<PAGE>   1


                       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: SEPTEMBER 30, 1997

                                       OR

[ ] 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.)

Two Ledgemont Center, 95 Hayden Avenue, Lexington, MA            02173
-----------------------------------------------------          ----------
       (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)

Indicate 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
                                        ---    ---



<PAGE>   2




                      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: 90,000,000 shares of common
stock, par value $1.00 per share, all of which are held by Fresenius Medical
Care AG.










                                       2
<PAGE>   3


             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

      ITEM 1:     FINANCIAL STATEMENTS

                  Consolidated Statements of Earnings
                  Consolidated Balance Sheets
                  Consolidated Statements of Cash Flows
                  Notes to Consolidated Financial Statements

      ITEM 2:     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATION

PART II: OTHER INFORMATION

       ITEM 1:    Legal Proceedings
       ITEM 5:    Other Information
       ITEM 6:    Exhibits and Reports on Form 8-K







                                       3
<PAGE>   4


                                     PART I

                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

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

                                                    SUCCESSOR       PREDECESSOR
                                                  -------------    -------------
                                                  THREE MONTHS     THREE MONTHS
                                                      ENDED            ENDED
                                                  SEPTEMBER 30,    SEPTEMBER 30,
                                                       1997             1996
                                                  -------------    -------------

NET REVENUES
     Health care services ......................     $542,884        $495,844
     Medical supplies ..........................      114,043          38,406
                                                     --------        --------
                                                      656,927         534,250
                                                     --------        --------

EXPENSES
     Cost of health care services ..............      328,864         305,454
     Cost of medical supplies ..................       82,642          25,246
     General and administrative expenses .......       93,903         114,328
     Provision for doubtful accounts ...........       28,853          37,547
     Depreciation and amortization .............       60,659          30,936
     Research and development ..................          441             598
     Allocation of Grace Chemicals expenses ....          ---           1,536
     Interest expense, net, and related 
       financing costs .........................       49,182           1,862
                                                     --------        --------
                                                      644,544         517,507
                                                     --------        --------
EARNINGS BEFORE INCOME TAXES ...................       12,383          16,743
PROVISION FOR INCOME TAXES .....................        7,254          14,225
                                                     --------        --------
NET EARNINGS ...................................     $  5,129        $  2,518
                                                     ========        ========

Earnings per share .............................     $   0.05        $   0.04

     See accompanying Notes to Unaudited, Consolidated Financial Statements


                                       4
<PAGE>   5






             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                   SUCCESSOR       PREDECESSOR
                                                                 ------------     -------------
                                                                  NINE MONTHS      NINE MONTHS
                                                                     ENDED            ENDED
                                                                 SEPTEMBER 30,    SEPTEMBER 30,
                                                                      1997             1996
                                                                 -------------    -------------

<S>                                                                <C>              <C>       
NET REVENUES
     Health care services ...................................      $1,582,447       $1,495,451
     Medical supplies .......................................         344,398          119,209
                                                                   ----------       ----------
                                                                    1,926,845        1,614,660
                                                                   ----------       ----------

EXPENSES
     Cost of health care services ...........................         953,826          888,441
     Cost of medical supplies ...............................         247,720           80,545
     General and administrative expenses ....................         282,189          319,466
     Provision for doubtful accounts ........................          71,285           80,475
     Depreciation and amortization ..........................         177,328           93,097
     Research and development ...............................           2,311            1,906
     Allocation of Grace Chemicals expenses .................             ---            5,322
     Interest expense, net, and related financing costs .....         136,373           16,325
                                                                   ----------       ----------
                                                                    1,871,032        1,485,577
                                                                   ----------       ----------
EARNINGS BEFORE INCOME TAXES ................................          55,813          129,083
PROVISION FOR INCOME TAXES ..................................          33,513           66,202
                                                                   ----------       ----------
NET EARNINGS ................................................      $   22,300       $   62,881
                                                                   ==========       ==========

Earnings per share ..........................................      $     0.24       $     0.66
</TABLE>

     See accompanying Notes to Unaudited, Consolidated Financial Statements






                                       5
<PAGE>   6



             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       SUCCESSOR
                                                                         -------------------------------------
                                                                         SEPTEMBER 30,            DECEMBER 31,
                                                                             1997                     1996
                                                                         -------------            ------------
                                                                          (UNAUDITED)

<S>                                                                       <C>                      <C>       
ASSETS
------
Current Assets:
     Cash and cash equivalents .....................................      $   17,958               $   50,422
     Accounts receivable, less allowances of $146,678  and
       $153,939 ....................................................         544,964                  516,083
     Inventories ...................................................         156,910                  153,480
     Deferred income taxes .........................................         120,121                  146,751
     Other current assets ..........................................         113,335                   86,907
                                                                          ----------               ----------
          Total Current Assets .....................................         953,288                  953,643
                                                                          ----------               ----------
Properties and equipment, net ......................................         635,053                  525,988
                                                                          ----------               ----------

Other Assets:
     Excess of cost over the fair value of net assets
       acquired and other intangible assets, net of
       accumulated amortization of $132,882 and $37,933 ............       3,325,380                3,057,957
     Other assets and deferred charges .............................          46,778                   58,491
                                                                          ----------               ----------
          Total Other Assets .......................................       3,372,158                3,116,448
                                                                          ----------               ----------
Total Assets .......................................................      $4,960,499               $4,596,079
                                                                          ==========               ==========

LIABILITIES AND EQUITY

Current Liabilities:
     Current portion of long-term debt and capitalized lease
       obligations .................................................      $   28,714               $   56,270
     Short-term borrowings from affiliates .........................             ---                   12,193
     Accounts payable ..............................................         136,333                  131,314
     Accrued liabilities ...........................................         388,272                  421,240
     Net payable to affiliates .....................................          26,645                   32,590
     Accrued income taxes ..........................................           5,203                   18,530
                                                                          ----------               ----------
          Total Current Liabilities ................................         585,167                  672,137
Long-term debt .....................................................       1,599,956                1,420,959
Non-current borrowings from affiliates .............................         647,082                  504,693
Capitalized lease obligations ......................................          11,822                   17,246
Deferred income taxes ..............................................         140,809                  179,290
Other liabilities ..................................................          26,725                   34,015
                                                                          ----------               ----------
          Total Liabilities ........................................       3,011,561                2,828,340
                                                                          ----------               ----------

Equity:
     Equity ........................................................       1,968,909                1,768,574
     Cumulative translation adjustment .............................         (19,971)                    (835)
                                                                          ----------               ----------
          Total Equity .............................................       1,948,938                1,767,739
                                                                          ----------               ----------
Total Liabilities and Equity .......................................      $4,960,499               $4,596,079
                                                                          ==========               ==========
</TABLE>

     See accompanying Notes to Unaudited, Consolidated Financial Statements.


                                       6
 
<PAGE>   7



             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                      SUCCESSOR             PREDECESSOR
                                                                                     ------------          -------------
                                                                                     NINE MONTHS            NINE MONTHS
                                                                                        ENDED                  ENDED
                                                                                     SEPTEMBER 30,         SEPTEMBER 30,
                                                                                         1997                   1996
                                                                                     ------------          -------------

<S>                                                                                   <C>                   <C>        
Cash Flows Provided by Operating Activities:
     Net earnings ..............................................................      $   22,300            $    62,881
     Adjustments to reconcile net earnings to net cash provided by
      operating activities:
          Depreciation and amortization ........................................         177,328                 93,097
          Provision for doubtful accounts ......................................          71,285                 80,475
          Provision for (benefit of) deferred income taxes .....................         (11,851)                 8,286
          Loss on disposal of properties and equipment .........................             739                  5,816

   Changes in operating assets and liabilities, net of effects of purchase
       acquisitions and foreign exchange:
          Increase in accounts receivable ......................................         (64,105)               (82,981)
          (Increase) decrease in inventories ...................................            (439)                 2,570
          Increase in other current assets .....................................         (22,871)               (20,569)
          Decrease in other assets and deferred charges ........................           6,566                    987
          Decrease in accounts payable .........................................         (12,559)               (12,454)
          Decrease in accrued income taxes .....................................          (8,774)                (5,541)
          Decrease in accrued liabilities ......................................         (38,332)               (17,282)
          (Decrease) increase in other long-term liabilities ...................          (8,974)                 5,320
          Net changes due to/from affiliates ...................................          (5,945)                    --
          Other, net ...........................................................           1,410                  2,812
                                                                                      ----------            -----------
     Net cash provided by operating activities .................................         105,778                148,325
                                                                                      ----------            -----------

Cash Flows from Investing Activities:
          Capital expenditures .................................................        (116,840)               (92,853)
          Payments for acquisitions, net of cash acquired ......................        (406,747)               (89,090)
                                                                                      ----------            -----------
     Net cash used in investing activities .....................................        (523,587)              (181,943)
                                                                                      ----------            -----------

Cash Flows from Financing Activities:

          Increase in borrowings from affiliates ...............................          72,993                     --
          Cash dividends paid ..................................................            (390)            (2,114,396)
          Proceeds on issuance of debt .........................................       1,095,678              2,390,607
          Payments on debt and capitalized leases ..............................        (960,231)              (338,793)
          Contributed capital from Fresenius Medical Care AG ...................         178,425                    ---
          Advances from Grace Chemicals, net ...................................             ---                279,819
                                                                                      ----------            -----------
     Net cash provided by financing activities .................................         386,475                217,237
                                                                                      ----------            -----------
Effects of changes in foreign exchange rates ...................................          (1,130)                 3,353
                                                                                      ----------            -----------
(Decrease) increase in cash and cash equivalents ...............................         (32,464)               186,972
Cash and cash equivalents at beginning of period ...............................          50,422                 33,530
                                                                                      ----------            -----------
Cash and cash equivalents at end of period .....................................      $   17,958            $   220,502
                                                                                      ==========            ===========

Supplemental disclosures of cash flow information: 
     Cash paid during the period for:
          Interest .............................................................      $   94,551            $    21,328
          Income taxes .........................................................          57,695                 59,308
     Intercompany borrowings of investment securities for acquisitions .........      $   57,202                     --
</TABLE>

     See accompanying Notes to Unaudited, Consolidated Financial Statements



                                       7
<PAGE>   8


             FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES

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

NOTE 1. THE COMPANY, REORGANIZATION AND BASIS OF PRESENTATION

THE COMPANY

    Fresenius Medical Care Holdings, Inc., ("FMCH" or the "Company"), formerly
known as W. R. Grace & Co. ("Grace New York"), together with its wholly owned
subsidiaries, National Medical Care, Inc. and its subsidiaries ("NMC") and
Fresenius USA, Inc. and its subsidiaries ("FUSA"), was formed as a result of a
series of transactions pursuant to the Agreement and Plan of Reorganization
dated as of February 4, 1996 by and between Grace New York and Fresenius AG (the
"Reorganization") which is more fully described hereunder.

    The Company is primarily engaged in (i) providing kidney dialysis services,
and clinical laboratory testing (ii) manufacturing and distributing products and
equipment for dialysis treatment and (iii) providing home infusion therapy, home
respiratory services, diagnostic services and other medical services.

THE REORGANIZATION

    The Reorganization, which was effective September 30, 1996, resulted from
the culmination of the following transactions: (1) NMC, which was a subsidiary
of W. R. Grace & Co. -- Conn. ("Grace Chemicals"), a wholly-owned subsidiary of
Grace New York, borrowed $2,300,000 and paid a cash dividend of approximately
$2,100,000 to Grace Chemicals; (2) the stock of NMC was transferred to Grace
New York, so that NMC and Grace Chemicals became sibling subsidiaries of Grace
New York; (3) the stock of Grace Chemicals was transferred to a newly formed
Delaware subsidiary of Grace New York ("New Grace") and the shares of New Grace
were spun-off to the Grace New York shareholders in a pro rata distribution; (4)
Grace New York was recapitalized such that each Grace New York shareholder
received one share of Class D Preferred Stock of Grace New York (the "Class D
Preferred Stock") for each share of Grace New York common stock held; and (5)
Grace New York, with NMC as its sole business, merged with a wholly-owned
subsidiary of Fresenius Medical Care AG ("FMC"), and Fresenius AG's worldwide
dialysis business ("FWD") was contributed as separate subsidiaries of FMC with
the result that 44.8% of the ordinary shares of FMC were exchanged for the
common stock held by Grace New York common shareholders in the merger
transaction and the balance of the ordinary shares of FMC were received by
Fresenius AG and the shareholders of FUSA, in consideration of the contribution
of FWD to FMC. All of the Grace New York (now Fresenius Medical Care Holdings,
Inc. ("FMCH")) common stock is held by FMC, while the Class D Preferred Stock
(which entitles its shareholders to a contingent dividend based on the
consolidated performance of FMC in the years 1997-2001) and other previously
issued classes of FMCH preferred stock remain outstanding.

    Effective October 1, 1996, FMC contributed all of the assets and liabilities
of FUSA to FMCH. The contribution of FUSA to FMCH by FMC was accounted for on
the cost basis since FUSA was a subsidiary under control of a common parent.
These consolidated financial statements include the results of FUSA's operations
and cash flows for the period January 1, 1997 through September 30, 1997.


                                       8
<PAGE>   9


BASIS OF PRESENTATION

BASIS OF CONSOLIDATION - PREDECESSOR BASIS

    The consolidated financial statements have been prepared as if the Company
had operated as an independent, stand alone entity for all periods presented.
Such financial statements have been prepared using the historical basis of
accounting prior to the Reorganization ("Predecessor") and include all of the
assets, liabilities, revenues, expenses and related taxes on income of the Grace
New York health care business operated by NMC (the "NMC Business") previously
included in the consolidated financial statements of Grace New York and its
subsidiaries prior to the Reorganization (the "Grace Consolidated Group").
Consequently, these consolidated financial statements include balances for
goodwill and other assets and liabilities related to the NMC Business that were
previously included in the financial statements of the Grace Consolidated Group,
except that there is no allocation to the NMC Business of Grace Chemicals'
borrowings and related interest expense. These consolidated financial statements
reflect only the borrowings and interest expense of NMC prior to the
Reorganization and interest expense of the Company after the Reorganization. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
55 ("SAB 55"), the financial statements have also been adjusted to include
certain expenses incurred by Grace Chemicals on the NMC Business's behalf prior
to the Reorganization.

    These consolidated financial statements do not necessarily indicate the
financial position and results of operations that would have occurred if the NMC
Business were a stand-alone entity on the dates, and for the periods, indicated.

ACCOUNTING FOR THE REORGANIZATION - SUCCESSOR BASIS

    The issuance of FMC ordinary shares for all of the common stock of NMC has
been recorded as an acquisition in accordance with the purchase method of
accounting. Accordingly, purchase accounting adjustments recorded by FMC have
been "pushed down" to NMC, thus establishing a new basis of accounting at NMC
("Successor"). The purchase price of the acquisition was determined as the
average of the mid-points of the ranges of valuation of NMC and FMC,
respectively, as assigned by independent financial advisors to Fresenius AG and
was approximately $1,152,000. The valuation has been increased for direct costs
incurred to consummate the transaction. The excess of the purchase price over
the cost of the net identifiable assets acquired at September 30, 1996 of
$1,696,698 has been allocated to the fair value of the assets acquired and
liabilities assumed with the remaining portion recorded as goodwill.

    The Agreement and Plan for Reorganization also provides for the payment of
additional purchase price to the holders of the FMCH Class D Preferred Stock in
the form of a dividend, contingent upon the attainment of certain specific
consolidated operating results by FMC. Such future dividends, if any, will be
recorded as an increase in goodwill.

    In order to properly allocate purchase price to assets acquired, the Company
obtained an independent appraisal to fair value all assets of NMC. Accordingly,
the carrying values of specifically identified intangible assets and certain
tangible assets were adjusted upward by $186,030 and $57,768, respectively, to
approximate their fair values.

    The Company has also recorded adjustments to increase liabilities assumed by
approximately $123,000 for pre-acquisition contingencies primarily related to
legal settlements and the anticipated costs incurred in the defense of
litigation. These adjustments resulted from discussions with the government in
March 1997. The Company has provided an estimate of legal costs at the low end
of an expected range, but the ultimate costs could be significantly higher. The
Company is in discussions with the government regarding these matters. Any
difference between the final settlement and the Company's estimate would be
adjusted to goodwill, if determined within the allocation period, or charged to
income if determined thereafter. In addition, the Company has accrued
approximately $50,000 for certain costs related to the closing of certain renal
products manufacturing and distribution operations as well as the closing of
certain clinics of the Homecare Division. These restructuring costs primarily
relate to severance payments and lease commitments. Through the period ended
September 30, 1997 approximately $18,200 in payments have been applied against
the pre-acquisition contingencies and $36,100 against the restructuring costs.



                                       9
<PAGE>   10



OTHER

    The accompanying unaudited consolidated financial statements and related
notes should be read in conjunction with the audited consolidated financials
which are contained in the Company's annual report on Form 10-K for the year
ended December 31, 1996. In the opinion of the Company, all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
have been included in the interim financial statements. The results for the nine
month period ended September 30, 1997 may not necessarily be indicative of the
results for the fiscal year ended December 31, 1997.

    All intercompany transactions and balances have been eliminated in
consolidation.

NOTE 2. INVENTORIES

<TABLE>
<CAPTION>
                                                                                                   SUCCESSOR
                                                                                    --------------------------------------
                                                                                    SEPTEMBER 30,             DECEMBER 31,
                                                                                        1997                      1996
                                                                                    -------------             ------------
Inventories:
<S>                                                                                    <C>                      <C>     
  Raw materials ................................................................       $ 29,299                 $ 41,659
  Manufactured goods in process ................................................          6,910                   11,837
  Manufactured and purchased inventory available for sale ......................         89,387                   64,156
                                                                                       --------                 --------
                                                                                        125,596                  117,652
   Health care supplies ........................................................         31,314                   35,828
                                                                                       --------                 --------
       Total ...................................................................       $156,910                 $153,480
                                                                                       ========                 ========
</TABLE>

NOTE 3. DEBT

    Long-term debt to outside parties consists of:

<TABLE>
<CAPTION>
                                                                                                   SUCCESSOR
                                                                                    --------------------------------------
                                                                                    SEPTEMBER 30,             DECEMBER 31,
                                                                                        1997                      1996
                                                                                    -------------             ------------

<S>                                                                                  <C>                       <C>      
Credit Agreement ...............................................................     $1,598,500                1,411,000
Third-party debt, primarily bank borrowings at variable                                                                  
  interest rates (3% - 14%) with various maturities ............................         20,473                   57,101
                                                                                     ----------                ---------
                                                                                      1,618,973                1,468,101
Less amounts classified as current .............................................         19,017                   47,142
                                                                                     ----------                ---------
                                                                                     $1,599,956                1,420,959
                                                                                     ==========                =========
</TABLE>
INTEREST RATE SWAP AGREEMENTS

NMC has entered into interest rate swap agreements with various commercial banks
for notational amounts totaling $1,600,000. These agreements effectively change
NMC interest rate exposure on the majority of its revolving loans to fixed rates
of interest between 5.76% and 6.60%. The first set of swap agreements became
effective on April 3, 1997. The second set of swap agreements were entered into
on June 17, 1997 and become effective on December 19, 1997 and April 3, 1998,
respectively. These swap agreements expire at various dates between December 15,
1997 and December 19, 2003. NMC had agreed under its Credit Agreement to have at
least $500,000 of interest rate protection.

FINANCING AGREEMENT

On August 28, 1997, FMCH established a new $204,000 receivables financing
facility with NationsBank to replace its former financing facility with
Citicorp. The agreement has an effective interest rate of 5.66% and matures on
August 27, 1998. Proceeds of $200,000 have been drawn down under the
NationsBank agreement.

SALE-LEASEBACK AGREEMENTS

On September 30, 1997 FUSA entered into an amendment to its existing
sale-leaseback agreements with Deutsche Bank. Pursuant to such amendment, FUSA
sold to Deutsche Bank certain equipment that it had recently acquired to expand
the capacity of its Ogden, Utah manufacturing facility. The purchase price of
the equipment was $13,109.


                                       10
<PAGE>   11


NOTE 4. EQUITY

At September 30, 1997, and December 31, 1996, respectively, the components of
FMCH's Equity, excluding Cumulative Translation Adjustment, as presented in the
Consolidated Balance Sheet are as follows:

<TABLE>
<CAPTION>
                                                                                                  SUCCESSOR
                                                                                    ------------------------------------
                                                                                    SEPTEMBER 30,           DECEMBER 31,
                                                                                        1997                    1996
                                                                                    -------------           ------------
<S>                         <C>                                                       <C>                         <C>  
Preferred Stocks, $100 par value
     - 6% Cumulative (1); 40,000
         shares authorized; 36,460 outstanding ...................................    $    3,646                  3,646
     - 8% Cumulative Class A (2); 50,000 shares authorized;
         16,176 outstanding ......................................................         1,618                  1,618
     - 8% Non-cumulative Class B (2); 40,000 shares
         authorized; 21,483 outstanding ..........................................         2,148                  2,148
                                                                                      ----------              ---------
                                                                                           7,412                  7,412

Preferred Stocks, $.10 par value - Non-cumulative Class D (3),
  100,000,000 shares authorized; 89,061,590 outstanding ..........................         8,906                  8,906
                                                                                      ----------              ---------
          Total Preferred ........................................................        16,318                 16,318

Common Stock, $1 par value: 300,000,000 shares authorized,
  90,000,000 outstanding .........................................................        90,000                 90,000
Paid in Capital ..................................................................     1,901,770              1,723,345
Retained Earnings (Deficit) ......................................................       (39,179)               (61,089)
                                                                                      ----------              ---------
          Total Equity ...........................................................    $1,968,909              1,768,574
                                                                                      ==========              =========
</TABLE>

(1) 160 votes per share
(2) 16 votes per share
(3) 1/10 vote per share





                                       11
<PAGE>   12


NOTE 5. COMMITMENTS AND CONTINGENCIES

CONTINGENT NON-NMC LIABILITIES OF GRACE NEW YORK (NOW KNOWN AS FRESENIUS MEDICAL
CARE HOLDINGS, INC.)

    In connection with the Reorganization, Grace Chemicals agreed to indemnify
Grace New York and NMC against all liabilities of Grace New York, whether
relating to events occurring before or after the Reorganization, other than
liabilities arising from or relating to NMC operations. Grace New York is
contingently liable for certain liabilities with respect to pre-Reorganization
matters that are not related to NMC operations. Grace New York believes that in
view of the nature of the non-NMC liabilities and Grace Chemicals' financial
position, the risk of significant loss from non-NMC liabilities is remote.

    Were events to violate the tax free nature of the Reorganization, the
resulting tax liability would be the obligation of FMCH. Subject to
representations by Grace Chemicals, FMCH and Fresenius AG, Grace Chemicals has
agreed to indemnify FMCH for such a tax liability. Were FMCH not able to collect
on the indemnity, the tax liability would have a material adverse effect on the
financial position of FMCH and the results of its operations.

OIG INVESTIGATIVE SUBPOENAS

    In October 1995, NMC received five investigative subpoenas from the Office
of Inspector General of the U.S. Department of Health and Human Services (the
"OIG"). The subpoenas were issued in connection with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts and
others concerning possible violations of federal laws, including the
Anti-kickback Statute and the False Claims Act. The subpoenas call for extensive
document production relating to various aspects of NMC's business. A sixth
subpoena, clarifying the scope of one originally served, was received in May
1996.

    The five subpoenas cover the following areas: (a) NMC's corporate
management, personnel and employees, organizational structure, financial
information and internal communications; (b) NMC's dialysis services business,
principally medical director contracts and compensation; (c) NMC's treatment of
credit balances resulting from overpayments received under the Medicare end
stage renal disease (ESRD) program, NMC's billing for home dialysis services and
payment of supplemental medical insurance premiums on behalf of indigent
patients; (d) NMC's LifeChem laboratory business ("LifeChem"), including
documents relating to testing procedures, marketing, customers, competition and
certain overpayments totaling approximately $4.9 million that were received by
LifeChem from the Medicare program with respect to laboratory services rendered
between 1989 and 1993; and (e) NMC's Homecare Division and, in particular,
information concerning the intradialytic parenteral nutrition ("IDPN") business
described below, including billing practices related to various services,
equipment and supplies and payments made by third parties as compensation for
administering IDPN therapy.

    On July 15, 1997, NMC received an investigatory subpoena duces tecum
requesting production of a number of patient records, in connection with the
government's review of billing practices related to various services, equipment
and supplies and payments made by third parties as compensation for
administering IDPN therapy, described above.

    Each of the patients whose records were subpoenaed is, or was, a Medicare
beneficiary. The subpoena calls for production of the records by August 15,
1997. The Company has discussed an extended schedule for production with the
government. The result of the government's review of these records, its
duration, and its effect, if any, on NMC cannot be predicted at this time.

    In the event that a U.S. government agency believes that any wrongdoing has
occurred, civil and/or criminal proceedings could be instituted, and if any such
proceedings were to be instituted and the outcome were unfavorable, NMC could be
subject to substantial fines, penalties and damages or could become excluded
from government reimbursement programs. Any such result could have a material
adverse effect on NMC's financial position or the results of operations of the
Company.

    FMC and NMC have provided the United States government with a joint and
several guarantee of payment of the obligations, if any, arising out of the
investigation by the OIG. In support of this guarantee, NMC has delivered to the
government an irrevocable standby letter of credit in the amount of $150
million.


                                       12
<PAGE>   13



DIAGNOSTICS SUBPOENA

    On October 31, 1996, Biotrax International Inc. ("Biotrax") and NMC
Diagnostic Services, Inc. ("DSI"), both of which are subsidiaries of FMCH,
received an investigatory subpoena from the OIG. The subpoena calls for the
production of extensive documents and was issued in connection with an
investigation being conducted by the OIG in conjunction with the U.S. Attorney
for the Eastern District of Pennsylvania concerning the possible submission of
false or improper claims to, and their payment by, the Medicare program. The
subpoena calls for the production of documents on corporate organization,
business plans, document retention, personnel files, sales and marketing and
Medicare billing issues relating to certain procedures offered by the prior
owner of the Biotrax business before its assets were acquired by NMC in March
1994 and by DSI following the acquisition. The Company has reviewed the subpoena
with its legal counsel and made extensive document production in response to the
subpoena. The outcome of this investigation, its duration, and its effect, if
any, on NMC cannot be predicted at this time. If, however, the results of this
investigation are adverse to the Company, the Company could face the same types
of potential consequences of the OIG investigation.

QUI TAM ACTIONS

SOUTH FLORIDA

    The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Southern District of Florida,
Southern Division (the "South Florida Action"). The original complaint in the
South Florida Action was filed under seal in 1996. The Relator filed an Amended
Complaint under seal on July 8, 1996. The seal with respect to the Amended
Complaint was partially lifted pursuant to court order to permit the government
to provide FMCH and NMC with a copy of the Amended Complaint. The Company and
NMC received copies of the Amended Complaint on July 10, 1996. Pursuant to a
court order dated July 26, 1996, the seal was further modified to permit the
Company to provide copies of the Amended Complaint to Fresenius AG, lenders
involved in the NMC credit facility and their respective counsel and to permit
the Company and NMC to describe the allegations of the Amended Complaint in
their securities filings with respect to the Reorganization.

    The Amended Complaint alleges, among other things, that the Company, Grace
Chemicals and NMC violated the False Claims Act in connection with certain
billing practices regarding IDPN and the administration of EPO. The Amended
Complaint alleges that as a result of this allegedly wrongful conduct, the
United States suffered actual damages in excess of $200 million and alleges that
the defendants are liable to the United States for three times the amount of the
alleged damages plus fines of up to $10,000 per false claim. The Amended
Complaint also seeks the imposition of a constructive trust on the proceeds of
the NMC dividend to Grace Chemicals for the benefit of the United States on the
ground that the Reorganization constitutes a fraudulent conveyance that will
render NMC unable to satisfy the claims asserted in the Amended Complaint.

TAMPA

    The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Middle District of Florida, Tampa
Division (the "Tampa Action"). The original complaint in the Tampa Action was
filed under seal in 1995. The seal with respect to the complaint was partially
lifted pursuant to court order to permit the government to provide the Company
and NMC with a copy of the complaint. Pursuant to a court order dated November
7, 1996, the seal was further modified to permit the Company and NMC to disclose
the complaint to the underwriters involved in two public securities offerings by
FMC (the "Offerings") and their counsel, to Fresenius AG, and to lending
institutions to whom NMC has contractual obligations, their successors and
assigns and their respective counsel and to disclose allegations in the
complaint in FMC's filings under the Securities Act of 1933, as amended, with
respect to the Offerings and in FMC's and FMCH's periodic filings under the
Securities Exchange Act of 1934, as amended.

    The complaint in the Tampa Action alleges, among other things, that the
Company, NMC and certain NMC subsidiaries violated the False Claims Act in
connection with the retention of overpayments made under the Medicare program,
the alleged submission of claims in violation of applicable cost caps and the
payment of supplemental Medicare insurance premiums as an inducement to patients
to obtain dialysis products and services from NMC. The complaint alleges that as
a result of this allegedly wrongful conduct, the United States suffered damages
in excess of $10 million including applicable fines, and alleges that the
defendants are liable to the United States for three times the amount of the
alleged damages plus fines of up to $10,000 per false claim.



                                       13
<PAGE>   14


PENNSYLVANIA, DELAWARE AND NEW JERSEY

    The Company and NMC have become aware that a qui tam action has been filed
in the United States District Court for the Eastern District of Pennsylvania
(the "Pennsylvania Action"). The original complaint in the Pennsylvania Action
was filed under seal in February of 1996. The seal with respect to the complaint
was partially lifted pursuant to court order to permit the government to provide
NMC with a copy of the complaint. Pursuant to a court order dated November 15,
1996, the seal was further modified to permit the Company and NMC to disclose
the complaint to the underwriters involved in the Offerings and their counsel,
to Fresenius AG, and to lending institutions to whom NMC has contractual
obligations, their successors and assigns and their respective counsel and to
disclose allegations in the complaint in the Company's filings under the
Securities Act with respect to the Offerings and in the Company's periodic
filings under the Exchange Act.

    The complaint in the Pennsylvania Action alleges, among other things, that a
pharmaceutical manufacturer, an unaffiliated dialysis provider and NMC violated
the False Claims Act in connection with the submission of claims to the Medicare
program for a non-sterile intravenous drug and for intravenous drugs which were
allegedly billed in excess of permissible Medicare reimbursement rates. The
complaint also claims that the defendants violated the Medicare and Medicaid
anti-kickback statutes in connection with the receipt of discounts an other in
kind payments as alleged inducements to purchase intravenous drugs. The
complaint is focused on the business relationship between the pharmaceutical
manufacturer and several providers, one of which is NMC. The complaint claims
that as a result of the allegedly wrongful conduct, the United States suffered
damages and that the defendants are liable to the United States for three times
the amount of the alleged damages plus civil penalties of up to $10,000 per
false claim. An adverse result in the Pennsylvania Action or an adverse result
in any other qui tam action could have a material adverse affect on the
Company's business, financial condition or results of operations.

     The Company and NMC have become aware that three additional qui tam
actions were filed in the Eastern District of Pennsylvania on May 26, 1995,
August 23, 1996 and November 4, 1996 (the "Additional Pennsylvania Actions").
The seal with respect to each of the complaints was partially lifted pursuant
to court order to permit the government to provide the Company, NMC and other
affiliated defendants with a copy of the complaint. Pursuant to three separate
court orders dated August 26, 1997, the seal was further modified to permit the
Company, NMC and other affiliated defendants to disclose the complaint to any
relevant investors, financial institutions and/or underwriters, their
successors and assigns and their respective counsel and to disclose allegations
in the complaints in their respective SEC and NYSE periodic required filings.

    The first qui tam alleges, among other things, that Biotrax International,
Inc. ("Biotrax"), a subsidiary of NMC, violated the False Claims Act in
connection with its submission of claims to the Medicare program for diagnostic
tests and induced overutilization of such tests in the medical community through
improper marketing practices also in violation of the Act.

    The second qui tam alleges, among other things, that Biotrax and NMC
Diagnostic Services ("DSI") induced overutilization of diagnostic tests by
several named and unnamed physician defendants in the local medical community,
through improper marketing practices and fee arrangements, in violation of the
False Claims Act.

    The third qui tam alleges, among other things, that NMC, DSI and Biotrax 
violated the False Claims Act in connection with the submission of claims to 
the Medicare program by improperly upcoding and otherwise billing for various 
diagnostic tests.

    Each of the complaints in the Additional Pennsylvania Actions claims that as
a result of the allegedly wrongful conduct, the United States suffered damages
and that the defendants are liable to the United States for three times the
amount of the alleged damages plus civil penalties of up to US-$10,000 per false
claim. An adverse result in any of the Additional Pennsylvania Actions could 
have a material adverse affect on the Company's business, financial conditions 
or results of operations.

    The Company, and NMC also have become aware of two additional qui tam
actions -- one filed in the District of Delaware on January 29, 1997 (the
"Delaware Action") and the second filed in the District of New Jersey on
February 26, 1997 (the "New Jersey Action").

    The Delaware Action alleges, among other things, that NMC and Biotrax a
subsidiary of NMC, violated the False Claims Act in connection with its
submission of claims to the Medicare program for diagnostic tests, and induced
overutilization of such tests through improper marketing practices which
provided impermissible incentives to health care providers to order these tests.

    The New Jersey Action alleges, among other things, that DSI and NMC violated
the False Claims Act in connection with the submission of claims to the Medicare
program for reimbursement for diagnostic tests, by causing unnamed physicians to
overutilize these tests through a variety of fee arrangements and other
impermissible inducements.

    Each of the qui tam complaint in the Delaware and New Jersey Actions claims
that as a result of the allegedly wrongful conduct, the United States suffered
damages and that the defendants are liable to the United States for three times
the amount of the alleged damages plus civil penalties of up to US-$10,000 per
false claim. An adverse result in either of the Delaware or New Jersey Actions
could have a material adverse affect on the Company's business, financial
conditions or result of operations.

OMNIBUS BUDGET RECONCILIATION ACT OF 1993

    The Omnibus Budget Reconciliation Act of 1993 ("OBRA 93") affected the
payment of benefits under Medicare and employer health plans for certain
eligible ESRD patients. In July 1994, the Health Care Financing Administration
("HCFA") issued an instruction to Medicare claims processors to the effect that
Medicare benefits for the patients affected by OBRA 93 would be subject to a new
18- month "coordination of benefits" period. This instruction had a positive
impact on NMC's dialysis revenues because, during the 18-month coordination of
benefits period, the patient's employer health plan was responsible for payment,
which was generally at a rate higher than that provided under Medicare.

    In April 1995, HCFA issued a new instruction, reversing its original
instruction in a manner that would substantially diminish the positive effect of
the original instruction on NMC's dialysis business. Under the new instruction,
no 18-month coordination of benefits period would arise and Medicare would
remain the primary payor for the patients affected by OBRA93. HCFA further
proposed that its new instruction be effective retroactive to August 1993, the
effective date of OBRA 93. Consequently, FMCH may be required to refund payments
received from employer health plans for services provided after August 1993
under HCFA's original instruction and to re-bill Medicare for the same services,
which would result in a cumulative reduction of net revenues to NMC totaling
approximately $120,000 as of September 30, 1997. NMC believes that the April
1995 instruction letter issued by HCFA does not constitute a proper notice of
final rulemaking and, accordingly, NMC continued to recognize revenues through
the end of June 1995. If HCFA's instruction letter is adjudged by the courts to
be the equivalent of a notice of proposed rulemaking, then NMC believes that a
60-day comment period would be required before the rule could become effective.
Therefore, NMC believes that it would be allowed to recognize the higher
reimbursement rate on dual eligible ESRD patients for 60 days subsequent to the
HCFA instruction letter, or approximately through July 1, 1995. Effective July
1, 1995, NMC ceased to recognize the incremental revenue realized under the
original instruction, which has resulted in a material reduction in NMC's
operating earnings in comparison to prior periods in which NMC recognized such
incremental revenue. However, NMC continued to bill the employer health plans as
primary payors through December 31, 1995, at which time NMC commenced billing
Medicare for the patients affected by OBRA 93.

    In May 1995, NMC filed suit in the U.S. District Court for the District of
Columbia seeking a declaratory judgment with respect to HCFA's instructions
relating to OBRA 93. In June 1995, the court granted NMC's motion for a
preliminary injunction to preclude HCFA from retroactively enforcing its new
instruction. The litigation is continuing with respect to NMC's request to
permanently enjoin HCFA's new instruction, both retroactively and prospectively.
While there can be no assurance that a permanent injunction will be issued, NMC
believes that it will ultimately prevail in its claim that the retroactive
reversal by HCFA of its original instruction relating to OBRA 93 was
impermissible under applicable law. If HCFA's revised instruction is upheld and
applied retroactively, NMC's business, financial position and results of
operations would be materially adversely affected. 


                                       14

<PAGE>   15
INTRADIALYTIC PARENTERAL NUTRITION

    NMC administers IDPN therapy to chronic dialysis patients who suffer from
severe gastrointestinal malfunctions. Since late 1993, Medicare claims
processors have sharply reduced the number of IDPN claims approved for payment
as compared to prior periods. NMC believes that the reduction in IDPN claims
currently being paid by Medicare represents an unauthorized policy coverage
change. Accordingly, NMC and other IDPN providers are pursuing various
administrative and legal remedies, including administrative appeals, to address
this reduction. In November 1995, NMC filed a complaint in the U.S. District
Court for the Middle District of Pennsylvania seeking a declaratory judgment and
injunctive relief to prevent the implementation of this policy coverage change.
Subsequently, the Court affirmed a prior report of the magistrate judge
dismissing NMC's complaint without considering any substantive claims, on the
grounds that the underlying cause of action should be submitted fully to the
administrative review processes available under the Medicare Act. The Company
decided not to appeal the Court's decision, but rather, to pursue the claims
through the available administrative processes.

    NMC management believes that its IDPN claims were consistent with published
Medicare coverage guidelines and ultimately will be approved for payment. Such
claims represent substantial accounts receivable of NMC, amounting to
approximately $153 million (net of a reserve of $55 million) and $140 million
(net of a reserve of $41 million) as of September 30, 1997 and December 31,
1996, respectively, and currently increasing at the rate of approximately $2,000
per month. When the coverage guidelines were revised effective July 1996, as
described below, some of NMC's claims continued to meet the more stringent
coverage criteria established in the new guidelines and will probably be
approved for payment by Medicare. NMC has reviewed the claims it has submitted
for patients who started on IDPN therapy before July 1996 and continued on
therapy after July 1996, but do not meet the new, more stringent coverage
criteria, and believes that these claims were consistent with published Medicare
coverage guidelines. NMC recognizes, however, that the regulations and coverage
guidelines are ambiguous as to whether these patients therapy continues to be
covered by Medicare after the effective date of the new coverage criteria. NMC
has continued to provide therapy to these patients and to pursue its appeals of
these claims through the administrative process. If the government determines
that continued coverage for these patients is inappropriate, such claims
ultimately will not be paid. Amounts in receivable for these patients are
approximately $12 million. If NMC is unable to collect its IDPN receivable, or
if IDPN coverage is reduced or eliminated, depending on the amount of the
receivable that is not collected and/or the nature of the coverage change, NMC's
business, financial position and results of operations could be materially
adversely affected.

    In May 1995 the Medicare claims processors circulated a draft coverage
policy which, if implemented in the form proposed, would have limited or
precluded continued coverage of parenteral and enteral nutrition ("PEN")
therapies, including IDPN therapy. In April 1996, NMC received a copy of a
revised final version of the new coverage policy, which became effective for
services billed on and after July 1, 1996. While the new policy permits
continued coverage of IDPN and other PEN therapies, and while the potential
impact of the new policy is subject to further analysis, NMC believes that the
new policy has made it substantially more difficult to qualify patients for
future coverage by, among other things, requiring certain patients to undergo
onerous and/or invasive tests in order to qualify for coverage. NMC, together
with other interested parties, is seeking to effect certain changes in the new
policy and NMC has made changes to its patient qualification procedures in order
to comply with the policy. However, if NMC is unable to achieve changes in the
new policy, if physicians and patients fail to accept the new qualification
procedures and/or if patients fail to qualify under such procedures, the policy
could significantly reduce the number of patients eligible for Medicare coverage
of IDPN and other PEN therapies, which would have a material adverse effect on
NMC's financial position and its results of operations.

OTHER LEGAL PROCEEDINGS

    NMC has received multiple subpoenas from a federal grand jury in the
District of New Jersey investigating, among other things, NMC's efforts to
persuade the U.S. Food and Drug Administration to lift a January 1991 import
hold issued with respect to NMC's Dublin, Ireland facility, whether NMC sold
defective products, the manner in which NMC handled customer complaints and the
development of a new dialyzer product line. Grace has also received two
subpoenas relating to this investigation. In February 1996, the U.S. Attorney
for the District of New Jersey notified NMC that it is a target of the New
Jersey grand jury investigation, insofar as it relates to possible violations of
federal criminal law in connection with efforts to affect the January 1991
import hold referred to above; the material element of the import hold was
lifted in 1992. In June 1996, NMC received a letter from the U.S. Attorney for
the District of New Jersey indicating that the U.S. Attorney had declined to
prosecute NMC with respect to a submission related to NMC's effort to lift the
import ban. The letter added that NMC remains a subject of a federal grand
jury's investigation into other matters. NMC also received a subpoena in June
1996 requesting certain documents in connection NMC's imports of the FoCus
[Registered Trademark] dialyzer from January 1991 to November 1995. The outcome
of these investigations and their impact, if any, on NMC's business, financial
condition and results of operations cannot be predicted at this time. However,
the Company believes that neither the Company nor any of its employees committed
any violations of law. Accordingly, the Company does not believe that the
results of these investigations will have a material adverse effect on the
Company's financial position and results of operations.




                                       15

<PAGE>   16

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

    For purposes of the following discussion, Fresenius Medical Care Holdings,
Inc., ("FMCH" or the "Company") formerly known as W. R. Grace & Co. ("Grace New
York"), together with the wholly owned subsidiaries, National Medical Care, Inc.
and its subsidiaries ("NMC") and Fresenius USA, Inc. and its subsidiaries
("FUSA") was formed as a result of a series of transactions pursuant to the
Agreement and Plan of Reorganization dated as of February 4, 1996 by and between
Grace New York and Fresenius AG ("the Reorganization"). The following is a
discussion of the financial condition and results of operations of FMCH. The
discussion should be read in conjunction with the financial statements included
elsewhere in this document.

    This section contains certain forward-looking statements. These
forward-looking statements are made based on management's expectations and
beliefs concerning future events impacting FMCH, but no assurance can be given
that such events will occur or that the results will be as anticipated. Such
statements include, without limitation, discussions concerning the outlook of
FMCH, government reimbursement, future plans and management's expectations
regarding future performance.

OVERVIEW

    FMCH is primarily engaged in (a) providing kidney dialysis services and
clinical laboratory testing, (b) manufacturing and distributing products and
equipment for dialysis treatment, and (c) providing home infusion therapy, home
respiratory services, diagnostic services and other medical services. Throughout
FMCH's history, a significant portion of FMCH's growth has resulted from the
development of new dialysis centers and the acquisition of existing dialysis
centers, as well as from the acquisition and development of complementary
businesses in the health care field.

    FMCH derives a significant portion of its net revenues from Medicare,
Medicaid and other government health care programs (approximately 62% in 1996).
The reimbursement rates under these programs, including the Composite Rate, the
reimbursement rate for EPO (which accounted for approximately 22% of dialysis
service's domestic net revenues in 1996), and the reimbursement rate for other
dialysis and non-dialysis related services and products, as well as other
material aspects of these programs, have in the past and may in the future be
changed as a result of deficit reduction and health care reform measures.

    FMCH's business, financial position and results of operations also could be
materially adversely effected by an adverse outcome in the OIG investigations,
any whistleblower action, the pending challenge by FMCH of changes effected by
Medicare in approving reimbursement claims relating to the administration of
IDPN or by the recent adoption of a new coverage policy that will change IDPN
coverage prospectively. FMCH's business, financial position and results of
operations would also be materially adversely affected by an adverse outcome in
the pending litigation concerning the implementation of certain provisions of
OBRA 93 relating to the coordination of benefits between Medicare and employer
health plans in the case of certain dual eligible ESRD patients.

    FMCH also derives a significant portion of its net revenues from
reimbursement by non-government payors. Historically, reimbursement rates paid
by these payors generally have been higher than Medicare and other government
program rates in all areas except for certain services provided by NMC Homecare.
However, non-government payors are imposing cost containment measures that are
creating significant downward pressure on reimbursement levels that FMCH
receives for its services and products.

    Dialysis Services operated or managed dialysis centers in 14 foreign
countries at September 30, 1997. In certain countries, FMCH experiences lower
reimbursement rates per treatment for dialysis services than are generally
realized in the U.S. FMCH's international dialysis services operations currently
generate less operating profit per treatment than domestic dialysis operations
due to both the lower reimbursement rates in some countries and the start-up
nature of many of the centers in foreign countries.




                                       16




<PAGE>   17

RESULTS OF OPERATIONS

    The following table summarizes certain unaudited operating results of FMCH
by principal business unit for the periods indicated. Intercompany eliminations
primarily reflect sales of medical supplies by Renal Products to DSD. This
information has been reorganized and prior periods have been reclassified to
conform with the business unit report of FMC.

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                         SEPTEMBER 30,                   SEPTEMBER 30,
                                                                     --------------------           -----------------------
                                                                      1997           1996            1997             1996
                                                                      ----           ----           ------           ------
                                                                     (DOLLARS IN MILLIONS)           (DOLLARS IN MILLIONS)

<S>                                                                   <C>            <C>            <C>              <C>   
Net Revenues:
    Dialysis Services ......................................          $487           $415           $1,390           $1,230
    Dialysis Products ......................................           170             80              497              240
    Homecare/Diagnostics ...................................            69             91              229              293
    Intercompany Eliminations ..............................           (69)           (51)            (189)            (148)
                                                                      ----           ----           ------           ------
Total Net Revenues .........................................          $657           $535           $1,927           $1,615
                                                                      ====           ====           ======           ======
Operating Earnings:
    Dialysis Services ......................................          $ 75           $ 35           $  199           $  169
    Dialysis Products ......................................            18             12               60               33
    Homecare/Diagnostics ...................................           (12)           (14)              (8)               1
                                                                      ----           ----           ------           ------
Total Operating Earnings ...................................          $ 81           $ 33           $  251           $  203
                                                                      ====           ====           ======           ======
Other Expenses:
    General Corporate ......................................          $ 19           $ 13           $   57           $   56
    Research & Development .................................             0              1                2                2
    Interest Expense, Net ..................................            49              2              136               16
                                                                      ----           ----           ------           ------

Total Other Expenses .......................................          $ 68           $ 16           $  195           $   74
                                                                      ----           ----           ------           ------
Earnings Before Income Taxes ...............................            13             17               56              129
Provision for Income Taxes .................................             8             14               34               66
                                                                      ----           ----           ------           ------
Net Earnings ...............................................          $  5           $  3           $   22           $   63
                                                                      ====           ====           ======           ======
</TABLE>

PROFORMA RESULTS OF OPERATIONS

    The following table represents the unaudited pro forma statements of
operations of the Company for the three months ended and nine months ended
September 1996, assuming the Reorganization occurred on January 1, 1996, and the
actual statements of operations for the three months ended and nine months ended
September 1996.

<TABLE>
<CAPTION>
                                                                     ACTUAL      PROFORMA          ACTUAL          PROFORMA
                                                                     ------      --------          ------          --------
                                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                         SEPTEMBER 30,                   SEPTEMBER 30,
                                                                     --------------------           -----------------------
                                                                      1996           1996            1996             1996
                                                                      ----           ----           ------           ------
                                                                     (DOLLARS IN MILLIONS)           (DOLLARS IN MILLIONS)

<S>                                                                   <C>            <C>            <C>              <C>   
Net Revenues:
       Dialysis Services ...................................          $415           $415           $1,230           $1,230
       Dialysis Products ...................................            80            153              240              451
       Homecare/Diagnostics ................................            91             91              293              293
       Intercompany Eliminations ...........................           (51)           (51)            (148)            (148)
                                                                      ----           ----           ------           ------
   Total Net Revenues ......................................          $535           $608           $1,615           $1,826
                                                                      ====           ====           ======           ======
   Operating Earnings:                                                                                               
       Dialysis Services ...................................          $ 35           $ 35           $  169           $  169
       Dialysis Products ...................................            12              3               33               24
       Homecare/Diagnostics ................................           (14)           (14)               1                1
                                                                      ----           ----           ------           ------
   Total Operating Earnings ................................          $ 33           $ 24           $  203           $  194
                                                                      ====           ====           ======           ======
   Other Expenses:                                                                                                   
       General Corporate ...................................          $ 13           $ 22           $   56               93
       Research & Development ..............................             1              1                2                4
       Interest Expense, Net ...............................             2             35               16              111
                                                                      ----           ----           ------           ------
   Total Other Expenses ....................................          $ 16           $ 58           $   74           $  208
                                                                      ----           ----           ------           ------
   Earnings Before Income Taxes ............................            17            (34)             129              (14)
   Provision for Income Taxes ..............................            14             (7)              66               13
                                                                      ----           ----           ------           ------
   Net Earnings  (Loss)  ...................................          $  3           $(27)          $   63           $  (27)
                                                                      ====           ====           ======           ======
</TABLE>




                                       17


<PAGE>   18

EFFECT OF REORGANIZATION ON RESULTS OF OPERATIONS

In accordance with U.S. GAAP relating to purchase accounting rules, the Company
adjusted to fair value its assets and liabilities which, on a pro forma basis,
would have resulted in increased amortization of approximately $15 million and
$45 million for the third quarter 1996 and first nine months of 1996,
respectively, as shown in the pro forma statement of operations as part of
General Corporate expenses. In addition, as part of the Reorganization, the
Company incurred additional debt, which would have resulted in a net increase in
interest expense, including amortization of debt issuance costs and other fees,
in the amounts of $33 million and $95 million for the third quarter 1996 and the
first nine months of 1996, respectively, on a pro forma basis. In connection
with the Reorganization, the addition of FUSA for the first nine months of 1996
would have resulted in increased revenues for Dialysis Products of $73 million
and $211 million and decreased operating earnings for Dialysis Products of $9
million and $9 million for the third quarter 1996 and first nine months of 1996,
respectively, on a pro forma basis. The Reorganization would have resulted in a
decrease in the Company's provision for income taxes of $21 million and $53
million for the third quarter 1996 and the first nine months of 1996,
respectively, on a pro forma basis. As a result of the above adjustments, on a
pro forma basis, the Company would have reported a net loss of $27 million for
both the third quarter 1996 and first nine months of 1996. Actual results show
profit of $3 million for the third quarter 1996 and $63 million the first nine
months of 1996.




                                       18
<PAGE>   19


THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED 
SEPTEMBER 30, 1996

    Net revenues for the third quarter of 1997 increased by 23% ($122 million)
over the comparable period of 1996, with Dialysis Services and Dialysis Products
accounting for most of the increase. Net earnings for the third quarter of 1997
increased 67% ($2 million) over the comparable period of 1996 as a result of
unfavorable one time adjustments made during the third quarter of 1996,
partially offset by interest expenses and depreciation and amortization expense
in 1997

    DIALYSIS SERVICES.

    Dialysis Services net revenues for the third quarter of 1997 increased by
17% ($72 million) over the comparable period of 1996, primarily as a result of a
17% increase in the number of treatments provided worldwide, partially offset by
a decline in the domestic ancillary revenue rate ($13 million). Laboratory
testing revenues for the third quarter of 1997 increased by $8 million over the
comparable period of 1996. This was primarily due to the third quarter results
of Spectra Laboratories ($12 million), acquired by FMCH in June 1997, partially
offset by decreases in LifeChem testing volume ($4 million).

    Dialysis Services operating earnings for the third quarter of 1997 increased
by 114% ($40 million) over the comparable period of 1996. This was primarily due
to three unfavorable one time adjustments made during the third quarter of 1996;
(writedowns in Portugal related to fraudulent activities ($10 million),
increased reserves for certain Portuguese uncollectible accounts and tax matters
($10 million), and write-offs of Brazil franchise fees ($9 million)). The effect
of these adjustments and the increase in treatment volume was partially offset
by decreases in volume of LifeChem laboratory testing. Spectra Laboratories 
operating earnings for the third quarter was $2 million.

    DIALYSIS PRODUCTS.

    Dialysis Products net revenues for the third quarter of 1997 increased by
113% ($90 million) over the comparable period of 1996, primarily due to $76
million of third quarter revenues of FUSA, which was contributed to FMCH by
Fresenius Medical Care AG effective October 1, 1996. During the third quarter
1997, approximately $14 million of product sales were made between FUSA and the
former Renal Products Division of NMC which have been eliminated for financial
reporting. There were no such eliminations recorded in 1996 as the two companies
were separate reporting entities.

    Dialysis Products operating earnings for the third quarter of 1997 increased
by 50% ($6 million) over the comparable period of 1996 primarily due to the
third quarter operating earnings of FUSA ($4 million). NMC's Renal Products
Division's operating earnings increased by approximately $2 million during the
quarter, primarily due to a reduction in operating expenses and distribution
costs ($1 million) as well as one-time charges recorded in the third quarter of
1996 for legal expenses ($1 million).

    HOMECARE/DIAGNOSTICS.

    Homecare/Diagnostics net revenues for the third quarter of 1997 decreased by
24% ($22 million) as compared to the third quarter of 1996. This is primarily
due to decreased volume related to changes in Medicare qualification procedures
for IDPN patients ($9 million), decreases in infusion therapy revenues mainly
due to continued price compression from managed care ($6 million), the effect of
the sale of Home Health business ($4 million), and decreases in the number of
diagnostics services primary care tests ($5 million). These decreases were
partially offset by increases in respiratory therapy revenues ($2 million).

    Homecare/Diagnostics operating earnings for the third quarter of 1997
increased by $2 million as compared to the third quarter of 1996, primarily due
to increased bad debt provisions in the third quarter of 1996; approximately
$12 million, partially offset by continued pricing pressure resulting from
managed care, decline in the number of Medicare patients who receive IDPN
treatments, and decreases in the volume of diagnostics services tests

    OTHER EXPENSES.

    FMCH's other expenses for the third quarter of 1997 increased by 325% ($52
million) over the comparable period of 1996. General corporate expenses
increased by $6 million due primarily to a $16 million increase to depreciation
and amortization expense associated with the revaluation of intangible assets at
the time of the Reorganization. This was partially offset by favorable savings
in foreign exchange ($8 million) and other cost reductions ($2 million).
Research and development expenses for the third quarter of 1997 




                                       19

<PAGE>   20

decreased by $1 million over the comparable period of 1996. Interest expense for
the third quarter of 1997 increased by $47 million over the comparable period of
1996 mainly due to the large amount of bank debt incurred to finance the
Reorganization and the interest expense associated with FUSA in the third
quarter of 1997 ($3 million).

    INCOME TAX RATE.

    The effective tax rate for the third quarter 1997 (58.6%) is significantly
lower than the rate for the comparable period of 1996 (85.0%) due primarily to
non-deductible losses and asset writedowns in certain foreign countries in the
third quarter of 1996, offset in part by non-deductible goodwill incurred as a
result of the reorganization.









                                       20
<PAGE>   21


NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED 
SEPTEMBER 30, 1996

    Net revenues for the first nine months of 1997 increased by 19% ($312
million) over the comparable period of 1996, with Dialysis Services and Dialysis
Products accounting for more than all of the entire increase. Net earnings for
the first nine months of 1997 decreased 65% ($41 million) over the comparable
period of 1996 as a result of increased interest expense partially offset by
increased operating earnings of dialysis products and dialysis services.

    DIALYSIS SERVICES.

    Dialysis Services net revenues for the first nine months of 1997 increased
by 13% ($160 million) over the comparable period of 1996, which included a
favorable OBRA 93 adjustment ($10 million), primarily due to the result of a 15%
increase in the number of treatments provided worldwide. This increase was
partially offset by a decline in the ancillary revenue rate ($13 million).
Laboratory testing revenues for the first nine months of 1997 increased by $7
million over the comparable period of 1996. This was primarily due to year to
date September revenues of Spectra Laboratories ($17 million), acquired by FINCH
in June 1997, partially offset by decreases in Lifetime testing volume ($10
million).

    Dialysis Services operating earnings for the first nine months of 1997
increased by 18% ($30 million) over the comparable period of 1996. This was
primarily due to three unfavorable one time adjustments made during the third
quarter of 1996; (write-down in Portugal related to fraudulent activities ($10
million), increased reserves for certain Portuguese uncollectible accounts and
tax matters ($10 million), and write-offs of Brazil franchise fees ($9
million)). The effect of these adjustments and the increase in treatment volume
was partially offset by the aforementioned OBRA 93 adjustment in 1996 and
decreases in volume of LifeChem laboratory testing. Spectra Laboratories year to
date September operating earnings was $2 million.

    DIALYSIS PRODUCTS.

     Dialysis Products net revenues for the first nine months of 1997
increased by 107% ($257 million) over the comparable period of 1996, primarily
due to $228 million of revenues for FUSS, which was contributed to FINCH by
Fresenius Medical Care AG effective October 1, 1996. During 1997, approximately
$32 million of product sales were made between FUSA and the former Renal
Products Division of NMC which have been eliminated for financial reporting.
There were no such eliminations recorded in 1996 as the two companies were
separate reporting entities.

Dialysis Products operating earnings for the first nine months of 1997 increased
by 82% ($27 million) over the comparable period of 1996 primarily due to the
operating earnings of FUSA ($20 million). NMC's Renal Products Division's
operating earnings increased by approximately $7 million during the first nine
months primarily due to a reduction in operating expenses and distribution costs
($4 million) as well as one-time charges recorded during 1996 for legal expenses
($3 million).

    HOMECARE/DIAGNOSTICS.

    Homecare/Diagnostics net revenues for the first nine months of 1997
decreased by 22% ($64 million) as compared to the first nine months of 1996.
This is primarily due to decreased volume related to changes in Medicare
qualification procedures for IDPN patients ($34 million), decreases in infusion
therapy revenues mainly due to continued price compression from managed care
($18 million), the effect of the sale of Home Health business ($6 million), and
decreases in the number of diagnostic services primary care tests 
($10 million). These decreases were partially offset by increases in respiratory
therapy revenues ($4 million).

    Homecare/Diagnostics operating earnings for the first nine months of 1997
decreased by $9 million as compared to the first nine months of 1996, primarily
due to continued pricing pressure resulting from managed care, the decline in
the number of Medicare patients who receive IDPN treatments, and decreases in
the volume of diagnostic services tests, partially offset by increased bad debt
provisions in 1996, approximately $16 million. 

    OTHER EXPENSES.

    FMCH's other expenses for the first nine months of 1997 increased by 164%
($121 million) over the comparable period of 1996. General corporate expense
increased by 2% ($1 million) primarily due to increased depreciation and
amortization expenses associated with the revaluation of intangible assets at
the time of the Reorganization ($46 million), offset by reduced legal expenses
($9 million), favorable savings in foreign exchange ($18 million), and other
cost reductions ($18 million). Research and development expenses for 



                                       21

<PAGE>   22

the first nine months of 1997 were virtually the same as they were for the
comparable period of 1996. Interest expense for the first nine months of 1997
increased by ($120 million) over the comparable period of 1996 mainly due to the
large amount of bank debt incurred to finance the reorganization and the
interest expense associated with FUSA in the first nine months of 1997 ($7
million).

    INCOME TAX RATE.

    The effective tax rate for the first nine months of 1997 (60.0%) is
significantly higher than the rate for the first nine months of 1996 (51.3%) due
primarily to the large amount of non-deductible goodwill incurred as a result of
the reorganization, offset in part by non deductible losses and asset-
writedowns in certain foreign countries in 1996.

LIQUIDITY AND CAPITAL RESOURCES

     FMCH made acquisitions totaling $464 million (including $57 million
issuance of investment securities) and $89 million, during the first nine months
of 1997 and 1996, respectively. FMCH made capital expenditures for internal
expansion, improvements, new furnishings and equipment of $117 million and $93
million during the first nine months of 1997 and 1996, respectively. The Company
intends to capitalize on the continuing shift in the U.S. from physician-owned
and hospital-based dialysis clinics to multi-center providers by acquiring
existing dialysis centers and the establishment of new or expanded centers and,
accordingly, will require significant capital resources to pursue its growth
strategy in the dialysis marketplace. FMCH may also make other strategic
acquisitions in the future.

    FMCH also requires capital resources for working capital purposes. FMCH used
cash to fund increases in accounts receivable of $64 million and $83 million
during the first nine months of 1997 and 1996, respectively. The increases in
accounts receivable reflect growth in NMC's business operations and, beginning
in 1994, the sharp reduction in IDPN claims approved for payment.

     FMCH during the first nine months of 1997 funded its acquisitions and
capital expenditures primarily through increased borrowings under its credit
facility ($187 million) and increased borrowings from affiliates ($73 million).
In addition, FMCH received capital contributions of $178 million from Fresenius
Medical Care, AG, which were used primarily in connection with repayment of
external debt and acquisitions. In addition, acquisitions were also funded
through issuance of investment securities by a Luxemborg subsidiary ("FMC
Finance), of Fresenius Medical Care AG ("FMC"). An intercompany payable 
($57 million) has been established between FMC Finance and FMCH. FMCH received 
net cash advances from Grace of $280 million during the first nine months of
1996.

    Effective July 1, 1995, FMCH ceased to recognize the incremental revenue
provided under HCFA's initial instruction under OBRA 93, although it continued
to bill private third-party payors for these amounts through December 31, 1995.
If FMCH's position with respect to the retroactive application of OBRA 93 is not
sustained, it may be required to refund amounts previously collected from
private third-party payors (approximately $190 million through June 30, 1995)
and rebill Medicare for these services, which would result in an estimated net
cash and operating earnings loss of approximately $120 million as of September
30, 1997. FMCH began billing Medicare as the primary payor for the dual eligible
ESRD patients affected by OBRA 93 effective January 1, 1996. If HCFA's revised
instruction under OBRA 93 is permanently enjoined on a prospective basis, or if
such revised instruction is sustained but given an effective date of later than
June 30, 1995, FMCH may be able to rebill such services to third-party payors
and, as a result, FMCH's future results of operations and financial position
would be favorably affected by the incremental revenue that FMCH would
recognize.

    NMC entered into a $2.5 billion Credit Agreement on September 27, 1996 with
a group of financial institutions. The Credit Agreement was used to fund a cash
dividend to Grace Chemicals of approximately $2.1 billion, finance existing
letters of credit and for general corporate purposes. In November 1996,
Fresenius Medical Care implemented two financings which raised a total of $731
million, the proceeds of which were invested in FMCH through a $249 million
equity infusion and a total of $482 million of loans to FMCH. The funds were
used to repay certain borrowings under the Credit Agreement. Also in November
1996, Fresenius Medical Care became a guarantor under the NMC Credit Agreement.
The Credit Agreement will be utilized to fund future capital requirements and
acquisitions and, to the extent necessary, General Corporate requirements,
including future letters of credit, and any claims on the Company which may
result from adverse settlements with the government on the OIG or other
investigations.

    On August 28, 1997, FMCH established a new $204,000 receivables financing
facility with NationsBank to replace its former financing facility with
CitiCorp. The agreement has an effective interest rate of 5.66% and matures on
August 27, 1998. Proceeds of $200 million have been drawn down under the
NationsBank agreement, an increase of $52 million from December 31, 1996. 


                                       22



<PAGE>   23

    The liquidity of FMCH is contingent upon a number of factors, principally
FMCH's future operating results and the contingencies referred to below. FMCH
believes that its current levels of liquidity, including availability under the
NMC Credit Agreement, are sufficient to meet its foreseeable needs. If existing
sources of funds are not sufficient to provide liquidity, FMCH may need to sell
assets or obtain debt or equity financing from additional external sources.
There can be no assurance that FMCH will be able to do so on satisfactory terms,
if at all.

IMPACT OF INFLATION

    A substantial portion of FMCH's net revenue is subject to reimbursement
rates which are regulated by the federal government and do not automatically
adjust for inflation. Non-governmental payors also are exerting 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 FMCH's business and results of
operations, possibly materially.

CONTINGENCIES

    FMCH is the subject of investigations by several federal agencies and
authorities, is a plaintiff in litigation against the federal government with
respect to the implementation of OBRA 93 and coverage for IDPN therapy, and is
seeking to change a proposed revision to IDPN coverage policies. An adverse
outcome in any of these matters, beyond the reserves which have established,
could have a material adverse effect on FMCH's business, financial condition and
results of operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128"),
which requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have publicly
traded common stock or potential common stock (options warrants, convertible
securities or contingent stock arrangements). SFAS 128 also requires a
presentation of earnings per share by an entity that has made a filing or is in
the process of filing with a regulatory agency in preparation for the sale of
those securities in a public market. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings. SFAS 128 is
effective for both interim and annual periods ending after December 15, 1997.
The Company does not believe that the effect on the Company's earnings per share
resulting from the adoption of SFAS 128 will be material.


                                       23
<PAGE>   24


                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

INTRADIALYTIC PARENTERAL NUTRITION

    NMC administers IDPN therapy to chronic dialysis patients who suffer from
severe gastrointestinal malfunctions. Since late 1993, Medicare claims
processors have sharply reduced the number of IDPN claims approved for payment
as compared to prior periods. NMC believes that the reduction in IDPN claims
currently being paid by Medicare represents an unauthorized policy coverage
change. Accordingly, NMC and other IDPN providers are pursuing various
administrative and legal remedies, including administrative appeals, to address
this reduction. In November 1995, NMC filed a complaint in the U.S. District
Court for the Middle District of Pennsylvania seeking a declaratory judgment and
injunctive relief to prevent the implementation of this policy coverage change.
Subsequently, the Court affirmed a prior report of the magistrate judge
dismissing NMC's complaint without considering any substantive claims, on the
grounds that the underlying cause of action should be submitted fully to the
administrative review processes available under the Medicare Act. The Company
decided not to appeal the Court's decision, but rather, to pursue the claims
through the available administrative processes.

    NMC management believes that its IDPN claims were consistent with published
Medicare coverage guidelines and ultimately will be approved for payment. Such
claims represent substantial accounts receivable of NMC, amounting to
approximately $153 million (net of a reserve of $55 million) and $140 million
(net of a reserve of $41 million) as of September 30, 1997 and December 31,
1996, respectively and currently increasing at the rate of approximately $2,000
per month. When the coverage guidelines were revised effective July 1996, as
described below, some of NMC's claims continued to meet the more stringent
coverage criteria established in the new guidelines and will probably be
approved for payment by Medicare. NMC has reviewed the claims it has submitted
for patients who started on IDPN therapy before July 1996 and continued on
therapy after July 1996, but do not meet the new, more stringent coverage
criteria, and believes that these claims were consistent with published Medicare
coverage guidelines. NMC recognizes, however, that the regulations and coverage
guidelines are ambiguous as to whether these patients' therapy continues to be
covered by Medicare after the effective date of the new coverage criteria. NMC
has continued to provide therapy to these patients and to pursue its appeals of
these claims through the administrative process. If the government determines
that continued coverage for these patients is inappropriate, such claims
ultimately will not be paid. Amounts in receivable for these patients are
approximately $12,000. If NMC is unable to collect its IDPN receivable, or if
IDPN coverage is reduced or eliminated, depending on the amount of the
receivable that is not collected and/or the nature of the coverage change, NMC's
business, financial position and results of operations could be materially
adversely affected.

    In May 1995 the Medicare claims processors circulated a draft coverage
policy which, if implemented in the form proposed, would have limited or
precluded continued coverage of parenteral and enteral nutrition ("PEN")
therapies, including IDPN therapy. In April 1996, NMC received a copy of a
revised final version of the new coverage policy, which became effective for
services billed on and after July 1, 1996. While the new policy permits
continued coverage of IDPN and other PEN therapies, and while the potential
impact of the new policy is subject to further analysis, NMC believes that the
new policy has made it substantially more difficult to qualify patients for
future coverage by, among other things, requiring certain patients to undergo
onerous and/or invasive tests in order to qualify for coverage. NMC, together
with other interested parties, is seeking to effect certain changes in the new
policy and NMC has made changes to its patient qualification procedures in order
to comply with the policy. However, if NMC is unable to achieve changes in the
new policy, if physicians and patients fail to accept the new qualification
procedures and/or if patients fail to qualify under such procedures, the policy
could significantly reduce the number of patients eligible for Medicare coverage
of IDPN and other PEN therapies, which would have a material adverse effect on
NMC's financial position and its results of operations.

OIG INVESTIGATIVE SUBPOENAS

    In October 1995, NMC received five investigative subpoenas from the Office
of Inspector General of the U.S. Department of Health and Human Services (the
"OIG"). The subpoenas were issued in connection with an investigation being
conducted by the OIG, the U.S. Attorney for the District of Massachusetts and
others concerning possible violations of federal laws, including the
Anti-kickback Statute and the False Claims Act. The subpoenas call for extensive
document production relating to various aspects of NMC's business. A sixth
subpoena, clarifying the scope of one originally served, was received in May
1996.


                                       24


<PAGE>   25

    The five subpoenas cover the following areas: (a) NMC's corporate
management, personnel and employees, organizational structure, financial
information and internal communications; (b) NMC's dialysis services business,
principally medical director contracts and compensation; (c) NMC's treatment of
credit balances resulting from overpayments received under the Medicare end
stage renal disease (ESRD) program, NMC's billing for home dialysis services and
payment of supplemental medical insurance premiums on behalf of indigent
patients; (d) NMC's LifeChem laboratory business ("LifeChem"), including
documents relating to testing procedures, marketing, customers, competition and
certain overpayments totaling approximately $4.9 million that were received by
LifeChem from the Medicare program with respect to laboratory services rendered
between 1989 and 1993; and (e) NMC's Homecare Division and, in particular,
information concerning the intradialytic parenteral nutrition ("IDPN") business
described below, including billing practices related to various services,
equipment and supplies and payments made by third parties as compensation for
administering IDPN therapy.

    On July 15, 1997, National Medical Care, Inc. received an investigatory
subpoena duces tecum requesting production of a number of patient records, in
connection with the government's review of billing practices related to various
services, equipment and supplies and payments made by third parties as
compensation for administering IDPN therapy, described above.

    Each of the patients whose records were subpoenaed is, or was, a Medicare
beneficiary. The subpoena calls for production of the records by August 15,
1997. The Company has discussed an extended schedule for production with the
government. The result of the government's review of these records, its
duration, and its effect, if any, on NMC cannot be predicted at this time.

    In the event that a U.S. government agency believes that any wrongdoing has
occurred, civil and/or criminal proceedings could be instituted, and if any such
proceedings were to be instituted and the outcome were unfavorable, NMC could be
subject to substantial fines, penalties and damages or could become excluded
from government reimbursement programs. Any such result could have a material
adverse effect on NMC's financial position or the results of operations of the
Company.

    FMC and NMC have provided the United States government with a joint and
several guarantee of payment of the obligations, if any, arising out of the
investigation by the OIG. In support of this guarantee, NMC has delivered to the
government an irrevocable standby letter of credit in the amount of $150
million.


                                       25
<PAGE>   26


ITEM 5. OTHER INFORMATION

       On June 12, 1997, the Company amended its Certificate of Incorporation
       to change Company's name to "Fresenius Medical Care Holdings, Inc."

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits

       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       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 10.1      Amendment No. 3 dated June 13, 1997 to the Credit
                         Agreement dated as of September 27, 1996 , among
                         National Medical Care, Inc. and Certain Subsidiaries
                         and Affiliates , as Borrowers, Certain Subsidiaries and
                         Affiliates, as Guarantors, the Lenders named therein,
                         NationsBank, N.A., as paying agent and the Bank of Nova
                         Scotia, the Chase Manhattan Bank, N.A., Dresdner Bank
                         AG and NationsBank, N.A. as Managing Agents, as
                         previously amended.

       Exhibit 10.2      Amendment No. 4, dated August 26, 1997 to the Credit
                         Agreement dated as of September 27, 1996, among
                         National Medical Care, Inc. and Certain Subsidiaries
                         and Affiliates, as Borrowers, Certain Subsidiaries and
                         Affiliates, as Guarantors, the Lenders named therein,
                         NationsBank, N.A., as paying agent and the Bank of Nova
                         Scotia, the Chase Manhattan Bank, N.A. , Dresdner Bank
                         AG and NationsBank, N.A. as Managing Agents, as
                         previously amended.

       Exhibit 10.3      Receivables Purchase Agreement dated August 28, 1997
                         between National Medical Care, Inc. and NMC Funding
                         Corporation.

       Exhibit 10.4      Transfer and Administration Agreement dated August 28,
                         1997 among NMC Funding Corporation, National Medical
                         Care, Inc., Enterprise Funding Corporation, the Bank
                         Investors listed therein and NationsBank, N.A., as
                         agent.



                                       26


<PAGE>   27

       Exhibit 11        Statement re. Computation of Per Share Earnings

       Exhibit 27        Financial Data Schedule

(b)    Reports on Form 8-K

       No reports on Form 8-K were filed during the quarter for which this
report is filed.





                                       27
<PAGE>   28


                                   SIGNATURES

   Pursuant to the requirement 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: November 14, 1997            /s/ Ben J. Lipps
      -----------------            ------------------------------------------
                                   NAME:  Ben J. Lipps
                                   TITLE: President (Chief Executive Officer)




DATE: November 14, 1997            /s/ Jerry A. Schneider
      -----------------            ------------------------------------------
                                   NAME:  Jerry A. Schneider
                                   TITLE: Chief Financial Officer







                                       28