries party thereto and the Lenders party                thereto. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.50 | 90-Day                Revolving Loan Agreement, dated September 25, 2006 among The Reader’s                Digest Association, Inc., JPMorgan Chase Bank, N.A. and The Royal                Bank of                Scotland plc. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.51 | Termination                Agreement dated as of April 23, 2001, between The Reader’s Digest                Association, Inc. and Michael A.                Brizel. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.52 | Termination                Agreement dated as of April 23, 2001, between The Reader’s Digest                Association, Inc. and Albert L.                Perruzza. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.53 | Termination                Agreement dated as of March 24, 2003, between The Reader’s Digest                Association, Inc. and Michael A.                Brennan. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 Securities 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 Securities Exchange Act                of                1934. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32 | Section                1350 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 Securities Exchange Act of                1934. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                  |   | The                Reader's Digest Association, Inc.                                                                                               |   |
|---------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                  |   | *(Registrant)*                                                                                                                                     |
|                                  |   |                                                                                                                                               |   |
|                                  |   |                                                                                                                                               |   |
|                                  |   |                                                                                                                                               |   |
| Date:                October 31, 2006 | By:    | /s/                Thomas D. Barry                                                                                                                 |   |
|                                  |   | Thomas                D. Barry                                                                                                                     |
|                                  |   | Vice                President of Finance and Corporate Controller(Chief                accounting officer and authorized                signatory) |

----