FORM 10-Q

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

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

              For the quarterly period ended September 30, 2005

                                     OR

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

              For the transition period from _______ to _______

                       Commission file number: 1-10434


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


                      Delaware                     13-1726769


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

              Pleasantville, New York                10570-7000


     (Address of principal executive offices)        (Zip Code)


                               (914) 238-1000

            (Registrant's telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).  Yes [   ]  No [X]

As     of     October     21,     2005,     98,528,255     shares     of   the
registrant's common stock were outstanding.

                                                          Page 1 of 24 pages.

<PAGE>




           THE READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES

                             Index to Form 10-Q

                             September 30, 2005


Part I - Financial Information                                        Page No.

Item 1. Financial Statements

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

  Consolidated Condensed Statements of Operations
   for the three-month periods ended September 30, 2005 and 2004         3

  Consolidated Condensed Balance Sheets
   as of September 30, 2005 and June 30, 2005                            4

  Consolidated Condensed Statements of Cash Flows
   for the three-month periods ended September 30, 2005 and 2004         5

  Notes to Consolidated Condensed Financial Statements                   6

Item 2. Management's Discussion and Analysis
  of Financial Condition and Results of Operations                      15

Item 4. Controls and Procedures                                         22

Part II - Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     23

Item 6. Exhibits                                                        23



            The Reader's Digest Association, Inc. and Subsidiaries
               Consolidated Condensed Statements of Operations
            Three-month periods ended September 30, 2005 and 2004
                    (In millions, except per share data)
                                 (unaudited)





                                                  Three-month periods ended
                                                         September 30,
                                                       2005       2004


Revenues                                             $ 516.4    $ 490.0

Product, distribution and editorial expenses          (221.0)    (203.0)
Promotion, marketing and administrative expenses      (304.8)    (322.9)
                                                     -------    -------
  Operating loss                                        (9.4)     (35.9)

Other (expense) income, net                             (6.7)     (11.0)
                                                     -------    -------
  Loss before income tax benefit                       (16.1)     (46.9)

Income tax benefit                                       7.9       16.6
                                                     -------    -------
  Net loss                                           $  (8.2)   $ (30.3)
                                                     =======    =======


Basic and diluted loss per share:

Weighted average common shares outstanding              97.4       97.3

  Basic and diluted loss per share                   $ (0.09)   $ (0.31)
                                                     =======    =======

Dividends per common share                           $  0.10    $  0.05
                                                     =======    =======







See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>

<TABLE>

                The Reader's Digest Association, Inc. and Subsidiaries
                         Consolidated Condensed Balance Sheets
                      As of September 30, 2005 and June 30, 2005
                                     (In millions)


                                                               September 30,   June 30,
                                                                    2005         2005
Assets                                                          (unaudited)

<S>                                                              <C>         <C>
  Cash and cash equivalents                                      $     55.2  $     37.7
  Accounts receivable, net                                            285.8       233.9
  Inventories, net                                                    215.8       162.4
  Prepaid and deferred promotion costs                                 60.5        53.8
  Prepaid expenses and other current assets                           160.3       144.9
                                                                 ----------  ----------
Total current assets                                                  777.6       632.7

Property, plant and equipment, net                                    119.1       119.3
Goodwill                                                              881.2       880.9
Other intangible assets, net                                          134.5       137.8
Prepaid pension assets                                                313.0       307.9
Other noncurrent assets                                               100.9       102.0
                                                                 ----------  ----------
Total assets                                                     $  2,326.3  $  2,180.6
                                                                 ==========  ==========

Liabilities and stockholders' equity

  Loans and notes payable                                        $     20.9  $       --
  Accounts payable                                                    137.2       109.8
  Accrued expenses                                                    250.7       267.4
  Income taxes payable                                                  4.9        34.5
  Unearned revenues                                                   429.7       395.5
  Other current liabilities                                            12.0        12.4
                                                                 ----------  ----------
Total current liabilities                                             855.4       819.6

Long-term debt                                                        674.0       559.2
Unearned revenues                                                     143.0       133.0
Accrued pension                                                       120.1       121.5
Postretirement and postemployment benefits other than pensions         96.3        96.7

Other noncurrent liabilities                                           95.1        84.4
                                                                 ----------  ----------
Total liabilities                                                   1,983.9     1,814.4

  Capital stock                                                        30.4        21.2
  Paid-in capital                                                     197.0       206.8
  Retained earnings                                                 1,203.1     1,221.6
  Accumulated other comprehensive loss                                (80.8)      (84.1)
  Treasury stock, at cost                                          (1,007.3)     (999.3)
                                                                 ----------  ----------
Total stockholders' equity                                            342.4       366.2
                                                                 ----------  ----------
Total liabilities and stockholders' equity                       $  2,326.3  $  2,180.6
                                                                 ==========  ==========

</TABLE>


See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>

<TABLE>

               The Reader's Digest Association, Inc. and Subsidiaries
                   Consolidated Condensed Statements of Cash Flows
                Three-month periods ended September 30, 2005 and 2004
                                    (In millions)
                                     (unaudited)

                                                           Three-month periods ended
                                                                 September 30,
                                                                 2005     2004

<S>                                                           <C>       <C>
Cash flows from operating activities
 Net loss                                                     $   (8.2) $ (30.3)
 Depreciation and amortization                                     9.4     15.1
 Amortization of debt issue costs                                  0.4      1.0
 Stock-based compensation                                          3.5      3.1
 Net gain on sales of certain assets                              (2.5)      --
 Changes in current assets and liabilities
   Accounts receivable, net                                      (50.7)   (36.6)
   Inventories, net                                              (53.0)   (52.4)
   Unearned revenues                                              32.8     19.2
   Accounts payable and accrued expenses                          10.7      1.3
   Other, net                                                    (51.0)   (33.5)
 Changes in noncurrent assets and liabilities                     15.8     28.6
                                                               --------  -------
Net change in cash due to operating activities                   (92.8)   (84.5)
                                                               --------  -------
Cash flows from investing activities
 Proceeds from sales of property, plant and equipment              3.4      0.1
 Purchases of intangible assets                                   (0.5)      --
 Capital expenditures                                             (6.3)    (3.2)
                                                               --------  -------
Net change in cash due to investing activities                    (3.4)    (3.1)
                                                               --------  -------
Cash flows from financing activities
 Proceeds from borrowings, net                                   135.8     85.8
 Repayments of term loan                                            --     (8.0)
 Dividends paid                                                  (10.1)    (5.2)
 Cash paid for financing fees                                       --     (0.5)
 Treasury stock repurchased                                       (9.4)      --
 Proceeds from employee stock purchase plan and exercise of
   stock options                                                   0.6      0.1
 Other, net                                                       (3.7)      --
                                                               --------  -------
Net change in cash due to financing activities                   113.2     72.2
                                                               --------  -------
Effect of exchange rate changes on cash                            0.5      0.7
                                                               --------  -------
Net change in cash and cash equivalents                           17.5    (14.7)

Cash and cash equivalents at beginning of period                  37.7     50.3
                                                               --------  -------
Cash and cash equivalents at end of period                    $   55.2  $  35.6
                                                              ========  =======

</TABLE>



See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>


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

Unless indicated otherwise, references in Notes to Consolidated Condensed
Financial Statements to "we," "us" and "our" are to The Reader's Digest
Association, Inc. and Subsidiaries.  All references to 2006 and 2005, unless
otherwise indicated, are to fiscal 2006 and fiscal 2005, respectively.  Our
fiscal year is the period from July 1 through June 30.


(1)   Basis of Presentation and Use of Estimates

The accompanying consolidated condensed financial statements include the
accounts of The Reader's Digest Association, Inc. and its majority-owned
subsidiaries.  All significant intercompany accounts and transactions have
been eliminated in consolidation.  These statements and accompanying notes
have not been audited but, in the opinion of management, have been prepared
in conformity with accounting principles generally accepted in the United
States applying certain assumptions and estimates, including all adjustments
considered necessary to present such information fairly.  All such
adjustments are of a normal recurring nature.  Although these estimates are
based on management's knowledge of current events and actions that we may
undertake in the future, actual results may ultimately differ from those
estimates.  The accompanying consolidated condensed financial statements
should be read in conjunction with the audited consolidated financial
statements included in our 2005 Annual Report to Stockholders.

We report on a fiscal year that begins on July 1.  The three-month periods
ended September 30, 2005 and 2004 are the first fiscal quarters of 2006 and
2005, 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.

In some instances, certain prior period amounts have been reclassified to
conform to the current year presentation.

Recent Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004),
"Share-Based Payment" (SFAS No. 123R).  This statement supersedes SFAS No.
123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123", and Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees."  The statement is effective for
interim or annual periods beginning after June 15, 2005.  Accordingly,
effective July 1, 2005, we adopted the fair-value recognition provisions of
SFAS No. 123R.  See Note 3, Stock-Based Compensation, for further information
on the implementation of SFAS No. 123R.


(2)   Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing net loss less preferred stock
dividend requirements by the weighted average number of common shares
outstanding during the period.  The preferred stock dividend requirements
were $0.3 for each of the three-month periods ended September 30, 2005 and
2004.

Diluted loss per share is computed in the same manner except that the
weighted average number of common shares outstanding assumes the exercise and
conversion of certain stock options and vesting of certain restricted stock.
For the three-month periods ended September 30, 2005 and 2004, 15.2 million
and 16.6 million stock options and restricted stock outstanding were excluded
from the diluted loss per share calculations since the effect of including
these options and restricted stock would have been anti-dilutive.
Accordingly, our loss per share for the three-month periods ended September
30, 2005 and 2004 is calculated using the basic number of shares.



<PAGE>


(3)   Stock-Based Compensation

As of July 1, 2005, we maintain certain stock-based compensation plans that
are described in Note 9 to the Consolidated Financial Statements included in
our 2005 Annual Report to Stockholders. In addition to these plans, the
Compensation and Nominating Committee of the Board of Directors (the
Committee) approved the 2005 Key Employee Long-Term Incentive Plan (the 2005
Plan) in August 2005.  Under the 2005 Plan, the Committee may grant stock
options, stock appreciation rights, restricted stock, restricted stock units,
deferred stock, performance units, performance shares and other stock-based
awards to eligible employees.  The Committee may grant up to a maximum of
2,900,000 underlying shares of Common Stock under the 2005 Plan. In addition,
661,440 underlying shares available for grant under the 2002 Key Employee
Long-Term Incentive Plan became available for issuance under the 2005 Plan.

Prior to July 1, 2005, we accounted for these plans under SFAS No. 123.  As
permitted under this standard, compensation cost was recognized using the
intrinsic value method described in APB No. 25.  Effective July 1, 2005, we
adopted the fair-value recognition provisions of SFAS No. 123R and the
Securities and Exchange Commission Staff Accounting Bulletin No. 107 using
the modified-prospective transition method; therefore, prior periods have not
been restated.  Compensation cost recognized in the three-month period ended
September 30, 2005 includes compensation cost for all share-based payments
granted prior to, but not yet vested as of July 1, 2005, based on the grant
date fair value estimated in accordance with the original provisions of SFAS
No. 123, and compensation cost for all share-based payments granted
subsequent to July 1, 2005, based on the grant date fair value estimated in
accordance with the provisions of SFAS No. 123R.

Stock Options

Stock options are granted with exercise prices not less than the fair market
value of our Common Stock at the time of the grant, with an exercise term (as
determined by the Committee) not to exceed 10 years.  The Committee
determines the vesting period for our stock options.  Generally, such stock
options become exercisable over four years.  Certain option awards provide
for accelerated vesting upon meeting specific retirement, death or disability
criteria.  During the three-month periods ended September 30, 2005 and 2004,
we granted 1.2 million and 1.8 million options, respectively.

No stock-based compensation cost related to stock options was recognized in
the statements of operations for the years ended June 30, 2005 and 2004, as
all options granted in these periods had an exercise price equal to the
market price at the date of grant.  As a result of adopting SFAS No. 123R,
our loss before taxes and net loss for the three-month period ended September
30, 2005 are $1.6 and $1.0 higher, respectively, than if we had continued to
account for stock-based compensation under APB No. 25.  Compensation expense
is recognized in the promotion, marketing and administrative expenses line
item of our statements of operations on a straight-line basis over the
vesting periods.  There are no capitalized stock-based compensation costs at
September 30, 2005 and 2004.  Basic and dilutive loss per share for the
three-month period ended September 30, 2005 would have been $(0.08), if we
had not adopted SFAS No. 123R, compared to the reported basic and dilutive
loss per share of $(0.09).  As of September 30, 2005, there was $10.9 of
total unrecognized compensation cost related to nonvested share-based
compensation arrangements to be recognized over a weighted-average period of
1.3 years.

The intrinsic values of options exercised during the periods ended September
30, 2005 and 2004 were not significant.  The total cash received from the
exercise of stock options was $0.6 and $0.1 for the three-month periods ended
September 30, 2005 and 2004, respectively, and are classified as financing
cash flows.  Shares are issued from treasury stock upon exercise of the
options.  Prior to the adoption of SFAS No. 123R, we presented all tax
benefits of deductions resulting from the exercise of stock options as
operating cash flows in the statements of cash flows.  SFAS No. 123R requires
that cash flows from tax benefits attributable to tax deductions in excess of
the compensation cost recognized for those options (excess tax benefits) be
classified as financing cash flows.  We did not have any significant excess
tax benefits for the three-month period ended September 30, 2005.

The fair values of the options granted during the three-month periods ended
September 30, 2005 and 2004 were estimated on the dates of their grants using
the Black-Scholes option-pricing model on the basis of the following weighted
average assumptions:



<PAGE>



                                      September 30,    September 30,
                                           2005            2004

        Risk-free interest rate            4.2%            3.4%
        Expected life                   6.25 years      4.1 years
        Expected volatility               31.8%           32.9%
        Expected dividend yield            2.6%            1.2%
        Weighted-average fair value of
          options granted                 $4.38           $4.43


The risk-free interest rate for the periods within the expected life of the
option is based on the U.S. Treasury yield curve in effect at the time of
grant.  In fiscal 2005, the expected life was based on historical exercises
and terminations.  Due to minimal exercising of stock options during the past
three fiscal years, in 2006, we have estimated the expected life of options
granted to be the midpoint between the average vesting term and the
contractual term.  The expected volatility for the periods with the expected
life of the option is determined using historical volatilities based on
historical stock prices.  The expected dividend yield is based on our annual
dividend in relation to our historical average stock price.  The increase in
the dividend yield is attributed to the increased dividend rate beginning
February 15, 2005.

Changes in outstanding options are as follows:
<TABLE>
                                                                               Weighted
                                                                 Weighted      Average
                                                                  Average     Remaining    Aggregate
                                                     Options     Exercise    Contractual   Intrinsic
                                                     (000's)        Price    Term (yrs.)     Value

<S>                                                  <C>         <C>             <C>        <C>
Outstanding at June 30, 2005                         12,757      $   23.76
  Granted                                             1,166          15.12
  Exercised                                             (36)         14.49
  Canceled                                             (434)         30.70
Options outstanding at September 30, 2005            13,453      $   22.82       5.6        $  4.0
Options vested or expected to vest at
  September 30, 2005                                 12,895      $   23.15       5.5        $  3.6
Options exercisable at September 30, 2005             9,874      $   25.60       4.5        $  1.7
Options available for grant at September 30, 2005     3,561
</TABLE>


The table below presents the pro forma effect on net loss and basic and
diluted loss per share if we had applied the fair value recognition provision
to options granted under our stock option plans for the three-month period
ended September 30, 2004.  For purposes of this pro forma disclosure, the
value of the options is estimated using the Black-Scholes option-pricing
model and amortized to expense over the options' vesting periods.  If we had
adopted the fair value based method for the quarter ended September 30, 2004,
additional net compensation expense of $(2.0) would have been recognized in
the statements of operations.

                                                                   Three-month
                                                                   period ended
                                                                   September 30,
                                                                       2004

          Net loss, as reported                                      $ (30.3)
                                                                     =======

          Less:  stock-based compensation expense determined
                 using the fair-value based method, net of tax          (2.0)
                                                                     -------

          Net loss, pro forma                                        $ (32.3)
                                                                     =======

          Basic and diluted loss per share, as reported              $ (0.31)
                                                                     =======

          Basic and diluted loss per share, pro forma                $ (0.34)
                                                                     =======


For the three-month period ended September 30, 2004, $2.0, net of tax, of
expenses related to restricted stock and other stock-based compensation plans
were included in our net loss and loss per share, as reported.



<PAGE>


Restricted Stock and Deferred Stock

Restricted Stock - Restricted stock are shares of Common Stock that are
subject to restrictions on transfer and risk of forfeiture until the
fulfillment of specified conditions.  In 2005, the market value of restricted
stock awards on the date of grant was recorded as a reduction of capital
stock.  In connection with the adoption of SFAS No. 123R in 2006, we
reclassified the unamortized restricted stock to paid-in capital.  Restricted
stock is expensed ratably over the term of the restriction period, ranging
from two to four years.  Restricted stock expense for the three-month periods
ended September 30, 2005 and 2004, amounted to $(1.6) and $(2.8),
respectively, before taxes of $(0.6) and $(1.1), respectively.

Deferred Stock - Deferred stock are rights to receive shares of Common Stock
upon the fulfillment of specified conditions.  We offer deferred stock
outside the United States.  Deferred stock is similar to restricted stock in
all respects, except that deferred stock is issued to the employee at the
completion of the vesting period.  We recognized expense of $(0.3), before
taxes of $(0.1), during both three-month periods ended September 30, 2005 and
2004, respectively, related to these awards.

A summary of the status of our nonvested shares for both restricted and
deferred stock as of September 30, 2005 and changes during the quarter ended
September 30, 2005, is as follows:

                                                     Weighted
                                                      Average
                                            Shares   Grant Date
            Nonvested Shares                (000's)  Fair Value


       Nonvested at June 30, 2005            2,416     $15.01
       Granted                                 138     $15.09
       Vested (1)                             (783)    $15.62
       Forfeitures                             (38)    $14.67
                                             -----     ------
       Nonvested at September 30, 2005       1,733     $14.75
                                             =====     ======

      (1) The shares vested during the three-months ended September 30, 2005
      include 234 shares of our Common Stock surrendered by employees in order
      to fulfill their tax withholding obligations.

The fair value of nonvested shares is determined based on the average of the
high and low stock price of our shares on the grant date.  The
weighted-average grant date fair value of nonvested shares granted during the
three-month periods ended September 30, 2005 and 2004 are $15.09 and $15.74,
respectively.  As of September 30, 2005, there was $10.7 of total
unrecognized compensation cost related to nonvested share-based compensation
arrangements to be recognized over a weighted-average period of 1.7 years.


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

In the first half of 2005, we modified the composition of two of our
reportable segments, Reader's Digest North America and Consumer Business
Services, to reflect a change in the composition of senior management and in
the way our chief operating decision maker internally manages three smaller
business units.  Reader's Digest Young Families, Trade Publishing and the
results of our financial services alliances in the United States are now
included in Reader's Digest North America.  We have restated reportable
segment results of operations to conform to our new reportable segments.



<PAGE>


Reportable segments are based on our method of internal reporting.  We
present our segment revenues as if the transactions were with third parties.
Revenues and expenses attributable to intercompany transactions are
eliminated (under the intercompany eliminations caption below) to reconcile
our reportable segment amounts to consolidated amounts, as reported in our
statements of operations.  The accounting policies of our segments are the
same as those described in Note 1 to the Consolidated Financial Statements
included in our 2005 Annual Report to Stockholders.

                                             Three-month periods ended
                                                    September 30,
                                                  2005        2004
                                                            Restated

Revenues
  Reader's Digest North America                 $  227.7    $  226.2
  Reader's Digest International                    235.0       214.8
  Consumer Business Services                        59.8        54.9
  Intercompany eliminations                         (6.1)       (5.9)
                                                --------    --------
Total revenues                                  $  516.4    $  490.0
                                                ========    ========

Operating (loss) profit
  Reader's Digest North America                 $   16.0    $   15.8
  Reader's Digest International                      1.4         0.7
  Consumer Business Services                       (18.0)      (18.5)
  Magazine deferred promotion amortization(1)         --       (25.4)
  Corporate Unallocated(2)                          (8.8)       (8.5)
                                                --------    --------
Operating loss                                  $   (9.4)   $  (35.9)
                                                ========    ========
Intercompany eliminations
  Reader's Digest North America                 $   (4.2)   $   (4.7)
  Reader's Digest International                     (1.5)       (0.9)
  Consumer Business Services                        (0.4)       (0.3)
                                                --------    --------
Total intercompany eliminations                 $   (6.1)   $   (5.9)
                                                ========    ========

      (1)In connection with our change to expensing magazine deferred promotion
        costs when the promotion is mailed to prospective customers, our
        reportable segment operating profit in 2005 includes such
        expenses as incurred.  Accordingly, amortization of
        previously deferred promotion costs is not included in
        segment results reviewed by our chief operating decision
        maker.  Amortization of previously capitalized magazine
        promotion costs related: 85% to Reader's Digest North America
        and 15% to Reader's Digest International. The amortization of
        previously capitalized magazine deferred promotion costs was
        completed in 2005.

      (2)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
        operating segments.  Governance and centrally managed
        expenses include costs for departments such as corporate
        finance, general corporate management, investor relations,
        legal, public relations and treasury and for related
        information technology and facility costs incurred by these
        departments.




<PAGE>


(5)   Comprehensive Loss

Accumulated other comprehensive loss as reported in our balance sheets as of
September 30, 2005 and 2004 represents foreign currency translation
adjustments.  The components of comprehensive loss, net of related tax, for
the three-month periods ended September 30, 2005 and 2004 were as follows:

                                             Three-month periods ended
                                                    September 30,
                                                 2005          2004

 Net loss                                      $ (8.2)        $(30.3)
 Change in:
   Foreign currency translation adjustments       3.3            4.7
                                               ------         ------
 Total comprehensive loss                      $ (4.9)        $(25.6)
                                               ======         ======


(6) Other Operating Items, Net

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

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

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

The table below reflects changes for the three-month period ended September
30, 2005 to accruals recorded in previous periods.  A majority of the
reserves remaining relate to severance and guaranteed minimum payments for
products that have been discontinued.  Most of the spending to date relates
to severance costs.  Of the approximately 880 positions identified to be
separated under the charges recorded in fiscal 2003, 2004 and 2005,
approximately 95% had been separated from the business as of September 30,
2005.

    Initial year       Balance at                       Balance at
      of charge      June 30, 2005     Spending     September 30, 2005

  2002 and prior        $  1.7          $ (0.1)          $  1.6
  2003                     1.8            (0.3)             1.5
  2004                     3.7            (0.9)             2.8
  2005                     2.9            (0.7)             2.2
                        ------          ------           ------
     Total              $ 10.1          $  2.0           $  8.1
                        ======          ======           ======


(7) Inventories, Net


                             September  30,   June 30,   September  30,
                                  2005          2005         2004

Raw materials                  $    8.9      $    7.8      $   10.2

Work-in-progress                    3.9           5.6           2.4
Finished goods                    203.0         149.0         193.2
                               --------      --------      --------
Total inventories, net         $  215.8      $  162.4      $  205.8
                               ========      ========      ========




(8)   Goodwill and Other Intangible Assets, Net

During the three-month period ended September 30, 2005, the carrying amount
of goodwill increased by $0.3 due to the impact of foreign currency
translation on goodwill balances outside the United States.  The carrying
amount of goodwill as of September 30, 2005 was $881.2 of which $687.5 was
attributable to Reader's Digest North America and $193.7 was attributable to
Consumer Business Services.  Reiman and Books Are Fun are our primary
reporting units in Reader's Digest North America and Consumer Business
Services, respectively.   Although the third quarter of the fiscal year is
our designated annual period, we continually monitor changes in our
businesses to assess whether the carrying amount of goodwill has been
impaired.  If circumstances indicate that the carrying value of goodwill has
been impaired, we would record a loss in the period the impairment is
identified.

The following categories of acquired intangible assets are included in other
intangible assets, net as of September 30, 2005 and June 30, 2005:
<TABLE>

                                            September 30, 2005       June 30, 2005
                                             Gross       Net       Gross       Net


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

Intangible assets with finite lives:
  Licensing agreements                         58.1       30.9       57.3       31.9
  Customer lists                              138.3       13.9      137.8       16.2
  Other tradenames and
    noncompete agreements                       3.0         --        3.0         --
                                           --------   --------   --------   --------
Total intangible assets                    $  289.1   $  134.5   $  287.8   $  137.8
                                           ========   ========   ========   ========

</TABLE>

Amortization related to intangible assets with finite lives amounted to
$(4.2) and $(9.8) for the three-month periods ended September 30, 2005 and
2004, respectively.  Our licensing agreement (discussed below) is principally
amortized over the initial 10-year contract term, with a portion being
amortized over the remaining 15-year term of our amended agreement.  Customer
lists are being amortized principally between three and six years from the
date of acquisition.  Estimated annual amortization expense for intangible
assets with finite lives by fiscal year is as follows:  2006 - $16.1; 2007 -
$10.8; 2008 - $6.1; 2009 - $5.8 and 2010 - $5.8.

Licensing Agreement

In May 2000, QSP, Inc. entered into a long-term licensing agreement with
World's Finest Chocolate, Inc.  The cost associated with the agreement was
assigned to licensing agreements and is included in other intangible assets,
net on the balance sheets.  In September 2002, this agreement was amended to
extend the term of the original agreement by 10 years, reduce the annual
minimum tonnage purchase requirements, favorably adjust pricing and permit
QSP to sell World's Finest Chocolate products through marketing channels
other than fundraising, under specified circumstances.  In connection with
these amended terms, QSP paid World's Finest Chocolate $10.5 in 2003.  The
amount paid in May 2000 to consummate the initial agreement is being
amortized over the original 10-year license term.  Amounts paid to amend the
agreement have been assigned to various amortization periods ranging from 5
to 15 years (the remaining period of the amended agreement).

The approximate annual minimum purchase amounts under the amended agreement
by calendar year are: 2005 - $58.8; 2006 - $60.8; 2007 - $62.6; 2008 - $64.5;
2009 - $66.4; and approximately $79.7 per year from 2010 through 2020.  These
amounts are estimates based on defined minimum tonnage requirements, as
stipulated in the amended agreement, and nominal price increases.


(9) Debt

As described in Note 11 to the Consolidated Financial Statements included in
our 2005 Annual Report to Stockholders, our borrowings include proceeds under
our $400.0 Five-Year Revolving Credit Agreement (2005 Credit Agreement) and
$300.0 in 6 1/2% senior unsecured notes due in 2011.  The interest rate on the
2005 Credit Agreement at September 30, 2005 is at LIBOR plus 100 basis points
and is subject to change based on our leverage ratio (as defined in the 2005
Credit Agreement).  The 2005 Credit Agreement contains financial covenants
that require us to maintain minimum interest coverage and maximum leverage
ratios, and it is secured by the stock of a substantial portion of our
subsidiaries.  In addition, in the first quarter 2006, we entered into three
uncommitted lines of credit totaling $75.0 that expire during the second and
third quarters of 2006.  The interest rate is consistent with the 2005 Credit
Agreement.

As of September 30, 2005, we had $374.0 of outstanding borrowings under the
2005 Credit Agreement and $300.0 outstanding under the senior unsecured
notes.  In addition, we had $20.9 of outstanding borrowings under our lines
of credit.  Interest expense for the three-month periods ended September 30,
2005 and 2004 was $(10.8) and $(11.5), respectively.  Interest income on cash
balances was $1.7 and $0.7 for the three-month periods ended September 30,
2005 and 2004, respectively.  The weighted average interest rate on our
borrowing for the three-month periods September 30, 2005 and 2004 was 5.5%
and 4.8%, respectively.


(10) Pension Information

We sponsor various pension plans including those for employees in the United
States, international employees and excess plans for executives.  The largest
plan, covering substantially all employees in the United States, is a cash
balance plan.

The table below details the components of our net periodic pension benefit
for the three-month periods ended September 30, 2005 and 2004.

                                        Three-month period ended
                                              September 30,
                                            2005       2004

Service cost                               $  4.1     $  4.7
Interest cost                                11.1       11.0
Expected return on plan assets              (17.3)     (17.9)
Amortization                                 (0.3)      (0.3)
Recognized actuarial gain                     1.8        0.8
                                           ------     ------
Net periodic pension benefit               $ (0.6)    $ (1.7)
                                           ======     ======

For the three-month period ended September 30, 2005, approximately $2.1 was
contributed to our international pension plans.  Because the Retirement Plan
in the United States is over-funded, we did not make any contributions during
the three-month period ended September 30, 2005.  Our U.S. unfunded plans
were established for certain officers.  Since these plans are only available
to certain executives, they are not qualified under the Internal Revenue
Code.  We fund the benefit payments ($2.0 in the first quarter 2006) under
these plans as they arise.

We also sponsor certain postretirement benefit plans in the United States and
Canada.  The table below details the components of our net periodic
postretirement cost for the three-month periods ended September 30, 2005 and
2004.

                                          Three-month period ended
                                                September 30,
                                               2005       2004

Service cost                                 $  0.2     $  0.3
Interest cost                                   1.1        1.3
Amortization of prior service cost             (0.7)      (0.4)
                                             ------     ------
Net periodic postretirement cost             $  0.6     $  1.2
                                             ======     ======


(11) Share Repurchase Authorization

In April 2005, we announced a $100.0 share repurchase authorization. In the
three-month period ended September 30, 2005, we repurchased approximately
575,000 shares for $8.9, of which $1.5 settled in early October 2005.  As of
September 30, 2005, we have repurchased approximately 985,000 shares for
$15.9.




<PAGE>


(12) Income Taxes

During the first quarter of 2006, we recorded a net benefit of $2.2
principally from the settlement of a tax audit in a foreign country.

(13) Subsequent Event

On October 31, 2005, Thomas O. Ryder, our Chairman and Chief Executive
Officer, announced his resignation as Chief Executive Officer,
effective December 31, 2005, and his retirement as Chairman, effective
December 31, 2006.  On October 31, 2005, the Board of Directors
approved the appointment of Eric W. Schrier, Senior Vice President and
Global Editor-In-Chief of The Reader's Digest Association, Inc. and current
President, Reader's Digest North America, as President and Chief Executive
Officer, effective January 1, 2006, and his nomination for election as
a Director in January 2006.



<PAGE>


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


Unless otherwise indicated, reference in Management's Discussion and Analysis
to "we," "us" and "our" are to The Reader's Digest Association, Inc. and its
Subsidiaries.  All references to 2006 and 2005, unless otherwise indicated,
are to fiscal 2006 and fiscal 2005, respectively.  Our fiscal year represents
the period from July 1 through June 30.

The following discussion and analysis provides information that we believe is
relevant to an assessment and understanding of our consolidated results of
operations and financial condition and has been written excluding the effect
of foreign currency translation, except as specifically noted otherwise.
This discussion should be read in conjunction with the Consolidated Condensed
Financial Statements and related notes.  Certain amounts and percentages do
not recalculate due to rounding.  Operating results for any interim period
are not necessarily indicative of the results for an entire year due to the
seasonality of our business.


Three-Month Period Ended September 30, 2005, Compared With Three-Month Period
Ended September 30, 2004

Results of Operations:  Company-Wide

Overview

Generally, the first quarter of the fiscal year is our smallest in terms of
revenue.  During this quarter our businesses prepare for the second quarter
peak selling season.  During the first quarter of 2006, revenues and profits
improved when compared with the first quarter of 2005 because of growth in
new products and markets, an indicator that our investments in the business
are continuing to show progress.  While competitive pressures continue to
adversely affect profitability at Books Are Fun, the performance of our
remaining businesses was positive.

The first quarter is also characterized by increased borrowings to finance
seasonal cash requirements in anticipation of the second quarter peak selling
season.  During the first quarter of 2006 we also used cash flow to finance
growth initiatives, including entering new markets and developing new
magazine concepts, shareholder value initiatives, such as our share
repurchase program, and capital expenditures.


Revenues

Revenues for the first quarter of 2006 increased 5% to $516, compared with
$490 for the first quarter of 2005.  Excluding the effect of foreign currency
translation, revenues increased 3%.  Revenues increased for Reader's Digest
International and Consumer Business Services, while revenues for Reader's
Digest North America were flat.

Revenues for Reader's Digest International increased principally due to
stronger products and promotion packages coupled with a stabilizing customer
base.  These factors were most evident in France, Russia, Brazil and
Australia.  In addition, revenues increased as a direct result of previous
investments in new markets, including Romania and the Ukraine.  These
increases were partially offset by lower revenues in Poland, Germany and
Portugal due to lower response rates to promotional mailings for books and
home entertainment products.

Higher revenues for Consumer Business Services were attributable to both
Books Are Fun and QSP.  Revenues at Books Are Fun were higher because of
increased events in the school and corporate markets, due to the timing of
events, partially offset by lost events in certain regions due to turnover of
independent sales representatives in the corporate market.  At QSP, increased
revenues were driven by higher gift and food sales volumes.

Revenues for Reader's Digest North America for the first quarter of 2006 were
flat when compared with the first quarter of 2005.  Weaker performance of
established book annual products and the absence of a one-time contract
termination payment of $2 from a former financial services alliance partner
were offset by circulation growth for newer magazine titles and improved
performance at U.S. Books and Home Entertainment.


Operating Loss

Operating loss for the first quarter of 2006 decreased to $(9), compared with
a loss of $(36) for the first quarter of 2005.  Foreign currency translation
favorably affected our operating loss by $1.  Improved profitability was
principally driven by the absence of $(25) of expense related to the
amortization of previously deferred magazine promotion costs in the first
quarter of 2005 (this change is more fully explained in our 2005 Annual
Report to Stockholders).  In addition, profits improved for Reader's Digest
International and Consumer Business Services, while profits for Reader's
Digest North America were flat.

Profits for Reader's Digest International increased because of higher
revenues and the timing of promotion costs (due to our change to expensing
magazine promotion costs when the promotion is mailed to prospective
customers), which were partially offset by investments in new products and
markets and in new customer acquisition.

Lower losses for Consumer Business Services were principally driven by
operating efficiencies and higher sales at QSP.  Partially offsetting these
improvements were lower margins at Books Are Fun due to competitive pressures.

Profits for Reader's Digest North America were flat because of investments in
new products, including the magazine Every Day with Rachael Ray and our Taste
of Home Entertaining business, and the absence of a contract termination
payment from a former financial services alliance partner.  Lower
amortization of intangible assets at Reiman and growth in newer magazines
offset these declines.

Corporate Unallocated expenses were flat in the first quarter of 2006 when
compared with the first quarter of 2005.  Lower facilities costs, due to the
sale and partial leaseback of our Westchester, New York headquarters
facility, were offset by stock option expense (see Recent Accounting
Standards for additional information) and lower net pension income.


Other (Expense) Income, Net

Other (expense) income, net decreased to $(7) in the first quarter of 2006,
compared with $(11) in the first quarter of 2005.  The decrease was driven by
a $3 gain on the sale of our building in Mexico and $1 of lower interest
expense.  The change in interest expense was attributable to lower
amortization of financing fees and lower debt balances in 2006 when
compared with 2005.


Income Taxes

The effective tax rate for the first quarter of 2006 was a benefit of 48.7%,
compared with a benefit of 35.5% for the first quarter of 2005.  The
increased benefit was driven by $2 related to the settlement of an
international tax audit.


Net Loss and Loss Per Share

As a result of the activities described above, for the first quarter of 2006
we incurred a net loss of $(8) or $(0.09) for both basic and diluted loss per
share, compared with a net loss of $(30) or $(0.31) for both basic and
diluted loss per share for the first quarter of 2005.  For the first quarters
of both 2006 and 2005, the effect of potentially dilutive shares was not
considered in the calculation of loss per share because such shares would
have been anti-dilutive.



<PAGE>



Results of Operations:  Operating Segments


                                                Three-month periods ended
                                                       September 30,
                                                       2005     2004

Revenues
  Reader's Digest North America                       $ 228    $ 226
  Reader's Digest International                         235      215
  Consumer Business Services                             60       55
  Intercompany eliminations                              (7)      (6)
                                                      -----    -----
Total revenues                                        $ 516    $ 490
                                                      =====    =====

Operating (loss) profit
  Reader's Digest North America                       $  16    $  16
  Reader's Digest International                           1        1
  Consumer Business Services                            (18)     (19)
  Magazine deferred promotion amortization(1)            --      (25)
  Corporate Unallocated(2)                               (8)      (9)
                                                      -----    -----
Operating loss                                        $  (9)   $ (36)
                                                      =====    =====
Intercompany eliminations
  Reader's Digest North America                       $  (5)   $  (5)
  Reader's Digest International                          (2)      (1)
  Consumer Business Services                             --       --
                                                      -----    -----
Total intercompany eliminations                       $  (7)   $  (6)
                                                      =====    =====

      (1)In connection with our change to expensing magazine deferred promotion
        costs when the promotion is mailed to prospective customers, our
        reportable segment operating profit in 2005 includes such
        expenses as incurred.  Accordingly, amortization of
        previously deferred promotion costs is not included in
        segment results reviewed by our chief operating decision
        maker.  Amortization of previously capitalized magazine
        promotion costs related: 85% to Reader's Digest North America
        and 15% to Reader's Digest International.  The amortization
        of previously capitalized magazine deferred promotion costs
        was completed in 2005.

      (2)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
        operating segments.  Governance and centrally managed
        expenses include costs for departments such as corporate
        finance, general corporate management, investor relations,
        legal, public relations and treasury and for related
        information technology and facility costs incurred by these
        departments.


Reader's Digest North America

Revenues for Reader's Digest North America for the first quarter of 2006
increased 1% to $228, compared with $226 for the first quarter of 2005.
Excluding the effect of foreign currency translation, revenues were flat.
The overall change in revenues was driven by lower sales of certain
established book annual products and the absence of a one-time contract
termination payment of $2 from a former financial services alliance partner.
These changes were offset by improved revenues for newer magazines and for
U.S. Books and Home Entertainment.

Improved revenues for U.S. Books and Home Entertainment were attributable to
higher retail sales for Trade Publishing and increased non-sweepstakes orders
for products in the Home & Health affinity due to strong product offerings.
These improvements were partially offset by lower sales of established book
annual products.

During the quarter, magazine-related revenues improved because of circulation
growth due to newer titles, including Cooking for 2 and Birds & Blooms Extra
(both of which were launched in the fourth quarter of 2005), and Backyard
Living, as well as increased advertising revenues for Reader's Digest
magazine, driven by a higher rate per page.  These increases were partially
offset by lower circulation revenues for Reader's Digest magazine, due to a
change in the mix of the renewal pool to newer subscribers and a lesser
reliance on agents.  Also, circulation for certain cooking titles continued
to decline.

Operating profit for the first quarter of 2006 increased 1% to $16.
Excluding the effect of foreign currency translation, profit decreased 2%.
The decline in profits was driven by investments in new products, including
the new magazine Every Day with Rachael Ray and our Taste of Home
Entertaining business, the absence of a one-time contract termination payment
of $2 from a former financial services alliance partner and, more moderately,
the impact of Hurricanes Katrina and Rita.

These decreases were partially offset by $6 of lower amortization of
intangible assets established when we acquired Reiman because the assets
reached the end of their useful lives, and growth in newer magazines.


Reader's Digest International

Revenues for Reader's Digest International for the first quarter of 2006
increased 9% to $235, compared with $215 for the first quarter of 2005.
Excluding the effect of foreign currency translation, revenues increased 6%.
Increased revenues were driven by stronger products and promotions, and by a
stabilizing customer base.  The most significant increases, in France,
Russia, Brazil and Australia, were driven by increased promotional mailings
in certain markets, including investment mailings to grow our customer base,
and increased response rates to promotional mailings for single sales
products.  In addition, revenues improved in new markets, including Romania
and the Ukraine, as we increased the level of operations in these markets.

These increases were partially offset by lower revenues in Poland, Germany
and Portugal due to lower response rates to promotional mailings for books
and home entertainment products.  In addition, revenues were lower due to the
absence of revenues from Moneywise magazine in the United Kingdom (which was
sold in the second quarter of 2005) and because we licensed publication of
Reader's Digest magazine to a third party in Norway.

Operating profit for this segment for the first quarter of 2006 doubled when
compared with the first quarter of 2005.  Excluding the effect of foreign
currency translation, profit increased 21%.  This improvement was principally
driven by the revenue activity described above and the timing of promotion
costs (due to our change to expensing magazine promotion costs when the
promotion is mailed to prospective customers).  The most significant
improvements were in the United Kingdom and Brazil.  Investments in new
products, new markets and new customer acquisition partially offset this
increase.


Consumer Business Services

Revenues for Consumer Business Services for the first quarter of 2006
increased 9% to $60, compared with $55 for the first quarter of 2005.
Excluding the effect of foreign currency translation, revenues increased 8%.

Revenues at Books Are Fun were higher because of increased events in the
school and corporate markets due to the timing of events between the first
and second quarters of 2006.  This was partially offset by shortfalls in
corporate events in certain regions due to turnover of independent sales
representatives.  Despite competitive influences, the sales force turnover
rate for most of our markets in the first quarter of 2006 (generally a peak
period for turnover) was less than in the first quarter of 2005 because of
effective recruiting efforts.  In addition, revenues were adversely affected
by lower average sales per event in the corporate market.

Revenues for QSP increased principally due to higher gift sales volumes and,
to a lesser extent, increased food sales volumes.  Increased gift volumes
were driven by increased student participation during the period and a higher
price mix of products sold.  Higher food volumes were driven by an 8%
increase in World's Finest Chocolate volume, partially offset by lower sales
of other products as we continue to convert more of our food business to
World's Finest Chocolate products.

Operating loss for the first quarter of 2006 decreased 3% to $(18), compared
with $(19) for the first quarter of 2005.  The smaller loss was driven by
operating efficiencies and higher profits from increased sales at QSP.  This
was partially offset by higher freight and warehousing costs for food
products at QSP because of increased inventory levels in anticipation of our
peak selling season and higher fuel costs.  The effect of competitive
pressures on margin at Books Are Fun lowered profitability.


Liquidity and Capital Resources

                                                               Three-month
                                                              period ended
                                                              September 30,
                                                                   2005

  Cash and cash equivalents at June 30, 2005                      $  38
  Net change in cash due to:
    Operating activities                                            (93)
    Investing activities                                             (3)
    Financing activities                                            112
  Effect of exchange rate changes on cash and cash equivalents        1
                                                                  -----
  Net change in cash and cash equivalents                            17

  Cash and cash equivalents at September 30, 2005                 $  55
                                                                  =====

Cash and cash equivalents increased 47% to $55 as of September 30, 2005,
compared with $38 as of June 30, 2005.  The increase in cash flows was
principally driven by proceeds from borrowings of $136 and proceeds from the
sale of our building in Mexico of $3.  These increases in cash flow were used
to fund seasonal operating cash requirements such as:

  -   a build-up of inventory at Books Are Fun and, to a lesser extent, QSP
      before the second quarter peak selling season
  -   a net increase in other current assets as a result of commission
      advances made to the sales force at QSP
  -   higher accounts receivable balances at QSP, since a majority of their
      first quarter revenues were generated in late September

In addition to seasonal requirements, cash flow was also used to fund
employee incentive payments made in the first quarter of 2006 that were
earned in 2005, and payments for dividends, share repurchases and capital
expenditures.

Debt
As described in Note 11 to the Consolidated Financial Statements included in
our 2005 Annual Report to Stockholders, our borrowings include proceeds under
our $400 Five-Year Revolving Credit Agreement (2005 Credit Agreement) and
$300 in senior unsecured notes.  The interest rate on the 2005 Credit
Agreement is currently at LIBOR plus 100 basis points and is subject to
change based on our leverage ratio (as defined in the 2005 Credit
Agreement).  The 2005 Credit Agreement contains financial covenants that
require us to maintain minimum interest coverage and maximum leverage ratios,
and it is secured by the stock of a substantial portion of our subsidiaries.
In addition, during the first quarter of 2006 we entered into three
uncommitted lines of credit totaling $75 that expire during the second and
third quarters of 2006.

As of September 30, 2005, we had $374 of outstanding borrowings under the
2005 Credit Agreement and $300 outstanding under the senior unsecured notes.
In addition, we had $21 of outstanding borrowings under our lines of credit.
Interest expense for the three-month periods ended September 30, 2005 and
2004 was $(11).  Interest income on cash balances was $2 and $1 for the
three-month periods ended September 30, 2005 and 2004, respectively.  The
weighted average interest rate on our borrowings for the three-month periods
ended September 30, 2005 and 2004 was 5.5% and 4.8%, respectively.


Recent Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004),
"Share-Based Payment" (SFAS No. 123R).  This statement supersedes SFAS No.
123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123", and Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees."  The statement is effective for
interim or annual periods beginning after June 15, 2005.

Prior to July 1, 2005, we accounted for our stock compensation plans under
SFAS No. 123.  As permitted under this standard, compensation cost was
recognized using the intrinsic value method described in APB No. 25.
Effective July 1, 2005, we adopted the fair-value recognition provisions of
SFAS No. 123R and the Securities and Exchange Commission Staff Accounting
Bulletin No. 107 using the modified-prospective-transition method; therefore,
prior periods have not been restated.  Compensation cost recognized in the
three-month period ended September 30, 2005 includes compensation cost for
all share-based payments granted prior to, but not yet vested as of, July 1,
2005, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, and compensation cost for all
share-based payments granted subsequent to July 1, 2005, based on the grant
date fair value estimated in accordance with the provisions of SFAS No.
123R.  See Note 3, Stock-Based Compensation in our Notes to Consolidated
Condensed Financial Statements for further information on our compensation
plans.

No stock-based compensation cost related to stock options was recognized in
the statements of operations for the years ended June 30, 2005 and 2004, as
all options granted in these periods had an exercise price equal to the
market price at the date of grant.  As a result of adopting SFAS No. 123R,
our loss before taxes and net loss for the three-month period ended September
30, 2005 are $2 and $1 higher, respectively, than if we had continued to
account for stock-based compensation under APB No. 25.  Basic and dilutive
loss per share for the three-month period ended September 30, 2005 would have
been $(0.08), if we had not adopted SFAS No. 123R, compared to the reported
basic and dilutive loss per share of $(0.09).  As of September 30, 2005,
there was $11 of total unrecognized compensation cost related to nonvested
options to be recognized over a weighted-average period of 1.3 years.

The fair values of the options granted during the three-month periods ended
September 30, 2005 and 2004 were estimated on the dates of their grants under
SFAS No. 123R using the Black-Scholes option-pricing model.  The risk-free
interest rate for the periods within the expected life of the option is based
on the U.S. Treasury yield curve in effect at the time of grant.  In fiscal
2005, the expected life was based on historical exercises and terminations.
Due to minimal stock option exercises during the past three fiscal years, in
2006 we have estimated the expected life of options granted to be the
midpoint between the average vesting term and the contractual term.  The
expected volatility for the periods with the expected life of the option is
determined using historical volatilities based on historical stock prices.
The expected dividend yield is based on our annual dividend in relation to
our historical average stock price.  The increase in the dividend yield is
attributed to the increased rate payable on February 15, 2005, to
stockholders of record at the close of business on February 1, 2005.

We also maintain restricted and deferred stock plans.  Restricted and
deferred stock expense amounted to $(2) and $(3), before taxes of $(1) and
$(1) for the three-month periods ended September 30, 2005 and 2004,
respectively.  As of September 30, 2005, there was $11 of total unrecognized
compensation cost related to nonvested restricted and deferred compensation
arrangements to be recognized over a weighted-average period of 1.7 years.


Forward-Looking Information

Fiscal 2006 Results

We recently launched a three-year plan that calls for consistent top and
bottom line growth.  We expect annual revenue growth in the mid single digits
and operating profit growth in the high single to low double digits during
the course of the plan.  For the first year of the plan, full-year 2006, we
expect revenues to grow in the low to mid single digits on a currency-neutral
basis and operating profits to grow in the mid teens.  We expect full-year
2006 earnings per share of $0.90 to $1.00 and cash flow to be in line with
previously announced guidance.  Also, consistent with prior guidance, the
timing of investment spending and higher direct-mail sales activity relative
to last year will result in a planned shift in profits from the second
quarter to the second half of the year.  This should result in slightly lower
profits in the second quarter and higher results in the second half.
Additionally, last year's second quarter included the positive impact of
$0.09 per share from the sales of certain assets and favorable tax audit
settlements.

In the first quarter of 2006, we incurred unexpected costs related to the
increase in fuel prices in the United States and the after-effects of
Hurricanes Katrina and Rita.  Flood damage in the wake of the hurricanes
indefinitely shut down territories of Books Are Fun and QSP in the Gulf Coast
and interfered with postal delivery of promotional mailings and product
shipments in Reader's Digest North America.  The impact of these factors was
not significant in the first quarter, but will adversely affect U.S.
businesses in the second quarter.


                                     *****

This report contains "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 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 access to consumers; and
-  the economic effects of terrorist activity and related events,
   especially those limiting access to consumers and otherwise affecting the
   direct marketing and direct sales industries.

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


<PAGE>


Item 4.    CONTROLS AND PROCEDURES

Our management evaluated, with the participation of our principal executive
officer and principal financial officer, the effectiveness of our disclosure
controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934) as of September 30, 2005.  Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were sufficient to provide
reasonable assurances that the information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.

There has been no change in our internal control over financial reporting
during the fiscal quarter ended September 30, 2005, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.




<PAGE>


                          PART II. OTHER INFORMATION

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
<TABLE>

                                                            (c) Total Number of      (d) Maximum Number (or
                          (a) Total                           Shares (or Units)         Approximate Dollar
                          Number of        (b) Average        Purchased as Part        Value) of Shares (or
                          Shares (or        Price Paid          of  Publicly          Units)  that May Yet Be
                             Units)          per Share         Announced Plans          Purchased Under the
      Period             Purchased (1)       (or Unit)           or Programs             Plans or Programs (2)

<S>                          <C>               <C>                 <C>                     <C>
July 1 - 31, 2005            193,825           $16.36              445,100                 $93,010,861
August 1 - 31, 2005           40,125           $15.34              130,000                 $86,129,347
September 1 - 30, 2005            --               --                   --                 $84,116,836
                             -------                               -------
         Total               233,950                               575,100
                             =======                               =======
</TABLE>


(1)   The shares purchased in July and August 2005 include 193,825 and 40,125
      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, our Board of Directors authorized our repurchase of
      up to $100.0 million of our Common Stock over the succeeding two years.


Item 6. EXHIBITS.

      10.53  Letter agreement dated as of October 31, 2005 between The
             Reader's Digest Association, Inc. and Thomas O. Ryder, filed
             as Exhibit 10.53 to our Current Report on Form 8-K dated
             October 31, 2005, is incorporated herein by reference.

      10.54  Noncompetition, Nonsolicitation and Confidentiality
             Agreement dated October 28, 2005 between The Reader's Digest
             Association, Inc. and Eric W. Schrier, filed as Exhibit
             10.54 to our Current Report on Form 8-K dated October 31,
             2005, is incorporated herein by reference.

      10.55  Compensation information regarding Named Executive Officers,
             included in Item 1.01 of our Current Report on Form 8-K
             dated October 31, 2005, is incorporated herein by reference.

      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.





<PAGE>




                                  SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.






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



Date:  November 1, 2005        By:   /s/ MICHAEL S. GELTZEILER
                               Michael S. Geltzeiler
                               Senior Vice President and Chief Financial
                               Officer
                               (principal financial officer and duly authorized
                               signatory)