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, 1998Commission 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
         (Address of principal executive         (Zip Code)
                    offices)

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      New York Stock Exchange
           par value $.01 per share                   
                                                      

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,   1998,   was
approximately  $113,194,989  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,  1998, 85,462,667 shares of the  registrant's
Class  A  Nonvoting  Common Stock and 21,716,057  shares  of  the
registrant's Class B Voting Common Stock were outstanding.
                                
               DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of Stockholders of
registrant to be held on November 13, 1998.  Certain information
therein is incorporated by reference into Part III hereof.


                        TABLE OF CONTENTS
                                

                                                             Page
                                                                 
PART I                                                           
                                                                 
   ITEM 1.  BUSINESS                                            1
     Reader's Digest Magazine                                   3
      Circulation                                               3
      Advertising                                               4
      Editorial                                                 4
      Production and Fulfillment                                4
     Books and Home Entertainment Products                      5
      Condensed Books                                           5
      Series Books                                              5
      General Books                                             6
      Music                                                     6
      Television and Video                                      6
      Production and Fulfillment                                7
     Direct Marketing Operations                                7
     Management Information Systems and Customer List           8
       Enhancement
     Special Interest Magazines                                 9
     QSP, Inc.                                                  9
     Competition and Trademarks                                10
     Employees                                                 10
     Executive Officers of the Company                         10
                                                                 
                                                                 
   ITEM 2.  PROPERTIES                                         12
                                                                 
   ITEM 3.  LEGAL PROCEEDINGS                                  13
                                                                 
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY        13
            HOLDERS
                                                                 
PART II                                                          
                                                                 
   ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND            
            RELATED STOCKHOLDER MATTERS                        13
                                                                 
   ITEM 6.  SELECTED FINANCIAL DATA                            13
                                                                 
   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF              
            FINANCIAL CONDITION AND RESULTS OF OPERATION       13
          
                                                                 
   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA        14
                                                                 
   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS        
            ON ACCOUNTING AND FINANCIAL DISCLOSURE             14
                                                                 
PART III                                                        
                                                                
   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE           14
            REGISTRANT
                                                                
   ITEM 11. EXECUTIVE COMPENSATION                            14
                                                                
   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL            
            OWNERS AND MANAGEMENT                             14
                                                                
   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    14
                                                                
PART IV                                                         
                                                                
   ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND         
            REPORTS ON FORM 8-K                               15
    
                                                                
   SIGNATURES                                                 19
                                                                
   FINANCIAL INFORMATION                                      20
                                                                
   CORPORATE AND SHAREHOLDER INFORMATION                      48


   "Reader's Digest" is a registered trademark of The Reader's
                    Digest Association, Inc.
                             PART I
ITEM 1.BUSINESS

      The Reader's Digest Association, Inc. (the "Company") is  a
preeminent  global  leader in publishing  and  direct  marketing,
creating  and  delivering products, including  magazines,  books,
recorded music collections, home videos and other products,  that
inform, enrich, entertain and inspire.

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

      In  response to a decline in recent years in the  Company's
financial performance, on August 11, 1997, the Board of Directors
of  the  Company asked George V. Grune to return as Chairman  and
Chief Executive Officer.  Mr. Grune had served as Chief Executive
Officer  of  the  Company from 1984 to 1994 and  retired  as  its
Chairman in 1995.

      After  reassuming  his  position,  Mr.  Grune  rebuilt  the
Company's  management team with strong experience in direct  mail
marketing  at the Company.  In addition, in September  1997,  the
Company  reorganized  its businesses into two  operating  groups,
Reader's  Digest  U.S.A. and Reader's Digest International.   The
Company's businesses had been organized in four operating  groups
--Reader's  Digest  Europe, Reader's Digest U.S.A.  and  Reader's
Digest  Pacific, and a fourth operating group that  operated  the
Company's school and youth group fundraising business and focused
on developing new products and entering new marketing channels.

       Mr.  Grune  implemented  a  strategy  of  stabilizing  and
strengthening  the  Company's core  business  by  investment  and
expansion.   This  strategy involved: refocusing  on  disciplined
direct marketing; refocusing on core product offerings; enhancing
utilization  of  the  Company's  worldwide  customer   databases;
revitalizing  growth  through investment  in  new  products,  new
markets  and new direct marketing channels; and enhancing  global
efficiency.

      Simultaneously with Mr. Grune's return to the Company,  the
Board  of Directors designated a Search Committee to find  a  new
Chief   Executive  Officer.   On  April  28,  1998,  that  search
culminated  with the election of Thomas O. Ryder as Chairman  and
Chief Executive Officer.

Strategic Initiatives

      The  Company is undertaking a three-phase strategy to build
on its fundamental strengths and create growth opportunities over
the next three years.

      In  July 1998, the Company announced as the first  step  in
this strategy a global reorganization that includes the following
key elements:

     The  organization of operations into four business groups
     (Global Books and Home Entertainment, United States Magazine
     Publishing, International Magazine Publishing and QSP, Inc.) to
     make greater use of global scale.
  
     The  restructuring of editorial organizations  to  ensure
     editorial quality and integrity worldwide.
  
     The establishment of new reporting relationships to sharpen
     focus and accountability.
  
     The reassignment of certain executives as well as the hiring
     of new people with key skill sets.

      The  second  phase of the strategy, announced in  September
1998,  targets  the  restructuring of costs and  the  raising  of
capital.  The main components of the restructuring are:

     The   elimination  or  rationalization  of  unproductive
     businesses.
  
     Cost reductions and re-engineering.
  
     Leveraging the asset base of the Company.

     The   elimination  or  rationalization   of   unproductive
businesses, which is expected to be completed within the next  18
months, will generally involve the following actions:

     The  sale  or  joint venturing of proprietary  publishing
     operations in Scandinavia, Finland, Benelux, Italy and South
     Africa.
  
     The  elimination or redirection of certain product lines,
     including  adult and children's retail book publishing,  the
     Today's  Best  Nonfiction (registered trademark) book series,
     and video  or  music businesses in selected international markets.

      Cost  reduction and re-engineering activities will  involve
the following:

     A 20-25% reduction in the number of individual promotional
     mailings globally, including the elimination of related product
     development and overhead costs.  The Company anticipates that
     this will increase response rates on continuing mailings.
  
     A 10-20% reduction in the circulation rate base for Reader's
     Digest magazine in the United States to improve the efficiency of
     promotional spending.  This action is also expected to reduce
     circulation and advertising revenue in the short term.
  
     The outsourcing of support functions in areas where it is
     cost-effective and the consolidation of suppliers and combination
     of purchasing efforts for greater negotiating leverage.

      Implementation  of  the second phase  of  the  strategy  is
expected  to reduce the Company's annual expense base,  excluding
other  operating items, by $300.0 million to $350.0  million  and
reduce annual revenues by approximately $200.0 million by the end
of  fiscal  2001.  As a result, the Company believes that  annual
operating  profit  will  increase by  $100.0  million  to  $150.0
million in three years.  The Company expects to record charges to
other  operating  items  in a range of  $30.0  million  to  $50.0
million in fiscal 1999 related to these actions as components  of
the plan are finalized.

      Leveraging  the asset base of the Company will include  the
following actions:

    The sale of important works from the art collection.
  
    The sale of international real estate holdings including its
    U.K. Canary Wharf facility.
  
    An  expected reduction in the quarterly dividend for  the
    second quarter of 1999 from $0.225 per share to $0.05 per share.

    The  actions to leverage the asset base of the Company  are
expected  to  convert  approximately  $200.0  million  of  under-
productive assets to cash in the next year and improve annual pre-
tax cash flow by $150.0 million to $200.0 million by fiscal 2001.

    The  announcement of the second phase of the strategy  also
focused on broadening the Company's customer base to include more
younger customers and more products for older customers.

    The third phase of the strategy is expected to be announced
in  January  1999 and will focus on plans to grow  the  business.
This will include investing in internal opportunities, as well as
targeting   acquisitions  that  leverage   the   Company's   core
strengths, expanding geographically, introducing new products and
engaging in at least one completely new business.

      The  following  is  a discussion of the operations  of  the
Company  based upon the four business segments through which  the
Company  reports its results of operations:  (1) Reader's  Digest
magazine, (2) books and home entertainment products, (3)  special
interest   magazines   and   (4)  other   businesses.   Financial
information by business segment and by geographic area appears at
Note 12 to the Company's consolidated financial statements in the
Financial Information section of this report.


Reader's Digest Magazine

      Reader's  Digest  magazine is a monthly,  general  interest
magazine consisting of original articles and previously published
articles  in condensed form, a condensed version of a  previously
published or soon-to-be published full-length book, monthly humor
columns,  such as "Laughter, The Best Medicine" (registered trademark),
"Life In  These United  States" (registered trademark), 
"Humor In Uniform" (registered trademark),  and  "All  In  A  Day's
Work(registered trademark),"  and  other  regular  features,  including
"Heroes For Today (registered trademark),"  "It  Pays To Enrich Your
Word Power (registered trademark)," "News  From  The
World Of Medicine (registered mark)," "Tales Out of School (registered
trademark)," "Virtual Hilarity (registered trademark),"
"Personal  Glimpses,"  and  "Campus  Comedy."   DeWitt  and  Lila
Wallace  founded  Reader's  Digest  magazine  in  1922.    Today,
Reader's  Digest has a worldwide circulation of about 28  million
and  over 100 million readers each month, generating revenues  of
$712.3 million in fiscal 1998, as compared with $729.2 million in
fiscal  1997 and $739.8 million in fiscal 1996.  Reader's  Digest
is  published in 48 editions and 19 languages, including a Slovak
language  edition  that  began  publication  in  July  1997.   In
addition, a Korean edition, an Indian edition, a braille  edition
and a recorded edition are published by third parties pursuant to
licenses.

      In  September  1997,  the Company introduced  the  Reader's
Digest  Large  Edition for Easier Reading in the  United  States,
offering most of the articles from Reader's Digest and all of the
humor  departments.   Unlike the Company's  previous  Large  Type
Edition, the new edition is complete with advertising and greatly
enhanced color graphics.

      In  May  1998,  Reader's Digest magazine launched  a  major
redesign of its editions worldwide, taking the familiar table  of
contents off the cover and replacing it with bold photography and
enhanced graphics.  The redesign is intended to better serve  the
readers  of Reader's Digest magazine by making it easier to  read
and more contemporary.


  Circulation

      Based  on the most recent audit report issued by the  Audit
Bureau   of   Circulation,   Inc.   ("ABC"),   a   not-for-profit
organization that monitors circulation in the United  States  and
Canada, the Company has determined that the United States English
language  edition  of  Reader's  Digest  has  the  largest   paid
circulation  of  any  United States magazine,  other  than  those
automatically  distributed  to  all  members  of   the   American
Association of Retired Persons.  Approximately 95% of the  United
States   paid   circulation  of  Reader's  Digest   consists   of
subscriptions.   The  balance consists of single  copy  sales  at
newsstands and in supermarkets and similar establishments.

      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 about 90%  of
circulation.  The balance is attributable to newsstand and  other
retail sales.
      The  Company  maintains its circulation rate  base  through
annual  subscription renewals and new subscriptions.  The  global
circulation  rate  base  for  Reader's  Digest  of  27.8  million
includes  a  circulation rate base of 15 million for  the  United
States--English  language edition.  In  the  United  States,  the
Company  sells approximately five million new subscriptions  each
year  in  order  to  maintain  its circulation  rate  base.   New
subscriptions  are sold primarily by direct mail, with  extensive
use   of   sweepstakes  entries.   The  largest   percentage   of
subscriptions  is sold between July and December  of  each  year.
Subscriptions to Reader's Digest may be canceled at any time  and
the  unused  subscription price is refunded.  In September  1998,
the  Company  announced its intention to reduce  the  circulation
rate  base  for  the United States--English language  edition  of
Reader's Digest by 10-20%.  See "Strategic Intitiatives."

      Worldwide  revenues from circulation accounted  for  $549.4
million,  or  77%  of  the  total  revenues  of  Reader's  Digest
magazine, in the fiscal year ended June 30, 1998.


  Advertising

       In fiscal 1998, Reader's Digest carried 12,715 advertising
pages:  1,050  advertising  pages in its  United  States--English
language  edition  and  11,665 advertising  pages  in  its  other
editions.    The  United  States  and  the  larger  international
editions  of Reader's Digest offer advertisers different regional
editions, major market editions and demographic editions.   These
editions, usually containing the same editorial material,  permit
advertisers to concentrate their advertising in specific  markets
or   to   target  specific  audiences.   Reader's  Digest   sells
advertising in both the United States and international  editions
principally  through an internal advertising  sales  force.   The
Company sells advertisements in multiple editions worldwide,  and
offers  advertisers discounts for placing advertisements in  more
than one edition.

      Worldwide  revenues from advertising accounted  for  $162.9
million,  or  23%  of  the  total  revenues  of  Reader's  Digest
magazine, in the fiscal year ended June 30, 1998.


  Editorial

       Reader's  Digest  is  a  reader-driven,  family  magazine.
Editorial  content is, therefore, crucial to the loyal subscriber
base   that   constitutes  the  cornerstone  of   the   Company's
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.
The  Company employs a professional staff to research  and  fact-
check all published pieces.

      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
United States edition and material taken from other international
editions   varies  greatly  among  editions.   In  general,   the
Company's  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

      All  editions of Reader's Digest are printed by independent
third  parties.  The United States edition is printed exclusively
by  one  printer  in Pennsylvania under a 10-year  contract  that
commenced  in  fiscal 1997 and there are also exclusive  printing
arrangements  in  other  countries.  The  Company  believes  that
generally  there  is  an adequate supply of alternative  printing
services  available to the Company at competitive prices,  should
the  need arise, although significant short-term disruption could
occur  in  certain markets.  The Company has developed  plans  to
minimize  recovery time in the event of a disaster  with  current
contract parties.

      The  principal  raw  materials used in the  publication  of
Reader's  Digest are coated and uncoated paper.  The Company  has
supply  contracts with a number of global suppliers of paper  and
believes  that those supply contracts provide an adequate  supply
of  paper  for  its  needs  and that, in any  event,  alternative
sources  are available at competitive prices.  Paper  prices  are
affected  by  a  variety of factors, including demand,  capacity,
pulp supply, and by general economic conditions.

     Subscription copies of the United States edition of Reader's
Digest are delivered through the United States Postal Service  as
"periodicals"  class mail.  Subscription copies of  international
editions  are also delivered through the postal service  in  each
country.   For  additional information  about  postal  rates  and
service, see "Direct Marketing Operations."

      Newsstand  and  other retail distribution  is  accomplished
through  a  distribution network.  The Company has contracted  in
each country with a magazine distributor for the distribution  of
Reader's Digest.


Books and Home Entertainment Products

      The  Company publishes and markets, principally  by  direct
mail,  Reader's  Digest  Condensed Books, series  books,  general
books,  recorded  music  collections and series  and  home  video
products and series.  See "Direct Marketing Operations."


  Condensed Books

     Reader's Digest Condensed Books (called "Select Editions" in
certain markets) is a continuing series of condensed versions  of
current popular fiction.  Condensation reduces the length  of  an
existing text, while retaining the author's style, integrity  and
purpose.   Today, Condensed Books are published in 13  languages,
and  are  marketed  in 24 countries.  In fiscal  1998,  Condensed
Books generated worldwide revenues of $261.9 million, as compared
with  $305.0 million in fiscal 1997 and $370.4 million in  fiscal
1996.

      International editions of Condensed Books generally include
some  material  from  the United States  edition  or  from  other
international editions, translated and edited as appropriate, and
some  condensations  of  locally  published  works.   Each  local
editorial  staff  determines  whether  existing  Condensed  Books
selections are appropriate for their local market.

      The Company publishes six volumes of Condensed Books a year
in  the  United  States.   Some  of the  Company's  international
subsidiaries  also  publish  six volumes  a  year,  while  others
publish four or five.


  Series Books

      The  Company  markets two types of series  books:   reading
series  and illustrated series.  These book series may  be  open-
ended continuing series, or may be closed-ended, consisting of  a
limited  number of volumes.  Series books are published in  eight
languages  and marketed in 16 countries. In fiscal  1998,  series
books generated worldwide revenues of $162.1 million, as compared
with  $209.5 million in fiscal 1997 and $264.3 million in  fiscal
1996.

      In  fiscal  1998,  reading  series  included  Today's  Best
Nonfictionr,  which  consists  of  five  volumes  per  year  each
generally  containing  condensed versions  of  four  contemporary
works  of nonfiction and The World's Best Reading, consisting  of
full-length editions of classic works of literature, of which six
volumes  are  published each year.  Today's  Best  Nonfiction  is
published in 7 countries in three languages and The World's  Best
Reading  is published in four countries in three languages.   The
Company announced in September 1998 that it will discontinue  the
Today's Best Nonfiction series.  See "Strategic Intitiatives."

      The Company markets illustrated series, which are generally
closed-ended, in 16 countries and publishes in nine languages.


  General Books

      The  Company's general books consist primarily of reference
books, cookbooks, "how-to" and "do-it-yourself" books, children's
books  and  books on subjects such as history, travel,  religion,
health, nature and the home.  General books are published  in  18
languages  and  are marketed in 40 countries.   In  fiscal  1998,
general books generated worldwide revenues of $608.5 million,  as
compared with $675.9 million in fiscal 1997 and $753.5 million in
fiscal 1996.

      New  general  books are generally 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,  the  Company conducts extensive research and  prepares  an
appropriate marketing strategy for the book.

      Although most sales of a general book will result from  the
initial  bulk  promotional mailing, substantial additional  sales
occur through subsequent promotions, catalog sales and the use of
sales  inserts  in  mailings for other Reader's Digest  products.
The Company also distributes its books for retail sale in stores,
through third-party distributors.


  Music

      The  Company publishes recorded music packages on cassettes
and  compact  discs, which it sells principally by  direct  mail.
The  music  packages  are  generally  collections  of  previously
recorded and newly commissioned material by a variety of artists,
although  they  may include selections from the Company's  almost
18,000-selection library.  The collections span a broad range  of
musical styles.  In certain markets, the Company also sells music
series, which are marketed in the same manner as Condensed  Books
and  series books.  The marketing strategy for music packages  is
similar  to  that for general books.  The Company  markets  music
products  in  37 countries, offering different music products  in
the various international markets because of diverse tastes.   In
fiscal  1998,  music  products generated  worldwide  revenues  of
$377.6  million, as compared with $404.2 million in  fiscal  1997
and $460.1 million in fiscal 1996.

      In  the United States, the Company became a member  of  the
Recording Industry Association of America in fiscal 1998, and was
recognized    with   47   gold,   platinum   and   multi-platinum
certificates.


  Television and Video

      The  Company's  television and home video products  are  in
genres  similar to its general books.  Several original  programs
have  won  awards of excellence, including five Emmy awards,  and
have  appeared  on the Disney Channel and the Discovery  Channel.
The  Company  continues  to expand its video  operations  in  the
United  States  and  in international markets  and  is  presently
marketing video products principally by direct mail in the United
States  and  32 other countries.  Most of the Company's  original
programs  have  been licensed to cable television networks.   The
Company  also  sells  its  home  video  products  through  retail
establishments.   In  fiscal 1998, home video products  generated
worldwide  revenues  of $215.8 million, as compared  with  $243.5
million in fiscal 1997 and $241.3 million in fiscal 1996.


  Production and Fulfillment

      The  various  editions of Condensed Books are  printed  and
bound  by third-party contractors.  The Company is a party to  an
exclusive  agreement through 2002 for printing  English  language
Condensed Books distributed in the United States and Canada.  The
Company  solicits  bids  for the printing  and  binding  of  each
general book or book series.  Production and manufacture of music
and  video  products  is  typically  accomplished  through  third
parties.

      The principal raw material necessary for the publication of
Condensed  Books, series books and general books is  paper.   The
Company  has  a number of paper supply arrangements  relating  to
paper  for  Condensed Books.  Paper for series books and  general
books is purchased for each printing.  The Company believes  that
existing contractual and other available sources of paper provide
an  adequate supply at competitive prices.  Third parties arrange
for  the  acquisition of some of the necessary raw materials  for
the manufacture of music and video products.

      Fulfillment,  warehousing,  customer  service  and  payment
processing  are conducted principally by independent contractors.
Most of the Company's products are packaged and delivered to  the
Postal  Service  directly  by  the  printer  or  supplier.    For
information about postal rates and service, see "Direct Marketing
Operations."

      In  all of the Company's direct marketing sales, a customer
may  return any book or home entertainment product to the Company
either  prior  to  payment or after payment for  a  refund.   The
Company  believes that its returned goods policy is essential  to
its  reputation and also elicits a greater number of orders, many
of   which  are  not  returned  because  of  the  generally  high
satisfaction rate of consumers with the Company's products.  This
policy  and  a "first book free" policy for Condensed  Books  and
series books result in a significant amount of returned goods.

     Sales of the Company's books and home entertainment products
are seasonal to some extent.  In the direct marketing industry as
a whole, the winter months have traditionally had higher consumer
response  than  other times of the year.  Sales are  also  higher
during the pre-Christmas season than in spring and summer.


Direct Marketing Operations

      The sale of magazine subscriptions, Condensed Books, series
books,  general  books,  music and video  products,  as  well  as
certain  other  products,  is  accomplished  principally  through
direct mail solicitations to households on the Company's customer
lists,  usually accompanied by sweepstakes entries and,  in  some
cases,  premium merchandise offers.  For many years  the  Company
has  been  acknowledged as a pioneer and innovator in the  direct
mail industry.

      As  part  of its growth strategy, the Company has begun  to
pursue  increased  distribution of its  products  through  direct
response channels other than direct mail, such as direct response
television,  telemarketing and the Internet, as well as  expanded
direct marketing channels, such as catalogs and clubs.

      The  Company  is  adapting the editorial  content  and  the
marketing   methods  of  its  magazines  and   books   and   home
entertainment products to new technologies, such as computer  on-
line  services.   In 1997, the Company launched  Reader's  Digest
World,  a World Wide Web site (www.readersdigest.com) that  links
the  Company's 13 local and international Web sites, for shopping
and  information about the Company's products.  In 1998, Reader's
Digest  World had over 2 million visitors from seventy  different
countries around the world.

      To  promote the sale of its products in the United  States,
the  Company  usually  offers a sweepstakes  in  its  promotional
mailings.   Prizes totaled about $8 million for the 1998  edition
of   the   sweepstakes.   Generally,  each   of   the   Company's
international  subsidiaries sponsors  its  own  sweepstakes,  the
mechanics  of  which  vary  from  jurisdiction  to  jurisdiction,
depending upon local law.

      From  time  to  time,  the Company is  involved  in  legal,
regulatory   and   investigative   proceedings   concerning   its
sweepstakes and other direct marketing practices.  Also from time
to   time,   more  restrictive  laws  or  regulations   governing
sweepstakes  or direct marketing are considered in  jurisdictions
in which the Company does business.  The Company does not believe
that such proceedings and proposed laws and regulations will have
a  material  adverse  effect  on the Company's  direct  marketing
business.

      The  Company  is  subject to postal rate  increases,  which
affect its product deliveries, promotional mailings and billings.
Postage  is  one  of  the  Company's  largest  expenses  in   its
promotional and billing activities.  In the past, the Company has
had  sufficient advance notice of most increases in postal  rates
so  that  the  higher rates could be factored into the  Company's
pricing strategies and operating plans.  Because increased prices
(or  increased  delivery charges paid by customers)  may  have  a
negative effect on sales, the Company may strategically determine
from  time  to  time  the extent, if any,  to  which  these  cost
increases are passed on to its customers.

      The  Company  relies  on  postal delivery  service  in  the
jurisdictions  in which it operates for timely  delivery  of  its
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  foreign
jurisdictions, some or all of the Company's products are  subject
to  sales  tax  or  value  added tax.   Tax,  like  delivery,  is
generally   stated  separately  on  bills  where   permitted   by
applicable law.  Nonetheless, tax increases or imposition of  new
taxes increases the total cost to the customer and thus may  have
a  negative  effect  on sales.  Moreover, in jurisdictions  where
applicable  tax  must  be  included in the  purchase  price,  the
Company may be unable to fully recover from customers the  amount
of any tax increase or new tax.


Management Information Systems and Customer List Enhancement

      The size and quality of the Company's computerized customer
list  of  current  and prospective customers in each  country  in
which  it  operates contribute significantly to its business  and
the  Company  is constantly striving to improve its  lists.   The
Company  believes that its United States list of over 60  million
households--over  half  the total number  of  households  in  the
country--is  one  of  the largest direct response  lists  in  the
United   States.   The  Company's  international  lists   include
approximately 50 million households, in the aggregate.

      The Company is making and will continue to make significant
investments in management information systems in order to improve
its   operating  efficiencies,  increase  the  level  of  service
provided to its customer base and facilitate globalization of the
Company.

      List  management activity is limited in some  international
subsidiaries because local jurisdictions, particularly in Europe,
have  data protection laws or regulations prohibiting or limiting
the  exchange  of  such information.  Certain jurisdictions  also
prohibit  the retention of information, other than certain  basic
facts, about noncurrent customers.  Although data protection laws
in  effect  from  time  to  time may hinder  the  Company's  list
enhancement capacity, the Company believes that current laws  and
regulations   do  not  prevent  the  Company  from  engaging   in
activities necessary to its business.
Special Interest Magazines

      The  Company  publishes several special interest  magazines
that it deems consistent with its image, editorial philosophy and
market   expertise.   The  Family  Handymanr  magazine   provides
instructions  and guidance for "do-it-yourself" home  improvement
projects.  New Choices: Living Even Better After 50r magazine  is
aimed  at  active,  mature  readers and provides  information  on
entertainment,  travel,  health  and  leisure  time   activities.
American  Health for Womenr magazine provides helpful information
on  medicine,  nutrition, psychology and fitness as those  issues
relate  to  women.   Walkingr magazine  provides  information  on
health and fitness for walking enthusiasts.  These magazines  are
sold  by subscription and on the newsstand.  Like most magazines,
the Company's special interest magazines are highly dependent  on
advertising revenue.  Each of these magazines publishes 10 issues
per  year,  except Walking, which publishes six times  per  year.
The Company also publishes Moneywise magazine, a magazine devoted
to helping families manage their finances, in the United Kingdom.

      The following table sets forth the circulation rate base of
each of the Company's United States special interest magazines at
June 30, 1998, as well as the number of advertising pages carried
for  the fiscal year ended June 30, 1998.  Circulation rate  base
data is as reported to ABC.

                                                      Number of
                                        Circulation  Advertising
                                        Rate Base       Pages
                                                       Carried
     The Family Handyman                 1,100,000      608
     American Health for Women           1,000,000      535
     New Choices: Living Even Better       600,000      483
     After 50
     Walking.                              650,000      364

      Moneywise had a circulation rate base of 101,700 as of  the
end of fiscal 1998 and carried 522 pages of advertising.

     Of total revenues of $97.0 million for the Company's special
interest   magazines  in  fiscal  1998,  59%  was  generated   by
circulation revenues and 41% by advertising revenues.

      The  U.S.  magazines  are promoted to  the  Company's  U.S.
customer  list and the Company's other products are  promoted  to
each  magazine's  customer list, as appropriate.   This  strategy
helps  to  expand  the Company's customer base  for  all  of  its
products.


QSP, Inc.

      The  Company's wholly owned subsidiaries, QSP, Inc. in  the
United  States and Quality Service Plan, Inc. in Canada  ("QSP"),
are  in the business of assisting schools and youth groups in the
United  States  and Canada in their fundraising  efforts.   QSP's
staff   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
revenue  from  a portion of the proceeds of each  sale.   Several
hundred   publishers  (including  the  Company)   make   magazine
subscriptions available to QSP at competitive, discounted prices.
QSP  also  obtains discounted music products from a  large  music
publisher.  Processing of magazine and music orders is  performed
for QSP by an independent contractor.  Processing of video, book,
gift  and  food orders is performed by QSP Distribution Services,
Inc.,  a wholly owned subsidiary of QSP, Inc. located in Conyers,
Georgia.


Competition and Trademarks

      Although  Reader's Digest magazine 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.   The  Company  believes  that   the
extensive  and longstanding international operations of  Reader's
Digest  provide  the  Company with a significant  advantage  over
competitors seeking to establish a global publication.

      The  Company owns numerous trademarks that it uses  in  its
business  worldwide.   Its  two  most  important  trademarks  are
"Reader's  Digest" and the "Pegasus" logo.  The Company  believes
that  the  name  recognition, reputation and image  that  it  has
developed  in each of its markets significantly enhance  customer
response  to  the  Company's direct marketing  sales  promotions.
Accordingly,  trademarks are important to the Company's  business
and the Company aggressively defends its trademarks.

     The Company believes that its name, image and reputation, as
well  as the quality of its customer lists, provide a significant
competitive advantage over many other direct marketers.  However,
the  Company's books and home entertainment products business  is
in  competition with companies selling similar products at retail
as  well  as  by  direct  marketing.   Because  tests  show  that
consumers'  responses  to  direct  marketing  promotions  can  be
adversely  affected  by the overall volume  of  direct  marketing
promotions,  the Company is also in competition  with  all  other
direct  marketers,  regardless  of  whether  the  products  being
offered are similar to the Company's products.

      Each  of  the  Company's special interest magazines  is  in
competition  with other magazines of the same genre  for  readers
and  advertising.   Nearly all of the Company's products  compete
with  other  products and services that utilize leisure  activity
time or disposable income.


Employees

      As  of  June  30, 1998, the Company employed  approximately
5,500 persons worldwide; approximately 2,100 were employed in the
United   States   and  3,400  were  employed  by  the   Company's
international subsidiaries.  The Company's relationship with  its
employees is generally satisfactory.


Executive Officers of the Company

     The following paragraphs set forth the name, age and offices
with  the  Company  of  each  present executive  officer  of  the
Company,  the  period  during which each  executive  officer  has
served  as  such and each executive officer's business experience
during the past five years:


        Name and Age             Positions and Offices With the Company
                                                    
Thomas O. Ryder (54)             Mr.  Ryder has been Chairman of the  Board
                                 and Chief Executive Officer of the Company
                                 since  April  28,  1998.   Mr.  Ryder  was
                                 President, American Express Travel Related
                                 Services  International,  a  division   of
                                 American  Express  Company,  from  October
                                 1995  to  April 1998.  Prior  thereto,  he
                                 served    as    President,   Establishment
                                 Services  - Worldwide of American  Express
                                 Travel Related Services.
                                 
Melvin R. Laird  (76)            Mr.  Laird has been a member of the  Board
                                 of  Directors of the Company  since  1990.
                                 He  has  served  as Senior Counsellor  for
                                 national  and international affairs  since
                                 1974  and  was  elected to the  additional
                                 position  of Vice President in 1989.   Mr.
                                 Laird joined the Company in 1974.
                                 
Thomas A. Belli (51)             Mr.  Belli has been President of QSP, Inc.
                                 since  November 1997, a position  he  also
                                 held  prior to July 1995.  He first joined
                                 the Company in August 1977.
                                 
M. John Bohane  (62)             Mr.  Bohane has been Senior Vice President
                                 of the Company and President, Global Books
                                 and  Home  Entertainment  since  July  27,
                                 1998.   Prior thereto, he was Senior  Vice
                                 President  of  the Company  and  President
                                 International  Operations, a  position  he
                                 held   since  rejoining  the  Company   on
                                 September  8, 1997.  He first  joined  the
                                 Company in 1964 and served in a number  of
                                 executive capacities, including President,
                                 Direct   Marketing,  until   leaving   the
                                 Company in July, 1991.  Mr. Bohane  served
                                 as  President and Chief Executive  Officer
                                 of  Newfield Publications from April, 1994
                                 to  July,  1995 and as Vice  President  of
                                 Corporate  Database  Marketing  of   Time-
                                 Warner,   Inc.,   from  April,   1992   to
                                 December, 1993.
                                 
Michael A. Brizel (41)           Mr.  Brizel  was appointed Vice  President
                                 and  General  Counsel on  July  27,  1998.
                                 Prior  thereto,  he  was  Vice  President,
                                 Legal  U.S. and Associate General Counsel,
                                 a  position he held since September  1996.
                                 Prior  thereto,  he was Associate  General
                                 Counsel of the Company.  Mr. Brizel joined
                                 the Company in July 1989.
                                 
Elizabeth G. Chambers (35)       Ms.  Chambers  has  been  Vice  President,
                                 Business  Redesign since August 10,  1998.
                                 Prior  to joining the company, she  was  a
                                 partner at the management consulting  firm
                                 of McKinsey & Company, a position she held
                                 from  June  1995  to August  1998  and  an
                                 associate from October 1989 to June 1995.
                                 
Gregory G. Coleman (44)          Mr. Coleman has been Senior Vice President
                                 and  President,  U.S. Magazine  Publishing
                                 since  July  27, 1998.  Prior thereto,  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,  Vice
                                 President, Publisher, U.S. Reader's Digest
                                 from November 1991 until December 1995.
                                 
Clifford H.R. DuPree (48)        Mr.  DuPree  was appointed Vice President,
                                 Corporate Secretary and Associate  General
                                 Counsel  on July 27, 1998.  He joined  the
                                 company  in May 1992 as Associate  General
                                 Counsel,  became  Assistant  Secretary  in
                                 March 1995 and Vice President in September
                                 1996.
                                 
Thomas D. Gardner (40)           Mr.   Gardner   has   been   Senior   Vice
                                 President,    Business    Planning     and
                                 Development since July 27, 1998.   He  was
                                 Vice President, Marketing, Reader's Digest
                                 U.S.A.  from November 1995 to  July  1998,
                                 Vice  President, Business Development from
                                 April   1995  to  November  1995,  and   a
                                 Director of Marketing prior thereto.   Mr.
                                 Gardner  joined  the Company  in  February
                                 1992.
                                 
Robert J. Krefting (54)          Mr.   Krefting   has  been   Senior   Vice
                                 President   and  President,  International
                                 Magazine  Publishing since July 27,  1998.
                                 Prior to joining the Company, Mr. Krefting
                                 was   sole   proprietor  of   Holly   Hill
                                 Publishing,    a    management    services
                                 corporation  serving  the  publishing  and
                                 venture  capital industries, from  January
                                 1993 to July 1998.
                                 
Gary S. Rich (37)                Mr.  Rich  has been Senior Vice President,
                                 Human  Resources, since  August  3,  1998.
                                 Prior  to  joining  the  Company,  he  was
                                 Senior   Vice   President,  Global   Human
                                 Resources for A.C. Nielsen Corporation,  a
                                 position  he held from June 1996  to  July
                                 1998.   Prior thereto, Mr. Rich  was  Vice
                                 President, Human Resources--Europe, Middle
                                 East   and  Africa  at  American   Express
                                 Company  (travel,  financial  and  network
                                 services).
                                 
George S. Scimone (51)           Mr.  Scimone  was  appointed  Senior  Vice
                                 President  and Chief Financial Officer  of
                                 the  Company  on  July  27,  1998.   Prior
                                 thereto,  Mr.  Scimone  served   as   Vice
                                 President and Chief Financial Officer from
                                 September   1997,   Vice   President   and
                                 President,  Reader's  Digest  U.S.A.  from
                                 November  1996  and  Vice  President   and
                                 Corporate Controller from September  1995.
                                 Prior  to joining the Company, Mr. Scimone
                                 was   Business  Chief  Financial  Officer,
                                 Electrical  Distribution  and  Control  of
                                 General Electric Company.
                       
Christopher P. Willcox  (51)     Mr. Willcox has been Senior Vice President
                                 and  Editor-in-Chief  of  Reader's  Digest
                                 magazine  since March 1996.  He served  as
                                 Worldwide Executive Editor from June  1994
                                 to   March  1996  and  Executive   Editor,
                                 International from October  1991  to  June
                                 1994.  He joined the Company in 1988.
                                 

      Pursuant to the By-Laws of the Company, officers  serve  at
the  pleasure of the Board of Directors.  Officers of the Company
are  elected annually to serve until their respective  successors
are elected and qualified.


ITEM 2.PROPERTIES

       The   Company's   headquarters  and  principal   operating
facilities are situated on approximately 120 acres in Westchester
County,  New  York, much of which the Company acquired  in  1940.
The   site   includes   five  principal   buildings   aggregating
approximately   703,000   square  feet  that   house   executive,
administrative,  editorial  and  operational  offices,  and  data
processing  and other facilities.  In New York City, the  Company
leases  approximately 167,000 square feet of office  space  in  a
total  of  two buildings, portions of which are used as editorial
offices  for its books and home entertainment products  business,
as  advertising sales offices for Reader's Digest magazine and as
offices  for  the  Company's  special  interest  magazines.   The
Company  leases space totaling approximately 51,000  square  feet
for  an  editorial  bureau, advertising sales offices  and  other
purposes  in  various cities in the United  States.   QSP  leases
approximately 163,000 square feet in Conyers, Georgia.

     The  Company  owns approximately 1,459,100 square  feet  and
leases  approximately 467,300 square feet of  space  outside  the
United  States  that  is utilized by the Company's  international
operating     subsidiaries    principally    as     headquarters,
administrative  and editorial offices and warehouse  space.   The
foregoing properties owned by the Company include 207,000  square
feet  of  space in Swindon, England, in a building owned  by  the
Company on land leased by the Company through 2076.

      The  Company believes that its current facilities, together
with expansions and upgrading of facilities presently underway or
planned,   are  adequate  to  meet  its  present  and  reasonably
foreseeable needs.  The Company also believes that adequate space
will be available to replace any leased facilities for which  the
leases expire in the near future.


ITEM 3.LEGAL PROCEEDINGS

      The  Company and its subsidiaries are defendants in various
lawsuits  and  claims arising in the regular course of  business.
Based on the opinions of management and counsel for such matters,
recoveries,  if  any,  by  plaintiffs  and  claimants  would  not
materially  affect the financial position of the Company  or  its
results of operations.


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

     No matter was submitted to a vote of security holders of the
Company  during the fourth quarter of the fiscal year ended  June
30, 1998.


                             PART II


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

      The information required under this Item is contained under
the  caption "Selected Quarterly Financial Data and Dividend  and
Market   Information"   in   the  section   entitled   "Financial
Information."


ITEM 6.SELECTED FINANCIAL DATA

      The information required under this Item is contained under
the  caption "Selected Quarterly Financial Data and Dividend  and
Market  Information" and "Selected Financial Data" in the section
entitled "Financial Information."


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

      The information required under this Item is contained under
the caption "Management's Discussion and Analysis" in the section
entitled "Financial Information."


ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required under this Item is contained in the
section entitled "Financial Information."


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

     None.


                            PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information with respect to directors of the Company  under
the  caption  "Proposal 1: Election of Directors"  in  the  Proxy
Statement  for the Annual Meeting of Stockholders of the  Company
to  be  held  on  November  13, 1998 is  incorporated  herein  by
reference.  Information with respect to executive officers of the
Company  appears  under the caption "Executive  Officers  of  the
Company" in Item 1 of Part I hereof and is incorporated herein 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 the Annual Meeting of Stockholders of the  Company
to  be  held  on  November  13, 1998 is  incorporated  herein  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 the Annual Meeting
of Stockholders of the Company to be held on November 13, 1998 is
incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.
                             PART IV


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

(a)(1) Financial Statements
       The  information required by this Item is contained in the
       section entitled "Financial Information."

   (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 the registrant's
     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 the registrant's Form 10-K  for  the  year
     ended June 30, 1993, 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 the registrant's 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 the registrant's  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   the
     Registration  Statement on Form S-1  (Registration  No.  33-
     32566)  filed  by  registrant  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 the registrant's Form 10-K  for  the  year
     ended June 30, 1994, is incorporated herein by reference.*

10.4 The  Reader's  Digest Association, Inc. Severance  Plan  for
     Senior  Management (Amendment and Restatement as of July  8,
     1994)  filed as Exhibit 10.5 to the registrant's  Form  10-K
     for the year ended June 30, 1994, is incorporated herein  by
     reference.*

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

10.6 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 the registrant's  Form  10-K
     for the year ended June 30, 1994, is incorporated herein  by
     reference.*

10.7 Supplemental  Retirement  Benefit  Agreement  dated  as   of
     September  13,  1991  between the registrant  and  James  P.
     Schadt filed as Exhibit 10.16 to the registrant's Form  10-K
     for the year ended June 30, 1993, is incorporated herein  by
     reference.*

10.8 Supplemental Retirement Benefit Agreement dated as  of  June
     8,  1994 between the registrant and Martin J. Pearson  filed
     as  Exhibit 10.15 to the registrant's Form 10-K for the year
     ended June 30, 1995 is incorporated herein by reference.*

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

10.10  The   Reader's  Digest  Association,  Inc.  Executive
       Financial Counseling Plan, amended and restated as  of  July
       1, 1998.*

10.11  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 the registrant's Form 10-Q for the quarter  ended
       March 31, 1996, is incorporated herein by reference.*

10.12  Termination Agreement dated as of
       April 1, 1996 between the registrant and James P. Schadt,
       filed as Exhibit 10.23 to the registrant's Form 10-Q for the
       quarter ended March 31, 1996, is incorporated herein by
       reference.*

10.13  Termination Agreement dated as of
       April 1, 1996 between the registrant and Paul A. Soden,
       filed as Exhibit 10.25 to the registrant's Form 10-Q for the
       quarter ended March 31, 1996, is incorporated herein by
       reference.*

10.14  Termination Agreement dated as of
       April 1, 1996 between the registrant and Stephen R. Wilson,
       filed as Exhibit 10.26 to the registrant's Form 10-Q for the
       quarter ended March 31, 1996, is incorporated herein by
       reference.*

10.15  Termination Agreement dated as of
       April 1, 1996 between the registrant and Martin J. Pearson,
       filed as Exhibit 10.24 to the registrant's Form 10-Q for the
       quarter ended December 31, 1996, is incorporated herein by
       reference.*

10.16  Agreement dated June 18, 1997
       between the registrant and James P. Schadt filed as Exhibit
       10.24 to the registrant's Form 10-K for the year ended June
       30, 1997, is incorporated by reference.*

10.17  Agreement dated as of August 1,
       1997 between the registrant and Martin J. Pearson filed as
       Exhibit 10.25 to the registrant's Form 10-K for the year
       ended June 30, 1997, is incorporated by reference.

10.18  Agreement dated August 10, 1997 between the registrant
       and James  P. Schadt  filed  as  Exhibit  10.26  to   the
       registrant's Form 10-K for the year ended June 30, 1997,  is
       incorporated by reference.*


10.19  US$400,000,000 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 the registrant's Form 10-Q for the quarter ended December
       31, 1996, is incorporated herein by reference.

10.20  Agreement  dated  as of August 11,  1997  between  the
       registrant  and George V. Grune, filed as Exhibit  10.28  to
       the  registrant's Form 10-Q for the quarter ended  September
       30, 1997, is incorporated herein by reference.*

10.21  First Amendment dated as of September 17, 1997 to  the
       $400,000,000   Competitive  Advance  and  Revolving   Credit
       Facility  Agreement dated as of November 12, 1996 among  the
       registrant, the Borrowing Subsidiaries, The Chase  Manhattan
       Bank and J.P. Morgan Securities Inc., filed as Exhibit 10.29
       to   the  registrant's  Form  10-Q  for  the  quarter  ended
       September 30, 1997, is incorporated herein by reference.

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

10.23  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 the registrant's
       Form  10-Q  for  the  quarter  ended  March  31,  1998,   is
       incorporated herein by reference.*

10.24  Employment Agreement dated as of April 28, 1998 between
       the  registrant and Thomas O. Ryder, filed as Exhibit  10.33
       to  the  registrant's Form 10-Q for the quarter ended  March
       31, 1998, is incorporated herein by reference.*

10.25  First  Amendment Agreement dated as of April 28,  1998
       between the registrant and George V. Grune, filed as Exhibit
       10.34  to  the registrant's Form 10-Q for the quarter  ended
       March 31, 1998, is incorporated herein by reference.*

10.26  The Reader's Digest Association, Inc. 1994 Key Employee
       Long  Term Incentive Plan, as amended and restated effective
       as  of  April  28,  1998,  filed as  Exhibit  10.35  to  the
       registrant's Form 10-Q for the quarter ended March 31, 1998,
       is incorporated herein by reference.*

10.27  Second  Amendment  dated as of June  2,  1998  to  the
       $400,000,000   Competitive  Advance  and  Revolving   Credit
       Facility  Agreement dated as of November 12, 1996 among  the
       registrant, the Borrowing Subsidiaries, The Chase  Manhattan
       Bank and J.P. Morgan Securities Inc.

10.28  Termination  Agreement dated  as  of  April  10,  1997
       between the registrant and George S. Scimone.*

10.29  Termination  Agreement dated  as  of  April  10,  1998
       between the registrant and Gregory G. Coleman.*

10.30  Termination  Agreement dated as of September  8,  1997
       between the registrant and M. John Bohane.*

10.31  Termination  Agreement dated as of September  8,  1997
       between the registrant and Marcia M. Lefkowitz.*

10.32  Supplemental Retirement Benefit Agreement dated as  of
       November  15,  1991 between the registrant  and  Gregory  G.
       Coleman.*

10.33  Supplemental Retirement Benefit Agreement dated as  of
       August  17,  1998  between  the  registrant  and  Marcia  M.
       Lefkowitz.*

10.34  Agreement  dated as of November 14, 1997  between  the
       registrant and Thomas A. Belli.*

10.35 Supplemental Retirement Benefit Agreement dated as  of
      August  22, 1988 between the registrant and George V.  Grune
      filed as Exhibit 10.7 to the Registration Statement on  Form
      S-1  (Registration  No.  33-32566) filed  by  registrant  on
      December 19, 1989, is incorporated herein by reference.*

10.36 Supplemental Retirement Benefit Agreement dated as  of
      August  25,  1988 between the registrant and M. John  Bohane
      filed as Exhibit 10.11 to the Registration Statement on Form
      S-1  (Registration  No.  33-32566) filed  by  registrant  on
      December 19, 1989, is incorporated herein by reference.*

10.37 Supplemental Retirement Agreement dated as of May  15,
      1985  between  the registrant and George V. Grune  filed  as
      Exhibit  10.12  to the Registration Statement  on  Form  S-1
      (Registration No. 33-32566) filed by registrant on  December
      19, 1989, is incorporated herein by reference.*

13    Financial  information contained in the  section  "Financial
      Information."

21   Subsidiaries of the registrant.

23   Consent of KPMG Peat Marwick LLP.

27   Financial Data Schedule.


(b)  Reports on Form 8-K

     During  the  three months ended June 30, 1998,  the  Company
     filed the following report on Form 8-K:

     Form  8-K dated April 28, 1998, which included a copy  of  a
     press release relating to senior management changes.


*Denotes a management contract or compensatory plan.

                           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: Thomas O. Ryder
                               (Thomas O. Ryder)
                                Chairman and Chief Executive Officer
Date:  September 24, 1998


      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
                                                  
     Thomas O. Ryder        Chairman and Chief    September 24, 1998
     (Thomas O. Ryder)      Executive Officer and
                            a Director

     Melvin R. Laird        Vice President and    September  24, 1998
     (Melvin R. Laird)      Senior Counsellor and
                            a Director
                                                  
     George S. Scimone      Senior Vice President  September 24, 1998
     (George S. Scimone)    and Chief             
                            Financial Officer
                            (chief accounting
                            officer)
                                                  
     Lynne V. Cheney        Director              September  24, 1998
     (Lynne V. Cheney)                            

     M. Christine DeVita    Director              September  24, 1998
     (M. Christine DeVita)                        

     George V. Grune        Director              September  24, 1998
     (George V. Grune)                            

     James E. Preston       Director              September  24, 1998
     (James E. Preston)                           

     Lawrence R. Ricciardi  Director              September  24, 1998
     (Lawrence R. Ricciardi)

     Robert G. Schwartz     Director              September  24, 1998
     (Robert G. Schwartz)                         

     C.J. Silas             Director              September  24, 1998
     (C.J. Silas)                             

     William J. White       Director              September  24, 1998
     (William J. White)                         

              THE READER'S DIGEST ASSOCIATION, INC.
                                
                      FINANCIAL INFORMATION


                                                            Page
                                                          
Business Segment Financial Information                      21

Geographic Financial Information                            22

Management's Discussion and Analysis                        23

Financial Statements:                                       

Consolidated Statements of Income--For the Years Ended June   31
30, 1998, 1997and 1996                                      
     
Consolidated Balance Sheets--June 30, 1998 and 1997           32
     
Consolidated Statements of Cash Flows--For the Years Ended    33
June 30, 1998, 1997 and 1996                                
     
Consolidated Statements of Changes in Stockholders' Equity--  34
For the Years Ended June 30, 1998, 1997 and 1996            
     
Notes to Consolidated Financial Statements                    35

Independent Auditors' Report                                  45

Report of Management                                          45

Selected Financial Data                                       46

Selected Quarterly Financial Data and Dividend and  Market    46    
Information (Unaudited)                                     

Management Information                                        47

Corporate and Shareholder Information                         48

<TABLE>
<CAPTION>
The Reader's Digest Association, Inc. and Subsidiaries

BUSINESS SEGMENT FINANCIAL INFORMATION

                                               Years ended June 30,
In millions                                1998        1997        1996
<S>                                    <C>          <C>        <C>
Revenues                                                        
 Reader's Digest Magazine              $   712.3    $ 729.2    $   739.8
 Books and Home Entertainment Products   1,635.0    1,850.5      2,099.4
 Special Interest Magazines                 97.0       81.9         91.9
 Other Businesses                          193.1      181.0        170.6
 Intersegment                               (3.7)      (3.6)        (3.6)
                                       $ 2,633.7  $ 2,839.0    $ 3,098.1
Operating profit F1                                            
 Reader's Digest Magazine              $    16.7     $ 42.7    $    11.2
 Books and Home Entertainment Products      37.9      175.6        192.0
 Special Interest Magazines                  1.7        0.4        (21.1)
 Other Businesses                           19.9       22.5         (9.9)
 Corporate Expense                         (46.0)     (48.4)       (62.9)
                                       $    30.2    $ 192.8    $   109.3
Identifiable assets                                             
 Reader's Digest Magazine              $   380.4    $ 410.4    $   358.3
 Books and Home Entertainment Products     853.6      881.8        981.1
 Special Interest Magazines                 75.0       76.4         66.4
 Other Businesses                           70.8       75.1         76.9
 Corporate                                 184.2      200.1        421.4
                                       $ 1,564.0  $ 1,643.8    $ 1,904.1
Depreciation and amortization                                   
 Reader's Digest Magazine              $    10.5     $ 11.2    $    11.8
 Books and Home Entertainment Products      27.2       27.8         30.4
 Special Interest Magazines                  3.3        2.0          1.6
 All other                                   5.2        5.7          5.0
                                       $    46.2     $ 46.7    $    48.8
Capital expenditures                                            
 Reader's Digest Magazine              $     9.2     $ 22.9    $    14.7
 Books and Home Entertainment Products      20.3       75.9         36.8
 All other                                   4.6       11.8          8.1
                                       $    34.1    $ 110.6    $    59.6
</TABLE>
F1 Operating profit for 1998, 1997 and 1996 reflects the
 allocation of other operating items of $70.0, $35.0 and $235.0,
 respectively, to the business segment financial information as
 follows (refer to note TWO in Notes to Consolidated Financial
 Statements for further information):  Reader's Digest Magazine
 $7.7, $5.6 and $37.6, Books and Home Entertainment Products
 $45.6, $25.5 and $130.1, Special Interest Magazines $1.0, $---
 and $21.4, Other Businesses $4.5, $0.5 and $42.1, and Corporate
 Expense $11.2, $3.4 and $3.8, respectively.

<TABLE>
<CAPTION>

The Reader's Digest Association, Inc. and Subsidiaries

GEOGRAPHIC FINANCIAL INFORMATION
                                
                                             Years ended June 30,
In millions                             1998         1997        1996
<S>                                  <C>           <C>         <C> 
Revenues                                                      
 United States                       $ 1,181.4     $ 1,236.4    $1,278.9
 Europe                                1,035.3       1,172.2     1,379.7
 Pacific and Other Markets               424.1         439.8       445.6
 Interarea                                (7.1)         (9.4)       (6.1)
                                     $ 2,633.7     $ 2,839.0    $3,098.1
Revenues interarea                                            
 United States                       $     2.7     $     2.9    $    3.2
 Europe                                    3.5           5.3         2.4
 Pacific and Other Markets                 0.9           1.2         0.5
                                     $     7.1     $     9.4    $    6.1
Operating profit F1                                          
 United States                       $    47.3     $   133.8    $   16.6
 Europe                                   11.1          94.1       110.0
 Pacific and Other Markets                17.8          13.3        45.6
 Corporate Expense                       (46.0)        (48.4)      (62.9)
                                     $    30.2     $   192.8    $  109.3
Identifiable assets                                           
 United States                       $   642.8     $   661.0    $  664.9
 Europe                                  510.9         542.2       563.4
 Pacific and Other Markets               226.1         240.5       254.4
 Corporate                               184.2         200.1       421.4
                                     $ 1,564.0     $ 1,643.8    $1,904.1
</TABLE>
F1 Operating profit for 1998, 1997 and 1996 reflects the
 allocation of other operating items of $70.0, $35.0 and $235.0,
 respectively, to the geographic financial information as follows
 (refer to note TWO in Notes to Consolidated Financial Statements
 for further information):  United States $36.7, $15.3 and
 $151.0, Europe $22.1, $7.4 and $63.5, Pacific and Other Markets
 $---, $8.9 and $16.7, and Corporate Expense $11.2, $3.4 and
 $3.8, respectively.

The Reader's Digest Association, Inc. and Subsidiaries

MANAGEMENT'S DISCUSSION AND ANALYSIS
Dollars in million, except per share data

Management's discussion and analysis as it pertains to geographic
and business segment information has been written excluding the
effect of the 1998 first quarter charges of $70.0, the 1997
fourth quarter charges of $35.0 and the 1996 third quarter
charges of $245.0 (referred to as the operating charges) in order
to analyze the results on a comparable basis. In addition, in
1996 reported results included $10.0 of savings recognized as a
result of the finalization of the company's lease termination
program in the United Kingdom.

 The 1998 first quarter charges were composed primarily of
severance costs of $39.5 associated with workforce reductions in
Europe, the United States, and at the corporate level; and other
costs associated with the discontinuation of certain businesses
and the realignment of business processes and operations.
Businesses that were discontinued include a children's book club
in the United States, and the company's investment in a World
Wide Web navigation service.  The realignment of business
processes and operations also related to certain vendor contracts
in the United States and Europe.

Results of Operations

1998 v. 1997 Worldwide revenues for 1998 decreased to $2,633.7,
or by 7%, compared with $2,839.0 for 1997.  Excluding the
adverse effect of changes in foreign currency exchange rates,
revenues decreased 3%.  This decline was because of lower unit
sales, lower-priced product offerings and sales of a lower-
priced product mix within Books and Home Entertainment
Products.  The decrease in unit sales was predominantly a
result of lower mail quantities, fewer profitably promotable
customers and lower customer response to promotional mailings
primarily in most developed markets.  Revenues declined
principally in the United States, Germany, Canada and other
developed markets. This decrease was largely offset by growth
in developing markets in Eastern Europe and Latin America.

 The company reported worldwide operating profit of $30.2 in
1998, compared with $192.8 in 1997.  The 1998 and 1997 results
reflect operating charges of $70.0 ($51.8 after tax, or $0.49
per share) and $35.0 ($22.2 after tax, or $0.21 per share),
respectively.  Excluding the effect of the operating charges,
worldwide operating profit decreased by 56% in 1998 compared
with 1997.  These operating results reflect lower revenues in
most developed markets, significant declines in operating
results in the United States and Germany and higher
proportionate product costs and promotional spending, slightly
offset by the benefits of cost-containment initiatives in most
developed markets.

 The company reported net income of $17.9, or $0.16 per share
in 1998, compared with net income of $133.5, or $1.24 per share
in 1997.  Excluding the effect of the operating charges, basic
and diluted earnings per share decreased 56% to $0.64 in 1998,
compared with $1.45 in 1997.

 1997 v. 1996 Worldwide revenues for 1997 decreased to $2,839.0,
or by 8%, compared with $3,098.1 for 1996.  Excluding the adverse
effect of changes in foreign currency exchange rates, revenues
decreased 7%.  Revenues declined in all geographic areas,
particularly in the company's European operations.  The decrease
in revenues was principally because of lower unit sales and, to a
lesser extent, lower-priced product offerings and sales of a
lower-priced product mix in Books and Home Entertainment
Products.  External factors, including weak European economies
and increased competitive pressures globally, affected revenues.
Tactical implementation of many simultaneous strategic
initiatives, including varying the quantity and frequency of
promotional mailings, moderating product pricing and introducing
greater promotion variety and less aggressive sweepstakes, also
contributed to lower worldwide revenues in 1997.

 Worldwide operating profit increased to $192.8 in 1997, compared
with $109.3 in 1996.  The 1997 and 1996 results reflect operating
charges of $35.0 ($22.2 after tax, or $0.21 per share) and $245.0
($169.8 after tax, or $1.57 per share), respectively.  Excluding
the effect of the operating charges, worldwide operating profit
decreased by 36% in 1997, compared with 1996.  These operating
results reflect the impact of lower revenues and higher inventory
write-offs as a result of lower customer response to third and
fourth quarter 1997 promotional mailings, partially offset by the
benefits of cost-containment initiatives.

 The company reported net income of $133.5, or $1.24 per share in
1997, compared with $80.6, or $0.73 per share in 1996.  Excluding
the effect of the operating charges, basic and diluted earnings
per share decreased 37% to $1.45 in 1997, compared with $2.30 in
1996, which includes the benefit of $0.09 per share from the
savings recognized as a result of the finalization of the
company's lease termination program in the United Kingdom.

Other Income, Net

1998 v. 1997                  Other income, net for 1998
decreased to $11.3, compared with $17.4 in the prior year.
This decrease was primarily because of lower gains on foreign
exchange transactions and hedging activity ($1.3 in 1998,
compared with $8.5 in 1997), lower interest income ($6.9 in
1998, compared with $11.4 in 1997), and higher interest expense
($9.4 in 1998, compared with $7.0 in 1997), which were
partially offset by gains on the sales of certain assets ($10.2
in 1998, compared with $1.4 in 1997).

 1997 v. 1996 Other income, net for 1997 decreased to $17.4,
compared with $28.4 in 1996.  This decrease was primarily because
of lower interest income ($11.4 in 1997, compared with $21.5 in
1996), lower gains on the sales of certain investments ($7.0 in
1997, compared with $15.8 in 1996), and higher interest expense
($7.0 in 1997, compared with $2.4 in 1996), which were partially
offset by higher gains on foreign exchange transactions and
hedging activity ($8.5 in 1997, compared with a loss of $6.1 in
1996).

Income Taxes

1998 v. 1997      The reported tax rate for 1998
was 56.9%, compared with a reported rate of 36.5% for 1997.
Excluding the effect of the operating charges, the overall
effective tax rate was 37.5% and 36.5% in 1998 and 1997,
respectively.  The higher effective tax rate in 1998 was
primarily because of a reduced amount of foreign tax credits
available.

 1997 v. 1996 The reported tax rate for 1997 was 36.5%, compared
with a reported rate of 41.5% for 1996.  Excluding the effect of
the operating charges, the overall effective tax rate was 36.5%
and 35.5% in 1997 and 1996, respectively.  The lower effective
rate in 1996 was primarily attributable to favorable settlements
relating to prior years.

Geographic Areas

<TABLE>
<CAPTION>
                    Operating Profit by Geographic Area
                                                      Other          
                                           As       operating       As
1998                                    reported      items      adjusted
<S>                                    <C>            <C>        <C>
United States                          $  47.3        $ 36.7     $  84.0
Europe                                    11.1          22.1        33.2
Pacific and Other Markets                 17.8           ---        17.8
Corporate Expense                        (46.0)         11.2       (34.8)
                                       $  30.2        $ 70.0    $  100.2
1997                                                            
United States                          $ 133.8        $ 15.3    $  149.1
Europe                                    94.1           7.4       101.5
Pacific and Other Markets                 13.3           8.9        22.2
Corporate Expense                        (48.4)          3.4       (45.0)
                                       $ 192.8        $ 35.0    $  227.8
</TABLE>

United States

1998 v. 1997                  Revenues in the United States
decreased from $1,236.4 in 1997 to $1,181.4, or by 4%, in 1998.
Revenues declined across all product lines within Books and
Home Entertainment Products, but most significantly as a result
of lower unit sales in general books and, to a lesser extent,
video products.  These declines were moderately offset by
increased revenues in Special Interest Magazines and at QSP,
the company's youth fund-raising organization.  The decrease in
general books revenues was primarily a result of lower customer
response to promotional mailings, lower mail quantities, and
fewer profitably promotable customers in 1998.  Video revenues
declined primarily because of lower mail quantities, lower
customer response to promotional mailings and, to a lesser
extent, a lower-priced mix of products sold in 1998.  The
increase in Special Interest Magazines was primarily a result
of the acquisition of Walking magazine in the third quarter of
1997.  QSP revenues increased primarily resulting from growth
in magazine subscription sales.  Operating profit decreased 44%
to $84.0 in 1998 compared with $149.1 in 1997, because of the
revenue decrease, higher promotional spending in order to
acquire and renew subscribers to Reader's Digest Magazine and
higher inventory reserve levels as a result of the lower
customer response rates, slightly offset by lower paper costs.

 1997 v. 1996                      Revenues in the United States
decreased from $1,278.9 in 1996 to $1,236.4, or by 3%, in 1997.
This decrease was primarily attributable to lower unit sales in
Books and Home Entertainment Products.  Revenues were also
adversely affected by the absence of revenues resulting from the
sale of Travel Holiday magazine in the third quarter of 1996.
Within Books and Home Entertainment Products, lower unit sales
were principally caused by declines in Condensed Books and music
products.  The decrease in Condensed Books and music products
sales was caused by lower customer response to promotional
mailings.  Operating profit decreased 11% to $149.1 in 1997
compared with $167.6 in 1996 because of lower revenues and lower
customer response to promotional mailings, partially offset by
lower paper costs and the benefit of cost-containment
initiatives.

Europe

1998 v. 1997                  Revenues in Europe decreased from
$1,172.2 in 1997 to $1,035.3, or by 12%, in 1998.  Excluding
the adverse effect of changes in foreign currency exchange
rates, revenues decreased 3%.  The revenue decrease was
primarily because of lower Books and Home Entertainment
Products revenues resulting from lower-priced product offerings
and sales of a lower-priced product mix in most product lines,
as well as lower unit sales of series books and Condensed
Books.  Lower average prices were a result of the reduction of
prices in certain markets coupled with a lower-priced mix of
products offered in 1998, principally in music and video
products.  Product expansion in Eastern European markets,
principally in general books, music and video products, was
more than offset by lower sales in most other markets,
including major markets.  This was particularly evident in
Germany, where sales and operating profit have declined more
significantly than in other markets.  Lower unit sales were a
result of a reduction in shipments caused by fewer customers
carried into 1998 for series books and Condensed Books, lower
mail quantities, fewer profitably promotable customers, and
lower customer response to promotional mailings.  Operating
profit decreased 67% to $33.2 in 1998, compared with $101.5 in
1997, as a result of lower revenues and higher proportionate
product costs and promotional spending, slightly offset by the
benefits of cost-containment initiatives in most developed
markets.

 1997 v. 1996 Revenues in Europe decreased from $1,379.7 in 1996
to $1,172.2, or by 15%, in 1997.  Excluding the adverse effect of
changes in foreign currency exchange rates, revenues decreased
12%.  The decrease in revenues was primarily attributable to
lower unit sales and, to a lesser extent, lower-priced product
offerings and sales of a lower-priced product mix within Books
and Home Entertainment Products.  Revenues declined in all
product lines within Books and Home Entertainment Products,
except for video products.  Operating profit decreased from
$173.5 in 1996 to $101.5, or by 41%, in 1997.  Results in 1997
were unfavorably affected by the continuing general weakness in
European economies, increased competitive pressures and the
company's ongoing actions to restore long-term growth in this
region.  These actions included the selective modification of the
number of promotional mailings and mail quantity in a given
mailing, variation of promotional formats and moderation of
product prices.  The impact of these items was partially offset
by the benefit of lower product returns and bad debts and the
implementation of cost-containment initiatives.

Pacific and Other Markets

1998 v. 1997 Revenues in Pacific and Other Markets decreased from
$439.8 in 1997 to $424.1, or by 4%, in 1998.  Excluding the
adverse effect of changes in foreign currency exchange rates,
revenues increased 4%.  Revenues increased primarily as a result
of higher unit sales of Books and Home Entertainment Products, as
well as higher circulation revenues for Reader's Digest Magazine.
Within Books and Home Entertainment Products, higher unit sales
of general books and, to a lesser extent, music products were
moderately offset by lower unit sales of Condensed Books and
video products.  Higher revenues in Latin America, reflecting
product expansion and increased circulation levels, primarily in
Brazil, were largely offset by significant revenue declines in
Canada and, to a lesser extent, in Australia because of lower
mail quantities and lower customer response to promotional
mailings in 1998.  In addition, revenues declined in Canada
because of the effects of a postal strike in November 1997 and
severe ice storms that forced closure of the business and
adversely affected postal service during the critical January
mailing period.  Operating profit decreased 20% to $17.8 in 1998,
compared with $22.2 in 1997, primarily because of the declines in
Canada and the negative impact of currency devaluation in the Far
East.  Excluding the devaluation, operating profit increased 20%,
principally as a result of improved performance in Mexico and
Brazil.

 1997 v. 1996 Revenues in Pacific and Other Markets decreased
from $445.6 in 1996 to $439.8, or by 1%, in 1997.  This decrease
was caused by lower Books and Home Entertainment Products
revenues; however, increased Reader's Digest Magazine circulation
revenues in new countries offset almost three-quarters of this
decline.  Within Books and Home Entertainment Products, the
decline in revenues resulted from lower-priced product offerings
and sales of a lower-priced product mix, as well as lower unit
sales in 1997, primarily in Condensed Books and general books.
Higher revenues in Latin America, reflecting product expansion in
Brazil and Argentina, were offset primarily by significant
revenue declines in South Africa and in Australia.  In South
Africa, substantially lower mail quantities and customer response
rates and the country's economic climate reduced unit sales. In
Australia, lower customer response to promotional mailings,
including the effect of promotional mailing variations and
increased competitive pressures reduced unit sales.  Operating
profit decreased 64% in 1997 to $22.2, primarily because of
higher proportionate promotional spending, continuing investments
in new country expansion, and higher inventory write-offs as a
result of the lower customer response rates.

Business Segments
<TABLE>
<CAPTION>
                   Operating Profit by Business Segment
                                                         Other        
                                                As     operating     As
1998                                         reported    items    adjusted
<S>                                          <C>       <C>        <C> 
Reader's Digest Magazine                     $  16.7   $   7.7    $  24.4
Books and Home Entertainment Products           37.9      45.6       83.5
Special Interest Magazines                       1.7       1.0        2.7
Other Businesses                                19.9       4.5       24.4
Corporate Expense                              (46.0)     11.2      (34.8)
                                              $ 30.2   $  70.0     $100.2
1997                                                              
Reader's Digest Magazine                      $ 42.7   $   5.6      $48.3
Books and Home Entertainment Products          175.6      25.5      201.1
Special Interest Magazines                       0.4       ---        0.4
Other Businesses                                22.5       0.5       23.0
Corporate Expense                              (48.4)      3.4      (45.0)
                                              $192.8   $  35.0     $227.8
</TABLE>

Reader's Digest Magazine

1998 v. 1997 Revenues for Reader's Digest Magazine decreased from
$729.2 in 1997 to $712.3, or by 2%, in 1998.  Excluding the
adverse effect of changes in foreign currency exchange rates,
revenues increased 2%.  The increase in revenues was attributable
to higher circulation revenues, slightly offset by lower
advertising revenues.  Increased circulation levels, primarily in
Russia and Brazil, were moderately offset by circulation declines
in several major markets, particularly in Germany.  In addition,
slightly higher circulation revenues in the United States were
attributable to a higher-priced mix of subscriptions, largely
offset by a lower number of subscriptions sold in 1998.  A
decline in the number of advertising pages sold in the United
States and Germany was slightly offset by a higher number of
pages sold in Pacific and Other Markets.  The decrease in
advertising pages was slightly offset by a higher average rate
per page, primarily in Europe.  Operating profit for Reader's
Digest Magazine decreased 50% to $24.4 in 1998, compared with
$48.3 in 1997.  The decrease reflected significantly higher
promotional spending in the United States and other major markets
to acquire and renew subscribers, partially offset by the
benefits of cost-containment initiatives in most developed
markets.  Consistent with industry practice, the company
periodically evaluates the financial implications of the
circulation rate base of Reader's Digest Magazine worldwide.  In
order to increase the efficiency of its promotional spending, the
company announced in September 1998 that it will reduce the rate
base for Reader's Digest Magazine in the United States by 10% to
20%.

 1997 v. 1996 Revenues for Reader's Digest Magazine decreased
from $739.8 in 1996 to $729.2, or by 1%, in 1997. Excluding the
adverse effect of changes in foreign currency exchange rates,
circulation revenues were about even year-over-year and
advertising revenues increased slightly from the prior year.
Increased circulation levels in Latin America, Eastern Europe and
Thailand were offset by lower paid copies in several European
countries and the United States.  The increase in advertising
revenues was attributable to a higher number of advertising pages
sold in Pacific and Other Markets and the United States, offset
by a lower number of pages in Europe and, to a lesser extent, a
higher average price per page in the United States offset by a
lower average price per page in Pacific and Other Markets.
Operating profit for Reader's Digest Magazine decreased in 1997
to $48.3 compared with $48.8 in 1996.  The decrease reflects
lower revenues, increased promotional spending and investments in
new countries, partially offset by lower paper costs and the
benefit of cost-containment initiatives.

Books and Home Entertainment Products

1998 v. 1997 Revenues for Books and Home Entertainment Products
decreased from $1,850.5 in 1997 to $1,635.0, or by 12%, in 1998.
Excluding the adverse effect of changes in foreign currency
exchange rates, revenues decreased 7%.  This decrease was
principally attributable to the company's United States and
European operations.  The lower revenues were predominantly a
result of significantly lower unit sales in series books,
Condensed Books and general books and, to a lesser extent, lower-
priced product offerings and sales of a lower-priced product mix
in all product lines, principally in music and video products.
The decline in series books and Condensed Books revenues was
caused by a combination of a reduction in shipments caused by
fewer customers carried into 1998, lower mail quantities and
fewer profitably promotable customers, as well as lower customer
response to promotional mailings in developed markets.  In
addition, in the United States, the frequency of Condensed Books
shipments, a reduced number of series mailings and the scaling
back of a book series also contributed to lower revenues.
General books revenue declines, most notably in the United States
but also in most other developed markets, were offset by growth
in Eastern Europe and Latin America, principally in Russia and
Brazil.  The substantial decrease in general books sales in the
United States was primarily a result of lower customer response
to promotional mailings, lower mail quantities and fewer
profitably promotable customers in 1998.  Operating profit for
Books and Home Entertainment Products decreased 58% to $83.5 in
1998, compared with $201.1 in 1997.  These operating results were
affected by lower revenues, higher proportionate product costs in
part because of higher inventory reserve levels in the United
States and higher proportionate promotional spending.

 1997 v. 1996 Revenues for Books and Home Entertainment Products
decreased from $2,099.4 in 1996 to $1,850.5, or by 12%, in 1997,
principally attributable to the company's European operations.
Excluding the adverse effect of changes in foreign currency
exchange rates, revenues decreased 10%.  Most product lines
reported significantly lower revenues, primarily because of lower
unit sales and, to a lesser extent, lower-priced product
offerings and sales of a lower-priced product mix.  External
factors, including weak European economies and increased
competitive pressures globally, affected revenues.  Tactical
implementation of many simultaneous strategic initiatives,
including varying the quantity and frequency of promotional
mailings, moderating product pricing and introducing greater
promotion variety and less aggressive sweepstakes, contributed to
lower revenues in 1997.  Operating profit for Books and Home
Entertainment Products decreased in 1997 to $201.1 compared with
$322.1 in 1996.  These operating results were affected by the
impact of the company's strategic actions to restore long-term
growth in Europe, lower than anticipated responses to promotional
mailings in Pacific and Other Markets, higher inventory write-
offs as a result of lower customer response to promotional
mailings in the third and fourth quarter of 1997, and lower
customer response to Condensed Books promotional mailings.

Special Interest Magazines

1998 v. 1997 Revenues for Special Interest Magazines increased
from $81.9 in 1997 to $97.0, or by 18%, in 1998.  This increase
was primarily attributable to the acquisition of Walking magazine
in the third quarter of 1997.  Excluding Walking, revenues
increased 5%, principally resulting from a higher number of
advertising pages sold and, to a lesser extent, higher
circulation levels in 1998.  Operating profit  for Special
Interest Magazines improved to $2.7 in 1998, compared with $0.4
in 1997, primarily as a result of the higher revenues, which were
partially offset by increased promotional spending associated
with Walking.

 1997 v. 1996 Revenues for Special Interest Magazines decreased
from $91.9 in 1996 to $81.9, or by 11%, in 1997.  This decrease
was primarily attributable to the absence of revenues resulting
from the sale of Travel Holiday magazine in the third quarter of
1996.  Excluding prior year revenues from Travel Holiday,
revenues increased 8% in 1997 compared with 1996.  The
acquisition of Walking magazine in the third quarter of 1997
accounted for 3% of the increase in revenues.  Revenues also
increased almost equally because of higher circulation levels and
advertising pages sold in 1997.  Operating performance improved
in 1997 compared with 1996 primarily reflecting the increases in
circulation and advertising revenues.

Other Businesses

1998 v. 1997 Revenues for Other Businesses, net of intersegment
sales, increased in 1998 to $189.4, or by 7%, compared with the
prior year, primarily as a result of growth in magazine
subscription sales at QSP in the United States.  Operating profit
improved primarily because of the disposal of the company's
investment in a World Wide Web navigation service, largely offset
by higher inventory reserve levels in the merchandise catalog
business in the United Kingdom and higher promotional costs at
QSP.

 1997 v. 1996 Revenues for Other Businesses, net of intersegment
sales, increased in 1997 to $177.4, or by 6%, compared with the
prior year, primarily because of growth in the merchandise
catalog business in the United Kingdom, higher sales at
QSP in the United States and the introduction of a merchandise
catalog business in the United States.  Operating profit
decreased because of costs associated with the company's
investment in a World Wide Web navigation service in 1997 and
higher proportionate promotional costs associated with the launch
of the catalog business in the United States, which were
partially offset by increased profits at QSP.

Corporate Expense

Corporate Expense in 1998 declined 23% to $34.8 compared with
$45.0 in 1997, primarily as a result of the benefit of cost-
containment initiatives and, to a lesser extent, savings in
employee benefits costs.  Corporate Expense in 1997 decreased 24%
to $45.0 compared with $59.1 in 1996 principally because of lower
recruiting and relocation expenses and the benefit of cost-
containment initiatives.

Fourth Quarter Results

Worldwide revenues for the fourth quarter of 1998 decreased to
$624.3, or by 2%, compared with $636.1 in the fourth quarter of
1997.  Excluding the adverse effect of changes in foreign
currency exchange rates, revenues increased 2%.  Growth in
revenues in Eastern Europe and Latin America was largely offset
by declines in the United States and other developed markets.
The increase in revenues was attributable primarily to higher
unit sales in Condensed Books and series books within Books and
Home Entertainment Products.  The company reported worldwide
operating profit of $5.6 in the fourth quarter of 1998, compared
with an operating loss of $37.9 in the fourth quarter of 1997.
Excluding the effect of the operating charges, the operating loss
was $2.9 in the fourth quarter of 1997.  The operating loss in
1997 primarily reflects higher levels of inventory write-offs
than in 1998 as a result of lower than anticipated customer
response to promotional mailings that occurred in the third and
fourth quarter of 1997.  Operating performance improved in the
fourth quarter of 1998 compared with the fourth quarter of 1997
primarily as a result of the lower levels of inventory write-
offs, moderately offset by higher promotional spending to acquire
and renew subscribers to Reader's Digest Magazine.

 The company reported net income of $5.4, or $0.05 per share in
the fourth quarter of 1998, compared with a net loss of $22.8, or
$0.22 per share in the fourth quarter of 1997.  Excluding the
effect of the operating charges, the loss per share was $0.01 in
the fourth quarter of 1997.

Currency Risk Management

The company is exposed to the effect of foreign exchange rate
fluctuations on the U.S. dollar value of its foreign
subsidiaries' income.  The company purchases foreign currency
option contracts to minimize the effect of fluctuating foreign
currencies on its earnings and specifically identifiable
anticipated transactions.  In addition, the company enters into
forward contracts to minimize the effect of fluctuating foreign
currency exchange rates on certain foreign currency denominated
assets and liabilities.  The company's primary foreign currency
market exposures include the British pound, the German mark and
the French franc.  In addition, the company anticipates that its
operations in Russia will be negatively affected by the
devaluation of the ruble.  This may have a material adverse
effect on the company's results of operations for fiscal 1999.
At June 30, 1998, the company estimated that the results of a
uniform 10% weakening in the value of the dollar relative to the
currencies in which the options and forwards are denominated
would result in a net decrease in the fair value of these
instruments of approximately $4.0.  This estimate, however,
includes changes in the fair value of forward contracts which
would be substantially offset by the related impact on the assets
and liabilities being hedged.  This calculation assumes that each
exchange rate would change in the same direction relative to the
U.S. dollar.  Changes in exchange rates not only affect the
dollar value of the fair value, but also impact the underlying
foreign subsidiaries' income.  The company's sensitivity analysis
as described above does not factor in a potential change in sales
levels, local currency prices, or amounts of options or forwards
to cover these changes.  Additional information concerning
derivative financial instruments is available in notes ONE and
FIVE in Notes to Consolidated Financial Statements.

Forward-Looking Information

Strategic Initiatives

The company is undertaking a three-phase strategy to build on its
fundamental strengths and create growth opportunities over the
next three years.

 In July 1998, the company announced as the first step in this
strategy a global reorganization that includes the following key
elements:

    The organization of operations into four business groups
  (Global Books and Home Entertainment, United States Magazine
  Publishing, International Magazine Publishing and QSP, Inc.) to
  make greater use of global scale.

    The restructuring of editorial organizations to ensure
editorial quality and integrity worldwide.

    The establishment of new reporting relationships to sharpen
focus and accountability.

    The reassignment of certain executives as well as the hiring
of new people with key skill sets.

 The second phase of the strategy, announced in September 1998,
targets the restructuring of costs and the raising of capital.
The main components of the restructuring are:

    The elimination or rationalization of unproductive
  businesses.

    Cost reductions and re-engineering.

    Leveraging the asset base of the company.

 The elimination or rationalization of unproductive businesses,
which is expected to be completed within the next 18 months, will
generally involve the following actions:

    The sale or joint venturing of proprietary publishing
  operations in Scandinavia, Finland, Benelux, Italy and South
  Africa.

    The elimination or redirection of certain product lines,
including adult and children's retail book publishing, the
Today's Best Nonfiction book series, and video or music
businesses in selected international markets.

 Cost reduction and re-engineering activities will involve the
following:

    A 20-25% reduction in the number of individual promotional
  mailings globally, including the elimination of related product
  development and overhead costs.  The company anticipates that
  this will increase response rates on continuing mailings.

    A 10-20% reduction in the circulation rate base for Reader's
Digest Magazine in the United States to improve the efficiency of
promotional spending.  This action is also expected to reduce
circulation and advertising revenue in the short term.

    The outsourcing of support functions in areas where it is
cost-effective and the consolidation of suppliers and combination
of purchasing efforts for greater negotiating leverage.

 Implementation of the second phase of the strategy is expected
to reduce the company's annual expense base, excluding other
operating items, by $300.0 to $350.0 and reduce annual revenues
by approximately $200.0 by the end of fiscal 2001.  As a result,
the company believes that annual operating profit will increase
by $100.0 to $150.0 in three years.  The company expects to
record charges to other operating items in a range of $30.0 to
$50.0 in fiscal 1999 related to these actions as components of
the plan are finalized.

 Leveraging the asset base of the company will include the
following actions:

    The sale of important works from the art collection.

    The sale of international real estate holdings including its
U.K. Canary Wharf facility.

    An expected reduction in the quarterly dividend for the
second quarter of 1999 from $0.225 per share to $0.05 per share.

 The actions to leverage the asset base of the company are
expected to convert approximately $200.0 of under-productive
assets to cash in the next year and improve annual pre-tax cash
flow by $150.0 to $200.0 by fiscal 2001.

 The announcement of the second phase of the strategy also
focused on broadening the company's customer base to include more
younger customers and more products for older customers.

 The third phase of the strategy is expected to be announced in
January 1999 and will focus on plans to grow the business.  This
will include investing in internal opportunities, as well as
targeting acquisitions that leverage the company's core
strengths, expanding geographically, introducing new products and
engaging in at least one completely new business.

Fiscal 1999 Results

 The company anticipates that its operations in Russia will be
negatively affected by the devaluation of the ruble.  This may
have a material adverse effect on the company's results of
operations for fiscal 1999.

 Notwithstanding the events in Russia, results for fiscal 1999
are expected to show a modest improvement over fiscal 1998 before
the effects of the above-mentioned actions and other operating
items; however, as the strategy is executed worldwide, results
are expected to show additional improvement in 1999 and more
significant benefits are anticipated over the next two to three
years.

Impact of the Year 2000 Issue

The year 2000 issue is the result of computer programs which were
written using only two digits, rather than four, to represent a
year.  Date-sensitive software or hardware may not be able to
distinguish between 1900 and 2000 and programs that perform
arithmetic operations, comparisons or sorting of date fields may
begin yielding incorrect results.  This could potentially cause a
system failure or miscalculations that could disrupt operations.

 The Company's State of Readiness.  The company has developed a
remediation plan for its year 2000 issue that involves three
overlapping phases:

1) Inventory - This phase includes the creation of an inventory
   of three functional areas:
     a)                       Applications and information
     technology (IT) equipment - These include all mainframe,
     network and desktop hardware and software, including custom
     and packaged applications, and IT embedded systems.
   
     b)                       Non-information technology (non-IT)
     embedded systems - These include non-IT equipment and
     machinery.  Non-IT embedded systems, such as security, fire
     prevention and climate control systems typically include
     embedded technology, such as microcontrollers.
   
     c)  Vendor relationships - These
     include significant third party vendors and suppliers of
     goods and services, as well as vendor and supplier
     interfaces.
 
The United States and developed international markets have
substantially completed the inventory phase and plan to be
fully completed by December 1998.

2) Analysis - This phase includes the evaluation of the
   inventoried items for year 2000 compliance, the determination
   of the remediation method and resources required and the
  development of an implementation plan.  A significant portion
  of the analysis phase is complete in the United States and
  developed international markets.  The United States and major
  developed international markets expect to complete the
  analysis phase for non-IT embedded systems by December 1998.
  All other components of the analysis phase for the United
  States and developed international markets are expected to be
  completed by March 1999.

3) Implementation - This phase includes executing the
  implementation plan for all applicable hardware and software,
  interfaces and systems.  This involves testing the changes,
  beginning to utilize the changed procedures in actual
  operations, testing in a year 2000-simulated environment and
  vendor interface testing.  Subsequent to implementation, the
  company will conduct live testing on January 1 and 2, 2000,
  before business commences on January 3, 2000.  The
  implementation phase, including testing for certain critical
  applications, has commenced in the United States and major
  developed international markets, and is expected to be
  completed by June 1999 for applications and IT equipment and
  non-IT embedded systems.  All other components of the
  implementation phase for the United States and developed
  international markets are expected to be completed by
  September 1999.

 The company's operations in developing international markets,
including operations in Latin America, Eastern Europe and the Far
East, are in the preliminary stages of assessing exposure with
respect to their local year 2000 issues.

 The company's remediation plan for its year 2000 issue is an
ongoing process and the estimated completion dates above are
subject to change.

 The Risk of the Company's Year 2000 Issue.  Overall, at this
time the company believes that its systems will be year 2000
compliant in a timely manner for several reasons.  Several
significant marketing and fulfillment systems are already
compliant.  In addition, the company extensively utilizes certain
shared applications that should be remediated once and then
deployed to all appropriate markets.  Also, comprehensive testing
of all critical systems is planned to be conducted in a simulated
year 2000 environment.  Additionally, critical fulfillment
systems in the United States and several developed international
markets use a one-digit field to denote the year, therefore the
date fields for these systems are updated every 10 years and the
year 2000 is not an issue requiring separate attention.

 The company believes that the risk of developing international
markets' not being year 2000 compliant on a timely basis is low
primarily because the majority of their custom applications are
shared systems that were developed in the United States and
Canada and are currently year 2000 compliant, or are expected to
be by December 31, 1998.  In addition, since most of the
equipment in these locations is relatively new there is less
likelihood that the equipment is not currently year 2000
compliant.

 The company believes that the area of greatest risk to the
company surrounding the year 2000 issue relates to significant
suppliers' failing to remediate their year 2000 issues in a
timely manner.  The company has relationships with certain
significant suppliers in most of the locations in which it
operates.  These relationships may be material to some local
operations and, in the aggregate, may be material to the company.
The company relies on suppliers to deliver a broad range of goods
and services worldwide, including book and magazine printing
services, supplies of promotional materials and paper, warehouse
facilities, lettershops which assemble promotional mailings,
customer service facilities, postal delivery services, banking
services, telecommunications and electricity.  The company is
conducting formal communications with its significant suppliers
in all locations to determine the extent to which it may be
affected by those third parties' plans to remediate their own
year 2000 issue in a timely manner.  The level of preparedness of
significant suppliers can vary greatly from country to country.
If a number of significant suppliers are not year 2000 compliant,
this could have a material adverse effect on the company's
results of operations, financial position or cash flow.

 The Company's Contingency Plans.  The company is developing its
country-by-country contingency plans and expects to have them
completed by June 1999.  To mitigate the effects of the company's
or significant suppliers' potential failure to remediate the year
2000 issue in a timely manner, the company would take appropriate
actions.  Such actions may include having arrangements for
alternate suppliers, re-running processes if errors occur, using
manual intervention to ensure the continuation of operations
where necessary, and scheduling activity in December 1999 that
would normally occur at the beginning of January 2000.  If it
becomes necessary for the company to take these corrective
actions, it is uncertain, until the contingency plans are
finalized, whether this would result in significant delays in
business operations or have a material adverse effect on the
company's results of operations, financial position or cash flow.

 Costs to Address the Company's Year 2000 Issue.  The total cost
of the company's remediation plan is estimated at approximately
$13.0 to $18.0 and is being funded through operating cash flows.
To manage the cash flow effects of these incremental costs, the
company has deferred certain IT development costs and system
enhancements.  Of the total cost, approximately $2.0 is
attributable to new hardware and software that will be
capitalized.  The remainder will be expensed as incurred.  To
date, approximately $4.0 of the total cost of the remediation
plan has been spent, the majority of which was expensed.

Impact of the Euro Conversion

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

                              The company has initiated an
internal analysis regarding the business and systems issues
related to the euro conversion and is in the process of
developing a strategic plan to ensure that all necessary
modifications are made on a timely basis.  As the first step, to
accommodate the introduction of the euro on January 1, 1999, the
company's operations in markets that are adopting the euro plan
to be able to accept payments and pay suppliers in euros at that
time, as well as have the ability to indicate the euro equivalent
of pricing on invoices.  During the transition period, the
company will be monitoring customer and competitor reaction to
the euro and will update the strategic plan as needed.

                              The company believes that the
conversion to the euro will not have a significant impact on the
marketing strategy for the company's European operations.  The
euro is not expected to have a significant competitive impact,
including the resulting need to synchronize prices between
markets, primarily because, for the most part, the editorial
content of the company's publishing products varies, the products
are published in local languages and they are sold principally
through direct mail rather than retail channels.  These factors
result in products that tend to be unique to each market that do
not easily lend themselves to price comparisons across borders.
The estimated costs to convert all affected systems to the euro
will not be finalized until the company has developed a strategic
plan; therefore it is uncertain whether the costs of conversion
will have a material adverse effect on the company's results of
operations, financial position or cash flow.

                              *****

 The statements contained in this report, if not historical, are
forward-looking statements, which involve risks and uncertainties
that could cause actual results to differ materially from the
financial results described in the forward-looking statements.
These risks and uncertainties include:  the effect of potentially
more restrictive privacy and other governmental regulation
relating to the company's marketing methods; the effect of
modified and varied promotions; the ability to identify customer
trends; the ability to continue to create a broadly appealing mix
of new products; the ability to attract and retain new and
younger magazine subscribers and product customers in view of the
maturing of an important portion of the U.S. customer base; the
ability to attract and retain subscribers and customers in an
economically efficient manner; the effect of selective
adjustments in pricing; the ability to expand and more
effectively utilize the company's customer database; the ability
to expand into new international markets and to introduce new
product lines into new and existing markets; the ability to
expand into new channels of distribution; the ability to
negotiate and implement productive strategic alliances and joint
ventures; the ability to contain and reduce costs, especially
through global efficiencies; the cost and effectiveness of the re-
engineering of business processes and operations; the accuracy of
management's assessment of the current status of the company's
business; the evolution of the company's organizational and
structural capabilities; the ability of the company to respond to
competitive pressures within and outside the direct marketing
industry; the effect of worldwide paper and postage costs; the
effect of postal disruptions on deliveries; the effect of foreign
currency fluctuations; the effect of the year 2000 issue; the
effect of the transition to the euro; and general economic
conditions, particularly those in Russia.

Liquidity and Capital Resources

Cash and cash equivalents, short-term investments and marketable
securities increased $23.7 to $126.1 at June 30, 1998, compared
with $102.4 at June 30, 1997.  This increase was primarily a
result of cash provided by operations ($93.9), net proceeds from
other long-term investments ($45.7) and proceeds from sales of
property, plant and equipment ($25.0), partially offset by
dividend payments ($97.1) and capital expenditures ($34.1).

 In 1998, the company reduced its quarterly dividend on common
stock to $0.225 per share.  The 1998 full-year dividend payment
decreased to $0.90 per share, or by 50% compared with 1997.  On
September 16, 1998, the company announced an expected reduction
in its quarterly dividend for the second quarter of 1999 to $0.05
per share.

 Capital expenditures in 1998 amounted to $34.1 and were
primarily for information technology.

 The company is a party to a Competitive Advance and Revolving
Credit Facility Agreement amended as of June 2, 1998, with a
syndicate of domestic and foreign banks (the credit agreement).
The credit agreement, which expires in November 2001, permits
competitive advance and revolving credit borrowings of up to
$300.0 by the company and its designated subsidiaries.  Interest
rates can be based on several pricing options that can vary based
upon operating results of the company.  The proceeds of the
borrowings may be used for general corporate purposes, including
acquisitions, share repurchases and commercial paper backup.  The
credit agreement contains certain restrictions on incurrence of
debt, liens and guarantees of indebtedness.  The company must
also comply with certain financial covenants, including a minimum
level of consolidated tangible net worth.  At June 30, 1998,
there were no borrowings outstanding under the credit agreement.

 Various international subsidiaries of the company have available
lines of credit totaling $62.6.  At June 30, 1998, loans in the
amount of $8.5 were outstanding under international lines of
credit at a weighted average interest rate of 7.9%.

 The company believes that its liquidity, capital resources,
cash flow and borrowing capacity are sufficient to fund normal
capital expenditures, working capital requirements, the payment
of dividends and implementation of the company's strategic
initiatives.


The Reader's Digest Association, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                  Years ended June 30,
In millions, except per share data             1998        1997      1996
<S>                                        <C>          <C>        <C>
Revenues                                   $  2,633.7   $ 2,839.0  $ 3,098.1
                                                                  
Product, distribution and editorial
 expenses                                       989.0     1,026.7    1,079.8
Promotion, marketing and administrative
 expenses                                     1,544.5     1,584.5    1,674.0
Other operating items                            70.0        35.0      235.0
                                                                  
Operating profit                                 30.2       192.8      109.3
                                                                  
Other income, net                                11.3        17.4       28.4
Income before provision for income taxes         41.5       210.2      137.7
                                                                  
Provision for income taxes                       23.6        76.7       57.1
                                                                  
Net income                                 $     17.9   $   133.5  $    80.6
                                                                  
Basic and diluted earnings per share            $0.16       $1.24      $0.73
                                                                  
Average common shares outstanding               106.5       106.7      107.9
</TABLE>
See accompanying notes to consolidated financial statements.


The Reader's Digest Association, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          June 30,
In millions                                           1998        1997
<S>                                               <C>          <C>                                                               
Assets
Current assets:                                                
Cash and cash equivalents                         $   122.8    $    69.1
Receivables, net                                      376.4        398.3
Inventories                                           162.2        167.8
Prepaid expenses and other current assets             311.2        290.6
                                                               
Total current assets                                  972.6        925.8
                                                               
Property, plant and equipment, net                    285.4        314.8
Intangible assets, net                                 41.8         59.1
Other noncurrent assets                               264.2        344.1
                                                               
Total assets                                      $ 1,564.0    $ 1,643.8
                                                               
Liabilities and stockholders' equity                           
Current liabilities:                                           
Accounts payable                                  $   172.1    $   193.0
Accrued expenses                                      377.4        373.6
Income taxes payable                                   21.0         22.1
Unearned revenue                                      355.4        356.5
Other current liabilities                              90.0         67.9
                                                               
Total current liabilities                           1,015.9      1,013.1
                                                               
Postretirement and postemployment benefits other
 than pensions                                        157.6        153.3
Other noncurrent liabilities                          131.9        131.4
                                                               
Total liabilities                                   1,305.4      1,297.8
                                                               
Stockholders' equity:                                          
Capital stock                                          16.6         29.0
Paid-in capital                                       144.8        141.8
Retained earnings                                     845.0        924.2
Foreign currency translation adjustment               (49.8)       (33.4)
Net unrealized losses on certain investments            ---         (0.3)
Treasury stock, at cost                              (698.0)      (715.3)
                                                               
Total stockholders' equity                            258.6        346.0
                                                               
Total liabilities and stockholders' equity        $ 1,564.0    $ 1,643.8
</TABLE>
See accompanying notes to consolidated financial statements.


The Reader's Digest Association, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                   Years ended June 30,
In millions                                      1998      1997       1996
<S>                                            <C>       <C>        <C>
Cash flows from operating activities                                
Net income                                     $ 17.9    $ 133.5    $  80.6
Depreciation and amortization                    46.2       46.7       48.8
Gains on the sales of certain investments        (5.2)      (7.0)     (15.8)
Gains on the sales of certain assets            (10.2)      (1.4)      (2.1)
Changes in assets and liabilities:                                  
 Receivables, net                                10.9      (33.3)     (15.8)
 Inventories                                     (1.9)      20.2      (25.7)
 Unearned revenue                                 7.6        7.7        5.3
 Accounts payable and accrued expenses            9.3      (36.2)     142.5
 Other, net                                      19.3      (32.9)    (105.6)
                                                                    
Net change in cash due to operating
 actitities                                      93.9       97.3      112.2
                                                                    
Cash flows from investing activities                                
Proceeds from maturities and sales of                               
 marketable securities and short-term
 investments                                     32.5      107.3      393.1
Purchases of marketable securities and short-                       
 term investments                                (2.3)     (23.1)    (194.3)
Capital expenditures                            (34.1)    (110.6)     (59.6)
Proceeds from other long-term investments,
 net                                             45.7        2.1       13.3
Proceeds from sales of property, plant and                            
 equipment                                       25.0        5.5        5.1
Other, net                                        ---      (13.6)      (7.2)
                                                                    
Net change in cash due to investing                                 
 activities                                      66.8      (32.4)     150.4
                                                                    
Cash flows from financing activities                                
Dividends paid                                  (97.1)    (193.3)    (190.1)
Common stock repurchased                          ---      (66.3)     (62.9)
Other, net                                       (5.6)      13.5       37.8
                                                                    
Net change in cash due to financing                                 
 activities                                    (102.7)    (246.1)    (215.2)
                                                                    
Effect of exchange rate changes on cash          (4.3)      (7.8)      (3.9)
                                                                    
Net change in cash and cash equivalents          53.7     (189.0)      43.5
                                                                    
Cash and cash equivalents at beginning of                           
 year                                            69.1      258.1      214.6
                                                                    
Cash and cash equivalents at end of year       $122.8    $  69.1    $ 258.1
                                                                    
Supplemental information                                            
Cash paid for interest                         $  5.4    $   5.3    $   2.0
Cash paid for income taxes                     $ 20.5    $  72.2    $ 158.5
</TABLE>
See accompanying notes to consolidated financial statements.

The Reader's Digest Association, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                  Years ended June 30,
In millions, except per share data               1998     1997      1996
<S>                                            <C>      <C>       <C>
Capital stock                                                     
 Preferred stock                                                  
 Balance at beginning and end of year          $  28.8  $  28.8   $  28.8
                                                                   
 Common stock                                                     
 Balance at beginning and end of year              1.4      1.4       1.4
                                                                   
 Unamortized restricted stock                                     
   Balance at beginning of year                   (1.2)    (1.8)     (0.7)
   Common stock issued under various plans       (12.4)     0.6      (1.1)
 Balance at end of year                          (13.6)    (1.2)     (1.8)
                                                                  
Paid-in capital                                                   
 Balance at beginning of year                    141.8    138.3     118.3
 Common stock issued under various plans           3.0      3.5      20.0
Balance at end of year                           144.8    141.8     138.3
                                                                   
Retained earnings                                                  
 Balance at beginning of year                    924.2    984.0   1,093.5
 Net income                                       17.9    133.5      80.6
 Dividends on common stock ($0.90, $1.80                          
  and $1.75 per share in 1998, 1997 and
  1996, respectively)                            (95.8)  (192.0)   (188.8)
 Dividends on preferred stock                     (1.3)    (1.3)     (1.3)
Balance at end of year                           845.0    924.2     984.0
                                                                   
Foreign currency translation adjustment                            
 Balance at beginning of year                    (33.4)   (14.2)     (0.3)
 Translation adjustment                          (16.4)   (19.2)    (13.9)
Balance at end of year                           (49.8)   (33.4)    (14.2)
                                                                   
Net unrealized (losses) gains on investments                      
 Balance at beginning of year                     (0.3)    (1.3)      5.1
 Net unrealized gains (losses), net of tax         0.3      1.0      (6.4)
Balance at end of year                             ---     (0.3)     (1.3)
                                                                   
Treasury stock                                                     
 Balance at beginning of year                   (715.3)  (656.3)   (605.3)
 Common stock repurchased                          ---    (66.3)    (62.9)
 Common stock issued under various plans          17.3      7.3      11.9
Balance at end of year                          (698.0)  (715.3)   (656.3)
                                                                  
Total stockholders' equity                     $ 258.6  $ 346.0   $ 478.9
</TABLE>
See accompanying notes to consolidated financial statements.


The Reader's Digest Association, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in millions, except per share data

ONE     Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the
accounts of The Reader's Digest Association, Inc. and its U.S.
and international subsidiaries (the company).  All significant
intercompany accounts and transactions have been eliminated in
consolidation.

 Certain prior year amounts have been reclassified to conform to
the current year presentation.

Use of Estimates

The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported
amounts in these financial statements.  Actual results could
differ from those estimates.

New Accounting Standards

In 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
This statement, which is effective for fiscal years beginning
after June 15, 1999, requires that entities recognize all
derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value.  This statement is
not expected to have a material impact on the company's results
of operations, financial position or cash flow.

           In 1998, the FASB issued SFAS No.
132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits."  The company adopted this statement
effective June 30, 1998, and modified disclosures relating to its
pension plans and postretirement benefits accordingly.  This
adoption had no effect on the company's results of operations,
financial position or cash flow.

           In 1998, the Accounting Standards
Executive Committee of the AICPA issued Statement of Position 98-
1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use."  This statement, which is effective
for fiscal years beginning after December 15, 1998, requires that
entities capitalize certain internal-use software costs once
certain criteria are met.  This statement is not expected to have
a material impact on the company's results of operations,
financial position or cash flow.

            In 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information."  These statements, which are effective for fiscal
years beginning after December 15, 1997, expand or modify
disclosures and will have no impact on the company's results of
operations, financial position or cash flow.

            In the second quarter of 1998, the
company adopted SFAS No. 128, "Earnings Per Share," for all
periods presented.  Diluted earnings per share is the same as
basic earnings per share for all periods presented because the
dilutive impact of potential common shares is not material.

 In 1997, the company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of."  This statement requires that certain assets be
reviewed for impairment and, if impaired, remeasured at fair
value, whenever events or circumstances indicate that the
carrying amount of the asset may not be recoverable.  This
adoption did not have a material effect on the company's results
of operations, financial position or cash flow.

 In 1997, the company adopted the fair value disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation."  As permitted by this statement, the company did
not change the method of accounting for its stock options and
other stock-based employee compensation awards.

Cash and Cash Equivalents

The company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.

Receivables, net

Receivables, net are reflected net of allowances for returns and
bad debts of $173.0, $166.2, $193.1 and $227.8 at June 30, 1998,
1997, 1996 and 1995, respectively.  Additions to the allowances
amounted to $505.0, $548.7 and $627.8 and amounts written off
amounted to $498.2, $575.6 and $662.5 during the years ended June
30, 1998, 1997 and 1996, respectively.

Inventories

Inventories are stated at the lower of cost or market, primarily
determined on the first-in, first-out (FIFO) basis.  The majority
of U.S. inventory is valued on the last-in, first-out basis.

Derivative Financial Instruments

The company is exposed to the effect of foreign exchange rate
fluctuations on the U.S. dollar value of its foreign
subsidiaries' income.  The company purchases foreign currency
option contracts to minimize the effect of fluctuating foreign
currencies on its earnings and specifically identifiable
anticipated transactions, generally over periods ranging up to 12
months.  In addition, the  company enters into forward contracts
to minimize the effect of fluctuating foreign currency exchange
rates on certain foreign currency denominated assets and
liabilities, generally over periods ranging up to 12 months.  The
company, as a matter of policy, does not speculate in financial
markets and, therefore, does not hold financial instruments for
trading purposes.

 Foreign currency option contracts that reduce the company's
exposure to the effects of fluctuating foreign currencies on its
earnings do not meet the criteria for hedge accounting; however,
option contracts that are designated as hedges and that reduce
the company's exposure to the effects of fluctuating foreign
currencies on specifically identifiable anticipated transactions,
where it is probable that the transactions will occur, meet the
criteria for hedge accounting.  Forward contracts meet the
criteria for hedge accounting as they are designated as, and are
effective as, hedges of specifically identified foreign currency
denominated assets and liabilities.

 Premiums on option contracts that qualify for hedge accounting
are amortized over the term of the contract and any gains at
maturity are included in other income, net.  If an option
contract is terminated before its maturity, the unamortized
premium associated with the contract is written off and included
in other income, net.  Option contracts that do not qualify for
hedge accounting are recorded at fair market value, and changes
in market value on such instruments are included in other income,
net.  The carrying value of option contracts is included in
prepaid expenses and other current assets.  Forward contracts are
reflected in the company's balance sheet at market value and
included in prepaid expenses and other current assets and other
current liabilities, and changes in market value on these
instruments are included in other income, net.  In the event that
the underlying foreign currency denominated asset or liability is
extinguished or terminated prior to the forward contract's
maturity, the company's policy is to enter into a separate
forward contract to offset any changes in market value from that
date until the maturity of the original contract.

Depreciation and Amortization

Property, plant and equipment are stated at cost, except for
property, plant and equipment that have been impaired, for which
the carrying amount is reduced to the estimated fair market
value.  Buildings and equipment are depreciated using the
straight-line method over useful lives up to 50 years for
buildings and up to five years for other equipment.  Leasehold
improvements are amortized using the straight-line method over
the term of the lease or the life of the improvement, whichever
is shorter.

Intangible Assets, net

Intangible assets, net are composed of distribution rights,
contracts, subscription lists and other intangible assets, as
well as the excess of costs over the fair value of net assets of
several businesses acquired.  The excess of costs over the fair
value of businesses acquired is amortized, on a straight-line
basis, over varying periods, not in excess of 40 years.  Other
acquired intangibles are amortized, on a straight-line basis,
over their estimated useful lives, not in excess of ten years.
The company continually evaluates the recoverability of its
intangible assets to determine whether current events or
circumstances warrant adjustments to the carrying value.  Such
evaluation may be based on projected income and cash flows from
operations of related businesses on an undiscounted basis as well
as other economic and market variables.

Stock-Based Compensation

Compensation cost is recognized for stock-based compensation
using the intrinsic value method.  Under this method,
compensation cost is the excess, if any, of the quoted market
price of the stock at the grant date over the amount an employee
must pay to acquire the stock.  The company's policy is to grant
stock options at fair market value at the date of grant.

Revenues

Sales of Books and Home Entertainment Products, less provisions
for returns, are recorded at the time of shipment.  Sales of
magazine subscriptions are recorded as unearned revenue at the
gross subscription price at the time the orders are received.
Proportionate shares of the gross subscription price are
recognized as revenues when the subscriptions are fulfilled.

Promotion Costs

Costs of direct response advertising are matched with the
expected revenue stream, generally over a period of one to 12
months.  Direct response advertising consists primarily of
promotion costs incurred in connection with the procurement of
magazine subscriptions and the sale of books and other products.

 Promotion costs of $927.0, $942.9 and $972.5 were incurred for
the years ended June 30, 1998, 1997 and 1996, respectively.
Prepaid promotion costs, included in prepaid expenses and other
current assets, amounted to $44.3 at June 30, 1998 and 1997.
 Deferred promotion costs, included in other noncurrent assets,
amounted to $102.8 and $119.6 at June 30, 1998 and 1997,
respectively.

Income Taxes

Deferred income taxes, net of appropriate valuation allowances,
are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates to differences between
the financial statement carrying amounts and the tax bases of
existing assets and liabilities.

 Deferred federal income taxes have not been provided on
undistributed earnings of foreign subsidiaries as any federal
taxes payable would be substantially offset by foreign tax
credits.

Basic and Diluted Earnings Per Share

Basic earnings per share is computed by dividing net income, less
preferred stock dividend requirements, by the weighted average
number of common shares outstanding during the year.  Diluted
earnings per share is computed by dividing net income, less
preferred stock dividend requirements, by the weighted average
number of common shares outstanding during the year, assuming
exercise and conversion of stock options.  A weighted average
number of common shares of 106.7, 106.7 and 108.1 for the years
ended June 30, 1998, 1997 and 1996, respectively was used for the
computation of diluted earnings per share.

Foreign Currency Translation

Revenues and expenses denominated in foreign currencies are
translated at average monthly exchange rates prevailing during
the year.  The assets and liabilities of international
subsidiaries are translated into U.S. dollars at the rates of
exchange in effect at the balance sheet date.  The resulting
translation adjustment is reflected as a separate component of
stockholders' equity.

 The U.S. dollar is used as the functional currency for
subsidiaries operating in highly inflationary economies, for
which both translation adjustments and gains and losses on
foreign currency transactions are included in other income, net.

TWO     Other Operating Items

In the first quarter of 1998, the company recorded charges of
$70.0 ($51.8 after tax, or $0.49 per share) composed primarily of
severance costs associated with workforce reductions in Europe,
the United States and at the corporate level, which are
anticipated to be completed by the end of 1999; and other costs
associated with the discontinuation of certain businesses and the
realignment of business processes and operations.  Businesses
that were discontinued include a children's book club in the
United States and the company's investment in a World Wide Web
navigation service.  The realignment of business processes and
operations also relates to certain vendor contracts in the United
States and Europe.

 In the fourth quarter of 1997, the company recorded charges of
$35.0 ($22.2 after tax, or $0.21 per share), relating primarily
to the realignment of the organization and operations.  The
realignment of the organization and operations covers the
separation of employee positions from the worldwide workforce by
the end of 1999 primarily through involuntary severance programs.
Also included in other items in the table which follows, are a
contract termination relating to the discontinuance of a
distributor relationship and the discontinuance of individual
products in certain business units.

 In the fourth quarter of 1996, the company finalized its lease
termination program in the United Kingdom at a savings of $10.0
below the provision that was originally established as part of
other operating items, originally recorded in 1994, relating to
losses on lease terminations and provisions for certain claims
against the company.

 In the third quarter of 1996, the company recorded total charges
of $245.0 ($169.8 after tax, or $1.57 per share), composed of
$204.0 related primarily to the streamlining of the company's
organizational structure and the strategic repositioning of
certain businesses and $41.0 for various claims against the
company.

 The charges related to the streamlining included the separation
of  approximately 1,300 employees from the worldwide workforce
through a combination of voluntary and involuntary severance
programs.  Also associated with the streamlining and included in
other items in the table which follows, are asset write-downs,
contract terminations and the outsourcing of certain functions
where it was cost-beneficial to the company.

 The strategic repositioning related primarily to the Special
Interest Magazines in the United States and a publishing and book
club business in the United Kingdom.  As a result of this
repositioning, Travel Holiday magazine was sold in 1996, and the
publishing and book club business was sold in 1997.

 Balances remaining of the $70.0, $35.0 and $204.0 charges at
June 30, 1998, are:

<TABLE>
<CAPTION>
                                 Balance at                      Balance at
                                   June 30,     1998      1998     June 30,
                                    1997      Charges   Activity     1998
<S>                                <C>       <C>       <C>         <C>                                                              
Employee retirement and
 severance benefits                $  56.7   $  39.5   $ (36.6)    $  59.6
Other items                           23.6      23.1     (22.5)       24.2
Business repositioning                 0.7       7.4      (4.2)        3.9
                                   $  81.0   $  70.0   $ (63.3)    $  87.7
</TABLE>

THREE   Other Income, Net
<TABLE>
<CAPTION>
                                                1998       1997      1996
<S>                                           <C>        <C>       <C>
Interest income                               $  6.9     $ 11.4    $  21.5
Interest expense                                (9.4)      (7.0       (2.4)
Gains on the sales of certain investments        5.2        7.0       15.8
Gains on the sales of certain assets            10.2        1.4        2.1
Gains (losses) on foreign exchange               1.3        8.5       (6.1)
Other, net                                      (2.9)      (3.9)      (2.5)
                                              $ 11.3     $ 17.4    $  28.4
</TABLE>

FOUR Supplemental Balance Sheet Information

<TABLE>
<CAPTION>

Inventories
                                                    1998          1997
<S>                                              <C>            <C>
Raw materials                                    $  21.8        $ 17.4
Work-in-progress                                    24.7          26.5
Finished goods                                     115.7         123.9
                                                 $ 162.2        $167.8
</TABLE>

 Inventories would have been $10.8 and $12.0 higher than the
amounts reported at June 30, 1998 and 1997, respectively, had the
FIFO method of inventory been used for U.S. inventory.

<TABLE>
<CAPTION>

Property, Plant and Equipment
                                                    1998          1997
<S>                                              <C>            <C>
Land                                             $ 12.5         $ 14.0
Buildings and building improvements               303.2          303.4
Furniture, fixtures and equipment                 290.4          316.2
Leasehold improvements                             16.3           21.9
                                                  622.4          655.5
Accumulated depreciation and amortization        (337.0)        (340.7)
                                                 $285.4         $314.8
</TABLE>

<TABLE>
<CAPTION>

Intangible Assets
                                                       1998        1997
<S>                                                   <C>       <C>
Distribution rights, contracts, subscription
 lists and other                                      $ 56.3    $  71.9
Excess of cost over fair value of net assets
 of businesses acquired                                 77.2       75.5
                                                       133.5      147.4
Accumulated amortization                               (91.7)     (88.3)
                                                      $ 41.8    $  59.1

Accrued Expenses
                                                         1998      1997
Compensation and other                                           
 employee benefits                                    $  93.0   $  85.3
Royalties and copyrights payable                         32.3      33.1
Taxes, other than income taxes                           15.8      19.1
Other, principally operating expenses F1                236.3     236.1
                                                      $ 377.4   $ 373.6
</TABLE>

F1 Includes $87.7 and $81.0 relating primarily to the remaining
reserve balances associated with other operating
items at June 30, 1998 and 1997, respectively.
 Refer to Note TWO for further explanation.

FIVE Derivative Financial Instruments

The company is a party to financial instruments with off-balance
sheet risk.  These financial instruments are used in the normal
course of business to manage the company's exposure to
fluctuations in foreign exchange rates.

 The company may be exposed to credit losses in the event of
nonperformance by the financial institutions that are
counterparties to these instruments; however, the company
mitigates this risk through specific minimum credit standards and
diversification of financial institutions with which it enters
into these derivative transactions.

 The company's derivative financial instruments also involve
elements of market risk as a result of potential changes in
foreign currency exchange rates.  The market risk associated with
the option contracts is limited to the carrying value of these
contracts in the company's consolidated balance sheet. Forward
contracts outstanding at the end of the year are effective hedges
of existing foreign currency exposures.  Therefore, the impact of
potential changes in future foreign currency exchange rates on
these instruments would generally offset the related impact on
the assets and liabilities being hedged.

<TABLE>
<CAPTION>

                                  Notional/                           
                                  Principal    Carrying    Fair       
1998                               Amounts      Value      Value  Maturity
<S>                                <C>         <C>        <C>      <C>
Forward Contracts                                                 
 Assets                            $  62.3     $  62.1    $ 62.1    1999
 Liabilities                       $  62.3     $  62.4    $ 62.4    1999
Option Contracts                                                  
 Assets                            $  59.1     $   1.8    $  1.8    1999
                                                                      
                                  Notional/                           
                                  Principal    Carrying    Fair       
1997                               Amounts       Value     Value  Maturity
Forward Contracts                                                  
 Assets                            $  28.0      $  28.0   $ 28.0    1998
 Liabilities                       $  28.0      $  27.9   $ 27.9    1998
Option Contracts                                                   
 Assets                            $ 181.5      $  10.5   $ 12.1    1998
</TABLE>

SIX  Pension Plans and Postretirement Benefits

The company adopted SFAS No. 132 effective June 30, 1998, and has
modified its disclosures relating to its pension plans and
postretirement benefits accordingly.

 Assumptions used to determine pension costs and projected
benefit obligations are as follows:

<TABLE>
<CAPTION>

                                                    U.S. Plans
                                              1998     1997    1996
<S>                                           <C>     <C>      <C>
Discount rate                                 7.0%    7.8%     7.8%
Compensation increase rate                    5.0%    5.3%     5.3%
Long-term rate of return on plan assets       9.5%    9.5%     9.5%
                                                         
                                               International Plans
                                              1998     1997    1996
Discount rate                                4-15%    4-15%   4-15%
Compensation increase rate                   3-10%    3-13%   3-13%
Long-term rate of return on plan assets      5-16%    5-16%   5-16%
</TABLE>

 Components of the company's consolidated net periodic pension
(benefit) cost are as follows:

<TABLE>
<CAPTION>

                                                 Pension Benefits
                                             1998      1997      1996
<S>                                         <C>       <C>       <C>
Service cost                                $ 18.2    $ 19.4    $ 20.9
Interest cost                                 45.7      46.1      44.4
Expected return on plan assets               (60.7)    (54.6)    (50.0)
Amortization                                  (3.2)     (2.8)     (2.8)
Recognized actuarial gain                     (3.4)     (0.1)     (0.1)
Special items                                  ---       ---       2.5
                                            $ (3.4  $    8.0    $ 14.9
</TABLE>

 The company provides medical and dental benefits to U.S. retired
employees and their dependents.  Substantially all of the
company's U.S. employees become eligible for these benefits when
they meet minimum age and service requirements.  The company has
the right to modify or terminate these unfunded benefits.

 A discount rate of 7.0% for 1998, and 7.8% for 1997 and 1996 was
used in determining the accumulated postretirement benefits
liability.

 Components of the company's costs for postretirement benefits
are as follows:

                                                   Other Benefits
                                              1998     1997      1996
Service cost                                $ 1.6     $ 2.5    $ 2.9
Interest cost                                 5.5       7.1      6.1
Recognized actuarial gain                    (2.2)     (0.7)    (1.1)
Special items                                 ---       ---      3.4
                                            $ 4.9     $ 8.9    $11.3

 Amortization in the pension benefits table above reflects both
amortization of prior service cost and amortization of the
transitional asset.  Special items in both tables above reflect
the net increase in 1996 pension expense and postretirement
benefits costs resulting from voluntary early retirement and
involuntary severance programs.

 During 1998, in accordance with Internal Revenue Code section
401(h), the company transferred $4.7 of excess pension assets to
fund postretirement benefits. The reconciliation of beginning and
ending balances of benefit obligations and fair value of plan
assets, and the funded status of the plans are as follows:


<TABLE>
<CAPTION>
                                   Pension Benefits      Other Benefits
                                    1998      1997      1998        1997
<S>                             <C>        <C>       <C>        <C>
Change in benefit obligation:                                    
 Benefit obligation at                                            
 beginning of year              $  620.7   $ 607.6   $  99.1    $   97.7
Service cost                        18.2      19.4       1.6         2.5
Interest cost                       45.7      46.1       5.5         7.1
Actuarial (gain) or loss            55.2       1.3     (19.4)       (3.7)
Exchange rate changes               (5.5)     (7.4)      ---         ---
Other items                          6.5      (1.5)      ---         ---
Benefits paid                      (43.6)    (44.8)     (5.0)       (4.5)
Benefit obligation at                                            
 end of year                    $  697.2   $ 620.7   $  81.8    $   99.1
Change in plan assets:                                           
Fair value of plan assets at                                     
 beginning of year              $  830.3   $ 720.1   $   ---    $    ---
Actual return on plan assets       154.0     151.7       ---         ---
Employer contribution                8.8       8.9       0.3         4.5
IRC section 401(h) transfer         (4.7)      ---       4.7         ---
Exchange rate changes               (7.5)     (1.6)      ---         ---
Other items                         (1.2)     (4.0)      ---         ---
Benefits paid                      (43.6)    (44.8)     (5.0)       (4.5)
Fair value of plan assets at
 end of year                     $  936.1  $ 830.3   $   ---    $    ---
Funded status                    $  238.9  $ 209.6   $ (81.8)   $  (99.1)
Unrecognized actuarial gain        (265.2)  (233.1)    (37.5)      (20.3)
Unrecognized transition asset       (16.9)   (21.9)      ---         ---
Unrecognized prior service cost      12.9     13.3       ---         ---
Additional minimum liability          ---     (2.4)      ---         ---
Net amount recognized            $  (30.3) $ (34.5)  $(119.3)   $ (119.4)

Amounts recognized in the balance
 sheet are as follows:

                                  Pension Benefits      Other Benefits
                                   1998      1997       1998       1997
Prepaid benefit cost             $  34.2   $  26.8   $   ---    $    ---
Accrued benefit liability          (64.9)    (62.0)   (119.3)     (119.4)
Intangible assets, net               0.4       0.7       ---         ---
Net amount recognized            $ (30.3)  $ (34.5)$  (119.3)   $ (119.4)
</TABLE>

 The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for the pension plans with
accumulated benefit obligations in excess of plan assets were
$90.2, $83.7 and $2.4, respectively, as of June 30, 1998, and
$78.9, $70.7 and $2.5, respectively, as of June 30, 1997.  The
projected benefit obligation and fair value of plan assets for
the pension plans with projected benefit obligations in excess of
plan assets were $100.7 and $11.9, respectively, as of June 30,
1998, and $91.1 and $11.6, respectively, as of June 30, 1997.

 The health care inflation assumption used to determine the
postretirement benefits liability was 8.0% for 1998, decreasing
gradually to 5.5% by the year 2004 and remaining at that level
thereafter.  For 1997, the health care inflation assumption used
to determine the postretirement benefits liability was 11.0% with
respect to medical benefits and 10.0% with respect to dental
benefits decreasing to 8.0% by the year 2001.  Assumed health
care cost trend rates have a significant effect on the amounts
reported for postretirement benefits.  A one-percentage-point
increase in assumed health care cost trend rates would increase
the total of the service and interest cost components and the
postretirement benefit obligation by $1.1 and $9.9, respectively.
A one-percentage-point decrease in assumed health care cost trend
rates would decrease the total of the service and interest cost
components and the postretirement benefit obligation by $0.9 and
$8.8, respectively.

SEVEN   Employee Compensation Plans

The 1989 and the 1994 Key Employee Long Term Incentive Plans (the
plans) provide that the Compensation and Nominating Committee of
the Board of Directors (the committee) may grant stock options,
stock appreciation rights, restricted stock, performance units
and other awards to eligible employees.  The committee may grant
certain stock-based awards up to a maximum of 5,420,000 and
10,800,000 underlying Class A shares of nonvoting common stock
(Class A) under the plans, respectively.  No awards may be
granted with respect to Class B voting common stock (Class B).
Under the plans, options have been granted with exercise prices
not less than 100% of the fair market value of the company's
common stock at the time of the grant, with an exercise term as
determined by the committee, not to exceed ten years.  The
options have vesting terms as determined by the committee, but
generally become exercisable over three or four years.

 On October 9, 1997, options and stock appreciation rights
related to 2.1 million shares of Class A stock were granted to
over 800 eligible employees pursuant to the plans (October
grant).  The October grant was never distributed.  The exercise
price of the October grant was $27.03 per share, the fair market
value of the company's common stock at October 9, 1997.  These
options provided for vesting ratably over four years and could be
exercised over a period of ten years from the date of grant.  On
November 18, 1997, the October grant was canceled and options and
stock appreciation rights related to 2.1 million shares of Class
A stock were reissued to eligible employees at a price of $21.47
per share, the fair market value of the company's stock at
November 18, 1997 (November grant).  This reissuance was in
connection with a significant revision of the company's executive
compensation structure, involving the elimination of long-term
cash performance awards, the reduction of annual cash bonuses and
the greater reliance on equity incentive awards.  The other terms
of the November grant were not changed from the terms of the
October grant.

 The company has adopted the disclosure provisions of SFAS
No. 123, and as permitted by this statement has continued to
measure compensation cost as the excess of the quoted market
price of the company's stock at the grant date over the amount
the employee must pay for the stock.  Accordingly, no
compensation expense is recognized for stock-based compensation
other than in the case of restricted stock awards, stock
appreciation rights and phantom stock options.

 SFAS No. 123 requires disclosure of pro forma net income and
earnings per share as if the fair value-based method had been
applied in measuring compensation cost for stock-based awards
granted in 1998, 1997 and 1996.

 Management believes that 1998, 1997 and 1996 pro forma amounts
are not representative of the effects of stock-based awards on
future pro forma net income and earnings per share because these
pro forma amounts exclude the pro forma compensation expense
related to unvested stock options granted before 1996.  In
addition, certain options vest over several years, and awards in
future years may occur whose terms and conditions may vary.

 Reported and pro forma net income and earnings per share amounts
are set forth below:

<TABLE>
<CAPTION>

                                                1998      1997     1996
<S>                  <C>                      <C>       <C>       <C>
Net income           As reported              $  17.9   $ 133.5   $ 80.6
                     Pro forma                $  10.5   $ 129.1   $ 78.6
                                                                  
Earnings per share                                                
                     As reported                $0.16    $1.24     $0.73
                     Pro forma                  $0.09    $1.20     $0.72
</TABLE>

 The weighted average fair value of options granted in 1998, 1997
and 1996 is $8.38, $9.32 and $14.80, respectively.  The weighted
average fair value of options granted in 1998 includes the value
of the November grant less the value of the October grant as of
the date that the November grant was issued.  The fair values of
the options granted were estimated on the date of their grant
using the Black-Scholes option-pricing model based on the
following weighted average assumptions:

                                       1998        1997       1996
Risk-free interest rate                5.5%       6.3%       6.4%
Expected life                        3.7 years  5.1 years  7.8 years
Expected volatility                   29.4%      23.5%      24.4%
Expected dividend yield                1.0%       3.7%       3.0%

 The following table summarizes information about stock options
outstanding at June 30, 1998:

<TABLE>
<CAPTION>
                       Options Outstanding       Options Exercisable
(Options in thousands)                                          
                           Weighted                             
                            Average   Weighted              Weighted
    Range of               Remaining   Average               Average
    Exercise              Contractual  Exercise              Exercise
     Prices       Options  Life (yrs.)  Price   Options       Price
<S>               <C>        <C>      <C>       <C>         <C>
$20.00 - $29.44   3,208      8.24     $ 23.57      889      $ 25.98
$35.56 - $39.81     110      8.31     $ 38.44       16      $ 38.57
$40.31 - $43.56   2,398      6.96     $ 41.40    1,300      $ 41.45
$45.06 - $48.13   2,950      5.84     $ 47.13    1,932      $ 47.19
$50.94 - $55.12     116      7.04     $ 51.39       35      $ 52.46
                  8,782      7.07     $ 36.90    4,172      $ 40.89
</TABLE>

Changes in outstanding options are as follows:

<TABLE>
<CAPTION>

                                                     Shares      Weighted
                                                   Subject to     Average
(Options in thousands)                              Options      Exercise
                                                                   Price
<S>                                                  <C>        <C>
Outstanding at June 30, 1995                         5,554      $  42.09
 Granted                                             1,303      $  47.20
 Exercised                                            (400)     $  31.11
 Canceled                                             (423)     $  44.62
Outstanding at June 30, 1996                         6,034      $  43.76
 Granted                                             1,722      $  41.04
 Exercised                                            (130)     $  25.67
 Canceled                                             (733)     $  44.53
Outstanding at June 30, 1997                         6,893      $  43.35
 Granted                                             4,880      $  24.76
 Exercised                                             (26)     $  20.13
 Canceled                                           (2,965)     $  32.05
Outstanding at                                                  
 June 30, 1998                                       8,782      $  36.90
Options exercisable at                                          
 June 30, 1998                                       4,172      $  40.89
Options available for grant at June 30, 1998         4,482      
</TABLE>

 Under the 1989 Employee Stock Purchase Plan (the ESPP), the
company is authorized to issue up to 1,650,000 Class A shares
principally to its full-time employees in the United States,
nearly all of whom are eligible to participate.  Under the terms
of the ESPP, employees can choose every six months to have up to
ten percent of their annual base earnings withheld to purchase
Class A shares.  The purchase price of the shares is 85% of the
lower of the fair market value of the Class A stock on the first
or last day of the six-month purchase period.  Approximately 50%
of eligible employees have participated in the plan in the last
three years.  In addition, several international subsidiaries of
the company have employee stock purchase plans (together with the
ESPP, the ESPP plans) under which the company is authorized to
issue up to 300,000 Class A shares to its full-time employees.
The terms of the plans in most locations are essentially the same
as the ESPP, except for one location, where the terms are based
upon a three- or five-year withholding period, and the purchase
price of the shares is 85% of the value of the Class A stock on
the first day of the purchase period.  Under the ESPP plans,
employees purchased 251,700 shares in 1998, 239,026 shares in
1997 and 194,162 shares in 1996.

 The weighted average fair value of these purchase rights granted
in 1998, 1997 and 1996 is $8.21, $13.13 and $11.72, respectively.
The fair values of the purchase rights were estimated on the date
of their grant using the Black-Scholes option-pricing model based
on the following weighted average assumptions:

                                         1998        1997       1996
Risk-free interest rate                  6.5%       5.4%       5.3%
Expected life                          1.0 years  1.0 years  0.8 years
Expected volatility                     34.0%      29.5%      16.8%
Expected dividend yield                  3.5%       4.3%       3.6%

 In 1998 the company granted 596,700 restricted Class A shares
with a value of $15.7 to over 100 employees at no cost.  In 1996
the company granted 51,347 performance-based restricted Class A
shares with a value of $2.4 to an executive officer at no cost.
The market value of shares awarded is recorded as unamortized
restricted stock which is included in capital stock.  Restricted
stock is amortized over the term of the restriction period.
Amortization of restricted stock amounted to $2.3, $0.6 and $1.3
for the years ended June 30, 1998, 1997 and 1996, respectively.

 The company granted 212,000 and 12,200 stock appreciation rights
to officers in 1998 and 1996, respectively.  The company also
issued 6,000 and 8,000 phantom stock options to non-employee
members of the Board of Directors in 1998 and 1997, respectively.

 The company contributed $5.0, $5.0 and $5.3 to its profit-
sharing plan for fiscal 1998, 1997 and 1996, respectively.

 Effective with the beginning of fiscal 1999, the company has
amended the restated Employees Profit-Sharing Plan to include a
401(k) Savings Plan component (401(k) plan).  The 401(k) plan
provides for employees to make pre-tax contributions to specified
investment options.  At the discretion of the Board of Directors,
the company can make matching contributions to the 401(k) plan.
The matching contributions vest ratably over a five-year period.

EIGHT   Income Taxes

United States and International income before provision for
income taxes are as follows:

                                          1998      1997       1996
United States                           $  8.1    $ 162.5     $ 59.7
International                             33.4       47.7       78.0
                                        $ 41.5    $ 210.2     $137.7

 Components of the company's (benefit) provision for income taxes
are as follows:

<TABLE>
<CAPTION>
                                          1998      1997       1996
<S>                                     <C>       <C>        <C>
Current                                                      
 Federal                                $  (3.8)  $ 10.0     $  40.1
 State and local                            1.1      3.2        16.1
 International                             17.4     22.0        75.8
                                        $  14.7   $ 35.2     $ 132.0
Deferred                                                     
 Federal                                $   2.2   $ 28.5     $ (44.8)
 State and local                            1.0      6.7        (8.7)
 International                              5.7      6.3       (21.4)
                                        $   8.9   $ 41.5     $ (74.9)
                                        $  23.6   $ 76.7     $  57.1
</TABLE>

 The differences between the effective income tax rate and the
statutory U.S. federal income tax rate are as follows:

<TABLE>
<CAPTION>
                                        1998      1997        1996

<S>                                     <C>       <C>        <C>
U.S. statutory tax rate                 35.0%     35.0%      35.0%
International operations                 2.1      (0.9)      (1.1)
State taxes, net                         1.2       2.6        2.1
Other operating items                   19.4       ---        6.0
Other, net                              (0.8)     (0.2)      (0.5)
Effective tax rate                      56.9%     36.5%      41.5%
</TABLE>

 The major components of the deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
                                             1998      1997
<S>                                        <C>        <C>
Assets:                                                        
Deferred compensation and other                                
 employee benefits                         $ 81.8     $ 92.8
Accounts receivable and other                                  
 allowances                                  38.2       30.7
Other, net                                  112.3      123.4
                                           $232.3     $246.9
Liabilities:                                                   
Deferred promotion costs                   $  3.2     $  4.8
Deferred compensation and other                                
 employee benefits                            7.3        7.0
Other, net                                   47.0       57.4
                                           $ 57.5     $ 69.2
                                           $174.8     $177.7
</TABLE>

 The balance sheet classification of the deferred tax assets and
liabilities is as follows:

                                                       1998      1997
Prepaid expenses and other current assets            $ 67.9    $ 67.9
Other noncurrent assets                               121.7     122.1
Other current liabilities                               3.7       2.5
Other noncurrent liabilities                           11.1       9.8
                                                     $174.8    $177.7

 Net operating loss carryforwards totaling $135.7 and $138.8 at
June 30, 1998 and 1997, respectively, the majority of which may
be carried forward indefinitely, are available to reduce future
tax of certain foreign subsidiaries in a number of jurisdictions.

NINE Debt

The company is a party to a Competitive Advance and Revolving
Credit Facility Agreement amended as of June 2, 1998, with a
syndicate of domestic and foreign banks (the credit agreement).
The credit agreement, which expires in November 2001, permits
competitive advance and revolving credit borrowings of up to
$300.0 by the company and its designated subsidiaries.  Interest
rates can be based on several pricing options that can vary based
upon operating results of the company.  The proceeds of the
borrowings may be used for general corporate purposes, including
acquisitions, share repurchases and commercial paper backup. The
credit agreement contains certain restrictions on incurrence of
debt, liens and guarantees of indebtedness.  The company must
also comply with certain financial covenants, including a minimum
level of consolidated tangible net worth.  Borrowings may be
denominated in U.S. dollars and various foreign currencies.  The
credit agreement obligates the company to pay a facility fee
ranging between .2% and .375% of the total commitment, whether
used or unused, dependent on levels of earnings of the company,
as well as a utilization fee of .05% of loans outstanding and
administrative fees.  Fees are payable quarterly in arrears.  The
amendment to the credit agreement provided for a reduction of the
minimum required level of consolidated tangible net worth, a
reduction of credit available from $400.0 to $300.0 and an
increase in borrowing costs.  At June 30, 1998 and 1997, there
were no borrowings outstanding under the credit agreement.

 International lines of credit totaled $62.6 and $93.8 at June
30, 1998 and 1997, respectively, of which $8.5 and $21.4 were
outstanding at a weighted average interest rate of 7.9% and 7.5%,
respectively.  These lines of credit expire at various dates
throughout 1999.  Borrowings under these lines of credit are
included in other current liabilities.  Because of the short
maturity of borrowings under the lines of credit, the carrying
amounts approximate fair value at June 30, 1998 and 1997.
 In 1998, the company entered into an agreement with Morgan
Guaranty Trust Company of New York for an uncommitted line of
credit of $50.0 (the Morgan line of credit) to be used for
general corporate purposes.  The Morgan line of credit lapsed on
June 30, 1998.  The loans under the Morgan line of credit were
payable on demand and bore a floating interest rate based on the
cost of funds of the bank plus a margin.  The company was also
party to an agreement with The Chase Manhattan Bank for a line of
credit of $75.0 (the Chase line of credit) for a term of one year
to be used for general corporate purposes.  The Chase line of
credit lapsed on April 30, 1998.  The loans under the Chase line
of credit were payable on demand and bore a floating interest
rate based on the cost of funds of the bank plus a margin.  At
June 30, 1997, there were no borrowings outstanding under the
Chase line of credit.

TEN  Capital Stock

<TABLE>
<CAPTION>
                                                           1998      1997
<S>                                                      <C>       <C>
First Preferred Stock, par value $1.00 per share;                  
 authorized 40,000 shares; issued and
 outstanding 29,720 shares                               $  3.0    $   3.0
Second Preferred Stock, par value $1.00 per share;                 
 authorized 120,000 shares; issued and outstanding
 103,720 shares                                            10.3       10.3
Third Subordinated Preferred Stock, par value $1.00 per            
 share; authorized 230,000 shares; issued and
 outstanding 155,022 shares                                15.5       15.5
Preference stock, par value $0.01 per share; authorized            
 25,000,000 shares; issued and outstanding none             ---        ---
Class A nonvoting common stock, par value $0.01 per                
 share; authorized 200,000,000 shares; issued
 119,428,472 shares                                         1.2        1.2
Class B voting common stock, par value  $0.01 per share;           
 authorized 25,000,000 shares; issued and outstanding               
 21,716,057 shares                                          0.2        0.2
Unamortized restricted stock                              (13.6)      (1.2)
                                                          $16.6      $29.0
Common stock in treasury, at cost; 33,982,205 and                  
 34,826,886 Class A shares in 1998 and 1997,             
 respectively                                           $(698.0)   $(715.3)
</TABLE>

 All shares of preferred stock have a preference in liquidation
of $100.00 per share.  The difference between the aggregate par
value and liquidation preference has been appropriated from
retained earnings.  Further, all preferred stock is redeemable at
any time at the option of the company at $105.00 per share plus
accrued dividends.  The terms of the First Preferred Stock and
the Second Preferred Stock provide for annual cumulative
dividends of $4.00 per share.  The terms of the Third
Subordinated Preferred Stock provide for annual cumulative
dividends of $5.00 per share.

 In 1997, the company announced its fifth stock repurchase
program, to acquire up to 5,000,000 shares of Class A nonvoting
common stock in open market transactions.  This program began
upon the completion of the prior programs, which together
provided for the repurchase of up to 16,000,000 shares of Class A
nonvoting common stock.  The company has repurchased a total of
16,768,000 shares of which 768,000 are related to the fifth
program.

ELEVEN   Commitments and Contingencies

The company is a defendant in several lawsuits and claims arising
in the regular course of business.  Based on the opinions of
management and counsel for the company in such matters,
recoveries, if any, by plaintiffs and claimants would not
materially affect the financial position of the company or its
results of operations.

 During the third quarter of 1996, the company's QSP, Inc.
subsidiary and the company reached an agreement with the
plaintiffs to settle an antitrust class action lawsuit commenced
in December 1993 by the Roman Catholic Bishop of San Diego and
the Chino Unified School District.  The agreement provided for
QSP, Inc. and the company to deliver up to $40.0 in retail value
of company products, coupons for discounts on QSP, Inc. programs
and cash.

 The company and its subsidiaries occupy certain facilities under
lease arrangements and lease certain equipment.  Rental expense
amounted to $25.6, $31.7 and $32.4 in 1998, 1997 and 1996,
respectively, and sublease income amounted to $6.0, $7.0 and $6.9
in 1998, 1997 and 1996, respectively.
 Future minimum rental commitments, net of sublease income, for
noncancelable operating leases are as follows:

                                      Minimum     Minimum        
                                       Rental    Sublease        
                                      Payments    Income       Net
1999                                  $  12.7    $  0.7      $ 12.0
2000                                  $  10.5    $  0.7      $  9.8
2001                                  $   8.2    $  0.7      $  7.5
2002                                  $   6.0    $  0.4      $  5.6
2003                                  $   6.0    $  0.4      $  5.6
Later years                           $  24.7    $  0.4      $ 24.3

TWELVE                        Segments

Segment information is located on pages 21 and 22 of this annual
report.

 The company's operations consist of the following business
segments:  Reader's Digest Magazine, Books and Home Entertainment
Products, Special Interest Magazines and Other Businesses.  The
Books and Home Entertainment Products segment includes Condensed
Books, known as Select Editions in certain markets, series and
general books, recorded music and videos.  The Special Interest
Magazine segment includes The Family Handyman, American Health
for Women, New Choices:  Living Even Better After 50 and Walking
in the United States and Moneywise in the United Kingdom.  Other
Businesses includes QSP, Inc., the company's youth fund-raising
organization and merchandise catalogs in selected countries.

 The company's geographic areas are composed of the United
States, Europe, and Pacific and Other Markets, which includes
Asia, Australia, Canada, Latin America, New Zealand and South
Africa.

 Identifiable assets by segment are those assets that are used in
the operation of that business.  Corporate assets consist
primarily of cash and cash equivalents and prepaid expenses and
other current assets at June 30, 1998.  At June 30, 1997 and
1996, corporate assets consisted primarily of cash and cash
equivalents, prepaid expenses and other current assets and other
noncurrent assets.

 Intersegment sales are included in the company's Other
Businesses segment.  Intersegment sales are accounted for with a
markup ranging between five and 10%, dependent upon the type of
product or service sold.

THIRTEEN                      Subsequent Events (Unaudited)

In the first quarter of fiscal 1999 the company announced its
intention to enter into a sale leaseback agreement for its
principal operating office in the United Kingdom.  The company
anticipates that this transaction will be finalized in the second
quarter of fiscal 1999.

 In connection with the new long-term strategy announced in
September 1998, the company expects to record additional charges
to other operating items in fiscal 1999 for the elimination of
unproductive businesses, cost reductions and re-engineering as
components of the plan are finalized.
     
     
     INDEPENDENT AUDITORS' REPORT
     
     
     
     The Stockholders and Board of Directors
     The Reader's Digest Association, Inc.
     
     We have audited the accompanying consolidated balance sheets
     of The Reader's Digest Association, Inc. and subsidiaries as
     of June 30, 1998 and 1997, and the related consolidated
     statements of income, changes in stockholders' equity, and
     cash flows for each of the years in the three-year period
     ended June 30, 1998.  These consolidated financial
     statements are the responsibility of the company's
     management.  Our responsibility is to express an opinion on
     these consolidated financial statements based on our audits.

      We conducted our audits in accordance with generally
     accepted auditing standards.  Those standards require that
     we plan and perform the audit to obtain reasonable assurance
     about whether the financial statements are free of material
     misstatement.  An audit includes examining, on a test basis,
     evidence supporting the amounts and disclosures in the
     financial statements.  An audit also includes assessing the
     accounting principles used and significant estimates made by
     management, as well as evaluating the overall financial
     statement presentation.  We believe that our audits provide
     a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements
     referred to above present fairly, in all material respects,
     the financial position of The Reader's Digest Association,
     Inc. and subsidiaries at June 30, 1998 and 1997, and the
     results of their operations and their cash flows for each of
     the years in the three-year period ended June 30, 1998, in
     conformity with generally accepted accounting principles.
     
     
     
     KPMG PEAT MARWICK LLP     
     KPMG Peat Marwick LLP
     New York, New York
     
     August 18, 1998
     REPORT OF MANAGEMENT
     
     The company has prepared the accompanying financial
     statements and other related financial information
     contained in this annual report in conformity with
     generally accepted accounting principles, applying certain
     estimates and judgments as required.
     
     The company maintains a system of internal accounting
     controls designed to provide reasonable assurance, at
     reasonable cost, that transactions and events are recorded
     properly and that assets are safeguarded.  The internal
     control system is supported by written policies and
     procedures and by the careful selection, training and
     supervision of qualified personnel, and is monitored by an
     internal audit function.
    
     The company's financial statements have been audited by
     KPMG Peat Marwick LLP, independent auditors, as stated in
     their report, which is presented herein.
   
     The Audit Committee of the Board of Directors, composed
     only of directors who are not employed by the company,
     meets periodically with management, internal auditors and
     the independent auditors to review accounting, auditing,
     financial reporting and other related matters.  The
     internal auditors and independent auditors have full and
     unrestricted access to the Audit Committee.
     
     
     
     
     
     
     
     
     THOMAS O. RYDER   
     Thomas O. Ryder
     Chairman and Chief Executive Officer
     
     
     GEORGE S. SCIMONE
     George S. Scimone
     Senior Vice President and
     Chief Financial Officer

The Reader's Digest Association, Inc. and Subsidiaries

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
 
 In millions, except per share data       1998 F1     1997 F2     1996 F3   1995    1994 F4
<S>                                      <C>         <C>        <C>       <C>       <C>
Income Statement Data                                                                       
Revenues                                 $2,633.7    $2,839.0   $3,098.1  $3,068.5  $2,806.4
Operating profit                         $   30.2    $  192.8   $  109.3  $  391.9  $  393.7
Net income                                   17.9    $  133.5   $   80.6  $  264.0  $  246.3
Basic and diluted earnings per share
 before cumulative effect of accounting
 changes/extraordinary items                $0.16       $1.24      $0.73     $2.35     $2.34
Cumulative effect of accounting                                                             
 changes/extraordinary items                  ---         ---        ---       ---     (0.23)
Basic and diluted earnings per share        $0.16       $1.24      $0.73     $2.35     $2.11
Dividends per common share                  $0.90       $1.80      $1.75     $1.55     $1.35
Balance Sheet Data                                                                          
Cash and cash equivalents, short-term                                                       
 investments and marketable securities   $  126.1    $  102.4   $  374.2  $  532.1  $  766.9
Total assets                             $1,564.0    $1,643.8   $1,904.1  $1,958.7  $2,049.4
Stockholders' equity                     $  258.6    $  346.0   $  478.9  $  640.8  $  791.0
Average common shares outstanding           106.5       106.7      107.9     112.0     115.7
Book value per common share                 $2.14       $2.98      $4.18     $5.66     $6.70
</TABLE>

 F1 Results for 1998 include the effect of first quarter
charges (aggregate pre-tax    charges of $70.0, or $0.49
per share).

 F2 Results for 1997 include the effect of fourth quarter
charges (aggregate pre-tax charges of $35.0, or
$0.21 per share).

 F3 Results for 1996 include the effects of third quarter
charges (aggregate pre-tax charges of $245.0, or
$1.57 per share) and fourth quarter savings on the
finalization of the company's lease termination program
in the United Kingdom ($10.0, or $0.09 per share).

 F4 Results for 1994 include the effects of promotion
accounting changes, net (pre- tax benefit of $113.9, or
$0.60 per share) and other operating items (aggregate
 pre-tax charge of $76.0, or $0.51 per share).
  
  
SELECTED QUARTERLY FINANCIAL DATA and
DIVIDEND AND MARKET INFORMATION (Unaudited)

<TABLE>
<CAPTION>
                                                                                                  High-Low
                                  Operating  Net (Loss) Income                              
In millions, except                (Loss)                              Dividends
 per share data         Revenues   Profit   Amount    Per Share F1   Per Share F2       Class A             Class B
<S>                    <C>        <C>       <C>         <C>            <C>         <C>                <C>            
1998                                                                                
 First Quarter F3      $  561.4   $ (83.5)  $(56.4)     $(0.53)        $0.225      $30-9/16 - 24-1/2  $29-1/4 - 23-15/16
 Second Quarter           812.5      86.4     54.3        0.51          0.225      $31-1/2  - 20-7/8  $30     - 21-5/8
 Third Quarter            635.5      21.7     14.6        0.13          0.225      $27-1/2  - 22-3/8  $27-7/8 - 23-1/2
 Fourth Quarter           624.3       5.6      5.4        0.05          0.225      $29-3/16 - 24-1/2  $29-1/8 - 23-15/16
                       $2,633.7   $  30.2   $ 17.9      $ 0.16         $0.90       $31-1/2  - 20-7/8  $30     - 21-5/8
1997                                                                                
 First Quarter         $  644.0   $  46.6   $ 34.6      $ 0.32         $0.45       $43-3/4  - 38-1/4  $40-1/4 - 36
 Second Quarter           874.6     132.6     84.1        0.78          0.45       $41-1/4  - 34      $38-1/8 - 32-3/4
 Third Quarter            684.3      51.5     37.6        0.35          0.45       $41      - 28-3/4  $37-1/4 - 26
 Fourth Quarter F4        636.1     (37.9)   (22.8)      (0.22)         0.45       $30      - 22-1/8  $28     - 21-7/8
                       $2,839.0   $ 192.8   $133.5      $ 1.24         $1.80       $43-3/4  - 22-1/8  $40-1/4 - 21-7/8
</TABLE>
 
The company's Class A and Class B stock are listed on the New
York Stock Exchange under the symbols RDA and RDB,
respectively.  As of June 30, 1998, there
 were approximately 2,193 holders of record of the company's
Class A stock and 308 holders of record of the company's Class
B stock.

 F1 Basic and diluted.

 F2 Cash dividends on common stock are declared and paid share
and share alike, on Class A and Class B stock.

 F3 Results for 1998 include the effect of first quarter
charges (aggregate pre-tax charges of $70.0, or $0.49 per
share).

 F4 Results for 1997 include the effect of fourth quarter
charges (aggregate pre-tax charges of $35.0, or $0.21 per
share).

                                
                     MANAGEMENT INFORMATION
BOARD OF DIRECTORS

THOMAS O. RYDER
Chairman and Chief Executive Officer
The Reader's Digest Association, Inc.
Director since 1998

LYNNE V. CHENEY(1)(2)
Senior Fello
American Enterprise Institute 
 for Public Policy
Director since 1993

M. CHRISTINE DEVITA(1)(3)
President
DeWitt Wallace-Reader's Digest Fund
Lila Wallace-Reader's Digest Fund
Director since 1993

GEORGE V. GRUNE
DeWitt Wallace-Reader's Digest Fund
Lila Wallace-Reader's Digest Fund
Director from 1977 to 1995 and since August 1997

MELVIN R. LAIRD(3)
Vice President and Senior Counsellor
The Reader's Digest Association, Inc.
Director since 1990

JAMES E. PRESTON(1)(3)
Chairman
Avon Products, Inc.
Director since 1994

LAWRENCE R. RICCIARDI
Senior Vice President
 and General Counsel
International Business Machines Corp.
Director since 1998

ROBERT G. SCHWARTZ(2)(3)
Retired Chairman, President and
 Chief Executive Officer
Metropolitan Life Insurance Company
Director since 1989

C.J. SILAS (2)
Retired Chairman and
  Chief Executive Officer
Phillips Petroleum Company
Director since 1992

WILLIAM J. WHITE (1)
Professor Northwestern University
Retired Chairman
Bell & Howell Company
Director since 1996

(1)  Audit Committee
(2)  Compensation and Nominating Committee
(3)  Finance Committee

CORPORATE MANAGEMENT

THOMAS O. RYDER
Chairman and Chief Executive Officer

THOMAS A. BELLI
President, QSP, Inc.

M. JOHN BOHANE
Senior Vice President and President
Global Books and Home Entertainment

MICHAEL A. BRIZEL
Vice President and General Counsel

ELIZABETH G. CHAMBERS
Vice President, Business Redesign

GREGORY G. COLEMAN
Senior Vice President and President,
U.S. Magazine Publishing

PETER J.C. DAVENPORT
Senior Vice President, Global Marketing

CLIFFORD H.R. DUPREE
Vice President and Corporate Secretary

THOMAS D. GARDNER
Senior Vice President
Business Planning and Development

ROBERT J. KREFTING
Senior Vice President and President,
International Magazine Publishing

MELVIN R. LAIRD
Vice President and Senior Counsellor

WILLIAM H. MAGILL
Vice President, Investor Relations

BONNIE M. MONAHAN
Vice President and Treasurer

GARY S. RICH
Senior Vice President,
Human Resources

GEORGE S. SCIMONE
Senior Vice President and
Chief Financial officer

CHRISTOPHER P. WILLCOX
Senior Vice President and Editor-in-Chief
Reader's Digest Magazine

              CORPORATE AND SHAREHOLDER INFORMATION
                                   
STOCK LISTINGS                     
                                   
Class A Nonvoting Common Stock     
Listed: New York Stock             
Exchange                           
Symbol: RDA                        
                                   
Class B Voting Common Stock        
Listed: New York Stock             
Exchange                           
Symbol: RDB                        

TRANSFER AGENT AND REGISTRAR
FOR RDA AND RDB

Chase Mellon Shareholder
Services, LLC
85 Challenger Road
Ridgefield Park, New Jersey 07660
Shareholder Inquiries: 800-230-2771


ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of shareholders will be held
Friday, November 13, 1998, at 10:00 a.m. at the Reader's
Digest Corporate Headquarters, DeWitt Wallace Auditorium,
Reader's Digest Road, Chappaqua, New York.

Holders of Class B Voting Common Stock of record at the
close of business on September 23, 1998, will be entitled to
vote at the meeting.


SHAREHOLDER REPORTS
Copies of the company's annual report on Form 10-K and proxy
statement filed with the Securities and Exchange
Commission are available upon request.

SHAREHOLDER INFORMATION SERVICE
Individual shareholders can access timely information
about The Reader's Digest Association, Inc. by calling our Shareholder
Information Service, which provides a recorded summary of the most
current financial results and other general investor information.
Callers can also use this service to request printed information
by fax or mail.  To access this service, please call toll-free
800-3133-RDA (800-313-3732) anytime day or night.
                                   
DIRECT STOCK PURCHASE INVESTOR SERVICES PROGRAM               
This program offers a convenient way to buy Reader's 
Digest common stock, containing many features such  
as dividend reinvestment, optional cash investment and       
custodial service for stock certificates.  For a complete 
informational package, contact:

The Chase Manhattan Bank
P. O. Box 750
Pittsburgh, PA  15230
800-242-4653

INVESTOR RELATIONS
Securities analysts, institutional investors and other investment
professionals should direct their inquiries to:

William H. Magill
Vice President, Investor Relations
Telephone: 914- 244-7683
E-mail: william.magill@readersdigest.com

MEDIA RELATIONS
Editors and reporters in the print, electronic and other
media should direct their questions to:

Stephen J. Morello
Vice President, Public Relations
 and Corporate Communications
Telephone: 914-244-7717
E-mail: stephen.morello@readersdigest.com

PRODUCT CATALOGS
For more information on our products, including free
catalogs, please call 800-846-2100 or write to Customer
Service at The Reader's Digest Association, Inc.

(copyright) 1998 The Reader's Digest Association, Inc.  Reader's Digest,
The Digest, the Pegasus logo, Today's Best Nonfiction and QSP are
registered trademarks of The Reader's Digest Association, Inc.
The Family Handyman, New Choices: Living Even Better After 50 ,
Walking and American Health For Women are registered trademarks
of RD Publications, Inc.