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, 2001

                                  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.
        incorporation or organization)         Employer
                                            Identification
                                                 No.)

            Pleasantville, New York           10570-7000


        (Address of principal executive        (Zip Code)
                   offices)

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

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

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


As of  April  30,  2001,  the  following  shares  of the  registrant's
common stock were outstanding:

Class A Nonvoting Common Stock, $0.01 par value:    90,095,391 shares
Class B Voting Common Stock, $0.01 par value:       12,432,164 shares


                                                   Page 1 of 23 pages.


        THE READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES

                          Index to Form 10-Q
                             (unaudited)

                            March 31, 2001


                                                                    Page No.

Part I - Financial Information:

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

  Consolidated Condensed Statements of Income
   for the three-month and nine-month periods ended March 31, 2001
   and 2000                                                             3

  Consolidated Condensed Balance Sheets
   as of March 31, 2001 and June 30, 2000                               4

  Consolidated Condensed Statements of Cash Flows
   for the nine-month periods ended March 31, 2001 and 2000             5

  Notes to Consolidated Condensed Financial Statements                  6

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


Part II - Other Information                                            22


             The Reader's Digest Association, Inc. And Subsidiaries
                   Consolidated Condensed Statements of Income
        Three-month and nine-month periods ended March 31, 2001 and 2000
                      (In millions, except per share data)
                                   (unaudited)

                              Three-month period ended  Nine-month period ended
                                       March 31,               March 31,
                                    2001       2000         2001       2000
                                            Restated      Restated   Restated
                                            (Note 7)      (Note 7)   (Note 7)

Revenues                          $ 607.7    $ 620.4     $ 2,020.2  $ 1,983.6

Product, distribution and
 editorial expenses                 240.9      228.9         778.9      739.5
Promotion, marketing and
 administrative expenses            326.5      351.1       1,000.5    1,018.7
Other operating items and
 impairment losses                     --        9.3          (8.2)       9.3
                                  -------    -------     ---------  ---------
  Operating profit                   40.3       31.1         249.0      216.1

Other income (expense), net           2.6       (7.8)         (4.6)      (8.8)
                                  -------    -------     ---------  ---------

  Income before provision for
   income taxes                      42.9       23.3         244.4      207.3

Provision for income taxes           15.0       10.5          90.4       79.6
                                  -------    -------     ---------  ---------

  Net income                      $  27.9    $  12.8     $   154.0  $   127.7
                                  =======    =======     =========  =========

Basic earnings per share:

  Weighted average common
   shares outstanding               102.7      106.2         102.8      106.7
                                  =======    =======     =========  =========

  Basic earnings per share        $  0.27    $  0.12     $    1.49  $    1.19
                                  =======    =======     =========  =========

Diluted earnings per share:

  Adjusted weighted average
   common shares outstanding        103.6      107.4         103.9      107.7
                                  =======    =======     =========  =========

  Diluted earnings per share      $  0.27    $  0.12     $    1.47  $    1.18
                                  =======    =======     =========  =========


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


See accompanying Notes to Consolidated Condensed Financial Statements.




         The Reader's Digest Association, Inc. and Subsidiaries
                 Consolidated Condensed Balance Sheets
                 As of March 31, 2001 and June 30, 2000
                             (In millions)
                              (unaudited)





                                                    March 31,    June 30,
                                                      2001         2000
                                                                 Restated
Assets                                                           (Note 7)

  Cash and cash equivalents                        $    53.9   $    49.7
  Receivables, net                                     381.5       285.3
  Inventories, net                                     152.9       120.3
  Prepaid and deferred promotion costs                 115.5       115.5
  Prepaid expenses and other current assets            215.5       201.7
                                                   ---------   ---------

Total current assets                                   919.3       772.5

  Marketable securities                                 13.4       173.5
  Property, plant and equipment, net                   156.9       152.4
  Intangible assets, net                               417.8       438.8
  Other noncurrent assets                              315.9       192.5
                                                   ---------   ---------

Total assets                                       $ 1,823.3   $ 1,729.7
                                                   =========   =========

Liabilities and stockholders' equity
  Loans and notes payable                          $   147.3   $    89.4
  Accounts payable                                      83.0       146.4
  Accrued expenses                                     275.4       309.6
  Income taxes payable                                 107.7        38.7
  Unearned revenue                                     337.1       289.4
  Other current liabilities                             20.5        30.9
                                                   ---------   ---------

Total current liabilities                              971.0       904.4

  Other noncurrent liabilities                         377.5       350.1
                                                   ---------   ---------

Total liabilities
                                                     1,348.5     1,254.5
  Capital stock                                         29.3        28.9
  Paid-in capital                                      226.1       223.1
  Retained earnings                                  1,214.9     1,077.5
  Accumulated other comprehensive (loss) income        (89.9)       31.0
  Treasury stock, at cost                             (905.6)     (885.3)
                                                   ---------   ---------
Total stockholders' equity                             474.8       475.2
                                                   ---------   ---------

Total liabilities and stockholders' equity         $ 1,823.3   $ 1,729.7
                                                   =========   =========

See accompanying Notes to Consolidated Condensed Financial Statements.




         The Reader's Digest Association, Inc. and Subsidiaries
            Consolidated Condensed Statements of Cash Flows
            Nine-month periods ended March 31, 2001 and 2000
                             (In millions)
                              (unaudited)


                                                 Nine-month period ended
                                                          March 31,
                                                     2001         2000
                                                                Restated
Cash flows from operating activities                            (Note 7)

  Net income                                       $ 154.0       $ 127.7
  Depreciation, amortization and asset
   impairments                                        41.8          37.1
  Minority interest                                     --          (2.6)
  Gains on the sales of businesses, assets
   and investments                                    (7.3)         (8.1)
  Equity in losses of an affiliate                    12.2          22.8
  Other, net of the effects of acquisitions
   and dispositions                                 (169.0)         37.0
                                                   -------       -------

Net change in cash due to operating activities        31.7         213.9
                                                   -------       -------

Cash flows from investing activities
  Proceeds from maturities and sales of
   short-term investments and marketable
   securities                                        11.3           23.2
  Purchases of investments and marketable
   securities                                        (0.8)         (28.0)
  Proceeds from other long-term investments,
   net and sale of a business                         1.3           12.4
  Proceeds from sales of property, plant and
   equipment                                          1.3            2.7
  Investment in and advances to an affiliate        (23.0)         (25.0)
  Payments for business acquisitions                   --         (393.9)
  Capital expenditures                              (31.3)         (14.1)
                                                   -------       -------


Net change in cash due to investing activities      (41.2)        (422.7)
                                                   -------       -------

Cash flows from financing activities
  Short-term borrowings, net                          58.2           6.5
  Dividends paid                                     (16.4)        (17.0)
  Common stock repurchased                           (34.1)        (45.5)
  Proceeds from employee stock purchase plan
   and exercise of stock options                      16.3           8.6
  Other, net                                           2.0           5.9
                                                   -------       -------

Net change in cash due to financing activities        26.0         (41.5)
                                                   -------       -------

Effect of exchange rate changes on cash              (12.3)         (5.3)
                                                   -------       -------

Net change in cash and cash equivalents                4.2        (255.6)

Cash and cash equivalents at beginning of period      49.7         413.4
                                                   -------       -------

Cash and cash equivalents at end of period         $  53.9       $ 157.8
                                                   =======       =======


See accompanying Notes to Consolidated Condensed Financial Statements.



         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
2001 and 2000, unless specifically identified, are to fiscal 2001 and
fiscal 2000, respectively.


(1)   Basis of Presentation and Use of Estimates

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

We report on a fiscal year beginning July 1.  The three-month periods
ended March 31, 2001 and 2000 are the third fiscal quarters of 2001 and
2000, respectively.  Operating results for any interim period are not
necessarily indicative of the results for an entire year due to the
seasonality of our business.

Other income (expense), net and net income have been restated for prior
periods to reflect equity in losses of an affiliate (including
amortization of goodwill associated with our investment in the
affiliate) (Note 7). In addition, certain prior period amounts have
been restated to conform to the current period presentation.
Specifically, customer service costs in 2000 have been reclassified to
reflect these costs as a component of product, distribution and
editorial expenses rather than promotion, marketing and administrative
expenses.


(2)   Basic and Diluted Earnings Per Share

Basic earnings per share is computed by dividing net income less
preferred stock dividend requirements 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, 2001 and 2000 and $1.0 for each of the nine-month
periods ended March 31, 2001 and 2000.

Diluted earnings per share is computed in the same manner except that
the weighted average number of common shares outstanding assumes the
exercise and conversion of certain stock options. For the three-month
period ended March 31, 2001, the assumed exercise and conversion
totaled 0.9 million shares; for the comparable period ended March 31,
2000, there were 1.2 million shares (1.1 million shares for the
nine-month period ended March 31, 2001 and 1.0 million shares for the
nine-month period ended March 31, 2000).



(3)   Revenues and Operating Profit (Loss) by Operating Segments

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

                            Three-month period ended   Nine-month period ended
                                    March 31,                March 31,
                                  2001      2000          2001        2000
Revenues
  Global Books and Home
   Entertainment                $ 367.2   $ 401.3      $ 1,186.2   $ 1,202.6
  U.S. Magazines                  161.8     136.8          594.5       521.7
  International Magazines          69.8      73.0          211.1       224.0
  Other Businesses                  8.9       9.3           28.4        35.3
                                -------   -------      ---------   ---------

Total revenues                  $ 607.7   $ 620.4      $ 2,020.2   $ 1,983.6
                                =======   =======      =========   =========

Operating profit (loss)
  Global Books and Home
   Entertainment                $  39.8   $  46.7      $   172.6   $   173.9
  U.S. Magazines                   10.4       7.8           87.1        85.1
  International Magazines          (2.1)     (2.0)          (0.5)        2.2
  Other Businesses                 (7.8)    (12.1)         (18.4)      (35.8)
                                -------   -------      ---------   ---------

Segment operating profit           40.3      40.4          240.8       225.4
  Other operating items              --       9.3           (8.2)        9.3
                                -------   -------      ---------   ---------

Total operating profit          $  40.3   $  31.1      $   249.0   $   216.1
                                =======   =======      =========   =========



(4)   Comprehensive Income

Accumulated other comprehensive (loss) income as reported in the
Consolidated Condensed Balance Sheets as of March 31, 2001 and June 30,
2000, primarily represents unrealized gains/losses on certain
investments and foreign currency translation adjustments.  The
components of comprehensive income, net of related tax, for the
three-month and nine-month periods ended March 31, 2001 and 2000 were
as follows:

                               Three-month period ended  Nine-month period ended
                                        March 31,              March 31,
                                     2001       2000        2001      2000
                                              Restated    Restated   Restated
                                              (Note 7)    (Note 7)   (Note 7)

Net income                          $ 27.9     $ 12.8      $ 154.0   $ 127.7
Change in:
  Foreign currency translation
   adjustments                       (15.0)      (7.8)       (17.6)     (9.4)
  Net unrealized (losses)
   gains on certain
   investments (1)                    (6.6)     101.4       (104.0)    255.4
  Net unrealized gains on
   certain derivative
   transactions, net of
   deferred tax liabilities of
   $0.3 and of $0.4, respectively      0.5         --          0.7        --
                                    ------    -------       ------   -------

Total comprehensive income          $  6.8    $ 106.4       $ 33.1   $ 373.7
                                    ======    =======       ======   =======

(1)Net unrealized (losses) 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, 2001, these amounts are net of deferred tax assets of $3.6 and
   $56.1, respectively.  For the three- and nine-month periods ended
   March 31, 2000, these amounts are net of deferred tax liabilities of
   $45.1 and $137.5, respectively.


(5)    Other Operating Items

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

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

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

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

Note 3 to our consolidated financial statements included in our 2000
Annual Report to Stockholders describes the nature and magnitude of the
charges that were recorded in conjunction with these components for the
past three fiscal years.  At June 30, 2000, we had accruals for other
operating items of $19.7, primarily for employee retirement and
severance benefits.

During the nine-month period ended March 31, 2001 we: (i) recorded
adjustments totaling $0.9 to remaining accrual balances from charges
originally recorded in fiscal 2000 and fiscal 1996; (ii) recorded
additional charges of $1.1 primarily related to costs associated with
the discontinuation of certain unproductive businesses; and (iii) made
payments totaling $7.9, of which $6.8 related to employee retirement
and severance benefits.  At March 31, 2001, the remaining balance of
accruals for other operating items, composed primarily of employee
retirement and severance benefits, was $12.0.

In addition, during the nine-month period ended March 31, 2001 we: (i)
recorded an impairment loss of $2.0 relating to goodwill associated
with one of our special interest magazines; (ii) adjusted accruals as a
result of a favorable tax settlement of $14.5, which resulted in a
reversal of charges of $10.1 originally recorded in other operating
items and $4.4 originally recorded in administrative expenses; and
(iii) adjusted remaining accrual balances for litigation charges
originally recorded as other operating items of $0.3.

The net amount recorded during the nine-months ended March 31, 2001 as
other operating items was $8.2 (income).

For the three-month period ended March 31, 2000, we recorded other
operating items of $9.3 (expense) consisting of the following: (i)
charges of $9.7 primarily for severance costs associated with the
outsourcing of customer service in certain countries and centralization
of certain accounting functions and costs related to the discontinuance
of certain unproductive activities; (ii) adjustments to remaining
accrual balances from charges originally recorded in 1999, 1998 and
1996 (this resulted in a benefit of $4.0); and (iii) asset impairments
of $3.6 related principally to property, plant and equipment in the
United Kingdom.


(6)   Inventories

                                               March 31,      June 30,
                                                 2001           2000

Raw materials                                  $  13.8        $  13.4
Work-in-progress                                  15.6           21.1
Finished goods                                   123.5           85.8
                                               -------        -------
Total inventories                              $ 152.9        $ 120.3
                                               =======        =======



(7)    Investments

Available for Sale Marketable Securities

Marketable securities on the balance sheet primarily represents the
fair market value (based on quoted market prices) of our investments in
LookSmart, Ltd. and WebMD Corporation. These securities are accounted
for and classified as available-for-sale securities.  As of March 31,
2001, the market value of the remaining shares totaled $10.4 for
LookSmart and $2.4 for WebMD.

Net unrealized losses on these investments, net of deferred taxes, is
included in accumulated other comprehensive (loss) income in
stockholders' equity on the balance sheet and amounted to a loss of
$(0.1) as of March 31, 2001.  During the three- and nine-month periods
ended March 31, 2001, respectively, we sold 300,000 and 1,250,000
shares of LookSmart, and recorded a pre-tax gain of $0.9 and $6.2 in
other income (expense), net on the income statement.

Investments, Equity Method

Investments in entities that are not majority-owned and that we do not
control, but over which we have the ability to exercise significant
influence are accounted for using the equity method. Generally, under
the equity method, original investments in these affiliates are
recorded at cost and are subsequently adjusted by our share of equity
in earnings or losses after the date of acquisition (including
amortization of goodwill).  Equity in earnings or losses of each
affiliate is recorded according to our level of ownership until the
affiliate's contributed capital has been fully depleted.  Thereafter,
we recognize the full amount of the losses generated by the affiliate
when we are the primary funding source.

During the second quarter of fiscal 2001, we changed our method of
accounting for our investment in BrandDirect Marketing, Inc. from the
cost method to the equity method of accounting.  Due to additional
funding, in the form of an advance, and other changes in circumstances
we obtained the ability to exercise significant influence as defined in
Accounting Principles Board Opinion No.18 (APB No.18), The Equity
Method of Accounting for Investments in Common Stock.  All prior
periods were restated to reflect reported results as if we had been
accounting for this investment on the equity method since initial
ownership in BrandDirect Marketing, Inc. in accordance with APB No.18.
The reported and restated results reflect equity losses in the
affiliate based upon the above (including amortization of goodwill
associated with our investment).

The following summarizes the effect on our results of the equity method
accounting treatment for our investment in BrandDirect Marketing, Inc.

<TABLE>

                                  Equity in
                    Investment     Earnings       Net     Effect on Basic  Effect on Diluted
  Period            and Advances  Losses (1)  Investment     EPS (2)             EPS (2)

<S>                     <C>         <C>         <C>          <C>               <C>
Fiscal 2000:
  Second Quarter        $ 25.0      $ 10.5      $ 14.5       $ (0.10)          $ (0.10)
  Third Quarter             --        12.3      $  2.2         (0.12)            (0.11)
  Fourth Quarter           5.0         6.3      $  0.9         (0.06)            (0.06)
                        ------      ------                   -------           -------
                        $ 30.0      $ 29.1                   $ (0.28)          $ (0.27)
                        ======      ======                   =======           =======

Fiscal 2001:
  First Quarter         $ 20.0      $  7.7      $ 13.2       $ (0.07)          $ (0.07)
  Second Quarter           3.0         4.5      $ 11.7         (0.05)            (0.05)
  Third Quarter             --          --      $ 11.7            --                --
                        ------      ------                   -------           -------
                        $ 23.0      $ 12.2                   $ (0.12)          $ (0.12)
                        ======      ======                   =======           =======
 </TABLE>

(1)   Equity in earnings/losses includes goodwill amortization
      associated with our investment totaling $8.2 for 2001 and $3.8 for
      2000.  In addition, during the third fiscal quarter of 2001 equity
      in earnings/losses reflects an impairment charge of $3.5.
(2)   EPS is earnings per share.

Investments, Cost Method

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

Licensing Agreement

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


(8)  Derivative Instruments

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

Risk Management and Objectives

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

Strategies and Description of Derivative Instruments

The following is a brief description of our derivative transactions.

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

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

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


Quantitative Disclosures of Derivative Instruments

Cash Flow Hedges - For the three-month period ended March 31, 2001,
changes in the spot value of the foreign currencies associated with
option contracts designated and qualifying as cash flow hedges of
forecasted royalty payments amounted to a gain of $0.5 (gain of $0.7
for the nine-month period ended March 31, 2001).  These changes are
reported in accumulated other comprehensive (loss) income included in
stockholders' equity on the balance sheet.  The gains and losses are
deferred until the underlying transaction is recognized in earnings.

The ineffective portion of the change in market value of these option
contracts, specifically, the time-value component of $0.4 was
recognized as a loss in other income (expense), net on the income
statement for the three-month period ended March 31, 2001 (loss of $1.0
for the nine-month period ended March 31, 2001).  The fair value of the
option contracts at March 31, 2001 of $1.6 is included in prepaid
expenses and other current assets on the balance sheet.

We anticipate that the net gains in accumulated other comprehensive
(loss) income relating to foreign currency option contracts existing at
March 31, 2001 will be recognized as gain (loss) on foreign exchange
during the 12 month period ended March 31, 2002.  As of March 31, 2001,
the approximate length of time over which we will hedge our exposure to
the variability in future cash flows associated with foreign currency
royalty fees is 12 months.  There were no cash flow hedges discontinued
during the nine-month period ended March 31, 2001.

Other Derivatives - For the three-month period ended March 31, 2001,
changes in the spot value of the foreign currencies and contract
settlements associated with option and forward contracts amounted to a
gain of $7.0 (gain of $4.8 for the nine-month period ended March 31,
2001).  These changes are reported in gain (loss) on foreign exchange
included in other income (expense), net on the income statement.  This
effect would generally be offset by the translation of the assets,
liabilities and future operating cash flows being hedged.  The fair
value of the option and forward contracts as of March 31, 2001 of $5.5
is included in prepaid expenses and other current assets on the balance
sheet.


(9) Debt

As described in Note 10 to our consolidated financial statements
included in our 2000 Annual Report to Stockholders, we are a party to a
Competitive Advance and Revolving Credit Facility Agreement (the Credit
Agreement) that provides for borrowings of up to $300.0 and expires on
October 31, 2001.  The Credit Agreement contains covenants to maintain
minimum levels of consolidated assets and net worth and a maximum level
of leverage.  At March 31, 2001, we had borrowings of $145.4
outstanding under the Credit Agreement and we were in compliance with
all covenants.  This amount is included in loans and notes payable on
the balance sheet.


(10) Share Repurchase Authorization

In January 2000, we announced authorization to repurchase up to 5
million shares of our outstanding Class A nonvoting common stock.  In
October 2000, we announced authorization to repurchase up to an
additional 5 million shares of our outstanding Class A nonvoting common
stock.  Subsequently, in May 2001, we announced authorization to
repurchase up to a total of $250 in shares of our outstanding Class A
nonvoting common stock, which superseded the 5 million-share repurchase
authorization announced in October 2000.  To date, under these
repurchase authorizations, we had purchased approximately 5.0 million
shares totaling $167.6 (0.7 million shares totaling $22.5 during the
three-month period ended March 31, 2001 and 1.0 million shares totaling
$34.1 during the nine-month period ended March 31, 2001).


(11)  Voluntary Comprehensive Promotion Agreement

In March 2001, we announced a voluntary comprehensive agreement with
attorneys general for 32 states and the District of Columbia regarding
standards for direct mail sweepstakes promotions.  We will promote
consumer education and adopt standards for promotions in the United
States similar to those agreed to by other direct marketing and
publishing companies.  The agreement includes establishment of a
consumer fund of approximately $6 to be used at the discretion of the
attorneys general for activities including consumer education efforts.
In addition, we will include a fact sheet in all mailings to educate
consumers, which explains in detail how our sweepstakes work, and will
modify the language and packaging we use for those promotions including
sweepstakes entries.  We also agreed to pay approximately $2 in
attorneys' fees.


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

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

Other income (expense), net and net income have been restated for prior
periods to reflect equity in losses of an affiliate (including
amortization of goodwill associated with our investment in the
affiliate), as described in Note 7 to our Consolidated Condensed
Financial Statements.

To analyze results on a comparable basis, Management's Discussion and
Analysis of operating profit has been written excluding the net effect
of other operating items of $8 (income) for the nine months ended March
31, 2001 and $9 (expense) for the three months ended March 31, 2000.

For the nine months ended March 31, 2001, other operating items of $8
(income) consisted of the following:
-  Adjustments to remaining accrual balances from charges originally
   recorded in fiscal years 2000, 1996 and 1994, which resulted in a
   benefit of $11.
-  Charges of $3 primarily related to costs associated with the
   discontinuation of certain unproductive businesses of $1, and an
   impairment loss of $2 relating to goodwill associated with one of
   our special interest magazines.

For the three months ended March 31, 2000 other operating items of $9
(expense) consisted of the following:
-  Charges of $13, primarily for: (i) severance costs associated
   with the outsourcing of customer service in certain countries and
   the centralization of certain accounting operations of $6, (ii)
   costs related to the discontinuation of certain activities of $3 and
   (iii) asset impairments of $4.
-  These charges were partially offset by adjustments to accrual
   balances from prior year charges, resulting in a benefit of $4.

Three-Month Period Ended March 31, 2001, Compared With Three-Month
Period Ended March 31, 2000

Results of Operations:  Company-Wide

Revenues and Operating Profit

Revenues for the third quarter of 2001 decreased 2% to $608, compared
with $620 in 2000.  However, excluding the adverse effect of foreign
currency translation, revenues increased 1%.  The increase in revenues
was primarily attributable to increased sales at QSP, Inc. resulting
from the integration of the products and sales force of World's Finest
Chocolate, Inc.  The increase was partially offset by a decrease in
revenues for Global Books and Home Entertainment (BHE) products sold in
the United States.  In the United States, revenues were lower for most
products, including general books, music single-sales, Select Editions
and video products.  However, revenues in international markets, for
most BHE products, were higher.  Improved series membership increased
revenue in international markets, while reduced mail quantities and in
some cases, lower response rates reduced revenues for general book
products.


Operating profit for the third quarter of 2001 of $40 was flat compared
with 2000.  However, excluding the adverse effect of foreign currency
translation, operating profit increased 5%.  Operating profit was
higher because of: (i) significantly lower employee expenses compared
with the prior year quarter, principally related to long-term incentive
plan compensation for senior executives, which resulted in lower
overhead expenses of $8; (ii) reduced marketing and development costs
compared with those associated with the launch in the prior year of
gifts.com; (iii) higher sales of QSP, Inc. products; and (iv) higher
sales in most international markets for BHE products.  Partially
offsetting higher profits were profit declines as a result of lower
revenues in United States for BHE products and lower advertising sales
of Reader's Digest and the Special Interest magazines.

Other Income (Expense), Net

Other income (expense), net increased to $3 in the third quarter of
2001, compared with expense of $(8) in the third quarter of 2000.
During the third quarter of 2000, equity in losses of an affiliate was
$12, while such losses were minimal in the third quarter of 2001.

Income Taxes

The effective tax rate for the third quarter of 2001 was 35.0%,
compared with a rate of 45.1% for the third quarter of 2000.  Excluding
the effect of equity in losses of an affiliate, the effective tax rate
for the third quarter of 2000 was 29.5%.  The lower rate for the prior
period was a result of tax initiatives in certain international
markets, as well as the deductibility of goodwill associated with the
sale of American Health magazine.

Net Income and Earnings Per Share

For the third quarter of 2001, net income was $28 or $0.27 per share
for both basic and diluted earnings per share.  In the prior year
period, net income was $13, or $0.12 per share for both basic and
diluted earnings per share.


Results of Operations:  Operating Segments

Global Books and Home Entertainment (BHE)

Revenues for BHE decreased 8% in the third quarter of 2001 to $367,
compared with $401 in 2000.  Excluding the adverse effect of foreign
currency translation, revenues decreased 5%.  The decline in revenues
was primarily in the United States for music single-sales, Selected
Editions and video products, and worldwide for general books.  Music
and video product revenues declined in the United States from lower
response rates and Select Editions revenues declined from reduced
mailings.  Offsetting a portion of this decline were higher sales of
series products sold internationally and growth for Books Are Fun, Ltd.
(BAF).  International markets with higher sales included Eastern
Europe, Mexico, Asia and Germany.  Conversely, Brazil, the United
Kingdom, Argentina, and Benelux experienced lower sales; and in Italy,
operations were discontinued.

The decline in revenues for general books in the United States was
primarily from a more popular product being offered in the prior year
quarter, How to do Just About Anything on a Computer, that outperformed
sales of this year's titles.  In international markets, primarily the
United Kingdom, Germany, Argentina, Benelux and Brazil, general books
sales were lower as a result of lower responses to certain titles and,
in some cases, reduced mail quantities.  However, general books
benefited from higher sales in Mexico and Eastern Europe as a result of
increased mail quantities.

The increase in series revenues (Select Editions and illustrated and
reading series) was primarily in Germany, Eastern Europe, the United
Kingdom and Russia.  Germany and Eastern Europe experienced improved
membership for these products.  In the United Kingdom, the timing of
shipments this quarter compared with the prior year quarter resulted in
increased sales.  In Russia, growth was derived from Select Editions
which was launched in the prior year quarter.  Also, in Asia, revenues
were higher from increased mail quantities and response rates to
certain general books and music single-sales products.


Operating profit for BHE decreased 15% in the third quarter of 2001 to
$40, compared with $47 in 2000.  Excluding the adverse effect of
foreign currency translation, operating profit decreased 10%.  The
decline in profits is mostly attributable to lower revenues for general
books sold worldwide and music single-sales, Select Editions and video
products sold in the United States.  Partially offsetting these
declines were significantly lower employee expenses compared with the
prior year quarter, principally long-term incentive plan compensation
for senior executives.  Other contributions to profit improvement were
from Young Families and BAF products sold in the United States.

In addition, there were profit improvements in international markets,
primarily Eastern Europe, Canada, the United Kingdom and Mexico, which
were partially offset by lower profits in Brazil and Germany.  Profits
for series products were higher as a result of improved membership in
Germany, and higher sales in the United Kingdom and Eastern Europe
during the quarter.  Profits were also higher in Eastern Europe and
Mexico from higher general books sales attributable to increased
mailings and response rates.  Profit declines in Brazil and Germany
were principally due to lower revenues from general books.

U.S. Magazines

Revenues for U.S. Magazines increased 18% in the third quarter of 2001
to $162, compared with $137 in 2000. The increase was primarily
attributable to higher food and gift sales of QSP, Inc. resulting from
the integration of the products and sales force of World's Finest
Chocolate, Inc.  These improvements were partially offset by a decrease
in advertising revenues for Reader's Digest and the Special Interest
magazines as a result of fewer ad pages and a lower average rate per
page.  The advertising decline was attributable to industry-wide
softness and delayed commitments within the automotive, do-it-yourself
and health categories.  In addition, circulation revenue was slightly
down due to lower renewals, partially offset by an increase in new
subscribers, who typically pay lower initial subscription fees.

Operating profit for U.S. Magazines increased 32% in the third quarter
of 2001 to $10, compared with $8 in 2000. The improvement resulted from
lower employee expenses compared with the prior year quarter,
principally long-term incentive plan compensation for senior
executives, and profit growth at QSP, Inc. from higher sales and
improved margins.  Circulation profit for Reader's Digest magazine was
down because of the lower renewals and lower initial subscription fees
typically paid by new subscribers.  Advertising profit was also down
from lower advertising sales, as described above.

International Magazines

Revenues for International Magazines decreased 4% in the third quarter
of 2001 to $70, compared with $73 in 2000.  However, excluding the
adverse effect of foreign currency translation, revenues increased 1%.
Circulation revenue increased in Mexico, Canada and Asia from price
increases and higher subscription volumes.  However, lower
subscriptions in certain countries, primarily Brazil, offset a portion
of the growth realized in other markets.  In addition, revenues were
lower as result of the discontinuation last year of our operations in
Italy and declines in advertising in some markets.

Operating losses for International Magazines of $2 for the third
quarter of 2001 was roughly flat compared with 2000.  Operating profit
increased in certain markets, notably in Asia, France, Benelux and
Mexico. In Asia and Mexico, increased subscriptions resulted in higher
profits.  Cost reduction initiatives contributed to profit gains in
Asia, France and Benelux.  Offsetting these gains was a loss in Brazil
during the current quarter from lower subscription revenues and
continued investment spending to build promotion lists.

Other Businesses

Revenues from Other Businesses decreased 5% in the third quarter of
2001 to $9, when compared with the third quarter of 2000.  Revenues
were lower for gifts.com, Inc. as a result of the Good Catalog Company
division's reduction of merchandise catalogs in circulation, partially
offset by increased sales generated by our gifts.com Web site.

Operating losses from Other Businesses were reduced in the third
quarter of 2001 to $(8), compared with $(12) in 2000, primarily from
planned reductions in marketing and development costs of gifts.com,
Inc. as well as improved results from financial services initiatives.
Profits at Good Catalog Company were adversely affected by sales of
lower margin products and reduced catalog promotions.


Nine-Month Period Ended March 31, 2001, Compared With Nine-Month Period
Ended March 31, 2000

Results of Operations:  Company-Wide

Revenues and Operating Profit

Revenues for the nine months ended March 31, 2001 increased 2% to
$2,020, compared with $1,984 in the prior year period.  Excluding the
adverse effect of foreign currency translation, revenues increased 6%.
The increase in revenues was primarily attributable to: (i) increased
sales at QSP, Inc. resulting from the integration of the products and
sales force of World's Finest Chocolate, Inc.; (ii) revenue growth for
all BHE products sold in international markets, and (iii) the
acquisition of BAF.  Improved membership in certain series products as
well as higher sales of general books, music and video products
generated higher revenues in our international BHE business.  Revenues
grew primarily in Eastern Europe and other developing markets because
of higher response rates to increased promotion and more effective
promotion techniques.

This revenue growth was partially offset by: (i) lower revenues
primarily for video products and general books sold in the United
States because of less popular products and reduced mailings; (ii)
reduced catalog activity at gifts.com, Inc.'s Good Catalog Company
division to improve profitability; (iii) lower advertising revenues for
the Special Interest magazines in the United States from industry-wide
softness, particularly in the automotive, do-it-yourself, and health
categories; and (iii) the absence of revenue following the sale of the
subscription list for American Health magazine, which ended publication
with the October 1999 issue.

Operating profit for the nine months ended March 31, 2001 increased 7%
to $241, compared with $225 in the prior year period.  Excluding the
adverse effect of foreign currency translation, operating profit
increased 14%.  Operating profit growth was driven by: (i) reduced
marketing and development costs compared with those associated with the
launch of gifts.com, and (ii) higher sales of all BHE products sold in
international markets.  However, profits declined as a result of lower
sales of video products, general books, and illustrated series products
in the United States from lower response rates and less popular product
offerings.  U.S. Magazines also experienced lower profits for Reader's
Digest and the Special Interest magazines primarily from industry-wide
softness in several advertising categories.

Other Income (Expense), Net

Other income (expense), net for the nine months ended March 31, 2001
was expense of $(5), compared with expense of $(9) in the prior year
period.  During the nine months ended March 31, 2001, equity in losses
of an affiliate was $11 less than the prior year period.  In addition,
income totaling $7 was realized from the sale of certain investments
and proceeds of $4 were recognized from the termination of an
agreement.  Partially offsetting these gains was interest expense, net,
which was $14 higher during the nine months ended March 31, 2001,
compared with the prior period, because of additional borrowings.  In
the prior year period, a gain of $7 was recognized from the sale of the
subscription list for American Health magazine.

Income Taxes

The effective tax rate for the nine months ended March 31, 2001 was
37.0%, compared with a rate of 38.4% for the prior year period.
Excluding the effect of equity in losses of an affiliate, the effective
tax rate for the nine months ended March 31, 2001 was 35.2%, compared
with a rate of 34.6% for the prior year period.  The lower rate for the
prior period was a result of tax initiatives in certain international
markets, as well as the deductibility of goodwill associated with the
sale of American Health magazine.

Net Income and Earnings Per Share

For the nine months ended March 31, 2001, net income was $154, or $1.47
per share on a diluted-earnings basis ($1.49 per share for basic
earnings per share).  In the prior year period, net income was $128, or
$1.18 per share on a diluted-earnings basis ($1.19 per share for basic
earnings per share).


Results of Operations:  Operating Segments

Global Books and Home Entertainment (BHE)

Revenues for BHE decreased 1% in the nine months ended March 31, 2001
to $1,186, compared with $1,203 in the prior year period.  Excluding
the adverse effect of foreign currency translation, revenues increased
5%.  The acquisition of BAF in the second quarter of 2000 and revenue
growth for all products sold in international markets were the primary
reasons for the increase in revenues.  The acquisition of BAF accounted
for a significant portion of the revenue increase in the United
States.  However, this growth was partially offset by revenue declines
principally in the United States during the third of quarter 2001 for
video products, general books and Select Editions.

Most of the revenue growth in our international markets was for series
products (Select Editions and reading and illustrated series) and was
especially high in Eastern Europe, Germany, Mexico, Asia and
Australia.  Sales of series products were higher as a result of
increased promotion efforts and improved membership, especially in
Germany and Switzerland, and improved response rates in Australia.
Revenues for general books increased, especially in Russia, Mexico, the
Czech Republic, and Asia, because of improved response rates resulting
from more effective promotion techniques and more popular products.
Revenues for music and video products were higher from increased
promotions and higher response rates, primarily in Mexico, Asia,
Australia, and Switzerland.  In the United Kingdom, revenues were lower
from reduced mailing activity of music and series products.  Revenues
were also lower because of the sale of our Italian operations in the
fourth quarter of 2000.

The decline in revenues for certain products in the United States was
principally from video products and general books.  Video sales were
adversely affected by a promotion shift to music products in the second
quarter of 2001, which increased revenues for music products, as well
as lower response rates to video mailings during the period.  The
decline in revenues for general books was principally from a more
popular product in the third quarter of 2000, How to do Just About
Anything on a Computer, that outperformed sales of this year's titles.
Series revenues declined from reduced mailings that took place during
the third quarter of 2001 as well as lower response rates from weaker
products.  Offsetting these declines was revenue growth for Young
Families products as a result of increased promotional activity.

Operating profit for BHE decreased 1% in the nine months ended March
31, 2001 to $173, compared with $174 in the prior year period.
However, excluding the adverse effect of foreign currency translation,
operating profit increased 9%.  Profits were higher in most
international markets and were especially higher in Eastern Europe,
Canada, the United Kingdom, Australia, Switzerland, Mexico and France.
Profit growth internationally was principally from increased sales as
described above.  In the United States, profits were lower for video,
general books and series products principally from lower profits for
these products realized in the third quarter of 2001.  Partially
offsetting these losses were higher profits for Young Families and
music products.  BAF had higher overall sales, but profits were lower
because of severe weather that adversely affected some winter sales
events, and late delivery to us of a significant seasonal product.

U.S. Magazines

Revenues for U.S. Magazines increased 14% in the nine months ended
March 31, 2001 to $595, compared with $522 in the prior year period.
Revenues increased due to a higher volume of food and gift items sold
at QSP, Inc. resulting from the integration of the products and sales
force of World's Finest Chocolate, Inc.  Also, advertising revenue for
Reader's Digest magazine was higher during the period compared with the
prior year.  These improvements in revenue were slightly offset by: (i)
a decline in circulation revenue for Reader's Digest due to lower
renewals partially offset by new subscribers; (ii) lower advertising
revenues for the Special Interest magazines from industry-wide
softness, particularly in the automotive, do-it-yourself, and health
categories; and (iii) the absence of revenue following the sale of the
subscription list for American Health magazine, which ended publication
with the October 1999 issue.

Operating profit for U.S. Magazines increased 2% for the nine months
ended March 31, 2001 to $87, compared with $85 in the prior year
period.  Additional sales of QSP, Inc. products and higher advertising
sales of Reader's Digest magazine resulted in higher profits.  These
increases were offset by certain profit declines. These declines
included, lower profits for the Special Interest magazines due to an
industry-wide softness in advertising and lower circulation profit for
Reader's Digest magazine because of lower renewals and the lower
initial subscription fees typically paid by new subscribers.


International Magazines

Revenues for International Magazines decreased 6% in the nine months
ended March 31, 2001 to $211, compared with $224 in the prior year
period.  However, excluding the adverse effect of changes in foreign
currency exchange rates, revenues increased 2%.  Revenues increased in
Mexico, Asia, and Canada, primarily from higher subscription renewals.
Offsetting a portion of the revenue growth were declines in circulation
revenues from strategic reductions in the circulation rates in the
United Kingdom and Germany, and the sale of our Italian operations in
the fourth quarter of 2000.

The International Magazines segment had a small loss for the nine-month
period ended March 31, 2001 compared with operating profit of $2 in the
prior year period.  This profit decline was partially attributable to
incremental spending on initiatives to acquire new customers and the
sale of our Italian operations.  Operating profit increased in certain
markets, notably in Asia, France, Canada and Mexico.  In Asia and
Mexico, increased subscriptions resulted in higher profits. In certain
other markets, the execution of global contracts to facilitate magazine
fulfillment resulted in lower paper and printing costs.  Offsetting
these gains were losses in Brazil and Australia.  In Brazil, lower
subscription sales as well as continued investment spending to build
promotion lists contributed to the loss.  In Australia new business
development and higher promotion costs from the timing of mailings
reduced profits.

Other Businesses

Revenues from Other Businesses decreased 20% for the nine-month ended
March 31, 2001 to $28, compared with $35 in the prior year period.
Revenues were lower for gifts.com, Inc. as a result of the Good Catalog
Company division's reduction in merchandise catalog promotions,
partially offset by increased sales generated by our gifts.com Web site.

Operating losses from Other Businesses decreased in the nine months
ended march 31, 2001 to $(18), compared with $(36) in the prior year
period, primarily from planned reductions in marketing and development
costs of gifts.com, Inc. and improved results from financial services
initiatives.


Forward-Looking Information

Fiscal 2001 and 2002 Results

Our U.S. business is being unfavorably affected by a combination of
factors, including weakness in the economy and in the direct mail
industry, and implementation of a new multi-state agreement on
sweepstakes marketing.  We expect that the multi-state agreement will
continue to have an effect on our U.S. BHE business for the balance of
fiscal 2001 and into fiscal 2002.  We expect softness in global
advertising as well as sales of BHE products in the United States to
continue through fiscal 2001, most likely resulting in fourth-quarter
earnings in the range of $0.18 to $0.21 per share (on a
diluted-earnings basis).  We expect that our tax rate for fiscal 2001
will be about 35% (excluding the effect of equity losses of an
affiliate).  Based on preliminary budget reviews, we expect earnings
growth for fiscal 2002 to be in the range of 10 to 20 percent.

Liquidity and Capital Resources

                                                           Nine-month
                                                          period ended
                                                         March 31, 2001

Cash and cash equivalents at June 30, 2000                     $ 50

Net change in cash due to:
  Operating activities                                           32
  Investing activities                                          (42)
  Financing activities                                           26
  Effect of exchange rate changes on cash and cash
   equivalents                                                  (12)
                                                               ----
Net change in cash and cash equivalents                           4

Cash and cash equivalents at March 31, 2001                    $ 54
                                                               ====

Cash and cash equivalents increased 8% to $54 at March 31, 2001,
compared with $50 at June 30, 2000.  Short-term borrowings increased by
$58 to $147 as of March 31, 2001 to finance additional receivables from
the timing of product shipments (higher revenue in the month of March
2001 compared with the prior year quarter) as well as higher QSP, Inc.
sales.  Also, during the third quarter of 2001, our BHE business in the
United States transitioned its fulfillment activities to an outsourced
vendor, which resulted in a planned blackout period for invoicing
during most of the month of February 2001.  This resulted in a
reduction in our receivables collection period and an increase in
receivables as of March 31, 2001.

Other factors that reduced our cash flow from operating activities were
higher inventory balances and lower accounts payable and accrued
expenses.  Inventories were higher principally for BAF, which
experienced lower than expected sales during the second and third
quarters of 2001 as a result of severe weather that adversely affected
some winter sales events.

As described in Note 10 to our consolidated financial statements
included in our 2000 Annual Report to Stockholders, we are a party to a
Competitive Advance and Revolving Credit Facility Agreement (the Credit
Agreement) that expires on October 31, 2001 and provides for borrowings
of up to $300.  The Credit Agreement contains covenants to maintain
minimum levels of consolidated assets and net worth and a maximum level
of leverage.  At March 31, 2001 we had largely seasonal borrowings of
$145 outstanding under the Credit Agreement.

In January 2000, we announced authorization to repurchase up to 5
million shares of our outstanding Class A nonvoting common stock.  In
October 2000, we announced authorization to repurchase up to an
additional 5 million shares of our outstanding Class A nonvoting common
stock.  Subsequently, in May 2001, we announced authorization to
repurchase up to a total of $250 in shares of our outstanding Class A
nonvoting common stock, which supersded the 5 million-share repurchase
authorization announced in October 2000.  To date, under these
repurchase authorizations, we had purchased approximately 5.0 million
shares totaling $168 (0.7 million shares totaling $22 during the
three-month period ended March 31, 2001 and 1.0 million shares totaling
$34 during the nine-month period ended March 31, 2001).

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

Currency Risk Management

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

At March 31, 2001, our primary foreign currency market exposures
included the euro and the British pound.  We estimate that the results
of a uniform 10% weakening and 10% strengthening in the value of the
U.S. dollar relative to the currencies in which our option and forward
contracts are denominated, with all other variables held constant,
would have the following effect:

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

Option contracts                         $ (6.9)            $ 12.6
Forward contracts                        $ (9.9)            $  8.1


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

Impact of the Euro Conversion

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

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

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


                                 *****

This report contains or incorporates by reference "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.  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/or 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 U.S. 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 integrate newly acquired and newly formed
      businesses successfully;
-     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 contain and reduce costs, especially through
      global efficiencies;
-     the cost and effectiveness of re-engineering of business
      processes and operations;
-     the accuracy of 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 industry, including the Internet;
-     the effects of worldwide paper and postage costs;
-     the effects of possible postal disruptions on deliveries;
-     the effects of foreign currency fluctuations;
-     the accuracy of management's assessment of the future effective
      tax rate and the effects of initiatives to reduce the rate;
-     the effects of the transition to the euro;
-     the effects and pace of our stock repurchase program; and
-     the effects of general economic conditions.

We do not undertake to update any forward-looking statements.
PART II.  OTHER INFORMATION


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

(a)   Exhibits

      10.29  The Reader's Digest Association, Inc. 1989 Key Employee Long
             Term Incentive Plan, as amended effective April 13, 2001.*

      10.20  The Reader's Digest Association, Inc. 1994 Key Employee Long
             Term Incentive Plan, as amended effective April 13, 2001.*

      10.31  The Reader's Digest Association, Inc. 2001 Income Continuation
             Plan for Senior Management.*

* Denotes a management contract or compensation plan.

(b)   Reports on Form 8-K

      During the three months ended March 31, 2001, we filed the
      following reports on Form 8-K:

      Form 8-K dated March 20, 2001, which announced the resignation of
      Gregory G. Coleman, Senior Vice President and President, U.S.
      Magazine Publishing.

      Form 8-K dated March 9, 2001, which included a press release
      relating to a Voluntary Comprehensive Agreement between the
      Company and State Attorneys General.

      Form 8-K dated January 16, 2001, which included a press release
      relating to the election of Jonathan B. Bulkeley to the Company's
      Board of Directors.



                               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 11, 2001                 By:   /s/THOMAS D. BARRY
                                          -------------------------
                                          Thomas D. Barry
                                          Vice President and Corporate
Controller
                                          (and authorized signatory)