UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC20549

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FORM10-K

(Mark One)

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|   | ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |

**For the fiscal year ended December31,2005**

or

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|   | TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |

**For the transition periodfrom**  **to** **.**

CommissionFile No.333-119231

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NALCOFINANCE HOLDINGS LLC

(Exact nameof registrant as specified in itscharter)

Delaware(State or otherjurisdiction ofIncorporation orOrganization)61-1464558(I.R.S.EmployerIdentificationNumber)

1601 West DiehlRoadNaperville, IL 60563-1198(630)305-1000

(Address, Including Zip Code, andTelephone Number, Including Area Code, of Registrant’s PrincipalExecutive Offices)

Securities registered pursuant toSection 12(b) of the Act:None

Securities registeredpursuant to Section 12(g) of theAct:None

Indicate bycheck mark if the registrant is a well-known seasoned issuer, asdefined in Rule 405 of the Securities Act. Yes  No

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes  No 

Indicate by checkmark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes No 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§ 229.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference inPart III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, or a non-acceleratedfiler. See definition of ‘‘accelerated filer and largeaccelerated filer’’ in Rule 12b-2 of the ExchangeAct.

Large accelerated filer   Accelerated filer   Non-acceleratedfiler   

Indicate by check mark whether theregistrant is a shell company, as defined in Rule 12b-2 of the ExchangeAct. Yes  No 

None of theCompany’s limited liability company units is held bynon-affiliates. As of January  31,  2006 there were 100units outstanding.

DOCUMENTS INCORPORATED BYREFERENCE**None**

The registrant meets the condition setforth in General Instruction I(1)(a) and (b) of Form 10-K and istherefore filing this Form with the reduced disclosureformat.

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FORM 10-KNALCOFINANCE HOLDINGS LLCTABLE OF CONTENTS

PartI

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| Item1.  |  | Business                                             |  |   | 2  |   |
| Item1A. |  | Risk Factors                                         |  |   | 18 |   |
| Item1B. |  | Unresolved StaffComments                             |  |   | 24 |   |
| Item2.  |  | Properties                                           |  |   | 24 |   |
| Item3.  |  | Legal Proceedings                                    |  |   | 24 |   |
| Item4.  |  | Submission of Matters to a Vote of Security Holders* |  |   | 24 |   |
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PartII

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| Item5.   |  | Market for Registrant’s CommonEquity, Related StockholderMatters and Issuer Purchases of EquitySecurities |  |   | 25 |   |
| Item 6.  |  | SelectedFinancial Data                                                                                          |  |   | 25 |   |
| Item7.   |  | Management’s Discussion and Analysis of FinancialCondition and Results of Operations                      |  |   | 30 |   |
| Item7A.  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                       |  |   | 54 |   |
| Item 8.  |  | Financial Statementsand Supplementary Data                                                                      |  |   | 55 |   |
| Item9.   |  | Changes in and Disagreements with Accountants on Accountingand Financial Disclosure                             |  |   | 99 |   |
| Item9A.  |  | Controls andProcedures                                                                                          |  |   | 99 |   |
| Item 9B. |  | OtherInformation                                                                                                |  |   | 99 |   |
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PartIII

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| Item10.  |  | Directors and Executive Officers ofthe Registrant *            |  |   | 100 |   |
| Item11.  |  | Executive Compensation*                                        |  |   | 100 |   |
| Item 12. |  | Security Ownership ofCertain Beneficial Owners and Management* |  |   | 100 |   |
| Item13.  |  | Certain Relationships and RelatedTransactions *                |  |   | 100 |   |
| Item14.  |  | Principal Accounting Fees andServices                          |  |   | 100 |   |
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PartIV

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| Item15.    |  | Exhibits, Financial StatementSchedules |     |   | 101 |   |
| Signatures |  |                                   | 115 |   |
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| * | Itemis omitted pursuant to the reduced disclosure format, as set forth onthe cover page of this filing, since all equity securities of theregistrant are owned directly by Nalco HoldingCompany. |

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PARTI

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| ITEM 1.  | BUSINESS |

Overview

OnAugust  31,  2003, Nalco Holdings LLC, our subsidiary and acompany formed by The Blackstone Group, Apollo Management, L.P. and GSCapital Partners (the ‘‘Sponsors’’),entered into a stock purchase agreement pursuant to which it agreed topurchase all of the outstanding shares of capital stock of Ondeo NalcoCompany (which is now known as Nalco Company) and the NalcoInternational SAS Subsidiaries, which had been operated as a singlebusiness unit, from subsidiaries of Suez S.A. (Suez or Seller). Theaggregate purchase price was $4,102.9  million in cash, aftergiving effect to direct costs of the Acquisition, closing date workingcapital and indebtedness purchase price adjustments, a post-closingworking capital and indebtedness purchase price adjustment, and certainother post-closing adjustments. The Transactions closed onNovember  4,  2003. In this report, we refer to thisacquisition as the ‘‘Acquisition,’’ and theterm ‘‘Transactions’’ means, collectively,the Acquisition and the related financings to fund theAcquisition.

All references in this report to‘‘Nalco,’’ the‘‘Company,’’‘‘we,’’‘‘our,’’ and‘‘us’’ mean, unless the context indicatesotherwise, (1) Nalco Holding Company and its subsidiaries andaffiliates on a consolidated basis, (2) the Predecessor, and (3) theSuccessor. In addition, when the context so requires, we use the term‘‘Predecessor’’ to refer to the historicaloperations of the Predecessor prior to the Acquisition and‘‘Successor’’ to refer to our historicaloperations following the Acquisition.

3D TRASAR®,ACTRENE®, ADOMITE®, AQUAMAXTM, BIO-MANAGE®,BRIGHT WATER®, ControlBromTM, CORE SHELL®,COKE-LESS®, EN/ACT®, ENERCEPT®,ENERSPERSE®, FREE FLOW®, Nalco ACT®,NALMET®, NEOSTARSM, NexGuard®,OdorTech®, PORTA-FEED®, PROSPECTM TreatServiceTM, PT TRASARTM, RO TRASARTM, SCORPION®II, SMART Solutions®, STA•BR•EX®,SULFA-CHECK®, SurFloSM Certified,THERMOGAINSM, TRASAR®, Tri-ACT®,ULTIMER®, UltraTreat®, ULTRION®,VALUELINE®, VANTAGE®, WaterServTM and certain otherproducts and services named in this document are our registeredtrademarks and service marks. Superfine i-Tone is a trademark of MohawkFine Papers.

We are the leading global provider ofintegrated water treatment and process improvement services, chemicalsand equipment programs for industrial and institutional applications.We are organized into three primary segments that correspond to the endmarkets we serve: Industrial and Institutional Services, EnergyServices and Paper Services. Our products and services are typicallyused in water treatment applications to prevent corrosion,contamination and the buildup of harmful deposits, or in productionprocesses to enhance process efficiency and improve ourcustomers’ end products.

Through our sales,research and marketing team of more than 7,000 technically trainedprofessionals, we serve more than 70,000 customer locations. We focuson providing our customers with technologically advanced engineeredsolutions and services. These technologically advanced engineeredsolutions and services enable our customers to improve their businessby increasing production yields, lowering manufacturing costs,extending asset lives and maintaining environmental standards. The costof our technologically advanced engineered solutions and servicesrepresents a small share of our customers’ overall productionexpense.

We derive our strength and stability from thequality of the products and services we provide and the diversity ofour revenues. We serve a broad range of end markets, includingaerospace, paper, chemical, pharmaceutical, petroleum, steel, power,food and beverage, medium and light manufacturing, metalworking andinstitutions such as hospitals, universities and hotels. We believe weoffer the broadest product portfolio in our industry, including morethan 15,000 products and 8,000 unique formulations. We have alsoestablished a global presence, with nearly 10,900 employees operatingin more than 130 countries, supported by a comprehensive network ofmanufacturing facilities, sales offices and research centers. Thisglobal presence provides a competitive advantage by enabling us tooffer a consistently high level of service to our local, regional andmultinational customers.

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Our CompetitiveStrengths

Our company has benefited from the followingcompetitive strengths:

Leading MarketPositions. We are the #1 provider of water treatmentservices to industrial and institutional end markets. We are also aleading provider of integrated water treatment and process improvementservices, maintaining the #1 position in the petroleum andpetrochemical markets and a close #3 position in the pulp and papermarket. We believe that our leading positions across our primarymarkets provide a competitive advantage in retaining existing businessand competing for new business. Although our market position in pulpand paper was lowered by the 2004 acquisition of Raisio by Ciba, webelieve the proximity of sales between the three market leaders allowsus all to operate as market leaders.

Diverse Customersand Industries Served. We provide products and services tomore than 70,000 customer locations across a broad range of industriesand institutions, including about 65% of Industry Weekmagazine’s top 500 U.S. manufacturers and all of the Euro Stoxx50 companies. In 2005, no single customer accounted for more than3% of our net sales. Our business is also diversifiedgeographically. In 2005, 48% of total sales were in NorthAmerica, 30% in Europe, Africa and the Middle East, 8% inLatin America and 14% in the Pacific region. We believe thisdiversification minimizes the potential impact of volatility from anyone customer, industry or geographic area.

GlobalReach.    We have a direct sales and marketing presence in 130countries across six continents. This enables us to provide aconsistently high level of service to local, regional and multinationalcustomers. We believe our global presence offers us a competitiveadvantage in meeting the global needs of our multinational customers,which are increasingly seeking single-source suppliers and positions usto extend our reach to higher growth markets. Our geographicaldiversity also mitigates the potential impact of volatility in anyindividual country or region. In 2005, we derived approximately$1,818  million, or 55% of our net sales, from ournon-U.S. subsidiaries (excluding sales to our U.S.operations).

World Class SalesTeam. Through the expertise of our more than 6,000 salesengineers and service technicians, we provide our customers withrelevant industry knowledge and experience in order to solvetechnically challenging and dynamic problems. Our team of experts hassignificant experience with more than 40% of our approximately2,000-person North American sales team having more than ten years ofservice with our Company. We believe this contributes significantly tothe number and strength of relationships with our customers. We alsoinvest heavily in recruiting and continuously training our salesprofessionals. For example, new hires spend more than half of theirfirst year on training. Sales and marketing expense was $798.2million, $793.4  million, and $789.1  million for the years2005, 2004, and 2003, respectively. In 2003, the total expense wascomprised of $660.4  million for the period from January1,  2003 through November  3,  2003 and $128.7million for the period from November  4,  2003 throughDecember  31,  2003. Of those amounts, approximately90% represented the average cost of our sales and service forceduring these time periods.

Integrated Technology,Sales and Service. We combine on-site service, innovativetechnology and engineering excellence to create value for ourcustomers. Our technical sales professionals identify problems andopportunities at the customer’s plant and our research teamsthen work to develop effective solutions to these needs, often workingjointly with our customers. Many of our customers specify ourformulations into their processes and products. This approach has ledto over 8,000 unique formulations, the development of more than 2,000active patents worldwide and a high degree of customerloyalty.

Stable and Significant Cash FlowGeneration. We have produced consistent cash flows andmaintained high margins over a sustained period of time. We attributethis to (1) the diversity of our revenues, (2) the service nature ofour business, (3) the high value we offer our customers, (4) thestrength of our customer relationships, (5) our limited dependency onany single raw material and (6) our low capital expenditures relativeto our net sales.

Premier ManagementTeam. Our senior management team consists of professionalswith significant experience within our Company and the water treatmentand industrial process improvement industry. 

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In connection with the Acquisition, Dr.William H. Joyce, former Chairman and Chief Executive Officer ofHercules Incorporated, became our Chairman and Chief Executive Officer,and Bradley J. Bell, former Chief Financial Officer of Rohm and HaasCompany, became our Chief Financial Officer. Dr.  Joyce andMr.  Bell bring additional leadership and industry experience toour management team. Our eight senior business leaders and executiveofficers have an average of 14 years of service with our Company and 30years of industry experience. Moreover, our senior management team issupported by business managers who have extensive experience withintheir respective operating divisions. Our top Executive Officers andother members of management hold about 5  million shares in ourCompany.

Business Strategy

We have historicallyexperienced sales growth in excess of industrial production growth inour core markets. We are pursuing a strategy designed to generate realsales growth at 5 percent annually for our base business. In addition,we are developing alternate channels to market intended to furtheraccelerate our growth. Earnings and cash flow growth are targeted togrow at faster rates than our underlying sales growth as we improveproductivity and working capital management. The key elements of thisstrategy are:

Pursue High-GrowthMarkets. We intend to continue to focus on high-growthmarkets and segments. Geographically, we plan to leverage our globalreach by capitalizing on our presence in high-growth emerging marketsincluding Asia, Eastern Europe and Latin America. For example, in Asia,we are focusing significant attention on the high-growth China andIndia markets, with a substantial effort to hire and train outstandingsales engineers and service technicians to meet growing customerdemand. In China, our focus has resulted in over 25% annualgrowth in sales since 1999. We are also forming new ventures in WestAfrica and Eastern Europe, which will permit us to pursue energyservices opportunities at new customer production facilities planned inthese areas.

Maintain TechnologicalLeadership. We strive to develop new technologies andproducts through a focused commitment to technology, research anddevelopment. The evolution of our existing products and the developmentof new technologies have historically allowed us to sustain and enhancethe profitability of our business and further penetrate our targetmarkets, including our existing customer base. For example, over thepast 15 years we have developed several generations of our TRASARautomated feed and control technology for cooling water treatmentprograms. We launched the latest generation of this technology, our 3DTRASAR cooling water stress management program, in 2004. In the oilfield market, an effort to develop new technology in corrosioninhibitors for a large customer in Alaska has led to over $20million in incremental sales as the technology has spread to otherregions and customers. Our engineers will continue to work closely withour customers in an effort to identify new product opportunities andjointly develop new technologies.

Pursue High-GrowthIndustry Segments. While we have shown the ability toexceed market growth rates even in many mature markets throughinnovative technology and advanced engineering, monitoring and controlservices, we believe that selecting the right industries on which tofocus resources helps us exceed underlying market growth rates. In thelate 1990s, we decided to disproportionately invest research,development and training resources to support fast growth in thedeepwater oil production industry. As a result, we are capturing about60% of business on these large platforms, exceeding our averagemarket share in our overall Energy Services business. In PaperServices, we believe that the tissue and towel and digital printingsegments will grow more rapidly than other Paper segments, and haveinvested disproportionately in these areas. In tissue and towel, wegrew nominal sales nearly 20% in 2005 to establish ourselves asthe clear #2 supplier to these customers. We have also expanded ourbusiness to provide hygiene water and air services by developingdiagnostic and on-site service capabilities to reduce the health riskscustomers face due to pathogens in water and air. Interest in theseapplications has grown across many industrysegments.

Build Upon Our Customer Base. Weseek to strengthen our position with our existing customer base as wellas pursue new customers by continuing to serve as the leading globalprovider of fully integrated water treatment services and industrialprocess solutions. An essential element of our 

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strategy is to continue integrating our salesand technical staff into our customers’ daily operations andprocess planning. Historically, this strategy has allowed us to expandour service and product offerings with existing customers and has ledto the development of new technologies. We continually seek to addvalue for our customers by identifying those services, products andequipment that will enhance their profitability through reduced costs,improved yields and decreased capital spending.

ExpandSupport of Multinational Customers. As one of a smallnumber of companies that can provide turnkey water management solutionson a global basis, we seek to leverage our relationships withmultinational companies by servicing them globally. We expect tobenefit significantly as larger customers further consolidate theirsupplier base and increase their reliance on full service providers,such as our Company.

Continue to ReduceCosts. We have initiated a comprehensive cost reductionplan that yielded savings in 2004 of $88  million compared to2003, with a year-end run rate to those savings of $110  million.In 2005, we generated additional savings versus 2004 of $89million, including the run-rate benefit of 2004 projects. We expect ourcost reduction plan to achieve incremental efficiencies through workprocess redesign and other targeted cost improvements, which addressinefficiencies in our administrative and overhead functions, as well asother support and service functions around theworld.

Maximize Cash Flow and ReduceDebt. We believe that there are significant opportunitiesto increase our cash flow. We believe that while the capitalexpenditures required to maintain our business are low relative to oursales, we can maintain capital expenditures at about $100million annually through continued management focus. During 2005, weadded production capacity for a few fast-growing product lines in everyregion of the world, including adding capacity to support furthergrowth of chemistries that are part of the 3D TRASAR cooling wateroffering. We expect our capital requirements for information technologyprojects to remain substantially lower than 2003 and 2004 levels. Whilemanagement has historically focused on particular components of workingcapital, we believe there is an opportunity to reduce our workingcapital needs, particularly in the areas of accounts receivable andinventories. We intend to use our free cash flow to reduceindebtedness. During the twelve months ended December  31,2005, we used Free Cash Flow of $121.5  million for debtreduction, including $99  million in optional prepayments of TermLoan A, from operating cash flows.

Focus on SupplyChain Management. We have a dedicated global supply chainteam that focuses on managing manufacturing, procurement and logisticsactivities. We believe that by coordinating these functions, we achievebetter inventory management and lower overall Company costs for ourdelivered end products. We believe that the introduction of a commonSAP platform for our North American and European operations willimprove our ability to coordinate production, inventory and deliverywithin each region and across these regions. We believe that we will beable to make additional improvements in our inventory management andlower procurement costs as we develop our abilities to fully utilizethesesystems.

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|             |  | OurDivisions                         |
|             |  | Industrialand Institutional Services |  | Energy Services              |  | PaperServices               |
| MarketPositions  |  | $6.6billion globalmarket(1)(2)       |  | $3.25billion globalmarket(1) |  | $7.8billion globalmarket(1) |
| #1MarketPosition |  | #1MarketPosition                     |  | #3Market Position            |
| MarketShare(3)   |  | 19%                                  |  | 29%                          |  | 9%                          |
| 2005NetSales(4)  |  | $1,494million                        |  | $897million                  |  | $699million                 |
| Representative   |  | Food andBeverage                     |  | Exploration                  |  | FinePaper                   |
| Markets          |  | Buildings, Hotels,Hospitals          |  | Field Development            |  | Uncoated FreeSheet          |
|             |  | Chemicals,Pharmaceuticals            |  | Production                   |  | Coated FreeSheet            |
|             |  | Manufacturing, Metals,               |  | Refining                     |  | Newsprint                   |
|             |  | Utilities,Mining                     |  | Petrochemical Manufacturing  |  | TissueContainerboard        |
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|  | (1) | Approximatemarket size based on internal estimates and industry publications andsurveys. |

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|  | (2) | Represents the water treatment and services markets, whichaccounted for approximately 79% of our Industrial andInstitutional Services division’s net sales in2005. |

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|  | (3) | Market sharecalculations include appropriate segment sales from India and Japanreported in Othersegment. |

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|  | (4) | Divisionalnet sales exclude approximately $223  million of sales allocatedto our Other segment, including our sales in India, Japan, and anIntegrated Channels Group. |

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Industrial and Institutional Services

Our Industrial and Institutional Services division providesproducts and services that are principally utilized in water treatmentapplications, such as raw water treatment, wastewater treatment,cooling programs and boiler treatment programs to control corrosion,the buildup of scale and microbial fouling. Variations of theseapplications can be used in a wide range of capacities, from smallboilers at a commercial building to large industrial boiler and coolingwater systems such as those found in steel mills and power plants.Customers use our water treatment programs to extend the useful life oftheir assets, minimize downtime of their facilities, conserve water andenergy and decrease their total cost of operation. We serve companiesacross a broad spectrum of industries, including aerospace, chemical,pharmaceutical, steel, power, food and beverage, medium and lightmanufacturing, metalworking, marine and institutions such as hospitals,universities and hotels. Six of our ten largest Industrial andInstitutional Services customers in 2005 have been with us for morethan ten years. Our Industrial and Institutional Services segmentgenerated net sales of $1,494  million in 2005, representing45% of net sales.

Water TreatmentApplications

Our water treatment capabilities areshared across our three core divisions. In our Industrial andInstitutional Services division, water treatment programs accounted for79% of our net sales in 2005. These water applications alsoaccounted for 16% of our Energy Services net sales and18% of our Paper Services net sales in 2005. The followingdescriptions include water treatment applications in the Industrial andInstitutional Services division, but these boiler water, cooling water,raw water and wastewater applications are also used in our PaperServices and Energy Services segments.

Boiler WaterApplications. We have specialized in boiler waterapplications for 75 years. Corrosion and scale buildup are the mostcommon problems addressed by our boiler water programs. We have helpedour customers overcome various boiler challenges by providingintegrated chemical solutions, process optimizations and mechanicalcomponent modifications. Our TRASAR technology is recognized as aninnovative water treatment program that prevents operational problems.TRASAR technology continues to evolve and today is used in conjunctionwith a number of boiler water treatment programs, such as NexGuard.NexGuard combines the most advanced boiler internal treatment chemistrywith TRASAR technology and state-of-the-art diagnostic, monitoring,feed and control equipment. Other applications of TRASAR include TRASARRecovery Boiler Leak Indication, which is designed to determine when aloss of concentrated boiler water occurs in operating boilers. We alsodevelop condensate treatment programs designed to prevent corrosion,overheating and rupture of boilers. Two examples of these programs areNalco ACT and Tri-ACT. In 2000, we were awarded a Research andDevelopment 100 Award for Nalco ACT, our revolutionary condensatetreatment comprised of food industry ingredients, making Nalco ACTunique in both its technical and safety merits. Tri-ACT is a series ofcorrosion inhibitors that includes blends of neutralizers, filmers andoxygen scavengers to provide uniform protection of the condensatesystem.

Cooling Water Applications. Ourcooling water treatment programs are designed to control the mainproblems associated with cooling water systems — corrosion,scale, microbial fouling and contamination — in openrecirculating, once-through and closed systems. In 2004, we launchedour 3D TRASAR stress management system for cooling water, theworld’s first automated system for simultaneous control ofcorrosion, scale and microbial fouling and contamination. Thismulti-patented combination of services, equipment, chemistry,automation and control builds on the strengths of our TRASAR technologyoffering and is an effective tool used to prevent problems, identifyefficiency improvements and improve control in cooling watersystems.

Our award-winning STA•BR•EX technologyis the world’s first stable, liquid bromine-based anti-microbialdesigned to control biofilms caused by microorganisms in cooling tower,condenser and heat exchanger systems. In 2006, we intend to introduceControlBrom stabilized bromine offerings to provide customers with theadvantages of stabilized bromine and the benefits of flexible andcost-efficient on-site activation.

WastewaterApplications. Our wastewater products and programs focus onimproving overall plant economics, addressing compliance issues,optimizing equipment efficiency and improving operator 

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capabilities and effectiveness. This isaccomplished by combining our highly trained sales engineers andmarketing and technical support staff members with key Nalco products,such as ULTRION, a liquid cationic coagulant that clarifies water moreeffectively than alum. The benefits of ULTRION include a reduction intotal solids in treated water, increased efficiency of waterclarification systems, reduction or elimination of pH adjustmentproblems and decreased settled sludge volume. For removing heavy metalsfrom wastewater, we use our patented NALMET technology, which canreduce regulated metals to below-compliance limits in one step. TheBIO-MANAGE program is part of our comprehensive bio-control servicethat controls microbial growth in water. To improve sludge dryness andreduce sludge handling costs, we use our proprietary CORE SHELLhigh-activity flocculants. We also offer our dispersion technology,ULTIMER, for which we won a United States Presidential Green ChemistryChallenge Award and a Research and Development 100 Award in 1999.ULTIMER polymers are water-based, yielding a more stable, soluble,user-friendly product. To address plant odor or foaming issues, weoffer a complete line of ODORTECH products andantifoams.

Mining and Mineral ProcessingApplications

We provide a wide range of qualityproducts, programs and services to help the mining and mineralprocessing industry improve product quality and productivity in a safeand environmentally responsible manner. Specifically, these offeringshelp increase recovery of the valued mineral, improve water quality forre-use or discharge to the environment, reduce contaminants in ourcustomer's products, increase plant throughput/utilization,reduce energy consumption, increase equipment life through scale andcorrosion control and reduce or eliminate dust. The industries we serveinclude alumina and bauxite, coal, copper, precious metals, iron ore,aggregates, kaolin, phosphate, soda ash and syntheticfuels.

Colloidal TechnologiesApplications

We invented and patented a commercialprocess for the production of stable concentrated silica solutions in1941. Today, we operate one of the single largest colloidal silicafacilities in the world, and our broad range of colloidal silicaproducts is used in applications in 39 countries. We manufacturecolloidal silica, other specialty colloidal particles and complementaryprocess chemicals used in the polishing of silicon wafers,semiconductor chips, memory disks and other electronic substrates; inthe manufacture of catalyst supports, vacuum formed shapes, hightemperature refractories and specialty coatings; and in the precisioninvestment casting of metal parts. Our technically proficient salesengineers work closely with our customers to design and implementcustom nanoparticle solutions for their raw material or processoptimization requirements. For example, in the investment castingindustry, we offer complete investment casting shell programs,including colloidal silica binders, polymers, wetting agents,antifoams, wax cleaners, biocides and refractories, designed to shortendrying cycles, increase prime coat adhesion, improve casting surfacequality and reduce casting defects.

Finishing TechnologiesApplications

As a leading innovator in metalworkingand surface finishing products and services for manufacturers aroundthe globe, the Finishing Technologies Group works closely withcustomers to optimize their production processes. Serving a broad rangeof manufacturers, including makers of auto parts, aerospace components,compressors, construction equipment, appliances and various fabricatedmetal parts and machinery, our highly trained sales engineers usespecialized resources, like our process simulation labs, to deliverprocess improvements that positively impact the total cost of ourcustomers’ operations. Finishing Technologies counts among itscustomers many of the world’s most recognized brand names. Ourextensive product line in this area includes metalworking fluids, rustpreventatives, cleaners, conversion coatings and paint boothmaintenance products.

Our growth continues to be fueled byinnovation and investment in emerging geographies. R&D in the areasof polymeric surface treatments and products and programs for thecontrol and mitigation of pathogens in the metalworking environmentwill generate new offerings in 2006.

Membrane TechnologiesApplications

Membrane technology is being adopted atan ever-increasing rate as a cost-effective technology for purifyingwater for both industrial and potable applications. Our productsaddress the needs of all 

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types of membrane systems, ranging fromseawater desalination; well and surface water purification, to advancedwater recycle processes and wastewater treatment.

Ourunique RO TRASAR technology, in combination with our state of the artchemistry provides added protection against the formation of mineralscale and allows reverse osmosis systems to operate without unscheduleddowntime, using only the exact required amount of antiscalant, even athigh recovery rates and using difficult water sources. Furthermore, ROTRASAR provides an added benefit in that it allows for enhanced troubleshooting and leak detection in membrane systems.

To combatmicrobial fouling — the most common and difficult problems totreat in a membrane system — our product range includesnon-oxidizing biocides that control a wide spectrum of microorganisms.Using our novel PT TRASAR technology, it is now possible to safelyreduce incidences of particulate fouling, by continuously monitoring,controlling and optimizing the addition of proprietary filter aidpolymers that enhance the performance of the pretreatment to the ROmembranes.

Our innovative performance-enhancing polymerchemistries can more than double the throughput of membrane-basedwastewater treatment systems. This in turn allows for the design ofcheaper and more compact wastewater treatment systems for bothindustrial and municipal applications.

Odor ControlApplications

We offer programs to combat odorcentering around three approaches: odor neutralization, precipitationand biological hydrogen sulfide prevention. Our odor neutralizationtechnology focuses on ODORtech, one of the most versatile odorsolutions we offer. ODORtech products are applied by an atomized mistat the point of release of the airborne odor and effectively neutralizecommon odors, such as ammonia, amines, mercaptans, hydrogen sulfide andsulfur dioxide. Common applications include roof vents, truck washstaging areas, landfills, garbage areas, HVAC equipment, automotiveinteriors and storage areas. Our precipitation products are speciallydesigned for hydrogen sulfide for aqueous applications and may alsoserve as coagulants or clarification aides. These products are commonlyused in sludge tanks, floor drains, clarifiers, lift stations andequalization tanks. Our bioengineering products offer a wide range ofspecial blends of bacteria and chemicals that prevent the formation ofhydrogen sulfide or degrading sulfur compounds. The treatments, whichproduce no sludge, are non-hazardous and are effective for longduration control, are commonly used to control odor in digesters, gasscrubbers, lift stations, floor drains, aeration basins andclarifiers.

Alternate Channels

One of ourstrategic goals is to add 1 to 2 percent in sales growth as a 2006year-end run rate through the development of alternate channels. Onenew channel is WaterServ, a program of products and services that taketechnology created for larger, industrial customers and adapt it tomeet the needs of smaller customers using an appropriately scaledbusiness model. Through WaterServ, smaller customers can take advantageof many of our water-centric programs, including boiler water, HVAC,facility care and automation programs.

WaterServ is runvia hubs in different cities building on the success of a test hubinitiated in Chicago in 2005. From these hubs, a specially trained teamcan sell and service smaller customers, creating a strongerrelationship with the customer. Using standardized equipment andservice packages, we can streamline and lower costs to serve andmaintain these accounts. The CRM software enables our customers to usereal, data-driven information to develop sales efficiency andeffectiveness key performance indicators (KPIs). TRASAR technology withremote 24-hour monitoring and alarming capability is the keydifferentiator to provide results with reduced sales engineerinvolvement in routine maintenance activities, while providingperformance superior to competitive offerings currentlyavailable.

Energy Services

Our Energy Servicesdivision provides on-site, technology driven solutions to the globalnatural gas, petroleum and petrochemical industries. In addition torecovery, production and process 

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enhancements, we deliver a full range of watertreatment offerings to refineries and petrochemical plants. Ourupstream process applications improve oil and gas recovery andproduction, extend production equipment life and decrease operatingcosts through services that include scale, paraffin and corrosioncontrol, oil and water separation, and gas hydrate managementsolutions. Our downstream process applications increase refinery andpetrochemical plant efficiency and the useful lives of customer assets,while improving refined and petrochemical product quality and yields.Our customers include the fifteen largest publicly traded oilcompanies. Our ten largest Energy Services customers in 2005 have beenwith us for more than twenty years. Our Energy Services divisiongenerated 2005 net sales of $897  million, representing27% of our net sales. We continue to emphasize safety andenvironmental leadership in our product development and implementationefforts.

Our Energy Services division is divided into aDownstream refinery and petrochemical processing service business andan Upstream group composed of our Oilfield Chemicals and Adomitebusiness.

Adomite Well ServiceApplications

We support the Drilling/Explorationservice industry by designing and supplying chemicals for drillingactivities. Our Adomite business supplies chemicals for the cementing,completion, drilling, fracturing and acidizing phases of oil and gasexploration, as well as conducting independent research and jointlydeveloping products with major well servicecompanies.

Oilfield Applications

Oil andnatural gas production is increasing in harsh environments: extremetemperature and pressure in remote locations. Exploration andproduction projects are gaining in scope and size and with oil pricesat all-time highs, the stakes have increased in flow assurance andinfrastructure protection. Focusing on these new challenges, theOilfield Chemicals group offers solutions to production flow challengessuch as hydrate formation, paraffin deposition and emulsifiedstreams.

We are the technology leader in the offshoremarketplace and are the only supplier of SurFlo Certified products thathave undergone aggressive testing to ensure safety and effectiveness inoffshore, deepwater and ultra-deepwater environments. Our FREEFLOWnatural gas hydrate inhibition program represents an industrystep-change, economically and safely displacing traditional hydratecontrol methods. Our expertise in new production techniques, such asseawater flood injection, helps our customers maximize the productionof their operation while ensuring the safety and reliability of theirinfrastructure. Produced oil contains water that is costly to transportand damaging to infrastructure. Our oil and water separationtechnologies and custom-blended products break oil and water emulsions,allowing water removal. Our water clarifiers work to purify that waterand make it safe for environmental re-introduction.

Ourproprietary ENERCEPT family of high-shear corrosion inhibitors protectshigh-shear, multi-phase oilfield flow lines, gathering systems andtransmission pipelines. The programs were originally designed to combatcorrosion in the challenging Alaskan North Slope conditions, and havesince been confirmed under a variety of conditions around the world.More traditional batch treatments are still a preferred method ofinhibition by many customers. ENERSPERSE truck-treating inhibitors areideal for rod-pumped land wells and other batch treatment applications,especially prevalent in New Frontiers such as the Caspian Sea area. In2005, in response to anticipated growing environmental regulations, wecontinued to focus on the further development of high performance greenchemistry solutions.

Downstream RefiningApplications

We provide process applicationsspecific to the petroleum refining and fuels industry, enabling ourcustomers to profitably refine and upgrade hydrocarbons. Our heavy oilupgrading programs minimize operation costs and mitigate fouling,corrosion, foaming and the effects of heavy metals when refininglower-quality crude oils.

The SCORPION II program combatsnapthenic acid corrosion problems, allowing refiners to take advantageof discounted high acid crudes through combined chemistry, novelmonitoring and 

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simulation technologies. Our proprietaryNEOSTAR crude oil database and our newly patented chemistries arecoupled with over 20 years of experience in the treatment of hightemperature corrosion. As energy costs continue to rise, refiners arelooking at innovative ways to reduce consumption. We partner with ourcustomers to deliver energy utilization efficiency.

Crudeunit fouling can increase energy and maintenance costs, while reducingcrude output. The THERMOGAIN program includes unique chemistries andpatented crude stability tests to prevent crude unit fouling. Inaddition, our holistic approach to water and process enables ourcustomers to maximize energy on the utilities side. With advances inmonitoring, chemistry and application, the 3D TRASAR cooling waterstress management program has reduced shutdowns for customers,resulting in maximum operational efficiency.

The refiningindustry is also addressing clean fuels regulations that requiredrastic reduction in the level of sulfur allowed in fuels. Our H2SScavengers, such as the SULFA-CHECK system, help our customers to meetregulatory standards.

Hydro-processing to meet low-sulfurfuel specifications can increase the corrosiveness of fuels. We offeran entire line of fuel additives, including corrosion inhibitors, toprotect engine fuel systems and pre-market underground storage tanksand piping. In addition, we offer fuel stabilizers, pour pointdepressants, cetane improvers, detergents and antioxidants for homeheating oil and premium diesel and gasoline packages. The PROSPEC TreatService combines our knowledge of fuel specifications, testrequirements, product selection, application technology and on-sitecoordination to solve expensive finished product problems in refinerytank farms, third party terminals and ports.

DownstreamChemical Processing Applications

We provide on-sitetechnical service and innovative chemical processing technologies atmore than 250 chemical plants in 45 countries worldwide. We guidechemical plants through obstacles that arise during operation and helpmaximize return on investment through products and services tailored toeach customer’s requirements, climate and logistics. We supportolefins producers worldwide with proprietary treatment programs forethylene and butadiene plant performance maximization.

TheACTRENE fouling control program represents a significant advancement inthe olefins chemical process industry, dramatically increasingoperations run-lengths. This technology reliably mitigates and controlsfouling in fractional distillation units. COKELESS coking controltechnology protects radiant and transfer line exchanger sections ofethylene plant furnaces without adverse effects to metallurgy ordownstream processes. AQUAMAX corrosion control providescost-effective, sodium-free corrosion control in dilution steamsystems. We also provide a comprehensive line of antifoams,antifoulants and corrosion inhibitors for butadieneoperations.

Water Applications

We providetotal water management solutions specific to refining and chemicalprocessing needs. See ‘‘ — Industrial andInstitutional Services — Water TreatmentApplications.’’

Paper Services

OurPaper Services division offers a comprehensive portfolio of programsthat are used in all principal steps of the papermaking process andacross all grades of paper, including printing and writing, board andpackaging, tissue and towel, and mechanical papers. Our clients includethe 20 largest paper companies in the world. Seven of our ten largestPaper Services clients in 2005 have been with us for more than tenyears. Our Paper Services segment generated 2005 net sales of$699  million, representing 21% of our net sales.

Today's pulp and papermakers continuously strive toproduce products with improved performance for less cost. Theircustomers demand that end product properties — such asbrightness, tissue softness, or paper strength — perform toincreasingly challenging specifications in a very competitiveenvironment. To help our clients excel, we developed our SMARTSolutions program, a grade-based approach for improving clients'end product performance and optimizing operationalefficiency.

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PulpApplications

The management of critical resourcessuch as fiber and water is common across all paper grades. Increasedcosts for wood, water and energy and greater use of recycled fiber areall creating challenges for our clients.

Our pulp processapplications focus on opportunities to reduce our clients’ totaloperating costs, utilize a broad range of recycled fibers, improve thequality of the pulp delivered to the paper mill and improve thestability of the pulp making process. These client benefits aredelivered through programs designed and tailored to the individualclient’s process and needs. We offer programs and services forevery phase of the pulping and bleaching process, including foamcontrol, scale control, pitch control, digester and chemical recoveryadditives for chemical pulping operations, mechanical mills andde-inking mills. Our Total Fiber Management approach focuses on yield,quality and substitution of fiber types to deliver the best combinationof cost and performance.

PaperApplications

As we approach the papermaking process,we take into account the varying needs of producers of different papergrades. Manufacturers of board and packaging, mechanical papers,printing and writing, and tissue and towel have very different needsbased on the demands of their customers. For example, maintainingstrength in board and packaging is achieved very differently than thesoftness demanded by consumers of tissue and towel products.

In addition, different paper segments have varying needsbased on market trends. A papermaker in a segment experiencing stronggrowth may need to maximize production rates, optimize finished sheetquality and minimize paper machine down time. For a segment facingslower growth, we may instead be asked to focus on improving operatingefficiencies and reducing the total cost of a client’soperations.

Our paper process applications focus onopportunities to reduce our clients’ total operating costs,increase machine productivity, improve sheet properties, enhanceproduct quality, and extend machine life. These client benefits areachieved through a variety of programs, including microorganismcontrol, increased retention, drainage and formation, felt cleaning,increased paper strength, prevention of surface pitch and stickiesdeposition, and chemical fiber de-inking. Advanced sensing, monitoringand automation technologies are incorporated into the applications tooptimize program effectiveness and minimize risk.

Specific to each grade segment, our programs deliver value inthe form of improved brightness, lower basis weight, improved bulk andsoftness, improved printability and many other key business driversthat our clients determine are critical to the success of theirbusiness. We integrate the entire papermaking process throughmechanical, operational and chemical means to concentrate specificallyon what our clients need to succeed in their marketsegments.

Partnering to Develop Superior DigitalGrades

HP's Indigo press can produceoutstanding results, but demands more of the printing substrate thanany other digital technology. A unique partnership between Mohawk FinePapers Inc. and us has resulted in the development of the highestperforming paper solution for HP Indigo presses — MohawkSuperfine i-ToneTM paper.

We worked with Mohawk tooutline the properties necessary to get the performance needed on theHP Indigo press without conventional, shelf-life-limited treatments.Our objective throughout the development process was to produce theabsolute best uncoated paper for the HP Indigo press that can also beused in any other digital printing environments. Based on severalfactors such as superior toner adhesion and blanket memory, twocritical measures of quality in digital papers, we believe theNalco/Mohawk partnership met its mark.

Mohawk Superfinei-Tone also brings unprecedented opportunities for printers to expandtheir printing capabilities and increase their profit potential, aswell as position themselves at the forefront of this excitingtechnology.

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Leveraging the proven technologyof the HP Indigo press, Mohawk, through this partnership with us, isonce again at the forefront of digital imaging innovation; leading inthe development of premium papers in the digital transformation of thegraphics industry.

Focusing on GrowthAreas

Our Paper Services division’s SMARTSolutions offering has already resulted in significant growthopportunities. Our grade-based approach led to a focused initiative inthe high-value tissue and towel segment. With the appropriate alignmentof technical support resources, and an unprecedented investment ininnovation we have developed an exceptional program portfolio fortissue and towel clients.

An example of these programs isour SMART Solutions for Coatings, which results in the proper balanceof mechanical, operational and chemical components to achieve thedesired sheet characteristics and to maximize machine runnability. As aresult of this unique client focus, we were able to substantiallyimprove our market share in this important, high growth grade segmentduring the past 24 months.

WaterApplications

Water is one of the primary components ofthe papermaking system. For each ton of paper produced, thousands ofgallons of water are used. Careful management of the water throughoutthe process not only significantly impacts the water, fiber and energycosts of an operation, but also significantly influences the finalproperties of the sheet and machine efficiency. Our integrated approachcombines our extensive papermaking and water expertise with advancedcomputer modeling to optimize the water and energy balance, flow andchemistry across the entire papermaking system including the pulp mill,paper mill and utility operations. See "— Industrialand Institutional Services — Water TreatmentApplications."

Our Services

Ourbusiness is focused on providing integrated solutions to complex issuesfor our customers. Differences in customer equipment and processesdrive substantial variation in the individual programs we create. Inaddition, fluctuations within an operation, such as changes in waterquality or petroleum characteristics, require us to continually adaptour solutions to meet our customers’ needs. These solutions areoften adapted on-site by our technical sales professionals. Our salesteams are supported by analytical services, consulting services,technical field services and environmental hygieneservices.

Analytical Services

Our highlytrained analytical researchers combine in-field work and laboratoryanalysis to develop recommendations. Our ISO 9001:2000-certifiedlaboratories use state-of-the-art equipment, including mass and nuclearmagnetic resonance spectrometers and scanning electron microscopes, toconduct sample testing and process failure analysis for watertreatment, paper process and energy process applications. We haveprovided analytical services for more than 50 years and our more than100 analytical researchers have an average of more than ten years ofexperience in this field. In addition, approximately 45% of ourchemists have advanced degrees.

ConsultingServices

Our on-site experts, industry technicalconsultants and researchers develop appropriate solutions for a broadrange of customer requirements, such as single process optimization,system-wide program implementation, troubleshooting or increasingefficiencies. We provide numerous plant, process and application auditsand surveys in water, energy or paper processing. We offer consultingfor all water use and discharge areas and make recommendations forimprovements, cost reductions or efficiency improvements through ourAdvanced Recycle Technology programs. Our technically trained sales

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professionals can also rely on guidance froma global knowledge management system that allows access to ourspecialized experts anywhere in the world. We take a multi-disciplinaryapproach to developing solutions by evaluating the mechanical,operational and chemical aspects of each process. By monitoringinteractions between these three system components, our field engineersare able to anticipate and solve problems and prevent damage tocustomer processes. We utilize advanced database and computeranalytical programs to support these efforts, including ourVANTAGE database, which captures analytical data,prepares diagnostic images and reports on a real-time basis.

Technical and Field Services

We provideexpert technical assistance for chemical feed and control equipmentinstallation, start-up, calibration, preventative maintenance andrepair throughout the world. In addition to the components we maintainregionally, we provide on-site services, including on-site testing,on-site system troubleshooting, inventory management, chemical usagedetermination, chemical dosage audits and cleaningservices.

Environmental HygieneServices

We offer a complete line of specializedservices designed to assess, control and reduce risk from water-bornepathogens such as Legionella. Trained hygiene service specialistsperform risk assessments to identify areas within the domestic cold andhot water, process water, cooling tower, emergency water and othersystems that could be at risk for pathogen proliferation. We thendevelop prioritized recommendations and a remediation plan to reducethe risk of pathogen exposure that can lead to illnesses such asLegionnaires’ Disease. Our protocols help our customers complywith guidelines created by professional organizations, state andfederal government agencies, or local governments.

CustomerTraining

In order to educate our customers andpromote more efficient and effective systems and processes in theiroperations, we have developed various training programs and interactiveonline training that teach operators and engineers how to work moreeffectively and efficiently. We conduct water treatment seminars toformally train our customers how to use our equipment and chemicals andhow to implement best practices. For example, we provide watertreatment workshops in a classroom setting where attendees discusstechnical and industry-related issues among their peers and are able toreview tailored answers to their operation-specific questions.Facilitators guide the attendees through various topics such astrending, energy management, cost implications, and best practices.These peer group discussions help the attendees troubleshoot and createsupport network groups. The latest addition to our training curriculumis our interactive, web-based program, Nalco University, which providesan economical and convenient alternative to ourseminars.

Equipment

We offer complete equipmentsystems as part of our integrated offering, ranging from reusableshipping containers and feed and process control equipment tointegrated wireless, web-based, data collection services. In addition,we offer a range of field test kits, process-monitoring equipment, andcomplete chemical feed and storage systems proven and tested forindustrial environments.

We recognize the importance ofaccurate, reliable chemical feed to the success of manufacturingprocess and water treatment programs. Pre-packaged chemical feedsystems ensure easy installation, start-up and reliable chemical feed,including our ValueLine Polymer Feeders and a line of modular pump andcontrol systems. These chemical feed systems are used to pump chemicalsinto a customer’s manufacturing and/or water treatment process.Some feed systems also have mixing technologies that producehigh-quality solutions without using mechanical agitators.Additionally, we have set the standard for returnable chemical deliverysystems and ‘‘hands-off’’ chemicalhandling. Our PORTA-FEED container units are returnable shippingcontainers set up at a customer’s plant to feed our chemicalsinto the customer’s system. When the chemical level is low, arefill unit is delivered to the plant and we take the empty PORTA-FEEDunit back for cleaning and re-use. Since the introduction of thePORTA-FEED program in 1985, we have eliminated the disposal of overthree million chemical drums.

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We also understand that it iscrucial to all businesses to have the power to monitor and controltheir chemical treatment programs on an on-going basis in an efficientand easy-to-use manner. Our web-based monitoring service is a powerfulmulti-functional microprocessor with an embedded web server availablein two series. Our Boiler Controller is designed to provide reliableautomation for corrosion and scaling control programs in boilers. OurCooling Tower Controller provides reliable automation of corrosion,scaling and microbiological growth control programs in cooling waterapplications. Both series include a revolutionary digitalcommunications package which allows the customer to change set points,manually activate or deactivate pumps and valves, upgrade software, andreceive reports or alarms, from any personal computer that has Internetaccess.

We have developed equipment that works with ourinnovative TRASAR and 3D TRASAR technology to provide real-time,on-line monitoring of actual chemical levels in a system. Through ourTRASAR system, we chemically ‘‘bar-code’’treatment molecules with a fluorescent tracer that reacts to specificlight wavelengths. Once the product is fed into a system, the tracer isoptically excited and detected. Our equipment monitors the level ofchemicals and continuously makes automatic adjustments as necessarythrough chemical injection systems linked to the TRASAR or 3D TRASARcontroller. By preventing overfeeding and underfeeding, and eliminatingthe unnecessary application of chemicals, this real-time, on-linemonitoring capability saves water and energy as well as improvesefficiency, reliability and productivity.

We offerintegrated UltraTreat systems that include industrial reverse osmosissystems, water softening equipment, multi-media and carbon filtrationand high efficiency filters.

Joint Ventures

Duringour history, we have entered into general partnerships or jointventures for limited scope business opportunities. For example, weconducted our energy services business through a joint venture withExxon Chemical Company, a division of Exxon Mobil Corporation, until2001 when we redeemed Exxon’s interest in the joint venture andit became a wholly owned subsidiary of our Company. We recentlyre-established a joint venture relationship with USFilter Corporation,Treated Water Outsourcing, to pursue process water treatmentoutsourcing projects and to supply standard water treatment equipmentpackages with our chemicals and service offerings. In June  2004,we entered into a joint venture with Katayama Chemical, Inc., or KCI,for the marketing and sale of our water treatment and process chemicalsin Japan. KCI is a leading participant in these markets in Japan andthe venture will permit the combination of our broad product portfoliowith KCI’s strong market presence. This joint venture will notinclude manufacturing, research and administrative resources, whichwill continue to be provided to the joint venture by the parents. InDecember  2004, we announced an industry-leading alliance withJohnsonDiversey that will help customers in the food, beverage,pharmaceutical and institutional industries reduce their totaloperating costs, improve operating efficiency and reduce environmentalimpacts. This total-site program called Responsible Resource Solutionstakes a comprehensive approach to a facility’s operations, anddelivers solutions to better manage key resources such as water, energyand waste. Additionally, we maintain longstanding partnerships in SaudiArabia, relating to base-water treatment, and in Spain, relating tooil-free emulsion polymers.

We will continue to evaluatethe potential for partnerships and joint ventures that can assist us inincreasing our geographic, technological and product reach. Forexample, we continue to evaluate partnerships that will expand ourofferings to our middle market customers and that will permit us a moresignificant local identity in certain Asiancountries.

Competition

Water management andprocess improvement service companies compete on the basis of theirdemonstrated value, technical expertise, chemical formulations,consulting services, detection equipment, monitoring services, anddosing and metering equipment. In general, the markets in which ourCompany competes are led by a few large companies, with the rest of themarket served by smaller entities focusing on more limited geographicregions.

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The market for water treatmentchemicals is highly fragmented, but is led by our Company and GE WaterTechnologies. The remainder of the market is comprised of mainlyregional and local players. Regional service providers tend to bemid-sized and focus either on a limited geographic region or a smallersubset of products and services and include companies such as AshlandInc.’s Drew Industrial Division, ChemTreat, Inc. and KuritaWater Industries Ltd. Local players are smaller and tend to focus onservicing local businesses typically requiring less sophisticatedapplications.

The largest participants in the energyservices sector are our Company, Baker Petrolite Corporation, GE WaterTechnologies and Champion Technologies, Inc. The remainder of themarket consists of smaller, regional niche companies focused on limitedgeographic areas.

The market for specialty and watertreatment chemicals used in the pulp and paper industry is fragmented.The top suppliers of water treatment services to the pulp and paperindustry are our Company, Hercules Incorporated, Kemira Oyj, CibaSpecialty Chemical Holding Inc., BASF AG and Akzo Nobel N.V.’sEKA Chemicals AB. The remainder of the market is comprised of smaller,regional participants.

Research and Development

Webenefit from a high quality research and development effort consistingof more than 450 personnel worldwide, more than 160 of whom havePh.D.s, dedicated to developing new technology and providing support.Our laboratories, which are located in the United States, theNetherlands and Singapore, are involved in the research and developmentof chemical products and in providing technical support, includingchemical analyses of water and process samples. Research anddevelopment spending was $58.6  million for the year endedDecember  31,  2005. Spending on research and developmentwas $56.8  million, $9.7  million, and $50.3  millionfor the year ended December  31,  2004, the period fromNovember  4,  2003 through December  31,  2003,and the period from January  1,  2003 throughNovember  3,  2003, respectively. In recent years, we havereceived numerous research and development awards, including awards forULTIMER 00LT053, ULTIMER, Nalco ACT, NALCO98DF063, TRASAR3000, our highstress polymers and STA•BR•EX•.

As part ofthe allocation of the purchase price for the Acquisition, we recorded aone-time charge of $122.3  million during the year endedDecember  31,  2004 for purchased in-process research anddevelopment, or IPR&D. The value of purchased IPR&D wascomprised of five ongoing development projects at the date of theAcquisition that were identified as having economic value, but that hadnot yet reached technological feasibility and had no alternative futureuse. Most of this charge was attributable to two projects, 3D TRASARand Bright Water. 3D TRASAR is a technology that is intended toautomate the cooling water treatment‘‘triangle’’ (scale, corrosion, andmicrobial fouling) by providing an integrated system of patentedchemicals and equipment to inhibit these conditions. Bright Waterentails the development of a polymer that will enhance the yield of oilfrom wells, while decreasing the amount of water produced with the oil.Commercialization of the 3D TRASAR began in 2004 and commercializationof Bright Water projects is planned for 2007.

We believethat continued research and development activities are critical tomaintaining our leadership position in the industry and will provide uswith a competitive advantage as we seek additional business with newand existing customers.

Intellectual Property

Weown or have licenses to use a large number of patents relating to alarge number of products and processes. We currently have more than 600patents in the United States and more than 2,000 worldwide withremaining durations ranging from less than one year to 20 years. Theaverage remaining duration is approximately nine years. We also haveover 360 registered U.S. trademarks covering our products. Our rightsunder such patents and licenses and trademarks are of significantimportance in the operation of the business. Patents related to ourTRASAR technology and trademarks related to Nalco Company and Calgonare considered material to our business. We believe that no otherpatent, trademark or license is material to ourbusiness.

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Raw Materials

We do notdepend on any one supplier for a material amount of our raw materials,but certain important raw materials are obtained from a sole source ora few major suppliers. Major requirements for key raw materials aretypically purchased pursuant to multi-year contracts. On a consolidatedbasis, we purchased direct materials totaling approximately $923million in 2005, up from $768  million in 2004. Direct materialpurchases include raw and packaged material purchases. Even with therapid growth of costs for some products in 2005, our largest collectiveraw material purchases — for a family of vinyl acetate polymers— represented less than 1.5 percent of sales or just over 5percent of direct material purchases.

WorkingCapital

To better serve and meet the needs of ourcustomers, approximately 16% of our inventories are maintainedat customer sites as consignment inventories. Although the consignmentinventory model is in place throughout the world, its use is mostprevalent in North America. The decision to put inventory at acustomer’s site is usually based on a request from the customer.Tracking systems are in place to follow movements, and inventoryquantities at each site are monitored to prevent inventory build-ups.Periodic physical counts are performed to validate the tracking systemsand to ensure that the accounting records are properlystated.

Employees

As of December  31,2005, we had nearly 10,900 employees, of whom approximately 4,400 wereemployed in North America, approximately 3,000 were employed in Europe,the Middle East and Africa, approximately 1,600 were employed in LatinAmerica and approximately 1,900 were employed in the Pacific region. Weconsider relations with our employees to be good.

EnvironmentalMatters

Governmental requirements relating to thedischarge of materials into the environment, environmental remediationor otherwise relating to the protection of the environment, have had,and will continue to have, an effect on us and on our operations. Undersome environmental laws, we may be jointly and severally liable for thecosts of environmental contamination on or emanating from ourproperties and at off-site locations where we disposed or arranged forthe disposal or treatment of regulated materials, and may also incurliability for damages to natural resources. We have made and continueto make expenditures for projects relating to the environment. We arecurrently identified as a potentially responsible party at contaminatedwaste disposal sites. We do not anticipate that these matters willresult in material liabilities; however, there can be no assurance thatdiscovery of previously unknown conditions or other circumstances willnot require significant expenditures by us.

We do notbelieve that compliance with environmental protection laws andregulations will have a material effect upon our capital expenditures,results of operations or competitive position although there can be noassurance to that effect. Our capital expenditures for environmentalcontrol facilities during 2006 are not expected to be material to us.We believe that any liability that may result from the resolution ofenvironmental matters for which sufficient information is available tosupport cost estimates will not have a material adverse effect on ourfinancial position or results of operations. However, we cannot predictthe effect on our financial position of expenditures for aspects ofcertain matters for which there is insufficient information. Inaddition, we cannot predict the effect of compliance with environmentallaws and regulations with respect to unknown environmental matters orfuture environmental requirements on our financial position, results ofoperations, liquidity or cash flow.

We have been named asa defendant in a series of multi-party lawsuits based on our claimedinvolvement in the supply of allegedly hazardous materials. Theplaintiffs seek damages for alleged personal injury resulting fromexposure to various chemicals. Certain of our operations at Garyville,Louisiana are also the subject of an ongoing environmental, civil andcriminal investigation. We 

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believe the investigation may relate to thestorage of used acid and leakage from a wastewater treatment tank, butcould include other matters. We do not believe that any materialcontamination resulted from this storage and leakage. Although webelieve a grand jury has not been empanelled and we would vigorouslycontest any criminal claims against us, we cannot predict the outcomeof this investigation. These matters have had de minimis impact on ourbusiness historically and we do not anticipate that these matterspresent any material risk to our business in the future.Notwithstanding our past experience, we cannot predict with certaintythe outcome of any such investigations, toxic tort claims or theinvolvement we might have in such matters in thefuture.

We are also subject to a variety of regulationsrelating to the production and handling of our products; and theconduct and condition of our production facilities. We do not believethat these regulatory requirements will have a material effect oncapital expenditures, results of operations or competitiveposition.

ExecutiveOfficers

|                    |  |                                                                                                               |  |        |    |        |  |  |  |  |
|--------------------|--|---------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
| Name               |  | Title                                                                                                         |  | Age    |
| Dr.William H.Joyce |  | Director,Chairman of the Board and Chief ExecutiveOfficer                                                     |  |   | 70 |   |
| WilliamJ. Roe      |  | Executive Vice President, Chief Operating Officer andPresident, Industrial and Institutional Servicesdivision |  |   | 52 |   |
| Bradley J.Bell     |  | Executive Vice President and Chief FinancialOfficer                                                           |  |   | 53 |   |
| Daniel M.Harker    |  | Senior Vice President, Global SupplyChain                                                                     |  |   | 53 |   |
| John L. Gigerich   |  | VicePresident, Administration                                                                                 |  |   | 63 |   |
| Mark W.Irwin       |  | Group Vice President and President, Paper Servicesdivision                                                    |  |   | 41 |   |
| Louis L. Loosbrock |  | GroupVice President and President, Pacificdivision                                                            |  |   | 52 |   |
|                    |

**Dr. William H.Joyce** has been our Chairman and Chief Executive Officer sincejoining us in November  2003. Dr.  Joyce was formerly theChairman and Chief Executive Officer of Hercules Incorporated, aposition he took in May  2001. Dr.  Joyce had beenChairman, President and Chief Executive Officer of Union CarbideCorporation from 1996 through May  2001. From 1995 to 1996,Dr.  Joyce was President and Chief Executive Officer, and from1993 to 1995 he was President of Union Carbide. Prior to that, he hadbeen Chief Operating Officer of Union Carbide since1992.

**William J. Roe** is our Executive VicePresident, Chief Operating Officer and President, Industrial andInstitutional Services division. Mr.  Roe has served as ChiefOperating Officer since 2001 and as Executive Vice President,Industrial and Institutional Services division, since November2003. Prior to that, in 1999, Mr.  Roe was elected Group VicePresident and President of the Pacific and Process divisions. In 1998,Mr.  Roe served as Vice President and President of the Processdivision. He was named District Manager for the Mining and MineralProcessing Chemicals Group in 1989, Marketing Manager in 1991 andpromoted to General Manager in 1994. Mr.  Roe joined our Companyin 1978 as an Assistant Chemist in Research. Mr.  Roe waspromoted to Chemist in 1979, Senior Chemist and Group Leader in 1981and to Technical Director in 1985.

**Bradley J. Bell**has been our Executive Vice President and Chief Financial Officer sincejoining us in November  2003. From 1997 to 2003, Mr.  Bellserved as Senior Vice President and Chief Financial Officer of Rohm andHaas Company. Prior to that, Mr.  Bell served as Vice Presidentand Treasurer of both the Whirlpool Corporation, from 1987 to 1997, andthe Bundy Corporation, from 1980 to 1987.

**DanielM.  Harker** is our Senior Vice President, Global Supply Chain.Mr.  Harker has served in this capacity since 2003. In 2001,Mr.  Harker became Vice President, Supply Chain, after joiningNalco from Calgon in 2000 as Vice President, Manufacturing andLogistics. From 1998 to 2000, Mr.  Harker served as VicePresident of Global Operations for Calgon. Prior to that, Mr.Harker was with Rhone Poulenc from 1993 to 1998, and Union Carbide from1975 to 1993.

**John L. Gigerich** is theCompany’s Vice President, Administration, joining the Company inJuly  2004. Between 2000 and June  2004, Mr.Gigerich was an independent consultant to major companies forinformation technology, procurement and logistics projects. From 1993through 1999, Mr.  Gigerich was 

17

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Vice President for Union CarbideCorporation, managing its information technology, procurement, andproduct distribution. Before that, Mr.  Gigerich spent 28 yearsin the banking industry. He is a Certified PublicAccountant.

**Mark W. Irwin** is our Group VicePresident and President of our Paper Services division. Mr.Irwin joined our Paper Services division in January  2003 asStrategic Business Unit Leader for Global Accounts, and three monthslater was named Group Vice President and President, Paper Servicesdivision. Mr.  Irwin most recently served as Global BusinessLeader of General Electric Specialty Materials’ Silicones Groupfrom 1997 to 2003. Prior to that, Mr.  Irwin was a NationalProduct Manager, Silicones and Silanes, for Witco Australia —OSi Specialties from 1995 to 1997. Mr.  Irwin served from 1987 to1995 as Regional Sales Manager, Industrial Chemicals for ICIAustralia.

**Louis L. Loosbrock** is our Group VicePresident and President of our Pacific division. Mr.  Loosbrockhas been President of the Pacific division since April  2003.Prior to that, Mr.  Loosbrock served as Group Vice President andPresident of our Pulp and Paper division from April  2002 toApril  2003. Mr.  Loosbrock served as General Manager,Global Mining from 1998 to 2002; Sales Manager from 1986 to 1989 and1991 to 1998; and Marketing Manager from 1989 to 1991. He began hiscareer with our Company in 1977 as a Sales Representative in the MiningGroup and in 1981 was named District Manager.

WebSite

The Company’s Web site address iswww.nalco.com. The Company makes available free of charge on or throughits Web site its Code of Ethical Business Conduct, Officer Code ofEthics, annual report on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, and all amendments to those reports assoon as reasonably practicable after such material is electronicallyfiled with or furnished to the Securities and Exchange Commission. TheWeb site also includes the Company’s corporate governanceguidelines and the charters for the audit, compensation, nominating andcorporate governance and safety, health and environment committees ofthe Board of Directors.

ITEM 1A. RISKFACTORS

If we are unable to respond to thechanging needs of a particular industry and to anticipate, respond toor utilize changing technologies and develop new offerings, it couldbecome more difficult for us to respond to our customers' needsand cause us to be less competitive.

We havehistorically been able to maintain our market positions and marginsthrough continuous innovation of products and development of newofferings to create value for our customers. Recent innovations anddevelopment that we have relied on include our 3D TRASAR system forcontrolling and monitoring chemical feed and our recent relationshipwith USFilter, which permits us to sell equipment solutions as part ofa bundled offering to our water treatment customers. We may not besuccessful in continuing to make similar innovations in the future. Ourfuture operating results will depend to a significant extent on ourability to continue to introduce new products and applications and todevelop new offerings that offer distinct value for our customers. Manyof our products may be affected by rapid technological change and newproduct introductions and enhancements. We expect to continue toenhance our existing products and identify, develop and manufacture newproducts with improved capabilities and make improvements in ourproductivity in order to maintain our competitive position. We intendto devote sizeable resources to the development of new technologicallyadvanced products and systems and to continue to devote a substantialamount of expenditures to the research and development functions of ourbusiness. However, we cannot assure youthat:

|  |              |                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------|
|  | •  | we will be successful indeveloping new products or systems or bringing them to market in atimely manner; |

|  |              |                                                                                                       |
|--|--------------|-------------------------------------------------------------------------------------------------------|
|  | •  | products or technologiesdeveloped by others will not render our offerings obsolete ornon-competitive; |

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | the market will acceptour innovations; |

18

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|  |              |                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------|
|  | •  | our competitorswill not be able to produce our core non-patented products at a lowercost; |

|  |              |                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------|
|  | •  | we will have sufficient resourcesto research and develop all promising new technologies and products;or |

|  |              |                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------|
|  | •  | significant research and developmentefforts and expenditures for products will ultimately provesuccessful. |

Our ability to anticipate, respond to andutilize changing technologies is crucial because we compete with manycompanies in each of the markets in which we operate. For example, wecompete with hundreds of companies in the water treatment chemicalsmarket, including our largest global competitor, GE Water Technologies.Other companies, including Ecolab, Inc., are expected to enter orincrease their presence in our markets. Our ability to competeeffectively is based on a number of considerations, such as product andservice innovation, product and service quality, distributioncapability and price. Moreover, water treatment for industrialcustomers depends on the particular needs of the industry. For example,the paper industry requires a specific water quality for bleachingpaper; certain industrial boilers require demineralized water; thepharmaceuticals industry requires ultra pure water for processing; and,in the case of municipal services, water treatment includesclarification for re-use, sludge dewatering and membrane ultrafiltration. We may not have sufficient financial resources to respondto the changing needs of a particular industry and to continue to makeinvestments in our business, which could cause us to become lesscompetitive.

Our substantial leverage could harm ourbusiness by limiting our available cash and our access to additionalcapital.

We are highly leveraged. As ofDecember  31,  2005, our total consolidated indebtednesswas $3,266.8  million and we had $250.0  million ofborrowing capacity available under our revolving credit facility(excluding $28.2  million of outstanding letters ofcredit).

Our high degree of leverage could have importantconsequences for you, including thefollowing:

|  |              |                                                                                                                                                                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | It may limit our and oursubsidiaries' ability to obtain additional financing for workingcapital, capital expenditures, product development, debt servicerequirements, acquisitions and general corporate or other purposes onfavorable terms or at all; |

|  |              |                                                                                                                                                                                                                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | A substantialportion of our subsidiaries' cash flows from operations must bededicated to the payment of principal and interest on their and ourindebtedness and thus will not be available for other purposes,including operations, capital expenditures and future businessopportunities; |

|  |              |                                                                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | It may limit our abilityto adjust to changing market conditions and place us at a competitivedisadvantage compared to those of our competitors that are lesshighly-leveraged; |

|  |              |                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------|
|  | •  | It may restrict ourability to make strategic acquisitions or cause us to makenon-strategic divestitures; and |

|  |              |                                                                                                                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | We maybe more vulnerable than a less leveraged company to a downturn ingeneral economic conditions or in our business, or we may be unable tocarry out capital spending that is important to ourgrowth. |

At December  31,  2005, we had$1,278.6  million of variable rate debt. A 1% increase inthe average interest rate would increase future interest expense byapproximately $12.8  million peryear.

19

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Despite our currentleverage, we may still be able to incur substantially more debt. Thiscould further exacerbate the risks that we and our subsidiariesface.

We and our subsidiaries may be able toincur substantial additional indebtedness in the future. The terms ofthe indentures governing our subsidiaries' notes do not fullyprohibit us or our subsidiaries from doing so. Nalco Company'srevolving credit facility provides commitments of up to $250.0million, all of which would have been available for future borrowingsas of December  31,  2005 (excluding $28.2  millionof outstanding letters of credit). If new debt is added to our currentdebt levels, the related risks that we and our subsidiaries now facecould intensify.

Our subsidiaries' debt agreementscontain restrictions that limit our flexibility in operating ourbusiness.

Nalco Company's senior creditagreement and the indentures governing our subsidiaries' existingnotes contain a number of significant covenants that, among otherthings, restrict our or our subsidiaries' abilityto:

|  |              |                               |
|--|--------------|-------------------------------|
|  | •  | incur additionalindebtedness; |

|  |              |                                                                                 |
|--|--------------|---------------------------------------------------------------------------------|
|  | •  | pay dividends on or makeother distributions or repurchase certain capitalstock; |

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | make certaininvestments; |

|  |              |                                                              |
|--|--------------|--------------------------------------------------------------|
|  | •  | enter into certain types oftransactions with our affiliates; |

|  |              |                                                             |
|--|--------------|-------------------------------------------------------------|
|  | •  | limitdividends or other payments by restrictedsubsidiaries; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | use assets as security inother transactions; and |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | sell certainassets or merge with or into other companies. |

In addition,under the senior credit agreement, Nalco Holdings LLC is required tosatisfy and maintain specified financial ratios and tests. Eventsbeyond our control may affect its ability to comply with thoseprovisions and Nalco Holdings LLC may not be able to meet those ratiosand tests. The breach of any of these covenants would result in adefault under the senior credit agreement and the lenders could electto declare all amounts borrowed under the senior credit agreement,together with accrued interest, to be due and payable and could proceedagainst the collateral securing that indebtedness.

The termsof Nalco Company’s senior credit agreement fully prohibit NalcoHoldings LLC and its subsidiaries from paying dividends or otherwisetransferring their assets to us.

Our operations areconducted through our subsidiaries and our ability to make payments onany obligations we may have is dependent on the earnings and thedistribution of funds from our subsidiaries. However, the terms ofNalco Company's senior credit agreement fully prohibit NalcoHoldings LLC and its subsidiaries from paying dividends or otherwisetransferring their assets to us. Accordingly, under the terms of thecredit agreement, Nalco Holdings LLC and its subsidiaries may not makedividends to Nalco Finance Holdings LLC.

Our significantnon-U.S. operations expose us to global economic and political changesthat could impact our profitability.

We havesignificant operations outside the United States, including jointventures and other alliances. We conduct business in approximately 130countries and, in 2005, approximately 55% of our net salesoriginated outside the United States. There are inherent risks in ourinternational operations,including:

|  |              |                                             |
|--|--------------|---------------------------------------------|
|  | •  | exchange controls andcurrency restrictions; |

|  |              |                                                                                        |
|--|--------------|----------------------------------------------------------------------------------------|
|  | •  | currencyfluctuations and devaluations, such as the recent currency crisis inArgentina; |

|  |              |                            |
|--|--------------|----------------------------|
|  | •  | tariffs and tradebarriers; |

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | export duties andquotas; |

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|  |              |                                                                                |
|--|--------------|--------------------------------------------------------------------------------|
|  | •  | changes in localeconomic conditions, such as the economic decline inVenezuela; |

|  |              |                                 |
|--|--------------|---------------------------------|
|  | •  | changes in laws andregulations; |

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | difficulties in managinginternational operations and the burden of complying with foreignlaws; |

|  |              |                                                               |
|--|--------------|---------------------------------------------------------------|
|  | •  | exposure to possible expropriationor other governmentactions; |

|  |              |                                                                              |
|--|--------------|------------------------------------------------------------------------------|
|  | •  | restrictions on our ability torepatriate dividends from our subsidiaries;and |

|  |              |                                                                                          |
|--|--------------|------------------------------------------------------------------------------------------|
|  | •  | unsettled political conditions andpossible terrorist attacks against American interests. |

Ourinternational operations also expose us to different local politicaland business risks and challenges. For example, in certain countries weare faced with periodic political issues that could result in currencyrisks or the risk that we are required to include local ownership ormanagement in our businesses. We are also periodically faced with therisk of economic uncertainty, such as recent strikes and currencyexchange controls in Venezuela, which has impacted our business inthese countries. Other risks in international business also includedifficulties in staffing and managing local operations, including ourobligations to design local solutions to manage credit risk to localcustomers and distributors.

Our overall success as aglobal business depends, in part, upon our ability to succeed indiffering economic, social and political conditions. We may notcontinue to succeed in developing and implementing policies andstrategies that are effective in each location where we do business,which could negatively affect ourprofitability.

Environmental, safety and production andproduct regulations or concerns could subject us to liability for finesor damages, require us to modify our operations and increase ourmanufacturing and delivery costs.

We are subject tothe requirements of environmental and occupational safety and healthlaws and regulations in the United States and other countries. Theseinclude obligations to investigate and clean up environmentalcontamination on or from properties or at off-site locations where weare identified as a responsible party. For example, we are currentlyidentified as a potentially responsible party at certain wastemanagement sites. Additionally, the U.S. Environmental ProtectionAgency is conducting a civil and criminal investigation ofenvironmental practices at our Louisiana manufacturing facility. Wehave also been named as a defendant in a series of multi-party andindividual lawsuits based on claims of exposure to hazardous materials.We cannot predict with certainty the outcome of any such tort claims orthe involvement we might have in such matters in the future and therecan be no assurance that the discovery of previously unknown conditionswill not require significant expenditures. In each of these chemicalexposure cases, our insurance carriers have accepted the claims on ourbehalf and our financial exposure is limited to the amount of ourdeductible; however, we cannot predict the number of claims that we mayhave to defend in the future and we may not be able to continue tomaintain such insurance.

The U.K. Health and SafetyExecutive (‘‘HSE’’) has sent us notice thatit intends to initiate legal proceedings against our U.K. subsidiaryunder the Health and Safety at Work Act. The place of these proceedingsis not indicated in the notice. This notice references a legionellaoutbreak that is claimed to have originated at cooling towers owned byone of the subsidiary’s customers. The HSE indicates that theproceedings will relate to the cleaning of these cooling towers. TheCompany has not received any specific charges or claims for relief, butwill, in any event, defend and refute any contention that it hasviolated any law.

We have made and will continue to makecapital and other expenditures to comply with environmentalrequirements. Although we believe we are in material compliance withenvironmental law requirements, we may not have been and will not atall times be in complete compliance with all of these requirements, andmay incur material costs, including fines or damages, or liabilities inconnection with these requirements in excess of amounts we havereserved. In addition, these requirements are complex, changefrequently and have tended to become more stringent over time. In thefuture, we may discover previously unknown contamination that couldsubject us to additional expense and liability. In addition, futurerequirements could be more onerous than current requirements.

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The activities at our productionfacilities are subject to a variety of federal, state, local andforeign laws and regulations (‘‘productionregulations’’). Similarly, the solid, air and liquidwaste streams produced from our production facilities are subject to avariety of regulations (‘‘wasteregulations’’) and many of our products and the handlingof our products are governmentally regulated or registered(‘‘product regulations’’). Each of theproduction, waste and product regulations is subject to expansion orenhancement. Any new or tightened regulations could lead to increasesin the direct and indirect costs we incur in manufacturing anddelivering products to our customers. For example, the EuropeanCommission is currently considering imposing new chemical registrationrequirements on the manufacturers and users of all chemicals, not justthose which are considered to be harmful or hazardous. Should suchregulations, referred to as REACH, be imposed, all chemical companieswill be faced with additional costs to conduct their businesses inEuropean Commission countries. Similarly, certain of our products areused to assist in the generation of tax credits for our customers, andthe termination or expiration of such tax credits could impact the saleof these products. In addition to an increase in costs in manufacturingand delivering products, a change in production regulations or productregulations could result in interruptions to our business andpotentially cause economic or consequential losses should we be unableto meet the demands of our customers for products.

We maynot be able to achieve all of our expected costsavings.

A variety of risks could cause us not toachieve the benefits of our expected cost savings, including, amongothers, the following:

|  |              |                                                                 |
|--|--------------|-----------------------------------------------------------------|
|  | •  | higher thanexpected severance costs related to staffreductions; |

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | higher than expectedretention costs for employees that will beretained; |

|  |              |                                                                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | delays in the anticipatedtiming of activities related to our cost-saving plan, including thereduction of inefficiencies in our administrative and overheadfunctions; and |

|  |              |                                                               |
|--|--------------|---------------------------------------------------------------|
|  | •  | other unexpected costsassociated with operating the business. |

We haveexperienced, and may continue to experience, difficulties in securingthe supply of certain raw materials we and our competitors need tomanufacture some of our products and increases in raw materialcosts.

In 2004 and 2005, certain of the raw materialsused by us and other chemical companies have faced supply limitation.If these limitations continue or become more severe, we risk shortfallsin our sales and the potential of claims from our customers if we areunable to fully meet contractual requirements.

Also,limitations on raw materials and rising prices for underlying productshave resulted in price increases for raw materials we purchase, and werisk further price increases for these materials. Our margins have beenimpacted by such raw materials price increases and will continue to beimpacted if we are unable to pass such increases through to ourcustomers.

Our pension plans are currently underfunded andwe may have to make significant cash payments to the plans, reducingthe cash available for our business.

We sponsorvarious pension plans worldwide that are underfunded and requiresignificant cash payments. For example, in 2004 and 2005, wecontributed $13.7  million and $30.0  million,respectively, to our pension plans. We are required to contribute atleast $65.9  million to the U.S. pension plan in 2006. We mayalso opt to make additional voluntary contributions to various pensionplans worldwide in 2006.

As of December  31,2005, our worldwide pension plans were underfunded by $434.2million (based on the actuarial assumptions used for purposes ofStatement of Financial Accounting Standards (SFAS) No. 87,Employers’ Accounting for Pensions). Our U.S. pensionplans are subject to the Employee Retirement Income Security Act of1974, or ERISA. Under ERISA, the Pension Benefit Guaranty 

22

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Corporation, or PBGC, has the authority toterminate an underfunded pension plan under certain circumstances. Inthe event our U.S. pension plans are terminated for any reason whilethe plans are underfunded, we will incur a liability to the PBGC thatmay be equal to the entire amount of the underfunding. Prior to theclosing of the Acquisition, the PBGC requested and received informationfrom us regarding our business, the Transactions and our pension plans.The PBGC took no further action with respect to theirinquiry.

We have recorded a significant amount of goodwilland other identifiable intangible assets, and we may never realize thefull value of our intangible assets.

We haverecorded a significant amount of goodwill and other identifiableintangible assets, including customer relationships, trademarks anddeveloped technologies. Goodwill and other net identifiable intangibleassets were approximately $3.4  billion as of December31,  2005, or 62% of our total assets. Goodwill, whichrepresents the excess of cost over the fair value of the net assets ofthe businesses acquired, was approximately $2.2  billion as ofDecember  31,  2005, or 40% of our total assets.Goodwill and net identifiable intangible assets are recorded at fairvalue on the date of acquisition and, in accordance with SFAS No. 142,Goodwill and Other Intangible Assets, will be reviewed at leastannually for impairment. Impairment may result from, among otherthings, deterioration in our performance, adverse market conditions,adverse changes in applicable laws or regulations, including changesthat restrict the activities of or affect the products and servicessold by our business, and a variety of other factors. Some of theproducts and services we sell to our customers, including but notlimited to those in the synthetic fuel industry, are dependent uponlaws and regulations, and changes to such laws or regulations couldimpact the demand for our products and services. The amount of anyquantified impairment must be expensed immediately as a charge toresults of operations. Depending on future circumstances, it ispossible that we may never realize the full value of our intangibleassets. Any future determination of impairment of a significant portionof goodwill or other identifiable intangible assets would have anadverse effect on our financial condition and results ofoperations.

Our future success will depend in part onour ability to protect our intellectual property rights, and ourinability to enforce these rights could permit others to offer productscompetitive with ours, which could reduce our ability to maintain ourmarket position and maintain our margins.

We rely onthe patent, trademark, copyright and trade secret laws of the UnitedStates and other countries to protect our intellectual property rights.However, we may be unable to prevent third parties from using ourintellectual property without authorization. The use of ourintellectual property by others could reduce any competitive advantagewe have developed or otherwise harm our business. If we had to litigateto protect these rights, any proceedings could be costly, and we maynot prevail.

We have obtained and applied for several U.S.and foreign trademark registrations, and will continue to evaluate theregistration of additional service marks and trademarks, asappropriate. Our pending applications may not be approved by theapplicable governmental authorities and, even if the applications areapproved, third parties may seek to oppose or otherwise challenge theseregistrations. A failure to obtain trademark registrations in theUnited States and in other countries could limit our ability to protectour trademarks and impede our marketing efforts in thosejurisdictions.

Our Sponsors have significant influence on usand may have conflicts of interest with us or you in thefuture.

As of December  31,  2005, ourSponsors beneficially own approximately 37.2% of the equity ofNalco Holding Company. In addition, our sponsors have the right todesignate collectively four nominees for election to the board ofdirectors. Representatives of our Sponsors occupy three of the nineseats on our board of directors. As a result, our Sponsors havesignificant influence over our decisions to enter into any corporatetransaction and may be able to prevent any transaction that requiresthe approval of our board of directors or the equityholders, regardlessof whether or not other members of our board of directors orequityholders believe that any such transactions are in their own bestinterests. Additionally, our Sponsors are in the business of makinginvestments in companies and may from time 

23

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to time acquire and hold interests inbusinesses that compete directly or indirectly with us. Our Sponsorsmay also pursue acquisition opportunities that may be complementary toour business, and as a result, those acquisition opportunities may notbe available to us.

ITEM 1B. UNRESOLVED STAFFCOMMENTS

None.

ITEM 2.PROPERTIES

Our principal administrative offices andresearch center are located in Naperville, Illinois. These facilitiesare leased. We maintain administrative and research facilities in SugarLand, Texas and Leiden, Netherlands, both of which we own, and inSingapore, which we lease. We position our manufacturing locations andwarehouses in a manner to permit ready access to our customers. Weoperate 18 plants in North America, 6 plants in Latin America, 11plants in Europe and the Middle East and 13 plants in the Pacificregion. We own all of our major manufacturing facilities and we alsohave a network of small leased sales offices in the United States and,to a lesser extent, in other parts of the world.

ITEM 3. LEGALPROCEEDINGS

Various claims, lawsuits and administrativeproceedings are pending or threatened against us and our subsidiaries,arising from the ordinary course of business with respect tocommercial, contract, intellectual property, product liability,employee, environmental and other matters. Historically, we have notfaced any litigation matters or series of litigation matters that havehad a material adverse impact on our business. In addition, we do notbelieve that there is any pending or reasonably predictable litigation,either individually or in the aggregate, that is likely to have amaterial adverse effect on our financial condition, results ofoperations, liquidity or cash flow. However, we cannot predict withcertainty the outcome of any litigation or the potential for futurelitigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

Omitted pursuant to General Instruction I(2)(c)to Form 10-K.

24

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PARTII

|                   |                                                                                                                      |
|-------------------|----------------------------------------------------------------------------------------------------------------------|
| **ITEM 5.**  | **MARKET FORREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES** |

The Company is adirect wholly owned subsidiary of Nalco Holding Company and,accordingly, there is no market for the Company’s limitedliability company interests represented by units.

|               |                         |
|---------------|-------------------------|
| ITEM 6.  | SELECTED FINANCIAL DATA |

The Successorfinancial statements include the consolidated audited financialstatements of Nalco Finance Holdings LLC and its subsidiaries. ThePredecessor financial statements include the combined financialstatements of Ondeo Nalco Group, which include the consolidatedfinancial statements of Ondeo Nalco Company and the combined financialstatements of the Nalco International SASSubsidiaries.

The following selected financial data hasbeen derived from the audited consolidated and combined financialstatements of Nalco Finance Holdings LLC and its subsidiaries as ofDecember  31,  2005, 2004, 2003, 2002 and 2001, and for theperiods from January  1,  2005 to December31,  2005, January  1,  2004 to December31,  2004, November  4,  2003 to December31,  2003, January  1,  2003 to November3,  2003, January  1,  2002 to December31,  2002, and January  1,  2001 to December31,  2001. The selected financial data as of and for the yearended December  31,  2000 has been derived from theCompany’s unaudited internal financial reporting toSuez.

You should read the following data inconjunction with ‘‘Management’s Discussion andAnalysis of Financial Condition and Results ofOperations’’ and the consolidated and combined financialstatements included elsewhere in this Annual Report.

25

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|                                              |  |                           |         |                           |  |                                         |         |                                       |  |                        |          |         |  |             |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|---------------------------|---------|---------------------------|--|-----------------------------------------|---------|---------------------------------------|--|------------------------|----------|---------|--|-------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Successor                 |         | Predecessor               |
| (dollarsin millions, except per sharedata)   |  | YearendedDecember31, 2005 |         | YearendedDecember31, 2004 |  | November 4, 2003throughDecember31, 2003 |         | January 1,2003throughNovember 3, 2003 |  | Year ended December31, |
| 2002                                         |  | 2001                      |         | 2000(1)                   |
|                                         |  |                      |         |                      |  |                                    |         |                                  |  |                   |          |    |  | (unaudited) |
| **Statementof Operations Data:**             |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |  |   |    |    |
| Netsales                                     |  | $                         | 3,312.4 |                      |  | $                                       | 3,033.3 |                                  |  | $                      | 460.1    |    |  | $           | 2,306.5 |    |  | $      | 2,644.3 |    |  | $      | 2,619.7 |    |  | $      | 2,147.1 |    |
| Operatingcosts andexpenses:                  |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |
| Costsof productsold                          |  |                      | 1,830.7 |                      |  |                                    | 1,578.4 |                                  |  |                   | 249.9    |    |  |        | 1,122.9 |    |  |   | 1,276.0 |    |  |   | 1,278.0 |    |  |   |    |    |
| Selling,administrative, and researchexpenses |  |                      | 1,030.2 |                      |  |                                    | 1,039.2 |                                  |  |                   | 174.7    |    |  |        | 892.4   |    |  |   | 982.1   |    |  |   | 1,031.2 |    |  |   |    |    |
| Impairmentof goodwill(2)                     |  |                      | — |                      |  |                                    | — |                                  |  |                   | —  |    |  |        | 244.4   |    |  |   | — |    |  |   | — |    |  |   |    |    |
| Amortizationof intangible assets(2)          |  |                      | 81.6    |                      |  |                                    | 96.3    |                                  |  |                   | 15.4     |    |  |        | 68.9    |    |  |   | 89.2    |    |  |   | 171.3   |    |  |   |    |    |
| In-processresearch anddevelopment            |  |                      | — |                      |  |                                    | 122.3   |                                  |  |                   | —  |    |  |        | — |    |  |   | — |    |  |   | 1.3     |    |  |   |    |    |
| Businessoptimization expenses(3)             |  |                      | 25.6    |                      |  |                                    | 1.7     |                                  |  |                   | 0.8      |    |  |        | 20.3    |    |  |   | 32.8    |    |  |   | 172.3   |    |  |   |    |    |
| Operatingcosts andexpenses                   |  |                      | 2,968.1 |                      |  |                                    | 2,837.9 |                                  |  |                   | 440.8    |    |  |        | 2,348.9 |    |  |   | 2,380.1 |    |  |   | 2,654.1 |    |  |   | 2,156.5 |    |
| Operatingearnings(loss)                      |  |                      | 344.3   |                      |  |                                    | 195.4   |                                  |  |                   | 19.3     |    |  |        | (42.4   | )  |  |   | 264.2   |    |  |   | (34.4   | )  |  |   | (9.4    | )  |
| Otherincome (expense), net(4)                |  |                      | 4.0     |                      |  |                                    | (57.0   | )                                |  |                   | (2.8     | )  |  |        | (17.3   | )  |  |   | 3.4     |    |  |   | (12.4   | )  |  |   |    |    |
| Interestincome                               |  |                      | 8.5     |                      |  |                                    | 10.1    |                                  |  |                   | 0.6      |    |  |        | 7.1     |    |  |   | 7.8     |    |  |   | 8.8     |    |  |   |    |    |
| Interestexpense                              |  |                      | (258.0  | )                    |  |                                    | (251.1  | )                                |  |                   | (49.6    | )  |  |        | (32.7   | )  |  |   | (38.5   | )  |  |   | (44.4   | )  |  |   |    |    |
| Earnings(loss) before incometaxes            |  |                      | 98.8    |                      |  |                                    | (102.6  | )                                |  |                   | (32.5    | )  |  |        | (85.3   | )  |  |   | 236.9   |    |  |   | (82.4   | )  |  |   |    |    |
| Incometax provision(benefit)                 |  |                      | 54.3    |                      |  |                                    | 47.5    |                                  |  |                   | (8.3     | )  |  |        | 68.7    |    |  |   | 105.2   |    |  |   | (1.8    | )  |  |   |    |    |
| Minorityinterests                            |  |                      | (5.7    | )                    |  |                                    | (5.8    | )                                |  |                   | 0.1      |    |  |        | (4.2    | )  |  |   | (3.3    | )  |  |   | (3.4    | )  |  |   |    |    |
| Netearnings(loss)                            |  | $                         | 38.8    |                      |  | $                                       | (155.9  | )                                |  | $                      | (24.1    | )  |  | $           | (158.2  | )  |  | $      | 128.4   |    |  | $      | (84.0   | )  |  | $      | (58.4   | )  |
| **NetEarnings (Loss) Per Share****Data(5):** |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |
| **Statementof Cash FlowsData:**              |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |
| Netcash provided by (usedfor):               |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |
| Operatingactivities                          |  | $                         | 201.8   |                      |  | $                                       | 237.1   |                                  |  | $                      | 88.7     |    |  | $           | 144.4   |    |  | $      | 323.1   |    |  | $      | 414.3   |    |  |   | — |    |
| Investingactivities                          |  |                      | (77.7   | )                    |  |                                    | (72.9   | )                                |  |                   | (4,145.1 | )  |  |        | (12.3   | )  |  |   | (126.1  | )  |  |   | (463.5  | )  |  |   | — |    |
| Financingactivities                          |  |                      | (125.9  | )                    |  |                                    | (231.8  | )                                |  |                   | 4,130.3  |    |  |        | (234.2  | )  |  |   | (232.7  | )  |  |   | 133.9   |    |  |   | — |    |
| **OtherFinancial Data(unaudited):**          |  |                      |    |                      |  |                                    |    |                                  |  |                   |     |    |  |        |    |    |  |   |    |    |  |   |    |    |
| EBITDA(6)                                    |  | $                         | 557.5   |                      |  | $                                       | 343.2   |                                  |  | $                      | 54.5     |    |  | $           | 106.8   |    |  | $      | 488.2   |    |  | $      | 245.7   |    |  |   | — |    |
| Non-cashcharges included in EBITDA(7)        |  |                      | 19.8    |                      |  |                                    | 174.4   |                                  |  |                   | 23.9     |    |  |        | 268.7   |    |  |   | 31.2    |    |  |   | 31.1    |    |  |   | — |    |
| Unusualitems included in EBITDA(8)           |  |                      | 6.4     |                      |  |                                    | 59.7    |                                  |  |                   | 6.3      |    |  |        | 48.5    |    |  |   | (33.3   | )  |  |   | 9.9     |    |  |   | — |    |
| Capitalexpenditures, net(9)                  |  |                      | 74.6    |                      |  |                                    | 91.8    |                                  |  |                   | 15.6     |    |  |        | 85.6    |    |  |   | 108.3   |    |  |   | 114.8   |    |  |   | — |    |
| Depreciation                                 |  |                      | 133.3   |                      |  |                                    | 114.3   |                                  |  |                   | 22.5     |    |  |        | 101.8   |    |  |   | 134.7   |    |  |   | 124.6   |    |  |   | — |    |
| Amortization                                 |  |                      | 81.6    |                      |  |                                    | 96.3    |                                  |  |                   | 15.4     |    |  |        | 68.9    |    |  |   | 89.2    |    |  |   | 171.3   |    |  |   | — |    |
|                                              |

|                                                                                      |  |                   |         |                   |  |        |         |        |  |        |         |             |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|--------|---------|-------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                 |  | Successor         |         | Predecessor       |
|                                                                                 |  | Asof December 31, |         | As of December31, |
| (dollarsinmillions)                                                                  |  | 2005              |         | 2004              |  | 2003   |         | 2002   |  | 2001   |         | 2000(1)     |
|                                                                                 |  |              |         |              |  |   |         |   |  |   |         | (unaudited) |
| **BalanceSheet Data:**                                                               |  |              |    |              |  |   |    |   |  |   |    |        |  |   |    |   |  |   |    |   |  |   |    |   |
| Cash and cashequivalents                                                             |  | $                 | 30.8    |              |  | $      | 33.2    |   |  | $      | 100.0   |        |  | $      | 120.5   |   |  | $      | 146.0   |   |  | $      | 71.6    |   |
| Workingcapital(10)                                                                   |  |              | 498.1   |              |  |   | 424.2   |   |  |   | 398.7   |        |  |   | 240.8   |   |  |   | 208.0   |   |  |   | 193.8   |   |
| Property,plant and equipment, net(11)                                                |  |              | 755.3   |              |  |   | 847.3   |   |  |   | 865.6   |        |  |   | 823.2   |   |  |   | 856.2   |   |  |   | 821.6   |   |
| Totalassets                                                                          |  |              | 5,554.9 |              |  |   | 5,934.5 |   |  |   | 6,163.8 |        |  |   | 6,486.4 |   |  |   | 6,512.2 |   |  |   | 6,406.6 |   |
| Totaldebt (including lease obligation and current portion of long-term debt)(11)(12) |  |              | 3,266.8 |              |  |   | 3,442.5 |   |  |   | 3,314.7 |        |  |   | 776.2   |   |  |   | 859.2   |   |  |   | 526.1   |   |
| Totalstockholders’investment                                                   |  |              | 680.4   |              |  |   | 694.3   |   |  |   | 1,069.0 |        |  |   | 3,589.2 |   |  |   | 3,734.4 |   |  |   | 4,011.8 |   |
| Offbalance sheet receivables facility(12)                                            |  |              | — |              |  |   | — |   |  |   | — |        |  |   | 87.0    |   |  |   | 101.0   |   |  |   | — |   |
|                                                                                      |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Pursuantto a tender offer completed on November  9,  1999, Suez,through its subsidiary, H2O Acquisition Co., or H2O, acquired virtuallyall of the outstanding shares of Nalco Chemical Company. In June1999, Degremont, a Suez subsidiary, acquired Calgon Corporation. Theacquisitions are included in the Predecessor’s operations fromthe dates of acquisition. Results from 2000 forward reflect the Suezpush down of purchase accounting to Nalco Chemical Company. InMarch  2001, Nalco Chemical Company’s name was changed toOndeo Nalco Company. Because the Predecessor reported to Suez in FrenchGAAP in 1999 and 2000, combined U.S. GAAP financial information in aformat similar to 2001-2005 is notavailable. |

|     |                                                                                                                                                                                 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The Predecessoradopted Statement of Financial Accounting Standards (SFAS) No. 142,Goodwill and Other Intangible Assets, as of January1,  2002. Under SFAS No. 142, goodwill and |

26

----

|  |                                                                                                                                                                                                                                                                                                    |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | intangible assets deemed to have indefinitelives are no longer amortized but are subject to annual impairmenttests. In the period from January  1,  2003 throughNovember  3,  2003, the Predecessor took a goodwillimpairment charge of $244.4  million based on the price paid inthe Acquisition. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | The Successorincurred business optimization expenses in connection with its programsto redesign and optimize its business and work processes. ThePredecessor incurred significant business optimization expenses as aresult of the global integration of the Nalco/Exxon Energy Chemicals,L.P. (Nalco/Exxon) joint venture and the implementation of global costreduction programs in the sales, marketing, manufacturing and supportservices operations. The costs incurred include severance, assetwrite-offs, facility closing costs and other items. See‘‘Management’s Discussion and Analysis ofFinancial Condition and Results of Operations — BusinessOptimizationExpenses.’’ |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Otherincome (expense), net consists of monitoring fees paid by the Successorto affiliates of the Sponsors, management fees paid by the Predecessorto Suez, capital gains/(losses) on the disposals of assets, franchisetaxes, equity earnings of unconsolidated subsidiaries, recognized gainsand losses on foreign currency transactions and other miscellaneousincome (expense). Also included for the year ended December31,  2004 were a $35.0  million charge for the terminationof the Monitoring Fee Agreement with affiliates of the Sponsors and a$13.7  million charge for the early repayment of senior discountnotes. |

|     |               |
|-----|---------------|
| (5) | Notapplicable |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | EBITDA, a measureused by management to measure operating performance, is defined as netearnings plus interest, taxes, depreciation and amortization. EBITDA isreconciled to net earnings (loss) in the following table. Ourmanagement believes EBITDA is useful to the investors because it isfrequently used by securities analysts, investors and other interestedparties in the evaluation of companies in our industry. EBITDA is not arecognized term under U.S. GAAP and does not purport to be analternative to net earnings (loss) as an indicator of operatingperformance or to cash flows from operating activities as a measure ofliquidity. Because not all companies use identical calculations, thispresentation of EBITDA may not be comparable to other similarly titledmeasures of other companies. Additionally, EBITDA is not intended to bea measure of free cash flow for management’s discretionary use,as it does not consider certain cash requirements such as interestpayments, tax payments and debt service requirements. The amounts shownfor EBITDA as presented herein differ from the amounts calculated underthe definition of EBITDA used in our debt instruments. The definitionof EBITDA used in our debt instruments is further adjusted for certaincash and non-cash charges and is used to determine compliance withfinancial covenants and our ability to engage in certain activitiessuch as incurring additional debt and making certain payments. |

The following is a reconciliation of net earnings (loss) toEBITDA:

|                                 |  |                            |  |                           |        |                                       |  |                                      |  |                      |  |        |       |        |  |        |       |         |  |  |  |  |  |  |  |  |
|---------------------------------|--|----------------------------|--|---------------------------|--------|---------------------------------------|--|--------------------------------------|--|----------------------|--|--------|-------|--------|--|--------|-------|---------|--|--|--|--|--|--|--|--|
|                            |  | Successor                  |  | Predecessor               |
|                            |  | YearendedDecember 31, 2005 |  | Year endedDecember31,2004 |        | November4,2003 throughDecember31,2003 |  | January1,2003 throughNovember 3,2003 |  | YearendedDecember31, |
| (dollarsinmillions)             |  | 2002                       |  | 2001                      |
| Netearnings(loss)               |  | $38.8                      |  | $                         | (155.9 | )                                |  | $(24.1)                              |  | $(158.2)             |  | $      | 128.4 |   |  | $      | (84.0 | )  |
| Interestexpense,net             |  | 249.5                      |  |                      | 241.0  |                                  |  | 49.0                                 |  | 25.6                 |  |   | 30.7  |   |  |   | 35.6  |    |
| Incometax provision(benefit)    |  | 54.3                       |  |                      | 47.5   |                                  |  | (8.3)                                |  | 68.7                 |  |   | 105.2 |   |  |   | (1.8  | )  |
| Depreciation                    |  | 133.3                      |  |                      | 114.3  |                                  |  | 22.5                                 |  | 101.8                |  |   | 134.7 |   |  |   | 124.6 |    |
| Amortizationof intangibleassets |  | 81.6                       |  |                      | 96.3   |                                  |  | 15.4                                 |  | 68.9                 |  |   | 89.2  |   |  |   | 171.3 |    |
| EBITDA                          |  | $557.5                     |  | $                         | 343.2  |                                  |  | $54.5                                |  | $106.8               |  | $      | 488.2 |   |  | $      | 245.7 |    |
|                                 |

|     |                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------|
| (7) | EBITDA,as defined above, was reduced by the following non-cash charges, eachof which is further discussed below: |

27

----

|                                                |  |                           |  |                           |         |                                       |  |                                      |  |                      |  |        |         |        |  |        |         |        |  |  |  |  |  |  |  |  |
|------------------------------------------------|--|---------------------------|--|---------------------------|---------|---------------------------------------|--|--------------------------------------|--|----------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|--|--|--|--|--|--|
|                                           |  | Successor                 |  | Predecessor               |
|                                           |  | YearendedDecember 31,2005 |  | Year endedDecember31,2004 |         | November4,2003 throughDecember31,2003 |  | January1,2003 throughNovember 3,2003 |  | YearendedDecember31, |
| (dollars inmillions)                           |  | 2002                      |  | 2001                      |
| Impairmentofgoodwill                           |  | $—                  |  | $                         | — |                                  |  | $—                             |  | $244.4               |  | $      | — |   |  | $      | — |   |
| In-processresearch anddevelopment              |  | —                   |  |                      | 122.3   |                                  |  | —                              |  | —              |  |   | — |   |  |   | 1.3     |   |
| Inventorystep-up                               |  | —                   |  |                      | 14.6    |                                  |  | 21.2                                 |  | —              |  |   | — |   |  |   | — |   |
| Assetwrite-offs                                |  | 2.8                       |  |                      | 1.1     |                                  |  | —                              |  | 4.2                  |  |   | 18.3    |   |  |   | 17.8    |   |
| Profitsharing and 401(k) expense funded bySuez |  | 13.2                      |  |                      | 27.8    |                                  |  | 4.0                                  |  | 20.0                 |  |   | 12.1    |   |  |   | 12.0    |   |
| Other                                          |  | 3.8                       |  |                      | 8.6     |                                  |  | (1.3)                                |  | 0.1                  |  |   | 0.8     |   |  |   | — |   |
|                                           |  | $19.8                     |  | $                         | 174.4   |                                  |  | $23.9                                |  | $268.7               |  | $      | 31.2    |   |  | $      | 31.1    |   |
|                                                |

Impairmentof Goodwill

Goodwill impairment of $244.4  millionwas recorded by the Predecessor in accordance with SFAS No. 142,Goodwill and Other Intangible Assets. Goodwill was evaluated forimpairment based on the purchase price for thePredecessor.

In-process Research andDevelopment

In-process research and development was aone-time charge of $122.3  million recorded during the year endedDecember  31,  2004, as a result of purchase accountingentries related to the Acquisition. In 2001, the Predecessor recorded$1.3  million of purchased in-process research and development,resulting from the redemption of Exxon’s 40% interest inthe Nalco/Exxon joint venture.

Inventory StepUp

As a result of purchase accounting for theAcquisition, the Successor wrote up its inventory to fair value andsubsequently charged the write up to cost of sales as the inventory wassold. The Successor statements of operations reflect the inventorystep-up in cost of product sold.

AssetWrite-Offs

In conjunction with our integration andprocess improvement initiatives, the Predecessor wrote off assetsconsisting primarily of a $5.0  million investment in start upventures in 2003, $9.6  million of assets related to obsoletesoftware systems in 2002 and $17.8  million of PORTA-FEEDstainless steel containers in 2001 as a result of a physicalinventory.

Profit Sharing and 401(k) Expense Funded bySuez

In conjunction with the Acquisition, the Successorentered into an agreement with Suez whereby Suez will reimburse theCompany for certain profit sharing and 401(k) matching contributionsmade by the Company to the Profit-SharingTrust.

Other

Other non-cash charges includethe non-cash impact on earnings of our equity investments and minorityinterests. Successor non-cash charges includes the non-cash portion ofrent expense under the sublease that the Successor entered into withSuez in conjunction with theAcquisition.

|     |                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | In addition to incurringnon-cash charges and business optimization expenses, our EBITDA wasimpacted by the following unusual (income) expenses, each of which isfurther discussed below: |

28

----

|                                           |  |                           |         |                            |  |                                        |         |                                      |  |                        |         |         |  |        |      |        |  |        |       |         |  |        |     |        |  |  |
|-------------------------------------------|--|---------------------------|---------|----------------------------|--|----------------------------------------|---------|--------------------------------------|--|------------------------|---------|---------|--|--------|------|--------|--|--------|-------|---------|--|--------|-----|--------|--|--|
|                                      |  | Successor                 |         | Predecessor                |
|                                      |  | YearendedDecember 31,2005 |         | Year endedDecember31, 2004 |  | November 4,2003 throughDecember31,2003 |         | January 1,2003 throughNovember3,2003 |  | Year ended December31, |
| (dollarsinmillions)                       |  | 2002                      |         | 2001                       |
| Pensionand OPEB settlement andcurtailment |  | $                         | 0.5     |                       |  | $                                      | 0.1     |                                 |  | $                      | (0.1    | )  |  | $      | 7.9  |   |  | $      | (47.6 | )  |  | $      | 0.4 |   |
| Loss(gain) on sales, net ofexpenses       |  |                      | 4.1     |                       |  |                                   | 0.2     |                                 |  |                   | 1.1     |    |  |   | 12.4 |   |  |   | (7.8  | )  |  |   | 0.9 |   |
| Otherunusualitems                         |  |                      | 1.8     |                       |  |                                   | 59.4    |                                 |  |                   | 5.3     |    |  |   | 25.7 |   |  |   | 19.4  |    |  |   | 6.6 |   |
| Suezmanagement fees,net                   |  |                      | — |                       |  |                                   | — |                                 |  |                   | — |    |  |   | 2.5  |   |  |   | 2.7   |    |  |   | 2.0 |   |
|                                      |  | $                         | 6.4     |                       |  | $                                      | 59.7    |                                 |  | $                      | 6.3     |    |  | $      | 48.5 |   |  | $      | (33.3 | )  |  | $      | 9.9 |   |
|                                           |

Pensionand Other Postretirement Benefits (OPEB) Settlement andCurtailment

In 2003, the Predecessor incurred $7.9million of curtailment and settlement charges primarily as a result ofthe transfer of senior executives back to Suez prior to theAcquisition. In the second half of 2002 the Predecessor amended itsU.S. defined benefit pension plan and its postretirement medical anddental plans, resulting in a non-cash curtailment gain of $49.4million, partially offset by $1.8  million of settlementcharges.

Loss (Gain) on Sales, Net ofExpenses

In 2003, the Predecessor recorded a loss of$5.3  million on the sale of its South African operations as wellas $8.1  million of one-time costs associated with theAcquisition. In 2002, the Predecessor sold its performance additivesbusiness, resulting in a gain of $12.4  million, and incurred$1.5  million of disposal costs and losses associated with itsdivestiture of Hydrosan. In 2001, the Predecessor incurred a$9.0  million loss on the sale of Calgon’s formerheadquarters facility that was partially offset by a $7.0million gain on the sale of the Predecessor’s corporateaircraft.

Other Unusual Items

TheSuccessor’s results for the year ended December31,  2004 were impacted by the effects of certain unusual items,including a $35.0  million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors, a$13.7  million charge for the early repayment of senior discountnotes, $1.4  million of expenses associated with changing thename of the Company’s operating company from Ondeo Nalco Companyto Nalco Company, $1.8  million in connection with the re-auditof the Predecessor’s 2001 financial statements, $1.9million of expenses related to the registration of publicly tradablesenior notes and senior subordinated notes that were exchanged forprivately placed notes issued in connection with the Acquisition, andother expenses resulting from the Acquisition.

During theperiod from November  4,  2003 through December31,  2003, the Successor’s results were impacted by theeffects of certain other unusual items, most notably $3.3million of legal and environmental costs related to events thatoccurred prior to Suez’ 1999 acquisition of Nalco ChemicalCompany and litigation costs not covered by the Company’s excessliability insurance policy.

The most significantother unusual item affecting the Predecessor’s results duringthe period from January  1,  2003 through November3,  2003 was a $10.4  million charge for the settlement ofan interest rate swap. Other unusual items for the year endedDecember  31,  2002 included legal and environmentalexpenses of $6.5  million, consultancy costs for processreengineering studies associated with our cost reduction programs andother consultancy services performed on behalf of Suez of $7.1million, and one-time pension and benefit expenses primarily related tothe redesign of our Australian benefit plan and the application ofregulatory changes in Germany of $4.7  million. Executiveseverance and relocation expense of $5.8  million accounted formost of the other unusual items during the year ended December31,  2001.

Suez Management Fees,Net

In connection with the Acquisition,agreements under which fees were paid by the Predecessor to Suez, orreceived from Suez, were terminated.

29

----

|           |                                                                 |
|-----------|-----------------------------------------------------------------|
| (9)  | Capitalexpenditures are net of proceeds from disposal ofassets. |

|            |                                                                                                                                                                                                                                      |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10)  | Working capitalis defined as current assets (excluding cash and cash equivalents) lesscurrent liabilities (excluding short-term debt and current portion oflong-term debt) and excluding intercompany balances calculated asfollows: |

|                                           |  |                   |         |                   |  |        |         |         |  |        |         |         |  |        |        |         |  |        |        |         |  |  |
|-------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                      |  | Successor         |         | Predecessor       |
|                                      |  | Asof December 31, |         | As of December31, |
| (dollarsinmillions)                       |  | 2005              |         | 2004              |  | 2003   |         | 2002    |  | 2001   |
| Currentassets less currentliabilities     |  | $                 | 506.3   |              |  | $      | 439.7   |    |  | $      | 446.8   |    |  | $      | (275.0 | )  |  | $      | (441.2 | )  |
| Lesscash and cashequivalents              |  |              | (30.8   | )            |  |   | (33.2   | )  |  |   | (100.0  | )  |  |   | (120.5 | )  |  |   | (146.0 | )  |
| Lessrelated party receivables andpayables |  |              | — |              |  |   | — |    |  |   | — |    |  |   | 48.4   |    |  |   | (33.3  | )  |
| Plusshort-termdebt                        |  |              | 22.6    |              |  |   | 17.7    |    |  |   | 51.9    |    |  |   | 587.9  |    |  |   | 828.5  |    |
| Workingcapital asdefined                  |  | $                 | 498.1   |              |  | $      | 424.2   |    |  | $      | 398.7   |    |  | $      | 240.8  |    |  | $      | 208.0  |    |
|                                           |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Asa result of the Acquisition, the Successor engaged independentappraisers to assist in determining the fair value of property, plantand equipment in connection with our allocation of purchase price.Preliminary and final valuations from the appraisers are included inthe balances at December  31,  2003 and 2004, respectively.In December  2002, Ondeo Nalco Company entered into asale-leaseback of its Naperville, Illinois headquarters and researchfacility that was treated as a financing lease for accounting purposes.Concurrent with the Acquisition, on November  4,  2003, thelease was assigned to another Suez subsidiary that subleased theproperty to the Successor. The Successor accounts for the sublease asan operating lease and has excluded the headquarters and researchfacility from property, plant andequipment. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12)  | Total debtdoes not include the Predecessor’s historical off balance sheetreceivables facility. In December  2001, Ondeo Nalco Companyentered into an agreement that allowed it to periodically transferundivided percentage ownership interests in a revolving pool of most ofits U.S. trade receivables to a multi-seller conduit administered by anindependent financial institution. The Predecessor accounted for thetransfer of undivided percentage ownership interest in the receivablesto the conduit as sales under SFAS No. 140, Accounting for Transfersand Servicing of Financial Assets and Extinguishments ofLiabilities. The loss on the sale of the undivided interests in thereceivables was $1.5  million and $1.8  million for theperiod from January  1,  2003 through November3,  2003 and the year ended December  31,  2002,respectively, and is included in interest expense. The undividedinterest in receivables that were transferred but not ultimately soldto the conduit (‘‘retained interest’’) isclassified in trade accounts receivable in the balance sheet. Theretained interest was $56.6  million at December31,  2002 and $49.0  million at December  31,2001. This program was unwound prior to closing of the Acquisition. TheSuccessor treats its new receivables facility as a general financingagreement resulting in the funding and related receivables being shownas liabilities and assets, respectively, on its consolidated balancesheet and the costs associated with the receivables facility beingrecorded as interest expense. |

|               |                                                                                           |
|---------------|-------------------------------------------------------------------------------------------|
| ITEM 7.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OFOPERATIONS |

The following discussion andanalysis of our financial condition and results of operations includesperiods prior to the formation of Nalco Finance Holdings LLC. It alsodiscusses periods prior to the Transactions, defined as the acquisitionof Ondeo Nalco Group, comprised of Nalco Company and NalcoInternational SAS Subsidiaries, by Nalco Holdings and the relatedfinancings in connection with such acquisition (the‘‘Acquisition’’). Accordingly, thediscussion and analysis of historical periods prior to the Transactionsdo not reflect the significant impact that the Transactions have had onus. In addition, the statements in the discussion and analysisregarding industry outlook, our expectations regarding the performanceof our business and the other non-historical statements in thediscussion and analysis are forward-looking statements. Theseforward-looking statements are subject to numerous risks anduncertainties, including, but not limited to, the risks 

30

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and uncertainties described in Item 1A,‘‘Risk Factors.’’ Our actual results maydiffer materially from those contained in or implied by anyforward-looking statements. You should read the following discussiontogether with the consolidated and combined financial statements ofNalco Finance Holdings LLC included elsewhere in thisreport.

‘‘Safe Harbor’’Statement Under Private Securities Litigation Reform Act of1995

This Annual Report for the fiscal year endedDecember  31,  2005 (the ‘‘AnnualReport’’) includes ‘‘forward-lookingstatements’’ within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. These forward-looking statements include statements concerningour plans, objectives, goals, strategies, future events, future revenueor performance, capital expenditures, financing needs, plans orintentions relating to acquisitions, business trends and otherinformation that is not historical information. When used in thisAnnual Report, the words ‘‘estimates,’’‘‘expects,’’‘‘anticipates,’’‘‘projects,’’‘‘plans,’’‘‘intends,’’ ‘‘believes,’’ ‘‘forecasts,’’ orfuture or conditional verbs, such as‘‘will,’’‘‘should,’’‘‘could’’ or‘‘may,’’ and variations of such words orsimilar expressions are intended to identify forward-lookingstatements. All forward-looking statements, including, withoutlimitation, management’s examination of historical operatingtrends and data are based upon our current expectations and variousassumptions. Our expectations, beliefs and projections are expressed ingood faith and we believe there is a reasonable basis for them.However, there can be no assurance that management’sexpectations, beliefs and projections will be achieved.

There are a number of risks and uncertainties thatcould cause our actual results to differ materially from theforward-looking statements contained in this Annual Report.Additionally, important factors could cause our actual results todiffer materially from the forward-looking statements we make in thisAnnual Report. As stated in Item 1A, ‘‘RiskFactors,’’ such risks, uncertainties and other importantfactors include, amongothers:

|              |                          |
|--------------|--------------------------|
| •  | our substantialleverage; |

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| •  | limitations onflexibility in operating our business contained in our debtagreements; |

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | increases ininterest rates as a result of our variable rateindebtedness; |

|              |                                    |
|--------------|------------------------------------|
| •  | pricing pressurefrom ourcustomers; |

|              |                                     |
|--------------|-------------------------------------|
| •  | technologicalchange and innovation; |

|              |                                              |
|--------------|----------------------------------------------|
| •  | risksassociated with our non-U.S.operations; |

|              |                                         |
|--------------|-----------------------------------------|
| •  | fluctuations incurrency exchange rates; |

|              |                                                    |
|--------------|----------------------------------------------------|
| •  | highcompetition in the markets in which weoperate; |

|              |                                                                |
|--------------|----------------------------------------------------------------|
| •  | adverse changes toenvironmental, health and safetyregulations; |

|              |                                               |
|--------------|-----------------------------------------------|
| •  | operating hazardsin our productionfacilities; |

|              |                                           |
|--------------|-------------------------------------------|
| •  | inability toachieve expected costsavings; |

|              |                                                  |
|--------------|--------------------------------------------------|
| •  | difficulties insecuring the raw materials weuse; |

|              |                                                                                              |
|--------------|----------------------------------------------------------------------------------------------|
| •  | our significant pensionbenefit obligations and the current underfunding of our pensionplans; |

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | our ability to realizethe full value of our intangibleassets; |

|              |                                                                                                                                   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------|
| •  | our ability to attractand retain skilled employees, particularly research scientists,technical sales professionals and engineers; |

|              |                                                            |
|--------------|------------------------------------------------------------|
| •  | our ability to protect ourintellectual property rights;and |

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | the possibility that ourowners’ interests will conflict with ours oryours. |

There may be other factors that may causeour actual results to differ materially from the forward-lookingstatements.

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All forward-lookingstatements attributable to us or persons acting on our behalf applyonly as of the date of this Annual Report and are expressly qualifiedin their entirety by the cautionary statements included in this AnnualReport. We undertake no obligation to update or revise forward-lookingstatements which may be made to reflect events or circumstances thatarise after the date made or to reflect the occurrence of unanticipatedevents.

Impact of the Acquisition and Related FinancingTransactions

On November  4,  2003, pursuantto a Stock Purchase Agreement between Nalco Holdings LLC, a Delawarelimited liability company, and Suez(‘‘Suez’’) and certain of its affiliates,Nalco Holdings LLC (the ‘‘Successor’’)acquired the net assets of Ondeo Nalco Group (the‘‘Predecessor’’). The aggregate purchaseprice was $4,102.9  million in cash, after giving effect todirect costs of the Acquisition, closing date working capital andindebtedness purchase price adjustments, a post-closing working capitaland indebtedness purchase price adjustment which was agreed to by usand Suez on March  25,  2004, and additional purchase priceadjustments related to taxes paid or tax refunds received by us forperiods prior to the Acquisition. The purchase price was financed byequity investments totaling $991.9  million from a consortium ofprivate equity funds controlled by the Blackstone Group, ApolloManagement, L.P., and investment partnerships affiliated with TheGoldman Sachs Group, Inc.; an equity investment of $10.0  millionfrom Dr. William H. Joyce, our Chairman and Chief Executive Officer;term loans of approximately $1,600  million; and the issuance of$665  million aggregate principal amount of73⁄4% senior notes due 2011,€200  million aggregate principal amount of73⁄4% senior notes due 2011, $465million aggregate principal amount of 8 7/8%senior subordinated notes due 2013 and €200  millionaggregate principal amount of 9% senior subordinated notes due2013. As a result, our interest expense currently is, and will continueto be, higher than it was prior to the Acquisition.

TheStock Purchase Agreement provided for certain adjustments of thepurchase price, including adjustments based on the closing workingcapital and indebtedness (as both are defined in the Stock PurchaseAgreement) of Ondeo Nalco Group at the date of the Acquisition. OnMarch  25,  2004, the Company and Suez agreed to a$25.6  million working capital adjustment payable to the Companyplus interest.

We accounted for the Acquisition using thepurchase method of accounting and, accordingly, the Acquisitionresulted in a new basis of accounting for us. We allocated the purchaseprice on the basis of our estimate of the fair value of the underlyingassets acquired and liabilities assumed. We retained third partyprofessionals to assist in the determination of a fair value of ourpension and post retirement obligations. We also engaged independentappraisers to assist in determining the fair values of property, plantand equipment and intangible assets acquired, including purchasedin-process research and development, trade names, trademarks, developedtechnology and customer relationships. We received final values fromthe appraisers in 2004, and we completed our allocation of purchaseprice. The excess of the total purchase price over the estimated fairvalue of the net assets acquired at closing was allocated to goodwill,and this indefinite lived asset is subject to annual impairment review.Goodwill in the transaction, based on the final allocation of thepurchase price, totaled $2,149.7  million. An allocation was madefor the fair value of research and development activities that, as ofthe date of the Acquisition, had commenced, but had not yet beencompleted, and have no alternative future use (in-process research anddevelopment). In conjunction with the independent appraisers, weestimated the fair value of in-process research and development andrecorded a one-time charge of $122.3  million during the yearended December  31,  2004 as a result of the final purchaseaccounting entries related to the Acquisition.

Inconjunction with the Acquisition, we formulated a plan to exit orrestructure certain activities. We recorded liabilities of $35.5million, primarily for employee severance and related costs, inconnection with our plan to exit or restructure certain activities. Asof December  31,  2005, $33.0  million has beencharged against this accrual. We expect that we will complete theseactivities by mid-2006.

Business OptimizationExpenses

We incurred significant, nonrecurring businessoptimization expenses as a result of the implementation of the redesignand optimization of business and work processes, global cost reductionprograms in 

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sales, marketing, manufacturing and supportservice functions, and the global integration of our businesses, asfollows:

|                                  |  |                            |         |                             |  |                                        |         |                                      |  |        |         |        |  |        |         |        |  |  |
|----------------------------------|--|----------------------------|---------|-----------------------------|--|----------------------------------------|---------|--------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                             |  | Successor                  |         | Predecessor                 |
| (dollarsin millions)             |  | Year endedDecember31, 2005 |         | Year ended December 31,2004 |  | November 4,2003 throughDecember31,2003 |         | January 1,2003 throughNovember3,2003 |
| Business process optimization(1) |  | $                          | 25.6    |                        |  | $                                      | 1.7     |                                 |  | $      | — |   |  | $      | — |   |
| 2002business realignment(2)      |  |                       | — |                        |  |                                   | — |                                 |  |   | 0.8     |   |  |   | 18.8    |   |
| Nalco/Exxonintegration(3)        |  |                       | — |                        |  |                                   | — |                                 |  |   | — |   |  |   | 1.5     |   |
|                             |  | $                          | 25.6    |                        |  | $                                      | 1.7     |                                 |  | $      | 0.8     |   |  | $      | 20.3    |   |
|                                  |

|           |                              |
|-----------|------------------------------|
| (1)  | BusinessProcess Optimization |

In addition to our plan to exitor restructure certain activities that was formulated in conjunctionwith the Acquisition, we continue to redesign and optimize our businessand work processes. Business process optimization expenses,representing employee severance and related costs, were $25.6million and $1.7  million for the years ended December31,  2005 and December  31,  2004, respectively. Weexpect to incur business process optimization expenses of approximately$10.0  million in 2006.

|           |                          |
|-----------|--------------------------|
| (2)  | 2002 BusinessRealignment |

During 2002, we realigned our supportfor the petroleum, petrochemical, pulp and paper industries to provideintegrated process improvement and water treatment sales and service tokey customers, primarily in North America. As a result, we incurredexpenses for severance, outplacement, and employee relocations forabout 100 personnel.

|           |                        |
|-----------|------------------------|
| (3)  | Nalco/ExxonIntegration |

As a result of acquiring Exxon’sinterest in the Nalco/Exxon joint venture in 2001, we incurred costsrelated to integrating the operations of the joint venture with ourother operations, including severance, legal and taxfees.

Critical Accounting Policies andEstimates

RevenueRecognition

Non-Contract Billings. Weuse a variety of shipping terms that determine the passage of title forour products. We have a policy of monitoring delivery terms and cut-offdates to ensure that revenue is properly recorded. In specific cases,when title passage is based upon ultimate receipt by the customer (FOBdestination) using a third-party carrier, it is necessary to estimatethe delivery time and the corresponding impact on revenuerecognition.

We issue credit memos for a variety ofreasons, including product returns, billing and price adjustments. Thecredit memos are often related to a previous billing event and mayimpact the amount of revenue recorded. We monitor credit memo activitylevels and include an estimate as a component of the revenuerecognition reserve.

ContractBillings. Contract billings are also reviewed as part of therevenue recognition process to align the periodic billings withservices performed.

Impairment of Long-Lived Assets OtherThan Intangibles

We conduct periodic reviews foridle equipment and review business plans for possible impairmentimplications. PORTA-FEED stainless steel containers, utilized to shipchemicals, represent approximately 7.5% of our property, plantand equipment and are managed globally to optimize the delivery ofchemicals to customer and company sites around the world. Due to theirhigh mobility, 

33

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there is a risk that PORTA-FEEDs could bedamaged or lost in transit. We perform continuous cycle counts of ourPORTA-FEEDs and when such counts are inconsistent with our trackingsystem, we investigate the discrepancy in order to locate thecontainer. If the PORTA-FEED is not found, we write off the assetimmediately.

We capitalize qualifying costs incurred inthe acquisition and development of software for internal use, includingthe costs of the software, materials, consultants, interest, andpayroll and payroll-related costs for employees dedicated to thedevelopment. We must use our judgment in determining whether the directcosts of materials and services consumed in developing or obtaininginternal-use computer software and an employee’s time and travelexpenses directly associated with developing software are recoverableand should be capitalized. We base our determination on the nature andthe extent of the activity that the employee is performing. Asignificant portion of our capitalized software costs relates to ourSAP implementation.

Goodwill and Other IntangibleAssets

Carrying values of goodwill, customerrelationships, trademarks, trade names, patents, developed technologyand other intangible assets are reviewed periodically for possibleimpairment using a discounted cash flow approach. The estimates andassumptions we use are consistent with the business plans and estimateswe use to manage operations and to make acquisition and divestituredecisions. The use of different assumptions would increase or decreasethe estimated value of future cash flows and would have increased ordecreased any impairment charge taken. Future outcomes may also differ.If we fail to achieve estimated volume and pricing targets, experienceunfavorable market conditions or achieve results that differ from ourestimates, then revenue and cost forecasts may not be achieved, and wemay be required to recognize additional impairmentcharges.

Pensions

Accounting for pensionsinvolves the selection of a discount rate and an expected rate ofreturn that we apply to a market-related value of plan assets. Thismethodology generally reduces the volatility of pension expense thatwould have otherwise resulted from changes in the value of the pensionplan assets and pension liability discount rates. In estimating thediscount rate, we look to rates of return on high quality, fixed-incomeinvestments that are expected to be available through the maturitydates of the pension benefits and receive one of the two highestratings given by a recognized ratings agency, and we review theassumption with our actuary.

The assets in the principaldomestic pension plan are diversified across equity and fixedincome investments. The investment portfolio has targetallocations of approximately 64% equity and 36%fixed income. Other assets such as real estate, hedge funds andprivate equity may be used judiciously to enhance portfolioreturns and diversification.

The expected long-term rateof return is established using historical market data for each assetclass as well as the target allocation. Historical markets areanalyzed and long-term historical relationships between equityand fixed income investments are preserved consistent with the widelyaccepted capital market principle that assets with highervolatility will generate a greater return over the long run.Active management is employed in most asset classes, which alsocontributes to the return assumption. The total weighted-averagereturn on each asset class supports our long-term expected rate ofreturn assumption.

We review our long-term rate of returnassumptions annually through comparison of our historical actual ratesof return with our expectations, consultation with our actuariesregarding the assumptions used by other large companies andconsultation with our investment managers regarding their expectationsfor future returns. While we believe our assumptions of future returnsare reasonable and appropriate, significant differences in our actualexperience or significant changes in our assumptions may materiallyaffect our pension obligations and our future pension expense. Theexpected long-term rate of return is applied to a calculated value ofplan assets, which recognizes changes in the fair value of plan assetsin a systematic manner over five years in determining pensionexpense.

34

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The net effect of changes inactuarial assumptions and experience has been deferred historically. Asa result of the Acquisition and the application of purchase accounting,all unamortized deferrals were eliminated as of the date of theAcquisition.

Other PostretirementBenefits

Accounting for other postretirementbenefits requires the selection of a discount rate and health care costtrend rates used to value benefit obligations. In estimating thediscount rate, we look to rates of return on high quality, fixed-incomeinvestments that receive one of the two highest ratings given by arecognized ratings agency and we review the assumption with ouractuary. We develop our estimate of the health care cost trend ratesthrough review of our recent health care cost trend experience anddiscussions with our actuary regarding the experience of similarcompanies.

Income Taxes

The Companyestimates its income tax consequences in each of the jurisdictions inwhich it operates in accordance with Statement of Financial AccountingStandards (‘‘SFAS’’) No. 109, Accountingfor Income Taxes. This results in recording deferred tax assets andliabilities in the consolidated balance sheet to recognize thetemporary differences caused by the timing of recognition of income andexpense for financial statement and tax purposes. Valuation allowancesare determined based on the realizability of the deferred tax assets.Relevant factors to determine the realizability of the assets includefuture taxable income, the expected timing of the reversal of temporarydifferences, tax planning strategies and the expiration dates of thevarious tax attributes. Valuation allowances are established for thoseassets that are determined to be more likely than not to expire withoutbenefit, or for which income of the proper character is notanticipated.

The effect of a valuation allowance expectedto be necessary for a deferred tax asset at the end of the year fororiginating deductible temporary differences and carryforwards areincluded in the annual effective tax rate for the year. The effect of achange in the beginning-of-the-year balance of a valuation allowanceresulting from a change in judgement about the realizability of therelated deferred tax asset in future years is recognized in the interimperiod in which the change occurs.

The tax positions takenby the Company are based on our interpretations of tax laws andregulations in the applicable federal, state and internationaljurisdictions. We believe that our tax returns properly reflect the taxconsequences of our operations, and that our reserves for taxcontingencies are appropriate and sufficient for the positions taken.However, these positions are subject to audit and review by the taxauthorities, which may result in future taxes, interest and penalties.Because of the uncertainty of the final outcome of these examinations,we have reserved tax contingencies (including related interest) forpositions that we consider the likelihood of being sustained to be lessthan probable. The tax reserves are reevaluated throughout the year,taking into account new legislation, regulations, case law and auditresults.

Environmental

Our business andoperations are subject to extensive environmental laws and regulationsgoverning, among other things, air emissions, wastewater discharges,the use and handling of hazardous substances, waste disposal and theinvestigation and remediation of soil and groundwater contamination. Aswith other companies engaged in similar manufacturing activities andproviding similar services, some risk of environmental liability isinherent in our operations.

We have been named as apotentially responsible party, or PRP, by the Environmental ProtectionAgency or state enforcement agencies at three waste sites where somefinancial contribution is or may be required. These agencies have alsoidentified many other parties who may be responsible for clean up costsat the waste disposal sites. Our financial contribution to remediatethese sites is expected to be minor. There has been no significantfinancial impact on us up to the present, nor is it anticipated thatthere will be in the future, as a result of these matters. We have madeand will continue to make provisions for these costs if our liabilitybecomes probable and when costs can be reasonablyestimated.

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Our operations at Garyville,Louisiana are the subject of a civil and criminal investigation by theUnited States Environmental Protection Agency and U.S. Department ofJustice which has included interviews with current and former employeesand document subpoenas. We believe the investigation may relate to thestorage of used acid and leakage from a wastewater treatment tank, butcould include other matters. We do not believe that any materialcontamination resulted from this storage and leakage. Although webelieve a grand jury has not been empanelled and we would vigorouslycontest any criminal claims against us, we cannot predict the outcomeof this investigation. We have also been named as a defendant in anumber of lawsuits alleging personal injury due to exposure tohazardous substances, including multi-party lawsuits alleging personalinjury in connection with our products and services. While we do notbelieve that based upon present information that any of these suitswill be material to us, there can be no assurance that theseenvironmental matters could not have, either individually or in theaggregate, a material adverse effect on our future financial conditionor results of operations.

Historically, our expendituresrelating to environmental compliance and clean up activities have notbeen significant. The environmental reserves represent our currentestimate of our proportional clean up costs and are based uponnegotiation and agreement with enforcement agencies, our previousexperience with respect to clean up activities, detailed review ofknown conditions, and information about other PRPs. The reserves arenot reduced by any possible recoveries from insurance companies orother PRPs not specifically identified. Although given the evolvingnature of environmental regulations, we cannot determine whether or nota material effect on future operations is reasonably likely to occur,we believe that the recorded reserve levels are appropriate estimatesof the potential liability. Although settlements will require futurecash outlays, it is not expected that such outlays will materiallyimpact our liquidity position, although there can be no assurance thatsuch impacts could not occur.

Executive LevelOverview

Despite the difficult challenges of raw materialcosts increases and shortages, coupled with unusually disruptivehurricanes, we managed to grow sales and earnings in 2005 whilegenerating cash to pay down debt. Absorbing the number of challenges wefaced while improving results and generating cash shows the strength ofour service-oriented business.

In 2005, we increased sales9.2% to $3.3  billion and improved net income to$38.8  million from a year-ago net loss of $155.9million.

Performance improvements did not come easily.The year put a tremendous strain on our employees, who worked harderthan ever to keep supply disruptions and other challenges fromimpacting the services, products and expertise we provide to customers.The financial results from this hard work fell short of both ourinternal expectations and variable incentive plan targets.

Cost savings played an important role in helping the companyimprove its results. For the year, structural cost savings and workprocess redesign efforts generated $89  million in benefits tooffset higher compensation costs, investments in selling and research,and other cost increases beyond purchased materials and freight. Ourperformance gap versus original expectations was caused primarily byhurricane-based costs of approximately $32  million, largepurchased material and freight cost increases and our usual lag inobtaining price increases.

Increased energy and materialcosts totaled about $166  million in 2005, versus price increasesfor the year of nearly $150  million. Although we obtained priceincreases in the fourth quarter higher than year-on-year costincreases, we clearly have more work to do in 2006 to capture enough inprice increases to match our higher costs over the past 18 months. In2004, costs were up $28.2  million over the prior year.

Price increases played a key role in our 7.2% organicsales growth in 2005. Real growth was up 2.2% as sales engineersfocused in the year on increasing price, resulting in 5.0%improvement. We define real growth as organic growth minus priceincreases designed to pass on higher purchased material and energycosts. From nominal sales growth of 9.2%, organic growthexcludes 1.3% in currency fluctuations and a 0.7%increase from the June  2004 creation of a joint venture inJapan.

36

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Sales increased organically by10.6% in Energy Services, 5.9% in Industrial andInstitutional Services, 4.6% in Paper Services and 11.9%in our Other segment, supported by very strong growth in India. Nominalsales in the Other segment increased 32.8%, gaining from fivemonths of sales consolidation from creation of the Katayama Nalco jointventure in Japan.

Our Energy Services business continuesto deliver strong results, despite substantial lost sales in the Gulfof Mexico following Hurricanes Katrina, Rita and Dennis. Although ourcustomers had initially expected to have nearly all Gulf operationsrunning by the end of 2005, we now expect it to be at least mid-year2006 before these operations are fully restored. Our Oil Field businessoverall grew strongly in 2005. We also saw very strong results in ourDownstream refining and petrochemical business, aided by strongperformance of our 3D TRASAR cooling water stress managementprogram.

We achieved the greatest level of pricingsuccess in the Industrial and Institutional Services business. Thatsuccess in pricing came at a cost, however, as our sales forces inNorth America and Europe were distracted from focusing as intently onreal growth. As we moved through the year, we improved our pricingskills. As we move into 2006, clearly gaining focus on generating realgrowth while continuing to properly capture price is a highpriority.

Obtaining price improvements has beenparticularly challenging in Paper Services. Our Paper Services businessfaced a tough customer environment in 2005. More importantly, thecompetitive environment was much slower to respond to cost pressuresthan in our other segments. While our Asia/Pacific paper business grewrapidly, this growth was not enough to offset price weakness in ourlarger North American and European paper business units. Throughout ourPaper business, we have developed offerings that are better able todrive customer value. We need to translate this improved customer valueinto better pricing.

Overall, we generated very strongresults in China, India, Brazil, Russia and the other Commonwealth ofIndependent States countries, as well as in key segments such asdeepwater oil, tissue and towel and membrane treatments. Expansion ofour 3D TRASAR cooling water stress management program contributed tosolid growth in our TRASAR-related cooling water business. Sales inthese high-growth areas continued to improve as strongly as they did in2004, even with the impact of hurricanes on our deepwater Gulf ofMexico business. The remainder of our business bore the brunt of theunusual market conditions in 2005.

During 2005,48% of Nalco's sales were in North America, 30% inEurope, 14% in Asia/Pacific and 8% in Latin America.Asia/Pacific and Latin America grew in their significance within theNalco portfolio. Operations in Europe struggled through the yearbecause of both work process and underlying economic health issues. Thecombination of improving European economies and process improvements wehave made — and continue to make — should enable ourEuropean business to get back to delivering real growth in2006.

We generated $121.5  million in Free Cash Flowfor the year, which we applied to debt reduction including $99million in voluntary reductions of Term Loan A. Free Cash Flow isdefined as net cash provided by operating activities, less capitalexpenditures and minority interestcharges.

|                                                |  |                            |       |         |  |  |
|------------------------------------------------|--|----------------------------|-------|---------|--|--|
| **(dollarsin millions)**                       |  | Year Ended December31,2005 |
| Net cash provided by operatingactivities       |  | $                          | 201.8 |    |
| Minorityinterests                              |  |                       | (5.7  | )  |
| Additions to property,plant, and equipment,net |  |                       | (74.6 | )  |
| Free cashflow                                  |  | $                          | 121.5 |    |
|                                                |

2006Outlook

Even with continued rising raw material costs andslower than projected recovery from the hurricanes, we believe arealistic target for 2006 is a near doubling of net income. Thisimprovement is expected without adding any provision for insurancerecovery related to the hurricanes. From our perspective 

37

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of the business, our 2006 improvement willbe good, but not quite as impressive as the projected net income numbermight suggest. For comparison, we are targeting a gain of about12% in Adjusted EBITDA (as defined by our debt covenants) from2005.

In our 2006 forecasts, we are assuming sales growthof about 7%, with more than half of the growth coming fromprice. This means that targeted real growth is expected to remain shortof the Company’s longer-term 5% base business growthtarget as efforts to obtain price are expected to continue to be adistraction from generating additional real sales growth. We areproceeding with our alternate channels program. All of our early trialslook good. Sales growth from alternate channels are not expected to bevisible initially, as this growth will be masked by planned declines insome low-margin portions of our Other segment business.

Given the global nature of our business, and the broadcross-section of the industries we serve — it is reasonable toassume that Nalco should minimally grow at a mix of world industrialproduction and world gross domestic product (GDP) growth rates. Growthat these rates, however, would leave us somewhat short of our targeted5% base business growth. As the cost/price environmentstabilizes over time, a number of external factors should help usexceed the world GDP/industrial production growth pace, and areimportant to some of the growth drivers we have identified for ourbusiness:

|              |                                                                                                                          |
|--------------|--------------------------------------------------------------------------------------------------------------------------|
| •  | In many parts of theworld, water is becoming scarcer, and of lower quality, requiringadditional recycling and treatment. |

|              |                                                                                                                                                         |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Crude oil is being taken fromharder-to-reach deepwater locations, and coming out of the ground withcontaminants that require more aggressive treatment. |

|              |                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Changes in pulp and paper marketconditions — with different wood sources and more recycledcontent — require additional services, chemicals, equipment andmonitoring and controlcapabilities. |

|              |                                                                                                                                                                                                                                                                                                                                                            |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | In many of theemerging markets, such as China, India, Russia and many countries inEastern Europe and parts of Latin America, manufacturing modernizationprovides an advantage to the very few global companies like Nalco withstrong technology and intellectual capital portfolios. This advantageis in addition to strong underlying market growthrates. |

|              |                                                                                                                                               |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Environmental controlscontinue to evolve and can also improve growth rates for our industryin many countries and across many industrysectors. |

|              |                                                                                           |
|--------------|-------------------------------------------------------------------------------------------|
| •  | The higher cost ofenergy improves the returns that our customers gain from Nalcoservices. |

Beyond the external factors that impact the sizeof our opportunity, we should also grow faster than worldGDP/industrial production by targeting our resources to the rightcustomer segments — deepwater oil, tissue and toweling, membranetreatments and many others. Our research and development investmentsare paying off with strong technology advantages in many industrysegments.

Our plans also call for year-over-year costs torise $100  million, based on the level of cost increases weexpect in the first quarter of 2006. A majority of this increase wasestablished prior to year-end 2005 and is carry-over impact into 2006.In addition to offsetting this expected growth in costs with priceincreases, we believe we can offset some cost increases in excess ofour expectations with higher prices, unless the increases are large orcome near the end of the year — when we would face our typicallag between incurring cost and capturing price.

For theyear, we also expect the following items to impact our earnings andcash flow:

|              |                                   |
|--------------|-----------------------------------|
| •  | Depreciation ofabout $135million. |

|              |                                    |
|--------------|------------------------------------|
| •  | Amortization of about$70  million. |

|              |                                                                                                                                                                  |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Effectivetax rate of about 50%, an improvement over 2005. With majorportions of our taxes fixed in nature, this effective rate drops aspre-tax earningsincrease. |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | Cash taxes expectedto be between $100-$110  million, up from nearly $81million in 2005. |

|              |                                                                                                                   |
|--------------|-------------------------------------------------------------------------------------------------------------------|
| •  | Net interestexpense in the range of $265-$270  million, of whichapproximately $230  million is to be paid incash. |

38

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|              |                                                  |
|--------------|--------------------------------------------------|
| •  | Capitalexpenditures of between $100-$105million. |

|              |                                                                                                                                                                              |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Pension funding ofabout $67 million, or approximately $20 million higher than expense,compared to 2005 funding of $30 million, which was about $14 millionless than expense. |

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | Workingcapital use of cash on the order of $40  million. |

|              |                                                                                                                                                                                                                        |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | In conjunction with theAcquisition, Suez has agreed to reimburse us for certain profit sharingcontributions made by us. As a result, we expect a Profit Sharingreimbursement from Suez forecasted at about $17million. |

The cash flow element we have the most ability toinfluence is working capital. We still have a significant amount ofimprovement in mind as we fix our internal processes in bothinventories and receivables. Because many of the process improvementswe are working on will not be fully installed until later in 2006, weare not expecting to obtain significant benefits during the year, butthese improvements should enable better working capital management aswe enter 2007.

Results of Operations

Year EndedDecember  31,  2005 Compared to the Year EndedDecember  31,  2004

Net salesfor the years ended December  31,  2005 and December31,  2004 may be compared asfollows:

|                                       |  |                 |         |                  |  |                                                |         |                     |  |                           |      |         |  |      |  |        |      |          |  |        |      |         |  |  |  |  |
|---------------------------------------|--|-----------------|---------|------------------|--|------------------------------------------------|---------|---------------------|--|---------------------------|------|---------|--|------|--|--------|------|----------|--|--------|------|---------|--|--|--|--|
|                                  |  | YearEnded       |         |             |  | Attributable to Changes inthe FollowingFactors |
| (dollarsin millions)                  |  | December31,2005 |         | December 31,2004 |  | %Change                                        |         | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial &InstitutionalServices |  | $               | 1,493.6 |             |  | $                                              | 1,396.1 |                |  |                      | 7.0  | %  |  | 1.2% |  |   | (0.1 | )%  |  |   | 5.9  | %  |
| EnergyServices                        |  |            | 897.1   |             |  |                                           | 806.6   |                |  |                      | 11.2 | %  |  | 1.3% |  |   | (0.7 | )%  |  |   | 10.6 | %  |
| PaperServices                         |  |            | 699.0   |             |  |                                           | 662.9   |                |  |                      | 5.4  | %  |  | 1.4% |  |   | (0.6 | )%  |  |   | 4.6  | %  |
| Other                                 |  |            | 222.7   |             |  |                                           | 167.7   |                |  |                      | 32.8 | %  |  | 0.7% |  |   | 20.2 | %   |  |   | 11.9 | %  |
| Netsales                              |  | $               | 3,312.4 |             |  | $                                              | 3,033.3 |                |  |                      | 9.2  | %  |  | 1.3% |  |   | 0.7  | %   |  |   | 7.2  | %  |
|                                       |

Netsales for the year ended December  31,  2005 were$3,312.4  million, a 9.2% increase from the$3,033.3  million reported for the year ended December31,  2004. On an organic basis, which excludes the impacts ofchanges in foreign currency translation rates and acquisitions anddivestitures, net sales were up 7.2%. Of this improvement,5.0% was attributed to price increases, while the remaining2.2% was driven by favorable sales growth broadly spread acrossour customer base. Despite lost sales in the Gulf of Mexico due tounusually disruptive hurricanes, the Energy Services division reporteda strong organic improvement in sales of 10.6%, more than halfof which represented growth. Strong performances were made by the OilField business, Downstream refining, and our petrochemical business.The Industrial and Institutional Services division reported organicgrowth of 5.9%, the majority of which was attributable to priceincreases with solid gains, exclusive of price increases, posted by ourwater treatment business in the Latin American and Pacific regions, aswell as our marine and Pacific region mining businesses. These gainswere offset by sales declines, exclusive of price increases, in NorthAmerica and, more notably, Europe. Difficulties in adapting workprocesses following our SAP system conversion in Europe onJanuary  1,  2005 and the generally slower economy in ourlargest western European markets were among the causes of the salesdecline in Europe. Higher sales during the three months endedDecember  31,  2004 was another contributing factor, asEuropean customers purchased in advance to avoid risking any potentialcomplications from the system conversion. Solid growth in LatinAmerica, rapid growth in the Pacific region, and a more modestimprovement in North America contributed to the 4.6% organicgrowth in Paper Services division sales. These improvements were partlyoffset by lower Paper Services sales in Europe, resulting from laborstrikes faced by our Finnish customers earlier in the year and theaforementioned factors that affected Industrial and InstitutionalServices sales in the region. Most of the organic improvement in‘‘other’’ sales was attributable toalternate channel sales, our subsidiary company in 

39

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India, and our Japanese joint venture,Katayama Nalco. The increase in ‘‘other’’sales attributable to acquisitions/divestitures represents theincremental impact of sales for the first five months of 2005 byKatayama Nalco, which was formed with Katayama Chemical Inc. onJune  1,  2004.

Gross profit**,**defined as the difference between net sales and cost of productsold, of $1,481.7  million for the year ended December31,  2005 increased by $26.8  million, or 1.8%, overthe $1,454.9  million reported for the year ended December31,  2004. On an organic basis and excluding the impact of a$14.6  million charge to cost of product sold during the yearended December  31,  2004 resulting from the sale ofinventory that had been revalued at selling price less costs to sell inpurchase accounting at the date of the Acquisition, gross profitdecreased by $14.9  million. This was primarily attributable tohigher costs of raw and other purchased materials, totalingapproximately $166.0  million in 2005, that grew at a faster pacethan the impact of increases in the selling prices of our products ofnearly $150.0  million. Gross profit margin for the year endedDecember  31,  2005 was 44.7% compared to48.0% for the year-ago period. Gross profit margin for the yearended December  31,  2004 was reduced approximately 48basis points as a result of the aforementioned $14.6  millioncharge resulting from purchase accounting.

Selling,administrative, and research expenses for the year endedDecember  31,  2005 of $1,030.2  million decreased by$9.0  million, or 0.9%, from $1,039.2  million forthe year ended December  31,  2004. On an organic basis,selling, administrative, and research expenses decreased by$28.2  million, or 2.7%, reflecting significantly lowerincentive plan expenses. This decrease was offset by the effect ofchanges in foreign currency translation rates and the incrementalimpact of expenses of Katayama Nalco for the first five months of2005.

Amortization of intangible assets was$81.6  million and $96.3  million for the year endedDecember  31,  2005 and 2004, respectively. The decreasewas attributable to lower amortization of customer relationships, whichare amortized using an accelerated method.

In-processresearch and development was a one-time charge of $122.3million recorded during the year ended December  31,  2004,as a result of purchase accounting related to the Acquisition. Thevalue of purchased IPR&D was comprised of five ongoing developmentprojects at the date of the Acquisition. Purchased IPR&D wasderived by assigning values to those projects identified by managementas having economic value, but that had not yet reached technologicalfeasibility and had no alternative futureuse.

Business optimization expenses, representingmostly employee severance and related costs, were $25.6  millionfor the year ended December  31,  2005, and included a$14.2  million charge recorded in June to support a plan tode-layer our management structure and reduce costs in lower-performingbusiness units. The plan called for the elimination of approximately220 positions, primarily in Europe and North America.

Other income (expense), net was a net income of$4.0  million and a net expense of $57.0  million for theyear ended December  31,  2005 and 2004, respectively. This$61.0  million favorable variation is due primarily to theCompany’s November  2004 termination of the monitoringservices provided to the Company by affiliates of the Sponsors,incurring a one-time fee of $35.0  million. Monitoring fees forsuch services were $11.2  million for the year endedDecember  31,  2004. In addition, the Company incurred a$13.7  million loss resulting from the early repayment of seniordiscount notes with an accreted value of $162.3  million, usingproceeds from the initial public offering of common stock of NalcoHolding Company, the Company’s parent company. Also contributingto the year-over-year decrease in net other expense was a favorablechange in foreign currency transaction gains and losses of $6.7million. An increase in losses from asset write-offs and disposals of$4.2  million and a $1.6  million decrease in equity inearnings of unconsolidated subsidiaries partly offset these favorablevariations.

Net interest expense, defined as thecombination of interest income and interest expense, of $249.5million for the year ended December  31,  2005 increased by$8.5  million from the $241.0  million reported for theyear ended December  31,  2004. The impact of higherinterest rates on variable rate borrowings in 2005 more than offset theimpact of a lower average debt level compared to 2004.

40

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The effective tax ratefor the year ended December  31,  2005 was 55.0%compared to an effective tax rate for the year ended December31,  2004 of 241.1%, after excluding the impact of theaforementioned charge for IPR&D.

Nalco FinanceHoldings LLC is treated as a pass-through entity for U.S. income taxpurposes; therefore, the taxable income and expense of the entity flowto its owners. Because Nalco Finance Holdings LLC has taxable losses,the pass through results in an increase to the effective tax rates forthe Company. During 2005 and 2004, approximately $29.4  millionand $51.8  million of expense, or $10.3  million and$18.1  million of tax benefit, respectively, flowed to theowners.

In addition, the effective tax rate for 2004included onetime tax costs related to restructuring in order to moreefficiently manage global cash and allow for more tax efficientrepatriation of certain foreign earnings.

The effectivetax rate in 2005 is lower than 2004 primarily because of the reductionof interest expense that flowed to the owners and the increased pre-taxearnings of the Company. In addition, the tax cost related to the prioryear restructuring does not repeat in 2005. The 2005 taxablerepatriation of foreign earnings was also reduced, in part, because oftherestructuring.

|                                                |  |                 |         |                   |  |        |        |         |  |  |
|------------------------------------------------|--|-----------------|---------|-------------------|--|--------|--------|---------|--|--|
|                                           |  | Yearended       |
| (dollarsin millions)                           |  | December31,2005 |         | December 31, 2004 |
| Earnings(loss) before income taxes as reported |  | $               | 98.8    |              |  | $      | (102.6 | )  |
| Addback:                                       |  |            |    |              |  |   |   |    |
| In-processR&D                              |  |            | — |              |  |   | 122.3  |    |
| Adjustedearnings (loss) before incometaxes     |  | $               | 98.8    |              |  | $      | 19.7   |    |
| Incometax provision (benefit) asreported       |  | $               | 54.3    |              |  | $      | 47.5   |    |
| Effectiveincome taxrate                        |  |            | 55.0    | %            |  |   | 241.1  | %  |
|                                                |

TheAmerican Jobs Creation Act of 2004 (the Jobs Creation Act) created aonetime incentive for American companies to repatriate earnings fromtheir foreign subsidiaries. The Company has completed a comparison ofthe benefits available to it under the Jobs Creation Act to those underother strategies for global cash and debt management, and it hascompared the benefits of implementing the incentive to the costsrequired to implement it. Based upon this analysis, the Company hasdecided not to structure its earnings repatriation under the provisionsof the Jobs Creation Act.

Minority interestexpense was $0.1  million lower than the $5.8  millionfor the year ended December  31,  2004. Higher earningswere reported by the Company’s non-wholly owned subsidiaries inIndia and Japan; however, these were more than offset by lower earningsof our non-wholly owned subsidiaries in Saudi Arabia, Malaysia, andSpain.

41

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Year Ended December31,  2004 Compared to the Year Ended December  31,2003

Net sales for the years endedDecember  31,  2004 and December  31,  2003 maybe compared asfollows:

|                                       |  |                 |         |                  |  |                                                |         |                     |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |  |  |  |  |
|---------------------------------------|--|-----------------|---------|------------------|--|------------------------------------------------|---------|---------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|--|--|--|--|
|                                  |  | YearEnded       |         |             |  | Attributable to Changes inthe FollowingFactors |
| (dollarsin millions)                  |  | December31,2004 |         | December 31,2003 |  | %Change                                        |         | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial& InstitutionalServices |  | $               | 1,396.1 |             |  | $                                              | 1,277.0 |                |  |                      | 9.3  | %  |  |   | 4.4 | %  |  |   | (0.2 | )%  |  | 5.1%   |
| EnergyServices                        |  |            | 806.6   |             |  |                                           | 720.1   |                |  |                      | 12.0 | %  |  |   | 3.7 | %  |  |   | (1.2 | )%  |  | 9.5%   |
| PaperServices                         |  |            | 662.9   |             |  |                                           | 622.8   |                |  |                      | 6.4  | %  |  |   | 3.8 | %  |  |   | 0.6  | %   |  | 2.0%   |
| Other                                 |  |            | 167.7   |             |  |                                           | 146.7   |                |  |                      | 14.4 | %  |  |   | 4.0 | %  |  |   | 11.5 | %   |  | (1.1)% |
| Netsales                              |  | $               | 3,033.3 |             |  | $                                              | 2,766.6 |                |  |                      | 9.6  | %  |  |   | 4.1 | %  |  |   | 0.3  | %   |  | 5.2%   |
|                                       |

Netsales for the year ended December  31,  2004 were$3,033.3  million, a 9.6% increase over the$2,766.6  million reported for the year ended December31,  2003. After adjusting for the favorable effects of changesin foreign currency translation rates and the net impact ofacquisitions and divestitures, net sales were up 5.2%. Severalfactors contributed to the strong growth in sales,including:

|              |                                        |
|--------------|----------------------------------------|
| •  | The improvement inthe general economy. |

|              |                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Theaddition of new sales engineers and service technicians, many of whomare supporting high growth rates in the emerging markets and in fastergrowing industry segments such as oilfield production and food andbeverage applications. |

|              |                                                                                                                                                                                                            |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Thereorganization of the Company’s sales and marketing organizationalong the lines of the global industry segments served, which wasinitiated in 2003 and began to positively impact results in2004. |

|              |                                                                                                                                                                                                           |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company’sability to develop solutions that did not require raw materials thatwere in short supply, while some of the Company’s competitorslacked this research and developmentcapability. |

|              |                                                                                                                                               |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The introductionof several proprietary technologies that brought true innovation to theapplications or industry segments where they are used. |

TheEnergy Services division reported organic growth in sales of9.5%, with double-digit improvements posted by both of itsupstream business groups. Led by its global mining business, theIndustrial and Institutional Services division reported a 5.1%organic increase in sales. Paper Services division sales were up2.0% on an organic basis, mainly due to new business gained andgood growth in the Pacific region, Europe and Latin America, offset bythe lingering effect of price and contract concessions in North Americain 2003. The unfavorable organic growth in‘‘other’’ was mainly due to the decisionmade in 2003 to reduce certain low-margin business with a majorcustomer, slightly offset by organic growth in India. The effect ofthis decision also reduced the organic growth of total net sales by0.3%.

Gross profit, defined as thedifference between net sales and cost of product sold, of$1,454.9  million for the year ended December  31,2004 increased by $61.1  million, or 4.4%, over the$1,393.8  million reported for the year ended December31,  2003.

Adjusted for the favorable effect ofchanges in foreign currency translation rates and the net unfavorableimpact of acquisitions and divestitures, gross profit increased by$2.7  million, or 0.2%. Significant factors contributingto the favorable organic change in gross profit were the aforementionedincrease in sales volumes, which favorably impacted gross profit byapproximately $79.5  million, but which was partly offset bymargin erosion mainly due to product mix ($48.0  million), rawmaterial cost increases ($20.3  million) and freight increases($7.9  million). Gross profit margin for the year endedDecember  31,  2004 declined to 48.0% from50.4% for the year ended December  31,  2003.

Selling, administrative, and researchexpenses for the year ended December  31,  2004 of$1,039.2  million decreased by $27.9  million, or2.6%, from the $1,067.1  million for the year endedDecember  31,  2003. 

42

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Adjusted for the unfavorable effects ofchanges in foreign currency translation rates and the impact ofacquisitions and divestitures, selling, administrative, and researchexpenses decreased by $69.1  million, or 6.5%, primarilydue to spending reductions initiatives launched in the fourth quarter2003 and tightened spending controls in2004.

Impairment of goodwill of$244.4  million was recorded by the Predecessor during the periodfrom January  1,  2003 through November  3,2003, and resulted from the Predecessor’s evaluation of itsgoodwill, based on the purchase price for the Acquisition and the fairvalue of its assets andliabilities.

Amortization of intangibleassets was $96.3  million and $84.3  million for theyear ended December  31,  2004 and 2003, respectively. Theincrease resulted from higher amortization of intangible assets as aresult of the Acquisition.

In-process research anddevelopment was a one-time charge of $122.3  millionrecorded during the year ended December  31,  2004, as aresult of final purchase accounting entries related to the Acquisition.The value of purchased IPR&D was comprised of five ongoingdevelopment projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative futureuse.

Business optimization expenses of$1.7  million for the year ended December  31,  2004were attributable to employee severance and related costs associatedwith work process redesign efforts. Business optimization expenses of$21.1  million for the year ended December  31,  2003were mostly attributable to the Predecessor’s sales andmarketing business realignment launched in 2002.

Otherincome (expense), net was an expense of $57.0  million and$20.1  million for the year ended December  31,  2004and 2003, respectively. This $36.9  million increase wasprimarily attributable to the payment of a $35.0  million fee in2004 for the termination of monitoring services provided by affiliatesof the Sponsors under a Monitoring Fee Agreement entered into on thedate of the Acquisition. The Company also incurred a $13.7million loss resulting from the early repayment of senior discountnotes with an accreted value of $162.3  million, using proceedsfrom the initial public offering of common stock of Nalco HoldingCompany. In addition, Sponsor monitoring fees were $11.2  millionfor the year ended December  31,  2004, whereas Suezmanagement fees paid by the Predecessor and Sponsor monitoring feespaid by the Successor were a combined $4.7  million for the yearended December  31,  2003. These unfavorable variationsfrom 2003 were partly offset by a $10.4  million charge incurredby the Predecessor in 2003 resulting from the discontinuance of hedgeaccounting for an interest rate swap and a $5.3  million loss onthe sale of the Predecessor’s South Africansubsidiary.

Net interest expense, defined as thecombination of interest income and interest expense, of $241.0million for the year ended December  31,  2004 increased by$166.4  million from the $74.6  million reported for theyear ended December  31,  2003. The increase was dueprimarily to the interest charges incurred on the new debt used tofinance the Acquisition and the issuance of the senior discount notesin January  2004.

The effective tax rate,excluding the impact of the aforementioned charge for purchasedIPR&D, was 241.1% for the year ended December31,  2004 compared to an effective tax rate in 2003 of47.7%, excluding the impact of the goodwill impairment. Theincrease in the effective tax rate was primarily caused by onetime taxcosts of restructuring to more efficiently repatriate certain foreignearnings and the loss of certain interest deductions that flowed to theCompany’s owners.

43

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Nalco Finance Holdings LLC istreated as a partnership for U.S. tax purposes; therefore, the taxableincome and expenses of the entity flow directly to the owners. In 2005,approximately $51.8  million of interest deductions ($18.1million of tax benefit) flowed to the owners and were not deductible bytheCompany.

|                                               |  |                 |         |                   |  |        |         |         |  |  |
|-----------------------------------------------|--|-----------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                          |  | Yearended       |
| (dollarsin millions)                          |  | December31,2004 |         | December 31, 2003 |
| Earnings(loss) before income taxes asreported |  | $               | (102.6  | )            |  | $      | (117.8  | )  |
| Addback:                                      |  |            |    |              |  |   |    |    |
| In-processR&D                             |  |            | 122.3   |              |  |   | — |    |
| Goodwillimpairment                            |  |            | — |              |  |   | 244.4   |    |
| Adjustedearnings (loss) before incometaxes    |  | $               | 19.7    |              |  | $      | 126.6   |    |
| Incometax provision (benefit) asreported      |  | $               | 47.5    |              |  | $      | 60.4    |    |
| Effectiveincome taxrate                       |  |            | 241.1   | %            |  |   | 47.7    | %  |
|                                               |

Minorityinterest expense was $5.8  million for the year endedDecember  31,  2004 compared to $4.1  million for theyear ended December  31,  2003. The change resulted mostlyfrom higher earnings reported by all of our majority-owned subsidiariesand the addition of our new joint venture with Katayama Chemical Inc.in June  2004. These increases were partly offset by the impactof the sale of the Predecessor’s South African subsidiary in2003.

Liquidity and Capital Resources

Operating activities. Historically, theCompany’s main source of liquidity has been its solid cash flowgenerated by operating activities. For the year ended December31,  2005, cash provided by operating activities was$201.8  million, a decrease of $35.3  million from the$237.1  million provided by operating activities in 2004. Higherworking capital requirements, primarily for trade accounts receivable,accrued compensation and other accrued expenses, more than offset theincrease in cash generated by earnings in 2005 from 2004.

For the year ended December  31,  2003, cashprovided by operating activities was $233.1  million (comprisedof $88.7  million for the period from November  4,2003 through December  31,  2003 and $144.4  millionfor the Predecessor during the period from January  1,2003 through November  3,  2003. The Predecessor had$87.0  million of net cash outflows for its accounts receivablesecuritization program, which was terminated in October2003

Investing activities. Net propertyadditions of $74.6  million accounted for most of the$77.7  million of cash used for investing activities in the yearended December  31,  2005. In 2004, cash used for investingactivities was $72.9  million, as net property additions of$91.8  million were partly offset by a $25.3  millionpurchase price adjustment related to the Acquisition. Slightly morethan one-third of the capital spending in 2004 was attributable to aninvestment in a common information systems platform for North Americaand Europe, which was fully implemented in January2005.

For the year ended December  31,  2003,cash used in investing activities was $4,157.4  million(comprised of $4,145.1  million for the period fromNovember  4,  2003 through December  31,  2003and $12.3  million for the Predecessor during the period fromJanuary  1,  2003 through November  3,  2003),of which $4,127.1  million was related to the Acquisition. Netproperty additions were $101.2  million in 2003. Businessacquisitions, net of divestitures, was $10.1  million for theyear ended December  31,  2003. Business acquisitions in2003 included $12.5  million to acquire the remaining interest inthe Predecessor’s 40%-owned Swiss affiliate and$10.9  million for the purchase of a company in the U.K. from arelated Suez company. Net proceeds from divestitures totaled$13.3  million during the year ended December  31,2003, which was mostly attributable to the sale of thePredecessor’s South African subsidiary. Net cash received by thePredecessor from notes receivable from related parties was $98.3million during 2003.

44

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Financingactivities**.** Most of the $125.9  million of cash usedfor financing activities during the year ended December31,  2005 was attributable to prepayments of the Company’sterm loan A debt totaling $99.0  million and a $22.0million reduction in borrowings from the Company’s receivablesfacility.

Net cash used for financing activities totaled$231.8  million during the year ended December  31,2004. Capital distributions, net of capital contributions, were$260.7  million. Proceeds from additional borrowings, net of debtrepayments and a redemption premium resulting from the early repaymentof senior discount notes, were $31.0  million.

InJanuary  2004, the Company used the net proceeds from theissuance of senior discount notes to make a return of capitaldistribution of $446.9  million to its parent, Nalco InvestmentHoldings LLC, which, in turn, made a distribution to the holders of itsmembership interests.

Also during the year endedDecember  31,  2004, the Company received additionalcapital contributions of $186.2  million from its direct parentcompany. Of this amount, $176.9  million resulted from theNovember  2004 public stock offering made by the Company’sindirect parent company, Nalco Holding Company. The remaining$9.3  million represented capital contributions received by theCompany’s ultimate parent company, Nalco LLC, and was comprisedof an additional equity investment of $1.2  million by Dr.William H. Joyce and $8.1  million in proceeds from the sale ofequity interests to certain officers and key employees under the NalcoLLC 2005 Unit Plan.

The $176.9  million capitalcontribution received in November  2004 was used to redeem aportion of the senior discount notes due 2014, including the payment ofthe applicable redemption premium of $14.6million.

Net cash provided by financing activities totaled$4,130.3  million during the period from November4,  2003 through December  31,  2003. This wasprimarily comprised of net borrowings of $3,221.7  million and a$1,001.9  million capital contribution from the Company’sunitholder which were used to finance the acquisition of the Companyand to pay $92.4  million of costs to obtain the debt financing.Net cash used by the Predecessor for financing activities during theperiod from January  1,  2003 through November3,  2003 totaled $234.2  million, which was attributable toa net decrease in borrowings of $280.4  million and dividendspaid of $29.0  million, partly offset by capital contributions of$77.7  million.

Prior to the Transactions, OndeoNalco Group obtained short-term financing in the United States fromSuez Finance LP, a finance company operated by Suez to provide fundingto its North American subsidiaries, rather than from external sources.In December  2001, Ondeo Nalco Group entered into a $150.0million off-balance sheet accounts receivable securitization facilitythat allowed it to periodically transfer undivided interests in most ofits U.S. trade receivables. This facility was terminated inOctober  2003 in anticipation of the sale of Ondeo Nalco Group bySuez.

Since the Transactions, we have been highlyleveraged. Our liquidity requirements are significant, primarily due todebt service requirements as well as research and development andcapital investment. Our primary source of liquidity will continue to becash flow generated from operations, but we also have availabilityunder a $250  million revolving credit facility and a $100million receivables facility, in each case subject to certainconditions. We believe that our financial position and financingstructure will provide flexibility in worldwide financing activitiesand permit us to respond to changing conditions in creditmarkets.

Senior credit facilities. Ourrevolving credit facility is part of our senior credit facilities thatwere entered into on November  4,  2003. Our senior creditfacilities also include a $300  million term loan A facility(which includes an €88.0  million tranche) maturingon November  4,  2009 and a $1,300  million term loanB facility maturing on November  4,  2010. Borrowings underthe senior credit facilities bear interest at a floating base rate plusan applicable margin. The applicable margin for borrowings under therevolving credit facility and the term loan A facility is 1.50%with respect to base rate borrowings and 2.50% with respect toLIBOR or Eurocurrency borrowings and may be reduced subject to ourattaining certain leverage ratios. The applicable margin for borrowingsunder the term loan B facility 

45

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is 1.00% with respect to base rateborrowings and 2.00% with respect to LIBOR or Eurocurrencyborrowings. The applicable margin for borrowings under the term loan Bfacility is not subject to adjustment.

In addition topaying interest on outstanding principal under the senior creditfacilities, we are required to pay a commitment fee to the lendersunder the revolving credit facility in respect of the unutilizedcommitments at a rate equal to 0.50%. We also pay customaryletter of credit fees.

The term loan A facility willamortize each year in quarterly amounts at a rate of 5% perannum in year one, 10% per annum in year two, 15% perannum in year three, 20% per annum in year four and 25%per annum in each of years five and six. In addition to the$15.3  million of scheduled payments due for the year endedDecember  31,  2004, we repaid an additional $82.6million using cash generated from operations and proceeds from theaccounts receivable securitization facility. An additional $99.0million was repaid during the year ended December  31,2005, using cash provided by operations.

The term loan Bfacility will amortize each year in an amount equal to 1% perannum in equal quarterly installments for the first six years and ninemonths, with the remaining amount payable on November  4,2010. In addition to the $13.0  million of scheduled payments duefor the year ended December  31,  2004, we repaid anadditional $206.0  million using cash generated from operationsand proceeds from the accounts receivable securitization facility.

Principal amounts outstanding under the revolving creditfacility will be due and payable in full at maturity on November4,  2009. As of December  31,  2005, there were nooutstanding borrowings under the revolving credit facility.

The senior credit facilities contain a number of covenantsthat, among other things, restrict, subject to certain exceptions, ourability and our subsidiaries’ ability, including Nalco Company,to sell assets, incur additional indebtedness or issue preferred stock,repay other indebtedness, pay dividends and distributions or repurchasecertain capital stock, create liens on assets, make investments, loansor advances, make certain acquisitions, engage in mergers orconsolidations, enter into sale and leaseback transactions, engage incertain transactions with affiliates, amend certain material agreementsgoverning our indebtedness, change the business conducted by us and oursubsidiaries (including Nalco Company) and enter into hedgingagreements. In addition, the senior credit facilities require NalcoCompany to maintain the following financial covenants: a maximum totalleverage ratio, a minimum interest coverage ratio and a maximum capitalexpenditures limitation. We were in compliance with all covenants atDecember  31,  2005.

Senior discount notes,senior notes and senior subordinated notes. As part of theTransactions, in November  2003, Nalco Company issued $665million aggregate principal amount of 73⁄4%U.S. dollar-denominated senior notes due 2011, €200million aggregate principal amount of 73⁄4%euro-denominated senior notes due 2011, $465  million aggregateprincipal amount of 8 7/8% U.S.dollar-denominated senior subordinated notes due 2013 and€200  million aggregate principal amount of9% euro-denominated senior subordinated notes due2013.

On January  21,  2004, Nalco FinanceHoldings LLC and Nalco Finance Holdings Inc. issued $694.0million aggregate principal amount at maturity of 9.0% seniordiscount notes due 2014. Prior to February  1,  2009,interest will accrue on the notes in the form of an increase in theaccreted value of such notes. The accreted value of each note willincrease from the date of issuance until February  1,  2009at a rate of 9.0% per annum, reflecting the accrual of non-cashinterest, such that the accreted value will equal the principal amountat maturity on February  1,  2009. Cash interest paymentson the notes will be due and payable beginning in 2009. Our primarysource of liquidity for such payments will be cash flow generated fromthe operations of subsidiaries, including Nalco Holdings and NalcoCompany. However, the terms of Nalco Company’s senior creditagreement fully prohibit Nalco Holdings and our other subsidiaries frompaying dividends or otherwise transferring assets to the issuers. Inaddition, the terms of certain of the indentures governing the existingsenior notes and senior subordinated notes of Nalco Companysignificantly restrict Nalco Company and our other subsidiaries frompaying dividends, making distributions and otherwise transferringassets to the issuers of the senior discount notes. In addition, as acondition to making such payments to the issuers 

46

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based on such formula, Nalco Holdings musthave an Adjusted EBITDA to interest expense ratio of at least 2.0 to 1after giving effect to any such payments. Notwithstanding suchrestrictions, such indentures permit an aggregate of $50.0million of such payments to be made whether or not there isavailability under the formula or the conditions to its use aremet.

In December  2004, Nalco Finance Holdings LLCand Nalco Finance Holdings Inc. redeemed a portion of the seniordiscount notes with an accreted value of $162.3  million usingproceeds from the initial public offering of common stock of NalcoHolding Company. The issuers paid a $14.6  million premium toredeem the notes. After the partial redemption, the aggregate principalamount at maturity of the notes declined to $460.8  million from$694.0  million.

The indentures governing thesenior discount notes, the senior notes and senior subordinated noteslimit our ability and the ability of our restricted subsidiariesto:

•    incur additionalindebtedness;

•    pay dividends on or make otherdistributions or repurchase certain capitalstock;

•    make certaininvestments;

•    enter into certain types oftransactions with affiliates;

•    limit dividends orother payments by our restricted subsidiaries;

•    useassets as security in other transactions; and

•    sellcertain assets or merge with or into othercompanies.

Subject to certain exceptions, the indenturesgoverning the senior discount notes, the senior notes and seniorsubordinated notes permit the Company and our restricted subsidiariesto incur additional indebtedness, including securedindebtedness.

Covenant compliance. Thebreach of covenants in our senior credit agreement that are tied toratios based on Adjusted EBITDA could result in a default under thatagreement and the lenders could elect to declare all amounts borroweddue and payable. Any such acceleration would also result in a defaultunder our indentures. Additionally, under our debt agreements, ourability to engage in activities such as incurring additionalindebtedness, making investments and paying dividends is also tied toratios based on Adjusted EBITDA.

Adjusted EBITDA is usedto determine our compliance with many of the covenants contained in theindentures governing the notes and in our senior credit agreement.Adjusted EBITDA is defined as EBITDA further adjusted to excludeunusual items and other adjustments permitted in calculating covenantcompliance under the indentures and our senior credit facility. Webelieve that the inclusion of supplementary adjustments to EBITDAapplied in presenting Adjusted EBITDA are appropriate to provideadditional information to investors to demonstrate compliance with ourfinancing covenants.

47

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Adjusted EBITDA is calculated asfollows:

|                                 |  |                                     |         |                                     |  |                                                 |         |                                               |  |        |       |         |  |        |        |         |  |  |
|---------------------------------|--|-------------------------------------|---------|-------------------------------------|--|-------------------------------------------------|---------|-----------------------------------------------|--|--------|-------|---------|--|--------|--------|---------|--|--|
|                            |  | Successor                           |         | Successor                           |  | Successor                                       |         | Predecessor                                   |
| (dollarsinmillions)             |  | **Yearended December  31,****2005** |         | **Yearended December  31,****2004** |  | **November4,  2003 through December  31, 2003** |         | **January1,  2003 through November  3, 2003** |
| Net earnings(loss)              |  | $                                   | 38.8    |                                |  | $                                               | (155.9  | )                                        |  | $      | (24.1 | )  |  | $      | (158.2 | )  |
| Interest,net                    |  |                                | 249.5   |                                |  |                                            | 241.0   |                                          |  |   | 49.0  |    |  |   | 25.6   |    |
| Incometax provision(benefit)    |  |                                | 54.3    |                                |  |                                            | 47.5    |                                          |  |   | (8.3  | )  |  |   | 68.7   |    |
| Depreciation                    |  |                                | 133.3   |                                |  |                                            | 114.3   |                                          |  |   | 22.5  |    |  |   | 101.8  |    |
| Amortization                    |  |                                | 81.6    |                                |  |                                            | 96.3    |                                          |  |   | 15.4  |    |  |   | 68.9   |    |
| EBITDA                          |  |                                | 557.5   |                                |  |                                            | 343.2   |                                          |  |   | 54.5  |    |  |   | 106.8  |    |
| Non-cashcharges(1)              |  |                                | 19.8    |                                |  |                                            | 174.4   |                                          |  |   | 23.9  |    |  |   | 268.7  |    |
| Businessoptimizationexpenses(2) |  |                                | 25.6    |                                |  |                                            | 1.7     |                                          |  |   | 0.8   |    |  |   | 20.3   |    |
| Unusualitems(3)                 |  |                                | 6.4     |                                |  |                                            | 59.7    |                                          |  |   | 6.3   |    |  |   | 48.5   |    |
| Otheradjustments(4)             |  |                                | (6.3    | )                              |  |                                            | 6.3     |                                          |  |   | 1.5   |    |  |   | (3.4   | )  |
| Costsavings(5)                  |  |                                | — |                                |  |                                            | — |                                          |  |   | 5.0   |    |  |   | 25.0   |    |
| AdjustedEBITDA                  |  | $                                   | 603.0   |                                |  | $                                               | 585.3   |                                          |  | $      | 92.0  |    |  | $      | 465.9  |    |
|                                 |

|     |                                                             |
|-----|-------------------------------------------------------------|
| (1) | Non-cashcharges are further detailed on the followingtable: |

|                                                |  |                            |         |                              |  |                                          |         |                                       |  |        |         |         |  |        |         |        |  |  |
|------------------------------------------------|--|----------------------------|---------|------------------------------|--|------------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|---------|--------|--|--|
|                                           |  | Successor                  |         | Successor                    |  | Successor                                |         | Predecessor                           |
| (dollarsin millions)                           |  | Year endedDecember31, 2005 |         | Year ended December 31, 2004 |  | November 4, 2003 throughDecember 31,2003 |         | January 1, 2003 throughNovember3,2003 |
| Impairment ofgoodwill                          |  | $                          | — |                         |  | $                                        | — |                                  |  | $      | — |    |  | $      | 244.4   |   |
| In-processresearch anddevelopment              |  |                       | — |                         |  |                                     | 122.3   |                                  |  |   | — |    |  |   | — |   |
| Inventorystep-up                               |  |                       | — |                         |  |                                     | 14.6    |                                  |  |   | 21.2    |    |  |   | — |   |
| Assetwrite-offs                                |  |                       | 2.8     |                         |  |                                     | 1.1     |                                  |  |   | — |    |  |   | 4.2     |   |
| Profitsharing expense and 401(k) funded bySuez |  |                       | 13.2    |                         |  |                                     | 27.8    |                                  |  |   | 4.0     |    |  |   | 20.0    |   |
| Other                                          |  |                       | 3.8     |                         |  |                                     | 8.6     |                                  |  |   | (1.3    | )  |  |   | 0.1     |   |
| Non-cashcharges                                |  | $                          | 19.8    |                         |  | $                                        | 174.4   |                                  |  | $      | 23.9    |    |  | $      | 268.7   |   |
|                                                |

Impairmentof goodwill

Goodwill impairment of $244.4million was recorded by the Predecessor in accordance with SFAS No.142, Goodwill and Other Intangible Assets. Goodwill wasevaluated for impairment based on the purchase price for thePredecessor.

In-process Research andDevelopment

In-process research and development was aone time charge of $122.3  million recorded during the year endedDecember  31,  2004, as a result of purchase accountingentries related to the Acquisition.

InventoryStep-Up

As a result of purchase accounting for theAcquisition, we wrote up our inventory to fair value and subsequentlycharged the write up to cost of product sold as the inventory wassold.

Profit Sharing and 401(k) Expense Funded bySuez

In conjunction with the Acquisition, we enteredinto an agreement with Suez whereby Suez will reimburse us for certainprofit-sharing and 401(k) matching contributions made by us to theProfit-Sharing Trust.

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Other

Othernon-cash charges include the non-cash impact on earnings of our equityinvestments and minority interests. Successor non-cash charges alsoincludes the non-cash portion of rent expense under the sublease thatwe entered into with Suez in conjunction with the Acquisition.

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Business optimization expenses for2005 and 2004 include costs associated with the redesign andoptimization of business and work processes. Business optimizationexpenses for 2003 include cost associated with the integration of theNalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) joint venture and theimplementation of global cost reduction programs in the sales,marketing, manufacturing and support services operations. See note 20to Item 8 for moreinformation. |

|           |                                                          |
|-----------|----------------------------------------------------------|
| (3)  | Unusual items arefurther detailed on the followingtable: |

|                                            |  |                           |         |                           |  |                                         |         |                                       |  |        |         |         |  |        |      |        |  |  |
|--------------------------------------------|--|---------------------------|---------|---------------------------|--|-----------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|------|--------|--|--|
|                                       |  | Successor                 |         | Successor                 |  | Successor                               |         | Predecessor                           |
| (dollarsin millions)                       |  | Year endedDecember31,2005 |         | Year endedDecember31,2004 |  | November 4, 2003through December31,2003 |         | January 1, 2003through November3,2003 |
| Pension and OPEB settlement andcurtailment |  | $                         | 0.5     |                      |  | $                                       | 0.1     |                                  |  | $      | (0.1    | )  |  | $      | 7.9  |   |
| Loss(gain) on sales, net ofexpenses        |  |                      | 4.1     |                      |  |                                    | 0.2     |                                  |  |   | 1.1     |    |  |   | 12.4 |   |
| Otherunusualitems(a)                       |  |                      | 1.8     |                      |  |                                    | 59.4    |                                  |  |   | 5.3     |    |  |   | 25.7 |   |
| Suezmanagement fees,net                    |  |                      | — |                      |  |                                    | — |                                  |  |   | — |    |  |   | 2.5  |   |
|                                       |  | $                         | 6.4     |                      |  | $                                       | 59.7    |                                  |  | $      | 6.3     |    |  | $      | 48.5 |   |
|                                            |

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | Ourresults for 2004 were impacted by the effects of certain other unusualitems, including a $35.0  million charge for the termination ofthe Monitoring Fee Agreement with affiliates of the Sponsors; a$13.7  million charge for the early repayment of senior discountnotes; expenses associated with the registration of publicly tradablesenior notes and senior subordinated notes that were exchanged for theprivately placed notes issued in connection with the Transactions;costs related to changing the name of our operating company from OndeoNalco Company to Nalco Company; and other Transaction-related expenses.In 2003, our results were impacted by the effects of certain otherunusual items including a termination charge for the settlement of aninterest rate swap; executive severance and relocation expenses; legaland environmental expenses that mainly related to events that occurredprior to Suez’s 1999 acquisition of Nalco Chemical Company andlitigation costs not covered by our excess liability insurance policy;and consultancy expenses incurred on behalf of Suez |

|           |                                                                                                                                                                                                                                                                                                                                  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | We are required to make adjustments toEBITDA for monitoring fees paid to the Sponsors, franchise taxes,401(k) matching contributions and other pro forma adjustments. Thesepro forma adjustments include purchase accounting adjustments forpensions and the incremental rent expense we will incur under oursublease with Suez. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Our financingagreements also permit us to adjust EBITDA on a pro forma basis forcertain cost savings that we expect to achieve. We initiated acomprehensive cost reduction plan that was expected to yield annualsavings of at least $30  million on a proforma basis in 2003. Weimplemented this plan immediately upon consummation of the Acquisition.The remainder of our cost reduction plan is expected to realizeincremental efficiencies through work process redesign and othertargeted cost improvement programs, which address inefficiencies in ouradministrative and overhead functions, as well as other supportfunctions around the world. |

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Our covenant levels and ratios forthe year ended December  31,  2005 are asfollows:

|                                                                                                           |  |                                   |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|-----------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                                                                                      |  | CovenantLevel at December 31,2005 |        | Ratios |
| **Senior creditfacility**(1)                                                                              |  |                              |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to cash interestratio                                                              |  |                              | 1.70x  |   |  |   | 2.87x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |                              | 6.50x  |   |  |   | 4.78x  |   |
| **Indentures**(2)                                                                                         |  |                              |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to fixed charge ratio required to incur additional debtpursuant to ratioprovisions |  |                              | 2.00x  |   |  |   | 2.52x  |   |
|                                                                                                           |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Oursenior credit facility requires us to maintain an Adjusted EBITDA tocash interest ratio starting at a minimum of 1.65x and a net debt toAdjusted EBITDA ratio starting at a maximum of 6.75x, in each case forthe most recent four quarter period. Failure to satisfy these ratiorequirements would constitute a default under the senior creditagreement. If our lenders failed to waive any such default, ourrepayment obligations under the senior credit agreement could beaccelerated, which would also constitute a default under ourindentures. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Our ability to incuradditional debt and make certain restricted payments under ourindentures, subject to specified exceptions, is tied to an AdjustedEBITDA to fixed charge ratio of at least 2.0 to 1, except that we mayincur certain debt and make certain restricted payments and certainpermitted investments without regard to the ratio, such as up to anaggregate principal amount of $1,950  million (including$1,188.6  million that was outstanding under our term loanfacilities as of December  31,  2005) and investments insimilar business and other investments equal to 6% of NalcoFinance Holdings LLC consolidated assets. |

Locallines of credit. Certain of our non-U.S. subsidiaries havelines of credit to support local requirements. As of December31,  2005, the aggregate outstanding balance under these locallines of credit was approximately $16.1  million. Certain ofthese lines of credit are equally and ratably secured with obligationsunder our senior credit facilities.

Receivablesfacility. Nalco Company entered into a receivables facilityon June  25,  2004 that provides up to $100.0million in funding from a commercial paper conduit sponsored byJPMorgan Chase Bank, one of the lenders under Nalco Company’ssenior credit facilities, based on availability of eligible receivablesand satisfaction of other customary conditions. At the closing, wereceived $92.0  million in proceeds, which we used to repay termloans under the senior credit facilities.

In connectionwith the receivables facility we established a wholly ownedconsolidated bankruptcy-remote special purpose subsidiary, NalcoReceivables LLC (the ‘‘transferor’’), towhich Nalco Company and one of its domestic subsidiaries (the‘‘sellers’’) sell trade accounts receivable(the ‘‘receivables’’) pursuant to areceivables purchase agreement. Pursuant to a receivables transferagreement, the transferor then transfers an undivided interest in thepurchased receivables to the commercial paper conduit or the relatedbank sponsor (the ‘‘transferees’’) inexchange for cash. The transferor’s purchase of receivables fromthe sellers is financed through the simultaneous transfer of thisundivided interest in the purchased receivables, together with cashcontributed to it by Nalco Company and the advances made by the sellersunder an intercompany note.

Nalco Company, as thereceivables collection agent, services, administers and collects thereceivables under the receivables transfer agreement for which itreceives a monthly servicing fee at a rate of 1% per annum ofthe average daily outstanding balance of receivables. Borrowings underthe receivables facility bear interest at a floating base rate plus ausage fee. The usage fee varies based upon our leverage ratio ascalculated under the senior credit facilities and is currently1.10% of the amount funded. In addition, the transferor isrequired to pay a fee on the unused portion of the receivables facilitythat varies based upon the same ratio and is currently 0.35% ofthe unused portion of the commitments. These rates are per annum andpayments of these fees are made to the lenders on the monthlysettlement date.

50

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Availability of funding under thereceivables facility depends primarily upon the outstanding tradeaccounts receivable balance from time to time. Aggregate availabilityis determined by using a formula that reduces the gross receivablesbalance by factors that take into account historical default anddilution rates, excessive concentrations and average days outstandingand the costs of the facility. Based on the terms of this facility andon the criteria described above, as of December  31,  2005,approximately $164.3  million of our accounts receivable balancewas considered eligible for financing under the program, of whichapproximately $84.9  million would have been available forfunding. As of December  31,  2005, we had $75.3million of outstanding borrowings under thisfacility.

This facility is treated as a general financingagreement resulting in the funding and related receivables being shownas liabilities and assets, respectively, on our consolidated balancesheet and the costs associated with the receivables facility beingrecorded as interest expense.

Results of Operations for2003

The preceding discussion and analysis offinancial condition and results of operations covers periods for thefiscal year ended December  31. For ease of comparison purposes,financial data for the period from November  4,  2003through December  31,  2003 has been added to the financialdata for the period from January  1,  2003 throughNovember  3,  2003, to arrive at a twelve-month combinedperiod ended December  31,  2003. This combined data may bereferred to as ‘‘the year ended December  31,2003’’ or‘‘2003’’.

|                                             |  |                                         |         |                                       |  |                             |         |         |  |        |         |         |  |  |
|---------------------------------------------|--|-----------------------------------------|---------|---------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                        |  | Successor                               |         | Predecessor                           |  | Combined                    |
| (dollarsin millions)                        |  | November 4, 2003throughDecember31, 2003 |         | January 1, 2003through November3,2003 |  | Year Ended December 31,2003 |
| Netsales                                    |  | $                                       | 460.1   |                                  |  | $                           | 2,306.5 |    |  | $      | 2,766.6 |    |
| Operatingcosts andexpenses:                 |  |                                    |    |                                  |  |                        |    |    |  |   |    |    |
| Cost ofproductsold                          |  |                                    | 249.9   |                                  |  |                        | 1,122.9 |    |  |   | 1,372.8 |    |
| Selling,administrative and researchexpenses |  |                                    | 174.7   |                                  |  |                        | 892.4   |    |  |   | 1,067.1 |    |
| Impairmentofgoodwill                        |  |                                    | — |                                  |  |                        | 244.4   |    |  |   | 244.4   |    |
| Amortizationof intangibleassets             |  |                                    | 15.4    |                                  |  |                        | 68.9    |    |  |   | 84.3    |    |
| Businessoptimizationexpenses                |  |                                    | 0.8     |                                  |  |                        | 20.3    |    |  |   | 21.1    |    |
| Operatingexpenses                           |  |                                    | 440.8   |                                  |  |                        | 2,348.9 |    |  |   | 2,789.7 |    |
| Operatingearnings(loss)                     |  |                                    | 19.3    |                                  |  |                        | (42.4   | )  |  |   | (23.1   | )  |
| Otherincome (expense),net                   |  |                                    | (2.8    | )                                |  |                        | (17.3   | )  |  |   | (20.1   | )  |
| Interestincome (expense),net                |  |                                    | (49.0   | )                                |  |                        | (25.6   | )  |  |   | (74.6   | )  |
| Lossbefore incometaxes                      |  |                                    | (32.5   | )                                |  |                        | (85.3   | )  |  |   | (117.8  | )  |
| Incometax provision(benefit)                |  |                                    | (8.3    | )                                |  |                        | 68.7    |    |  |   | 60.4    |    |
| Minorityinterests                           |  |                                    | 0.1     |                                  |  |                        | (4.2    | )  |  |   | (4.1    | )  |
| Netloss                                     |  | $                                       | (24.1   | )                                |  | $                           | (158.2  | )  |  | $      | (182.3  | )  |
|                                             |

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Contractual Obligations andCommitments

The following table summarizes our expectedcash outflows resulting from our contractual obligations as ofDecember  31,2005:

|                                 |  |                       |         |        |  |             |         |              |  |               |         |        |  |        |         |        |  |        |         |        |  |  |
|---------------------------------|--|-----------------------|---------|--------|--|-------------|---------|--------------|--|---------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                            |  | PaymentsDue By Period |
| (dollars in millions)           |  | Total                 |         | 2006   |  | 2007 to2008 |         | 2009 to 2010 |  | 2011andbeyond |
| ContractualObligations:         |  |                  |    |   |  |        |    |         |  |          |    |   |  |   |    |   |  |   |    |   |
| Debtobligations:                |  |                  |    |   |  |        |    |         |  |          |    |   |  |   |    |   |  |   |    |   |
| Principal                       |  | $                     | 3,355.3 |   |  | $           | 3.8     |         |  | $             | 150.4   |   |  | $      | 1,138.9 |   |  | $      | 2,062.2 |   |
| Interest                        |  |                  | 1,505.0 |   |  |        | 210.2   |         |  |          | 420.7   |   |  |   | 466.5   |   |  |   | 407.6   |   |
| Totaldebtobligations            |  |                  | 4,860.3 |   |  |        | 214.0   |         |  |          | 571.1   |   |  |   | 1,605.4 |   |  |   | 2,469.8 |   |
| Operatingleaseobligations(1)    |  |                  | 269.6   |   |  |        | 16.3    |         |  |          | 25.1    |   |  |   | 28.8    |   |  |   | 199.4   |   |
| Purchaseobligations(2)          |  |                  | — |   |  |        | — |         |  |          | — |   |  |   | — |   |  |   | — |   |
| Otherlong-termliabilities(3)(4) |  |                  | 299.0   |   |  |        | 65.9    |         |  |          | 106.9   |   |  |   | 53.3    |   |  |   | 72.9    |   |
| Total                           |  | $                     | 5,428.9 |   |  | $           | 296.2   |         |  | $             | 703.1   |   |  | $      | 1,687.5 |   |  | $      | 2,742.1 |   |
|                                 |

|     |                                                                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Representsfuture minimum rental payments related to administrative, research,manufacturing, and warehouse facilities. Operating leases are also inplace for vehicles and office equipment, the amounts of which are notreadily available. |

|     |                                                                                                                                                                                                                                                                |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Excluded fromthe table are open purchase orders for raw materials and supplies usedin the normal course of business, supply contracts with customers,distribution agreements, joint venture agreements and other contractswithout express fundingrequirements. |

|     |                                                                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Does not reflectobligations under the Contribution Agreement relating to our ProfitSharing and Savings Plan, for which Suez has agreed to reimburseus. |

|     |                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The amounts in long-termliabilities represent our expected minimum pension funding requirementsfor the principal domestic defined benefit pension plan through 2015.Minimum pension funding is defined by the current law in place withoutconsideration of any past temporary pension funding relief or futureproposed pension legislation. Amounts beyond 2015 are not reasonablyestimable. |

Our contractual obligations andcommitments over the next several years are significant. Ourprimary source of liquidity will continue to be cash flowgenerated from operations. In the period January  1,  2003through December  31,  2005 our cumulative cash flow fromoperations was $672.0  million. We have availability undera $250  million revolving credit facility to assist us, ifrequired, in meeting our working capital needs and othercontractual obligations. This multi-year revolving credit facilitymatures in November 2009. If our cash flow from operations isinsufficient to fund our debt service and other obligations, wemay be forced to reduce or delay capital expenditures, seek additionalcapital or seek to restructure or refinance our indebtedness. AtDecember  31,  2005, there were no outstandingborrowings under the $250  million revolving credit facility,excluding $28.2  million of outstanding letters ofcredit.

We believe that cash flow generated fromoperations and our borrowing capacity will be adequate to meetour obligations and business requirements. Our ability to fund theseitems and to reduce debt may be affected by general economic,financial, competitive, legislative and regulatory factors, and thecost of litigation claims, among other things.

Thefollowing table summarizes our expected cash outflows resulting fromcommercial commitments as of December  31,  2005.Commercial commitments include lines of credit, guarantees and otherpotential cash outflows resulting from a contingent event that requiresour performance pursuant to a funding commitment.

52

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|                             |  |                                          |         |        |  |             |         |              |  |               |         |        |  |        |         |        |  |        |         |        |  |  |
|-----------------------------|--|------------------------------------------|---------|--------|--|-------------|---------|--------------|--|---------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                        |  | Amountof Commitment Expiration PerPeriod |
| (dollarsin millions)        |  | Total                                    |         | 2006   |  | 2007 to2008 |         | 2009 to 2010 |  | 2011andbeyond |
| CommercialCommitments:      |  |                                     |    |   |  |        |    |         |  |          |    |   |  |   |    |   |  |   |    |   |
| Standbyletters of credit(1) |  | $                                        | 40.4    |   |  | $           | 39.1    |         |  | $             | 1.2     |   |  | $      | 0.1     |   |  | $      | — |   |
| Guarantees                  |  |                                     | — |   |  |        | — |         |  |          | — |   |  |   | — |   |  |   | — |   |
| Othercommercialcommitments  |  |                                     | 6.1     |   |  |        | 5.8     |         |  |          | 0.2     |   |  |   | 0.1     |   |  |   | — |   |
| Total                       |  | $                                        | 46.5    |   |  | $           | 44.9    |         |  | $             | 1.4     |   |  | $      | 0.2     |   |  | $      | — |   |
|                             |

|     |                                                                       |
|-----|-----------------------------------------------------------------------|
| (1) | Thefinal maturity of current instruments is subject to annualrenewal. |

Recent Accounting Pronouncements

InDecember 2004, the Financial Accounting Standards Board(‘‘FASB’’) issued SFAS No. 123(R),Share Based Payment, which revises SFAS No. 123, Accountingfor Stock-Based Compensation, and supersedes Accounting PrinciplesBoard Opinion (APB) No. 25, Accounting for Stock Issued toEmployees. SFAS No. 123(R) requires all share-based payments toemployees, including grants of employee stock options, to be recognizedin the financial statements based on their fair values. SFAS No. 123(R)is effective for public companies at the beginning of the first interimor annual period beginning after June  15,  2005. Earlyadoption is encouraged for periods in which financial statements havenot yet been issued.

The Company elected to adoptSFAS No. 123(R) as of October  1,  2004, using themodified-prospective transition method. Compensation cost charged toearnings for the Company’s equity compensation plan was $0.3million and $0.1  million for the years ended December 31, 2005and December  31,  2004, respectively. No share-basedcompensation was charged to earnings by the Successor during the periodfrom November  4,  2003 through December  31,2003 or by the Predecessor during the period from January1,  2003 through November  3,  2003, since noshare-based compensation plans existed during those periods.

In November  2004, the FASB issued SFASNo. 151, Inventory Costs. This statement clarifies theaccounting for the abnormal amount of idle facilities expense, freight,handling costs and wasted material. This statement requires that thoseitems be recognized as current-period expense. In addition, SFAS No.151 requires that allocation of fixed overhead to the cost ofconversion be based on the normal capacity of the productionfacilities. This statement is effective for inventory costs incurredafter December  31,  2005. Adoption of this statement willnot have a material effect on the financial statements of theCompany.

53

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|                |                                                           |
|----------------|-----------------------------------------------------------|
| ITEM 7A.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK |

We are subject to inherent risks attributedto operating in a global economy. We may utilize derivative financialinstruments as necessary to manage foreign currency exchange raterisks. We manage foreign currency exchange risk arising from financialactivities pursuant to our corporate guidelines. Forward contracts and,occasionally, swaps and options are utilized to protect these cashflows from adverse movements in exchange rates, and we account forthese instruments by marking them to market at each balance sheet date.We may also employ hedge accounting as permitted by SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities. Inaddition, we use certain foreign currency debt as a hedge of theforeign currency exposure of a portion of our net investment in foreignoperations.

Upon issuance, we designated the€200.0  million aggregate principal amount of73⁄4% senior notes due 2011, the€200.0  million aggregate principal amount of9% senior subordinated notes due 2013, and the€88.0  million term loan as a hedge of our netinvestment in subsidiary companies whose assets, liabilities, andoperations are measured using the euro as their functional currency.Because of the high degree of effectiveness between the hedginginstruments and the exposure being hedged, fluctuations in the value ofthe euro-denominated debt due to exchange rate changes are offset bychanges in the net investment. Accordingly, changes in the value of theeuro-denominated debt are recognized in foreign currency translationadjustment, a component of accumulated other comprehensive income, tooffset changes in the value of our net investment in subsidiarycompanies whose financial statements are measured using the euro astheir functional currency.

We formally assess, on aquarterly basis, whether the euro-denominated debt is effective atoffsetting changes in the value of the underlying exposure. For theyear ended December  31,  2005, we recorded a $85.3million non-cash pretax gain in the accumulated foreign currencytranslation adjustment account related to this hedge. No hedgeineffectiveness was recorded in income.

We also manageoperational (transactional) foreign currency risk, particularly inemerging markets, by closely managing both pricing and raw materialsourcing. Risks associated with foreign exchange translation exposuresare not hedged.

We have exposure to fluctuations inforeign currency exchange rates. Based on our derivative foreigncurrency instruments outstanding at December  31,  2005 and2004, a 10% strengthening or weakening in the value of the U.S.dollar relative to the currencies in which those derivative foreigncurrency instruments are denominated would result in a gain or loss infair values of less than $1.3  million and $4.8  million,respectively.

At December  31,  2005, we had$1,278.6  million of variable rate debt. A 1% increase inthe average interest rate would increase future interest expense byapproximately $12.8  million per year.

Oursensitivity analysis of the effects of the changes in interest ratesand foreign currency exchange rates do not reflect the effect of suchchanges on the related hedged transactions or on other operatingtransactions. The analysis also does not factor in a potential changein the level of variable rate borrowings or derivative instrumentsoutstanding that could take place if these hypothetical conditionsprevailed.

We are exposed to credit loss in the event ofnonperformance by the other party to the derivative financialinstruments. We limit this exposure by entering into agreementsdirectly with a number of major financial institutions that meet ourcredit standards and that are expected to satisfy fully theirobligations under the contracts. We view derivative financialinstruments as a risk management tool and do not use them forspeculative or trading purposes.

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ITEM 8. FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

Index to FinancialStatements

Nalco Finance Holdings LLC andSubsidiariesConsolidated and Combined FinancialStatements

Year ended December  31,  2005(Successor)Year ended December  31,  2004(Successor)Period from November  4,  2003through December  31,  2003 (Successor)Periodfrom January  1,  2003 through November  3,2003(Predecessor)

|                                                                                                    |  |        |  |  |  |  |
|----------------------------------------------------------------------------------------------------|--|--------|--|--|--|--|
| Reportof Independent Registered Public AccountingFirm                                              |  | 56     |
| Report of Independent RegisteredPublic Accounting Firm on Internal Control Over FinancialReporting |  | 57     |
| Consolidated andCombined FinancialStatements                                                       |  |   |
| ConsolidatedBalance Sheets                                                                         |  | 58     |
| Consolidated andCombined Statements ofOperations                                                   |  | 59     |
| Consolidated andCombined Statements of Unitholder’s and Shareholders’Equity            |  | 60     |
| Consolidated and CombinedStatements of Cash Flows                                                  |  | 61     |
| Notes toConsolidated and Combined FinancialStatements                                              |  | 63     |
|                                                                                                    |

55

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Report of Independent Registered PublicAccounting Firm

The Board of Directors and Unitholder ofNalco Finance Holdings LLC

We have audited theaccompanying consolidated balance sheets of Nalco Finance Holdings LLCand subsidiaries as of December  31,  2005 and 2004, andthe related consolidated statements of operations, unitholder’sequity, and cash flows for the years ended December  31,2005 and 2004, and for the period from November  4,  2003to December  31,  2003 (Successor), and the combinedstatements of operations, shareholders’ equity, and cash flowsof Ondeo Nalco Group (companies listed in Note 2) for the period fromJanuary  1,  2003 to November  3,  2003(Predecessor). Our audits also included the financial statementschedules listed in the Index at Item 15(a)(2). These financialstatements and schedules are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements and schedules based on our audits.

Weconducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

In ouropinion, the financial statements referred to above present fairly, inall material respects, the consolidated financial position of NalcoFinance Holdings LLC and subsidiaries as of December  31,2005 and 2004, and the consolidated results of their operations andtheir cash flows for the years ended December  31,  2005and 2004, and for the period from November  4,  2003 toDecember  31,  2003 (Successor), and the combined resultsof Ondeo Nalco Group’s operations and its cash flows for theperiod from January  1,  2003 to November  3,2003 (Predecessor), in conformity with U.S. generally acceptedaccounting principles. Also, in our opinion, the related financialstatement schedules, when considered in relation to the basic financialstatements taken as a whole, present fairly in all material respectsthe information set forth therein.

We also have audited,in accordance with the standards of the Public Company AccountingOversight Board (United States), the effectiveness of Nalco FinanceHoldings LLC's internal control over financial reporting as ofDecember  31,  2005, based on criteria established inInternal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our reportdated February  28,  2006 expressed an unqualified opinionthereon.

/s/ ERNST & YOUNG LLPChicago,IllinoisFebruary  28,  2006

56

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Report of Independent Registered PublicAccounting Firm on Internal ControlOver FinancialReporting

The Board of Directors and Unitholder of NalcoFinance Holdings LLC

We have audited management’sassessment, included in the accompanying Management’s Report onInternal Control Over Financial Reporting, that Nalco Finance HoldingsLLC maintained effective internal control over financial reporting asof December  31,  2005, based on criteria established inInternal Control — Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (the COSOcriteria). Nalco Finance Holdings LLC’s management isresponsible for maintaining effective internal control over financialreporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express anopinion on management’s assessment and an opinion on theeffectiveness of the company’s internal control over financialreporting based on our audit.

We conducted our audit inaccordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding ofinternal control over financial reporting, evaluatingmanagement’s assessment, testing and evaluating the design andoperating effectiveness of internal control, and performing such otherprocedures as we considered necessary in the circumstances. We believethat our audit provides a reasonable basis for ouropinion.

A company’s internal control overfinancial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets thatcould have a material effect on the financialstatements.

Because of its inherent limitations, internalcontrol over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures maydeteriorate.

In our opinion, management’sassessment that Nalco Finance Holdings LLC maintained effectiveinternal control over financial reporting as of December31,  2005, is fairly stated, in all material respects, based onthe COSO criteria. Also, in our opinion, Nalco Finance Holdings LLCmaintained, in all material respects, effective internal control overfinancial reporting as of December  31,  2005, based on theCOSO criteria.

We also have audited, in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates), the consolidated financial statements of Nalco FinanceHoldings LLC and subsidiaries, as of December  31,  2005and 2004 and for the years ended December  31,  2005 and2004 and for the period from November  4,  2003 toDecember  31,  2003 (Successor) and the combined financialstatements of Ondeo Nalco Group (companies listed in Note 2) for theperiod from January  1,  2003 to November  3,2003 (Predecessor), and our report dated February  28,2006 expressed an unqualified opinion thereon.

/s/ ERNST& YOUNG LLPChicago, IllinoisFebruary  28,2006

57

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Nalco Finance Holdings LLC andSubsidiariesConsolidated Balance Sheets(dollars inmillions)

|                                                                                           |  |                 |         |                 |  |        |         |        |  |  |
|-------------------------------------------------------------------------------------------|--|-----------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                                                                      |  | December31,2005 |         | December31,2004 |
| Assets                                                                                    |  |            |    |            |  |   |    |   |
| Currentassets:                                                                            |  |            |    |            |  |   |    |   |
| Cash and cashequivalents                                                                  |  | $               | 30.8    |            |  | $      | 33.2    |   |
| Tradeaccounts receivable, less allowances of $16.6 and $21.1 in 2005 and2004,respectively |  |            | 622.3   |            |  |   | 594.2   |   |
| Inventories                                                                               |  |            | 313.2   |            |  |   | 313.5   |   |
| Deferredincometaxes                                                                       |  |            | 21.1    |            |  |   | 44.2    |   |
| Prepaidexpenses and other currentassets                                                   |  |            | 62.0    |            |  |   | 45.9    |   |
| Totalcurrentassets                                                                        |  |            | 1,049.4 |            |  |   | 1,031.0 |   |
| Property,plant, and equipment,net                                                         |  |            | 755.3   |            |  |   | 847.3   |   |
| Goodwill                                                                                  |  |            | 2,196.7 |            |  |   | 2,368.3 |   |
| Otherintangible assets, net                                                               |  |            | 1,227.5 |            |  |   | 1,323.6 |   |
| Deferred financingcosts                                                                   |  |            | 55.0    |            |  |   | 64.6    |   |
| Receivable fromformer shareholder                                                         |  |            | 73.2    |            |  |   | 87.2    |   |
| Othernoncurrentassets                                                                     |  |            | 197.8   |            |  |   | 212.5   |   |
| Totalassets                                                                               |  | $               | 5,554.9 |            |  | $      | 5,934.5 |   |
| **Liabilitiesand unitholder’s equity**                                              |  |            |    |            |  |   |    |   |
| Currentliabilities:                                                                       |  |            |    |            |  |   |    |   |
| Accountspayable                                                                           |  | $               | 285.4   |            |  | $      | 261.9   |   |
| Accruedexpenses                                                                           |  |            | 141.7   |            |  |   | 168.7   |   |
| Accruedcompensation                                                                       |  |            | 61.5    |            |  |   | 105.8   |   |
| Short-termdebt                                                                            |  |            | 22.6    |            |  |   | 17.7    |   |
| Incometaxes                                                                               |  |            | 31.9    |            |  |   | 37.2    |   |
| Totalcurrentliabilities                                                                   |  |            | 543.1   |            |  |   | 591.3   |   |
| Long-termdebt                                                                             |  |            | 3,244.2 |            |  |   | 3,424.8 |   |
| Deferred incometaxes                                                                      |  |            | 380.7   |            |  |   | 501.5   |   |
| Accrued pensionbenefits                                                                   |  |            | 416.4   |            |  |   | 411.7   |   |
| Otherliabilities                                                                          |  |            | 278.9   |            |  |   | 296.8   |   |
| Minorityinterest                                                                          |  |            | 11.2    |            |  |   | 14.1    |   |
| Commitments andcontingencies                                                              |  |            | — |            |  |   | — |   |
| Unitholder’sequity                                                                  |  |            | 680.4   |            |  |   | 694.3   |   |
| Totalliabilities and unitholder’sequity                                             |  | $               | 5,554.9 |            |  | $      | 5,934.5 |   |
|                                                                                           |

Seenotes to consolidated and combined financialstatements.

58

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Nalco Finance Holdings LLC andSubsidiariesConsolidated and Combined Statements ofOperations(dollars in millions, except per shareamounts)

|                                             |  |                            |         |                            |  |                                          |         |                                        |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------------|--|----------------------------|---------|----------------------------|--|------------------------------------------|---------|----------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                        |  | Successor                  |         | Predecessor                |
|                                        |  | Yearended December 31,2005 |         | Year ended December31,2004 |  | November 4, 2003through December 31,2003 |         | January 1, 2003through November 3,2003 |
| Netsales                                    |  | $                          | 3,312.4 |                       |  | $                                        | 3,033.3 |                                   |  | $      | 460.1   |    |  | $      | 2,306.5 |    |
| Operatingcosts andexpenses:                 |  |                       |    |                       |  |                                     |    |                                   |  |   |    |    |  |   |    |    |
| Costof product sold                         |  |                       | 1,830.7 |                       |  |                                     | 1,578.4 |                                   |  |   | 249.9   |    |  |   | 1,122.9 |    |
| Selling,administrative and researchexpenses |  |                       | 1,030.2 |                       |  |                                     | 1,039.2 |                                   |  |   | 174.7   |    |  |   | 892.4   |    |
| Impairmentofgoodwill                        |  |                       | — |                       |  |                                     | — |                                   |  |   | — |    |  |   | 244.4   |    |
| Amortizationof intangibleassets             |  |                       | 81.6    |                       |  |                                     | 96.3    |                                   |  |   | 15.4    |    |  |   | 68.9    |    |
| In-processresearch anddevelopment           |  |                       | — |                       |  |                                     | 122.3   |                                   |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses                |  |                       | 25.6    |                       |  |                                     | 1.7     |                                   |  |   | 0.8     |    |  |   | 20.3    |    |
| Totaloperating costs and expenses           |  |                       | 2,968.1 |                       |  |                                     | 2,837.9 |                                   |  |   | 440.8   |    |  |   | 2,348.9 |    |
| Operatingearnings(loss)                     |  |                       | 344.3   |                       |  |                                     | 195.4   |                                   |  |   | 19.3    |    |  |   | (42.4   | )  |
| Otherincome (expense),net                   |  |                       | 4.0     |                       |  |                                     | (57.0   | )                                 |  |   | (2.8    | )  |  |   | (17.3   | )  |
| Interestincome                              |  |                       | 8.5     |                       |  |                                     | 10.1    |                                   |  |   | 0.6     |    |  |   | 7.1     |    |
| Interestexpense                             |  |                       | (258.0  | )                     |  |                                     | (251.1  | )                                 |  |   | (49.6   | )  |  |   | (32.7   | )  |
| Earnings(loss) before incometaxes           |  |                       | 98.8    |                       |  |                                     | (102.6  | )                                 |  |   | (32.5   | )  |  |   | (85.3   | )  |
| Incometax provision(benefit)                |  |                       | 54.3    |                       |  |                                     | 47.5    |                                   |  |   | (8.3    | )  |  |   | 68.7    |    |
| Minorityinterests                           |  |                       | (5.7    | )                     |  |                                     | (5.8    | )                                 |  |   | 0.1     |    |  |   | (4.2    | )  |
| Netearnings(loss)                           |  | $                          | 38.8    |                       |  | $                                        | (155.9  | )                                 |  | $      | (24.1   | )  |  | $      | (158.2  | )  |
|                                             |

Seenotes to consolidated and combined financialstatements.

59

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Nalco Finance Holdings LLC andSubsidiariesConsolidated and Combined Statement ofUnitholder’s and Shareholders’ Equity(dollars inmillions)

|                                                                       |  |                 |         |                    |  |                                             |         |             |  |                                      |         |                            |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|-----------------------------------------------------------------------|--|-----------------|---------|--------------------|--|---------------------------------------------|---------|-------------|--|--------------------------------------|---------|----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                  |  |            |         |               |  | AccumulatedOther Comprehensive Income(Loss) |         |        |
|                                                                  |  | CapitalAccounts |         | AccumulatedDeficit |  | MinimumPensionLiabilityAdjustment           |         | Derivatives |  | ForeignCurrencyTranslationAdjustment |         | Comprehensive Income(Loss) |
| **PredecessorCompany**                                                |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| **Balanceat January 1,2003**                                          |  | $               | 4,156.9 |               |  | $                                           | (284.1  | )      |  | $                                    | (73.5   | )                     |  | $      | (8.5    | )  |  | $      | (101.6  | )  |  |   |   |    |
| Netloss                                                               |  |            |    |               |  |                                        | (158.2  | )      |  |                                 |    |                       |  |   |    |    |  |   |    |    |  | $      | (158.2 | )  |
| Capitalcontribution                                                   |  |            | 77.7    |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Acquisitionof AquazurLimited                                          |  |            | (2.8    | )             |  |                                        | (8.1    | )      |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Othercomprehensive income(loss):                                      |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| Gainon derivatives — net of tax of$5.4                          |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | 8.5     |    |  |   | — |    |  |   | 8.5    |    |
| Currencytranslationadjustments                                        |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | 54.1    |    |  |   | 54.1   |    |
| Comprehensiveloss                                                     |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  | $      | (95.6  | )  |
| Distributionstoshareholder                                            |  |            | — |               |  |                                        | (29.0   | )      |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Balanceat November  3,2003                                            |  | $               | 4,231.8 |               |  | $                                           | (479.4  | )      |  | $                                    | (73.5   | )                     |  | $      | — |    |  | $      | (47.5   | )  |  |   |   |    |
| **SuccessorCompany**                                                  |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| Capitalcontribution                                                   |  | $               | 1,001.9 |               |  | $                                           | — |        |  | $                                    | — |                       |  | $      | — |    |  | $      | — |    |  |   |   |    |
| Netloss                                                               |  |            | — |               |  |                                        | (24.1   | )      |  |                                 | — |                       |  |   | — |    |  |   | — |    |  | $      | (24.1  | )  |
| Othercomprehensiveincome:                                             |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| Currencytranslation adjustments — net of tax benefit of$18.0    |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | 91.2    |    |  |   | 91.2   |    |
| Comprehensiveincome                                                   |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  | $      | 67.1   |    |
| **Balanceat December  31,2003**                                       |  |            | 1,001.9 |               |  |                                        | (24.1   | )      |  |                                 | — |                       |  |   | — |    |  |   | 91.2    |    |  |   |   |    |
| Capitalcontributions                                                  |  |            | 186.2   |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Capitaldistributions                                                  |  |            | (446.9  | )             |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Netloss                                                               |  |            | — |               |  |                                        | (155.9  | )      |  |                                 | — |                       |  |   | — |    |  |   | — |    |  | $      | (155.9 | )  |
| Othercomprehensive income(loss):                                      |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| Losson derivatives — net of tax benefit of$0.2                  |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | (0.2    | )  |  |   | — |    |  |   | (0.2   | )  |
| Currencytranslation adjustments — net of tax of$7.5             |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | 42.1    |    |  |   | 42.1   |    |
| Comprehensiveloss                                                     |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  | $      | (114.0 | )  |
| **Balanceat December  31,2004**                                       |  |            | 741.2   |               |  |                                        | (180.0  | )      |  |                                 | — |                       |  |   | (0.2    | )  |  |   | 133.3   |    |  |   |   |    |
| Share-basedcompensation                                               |  |            | 0.3     |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | — |    |  |   |   |    |
| Netearnings                                                           |  |            | — |               |  |                                        | 38.8    |        |  |                                 | — |                       |  |   | — |    |  |   | — |    |  | $      | 38.8   |    |
| Othercomprehensive income(loss):                                      |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  |   |   |    |
| Minimumpension liability adjustment — net of tax benefit of$0.8 |  |            | — |               |  |                                        | — |        |  |                                 | (1.8    | )                     |  |   | — |    |  |   | — |    |  |   | (1.8   | )  |
| Gainon derivatives — net of tax of$0.2                          |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | 0.2     |    |  |   | — |    |  |   | 0.2    |    |
| Currencytranslation adjustments — net of tax of$7.9             |  |            | — |               |  |                                        | — |        |  |                                 | — |                       |  |   | — |    |  |   | (51.4   | )  |  |   | (51.4  | )  |
| Comprehensiveloss                                                     |  |            |    |               |  |                                        |    |        |  |                                 |    |                       |  |   |    |    |  |   |    |    |  | $      | (14.2  | )  |
| **Balanceat December  31,2005**                                       |  | $               | 741.5   |               |  | $                                           | (141.2  | )      |  | $                                    | (1.8    | )                     |  | $      | — |    |  | $      | 81.9    |    |  |   |   |    |
|                                                                       |

Seenotes to consolidated and combined financialstatements.

60

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Nalco Finance Holdings LLC andSubsidiariesConsolidated and Combined Statements of CashFlows(dollars inmillions)

|                                                                                          |  |                           |         |                           |  |                                         |         |                                       |  |        |          |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------|--|---------------------------|---------|---------------------------|--|-----------------------------------------|---------|---------------------------------------|--|--------|----------|---------|--|--------|---------|---------|--|--|
|                                                                                     |  | Successor                 |         | Predecessor               |
|                                                                                     |  | YearendedDecember 31,2005 |         | Year endedDecember31,2004 |  | November 4, 2003through December31,2003 |         | January 1, 2003through November3,2003 |
| **Operatingactivities**                                                                  |  |                      |    |                      |  |                                    |    |                                  |  |   |     |    |  |   |    |    |
| Netearnings(loss)                                                                        |  | $                         | 38.8    |                      |  | $                                       | (155.9  | )                                |  | $      | (24.1    | )  |  | $      | (158.2  | )  |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |                      |    |                      |  |                                    |    |                                  |  |   |     |    |  |   |    |    |
| Depreciation                                                                             |  |                      | 133.3   |                      |  |                                    | 114.3   |                                  |  |   | 22.5     |    |  |   | 101.8   |    |
| Amortization                                                                             |  |                      | 81.6    |                      |  |                                    | 96.3    |                                  |  |   | 15.4     |    |  |   | 68.9    |    |
| In-processresearch anddevelopment                                                        |  |                      | — |                      |  |                                    | 122.3   |                                  |  |   | —  |    |  |   | — |    |
| Impairmentofgoodwill                                                                     |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | 244.4   |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |                      | 40.2    |                      |  |                                    | 49.1    |                                  |  |   | 17.4     |    |  |   | — |    |
| Losson early extinguishment ofdebt                                                       |  |                      | — |                      |  |                                    | 13.7    |                                  |  |   | —  |    |  |   | — |    |
| Equityin earnings of unconsolidated subsidiaries, net ofdistributions                    |  |                      | 2.5     |                      |  |                                    | 2.8     |                                  |  |   | (0.4     | )  |  |   | (1.8    | )  |
| Deferredincometaxes                                                                      |  |                      | (28.2   | )                    |  |                                    | (49.2   | )                                |  |   | (18.4    | )  |  |   | (17.1   | )  |
| Securitizedaccounts receivable,net                                                       |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | (87.0   | )  |
| Amortizationof unearned employee compensation and accretion ofobligation                 |  |                      | 13.2    |                      |  |                                    | 27.8    |                                  |  |   | 4.0      |    |  |   | 20.0    |    |
| Definedbenefit pension planexpense                                                       |  |                      | 43.9    |                      |  |                                    | 39.8    |                                  |  |   | 6.6      |    |  |   | 43.2    |    |
| Other,net                                                                                |  |                      | (12.7   | )                    |  |                                    | 2.9     |                                  |  |   | (2.7     | )  |  |   | (22.2   | )  |
| Changesin current assets andliabilities:                                                 |  |                      |    |                      |  |                                    |    |                                  |  |   |     |    |  |   |    |    |
| Tradeaccountsreceivable                                                                  |  |                      | (59.9   | )                    |  |                                    | (86.4   | )                                |  |   | 11.3     |    |  |   | 3.7     |    |
| Inventories                                                                              |  |                      | (8.1    | )                    |  |                                    | (10.9   | )                                |  |   | 28.7     |    |  |   | (0.4    | )  |
| Accountspayable                                                                          |  |                      | 29.8    |                      |  |                                    | 96.3    |                                  |  |   | 4.0      |    |  |   | (44.3   | )  |
| Payabletoshareholder                                                                     |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | 6.2     |    |
| Contributionto profit-sharingtrust                                                       |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | (24.0   | )  |
| Otherreceivables from relatedparties                                                     |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | (1.9    | )  |
| Other                                                                                    |  |                      | (72.6   | )                    |  |                                    | (25.8   | )                                |  |   | 24.4     |    |  |   | 13.1    |    |
| Netcash provided by operatingactivities                                                  |  |                      | 201.8   |                      |  |                                    | 237.1   |                                  |  |   | 88.7     |    |  |   | 144.4   |    |
| **Investingactivities**                                                                  |  |                      |    |                      |  |                                    |    |                                  |  |   |     |    |  |   |    |    |
| Acquisitionof Ondeo NalcoGroup                                                           |  |                      | — |                      |  |                                    | — |                                  |  |   | (4,127.1 | )  |  |   | — |    |
| Purchaseprice adjustment on acquisition of Ondeo NalcoGroup                              |  |                      | (3.2    | )                    |  |                                    | 25.3    |                                  |  |   | —  |    |  |   | — |    |
| Businesspurchases/sales,net                                                              |  |                      | — |                      |  |                                    | (2.3    | )                                |  |   | —  |    |  |   | (10.1   | )  |
| Additionsto property, plant, and equipment,net                                           |  |                      | (74.6   | )                    |  |                                    | (91.8   | )                                |  |   | (15.6    | )  |  |   | (85.6   | )  |
| Notesreceivable from relatedparties                                                      |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | 98.3    |    |
| Investmentsin affiliatedcompanies                                                        |  |                      | — |                      |  |                                    | — |                                  |  |   | —  |    |  |   | (6.0    | )  |
| Otherinvestingactivities                                                                 |  |                      | 0.1     |                      |  |                                    | (4.1    | )                                |  |   | (2.4     | )  |  |   | (8.9    | )  |
| Netcash used for investingactivities                                                     |  |                      | (77.7   | )                    |  |                                    | (72.9   | )                                |  |   | (4,145.1 | )  |  |   | (12.3   | )  |
|                                                                                          |

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Nalco Finance Holdings LLC andSubsidiariesConsolidated and Combined Statements of Cash Flows(continued)(dollars inmillions)

|                                                                    |  |                           |         |                           |  |                                         |         |                                       |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|---------------------------|---------|---------------------------|--|-----------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                               |  | Successor                 |         | Predecessor               |
|                                                               |  | YearendedDecember 31,2005 |         | Year endedDecember31,2004 |  | November 4, 2003through December31,2003 |         | January 1, 2003through November3,2003 |
| **Financingactivities**                                            |  |                      |    |                      |  |                                    |    |                                  |  |   |    |    |  |   |    |    |
| Cashdividends                                                      |  | $                         | — |                      |  | $                                       | — |                                  |  | $      | — |    |  | $      | (29.0   | )  |
| Proceedsfrom long-termdebt                                         |  |                      | 24.3    |                      |  |                                    | 719.7   |                                  |  |   | 3,214.2 |    |  |   | 0.6     |    |
| Paymentsof long-termdebt                                           |  |                      | (145.8  | )                    |  |                                    | (639.3  | )                                |  |   | (0.8    | )  |  |   | (8.3    | )  |
| Short-termdebt,net                                                 |  |                      | 2.9     |                      |  |                                    | (34.8   | )                                |  |   | 8.3     |    |  |   | (272.7  | )  |
| Redemptionpremium on early extinguishment ofdebt                   |  |                      | — |                      |  |                                    | (14.6   | )                                |  |   | — |    |  |   | — |    |
| Deferredfinancingcosts                                             |  |                      | (1.3    | )                    |  |                                    | (1.2    | )                                |  |   | (92.4   | )  |  |   | — |    |
| Capitalcontributions                                               |  |                      | — |                      |  |                                    | 186.2   |                                  |  |   | 1,001.9 |    |  |   | 77.7    |    |
| Capitaldistributions                                               |  |                      | — |                      |  |                                    | (446.9  | )                                |  |   | — |    |  |   | — |    |
| Otherfinancingactivities                                           |  |                      | (6.0    | )                    |  |                                    | (0.9    | )                                |  |   | (0.9    | )  |  |   | (2.5    | )  |
| Netcash provided by (used for) financingactivities                 |  |                      | (125.9  | )                    |  |                                    | (231.8  | )                                |  |   | 4,130.3 |    |  |   | (234.2  | )  |
| Effectof foreign exchange rate changes on cash and cashequivalents |  |                      | (0.6    | )                    |  |                                    | 0.8     |                                  |  |   | 1.7     |    |  |   | 6.0     |    |
| Increase(decrease) in cash and cashequivalents                     |  |                      | (2.4    | )                    |  |                                    | (66.8   | )                                |  |   | 75.6    |    |  |   | (96.1   | )  |
| Cashand cash equivalents at beginning of theperiod                 |  |                      | 33.2    |                      |  |                                    | 100.0   |                                  |  |   | 24.4    |    |  |   | 120.5   |    |
| Cashand cash equivalents at end of theperiod                       |  | $                         | 30.8    |                      |  | $                                       | 33.2    |                                  |  | $      | 100.0   |    |  | $      | 24.4    |    |
| **Supplementalcash flowsinformation**                              |  |                      |    |                      |  |                                    |    |                                  |  |   |    |    |  |   |    |    |
| Cashpaid during the periodfor:                                     |  |                      |    |                      |  |                                    |    |                                  |  |   |    |    |  |   |    |    |
| Interest                                                           |  | $                         | 217.6   |                      |  | $                                       | 206.7   |                                  |  | $      | 6.4     |    |  | $      | 32.4    |    |
| Incometaxes                                                        |  |                      | 80.4    |                      |  |                                    | 92.3    |                                  |  |   | 14.2    |    |  |   | 43.0    |    |
|                                                                    |

Seenotes to consolidated and combined financialstatements.

62

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Nalco FinanceHoldings LLC and SubsidiariesNotes to Consolidated and CombinedFinancial Statements(dollars in millions, except per shareamounts)December  31,2005

1.    Descriptionof Business and Change in Ownership

Description ofBusiness

Nalco Finance Holdings LLC and subsidiaries(the Company or Successor) is engaged in the worldwide manufacture andsale of highly specialized service chemical programs. This includesproduction and service related to the sale and application of chemicalsand technology used in water treatment, pollution control, energyconservation, oil production and refining, steelmaking, papermaking,mining, and other industrial processes.

Change inOwnership

On November  4,  2003, NalcoHoldings LLC (the Buyer), a newly formed entity controlled byaffiliates of The Blackstone Group, L.P., Apollo Management, L.P., andThe Goldman Sachs Group, Inc. (collectively, the Sponsors), pursuant toa Stock Purchase Agreement, (as amended, the Stock Purchase Agreement)with Suez S.A. (Suez or Seller) and certain of its affiliates, acquiredthe net assets of Ondeo Nalco Group (as defined in Note 2 below) for$4,127.1  million including direct costs of the acquisition of$125.6  million, excluding assumed debt of $30.2  million,and subject to certain closing and post-closing adjustments (theAcquisition).

The Buyer was capitalized by equityinvestments totaling $991.9  million from the Sponsors and$10.0  million from Dr. William H. Joyce, the Chairman and ChiefExecutive Officer of the Buyer. The equity investments were made toNalco Investment Holdings LLC which, in turn, contributed$1,001.9  million to the Buyer and was its parent company untilJanuary  14,  2004. Funding for the Acquisition includedthe equity investments and the issuance of senior notes and seniorsubordinated notes (the Notes) in a private offering, and new revolvingcredit and term loan facilities by the Buyer, through its 100%owned subsidiary, Nalco Company.

The Stock PurchaseAgreement provided for certain adjustments of the purchase price,including adjustments based on the closing working capital andindebtedness (as both are defined in the Stock Purchase Agreement) ofthe Ondeo Nalco Group at the date of the Acquisition. On March25,  2004, the Buyer and Suez agreed to a $25.6  millionworking capital adjustment payable to the Buyer plus interest. TheBuyer recorded the purchase price adjustment in 2004 by decreasinggoodwill. The Stock Purchase Agreement also provided for adjustments ofthe purchase price for taxes paid, or tax refunds received, by theBuyer for periods prior to the Acquisition, to the extent not alreadytaken into account in the closing working capital at the date of theAcquisition.

On January  14,  2004, NalcoInvestment Holdings LLC contributed its 100% interest in theBuyer to a newly formed entity, Nalco Finance Holdings LLC, in exchangefor a 99% interest in Nalco Holdings LLC. The remaining1% interest in Nalco Holdings LLC was held indirectly by NalcoInvestment Holdings LLC through its wholly owned subsidiary, NalcoFinance Holdings II Inc. As of January  14,  2004, NalcoFinance Holdings LLC became the direct parent company of the Buyer.Subsequent to that date, the Sponsors and Dr.  Joyce engaged in aseries of transactions that ultimately resulted in a newly formedentity, Nalco LLC, becoming the indirect and ultimate parent company ofNalco Investment Holdings LLC, Nalco Finance Holdings LLC, and theBuyer. Nalco LLC’s interests in Nalco Investment Holdings LLCwere held through its holdings of 100% of the interests of eachof BCP Nalco I LLC, BCP Nalco II LLC, APV Nalco LLC, GS Nalco LLC andJAG Nalco LLC (collectively, the Sponsor entities), which collectivelyheld 100% of the interests of Nalco Investment HoldingsLLC.

On June  1,  2004, Nalco InvestmentHoldings II LLC was formed as a direct subsidiary of Nalco LLC. OnJune  7,  2004, Nalco Investment Holdings II LLC mergedwith each of the Sponsor entities and 

63

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1.    Descriptionof Business and Change in Ownership   (continued)

was the surviving entity of such merger. As aresult of the merger, Nalco Investment Holdings II LLC owned100% of the equity interests of Nalco Investment Holdings LLC.On June  17,  2004, Nalco Investment Holdings II LLC wasconverted into a corporation named Nalco Investment Holdings II Corp.and has since been renamed Nalco Holding Company. As entities undercommon control, the contribution of Nalco Holdings LLC to Nalco FinanceHoldings LLC was accounted for in a manner similar to a pooling ofinterests. Therefore, the results for the period prior toJanuary  14,  2004 (date of inception) include theconsolidated results of Nalco Holdings LLC andsubsidiaries.

2.    Basisof Presentation

All intercompany balances andtransactions are eliminated. Investments in companies or partnershipsin which the Company/Predecessor does not have control, but has theability to exercise significant influence over operating and financialpolicies, are reported using the equitymethod.

Predecessor — Theaccompanying combined financial statements of the Predecessor prior tothe Acquisition include the consolidated financial statements of OndeoNalco Company and subsidiaries (ONC) and the combined financialstatements of certain subsidiaries of Nalco International SAS (NIS)plus Calgon Europe Limited (UK), owned by Degremont (a former relatedparty). The combined financial statements of NIS subsidiaries are acombination of the consolidated financial statements of Ondeo NalcoFrance, the consolidated financial statements of Aquazur Ltd., and theconsolidated financial statements of Nalco Dutch Holdings B.V., OndeoNalco Belgium NV/SA, Wyss Wassertechnik AG, Ondeo Nalco (Shanghai)Trading Co., Ltd., and Nalco Portuguesa (Quimica Industrial) Ltd. OndeoIndustrial Solutions North America, a subsidiary of ONC, has beenexcluded from the Predecessor, as it was not acquired by theCompany.

Successor — Theaccompanying consolidated financial statements include the accounts ofNalco Finance Holdings LLC and subsidiaries (collectively, the Company)subsequent to the Acquisition.

Certain reclassificationshave been made to the prior year data to conform to the current yearpresentation which had no effect on net income reported for anyperiod.

The consolidated financial statements of theSuccessor as of and for the years ended December  31,  2005and 2004 and as of and for the period from November  4,2003 through December  31,  2003 reflect the Acquisitionunder the purchase method of accounting, in accordance with theFinancial Accounting Standards Board(‘‘FASB’’) Statement of FinancialAccounting Standards (‘‘SFAS’’)No. 141, Business Combinations.

Thefollowing unaudited pro forma financial data summarizes the results ofoperations for the year ended December  31,  2003 as if theAcquisition had occurred as of the beginning of theperiod.

Pro forma adjustments include adjustments for (1)purchase accounting, including, (i) the elimination of inventorywrite-up recorded as a result of the Acquisition, (ii) adjustments todepreciation and amortization to reflect the fair value of property,plant and equipment and identified intangible assets (with finitelives), (iii) elimination of the pension and other postretirementbenefit amortization of unrecognized actuarial losses, prior servicecosts and transition obligations and assets losses, and (2) adjustmentsfor items directly related to the transaction, including (i) rentexpense that we would have incurred had the sublease of our Naperville,Illinois headquarters and research facility been in place, (ii)elimination of management fees that Suez and its affiliates charged tothe Company for general corporate overhead and of charges to Suez andits affiliates for tax planning and compliance and treasuryadministration provided by the Company in North America, (iii)adjustments to interest expense to reflect the Company’s newcapital structure, and (iv) corresponding adjustments to income taxexpense.

The following pro forma amounts are notnecessarily indicative of the results that would have been attained ifthe Acquisition had occurred at the beginning of the period presentedor that may be attained in the future:

64

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2.    Basisof Presentation   (continued)

|                   |  |                                         |         |         |  |  |
|-------------------|--|-----------------------------------------|---------|---------|--|--|
|              |  | (Unaudited)Year Ended December 31, 2003 |
| Netsales          |  | $                                       | 2,766.6 |    |
| Operatingearnings |  |                                    | 0.2     |    |
| Netloss           |  |                                    | (237.3  | )  |
|                   |

The Company hasallocated the purchase price on the basis of the fair value of theunderlying assets acquired and liabilities assumed asfollows:

|                                                  |  |                     |         |        |  |  |
|--------------------------------------------------|--|---------------------|---------|--------|--|--|
|                                             |  | AsofNovember 4,2003 |
| Currentassets:                                   |  |                |    |   |
| Cash and cashequivalents                         |  | $                   | 24.3    |   |
| Trade accountsreceivable                         |  |                | 477.5   |   |
| Inventories                                      |  |                | 316.5   |   |
| Othercurrentassets                               |  |                | 101.8   |   |
| Goodwill                                         |  |                | 2,149.7 |   |
| Intangibleassets                                 |  |                | 1,410.0 |   |
| Purchased in-process researchand development     |  |                | 122.3   |   |
| Other noncurrentassets                           |  |                | 366.0   |   |
| Property, plant andequipment                     |  |                | 833.3   |   |
| Totalassetsacquired                              |  |                | 5,801.4 |   |
| Currentliabilities:                              |  |                |    |   |
| Accountspayable                                  |  |                | 138.7   |   |
| Accruedexpenses                                  |  |                | 268.9   |   |
| Other currentliabilities                         |  |                | 74.4    |   |
| Long-termdebt                                    |  |                | 30.2    |   |
| Deferred incometaxes                             |  |                | 502.2   |   |
| Accrued pension and otherpostretirement benefits |  |                | 539.9   |   |
| Othernoncurrentliabilities                       |  |                | 144.2   |   |
| Totalliabilitiesassumed                          |  |                | 1,698.5 |   |
| Netassetsacquired                                |  | $                   | 4,102.9 |   |
|                                                  |

Cashand cash equivalents, trade accounts receivable, other current assets,accounts payable, accrued expenses and other current liabilities werestated at historical carrying values, given the short-term nature ofthese assets and liabilities.

Inventory, other noncurrentassets, long-term debt, and other noncurrent liabilities outstanding asof the effective date of the Acquisition were allocated based onmanagement’s judgments and estimates.

Deferredincome taxes have been provided in the consolidated balance sheet basedon the tax versus book basis of the assets acquired and liabilitiesassumed, as adjusted to estimated fair values. Valuation allowanceswere established for deferred tax assets related to all of the taxcarryforwards for which utilization is uncertain.

TheCompany’s projected pension and other postretirement benefitobligations and assets were reflected in the allocation of purchaseprice at the projected benefit obligation less plan assets at fairmarket value, based on management’s computations which includedvaluations performed by independent actuaries engaged by theCompany.

65

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2.    Basisof Presentation   (continued)

The Company engaged independentappraisers to assist in determining the fair values of property, plantand equipment and intangible assets acquired, including purchasedin-process research and development (IPR&D), trade names,trademarks, developed technology and customer relationships. TheCompany received final values from the appraisers during 2004, whichhave been included in the above table.

The Companyrecorded a one-time charge for purchased IPR&D expenses of$122.3  million during the year ended December  31,2004. The value of purchased IPR&D was comprised of five ongoingdevelopment projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative future use. Theseproducts had not been released to the market as of the date of theAcquisition, but the features and functionality of the products hadbeen defined.

During the year ended December31,  2004, the Company reduced by $19.6  million the fairvalue of property, plant and equipment to reflect the final valuationprovided by its independent appraisers.

Trademarks andtrade names were valued based on the relief of royalty approach. Thismethod allocates value based on what the Company would be willing topay as a royalty to a third-party owner of the trademark or trade namein order to exploit the economic benefits. Trademarks and trade namesthat have been valued under this approach have a value of $830.0million with an estimated indefinite life.

Patents anddeveloped technology were valued based on the relief of royaltyapproach. This method allocates value based on what the Company wouldbe willing to pay as a royalty to a third-party owner of the patent ortechnology in order to exploit the economic benefits. The technologiesthat have been valued under this approach have a value of$100.0 million with an estimated weighted average useful life of10 years.

Customer relationships were valued using anincome approach after considering a fair return on fixed assets,working capital, patents, trade names, trademarks, technology, andassembled workforce. A value of $480.0 million was assigned tocustomer relationships. As of December  31,  2003, anestimated useful life of 10 years had been used based on preliminaryinformation obtained from our independent appraisers.

During the year ended December  31,  2004, weobtained updated information from our independent appraisers andrevised the estimated useful life of customer relationships to 16years.

Based on the final valuation, approximately$311.6  million of goodwill and other intangible assets will bedeductible for income tax purposes. The primary reasons for theAcquisition and the primary factors that contributed to a purchaseprice that resulted in recognition of goodwillinclude:

|  |              |                                                                                                                                                                                                                                                                           |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company’s leadingmarket position as a global provider of integrated water treatment andprocess improvement services, chemicals and equipment programs forindustrial and institutional applications offers a competitiveadvantage in competing for newcustomers; |

|  |              |                                                                                                                                                                                                                                                                                                                                               |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company, being one ofonly a small number of companies that can provide turnkey watermanagement solutions on a global basis (130 countries across sixcontinents), offers a competitive advantage in meeting the global needsof multinational customers and mitigates the potential impact ofvolatility in any individual country orregion; |

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The diverse customer base andindustries served minimizes the potential impact of volatility from anyone customer or industry. |

Other considerations affectingthe value of goodwill include:

|  |              |                                                                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Thepotential for improved earnings and cash flow gained from operating asa stand-alone company with focused management effort and more efficientresource management and from the ability of the assembled work force todrive significant annual cost reductions in the administrative andoverhead functions; |

66

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2.    Basisof Presentation   (continued)

|  |              |                                                                                                                               |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The historicalheavy investment in recruiting and continuously training more than5,500 sales engineers and servicetechnicians; |

|  |              |                                                                                                                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The ability of theassembled workforce to develop future innovative technologies andproducts, as has been done in the past through a focused commitment totechnology, research and development; |

|  |              |                                                                                                                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The application of purchase accounting,particularly for such items as pension, other postretirement benefits,and deferred tax liabilities for which significant reserve balanceswere recorded with no corresponding significant short-term cashoutflows. |

In conjunction with the Acquisition, the Companyformulated a plan to exit or restructure certain activities. TheCompany recorded liabilities of $35.5  million, primarily foremployee severance and related costs, in connection with theCompany’s plan to exit or restructure certain activities. As ofDecember  31,  2005, $33.0  million has been chargedagainst this accrual. The Company expects that these activities will becompleted by mid-2006.

The consolidated statements ofoperations for the year ended December  31,  2004 and forthe period from November  4,  2003 through December31,  2003 include an additional $14.6  million and$21.2  million, respectively, in cost of products sold related tothe sale of inventory that had been revalued at selling price lesscosts to sell in purchaseaccounting.

3.    Summaryof Significant Accounting Policies

Use ofEstimates

The preparation of financial statements inconformity with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from thoseestimates.

Reclassifications

Certainreclassifications have been made to the consolidated statements ofoperations for the year ended December  31,  2004 and forthe period from November  4,  2003 through December31,  2003 and the combined statements of operations for theperiod from January  1,  2003 through November3,  2003 to conform to the current year presentation. Thesereclassifications had no effect on net earnings (loss) reported for anyperiod.

Foreign Currency Translation

Localcurrencies are the functional currencies for most foreign operations.Their financial statements are translated at current and averageexchange rates, with any resulting translation adjustments included inthe currency translation adjustment account in unitholders’equity. The financial statements of any foreign subsidiaries thatoperate in highly inflationary environments are translated using acombination of current, average, and historical exchange rates, withthe resulting translation impact included in results of operations.Transactions executed in different currencies resulting in exchangeadjustments are included in results of operations.

Concentration of Credit Risk

Credit risk representsthe accounting loss that would be recognized at the reporting date ifcounterparties failed completely to perform as contracted. Managementbelieves the likelihood of incurring material losses due toconcentration of credit risk is remote. The principal financialinstruments subject to credit risk are as follows:

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3.    Summaryof Significant Accounting Policies   (continued)

Cash and CashEquivalents

A formal policy exists of placing theseinstruments in investment grade companies and institutions and limitingthe size of an investment with any single entity.

AccountsReceivable

A large number of customers in diverseindustries and geographies, as well as the practice of establishingreasonable credit lines, limits credit risk. The allowance for doubtfulaccounts is adequate to cover potential credit risklosses.

Foreign Exchange Contracts andDerivatives

Formal policies exist, which establishcredit limits and investment grade credit criteria of‘‘A’’ or better for allcounterparties.

Cash and Cash Equivalents

Cash andcash equivalents include all cash balances and highly liquidinvestments with original maturities of three months orless.

Accounts Receivable and Allowance for DoubtfulAccounts

The Company carries its accounts receivable attheir face amounts less an allowance for doubtful accounts. On aperiodic basis, the Company evaluates its accounts receivable andestablishes the allowance for doubtful accounts based on a combinationof specific customer circumstances and credit conditions and based on ahistory of write-offs and collections. The Company’s policy isgenerally to not charge interest on trade receivables after the invoicebecomes past due. A receivable is considered past due if payments havenot been received within agreed upon invoice terms.

InventoryValuation

Inventories are valued at the lower of cost ormarket. Approximately 56% and 54% of the inventories atDecember  31,  2005 and 2004, respectively, are valuedusing the average cost or first-in, first-out (FIFO) method. Theremaining inventories are valued using the last-in, first-out (LIFO)method. Reported inventory amounts would have been $2.4  millionhigher at December  31,  2005 and $14.5  millionlower at December  31,  2004, if the FIFO method ofaccounting had been used for allinventories.

Goodwill

The Predecessor adopted SFASNo. 142, Goodwill and Other Intangible Assets, as ofJanuary  1,  2002. Under SFAS No. 142, goodwill andintangible assets deemed to have indefinite lives are no longeramortized but are subject to annual impairment tests. Goodwill istested for impairment at least annually, and impairment, if any,recorded as expense in the period ofimpairment.

Intangibles

The Company amortizescustomer relationships using an accelerated method to reflect thepattern in which the economic benefits of that asset are realized. Thestraight-line method is used for all other assets subject toamortization. Customer relationships and patents and developedtechnology are being amortized over estimated useful lives of 16 yearsand 10 years, respectively.

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3.    Summaryof Significant Accounting Policies   (continued)

Deferred FinancingCosts

Deferred financing costs are incurred to obtainlong-term financing and are amortized using the effective interestmethod over the term of the related debt. The amortization of deferredfinancing costs, which is classified in interest expense in thestatement of operations, was $10.9  million for the year endedDecember  31,  2005, $11.2  million for the yearended December  31,  2004, and $17.4  million for theperiod from November  4,  2003 through December31,  2003, which included the immediate write-off of $15.8million for bridge financing commitment fees incurred in connectionwith the Acquisition.

Income Taxes

Income taxesare recognized during the period in which transactions enter into thedetermination of financial statement income, with deferred income taxesbeing provided for the tax effect of temporary differences between thecarrying amount of assets and liabilities and their tax bases.

Deferred income taxes are provided on the undistributedearnings of foreign subsidiaries and affiliated companies except to theextent such earnings are considered to be permanently reinvested in thesubsidiary or affiliate. In cases where foreign tax credits will notoffset U.S. income taxes, appropriate provisions are included in theconsolidated statement of operations.

Valuationallowances are determined based on the realizability of the deferredtax assets. Relevant factors to determine the realizability of theassets include future taxable income, the expected timing of thereversal of temporary differences, tax planning strategies and theexpiration dates of the various tax attributes. Valuation allowancesare established for those assets that are determined to be more likelythan not to expire without benefit, or for which income of the propercharacter is not anticipated.

The effect of a valuationallowance expected to be necessary for a deferred tax asset at the endof the year for originating deductible temporary differences andcarryforwards is included in the annual effective tax rate for theyear. The effect of a change in the beginning-of-the-year balance of avaluation allowance resulting from a change in judgement about therealizability of the related deferred tax asset in future years isrecognized in the interim period in which the changeoccurs.

The Company reserves tax contingencies (includingrelated interest) for tax positions it has taken for which thelikelihood of being sustained is considered to be less than probable.The tax reserves are reevaluated throughout the year, taking intoaccount new legislation, regulations, case law and auditresults.

Derivative Instruments

In accordance withthe provisions of SFAS No. 133, Accounting for DerivativeInstruments and Hedging Activities, as amended by SFAS No. 138,Accounting for Certain Derivative Instruments and Certain HedgingActivities, derivatives are recognized as either assets orliabilities in the balance sheets at fair value.

RetirementPlans

The cost of retirement plans is computed on thebasis of accepted actuarial methods (using the projected unit creditmethod for the principal plan) and includes current service costs andamortization of increases in prior service costs over the expectedfuture service of active participants as of the date such costs arefirst recognized.

The costs of health and life insurancepostretirement benefits are accrued as earned. Annual expenserepresents a combination of interest and service cost provisions. Mostpostretirement benefits are not funded.

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3.    Summaryof Significant Accounting Policies   (continued)

Revenue Recognition

Revenuefrom sales of products, including amounts billed to customers forshipping and handling costs, is recognized at the time: (1) persuasiveevidence of an arrangement exists, (2) ownership and all risks of losshave been transferred to the buyer, which is generally upon shipment,(3) the price is fixed and determinable, and (4) collectibility isreasonably assured. Revenue from services is recognized when theservices are provided to the customer.

Shipping andhandling costs, including certain warehousing costs incurred by theCompany, are included in cost of products sold.

Research andDevelopment

Research and development costs, excludingcosts to acquire in-process research and development, totaled$58.6  million, $56.8  million, $9.7  million, and$50.3  million for the year ended December  31,2005, the year ended December  31,  2004, the period fromNovember  4,  2003 through December  31,  2003,and the period from January  1,  2003 throughNovember  3,  2003, respectively. Research and developmentcosts are charged to expense as incurred. Purchased in-process researchand development costs were $122.3  million for the year endedDecember  31,  2004.

Recent AccountingPronouncements

In November  2004, the FASBissued SFAS No. 151, Inventory Costs. This statementclarifies the accounting for the abnormal amount of idle facilitiesexpense, freight, handling costs and wasted material. This statementrequires that those items be recognized as current-period expense. Inaddition, SFAS No. 151 requires that allocation of fixed overhead tothe cost of conversion be based on the normal capacity of theproduction facilities. This statement is effective for inventory costsincurred after December  31,  2005. Adoption of thisstatement will not have a material effect on the consolidated financialstatements of the Company.

4.    Acquisitionsand Divestitures

The Company acquired two businesses andcertain patents during 2004 for a combined purchase price of$2.5  million, net of cash acquired. Each of these acquisitionswas treated as a purchase, and their results of operations have beenincluded in the consolidated financial statements since theirrespective dates of acquisition. The purchase price exceeded the fairvalue of tangible net assets by $2.5  million, which wasallocated to other intangible assets and patents and developedtechnology.

In June  2004, the Company and KatayamaChemical Inc. formed a joint venture in Japan, Katayama Nalco Inc., toprovide water treatment and process improvement services, chemicals,and equipment to Japanese industrial and institutional customers. Theresults of Katayama Nalco Inc. are included in the Company’sconsolidated financial statements since it exercises control over thisjoint venture.

The Company sold a business during 2004 forapproximately $0.2  million. No gain or loss was recorded on thesale.

During the period from January  1,  2003through November  3,  2003, the Predecessor acquiredAquazur Ltd. from NIS and increased its investment in Oekophil AG from40% to 100%. Each of the acquisitions was accounted foras a purchase; however, as disclosed in Note 2, the combined financialstatements of the Predecessor include the results of Aquazur Ltd. priorto its acquisition from NIS. The combined purchase price of theseacquisitions, net of cash acquired, was $23.4  million. Thepurchase price exceeded the fair value of the net tangible assetsacquired by $12.9  million, which was allocated to goodwill.

The Predecessor received net proceeds of $13.3  millionand recognized a pretax loss of $5.2  million on the sale of itsSouth African subsidiary and two small businesses during the periodfrom January  1,  2003 through November  3,2003.

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4.    Acquisitionsand Divestitures   (continued)

The pro forma impact as if theaforementioned acquisitions had occurred at the beginning of therespective years is notsignificant.

5.    Securitizationof Accounts Receivable

In June  2004, the Companyentered into a three-year accounts receivable securitization facilitywith a commercial paper conduit sponsored by one of the lenders underthe Company’s senior credit facilities. The facility provides upto $100.0  million in funding, based on availability of eligibletrade accounts receivable and other customary factors.

Inconnection with the facility, the Company established abankruptcy-remote, wholly owned, special purpose limited liabilitycompany (the ‘‘Transferor’’), into whichNalco Company and one of its domestic subsidiaries (the‘‘Sellers’’) transfer all eligible tradeaccounts receivable (the ‘‘Receivables’’).Pursuant to a Receivables Transfer Agreement, the Transferor thentransfers an undivided interest in the Receivables to the commercialpaper conduit or the related bank sponsor (the‘‘Transferees’’) in exchange forcash.

The financing fee charged by the Transferees underthe facility is based on the amount funded and the conduit’scost of funds for issuing commercial paper plus a margin that variesbased on the leverage ratio as calculated under the Company’ssenior credit facilities. A commitment fee that varies based on thesame ratio and the unused portion of the facility is also charged bythe conduit. Under the facility, Nalco Company services, administersand collects the Receivables, for which it receives a monthly servicingfee of 1% per annum of the average daily outstanding balance ofReceivables.

Availability of funding under the facilitydepends primarily upon the outstanding Receivables balance from time totime. The facility may be terminated for, among other reasons, materialbreaches of representations and warranties, bankruptcies of the Sellersor the Transferor, a judgment or order for the payment of moneyrendered against the Transferor, cross-defaults to the Company’sother debt, or breach of specified financial covenants. The Company iscurrently in compliance with these covenants.

The facilityis accounted for as a secured borrowing, resulting in the funding andrelated Receivables being shown as liabilities and assets,respectively, on the Company’s consolidated balance sheet andthe costs associated with the facility being recorded as interestexpense. The Company had outstanding borrowings of $75.3  millionand $97.3  million at December  31,  2005 and 2004,respectively, under the facility.

In December  2001,the Predecessor entered into an agreement that allowed it toperiodically transfer undivided percentage ownership interests in arevolving pool of most of the Predecessor’s U.S. tradereceivables to a multiseller conduit (Conduit) administered by anindependent financial institution. The agreement was terminated inOctober  2003, and the Predecessor repurchased $100.7million of receivables to facilitate thistermination.

Under the terms of the agreement, thePredecessor could transfer trade accounts receivable to abankruptcy-remote special purpose entity (SPE), and the Conduit, orbackup purchasers, was required to purchase from the SPE an undividedownership interest of up to $150.0 million in those receivables.The percentage ownership interest in receivables purchased by theConduit could increase or decrease over time, depending on thecharacteristics of the SPE’s receivables, including delinquencyrates and debtor concentrations. The Predecessor serviced thereceivables transferred to the SPE and received a servicing fee, whichapproximated market compensation for these services.

Underthe terms of the agreement, the Conduit paid the SPE the face amount ofthe undivided interest at the time of purchase. On a monthly basis,this sales price was adjusted, resulting in payments by the SPE to theConduit of amounts that varied based on the interest rate on certain ofthe Conduit’s liabilities and the length of time the soldreceivables remained outstanding. Collections on sold receivables wereused to purchase additional receivables from thePredecessor.

The Predecessor accounted for the transfer ofundivided percentage ownership interest in the receivables to theConduit as sales under SFAS No. 140, Accounting for Transfersand Servicing of 

71

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5.    Securitizationof Accounts Receivable   (continued)

Financial Assets and Extinguishments ofLiabilities. The Predecessor’s loss on the sale of theundivided interests in the receivables was $1.5  million and forthe period from January  1,  2003 through November3,  2003, and was included in interest expense.

Cash flows from the sale of undivided interests in thereceivables to the Conduit, net of receivables repurchased tofacilitate termination of the agreement, were reported by thePredecessor as an operating activity in the statement of cashflows.

6.    Inventories

Inventoriesconsist of thefollowing:

|                                  |  |                  |       |                  |  |        |       |        |  |  |
|----------------------------------|--|------------------|-------|------------------|--|--------|-------|--------|--|--|
|                             |  | December31, 2005 |       | December 31,2004 |
| Finished products                |  | $                | 242.6 |             |  | $      | 245.4 |   |
| Raw materials andwork-in-process |  |             | 70.6  |             |  |   | 68.1  |   |
|                             |  | $                | 313.2 |             |  | $      | 313.5 |   |
|                                  |

7.    Goodwill

Changes in the carrying value of goodwill fromDecember  31,  2003 to December  31,  2005 aresummarizedbelow:

|                                                    |  |        |         |         |  |  |
|----------------------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December  31,2003                     |  | $      | 2,500.1 |    |
| Adjustment to record purchasedIPR&D expense    |  |   | (122.3  | )  |
| Adjustment toOndeo Nalco Group purchaseprice       |  |   | (21.7   | )  |
| Revised fair value of property,plant and equipment |  |   | 19.6    |    |
| Adjustment to fairvalue of other long termassets   |  |   | 1.4     |    |
| Adjustment to accruedliabilities                   |  |   | 25.2    |    |
| Adjustments todeferred income taxes:               |  |   |    |    |
| ReimbursementAgreement with Suez                   |  |   | (42.8   | )  |
| Stateincome tax rates                              |  |   | (27.9   | )  |
| Excess LossAccount                                 |  |   | (22.3   | )  |
| Other                                              |  |   | 1.1     |    |
| Reclassificationfor business held for sale         |  |   | (4.8    | )  |
| Effect offoreign currencytranslation               |  |   | 62.7    |    |
| Balanceas of December  31,2004                     |  |   | 2,368.3 |    |
| Adjustment to deferred incometaxes                 |  |   | (71.6   | )  |
| Adjustment to Ondeo Nalco Grouppurchase price      |  |   | (2.5    | )  |
| Excess accruals forcosts to exit activities        |  |   | (0.4    | )  |
| Effect offoreign currencytranslation               |  |   | (97.1   | )  |
| Balanceas of December  31,2005                     |  | $      | 2,196.7 |    |
|                                                    |

Inits preliminary purchase price allocation, the Company recorded a$42.8  million deferred tax liability related to the$112.7  million receivable recorded at the date of theAcquisition for the Reimbursement Agreement with Suez (see Note 9).During 2004, it was determined that the receivable was not a taxabletemporary difference, and the deferred tax liability was reversed. Alsoduring 2004, the Company adjusted certain deferred state income taxassets and liabilities as of the date of the Acquisition to reflect thetax rate at which it is expected they will be settled. Theseadjustments resulted in a $27.9  million decrease in goodwill. Inaddition, it was determined during 2004 that the sale of the OndeoNalco Group to the Sponsors accelerated the recapture of certain U.S.tax deductions in the Seller’s 2003 tax year. The recognition oftaxable income by the Seller due to an Excess Loss Account restored taxbasis for the Company. As a result, the Company reduced deferred taxliabilities and goodwill by the $22.3  million taximpact.

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7.    Goodwill   (continued)

During 2005, the Company adjustedcertain deferred tax liabilities related to purchase accounting,primarily related to intangible assets. As a result, goodwill anddeferred tax liabilities were reduced by $71.6million.

The Company will evaluate goodwill for impairmentin the fourth quarter of each year and whenever a triggering eventoccurs. The Company completed its annual goodwill impairment test inthe fourth quarter 2005 and determined that no goodwill wasimpaired.

8.    Other IntangibleAssets

The Company’s intangible assets aresummarized asfollows:

|                                          |  |                  |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|------------------------------------------|--|------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                     |  | December31, 2005 |         | December 31,2004        |
|                                     |  | GrossAmount      |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject toamortization: |  |             |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Customerrelationships                    |  | $                | 486.4   |                    |  | $           | (169.8  | )                  |  | $      | 506.6   |   |  | $      | (103.5  | )  |
| Patentsand developedtechnology           |  |             | 100.5   |                    |  |        | (22.2   | )                  |  |   | 100.5   |   |  |   | (12.2   | )  |
| Other                                    |  |             | 2.4     |                    |  |        | (0.3    | )                  |  |   | 2.2     |   |  |   | — |    |
| Intangiblesnot subject toamortization:   |  |             |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Trademarksand tradenames                 |  |             | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
| Pensionasset                             |  |             | 0.5     |                    |  |        | — |                    |  |   | — |   |  |   | — |    |
|                                     |  | $                | 1,419.8 |                    |  | $           | (192.3  | )                  |  | $      | 1,439.3 |   |  | $      | (115.7  | )  |
|                                          |

Estimatedannual amortization expense for the years ending December31,  2006 through December  31,  2010 is asfollows:

Year ending December31

|      |  |        |      |        |  |  |
|------|--|--------|------|--------|--|--|
| 2006 |  | $      | 68.6 |   |
| 2007 |  |   | 58.7 |   |
| 2008 |  |   | 50.5 |   |
| 2009 |  |   | 43.6 |   |
| 2010 |  |   | 37.9 |   |
|      |

9.    ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreement withSuez

The Predecessor previously had an Employee StockOwnership Plan (ESOP), which gave most U.S. employees an additionalopportunity to share in the ownership of the Predecessor’sstock. Preferred shares were allocated to eligible employees based on apercentage of pretax earnings.

At the inception of theESOP, the Predecessor and a trustee entered into a trust agreement,constituting the ESOP Trust, to fund benefits under thePredecessor’s ESOP. As part of its acquisition of Nalco ChemicalCompany in November  1999, Suez purchased from the trustee all ofthe issued and outstanding Series B ESOP Convertible Preferred Stock ata price of $1,060 per share. The trustee credited proceeds from thesale of allocated shares to participants’ accounts. Under theterms of an agreement (the Contribution Agreement), the Predecessor andthe ESOP trustee agreed that the trustee would use proceeds from thesale of shares held in the loan suspense account to repay theoutstanding principal and accrued interest on the ESOP loans. It wasalso agreed that all proceeds remaining after the repayment of theloans and accrued interest would be allocated to participants’accounts. In return, the Predecessor agreed to make contributions tothe Profit Sharing, Investment and Pay Deferral Plan Trust (the Trust)on or before December 31, 2010, having a present value equal to$124.6  million, the outstanding principal and accrued interestpaid on the ESOP loans. The plan was amended effective January1,  2003 to also permit matching contributions under theCompany’s 

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9.    ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreement withSuez   (continued)

401(k) plan to count as contributions to theTrust. The Contribution Agreement provides for specified minimum annualcontributions to be made to the Trust, with interest accruing on theoutstanding contribution balance at an annual rate of 8.5%compounded monthly. The contribution commitment becomes due and payablein its entirety if one or more events that are specified in theContribution Agreement occur. The Predecessor, upon the acquisition bySuez, recorded a liability of $139.1  million for thiscontribution commitment, representing the present value of the totalexpected contributions to the Trust, with a corresponding deferredemployee profit sharing asset.

Contributions to the Trustand expenses recorded related to the Contribution Agreement are asfollows:

|                                                 |  |                           |        |                           |  |                                        |        |                                      |  |        |         |        |  |        |        |        |  |  |
|-------------------------------------------------|--|---------------------------|--------|---------------------------|--|----------------------------------------|--------|--------------------------------------|--|--------|---------|--------|--|--------|--------|--------|--|--|
|                                            |  | Successor                 |        | Predecessor               |
|                                            |  | YearendedDecember 31,2005 |        | Year endedDecember31,2004 |  | November 4,2003 throughDecember31,2003 |        | January 1,2003 throughNovember3,2003 |
| Contributions to theTrust                       |  | $                         | 21.5   |                      |  | $                                      | 14.2   |                                 |  | $      | — |   |  | $      | 24.0   |   |
| Expenserecorded:                                |  |                      |   |                      |  |                                   |   |                                 |  |   |    |   |  |   |   |   |
| Amortizationof unearned employee profit sharing |  | $                         | 7.0    |                      |  | $                                      | 20.8   |                                 |  | $      | 2.8     |   |  | $      | 13.8   |   |
| Accretionof obligation toTrust                  |  |                      | 6.2    |                      |  |                                   | 7.0    |                                 |  |   | 1.2     |   |  |   | 6.2    |   |
| Totalincluded in operatingexpenses              |  | $                         | 13.2   |                      |  | $                                      | 27.8   |                                 |  | $      | 4.0     |   |  | $      | 20.0   |   |
|                                                 |

Pursuantto the Stock Purchase Agreement, the Company and Suez entered into anagreement (the Reimbursement Agreement) on November  4,2003, whereby Suez shall reimburse the Company for all contributionsthe Company makes to the Trust in order to satisfy its obligationsunder the Contribution Agreement. As part of the allocation of theAcquisition purchase price, the Company recorded a receivable from Suezof $112.7  million, equivalent to the Company’s recordedliability to the Trust. Interest accretes on this receivable at thesame rate that it accretes on the Company’s obligation to theTrust.

Payments received from Suez and income recordedrelated to the reimbursement arrangement are asfollows:

|                                 |  |                           |        |                            |  |        |        |        |  |  |
|---------------------------------|--|---------------------------|--------|----------------------------|--|--------|--------|--------|--|--|
|                            |  | Successor                 |
|                            |  | YearendedDecember 31,2005 |        | Year endedDecember 31,2004 |
| Payments received fromSuez      |  | $                         | 21.5   |                       |  | $      | 14.2   |   |
| Incomerecorded:                 |  |                      |   |                       |  |   |   |   |
| Accretion ofreceivable fromSuez |  | $                         | 6.2    |                       |  | $      | 7.0    |   |
|                                 |

OnNovember  4,  2003, the Company entered into a subleaseagreement with Leo Holding Company (Leo), a subsidiary of Suez, wherebythe Company subleases its corporate headquarters and research facilityfrom Leo (see Note 14). Under the terms of the Reimbursement Agreement,if the Company fails to pay when due any sublease rent (as defined inthe sublease agreement), Suez shall have the right to reduce itsreimbursement obligations to the Company pursuant to the ReimbursementAgreement by an amount equal to suchshortfall.

10.    Property,Plant, and Equipment

Property, plant, and equipment(including major improvements) are recorded at cost. Depreciation ofbuildings and equipment is calculated over their estimated useful livesgenerally using the straight-line method.

74

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10.    Property,Plant, and Equipment   (continued)

The estimated useful lives of themajor classes of depreciable assets acquired since the date of theAcquisition are as follows: buildings — 33 to 40 years; software— 5 years; equipment — 3 to 15 years.

TheCompany engaged independent appraisers to assist in determining thefair values of property, plant and equipment as of the date of theAcquisition. Final values from the appraisers are reflected in theamounts in the table below. The Company is depreciating the acquiredassets based on the final fair values and the remaining usefullives.

Interest capitalized in connection with thedevelopment of a new management information system in Europe was$0.2  million, $1.6  million, $0.1  million, and$0.1  million for the year ended December  31,  2005,the year ended December  31,  2004, the period fromNovember  4,  2003 through December  31,  2003,and the period from January  1,  2003 throughNovember  3,  2003, respectively.

Property,plant, and equipment consist of thefollowing:

|                                   |  |                 |         |                 |  |        |        |         |  |  |
|-----------------------------------|--|-----------------|---------|-----------------|--|--------|--------|---------|--|--|
|                              |  | December31,2005 |         | December31,2004 |
| Land                              |  | $               | 74.8    |            |  | $      | 80.9   |    |
| Buildings                         |  |            | 164.3   |            |  |   | 165.4  |    |
| Software                          |  |            | 104.0   |            |  |   | 103.0  |    |
| Equipment                         |  |            | 697.1   |            |  |   | 640.9  |    |
|                              |  |            | 1,040.2 |            |  |   | 990.2  |    |
| Accumulateddepreciation           |  |            | (284.9  | )          |  |   | (142.9 | )  |
| Property,plant, and equipment,net |  | $               | 755.3   |            |  | $      | 847.3  |    |
|                                   |

11.    IncomeTax

The provision (benefit) for income taxes wascalculated based upon the following components of earnings (loss)before incometaxes:

|                                   |  |                           |       |                           |  |                                         |        |                                       |  |        |       |         |  |        |        |         |  |  |
|-----------------------------------|--|---------------------------|-------|---------------------------|--|-----------------------------------------|--------|---------------------------------------|--|--------|-------|---------|--|--------|--------|---------|--|--|
|                              |  | Successor                 |       | Predecessor               |
|                              |  | YearendedDecember 31,2005 |       | Year endedDecember31,2004 |  | November 4, 2003through December31,2003 |        | January 1, 2003through November3,2003 |
| UnitedStates                      |  | $                         | (91.7 | )                    |  | $                                       | (268.1 | )                                |  | $      | (33.0 | )  |  | $      | (233.1 | )  |
| Foreign                           |  |                      | 190.5 |                      |  |                                    | 165.5  |                                  |  |   | 0.5   |    |  |   | 147.8  |    |
| Earnings(loss) before incometaxes |  | $                         | 98.8  |                      |  | $                                       | (102.6 | )                                |  | $      | (32.5 | )  |  | $      | (85.3  | )  |
|                                   |

75

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11.    IncomeTax   (continued)

The components of the income taxprovision (benefit) are asfollows:

|                              |  |                           |        |                           |  |                                         |        |                                       |  |        |        |         |  |        |        |         |  |  |
|------------------------------|--|---------------------------|--------|---------------------------|--|-----------------------------------------|--------|---------------------------------------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                         |  | Successor                 |        | Predecessor               |
|                         |  | YearendedDecember 31,2005 |        | Year endedDecember31,2004 |  | November 4, 2003through December31,2003 |        | January 1, 2003through November3,2003 |
| Current:                     |  |                      |   |                      |  |                                    |   |                                  |  |   |   |    |  |   |   |    |
| UnitedStates                 |  | $                         | (4.6   | )                    |  | $                                       | 18.3   |                                  |  | $      | (0.3   | )  |  | $      | 23.1   |    |
| Stateandlocal                |  |                      | 0.6    |                      |  |                                    | 0.2    |                                  |  |   | 1.4    |    |  |   | 6.4    |    |
| Foreign                      |  |                      | 86.5   |                      |  |                                    | 78.2   |                                  |  |   | 9.0    |    |  |   | 56.3   |    |
| Totalcurrent                 |  |                      | 82.5   |                      |  |                                    | 96.7   |                                  |  |   | 10.1   |    |  |   | 85.8   |    |
| Deferred:                    |  |                      |   |                      |  |                                    |   |                                  |  |   |   |    |  |   |   |    |
| UnitedStates                 |  |                      | (10.0  | )                    |  |                                    | (27.6  | )                                |  |   | (11.8  | )  |  |   | (16.1  | )  |
| Stateandlocal                |  |                      | (0.7   | )                    |  |                                    | (3.9   | )                                |  |   | 1.0    |    |  |   | (3.0   | )  |
| Foreign                      |  |                      | (17.5  | )                    |  |                                    | (17.7  | )                                |  |   | (7.6   | )  |  |   | 2.0    |    |
| Totaldeferred                |  |                      | (28.2  | )                    |  |                                    | (49.2  | )                                |  |   | (18.4  | )  |  |   | (17.1  | )  |
| Incometax provision(benefit) |  | $                         | 54.3   |                      |  | $                                       | 47.5   |                                  |  | $      | (8.3   | )  |  | $      | 68.7   |    |
|                              |

Deferredtax assets and liabilities are recognized for the expected future taxconsequences of temporary differences between the financial statementbasis and the tax basis of assets and liabilities using enactedstatutory tax rates applicable to future years. Net deferred income taxassets (liabilities) are asfollows:

|                                                  |  |                 |         |                  |  |        |        |         |  |  |
|--------------------------------------------------|--|-----------------|---------|------------------|--|--------|--------|---------|--|--|
|                                             |  | December31,2005 |         | December 31,2004 |
| Retirementbenefits                               |  | $               | 50.9    |             |  | $      | 59.4   |    |
| Pension                                          |  |            | 136.1   |             |  |   | 119.9  |    |
| UnitedStates net operating losscarryforwards     |  |            | 55.8    |             |  |   | 37.6   |    |
| Foreign taxlosscarryforwards                     |  |            | 38.7    |             |  |   | 34.5   |    |
| Leveragedleaseinvestments                        |  |            | 4.1     |             |  |   | 1.9    |    |
| Accruals                                         |  |            | 18.1    |             |  |   | 42.8   |    |
| Otherdeferred taxassets                          |  |            | 50.1    |             |  |   | 35.4   |    |
| Totaldeferred taxassets                          |  |            | 353.8   |             |  |   | 331.5  |    |
| Valuationallowance                               |  |            | (51.4   | )           |  |   | (44.1  | )  |
| Netdeferred taxassets                            |  | $               | 302.4   |             |  | $      | 287.4  |    |
| Property                                         |  | $               | (129.3  | )           |  | $      | (134.7 | )  |
| Softwareamortization                             |  |            | (7.7    | )           |  |   | (17.8  | )  |
| Intangibleassets                                 |  |            | (468.2  | )           |  |   | (536.2 | )  |
| Otherdeferred taxliabilities                     |  |            | (56.8   | )           |  |   | (59.3  | )  |
| Totaldeferred taxliabilities                     |  |            | (662.0  | )           |  |   | (748.0 | )  |
| Netdeferred taxassets                            |  |            | 302.4   |             |  |   | 287.4  |    |
| Totaldeferred incometaxes                        |  | $               | (359.6  | )           |  | $      | (460.6 | )  |
| Includedin:                                      |  |            |    |             |  |   |   |    |
| Deferred income taxes— currentasset        |  | $               | 21.1    |             |  | $      | 44.2   |    |
| Incometaxes — currentliability             |  |            | — |             |  |   | (3.3   | )  |
| Deferredincome taxes — noncurrentliability |  |            | (380.7  | )           |  |   | (501.5 | )  |
|                                             |  | $               | (359.6  | )           |  | $      | (460.6 | )  |
|                                                  |

76

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11.    IncomeTax   (continued)

These deferred tax assets andliabilities are classified in the balance sheets based on the balancesheet classification of the related assets andliabilities.

Pursuant to the Stock Purchase Agreement,Suez has provided an indemnity for certain contingent taxes that relateto periods prior to November  4,  2003. The Company hasincluded $0.4  million of interest, and no penalties in incometax expense for the potential tax exposures not subject to theindemnity.

The effective rate of the provision (benefit)for income taxes differs from the United States statutory tax rate dueto the followingitems:

|                                           |  |                           |         |                           |  |                                        |         |                                       |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------|--|---------------------------|---------|---------------------------|--|----------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                      |  | Successor                 |         | Predecessor               |
|                                      |  | YearendedDecember 31,2005 |         | Year endedDecember31,2004 |  | November 4,2003 throughDecember31,2003 |         | January 1, 2003through November3,2003 |
| United States statutory taxrate           |  | $                         | 34.5    |                      |  | $                                      | (35.9   | )                                |  | $      | (11.4   | )  |  | $      | (29.9   | )  |
| Stateincome taxes, net of federalbenefits |  |                      | (0.1    | )                    |  |                                   | (2.4    | )                                |  |   | 0.4     |    |  |   | 3.9     |    |
| Foreigntax ratedifferential               |  |                      | (7.7    | )                    |  |                                   | (3.4    | )                                |  |   | 1.5     |    |  |   | (4.3    | )  |
| Nondeductiblegoodwillimpairment           |  |                      | — |                      |  |                                   | — |                                  |  |   | — |    |  |   | 85.5    |    |
| Withholdingtaxes                          |  |                      | 6.4     |                      |  |                                   | 8.7     |                                  |  |   | 0.1     |    |  |   | 3.6     |    |
| In-processresearch anddevelopment         |  |                      | — |                      |  |                                   | 42.8    |                                  |  |   | — |    |  |   | — |    |
| Interestdeducted byowners                 |  |                      | 10.3    |                      |  |                                   | 18.1    |                                  |  |   | — |    |  |   | — |    |
| U.S.tax on foreignearnings                |  |                      | 9.7     |                      |  |                                   | 18.7    |                                  |  |   | — |    |  |   | 5.9     |    |
| U.S.tax on subsidiarydisposition          |  |                      | — |                      |  |                                   | 1.8     |                                  |  |   | — |    |  |   | 5.2     |    |
| Creditsandincentives                      |  |                      | (1.3    | )                    |  |                                   | (2.4    | )                                |  |   | (0.2    | )  |  |   | (0.8    | )  |
| Prioryearadjustments                      |  |                      | — |                      |  |                                   | — |                                  |  |   | (0.1    | )  |  |   | 1.3     |    |
| Fixedassetrevaluation                     |  |                      | — |                      |  |                                   | (2.7    | )                                |  |   | — |    |  |   | — |    |
| Changesin valuationallowances             |  |                      | (1.8    | )                    |  |                                   | 0.2     |                                  |  |   | 0.5     |    |  |   | (3.0    | )  |
| Nondeductibleitems                        |  |                      | 5.1     |                      |  |                                   | 4.4     |                                  |  |   | 0.7     |    |  |   | 2.2     |    |
| Other                                     |  |                      | (0.8    | )                    |  |                                   | (0.4    | )                                |  |   | 0.2     |    |  |   | (0.9    | )  |
| Incometax provision(benefit)              |  | $                         | 54.3    |                      |  | $                                      | 47.5    |                                  |  | $      | (8.3    | )  |  | $      | 68.7    |    |
|                                           |

Noprovision has been made for United States or foreign income taxesrelated to approximately $490.5  million of undistributedearnings of foreign subsidiaries at December  31,  2005, asthe Company considers these earnings to be permanently reinvested. Itwas not practicable to estimate the additional income taxes andapplicable withholding taxes that would be payable on the remittance ofsuch undistributed earnings.

Nalco Finance Holdings LLC istreated as a pass-through entity for U.S. tax purposes; therefore, thetaxable income and expenses of the entity flow directly to the owners.In 2005, approximately $29.4  million of interest and otherdeductions ($10.3  million of tax benefit) flowed to the ownersand were not deductible by the Company.

The Predecessormade income tax payments of $43.0  million, net of tax refunds of$4.2  million during the period from January  1,2003, through November  3,  2003. Through November3,  2003, a portion of the Predecessor’s United Statesoperations were conducted as part of a United States consolidatedfederal tax group that generated tax losses. Without the lossesgenerated by other members of the group, the Predecessor would havemade additional income tax payments of approximately $51.2million during the period from January  1,  2003, throughNovember  3,  2003.

77

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11.    IncomeTax   (continued)

The Company has United Statesfederal net operating losses of approximately $140.9  million($49.3  million tax effect) expiring between 2019 and 2024. Avaluation allowance has been established on $23.1  million($8.1  million tax effect) of certain separate return limitationyear amounts, that if released would be credited to goodwill.Management has identified a tax planning strategy that would beimplemented prior to 2019 in order to utilize the losses if futuretaxable income does not otherwise utilize the operating losscarryforwards.

The Company has state net operating losscarryforwards, which could reduce future taxes by $6.5  million.A valuation allowance of $2.0  million has been established forthe portion of which realization is uncertain due to relatively shortcarryforward periods. Implementation of the tax planning strategy forthe United States federal losses would also utilize the losses of thestates with longer carryforward periods.

The Company hasUnited States foreign tax credit carryforwards of $6.2  million.A full valuation allowance has been established, as it is uncertainthat the Company will be eligible to utilize thecredits.

The Company has approximately $97.0million ($29.1  million tax effect) of U.K. capital losscarryforwards that do not expire. The losses can only be used to offsetfuture capital gains in the U.K. A full valuation allowance has beenestablished pending the recognition of taxable U.K. capitalgains.

The Company has a net operating loss carryforwardin Brazil of approximately $10.4  million ($3.5  milliontax effect) expiring in 2006. A full valuation allowance has beenestablished.

The Company has net operating losscarryforwards in Venezuela of approximately $4.8  million($1.6  million tax effect) expiring in 2008. A full valuationallowance has been established, as it is uncertain that the Companywill utilize the carryforwards.

The Company has otherforeign net operating loss carryforwards with approximately $4.4million tax effect that expire no sooner than 2015, for which novaluation allowance is considered necessary.

The AmericanJobs Creation Act of 2004 (the Jobs Creation Act) created a one-timeincentive for American companies to repatriate earnings from theirforeign subsidiaries. The Company has completed a comparison of thebenefits available to it under the Jobs Creation Act to those underother strategies for global cash and debt management, and it hascompared the benefits of implementing the incentive to the costsrequired to implement it. Based upon this analysis, the Company hasdecided not to structure its earnings repatriation under the provisionsof the Jobs Creation Act.

78

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12.    Debt

Debtconsists of thefollowing:

|                                              |  |                 |         |                 |  |        |         |        |  |  |
|----------------------------------------------|--|-----------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                         |  | December31,2005 |         | December31,2004 |
| **Short-term**                               |  |            |    |            |  |   |    |   |
| Checksoutstanding and bankoverdrafts         |  | $               | 17.9    |            |  | $      | 16.9    |   |
| Notes payableto banks                        |  |            | 0.9     |            |  |   | — |   |
| Currentmaturities of long-termdebt           |  |            | 3.8     |            |  |   | 0.8     |   |
|                                         |  | $               | 22.6    |            |  | $      | 17.7    |   |
| **Long-term**                                |  |            |    |            |  |   |    |   |
| Securitizedtrade accounts receivablefacility |  | $               | 75.3    |            |  | $      | 97.3    |   |
| Term loan A,due November2009                 |  |            | 107.6   |            |  |   | 218.4   |   |
| Term loan B, dueNovember2010                 |  |            | 1,081.0 |            |  |   | 1,081.0 |   |
| Senior notes,due November2011                |  |            | 900.7   |            |  |   | 937.4   |   |
| Senior subordinatednotes, due November2013   |  |            | 700.7   |            |  |   | 737.4   |   |
| Unsecured notes,due May  2008                |  |            | 27.8    |            |  |   | 27.8    |   |
| Seniordiscount notes, due February2014       |  |            | 353.5   |            |  |   | 324.2   |   |
| Other                                        |  |            | 1.4     |            |  |   | 2.1     |   |
|                                         |  |            | 3,248.0 |            |  |   | 3,425.6 |   |
| Less:Currentportion                          |  |            | 3.8     |            |  |   | 0.8     |   |
|                                         |  | $               | 3,244.2 |            |  | $      | 3,424.8 |   |
|                                              |

Theweighted-average interest rate on short-term debt was 4.6% and4.3% at December  31,  2005 and December31,  2004, respectively.

On January21,  2004, Nalco Finance Holdings LLC and its 100% ownedsubsidiary, Nalco Finance Holdings Inc. (together, the Issuers), issued$694.0  million aggregate principal amount at maturity of9.0% senior discount notes due 2014. Prior to February1,  2009, interest will accrue on the senior discount notes inthe form of an increase in the accreted value of such notes.Thereafter, cash interest on the senior discount notes will accrue andbe payable semiannually in arrears on February  1 andAugust  1 of each year, commencing on August  1,2009, at a rate of 9.0% per annum. The accreted value of eachnote will increase from the date of issuance until February1,  2009 at a rate of 9.0% per annum, reflecting theaccrual of non-cash interest, such that the accreted value will equalthe principal amount at maturity on February  1,  2009.

In December  2004, the Issuers redeemed a portion ofthe senior discount notes with an accreted value of $162.3million using proceeds from the initial public offering of common stockof Nalco Holding Company. The Issuers paid a $14.6  millionpremium to redeem the notes, and incurred a $13.7  million losson the extinguishment of these notes, which is included in other income(expense). After the partial redemption, the aggregate principal amountat maturity of the notes declined to $460.8  million from$694.0  million. At December  31,  2005, the seniordiscount notes had an accreted value of approximately $762.39 per$1,000 principal amount at maturity of notes, resulting in a totalaccreted value of $351.3  million. The $2.2  milliondifference between the carrying value of the notes and the totalaccreted value represents a premium, which is being amortized over theterm of the notes.

The Issuers do not generate anyrevenue, and Nalco Finance Holdings Inc. was incorporated solely toaccommodate the issuance of the notes by Nalco Finance Holdings LLC.All of the Issuers’ consolidated assets are owned, and all ofthe Issuers’ consolidated net sales are earned, by its directand indirect subsidiaries. As of December  31,  2005, theIssuers’ subsidiaries had $1,033.2  million of restrictednet assets.

The terms of Nalco Company’s seniorcredit agreement fully prohibit Nalco Holdings LLC and its subsidiariesfrom paying dividends or otherwise transferring their assets to theIssuers. Further, the terms of the indentures governing the seniornotes and senior subordinated notes of Nalco Company significantlyrestrict Nalco Company and the Issuers’ other subsidiaries frompaying dividends or 

79

----

12.    Debt   (continued)

otherwise transferring assets to theIssuers. The ability of Nalco Company to make such payments is governedby a formula based on its consolidated net income, as well as meetingcertain other conditions. Notwithstanding such restrictions, suchindentures permit an aggregate of $50.0  million of such paymentsto be made whether or not there is availability under the formula orthe conditions to its use are met. The Issuers’ subsidiarieswill be permitted under the terms of the senior credit facilities andother indebtedness to incur additional indebtedness that may severelyrestrict or prohibit the making of distributions, the payment of thedividends or the making of loans by such subsidiaries to theIssuers.

In connection with the Acquisition, Nalco Company(Nalco), a wholly owned indirect subsidiary of Nalco Finance HoldingsLLC, issued senior notes and senior subordinated notes in a privateoffering and entered into senior secured creditfacilities.

On November  4,  2003, Nalcoissued senior notes and senior subordinated notes (Notes). The seniornotes were issued in the principal amount of $665.0  million and€200.0  million and bear interest at 7.75%.The senior subordinated notes were issued in the principal amount of$465.0  million and €200.0  million and bearinterest at 8.875% and 9.0%, respectively. Interest ispayable semi-annually on May  15 and November  15. TheNotes do not have required principal payments prior to maturity. NalcoHolding Company’s and Nalco’s direct and indirectdomestic subsidiaries that guarantee its obligations under the seniorcredit facilities guarantee the Notes.

At its option,Nalco may redeem some or all of the senior notes and seniorsubordinated notes, beginning November  15,  2007 andNovember  15,  2008, respectively, at the redemption pricesset forth below (expressed as percentages of principal amount), plusaccrued interest, if any, if redeemed during the twelve-month periodcommencing on November  15 of the years set forth below:

|                   |  |                          |  |                   |  |                            |  |                      |  |  |  |  |  |  |  |  |  |  |
|-------------------|--|--------------------------|--|-------------------|--|----------------------------|--|----------------------|--|--|--|--|--|--|--|--|--|--|
| Senior notes      |  | Seniorsubordinated notes |
| Period            |  | RedemptionPrice          |  | Period            |  | U.S. dollarRedemptionPrice |  | Euro RedemptionPrice |
| 2007              |  | 103.875%                 |  | 2008              |  | 104.438%                   |  | 104.500%             |
| 2008              |  | 101.938%                 |  | 2009              |  | 102.958%                   |  | 103.000%             |
| 2009andthereafter |  | 100.000%                 |  | 2010              |  | 101.479%                   |  | 101.500%             |
|              |  |                     |  | 2011andthereafter |  | 100.000%                   |  | 100.000%             |
|                   |

Nalcomay redeem some or all of the senior notes and senior subordinatednotes, prior to November  15,  2007 and November15,  2008, respectively, at a price equal to the principal amountof the notes, plus a specified‘‘make-whole’’ premium. In addition, on orprior to November  15,  2006, Nalco may redeem up to35% of each of the senior notes and senior subordinated noteswith the proceeds of certain equity offerings.

OnNovember  4,  2003, the Company entered into senior securedcredit facilities which provided for a revolving credit facility andthree term loans: a $200.0  million term loan A, a€88.0  million term loan A, and a $1,300.0million term loan B. The senior secured credit facilities areunconditionally guaranteed by Nalco Holdings LLC, Nalco, and certaindomestic subsidiaries of Nalco Holdings LLC (collectively, theGuarantors). The repayment of these facilities is secured bysubstantially all the assets of the Guarantors, including, but notlimited to, a pledge of their capital stock and 65% of thecapital stock of each non-U.S. subsidiary owned by the Guarantors. Therevolving credit facility, which expires in November  2009,provides for borrowings up to $250  million, a portion of whichmay be made available to the Company’s non-U.S. subsidiaryborrowers in euros. The revolving credit facility also includesborrowing capacity available for letters of credit. The facility bearsinterest at a rate equal to an applicable margin plus, at theCompany’s option, either (a) a base rate determined by referenceto the greater of (1) the prime rate, (2) the three-month certificateof deposit rate plus 0.5%, and (3) the federal funds rate plus0.5% or (b) LIBOR or EURIBOR plus an applicable margin rangingfrom 1.0% to 2.5%, depending on the type of borrowing andthe leverage ratio of the Company, as defined in the credit agreement.Interest is generally due quarterly in arrears, and is also due uponexpiration of any particular loan. In addition, there is an annual loancommitment fee of 

80

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12.    Debt   (continued)

0.5% on the unused portion of therevolving credit facility. The Company is also required to pay aparticipation fee in respect of the undrawn portion of the letters ofcredit, at a rate per annum equal to LIBOR or EURIBOR plus anapplicable margin, a fronting fee at a rate of 0.25% per annumof the daily average amount, as well as customary letter of creditfees. As of December  31,  2005, the Company had$28.2  million in outstanding letters of credit, none of whichhad been drawn against.

Term loan A bears interest at thesame rate as the revolving credit facility. The applicable margin forborrowings under the term loan B facility is 1.0% with respectto base rate borrowings and 2.0% with respect to LIBOR orEurocurrency borrowings. Unlike the term loan A and the revolvingcredit facility, term loan B is not subject to adjustment based on theleverage ratio (as defined in the credit agreement).

Nalco prepaid $99.0  million of term loan borrowingsduring 2005 using cash generated from operations. In addition to the$28.6  million of scheduled payments in 2004 under term loanfacilities, Nalco repaid an additional $288.3  million using cashgenerated from operations and $92.0  million in proceeds from anaccounts receivable securitization. Nalco also repaid $15.0million of revolving credit facility borrowings during the year endedDecember  31,  2004.

At December31,  2005, the Company had $1,188.6  million outstandingunder the senior secured credit facilities with a weighted-averageinterest rate of 6.30%. The amounts outstanding, as well as thebase rates and applicable margins, at December  31,  2005and December  31,  2004 were asfollows:

|                         |  |        |                                    |                         |  |                  |      |         |  |                         |      |                  |  |        |         |        |  |        |      |         |  |        |      |         |  |  |
|-------------------------|--|--------|------------------------------------|-------------------------|--|------------------|------|---------|--|-------------------------|------|------------------|--|--------|---------|--------|--|--------|------|---------|--|--------|------|---------|--|--|
|                    |  | 2005   |                                    | 2004                    |
|                    |  | Amount |                                    | WeightedAverageBaseRate |  | ApplicableMargin |      | Amount  |  | WeightedAverageBaseRate |      | ApplicableMargin |
| Termloan A (U.S.dollar) |  | $      | 31.9                               |                    |  |             | 7.25 | %  |  |                    | 1.50 | %           |  | $      | 130.9   |   |  |   | 2.42 | %  |  |   | 2.46 | %  |
| Termloan A(euro)        |  | € |      64.2 |                    |  |             | 2.53 | %  |  |                    | 2.50 | %           |  | € | 64.2    |   |  |   | 2.19 | %  |  |   | 2.50 | %  |
| TermloanB               |  | $      | 1,081.0                            |                    |  |             | 4.34 | %  |  |                    | 1.98 | %           |  | $      | 1,081.0 |   |  |   | 2.33 | %  |  |   | 2.00 | %  |
|                         |

The$27.8  million of unsecured notes bear interest at 6.25%with interest payments due on May  15 and November  15. The$1.4  million in other long-term debt at December31,  2005 was borrowed by two foreign subsidiaries. Of thisamount, $1.0  million was borrowed at an interest rate of10.5%. The remaining $0.4  million is non-interestbearing.

The senior secured credit facilities, seniornotes, and senior subordinated notes contain a number of covenantsthat, among other things, restrict, subject to certain exceptions, theability of the Company to sell assets; incur additional indebtedness orissue preferred stock; repay other indebtedness; pay dividends orrepurchase stock; create liens on assets; make investments, loans oradvances; make acquisitions, mergers or consolidations; enter into saleand leaseback transactions; engage in certain transactions withaffiliates; amend certain material agreements governing ourindebtedness; change the business of the Company; and enter intohedging contracts. In addition, the Company must maintain financialcovenants including a maximum total leverage ratio, minimum interestcoverage ratio, and maximum capital expenditure limitation. As ofDecember  31,  2005, the Company was in compliance with allof these covenants.

81

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12.    Debt   (continued)

The following table presents theprojected annual maturities of long-term debt for years after2005:

|            |  |        |         |        |  |  |
|------------|--|--------|---------|--------|--|--|
| 2006       |  | $      | 3.8     |   |
| 2007       |  |   | 96.5    |   |
| 2008       |  |   | 53.9    |   |
| 2009       |  |   | 57.9    |   |
| 2010       |  |   | 1,081.0 |   |
| Thereafter |  |   | 2,062.2 |   |
|       |  | $      | 3,355.3 |   |
|            |

The$107.3  million difference between the total projected annualmaturities of long-term debt of $3,355.3  million and thecarrying value of $3,248.0  million is mostly attributable to the$109.5  million difference between the $460.8  millionaggregate principal amount at maturity of the senior discount notes andtheir accreted value of $351.3  million. Partly offsetting thatdifference is the $2.2  million unamortized premium attributableto thosenotes.

13.    Leases

TheCompany leases administrative, research, manufacturing, and warehousefacilities and data processing and other equipment under non-cancelableleases that expire at various dates through 2027. Rent expense totaled$39.1  million, $44.6  million, $9.2  million, and$23.8  million, for the year ended December  31,2005, the year ended December  31,  2004, the period fromNovember  4,  2003 through December  31,  2003,and the period from January  1,  2003 throughNovember  3,  2003, respectively.

Futureminimum rental payments for operating leases related to facilities,with initial or remaining terms greater than one year, are asfollows:

Year ending December31

|            |  |        |       |        |  |  |
|------------|--|--------|-------|--------|--|--|
| 2005       |  | $      | 16.3  |   |
| 2006       |  |   | 13.7  |   |
| 2007       |  |   | 11.4  |   |
| 2008       |  |   | 10.6  |   |
| 2009       |  |   | 18.2  |   |
| Thereafter |  |   | 199.4 |   |
|       |  | $      | 269.6 |   |
|            |

14.    Sale-LeasebackTransaction

In December  2002, the Predecessorentered into an agreement whereby it sold and leased back its corporateheadquarters and research facility in Naperville, IL. As a result ofthe sale, the Predecessor received proceeds of $144.8  million,net of $5.2  million of transaction costs. The related lease wasfor an initial term of 25 years, and required the Predecessor to maketotal minimum payments of $264.2 million over the initial leaseterm. The lease agreement provided for two fixed rate renewal periodsof 5 years each and two fair value renewal periods of 5 yearseach.

The Predecessor’s payment obligations, alongwith certain other items under the lease agreement, were fullyguaranteed by Suez. Because of the guarantee, the Predecessor wasprecluded from accounting for this transaction as a sale and leasebackof the property and instead accounted for it as a financing, with aneffective interest rate of 5.5%. The Predecessor provided across guarantee to Suez of any payments made by Suez under itsguarantee.

Under the terms of an agreement executedNovember  4,  2003 between the Company and Leo HoldingCompany (Leo), a subsidiary of Suez, the Company assigned its rightsand obligations under 

82

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14.    Sale-LeasebackTransaction   (continued)

the lease agreement to Leo. Simultaneously,Suez was released from its guarantee, and the Company and Leo enteredinto an agreement whereby the Company subleases its corporateheadquarters and research facility from Leo. The terms of the subleaseagreement are generally identical to those of the lease agreement thatwas assigned to Leo. As a result of these transactions, the leasedproperty, the remaining obligation under the lease assigned to Leo, andthe related deferred income taxes were removed from theCompany’s balance sheet as part of the allocation of theAcquisition purchase price. The Company accounts for the sublease as anoperating lease.

On November  4,  2003, theCompany entered into a Reimbursement Agreement with Suez whereby Suezshall reimburse the Company for all contributions the Company makes tothe Profit Sharing, Investment and Pay Deferral Plan Trust (see Note9). Under the terms of the sublease agreement, if Suez fails to pay anyof the payments required to be made under the Reimbursement Agreement,the Company shall have the right to set off such overdue amountsagainst the rent due under the subleaseagreement.

15.    Pensionand Other Postretirement Benefit Plans

The Company hasseveral noncontributory, defined benefit pension plans covering mostemployees in the U.S. and those with certain foreign subsidiaries. Theprincipal domestic plan represents approximately 57% of thebenefit obligation and 53% of the total fair value of planassets at December  31,  2005. The Company also provides asupplementary, nonqualified, unfunded plan for U.S. employees whosepension benefits exceed ERISA limitations. In addition, the Company hasdefined benefit postretirement plans that provide medical, dental, andlife insurance benefits for substantially all U.S. retirees andeligible dependents. In conjunction with the Acquisition, the Companyassumed these plans from the Predecessor without amendment. The Companyretains the right to change or terminate these benefits, and severalamendments were made in 2002 to the principal domestic pension plan andthe defined benefit postretirement medical and dentalplans.

At the end of 2002, the domestic pensionplan was amended such that beginning January  2003, pensionbenefits no longer accrue for those participants in the pension planhired or rehired after October  1999 and for those participantshired before November  1999, but with less than five years ofvesting service at the end of 2002. However, these participants willcontinue to earn vesting service. These plan amendments resulted in acurtailment credit of $7.8  million in 2002. For thoseparticipants hired before November  1999 and with more than fiveyears of vesting service, the pension plan was amended to reduce futurebenefit accruals and to increase the reduction factors for earlyretirement.

Also during 2002, eligibility forparticipation in the defined benefit postretirement medical and dentalplans was changed from age 55 with at least ten years of service to age55 with at least ten years of service after age 45. Also, employeeswith less than five years of service at the end of 2003 will only beprovided access to coverage at retirement; the Company will notcontribute to the cost of the coverage. The plans were also amendedsuch that retirees and their dependents will be required to pay50% of plan costs in 2005 andbeyond.

Beginning in 2005, a November  30measurement date is used for the defined benefit plans for pension andother postretirement benefits. A December  31 measurement datehad been used in prior years.

The following tablesdetail the changes in the funded status of defined benefit pension andother postretirement benefit plans and set forth amounts recognized andnot recognized in the balance sheets:

83

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15.    Pensionand Other Postretirement Benefit Plans   (continued)

|                                                       |  |                 |        |         |  |        |         |         |  |  |
|-------------------------------------------------------|--|-----------------|--------|---------|--|--------|---------|---------|--|--|
|                                                  |  | PensionBenefits |
|                                                  |  | 2005            |        | 2004    |
| **Changein benefit obligation**                       |  |            |   |    |  |   |    |    |
| Benefitobligation at beginning ofyear                 |  | $               | 775.7  |    |  | $      | 706.2   |    |
| Servicecost                                           |  |            | 28.2   |    |  |   | 27.2    |    |
| Interestcost                                          |  |            | 40.2   |    |  |   | 39.4    |    |
| Participantcontributions                              |  |            | 1.4    |    |  |   | 1.6     |    |
| Planamendments                                        |  |            | 0.4    |    |  |   | 0.5     |    |
| Actuarialloss                                         |  |            | 12.7   |    |  |   | 27.1    |    |
| Benefitspaid                                          |  |            | (35.7  | )  |  |   | (49.6   | )  |
| Other                                                 |  |            | 9.4    |    |  |   | 1.4     |    |
| Foreigncurrency exchange ratechanges                  |  |            | (39.2  | )  |  |   | 21.9    |    |
| Benefitobligation at end ofyear                       |  | $               | 793.1  |    |  | $      | 775.7   |    |
| **Changein plan assets**                              |  |            |   |    |  |   |    |    |
| Fair value ofplan assets at beginning ofyear          |  | $               | 354.0  |    |  | $      | 346.6   |    |
| Actual return onplan assets                           |  |            | 25.7   |    |  |   | 29.4    |    |
| Employercontributions                                 |  |            | 30.0   |    |  |   | 13.7    |    |
| Participantcontributions                              |  |            | 1.4    |    |  |   | 1.6     |    |
| Benefitspaid                                          |  |            | (35.7  | )  |  |   | (49.6   | )  |
| Other                                                 |  |            | 3.2    |    |  |   | 1.1     |    |
| Foreigncurrency exchange ratechanges                  |  |            | (19.7  | )  |  |   | 11.2    |    |
| Fairvalue of plan assets at end ofyear                |  | $               | 358.9  |    |  | $      | 354.0   |    |
| Fundedstatus                                          |  | $               | (434.2 | )  |  | $      | (421.7  | )  |
| Unrecognizednet actuarialloss                         |  |            | 20.6   |    |  |   | 10.9    |    |
| Unrecognized priorservice costs                       |  |            | 1.4    |    |  |   | 0.5     |    |
| Employeecontributions/benefit payments duringDecember |  |            | 0.9    |    |  |   | — |    |
| Netamount recognized                                  |  | $               | (411.3 | )  |  | $      | (410.3  | )  |
|                                                       |

84

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15.    Pensionand Other Postretirement Benefit Plans   (continued)

|                                                      |  |                             |         |         |  |        |         |         |  |  |
|------------------------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                 |  | OtherPostretirementBenefits |
|                                                 |  | 2005                        |         | 2004    |
| Changein benefit obligation                          |  |                        |         |    |
| Benefitobligation at beginning ofyear                |  | $                           | 165.6   |    |  | $      | 166.6   |    |
| Servicecost                                          |  |                        | 5.5     |    |  |   | 6.2     |    |
| Interestcost                                         |  |                        | 8.7     |    |  |   | 9.3     |    |
| Participantcontributions                             |  |                        | 5.7     |    |  |   | 4.5     |    |
| Planamendments                                       |  |                        | (2.2    | )  |  |   | (18.5   | )  |
| Actuarial(gain) loss                                 |  |                        | (9.6    | )  |  |   | 8.8     |    |
| Benefitspaid                                         |  |                        | (11.9   | )  |  |   | (11.3   | )  |
| Benefitobligation at end ofyear                      |  | $                           | 161.8   |    |  | $      | 165.6   |    |
| **Changein plan assets**                             |  |                        |    |    |  |   |    |    |
| Fair value ofplan assets at beginning ofyear         |  | $                           | — |    |  | $      | — |    |
| Employercontributions                                |  |                        | 6.2     |    |  |   | 6.8     |    |
| Participantcontributions                             |  |                        | 5.7     |    |  |   | 4.5     |    |
| Benefitspaid                                         |  |                        | (11.9   | )  |  |   | (11.3   | )  |
| Fairvalue of plan assets at end ofyear               |  | $                           | — |    |  | $      | — |    |
| Fundedstatus                                         |  | $                           | (161.8  | )  |  | $      | (165.6  | )  |
| Unrecognizednet actuarial (gain)loss                 |  |                        | (0.8    | )  |  |   | 8.8     |    |
| Unrecognized priorservice costs                      |  |                        | (14.9   | )  |  |   | (16.7   | )  |
| Employeecontributions/benefit payment duringDecember |  |                        | 0.7     |    |  |   | — |    |
| Netamount recognized                                 |  | $                           | (176.8  | )  |  | $      | (173.5  | )  |
|                                                      |

Amountsrecognized in the balance sheets consistof:

|                                       |  |                 |         |                              |  |                 |         |                  |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------|--|-----------------|---------|------------------------------|--|-----------------|---------|------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                  |  | PensionBenefits |         | Other PostretirementBenefits |
|                                  |  | December31,2005 |         | December 31, 2004            |  | December31,2005 |         | December 31,2004 |
| Otherassets                           |  | $               | 2.0     |                         |  | $               | 1.4     |             |  | $      | — |    |  | $      | — |    |
| Accruedexpenses                       |  |            | — |                         |  |            | — |             |  |   | (6.0    | )  |  |   | (6.0    | )  |
| Accruedpension/postretirementbenefits |  |            | (416.4  | )                       |  |            | (411.7  | )           |  |   | (170.8  | )  |  |   | (167.5  | )  |
| Intangibleassets                      |  |            | 0.5     |                         |  |            | — |             |  |   | — |    |  |   | — |    |
| Accumulatedother comprehensiveincome  |  |            | 2.6     |                         |  |            | — |             |  |   | — |    |  |   | — |    |
| Netamountrecognized                   |  | $               | (411.3  | )                       |  | $               | (410.3  | )           |  | $      | (176.8  | )  |  | $      | (173.5  | )  |
|                                       |

Theaccumulated benefit obligation for all defined benefit pension planswas $656.7  million and $625.5  million at November30,  2005 and December  31,  2004, respectively.

The projected benefit obligation, accumulated benefitobligation, and fair value of plan assets for all defined benefitpension plans with projected benefit obligations in excess of planassets were asfollows:

|                               |  |        |       |        |  |        |       |        |  |  |
|-------------------------------|--|--------|-------|--------|--|--------|-------|--------|--|--|
|                          |  | 2005   |       | 2004   |
| Projectedbenefitobligation    |  | $      | 781.9 |   |  | $      | 765.8 |   |
| Accumulatedbenefit obligation |  |   | 649.9 |   |  |   | 619.4 |   |
| Fairvalue of planassets       |  |   | 347.3 |   |  |   | 342.0 |   |
|                               |

85

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15.    Pensionand Other Postretirement Benefit Plans   (continued)

The projected benefit obligation,accumulated benefit obligation, and fair value of plan assets for alldefined benefit pension plans with accumulated benefit obligations inexcess of plan assets were asfollows:

|                               |  |        |       |        |  |        |       |        |  |  |
|-------------------------------|--|--------|-------|--------|--|--------|-------|--------|--|--|
|                          |  | 2005   |       | 2004   |
| Projectedbenefitobligation    |  | $      | 778.9 |   |  | $      | 764.3 |   |
| Accumulatedbenefit obligation |  |   | 648.1 |   |  |   | 618.4 |   |
| Fairvalue of planassets       |  |   | 345.0 |   |  |   | 340.8 |   |
|                               |

Netpension and other postretirement benefit expense for all definedbenefit plans was comprisedof:

|                                    |  |                                       |         |                                       |  |                                                     |         |                                                     |  |        |         |         |  |        |       |         |  |  |
|------------------------------------|--|---------------------------------------|---------|---------------------------------------|--|-----------------------------------------------------|---------|-----------------------------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--|
|                               |  | PensionBenefits                       |
|                               |  | SuccessorYear ended December 31, 2005 |         | Successor Year endedDecember 31, 2004 |  | Successor November 4, 2003through December 31, 2003 |         | Predecessor January 1,2003 through November 3, 2003 |
| Servicecost                        |  | $                                     | 28.2    |                                  |  | $                                                   | 27.2    |                                                |  | $      | 4.6     |    |  | $      | 19.9  |    |
| Interestcost                       |  |                                  | 40.2    |                                  |  |                                                | 39.4    |                                                |  |   | 6.6     |    |  |   | 31.1  |    |
| Expectedreturn on planassets       |  |                                  | (25.1   | )                                |  |                                                | (26.9   | )                                              |  |   | (4.5    | )  |  |   | (27.1 | )  |
| Amortizationof prior servicecost   |  |                                  | 0.1     |                                  |  |                                                | — |                                                |  |   | — |    |  |   | (2.0  | )  |
| Amortizationof net transitionasset |  |                                  | — |                                  |  |                                                | — |                                                |  |   | — |    |  |   | (0.1  | )  |
| Recognizednet actuarialloss        |  |                                  | — |                                  |  |                                                | — |                                                |  |   | — |    |  |   | 12.4  |    |
| Specialterminationbenefits         |  |                                  | — |                                  |  |                                                | — |                                                |  |   | — |    |  |   | 1.1   |    |
| Settlementcharge                   |  |                                  | 0.1     |                                  |  |                                                | 0.1     |                                                |  |   | 0.1     |    |  |   | 5.9   |    |
| Curtailment                        |  |                                  | 0.4     |                                  |  |                                                | — |                                                |  |   | (0.2    | )  |  |   | 2.0   |    |
| Netbenefit expense                 |  | $                                     | 43.9    |                                  |  | $                                                   | 39.8    |                                                |  | $      | 6.6     |    |  | $      | 43.2  |    |
|                                    |

|                                  |  |                                       |         |                                       |  |                                                     |         |                                                     |  |        |         |        |  |        |      |         |  |  |
|----------------------------------|--|---------------------------------------|---------|---------------------------------------|--|-----------------------------------------------------|---------|-----------------------------------------------------|--|--------|---------|--------|--|--------|------|---------|--|--|
|                             |  | OtherPostretirementBenefits           |
|                             |  | SuccessorYear ended December 31, 2005 |         | Successor Year endedDecember 31, 2004 |  | Successor November 4, 2003through December 31, 2003 |         | Predecessor January 1,2003 through November 3, 2003 |
| Servicecost                      |  | $                                     | 5.5     |                                  |  | $                                                   | 6.2     |                                                |  | $      | 1.0     |   |  | $      | 4.3  |    |
| Interestcost                     |  |                                  | 8.7     |                                  |  |                                                | 9.3     |                                                |  |   | 1.6     |   |  |   | 7.6  |    |
| Amortizationof prior servicecost |  |                                  | (4.0    | )                                |  |                                                | (1.8    | )                                              |  |   | — |   |  |   | (8.4 | )  |
| Recognizednet actuarialloss      |  |                                  | — |                                  |  |                                                | — |                                                |  |   | — |   |  |   | 6.0  |    |
| Netbenefit expense               |  | $                                     | 10.2    |                                  |  | $                                                   | 13.7    |                                                |  | $      | 2.6     |   |  | $      | 9.5  |    |
|                                  |

InJanuary  2005, final regulations implementing the MedicarePrescription Drug, Improvement, and Modernization Act of 2003 (the Act)were issued by the Centers for Medicare & Medicaid Services (CMS)of the U.S. Department of Health and Human Services. The finalregulations clarify how companies providing retiree prescription drugbenefits should determine if those benefits are actuarially equivalentto Medicare Part D coverage. Under the Act, a federal subsidy isavailable, beginning in January  2006, to those companiesproviding prescription drug benefits that are actuarially equivalent toMedicare Part D coverage.

Based on the proposedregulations issued by CMS in July  2004, the Company concludedthat its retiree prescription drug benefit plan was not actuariallyequivalent to Medicare Part D coverage and that it did not qualify forthe subsidy provided by the Act. However, as a result of the finalregulations issued in January  2005, the Company determined thatits plan is actuarially equivalent, and the Company will qualify forthe subsidy.

As a result of qualifying for the subsidy,the accumulated benefit obligation for the Company’s definedpostretirement benefit plans other than pensions was reduced byapproximately $6.2  million as of 

86

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15.    Pensionand Other Postretirement Benefit Plans   (continued)

January  2005. The interest costcomponent of other postretirement benefits expense was reduced by$0.3  million for the year ended December  31,  2005.The reduction in the service cost component wasinsignificant.

The weighted-average assumptions used forthe U.S. defined benefit plans as of the measurement date for each ofthe last two years were asfollows:

|                                        |  |                 |  |                              |  |        |      |         |  |        |      |         |  |  |  |  |  |  |
|----------------------------------------|--|-----------------|--|------------------------------|--|--------|------|---------|--|--------|------|---------|--|--|--|--|--|--|
|                                   |  | PensionBenefits |  | Other PostretirementBenefits |
|                                   |  | 2005            |  | 2004                         |  | 2005   |      | 2004    |
| Discountrates                          |  | 5.75%           |  | 5.75%                        |  |   | 5.75 | %  |  |   | 5.75 | %  |
| Ratesof increase in compensationlevels |  | 3.94%           |  | 3.94%                        |  |   | 3.87 | %  |  |   | 3.87 | %  |
|                                        |

Theweighted-average assumptions used for the foreign defined benefitpension plans as of the measurement date for each of the last two yearswere asfollows:

|                                        |  |        |      |         |  |        |      |         |  |  |
|----------------------------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                   |  | 2005   |      | 2004    |
| Discountrates                          |  |   | 4.76 | %  |  |   | 5.18 | %  |
| Ratesof increase in compensationlevels |  |   | 3.36 | %  |  |   | 3.36 | %  |
|                                        |

Theweighted-average assumptions used to determine net pension and otherpostretirement benefit expense for the U.S. defined benefit plans wereasfollows:

|                                         |  |                             |        |                             |  |                                          |        |                                        |  |        |      |         |        |         |      |         |  |  |
|-----------------------------------------|--|-----------------------------|--------|-----------------------------|--|------------------------------------------|--------|----------------------------------------|--|--------|------|---------|--------|---------|------|---------|--|--|
|                                    |  | Successor                   |        | Predecessor                 |
|                                    |  | Yearended December 31, 2005 |        | Year ended December31, 2004 |  | November 4, 2003through December 31,2003 |        | January 1, 2003through November 3,2003 |
| Discountrates                           |  |                        | 5.75   | %                      |  |                                     | 6.00   | %                                 |  |   | 6.00 | %  |        |    | 6.75 | %  |
| Ratesof increase in compensationlevels: |  |                        |   |                        |  |                                     |   |                                   |  |   |      |    |   |    |
| Pensionbenefits                         |  |                        | 3.94   | %                      |  |                                     | 4.19   | %                                 |  | 4.19%  |      |    | 4.19   | %  |
| Otherpostretirementbenefits             |  |                        | 3.87   | %                      |  |                                     | 4.12   | %                                 |  | 4.12%  |      |    | 4.12   | %  |
| Expectedlong-term return on planassets  |  |                        | 8.50   | %                      |  |                                     | 8.50   | %                                 |  | 8.50%  |      |    | 9.00   | %  |
|                                         |

Theweighted-average assumptions used to determine net pension expense forthe foreign defined benefit pension plans were asfollows:

|                                        |  |                             |      |                             |  |                                         |      |                                        |  |        |      |         |      |         |      |         |  |  |
|----------------------------------------|--|-----------------------------|------|-----------------------------|--|-----------------------------------------|------|----------------------------------------|--|--------|------|---------|------|---------|------|---------|--|--|
|                                   |  | Successor                   |      | Predecessor                 |
|                                   |  | Yearended December 31, 2005 |      | Yearended December 31, 2004 |  | November 4,2003through December 31,2003 |      | January 1, 2003throughNovember 3, 2003 |
| Discountrates                          |  |                        | 5.17 | %                      |  |                                    | 5.42 | %                                 |  |   | 5.43 | %  |      |    | 5.74 | %  |
| Ratesof increase in compensationlevels |  |                        | 3.36 | %                      |  |                                    | 3.35 | %                                 |  | 3.71%  |      |    | 3.40 | %  |
| Expectedlong-term return on planassets |  |                        | 6.74 | %                      |  |                                    | 8.15 | %                                 |  | 7.97%  |      |    | 7.75 | %  |
|                                        |

Theassets in the Company’s principal domestic pension plan areinvested to obtain a reasonable long-term rate of return at anacceptable level of investment risk. Risk tolerance is establishedthrough careful consideration of plan liabilities, plan funded status,and corporate financial condition. Investment risk is measured andmonitored on an ongoing basis through periodic investment portfolioreviews, liability measurements and asset/liability studies. A similarapproach to assessing investment risk and obtaining reasonableinvestment returns is employed for the foreign pensionplans.

The assets in the principal domestic pension planare diversified across equity and fixed income investments. Theinvestment portfolio has target allocations of approximately 64%equity and 36% fixed income. Other assets such as real estate,hedge funds and private equity may be used judiciously to enhanceportfolio returns and diversification. For the fiscal years endedDecember  31,  2005 and December  31,  2004,the plan had an immaterial amount of assets invested in thesealternative investment classes. The foreign pension plans havecomparable asset allocations to the principal domestic plan, with somevariances for local practices.

The expected long-term rateof return is established using historical market data for each assetclass as well as the target allocation. Historical markets are analyzedand long-term historical relationships 

87

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15.    Pensionand Other Postretirement Benefit Plans   (continued)

between equity and fixed income investmentsare preserved consistent with the widely accepted capital marketprinciple that assets with higher volatility will generate a greaterreturn over the long run. Active management is employed in most assetclasses, which also contributes to the return assumption. The totalweighted-average return on each asset class supports theCompany’s long-term expected rate of return assumption.

The percentages of each major class of plan assets held bythe Company’s principal domestic defined benefit pension plan asof the measurement date for each of the last two years and targetallocations were asfollows:

|                       |  |        |       |                   |  |        |       |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------|--|--------|-------|-------------------|--|--------|-------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                  |  | Actual |       | TargetAllocations |
|                  |  | 2005   |       | 2004              |  | 2005   |       | 2004    |
| Equitysecurities      |  |   | 67.6  | %            |  |   | 64.8  | %  |  |   | 64.3    | %  |  |   | 64.3    | %  |
| Fixedincomesecurities |  |   | 31.7  |              |  |   | 33.7  |    |  |   | 35.7    |    |  |   | 35.7    |    |
| Cash                  |  |   | 0.7   |              |  |   | 1.5   |    |  |   | — |    |  |   | — |    |
|                  |  |   | 100.0 | %            |  |   | 100.0 | %  |  |   | 100.0   | %  |  |   | 100.0   | %  |
|                       |

Theassumed health care cost trend rates used as of the measurement datefor each of the last two years were asfollows:

|                                                                                 |  |        |      |         |  |        |      |         |  |  |
|---------------------------------------------------------------------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                                                            |  | 2005   |      | 2004    |
| Healthcare cost trend rate assumed for nextyear                                 |  |   | 10   | %  |  |   | 10   | %  |
| Rate towhich the cost trend rate is assumed to decline (the ultimate trendrate) |  |   | 5    | %  |  |   | 5    | %  |
| Year thatthe rate reaches the ultimate trendrate                                |  |   | 2011 |    |  |   | 2010 |    |
|                                                                                 |

Aone-percentage-point change in assumed health care cost trend rateswould have the following effects:

|                                                       |  |                      |     |          |  |        |      |         |  |  |
|-------------------------------------------------------|--|----------------------|-----|----------|--|--------|------|---------|--|--|
|                                                  |  | One-Percentage-Point |
|                                                  |  | Increase             |     | Decrease |
| Effecton total of service and interest costcomponents |  | $                    | 0.7 |     |  | $      | (0.6 | )  |
| Effect onpostretirement benefitobligation             |  |                 | 7.2 |     |  |   | (6.9 | )  |
|                                                       |

TheCompany expects to contribute $66.6  million to its pension plansand $8.2  million to its other defined postretirement benefitplans in 2006.

The following estimated future benefitpayments are expected to be paid in the yearsindicated:

|           |  |                 |       |                             |  |        |      |        |  |  |
|-----------|--|-----------------|-------|-----------------------------|--|--------|------|--------|--|--|
| Year      |  | PensionBenefits |       | OtherPostretirementBenefits |
| 2006      |  | $               | 39.4  |                        |  | $      | 8.2  |   |
| 2007      |  |            | 36.6  |                        |  |   | 8.9  |   |
| 2008      |  |            | 39.7  |                        |  |   | 9.4  |   |
| 2009      |  |            | 38.9  |                        |  |   | 9.9  |   |
| 2010      |  |            | 42.6  |                        |  |   | 10.3 |   |
| 2011-2015 |  |            | 275.4 |                        |  |   | 57.4 |   |
|           |

16.    EquityCompensation Plans

Nalco Holding Company, theCompany’s direct parent company, adopted the Nalco HoldingCompany 2004 Stock Incentive Plan (the‘‘Plan’’) to aid the Company in recruitingand retaining key employees, directors and consultants and to motivatethem to exert their best efforts on behalf of the Company. The Planpermits the grant of stock options, stock appreciation rights,restricted stock and other stock-based awards for up to 7.5million shares of common stock.

A total of 76,260 stockoptions were granted during the year ended December  31,2005. The options, which have a contractual term of 10 years, vestratably over 4 years, beginning on the first anniversary 

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16.    EquityCompensation Plans   (continued)

of the grant date and on each of the threesubsequent anniversary dates. The exercise price and grant-date fairvalue of each option was $17.25 and $6.22, respectively. The exerciseprice represented the market price of Nalco Holding Company commonstock on the date of grant. The grant-date fair value of the optionswas estimated using the Black-Scholes option-pricing model, using anexpected option life of 6.25 years, a risk-free interest rate of3.88%, an expected volatility of 30.3%, and an expecteddividend yield of 0.5%.

Because Nalco HoldingCompany has been a public company only since November  2004,there is limited historical data on the volatility of its common stock.As a result, the expected volatility was estimated based on the averagevolatility of the common stock of a peer group of companies. Sincehistorical information concerning option exercise behavior by theCompany’s employees was non-existent and such information wasnot readily available from a peer group of companies, the expectedoption life was estimated using the ‘‘simplifiedmethod’’ permitted by Staff Accounting Bulletin No. 107issued by the United States Securities and ExchangeCommission.

As of December  31,  2005, all76,260 options granted in 2005 were outstanding, but none wasvested.

A total of 18,000 restricted stock units weregranted to non-management directors during the year endedDecember  31,  2005. These restricted stock units vest intounrestricted shares of Nalco Holding Company common stock on the secondanniversary of the grant date if the director continues to serve as adirector. Since the directors cannot convert the restricted stock unitsinto shares of common stock until the requisite service period has beencompleted, the restricted stock units are similar to nonvested shares,and their fair value is determined based on the market price of NalcoHolding Company’s stock on the grant date.

Theweighted-average grant-date fair value of restricted stock unitsgranted during 2005 was $19.18. There were 16,000 restricted stockunits outstanding at December  31,  2005, as 2,000restricted stock units with a grant-date fair value of $20.05 werecancelled during 2005 when the director to whom those restricted stockunits were granted resigned.

Nalco LLC, theCompany’s ultimate parent company, established the Nalco LLC2004 Unit Plan (the ‘‘Unit Plan’’) forpurposes of (i) attracting and retaining exceptional officers and otherkey employees, non-employee directors and consultants of Nalco LLC andthe Company and (ii) enabling such individuals to acquire an equityinterest in Nalco LLC and to participate in the long-term growth andfinancial success of Nalco LLC and the Company.

During2004, Nalco LLC granted certain officers and key employees of theCompany rights to purchase a designated number of one or more classesof equity interests (‘‘Units’’) in NalcoLLC. Those officers and key employees who elected to purchase suchUnits did so at the Units’ fair value, discounted for anyvesting provisions, as determined by a valuation consultant, sinceNalco LLC is a private company and there is no public market for itsshares.

The Units subject to the Plan include class A,class B, class C, and class D Units. The class A Units are fully vestedat the time of purchase by an employee and have economiccharacteristics that are similar to those of shares of common stock ina private corporation. The class B, class C, and class D Units aresubject to vesting provisions, meaning that in order for such Units tobe entitled to distributions or other benefits, an employee will haveto continue to provide services for a certain period of time. However,with respect to the class C and class D Units, such vesting will beaccelerated if the Company achieves certain EBITDA performance targets.The Units also become fully vested 18 months after a change in controlof the Company, subject to certain other conditions.

Themethods employed to value the class A Units were the guideline publiccompany method, using multiples of EBITDA and sales, and the incomeapproach, using the discounted free cash flow method. The class B,class C, and class D Units are essentially structured as options andwere valued using the Black-Scholes option pricing model. The expectedoption life, risk-free interest rate, expected annual volatility, anddividend yield used to calculate the fair value of the Units was 6.0

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16.    EquityCompensation Plans   (continued)

years, 3.15%, 19.6%, and0.0%, respectively. The expected annual volatility was estimatedusing a group of guideline public companies as a proxy, since the Unitsare not publicly traded. A minority interest discount and variousmarketability discounts also affected the fair value of the class B,class C, and class D Units.

Though Nalco Holding Companyand Nalco LLC established the Plan and the Unit Plan, respectively, theCompany will account for the Plan and the Unit Plan since theireconomic substance is substantially the same for the Company and itsemployees.

In December  2004, the FASB issued SFASNo. 123(R), Share-Based Payment, which revises SFAS No. 123,Accounting for Stock-Based Compensation, and supersedesAccounting Principles Board Opinion (APB) No. 25, Accounting forStock Issued to Employees. SFAS No. 123(R) requires all share-basedpayments to employees, including grants of employee stock options, tobe recognized in the financial statements based on their fairvalues.

The Company elected to adopt SFAS No. 123(R) asof October  1,  2004, using the modified-prospectivetransition method. Compensation cost charged to earnings for equitycompensation plans was $0.3  million and $0.1  million forthe years ended December  31,  2005 and December31,  2004, respectively. Compensation cost is recognized ratablyover the estimated requisite service periods that the respective equityinstruments vest. No share-based compensation was charged to earningsby the Successor during the period from November  4,  2003through December  31,  2003 or by the Predecessor duringthe period from January  1,  2003 through November3,  2003, since no share-based compensation plans existed duringthose periods.

As a result of the purchase of Units underthe Unit Plan by key officers and employees, the Company received anadditional contribution of capital of $8.1  million from NalcoLLC in2004.

17.    Unitholder’sEquity

Unitholder’s equity consists of thefollowing:

|                                      |  |                 |        |                  |  |        |        |         |  |  |
|--------------------------------------|--|-----------------|--------|------------------|--|--------|--------|---------|--|--|
|                                 |  | December31,2005 |        | December 31,2004 |
| Capitalaccount                       |  | $               | 741.5  |             |  | $      | 741.2  |    |
| Accumulateddeficit                   |  |            | (141.2 | )           |  |   | (180.0 | )  |
| Accumulatedother comprehensiveincome |  |            | 80.1   |             |  |   | 133.1  |    |
|                                 |  | $               | 680.4  |             |  | $      | 694.3  |    |
|                                      |

Thecapital structure of the Company consists of one class of limitedliability company interests represented by Units, which are identicalwith each other in every respect. At December  31,  2004,there were 100 Units issued and outstanding, of which 99 were owned byNalco Investment Holdings LLC and 1 was owned by Nalco Finance HoldingsII, Inc.

In January  2005, Nalco InvestmentHoldings LLC and Nalco Finance Holdings II, Inc. were liquidated intotheir parent company, Nalco Holding Company. As of that date, NalcoHolding Company became the direct parent company of Nalco FinanceHoldings LLC.

At December  31,  2003, NalcoInvestment Holdings LLC was the sole member of the Company and ownedall outstanding Units as a result of its $1,001.9  millioncapital contribution to the Company on November  4,  2003.On January  14,  2004, Nalco Investment Holdings LLCcontributed its 100% interest in Nalco Holdings LLC in exchangefor a 100% interest in a newly formed company, Nalco FinanceHoldings LLC. As of that date, Nalco Finance Holdings LLC became theparent company of Nalco Holdings LLC.

During the yearended December  31,  2004, Nalco Finance Holdings LLC usedthe net proceeds from the issuance of the senior discount notes due2014 to make a return of capital distribution of $446.9  millionto its parent, Nalco Investment Holdings LLC, which in turn made adistribution to the holders of its membershipinterests.

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17.    Unitholder’sEquity   (continued)

Also during the year endedDecember  31,  2004, the Company received additionalcapital contributions of $186.2  million from its direct parentcompany, Nalco Investment Holdings LLC. Of this amount, $176.9million resulted from the November  2005 public stock offeringmade by the Company’s indirect parent company, Nalco HoldingCompany. The remaining $9.3  million represented capitalcontributions received by the Company’s ultimate parent company,Nalco LLC, and was comprised of an additional equity investment of$1.2  million by Dr. William H. Joyce and $8.1  million inproceeds from the sale of equity interests to certain officers and keyemployees under the Nalco LLC 2004 Unit Plan.

18.    FinancialInstruments and Risk Management

The Company and itsPredecessor have used derivatives to fix the cost of issuing debt andto manage well-defined interest rate and foreign exchange exposures.For derivative instruments not designated as hedging instruments, theunrealized gain or loss is recognized in other income (expense) incurrent earnings during the period of change.

Notional Amountand Credit Exposures of Derivatives

The notionalamounts of derivatives discussed below do not represent amountsexchanged by the parties and, thus, are not a measure of the exposureof the Company through its use of derivatives. The amounts exchangedare calculated on the basis of the notional amounts and the other termsof the derivatives, which relate primarily to interest rates andforeign exchange rates.

The Company is exposed tocredit-related losses in the event of nonperformance by counterpartiesto financial instruments, but it does not expect any counterparties tofail to meet their obligations given their high creditratings.

Interest Rate RiskManagement

Interest rate swap agreements were used bythe Predecessor to reduce the potential impact of increases in interestrates on floating rate debt. During 2001, the Predecessor entered intoan interest rate swap agreement with a former related party. Thisinterest rate swap was designated as a hedge of future cash flowsrelated to certain variable interest rate borrowings. Changes in fairvalue of the interest rate swap were recognized in other comprehensiveincome and subsequently reclassified into interest expense as paymentsbecame due and the swap approached maturity.

During thethird quarter of 2003, it became probable that the future interestpayments hedged by the swap would not be made because it was expectedthat the related debt would be repaid immediately before the sale ofthe Predecessor during the fourth quarter of 2003. As a result, thePredecessor discontinued accounting for the swap as a hedge, and a$10.9  million pretax loss reported in accumulated othercomprehensive income was reclassified to earnings during the thirdquarter 2003. The swap was terminated in October  2003,ultimately resulting in a pretax loss of $10.4  million that wasreported in other income (expense) for the period January1,  2003 through November  3,2003.

Foreign Exchange Risk Management

TheCompany and its Predecessor have used various types of foreign exchangecontracts, including currency swaps and forward exchange contracts, tomanage foreign exchange risk. In addition, the Company uses certainforeign currency debt as a hedge of the foreign currency exposure of aportion of its net investment in foreign operations.

Uponissuance, the Company designated the €200.0  millionsenior notes, the €200.0  million seniorsubordinated notes, and the €88.0  million term loanas a hedge of its net investment in subsidiary companies whose assets,liabilities, and operations are measured using the euro as theirfunctional currency. Because of the high degree of effectivenessbetween the hedging instruments and the 

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18.    FinancialInstruments and Risk Management   (continued)

exposure being hedged, fluctuations in thevalue of the euro-denominated debt due to exchange rate changes areoffset by changes in the net investment. Accordingly, changes in thevalue of the euro-denominated debt are recognized in foreign currencytranslation adjustment, a component of accumulated other comprehensiveincome, to offset changes in the value of the Company’s netinvestment in subsidiary companies whose financial statements aremeasured using the euro as their functional currency.

TheCompany formally assesses, on a quarterly basis, whether theeuro-denominated debt is effective at offsetting changes in the valueof the underlying exposure. A gain of $53.4  million (net ofincome taxes of $31.9  million) was reported as a component ofother comprehensive income within the accumulated foreign currencytranslation adjustment account for the year ended December31,  2005. Losses of $28.2  million (net of income taxes of$16.5  million) and $29.4  million (net of income taxes of$18.0  million) were reported as a component of othercomprehensive loss within the accumulated foreign currency translationadjustment account for the year ended December  31,  2004and the period from November  4,  2003 throughDecember  31,  2003, respectively. No hedge ineffectivenesswas recorded in income.

The Company’s forwardexchange contracts at December  31,  2005 and 2004 weredesignated as cash flow hedges of the variability of the cash flowsfrom certain intercompany foreign currency loans and forecasted 2005royalty payments due to changes in foreign exchange rates. The fairvalue of these contracts was a net liability of $0.1  million and$1.3  million at December  31,  2005 andDecember  31,  2004, respectively.

InOctober  2003, the Predecessor terminated three currency swapagreements when the intercompany foreign currency loans they werehedging were settled. The gain on the termination of the swaps was notmaterial.

19.    FairValue of Financial Instruments

The following methods andassumptions were used to estimate the fair values of financialinstruments:

Cash and cash equivalents and short-termdebt

The carrying amount approximates fair valuebecause of the short-term maturities of suchinstruments.

Long-term debt

The fairvalue of the Company’s senior notes, senior subordinated notes,and senior discount notes was estimated based on their quoted marketprices. The carrying value of amounts outstanding under theCompany’s senior secured credit facilities is considered toapproximate fair value because interest accrues at rates whichfluctuate with interest rate trends. The carrying value of otherlong-term debt outstanding, other than the 6.25% fixed rateunsecured notes, also approximates fair value due to the variablenature of their interest rates.

The fair value of the6.25% fixed rate unsecured notes was based on the quoted marketprice for similar debtinstruments.

Derivatives

The fairvalue of derivatives, including foreign currency forward exchangecontracts, was estimated based on current settlement prices and quotedmarket prices of comparable contracts and represents their carryingvalues.

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19.    FairValue of Financial Instruments   (continued)

The following table presents thecarrying amounts and fair values of financial instruments as of the endof the last twoyears:

|                          |  |                |         |            |  |                |         |           |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|----------------|---------|------------|--|----------------|---------|-----------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | 2005           |         | 2004       |
|                     |  | CarryingAmount |         | Fair Value |  | CarryingAmount |         | FairValue |
| Assets                   |  |           |         |       |  |           |         |      |
| Cashand cashequivalents  |  | $              | 30.8    |       |  | $              | 30.8    |      |  | $      | 33.2    |   |  | $      | 33.2    |   |
| Forwardexchangecontracts |  |           | 0.8     |       |  |           | 0.8     |      |  |   | — |   |  |   | — |   |
| **Liabilities**          |  |           |    |       |  |           |    |      |  |   |    |   |  |   |    |   |
| Short-termdebt           |  | $              | 22.6    |       |  | $              | 22.6    |      |  | $      | 17.7    |   |  | $      | 17.7    |   |
| Long-termdebt            |  |           | 3,244.2 |       |  |           | 3,323.1 |      |  |   | 3,424.8 |   |  |   | 3,616.5 |   |
| Forwardexchangecontracts |  |           | 0.9     |       |  |           | 0.9     |      |  |   | 1.3     |   |  |   | 1.3     |   |
|                          |

20.    BusinessOptimization Expenses

In addition to the Company’splan to exit or restructure certain activities that was formulated inconjunction with the Acquisition, the Company is continuing to redesignand optimize its business and work processes. Business processoptimization expenses, representing mostly employee severance andrelated costs, were $25.6  million and $1.7  million forthe years ended December  31,  2005 and December31,  2004, respectively.

During 2002, thePredecessor began a program to realign its support for the petroleum,petrochemical, pulp, and paper industries to provide one-stop processimprovement and water treatment sales and service to these keycustomers. As a result, the Predecessor and the Company incurredexpenses during 2002 and 2003, which consisted primarily of severance,outplacement, and employee relocations, for about 100personnel.

As a result of acquiring Exxon’sinterest in the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) jointventure in 2001, the Predecessor incurred costs related to integratingthe operations of the joint venture with those of the Predecessor.Certain costs totaling $6.0 million, which were related to theintegration, including severance, employee relocations, and assetsimpairments, were accrued as a liability on the date ofacquisition.

The Predecessor also incurred consulting andother expenses that were charged to business optimization expensesduring 2002 and 2003.

Business optimization expenses werecomprised of thefollowing:

|                              |  |                             |         |                            |  |                                        |         |                                       |  |        |         |        |  |        |         |        |  |  |
|------------------------------|--|-----------------------------|---------|----------------------------|--|----------------------------------------|---------|---------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                         |  | Successor                   |         | Predecessor                |
|                         |  | Yearended December 31, 2005 |         | Yearended December 31,2004 |  | November4, 2003through December31,2003 |         | January 1, 2003throughNovember 3,2003 |
| Business processoptimization |  | $                           | 25.6    |                       |  | $                                      | 1.7     |                                  |  | $      | — |   |  | $      | — |   |
| 2002businessrealignment      |  |                        | — |                       |  |                                   | — |                                  |  |   | 0.8     |   |  |   | 18.8    |   |
| Nalco/Exxonintegration       |  |                        | — |                       |  |                                   | — |                                  |  |   | — |   |  |   | 1.5     |   |
|                         |  | $                           | 25.6    |                       |  | $                                      | 1.7     |                                  |  | $      | 0.8     |   |  | $      | 20.3    |   |
|                              |

AllPredecessor business optimization plans were completed as ofDecember  31,  2003.

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21.    Summary of Other Income(Expense)

The components of other income (expense), netin the statement of operations include thefollowing:

|                                                 |  |                             |         |                             |  |                                           |         |                                        |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|-----------------------------|---------|-----------------------------|--|-------------------------------------------|---------|----------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | Successor                   |         | Predecessor                 |
|                                            |  | Yearended December 31, 2005 |         | Yearended December 31, 2004 |  | November 4, 2003through December 31, 2003 |         | January1, 2003through November 3, 2003 |
| Gain(loss) on sale ofbusiness                   |  | $                           | — |                        |  | $                                         | — |                                   |  | $      | — |    |  | $      | (5.2    | )  |
| Losson early extinguishment ofdebt              |  |                        | — |                        |  |                                      | (13.7   | )                                 |  |   | — |    |  |   | — |    |
| Suezmanagementfees                              |  |                        | — |                        |  |                                      | — |                                   |  |   | — |    |  |   | (2.9    | )  |
| Sponsormonitoringfees                           |  |                        | — |                        |  |                                      | (11.2   | )                                 |  |   | (1.8    | )  |  |   | — |    |
| Sponsormonitoring agreement terminationfee      |  |                        | — |                        |  |                                      | (35.0   | )                                 |  |   | — |    |  |   | — |    |
| Franchisetaxes                                  |  |                        | (1.4    | )                      |  |                                      | (2.2    | )                                 |  |   | (0.5    | )  |  |   | (0.3    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                        | 1.6     |                        |  |                                      | 3.2     |                                   |  |   | 0.4     |    |  |   | 2.0     |    |
| Foreigncurrency exchange adjustments            |  |                        | 5.2     |                        |  |                                      | (1.5    | )                                 |  |   | (0.9    | )  |  |   | 3.0     |    |
| Swapsettlement                                  |  |                        | — |                        |  |                                      | — |                                   |  |   | — |    |  |   | (10.4   | )  |
| Otherincome (expense),net                       |  |                        | (1.4    | )                      |  |                                      | 3.4     |                                   |  |   | — |    |  |   | (3.5    | )  |
|                                            |  | $                           | 4.0     |                        |  | $                                         | (57.0   | )                                 |  | $      | (2.8    | )  |  | $      | (17.3   | )  |
|                                                 |

22.    RelatedParty Transactions

The Company paid certain costs onbehalf of Nalco Holding Company in connection with its initial publicoffering of common stock in 2004 and secondary offering in 2005. TheCompany had a receivable of $2.5  million and $0.7  millionfrom Nalco Holding Company for these costs at December31,  2005 and December  31,  2004, respectively,which was classified with other noncurrent assets. Interest earned onthis receivable was $0.1  million during the year endedDecember  31,  2005.

The Company borrowedcertain excess cash amounts from Nalco Holding Company during the yearended December  31,  2004, and interest expense on theseborrowings was $0.3  million.

On November4,  2003, the Company entered into a Monitoring Fee Agreementwith affiliates of the Sponsors for monitoring, advisory and consultingservices in relation to the affairs of the Company, including debt andequity offerings, relationships with bankers and lenders, corporatestrategy, acquisitions and dispositions, and other matters as may berequested. The Company agreed to pay an annual monitoring fee of atleast $10.0  million for these services. The fee could beincreased depending on the Company’s earnings. During the yearended December  31,  2004 and the period fromNovember  4,  2003 through December  31,  2003,the Company paid $11.2  million and $1.8  million,respectively, for these services.

In connection with thepublic offering of common stock by the Company’s indirect parentcompany, Nalco Holding Company, in November  2004, the Companyamended and restated the Monitoring Fee Agreement, pursuant to whichthe Company terminated the monitoring services provided to the Companyby the Sponsors’ affiliates. A termination fee of $35.0million was paid to the Sponsors’ affiliates, which was chargedto other income (expense). The amended and restated agreement willprovide the Sponsors’ affiliates with a right of first refusalto provide us with financial advisory services in exchange for mutuallyagreeable compensation. This right of first refusal will terminate whenthe Sponsors directly or indirectly hold less than 5% of NalcoHolding Company’s outstanding common stock.

As partof the Acquisition, the Company executed a Transaction Fee Agreementwhereby the Company agreed to pay affiliates of the Sponsors for thefinancial and structural analysis, due diligence investigations, otheradvice and negotiation assistance necessary in order to enable theAcquisition to be consummated. Pursuant to this agreement, the Companypaid affiliates of the Sponsors a transaction fee of $75.0million during the period from November  4,  2003 throughDecember  31,  2003. The Company also reimbursed affiliatesof the Sponsors $1.1  million for 

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22.    RelatedParty Transactions   (continued)

miscellaneous expenses incurred inconnection with the Acquisition. The transaction fee and expensereimbursement were capitalized and included as part of the purchaseprice.

The Predecessor provided certain manufacturing andselling services to other subsidiaries of Suez. Amounts earned by thePredecessor for the period from January  1,  2003 throughNovember  3,  2003 were $0.3  million. In addition,the Predecessor paid Suez management fees of $2.9  million forthe period from January  1,  2003 through November 3,2003.

The Predecessor lent funds to various othersubsidiaries of Suez. Interest earned from related companies was$1.0  million for the period from January  1,  2003through November  3,  2003.

The Predecessoralso borrowed funds from other subsidiaries of Suez. Interest expenseto related companies was $13.5  million for the period fromJanuary  1,  2003 through November  3,2003.

The Predecessor was a counterparty to an interestrate swap agreement with a subsidiary of Suez. The swap was terminatedin October  2003, resulting in a pretax charge of $10.4million during the period from January  1,  2003 throughNovember  3,2003.

23.    SegmentInformation

The Company provides integrated watertreatment and process improvement services for industrial andinstitutional applications, using technologically advanced solutions,combining chemical products and equipment, and consistent, reliableon-site service and expertise. These solutions and services enable theCompany’s customers to improve production yields, lowermanufacturing costs, extend asset lives and maintain environmentalstandards at costs that represent a small share of their overallproduction expense.

The Company is organized based on theend markets it serves. The organization is comprised of the followingreportable segments:

Industrial and InstitutionalServices — This segment serves the globalwater treatment and process chemical needs of the industrial,institutional, and municipal markets.

EnergyServices — This segment serves the processchemicals and water treatment needs of the global petroleum andpetrochemical industries in both upstream and downstreamapplications.

PaperServices — This segment serves the processchemicals and water treatment needs of the global pulp and paperindustry.

Other — Thissegment serves the alternative channels to market, supply chainactivities, and certain other operating expenses not allocated to asegment. It also includes the Company’s subsidiary in India andthe Katayama Nalco joint venture.

The Company evaluatesthe performance of its segments based on ‘‘directcontribution’’, which is defined as net sales, less costof product sold (excluding variances to standard costs), selling andservice expenses, marketing expenses and research expenses directlyattributable to each segment. There are no intersegment revenues. Prioryear data have been reclassified between segments to conform to thecurrent year presentation.

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23.    SegmentInformation   (continued)

Net sales by reportable segmentwere asfollows:

|                                      |  |                            |         |                            |  |                                          |         |                                        |  |        |       |        |  |        |         |        |  |  |
|--------------------------------------|--|----------------------------|---------|----------------------------|--|------------------------------------------|---------|----------------------------------------|--|--------|-------|--------|--|--------|---------|--------|--|--|
|                                 |  | Successor                  |         | Predecessor                |
|                                 |  | Yearended December 31,2005 |         | Year ended December31,2004 |  | November 4, 2003through December 31,2003 |         | January 1, 2003through November 3,2003 |
| Industrial and InstitutionalServices |  | $                          | 1,493.6 |                       |  | $                                        | 1,396.1 |                                   |  | $      | 213.8 |   |  | $      | 1,063.2 |   |
| EnergyServices                       |  |                       | 897.1   |                       |  |                                     | 806.6   |                                   |  |   | 123.7 |   |  |   | 596.4   |   |
| PaperServices                        |  |                       | 699.0   |                       |  |                                     | 662.9   |                                   |  |   | 104.3 |   |  |   | 518.5   |   |
| Other                                |  |                       | 222.7   |                       |  |                                     | 167.7   |                                   |  |   | 18.3  |   |  |   | 128.4   |   |
| Netsales                             |  | $                          | 3,312.4 |                       |  | $                                        | 3,033.3 |                                   |  | $      | 460.1 |   |  | $      | 2,306.5 |   |
|                                      |

Thefollowing table presents direct contribution by reportable segment andreconciles the total segment direct contribution to earnings (loss)before incometaxes:

|                                     |  |                            |         |                             |  |                                          |         |                                        |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------|--|----------------------------|---------|-----------------------------|--|------------------------------------------|---------|----------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                |  | Successor                  |         | Predecessor                 |
|                                |  | Yearended December 31,2005 |         | Year ended December31, 2004 |  | November 4, 2003through December 31,2003 |         | January 1, 2003through November 3,2003 |
| Segment directcontribution:         |  |                       |    |                        |  |                                     |    |                                   |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices |  | $                          | 364.3   |                        |  | $                                        | 353.5   |                                   |  | $      | 47.7    |    |  | $      | 270.9   |    |
| EnergyServices                      |  |                       | 191.0   |                        |  |                                     | 173.5   |                                   |  |   | 23.8    |    |  |   | 131.1   |    |
| PaperServices                       |  |                       | 136.0   |                        |  |                                     | 155.8   |                                   |  |   | 23.4    |    |  |   | 120.2   |    |
| Other                               |  |                       | (66.5   | )                      |  |                                     | (78.1   | )                                 |  |   | (23.1   | )  |  |   | (49.3   | )  |
| Totalsegment directcontribution     |  |                       | 624.8   |                        |  |                                     | 604.7   |                                   |  |   | 71.8    |    |  |   | 472.9   |    |
| Expensesnot allocated tosegments:   |  |                       |    |                        |  |                                     |    |                                   |  |   |    |    |  |   |    |    |
| Administrativeexpenses              |  |                       | 173.3   |                        |  |                                     | 189.0   |                                   |  |   | 36.3    |    |  |   | 181.7   |    |
| Impairmentofgoodwill                |  |                       | — |                        |  |                                     | — |                                   |  |   | — |    |  |   | 244.4   |    |
| Amortizationof intangibleassets     |  |                       | 81.6    |                        |  |                                     | 96.3    |                                   |  |   | 15.4    |    |  |   | 68.9    |    |
| In-processresearch anddevelopment   |  |                       | — |                        |  |                                     | 122.3   |                                   |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses        |  |                       | 25.6    |                        |  |                                     | 1.7     |                                   |  |   | 0.8     |    |  |   | 20.3    |    |
| Operatingearnings(loss)             |  |                       | 344.3   |                        |  |                                     | 195.4   |                                   |  |   | 19.3    |    |  |   | (42.4   | )  |
| Otherincome (expense),net           |  |                       | 4.0     |                        |  |                                     | (57.0   | )                                 |  |   | (2.8    | )  |  |   | (17.3   | )  |
| Interestincome                      |  |                       | 8.5     |                        |  |                                     | 10.1    |                                   |  |   | 0.6     |    |  |   | 7.1     |    |
| Interestexpense                     |  |                       | (258.0  | )                      |  |                                     | (251.1  | )                                 |  |   | (49.6   | )  |  |   | (32.7   | )  |
| Earnings(loss) before incometaxes   |  | $                          | 98.8    |                        |  | $                                        | (102.6  | )                                 |  | $      | (32.5   | )  |  | $      | (85.3   | )  |
|                                     |

TheCompany has a single supply chain organization that serves all thereportable segments. As such, asset and capital expenditure informationby reportable segment has not been reported and is not available, sincethe Company does not produce such information internally. In addition,although depreciation expense is a component of each reportablesegment’s direct contribution, it is not discretelyidentifiable.

96

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23.    SegmentInformation   (continued)

Net sales by geographic regionwere asfollows:

|                |  |                             |         |                             |  |                                           |         |                                         |  |        |       |        |  |        |         |        |  |  |
|----------------|--|-----------------------------|---------|-----------------------------|--|-------------------------------------------|---------|-----------------------------------------|--|--------|-------|--------|--|--------|---------|--------|--|--|
|           |  | Successor                   |         | Predecessor                 |
|           |  | Yearended December 31, 2005 |         | Year ended December 31,2004 |  | November 4, 2003 throughDecember 31, 2003 |         | January 1, 2003 through November3, 2003 |
| UnitedStates   |  | $                           | 1,494.3 |                        |  | $                                         | 1,375.8 |                                    |  | $      | 212.0 |   |  | $      | 1,110.6 |   |
| Othercountries |  |                        | 1,818.1 |                        |  |                                      | 1,657.5 |                                    |  |   | 248.1 |   |  |   | 1,195.9 |   |
|           |  | $                           | 3,312.4 |                        |  | $                                         | 3,033.3 |                                    |  | $      | 460.1 |   |  | $      | 2,306.5 |   |
|                |

Long-livedassets by geographic region were asfollows:

|                |  |                 |         |                  |  |        |         |        |  |  |
|----------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--|
|           |  | December31,2005 |         | December 31,2004 |
| UnitedStates   |  | $               | 2,687.6 |             |  | $      | 2,903.7 |   |
| Othercountries |  |            | 1,817.9 |             |  |   | 1,999.8 |   |
|           |  | $               | 4,505.5 |             |  | $      | 4,903.5 |   |
|                |

Netsales by geographic area were determined based on origin of sale.Geographic data on long-lived assets is based on physical location ofthose assets. There were no sales from a single foreign country thatwere material to the consolidated net sales of the Company or thecombined net sales of thePredecessor.

24.    Contingencies and Litigation

Various claims, lawsuits andadministrative proceedings are pending or threatened against theCompany and its subsidiaries, arising from the ordinary course ofbusiness with respect to commercial, contract, intellectual property,product liability, employee, environmental and other matters.Historically, these matters have not had a material impact on theconsolidated financial position of the Company. However, the Companycannot predict the outcome of any litigation or the potential forfuture litigation.

The Company has been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three waste sites where somefinancial contribution is or may be required. These agencies have alsoidentified many other parties who may be responsible for clean up costsat these waste disposal sites. The Company is also remediating a smallground contamination it discovered at its plant in Colombia. TheCompany’s financial contribution to remediate these sites is notexpected to be material. There has been no significant financial impacton the Company up to the present, nor is it anticipated that there willbe in the future, as a result of these matters. The Company has madeand will continue to make provisions for these costs if theCompany’s liability becomes probable and when costs can bereasonably estimated.

The Company’s undiscountedreserves for known environmental clean up costs were $2.2million at December  31,  2005.

Theseenvironmental reserves represent management’s current estimateof its proportional clean-up costs (and the cost to remediate theColombia site) and are based upon negotiation and agreement withenforcement agencies, its previous experience with respect to clean-upactivities, a detailed review by the Company of known conditions, andinformation about other PRPs. They are not reduced by any possiblerecoveries from insurance companies or other PRPs not specificallyidentified. Although management cannot determine whether or not amaterial effect on future operations is reasonably likely to occur,given the evolving nature of environmental regulations, it believesthat the recorded reserve levels are appropriate estimates of thepotential liability. Although settlement will require future cashoutlays, it is not expected that such outlays will materially impactthe Company’s liquidity position. Expenditures for the yearended December  31,  2005, relating to environmentalcompliance and clean up activities, were notsignificant.

97

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24.    Contingencies and Litigation   (continued)

The Company has been named as adefendant in lawsuits based on claimed involvement in the supply ofallegedly defective or hazardous materials and the claimed presence ofhazardous substances at its plants. The plaintiffs in these cases seekdamages for alleged personal injury or potential injury resulting fromexposure to our products or other chemicals. These matters have had ade minimis impact on the Company’s business historically and theCompany does not anticipate these matters to present any material riskto the Company’s business in the future. Notwithstanding, theCompany cannot predict the outcome of any such lawsuits or theinvolvement the Company might have in these matters in thefuture.

The U.K. Health and Safety Executive(‘‘HSE’’) has sent notice that it intendsto initiate legal proceedings against the Company’s U.K.subsidiary under the Health and Safety at Work Act. The place of theseproceedings is not indicated in the notice. This notice references alegionella outbreak that is claimed to have originated at coolingtowers owned by one of the subsidiary’s customers. The HSEindicates that the proceedings will relate to the cleaning of thesecooling towers. The Company has not received any specific charges orclaims for relief, but will, in any event, defend and refute anycontention that it has violated any law.

The Company hasreceived subpoenas from the U.S. Department of Justice for documentsand testimony relating to its storage of claimed hazardous materials,the claimed leakage of wastewater and other matters at its plant inGaryville, Louisiana. No charges or indictments have been filed, butthe outcome of this investigation is unknown to the Company.

In the ordinary course of its business, the Company is also aparty to a number of lawsuits and is subject to various claims relatingto trademarks, employee matters, contracts, transactions, chemicals andother matters, the outcome of which, in the opinion of management,should not have a material effect on the consolidated financialposition of the Company. However, we cannot predict the outcome of anylitigation or the potential for future litigation. Were an unfavorableruling to occur, there exists the possibility of a material adverseimpact on the results of operations for the period in which the rulingoccurs. The Company maintains accruals where the outcome of the matteris probable and can be reasonablyestimated.

25.    QuarterlyResults of Operations(Unaudited)

|                                   |  |                 |         |                  |  |              |         |                |                   |        |         |        |  |        |        |         |  |  |
|-----------------------------------|--|-----------------|---------|------------------|--|--------------|---------|----------------|-------------------|--------|---------|--------|--|--------|--------|---------|--|--|
|                              |  | FirstQuarter    |         | SecondQuarter(1) |  | ThirdQuarter |         | Fourth Quarter |
| **2005**                          |  |            |    |             |  |         |    |           |                   |   |    |   |  |   |   |    |
| Netsales                          |  | $               | 777.6   |             |  | $            | 836.3   |           |                   | $      | 834.9   |   |  | $      | 863.6  |    |
| Costof productsold                |  |            | 412.4   |             |  |         | 479.9   |           |                   |   | 457.6   |   |  |   | 480.8  |    |
| Businessoptimizationexpenses      |  |            | 0.8     |             |  |         | 17.0    |           |                   |   | 3.5     |   |  |   | 4.3    |    |
| Earnings(loss) before incometaxes |  |            | 23.1    |             |  |         | (7.8    | )         |                   |   | 38.3    |   |  |   | 45.2   |    |
| Netearnings(loss)                 |  |            | 10.0    |             |  |         | (5.5    | )         |                   |   | 13.7    |   |  |   | 20.6   |    |
|                              |  | FirstQuarter(2) |         | SecondQuarter(3) |  | ThirdQuarter |         |           | Fourth Quarter(4) |   |
| 2004                              |  |            |    |             |  |         |    |           |                   |   |    |   |  |   |   |    |
| Netsales                          |  | $               | 713.3   |             |  | $            | 740.4   |           |                   | $      | 774.2   |   |  | $      | 805.4  |    |
| Costof productsold                |  |            | 374.4   |             |  |         | 372.2   |           |                   |   | 401.3   |   |  |   | 430.5  |    |
| Businessoptimizationexpenses      |  |            | — |             |  |         | — |           |                   |   | — |   |  |   | 1.7    |    |
| Earnings(loss) before incometaxes |  |            | (122.7  | )           |  |         | 19.9    |           |                   |   | 30.9    |   |  |   | (30.7  | )  |
| Netearnings(loss)                 |  |            | (126.7  | )           |  |         | 2.4     |           |                   |   | 2.0     |   |  |   | (33.6  | )  |
|                                   |

|     |                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------|
| (1) | Earnings(loss) before income taxes includes a $10.7  million charge($6.6  million after tax) for inventorywrite-offs. |

|     |                                                                                                                                                                                                                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Earnings (loss) beforeincome taxes includes a $122.3  million charge ($122.3million after tax) for purchased in-process research and developmentand a $14.1  million charge ($9.8  million after tax)related to the sale of inventory that had been revalued at sellingprice less costs to sell in purchaseaccounting. |

|     |                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Earnings (loss) beforeincome taxes includes a $0.4  million charge ($0.3  millionafter tax) related to the sale of inventory that had been revalued atselling price less costs to sell in purchaseaccounting. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Earnings (loss) beforeincome taxes includes a $35.0  million charge ($21.8million after tax) for the termination of the Monitoring Fee Agreementwith affiliates of the Sponsors, a $13.7  million charge($13.7  million after tax) for the early repayment of seniordiscount notes, and a $0.1  million charge ($0.1  millionafter tax) related to the sale of inventory that had been revalued atselling price less costs to sell in purchaseaccounting. |

98

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|               |                                                                                     |
|---------------|-------------------------------------------------------------------------------------|
| ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE |

None.

ITEM 9A.CONTROLS AND PROCEDURES

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluationof disclosure controls and procedures. |

TheCompany’s chief executive officer and chief financial officer,after evaluating the effectiveness of the Company’s‘‘disclosure controls and procedures’’ (asdefined in the Securities Exchange Act of 1934 Rules 13a-15(e) and15d-15(e)) as of the end of the period, have concluded that theCompany’s disclosure controls and procedures were adequate anddesigned to ensure that material information relating to the Companyand its consolidated subsidiaries would be made known to them by otherswithin those entities as appropriate to allow timely decisionsregarding requireddisclosures.

|           |                                                                       |
|-----------|-----------------------------------------------------------------------|
| (b)  | Management’s Report onInternal Control over Financial Reporting |

TheCompany’s management is responsible for establishing andmaintaining adequate internal control over financial reporting, as suchterm is defined in Securities Exchange Act of 1934 Rules 13a-15(f) and15d-15(f). Under the supervision and with the participation of theCompany’s management, including the Chief Executive Officer andChief Financial Officer, an evaluation of the effectiveness of theCompany’s internal control over financial reporting wasconducted as of December  31,  2005 based on the frameworkin Internal Control—Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO). Based onthat evaluation, management concluded that the Company’sinternal control over financial reporting was effective as ofDecember  31,  2005.

Management’s assessment of the effectivenessof the Company’s internal control over financial reporting as ofDecember  31,  2005 has been audited by Ernst & YoungLLP, an independent registered public accounting firm, as stated intheir report which is included in Item8.

|           |                                                       |
|-----------|-------------------------------------------------------|
| (c)  | Changes in internal controls over financialreporting. |

There were no changes in theCompany’s internal controls over financial reporting thatoccurred during the fourth quarter of 2005 that have materiallyaffected, or are reasonably likely to materially affect, theCompany’s internal controls over financialreporting.

ITEM 9B. OTHER INFORMATION

There was noinformation required to be disclosed in a report on Form 8-K during thefourth quarter of 2005 that was not previouslyreported.

99

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PARTIII

|                 |                                                   |
|-----------------|---------------------------------------------------|
| ITEM 10.   | DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT |

Omitted pursuant toGeneral Instruction I(2)(c) to Form 10-K.

|                |                        |
|----------------|------------------------|
| ITEM 11.  | EXECUTIVE COMPENSATION |

Omittedpursuant to General Instruction I(2)(c) to Form10-K.

|                 |                                                               |
|-----------------|---------------------------------------------------------------|
| ITEM 12.   | SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT |

Omitted pursuantto General Instruction I(2)(c) to Form 10-K.

|                |                                               |
|----------------|-----------------------------------------------|
| ITEM 13.  | CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS |

Omitted pursuant to General InstructionI(2)(c) to Form 10-K.

|                |                                       |
|----------------|---------------------------------------|
| ITEM 14.  | PRINCIPAL ACCOUNTING FEES ANDSERVICES |

The following table presents fees forprofessional services rendered by Ernst & Young LLP for the auditof the Company's annual financial statements for 2005 and 2004,and fees billed for audit-related services, tax services and all otherservices rendered by Ernst & Young LLP for 2005 and 2004.

|                             |  |        |         |        |  |        |         |        |  |  |
|-----------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
| (dollarsinmillions)         |  | 2005   |         | 2004   |
| Auditfees(1)                |  | $      | 5.6     |   |  | $      | 6.1     |   |
| Audit-relatedfees(2)        |  |   | 0.1     |   |  |   | — |   |
| Auditand audit-related fees |  |   | 5.7     |   |  |   | 6.1     |   |
| Taxfees(3)                  |  |   | 0.2     |   |  |   | 0.1     |   |
| All otherfees               |  |   | — |   |  |   | — |   |
| Totalfees(4)                |  | $      | 5.9     |   |  | $      | 6.2     |   |
|                             |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Auditfees for 2005 and 2004 include fees for the audit of the annualconsolidated financial statements, reviews of the condensedconsolidated financial statements included in the Company'squarterly reports, and statutory audits. Additionally, audit fees for2005 and 2004 include fees for reviews of registration statements andissuances of related letters to underwriters and consents, and auditfees for 2004 include fees for the re-audit of the 2001 financialstatements. |

|     |                                                                                                                                 |
|-----|---------------------------------------------------------------------------------------------------------------------------------|
| (2) | Audit-relatedfees for 2005 consisted primarily of fees for general assistancesrelated to Section 404 of the Sarbanes-Oxley Act. |

|     |                                                                                   |
|-----|-----------------------------------------------------------------------------------|
| (3) | Tax fees for 2005 and 2004consisted principally of fees for tax advisoryservices. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (4) | Ernst &Young LLP full time, permanent employees performed all of theprofessional services described in this chart. |

TheCompany’s Pre-Approval Policy setting forth the Company’spolicy for pre-approval of audit and non-audit services can be found atthe Company’s Web site at www.nalco.com.

Tosafeguard the continued independence of the independent auditors, theAudit Committee has adopted a policy that prevents the independentauditors from providing services to the Company that are prohibitedunder Section 10A(g) of the Securities Exchange Act of 1934, asamended. This policy also provides that independent auditors are onlypermitted to provide services to the Company that have beenpre-approved by the Audit Committee. Pursuant to the policy, all auditservices require advance approval by the Audit Committee. All otherservices by the independent auditors that fall within certaindesignated dollar thresholds, both per engagement as well as annualaggregate, have been pre-approved under the policy. Different dollarthresholds apply to the three categories of pre-approved servicesspecified in the policy (Audit-Related services, Tax services and Otherservices). All services that exceed the dollar thresholds must beapproved in advance by the Audit Committee. Pursuant to applicableprovisions of the Securities Exchange Act of 1934, as amended, theAudit Committee has delegated approval authority to the Chairman of theAudit Committee, who is an independent director. The Chairman haspresented all approval decisions to the full Audit Committee.

100

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PART IV

|                |                                        |
|----------------|----------------------------------------|
| ITEM 15.  | EXHIBITS, FINANCIAL STATEMENTSCHEDULES |

|               |                     |
|---------------|---------------------|
| (a) (1)  | FinancialStatements |

The following consolidated and combinedfinancial statements of Nalco Finance Holdings LLC and subsidiaries arefiled as part of this report under Item 8 — Financial Statementsand Supplementary Data:

Consolidated Balance Sheets— December  31,  2005 and2004

Consolidated and Combined Statements of Operations— Year ended December  31,  2005 (Successor), Yearended December  31,  2004 (Successor), Period fromNovember  4,  2003 through December  31,  2003(Successor), and Period from January  1,  2003 throughNovember  3,  2003(Predecessor).

Consolidated and Combined Statement ofUnitholders’ and Shareholders’ Equity — Year endedDecember  31,  2005 (Successor), Year ended December31,  2004 (Successor), Period from November  4,  2003through December  31,  2003 (Successor), and Period fromJanuary  1,  2003 through November  3,  2003(Predecessor).

Consolidated and Combined Statements ofCash Flows — Year ended December  31,  2005(Successor), Year ended December  31,  2004 (Successor),Period from November  4,  2003 through December31,  2003 (Successor), and Period from January  1,2003 through November  3,  2003(Predecessor).

Notes to Consolidated and CombinedFinancial Statements

(a) (2) Financial statementschedules:

|  |                        |                                |
|--|------------------------|--------------------------------|
|  | ScheduleI—  | Condensed FinancialInformation |

Schedule II — Valuation andQualifying Accounts

All other financial statementschedules are not required under the relevant instructions or areinapplicable and therefore have beenomitted.

101

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Schedule I— Condensed Financial Information

Nalco Finance HoldingsLLC (Parent Company Only)

Condensed BalanceSheetsDecember  31,  2005 and 2004(dollars inmillions)

|                                                   |  |                  |         |                  |  |        |         |        |  |  |
|---------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|--------|--|--|
|                                              |  | December31, 2005 |         | December 31,2004 |
| Investment insubsidiaries                         |  | $                | 1,033.2 |             |  | $      | 1,017.7 |   |
| Debtissuecost                                     |  |             | 0.7     |             |  |   | 0.8     |   |
| **TotalAssets**                                   |  | $                | 1,033.9 |             |  | $      | 1,018.5 |   |
| Long-termdebt                                     |  | $                | 353.5   |             |  | $      | 324.2   |   |
| Totalunitholder’sequity                     |  |             | 680.4   |             |  |   | 694.3   |   |
| **TotalLiabilities and Unitholder’sEquity** |  | $                | 1,033.9 |             |  | $      | 1,018.5 |   |
|                                                   |

Seeaccompanying note to condensed financialstatements.

102

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Schedule I — Condensed FinancialInformation — Continued

Nalco Finance Holdings LLC(Parent Company Only)

Condensed Statements ofOperationsYear ended December  31,  2005 Yearended December  31,  2004Period from November4,  2003 through December  31,  2003(dollars inmillions)

|                                              |  |                             |         |                             |  |                                                     |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|-----------------------------|---------|-----------------------------|--|-----------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Yearended December 31, 2005 |         | Year ended December31, 2004 |  | Period from November 4,2003through December 31,2003 |
| **NetSales**                                 |  | $                           | — |                        |  | $                                                   | — |    |  | $      | — |    |
| Operatingcosts andexpenses:                  |  |                        |    |                        |  |                                                |    |    |  |   |    |    |
| Selling,administrative, and researchexpenses |  |                        | — |                        |  |                                                | 0.1     |    |  |   | — |    |
| Totaloperating costs andexpenses             |  |                        | — |                        |  |                                                | 0.1     |    |  |   | — |    |
| Operatingearnings(loss)                      |  |                        | — |                        |  |                                                | (0.1    | )  |  |   | — |    |
| Equityin earnings (losses) ofsubsidiaries    |  |                        | 68.2    |                        |  |                                                | (104.2  | )  |  |   | (24.0   | )  |
| Losson early repayment ofdebt                |  |                        | — |                        |  |                                                | (13.7   | )  |  |   | — |    |
| Interestexpense                              |  |                        | (29.4   | )                      |  |                                                | (37.9   | )  |  |   | — |    |
| Earnings(loss) before incometaxes            |  |                        | 38.8    |                        |  |                                                | (155.9  | )  |  |   | (24.0   | )  |
| Incometax provision(benefit)                 |  |                        | — |                        |  |                                                | — |    |  |   | — |    |
| **Netearnings(loss)**                        |  | $                           | 38.8    |                        |  | $                                                   | (155.9  | )  |  | $      | (24.0   | )  |
|                                              |

Seeaccompanying note to condensed financialstatements.

103

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Schedule I — Condensed FinancialInformation — Continued

Nalco Finance Holdings LLC(Parent Company Only)

Condensed Statements of CashFlowsYear ended December  31,  2005 Year endedDecember  31,  2004Period from November4,  2003 through December  31,  2003(dollars inmillions)

|                                          |  |                            |         |                            |  |                                                     |         |         |  |        |          |         |  |  |
|------------------------------------------|--|----------------------------|---------|----------------------------|--|-----------------------------------------------------|---------|---------|--|--------|----------|---------|--|--|
|                                     |  | Yearended December 31,2005 |         | Year ended December31,2004 |  | Period from November 4, 2003throughDecember 31,2003 |
| **Operatingactivities**                  |  |                       |    |                       |  |                                                |    |    |  |   |     |    |
| Netearnings(loss)                        |  | $                          | 38.8    |                       |  | $                                                   | (155.9  | )  |  | $      | (24.0    | )  |
| Non-cashadjustments                      |  |                       | (38.8   | )                     |  |                                                | 155.8   |    |  |   | 23.6     |    |
| Netcash used for operatingactivities     |  |                       | — |                       |  |                                                | (0.1    | )  |  |   | (0.4     | )  |
| **Investingactivities**                  |  |                       |    |                       |  |                                                |    |    |  |   |     |    |
| Acquisitionof Ondeo NalcoGroup           |  |                       | — |                       |  |                                                | — |    |  |   | (1,001.5 | )  |
| Investmentinsubsidiaries                 |  |                       | — |                       |  |                                                | (11.0   | )  |  |   | —  |    |
| Netcash used for investingactivities     |  |                       | — |                       |  |                                                | (11.0   | )  |  |   | (1,001.5 | )  |
| **Financingactivities**                  |  |                       |    |                       |  |                                                |    |    |  |   |     |    |
| Capitalcontributions (distributions),net |  |                       | — |                       |  |                                                | (260.7  | )  |  |   | 1,001.9  |    |
| Proceedsfrom long-termdebt               |  |                       | — |                       |  |                                                | 449.9   |    |  |   | —  |    |
| Paymentsof long-termdebt                 |  |                       | — |                       |  |                                                | (162.3  | )  |  |   | —  |    |
| Other                                    |  |                       | — |                       |  |                                                | (15.8   | )  |  |   | —  |    |
| Netcash provided by financingactivities  |  |                       | — |                       |  |                                                | 11.1    |    |  |   | 1,001.9  |    |
| Increaseincash                           |  |                       | — |                       |  |                                                | — |    |  |   | —  |    |
| Cashat beginning ofperiod                |  |                       | — |                       |  |                                                | — |    |  |   | —  |    |
| Cashat the end ofperiod                  |  | $                          | — |                       |  | $                                                   | — |    |  | $      | —  |    |
|                                          |

Seeaccompanying note to condensed financialstatements.

104

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Schedule I — Condensed FinancialInformation — Continued

Nalco Finance Holdings LLC(Parent Company Only)

Note to Condensed FinancialStatementsDecember  31,  2005

|          |                      |
|----------|----------------------|
| 1.  | Basisof Presentation |

Under the terms of agreements governingindebtedness of certain subsidiaries of Nalco Finance Holdings LLC (the‘‘Company’’), such subsidiaries arerestricted from making dividend payments, loans or advances to theCompany. Although the Company was not formed until January  2004,if the Company had been in existence as of December  31,2003, these restrictions would have resulted in the restricted netassets (as defined in Rule 4-03(e)(3) of Regulation S-X) of theCompany’s subsidiaries exceeding 25% of the consolidatednet assets of the Company and its subsidiaries. Schedule I presents thecondensed financial information of the Company as if it had been inexistence as of December  31,  2003. Schedule I is derivedfrom the financial statements of Nalco Holdings LLC, which was theprevious parent company as of December  31,  2003, whichNalco Finance Holdings LLC owns 100% subsequent toJanuary  14,  2004.

The unaudited financialstatements for Nalco Finance Holdings LLC (Parent Company Only)summarize the results of operations for the years ended December31,  2005 and December  31,  2004 and for the periodNovember  4,  2003 through December  31,  2003and as of December  31,  2005 and 2004. In thesestatements, Nalco Finance Holdings LLC’s investment insubsidiaries is stated at cost plus equity in undistributed earnings ofsubsidiaries since the date of acquisition, November  4,2003. Nalco Finance Holdings LLC’s share of net income of itsunconsolidated subsidiaries is included in consolidated income usingthe equity method. The Nalco Finance Holdings LLC statements should beread in conjunction with the Company’s financialstatements.

105

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Schedule II —Valuation and Qualifying AccountsYear Ended December31,  2005 (Successor), Year Ended December  31,2004 (Successor),Period from November  4,  2003through December  31,  2003 (Successor),and Periodfrom January  1,  2003 through November  3,2003(Predecessor)

|                                                                         |  |                             |        |                            |  |                         |         |            |  |                        |         |           |  |        |         |              |  |        |        |        |  |  |
|-------------------------------------------------------------------------|--|-----------------------------|--------|----------------------------|--|-------------------------|---------|------------|--|------------------------|---------|-----------|--|--------|---------|--------------|--|--------|--------|--------|--|--|
|                                                                    |  |                        |        | Additions                  |  |                    |         |       |
| (dollarsin millions)                                                    |  | Balance atBeginningofPeriod |        | Charged toCostsandExpenses |  | Charged toOtherAccounts |         | Deductions |  | Balance atEnd ofPeriod |
| **Year Ended December 31, 2005(Successor):**                            |  |                        |   |                       |  |                    |    |       |  |                   |    |      |  |   |    |         |  |   |   |   |
| Allowance for doubtfulaccounts                                          |  | $                           | 21.1   |                       |  | $                       | 2.8     |       |  | $                      | — |      |  | $      | (7.3)   | (1)(2)  |  | $      | 16.6   |   |
| Deferred tax asset valuationallowance                                   |  |                        | 44.1   |                       |  |                    | (1.8    | )     |  |                   | 9.1     | (3)  |  |   | — |         |  |   | 51.4   |   |
| **YearEnded December  31,  2004(Successor):**                           |  |                        |   |                       |  |                    |    |       |  |                   |    |      |  |   |    |         |  |   |   |   |
| Allowancefor doubtfulaccounts                                           |  | $                           | 21.0   |                       |  | $                       | 2.9     |       |  | $                      | 0.6     | (1)  |  | $      | (3.4)   | (2)     |  | $      | 21.1   |   |
| Deferredtax asset valuationallowance                                    |  |                        | 35.6   |                       |  |                    | 0.2     |       |  |                   | 8.3     | (4)  |  |   | — |         |  |   | 44.1   |   |
| **Periodfrom November  4,  2003 through December  31,2003(Successor):** |  |                        |   |                       |  |                    |    |       |  |                   |    |      |  |   |    |         |  |   |   |   |
| Allowancefor doubtfulaccounts                                           |  | $                           | 21.6   |                       |  | $                       | 1.5     |       |  | $                      | 0.8     | (1)  |  | $      | (2.9)   | (2)     |  | $      | 21.0   |   |
| Deferredtax asset valuationallowance                                    |  |                        | 28.1   |                       |  |                    | — |       |  |                   | 7.5     | (5)  |  |   | — |         |  |   | 35.6   |   |
| **Periodfrom January  1,  2003 through November  3,2003(Predecessor):** |  |                        |   |                       |  |                    |    |       |  |                   |    |      |  |   |    |         |  |   |   |   |
| Allowancefor doubtfulaccounts                                           |  | $                           | 24.8   |                       |  | $                       | 5.4     |       |  | $                      | 0.9     | (1)  |  | $      | (9.5)   | (2)     |  | $      | 21.6   |   |
| Deferredtax asset valuationallowance                                    |  |                        | 30.3   |                       |  |                    | (2.2    | )     |  |                   | — |      |  |   | — |         |  |   | 28.1   |   |
|                                                                         |

|  |
|--|
|  |  |
|  |

|     |                                                                          |
|-----|--------------------------------------------------------------------------|
| (1) | Foreigncurrency translation adjustments (balance for 2005 equals$(0.9)). |

|     |                                                                      |
|-----|----------------------------------------------------------------------|
| (2) | Account write-offs net ofrecoveries (balance for 2005 equals$(6.4)). |

|     |                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Additional allowanceresulting from the Acquisition charged to goodwill of $0.6, foreigncurrency translation adjustments of $(2.8), and increase in deferredtax asset attributes of$11.3. |

|     |                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------|
| (4) | Foreign currency translationadjustments of $4.6 and reclassification of $3.7 from deferred taxassets. |

|     |                                                                        |
|-----|------------------------------------------------------------------------|
| (5) | Additional allowanceresulting from the Acquisition charged togoodwill. |

106

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(a) (3) Exhibits requiredto be filed by Item 601 of RegulationS-K:

|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |
|-------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| **ExhibitNumber** |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 2.1               |  | StockPurchase Agreement among Nalco Holdings LLC (formerly known asBlackstone/Neptune Acquisition Company L.L.C.), Leo Holding Company andNalco International SAS, dated as of August  31,  2003,which is incorporated herein by reference from Exhibit 2.1 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1               |  | Certificateof Formation of Nalco Finance Holdings LLC, which is incorporatedherein by reference from Exhibit 3.1 on Form S-4 of Nalco FinanceHoldings LLC and Nalco Finance Holdings, Inc. filed on September23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3.2               |  | LimitedLiability Agreement of Nalco Finance Holdings LLC, which isincorporated herein by reference from Exhibit 3.2 on Form S-4 of NalcoFinance Holdings LLC and Nalco Finance Holdings, Inc. filed onSeptember  23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.3               |  | Certificateof Incorporation of Nalco Finance Holdings, Inc., which is incorporatedherein by reference from Exhibit 3.3 on Form S-4 of Nalco FinanceHoldings LLC and Nalco Finance Holdings, Inc. filed on September23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.4               |  | By-lawsof Nalco Finance Holdings, Inc., which is incorporated herein byreference from Exhibit 3.4 on Form S-4 of Nalco Finance Holdings LLCand Nalco Finance Holdings, Inc. filed on September  23,2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.1               |  | SeniorDiscount Notes Indenture, dated as of January  21,  2004among Nalco Finance Holdings LLC, Nalco Finance Holdings Inc. and TheBank of New York, as Trustee, which is incorporated herein by referencefrom Exhibit 4.1 on Form S-4 of Nalco Finance Holdings LLC and NalcoFinance Holdings, Inc. filed on September  23,  2004 (FileNo.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2               |  | SeniorDiscount Notes Registration Rights Agreement, dated as ofJanuary  21,  2004, among Nalco Finance Holdings LLC, NalcoFinance Holdings Inc. and Goldman, Sachs & Co., which isincorporated herein by reference from Exhibit 4.2 on Form S-4 of NalcoFinance Holdings LLC and Nalco Finance Holdings, Inc. filed onSeptember  23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1              |  | CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBook Managers, which is incorporated herein by reference from Exhibit10.1 of the Registration Statement on Form S-4 of Nalco Company filedon May  17,  2004 (File No.333-115560). |
| 10.2              |  | U.S.Guarantee and Collateral Agreement, dated as of November4,  2003, among Nalco Holdings LLC, Nalco Company, each domesticsubsidiary of Nalco Holdings LLC named therein and Citicorp NorthAmerica, Inc., as Collateral Agent, which is incorporated herein byreference from Exhibit 10.2 of the Registration Statement on Form S-4of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                   |

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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|-------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.3  |  | GuaranteeAgreement, dated as of August  31,  2003, between Suez andBlackstone/Neptune Acquisition Company L.L.C., which is incorporatedherein by reference from Exhibit 10.3 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                                  |
| 10.4  |  | Non-CompetitionAgreement, dated as of November  4,  2003 between Suez andBlackstone/Neptune Acquisition Company L.L.C., which is incorporatedherein by reference from Exhibit 10.4 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                            |
| 10.5  |  | ReimbursementAgreement, dated as of November  4,  2003 between Suez andNalco Company, which is incorporated herein by reference from Exhibit10.5 of the Registration Statement on Form S-4 of Nalco Company filedon May  17,  2004 (File No.333-115560).                                                                                                                                              |
| 10.6  |  | SubleaseAgreement, dated as of November  4,  2003 between LeoHolding Company, as sublandlord and Ondeo Nalco Company, as subtenant,which is incorporated herein by reference from Exhibit 10.6 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                                                                  |
| 10.7  |  | TransactionFee Agreement, dated as of November  4,  2003, among NalcoCompany, Goldman, Sachs & Co., Apollo Management V, L.P., andBlackstone Management Partners IV L.L.C., which is incorporated hereinby reference from Exhibit 10.7 of the Registration Statement on FormS-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                    |
| 10.8  |  | MonitoringFee Agreement, dated as of November  4,  2003, betweenNalco Company, Blackstone Management Partners IV L.L.C., ApolloManagement V, L.P. and Goldman, Sachs & Co., which is incorporatedherein by reference from Exhibit 10.8 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                    |
| 10.9  |  | AmendmentNo. 1, dated as of November  4,  2003 to the Monitoring FeeAgreement, dated as of November  4,  2003, among NalcoCompany, Blackstone Management Partners IV L.L.C., Apollo Management V,L.P. and Goldman, Sachs & Co. which is incorporated herein byreference from Exhibit 10.9 of the Registration Statement on Form S-4of Nalco Company filed on May  17,  2004 (File No.333-115560). |
| 10.10 |  | SponsorServices Agreement, dated as of November  16,  2004,amending and restating the Monitoring Fee Agreement, among NalcoCompany, Blackstone Management Partners IV L.L.C., Apollo Management V,L.P. and Goldman, Sachs & Co., which is incorporated herein byreference from Exhibit 10.2 on Form 8-K of Nalco Holding Company filedon November  18,  2004 (FileNo. 001-32342).            |
| 10.11 |  | SeveranceAgreement, effective as of January  1,  2004, between NalcoCompany and William J. Roe, which is incorporated herein by referencefrom Exhibit 10.10 of Amendment No. 2 to the Registration Statement onForm S-4 of Nalco Company filed on August  11,  2004 (FileNo.333-115560).                                                                                                              |
| 10.12 |  | EmploymentAgreement, effective as of November  1,  2003, betweenNalco Company and Bradley J. Bell, which is incorporated herein byreference from Exhibit 10.11 of the Registration Statement on Form S-4of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                                                |
|       |

108

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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |
|-------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.13 |  | SeveranceAgreement, effective as of January  1,  2004, between NalcoCompany and Daniel M.  Harker, which is incorporated herein byreference from Exhibit 10.13 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).                                                                                                                            |
| 10.14 |  | ReceivablesPurchase Agreement, dated as of June  25,  2004, amongNalco Company, Nalco Energy Services, L.P. and Nalco Receivables LLC,which is incorporated herein by reference from Exhibit 10.16 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August  11,  2004 (File No.333-115560).                                                                   |
| 10.15 |  | ReceivablesTransfer Agreement, dated as of June  25,  2004, amongNalco Receivables LLC, Nalco Company, JPMorgan Chase Bank and theseveral transferees and funding agents party hereto from time to time,which is incorporated herein by reference from Exhibit 10.17 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August  11,  2004 (File No.333-115560). |
| 10.16 |  | EmploymentAgreement, dated as of August  3,  2004, between Nalco LLCand William H. Joyce, which is incorporated herein by reference fromExhibit 10.18 of Amendment No. 2 to the Registration Statement on FormS-4 of Nalco Company filed on August  11,  2004 (File No.333-115560).                                                                                                               |
| 10.17 |  | NalcoLLC 2004 Unit Plan, which is incorporated herein by reference fromExhibit 10.24 of the Registration Statement on Form S-1 of NalcoHolding Company filed on August  26,  2004 (FileNo. 333-118583).                                                                                                                                                                                 |
| 10.18 |  | NalcoLLC Limited Liability Company Operating Agreement, dated May17,  2004, which is incorporated herein by reference from Exhibit10.25 of the Registration Statement on Form S-1 of Nalco HoldingCompany filed on August  26,  2004 (FileNo. 333-118583).                                                                                                                              |
| 10.19 |  | Warrant Agreement, whichis incorporated herein by reference from Exhibit 10.4 on Form 8-K ofthe Nalco Holding Company filed on November  18,  2004(FileNo. 001-32342).                                                                                                                                                                                                                       |
| 10.20 |  | RegistrationRights Agreement, dated as of November  16,  2004, amongNalco Holding Company, Nalco LLC and the other parties named therein,which is incorporated herein by reference from Exhibit 10.1 on Form 8-Kof the Nalco Holding Company filed on November  18,  2004(FileNo. 001-32342).                                                                                                |
| 10.21 |  | StockholdersAgreement, dated as of November  16,  2004, between NalcoHolding Company and Nalco LLC, which is incorporated herein byreference from Exhibit 10.3 on Form 8-K of the Nalco Holding Companyfiled on November  18,  2004 (FileNo. 001-32342).                                                                                                                                     |
| 10.22 |  | NalcoHolding Company 2004 Stock Incentive Plan, which is incorporated hereinby reference from Exhibit 10.5 on Form 8-K of Nalco Holding Companyfiled on November  18,  2004 (FileNo. 001-32342).                                                                                                                                                                                             |
| 10.23 |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and William H. Joyce, which is incorporatedherein by reference from Exhibit 10.30 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                                                                                            |
| 10.24 |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and Bradley J. Bell, which is incorporatedherein by reference from Exhibit 10.31 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (File No. 333-118583).                                                                                            |
|       |

109

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|       |  |                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|-------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.25 |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and William J. Roe, which is incorporatedherein by reference from Exhibit 10.32 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                                  |
| 10.26 |  | ManagementMembers Agreement (Class B, C and D units), dated as of June11,  2004, between Nalco LLC and William H. Joyce, which isincorporated herein by reference from Exhibit 10.35 of the RegistrationStatement on Form S-1 of Nalco Holding Company filed onAugust  26,  2004 (File No. 333-118583).                     |
| 10.27 |  | Management MembersAgreement (Class B, C and D units), dated as of June  11,2004, between Nalco LLC and Bradley J. Bell, which is incorporatedherein by reference from Exhibit 10.36 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                        |
| 10.28 |  | ManagementMembers Agreement (Class B, C and D units), dated as of June11,  2004, between Nalco LLC and William J. Roe, which isincorporated herein by reference from Exhibit 10.37 of the RegistrationStatement on Form S-1 of Nalco Holding Company filed onAugust  26,  2004 (File No. 333-118583).                       |
| 10.29 |  | Management MembersAgreement (Class A units), dated as of June  11,  2004,between Nalco LLC and Daniel M.  Harker, which is incorporatedherein by reference from Exhibit 10.32 of the Annual Report on Form10-K of Nalco Holding Company filed on March  24, 2005 (File No.001-32342).                                                 |
| 10.30 |  | Management MembersAgreement (Class B, C and D units), dated as of June  11,2004, between Nalco LLC and Daniel M.  Harker, which isincorporated herein by reference from Exhibit 10.33 of the AnnualReport on Form 10-K of Nalco Holding Company filed on March 24, 2005(File No.001-32342).                                           |
| 10.31 |  | Formof Nalco Holding Company 2004 Stock Incentive Plan Restricted StockUnit Agreement, which is incorporated herein by reference from Exhibit99.2 on Form S-8 of Nalco Holding Company filed on February7,  2005 (FileNo. 333-122582).                                                                                           |
| 10.32 |  | ManagementIncentive Plan of Nalco Company, which is incorporated herein byreference from Exhibit 99.1 on Form 8-K of Nalco Holding Company filedon March  1,  2005 (FileNo. 001-32342).                                                                                                                                          |
| 10.33 |  | LongTerm Cash Incentive Plan of Nalco Company, which is incorporated hereinby reference from Exhibit 99.2 on Form 8-K of Nalco Holding Companyfiled on March  1,  2005 (FileNo. 001-32342).                                                                                                                                      |
| 10.34 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Daniel S. Sanders, which is incorporated herein byreference from Exhibit 10.37 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342). |
| 10.35 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Douglas A. Pertz, which is incorporated herein byreference from Exhibit 10.38 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).  |
| 10.36 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Leon D. Black, which is incorporated herein byreference from Exhibit 10.39 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).     |
|       |

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|       |  |                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |
|-------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.37 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Paul H. O’Neill, which is incorporatedherein by reference from Exhibit 10.40 of the Annual ReportForm 10-K Nalco Holding Company filed on March  24,2005 (File No.001-32342).                  |
| 10.38 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Chinh Chu, which is incorporated herein byreference from Exhibit 10.41 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).                            |
| 10.39 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Joshua Harris, which is incorporated herein byreference from Exhibit 10.42 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).                        |
| 10.40 |  | Indenture,dated as of May  1,  1998, between Nalco Chemical Companyand The Chase Manhattan Bank, which is incorporated herein by referencefrom Exhibit 4.1 of the Registration Statement on Form S-4 of NalcoCompany filed on May  17,  2004 (File No.333-115560).                                                                                       |
| 10.41 |  | FirstSupplemental Indenture, dated as of December  3,  1999, byand between Nalco Chemical Company and The Chase Manhattan Bank, whichis incorporated herein by reference from Exhibit 4.2 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                          |
| 10.42 |  | SeniorNotes Indenture, dated as of November  4,  2003, amongNalco Company, the Guarantors named therein and The Bank of New York,as Trustee, which is incorporated herein by reference from Exhibit 4.3of the Registration Statement on Form S-4 of Nalco Company filed onMay  17,  2004 (File No.333-115560).                                           |
| 10.43 |  | SeniorNotes Supplemental Indenture, dated as of November  12,2003, among Nalco Company, the guarantors named therein and The Bank ofNew York, as Trustee, which is incorporated herein by reference fromExhibit 4.4 of the Registration Statement on Form S-4 of Nalco Companyfiled on May  17,  2004 (File No. 333-115560).                             |
| 10.44 |  | Senior SubordinatedNotes Indenture, dated as of November  4,  2003, amongNalco Company, the Guarantors named therein and The Bank of New York,as Trustee, which is incorporated herein by reference from Exhibit 4.5of the Registration Statement on Form S-4 of Nalco Company filed onMay  17,  2004 (File No. 333-115560).                             |
| 10.45 |  | Senior SubordinatedNotes Supplemental Indenture, dated as of November  12,2003, among Nalco Company, the guarantors named therein and The Bank ofNew York, as Trustee, which is incorporated herein by reference fromExhibit 4.6 of the Registration Statement on Form S-4 of Nalco Companyfiled on May  17,  2004 (File No.333-115560).                 |
| 10.46 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective November  14,  2005, between NalcoHolding Company and Sanjeev Mehra, assigned to Goldman Sachs Group,Inc., which is incorporated herein by reference from Exhibit 99.1 onForm 8-K of Nalco Holding Company filed on November  15,2005 (FileNo. 001-32342). |
| 10.47 |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective May  26,  2005, between Nalco HoldingCompany and Rodney F. Chase, which is incorporated herein by referencefrom Exhibit 99.1 on Form 8-K of Nalco Holding Company filed onMay  27,  2005 (FileNo. 001-32342).                                              |
|       |

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |  |  |
|--------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.48  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective May  26,  2005, between Nalco HoldingCompany and Richard B. Marchese, which is incorporated herein byreference from Exhibit 99.2 on Form 8-K of Nalco Holding Company filedon May  27,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.49  |  | DeathBenefit Agreement and Addendum, effective May  26,  2005,between Nalco Company and William H. Joyce, which is incorporatedherein by reference from Exhibit 99.3 on Form 8-K of Nalco HoldingCompany filed on May  27,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.50  |  | TheNalco Company Supplemental Profit Sharing Plan, effective May1,  2005, between Nalco Holding Company and William H. Joyce,which is incorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on May  11,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.51  |  | FormNalco Company Death Benefit Agreement and Addendum to Death BenefitAgreement, which is incorporated herein by reference from Exhibit 99.2on Form 8-K of Nalco Holding Company filed on May  11,2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.52  |  | Changeof Control Employment Agreement, effective May  10,  2005,between Nalco Holding Company and William H. Joyce, which isincorporated herein by reference from Exhibit 99.3 on Form 8-K of NalcoHolding Company filed on May  11,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.53  |  | Formof Nalco Holding Company 2006 Stock Incentive Plan Restricted StockUnit Agreement, which is incorporated herein by reference from Exhibit99-1 on Form 8-K of Nalco Holding Company filed on February15,  2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.54  |  | AmendmentNo. 3, dated as of October  19,  2005, to the CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBook Managers, which is incorporated herein by reference from Exhibit10.2 on the Quarterly Report on Form 10-Q of Nalco HoldingCompany filed on November  14,  2005 (File No.001-32342). |
| 10.55  |  | AmendmentNo. 2, dated as of May  31,  2005, to the ReceivablesTransfer Agreement dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time to time, which isincorporated herein by reference from Exhibit 10.1 on the QuarterlyReport on Form 10-Q of Nalco Holding Company filed onAugust  15,  2005 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.56  |  | AmendmentNo. 3, dated as of September  30,  2005, to the ReceivablesTransfer Agreement dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time to time, which isincorporated herein by reference from Exhibit 10.1 on the QuarterlyReport on Form 10-Q of Nalco Holding Company filed onNovember  14,  2005 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.57* |  | AmendmentNo. 1, dated as of December  30,  2005, to the Nalco LLCLimited Liability Company Operating Agreement, dated May17,  2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |

112

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |  |  |
|--------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.58* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Chinh E.Chu.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.59* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Joshua J.Harris.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.60* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Sanjeev Mehra, assigned to GoldmanSachs Group,Inc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.61* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Rodney F.Chase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.62* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Richard B.Marchese.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.63* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Paul H.O’Neill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.64* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Douglas A.Pertz.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.65* |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Daniel S.Sanders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.66* |  | OmnibusAmendment, dated as of December  31,  2005, Amendment No.1to the Receivables Purchase Agreement, dated as of June25,  2004, among Nalco Company, Nalco Energy Services, L.P. andNalco Receivables LLC, and Amendment No. 4 to the Receivables TransferAgreement, dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time totime.                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.67* |  | AmendmentNo. 5, dated as of December  31,  2005, to the ReceivablesTransfer Agreement, dated as of June  25,  2004, amongNalco Receivables LLC, Nalco Company, JPMorgan Chase Bank and theseveral transferees and funding agents party hereto from time totime.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.68* |  | AmendmentNo. 4, dated as of February  22,  2006, to the CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBookManagers. |
| 10.69* |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and John L. Gigerich.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |

113

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|        |  |                                                                                                                                                                                                                                                                  |  |  |  |  |
|--------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 10.70* |  | ConsultingAgreement, effective as of July  1,  2004, between NalcoCompany and John L.Gigerich.                                                                                                                                                                   |
| 10.71* |  | AmendmentNo. 1, dated as of December 30, 2005, to the Registration RightsAgreement, dated as of November 16, 2004, among Nalco Holding Company,Nalco LLC and the other parties namedtherein.                                                                     |
| 18.1*  |  | Letterregarding change in accountingprinciple                                                                                                                                                                                                                    |
| 23.1*  |  | Consentof Ernst & YoungLLP                                                                                                                                                                                                                                   |
| 31.1*  |  | Certificationof the Chairman and Chief Executive Officer pursuant to Rule 13a-14(a)of Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of2002.                                                                       |
| 31.2*  |  | Certificationof the Executive Vice President and Chief Financial Officer pursuant toRule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuantto Section 302 of the Sarbanes-Oxley Act of2002.                                                       |
| 32.1*  |  | Certificationof William H. Joyce, our Chairman and Chief Executive Officer, andBradley J. Bell, our Executive Vice President and Chief FinancialOfficer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002. |
|        |

*filedherewith

Shareholders may obtain copies of Exhibitswithout charge upon written request to the Corporate Secretary, NalcoFinance Holdings LLC, 1601 West Diehl Road, Naperville, IL60563.

114

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SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

|  | NALCO FINANCE HOLDINGSLLC(Registrant) |
|--|---------------------------------------|

|        |  |        |  |                    |  |  |  |  |  |  |
|--------|--|--------|--|--------------------|--|--|--|--|--|--|
|   |  | By:    |  | /s/ BRADLEY J.BELL |
|   |  |   |  | Bradley J.Bell     |
|        |

|  | Executive Vice Presidentand Chief Financial Officer(Principal FinancialOfficer) |
|--|---------------------------------------------------------------------------------|

Date: March  2,2006

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacitiesindicated on March  2,2006.

|                          |  |                                                               |  |  |  |  |
|--------------------------|--|---------------------------------------------------------------|--|--|--|--|
| Signature                |  | Title                                                         |
| /s/WILLIAM H. JOYCE      |  | Chairman ofthe Board andChief Executive Officer               |
| William H.Joyce          |
| /s/ BRADLEY J.BELL       |  | Executive Vice President,Chief FinancialOfficer and Treasurer |
| Bradley J.Bell           |
| /s/FREDERIC JUNG         |  | Controller                                                    |
| FredericJung             |  |                                                          |
| /s/RODNEY F. CHASE       |  | Director                                                      |
| Rodney F.Chase           |  |                                                          |
| /s/CHINH E. CHU          |  | Director                                                      |
| Chinh E.Chu              |  |                                                          |
| /s/JOSHUA J. HARRIS      |  | Director                                                      |
| Joshua J.Harris          |  |                                                          |
| /s/RICHARD B. MARCHESE   |  | Director                                                      |
| Richard B.Marchese       |  |                                                          |
| /s/SANJEEV K. MEHRA      |  | Director                                                      |
| Sanjeev K.Mehra          |  |                                                          |
| /s/PAUL H. O’NEILL |  | Director                                                      |
| Paul H.O’Neill     |  |                                                          |
| /s/DOUGLAS A. PERTZ      |  | Director                                                      |
| Douglas A.Pertz          |  |                                                          |
| /s/DANIEL S. SANDERS     |  | Director                                                      |
| Daniel S.Sanders         |  |                                                          |
|                          |

115

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