==============================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended June 30, 2000 Commission file number: 1-10434

                    The Reader's Digest Association, Inc.
            (Exact name of registrant as specified in its charter)

                        Delaware                     13-1726769
             (State or other jurisdiction of           (I.R.S.
             incorporation or organization)           Employer
                                                   Identification
                                                        No.)
                 Pleasantville, New York                10570
        (Address of principal executive offices)     (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

                                               Name of each exchange
                Title of each class            on which registered

          Class A Nonvoting Common Stock
             par value $.01 per share         New York Stock Exchange

            Class B Voting Common Stock
             par value $.01 per share         New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:    None
                                --------------

Indicate by check mark if  disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained,  to
the best of the  registrant's  knowledge,  in definitive  proxy or information
statements  incorporated  by  reference  in Part III of this  Form 10-K or any
amendment to this Form 10-K.  [X]

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 [ ]

The aggregate market value of registrant's  voting stock held by  non-affiliates
of registrant, at August 31, 2000, was approximately $197,622,764,  based on the
closing  price  of  registrant's  Class B Voting  Stock  on the New  York  Stock
Exchange--Composite Transactions on such date.

As of August 31, 2000,  90,520,731 shares of the registrant's  Class A Nonvoting
Common Stock and  12,432,164  shares of the  registrant's  Class B Voting Common
Stock were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Annual Report to Stockholders of The Reader's Digest Association, Inc. for
the fiscal year ended June 30, 2000.  Certain information therein is
incorporated by reference into Part I and Part II hereof.

Proxy Statement for the Annual Meeting of Stockholders of The Reader's Digest
Association, Inc. to be held on November 10, 2000.  Certain information
therein is incorporated by reference into Part III hereof.


                                TABLE OF CONTENTS

                                                                            Page
PART I

    ITEM 1. BUSINESS....................................................     1
      Strategic Initiatives.............................................     1
      Operating Segments................................................     2
      Global Books and Home Entertainment...............................     2
         Select Editions................................................     2
         Series Books...................................................     2
         General Books..................................................     2
         Music..........................................................     3
         Video..........................................................     3
         Other Books and Gift Items.....................................     3
         Production and Fulfillment.....................................     4
      U.S. Magazines....................................................     4
         Circulation and Advertising....................................     5
         QSP............................................................     6
         Editorial......................................................     6
         Production and Fulfillment.....................................     6
      International Magazines...........................................     7
         Circulation and Advertising....................................     8
         Editorial......................................................     8
         Production and Fulfillment.....................................     8
      Other Businesses..................................................     8
         Merchandise Catalogs and Online Shopping Operations............     8
         Financial Services.............................................     9
         Other Developing Businesses....................................     9
      Direct Marketing Operations.......................................    10
      Information Technology and Customer List Enhancement..............    11
      Competition and Trademarks........................................    11
      Employees.........................................................    12
      Executive Officers................................................    12

    ITEM 2. PROPERTIES..................................................    15

    ITEM 3. LEGAL PROCEEDINGS...........................................    15

    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........    15


PART II

    ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.........................................    16

    ITEM 6. SELECTED FINANCIAL DATA.....................................    16

    ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATION..........................    16

    ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
            MARKET RISK.................................................    17


                                TABLE OF CONTENTS
                                   (Continued)

                                                                            Page

    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................    17

    ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE......................    17


PART III

    ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........    18

    ITEM 11.EXECUTIVE COMPENSATION......................................    18

    ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT..............................................    18

    ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............    18


PART IV

    ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
            ON FORM 8-K.................................................    19

    SIGNATURES..........................................................    23

    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..........................    24






  Unless the context  otherwise  requires,  references  in this Annual Report on
   Form 10-K to "Reader's Digest," "we," "us" and "our" are to The Reader's
                Digest Association, Inc. and its subsidiaries.


     "Reader's Digest" and the Pegasus logo are  registered  trademarks  of
                    The Reader's Digest Association, Inc.


                                     PART I
ITEM 1.  BUSINESS

      We are a preeminent global leader in publishing and direct marketing,  and
we create and deliver  products  that  inform,  enrich,  entertain  and inspire,
including magazines, books, recorded music collections, home videos.

      We are a Delaware corporation, originally incorporated in New York in 1926
and  then  reincorporated  in  Delaware  in 1951.  The  mailing  address  of our
principal  executive offices is Pleasantville,  New York 10570 and our telephone
number is (914) 238-1000.

      We are best known for publishing our flagship  Reader's  Digest  magazine.
Reader's Digest is a monthly,  general interest magazine  consisting of original
articles,  previously  published  articles in  condensed  form,  and a condensed
version of a previously  published or  soon-to-be  published  full-length  book.
Reader's Digest also contains monthly humor columns such as "Laughter,  The Best
Medicine(R),"  "Life's Like That(R)," "Humor In Uniform(R)," and "All In A Day's
Work(R)," and other regular features,  including "Heroes For Today(R)," "It Pays
To Enrich Your Word Power(R)," "News From The World Of Medicine(R),"  "Tales Out
of  School(R),"  "Virtual  Hilarity(R),"  "Personal  Glimpses(R),"  and  "Campus
Comedy(R)."  The  international  editions of  Reader's  Digest  include  similar
features.

      DeWitt and Lila Acheson Wallace founded  Reader's Digest magazine in 1922.
Today,  Reader's Digest has a worldwide circulation of about 24 million and over
100 million readers each month.  Reader's Digest is published in 48 editions and
19 languages.

      Currently,   our  largest   business   unit  is  Global   Books  and  Home
Entertainment,  which  publishes and markets  Reader's  Digest Select  Editions,
series books,  general books,  recorded music  collections and series,  and home
video products and series.  Global Books and Home Entertainment also sells books
and gift items by display  marketing  products on-site at schools and businesses
through Books Are Fun, Ltd., which was acquired on October 1, 1999.


Strategic Initiatives

      The key elements of our long-term growth strategy include:

      -  expanding our presence in five areas of intense consumer
         interest--health, home, family, finance and faith;

      -  selling non-publishing products and services in those areas;

      -  continuing our geographic expansion;

      -  developing new marketing channels;

      -  broadening our customer base to include more younger customers and more
         products for older customers; and

      -  integrating the Internet into all of our businesses.

To implement this strategy, we expect to invest in internal growth opportunities
in our core businesses.  We also expect to make  acquisitions and form alliances
that leverage our core strengths.




<PAGE>


Operating Segments

      We have four operating segments: Global Books and Home Entertainment, U.S.
Magazines,  International Magazines and Other Businesses.  Financial information
about each of our operating  segments is included in Note 13 to our consolidated
financial statements, which are incorporated by reference into this report.


Global Books and Home Entertainment

      Our Global Books and Home Entertainment operations publish Reader's Digest
Select Editions,  series books,  general books,  recorded music  collections and
series, and home video products and series. We market these products principally
by direct mail.  Global Books and Home  Entertainment  also sells books and gift
items by display  marketing  products on-site at schools and businesses  through
Books Are Fun. For more  information  about how we market our  products,  please
refer to the section of this report captioned "Direct Marketing Operations."


   Select Editions

      Reader's Digest Select  Editions,  which were formerly  called  "Condensed
Books" in many markets, are a continuing series of condensed versions of current
popular fiction.  A condensed work reduces the length of an existing text, while
retaining the author's  style,  integrity and purpose.  Today, we publish Select
Editions in 15 languages,  and market them in 28 countries. We generally publish
six volumes of Select  Editions a year. Some of our  international  subsidiaries
publish  four or  five  volumes  a year.  Select  Editions  generated  worldwide
revenues of $266.0  million in fiscal  2000,  $254.1  million in fiscal 1999 and
$260.4 million in fiscal 1998.

      International  editions of Select Editions generally include some material
from the U.S.  edition  or from other  international  editions,  translated  and
edited as  appropriate.  International  editions  also  include  some  condensed
versions of locally  published  works.  Each local  editorial  staff  determines
whether  existing  Select  Editions  selections are  appropriate for their local
market.


   Series Books

      We market  two  types of  series  books--reading  series  and  illustrated
series.   These  book  series  may  be  either   open-ended  and  continuing  or
closed-ended,  consisting  of a limited  number of volumes.  We publish  reading
series  books in four  languages  and market them in 11  countries.  Our reading
series include The World's Best Reading,  which consists of full-length editions
of classic works of  literature.  We publish six or seven volumes of The World's
Best  Reading  each  year in  seven  countries  and two  languages.  We  publish
illustrated  series,  which are generally  closed-ended,  in seven languages and
market them in 15 countries. Series books generated worldwide revenues of $121.5
million in fiscal  2000,  $125.5  million in fiscal  1999 and $162.1  million in
fiscal 1998.


   General Books

      Our  general  books  consist  primarily  of  reference  books,  cookbooks,
"how-to"  and  "do-it-yourself"  books and  children's  books,  some of which we
publish in series.  We also publish books on subjects  such as history,  travel,
religion,  health, nature and the home. We publish general books in 19 languages
and market them in 36 countries.  General books generated  worldwide revenues of
$444.0 million in fiscal 2000,  $507.4 million in fiscal 1999 and $606.0 million
in fiscal 1998.

      New general books are usually original Reader's Digest books, but may also
be books acquired from other  publishers.  During the development  period for an
original  Reader's  Digest book,  we conduct  extensive  research and prepare an
appropriate marketing strategy for the book.

      We sell most copies of a general  book through  initial  bulk  promotional
mailings.  We  also  sell  substantial   additional  copies  through  subsequent
promotions,  through  catalog  sales and  through  the use of sales  inserts  in
mailings for other  Reader's  Digest  products.  We also  distribute our general
books for retail sale in stores through independent distributors.


   Music

      Our music  collections,  released  on compact  discs and  cassettes  in 31
countries,  span a broad range of musical styles, ranging from classical to pop,
and from jazz to local folk. We offer both  international and local repertoires,
which reflect our  customers'  taste and  expectations.  In most markets we also
sell music series, in various musical genres. Music products generated worldwide
revenues of $277.6  million in fiscal  2000,  $345.5  million in fiscal 1999 and
$377.5 million in fiscal 1998.

      We license existing recordings from major record companies and sponsor our
own recordings with the world's most renowned  orchestras and with international
and  local  artists.  Our music  vault  now  consists  of  approximately  20,000
selections,  used in our music collections around the world. We also license our
selections to third parties for retail sales or for movie  synchronization.  Our
focus in recent years has been  acquiring more rights to master  recordings.  In
2000, we acquired a complete  catalog,  entitled  Discover,  comprising over 200
compact discs of high quality classical recordings.

      We are a member of the Recording  Industry  Association  of America in the
United  States,  and  we  have  been  recognized  with  51  gold,  platinum  and
multi-platinum  certificates.  In several other countries we are a member of the
International Federation of the Phonographic Industry.


   Video

      Our single sales home video products and series reflect the core interests
of our  global  customers  - travel,  natural  history,  history,  science,  and
emerging  areas of interest - health and  computers.  We market  video  products
through direct response channels in the United States and 23 other countries. In
some  countries we also sell our home video  products  through  retail  outlets.
While we are ensuring continued growth in our more established  markets,  we are
supporting  the  dynamic  potential  of video  operations  in Latin  America and
Eastern Europe.  Home video products  generated  worldwide revenues of $158.9 in
fiscal 2000, $193.1 million in fiscal 1999 and $215.8 million in fiscal 1998.

      We are  working  with  award-winning  production  companies  in the United
States,  Europe  and  Australia  to  create  original  programs  with  very high
editorial and production standards. Several original programs have won awards of
excellence,  including  five  Emmy  awards.  In  May  1999,  we  entered  into a
multi-year  agreement  with CBS  Productions  to develop  television  movies and
mini-series based on the personal dramas chronicled in Reader's Digest.  Most of
our original  programs have been licensed to  broadcasters  worldwide  through a
major  international  distributor.  We are keeping  pace with new  technological
developments--including  creating of a Global Video Digital  Library--that  will
allow us to deliver  even  better  quality,  multi-dimensional  programs  to our
customers.


   Other Books and Gift Items

      On October 1, 1999, we purchased 100% of the stock of Books Are Fun. Books
Are Fun sells premium-quality books and gift items at discount prices by display
marketing  those products  on-site at schools and businesses in all 50 states of
the United States and across Canada using book fairs and similar displays. Books
Are Fun's book categories include  best-selling  novels,  cookbooks,  children's
books,  education,  sports, hobby, nature, travel and self-help titles. Non-book
categories include music,  videos and gift items. Books Are Fun  representatives
serve approximately 60,000 schools,  12,000 large corporations and institutions,
9,000 day-care centers and 20,000 small businesses.


   Production and Fulfillment

      We hire independent  contractors to print and bind the various editions of
Select  Editions.  We have an exclusive  agreement  with a printing  company for
printing  English-language  Select Editions distributed in the United States and
Canada. That agreement expires in 2005. Beginning in fiscal 2001, all other U.S.
book products are printed by a single  independent  contractor.  We usually hire
independent contractors to produce and manufacture our music and video products.

      Paper is the principal raw material necessary for production of our Select
Editions,  series books and general books. We have an exclusive agreement with a
major  supplier to supply paper for Select  Editions.  The agreement  expires in
2002. We purchase paper for series books and general books for each printing. We
believe that our existing  contractual  arrangements and other available sources
of paper provide us with an adequate supply of paper at competitive  prices.  We
use  independent  contractors to arrange for us to acquire some of the necessary
raw materials to manufacture music and video products.

      We hire independent  contractors to handle our  fulfillment,  warehousing,
customer service and payment  processing.  In September 1999, we entered into an
agreement with a single independent  contractor to handle fulfillment processing
for our U.S. Books and Home  Entertainment  and U.S. Magazine  operations.  That
agreement  expires in 2006. The printers or suppliers of our products  generally
package  and  deliver  those  products  directly  to  the  postal  service.  For
information about postal rates and postal services,  please refer to the section
of this report captioned "Direct Marketing Operations."

      It is our direct  marketing  policy that a customer may return any book or
home entertainment  product to us for a refund,  either before or after payment.
We believe that our returned  goods  policy is essential to our  reputation  and
that it  elicits  a greater  number  of  orders.  Many of those  orders  are not
returned because a high number of consumers are satisfied with our products.

      Sales of books and home entertainment products are seasonal. In the direct
marketing  industry as a whole, more consumers respond in the winter months than
during  the rest of the  year.  Also,  sales are  typically  higher  during  the
pre-Christmas season than in spring and summer.


U.S. Magazines

      Our U.S. Magazines  operations publish Reader's Digest and several special
interest  magazines in the United  States.  These  magazines are sold  primarily
through direct marketing.  In addition,  U.S.  Magazines sells its magazines and
other  magazines and products  through youth  fundraising  campaigns of our QSP,
Inc. subsidiary.

      U.S. Magazines publishes Reader's Digest in several editions, including an
English-language  edition,  a Spanish  language  edition and the Reader's Digest
Large Edition for Easier Reading. We license independent  contractors to publish
a braille edition and a recorded edition in the United States.

      We  publish  several  special  interest  magazines  that  we  believe  are
consistent with our image, editorial philosophy and market expertise. The Family
Handyman(R)  magazine  provides  instructions and guidance for  "do-it-yourself"
home improvement projects. New Choices:  Living Even Better After 50(R) magazine
is aimed at active,  mature readers and provides  information on  entertainment,
travel,  health  and  leisure  time  activities.  Walking(R)  magazine  provides
information   on  health  and   fitness  for   walking   enthusiasts.   American
Woodworker(R)   magazine  and  its  consumer  trade  show   operations   provide
information,  instruction  and guidance  for  professional  and serious  amateur
woodworkers.  Prior to  August  1999,  we also  published  American  Health  for
Women(R) magazine,  which provided helpful  information on medicine,  nutrition,
psychology and fitness as those issues relate to women.  In August 1999, we sold
the American Health magazine  trademark,  subscriber list and other  circulation
assets.

      We promote our U.S. special interest magazines to our U.S. Reader's Digest
customer list. We also promote other products to each magazine's  customer list,
as  appropriate.  This strategy  helps us to expand the customer base for all of
our products.

      We also publish other limited-edition special interest publications in the
United  States,  such as  Reader's  Digest  Christmas,  which we have  published
annually since 1997 and Reader's Digest Your Family,  which debuted as a special
edition in May 1999.


   Circulation and Advertising

      The following table shows circulation and advertising information for U.S.
Magazines operations for fiscal 2000.

<TABLE>
<CAPTION>
                                                              June 30,2000       Advertising
                                                    Issues     Circulation          Pages
           Magazine Title                          Per Year     Rate Base          Carried

<S>                                                   <C>      <C>                 <C>
Reader's Digest--U.S.--English edition ...             12       12,500,000          1,131
 Reader's Digest Large Edition for
  Easier Reading ........................              12          463,000            153
The Family Handyman .....................              10        1,100,000            707
American Health for Women ...............               3        1,000,000            131
 New Choices: Living Even Better After 50              10          600,000            494
Walking .................................               7          650,000            435
Selecciones .............................              12          210,000            247
American Woodworker .....................               7          325,000            384
</TABLE>

      Approximately  68% of total U.S.  fiscal 2000 revenues for Reader's Digest
was  generated  by  circulation  revenues  and  32%  by  advertising   revenues.
Approximately  58% of total U.S.  fiscal 2000 revenues for the special  interest
magazines  were  generated  by  circulation  revenues  and  42%  by  advertising
revenues.

      We have determined that the  U.S.--English  edition of Reader's Digest has
the  largest  paid   circulation  of  any  U.S.   magazine,   other  than  those
automatically  distributed to all members of the American Association of Retired
Persons.  Our  determination  is based on the most recent audit report issued by
the Audit  Bureau of  Circulation,  Inc.,  a  not-for-profit  organization  that
monitors  circulation in the United States and Canada.  Approximately 94% of the
U.S. paid circulation of Reader's Digest consists of subscriptions.  The balance
consists  of single copy sales at  newsstands  and in  supermarkets  and similar
retail  establishments.  We sell our special interest  magazines by subscription
and at newsstands.

      We maintain the  circulation  rate base for Reader's Digest through annual
subscription  renewals and new subscriptions.  The circulation rate base for the
U.S.--English  edition of Reader's  Digest was  reduced  from 15 million to 13.3
million  copies per issue for the  January-June  1999 issues and to 12.5 million
with the July 1999  issue.  Each year,  we sell  approximately  4.3  million new
subscriptions  in the United  States to maintain  the current  circulation  rate
base.  We sell new  subscriptions  primarily by direct mail. We sell the largest
percentage of subscriptions between July and December of each year.  Subscribers
to Reader's Digest may cancel their subscriptions at any time and we will refund
the unused  subscription  price.  For additional  information  regarding  direct
marketing of subscriptions, please refer to the section of this report captioned
"Direct Marketing Operations."

      The U.S. editions of Reader's Digest offer advertisers  different regional
editions,  major market editions and demographic editions. These editions, which
usually contain the same editorial  material,  permit advertisers to concentrate
their advertising in specific markets or to target specific audiences.  Reader's
Digest sells  advertising in the United States  principally  through an internal
advertising  sales force.  We sell  advertisements  in multiple  Reader's Digest
editions worldwide,  and offer discounts for placing advertisements in more than
one edition.

      Like most other  magazines,  our  special  interest  magazines  are highly
dependent on advertising revenues.


   QSP

      We also market and sell  subscriptions  to Reader's Digest and the special
interest magazines in the United States through QSP. QSP helps schools and youth
groups  prepare  fundraising  campaigns  in  which  participants  sell  magazine
subscriptions,  music and video products, books, food and gifts. QSP derives its
revenues  from  the  sale  of  products  through  fundraising  organizations.  A
substantial  majority of QSP's  sales occur  during the first half of our fiscal
year, which includes the fall school semester.

      In May  2000,  QSP  completed  its  acquisition  of the  almost  200 sales
representatives  of World's Finest  Chocolate,  Inc., a leading  chocolate sales
fundraiser,  who joined the 300 sales  representatives  of QSP. QSP also entered
into a long-term licensing agreement with World's Finest Chocolate providing for
a long-term  commitment to purchase  World's Finest  Chocolate  products and the
exclusive right to sell those products for fundraising purposes. QSP and World's
Finest Chocolate expect to combine the product lines that they offer for sale by
their fundraising clients.

      In March 2000,  QSP entered  into an alliance  agreement  with  Schoolpop,
Inc., an online  fundraiser that enables online shoppers to contribute  funds to
schools.  Through  the  alliance,  QSP will  introduce  and build  awareness  of
Schoolpop,   Inc.'s  online   fundraising   programs   among  school  and  youth
organizations and QSP's magazine  subscription services and fundraising services
and World's Finest Chocolate products will be promoted online through Schoolpop.
QSP also acquired a nine percent equity interest in Schoolpop, Inc.


   Editorial

      Reader's Digest is a reader-driven, family magazine. Its editorial content
is,  therefore,  crucial  to the  loyal  subscriber  base that  constitutes  the
cornerstone of our  operations.  The editorial  mission of Reader's Digest is to
inform, enrich,  entertain and inspire. The articles,  book section and features
included  in Reader's  Digest  cover a broad  range of  contemporary  issues and
reflect an awareness of traditional values.

      A substantial  portion of the  selections in Reader's  Digest are original
articles written by staff writers or free-lance writers. The balance is selected
from existing  published  sources.  All material is condensed by Reader's Digest
editors. We employ a professional staff to research and fact-check all published
pieces.


   Production and Fulfillment

      We hire  independent  contractors  to print all U.S.  editions of Reader's
Digest and our special interest magazines.  We have an exclusive contract with a
U.S. printer to print the U.S.  editions of Reader's  Digest.  The contract will
expire in 2007.  We  believe  that  generally,  there is an  adequate  supply of
alternative printing services available to us at competitive prices,  should the
need arise. Nevertheless, significant short-term disruption could occur. We have
contingency plans to minimize recovery time should our current contract printers
be unable to meet our production requirements.


<PAGE>


      Lightweight coated and uncoated paper are the principal raw materials used
in the production of Reader's  Digest and special  interest  magazines.  We have
exclusive  supply  contracts  with a number of global and regional  suppliers of
paper. Our principal contract expires in 2002. We believe those supply contracts
provide  an  adequate  supply of paper for our  needs  and that,  in any  event,
alternative  sources are available at competitive  prices.  A variety of factors
affect paper  prices,  including  demand,  capacity,  pulp  supply,  and general
economic conditions.

      In September 1999, we entered into an agreement with a single  independent
contractor to handle our fulfillment processing. That agreement expires in 2006.
The same  contractor  also  handles  these  matters for our U.S.  Books and Home
Entertainment operations.

      We deliver  subscription copies of the U.S. edition of Reader's Digest and
the special  interest  magazines  through the United  States  Postal  Service as
"periodicals"  class mail.  For  additional  information  about postal rates and
service,  please refer to the section of this report captioned "Direct Marketing
Operations."

      A distribution network handles newsstand and other retail distribution.

      Several hundred other publishers make magazine subscriptions  available to
QSP at  competitive,  discounted  prices.  QSP  also  obtains  discounted  music
products from a large music publisher.  QSP engages an independent contractor to
handle  processing  of magazine and music  orders.  A subsidiary  of QSP handles
processing of video, book, gift and food orders.


International Magazines

      Our  International  Magazines  operations  publish  Reader's  Digest in 47
editions  and 19 languages  outside the United  States.  We license  independent
contractors to publish Reader's Digest in India,  Italy, Korea and South Africa.
International  Magazines also publishes Moneywise, a magazine devoted to helping
families  manage their  finances,  in the United  Kingdom.  In August  1999,  we
acquired  Benchmark,  Ltd., a publisher of monthly investment guides distributed
in Hong Kong, Taiwan and Singapore. In June 2000, we acquired Rena, publisher of
the leading Czech do-it-yourself and gardening monthly magazine.


   Circulation and Advertising

      Reader's  Digest  is truly a global  magazine.  Many of its  international
editions have the largest paid  circulation  for monthly  magazines  both in the
individual  countries and in the regions in which they are  published.  For most
international editions of Reader's Digest,  subscriptions comprise almost 93% of
circulation.  The balance is  attributable  to newsstand and other retail sales.
Approximately  82% of total  international  fiscal 2000  revenues  for  Reader's
Digest were generated by circulation revenues and 18% by advertising revenues.

      The following  table shows  circulation  and  advertising  information for
International Magazines operations for fiscal 2000.

                                                  June 30,2000   Advertising
                                         Issues    Circulation      Pages
          Magazine Title                Per Year   Rate Base       Carried

         Reader's Digest                   12      11,225,633      12,460
         Moneywise                         12         104,000         712

      We maintain the  circulation  rate base for Reader's Digest through annual
subscription  renewals and new  subscriptions.  Each year, we sell approximately
three million new  international  Reader's Digest  subscriptions to maintain the
international  circulation  rate base.  We sell new  subscriptions  primarily by
direct mail. We sell the largest  percentage of  subscriptions  between July and
January  of  each  year.   Subscribers  to  Reader's  Digest  may  cancel  their
subscriptions at any time and we will refund the unused  subscription price. For
additional information regarding direct marketing of subscriptions, please refer
to the section of this report captioned "Direct Marketing Operations."

      The larger  international  editions of Reader's  Digest offer  advertisers
different  regional  editions,  major market editions and demographic  editions.
These  editions,  which  usually  contain the same  editorial  material,  permit
advertisers to concentrate  their  advertising in specific  markets or to target
specific audiences.  Reader's Digest sells international advertising principally
through an internal  advertising sales force. We sell advertisements in multiple
Reader's   Digest   editions   worldwide,   and  offer   discounts  for  placing
advertisements in more than one edition.


   Editorial

      The  international  editions of Reader's Digest contain content and follow
editorial  procedures similar to the U.S. editions.  Each international  edition
has a local  editorial  staff  responsible  for  the  editorial  content  of the
edition.  The mix of locally generated editorial  material,  material taken from
the U.S.  edition and material taken from other  international  editions  varies
greatly among  editions.  In general,  our larger  international  editions,  for
example,  those in Canada,  France,  Germany and the United Kingdom,  carry more
original or locally adapted material than do smaller editions.


   Production and Fulfillment

      We hire  independent  contractors to print all  international  editions of
Reader's  Digest  and  to  provide  fulfillment  services.  Issues  relating  to
available  printing  capacity  and paper  supplies  are  similar to those in the
United States.

      Subscription  copies of  international  editions  of  Reader's  Digest are
delivered  through the postal  service in each country of  publication.  We have
also  contracted in each country with a newsstand  magazine  distributor for the
distribution of Reader's Digest.  For additional  information about postal rates
and  service,  please  refer to the  section of this  report  captioned  "Direct
Marketing Operations."


Other Businesses

   Merchandise Catalogs and Online Shopping Operations

      Our  gifts.com,   Inc.  subsidiary  comprises  the  Good  Catalog  Company
division, a catalog marketer of home, garden and gift-related  products, and the
gifts.com division, an online gift shopping service. We own an 80.1% interest in
gifts.com,  Inc. and  Domain.com,  Inc., an affiliate of StarTek,  Inc.,  owns a
19.9% interest.  We created the gifts.com  online shopping service in fall 1999.
The gifts.com Web site features over 500 different  products,  including leading
brands and non-branded specialty items, as well as a specialty gifts catalog. In
July 2000,  gifts.com,  Inc.  signed an agreement with Altura  International,  a
leading  architect,  manager and developer of custom online shopping malls,  and
its subsidiary and flagship shopping portal, CatalogCity.com,  to develop custom
online gift stores for leading Web sites.

      Good Catalog  Company offers over 2,000  different  products  through five
different  catalog  titles,  which have a total  circulation of over 20 million.
Merchandise  ranges  from home  furnishing  and  decorative  accents  to garden,
health, fitness, sports and electronic goods, as wells as children's toys, games
and crafts.



   Financial Services

      Insurance.  In August 1999,  we formed an exclusive  alliance  with member
companies  of  Torchmark  Corporation,  which  market life and health  insurance
products to our  customers in the United  States.  The products are marketed and
sold  by  Torchmark   Corporation   member   companies   through   direct  mail,
telemarketing,  and  advertising  in our  magazines.  There is also an  Internet
marketing component.  Torchmark Corporation member companies underwrite policies
and provide customer and claims services.

      In January 2000, we formed an alliance with American  International Group,
Inc.  under  which  they  will  offer a range of  personal  insurance  products,
including  automobile,  homeowners and personal liability  insurance to our U.S.
customers.

      In February 2000, we formed an alliance with American International Group,
Inc. to develop a program under which its member  companies  will market a range
of life,  accident and health and general insurance products and services to our
customers  in  26  other   countries   outside  the  United   States.   American
International  Group,  Inc.  member  companies will  administer the products and
provide customer and claims services and marketing support for all products.

      Credit  Card.  In August 1999,  we signed an  agreement  with First USA, a
subsidiary of Bank One Corporation,  to market a Reader's  Digest-branded credit
card to our customers. Under the agreement, First USA launched a Reader's Digest
Platinum MasterCard in April 2000. FirstUSA administers the credit cards.


   Other Developing Businesses

      Readersdigesthealth.com.  As part of our global Internet health  strategy,
in 2000,  we launched  readersdigesthealth.com,  a Web site  intended to provide
users  who  want to  actively  manage  their  health  with  high-quality  health
information, advice and products. The site draws content from our health-related
editorial products and from other health-related  content sources. In July 1999,
we entered into an alliance  agreement  with an  affiliate of WebMD  Corporation
that    provides    for   WebMD   to   develop,    host   and    maintain    the
readersdigesthealth.com  Web site and for  content  from each party to appear on
the other's Web site.  Also under the  agreement,  WebMD will  provide  Reader's
Digest  magazine to the  subscribers  to its healthcare  professional  services,
purchasing a minimum of 3,000,000  copies over the five-year period after launch
of the site.  WebMD will also purchase  advertising  in our magazines to promote
the WebMD Web site.  Each issue of the U.S.  edition  of  Reader's  Digest  will
include WebMD advertorial pages,  including an "Ask WebMD" column and a calendar
of   online   events   that  will   occur  on  both  the  WebMD   site  and  the
readersdigesthealth.com site.

      YOURxPLAN.  In April 2000, we entered into an agreement with
Merck-Medco Managed Care, L.L.C., a subsidiary of Merck & Co., Inc. to offer
YOURxPLAN, a discount prescription drug service.  Under the agreement, we are
primarily responsible for marketing the service and Merck-Medco administers
the program, handles product sourcing, fulfillment, customer service and
clinical oversight.  The arrangement includes both revenue and cost sharing.

      Membership  Clubs.  In October  1999,  we entered into an  agreement  with
BrandDirect  Marketing,  Inc., an affinity,  membership-based,  direct marketing
company,  to acquire an 18% equity interest in BrandDirect  Marketing,  Inc. The
agreement also permits us to acquire additional equity in BrandDirect Marketing,
Inc. through the exercise of warrants and other rights.  The agreement  provides
for joint development and marketing of Reader's Digest-branded  membership clubs
in which  consumers pay an annual  membership fee for a wide range of membership
benefits.  We intend to build clubs around our core  affinities  and to sell our
products  and   services   through   those  clubs  in  the  United   States  and
internationally.


Direct Marketing Operations

      We sell magazine  subscriptions,  Select Editions,  series books,  general
books, music and video products, as well as certain other products,  principally
through  direct mail  solicitations  to  households on our customer  lists.  Our
products and product offers are usually  accompanied by sweepstakes entries and,
in some  cases,  premium  merchandise  offers.  For  many  years,  we have  been
acknowledged as a pioneer and innovator in the direct mail industry.

      As part of our growth  strategy  and our strategy to decrease our reliance
on sweepstakes marketing, we are increasing distribution of our products through
direct-response  channels  other than  direct  mail.  These  other  distribution
channels  include  direct-response  television,   telemarketing,  the  Internet,
catalogs and clubs. We are also  continuing to conduct tests of  non-sweepstakes
promotional  mailing packages in the United States. The initial results of these
tests have been encouraging.

      We are adapting the  editorial  content and the  marketing  methods of our
magazines and books and home entertainment products to new technologies. Our Web
site--www.readersdigest.com--links  our 34 local and international Web sites and
our 11 online stores, for shopping and information about our products.  In 2000,
readersdigest.com had over 8.1 million visitors from around the world.

      To promote the sale of our products in the United States, we usually offer
a sweepstakes in our promotional mailings.  Prizes totaled about $10 million for
the  2000  edition  of the  sweepstakes.  Generally,  each of our  international
subsidiaries sponsors its own sweepstakes. The mechanics of the sweepstakes vary
from jurisdiction to jurisdiction, depending upon local law.

      From time to time, we are involved in legal,  regulatory and investigative
proceedings  concerning our  sweepstakes and other direct  marketing  practices.
Also from time to time,  jurisdictions  in which we do  business  consider  more
restrictive  laws or  regulations  governing  sweepstakes  or direct  marketing.
Although  some of these  proceedings  may have  negatively  affected  our direct
marketing  business,  we do not believe that these proceedings and proposed laws
and  regulations  will have a material  adverse  effect on our direct  marketing
business.

      We are  subject  to  postal  rate  increases,  which  affect  our  product
deliveries,  promotional  mailings and  billings.  Postage is one of the largest
expenses in our  promotional  and billing  activities.  In the past, we have had
sufficient  advance  notice of most  increases  in postal rates so that we could
factor the higher rates into our pricing strategies and operating plans.  Higher
postal rates or other delivery  charges  usually  increase the total cost to the
customer,  which  may have a  negative  effect on  sales.  As a  result,  we may
strategically  determine  the  extent,  if any, to which we will pass these cost
increases on to our customers.

      We rely on postal delivery service for timely delivery of our products and
promotional  mailings.  In the  United  States and most  international  markets,
delivery service is generally  satisfactory.  Some international  jurisdictions,
however,  experience  periodic work stoppages in postal delivery service or less
than adequate postal efficiency.

      In  some   states  in  the  United   States  and  in  some   international
jurisdictions,  some or all of our  products  are  subject to sales tax or value
added tax. Taxes, like delivery costs, are generally stated separately on bills,
where  permitted by applicable  law. Higher taxes increase the total cost to the
customer,  which may have a negative  effect on sales.  In  jurisdictions  where
applicable tax must be included in the purchase price, we may be unable to fully
recover from customers the amount of any tax increase or new tax.


Information Technology and Customer List Enhancement

      The size and  quality of our  computerized  customer  list of current  and
prospective customers in each country where we operate contributes significantly
to our business.  We are constantly  striving to improve our customer  lists. We
believe that our U.S.  list of over 54 million  households--over  half the total
number of households in the country--is one of the largest direct response lists
in the United States.  Our international  lists include a total of approximately
49 million households.

      We  continue  to  make  significant   investments  in  our  database  list
management  and  related   information   technology  to  improve  our  operating
efficiencies,  to increase the level of service we provide to our customer  base
and to facilitate globalization of our operations.

      Some  international  jurisdictions,  particularly  in  Europe,  have  data
protection  laws  or  regulations   prohibiting  or  limiting  the  exchange  of
information of the type that we maintain.  Some  jurisdictions also prohibit the
retention of  information,  other than certain  basic  facts,  about  noncurrent
customers.  Although these regulations may hinder our ability to collect, retain
and use customer  information,  we believe that current laws and  regulations do
not prevent us from  engaging  in  activities  necessary  to operate our current
businesses.


Competition and Trademarks

      Although Reader's Digest is a unique and  well-established  institution in
the  magazine  publishing  industry,   it  competes  with  other  magazines  for
subscribers and with magazines and all other media, including television,  radio
and  the  Internet,   for  advertising.   We  believe  that  the  extensive  and
longstanding  international  operations  of  Reader's  Digest  provide us with a
significant   advantage   over   competitors   seeking  to  establish  a  global
publication.

      We own numerous trademarks that we use in our business worldwide.  Our two
most  important  trademarks  are "Reader's  Digest" and the  "Pegasus"  logo. We
believe that the name  recognition,  reputation and image that we have developed
in each of our markets  significantly  enhance  customer  response to our direct
marketing sales promotions.  For these reasons,  trademarks are important to our
business and we aggressively defend our trademarks.

      We believe that our company  name,  image and  reputation,  as well as the
quality of our customer lists, provide a significant  competitive advantage over
many other direct marketers.  However, our books and home entertainment business
competes with companies  selling similar products at retail as well as by direct
marketing through various channels,  including the Internet.  Because tests show
that  consumers'  responses  to direct  marketing  promotions  can be  adversely
affected by the overall volume of direct marketing  promotions,  we also compete
with all other  direct  marketers,  regardless  of whether  their  products  are
similar to our products.

      Each of our special  interest  magazines  competes with other magazines of
the same genre for readers and  advertising.  Nearly all of our products compete
with  other  products  and  services  that  utilize  leisure  activity  time  or
disposable income.


Employees

      As of June 30, 2000, we employed about 5,000 people worldwide. We employed
about  2,400  in  the  United  States  and  about  2,600  in  our  international
subsidiaries. Our relationship with our employees is generally satisfactory.


Executive Officers

      The following is some information about our executive officers.

Name and Age                Positions With Reader's Digest and Recent
                               Business Experience

Thomas O. Ryder (56)        Mr. Ryder has been Chairman of the Board and
                            Chief Executive Officer and a Director of
                            Reader's Digest since April 1998.  Mr. Ryder was
                            President, American Express Travel Related
                            Services International, a division of American
                            Express Company (travel, financial and network
                            services), from October 1995 to April 1998.
                            Before October 1995, he served as President,
                            Establishment Services - Worldwide of American
                            Express Travel Related Services.

M. John Bohane  (64)        Mr. Bohane has been a Senior Vice President of
                            Reader's Digest and President, Global Books and
                            Home Entertainment since July  1998.  Before July
                            1998, he was Senior Vice President of Reader's
                            Digest and President, International Operations, a
                            position he held since rejoining Reader's Digest
                            in September 1997.  He first joined Reader's
                            Digest in 1964 and served in a number of
                            executive capacities, including President, Direct
                            Marketing, until leaving Reader's Digest in July
                            1991.

Michael A. Brizel (43)      Mr. Brizel has been Vice President and General
                            Counsel of Reader's Digest since July 1998.
                            Before July 1998, he was Vice President, Legal
                            U.S. and Associate General Counsel, a position he
                            held since September 1996.  Before September
                            1996, he was Associate General Counsel of
                            Reader's Digest.  Mr. Brizel joined Reader's
                            Digest in July 1989.

Elizabeth G. Chambers (37)  Ms.  Chambers has been Senior Vice President,
                            Strategy  and  Business  Redesign  since
                            November  1999.  Before  November 1999, she was Vice
                            President,  Business  Redesign of Reader's Digest, a
                            position she held since joining  Reader's  Digest in
                            August 1998.  Before August 1998,  she was a partner
                            at the  management  consulting  firm of  McKinsey  &
                            Company.


<PAGE>





Name and Age                Positions With Reader's Digest and Recent
                               Business Experience

Gregory G. Coleman (46)     Mr. Coleman has been a Senior Vice President and
                            President, U.S. Magazine Publishing of Reader's
                            Digest since July 1998.  Before July 1998, he was
                            Senior Vice President, Worldwide Publisher,
                            Reader's Digest Magazine, a position he held
                            since October 1997. Mr. Coleman also served as
                            Vice President and General Manager, U.S.
                            Magazines and Publisher, U.S. Reader's Digest
                            from December 1995 until October 1997, and Vice
                            President, Publisher, U.S. Reader's Digest prior
                            to December 1995.

Peter J.C. Davenport (60)   Mr. Davenport has been Senior Vice President,
                            Global Marketing and Publishing since October
                            1999.  Before October 1999, he was Senior Vice
                            President, Global Direct Marketing, except for
                            the period March to September 1997 when he
                            temporarily retired.  Mr. Davenport first joined
                            the Company in 1958.

Clifford H.R. DuPree (50)   Mr. DuPree has been Vice President,
                            Corporate Secretary and Associate General Counsel of
                            Reader's  Digest since July 1998. He joined Reader's
                            Digest  in May 1992 as  Associate  General  Counsel,
                            became  Assistant  Secretary  in March 1995 and Vice
                            President in September 1996.

Thomas D. Gardner (42)      Mr. Gardner has been Senior Vice President, U.S.
                            New Business Development of Reader' s Digest
                            since July 1998.  He was Vice President,
                            Marketing, Reader's Digest U.S.A. from November
                            1995 to July 1998, Vice President, Business
                            Development before November 1995.  Mr. Gardner
                            joined Reader's Digest in February 1992.

Robert J. Krefting (56)     Mr. Krefting has been Senior Vice President and
                            President, International Magazine Publishing of
                            Reader's Digest since July 1998.  Before joining
                            Reader's Digest, Mr. Krefting was sole proprietor
                            of Holly Hill Publishing, a management services
                            corporation serving the publishing and venture
                            capital industries.

Albert L. Perruzza (53)     Mr. Perruzza has been Senior Vice President,
                            Global Operations since October 1999.  Before
                            October 1999, he was Vice President, Database
                            Management Operations, a position he held since
                            August 1998.  Mr. Perruzza served as Vice
                            President, Customer Service Operations before
                            August 1998.  Mr. Perruzza first joined Reader's
                            Digest in 1972.

Robert E. Raymond (44)      Mr. Raymond was appointed Vice President,
                            Strategic Acquisitions & Alliances of Reader's
                            Digest in June 1999.  Before June 1999, he was
                            Vice President and General Manager, Music, Video,
                            Special Channels, a position he held since April
                            1998.  Mr. Raymond also served as Vice President
                            Marketing, Video/New Business from December 1997
                            until April 1998 and Director of Marketing,
                            Video/New Business before December 1997.  Mr.
                            Raymond joined Reader's Digest in 1993.


<PAGE>





Name and Age                Positions With Reader's Digest and Recent
                               Business Experience

Gary S. Rich (39)           Mr. Rich has been Senior Vice President, Human
                            Resources of Reader's Digest since August 1998.
                            Before joining Reader's Digest, he was Senior
                            Vice President, Global Human Resources for A.C.
                            Nielsen Corporation (provider of market research,
                            information and analysis to the consumer products
                            and services industries), a position he held from
                            June 1996 to July 1998.  Before June 1996, Mr.
                            Rich was Vice President, Human Resources-Europe,
                            Middle East and Africa, at American Express
                            Company (travel, financial and network services).

Eric W. Schrier (48)        Mr. Schrier has been Senior Vice President and
                            Editor-in-Chief of Reader's Digest since January
                            2000.  Before joining Reader's Digest, he was
                            President and Chief Executive Officer of Time
                            Inc. Health.

George S. Scimone (53)      Mr. Scimone has been Senior Vice President and
                            Chief Financial Officer of Reader's Digest since
                            July 1998.  Mr. Scimone served as Vice President
                            and Chief Financial Officer from September 1997
                            to July 1998, as Vice President and President,
                            Reader's Digest U.S.A. from November 1996 to
                            September 1997 and as Vice President and
                            Corporate Controller before November 1996.  Prior
                            to joining Reader's Digest, Mr. Scimone was
                            Business Chief Financial Officer, Electrical
                            Distribution and Control of General Electric
                            Company (appliances, aircraft engines, and other
                            electrical products and services).


      Our  By-Laws  state that  officers  serve at the  pleasure of our board of
directors.  We elect our officers annually and they serve until their successors
are elected and qualified.


<PAGE>



ITEM 2.  PROPERTIES

      Our  headquarters  and  principal  operating  facilities  are  situated on
approximately  120 acres in  Westchester  County,  New York. We acquired much of
this  property  in 1940.  The  table  below  shows  our  headquarters  and other
properties that we own or lease.

Location                 Area (sq. ft.)     Principal uses

Westchester County, NY   703,000  owned     Executive, administrative,
                                            editorial and operational offices;
                                            data processing; other facilities

New York, NY             153,180 leased     Books and home entertainment
                                            products editorial offices; Reader's
                                            Digest magazine advertising sales
                                            offices; special interest magazines
                                            offices

Various U.S. cities      220,669 leased     Editorial offices, advertising sales
                                            offices; other facilities

Conyers, GA              163,375 leased     QSP fulfillment facilities

International            589,138 owned      Headquarters, administrative and
                         678,258 leased     editorial offices; warehouse
                                            facilities

      We believe  that our current  facilities,  together  with  expansions  and
upgrades of facilities  presently underway or planned,  are adequate to meet our
present and reasonably  foreseeable  needs.  We also believe that adequate space
will be available to replace any leased  facilities  whose leases  expire in the
near future.


ITEM 3.  LEGAL PROCEEDINGS

      We and our  subsidiaries  are  defendants  in various  lawsuits and claims
arising in the regular  course of business.  Based on the opinions of management
and counsel for these matters, we believe that recoveries, if any, by plaintiffs
and claimants would not materially  affect our financial  position or results of
operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter  was  submitted  to a vote of our  security  holders  during the
fourth quarter of the fiscal year ended June 30, 2000.



<PAGE>


                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The information  contained under the caption "Selected Quarterly Financial
Data  and  Dividend  and  Market  Information"  in our  2000  Annual  Report  to
Stockholders is incorporated into this Item by reference.

ITEM 6.  SELECTED FINANCIAL DATA

      The information  contained under the caption "Selected Quarterly Financial
Data and Dividend and Market  Information" and "Selected  Financial Data" in our
2000 Annual Report to Stockholders is incorporated into this Item by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATION

      The information contained under the caption  "Management's  Discussion and
Analysis" in our 2000 Annual Report to Stockholders  is  incorporated  into this
Item by reference.

      This  report  contains  or  incorporates  by  reference   "forward-looking
statements"   within  the  meaning  of  the  U.S.   federal   securities   laws.
Forward-looking statements include any statements that address future results or
occurrences.  These  forward-looking  statements  inherently  involve  risks and
uncertainties  that could cause actual future results and  occurrences to differ
materially  from  the  forward-looking  statements.  Some  of  these  risks  and
uncertainties include factors relating to:

     -   the effects of potentially more restrictive privacy and other
         governmental regulation relating to our  marketing methods;

     -   the effects of modified and varied promotions;

     -   our ability to identify customer trends;

     -   our ability to continue to create a broadly appealing mix of new
         products;

     -   our ability to attract and retain new and younger magazine subscribers
         and product customers in view of the maturing of an important
         portion of our U.S. customer base;

     -   our ability to attract and retain subscribers and customers in an
         economically efficient manner;

     -   the effects of selective adjustments in pricing;

     -   our ability to expand and more effectively utilize our customer
         database;

     -   our ability to expand into new international markets and to introduce
         new product lines into new and existing markets;

     -   our ability to expand into new channels of distribution;

     -   our ability to negotiate and implement productive acquisitions,
         strategic alliances and joint ventures;

     -   our ability to integrate newly acquired and newly formed businesses
         successfully;

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

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

     -   our ability to contain and reduce costs, especially through global
         efficiencies;

     -   the cost and effectiveness of our re-engineering of business processes
         and operations;

     -   the accuracy of our management's assessment of the current status of
         our business;

     -   the evolution of our organizational and structural capabilities;

     -   our ability to respond to competitive pressures within and outside the
         direct marketing industry, including the Internet;

     -   the effects of worldwide paper and postage costs;

     -   the effects of possible postal disruptions on deliveries;

     -   the effects of foreign currency fluctuations;

     -   the accuracy of our management's assessment of the future effective tax
         rate and the effect of initiatives to reduce the rate;

     -   the effects of the transition to the euro;

     -   the effects and pace of our stock repurchase program; and

     -   the effects of general economic conditions.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The information contained under the caption  "Management's  Discussion and
Analysis" in the section entitled  "Currency Risk Management" in our 2000 Annual
Report to Stockholders is incorporated into this Item by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Our Consolidated Financial Statements appearing on pages 55 through 101 of
our 2000 Annual  Report to  Stockholders,  together  with the report of KPMG LLP
appearing on page 102, are incorporated into this Item by reference.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

      None.


<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information  with respect to our directors under the caption  "Proposal 1:
Election  of  Directors"  in the  Proxy  Statement  for our  Annual  Meeting  of
Stockholders to be held on November 10, 2000 is  incorporated  into this Item by
reference.  Information with respect to our executive officers appears under the
caption  "Executive  Officers"  in  Item  1 of  Part  I of  this  report  and is
incorporated into this Item by reference.


ITEM 11. EXECUTIVE COMPENSATION

      Information  with  respect to  executive  compensation  under the captions
"Executive  Compensation," "Report of the Compensation and Nominating Committee"
and  "Performance  Graph" in the  Proxy  Statement  for our  Annual  Meeting  of
Stockholders to be held on November 10, 2000 is  incorporated  into this Item by
reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Information  with  respect to  security  ownership  of certain  beneficial
owners and management under the caption "Equity Security Ownership" in the Proxy
Statement for our Annual Meeting of Stockholders to be held on November 10, 2000
is incorporated into this Item by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      None.


<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1 Financial Statements
      An index of our Consolidated  Financial  Statements  appears on page 24 of
      this report.

    2 Financial Statement Schedules
      All  schedules  have been  omitted  since the  information  required to be
      submitted has been included in the  Consolidated  Financial  Statements or
      Notes thereto or has been omitted as not applicable or not required.

    3 Exhibits

3.1.1 Restated  Certificate of Incorporation of The Reader's Digest Association,
      Inc. filed with the State of Delaware on February 7, 1990 filed as Exhibit
      3.1.1 to our Annual  Report on Form 10-K for the year ended June 30, 1993,
      is incorporated herein by reference.

3.1.2 Certificate  of  Amendment  of the  Certificate  of  Incorporation  of The
      Reader's  Digest  Association,  Inc.  filed with the State of  Delaware on
      February 22, 1991 filed as Exhibit 3.1.2 to our Annual Report on Form 10-K
      for the year ended June 30, 1993, is incorporated herein by reference.

3.1.2 Certificate  of  Amendment  of the  Certificate  of  Incorporation  of The
      Reader's  Digest  Association,  Inc.  filed with the State of  Delaware on
      November 19, 1999 filed as Exhibit 10.29 to our  Quarterly  Report on Form
      10-Q for the  quarter  ended March 31,  2000,  is  incorporated  herein by
      reference.

3.2   Amended and Restated  By-Laws of The Reader's  Digest  Association,  Inc.,
      effective  February 22, 1991 filed as Exhibit 3.2 to our Annual  Report on
      Form 10-K for the year  ended June 30,  1993,  is  incorporated  herein by
      reference.

10.1  The Reader's Digest Association,  Inc. Management  Incentive  Compensation
      Plan  (Amendment and Restatement as of July 1, 1994) filed as Exhibit 10.1
      to our Annual  Report on Form 10-K for the year ended  June 30,  1994,  is
      incorporated herein by reference.*

10.2  The Reader's Digest Association, Inc. 1989 Key Employee Long Term
      Incentive Plan filed as Exhibit 10.2 to our Registration Statement on
      Form S-1 (Registration No. 33-32566) filed on December 19, 1989, is
      incorporated herein by reference.*

10.3  The  Reader's  Digest   Association,   Inc.  Deferred   Compensation  Plan
      (Amendment  and  Restatement  as of July 8, 1994) filed as Exhibit 10.4 to
      our  Annual  Report  on Form 10-K for the year  ended  June 30,  1994,  is
      incorporated herein by reference.*

10.4  The Reader's Digest Association,  Inc. Income Continuation Plan for Senior
      Management  (amended  and  restated)  filed as Exhibit  10.5 to our Annual
      Report on Form 10-K for the year  ended  June 30,  1993,  is  incorporated
      herein by reference.*

10.5  Excess Benefit  Retirement Plan of The Reader's Digest  Association,  Inc.
      (Amendment  and  Restatement  as of July 1, 1994) filed as Exhibit 10.7 to
      our  Annual  Report  on Form 10-K for the year  ended  June 30,  1994,  is
      incorporated herein by reference.*


      *Denotes a management contract or compensatory plan.



<PAGE>


10.6  The  Reader's  Digest  1992  Executive   Retirement  Plan  (Amendment  and
      Restatement as of October 10, 1996),  filed as Exhibit 10.12 to our Annual
      Report on Form 10-K for the year  ended  June 30,  1997,  is  incorporated
      herein by reference.*

10.7  The Reader's Digest Association, Inc. Executive Cash Balance Retirement
      Plan.*

10.8  The Reader's Digest Association, Inc. Executive Financial Counseling Plan,
      amended  and  restated  as of July 1, 1998 filed as  Exhibit  10.10 to our
      Annual  Report  on  Form  10-K  for the  year  ended  June  30,  1998,  is
      incorporated herein by reference.*

10.9  Amendment No. 1 to The Reader's Digest Association, Inc. Management
      Incentive Compensation Plan (effective as of April 11, 1996) filed as
      Exhibit 10.1.1 to our Quarterly Report on Form 10-Q for the quarter
      ended March 31, 1996, is incorporated herein by reference.*

10.10 Competitive  Advance and Revolving  Credit Facility  Agreement dated as of
      November 12, 1996 between the registrant, the Borrowing Subsidiaries,  The
      Chase Manhattan Bank and J.P.  Morgan  Securities  Inc.,  filed as Exhibit
      10.23 to our Quarterly  Report on Form 10-Q for the quarter ended December
      31, 1996, is incorporated herein by reference.

10.11 First Amendment dated as of September 17, 1997 to the Competitive
      Advance and Revolving Credit Facility Agreement dated as of November
      12, 1996 among The Reader's Digest Association, Inc., the Borrowing
      Subsidiaries, The Chase Manhattan Bank and J.P. Morgan Securities Inc.,
      filed as Exhibit 10.29 to our Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1997, is incorporated herein by reference.

10.12 The Reader's Digest Association, Inc. Director Compensation Program, filed
      as  Exhibit  10.31 to our  Quarterly  Report on Form 10-Q for the  quarter
      ended March 31, 1998, is incorporated herein by reference.*

10.13 The Reader's  Digest  Association,  Inc.  Deferred  Compensation  Plan for
      Directors,  amended and  restated as of March 13,  1998,  filed as Exhibit
      10.31 to our Quarterly Report on Form 10-Q for the quarter ended March 31,
      1998, is incorporated herein by reference.*

10.14 Employment  Agreement  dated as of April 28,  1998  between  The  Reader's
      Digest  Association,  Inc. and Thomas O. Ryder,  filed as Exhibit 10.33 to
      our Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, is
      incorporated herein by reference.*

10.15 The  Reader's  Digest  Association,  Inc.  1994  Key  Employee  Long  Term
      Incentive  Plan,  as amended and restated  effective as of August 13, 1999
      filed as  Exhibit  10.17 to our  Annual  Report  on Form 10-K for the year
      ended June 30, 1999, is incorporated herein by reference.*

10.16 Second Amendment dated as of June 2, 1998 to the Competitive Advance
      and Revolving Credit Facility Agreement dated as of November 12, 1996
      among The Reader's Digest Association, Inc., the Borrowing
      Subsidiaries, The Chase Manhattan Bank and J.P. Morgan Securities Inc.,
      filed as Exhibit 10.27 to our Annual Report on Form 10-K for the year
      ended June 30, 1998, is incorporated herein by reference.

10.17 Third Amendment dated as of September 2, 1999 to the Competitive
      Advance and Revolving Credit Facility Agreement dated as of November
      12, 1996 among The Reader's Digest Association, Inc., the Borrowing
      Subsidiaries, The Chase Manhattan Bank and J.P. Morgan Securities Inc.,
      filed as Exhibit 10.19 to our Annual Report on Form 10-K for the year
      ended June 30, 1999, is incorporated herein by reference.*


      *Denotes a management contract or compensatory plan.


<PAGE>


10.18 Termination  Agreement  dated as of April 10, 1997  between  The  Reader's
      Digest Association,  Inc. and George S. Scimone, filed as Exhibit 10.28 to
      our  Annual  Report  on Form 10-K for the year  ended  June 30,  1998,  is
      incorporated herein by reference.*

10.19 Termination  Agreement  dated as of April 10, 1998  between  The  Reader's
      Digest Association, Inc. and Gregory G. Coleman, filed as Exhibit 10.29 to
      our  Annual  Report  on Form 10-K for the year  ended  June 30,  1998,  is
      incorporated herein by reference.*

10.20 Termination  Agreement  dated as of September 8, 1997 between The Reader's
      Digest Association, Inc. and M. John Bohane, filed as Exhibit 10.30 to our
      Annual  Report  on  Form  10-K  for the  year  ended  June  30,  1998,  is
      incorporated herein by reference.*

10.21 Termination Agreement dated as of September 1, 1996 between The
      Reader's Digest Association, Inc. and Christopher P. Willcox, as
      amended on February 24, 2000, filed as Exhibit 10.30 to our Quarterly
      Report on Form 10-Q for the quarter ended March 31, 2000, is
      incorporated herein by reference *

10.22 Termination Agreement dated as of September 8, 1997 between The
      Reader's Digest Association, Inc. and Peter J.C. Davenport.*

10.23 Supplemental  Retirement  Benefit  Agreement dated as of November 15, 1991
      between The Reader's  Digest  Association,  Inc.  and Gregory G.  Coleman,
      filed as  Exhibit  10.32 to our  Annual  Report  on Form 10-K for the year
      ended June 30, 1998, is incorporated herein by reference.*

10.24 Supplemental Retirement Benefit Agreement dated as of August 25, 1988
      between The Reader's Digest Association, Inc. and M. John Bohane, filed
      as Exhibit 10.11 to our Registration Statement on Form S-1
      (Registration No. 33-32566) filed on December 19, 1989, is incorporated
      herein by reference.*

10.25 Supplemental Retirement Agreement dated as of August 25, 1988 between
      The Reader's Digest Association, Inc. and Peter J.C. Davenport.*

10.26 The Reader's Digest  Association,  Inc. Senior Management  Incentive Plan,
      filed as  Exhibit  10.27 to our  Annual  Report  on Form 10-K for the year
      ended June 30, 1999, is incorporated herein by reference.*

10.27 Stock Purchase Agreement dated August 25, 1999 by and among The
      Reader's Digest Association, Inc., Books Are Fun, Ltd. and the other
      parties listed therein filed as Exhibit 10.28 to our Annual Report on
      Form 10-K for the year ended June 30, 1999, is incorporated herein by
      reference.

13    Financial information appearing at pages 55 through 101 of our 2000 Annual
      Report to  Stockholders,  together  with the  report  thereon  of KPMG LLP
      appearing on page 102 (furnished for the information of the Securities and
      Exchange Commission only and not to be deemed filed as part of this Annual
      Report on Form 10-K, except for the portions thereof that are specifically
      incorporated herein by reference).

21    Subsidiaries of The Reader's Digest Association, Inc.

23    Consent of KPMG LLP.

27    Financial Data Schedule.


*Denotes a management contract or compensatory plan.

(b)   Reports on Form 8-K

            During the three  months  ended June 30,  2000,  we did not file any
      Current Reports on Form 8-K.



<PAGE>


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) 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.


                              By:     /s/THOMAS O. RYDER
                                        (Thomas O. Ryder)
                                    Chairman and Chief Executive Officer
Date:  September 22, 2000


      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

            Signature                       Title                  Date

   /s/THOMAS O. RYDER             Chairman and Chief        September 22, 2000
      (Thomas O. Ryder)           Executive Officer and a
                                    Director


   /s/GEORGE S. SCIMONE           Senior Vice President     September 22, 2000
      (George S. Scimone)         and Chief Financial
                                     Officer

   /s/DORVIN D. LIVELY            Vice President and        September 22, 2000
      (Dorvin D. Lively)          Corporate
                                  Controller (chief
                                  accounting officer)

                                  Director                  September 22, 2000
      (Lynne V. Cheney)

   /s/M. CHRISTINE DEVITA         Director                  September 22, 2000
      (M. Christine DeVita)

   /s/JAMES E. PRESTON            Director                  September 22, 2000
      (James E. Preston)

   /s/LAWRENCE R. RICCIARDI       Director                  September 22, 2000
      (Lawrence R. Ricciardi)

   /s/C.J. SILAS                  Director                  September 22, 2000
      (C.J. Silas)

   /s/WILLIAM J. WHITE            Director                  September 22, 2000
      (William J. White)

   /s/ED ZSCHAU                   Director                  September 22, 2000
      (Ed Zschau)


<PAGE>


                    THE READER'S DIGEST ASSOCIATION, INC.

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                          Page


Management's Discussion and Analysis....................................    *

Financial Statements:

      Consolidated Statements of Income--For the Years Ended June 30,
         2000, 1999 and 1998............................................    *

      Consolidated Balance Sheets--June 30, 2000 and 1999...............    *

      Consolidated Statements of Cash Flows--For the Years Ended June 30,
          2000, 1999 and 1998........................................       *

      Consolidated Statements of Changes in Stockholders' Equity--For
         the Years Ended June 30, 2000, 1999 and 1998...................    *

Notes to Consolidated Financial Statements..............................    *

Independent Auditors' Report............................................    *

Report of Management....................................................    *

Selected Financial Data.................................................    *

Selected  Quarterly  Financial  Data and Dividend and Market  Information
(Unaudited).............................................................    *


------------
      *This  financial  information  is  incorporated  by  reference to our 2000
Annual Report to Stockholders. For additional information,  please refer to Item
8 of this report.



<PAGE>


                                 SUBSIDIARIES OF
                    THE READER'S DIGEST ASSOCIATION, INC.

Argentina
    Reader's Digest Argentina S.A.

Australia
    The Reader's Digest Association Pty. Limited
        Reader's Digest (Australia) Pty. Ltd.

Austria
    Verlag Das Beste GmbH

Belgium
    N.V. Reader's Digest S.A.
    Reader's Digest World Services, S.A.

Brazil
    Reader's Digest Brasil Ltda.

Canada
    The Reader's Digest Association (Canada) Ltd.
        Quality Service Programs, Inc.

Chile
    Reader's Digest Chile Limitada

Colombia
    Reader's Digest Colombia S.A.

Czech Republic
    Reader's Digest Vyber s.r.o.
        Rena s.r.o.

Denmark
    Forlaget Det Beste A/S

England
    The Reader's Digest Association Limited
        RD Publications Ltd.
        Money Magazine Limited
        Reader's Digest Financial Services (Family Insurance Services) Limited
        The Reader's Digest Association (Ireland) Limited
        Reader's Digest Holdings Limited
    Reader's Digest Children's Publishing Limited (formerly Victoria House
    Publishing, Ltd.)
    Reader's Digest European Systems Ltd.
    Reader's Digest Central & Eastern Europe Limited

Finland
    Oy Valitut Palat - Reader's Digest Ab

France
    Selection du Reader's Digest S.A.
        Selection du Reader's Digest Assurances SARL


<PAGE>


Germany
    Verlag Das Beste GmbH
        Optimail/Direcktwerbeservice GmbH
        Pegasus Buch-und Zeitschriften - Vertriebsgesellschaft.mbH

Hong Kong
    Reader's Digest Association Far East Limited
        Asian Qualiproducts Services, Limited
    Reader's Digest Asia, Ltd.
    Reader's Digest (East Asia) Limited
        Reader's Digest Global Advertising Ltd.
        Reader's Digest (Malaysia) Sdn. Bhd
    R.D. Properties, Ltd.

Hungary
    Reader's Digest Kiado KFT

Italy
    Selezione dal Reader's Digest S.p.A.

Japan
    The Reader's Digest Ltd.

Mexico
    Caribe Condor S.A. de C.V.
        Reader's Digest Mexico, S.A. de C.V.
        Corporativo Reader's Digest de R.L. de CV

Netherlands
    Uitgeversmaatschappij The Reader's Digest N.V.
        Distrimedia Services B.V.
        Reader's Digest European Shared Services

New Zealand
    The Reader's Digest Association (New Zealand) Limited

Norway
    Det Beste A/S

Peru
    Reader's Digest Peru, S.A.

Philippines
    Reader's Digest (Philippines) Inc.

Poland
    Reader's Digest Przeglad Sp.z o.o.

Portugal
    Seleccoes do Reader's Digest (Portugal) S.A.
    Euroseleccoes - Publicacoes E Artigos Promocionais, Lda.

Russia
    Joint Stock Company "Publishing House Reader's Digest"

Spain
    Reader's Digest Selecciones S.A.

Sweden
    Reader's Digest Aktiebolag

Switzerland
    Das Beste aus Reader's Digest AG

Thailand
    Reader's Digest (Thailand) Limited

United States*
    Ardee Music Publishing, Inc.
    Books Are Fun, Ltd.
    gifts.com, Inc.
    Pegasus Finance Corp.
    Pegasus Investment, Inc.
    Pegasus Sales, Inc.
    Pleasantville Music Publishing, Inc.
    QSP, Inc.
        Reader's Digest Sub Eight, Inc.
        VideOvation, Inc.
        QSP Distribution Services, Inc.
        QSP Products and Programs, Inc.
        QSP Sales, Inc.
        Family Reading Program Corp.
    R.D. Manufacturing Corporation
    Pegasus Asia Investments Inc.
    RD Publications, Inc.
        RD Large Edition, Inc.
        RD Walking, Inc.
        Travel Publications, Inc.
           RD Member Services Inc.
        Home Service Publications, Inc.
        Retirement Living Publishing Company, Inc.
        RD Trade Shows, Inc.
    Reader's Digest Children's Publishing, Inc.
    Reader's Digest Entertainment, Inc.
    Reader's Digest Latinoamerica, S.A.
    Reader's Digest Sales and Services, Inc.
    Reader's Digest Sub Nine, Inc.
    Reader's Digest Sub Ten, Inc.
    Reader's Digest Young Families, Inc.
    SMDDMS, Inc.
    The Reader's Digest Association (Russia) Incorporated
    W.A. Publications, Inc.
---------------------
*   All are Delaware corporations except W.A. Publications, Inc., a New York
    corporation.