Seymour & Elder (1986) investigated the reading of children in the first year of school and suggested that the first stage of learning to read shows little involvement of assembled phonology. The present study examines processes involved in the reading-aloud and printed-word comprehension of children in the second year of school. Use of assembled phonology was evident in the children's reading-aloud responses, and proficiency in its use was related to reading ability. Printed-word comprehension appeared to involve prior retrieval of a phonological code for less frequent words. Similarities between the processing systems for reading used by these children and by skilled readers were discussed, and related to the computational model of reading development proposed by Seidenberg & McClelland (1989).