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, 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 [  ]

As of April  29,  2005,  99,581,694  shares of the  registrant's  common
stock were outstanding.


                                                          Page 1 of 37 pages.


<PAGE>



           THE READER'S DIGEST ASSOCIATION, INC. AND SUBSIDIARIES

                             Index to Form 10-Q


                               March 31, 2005


                                                                      Page No.

Part I - Financial Information:

Item 1.  Financial Statements

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

  Consolidated Condensed Statements of Operations
   for the three-month and nine-month periods ended
   March 31, 2005 and 2004                                                  3

  Consolidated Condensed Balance Sheets
   as of March 31, 2005 and June 30, 2004                                   4

  Consolidated Condensed Statements of Cash Flows
   for the nine-month periods ended March 31, 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                                          28


Part II - Other Information:                                               29

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      29

Item 6.   Exhibits and Reports on Form 8-K                                 29



<TABLE>

                   The Reader's Digest Association, Inc. and Subsidiaries
                      Consolidated Condensed Statements of Operations
             Three-month and nine-month periods ended March 31, 2005 and 2004
                           (In millions, except per share data)
                                       (unaudited)

                                        Three-month period ended   Nine-month period ended
                                                 March 31,                March 31,
                                              2005       2004         2005       2004

<S>                                       <C>        <C>          <C>          <C>
Revenues                                  $   544.9  $   561.0    $   1,832.9  $   1,852.1

Product, distribution and                    (232.5)    (234.9)        (743.9)      (753.3)
editorial expenses
Promotion, marketing and administrative
 expenses                                    (309.5)    (307.0)      (1,033.8)      (970.1)
Goodwill charge                              (129.0)        --         (129.0)          --
Other operating items, net                       --         --             --         (9.1)
                                          ---------  ---------    -----------  -----------
  Operating (loss) profit                    (126.1)      19.1          (73.8)       119.6

Other expense, net                             (3.8)     (17.5)         (18.3)       (35.1)
                                          ---------  ---------    -----------  -----------
(Loss) income before provision
   for income taxes                          (129.9)       1.6          (92.1)        84.5

Income tax benefit (provision)                  0.3        0.6           (9.9)       (29.3)
                                          ---------  ---------    -----------  -----------
  Net (loss) income                       $  (129.6) $     2.2    $    (102.0) $      55.2
                                          =========  =========    ===========  ===========

Basic (loss) earnings per share:
  Weighted average common shares
   outstanding                                 97.6       97.1           97.4         97.0
                                          =========  =========    ===========  ===========
  Basic (loss) earnings per share         $   (1.33) $    0.02     $    (1.06) $      0.56
                                          =========  =========    ===========  ===========
Diluted (loss) earnings per share:
  Adjusted weighted average common
   shares outstanding                          97.6       99.4           97.4         99.2
                                          =========  =========    ===========  ===========
  Diluted (loss) earnings per share       $   (1.33) $    0.02     $    (1.06) $      0.55
                                          =========  =========    ===========  ===========
Dividends per common share                $    0.10  $    0.05     $     0.20  $      0.15
                                          =========  =========    ===========  ===========


</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements.



<PAGE>

<TABLE>

                 The Reader's Digest Association, Inc. and Subsidiaries
                         Consolidated Condensed Balance Sheets
                        As of March 31, 2005 and June 30, 2004
                                       (In millions)
                                         (unaudited)




                                                                     March 31,    June 30,
                                                                       2005        2004

<S>                                                                <C>         <C>
Assets

  Cash and cash equivalents                                        $     48.7  $     50.3
  Accounts receivable, net                                              264.5       229.0
  Inventories                                                           183.2       152.0
  Prepaid and deferred promotion costs                                   48.5       106.9
  Prepaid expenses and other current assets                             181.8       152.1
                                                                   ----------  ----------
Total current assets                                                    726.7       690.3

  Property, plant and equipment, net                                    117.5       155.8
  Goodwill                                                              881.0     1,009.5
  Other intangible assets, net                                          145.2       173.9
  Other noncurrent assets                                               421.5       413.2
                                                                   ----------  ----------
Total assets                                                       $  2,291.9  $  2,442.7
                                                                   ==========  ==========

Liabilities and stockholders' equity
  Loans and notes payable                                          $     58.7  $     83.9
  Accounts payable                                                      111.1       110.6
  Accrued expenses                                                      285.4       268.7
  Income taxes payable                                                   43.2        15.5
  Unearned revenue                                                      435.2       403.4
  Other current liabilities                                               9.9        10.2
                                                                   ----------  ----------
Total current liabilities                                               943.5       892.3

  Long-term debt                                                        515.4       637.7
  Postretirement and postemployment benefits other than pensions        116.5       119.5
  Unearned revenue                                                      133.8       129.3
  Other noncurrent liabilities                                          220.9       200.8
                                                                   ----------  ----------
Total liabilities                                                     1,930.1     1,979.6

  Capital stock                                                          18.6        17.8
  Paid-in capital                                                       207.1       210.1
  Retained earnings                                                   1,207.6     1,330.4
  Accumulated other comprehensive loss                                  (77.4)      (89.4)
  Treasury stock, at cost                                              (994.1)   (1,005.8)
                                                                   ----------  ----------
Total stockholders' equity                                              361.8       463.1
                                                                   ----------  ----------
Total liabilities and stockholders' equity                         $  2,291.9  $  2,442.7
                                                                   ==========  ==========

</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
                    Nine-month periods ended March 31, 2005 and 2004
                                      (In millions)
                                       (unaudited)

                                                                    Nine-month period ended
                                                                            March 31,
                                                                        2005        2004

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

  Net (loss) income                                                   $ (102.0)   $   55.2
  Depreciation and amortization                                           45.0        47.7
  Asset impairments                                                         --         0.8
  Goodwill charge                                                        129.0          --
  Amortization of debt issue costs                                         3.1         9.4
  Stock-based compensation                                                 8.2         7.8
  Net gain on marketable securities and the sales of certain assets      (12.6)       (3.8)
   Changes in current assets and liabilities, net of effects of
    acquisitions and dispositions:
   Accounts receivable, net                                              (22.7)        6.9
   Inventories                                                           (27.1)       (8.2)
   Unearned revenue                                                       22.8        23.1
   Accounts payable and accrued expenses                                   3.6       (15.6)
   Other, net                                                             67.6        22.1
  Changes in noncurrent assets and liabilities, net of effects of
   acquisitions and dispositions                                          (1.0)       16.0
                                                                      --------    --------
Net change in cash due to operating activities                           113.9       161.4
                                                                      --------    --------
Cash flows from investing activities
  Proceeds from sales of marketable securities                              --         0.8
  Purchases of licensing agreements                                         --        (1.3)
  Proceeds from other long-term investments and sales of businesses        4.1         3.0
  Proceeds from sales of property, plant and equipment                    58.0         0.6
  Capital expenditures                                                   (13.0)      (12.3)
                                                                      --------    --------
Net change in cash due to investing activities                            49.1        (9.2)
                                                                      --------    --------
Cash flows from financing activities
  Repayments of term loan                                               (111.0)     (428.6)
  Proceeds from senior notes offering                                       --       300.0
  Proceeds (repayments) of revolving credit and other
   short-term facilities, net                                            (36.5)       (0.7)
  Dividends paid                                                         (20.5)      (15.5)
  Cash paid for financing fees                                            (0.5)       (6.5)
  Proceeds from employee stock purchase plan and exercise
   of stock options                                                        1.4         1.4

  Other, net                                                              (2.3)        0.6
                                                                      --------    --------
Net change in cash due to financing activities                          (169.4)     (149.3)
                                                                      --------    --------
Effect of exchange rate changes on cash                                    4.8         2.6
                                                                      --------    --------
Net change in cash and cash equivalents                                   (1.6)        5.5

Cash and cash equivalents at beginning of period                          50.3        51.3
                                                                      --------    --------
Cash and cash equivalents at end of period                            $   48.7    $   56.8
                                                                      ========    ========

</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements.


<PAGE>


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



Unless indicated otherwise, references in Notes to Consolidated Condensed
Financial Statements to "we," "us" and "our" are to The Reader's Digest
Association, Inc. and Subsidiaries.  All references to 2005 and 2004, unless
otherwise indicated, are to fiscal 2005 and fiscal 2004, 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 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.  Accordingly, the accompanying
consolidated condensed financial statements should be read in conjunction
with the audited Consolidated Financial Statements included in our 2004
Annual Report to Stockholders.  All adjustments are of a normal recurring
nature.  Although estimates are based on management's knowledge of current
events and actions that we may undertake in the future, actual results may
ultimately differ from those estimates.

We report on a fiscal year that begins July 1.  The three-month periods ended
March 31, 2005 and 2004 are the third fiscal quarters of 2005 and 2004,
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, SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123, and Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees.  The most significant change is the
requirement to recognize, in the statements of operations, the value of
employee stock options and other stock-based compensation (including employee
stock purchase plans) as calculated using the fair value based method, as
opposed to the intrinsic value method currently used.  The statement is
effective for interim or annual periods beginning after June 15, 2005.  We
are continuing to evaluate the full impact of SFAS No. 123R for its adoption
in the first quarter of fiscal 2006.

In December 2004, the FASB issued FASB Staff Position (FSP) 109-2, Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Jobs Creation Act of 2004.  This statement was effective
upon issuance.  The American Jobs Creation Act (the Act) allows a one-time
dividends received deduction on the repatriation of certain foreign earnings,
provided certain criteria in the Act are satisfied.  Based on our analysis,
we currently do not expect to derive any benefit from this provision of the
Act.  Accordingly, no tax expense has been recognized in the statements of
operations for the three- or nine-month periods ended March 31, 2005.




<PAGE>


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

Basic (loss) earnings per share is computed by dividing net (loss) 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,
2005 and 2004 and $1.0 for each of the nine-month periods ended March 31,
2005 and 2004.

Diluted (loss) 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 and vesting of certain restricted
stock.  For the three- and nine-month periods ended March 31, 2005, all 12.9
million stock options outstanding were excluded from the diluted loss per
share calculations since the effect of including these options would have
been anti-dilutive.  Accordingly, our loss per share for the three- and
nine-month periods ended March 31, 2005 is calculated using the basic number
of shares.

For the three- and nine-month periods ended March 31, 2004, the assumed
exercise, conversion and vesting were 2.3 and 2.2 million shares,
respectively.  In addition, stock options to purchase 11.0 million shares
were not included in the calculation of diluted earnings per share for the
three- and nine-month periods ended March 31, 2004, because the exercise
price for these options exceeded the average market price during these
periods.  Accordingly, the effect of including these options in the
calculation of earnings per share would have been anti-dilutive.


(3)   Stock-Based Compensation

We have applied the disclosure provisions of SFAS No. 123 and SFAS No. 148;
as permitted under these statements, we continue to measure stock
compensation expense using the intrinsic value method prescribed under APB
No. 25.  Intrinsic value represents the excess of the quoted market price of
our stock at the grant date over the amount the employee must pay for the
stock.  Since our practice is to grant stock options with an exercise price
equal to the market price (based on quoted market prices) at the date of
grant, no compensation expense is recognized.  Compensation expense is
recognized with respect to restricted stock and similar instruments.

The table below shows our net (loss) income and basic and diluted (loss)
earnings per share as reported on our statements of operations for the
respective periods and adjusts these amounts to include the pro forma impact
of using the fair value based method to calculate stock compensation expense
as prescribed under SFAS No. 123.  The fair value of our options and shares
to be issued in connection with employee stock purchase plans on the date of
grant was calculated using the Black-Scholes option-pricing model.

The pro forma stock compensation would result in additional expense of $(1.4)
and $(5.0), net of tax, for the three- and nine-month periods ended March 31,
2005, respectively.  For the three- and nine-month periods ended March 31,
2004, such amounts would be $(2.6) and $(8.2), net of tax, respectively.


<PAGE>



                            Three-month period ended    Nine-month period ended
                                     March 31,                  March 31,
                                  2005       2004            2005       2004

Net (loss) income, as
  reported                     $  (129.6)  $   2.2        $  (102.0) $   55.2
                               =========   =======        =========  ========

Less:  stock-based
  compensation expense
  determined using the fair
  value based method, net of
  tax                               (1.4)     (2.6)            (5.0)     (8.2)
                               ---------   -------        ---------  --------

Net (loss) income, pro forma   $  (131.0)  $  (0.4)       $  (107.0) $   47.0
                               =========   =======        =========  ========
Basic (loss) earnings per
  share, as reported           $   (1.33)  $  0.02        $   (1.06) $   0.56
                               =========   =======        =========  ========
Basic (loss) earnings per
  share, pro forma             $   (1.35)  $ (0.01)       $   (1.11) $   0.48
                               =========   =======        =========  ========
Diluted (loss)earnings per
  share, as reported           $   (1.33)  $  0.02        $   (1.06) $   0.55
                               =========   =======        =========  ========
Diluted (loss)earnings per
  share, pro forma             $   (1.35)  $ (0.01)       $   (1.11) $   0.46
                               =========   =======        =========  ========


For the three- and nine-month periods ended March 31, 2005, $1.8 and $5.4,
net of tax, respectively, of expenses related to restricted stock are
included in our net (loss) income and (loss) earnings per share, as
reported.  For the three- and nine-month periods ended March 31, 2004, those
amounts were approximately $1.4 and $5.1, net of tax, respectively.


(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.

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.  We separately report Corporate Unallocated
expenses, which include the cost of governance and centrally managed
expenses, as well as the accounting for U.S. pension plans, postretirement
healthcare costs and executive compensation programs that are not allocated
to the operating segments.  Governance and centrally managed expenses include
costs for departments such as corporate finance, general corporate
management, investor relations, legal, public relations and treasury and for
related information technology and facility costs incurred by these
departments.

The accounting policies of our segments are the same as those described in
Note 1 to the Consolidated Financial Statements included in our 2004 Annual
Report to Stockholders.


<PAGE>



                              Three-month period ended  Nine-month period ended
                                       March 31,               March 31,
                                     2005      2004         2005       2004
                                            Restated                 Restated
Revenues
  Reader's Digest North America   $  211.2  $  217.7    $    689.2  $    702.2
  Reader's Digest International      238.8     238.7         759.8       730.0
  Consumer Business Services          99.3     109.0         404.6       443.5
  Intercompany eliminations           (4.4)     (4.4)        (20.7)      (23.6)
                                  --------  --------    ----------  ----------
Total revenues                    $  544.9  $  561.0    $  1,832.9  $  1,852.1
                                  ========  ========    ==========  ==========

Operating (loss) profit
  Reader's Digest North America   $   21.9  $   14.2    $     63.0  $     59.4
  Reader's Digest International        7.3      13.9          49.2        36.3
  Consumer Business Services          (4.1)      1.2          38.6        66.2
  Magazine deferred promotion
     amortization(1)                 (13.1)       --         (64.7)         --
   Goodwill charge(2)               (129.0)       --        (129.0)         --
   Corporate Unallocated              (9.1)    (10.2)        (30.9)      (33.2)
  Other operating items, net            --        --            --        (9.1)
                                  --------  --------    ----------  ----------
Operating (loss) profit           $ (126.1) $   19.1    $    (73.8) $    119.6
                                  ========  ========    ==========  ==========
Intercompany eliminations
  Reader's Digest North America   $   (1.8) $   (2.0)   $     (7.5) $     (9.8)
  Reader's Digest International       (0.9)     (0.9)         (2.9)       (2.3)
  Consumer Business Services          (1.7)     (1.5)        (10.3)      (11.5)
                                  --------  --------    ----------  ----------
Total intercompany eliminations   $   (4.4) $   (4.4)   $    (20.7) $    (23.6)
                                  ========  ========    ==========  ==========

  (1)   In connection with our change to expensing magazine deferred promotion
        costs when the promotion is mailed to prospective customers,
        our reportable segment operating (loss) profit in 2005
        includes such expenses as incurred.  Amortization of
        previously deferred promotion costs is not included in
        segment results reviewed by our chief operating decision
        maker.  For the three-month period ended March 31, 2005,
        magazine deferred promotion amortization relates to: 89% to
        Reader's Digest North America and 11% to Reader's Digest
        International.  For the nine-month period ended March 31,
        2005, magazine deferred promotion amortization relates to:
        88% to Reader's Digest North America and 12% to Reader's
        Digest International.

   (2)  The goodwill charge related to Books Are Fun, part of the Consumer
        Business Services reportable segment, is not included in segment
        results reviewed by our chief operating decision maker.  See
        Note 8, Goodwill and Other Intangible Assets, Net for further
        information.



<PAGE>



(5)   Comprehensive (Loss) Income

Accumulated other comprehensive loss as reported in our balance sheets
primarily represents foreign currency translation adjustments.  The
components of comprehensive (loss) income, net of related tax, for the three-
and nine-month periods ended March 31, 2005 and 2004 were as follows:
<TABLE>

                                           Three-month period ended   Nine-month period ended
                                                     March 31,               March 31,
                                                   2005     2004           2005    2004

<S>                                             <C>       <C>           <C>       <C>
Net (loss) income                               $ (129.6) $  2.2        $ (102.0) $  55.2
Change in:
  Foreign currency translation adjustments          (3.5)   (3.5)           11.8      4.0
  Net unrealized gains on certain
    investments(1)                                    --      --              --      0.2
  Reclassification adjustments for gains that
    are included in net income(2)                     --      --              --     (0.5)
  Net unrealized gains (losses) on certain
    derivative transactions(3)                       0.1    (0.1)            0.2     (0.1)
  Reclassification adjustments for losses
     that are included in net income(4)               --     1.0              --      1.0
                                                --------  ------        --------  -------
Total comprehensive (loss) income               $ (133.0) $ (0.4)       $  (90.0) $  59.8
                                                ========  ======        ========  =======

</TABLE>

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

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

(3)Net unrealized gains (losses) on certain derivative transactions, net of
   related tax, principally represent gains and losses on the value of our
   interest rate caps.  For the three- and nine-month periods ended March 31,
   2005, these amounts are net of deferred taxes of zero and $0.1, respectively.
   For each of the three- and nine-month periods ended March 31, 2004, these
   amounts are net of nominal deferred tax liabilities.  See Note 10,
   Derivative Instruments, for additional information.

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


(6)  Other Operating Items, Net

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 these charges,
included in accrued expenses in 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.

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



<PAGE>


The table below reflects changes for the nine-month period ended March 31,
2005 to accruals recorded in previous periods.  The majority of the reserves
remaining relates to severance and guaranteed minimum payments for products
that have already been discontinued.  Most of the spending to date relates to
severance costs.  Of the approximately 820 positions identified to be
separated under the charges recorded in fiscal 2003 and 2004, approximately
90% had been separated from the business as of March 31, 2005.

   Initial year      Balance at     Spending/      Balance at
    of charge      June 30, 2004   Adjustments   March 31, 2005

  2002 & prior       $    3.2       $   (1.3)       $    1.9
  2003                    6.7           (2.9)            3.8
  2004                   11.8           (4.8)            7.0
                     --------       --------        --------
     Total           $   21.7       $   (9.0)       $   12.7
                     ========       ========        ========


 (7)  Inventories

                                              March 31,       June 30,
                                                2005            2004

Raw materials                                 $   6.7         $   9.7
Work-in-progress                                  3.8             5.0
Finished goods                                  172.7           137.3
                                              -------         -------
Total inventories                             $ 183.2         $ 152.0
                                              =======         =======

As of March 31, 2005 and 2004, we held inventory of $183.2 and $167.4,
respectively. The method used to value our inventories is the first-in,
first-out (FIFO) method.


(8)   Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill by segment for the nine-month
period ended March 31, 2005, are as follows:
<TABLE>

                                                                         Consumer
                                                     Reader's Digest     Business
                                                      North America      Services      Total



<S>                <C> <C>                             <C>              <C>         <C>
Balance as of June 30, 2004                            $  686.5         $  323.0    $  1,009.5
  Reclassification as a result of change in
    reportable segments                                     1.0             (1.0)           --
  Impact of foreign currency translation on goodwill
    balances outside the United States                       --              0.5           0.5
  Goodwill charge                                            --           (129.0)       (129.0)
                                                       --------         --------    ----------
Balance as of March 31, 2005                           $  687.5         $  193.5    $    881.0
                                                       ========         ========    ==========

</TABLE>

At least annually, we review the carrying amount of goodwill and other
intangibles with indefinite lives for recoverability.  We tested the
recoverability of these assets in the third quarter of 2005 (our designated
annual period).  Based on our assessment, Books Are Fun (a reporting unit
within our Consumer Business Services segment) recorded a goodwill charge of
$(129.0) in the third quarter of 2005 because the performance of our product
portfolio and competitive pressures on margin resulted in revenue and
operating profits falling short of our expectations.  The fair value of Books
Are Fun was determined independently using a combination of discounted future
net cash flows and an assessment of comparable companies in the marketplace.
We determined that no other goodwill and intangible losses have occurred.



<PAGE>


The following categories of acquired intangible assets are included in other
intangible assets, net, on the balance sheets, as of March 31, 2005 and June
30, 2004:
<TABLE>

                                              March 31, 2005        June 30, 2004
                                             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                         57.6       33.3       56.0       36.5
  Customer lists                              137.9       22.2      137.8       47.7
  Other tradenames and
   noncompete agreements                        3.0         --        3.0         --
                                           --------   --------   --------   --------
Total intangible assets                    $  288.2   $  145.2   $  286.5   $  173.9
                                           ========   ========   ========   ========

</TABLE>

Amortization related to intangible assets with finite lives amounted to $9.9
and $29.7 for the three- and nine-month periods ended March 31, 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 total 18-year term of our amended agreement.  Customer
lists are being amortized principally between three and six years.  Estimated
fiscal year amortization expense for intangible assets with finite lives is
as follows:  fiscal 2005 - $36.9; fiscal 2006 - $16.0; fiscal 2007 - $10.6;
fiscal 2008 - $5.9, and fiscal 2009 - $5.7.

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 6
to 16 years (the remaining period of the amended agreement).

The approximate annual minimum purchase amounts under the amended agreement
are: calendar year 2005 - $57.3; calendar year 2006 - $60.1; calendar year
2007 - $61.9; calendar year 2008 - $63.7; calendar year 2009 - $65.6; and
approximately $78.7 per year from calendar year 2010 to calendar year 2020.
These amounts are estimates based on 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 2004 Annual Report to Stockholders, our debt obligations as of March 31,
2005, consist principally of borrowings from the Term Loan Agreement (Term
Loan), our Five-Year Revolving Credit and Competitive Advance Facility
Agreement (Five-Year Facility) and $300.0 in senior unsecured notes.  As
discussed below, the Term Loan and Five-Year Facility were terminated and
replaced in April 2005.  The Term Loan and the Five-Year Facility are
collectively referred to as the 2002 Credit Agreements.  The maximum
borrowing allowed under the Five-Year Facility was $192.5.  The 2002 Credit
Agreements were secured by substantially all of our assets and were subject
to various financial and non-financial covenants.

During the nine-month period ended March 31, 2005, we repaid $111.0 of
principal outstanding related to the Term Loan and $36.5, net, related to the
Five-Year Facility.  As of March 31, 2005, we had outstanding borrowings of
$266.1 under the Term Loan, $8.0 under the Five-Year Facility and $300.0
under the senior unsecured notes.

On April 14, 2005, we entered into the $400.0 Five-Year Revolving Credit
Agreement (2005 Credit Agreement) to retire all outstanding borrowings under
the 2002 Credit Agreements and for general corporate purposes.  Approximately
$2.0 of financing fees related to the 2005 Credit Agreement will be deferred
and amortized on a straight-line basis over the life of the 2005 Credit
Agreement.  In connection with the termination of the 2002 Credit Agreements,
we will record in the fourth quarter a write-off of $7.3 related to the
associated capitalized financing fees and the discontinuance of the related
interest rate protection agreements.  The interest rate on the 2005 Credit
Agreement is currently at LIBOR plus 125 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 a minimum interest coverage ratio and maximum leverage
ratio, and is secured by the stock of a substantial portion of our
subsidiaries.

Interest expense for the three- and nine-month periods ended March 31, 2005
was $11.8 and $35.6, respectively ($18.2 and $42.6 for the three- and
nine-month periods ended March 31, 2004, respectively).  Interest income on
cash balances was $1.7 and $4.3 for the three- and nine-month periods ended
March 31, 2005, respectively ($1.2 and $3.7 for the three- and nine-month
periods ended March 31, 2004, respectively).  The weighted average interest
rate on our borrowings for the nine-month periods ended March 31, 2005 and
2004 was 5.1% and 4.2%, respectively.


(10) Derivative Instruments

Risk Management and Objectives

In the 2002 Credit Agreements (referred to in Note 9, Debt), we were required
to enter into interest rate protection agreements to fix or limit the
interest cost with respect to at least one-third of the outstanding
borrowings under the Term Loan.  As of March 31, 2005, we maintained
agreements to cap at 6% the LIBOR interest rate component of our borrowings
for up to a notional value of $150.0.  In connection with the termination of
the 2002 Credit Agreements, our interest rate protection agreements were
discontinued in April 2005; accordingly, we plan to record a write-off of
approximately $0.4.

In the normal course of business, we are exposed to market risk from the
effect of foreign exchange rate fluctuations on the U.S. dollar value of our
foreign subsidiaries' results of operations and financial condition.  A
significant portion of our risk is associated with foreign exchange rate
fluctuations of the euro.  We purchase forward contracts to minimize the
effect of fluctuating foreign currencies on significant, specifically
identifiable, known transactions.

As a matter of policy, we do not speculate in financial markets and,
therefore, we do not hold financial instruments for trading purposes. We
continually monitor foreign currency risk and our use of derivative
instruments.

Cash Flow Hedges - For the three- and nine-month periods ended March 31, 2005
and 2004, the fair value of our interest rate caps was largely unchanged.
Any changes in fair value are reported in accumulated other comprehensive
(loss) income included in stockholders' equity on the balance sheets.  The
gains and losses are deferred until the underlying transaction is recognized
in earnings.


(11) 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.



<PAGE>


The table below details the components of our net periodic pension (benefit)
cost for the three- and nine-month periods ended March 31, 2005 and 2004.
<TABLE>

                                 Three-month period ended    Nine-month period ended
                                          March 31,                  March 31,
                                        2005     2004             2005     2004

<S>                                   <C>      <C>              <C>      <C>
Service cost                          $   4.8  $   5.0          $  14.3  $  14.5
Interest cost                            11.2     11.5             33.4     33.7
Expected return on plan assets          (18.2)   (16.3)           (54.2)   (48.1)
Amortization of prior service cost       (0.2)    (0.1)            (0.8)    (0.4)
Recognized actuarial gain                 0.8      1.4              2.4      4.1
                                      -------  -------          -------  -------
Net periodic pension (benefit) cost   $  (1.6) $   1.5          $  (4.9) $   3.8
                                      =======  =======          =======  =======
</TABLE>

For the three- and nine-month periods ended March 31, 2005, approximately
$2.4 and $8.2, respectively were contributed to our pension plans.

We also sponsor certain postretirement benefit plans, in the U.S. and
Canada.  The table below details the components of our net periodic
postretirement cost (benefit) for the three- and nine-month periods ended
March 31, 2005 and 2004.
<TABLE>

                                       Three-month period ended    Nine-month period ended
                                               March 31,                  March 31,
                                            2005      2004            2005        2004

<S>                                        <C>       <C>             <C>        <C>
Service cost                               $  0.2    $  0.3          $  0.8     $  0.9
Interest cost                                 1.3       1.6             3.8        4.7
Amortization of prior service cost           (0.4)     (0.2)           (1.3)      (0.4)
                                           ------    ------          ------     ------
Net periodic postretirement cost           $  1.1    $  1.7          $  3.3     $  5.2
                                           ======    ======          ======     ======

</TABLE>


(12) Share Repurchase Authorization

On April 28, 2005, our Board of Directors authorized our repurchase of up to
$100.0 of our Common Stock over the succeeding two years and rescinded its
May 2001 authorization to repurchase up to $250.0 of our Common Stock.  We
did not repurchase any shares under the May 2001 authorization in 2004 or
2005.


(13) Sale-Leaseback Transaction

On December 22, 2004, we completed the sale and partial leaseback of our
corporate headquarters facility in Westchester, New York.  Under the
agreement, we received $48.5 in cash and will receive an additional $10.0 on
the second anniversary of closing, subject to certain conditions.  The gain
of $22.8, based on total consideration, was deferred and will be amortized
over the initial 20-year lease term as a reduction in rent expense.  During
the lease term, we will make annual minimum lease payments of approximately
$3.0, subject to increases every five years based on changes in the Consumer
Price Index.  In addition, we have leased additional space for three years in
this facility at an annual cost of $0.6.





<PAGE>



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

Unless otherwise indicated, reference in Management's Discussion and Analysis
to "we," "us" and "our" are to The Reader's Digest Association, Inc. and its
Subsidiaries.  All references to 2005 and 2004, unless otherwise indicated,
are to fiscal 2005 and fiscal 2004, respectively.  Our fiscal year represents
the period from July 1 through June 30.

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


Three-Month Period Ended March 31, 2005, Compared With Three-Month Period
Ended March 31, 2004

Results of Operations:  Company-Wide

Overview

Operationally, the second half of the fiscal year is not as significant as
the first half because the second quarter of the fiscal year is our most
significant in terms of revenues and operating profit from our reportable
segments.  The third quarter of 2005 was characterized by continued
challenges for Consumer Business Services, and lower revenues for Reader's
Digest North America and Reader's Digest International, when compared with
the third quarter of 2004.  The goodwill charge related to Books Are Fun and
the effect of expensing magazine direct-response promotion costs when the
promotion is mailed to prospective customers were the most significant
factors affecting overall profitability.  Aside from the amortization related
to previously deferred magazine promotion costs, expense timing differences
between quarters also affected the profitability of our reportable segments
on a comparative basis.


Revenues

Revenues for the third quarter of 2005 decreased 3% to $545, compared with
$561 for the third quarter of 2004.  Excluding the effect of foreign currency
translation, revenues decreased 5%.  The revenue decline was noted across all
of our reportable segments.

The decrease in revenues for Reader's Digest International was principally
driven by lower membership in certain series products and planned declines in
circulation for Reader's Digest magazine.  These decreases were partially
offset by increased sales of certain single sales products.  The most
significant revenue declines were in Germany, the United Kingdom, Mexico and
France.  These declines were partially offset by increased revenues in
Australia and from the addition of new markets.

In Consumer Business Services, both Books Are Fun and QSP continue to
experience challenges in various aspects of their businesses.  Lower average
sales per school event principally drove the revenue decline in Books Are
Fun, while QSP was adversely affected by lower same-school sales.

Revenues in Reader's Digest North America decreased because of lower
circulation and advertising revenues for Reader's Digest magazine and at
Reiman, and the planned elimination of certain activity at Reader's Digest
Young Families.  These declines were partially offset by increased revenues
from new products.


Operating (Loss) Profit

Operating loss for the third quarter of 2005 was $(126), compared with a
profit of $19 for the third quarter of 2004.  The decline was principally
driven by the $(129) goodwill charge related to Books Are Fun and $(13) of
expense related to our magazine deferred promotion change (both of which are
described in further detail below).  Profits were also adversely affected by
performance in Consumer Business Services, and by the timing of promotional
mailings, and investments in new products and markets at Reader's Digest
International.  These declines were partially offset by improved profits at
Reader's Digest North America.

In addition to lower sales volumes in Consumer Business Services and Reader's
Digest International, increased commissions and account retention efforts
furthered the decline in profits.

These declines were partially offset by increased profits at Reader's Digest
North America, due in part to the favorable effect of expense timing
differences related to our magazine deferred promotion change (described in
further detail below), improved circulation profitability and profits from
new products.

Corporate Unallocated expenses were $1 lower in the third quarter of 2005
when compared with the third quarter of 2004.  Higher net pension income
(from our overfunded U.S. pension plans), and lower facility costs due to the
sale-leaseback of our headquarters facility in Westchester New York, drove
the decline.

Magazine Deferred Promotion Change
During the fourth quarter of 2004, we reassessed our accounting for magazine
direct-response promotion costs in light of changes in our business, as well
as the strategies and initiatives undertaken by our magazine business.  As a
result of these changes, pursuant to American Institute of Certified Public
Accountants Statement of Position (SOP) 93-7, Reporting on Advertising Costs,
effective July 1, 2004, we no longer defer and amortize magazine promotion
costs, but expense such costs when the promotion is mailed to prospective
customers.  During the third quarter of 2005, expenses were affected by $(13)
related to amortization of previously deferred magazine promotion costs.
Such amount is included as a component of promotion, marketing and
administrative expenses in our statements of operations.  In addition,
because we currently expense magazine direct-response promotion costs when
the promotion is mailed to prospective customers, instead of deferring and
amortizing such costs (as we did in the prior year), promotion expense
variance in the third quarter of 2005 is higher.

Goodwill Charge
The third quarter of the fiscal year is our designated annual period to
assess the recoverability of goodwill and our indefinite lived intangible
assets.  Based on our assessment, Books Are Fun recorded a goodwill charge of
$(129) in the third quarter of 2005 because the performance of our product
portfolio and competitive pressures on margin resulted in revenue and
operating profits falling short of our expectations.  The fair value of Books
Are Fun was determined independently using a combination of discounted future
net cash flows and an assessment of comparable companies in the marketplace.


Other Expense, Net

Other expense, net for the third quarter of 2005 decreased to $(4), compared
with $(18) for the third quarter of 2004.  The primary reasons for the
decrease were:

  -   A $(7) write-off of deferred financing fees in the third quarter of 2004
      because we refinanced a portion of our existing debt and terminated some
      of our interest rate caps that were no longer required;
  -   A gain of $5 from the sale of a building in Portugal in the third
      quarter of 2005;
  -   The write-off of $(2) in the third quarter of 2004 of foreign currency
      translation losses associated with the closure of our business in Norway.


<PAGE>


Income Taxes

The effective income tax rate for the third quarter of 2005 was a benefit of
0.2% primarily due to the non-deductible write-down of goodwill at Books Are
Fun.  Excluding this write-down, the effective rate was a benefit of 34.5%,
compared with a benefit of 34.8% for the third quarter of 2004.  During the
quarter, the Company filed its tax return for the fiscal year ended June 30,
2004 resulting in a tax benefit, which was offset by recognition of a tax
liability as a result of an ongoing IRS tax audit.


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

In the third quarter of 2005, net loss was $(130), or $(1.33) per share for
both basic and diluted loss per share.  In the prior period, we reported net
income of $2 or $0.02 per share for both basic and diluted earnings per
share.  For the third quarter of 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.


Results of Operations:  Reportable Segments

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


                                           Three-month period ended
                                                    March 31,
                                                 2005      2004
                                                        Restated(4)

Revenues
  Reader's Digest North America                 $ 211      $ 218
  Reader's Digest International                   239        238
  Consumer Business Services                       99        109
  Intercompany eliminations                        (4)        (4)
                                                -----      -----
Total revenues                                  $ 545      $ 561
                                                =====      =====

Operating (loss) profit
  Reader's Digest North America                 $  22      $  14
  Reader's Digest International                     7         14
  Consumer Business Services                       (4)         1
  Magazine deferred promotion amortization(1)     (13)        --
  Goodwill charge(2)                             (129)        --
  Corporate Unallocated(3)                         (9)       (10)
                                                -----      -----
Operating (loss) profit                         $(126)     $  19
                                                =====      =====

Intercompany eliminations
  Reader's Digest North America                 $  (2)     $  (2)
  International Businesses                         (1)        (1)
  Consumer Business Services                       (1)        (1)
                                                -----      -----
Total intercompany eliminations                 $  (4)     $  (4)
                                                =====      =====

    (1) In connection with our change to expensing magazine deferred promotion
        costs when the promotion is mailed to prospective customers, our
        reportable segment operating (loss) profit in 2005 includes
        such expenses as incurred.  Amortization of previously deferred
        promotion costs is not included in segment results reviewed by
        our chief operating decision maker.  Magazine deferred
        promotion amortization relates to: 89% to Reader's Digest North
        America and 11% to Reader's Digest International.

    (2) The third quarter of the fiscal year is our designated annual period to
        assess the recoverability of goodwill and our indefinite lived
        intangible assets.  Based on our assessment, Books Are Fun recorded a
        goodwill charge of $(129) in the third quarter of 2005 because the
        performance of our product portfolio and competitive pressures on margin
        resulted in revenue and operating profits falling short of our
        expectations.  The fair value of Books Are Fun was determined
        independently using a combination of discounted future net cash flows
        and an assessment of comparable companies in the marketplace.

    (3) 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 executive
        compensation programs that are not allocated to the reportable
        segments.  Governance and centrally managed expenses include
        costs for departments such as corporate finance, general
        corporate management, investor relations, legal, public
        relations and treasury and for related information technology
        and facility costs incurred by these departments.

    (4) We modified the composition of two of our reportable segments, Reader's
        Digest North America and Consumer Business Services in the
        first half of 2005.  Three smaller business units were
        reclassified to reflect a change in the way we manage these
        businesses, including synergies with some of our other
        businesses.  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 and the discussion below for prior periods to
        conform to our new reportable segments.


Reader's Digest North America

Revenues for Reader's Digest North America for the third quarter of 2005
decreased 3% to $211, compared with $218 for the third quarter of 2004.
Excluding the effect of foreign currency translation, revenues decreased 4%.
The principal declines were in U.S. Books and Home Entertainment, Reader's
Digest magazine, and Reiman.  Partially offsetting these declines were
improved revenues from new products.

The decline in revenues for U.S. Books and Home Entertainment was principally
driven by the planned elimination of marginally profitable and unprofitable
activity at Reader's Digest Young Families, and a continued decline in
membership for Select Editions.  Increased response rates to promotional
mailings for single sales products in the Home and Health affinity and
increased revenues in Reader's Digest Children's Publishing partially offset
the decline.

Revenues for Reader's Digest magazine declined because of lower circulation
and advertising revenues.  While circulation revenues continue to be
adversely affected by declining renewal pools, advertising revenues were
lower because of fewer advertising pages, partially offset by a higher rate
per page.  The decline in advertising was principally driven by fewer
prescription drug pages.

Reiman revenues declined principally because of lower circulation revenues
for certain cooking magazines, which was driven by lower promotion efforts to
maximize profitability.  A shift in the timing of certain annual book product
shipments, to the fourth quarter of 2005, and the absence of revenues from
Crafting Traditions magazine (sold in the second quarter of 2005) contributed
to the decline.  These declines were partially offset by increased revenues
from Backyard Living (launched in the third quarter of 2004) and increased
catalog sales.

Revenue declines were also partially offset by improved revenues in Canada,
principally due to Our Canada, a new magazine launched in the third quarter
of 2004, combined with increased response rates to promotional mailings for
single sales products.

Operating profit for this segment for the third quarter of 2005 increased 54%
to $22, compared with $14 for the third quarter of 2004.  The improvement in
profit was principally driven by $7 related to the effect of expensing
magazine direct-response promotion costs when the promotion is mailed to
prospective customers.  Improved performance for new magazines, Backyard
Living and Our Canada, the effects of cost-reduction measures initiated in
previous periods and lower promotion costs contributed to the improvement.
These improvements were partially offset by investments in new product
development.


Reader's Digest International

Revenues for Reader's Digest International for the third quarter of 2005 were
flat when compared with the third quarter of 2004.  Excluding the effect of
foreign currency translation, revenues declined 5%.  This reflects declines
in Germany, the United Kingdom, Mexico and France.  Fewer active customers
for series products and lower mail quantities because of a decline in the
number of promotable customers resulted in lower revenues for Books and Home
Entertainment products.  In addition, changes in promotional activity to
reduce the frequency of our mailings and a shift in the timing of mailing
activity into the second and fourth quarters further lowered revenues.
Reader's Digest magazine revenues were adversely affected by planned
reductions in circulation in certain markets to better manage customer
acquisition costs and improve profitability, and by lower advertising
revenues.

In addition, revenues in Russia declined due to a shift in the timing of
certain sales from the third quarter of 2005 to the fourth quarter, while
revenues in Norway declined because we changed how we conduct business in
this market, including licensing the publication of Reader's Digest magazine
to a third party.

These declines were partially offset by the addition of revenues from several
new markets, and increased revenues in Australia and Portugal due to improved
response rates to promotional mailings and increased promotional mailings,
respectively.

Operating profit for this segment for the third quarter of 2005 declined 47%
to $7, compared with $14 in the third quarter of 2004.  The decline in
profitability was driven by the revenue changes described above, investments
in developing new products and markets, and the effect of expensing magazine
direct-response promotion costs when the promotion is mailed to prospective
customers.  Lower overhead costs due to the effects of ongoing cost-cutting
measures and more efficient promotional mailings partially offset these
declines.  In addition, the reversal of a tax expense and efforts to
right-size magazine circulation to more profitable levels further offset the
profit decline.


Consumer Business Services

Revenues for Consumer Business Services for the third quarter of 2005
decreased 9% to $99, compared with $109 for the third quarter of 2004.
Revenues for Books Are Fun and QSP declined.

The decline in revenues at Books Are Fun was driven by lower average sales
per display event and, to a lesser extent, fewer business display events.
The decline in average sales per school display event was attributable to
weaker performance of our product portfolio, while the decline in business
events was driven by sales force vacancies in certain territories.  As of the
end of the third quarter, we had fewer independent sales representatives than
we did at the end of the third quarter of 2004 in the corporate business.
Although we have intensified recruiting efforts to support our core business
and other initiatives, new representatives generally require a certain amount
of time to build their territories.  Accordingly, these representatives did
not significantly affect revenues this quarter.

Revenues at QSP were lower because of declines in same-school sales of
magazine and gift products, attributable to lower participation in
fundraising programs.  Increased incentives to attract and retain more
magazine accounts contributed to the revenue decline.  Although revenues for
food products were flat, sales of World's Finest Chocolate (WFC) products
increased 8% due to efforts to convert more of our food business to these
products.

Operating loss for this segment for the third quarter of 2005 was $(4),
compared with a profit of $1 for the third quarter of 2004.  The decline in
profitability was principally driven by the revenue changes described above.
In addition, increased commissions and account incentives at Books Are Fun
and QSP, respectively, and inventory write-offs at QSP, contributed to the
decline.  Partially offsetting the profit decline was a penalty associated
with the minimum purchase commitment related of our WFC licensing agreements
that was recorded in the prior period.



<PAGE>


Nine-Month Period Ended March 31, 2005, Compared With Nine-Month Period Ended
March 31, 2004

Results of Operations:  Company-Wide

Overview

We generate the vast majority of our revenues and operating profit in the
first nine months of the fiscal year.  This is because the second quarter is
the most significant in terms of revenue, and, to a greater extent, profit.
In 2005, the first nine months were characterized by continued challenges in
Consumer Business Services, partially offset by improved profits at Reader's
Digest International and Reader's Digest North America.  The goodwill charge
related to Books Are Fun and the effect of expensing magazine direct-response
promotion costs when the promotion is mailed to prospective customers were
the most significant factors affecting overall profitability.  Aside from the
amortization related to previously deferred magazine promotion costs, expense
timing differences between quarters also affected the profitability of our
reportable segments on a comparative basis.


Revenues

Revenues for the nine-month period ended March 31, 2005 decreased 1% to
$1,833, compared with $1,852 for the nine-month period ended March 31, 2004.
Excluding the effect of foreign currency translation, revenues declined 4%.
The revenue decline was driven by Consumer Business Services, Reader's Digest
International, and, to a lesser extent, Reader's Digest North America.

Lower sales at QSP and Books Are Fun drove the decline in revenues for
Consumer Business Services.  QSP experienced lower magazine and gift sales
volumes, and increased account incentives.  Lower average sales per event in
schools and fewer business display events held adversely affected Books Are
Fun.

Revenues declined in Reader's Digest International because of declining
membership in certain series products and lower response rates to promotional
mailings.  In addition, planned reductions in circulation for Reader's Digest
magazine contributed to the decline.  The most significant revenue declines
were in Germany, the United Kingdom, Brazil, Mexico and Switzerland.  These
declines were partially offset by increased revenues in Australia and from
the addition of new markets.

Reader's Digest North America revenues were lower due to the planned
elimination of certain activity at Reader's Digest Young Families, and lower
circulation revenues for Reader's Digest magazine and at Reiman.  These
declines were partially offset by revenues attributable to new products.


Operating (Loss) Profit

Operating loss for the nine-month period ended March 31, 2005 was $(74),
compared with a profit of $120 for the nine-month period ended March 31,
2004.  The decline was principally driven by the $(129) goodwill charge
related to Books Are Fun and $(65) of expense related to our magazine
deferred promotion change (both of which are described in further detail
below).  Profits were also adversely affected by performance in Consumer
Business Services.  Increased profits at Reader's Digest International and
Reader's Digest North America partially offset these declines.

Lower revenues, and increased commissions and account incentives principally
drove the decline in profits in Consumer Business Services.  In addition,
competitive pressures on profit margins adversely affected profits at Books
Are Fun.

Increased profits at Reader's Digest International and Reader's Digest North
America were principally attributable to lower customer acquisition costs and
lower promotion costs, respectively.  Both reportable segments benefited from
the effects of cost-cutting measures initiated in previous periods.

Corporate Unallocated expenses were $2 lower for the nine-month period ended
March 31, 2005, when compared with the comparable period in the prior year.
Higher net pension income (from our overfunded U.S. pension plans) and lower
costs associated with postretirement healthcare benefits (due to changes in
plan benefits and the effect of a subsidy pursuant to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003) were partially
offset by increased incentive compensation expenses.

Magazine Deferred Promotion Change
During the fourth quarter of 2004, we reassessed our accounting for magazine
direct-response promotion costs in light of changes in our business, as well
as the strategies and initiatives undertaken by our magazine business.  As a
result of these changes, pursuant to SOP 93-7, effective July 1, 2004, we no
longer defer and amortize magazine promotion costs, but expense such costs
when the promotion is mailed to prospective customers.  During the nine-month
period ended March 31, 2005, expenses were affected by $(65) related to
amortization of previously deferred magazine promotion costs.  Such amount is
included as a component of promotion, marketing and administrative expenses
on the income statements.  In addition, because we currently expense magazine
direct-response promotion costs when the promotion is mailed to prospective
customers, instead of deferring and amortizing such costs (as we did in the
prior year), promotion expense variance for the nine-month period ended March
31, 2005 is higher.

Goodwill Charge
The third quarter of the fiscal year is our designated annual period to
assess the recoverability of goodwill and our indefinite lived intangible
assets.  Based on our assessment, Books Are Fun recorded a goodwill charge of
$(129) in the third quarter of 2005 because the performance of our product
portfolio and competitive pressures on margin resulted in revenue and
operating profits falling short of our expectations.  The fair value of Books
Are Fun was determined independently using a combination of discounted future
net cash flows and an assessment of comparable companies in the marketplace.


Other Expense, Net

Other expense, net for the nine-month period ended March 31, 2005 decreased
to $(18), compared with $(35) for the nine-month period ended March 31,
2004.  The primary reason for the decrease were:

  -   A $(7) write-off, in the third quarter of 2004, of deferred financing
      fees due to the refinancing of a portion of our Term Loan and the
      termination of certain interest rate caps that were no longer required.
  -   A gain of $7 from the sale of buildings in Portugal and Australia in
      2005;
  -   Gains of $3 from the sale of Moneywise magazine in the United Kingdom
      and Crafting Traditions magazine in the United States, both of which
      occurred in the second quarter of 2005;
  -   Gains of $2 from the sale of other non-strategic assets in 2005;
  -   The write-off of $(2) in the third quarter of 2004 of foreign currency
      translation losses associated with the closure of our business in Norway;
  -   A gain of $3 from proceeds received in exchange for our interest in
      Schoolpop, Inc. in the first quarter of 2004, which merged into an
      unrelated third party.


Income Taxes

The effective tax rate for the nine-month period ended March 31, 2005 was
10.7%, compared with a rate of 34.7% for the nine-month period ended March
31, 2004.  Excluding the non-deductible write-down of goodwill at Books Are
Fun, the effective tax rate for the nine-month period ended March 31, 2005
was 26.8%.  The reduction in the effective tax rate primarily relates to
non-recurring events in the second quarter of 2005.  These events included
the reversal of tax reserves resulting from various settlements of U.S.
federal and state tax audits, partially offset by a reduction in the value of
certain deferred tax assets as a result of a change to the tax law of a
foreign jurisdiction.


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

For the nine-month period ended March 31, 2005, net loss was $(102) or
$(1.06) per share for both basic and diluted loss per share.  In the prior
year period, net income was $55, or $0.55 per share on a diluted-earnings
basis ($0.56 per share for basic earnings per share).  For the nine-month
period ended March 31, 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.


Results of Operations:  Reportable Segments

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


                                              Nine-month period ended
                                                      March 31,
                                                  2005       2004
                                                         Restated(5)

Revenues
  Reader's Digest North America                 $   689    $   702
  Reader's Digest International                     760        730
  Consumer Business Services                        405        444
  Intercompany eliminations                         (21)       (24)
                                                -------    -------
Total revenues                                  $ 1,833    $ 1,852
                                                =======    =======

Operating (loss) profit
  Reader's Digest North America                 $    63    $    60
  Reader's Digest International                      49         36
  Consumer Business Services                         39         66
  Magazine deferred promotion amortization(1)       (65)        --
  Goodwill charge(2)                               (129)        --
  Corporate Unallocated(3)                          (31)       (33)
  Other operating items, net(4)                      --         (9)
                                                -------    -------
Operating (loss) profit                         $   (74)   $   120
                                                =======    =======

Intercompany eliminations
  Reader's Digest North America                 $    (8)   $   (10)
  Reader's Digest International                      (3)        (2)
  Consumer Business Services                        (10)       (12)
                                                -------    -------
Total intercompany eliminations                 $   (21)   $   (24)
                                                =======    =======

  (1)  In connection with our change to expensing magazine deferred promotion
       costs when the promotion is mailed to prospective customers,
       our reportable segment operating (loss) profit in 2005 includes
       such expenses as incurred.  Amortization of previously deferred
       promotion costs is not included in segment results reviewed by
       our chief operating decision maker.  Magazine deferred
       promotion amortization relates to: 88% to Reader's Digest North
       America and 12% to Reader's Digest International.

  (2)  The third quarter of the fiscal year is our designated annual period to
       assess the recoverability of goodwill and our indefinite lived intangible
       assets.  Based on our assessment, Books Are Fun recorded a goodwill
       charge of $(129) in the third quarter of 2005 because the performance of
       our product portfolio and competitive pressures on margin resulted in
       revenue and operating profits falling short of our expectations.  The
       fair value of Books Are Fun was determined independently using a
       combination of discounted future net cash flows and an assessment of
       comparable companies in the marketplace.

  (3)  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 executive
       compensation programs that are not allocated to the reportable
       segments.  Governance and centrally managed expenses include
       costs for departments such as corporate finance, general
       corporate management, investor relations, legal, public
       relations and treasury and for related information technology
       and facility costs incurred by these departments.

  (4)  Other operating items, net in 2004 consists primarily of severance and
       other charges taken to streamline our operations.  This charge
       related to: 6% to Reader's Digest North America, 71% to
       Reader's Digest International, 22% to Consumer Business
       Services and 1% to corporate departments that benefit the
       entire organization.

  (5)  We modified the composition of two of our reportable segments, Reader's
       Digest North America and Consumer Business Services in the
       first half of 2005.  Three smaller business units were
       reclassified to reflect a change in the way we manage these
       businesses, including synergies with some of our other
       businesses.  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 and the discussion below for prior periods to
       conform to our new reportable segments.


Reader's Digest North America

Revenues for Reader's Digest North America for the nine-month period ended
March 31, 2005 decreased 2% to $689, compared with $702 for the nine-month
period ended March 31, 2004.  Excluding the effect of foreign currency
translation, revenues declined 3%.  Revenue declines in U.S. Books and Home
Entertainment, Reader's Digest magazine, and Reiman, were partially offset by
increased revenues for new products and certain Special Interest Magazines.

Lower revenues for U.S. Books and Home Entertainment were driven by the
planned elimination of marginally profitable and unprofitable activity in
Reader's Digest Young Families and a continued decline in Select Editions
membership.

Circulation revenues for Reader's Digest magazine were adversely affected by
the January 2004 reduction in the rate base and a continued decline in
renewal pools.

Reiman revenues declined because of lower renewals for certain cooking
magazines and the absence of revenues from Crafting Traditions magazine (sold
in the second quarter of 2005).  Increased revenues from Backyard Living,
launched in the third quarter of 2004, and increased catalog sales partially
offset these declines.

Increased revenues in Canada were principally driven by Our Canada, a new
magazine launched in the third quarter of 2004, and increased sales of
general book products due to increased response rates to promotional
mailings.  Revenues also improved because of increased advertising in certain
Special Interest Magazines.

Operating profit for this segment for the nine-month period ended March 31,
2005 increased 6% to $63, compared with $60 for the nine-month period ended
March 31, 2004.  The increase in profit was principally driven by the results
of cost-reduction measures initiated in prior periods, lower promotion costs
and improved performance of new products.  Lower production costs for
Reader's Digest magazine, due to the January 2004 reduction in the rate base,
contributed to the improvement.  These increases were partially offset by the
effect of expensing magazine direct-response promotion costs when the
promotion is mailed to prospective customers and by investments in new
products.


Reader's Digest International

Revenues for Reader's Digest International for the nine-month period ended
March 31, 2005 increased 4% to $760, compared with $730 for the nine-month
period ended March 31, 2004.  Excluding the effect of foreign currency
translation, revenues declined 3%.  The revenue declines in this segment were
driven by Germany, the United Kingdom, Brazil, Mexico and Switzerland.  In
these markets, sales of certain Books and Home Entertainment products were
lower, especially series products due to a declining membership in the
series, lower response rates to promotional mailings and a decline in the
number of promotable customers.  In addition, revenues for Reader's Digest
magazine were lower because of planned reductions in circulation to better
manage customer acquisition costs and improve profitability.

Revenues were also lower in the United Kingdom because of the absence of
revenues from Moneywise magazine (which was sold in the second quarter of
2005), and in Norway, principally because we licensed publication of Reader's
Digest magazine to a third party.

These declines were partially offset by increased revenues in Australia
because of improved response rates to promotional mailings for Books and Home
Entertainment products, and in Portugal due to increased promotional
activity.  Revenues also improved because of strong performance in new
markets, including Romania and Ukraine.

Operating profit for this segment for the nine-month period ended March 31,
2005 increased 36% to $49, compared with $36 for the nine-month period ended
March 31, 2004.  Excluding the effect of foreign currency translation,
profits increased 19%.  This profit improvement was driven by increased
magazine profitability, due to the new circulation strategy, and more
efficient mailings for Books and Home Entertainment products.  In addition,
the results of ongoing cost-reduction measures and lower product and
distribution costs contributed to the improvement.

These profit improvements were partially offset by the effect of expensing
magazine direct-response promotion costs when the promotion is mailed to
prospective customers, the revenue changes described above and investments in
new products and markets.


Consumer Business Services

Revenues for Consumer Business Services for the nine-month period ended March
31, 2005 decreased 9% to $405, compared with $444 for the nine-month period
ended March 31, 2004, due to weaker performance at both QSP and Books Are Fun.

Lower magazine and gift sales volumes and increased incentives to attract and
retain more accounts drove the decline in revenues at QSP.  These declines
were partially offset by increased sales of music products.  Although
revenues for food products were flat, sales of WFC products increased 8% due
to efforts to convert more of our food business to these products.

Revenues for Books Are Fun decreased due to lower average sales per school
event and fewer business display events held.  Average sales per school event
were lower because of weaker performance of our product portfolio and a shift
in the mix of products sold, to lower-priced products.  The decline in
business events was principally driven by turnover in the independent sales
force due to increased competition.  Although we have intensified recruiting
efforts, new representatives generally require a certain amount of time to
build their territories.  Accordingly, these representatives did not
significantly affect revenues this quarter.

Operating profit for this segment for the nine-month period ended March 31,
2005 decreased 42% to $39, compared with $66 for the nine-month period ended
March 31, 2004.  The revenue changes described above, increased commissions
and account incentives at Books Are Fun, and investments at QSP principally
drove the decline in profits.  Investments at QSP included additional account
incentives, commissions, enhanced promotional materials and costs to
integrate new products.


Forward-Looking Information

Fiscal 2005 Results

We expect revenues in the fourth quarter to improve over the year-ago period,
driving high double-digit operating profit growth.  We expect continued
strong performances from our core businesses and progress at Books Are Fun
and QSP.  Fourth quarter results will include a $(7) write-off of
financing fees associated with the replacement of our 2002 Credit Agreements
(described below) with a new $400 Five-Year Revolving Credit Agreement at more
favorable terms.  We expect 2005 full-year loss per share to be on the high
end of our previously announced guidance range of $(1.08) and $(0.98) per
share, including $(1.32) per share related to our goodwill charge at Books
Are Fun, $(0.49) per share related to amortization of our magazine deferred
promotion asset as of June 30, 2004 and $(0.04) per share related to the
write-off of $(7) of financing fees.  This estimate does not include the
effect of special items, including restructuring charges, that cannot be
forecasted at this time.


Liquidity and Capital Resources

                                                                 Nine-month
                                                                 period ended
                                                                March 31, 2005

Cash and cash equivalents at June 30, 2004                          $  50

Net change in cash due to:
  Operating activities                                                114
  Investing activities                                                 49
  Financing activities                                               (169)
  Effect of exchange rate changes on cash and cash equivalents          5
                                                                    -----
Net change in cash and cash equivalents                                (1)

Cash and cash equivalents at March 31, 2005                         $  49
                                                                    =====

Cash and cash equivalents decreased 3% to $49 as of March 31, 2005, compared
with $50 as of June 30, 2004.  The decrease in cash was primarily due to
financing activities; principally, the repayment of $148 of outstanding debt and
the payment of $20 for cash dividends.  Sources of cash are attributed to cash
flow from operations and investing activities.  The sale of non-strategic
assets, including our headquarters facility in Westchester, New York (discussed
below), and the sale of our building in Australia generated $62 in cash.  In
addition, positive cash flow was driven by net income before depreciation,
amortization and goodwill charges, and from a decrease in our working capital
of $15.

Debt

As described in Note 11 to the Consolidated Financial Statements included in
our 2004 Annual Report to Stockholders, our debt obligations as of March 31,
2005, principally comprise the Term Loan Agreement (Term Loan), the
Five-Year Revolving Credit and Competitive Advance Facility Agreement
(Five-Year Facility) (collectively referred to as the 2002 Credit
Agreements), and $300 in senior unsecured notes.  The maximum borrowing
allowed under the Five-Year Facility was $193.  As of March 31, 2005, we had
outstanding borrowings of $266 under the Term Loan and $8 under the Five-Year
Facility.  As discussed below, the Term Loan and the Five-Year Facility were
terminated and replaced in April 2005.  During the nine-month period ended
March 31, 2005, we repaid $111 of principal outstanding related to the Term
Loan and $37, net, related to the Five-Year Facility.  The weighted average
interest rate on our borrowings for the nine-month periods ended March 31,
2005 and 2004 was 5.1% and 4.2%, respectively (5.5% and 4.5% for the
three-month periods ended March 31, 2005 and 2004, respectively).

Under the 2002 Credit Agreements, we were required to hedge at least
one-third of borrowings outstanding under the Term Loan.  These instruments
capped at 6% the LIBOR interest rate component of $150 of our borrowings under
the Term Loan.

On April 14, 2005, we entered into the $400 Five-Year Revolving Credit
Agreement (2005 Credit Agreement) to retire all outstanding borrowings under
the 2002 Credit Agreements and for general corporate purposes.  Approximately
$2 of financing fees related to the 2005 Credit Agreement will be deferred
and amortized on a straight-line basis over the life of the 2005 Credit
Agreement.  In connection with the termination of the 2002 Credit Agreements,
we will record in the fourth quarter a write-off of $(7) related to the
associated capitalized financing fees and the discontinuance of the related
interest rate protection agreements.  The interest rate on the 2005 Credit
Agreement is currently at LIBOR plus 125 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 a minimum interest coverage ratio and maximum leverage
ratio, and is secured by the stock of a substantial portion of our
subsidiaries.

Historically, in the first quarter of the fiscal year, we use proceeds from
short-term borrowings to finance cash flow requirements in anticipation of
the second quarter, our peak-selling season.  During the second quarter of
the fiscal year, we normally generate cash from operations and pay down our
short-term borrowings.  During the second half of the fiscal year, cash flow
is generally sufficient to fund operations.  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 and the implementation of our strategic initiatives.

Sale-Leaseback Transaction
In the second quarter of 2005, we completed the sale and partial leaseback of
our corporate headquarters facility in Westchester, New York.  Under the
agreement, we received $49 in cash and will receive an additional $10 on the
second anniversary of closing, subject to certain conditions.  The gain of
$23, based on total consideration, was deferred and will be amortized over
the initial 20-year lease term as a reduction in rent expense.  During the
lease term, we will make annual minimum lease payments of approximately $3,
subject to increases every five years based on changes in the Consumer Price
Index.  In addition, we have leased additional space for three years at an
annual cost of $1.  This transaction is expected to lower operating costs and
reduce interest expense by $10 annually.

Dividend Increase
On January 21, 2005, we announced an increase in the quarterly dividend per
common share from $0.05 to $0.10.

Share Repurchase Authorization
On April 28, 2005, our Board of Directors authorized our repurchase of up to
$100 of our Common Stock over the succeeding two years and rescinded its May
2001 authorization to repurchase up to $250 of our Common Stock.  We did not
repurchase any shares under the May 2001 authorization in fiscal 2004 or
fiscal 2005.


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, SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123, and Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees.  The most significant change is the
requirement to recognize, in the statements of operations, the value of
employee stock options and other stock-based compensation (including employee
stock purchase plans) as calculated using the fair value based method, as
opposed to the intrinsic value method currently used.  The statement is
effective for interim or annual periods beginning after June 15, 2005.  We
are continuing to evaluate the full impact of SFAS No. 123R for its adoption
in the first quarter of fiscal 2006.

In December 2004, the FASB issued FASB Staff Position (FSP) 109-2, Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Jobs Creation Act of 2004.  This statement was effective
upon issuance.  The American Jobs Creation Act (the Act) allows a one-time
dividends received deduction on the repatriation of certain foreign earnings,
provided certain criteria in the Act are satisfied.  Based on our analysis,
we currently do not expect to derive any benefit from this provision of the
Act.  Accordingly, no tax expense has been recognized in the statements of
operations for the three- or nine-month periods ended March 31, 2005.


                                     *****

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

Under the supervision of our Chief Executive Officer and Chief Financial
Officer, we evaluated our disclosure controls and procedures and internal
control over financial reporting (as defined in rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) and concluded that (i) our
disclosure controls and procedures were effective as of March 31, 2005 and
(ii) no change in internal control over financial reporting occurred during
the quarter ended March 31, 2005 that has materially affected, or is
reasonably likely to materially affect, such internal control over financial
reporting.

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



<PAGE>


PART II.  OTHER INFORMATION

Item 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       (or Unit)         or Programs             Plans or Programs


<S>                        <C>           <C>                  <C>                       <C>
January 1 - 31, 2005        --              --                --                        --
February 1 - 28, 2005       --              --                --                        --
March 1 - 31, 2005         1,167         $ 17.08              --                        --
                        ------------------------------------------------------------------------
        Total              1,167         $ 17.08              --                        --
</TABLE>

All of the share amounts noted represent  shares of the Company's  Common Stock
that were  surrendered  to the  Company  in order to  fulfill  tax  withholding
obligations of employees upon vesting of restricted stock.


Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

      10.40 Addendum effective January 1, 2005 to The Reader's Digest
            Association, Inc. Director Compensation Program, filed as exhibit
            10.34 to our Current Report on Form 8-K dated November 18, 2004, is
            incorporated herein by reference.*

      10.41 Amended and Restated Sale Purchase Agreement between The Reader's
            Digest Association, Inc. and GAP III Properties LLC and Summit
            Development, LLC dated as of November 18, 2004, but effective as of
            September 10, 2004, filed as exhibit 10.35 to our Current Report on
            Form 8-K dated November 18, 2004, is incorporated herein by
            reference.

      10.42 Description of operation of the executive incentive program of The
            Reader's Digest Association, Inc., including the Senior Management
            Incentive Plan (fiscal 2006 awards), the Management Incentive
            Compensation Plan (fiscal 2006 awards) and the 2002 Key Employee
            Long Term Incentive Plan (fiscal 2005 and 2006 awards), included in
            Item 1.01 of our Current Report on Form 8-K dated March 11, 2005,
            is incorporated herein by reference.*

      10.43 Five-Year Revolving Credit Agreement, dated as of April 14, 2005,
            among the Company, as Borrower and Guarantor, Books Are Fun, Ltd.,
            QSP, Inc. and Reiman Media Group, Inc., as Borrowing Subsidiaries
            and Subsidiary Guarantors, the Lenders party thereto, JPMorgan
            Chase Bank, N.A., as administrative agent and collateral agent, The
            Royal Bank of Scotland plc, as syndication agent and Commerzbank
            AG, New York Branch, HSBC Bank USA, National Association, and
            Wachovia Bank, National Association, as co-documentation agents,
            and the joint lead arrangers and joint bookrunners named therein,
            filed as exhibit 10.1 to our Current Report on Form 8-K dated April
            14, 2005, is incorporated herein by reference.

      10.44 Description of operation of the Senior Management Incentive Plan
            (Fiscal 2005), the Management Incentive Compensation Plan (Fiscal
            2005) and the Long-Term Incentive Plan (Fiscal 2004-2005 Performance
            Shares) of The Reader's Digest Association, Inc.*

      10.45 Salary compensation information.*

      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    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.


*Denotes a compensatory contract, plan or arrangement.



(b)   Reports on Form 8-K

      During the three months ended March 31, 2005, we filed the following
      reports on Form 8-K:

        - Current Report on Form 8-K dated January 5, 2005, Items 1.01 and 8.01

        - Current Report on Form 8-K dated January 10, 2005, Items 2.02 and 9.01

        - Current Report on Form 8-K dated January 21, 2005, Item 8.01

        - Current Report on Form 8-K dated January 26, 2005, Items 2.02, 7.01
          and 9.01

        - Current Report on Form 8-K dated March 11, 2005, Item 1.01



<PAGE>










                                  SIGNATURES


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






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



Date:  May 5, 2005                By:  /s/THOMAS D. BARRY
                                       Thomas D. Barry
                                       Vice President and Corporate Controller
                                       (Chief accounting officer and authorized
                                       signatory)