SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2003

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

FOR THE TRANSITION PERIOD FROM ________________TO__________________

COMMISSION FILE NUMBER: 1-3720

FRESENIUS MEDICAL CARE HOLDINGS, INC.
-------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

New York 13-3461988
-------- ----------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer ID No.)

95 Hayden Avenue, Lexington, MA 02420
------------------------------- -----
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, Including Area Code: 781-402-9000
----------------------------------------------------------------

-------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)

Indicated by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (As
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of the date
hereof, 90,000,000 shares of common stock, par value $1.00 per share, are
outstanding, all of which are held by Fresenius Medical Care AG.

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

TABLE OF CONTENTS

PAGE

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Unaudited Consolidated Statements of Operations....................... 4
Unaudited Consolidated Statements of Comprehensive Income............. 5
Unaudited Consolidated Balance Sheets................................. 6
Unaudited Consolidated Statements of Cash Flows....................... 7
Notes to Unaudited Consolidated Interim Financial Statements.......... 9

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................... 20

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK........................................................... 26

ITEM 4: CONTROLS AND PROCEDURES............................................... 27

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings..................................................... 28
ITEM 4: Submission of Matters to a Vote of Security Holders................... 30
ITEM 5: Other Matters......................................................... 30
ITEM 6: Exhibits and Reports on Form 8-K...................................... 31

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED, CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------

NET REVENUES
Health care services ............................................... $ 845,656 $ 814,264 $1,669,416 $1,598,286
Medical supplies ................................................... 109,688 116,136 215,729 226,018
---------- ---------- ---------- ----------
955,344 930,400 1,885,145 1,824,304
---------- ---------- ---------- ----------
EXPENSES
Cost of health care services ....................................... 602,000 575,269 1,188,244 1,138,924
Cost of medical supplies ........................................... 74,776 81,495 148,325 154,618
General and administrative expenses ................................ 89,676 79,669 177,163 155,840
Provision for doubtful accounts .................................... 25,341 25,998 47,958 47,338
Depreciation and amortization ...................................... 29,602 36,638 61,040 72,073
Research and development ........................................... 1,983 2,007 4,128 4,005
Interest expense, net and related financing costs including $24,850
and $49,987 for the three months and $49,740 and $83,666 for
the six months ended, respectively, of interest with affiliates 48,847 72,118 100,157 127,141
---------- ---------- ---------- ----------
872,225 873,194 1,727,015 1,699,939
---------- ---------- ---------- ----------

INCOME BEFORE INCOME TAXES ............................................ 83,119 57,206 158,130 124,365
PROVISION FOR INCOME TAXES ............................................ 29,374 22,512 59,076 49,213
---------- ---------- ---------- ----------

NET INCOME ............................................................ 53,745 34,694 99,054 75,152

Basic and fully dilutive net income per share ......................... $ 0.60 $ 0.38 $ 1.10 $ 0.83

See accompanying Notes to Unaudited, Consolidated Financial Statements.

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

UNAUDITED, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2003 2002 2003 2002
-------- -------- -------- --------

NET INCOME............................................ $ 53,745 $ 34,694 $ 99,054 $ 75,152

Other comprehensive income
Foreign currency translation adjustments .......... 1,847 1,546 3,189 1,113
Derivative instruments net of deferred tax
benefit of $4,287 and $4,971 for the three months
and $4,452 and $1,158 for the six months ended,
respectively .................................... (6,402) (11,832) (8,397) (5,922)
-------- -------- -------- --------
Total other comprehensive income .................. (4,555) (10,286) (5,208) (4,809)
-------- -------- -------- --------
COMPREHENSIVE INCOME.................................. $ 49,190 $ 24,408 $ 93,846 $ 70,343
-------- -------- -------- --------

See accompanying Notes to Unaudited, Consolidated Financial Statements.

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

UNAUDITED, CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

JUNE 30, DECEMBER 31,
2003 2002
----------- -----------

ASSETS

Current Assets:
Cash and cash equivalents .................................. $ 36,997 $ 30,013
Accounts receivable, less allowances of $123,084 and
$121,620 ................................................. 532,825 387,222
Inventories ................................................ 189,972 185,892
Deferred income taxes ...................................... 157,781 157,353
Other current assets ....................................... 122,623 128,619
----------- -----------
Total Current Assets ................................... 1,040,198 889,099
----------- -----------

Properties and equipment, net ................................. 528,171 531,081
----------- -----------
Other Assets:
Goodwill ................................................... 2,943,825 2,934,581
Other intangible assets, net of
accumulated amortization of $308,961 and $299,917 ....... 504,474 491,988
Other assets and deferred charges .......................... 224,278 163,595
----------- -----------
Total Other Assets ..................................... 3,672,577 3,590,164
----------- -----------
Total Assets .................................................. $ 5,240,946 $ 5,010,344
=========== ===========

LIABILITIES AND EQUITY

Current Liabilities:
Current portion of long-term debt and capitalized lease
obligations ............................................. 7,811 2,303
Current portion of borrowing from affiliates ............... 268,964 315,394
Accounts payable ........................................... 64,372 100,603
Accrued liabilities ........................................ 254,241 261,888
Accrued special charge for legal matters ................... 179,094 191,130
Net accounts payable to affiliates ......................... 53,811 28,897
Accrued income taxes ....................................... 80,289 61,754
----------- -----------
Total Current Liabilities ............................... 908,582 961,969

Long-term debt ................................................ 733,388 616,900
Non-current borrowings from affiliates ........................ 654,468 654,693
Capitalized lease obligations ................................. 733 1,120
Deferred income taxes ......................................... 108,331 96,453
Other liabilities ............................................. 194,329 185,200
----------- -----------
Total Liabilities .......................................... 2,599,831 2,516,335
----------- -----------

Mandatorily Redeemable Preferred Securities ................... 818,376 771,209
----------- -----------

Equity:
Preferred stock, $100 par value ............................ 7,412 7,412
Preferred stock, $.10 par value ............................ -- 8,906
Common stock, $1 par value; 300,000,000 shares
authorized; outstanding 90,000,000 ......................... 90,000 90,000
Paid in capital ............................................... 1,976,017 1,942,755
Retained deficit .............................................. (162,055) (242,846)
Accumulated comprehensive loss ................................ (88,635) (83,427)
----------- -----------
Total Equity ............................................... 1,822,739 1,722,800
----------- -----------
Total Liabilities and Equity .................................. $ 5,240,946 $ 5,010,344
=========== ===========

See accompanying Notes to Unaudited, Consolidated Financial Statements.

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES
UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

SIX MONTHS ENDED
JUNE 30,
------------------------
2003 2002
--------- ---------

Cash Flows from Operating Activities:
Net Income ................................................. $ 99,054 $ 75,152
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................... 61,040 72,073
Provision for doubtful accounts ......................... 47,958 47,338
Deferred income taxes ................................... 20,496 23,153
(Gain) loss on disposal of properties and equipment ..... (2,070) 1,263

Changes in operating assets and liabilities, net of effects of
purchase acquisitions and foreign exchange:
Decrease (increase) in accounts receivable ................. 6,662 (29,992)
(Increase) in inventories .................................. (674) (875)
Decrease (increase) in other current assets ................ 9,143 (8,551)
(Increase) in other assets and deferred charges ............ (701) (7,824)
(Decrease) increase in accounts payable .................... (36,107) 7,065
Increase (decrease) in accrued income taxes ................ 18,535 (8,867)
Decrease in accrued liabilities ............................ (12,942) (5,601)
Decrease in accrued special charge for legal matters ....... (12,036) (11,092)
Decrease in other long-term liabilities .................... (3,271) (14,651)
Net changes due to/from affiliates ......................... 23,222 (6,204)
Other, net ................................................. (6,562) (2,670)
--------- ---------
Net cash provided by operating activities ..................... 211,747 129,717
--------- ---------

Cash Flows from Investing Activities:
Capital expenditures ....................................... (50,852) (44,693)
Proceeds from sale of property and equipment ............... 5,303 4,187
Payments for acquisitions, net of cash acquired ............ (18,609) (23,344)
Increase in other assets ................................... -- (1,000)
--------- ---------
Net cash used in investing activities ......................... (64,158) (64,850)
--------- ---------

Cash flows from Financing Activities:
Net decrease in borrowings from affiliates ................. (46,655) (391,961)
Cash dividends paid ........................................ (260) (260)
Net (decrease) increase in receivable financing facility ... (196,675) 8,000
Redemption of Series D Preferred Stock ..................... (8,906) --
Net increase in debt and capitalized leases ................ 121,448 321,366
Debt issuance costs ........................................ (12,325) --
Other, net .................................................. (421) --
--------- ---------
Net cash used in financing activities ......................... (143,794) (62,855)
--------- ---------

Effects of changes in foreign exchange rates .................. 3,189 1,036
--------- ---------
Change in cash and cash equivalents ........................... 6,984 3,048
--------- ---------
Cash and cash equivalents at beginning of period .............. 30,013 26,786
--------- ---------
Cash and cash equivalents at end of period .................... $ 36,997 $ 29,834
========= =========

See accompanying Notes to Unaudited, Consolidated Financial Statements

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

SIX MONTHS ENDED
JUNE 30,
------------------------
2003 2002
--------- ---------

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net .............................. $ 80,418 $ 135,171
========= =========
Income taxes paid, net ..................... $ 20,307 $ 34,889
========= =========

Details for Acquisitions:
Assets acquired ............................... $ 20,544 $ 24,583
Liabilities assumed ........................... (1,935) (1,239)
--------- ---------
Net cash paid for acquisitions ............. $ 18,609 $ 23,344
========= =========

See accompanying Notes to Unaudited Consolidated Financial Statements

FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

NOTE 1. THE COMPANY

Fresenius Medical Care Holdings, Inc., a New York corporation ("the
Company") is a subsidiary of Fresenius Medical Care AG, a German corporation
("FMCAG"). The Company conducts its operations through five principal
subsidiaries, National Medical Care, Inc. ("NMC"); Fresenius USA Marketing,
Inc., Fresenius USA Manufacturing, Inc., and SRC Holding Company, Inc., all
Delaware corporations and Fresenius USA, Inc., a Massachusetts corporation.

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries and those financial statements where
the Company controls professional corporations in accordance with Emerging
Issues Task Force Issue 97-2.

The Company is primarily engaged in (i) providing kidney dialysis
services, and clinical laboratory testing, and (ii) manufacturing and
distributing products and equipment for kidney dialysis treatment.

BASIS OF PRESENTATION

BASIS OF CONSOLIDATION

The consolidated financial statements in this report at June 30, 2003
and 2002 and for the three and six month interim periods then ended are
unaudited and should be read in conjunction with the audited, consolidated
financial statements in the Company's 2002 report on Form 10-K. Such interim
financial statements reflect all adjustments that, in the opinion of management,
are necessary for a fair presentation of the results of the interim periods
presented. Certain amounts in the prior periods' consolidated financial
statements have been reclassified to conform to the current periods' basis of
presentation.

The results of operations for the three and six month period ended June
30, 2003 are not necessarily indicative of the results of operations for the
fiscal year ending December 31, 2003.

All intercompany transactions and balances have been eliminated in
consolidation.

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income available
to common shareholders by the weighted-average number of common shares
outstanding during the year. Diluted net income per share includes the effect of
all dilutive potential common shares that were outstanding during the year. The
number of shares used to compute basic and diluted net income per share was
90,000 in all periods as there were no potential common shares and no
adjustments to income available to common shareholders to be considered for
purposes of the diluted net income per share calculation.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
2003 2002 2003 2002
------ ------ ------ ------

The weighted average number of shares of
Common Stock were as follows ........... 90,000 90,000 90,000 90,000
====== ====== ====== ======

Net income used in the computation of earnings per share was as follows:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ----------------------
2003 2002 2003 2002
-------- --------- -------- --------

Net income .................................. $ 53,745 $ 34,694 $ 99,054 $ 75,152

Dividends paid on preferred stocks .......... (130) (130) (260) (260)
-------- -------- -------- --------

Income available to common shareholders ..... $ 53,615 $ 34,564 $ 98,794 $ 74,892
======== ======== ======== ========

Basic and fully dilutive net income per share $ 0.60 $ 0.38 $ 1.10 $ 0.83
======== ======== ======== ========

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to market risk due to changes in interest rates
and foreign currencies. The Company uses derivative financial instruments,
including interest rate swaps and foreign exchange contracts, as part of its
risk management strategy. These instruments are used as a means of hedging
exposure to interest rate and foreign currency fluctuations in connection with
debt obligations, forecasted raw material purchases and other obligations and
Euro denominated mandatorily redeemable preferred stock.

The interest rate swaps are designated as cash flow hedges effectively
converting certain variable interest rate payments into fixed interest rate
payments. After tax losses of $7.6 million ($12.6 million pretax) for the three
months ended June 30, 2003 and after tax losses of $7.7 million ($12.8 million
pretax) for the six months ended June 30, 2003 were deferred in other
comprehensive income. Interest payable and receivable under the swap terms are
accrued and recorded as adjustments to interest expense at each reporting date.

The Company enters into forward rate agreements that are designated and
effective as hedges of forecasted raw material purchases and other obligations.
After tax losses of $0.2 million ($0.5 million pretax) for the three months
ended June 30, 2003 and after tax losses of $0.9 million ($1.6 million pretax)
for the six months ended June 30, 2003 were deferred in other comprehensive
income and will be reclassified into cost of sales in the period during which
the hedged transactions affect earnings. All deferred amounts will be
reclassified into earnings within the next twelve months.

The Company enters into forward rate agreements that are designated and
effective as hedges of changes in the fair value of the Euro denominated
mandatorily redeemable preferred stock. Changes in fair value are recorded in
earnings and offset against gains and losses resulting from the underlying
exposures. After tax losses of $1.2 million ($2.0 million pretax) for the three
months ended June 30, 2003 and after tax losses of $2.4 million ($4.1 million
pretax) for the six months ended June 30, 2003 were deferred in other
comprehensive income.

Periodically, the Company enters into derivative instruments with
related parties to form a natural hedge for currency exposures on intercompany
obligations. These instruments are reflected in the consolidated balance sheets
at fair value with changes in fair value recognized in earnings. Pre-tax (gains)
losses recorded in the consolidated statements of operations for the three and
six months ended June 30, 2003 were ($5.3) million and ($9.5) million,
respectively.

NEW PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections ("SFAS 145"). SFAS 145 rescinds Statement No. 4 and requires the
criteria under Opinion 30 to determine if losses from extinguishment of debt
should be classified as extraordinary items. SFAS 145 amends Statement No. 13 to
require that certain lease modifications that have economic effects similar to
sale-leaseback arrangements be accounted for in a similar manner as
sale-leaseback transactions. The Company has adopted SFAS No. 145 as related to
SFAS No. 4 effective January 1, 2003. In the second quarter 2002, the Company
reported an extraordinary loss of $9.8 million for the early redemption of
borrowings from affiliates. This extraordinary loss has been reclassified and
presented as a loss from operating earnings. The Company adopted the remaining
provisions of SFAS 145 effective April 1, 2002.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 nullifies EITF
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
The principal difference between this statement and EITF 94-3 relates to the
requirements for the recognition of a liability for a cost associated with an
exit or disposal activity. SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF 94-3, a liability for an exit cost was recognized at the
date of an entity's commitment to an exit plan. The provisions of SFAS 146 were
adopted effective January 1, 2003 for exit or disposal activities that are
initiated after December 31, 2002. There is no material impact on the Company's
financial statements related to the adoption of SFAS 146.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees of
Indebtedness of Others. FIN 45 requires a guarantor to recognize a liability
measured at fair value at the inception of a guarantee for obligations
undertaken, including its obligation to stand ready to perform over the term of
the guarantee. The initial recognition and measurement provisions are applicable
prospectively to guarantees issued or modified after December 31, 2002. FIN 45
also clarifies and expends the disclosure requirements related to guarantees and
product warranties. The Company adopted those disclosures on December 31, 2002.
There is no material impact on the Company's financial statements related to the
adoption of FIN 45.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure - an amendment of FASB
Statement No. 123. SFAS 148 provides alternative methods for a change to the
fair value based method of accounting for stock-based employee compensation. It
also amends the disclosure requirements of SFAS No. 123 to require disclosures
in both annual and interim financial statements of the method of accounting for
stock-based employee compensation and the effect the method used had on reported
results. The Company adopted the annual disclosure requirement on December 31,
2002. There is no material impact on the Company's financial statements related
to the adoption of this standard.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 ("FIN 46") Consolidation of Variable Interest Entities.
FIN 46 addresses the consolidation of variable interest entities by the primary
beneficiary, when the total equity investment at risk is not sufficient to
permit the entity to finance its activities without additional subordinated
support from other parties and/ or the equity investor lacks certain essential
characteristics of a controlling financial interest. FIN 46 requires existing
variable interest entities to be consolidated if those entities do not
effectively disburse risk among the parties involved. The interpretation becomes
effective at various dates in 2003 and provides various transition rules. The
Company is assessing the impact of the adoption of FIN 46 on its financial
statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies
financial reporting for derivative instruments. This statement is effective for
contracts entered into or modified after June 30, 2003. The Company is
evaluating the impact of the adoption of this standard on its results of
operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
150 establishes standards for how an issuer classifies and measures certain
financial instruments. This statement is effective for financial instruments
entered into or modified after May 31, 2003 and for existing instruments
effective July 1, 2003. Upon adoption of SFAS 150, the Company will reclassify
its mandatorily redeemable preferred securities, entered into with FMCAG, to
liabilities. The Company is evaluating the impact of the adoption of this
standard on its results of operations.

NOTE 2. INVENTORIES

JUNE 30, DECEMBER 31,
2003 2002
---------- -----------

Inventories:
Raw materials ......................................... $ 46,184 $ 44,670
Manufactured goods in process ......................... 12,420 11,127
Manufactured and purchased inventory available for sale 75,294 70,127
---------- -----------
133,898 125,924
Health care supplies .................................. 56,074 59,968
---------- -----------
Total ............................................ $ 189,972 $ 185,892
========== ===========

NOTE 3. DEBT

2003 SENIOR CREDIT AGREEMENT

On February 21, 2003, the Company and FMCAG entered into an amended and
restated credit agreement (hereafter "2003 Senior Credit Agreement") with Bank
of America N.A, Credit Suisse First Boston, Dresdner Bank AG New York, JPMorgan
Chase Bank, The Bank of Nova Scotia and certain other lenders (collectively, the
"Lenders"), pursuant to which the Lenders have made available to the Company and
certain subsidiaries and affiliates an aggregate of up to $1,500,000 through
three credit facilities:

- - a revolving credit facility of up to $500,000 (of which up to $250,000
is available for letters of credit, up to $300,000 is available for
borrowings in certain non-U.S. currencies, up to $75,000 is available
as swing lines in U.S. dollars, up to $250,000 is available as a
competitive loan facility and up to $50,000 is available as swing lines
in certain non-U.S. currencies, the total of which cannot exceed
$500,000) which will be due and payable on October 31, 2007.

- - a term loan facility ("Loan A") of $500,000, also scheduled to expire
on October 31, 2007. The terms of the 2003 Senior Credit Agreement
require quarterly payments of $25,000 beginning in the third quarter of
2004 that permanently reduce the term loan facility. The remaining
amount outstanding is due on October 31, 2007.

- - a term loan facility ("Loan B") of $500,000, scheduled to expire
February 21, 2010 with a repayment provision that if the Trust
Preferred Securities due February 1, 2008 are not repaid, refinanced or
have their maturity extended, repayment will be due on October 31,
2007. The terms of the Loan B require repayments of 0.25% ($1,250) per
quarter beginning with the second quarter of 2003.

Loans under the 2003 Senior Credit Agreement bear interest at a base
rate determined in accordance with the agreement. For the revolving credit
facility and Loan A, interest will be at a rate equal to LIBOR plus an
applicable margin, or an alternate base rate, defined as the higher of the Bank
of America prime rate or the Federal Funds rate plus the applicable margin. The
applicable margin is variable and depends on the ratio of EBITDA and funded debt
as defined in the credit agreement. The interest rate for Loan B is LIBOR plus a
percentage in accordance with the agreement. Fees are also payable at a
percentage per annum on the portion of available borrowings under the 2003
Senior Credit Agreement that are not used.

In addition to scheduled principal payments, indebtedness under the
2003 Senior Credit Agreement will be reduced by portions of the net cash
proceeds from certain sales of assets, securitization transactions and the
issuance of subordinated debt and equity securities.

The 2003 Senior Credit Agreement includes covenants that require FMCAG
to maintain certain financial ratios or meet other financial tests. Under the
Senior Credit Agreement, FMCAG is obligated to maintain a minimum consolidated
net worth, a minimum consolidated fixed charge ratio and a maximum leverage
ratio (ratio of consolidated funded debt to EBIDTA). In addition, the 2003
Senior Credit Agreement includes other covenants which, among other things,
restrict or have the effect of restricting the Company's ability to dispose of
assets, incur debt, pay dividends, create liens or make capital expenditures,
investments and acquisitions. The breach of any of the covenants could result in
a default under the 2003 Senior Credit Agreement. In default, the outstanding
balance under the 2003 Senior Credit Agreement becomes due and payable. FMCAG
is in compliance with all financial covenants as of June 30, 2003.

JUNE 30, DECEMBER 31,
2003 2002
---------- ----------

Long-term debt to outside parties consists of:

2003 Senior Credit Agreement ................. $ 738,038 $ 616,900
Other ........................................ 2,717 1,840
---------- ----------
740,755 618,740
Less amounts classified as current ........... 7,367 1,840
---------- ----------
$ 733,388 $ 616,900
========== ==========

Borrowings from affiliates consists of:

JUNE 30, DECEMBER 31,
2003 2002
---------- -----------

FMCAG borrowings primarily at interest
rates approximating 1.08% and 2.22%, respectively .......... $ 124,243 $ 214,000
RTC Holdings International, Inc. borrowings at a fixed interest
rate of 2.7% ............................................... 11,000 11,000
Fresenius AG borrowing at interest rates approximating 1.32%
and 2.73%, respectively ....................................... 50,000 6,000
Fresenius Medical Care Trust Finance S.a.r.l. borrowings at
interest rates ranging between 8.25% and 9.25% ............. 654,244 654,244
Franconia Acquisition, LLC at interest rates approximating
1.57% and 2.40%, respectively ............................. 83,721 83,721
Other ......................................................... 224 1,122
---------- ----------
923,432 970,087
Less amounts classified as current 268,964 315,394
---------- ----------
Total ......................................................... $ 654,468 $ 654,693
========== ==========

NOTE 4. TRANSACTONS UNDER COMMON CONTROL

Effective April 1, 2003, FMCH acquired, through a transfer, legal
ownership of the North American operations of the adsorber business of Fresenius
AG. Net assets of $17,416 were transferred at their carrying value since the
subsidiaries remain under control of a common parent. The results of operations
and cash flows of the adsorber business are included prospectively in these
financial statements effective as the date of transfer.

NOTE 5. MANDATORILY REDEEMABLE PREFERRED SECURITIES

During 2001 and 2000, a wholly-owned subsidiary of the Company issued
shares of various series of Preferred Stock ("Redeemable Preferred Securities")
to NMC which were then transferred to FMCAG for proceeds totaling $392,037 in
2001 and $305,500 in 2000. No Redeemable Preferred Securities were issued during
the six months ended June 30, 2003. The table below provides information for
Redeemable Preferred Securities for the periods indicated.

JUNE 30, DECEMBER 31,
2003 2002
----------- -----------

MANDATORILY REDEEMABLE PREFERRED SECURITIES
Series A Preferred Stock, 1,000 shares .. $ 113,500 $ 113,500
Series B Preferred Stock, 300 shares .... 34,000 34,000
Series C Preferred Stock, 1,700 shares .. 192,000 192,000
Series D Preferred Stock, 870 shares .... 97,500 97,500
Series E Preferred Stock, 1,300 shares .. 147,500 147,500
Series F Preferred Stock, 980 shares .... 113,037 113,037
----------- -----------
697,537 697,537
Mark to Market Adjustment ............... 120,839 73,672
----------- -----------
Total ................................... $ 818,376 $ 771,209
=========== ===========

These securities are similar in substance except for the order of
preference both as to dividends and liquidation, dissolution or winding-up of
the subsidiary. The order of preference among the various series corresponds to
the alphabetical order of Series A through Series F. In addition, the holders of
the Redeemable Preferred Securities are entitled to receive dividends in an
amount of dollars per share that varies from approximately 3% to 8% of the
purchase price depending on the Series. The dividends will be declared and paid
in cash at least annually. All the Redeemable Preferred Securities have a par
value of $.01 per share.

Upon liquidation or dissolution or winding up of the issuer of the
Redeemable Preferred Securities, the holders of the Redeemable Preferred
Securities are entitled to an amount equal to the liquidation preference for
each share of stock plus an amount equal to all accrued and unpaid dividends
thereon through the date of distribution. The liquidation preference is the sum
of the issuance price plus, for each year or portion thereof, an amount equal to
one-half of one percent of the issue price, not to exceed 5% of the issue price
in the aggregate.

Redeemable Preferred Securities (Series A and C) originally due to be
sold to the Company in 2002 for Euro 341,385 had their redemption dates extended
until October and November 2003, respectively. The other Redeemable Preferred
Securities will be sold back to the Company two years from their respective date
of issuance for a total amount equal to Euros 160,388 (Series B and F) and US
dollars $245,000 (Series D and E) plus any accrued and unpaid dividends.
Redeemable Preferred Securities (Series B, E, and F) have redemption dates in
August 2003. Redeemable Preferred Securities (Series D) are scheduled for
redemption in April 2004. The Company expects that all securities will be
extended or refinanced for a term of up to three years upon their maturity.

Dividends were recorded and classified as part of interest expense in
the consolidated statement of operations in the amounts of $10,139 and $10,646
in the three month periods ended June 30, 2003 and 2002, respectively and
$19,818 and $20,575 in the six month periods ended June 30, 2003 and 2002,
respectively. During the three months ended March 31, 2003 and 2002, cash
dividend payments were made totaling $8,733 and $29,850, respectively. No
dividend payments were made in the three months ended June 30, 2003 and 2002.
The Euro Redeemable Preferred Securities are deemed to be a Euro liability and
the risk of foreign currency fluctuations are hedged through forward currency
contracts.

The Company records mark to market adjustments based on fluctuations in
currency rates and records the offset to accumulated comprehensive income.

The holders of the Redeemable Preferred Securities have the same
participation rights as the holders of all other classes of capital stock of the
issuing subsidiary.

NOTE 6: RETIREMENT OF INTERCOMPANY DEBT

On June 27, 2002 the Company repaid its intercompany debt to FMC
Finance S.a.r.l in the amount of $350,995, originally due in 2006, utilizing
funds borrowed under its senior credit facility. At that time, an extraordinary
loss of $9,780, net of a tax benefit of $6,530 was recorded for the premium owed
to FMC Finance S.a.r.l for the early retirement of this obligation in accordance
with the terms of the intercompany debt agreement.

As of January 1, 2003, the Company adopted SFAS No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and
Technical Corrections in regard to SFAS No. 4. As a result, the loss is no
longer presented as an extraordinary loss, but in interest expense, with the
related income tax effect included in income taxes.

NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

Changes in the carrying amount of goodwill for the six months ended
June 30, 2003 are as follows:

JUNE 30,
2003
-----------

Carrying value as of December 31, 2002 $ 2,934,581
Goodwill acquired for the six months
ended June 30, 2003 ............. 20,810
Reclassifications .................... (11,566)
-----------
Carrying value as of June 30, 2003 ... $ 2,943,825
===========

At June 30, 2003 and December 31, 2002, other intangible assets consisted of the
following:

JUNE 30, 2003 DECEMBER 31, 2002
--------------------------------------- ---------------------------------------
GROSS GROSS
CARRYING ACCUMULATED CARRYING CARRYING ACCUMULATED CARRYING
VALUE AMORTIZATION VALUE VALUE AMORTIZATION VALUE
--------- ------------ --------- --------- ------------ ---------

AMORTIZABLE INTANGIBLE ASSETS:
Patient Relationships $ 236,808 $(196,575) $ 40,233 $ 236,446 $(189,277) $ 47,169

Other Intangibles $ 108,982 $ (59,102) $ 49,880 $ 108,982 $ (57,356) $ 51,626
--------- --------- --------- --------- --------- ---------

$ 345,790 $(255,677) $ 90,113 $ 345,428 $(246,633) $ 98,795
========= ========= ========= ========= ========= =========
NON-AMORTIZABLE INTANGIBLE ASSETS

Tradename $ 210,137 $ -- $ 210,137 $ 210,137 $ -- $ 210,137

Management Contracts $ 204,224 $ -- $ 204,224 $ 183,056 $ -- $ 183,056
--------- --------- --------- --------- --------- ---------

$ 414,361 $ -- $ 414,361 $ 393,193 $ -- $ 393,193
========= ========= ========= ========= ========= =========

NET INTANGIBLES $ 760,151 $(255,677) $ 504,474 $ 738,621 $(246,633) $ 491,988
========= ========= ========= ========= ========= =========

Amortization expense for amortizable intangible assets at June 30,
2003 is estimated to be $10,500 for the remaining six months of 2003, $16,500
for 2004, $15,100 for 2005, $10,600 for 2006, and $7,900 for 2007.

NOTE 8. SPECIAL CHARGE FOR LEGAL MATTERS

In the fourth quarter of 2001, the Company recorded a $258 million
special charge to address 1996 merger-related legal matters, estimated
liabilities and legal expenses arising in connection with the Grace Chapter 11
Proceedings and the cost of resolving pending litigation and other disputes with
certain commercial insurers (see Note 11).

The Company accrued $172 million principally representing a
provision for income taxes payable for the years prior to the 1996 merger for
which the Company has been indemnified by W.R. Grace, but may ultimately be
obligated to pay as a result of Grace's Chapter 11 Proceedings. In addition,
that amount included the estimated costs of defending the Company in all
litigation arising out of Grace's Chapter 11 Proceedings. During the second
quarter of 2003, the court supervising Grace's Chapter 11 Proceedings approved
the definitive settlement agreement entered into among the Company, the
committees representing asbestos creditors and W.R. Grace.

The Company included $55 million in the special charge to provide
for settlement obligations, legal expenses and the resolution of disputed
accounts receivable relating to various insurance companies. In the second
quarter of 2003, the Company reached an agreement to settle litigation with
another group of insurance companies (see Note 11) and a process to resolve
remaining accounts receivable issues. The Company continues its discussions and
negotiations with the commercial insurers to resolve this component of the
special charge.

The remaining amount of the special charge ($30 million) was accrued
mainly for (i) assets and receivables that are impaired in connection with other
legal matters and (ii) anticipated expenses associated with the continued
defense and resolution of the legal matters.

Based on these developments, the Company has reduced its estimate
for the settlement and related costs of the Grace Chapter 11 Proceedings by $39
million. This reduction of the provision for the Grace matter has been applied
to the other components of the special charge (i.e., reserves for settlement
obligations and disputed accounts receivable from the commercial insurers and
other merger-related legal matters). At June 30, 2003, there was a remaining
balance of $179 million for the accrual for the special charge

for legal matters. The Company believes that this reserve is adequate for the
settlement of all matters described above.

During the three and six months ended June 30, 2003, $7 million and $12 million,
respectively in charges were applied against the accrued special charge for
legal matters.

NOTE 9. EQUITY

CLASS D PREFERRED STOCK

On February 4, 2003, the Company announced the exercise of its right to
redeem all of its outstanding shares of the Class D Preferred Stock ("Class D
Shares"). The Class D Shares were issued to the common shareholders of W.R.
Grace & Co. in connection with the 1996 reorganization involving W. R. Grace and
Fresenius Medical Care.

Commencing on March 28, 2003, Class D Shares that were properly
transferred to, and received by, the redemption agent were redeemed at a
redemption price of $0.10 per share. Upon completion of the redemption, FMCH
will have redeemed the 89 million outstanding Class D Shares at a total cash
outflow of $8,906. This transaction had no earnings impact for the Company.
After March 28, 2003 the Class D Shares ceased to be deemed issued and
outstanding shares of the Company's capital stock and were restored to the
status of authorized but unissued shares of preferred stock.

NOTE 10. PENSION PLANS

During the first quarter of 2002, the Company recorded a gain of
approximately $13.1 million resulting from the curtailment of the Company's
defined benefit and supplemental executive retirement plans. The Company has
retained all employee pension obligations as of the closing date for the
fully-vested and frozen benefits for all employees.

NOTE 11. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

COMMERCIAL LITIGATION

The Company was formed as a result of a series of transactions pursuant
to the Agreement and Plan of Reorganization (the "Merger") dated as of February
4, 1996 by and between W.R. Grace & Co. and Fresenius AG. At the time of the
Merger, a W.R. Grace & Co. subsidiary known as W.R. Grace & Co.-Conn. had, and
continues to have, significant potential liabilities arising out of
product-liability related litigation, pre-Merger tax claims and other claims
unrelated to NMC, which was Grace's dialysis business prior to the Merger. In
connection with the Merger, W.R. Grace & Co.-Conn. agreed to indemnify the
Company, and NMC against all liabilities of W.R. Grace & Co., whether relating
to events occurring before or after the Merger, other than liabilities arising
from or relating to NMC's operations. W.R. Grace & Co. and certain of its
subsidiaries filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code (the "Grace Chapter 11 Proceedings") on April 2, 2001.

Pre-Merger tax claims or tax claims that would arise if events were to
violate the tax-free nature of the Merger, could ultimately be the obligation of
the Company. In particular, W. R. Grace & Co. has disclosed in its filings with
the Securities and Exchange Commission that: its tax returns for the 1993 to
1996 tax years are under audit by the Internal Revenue Service (the "Service");
W. R. Grace & Co. has received the Service's examination report on tax periods
1993 to 1996; that during those years Grace deducted approximately $122,100 in
interest attributable to corporate owned life insurance ("COLI") policy loans;
that W.R. Grace & Co. has paid $21,200 of tax and interest related to COLI
deductions taken in tax years prior to 1993; that a U.S. District Court ruling
has denied interest deductions of a taxpayer in a similar situation and that
W.R. Grace & Co. is seeking a settlement of the Service's claims. Subject to
certain representations made by W.R. Grace & Co., the Company and Fresenius AG,
W.R. Grace & Co. and certain of its affiliates agreed to indemnify the Company
against this and other pre-Merger and Merger related tax liabilities.

Prior to and after the commencement of the Grace Chapter 11
Proceedings, class action complaints were filed against W.R. Grace & Co. and the
Company by plaintiffs claiming to be creditors of W.R. Grace & Co.- Conn., and
by the asbestos creditors' committees on behalf of the W.R. Grace & Co.
bankruptcy estate in the Grace Chapter 11 Proceedings, alleging among other
things that the Merger was a fraudulent conveyance, violated the uniform
fraudulent transfer act and constituted a conspiracy. All such cases have been
stayed and transferred to or are pending before the U.S. District Court as part
of the Grace Chapter 11 Proceedings.

On February 6, 2003, the Company reached a definitive agreement with
the asbestos creditors' committees on behalf of the W.R. Grace and Co.
bankruptcy estate in the matters pending in the Grace Chapter 11 Proceedings for
the settlement of all fraudulent conveyance claims against it and other claims
related to the Company that arise out of the bankruptcy of W.R. Grace & Co.
Subsequently, the settlement agreement was amended and W.R. Grace was added as a
settling party. Under the terms of the settlement agreement as amended (the
"Settlement Agreement"), fraudulent conveyance and other claims raised on behalf
of asbestos claimants will be dismissed with prejudice and the Company will
receive protection against existing and potential future W.R. Grace & Co.
related claims, including fraudulent conveyance and asbestos claims, and
indemnification against income tax claims related to the non-NMC members of the
W.R. Grace & Co. consolidated tax group upon confirmation of a W.R. Grace & Co.
bankruptcy reorganization plan that contains such provisions. Under the
Settlement Agreement, the Company will pay a total of $115,000 to the W.R. Grace
& Co. bankruptcy estate, or as otherwise directed by the Court, upon plan
confirmation. No admission of liability has been or will be made. The Settlement
Agreement has been approved by the U.S. District Court. Subsequent to the
Merger, W.R. Grace & Co. was involved in a multi-step transaction involving
Sealed Air Corporation (formerly known as Grace Holding, Inc.). The Company is
engaged in litigation with Sealed Air Corporation ("Sealed Air") to confirm the
Company's entitlement to indemnification from Sealed Air for all losses and
expenses incurred by the Company relating to pre-Merger tax liabilities and
Merger-related claims. Under the Settlement Agreement, upon confirmation of a
plan that satisfies the conditions to the Company's payment obligation, this
litigation will be dismissed with prejudice.

In April 2003, the Company, NMC, and certain NMC subsidiaries agreed to
settle all litigation filed by a group of insurance companies concerning
allegations of inappropriate billing practices and misrepresentations and the
Company's counterclaims against the plaintiffs in these matters based on
inappropriate claim denials and delays in claim payments. The costs of the
settlement will be charged against previously established accruals. See "Accrued
Special Charge for Legal Matters" below. Other private payors have contacted the
Company regarding similar claims and may file their own lawsuit seeking
reimbursement and other damages. Although the ultimate outcome on the Company of
any such proceedings cannot be predicted at this time, an adverse result could
have a material adverse effect on the Company's business, financial condition
and results of operations.

On April 4, 2003, the Company filed a suit in the United States
District Court for the Northern District of California, Fresenius USA, Inc., et
al., v. Baxter International Inc., et al., Case No. C 03-1431, seeking a
declaratory judgment that the Company does not infringe on patents held by
Baxter International, Inc. and its subsidiaries and affiliates ("Baxter"), that
the patents are invalid, and that Baxter is without right or authority to
threaten or maintain suit against the Company for alleged infringement of
Baxter's patents. In general, the alleged patents concern touch screens,
conductivity alarms, power failure data storages, and balance chambers for
hemodialysis machines. Baxter has filed counterclaims against the Company
seeking monetary damages and injunctive relief, and alleging that the Company
willfully infringes on the Baxter's patents. The Company believes its claims are
meritorious, although the ultimate outcome of any such proceedings cannot be
predicted at this time and an adverse result could have a material adverse
effect on the Company's business, financial condition, and results of
operations.

OTHER LITIGATION AND POTENTIAL EXPOSURES

From time to time, the Company is a party to or may be threatened with
other litigation arising in the ordinary course of its business. Management
regularly analyzes current information including, as applicable, the Company's
defenses and insurance coverage and, as necessary, provides accruals for
probable liabilities for the eventual disposition of these matters.

The Company, like other health care providers, conducts its operations
under intense government regulation and scrutiny. The Company must comply with
regulations which relate to or govern the safety and efficacy of medical
products and supplies, the operation of manufacturing facilities, laboratories
and dialysis clinics, and environmental and occupational health and safety. The
Company must also comply with the Anti-Kickback Statute, the False Claims Act,
the Stark Statute, and other federal and state fraud and abuse laws. Applicable
laws or regulations may be amended, or enforcement agencies or courts may make
interpretations that differ from the Company's or the manner in which the
Company conduct its business. Enforcement has become a high priority for the
federal government and some states. In addition, the provisions of the False
Claims Act authorizing payment of a portion of any recovery to the party
bringing the suit encourage private plaintiffs to commence "whistle blower"
actions. By virtue of this regulatory environment, as well as our corporate
integrity agreement with the government, the Company expects that its business
activities and practices will continue to be subject to extensive review by
regulatory authorities and private parties, and expects continuing inquiries,
claims and litigation relating to its compliance with applicable laws and
regulations. The Company may not always be aware that an inquiry or action has
begun, particularly in the case of "whistle blower" actions, which are initially
filed under court seal.

inadvertently, have submitted inadequate or false billings. The actions of such
persons may subject the Company and its subsidiaries to liability under the
Anti-Kickback Statute, the Stark Statute and the False Claims Act, among other
laws.

Physicians, hospitals and other participants in the health care
industry are also subject to a large number of lawsuits alleging professional
negligence, malpractice, product liability, worker's compensation or related
claims, many of which involve large claims and significant defense costs. The
Company has been subject to these suits due to the nature of its business and
the Company expects that those types of lawsuits may continue. Although the
Company maintains insurance at a level which it believes to be prudent, the
Company cannot assure that the coverage limits will be adequate or that
insurance will cover all asserted claims. A successful claim against the Company
or any of its subsidiaries in excess of insurance coverage could have a material
adverse effect upon the Company and the results of its operations. Any claims,
regardless of their merit or eventual outcome, also may have a material adverse
effect on the Company's reputation and business.

The Company has also had claims asserted against it and has had
lawsuits filed against it relating to businesses that it has acquired or
divested. These claims and suits relate both to operation of the businesses and
to the acquisition and divestiture transactions. The Company has asserted its
own claims, and claims for indemnification. Although the ultimate outcome on the
Company cannot be predicted at this time, an adverse result could have a
material adverse effect upon the Company's business, financial condition, and
results of operations.

ACCRUED SPECIAL CHARGE FOR LEGAL MATTERS

At December 31, 2001, the Company recorded a pre-tax special charge of
$258,000 to reflect anticipated expenses associated with the continued defense
and resolution of pre-Merger tax claims, Merger-related claims, and commercial
insurer claims. The costs associated with the Settlement Agreement and
settlement with insurers are charged against this accrual. While the Company
believes that its remaining accruals reasonably estimate the Company's currently
anticipated costs related to the continued defense and resolution of the
remaining matters, no assurances can be given that the actual costs incurred by
the Company will not exceed the amount of these accruals.

NOTE 12. INDUSTRY SEGMENTS INFORMATION

The Company's reportable segments are Dialysis Services and Dialysis
Products. For purposes of segment reporting, the Dialysis Services Division and
Spectra Renal Management are combined and reported as Dialysis Services. These
divisions are aggregated because of their similar economic classifications.
These include the fact that they are both health care service providers whose
services are provided to a common patient population, and both receive a
significant portion of their net revenue from Medicare and other government and
non-government third party payors. The Dialysis Products segment reflects the
activity of the Dialysis Products Division only.

The table below provides information for the three and six months ended June 30,
2003 and 2002 pertaining to the Company's two industry segments.

LESS
DIALYSIS DIALYSIS INTERSEGMENT
SERVICES PRODUCTS SALES TOTAL
---------- ---------- ------------ ----------

NET REVENUES
Three Months Ended 6/30/03 $ 849,986 $ 195,790 $ 90,432 $ 955,344
Three Months Ended 6/30/02 818,666 191,507 79,773 930,400

Six Months Ended 6/30/03 $1,678,212 $ 386,330 $ 179,397 $1,885,145
Six Months Ended 6/30/02 1,607,199 374,714 157,609 1,824,304

OPERATING EARNINGS
Three Months Ended 6/30/03 $ 104,994 $ 36,314 -- $ 141,308
Three Months Ended 6/30/02 103,548 35,201 -- 138,749

Six Months Ended 6/30/03 $ 205,077 $ 70,873 -- $ 275,950
Six Months Ended 6/30/02 196,740 70,531 -- 267,271

ASSETS AT 6/30/03 $2,618,949 $ 620,254 $3,239,203
12/31/02 2,657,692 635,778 -- 3,293,470

DEPRECIATION AND AMORTIZATION
Three Months Ended 6/30/03 $23,660 $ 4,594 -- $28,254
Three Months Ended 6/30/02 26,795 4,381 -- 31,176

Six Months Ended 6/30/03 $49,383 $ 8,964 -- $58,347
Six Months Ended 6/30/02 52,479 8,682 -- 61,161

Total assets at June 30, 2003 of $5,240,946 is comprised of total
assets for reportable segments, $3,239,203; intangible assets not allocated to
segments, $1,876,359 accounts receivable financing agreement ($248,574); and
other corporate assets, $373,958.

Total assets at December 31, 2002 is comprised of total assets for
reportable segments, $3,293,470; intangible assets not allocated to segments,
$1,876,780; accounts receivable financing agreement ($445,249); and other
corporate assets, $285,343.

The table below provides the reconciliations of reportable segment operating
earnings to the Company's consolidated totals.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
SEGMENT RECONCILIATION 2003 2002 2003 2002
---------------------- --------- --------- --------- ---------

INCOME BEFORE INCOME TAXES:

Total operating earnings for reportable segments $ 141,308 $ 138,749 $ 275,950 $ 267,271
Corporate G&A .................................. (6,011) (1,956) (10,842) (848)
Corporate depreciation and amortization ........ (1,348) (5,462) (2,693) (10,912)
Research and development expense ............... (1,983) (2,007) (4,128) (4,005)
Net interest expense ........................... (48,847) (72,118) (100,157) (127,141)
--------- --------- --------- ---------

Income Before Income Taxes ..................... $ 83,119 $ 57,206 $ 158,130 $ 124,365
========= ========= ========= =========

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company. The discussion should be read in conjunction with the
unaudited consolidated financial statements included elsewhere in this document.

This section contains certain forward-looking statements that are subject to
various risks and uncertainties. Such statements include, without limitation,
discussions concerning the outlook of the Company, government reimbursement,
future plans and management's expectations regarding future performance. Actual
results could differ materially from those contained in these forward-looking
statements due to certain factors including, without limitation, changes in
business, economic and competitive conditions, regulatory reforms, foreign
exchange rate fluctuations, uncertainties in litigation or investigative
proceedings, the realization of anticipated tax deductions, and the availability
of financing. These and other risks and uncertainties, which are more fully
described elsewhere in this report and in other Company reports filed from time
to time with the Securities and Exchange Commission, could cause the Company's
results to differ materially from the results that have been or may be projected
by or on behalf of the Company.

RESULTS OF OPERATIONS

The following table summarizes certain operating results of the Company
by principal business unit for the periods indicated. Intercompany eliminations
primarily reflect sales of medical supplies by Dialysis Products to Dialysis
Services.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
(DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS)
-------------------------- ---------------------------
2003 2002 2003 2002
--------- --------- --------- ---------

NET REVENUES
Dialysis Services............................ $ 850 $ 819 $ 1,678 $ 1,607
Dialysis Products............................ 195 191 386 375
Intercompany Eliminations.................... (90) (80) (179) (158)
--------- --------- --------- ---------
Total Net Revenues.............................. $ 955 $ 930 $ 1,885 $ 1,824
========= ========= ========= =========
Operating Earnings:
Dialysis Services............................ $ 105 $ 103 $ 205 $ 197
Dialysis Products............................ 36 35 71 70
--------- --------- --------- ---------
Total Operating Earnings........................ 141 138 276 267
--------- --------- --------- ---------
Other Expenses:
General Corporate............................ $ 7 $ 7 $ 14 $ 12
Research & Development....................... 2 2 4 4
Interest Expense, Net........................ 49 72 100 127
--------- --------- --------- ---------
Total Other Expenses............................ 58 81 118 143
--------- --------- --------- ---------

Earnings Before Income Taxes ................... 83 57 158 124
Provision for Income Taxes...................... 29 22 59 49
--------- --------- --------- ---------
Net Income...................................... $ 54 $ 35 $ 99 $ 75
========= ========= ========= =========

THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

Net revenues for the second quarter of 2003 increased by 3% ($25
million) over the comparable period in 2002. Net income for the second quarter
of 2003 increased by 55% to $54 million as compared to $35 million in 2002. This
increase was due to increased operating earnings ($3 million), and decreased
interest expense ($23 million), partially offset by increased income taxes ($7
million).

DIALYSIS SERVICES

Dialysis Services net revenues for the second quarter of 2003 increased
by 4% to $846 million (net of $4 million of intercompany sales). The growth in
dialysis services revenue resulted primarily from a 7% increase in treatment
volume reflecting base business growth (4%); the impact of 2003 and 2002
acquisitions (1%), and the transfer of billing for some Medicare peritoneal
dialysis patients from Dialysis Products (Method II billing) to Dialysis
Services (Method I billing) (2%). The increase in treatment volume was partially
offset by a decrease in revenue per treatment from $285 in the second quarter of
2002 to $275 in the second quarter of 2003. The decrease in revenue rate per
treatment is primarily due to the change from Method II to Method I billing and
decreased ancillary revenues.

Dialysis Services operating earnings for the second quarter of 2003
increased by 2% ($2 million) as compared to the comparable period of 2002. The
operating margin decreased from 12.6% in the second quarter of 2002 to 12.4% in
the second quarter of 2003 resulting primarily from lower ancillary margins in
2003 versus 2002.

DIALYSIS PRODUCTS

Dialysis Products gross revenues increased by 2% to $195 million in the
second quarter of 2003 as compared to $191 million in the comparable period of
2002. Internal sales to Dialysis Services increased by 12% to $85 million and
were partially offset by a decrease in external sales of 4% to $110 million.
Dialysis Product external sales in the second quarter of both 2003 and 2002
include the sales of machines to a third party leasing company which are leased
back by Dialysis Services. Dialysis Product external sales in the second quarter
2002 also includes Method II PD revenues for Dialysis Services patients. Method
II patients were transferred to Method I effective January 1, 2003 therefore
there were no similar Method II revenues recorded in the second quarter 2003.
Dialysis Products measures its external sales performance based on its sales to
the "net available external market." The net available external market excludes
machine sales and Method II revenues involving Dialysis Services as well as
sales to other vertically integrated dialysis companies. Net available external
market sales increased by 5% to $97 million in the second quarter of 2003 as
compared to $92 million in 2002.

The Company uses net available external market as a key operating
metric as it eliminates the impact of internal sales and activity with another
vertically integrated company to provide a true measure of product that is sold
into the market. The following is a reconciliation of gross product revenues to
net available external market for the quarter ended June 30, 2003 and 2002.

Three Months Ended
June 30,
-------------------
(dollars in millions)
2003 2002
----- -----

Gross product revenues ..................... $ 195 $ 191
Intercompany eliminations .................. (85) (76)
----- -----
External revenues .......................... 110 115
Machine sales .............................. (10) (9)
Vertically integrated dialysis company sales (3) (3)
Method II sales ............................ - (11)
----- -----
Net available external market sales ........ $ 97 $ 92
===== =====

Dialysis Products operating earnings for the second quarter of 2003
increased by 3% to $36 million from $35 million in the comparable period of
2002. The operating margin increased from 30.4% in the second quarter of 2002 to
32.8% in the second quarter of 2003 primarily resulting from lower manufacturing
costs in 2003 versus 2002.

OTHER EXPENSES

The Company's other expenses for the second quarter of 2003 decreased
by 28% to $58 million as compared to $81 million in the comparable period of
2002 due to a decrease in interest expense of $23 million. The decrease in
interest expense is primarily the result of lower intercompany borrowings ($7
million) and a non-recurring charge for the early retirement of intercompany
borrowings in the second quarter 2002 ($16 million). In the second quarter of
2002, the Company repaid its intercompany debt to FMC Finance S.a.r.l. in the
amount of approximately $351 million. At the time, an extraordinary loss of
approximately $10 million, net of a tax benefit of $6 million was recorded for
the premium owed to FMC Finance S.a.r.l. for the early retirement of this
obligation. With the adoption of SFAS 145, the loss is no longer presented as an
extraordinary loss, but in interest expense ($16 million) and related tax
benefit ($6 million) included in income taxes. (See Note 6 to Unaudited,
Consolidated Financial Statements.)

General corporate expenses remained comparable at $7 million for the
three months ended June 30, 2003 and 2002 resulting from reduced amortization
expense of $4 million and lower general corporate costs of $1 million, entirely
offset by unfavorable fluctuations in foreign currency of $5 million ($5 million
in gains realized in the three months ended June 30, 2003 as compared to $10
million in gains in the comparable period of 2002).

INCOME TAX RATE

The effective tax rate from operations for the second quarter of 2003
(35.3%) is lower than the rate for the comparable period of 2002 (39.4%) due to
tax benefits related to the special charge for legal matters partially offset by
additional provisions for tax related matters.

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

Net revenues for the first six months of 2003 increased by 3% ($61
million) over the comparable period in 2002. Net income for the first six months
of 2003 increased by 32% to $99 million as compared to $75 million in 2002. This
increase was due to increased operating earnings ($9 million), and decreased
interest expense ($27 million), partially offset by increased general corporate
expenses ($2 million) and increased income taxes ($10 million).

DIALYSIS SERVICES

Dialysis Services net revenues for the first six months of 2003
increased by 4% to $1,669 million (net of $9 million of intercompany sales). The
growth in dialysis services revenue resulted primarily from a 7% increase in
treatment volume reflecting base business growth (4%); the impact of 2003 and
2002 acquisitions (1%), and the transfer of billing for some Medicare peritoneal
dialysis patients from Dialysis Products (Method II billing) to Dialysis
Services (Method I billing) (2%). The increase in treatment volume was partially
offset by a decrease in revenue per treatment from $285 in the first six months
of 2002 to $277 in the first six months of 2003. The decrease in revenue rate
per treatment is primarily due to the change from Method II to Method I billing
and decreased ancillary revenues.

Dialysis Services operating earnings for the first six months of 2003
increased by 4% ($8 million) as compared to the comparable period of 2002
consistent with revenue growth. The operating margin remained constant at 12.3%
for both the first six months of 2003 and 2002.

DIALYSIS PRODUCTS

Dialysis Products gross revenues increased by 3% to $386 million for
the first six months of 2003 as compared to $375 million in the comparable
period 2002. Internal sales to Dialysis Services increased by 14% to $170
million and were partially offset by a decrease in external sales of 4% to $216
million. Dialysis Product external sales the first six months of both 2003 and
2002 include the sales of machines to a third party leasing company which are
leased back by Dialysis Services. Dialysis Product external sales in the first
six months of 2002 also includes Method II PD revenues for Dialysis Services
patients. Method II patients were transferred to Method I effective January 1,
2003 therefore there were no similar Method II revenues recorded in the second
quarter 2003. Dialysis Products measures its external sales performance based on
its sales to the "net available external market." The net available external
market excludes machine sales and Method II revenues involving Dialysis Services
as well as sales to other vertically integrated dialysis companies. Net
available external market sales increased by 5% to $191 million in the first six
months of 2003 as compared to $181 million in 2002.

Six Months Ended
June 30,
-------------------
(dollars in millions)
2003 2002
----- -----

Gross product revenues ..................... $ 386 $ 375
Intercompany eliminations .................. (170) (149)
----- -----
External revenues .......................... 216 226
Machine sales .............................. (18) (15)
Vertically integrated dialysis company sales (7) (9)
Method II sales ............................ -- (21)
----- -----
Net available external market sales ........ $ 191 $ 181
===== =====

Dialysis Products operating earnings for the first six months of 2003
increased by 1% to $71 million from $70 million in the comparable period of
2002. The operating margin increased from 31.0% in the first six months of 2002
to 32.9% in the first six months of 2003 primarily resulting from lower
manufacturing costs in 2003 versus 2002.

OTHER EXPENSES

The Company's other expenses for the first six months of 2003 decreased
by 17% to $118 million as compared to $143 million in the comparable period of
2002 due to a decrease in interest expense of $27 million partially offset by
increased general corporate expenses ($2 million). The decrease in interest
expense is primarily the result of lower intercompany borrowings ($11 million)
and a non-recurring charge for the early retirement of intercompany borrowings
in the second quarter of 2002 ($16 million). In the second quarter of 2002, the
Company repaid its intercompany debt to FMC Finance S.a.r.l. in the amount of
approximately $351 million. At the time, an extraordinary loss of approximately
$10 million, net of a tax benefit of $6 million was recorded for the premium
owed to FMC Finance S.a.r.l. for the early retirement of this obligation. With
the adoption of SFAS 145, the loss is no longer presented as an extraordinary
loss, but in interest expense ($16 million) and related tax benefit ($6 million)
included in income taxes. (See Note 6 to Unaudited Consolidated Financial
Statements.)

The increase in general corporate expenses is primarily due to a
one-time gain on pension curtailment of $13 million that was realized in the
first quarter of 2002 partially offset by favorable fluctuations in foreign
currency of $3 million ($11 million in gains realized in the six months ended
June 30, 2003 as compared to $8 million in gains in the comparable period of
2002) and reduced amortization expense of $8 million.

INCOME TAX RATE

The effective tax rate from operations for the first six months of 2003
(37.4%) is lower than the rate for the comparable period of 2002 (39.6%) due to
tax benefits related to the special charge for legal matters partially offset by
additional provisions for tax related matters.

LIQUIDITY AND CAPITAL RESOURCES

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30,
2002.

The Company's cash requirements for the first six months of 2003 and
2002 were funded by cash from operations, additional intercompany borrowings,
borrowings under its credit facility and proceeds from a receivable financing
facility.

OPERATING ACTIVITIES

The Company generated cash from operations of $212 million in the first
six months of 2003 as compared to $130 million in the comparable period of 2002.
The increase in operating cash of $82 million is primarily related to lower
interest payments of $55 million, decreased tax payments of $15 million,
improvements in accounts receivable of $55 million resulting from favorable cash
collections, partially offset by net other working capital of $43 million.

INVESTING ACTIVITIES

Net cash used in investing activities was $64 million in the first six
months of 2003 as compared to $65 million in the first six months of 2002. The
Company funded its acquisitions and capital expenditures primarily through cash
flows from operations in 2003 and 2002. The decreases in cash used in investing
related to decreased acquisition spending ($5 million) and increases in net
capital expenditures ($5 million). Acquisition spending in the first six months
of 2003 and 2002 was approximately $18 million and $23 million respectively with
no individually significant transactions. Capital expenditures totaling $51
million in the first six months of 2003 and $45 million in the first six months
of 2002 respectively, were made for new clinics, improvements to existing
clinics and maintenance of production facilities.

FINANCING ACTIVITIES

On February 21, 2003 the Company and FMCAG entered into an amended and
restated credit agreement ("2003 Senior Credit Agreement") with the Bank of
America N.A., Credit Suisse First Boston, Dresdner Bank AG New York, JPMorgan
Chase Bank, the Bank of Nova Scotia, and certain other lenders (collectively,
the "Lenders"), pursuant to which the Lenders have made available to the Company
and certain subsidiaries and affiliates an aggregate of up to $1.5 billion
through three credit facilities. The three facilities include a revolving
facility of $500 million and two term loan facilities of $500 million each. The
Company used the initial borrowings under the 2003 Senior Credit Agreement to
refinance outstanding borrowings under our prior senior credit agreement and for
general corporate purposes (See Note 3 of the Consolidated Financial
Statements).

Net cash flows used in financing activities were $144 million in the
first six months of 2003 as compared to $63 million in the comparable period of
2002 for a change of $81 million. Increase in net cash used in financing
activities in the first six months of 2003 is principally related to a decrease
in borrowing from affiliates of $47 million, along with approximately $121
million in increases in borrowings from the Company's 2003 Senior Credit
Facility. Debt and capital lease obligations in 2002 increased by $321 million
primarily due to higher borrowings under the Company's credit facility in order
to fund the early repayment of intercompany debt and the premium on the early
redemption of this intercompany obligation. (See Note 6 of the Consolidated
Financial Statements).

The Company has an asset securitization facility (the "Accounts
Receivable Facility") whereby receivables are sold to NMC Funding Corporation
(the "Transferor"), a wholly owned subsidiary of the Company, and subsequently
the Transferor transfers and assigns percentage ownership interests in
receivables to certain bank investors. The maximum securitization limit under
the Accounts Receivable Facility is $560 million at June 30, 2003. The facility
has a term of 364 days and matures on October 23, 2003. The Company has
historically renewed this facility for a new 364 day term upon maturity.

For the six months ended June 30, 2003, the Company decreased its sales
under the Accounts Receivable Facility by $197 million primarily using funds
drawn under the 2003 Senior Credit Agreement. Accounts receivable on the face of
the balance sheet are shown net of the Accounts Receivable Facility.

Approximately $9 million of cash was paid to redeem the Company's
Series D Preferred Stock (See Note 9 of the Consolidated Financial Statements).
In addition, approximately $12 million was used for payment of debt issuance
costs related to the Company's 2003 Senior Credit Agreement.

Short-term borrowings are made under the Accounts Receivable Facility
and from affiliates. Long-term financing is provided by the revolving credit
portion of our senior credit facility. We believe that our existing credit
facility, cash generated from operations and other current sources of financing
are sufficient to meet our foreseeable cash requirements.

The 2003 Senior Credit Agreement includes covenants that require FMCAG
to maintain certain financial ratios or meet other financial tests. Under the
Senior Credit Agreement, FMCAG is obligated to maintain a minimum consolidated
net worth, a minimum consolidated fixed charge ratio (ratio of consolidated
funded debt to EBIDTA) and a maximum leverage ratio. In addition, the 2003
Senior Credit Agreement includes other covenants which, among other things,
restrict or have the effect of restricting the Company's ability to dispose of
assets, incur debt, pay dividends, create liens or make capital expenditures,
investments and acquisitions. The breach of any of the covenants could result in
a default under the 2003 Senior Credit Agreement. In default, the outstanding
balance under the 2003 Senior Credit Agreement becomes due and payable. FMCAG
is in compliance with all financial covenants as of June 30, 2003.

CRITICAL ACCOUNTING POLICIES

The Company has identified the following selected accounting policies
and issues that the Company believes are critical to understand the financial
reporting risks presented in the current economic environment. These matters and
judgments, and uncertainties affecting them, are also essential to understand
the Company's reported and future operating results. See Notes to Consolidated
Financial Statements - Note 2, "Summary of Significant Accounting Policies"
included in the Company's 2002 report on Form 10- K.

RECOVERABILITY OF GOODWILL AND INTANGIBLE ASSETS

The growth of the Company's business through acquisitions has created a
significant amount of intangible assets, including goodwill, patient
relationships, tradenames and other intangibles. At June 30, 2003, the carrying
amount of net intangible assets amounted to $3,448 million representing
approximately 66% of the Company's total assets. SFAS 144, Accounting for the
Impairment or Disposal of long lived Assets, requires assessment of long lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of assets might be impaired. In accordance with SFAS 142,
Goodwill and Other Intangible Assets, goodwill is reviewed for impairment at
least once a year, at the end of the year.

To comply with the provisions of SFAS No. 142, the fair value of the
reporting unit is compared to the reporting unit's carrying amount. The Company
estimates the fair value of each reporting unit using estimated future cash
flows for the unit discounted by a weighted average cost of capital specific to
that unit. Estimated cash flows are based on our budgets for the next three
years, and projections for the following years based on an expected growth rate.
The growth rate is based on industry and internal projections. The discount
rates reflect any inflation in local cash flows and risks inherent to each
reporting unit.

If the fair value of the reporting unit is less than its carrying
value, a second step is performed which compares the fair value of the reporting
unit's goodwill to the carrying value of its goodwill. If the fair value of the
goodwill is less than its carrying value, the difference is recorded as an
impairment charge.

A prolonged downturn in the healthcare industry with lower than
expected increases in reimbursement rates and/or higher than expected costs for
providing healthcare services could adversely affect our estimated future
cashflows. Future adverse changes in a reporting unit's economic environment
might affect the discount rate. A decrease in our estimated future cash flows
and/or a decline in the macroeconomic environment could result in impairment
charges to goodwill and other intangible assets which could materially and
adversely affect our future financial position and operating results.

LEGAL CONTINGENCIES

The Company is a party to certain litigation including the commercial
insurer litigation, W.R. Grace & Co. bankruptcy and Sealed Air Corporation
indemnification litigation and other litigation arising in the ordinary course
of the Company's business as described in Note 11 "Commitments and
Contingencies" in the Company's Unaudited Consolidated Financial Statements. The
outcome of these matters may have a material effect on the Company's financial
position, results of operations or cash flows.

The Company regularly analyzes current information relating to these
litigation matters and provides accruals for probable contingent losses
including the estimated legal expenses to resolve the matter. In its decisions
regarding the recording of litigation accruals, the Company considers the
probability of an unfavorable outcome and its ability to make a reasonable
estimate of the amount of contingent loss. The mere filing of a suit or formal
assertion of a claim or assessment does not necessarily require the recording of
an accrual.

REVENUE RECOGNITION

Revenues are recognized on the date services and related products are
provided/shipped and are recorded at amounts estimated to be received under
reimbursement arrangements with third-party payors, including Medicare and
Medicaid. Retroactive adjustments are accrued on an estimated basis in the
period the related services are rendered and adjusted in future periods as final
settlements are determined. The Company records an allowance for estimated
uncollectible accounts receivable based upon an analysis of historical
collection experience. The analysis considers differences in collection
experience by payor mix and aging of the accounts receivable. From time to time,
the Company reviews the accounts receivable for changes in historical collection
experience to ensure the appropriateness of the allowances.

A significant change in collection experience, a deterioration of the
aging of accounts receivable, or a significant change in the mix of payers may
adversely affect the Company's estimate of the allowance for doubtful accounts.
Consequently, it is possible that our future operating results could be
materially and adversely affected by additional charges for bad debt and our
cash flows may be reduced by lower collection of receivables.

Net Revenues from machine sales to a third party leasing company where
there is a leaseback of the machines by the Dialysis Services Division were $9.9
million and $9.2 million for the three months ended June 30, 2003 and 2002, and
$18.2 million and $14.6 million for the six months ended June 30, 2003 and 2002
respectively. The profits on these sales are deferred and amortized to earnings
over the lease terms.

SELF INSURANCE PROGRAMS

The Company is self-insured for professional, product and general
liability, auto and worker's compensation claims up to predetermined amounts
above which third party insurance applies. Estimates include ultimate costs for
both reported and incurred but not reported claims.

TAX MATTERS

The Internal Revenue Service has proposed federal income tax
deficiencies for the years 1997 and 1998. The Company is contesting these
proposed deficiencies and believes that adequate provision has been made for any
adjustment that may result from this tax examination.

IMPACT OF INFLATION

A substantial portion of the Company's net revenue is subject to
reimbursement rates which are regulated by the federal government and do not
automatically adjust for inflation. Moreover, non-governmental payors continue
to exert downward pressure on reimbursement levels. Increased operating costs
that are subject to inflation, such as labor and supply costs, without a
compensating increase in reimbursement rates, may adversely affect the Company's
business and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks due to changes in interest rates
and foreign currency rates. The Company uses derivative financial instruments,
including interest rate swaps and foreign exchange contracts, as part of its
market risk management strategy. These instruments are used as a means of
hedging exposure to interest rate and foreign currency fluctuations in
connection with debt obligations and purchase commitments. The Company does not
hold or issue derivative instruments for trading or speculative purposes.

Hedge accounting is applied if the derivative reduces the risk of the
underlying hedged item and is designated at inception as a hedge. Additionally,
changes in the value of the derivative must result in payoffs that are highly
correlated to the changes in value of the hedged item. Derivatives are measured
for effectiveness both at inception and on an ongoing basis.

The Company enters into foreign exchange contracts that are designated
as, and effective as, hedges for forecasted purchase transactions. Also, since
the Company carries a substantial amount of floating rate debt, the Company uses
interest rate swaps to synthetically change certain variable-rate debt
obligations to fixed-rate obligations to mitigate the impact of interest rate
fluctuations.

Gains and losses on foreign exchange contracts accounted for as hedges
are deferred in other assets or liabilities. The deferred

gains and losses are recognized as adjustments to the underlying hedged
transaction when the future sales or purchases are recognized. Interest rate
swap payments and receipts are recorded as part of interest expense. The fair
value of the swap contracts is recognized in other liabilities in the financial
statements. Cash flows from derivatives are recognized in the consolidated
statement of cash flows in the same category as the item being hedged.

At June 30, 2003, the fair value of the Company's interest rate
agreements, which consisted entirely of interest rate swaps, is recorded as a
liability valued at approximately $112.0 million and the fair value of the
Company's foreign exchange contracts, which consisted entirely of forward
agreements, is recorded as an asset valued at approximately $143.7 million. The
Company had outstanding contracts covering the purchase of 615.4 million Euros
("EUR") at an average contract price of $0.9601 per EUR, for delivery between
July 2003 and May 2004, contracts for the purchase of 84 million Mexican Pesos
at an average contract price of 1039101 pesos per US dollar, and contracts for
the purchase of $9.1 million US dollars at an average contract price of $.6522
per Canadian Dollar.

ITEM 4. CONTROLS AND PROCEDURES

The Company's management, including the Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of
the Company's disclosure controls and procedures within 90 days prior to the
filing of this report, as contemplated by Securities Exchange Act Rule 13a-14.
Based on that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the disclosure controls and procedures are effective in
alerting them in a timely manner that all material information required to be
filed in this quarterly report has been made known to them. There have been no
significant changes to internal controls, or in factors that could significantly
affect internal controls, subsequent to the date the Chief Executive Officer and
the Chief Financial Officer completed their evaluation.

PART II
OTHER INFORMATION
LEGAL PROCEEDINGS

COMMERCIAL LITIGATION

Baxter is without right or authority to threaten or maintain suit against the
Company for alleged infringement of Baxter's patents. In general, the alleged
patents concern touch screens, conductivity alarms, power failure data storages,
and balance chambers for hemodialysis machines. Baxter has filed counterclaims
against the Company seeking monetary damages and injunctive relief, and alleging
that the Company willfully infringes on the Baxter's patents. The Company
believes its claims are meritorious, although the ultimate outcome of any such
proceedings cannot be predicted at this time and an adverse result could have a
material adverse effect on the Company's business, financial condition, and
results of operations.

OTHER LITIGATION AND POTENTIAL EXPOSURES

The Company operates many facilities throughout the U.S. In such a
decentralized system, it is often difficult to maintain the desired level of
oversight and control over the thousands of individuals employed by many
affiliated companies. The Company relies upon its management structure,
regulatory and legal resources, and the effective operation of its compliance
program to direct, manage and monitor the activities of these employees. On
occasion, the Company may identify instances where employees, deliberately or
inadvertently, have submitted inadequate or false billings. The actions of such
persons may subject the Company and its subsidiaries to liability under the
Anti-Kickback Statute, the Stark Statute and the False Claims Act, among other
laws.

ACCRUED SPECIAL CHARGE FOR LEGAL MATTERS

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

(a) Annual Meeting. The shareholders of the Company acted by majority
written consent in lieu of an annual meeting of shareholders on May
26, 2003 (the "Shareholder Action")

(b) Election of Directors. Pursuant to the Shareholder Action, the
shareholders elected Ben J. Lipps, Jerry Schneider and Ronald Kuerbitz
to serve as directors until the next annual meeting of shareholders.
Shares representing the 90,000,000 votes were voted in favor of the
election of Messrs. Lipps, Schneider, Kuerbitz to the Board of
Directors. There was no vote against their election, no abstentions
and no broker non-votes.

ITEM 5. OTHER MATTERS

(a) Resignation. Effective June 1, 2003, Jerry Schneider resigned his
positions of Chief Financial Officer, Vice President and Treasurer.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------

Exhibit 3.1 Certificate of Incorporation of Fresenius Medical Care
Holdings, Inc. (f/k/a W. R. Grace & Co.) under Section 402 of the
New York Business Corporation Law dated March 23, 1988
(incorporated herein by reference to the Form 8-K of the Company
filed on May 9, 1988).

Exhibit 3.2 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
May 25, 1988 (changing the name to W. R. Grace & Co.,
incorporated herein by reference to the Form 8-K of the Company
filed on May 9, 1988).

Exhibit 3.3 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
September 27, 1996 (incorporated herein by reference to the Form
8-K of the Company filed with the Commission on October 15,
1996).

Exhibit 3.4 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. (f/k/a W. R. Grace & Co.)
under Section 805 of the New York Business Corporation Law dated
September 27, 1996 (changing the name to Fresenius National
Medical Care Holdings, Inc., incorporated herein by reference to
the Form 8-K of the Company filed with the Commission on October
15, 1996).

Exhibit 3.5 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. under Section 805 of the
New York Business Corporation Law dated June 12, 1997 (changing
name to Fresenius Medical Care Holdings, Inc., incorporated
herein by reference to the Form 10-Q of the Company filed with
the Commission on August 14, 1997).

Exhibit 3.6 Certificate of Amendment of the Certificate of Incorporation of
Fresenius Medical Care Holdings, Inc. dated July 6, 2001
(authorizing action by majority written consent of the
shareholders) (incorporated herein by reference to the Form 10-Q
of the Company filed with the Commission on August 14, 2001).

Exhibit 3.7 Amended and Restated By-laws of Fresenius Medical Care
Holdings, Inc. (incorporated herein by reference to the Form 10-Q
of the Company filed with the Commission on August 14, 1997).

Exhibit 4.1* Amended and Restated Credit Agreement dated as of February
21, 2003 among Fresenius Medical Care AG, Fresenius Medical Care
Holdings, Inc., and the agents and lenders named therein.
(incorporated herein by reference to the Form 10-Q of Registrant
filed with Commission on May 15, 2003)

Exhibit 4.2 Fresenius Medical Care AG 1996 Stock Incentive Plan
(incorporated herein by reference to the Fresenius Medical Care
AG's Registrant Statement on Form S-8 dated October 1, 1996).

Exhibit 4.3 Fresenius Medical Care AG 1998 Stock Incentive Plan as amended
effective as of August 3, 1998 (incorporated herein by reference
to the Form 10-Q of Registrant filed with Commission on May 14,
1998).

Exhibit 4.4 Fresenius Medical Care AG 2001 International Stock Incentive
Plan (incorporated by reference to the Registration Statement on
Form F-4 of Fresenius Medical Care AG filed August 2, 2001
(Registration No. 333-66558)).

Exhibit 4.5 Senior Subordinated Indenture dated as of February 19, 1998,
among Fresenius Medical Care AG, State Street Bank and Trust
Company as Trustee and Fresenius Medical Care Holdings, Inc., and
Fresenius Medical Care AG, as Guarantors with respect to the
issuance of 7 7/8% Senior Subordinated Notes due 2008
(incorporated herein by reference to the Form 10-K of Registrant
filed with Commission on March 23, 1998).

Exhibit 4.6 Senior Subordinated Indenture dated as of February 19, 1998
among FMC Trust Finance S.a.r.l. Luxemborg, as Insurer, State
Street Bank and Trust Company as Trustee and Fresenius Medical
Care Holdings, Inc., and Fresenius Medical Care AG, as Guarantors
with respect to the issuance of 7 3/8% Senior Subordinated Notes
due 2008 (incorporated herein by reference to the Form 10-K of
Registrant filed with Commission on March 23, 1998).

Exhibit 4.7 Senior Subordinated Indenture dated as of June 6, 2001 among
Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxemborg -
III, Fresenius Medical Care Holdings, Inc., Fresenius Medical
Care Deutschland GmbH and State Street Bank and Trust Company
with respect to 7 7/8% Senior Subordinated Notes due 2011
(incorporated herein by reference to the Registration Statement
on Form F-4 of Fresenius Medical Care AG dated August 2, 2001
(Registration No. 333-66558)).

Exhibit 4.8 Senior Subordinated Indenture dated as of June 15, 2001 among
Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxemborg -
III, Fresenius Medical Care Holdings, Inc., Fresenius Medical
Care Deutschland GmbH and State Street Bank and Trust Company
with respect to 7 7/8% Senior Subordinated Notes due 2011
(incorporated herein by reference to the Registration Statement
on Form F-4 of Fresenius Medical Care AG dated August 2, 2001
(Registration No. 333-66558)).

Exhibit 10.1* Product Purchase Agreement effective January 1, 2002 between
Amgen USA, Inc. and National Medical Care, Inc. (incorporated by
reference to the Form 10-Q of the Registrant filed with the
Commission on May 15, 2002).

Exhibit 10.2 Receivables Purchase Agreement dated August 28, 1997 between
National Medical Care, Inc. and NMC Funding Corporation
(incorporated herein by reference to the Form 10-Q of the
Registrant filed with the Commission on November 14, 1997).

Exhibit 10.3 Amendment dated as of September 28, 1998 to the Receivables
Purchase Agreement dated as of August 28, 1997, by and between
NMC Funding Corporation, as Purchaser and National Medical Care,
Inc., as Seller (incorporated herein by reference to the Form
10-Q of Registrant filed with Commission on November 12, 1998).

Exhibit 10.4 Second Amended and Restated Transfer and Administrative
agreement dated as of September 24, 2002 among NMC Funding
Corporation, National Medical Care, Inc., Enterprise Funding
Corporation, Compass US Acquisition, LLC, Giro Multifunding
Corporation, the Bank Investors listed therein, WestLB AG, New
York Branch (formerly known as Westdeutsche Landesbank
Girozentrale, New York Branch), as an administrative agent and
Bank of America, N.A., as an administrative agent (incorporated
herein by reference to the Form 10-Q of Registrant filed with
Commission on November 14, 2002).

Exhibit 10.5 Amendment No.1 dated as of October 22, 2002 to the Second
Amended and Restated Transfer and Administrative agreement dated
as of September 24, 2002 among NMC Funding Corporation, National
Medical Care, Inc., Enterprise Funding Corporation, Compass US
Acquisition, LLC, Giro Multifunding Corporation, the Bank
Investors listed therein, WestLB AG, New York Branch (formerly
known as Westdeutsche Landesbank Girozentrale, New York Branch),
as an administrative agent and Bank of America, N.A., as an
administrative agent (incorporated herein by reference to the
Form 10-Q of Registrant filed with Commission on November 14,
2002).

Exhibit 10.6 Amendment No.2 dated as of November 8, 2002 to the Second
Amended and Restated Transfer and Administrative agreement dated
as of September 24, 2002 among NMC Funding Corporation, National
Medical Care, Inc., Enterprise Funding Corporation, Compass US
Acquisition, LLC, Giro Multifunding Corporation, Asset One
Securitization, LLC, the Bank Investors listed therein, WestLB
AG, New York Branch (formerly known as Westdeutsche Landesbank
Girozentrale, New York Branch), as an administrative agent and
Bank of America, N.A., as an administrative agent, (incorporated
herein by reference to the Form 10-K of Registrant filed with
Commission on March 17, 2003).

Exhibit 10.7 Amendment No.3 dated as of December 18, 2002 to the Second
Amended and Restated Transfer and Administrative agreement dated
as of September 24, 2002 among NMC Funding Corporation, National
Medical Care, Inc., Enterprise Funding Corporation, Compass US
Acquisition, LLC, Giro Multifunding Corporation, Asset One
Securitization, LLC, the Bank Investors listed therein, WestLB
AG, New York Branch (formerly known as Westdeutsche Landesbank
Girozentrale, New York Branch), as an administrative agent and
Bank of America, N.A., as an administrative agent, (incorporated
herein by reference to the Form 10-K of Registrant filed with
Commission on March 17, 2003).

Exhibit 10.8 Employment Agreement dated January 1, 1992 by and between
Ben J. Lipps and Fresenius USA, Inc. (incorporated herein by
reference to the Annual Report on Form 10-K of Fresenius USA,
Inc., for the year ended December 31, 1992).

Exhibit 10.9 Modification to FUSA Employment Agreement effective as of
January 1, 1998 by and between Ben J. Lipps and Fresenius Medical
Care AG (incorporated herein by reference to the Form 10-Q of
Registrant filed with Commission on May 14, 1998).

Exhibit 10.11 Employment Agreement dated January, 1, 2003 by and between
Ronald J. Kuerbitz and National Medical Care, Inc. (filed
herewith).

Exhibit 10.12 Employment Agreement dated June 1, 2003 by and between J.
Michael Lazarus and National Medical Care, Inc. (filed
herewith).

Exhibit 10.13 Employment Agreement dated January 1, 2003 by and between
Robert "Rice" M. Powell, Jr. and National Medical Care, Inc.
(filed herewith).

Exhibit 10.14 Employment Agreement dated July 1, 2002 by and between John
F. Markus and National Medical Care, Inc. (incorporated herein by
reference to the Form 10-Q of Registrant filed with Commission on
August 14, 2002).

Exhibit 10.15 Employment Agreement dated February 4, 2003 by and between Mats
Wahlstrom and National Medical Care, Inc. (filed herewith).

Exhibit 10.16 Employment Agreement dated June 1, 2003 by and between Michael
Brosnan and National Medical Care, Inc. (filed herewith).

Exhibit 10.17 Retention Bonus dated October 25, 2002, by and between
Fresenius Medical Care North America and Rice Powell (filed
herewith).

Exhibit 10.18 Retention Bonus dated June 20, 2003, by and between
Fresenius Medical Care North America and Michael Brosnan (filed
herewith).

Exhibit 10.19 Retention Bonus dated August 8, 2003 by and between Fresenius
Medical Care North America and Ronald Kuerbitz (filed herewith).

Exhibit 10.20 Subordinated Promissory Note dated as of May 18, 1999, among
National Medical Care, Inc. and certain Subsidiaries with
Fresenius AG as lender (incorporated herein by reference to the
Form 10-Q of Registrant filed with Commission on November 22,
1999).

Exhibit 10.21 Corporate Integrity Agreement between the Offices of Inspector
General of the Department of Health and Human Services and
Fresenius Medical Care Holdings, Inc. dated as of January 18,
2000 (incorporated herein by reference to the Form 8-K of the
Registrant filed with the Commission on January 21, 2000).

Exhibit 10.22 First Amended Settlement Agreement dated April 14, 2003 by and
among the Company, National Medical Care, Inc., the Official
Committee of Asbestos Personal Injury Claimants, and the Official
Committee of Asbestos Property Damage Claimants of W.R. Grace &
Co., W.R. Grace & Co. and W.R. Grace & Co. - Conn (incorporated
herein by reference to the Form 8-K of Registrant filed with
Commission on April 21, 2003).

Exhibit 11 Statement re: Computation of Per Share Earnings.

Exhibit 31.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

Current report on Form 8-K, dated May 7, 2003 furnished under Item 9,
"Regulation FD Disclosure". A copy of the press release announcing the
Company's financial results for the quarter ended March 31, 2003 was
attached to the Form 8-K.

* Confidential treatment has been requested as to certain portions of this
Exhibit

SIGNATURES

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

Fresenius Medical Care Holdings, Inc.

DATE: August 14, 2003 /s/Ben J. Lipps
-----------------------------------------
NAME: Ben J. Lipps
TITLE: President (Chief Executive Officer)