I wanted to comment on the English half of this translation a bit, since tofro's answer already explains the German half. While English uses the present participle/gerund (the "-ing" form) in a number of ways, German only uses it to form an adjective, and even then the adjective must go in front of the noun. That means that many English sentences involving "-ing" can be a challenge to translate into German. You generally have to rephrase the English before you can get anything sensible in German. In this case, the main content of the sentence is "He is busy" -- Er ist beschäftigt. To figure out the role of "reading" here, think about what question the "reading" part would answer. I think it would go something like this:
How is he?
Busy
What is he busy doing?
Reading
So it's not "busy" that's modifying "reading", in which case you'd use "busily", but "reading" that's modifying "busy". But recall that German does not use the "-ing" form this way; it's more natural to rephrase the question to ask for a noun:
What is he busy with?
Reading
To make a verb into a noun in German you just have to capitalize it: Reden. You have to use a preposition to connect Reden with lesen. The question "What is he busy with?" gives you a clue that the preposition required is mit.
Keep in mind that while German grammar is difficult, English grammar is also difficult, but if you're a native English speaker you tend not to notice. So while you might think that knowing German grammar is enough, many times you also have to know enough English grammar to properly analyze an English sentence before trying to translate it. English and German are both Germanic languages, so their grammars are more similar than you might expect. But both have features not present in the other and that fact can make translation tricky in either direction.