|  |
|--|
|  |
|  |
|  |
|  |

UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

|  |
|--|
|  |  |  |  |
|  |

FORM 10-K

(Mark One)

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

**For the fiscal year ended December 31,2004**

**or**

|        |                                                                                             |
|--------|---------------------------------------------------------------------------------------------|
|   | **TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

**For the transition period from                     to                    .**

CommissionFile No. 001-32342

|  |
|--|
|  |  |  |  |
|  |

NALCOHOLDING COMPANY

(Exact name ofregistrant as specified in its charter)

|                                                               |  |                                        |  |  |  |  |
|---------------------------------------------------------------|--|----------------------------------------|--|--|--|--|
| Delaware                                                      |  | 16-1701300                             |
| (State or otherjurisdiction of Incorporation or Organization) |  | (I.R.S.Employer Identification Number) |
|                                                               |

1601 WestDiehl Road Naperville, IL 60563-1198 (630) 305-1000

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

Securities registered pursuantto Section 12(b) of the Act:

|                              |  |                                          |  |  |  |  |
|------------------------------|--|------------------------------------------|--|--|--|--|
| Titleof each class           |  | Name of each exchange on whichregistered |
| Common Stock, $0.01 parvalue |  | New York StockExchange                   |
|                              |

Securities registeredpursuant to Section 12(g) of the Act:**None**

Indicateby check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.    Yes    No 

Indicate by check mark if disclosureof delinquent filers pursuant to Item 405 of Regulation S-K(§  229.405 of this chapter) is not contained herein, andwill not 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 is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act.)Yes     No 

The aggregate market value ofvoting and non-voting common stock held by non-affiliates of theregistrant as of March 3, 2005 was $1,021,020,475.

As of March3, 2005, the number of shares of the registrant's common stock,par value $0.01 per share, outstanding was 141,663,369 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions ofthe registrant's proxy statement (the "ProxyStatement") for the annual meeting of shareholders to beheld May 5, 2005 are incorporated by reference into PartIII.

|  |
|--|
|  |
|  |
|  |
|  |

----

FORM 10-KNALCOHOLDING COMPANYTABLE OF CONTENTS

|            |  |                                                                                                            |  |        |     |        |
|------------|--|------------------------------------------------------------------------------------------------------------|--|--------|-----|--------|
|       |  | **PartI**                                                                                                  |
| Item1.     |  | Business                                                                                                   |  |   | 2   |   |
| Item 2.    |  | Properties                                                                                                 |  |   | 17  |   |
| Item3.     |  | Legal Proceedings                                                                                          |  |   | 17  |   |
| Item4.     |  | Submission of Matters to a Vote of SecurityHolders                                                         |  |   | 17  |   |
|       |  | **PartII**                                                                                                 |
| Item 5.    |  | Market for Registrant'sCommon Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities |  |   | 19  |   |
| Item6.     |  | Selected Financial Data                                                                                    |  |   | 19  |   |
| Item7.     |  | Management's Discussion and Analysis of FinancialCondition and Results of Operations                       |  |   | 26  |   |
| Item7A.    |  | Quantitative and Qualitative Disclosures About MarketRisk                                                  |  |   | 55  |   |
| Item 8.    |  | FinancialStatements and Supplementary Data                                                                 |  |   | 56  |   |
| Item9.     |  | Changes in and Disagreements with Accountants on Accountingand Financial Disclosure                        |  |   | 101 |   |
| Item9A.    |  | Controls and Procedures                                                                                    |  |   | 101 |   |
| Item 9B.   |  | Other Information                                                                                          |  |   | 101 |   |
|       |  | **PartIII**                                                                                                |
| Item 10.   |  | Directors and ExecutiveOfficers of the Registrant                                                          |  |   | 102 |   |
| Item11.    |  | Executive Compensation                                                                                     |  |   | 102 |   |
| Item12.    |  | Security Ownership of Certain Beneficial Owners andManagement                                              |  |   | 102 |   |
| Item 13.   |  | CertainRelationships and Related Transactions                                                              |  |   | 102 |   |
| Item 14.   |  | Principal Accountant Fees andServices                                                                      |  |   | 102 |   |
|       |  | **PartIV**                                                                                                 |
| Item 15.   |  | Exhibits, FinancialStatement Schedules                                                                     |  |   | 103 |   |
| Signatures |  |                                                                                             |  |   | 114 |   |
|            |

1

----

PART I

ITEM 1.    BUSINESS

Overview

On August 31, 2003,Nalco Holdings LLC, our subsidiary and a company formed by TheBlackstone Group, Apollo Management, L.P. and GS Capital Partners (the"Sponsors"), entered into a stock purchaseagreement pursuant to which it agreed to purchase all of theoutstanding shares of capital stock of Ondeo Nalco Company (which isnow known as Nalco Company) and the Nalco International SASSubsidiaries, which had been operated as a single business unit, fromsubsidiaries of Suez S.A. (Suez or Seller). The aggregate purchaseprice was $4,105.4 million in cash, after giving effect to direct costsof the Acquisition, closing date working capital and indebtednesspurchase price adjustments, a post-closing working capital andindebtedness purchase price adjustment, and certain other post-closingadjustments. The Transactions closed on November 4, 2003. In thisreport, we refer to this acquisition as the"Acquisition," and the term"Transactions" means, collectively, theAcquisition and the related financings to fund the Acquisition.

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 TRASARTM,ACTRENE®, ADOMITE®, AQUAMAXTM,BIO-MANAGE®, BRIGHT WATERTM,COKE-LESS®, EN/ACTTM,ENERCEPT®, ENERSPERSE®, NalcoACT®, NALMET®, NEOSTARSM,NexGuard®, OdorTech®,PORTA-FEED®, PROSPECTM Treat Service,SCORPION® II, SMART SolutionsTM,STA•BR•EX®, SULFA-CHECK®,SurFloSM Certified, THERMOGAINSM,TRASAR®, Tri-ACT®,ULTIMER®, UltraTreat®,ULTRION®, VALUELINE®,VANTAGE®, and certain other products and services namedin this document are our registered trademarks and service marks.

We are the leading global provider of integrated water treatment andprocess improvement services, chemicals and equipment programs forindustrial and institutional applications. We are organized into threeprimary segments which correspond to the end markets we serve:Industrial and Institutional Services, Energy Services and PaperServices. Our products and services are typically used in watertreatment applications to prevent corrosion, contamination and thebuildup of harmful deposits, or in production processes to enhanceprocess efficiency and improve our customers' end products.

Through our sales, research and marketing team of more than 6,500technically trained professionals, we serve more than 60,000 customerlocations. We focus on providing our customers with technologicallyadvanced engineered solutions and services. These technologicallyadvanced engineered solutions and services enable our customers toimprove their business by increasing production yields, loweringmanufacturing costs, extending asset lives and maintainingenvironmental standards. The cost of our technologically advancedengineering solutions and services represents a small share of ourcustomers' overall production expense.

We derive ourstrength and stability from the quality of the products and services weprovide and the diversity of our revenues. We serve a broad range ofend markets, including aerospace, paper, chemical, pharmaceutical,petroleum, steel, power, food and beverage, medium and lightmanufacturing, metalworking and institutions such as hospitals,universities and hotels. We believe we offer the broadest productportfolio in our industry, including more than 5,000 products and 3,100unique formulations. We have also established a global presence, withapproximately 10,500 employees operating in 130 countries, supported bya comprehensive network of manufacturing facilities, sales offices andresearch centers. This global presence provides a competitive advantageby enabling us to offer a consistently high level of service to ourlocal, regional and multinational customers.

2

----

Our Competitive Strengths

Ourcompany has benefited from the following competitive strengths:

Leading Market Positions.    We are the #1 provider ofwater treatment services to industrial and institutional end markets.We are also a leading provider of integrated water treatment andprocess improvement services, maintaining the #1 position in thepetroleum and petrochemical markets and a close #3 position in the pulpand paper market. We believe that our leading positions across ourprimary markets provide a competitive advantage in retaining existingbusiness and competing for new business. Although our market positionin pulp and paper was lowered by the 2004 acquisition of Raisio byCiba, we believe the proximity of sales between the three marketleaders allows us all to operate as market leaders.

DiverseCustomers and Industries Served.    We provide products andservices to more than 60,000 customer locations across a broad range ofindustries and institutions. In 2004, no single customer accounted formore than 3% of our net sales. Our business is also diversifiedgeographically. In 2004, 48% of total sales were in NorthAmerica, 33% in Europe, Africa and the Middle East, 7% inLatin America and 12% 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 2004, we derived approximately $1,658million, or 55% of our net sales, from our non-U.S. subsidiaries(excluding sales to our U.S. operations).

World Class SalesTeam.    Through the expertise of our more than 5,500 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 approximately2,100-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 $818.5 million,$799.1 million, and $763.4 million for the years 2004, 2003, and 2002,respectively. In 2003, the total expense was comprised of $668.7million for the period from January 1, 2003 through November 3, 2003and $130.4 million for the period from November 4, 2003 throughDecember 31, 2003. Of those amounts, approximately 90%represented the average cost of our sales and service force duringthese time periods.

Integrated Technology, Sales andService.    We combine on-site service, innovative technologyand engineering excellence to create value for our customers. Ourtechnical sales professionals identify problems and opportunities atthe customer's plant and our research teams then work to developeffective solutions to these needs, often working jointly with ourcustomers. Many of our customers specify our formulations into theirprocesses and products. This approach has led to over 3,100 uniqueformulations, the development of more than 2,000 active patentsworldwide and a high degree of customer loyalty.

Stable andSignificant Cash Flow Generation.    We have produced consistentcash flows and maintained high margins over a sustained period of time.We attribute this to (1) the diversity of our revenues, (2) the servicenature of our business, (3) the high value we offer our customers, (4)the strength of our customer relationships, (5) our limited dependencyon any single raw material and (6) our low capital expendituresrelative to 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. In connection with theAcquisition, Dr. William H. Joyce, former Chairman 

3

----

and Chief Executive Officer of HerculesIncorporated, became our Chairman and Chief Executive Officer, andBradley J. Bell, former Chief Financial Officer of Rohm and HaasCompany, became our Chief Financial Officer. Dr. Joyce and Mr. Bellbring additional leadership and industry experience to our managementteam. Our seven Executive Officers have an average of over 11 years ofservice with our Company and over 27 years of industry experience.Moreover, our Executive Officers are supported by business managers whohave extensive experience within their respective operating divisions.Our top Executive Officers and other members of management haveinvested through our direct parent company, Nalco LLC, an aggregate of$19.3 million in our Company.

Business Strategy

We havehistorically experienced sales growth in excess of industrialproduction growth in our core markets. We are pursuing a strategydesigned to continue this trend by expanding our market positions andincreasing our revenues, as well as enhancing our cash flow. The keyelements of this strategy are:

Build Upon Our CustomerBase.    We seek to strengthen our position with our existingcustomer base as well as pursue new customers by continuing to serve asthe leading global provider of fully integrated water treatmentservices and industrial process solutions. An essential element of ourstrategy is to continue integrating our sales and technical staff intoour customers' daily operations and process planning.Historically, this strategy has allowed us to expand our service andproduct offerings with existing customers and has led to thedevelopment of new technologies. We continually seek to add value forour customers by identifying those services, products and equipmentthat will enhance their profitability through reduced costs, improvedyields and decreased capital spending.

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 have focused sales efforts on the high-growth China market, whichhas resulted in over 25% annual growth in sales in that marketsince 1999. We are also forming new ventures in West Africa and EasternEurope, which will permit us to pursue energy services opportunities atnew production facilities planned in these areas. We also intend tocontinue to pursue high-growth segments in a variety of areas closelyrelated to our core businesses and competencies. For example, we aretargeting hygiene services opportunities in the healthcare, hotel,education and commercial real estate industries by developingdiagnostic and on-site service capabilities to reduce the health riskscustomers face due to pathogens in water and air.

MaintainTechnological Leadership.    We strive to develop newtechnologies and products through a focused commitment to technology,research and development. The evolution of our existing products andthe development of new technologies have historically allowed us tosustain and enhance the profitability of our business and furtherpenetrate our target markets, including our existing customer base. Forexample, over the past 13 years we have developed several generationsof our TRASAR automated feed and control technology for cooling watertreatment programs. We launched the latest generation of thistechnology, 3D TRASAR, in 2004. In the oil field market, an effort todevelop new technology in corrosion inhibitors for a large customer inAlaska has led to over $20 million in incremental sales as thetechnology has spread to other regions and customers. Our engineerswill continue to work closely with our customers in an effort toidentify new product opportunities and jointly develop newtechnologies.

Follow the Global Expansion of MultinationalCustomers.    As one of a small number of companies that canprovide turnkey water management solutions on a global basis, we seekto leverage our relationships with multinational companies by servicingthem globally. For example, our Paper Services division gained over $10million in new business in Europe when one of our large customersexpanded its geographic reach beyond North America. 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 Reduce Costs.    Wehave initiated a comprehensive cost reduction plan that yielded savingsin 2004 of $88 million compared to 2003, with a year-end run rate tothose savings of $110 

4

----

million. In 2005, we intend to generateadditional savings versus 2004 of $75 million, which include therun-rate benefit of 2004 projects. We expect our cost reduction plan toachieve incremental efficiencies through work process redesign andother targeted cost improvements, which address inefficiencies in ouradministrative and overhead functions, as well as other support andservice functions around the world.

Maximize Cash Flow andReduce Debt.    We believe that there are significantopportunities to increase our cash flow. We believe that while thecapital expenditures required to maintain our business are low relativeto our sales, we can maintain capital expenditures at a $100 millionannual level through continued management focus. With rapid volumegrowth at the end of 2004, we believe that our existing productioncapacity requires modest incremental investment to keep up with currentgrowth expectations. However, we have concluded projects to improve ourinformation systems in North America and Europe, which willsignificantly reduce information technology capital demands in 2005.While management has historically focused on particular components ofworking capital, we believe there is an opportunity to reduce ourworking capital needs. We intend to use our free cash flow to reduceindebtedness. During the twelve months ended December 31, 2004, we made$28.0 million of scheduled repayments and $212.0 million of optionalprepayments on our indebtedness from operating cash flows.

Focus on Supply Chain Management.    We have a dedicatedglobal supply chain team that focuses on managing manufacturing,procurement, logistics, and customer service activities. We believethat by coordinating these functions, we achieve better inventorymanagement and lower overall Company costs for its purchases. Webelieve that the introduction of a common SAP platform for our NorthAmerican and European operations will enable better production,inventory and delivery coordination within each region and across theseregions. We believe that we will be able to make additionalimprovements in our inventory management and lower procurementcosts.

OurDivisions

|                       |  |                                                                                                              |  |                                                                         |  |                                                                             |  |  |  |  |  |  |  |  |
|-----------------------|--|--------------------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------------------|--|-----------------------------------------------------------------------------|--|--|--|--|--|--|--|--|
|                  |  | IndustrialandInstitutional Services                                                                          |  | Energy Services                                                         |  | PaperServices                                                               |
| MarketPositions       |  | $5.7billion global market(1)(2)#1 MarketPosition                                                             |  | $3.1billion global market(1)#1 MarketPosition                           |  | $7.7billion global market(1)#3 MarketPosition                               |
| MarketShare           |  | 19%                                                                                                          |  | 26%                                                                     |  | 9%                                                                          |
| 2004NetSales(3)       |  | $1,402 million                                                                                               |  | $805million                                                             |  | $663million                                                                 |
| RepresentativeMarkets |  | Foodand BeverageBuildings, Hotels, HospitalsChemicals,PharmaceuticalsManufacturing, Metals, Utilities,Mining |  | ExplorationFieldDevelopmentProductionRefiningPetrochemicalManufacturing |  | FinePaper Uncoated Free SheetCoated Free SheetNewsprintTissueContainerboard |
|                       |

|     |                                                                                          |
|-----|------------------------------------------------------------------------------------------|
| (1) | Approximatemarket size based on internal estimates and industry publications andsurveys. |

|     |                                                                                                                                                                   |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents the watertreatment and services markets, which accounted for approximately76% of our Industrial and Institutional Servicesdivision's net sales in2003. |

|     |                                                                                                                                                                      |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Divisional net salesexclude approximately $163 million of sales allocated to our Othersegment, including our sales in India, Japan, and an IntegratedChannels Group. |

Industrial and Institutional Services

Our Industrial and Institutional Services division provides productsand services that are principally utilized in water treatmentapplications such as raw water treatment, wastewater treatment, coolingprograms and boiler treatment programs to control corrosion, the buildup of scale and microbial fouling. Variations of these applications canbe used from small boilers at a commercial 

5

----

building up to large industrial boiler andcooling water systems such as those found in steel mills and powerplants. Customers use our water treatment programs to extend the usefullife of their assets, minimize downtime of their facilities andconserve water and energy. We serve companies across a broad spectrumof industries, including aerospace, chemical, pharmaceutical, steel,power, food and beverage, medium and light manufacturing, metalworkingand institutions such as hospitals, universities and hotels. Six of ourten largest Industrial and Institutional Services customers in 2004have been with us for more than ten years. Our Industrial andInstitutional Services segment generated 2004 net sales of $1,402million, representing 46% of our net sales.

Water Treatment Applications

Our watertreatment capabilities are shared across our three core divisions. Inour Industrial and Institutional Services division, water treatmentprograms accounted for 76% of our net sales in 2004. These waterapplications also accounted for 11% of our Energy Services netsales and 15% of our Paper Services net sales in 2004. Thefollowing descriptions include water treatment applications in theIndustrial and Institutional Services division, but these boiler water,cooling water, raw water and wastewater applications are also used inthe other divisions.

Boiler Water Applications.    Wehave specialized in boiler water applications for 75 years. Corrosion,scale buildup and microbial fouling are the most common problemsaddressed by our boiler water programs. We have helped our customersovercome various boiler challenges by providing integrated chemicalsolutions, process optimizations and mechanical componentmodifications. Our TRASAR technology is recognized as an innovativewater treatment program that prevents operational problems. TRASARtechnology continues to evolve and today is used in a number of boilerwater treatment programs such as NexGuard. NexGuard combines the mostadvanced boiler internal treatment chemistry with TRASAR technology andstate-of-the-art diagnostic, monitoring, feed and control equipment.Other applications of TRASAR include TRASAR Recovery Boiler LeakIndication, which is designed to determine when a loss of concentratedboiler water occurs in operating boilers. We also develop condensatetreatment programs designed to prevent corrosion, overheating andrupture of boilers. Two examples of these programs are Nalco ACT andTri-ACT. In 2000, we were awarded a Research and Development 100 Awardfor Nalco ACT, our revolutionary food-grade boiler treatment. Tri-ACT,a series of corrosion inhibitors, includes neutralizers, filmers andoxygen scavengers to provide uniform protection of the condensatesystem.

Cooling Water Applications.    Our coolingwater treatment programs are designed to control the main problemsassociated with cooling water systems such as corrosion, scale,microbial fouling and contamination, in open recirculating,once-through and closed systems. In 2004, we launched our 3D TRASARstress management system for cooling water, the world's firstautomated system for simultaneous control of corrosion, scale andmicrobial fouling and contamination. This multi-patented combination ofservices, equipment, chemistry and automation and control is aneffective tool used to identify efficiency improvements, solveproblems, and improve control in cooling water systems – buildingon the strengths of our TRASAR technology offering.

Ouraward-winning STA•BR•EX technology is the world's firststable, liquid-bromine-based anti-microbial designed to controlbiofilms caused by microorganisms in cooling tower, condenser and heatexchanger systems. Our High Stress Polymer Program, including an activepolymer analysis method, is specifically designed to improveperformance in "stressed" cooling watertreatment systems. Stress occurs when a system is forced outside itsnormal operating parameters and typically includes high temperatures,decreased flow and increased hardness levels. Excessive system stressescan consume polymers, an essential part of many cooling water treatmentprograms, thereby reducing system performance.

Raw WaterApplications.    Through our patented products and innovativechemical and service solutions, we assist industries in properlymanaging raw water. The NALMET program removes heavy metal dischargefrom the water supply and the BIO-MANAGE program is part of ourcomprehensive bio-control service that controls microbial growth inwater. Our boiler water pretreatment system 

6

----

prepares raw water before entering a boiler byreducing or removing unwanted impurities such as clay, silt and otherorganic materials from the water through lime-soda softening,filtration, ion exchange and reverse osmosis. Our water clarificationprograms are specifically designed to enhance the removal of biologicaland chemical substances that deplete oxygen in water, minimize sludgevolume, help with environmental compliance and improve the use ofexisting mechanical treatment methods with chemical precipitation.

Wastewater Applications.    Our wastewater products andprograms focus on improving overall plant economics, optimizingequipment efficiency, addressing compliance issues with bioengineeringsolutions and increasing operator capabilities and effectiveness. Inaddition to the versatile TRASAR technology, which also allowsreal-time monitoring and control of our wastewater applications, wemanufacture ULTRION, a liquid cationic coagulant that clarifies watermore efficiently than alum, with less caustic or lime. The benefits ofULTRION include a reduction in total solids in treated water, increasedefficiency of water clarification systems, reduction or elimination ofpH adjustment problems and decreased settled sludge volume. We alsooffer our dispersion technology, ULTIMER, for which we won a UnitedStates Presidential Green Chemistry Challenge Award and a Research andDevelopment 100 Award in 1999. ULTIMER polymers are water-based,yielding a more stable, soluble, user-friendly product.

Mining and Mineral Processing Applications

Weoffer a wide range of programs to help mining and mineral processingcustomers improve their operating efficiency and productivity in anenvironmentally responsible manner. Our EN/ACT (Environmental Analysisand Chemical Treatment) programs, which help maintain water, air andsoil quality, enable our customers to improve their operations whilemeeting strict environmental regulations. We also provide dust control,scale and corrosion control, liquid and solid separation, filtrationaids, agglomeration aids, flotation reagents, metals removal, automatedsystems and an array of products and services for synthetic fuelproducers and consumers. The industries we serve include aggregates,alumina and bauxite, coal, copper, kaolin, phosphate, precious metalsand synthetic fuels.

Colloidal TechnologiesApplications

We invented the original commercial process tomake stable concentrated silica solutions and we were granted theoriginal silica patent in 1941. Today, we operate one of the singlelargest colloidal silica facilities in the world and our broad range ofcolloidal silica products is used in applications in 39 countries. Wemanufacture colloidal silica, specialty silica solutions andcomplementary process chemicals used in precision investment casting ofmetal parts, the polishing of silicon wafers, memory disks and otherelectronic substrates, vacuum formed shapes and high temperaturerefractories, wine and juice clarification and specialty coatings. Weoffer a wide range of products and programs for the investment castingindustry, 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.

FinishingTechnologies Applications

We provide manufacturing companiesworldwide with customized programs and services that focus onmetalworking, paint finishing and related post-treatment processes. Ourfabrication product line includes metalworking fluids, drawingcompounds, stamping lubricants and rust preventatives and a line ofsynthetic, semi-synthetic and soluble oil coolants. Pre-treatmentproducts include cleaners, conversion coatings, final seals and plasticpretreatments. Post-treatment programs include paint strippers,specialty coatings as well as products to enhance wastewaterclarification and paint de-tackification. The automotive, fastener andother durable goods manufacturers are key industry segments for thesetechnologies.

Membrane TechnologiesApplications

Membrane systems have been widely adopted inindustrialized and developing countries as an efficient andcost-effective technology for the purification of municipal andindustrial grade water and 

7

----

wastewater. Our products are available for seawater systems, brackish water systems and all types of recycle andsmall systems. We provide anti-scalants with RO TRASAR monitoring andcontrol technology that are tailored to the requirements of most waterqualities, as well as solutions that protect against high levels ofiron and silica in water. To combat microbial fouling – the mostcommon and difficult problems to treat in a membrane system – ourproduct range includes non-oxidizing biocides that can handle a widespectrum of microorganisms. We have recently introduced innovativepolymeric solutions to enhance performance of micro-filtration andultra-filtration membrane systems for water and wastewatertreatment.

Odor Control Applications

Weoffer programs to combat odor centering around three approaches: odorneutralization, precipitation and biological hydrogen sulfideprevention. Our odor neutralization technology focuses on ODORtech, oneof the most versatile odor solutions we offer. ODORtech products areapplied by an atomized mist at the point of release of the airborneodor and effectively neutralize common odors, such as ammonia, amines,mercaptans, hydrogen sulfide and sulfur dioxide. Common applicationsinclude roof vents, truck wash staging, landfills, garbage areas, HVACequipment, automotive interiors and storage areas. Our precipitationproducts are specially designed for hydrogen sulfide for aqueousapplications and may also serve as coagulants or clarification aides.These products are commonly used in sludge tanks, floor drains,clarifiers, lift stations and equalization tanks. Our bioengineeringproducts offer a wide range of special blends of bacteria and chemicalsthat prevent the formation of hydrogen sulfide or degrading sulfurcompounds. The treatments, which produce no sludge, are non-hazardousand are effective for long duration control, are commonly used tocontrol odor in digesters, gas scrubbers, lift stations, floor drains,aeration basins and clarifiers.

Energy Services

OurEnergy Services division provides on-site, technology driven solutionsto the global natural gas, petroleum and petrochemical industries. Inaddition to recovery, production and process enhancements, we deliver afull range of water treatment offerings to refineries and petrochemicalplants. Our upstream process applications improve oil and gas recoveryand production, 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 2004 have beenwith us for more than twenty years. Our Energy Services divisiongenerated 2004 net sales of $805 million, representing 27% ofour net sales. We continue to emphasize safety and environmentalleadership in our product development and implementation efforts.

Our Energy Services division is divided into three groups that focuson specific industry segments: Oilfield Chemicals, our Downstream groupand Adomite well service chemicals.

OilfieldApplications

Our oilfield business focuses on flow assuranceand infrastructure protection, offering solutions to production flowchallenges such as hydrate formation, paraffin deposition andemulsified streams. 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.

8

----

Our proprietary ENERCEPT family ofhigh-shear corrosion inhibitors protects high-shear, multi-phaseoilfield flow lines, gathering systems and transmission pipelines. Theprograms were originally designed to combat corrosion in thechallenging Alaskan North Slope conditions, and have since beenconfirmed under a variety of conditions around the world. Moretraditional batch treatments are still a preferred method of inhibitionby many customers. ENERSPERSE truck-treating inhibitors are ideal forrod-pumped land wells and other batch treatment applications.

Downstream Refining Applications

We provideprocess applications specific to the petroleum refining and fuelsindustry, enabling our customers to profitably refine and upgradehydrocarbons. Our heavy oil upgrading programs minimize operation costsand mitigate fouling, corrosion, foaming and the effects of heavymetals when refining lower-quality crude oils.

The SCORPION IIprogram combats napthenic acid corrosion problems, allowing refiners totake advantage of discounted high acid crudes through combinedchemistry, novel monitoring and simulation technologies. Ourproprietary NEOSTAR crude oil database and our new patented chemistriesare coupled with over 20 years of experience in the treatment of hightemperature corrosion. Crude unit fouling can increase energy andmaintenance costs, while reducing crude output. The THERMOGAIN programincludes unique chemistries and patented crude stability tests toprevent crude unit fouling. The refining industry is also addressingclean fuels regulations that require drastic reduction in the level ofsulfur allowed in fuels. Our H2S Scavengers, such as theSULFA-CHECK system, helps our customers to meet regulatorystandards.

Hydro-processing to meet low-sulfur fuelspecifications can increase the corrosiveness of fuels. We offer anentire 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.

Downstream Chemical Processing Applications

We provide on-site technical service and innovative chemicalprocessing technologies at more than 250 chemical plants in 45countries worldwide. We guide chemical plants through obstacles thatarise during operation and help maximize return on investment throughproducts and services tailored to each customer's requirements,climate and logistics. We support olefins producers worldwide withproprietary treatment programs for ethylene and butadiene plantperformance maximization.

The ACTRENE fouling control programrepresents a significant advancement in the olefins chemical processindustry, dramatically increasing operations run-lengths. Thistechnology reliably mitigates and controls fouling in fractionaldistillation units. COKELESS coking control technology protects radiantand transfer line exchanger sections of ethylene plant furnaces withoutadverse effects to metallurgy or downstream processes. AQUAMAXcorrosion control provides cost-effective, sodium-free corrosioncontrol in dilution steam systems. We also provide a comprehensive lineof antifoams, antifoulants and corrosion inhibitors for butadieneoperations.

Adomite Well ServiceApplications

We support the Drilling/Exploration serviceindustry by designing and supplying chemicals for drilling activities.Our Adomite business supplies chemicals for the cementing, completion,drilling, fracturing and acidizing phases of oil and gas exploration,as well as conducting independent research and jointly developingproducts with major well service companies.

WaterApplications

We provide total water management solutionsspecific to refining and chemical processing needs. See"—Industrial and Institutional Services—WaterTreatment Applications."

9

----

Paper Services

Our Paper Servicesdivision offers a comprehensive portfolio of programs that are used inall principal steps of the papermaking process and across all grades ofpaper, including printing and writing, board and packaging, tissue andtowel, and mechanical papers. Our customers include the 20 largestpaper companies in the world, which collectively accounted forapproximately 41% of global production capacity in the paperindustry in 2003. Nine of our ten largest Paper Services customers in2004 have been with us for more than ten years. Our Paper Servicessegment generated 2004 net sales of $663 million, representing22% of our net sales.

Today's pulp and papermakerscontinuously strive to produce products with improved performance forless cost. Their customers demand that end product properties, such asbrightness, tissue softness, or paper strength, perform to increasinglychallenging specifications – in a very competitive environment.To help our customers excel, Nalco developed its SMART Solutionsprogram, a grade-based approach for improving customers' endproduct performance and optimizing operational efficiency.

Pulp Applications

The management of criticalresources such as fiber and water is common across all paper grades.Increased costs for wood, water and energy and greater use of recycledfiber are all creating challenges for our customers.

Our pulpprocess applications focus on opportunities to reduce ourcustomers' total operating costs, utilize a broad range ofrecycled fibers, improve the quality of the pulp delivered to the papermill and improve the stability of the pulp making process. Thesecustomer benefits are delivered through programs designed and tailoredto the individual customer's process and needs. We offer programsand services for every phase of the pulping and bleaching process,including foam control, scale control, pitch control, digester andchemical recovery additives for chemical pulping operations, mechanicalmills and de-inking mills. Our Total Fiber Management approach focuseson yield, quality and substitution of fiber types to deliver the bestcombination of cost and performance.

PaperApplications

As we approach the papermaking process, we takeinto account the varying needs of producers of different paper grades.Manufacturers of board and packaging, mechanical papers, printing andwriting, and tissue and towel have very different needs based on thedemands of their customers. For example, maintaining strength in boardand packaging is achieved very differently than the softness demandedby consumers of tissue and towel products.

In addition,different paper segments have varying needs based on market trends. Apapermaker in a segment experiencing strong growth may need to maximizeproduction rates, optimize finished sheet quality and minimize papermachine down time. For a segment facing slower growth, we may insteadbe asked to focus on improving operating efficiencies and reducing thetotal cost of a customer's operations.

Our paper processapplications focus on opportunities to reduce our customers'total operating costs, increase machine productivity, improve sheetproperties, enhance product quality, and extend machine life. Thesecustomer benefits are achieved through a variety of programs, includingmicroorganism control, increased retention drainage and formation, feltcleaning, increased paper strength, prevention of surface pitch andstickies deposition, and chemical fiber de-inking. Advanced sensing,monitoring and automation technologies are incorporated into theapplications to optimize program effectiveness and minimize risk.

Specific to each grade segment, our programs deliver value in theform of improved brightness, lower basis weight, improved bulk andsoftness, improved printability and many other key business driverswhich our customers determine are critical to the success of theirbusiness.

At Nalco, we integrate the entire papermaking processthrough mechanical, operational and chemical means to concentratespecifically on what our customers need to succeed in their marketsegments.

10

----

Water Applications

Water is one of the primary components of the papermaking system.For each ton of paper produced, thousands of gallons of water are used.Careful management of the water throughout the process not onlysignificantly impacts the water, fiber and energy costs of anoperation, but also significantly influences the final properties ofthe sheet. Our integrated resource approach combines our extensivepapermaking and water expertise with advanced computer modeling tooptimize the water balance, flow and chemistry across the entirepapermaking system including the pulp mill, paper mill and utilityoperations. See "—Industrial and InstitutionalServices—Water Treatment Applications."

Our Services

Our business is focused on providingintegrated solutions to complex issues for our customers. Differencesin customer equipment and processes drive substantial variation in theindividual programs we create. In addition, fluctuations within anoperation, such as changes in water quality or petroleumcharacteristics, require us to continually adapt our solutions to meetour customers' needs. These solutions are often adapted on-siteby our technical sales professionals. Our sales teams are supported byanalytical services, consulting services, technical field services andenvironmental hygiene services.

AnalyticalServices

Our highly trained analytical researchers combinein-field work and laboratory analysis to develop recommendations. OurISO 9002-certified laboratories use state-of-the-art equipment,including mass and nuclear magnetic resonance spectrometers andmultiple testing stations, to conduct sample testing and processfailure analysis for water treatment, paper process and energy processapplications. We have provided analytical services for more than 50years and most of our more than 100 analytical researchers have anaverage of more than ten years of experience with our Company. Inaddition, approximately 45% of our chemists have advanceddegrees.

Consulting Services

Our on-siteexperts, industry technical consultants and researchers developappropriate solutions for a broad range of customer requirements, suchas single process optimization, system-wide program implementation,troubleshooting or increasing efficiencies. We provide numerous plant,process and application audits and surveys in water, energy or paperprocessing. We offer consulting for all water use and discharge areasand make recommendations for improvements, cost reductions orefficiency improvements through our Advanced Recycle Technologyprograms. Our technically trained sales professionals can also rely onguidance from a global knowledge management system that allows accessto our specialized experts anywhere in the world. We take amulti-disciplinary approach to developing solutions by evaluating themechanical, operational and chemical aspects of each process. Bymonitoring interactions between these three system components, ourfield engineers are able to anticipate and solve problems and preventdamage to customer processes. We utilize advanced database and computeranalytical programs to support these efforts, including our Vantagedatabase, which captures analytical data, prepares diagnostic imagesand reports on a real-time basis.

Technical andField Services

We provide expert technical assistance forchemical feed and control equipment installation, start-up,calibration, preventative maintenance and repair throughout the world.In addition to the components we maintain regionally, we provideon-site services, including on-site testing, on-site systemtroubleshooting, inventory management, chemical usage determination,chemical dosage audits and cleaning services.

Environmental Hygiene Services

We offer acomplete line of specialized services designed to assess, control andreduce risk from water-borne pathogens such as Legionella. Trainedhygiene service specialists perform risk assessments 

11

----

to identify areas within the domestic coldand hot 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.

Customer Training

In order to educate ourcustomers and promote more efficient and effective systems andprocesses in their operations, we have developed various trainingprograms and interactive online training that teach operators andengineers how to work more effectively and efficiently. We conductwater treatment seminars to formally train our customers how to use ourequipment and chemicals and how to implement best practices. Forexample, we provide water treatment workshops in a classroom settingwhere attendees discuss technical and industry-related issues amongtheir peers and are able to review tailored answers to theiroperation-specific questions. Facilitators guide the attendees throughvarious topics such as trending, energy management, cost implications,and best practices. These peer group discussions help the attendeestroubleshoot and create support network groups. The latest addition toour training curriculum is our interactive, web-based program, NalcoUniversity, which provides an economical and convenient alternative toour seminars.

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" chemical handling.Our PORTA-FEED container units are returnable shipping containers setup at a customer's plant to feed our chemicals into thecustomer's system. When the chemical level is low, a refill unitis delivered to the plant and we take the empty PORTA-FEED unit backfor cleaning and re-use. Since the introduction of the PORTA-FEEDprogram in 1985, we have eliminated the disposal of over three millionchemical drums.

We also understand that it is crucial to allbusinesses to have the power to monitor and control their chemicaltreatment programs on an on-going basis in an efficient and easy-to-usemanner. Our web-based monitoring service is a powerful multi-functionalmicroprocessor with an embedded web server available in two series. OurBoiler Controller is designed to provide reliable automation forcorrosion and scaling control programs in boilers. Our Cooling TowerController provides reliable automation of corrosion, scaling andmicrobiological growth control programs in cooling water applications.Both series include a revolutionary digital communications packagewhich allows the customer to change set points, manually activate ordeactivate pumps and valves, upgrade software, and receive reports oralarms, from any personal computer that has Internet access.

Wehave developed equipment that works with our innovative TRASAR and 3DTRASAR technology to provide real-time, on-line monitoring of actualchemical levels in a system. Through the TRASAR system, we chemically"bar-code" treatment molecules with afluorescent tracer that reacts to specific light wavelengths. Once theproduct is fed into a system, the tracer is optically excited anddetected. Our equipment monitors the level of chemicals andcontinuously makes automatic adjustments as necessary through chemicalinjection systems linked to the TRASAR or 3D TRASAR controller. Bypreventing overfeeding and underfeeding, and eliminating theunnecessary application 

12

----

of chemicals, this real-time, on-linemonitoring capability saves water and energy as well as improvesefficiency, reliability and productivity.

We offer integratedUltraTreat systems that include industrial reverse osmosis systems,water softening equipment, multi-media and carbon filtration and highefficiency filters.

Joint Ventures

During our history,we have entered into general partnerships or joint ventures for limitedscope business opportunities. For example, we conducted our energyservices business through a joint venture with Exxon Chemical Company,a division of ExxonMobil Corporation, until 2001 when we redeemedExxon's interest in the joint venture and it became a whollyowned subsidiary of our Company. We recently re-established a jointventure relationship with USFilter, Treated Water Outsourcing, topursue process water treatment outsourcing projects and to supplystandard water treatment equipment packages with our chemicals andservice offerings. In June 2004, we entered into a joint venture withKatayama Chemical, Inc., or KCI, for the marketing and sale of ourwater treatment and process chemicals in Japan. KCI is a leadingparticipant in these markets in Japan and the venture will permit thecombination of our broad product portfolio with KCI's strongmarket presence. This joint venture will not include manufacturing,research and administrative resources, which will continue to beprovided to the joint venture by the parents. In December 2004, weannounced an industry-leading alliance with JohnsonDiversey that willhelp customers in the food, beverage, pharmaceutical and institutionalindustries reduce their total operating costs, improve operatingefficiency and reduce environmental impacts. This total-site programcalled Responsible Resource Solutions takes a comprehensive approach toa facility's operations, and delivers solutions to better managekey resources such as water, energy and waste. Additionally, wemaintain longstanding partnerships in Saudi Arabia, relating tobase-water treatment, and in Spain, relating to oil-free emulsionpolymers.

We will continue to evaluate the potential forpartnerships and joint ventures that can assist us in increasing ourgeographic, technological and product reach. For example, we continueto evaluate partnerships that will expand our offerings to our middlemarket customers and that will permit us a more significant localidentity in certain Asian countries.

Competition

Watermanagement and process improvement service companies compete on thebasis of their demonstrated value, technical expertise, chemicalformulations, consulting services, detection equipment, monitoringservices, and dosing and metering equipment. In general, the markets inwhich our Company competes are led by a few large companies, with therest of the market served by smaller entities focusing on more limitedgeographic regions.

The market for water treatment chemicals ishighly fragmented, but is led by our Company and GE Water Technologies.The remainder of the market is comprised of mainly regional and localplayers. Regional service providers tend to be mid-sized and focuseither on a limited geographic region or a smaller subset of productsand services and include companies such as Ashland Inc.'s DrewIndustrial Division, ChemTreat, Inc. and Kurita Water Industries Ltd.Local players are smaller and tend to focus on servicing localbusinesses typically requiring less sophisticated applications.

The largest participants in the energy services sector are ourCompany, Baker Petrolite Corporation, GE Water Technologies andChampion Technologies, Inc. The remainder of the market consists ofsmaller, regional niche companies focused on limited geographicareas.

The market for specialty and water treatment chemicalsused in the pulp and paper industry is fragmented. The top suppliers ofwater treatment services to the pulp and paper industry are ourCompany, Hercules Incorporated, Kemira Oyj, Ciba Specialty ChemicalHolding Inc., BASF AG and Akzo Nobel N.V.'s EKA Chemicals AB. Theremainder of the market is comprised of smaller, regionalparticipants.

13

----

Research and Development

Webenefit from a high quality research and development effort consistingof more than 400 personnel worldwide, more than 135 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 $56.5 million for the year ended December 31,2004, with work process improvements and management layer reductionsmore than offsetting incremental spending on new technologydevelopment. Spending on research and development was $9.7 million,$50.3 million, and $57.9 million for the period from November 4, 2003through December 31, 2003, the period from January 1, 2003 throughNovember 3, 2003, and the year ended December 31, 2002, respectively.In recent years, we have received numerous research and developmentawards, including awards for ULTIMER 00LT053, ULTIMER, Nalco ACT,NALCO98DF063, TRASAR3000, our high stress polymers andSTA•BR•EX•.

As part of the allocation of thepurchase price for the Acquisition, we recorded a one-time charge of$122.3 million during the year ended December 31, 2004 for purchasedin-process research and development, or IPR&D. The value ofpurchased IPR&D was comprised of five ongoing development projectsat the date of the Acquisition that were identified as having economicvalue, but that had not yet reached technological feasibility and hadno alternative future use. Most of this charge was attributable to twoprojects, 3D TRASAR and Bright Water. 3D TRASAR is a technology that isintended to automate the cooling water treatment"triangle" (scale, corrosion, and microbialfouling) by providing an integrated system of patented chemicals andequipment to inhibit these conditions. Bright Water entails thedevelopment of a polymer that will enhance the yield of oil from 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 2005. Commercialization of twoof the other three projects included in the charge for purchasedIPR&D occurred during 2004, with the third project under continuingdevelopment. We estimate that completion costs and capital requirementsfor all five projects will not be material.

We believe thatcontinued 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

We own orhave licenses to use a large number of patents relating to a largenumber 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 our business.

RawMaterials

We do not depend on any one supplier for a materialamount of our raw materials, but certain important raw materials areobtained from a sole source or a few major suppliers. Majorrequirements for key raw materials are typically purchased pursuant tomulti-year contracts. On a consolidated basis, we purchased rawmaterials totaling approximately $745 million in 2004**,**with nosingle raw material accounting for more than 3.5% of our totalpurchases.

Working Capital

To better serve and meet theneeds of our customers, approximately 15% of our inventories aremaintained at customer sites as consignment inventories. Although theconsignment inventory model 

14

----

is in place throughout the world, its use ismost prevalent 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 properly stated.

Employees

As of December 31, 2004, we had approximately10,500 employees, of whom approximately 4,375 were employed in NorthAmerica, approximately 3,100 were employed in Europe, the Middle Eastand Africa, approximately 1,450 were employed in Latin America andapproximately 1,625 were employed in the Pacific region. We considerrelations with our employees to be good.

EnvironmentalMatters

Governmental requirements relating to the discharge ofmaterials into the environment, environmental remediation or otherwiserelating to the protection of the environment, have had, and willcontinue to have, an effect on us and our operations. Under someenvironmental 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 not believethat compliance with environmental protection laws and regulations willhave a material effect upon our capital expenditures, results ofoperations or competitive position although there can be no assuranceto that effect. Our capital expenditures for environmental controlfacilities during 2005 are not expected to be material to us. Webelieve 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 as adefendant 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 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 the future.

We arealso subject to a variety of regulations relating to the production andhandling of our products; and the conduct and condition of ourproduction facilities. We do not believe that these regulatoryrequirements will have a material effect on capital expenditures,results of operations or competitive position.

15

----

ExecutiveOfficers

|                    |  |                                                                                                               |  |        |    |        |  |  |  |  |
|--------------------|--|---------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|
| Name               |  | Title                                                                                                         |  | Age    |
| Dr.William H.Joyce |  | Director,Chairman of the Board and Chief Executive Officer                                                    |  |   | 69 |   |
| William J. Roe     |  | Executive VicePresident, Chief Operating Officer and President, Industrial andInstitutional Services division |  |   | 51 |   |
| BradleyJ. Bell     |  | Executive Vice President and Chief FinancialOfficer                                                           |  |   | 52 |   |
| Daniel M. Harker   |  | SeniorVice President, Supply Chain                                                                            |  |   | 52 |   |
| Mark L.Bosanko     |  | Group Vice President and President, Energy Servicesdivision                                                   |  |   | 49 |   |
| Mark W. Irwin      |  | Group VicePresident and President, Paper Servicesdivision                                                     |  |   | 41 |   |
| Louis L. Loosbrock |  | GroupVice President and President, Pacificdivision                                                            |  |   | 51 |   |
|               |  |
|                    |

**Dr.William H. Joyce**has been our Chairman and Chief Executive Officersince joining us in November 2003. Dr. Joyce was formerly the Chairmanand Chief Executive Officer of Hercules Incorporated, a position hetook in May 2001. Dr. Joyce had been Chairman, President and ChiefExecutive Officer of Union Carbide Corporation from 1996 through May2001. From 1995 to 1996, Dr. Joyce was President and Chief ExecutiveOfficer, and from 1993 to 1995 he was President of Union Carbide. Priorto that, he had been Chief Operating Officer of Union Carbide since1992.

**William J. Roe**is our Executive Vice President,Chief Operating Officer and President, Industrial and InstitutionalServices division. Mr. Roe has served as Chief Operating Officer since2001 and as Executive Vice President, Industrial and InstitutionalServices division, since November 2003. Prior to that, in 1999, Mr. Roewas elected Group Vice President and President of the Pacific andProcess divisions. In 1998, Mr. Roe served as Vice President andPresident of the Process division. He was named District Manager forthe Mining and Mineral Processing Chemicals Group in 1989, MarketingManager in 1991 and promoted to General Manager in 1994. Mr. Roe joinedour Company in 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**hasbeen our Executive Vice President and Chief Financial Officer sincejoining us in November 2003. From 1997 to 2003, Mr. Bell served asSenior Vice President and Chief Financial Officer of Rohm and HaasCompany. Prior to that, Mr. Bell served as Vice President and Treasurerof both the Whirlpool Corporation, from 1987 to 1997, and the BundyCorporation, from 1980 to 1987.

**Daniel M. Harker**is ourSenior Vice President, Supply Chain. Mr. Harker has served in thiscapacity since 2003. In 2001, Mr. Harker became Vice President, SupplyChain, after joining Nalco from Calgon in 2000 as Vice President,Manufacturing and Logistics. From 1998 to 2000, Mr. Harker served asVice President of Global Operations for Calgon. Prior to that, Mr.Harker was with Rhone Poulenc from 1993 to 1998, and Union Carbide from1975 to 1993.

**Mark L. Bosanko**is our Group Vice Presidentand President of our Energy Services division. Mr. Bosanko has servedin this capacity since 2001. Mr. Bosanko was named Senior VicePresident of Operations for the division's predecessorNalco/Exxon Energy Chemicals, L.P. joint venture in 1999. Prior tothat, Mr. Bosanko served as Vice President, Oil Field ChemicalsWorldwide. In 1995, Mr. Bosanko was named Vice President, Oil FieldChemicals, responsible for North America and West Africa. Mr. Bosankobecame General Manager, Additives Worldwide for Nalco/Exxon EnergyChemicals, L.P. after the joint venture was formed in 1994. Prior tothat, Mr. Bosanko served as District Manager and Sales Manager beforehe was named General Manager, Additives Group in 1993. From 1984 to1993, Mr. Bosanko served as Area Sales manager. Mr. Bosanko joined ourCompany in 1981 as a Visco District Representative.

**Mark W.Irwin**is our Group Vice President and President of our PaperServices division. Mr. Irwin joined our Paper Services division inJanuary 2003 as Strategic Business Unit Leader for Global 

16

----

Accounts, and three months later was namedGroup Vice President and President, Paper Services division. Mr. Irwinmost recently served as Global Business Leader of General ElectricSpecialty Materials' Silicones Group from 1997 to 2003. Prior tothat, Mr. Irwin was a National Product Manager, Silicones and Silanes,for Witco Australia – OSi Specialties from 1995 to 1997. Mr.Irwin served from 1987 to 1995 as Regional Sales Manager, IndustrialChemicals for ICI Australia.

**Louis L. Loosbrock**is ourGroup Vice President and President of our Pacific division. Mr.Loosbrock has 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 to April 2003.Mr. Loosbrock served as General Manager, Global Mining from 1998 to2002; Sales Manager from 1986 to 1989 and 1991 to 1998; and MarketingManager from 1989 to 1991. He began his career with our Company in 1977as a Sales Representative in the Mining Group and in 1981 was namedDistrict Manager.

Web Site

The Company's Web siteaddress is www.nalco.com. The Company makes available free of charge onor through its Web site its Code of Ethical Business Conduct, OfficerCode of Ethics, annual report on Form 10-K, quarterly reports on Form10-Q, current reports on Form 8-K, and all amendments to those reportsas soon 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, and nominatingand corporate governance committees of the Board of Directors.

ITEM 2.    PROPERTIES

Our principal administrativeoffices and research center are located in Naperville, Illinois. Thesefacilities are leased. We maintain administrative and researchfacilities in Sugar Land, Texas and Leiden, Netherlands, both of whichwe own, and in Singapore, which we lease. We position our manufacturinglocations and warehouses in a manner to permit ready access to ourcustomers. We operate 18 plants in North America, 6 plants in LatinAmerica, 12 plants in Europe and the Middle East and 13 plants in thePacific region. We own all of our major manufacturing facilities and wealso have a network of small leased sales offices in the United Statesand, to a lesser extent, in other parts of the world.

ITEM3.    LEGAL PROCEEDINGS

Various claims, lawsuits andadministrative proceedings are pending or threatened against us and oursubsidiaries, arising from the ordinary course of business with respectto commercial, intellectual property, product liability, employee andenvironmental matters. Historically, we have not faced any litigationmatters or series of litigation matters that have had a materialadverse impact on our business. In addition, we do not believe thatthere is any pending or reasonably predictable litigation, eitherindividually or in the aggregate, that is likely to have a materialadverse effect on our financial condition, results of operations,liquidity or cash flow. However, we cannot predict with certainty theoutcome of any litigation or the potential for future litigation.

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

On November 8, 2004, Nalco LLC, the sole stockholder of the Company,adopted resolutions by written consent with respect to the followingmatters involving ourCompany:

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (i)  | Initial PublicOffering.    Nalco LLC authorized approval of the initial publicoffering of shares of common stock, par value $.01 per share, of theCompany (the "Offering") pursuant to anUnderwriting Agreement entered into among the Company and a group ofunderwriters represented by Goldman, Sachs & Co., Citigroup GlobalMarkets Inc., J.P. Morgan Securities Inc. and UBS Securities LLC, asdescribed in the Registration Statement of the Company on Form S-1 asfiled with the Securities and Exchange Commission (the"Commission"), under the Securities Act of1933, as amended, on October 29, 2004 (file number333-118583). |

17

----

|  |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (ii)  | Amendedand Restated Certificate of Incorporation.    Nalco LLC approved theAmended and Restated Certificate of Incorporation and authorized filingthereof with the Secretary of State of the State of Delawareimmediately prior to the completion of the Offering. References to, anddescriptions of, the Amended and Restated Certificate of Incorporationas set forth in this Item 4 are qualified in their entirety byreference to the Amended and Restated Certificate of Incorporationfiled as Exhibit 3.1 to the Company's Current Report on Form 8-K,filed with the Commission under the Securities Act on November 18, 2004(file number001-32342). |

|  |             |                                                                                                                                                                                                                          |
|--|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (iii)  | Election ofDirectors.    Nalco LLC elected the following individuals asdirectors of the Company effective immediately upon the effectivenessof the Amended and Restated Certificate ofIncorporation: |

|                  |
|------------------|
|                  |  |  |  |  |  |  |  |  |  |  |
| ClassI           |  | Class II |  | Class III |
| Douglas A.Pertz  |  | Richard A. Friedman |  | Chinh E. Chu |
| William H. Joyce |  | Leon D. Black |  | Joshua J.Harris |
| Paul H. O'Neill  |  | Sanjeev K.Mehra |  |
|                  |

|  |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (iv)  | NalcoHolding Company 2004 Stock Incentive Plan.    Nalco LLC approved theNalco Holding Company 2004 Stock Incentive Plan and the reservation of7,500,000 shares of common stock by the Company for grants under theStock Incentive Plan. References to, and descriptions of, the NalcoHolding Company 2004 Stock Incentive Plan as set forth in this Item 4are qualified in their entirety by reference to the Nalco HoldingCompany 2004 Stock Incentive Plan filed as Exhibit 10.5 to theCompany's Current Report on Form 8-K, filed with the Commissionunder the Securities Act on November 18, 2004 (file number001-32342). |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (v)  | StockholdersAgreement.    Nalco LLC authorized execution of the StockholdersAgreement immediately prior to and contingent on completion of theOffering to be entered into among Nalco LLC, the Company and certainmembers of Nalco LLC controlled by the Sponsors. References to, anddescriptions of, the Stockholders Agreement as set forth in this Item 4are qualified in their entirety by reference to the StockholdersAgreement, dated November 16, 2004, filed as Exhibit 10.3 to theCompany's Current Report on Form 8-K, filed with the Commissionunder the Securities Act on November 18, 2004 (file number001-32342). |

|  |            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (vi)  | RegistrationRights Agreement.    Nalco LLC authorized execution of theRegistration Rights Agreement immediately prior to and contingent onthe completion of the Offering among Nalco LLC, the Company and certainof the members of Nalco LLC. References to, and descriptions of, theRegistration Rights Agreement as set forth in this Item 4 are qualifiedin their entirety by reference to the Registration Rights Agreement,dated November 16, 2004, filed as Exhibit 10.1 to the Company'sCurrent Report on Form 8-K, filed with the Commission under theSecurities Act on November 18, 2004 (file number001-32342). |

|  |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (vii)  | Warrant.    NalcoLLC authorized the exercise of a warrant, upon its receipt as adividend from the Company, in accordance with its terms at such timeand in such manner as is specified therein. References to, anddescriptions of, the Warrant as set forth in this Item 4 are qualifiedin their entirety by reference to the conformed copy of the Warrantfiled as Exhibit 10.4 to the Company's Current Report on Form8-K, filed with the Commission under the Securities Act on November 18,2004 (file number 001-32342). |

18

----

PART II

|               |                                                                                                            |
|---------------|------------------------------------------------------------------------------------------------------------|
| ITEM 5.  | MARKET FOR REGISTRANT'S COMMONEQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES |

|  |           |                                                                                                                                                                                                       |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | TheCompany's common stock is traded on the New York Stock Exchange(ticker symbol NLC). As of February 15, 2005, the number of holders ofrecord of the Company's common stock was approximately 5,600. |

|  |        |                                                                                                                                                                                                                                  |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | High and low sales prices forthe Company's common stock from November 10, 2004, the date itbegan trading, through December 31, 2004 were $20.24 and $15.00,respectively. The closing sales price on December 31, 2004 was$19.52. |

|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | Nalco HoldingCompany's operations are conducted through its subsidiaries andits ability to make payments on any obligations it may have isdependent on the earnings and the distribution of funds from itssubsidiaries. However, the terms of Nalco Company's senior creditagreement fully prohibit Nalco Holdings LLC and its subsidiaries frompaying dividends or otherwise transferring their assets to NalcoHolding Company. Accordingly, under the terms of the credit agreement,Nalco Holdings and its subsidiaries may not make dividends to NalcoHolding Company to enable it to pay dividends on its commonstock. |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (b)  | On November 16,2004, Nalco Holding Company completed an initial public offering of51,111,111 shares of its common stock, including 6,666,667 shares soldpursuant to an underwriters' option to purchase additionalshares, at a price of $15.00 per share. The effective date of NalcoHolding Company's Registration Statement on Form S-1 (file number333-118583) for registering the shares was November 10, 2004. Netproceeds from the offering, after deducting underwriting discounts of$42.2 million and other offering expenses of $4.0 million, were $720.5million. |

|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | Approximately$544.6 million of the net proceeds was used to pay a dividend that wasdeclared immediately prior to the consummation of the offering to NalcoLLC, the sole stockholder of the Company on the record date of thedividend. The remaining $175.9 million of the net proceeds was usedtoward the redemption of a portion of the senior discount notes due2014, including the payment of the applicable redemption premium. |

|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | In addition to the cashdividend paid from the net proceeds from the offering of shares of itscommon stock, Nalco Holding Company issued another dividend to NalcoLLC immediately prior to the consummation of the offering. The dividendconsisted of 90,552,158 shares of Nalco Holding Company common stockand a warrant to purchase, for $0.01 per share, up to 6,191,854 sharesof Nalco Holding Company common stock. |

|  |           |                                                                                                                             |
|--|-----------|-----------------------------------------------------------------------------------------------------------------------------|
|  | (c)  | There were no repurchasesof any of the Company's common stock by or on behalf of theCompany during the fourth quarter 2004. |

ITEM 6.    SELECTEDFINANCIAL DATA

The Successor financial statements include theconsolidated audited financial statements of Nalco Holding Company andits subsidiaries. The Predecessor financial statements include thecombined financial statements of Ondeo Nalco Group, which include theconsolidated financial statements of Ondeo Nalco Company and thecombined financial statements of the Nalco International SASSubsidiaries.

The following selected financial data has beenderived from the audited consolidated and combined financial statementsof Nalco Holding Company and its subsidiaries as of December 31, 2004,2003 and 2002, and for the periods from January 1, 2004 to December 31,2004, November 4, 2003 to December 31, 2003, January 1, 2003 toNovember 3, 2003, January 1, 2002 to December 31, 2002, and January 1,2001 to December 31, 2001. The selected financial data as of December31, 2001 and as of and for the years ended December 31, 2000 andDecember 31, 1999 has been derived from the Company's unauditedinternal financial reporting to Suez.

19

----

You should read the following data inconjunction with "Management's Discussion andAnalysis of Financial Condition and Results of Operations"and the consolidated and combined financial statements includedelsewhere in this Annual Report.

|                                                    |  |                          |         |                                        |  |                                |          |                                                |  |        |         |             |  |             |         |         |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------|----------|------------------------------------------------|--|--------|---------|-------------|--|-------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                               |  | Successor                |         | Predecessor                            |
| (dollarsin millions, except per sharedata)         |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1throughNovember3,2003 |          |     Year ended December31, |
| 2002                                               |  | 2001                     |         | 2000(1)                                |  | 1999(1)                        |          |
| **Statement of OperationsData:**                   |  |                     |         |                                   |  |                           |          |                                           |  |   |         | (unaudited) |  | (unaudited) |
| Netsales                                           |  | $                        | 3,033.3 |                                   |  | $                              | 460.1    |                                           |  | $      | 2,306.5 |        |  | $           | 2,644.3 |    |  | $      | 2,619.7 |    |  | $      | 2,147.1 |    |  | $      | 601.2  |    |
| Operatingcosts andexpenses:                        |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Costsof product sold                               |  |                     | 1,552.2 |                                   |  |                           | 248.2    |                                           |  |   | 1,114.6 |        |  |        | 1,266.1 |    |  |   | 1,268.1 |    |  |   |    |    |  |   |   |    |
| Selling,administrative, and researchexpenses       |  |                     | 1,065.4 |                                   |  |                           | 176.4    |                                           |  |   | 900.7   |        |  |        | 992.0   |    |  |   | 1,041.1 |    |  |   |    |    |  |   |   |    |
| Impairmentof goodwill(2)                           |  |                     | — |                                   |  |                           | —  |                                           |  |   | 244.4   |        |  |        | — |    |  |   | — |    |  |   |    |    |  |   |   |    |
| Amortizationof intangible assets(2)                |  |                     | 96.3    |                                   |  |                           | 15.4     |                                           |  |   | 68.9    |        |  |        | 89.2    |    |  |   | 171.3   |    |  |   |    |    |  |   |   |    |
| In-processresearch anddevelopment                  |  |                     | 122.3   |                                   |  |                           | —  |                                           |  |   | — |        |  |        | — |    |  |   | 1.3     |    |  |   |    |    |  |   |   |    |
| Businessoptimization expenses(3)                   |  |                     | 1.7     |                                   |  |                           | 0.8      |                                           |  |   | 20.3    |        |  |        | 32.8    |    |  |   | 172.3   |    |  |   |    |    |  |   |   |    |
| Operatingcosts andexpenses                         |  |                     | 2,837.9 |                                   |  |                           | 440.8    |                                           |  |   | 2,348.9 |        |  |        | 2,380.1 |    |  |   | 2,654.1 |    |  |   | 2,156.5 |    |  |   | 868.4  |    |
| Operatingearnings(loss)                            |  |                     | 195.4   |                                   |  |                           | 19.3     |                                           |  |   | (42.4   | )      |  |        | 264.2   |    |  |   | (34.4   | )  |  |   | (9.4    | )  |  |   | (267.2 | )  |
| Otherincome (expense), net(4)                      |  |                     | (57.0   | )                                 |  |                           | (2.8     | )                                         |  |   | (17.3   | )      |  |        | 3.4     |    |  |   | (12.4   | )  |  |   |    |    |  |   |   |    |
| Interestincome                                     |  |                     | 10.2    |                                   |  |                           | 0.6      |                                           |  |   | 7.1     |        |  |        | 7.8     |    |  |   | 8.8     |    |  |   |    |    |  |   |   |    |
| Interestexpense                                    |  |                     | (250.8  | )                                 |  |                           | (49.6    | )                                         |  |   | (32.7   | )      |  |        | (38.5   | )  |  |   | (44.4   | )  |  |   |    |    |  |   |   |    |
| Earnings(loss) before incometaxes                  |  |                     | (102.2  | )                                 |  |                           | (32.5    | )                                         |  |   | (85.3   | )      |  |        | 236.9   |    |  |   | (82.4   | )  |  |   |    |    |  |   |   |    |
| Incometax provision(benefit)                       |  |                     | 30.8    |                                   |  |                           | (8.3     | )                                         |  |   | 68.7    |        |  |        | 105.2   |    |  |   | (1.8    | )  |  |   |    |    |  |   |   |    |
| Minorityinterests                                  |  |                     | (5.8    | )                                 |  |                           | 0.1      |                                           |  |   | (4.2    | )      |  |        | (3.3    | )  |  |   | (3.4    | )  |  |   |    |    |  |   |   |    |
| Netearnings(loss)                                  |  | $                        | (138.8  | )                                 |  | $                              | (24.1    | )                                         |  | $      | (158.2  | )      |  | $           | 128.4   |    |  | $      | (84.0   | )  |  | $      | (58.4   | )  |  | $      | (213.6 | )  |
| **NetEarnings (Loss) Per Share Data(5):**          |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |
| **Basicand diluted net earnings (loss) pershare:** |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |
| Netearnings (loss) pershare                        |  | $                        | (1.42   | )                                 |  | $                              | (0.27    | )                                         |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Weightedaverage shares(millions)                   |  |                     | 97.7    |                                   |  |                           | 90.6     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| **Statementof Cash FlowsData:**                    |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netcash provided by (usedfor):                     |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Operatingactivities                                |  | $                        | 237.5   |                                   |  | $                              | 88.7     |                                           |  | $      | 144.4   |        |  | $           | 323.1   |    |  | $      | 414.3   |    |  |   |    |    |  |   |   |    |
| Investingactivities                                |  |                     | (72.2   | )                                 |  |                           | (4,145.1 | )                                         |  |   | (12.3   | )      |  |        | (126.1  | )  |  |   | (463.5  | )  |  |   |    |    |  |   |   |    |
| Financingactivities                                |  |                     | (232.8  | )                                 |  |                           | 4,130.3  |                                           |  |   | (234.2  | )      |  |        | (232.7  | )  |  |   | 133.9   |    |  |   |    |    |  |   |   |    |
| **OtherFinancial Data(unaudited):**                |  |                     |    |                                   |  |                           |     |                                           |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| EBITDA(6)                                          |  | $                        | 343.2   |                                   |  | $                              | 54.5     |                                           |  | $      | 106.8   |        |  | $           | 488.2   |    |  | $      | 245.7   |    |  |   |    |    |  |   |   |    |
| Non-cashcharges included in EBITDA(7)              |  |                     | 174.4   |                                   |  |                           | 23.9     |                                           |  |   | 268.7   |        |  |        | 31.2    |    |  |   | 31.1    |    |  |   |    |    |  |   |   |    |
| Unusualitems included in EBITDA(8)                 |  |                     | 59.7    |                                   |  |                           | 6.3      |                                           |  |   | 48.5    |        |  |        | (33.3   | )  |  |   | 9.9     |    |  |   |    |    |  |   |   |    |
| Capitalexpenditures, net(9)                        |  |                     | 91.8    |                                   |  |                           | 15.6     |                                           |  |   | 85.6    |        |  |        | 108.3   |    |  |   | 114.8   |    |  |   |    |    |  |   |   |    |
| Depreciation                                       |  |                     | 114.3   |                                   |  |                           | 22.5     |                                           |  |   | 101.8   |        |  |        | 134.7   |    |  |   | 124.6   |    |  |   |    |    |  |   |   |    |
| Amortization                                       |  |                     | 96.3    |                                   |  |                           | 15.4     |                                           |  |   | 68.9    |        |  |        | 89.2    |    |  |   | 171.3   |    |  |   |    |    |  |   |   |    |
|                                                    |

|                                                                                      |  |                   |         |                   |  |        |         |        |  |             |         |             |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|-------------|---------|-------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                 |  | Successor         |         | Predecessor       |
|                                                                                 |  | Asof December 31, |         | As of December31, |
| (dollars inmillions)                                                                 |  | 2004              |         | 2003              |  | 2002   |         | 2001   |  | 2000(1)     |         | 1999 (1)    |
| **BalanceSheetData:**                                                                |  |              |         |              |  |   |         |   |  | (unaudited) |         | (unaudited) |
| Cashand cashequivalents                                                              |  | $                 | 33.3    |              |  | $      | 100.0   |   |  | $           | 120.5   |        |  | $      | 146.0   |   |  | $      | 71.6    |   |  | $      | 80.0    |   |
| Workingcapital(10)                                                                   |  |              | 424.2   |              |  |   | 398.7   |   |  |        | 240.8   |        |  |   | 208.0   |   |  |   | 193.8   |   |  |   | 298.6   |   |
| Property,plant and equipment, net(11)                                                |  |              | 847.3   |              |  |   | 865.6   |   |  |        | 823.2   |        |  |   | 856.2   |   |  |   | 821.6   |   |  |   | 573.0   |   |
| Totalassets                                                                          |  |              | 5,933.9 |              |  |   | 6,163.8 |   |  |        | 6,486.4 |        |  |   | 6,512.2 |   |  |   | 6,406.6 |   |  |   | 5,529.3 |   |
| Totaldebt (including lease obligation and current portion of long-term debt)(11)(12) |  |              | 3,442.5 |              |  |   | 3,314.7 |   |  |        | 776.2   |        |  |   | 859.2   |   |  |   | 526.1   |   |  |   | 500.0   |   |
| Totalstockholders'investment                                                         |  |              | 710.4   |              |  |   | 1,069.0 |   |  |        | 3,589.2 |        |  |   | 3,734.4 |   |  |   | 4,011.8 |   |  |   | 4,264.0 |   |
| Offbalance sheet receivables facility(12)                                            |  |              | — |              |  |   | — |   |  |        | 87.0    |        |  |   | 101.0   |   |  |   | — |   |  |   | — |   |
|                                                                                      |

20

----

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Pursuantto a tender offer completed on November 9, 1999, Suez, through itssubsidiary, H2O Acquisition Co., or H2O, acquired virtually all of theoutstanding shares of Nalco Chemical Company. In June 1999, Degremont,a Suez subsidiary, acquired Calgon Corporation. The acquisitions areincluded in the Predecessor's operations from the dates ofacquisition. Results from 2000 forward reflect the Suez push down ofpurchase accounting to Nalco Chemical Company. In March 2001, NalcoChemical Company's name was changed to Ondeo Nalco Company.Because the Predecessor reported to Suez in French GAAP in 1999 and2000, combined U.S. GAAP financial information in a format similar to2001-2004 is not available. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | ThePredecessor adopted Statement of Financial Accounting Standards (SFAS)No. 142, Goodwill and Other Intangible Assets, as ofJanuary 1, 2002. Under SFAS No. 142, goodwill and intangible assetsdeemed to have indefinite lives are no longer amortized but are subjectto annual impairment tests. In the period from January 1, 2003 throughNovember 3, 2003, the Predecessor took a goodwill impairment charge of$244.4 million based on the price paid in the Acquisition. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | The Successor incurred businessoptimization expenses in connection with its programs to redesign andoptimize its business and work processes. The Predecessor incurredsignificant business optimization expenses as a result of the globalintegration of the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon)joint venture and the implementation of global cost reduction programsin the sales, marketing, manufacturing and support services operations.The costs incurred include severance, asset write-offs, facilityclosing costs and other items. See "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations—Business OptimizationExpenses." |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 December 31, 2004were a $35.0 million charge for the termination of the Monitoring FeeAgreement with affiliates of the Sponsors and a $13.7 million chargefor the early repayment of senior discount notes. |

|     |                                                                                                                                                                                                                                                                      |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Net earnings (loss) per share iscalculated by dividing net earnings (loss) by the weighted averageshares outstanding. Net earnings (loss) per share is not applicable forthe historical Predecessor periods as there were no shares outstandingduring those periods. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | EBITDA, ameasure used by management to measure operating performance, is definedas net earnings plus interest, taxes, depreciation and amortization.EBITDA is reconciled 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. |

21

----

The following is a reconciliation of netearnings (loss) to EBITDA:

|                                 |
|---------------------------------|
|                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                            |  | Successor |  | Predecessor |
| (dollarsinmillions)             |  | YearendedDecember31, 2004 |  | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |  |     Year ended December31, |
| 2002                            |  | 2001 |  |
| Netearnings(loss)               |  | $ | (138.8 | )  |  | $ | (24.1 | )  |  | $ | (158.2 | )  |  | $ | 128.4 |   |  | $ | (84.0 | )  |
| Interestexpense,net             |  |   | 240.6 |   |  |   | 49.0 |   |  |   | 25.6 |   |  |   | 30.7 |   |  |   | 35.6 |   |
| Incometax provision(benefit)    |  |   | 30.8 |   |  |   | (8.3 | )  |  |   | 68.7 |   |  |   | 105.2 |   |  |   | (1.8 | )  |
| Depreciation                    |  |   | 114.3 |   |  |   | 22.5 |   |  |   | 101.8 |   |  |   | 134.7 |   |  |   | 124.6 |   |
| Amortizationof intangibleassets |  |   | 96.3 |   |  |   | 15.4 |   |  |   | 68.9 |   |  |   | 89.2 |   |  |   | 171.3 |   |
| EBITDA                          |  | $ | 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 discussedbelow: |

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                           |  | Successor |  | Predecessor |
| (dollarsinmillions)                            |  | YearendedDecember31,2004 |  | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |  |     Year ended December31, |
| 2002                                           |  | 2001 |  |
| Impairmentofgoodwill                           |  | $ | — |   |  | $ | — |   |  | $ | 244.4 |   |  | $ | — |   |  | $ | — |   |
| In-processresearch anddevelopment              |  |   | 122.3 |   |  |   | — |   |  |   | — |   |  |   | — |   |  |   | 1.3 |   |
| Inventorystep-up                               |  |   | 14.6 |   |  |   | 21.2 |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Assetwrite-offs                                |  |   | 1.1 |   |  |   | — |   |  |   | 4.2 |   |  |   | 18.3 |   |  |   | 17.8 |   |
| Profitsharing and 401(k) expense funded bySuez |  |   | 27.8 |   |  |   | 4.0 |   |  |   | 20.0 |   |  |   | 12.1 |   |  |   | 12.0 |   |
| Other                                          |  |   | 8.6 |   |  |   | (1.3 | )  |  |   | 0.1 |   |  |   | 0.8 |   |  |   | — |   |
|                                           |  | $ | 174.4 |   |  | $ | 23.9 |   |  | $ | 268.7 |   |  | $ | 31.2 |   |  | $ | 31.1 |   |
|                                                |

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 and Development

|        |                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 accounting entries relatedto the Acquisition. In 2001, the Predecessor recorded $1.3 million ofpurchased in-process research and development, resulting from theredemption of Exxon's 40% interest in the Nalco/Exxonjoint venture. |

Inventory Step Up

|        |                                                                                                                                                                                                                                                                                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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. |

Asset Write-Offs

|        |                                                                                                                                                                                                                                                                                                                                                                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In conjunction with our integration and processimprovement initiatives, the Predecessor wrote off assets consistingprimarily of a $5.0 million investment in start up ventures in 2003,$9.6 million of assets related to obsolete software systems in 2002 and$17.8 million of PORTA-FEED stainless steel containers in 2001 as aresult of a physical inventory. |

22

----

Profit Sharing and 401(k) ExpenseFunded by Suez

|        |                                                                                                                                                                                                                                          |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In conjunction with theAcquisition, the Successor entered into an agreement with Suez wherebySuez will reimburse the Company for certain profit sharing and 401(k)matching contributions made by the Company to the Profit-SharingTrust. |

Other

|        |                                                                                                                                                                                                                                                                                        |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Other non-cashcharges include the non-cash impact on earnings of our equityinvestments and minority interests. Successor non-cash charges includesthe non-cash portion of rent expense under the sublease that theSuccessor entered into with Suez 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: |

|                                           |
|-------------------------------------------|
|                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                      |  | Successor |  | Predecessor |
| (dollarsinmillions)                       |  | YearEndedDecember31,2004 |  | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |  |     Year Ended December31, |
| 2002                                      |  | 2001 |  |
| Pensionand OPEB settlement andcurtailment |  | $ | — |   |  | $ | (0.1 | )  |  | $ | 7.9 |   |  | $ | (47.6 | )  |  | $ | 0.4 |   |
| Loss(gain) on sales, net ofexpenses       |  |   | 0.2 |   |  |   | 1.1 |   |  |   | 12.4 |   |  |   | (7.8 | )  |  |   | 0.9 |   |
| Otherunusualitems                         |  |   | 59.5 |   |  |   | 5.3 |   |  |   | 25.7 |   |  |   | 19.4 |   |  |   | 6.6 |   |
| Suezmanagement fees,net                   |  |   | — |   |  |   | — |   |  |   | 2.5 |   |  |   | 2.7 |   |  |   | 2.0 |   |
|                                      |  | $ | 59.7 |   |  | $ | 6.3 |   |  | $ | 48.5 |   |  | $ | (33.3 | )  |  | $ | 9.9 |   |
|                                           |

Pensionand Other Postretirement Benefits (OPEB) Settlement andCurtailment

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In 2003, the Predecessorincurred $7.9 million of curtailment and settlement charges primarilyas a result of the transfer of senior executives back to Suez prior tothe Acquisition. 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 settlement charges. |

Loss (Gain) on Sales, Net of Expenses

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In 2003, the Predecessor recorded a loss of $5.3million on the sale of its South African operations as well as $8.1million of one-time costs associated with the Acquisition. In 2002, thePredecessor sold its performance additives business, resulting in again of $12.4 million, and incurred $1.5 million of disposal costs andlosses associated with its divestiture of Hydrosan. In 2001, thePredecessor incurred a $9.0 million loss on the sale of Calgon'sformer headquarters facility that was partially offset by a $7.0million gain on the sale of the Predecessor's corporateaircraft. |

Other Unusual Items

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The Successor's results for the year endedDecember 31, 2004 were impacted by the effects of certain unusualitems, including a $35.0 million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors, a $13.7million charge for the early repayment of senior discount notes, $1.4million of expenses associated with changing the name of theCompany's operating company from Ondeo Nalco Company to NalcoCompany, $1.8 million in connection with the re-audit of thePredecessor's 2001 financial statements, $1.9 million of expensesrelated to the registration of publicly tradable senior notes andsenior subordinated notes that were exchanged for privately placednotes issued in connection with the Acquisition, and other expensesresulting from the Acquisition. |

23

----

|        |                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | During the period fromNovember 4, 2003 through December 31, 2003, the Successor'sresults were impacted by the effects of certain other unusual items,most notably $3.3 million of legal and environmental costs related toevents that occurred prior to Suez' 1999 acquisition of NalcoChemical Company and litigation costs not covered by theCompany's excess liability insurance policy. |

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The most significant other unusual item affectingthe Predecessor's results during the period from January 1, 2003through November 3, 2003 was a $10.4 million charge for the settlementof an interest rate swap. Other unusual items for the year endedDecember 31, 2002 included legal and environmental expenses of $6.5million, consultancy costs for process reengineering studies associatedwith our cost reduction programs and other consultancy servicesperformed on behalf of Suez of $7.1 million, and one-time pension andbenefit expenses primarily related to the redesign of our Australianbenefit plan and the application of regulatory changes in Germany of$4.7 million. Executive severance and relocation expense of $5.8million accounted for most of the other unusual items during the yearended December 31, 2001. |

Suez Management Fees, Net

|        |                                                                                                                                             |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   | In connection with the Acquisition, agreementsunder which fees were paid by the Predecessor to Suez, or received fromSuez, were terminated. |

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

|      |                                                                                                                                                                                                                                      |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10) | Working capital isdefined 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, |
| (dollars inmillions)                      |  | 2004 |  | 2003 |  | 2002 |  | 2001 |
| Currentassets less currentliabilities     |  | $ | 439.8 |   |  | $ | 446.8 |   |  | $ | (275.0 | )  |  | $ | (441.2 | )  |
| Lesscash and cashequivalents              |  |   | (33.3 | )  |  |   | (100.0 | )  |  |   | (120.5 | )  |  |   | (146.0 | )  |
| Lessrelated party receivables andpayables |  |   | — |   |  |   | — |   |  |   | 48.4 |   |  |   | (33.3 | )  |
| Plusshort-termdebt                        |  |   | 17.7 |   |  |   | 51.9 |   |  |   | 587.9 |   |  |   | 828.5 |   |
| Workingcapital asdefined                  |  | $ | 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 December2002, Ondeo Nalco Company entered into a sale-leaseback of itsNaperville, Illinois headquarters and research facility that wastreated as a financing lease for accounting purposes. Concurrent withthe Acquisition, on November 4, 2003, the lease was assigned to anotherSuez subsidiary that subleased the property back to the Successor. TheSuccessor accounts for the sublease as an operating lease and hasexcluded the headquarters and research facility from property, plantand equipment. |

|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12) | Total debt doesnot include the Predecessor's historical off balance sheetreceivables facility. In December 2001, Ondeo Nalco Company enteredinto an agreement that allowed it to periodically transfer undividedpercentage ownership interests in a revolving pool of most of its 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 the period fromJanuary 1, 2003 through November 3, 2003 and the year ended December31, 2002, respectively, and is included in interest expense. Theundivided interest in receivables that were transferred but notultimately sold to the conduit ("retainedinterest") is classified in trade accounts |

24

----

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | receivable in the balance sheet. The retainedinterest was $56.6 million at December 31, 2002 and $49.0 million atDecember 31, 2001. This program was unwound prior to closing of theAcquisition. The Successor treats its new receivables facility as ageneral financing agreement resulting in the funding and relatedreceivables being shown as liabilities and assets, respectively, on itsconsolidated balance sheet and the costs associated with thereceivables facility being recorded as interestexpense. |

25

----

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| ITEM7.  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

The followingdiscussion and analysis of our financial condition and results ofoperations includes periods prior to the formation of Nalco HoldingCompany. It also discusses periods prior to the Transactions, definedas the acquisition of Ondeo Nalco Group, comprised of Nalco Company andNalco International SAS Subsidiaries, by Nalco Holdings and the relatedfinancings in connection with such acquisition (the"Acquisition"). Accordingly, the discussionand analysis of historical periods prior to the Transactions do notreflect the significant impact that the Transactions have had on us. Inaddition, the statements in the discussion and analysis regardingindustry outlook, our expectations regarding the performance of ourbusiness and the other non-historical statements in the discussion andanalysis are forward-looking statements. These forward-lookingstatements are subject to numerous risks and uncertainties, including,but not limited to, the risks and uncertainties described in"Risk Factors." Our actual results may differmaterially from those contained in or implied by any forward-lookingstatements. You should read the following discussion together with theconsolidated and combined financial statements of Nalco Holding Companyincluded elsewhere in this report.

"SafeHarbor" Statement Under Private Securities LitigationReform Act of 1995

This Annual Report for the fiscal year endedDecember 31, 2004 (the "Annual Report")includes "forward-looking statements" withinthe meaning of Section 27A of the Securities Act of 1933 and Section21E of the Securities Exchange Act of 1934. These forward-lookingstatements include statements concerning our plans, objectives, goals,strategies, future events, future revenue or performance, capitalexpenditures, financing needs, plans or intentions relating toacquisitions, business trends and other information that is nothistorical information. When used in this Annual Report, the words"estimates,""expects,""anticipates,""projects,""plans," "intends,""believes,""forecasts," or future 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.

Thereare a number of risks and uncertainties that could cause our actualresults to differ materially from the forward-looking statementscontained in this Annual Report. Additionally, important factors couldcause our actual results to differ materially from the forward-lookingstatements we make in this Annual Report. As stated in the sectionentitled "Risk Factors," such risks,uncertainties and other important factors include, amongothers:

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

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| •  | limitations on flexibility inoperating our business contained in our debtagreements; |

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | increases in interest ratesas a result of our variable rateindebtedness; |

|              |                                     |
|--------------|-------------------------------------|
| •  | pricing pressure from ourcustomers; |

|              |                                     |
|--------------|-------------------------------------|
| •  | technological change andinnovation; |

|              |                                               |
|--------------|-----------------------------------------------|
| •  | risks associated with ournon-U.S. operations; |

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

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

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

|              |                                                |
|--------------|------------------------------------------------|
| •  | operating hazards in ourproduction facilities; |

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

|              |                                                   |
|--------------|---------------------------------------------------|
| •  | difficulties in securing theraw materials we use; |

26

----

|              |                                                                                              |
|--------------|----------------------------------------------------------------------------------------------|
| •  | our significantpension benefit obligations and the current underfunding of our pensionplans; |

|              |                                                                |
|--------------|----------------------------------------------------------------|
| •  | our ability to realize the fullvalue of our intangible assets; |

|              |                                                                                                                                   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------|
| •  | ourability to attract and retain skilled employees, particularly researchscientists, technical sales professionals and engineers; |

|              |                                                             |
|--------------|-------------------------------------------------------------|
| •  | our ability to protect our intellectualproperty rights; and |

|              |                                                                             |
|--------------|-----------------------------------------------------------------------------|
| •  | the possibilitythat our owners' interests will conflict with ours or yours. |

There may be other factors that may cause our actual results todiffer materially from the forward-looking statements.

Allforward-looking statements attributable to us or persons acting on ourbehalf apply only as of the date of this Annual Report and areexpressly qualified in their entirety by the cautionary statementsincluded in this Annual Report. We undertake no obligation to update orrevise forward-looking statements which may be made to reflect eventsor circumstances that arise after the date made or to reflect theoccurrence of unanticipated events.

RiskFactors

If we are unable torespond to the changing needs of a particular industry and toanticipate, respond to or utilize changing technologies and develop newofferings, it could become more difficult for us to respond to ourcustomers' needs and cause us to be less competitive.

Wehave historically been able to maintain our market positions andmargins through continuous innovation of products and development ofnew offerings 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; |

|              |                                                                                           |
|--------------|-------------------------------------------------------------------------------------------|
| •  | our competitors willnot 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 and utilizechanging technologies is crucial because we compete with many companiesin each of the markets in which we operate. For example, we competewith hundreds of companies in the water treatment chemicals market,including our largest global 

27

----

competitor, GE Water Technologies. Othercompanies, including Ecolab, Inc., are expected to enter or increasetheir presence in our markets. Our ability to compete effectively isbased on a number of considerations, such as product and serviceinnovation, product and service quality, distribution capability andprice. Moreover, water treatment for industrial customers depends onthe particular needs of the industry. For example, the paper industryrequires a specific water quality for bleaching paper; certainindustrial boilers require demineralized water; the pharmaceuticalsindustry requires ultra pure water for processing; and, in the case ofmunicipal services, water treatment includes clarification for re-use,sludge dewatering and membrane ultra filtration. We may not havesufficient financial resources to respond to the changing needs of aparticular industry and to continue to make investments in ourbusiness, which could cause us to become less competitive.

Our substantial leverage could harm our business bylimiting our available cash and our access to additional capital.

We are highly leveraged. As of December 31, 2004, our totalconsolidated indebtedness was $3,442.5 million and we had $250.0million of borrowing capacity available under our revolving creditfacility (excluding $35.3 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 our growth. |

AtDecember 31, 2004, we had $1,408.9 million of variable rate debt. A1% increase in the average interest rate would increase futureinterest expense by approximately $14.1 million per year.

Despite our current leverage, we may still be able to incursubstantially more debt. This could further exacerbate the risks thatwe and our subsidiaries face.

We and our subsidiaries may beable to incur substantial additional indebtedness in the future. Theterms of the indentures governing our subsidiaries' notes do notfully prohibit us or our subsidiaries from doing so. NalcoCompany's revolving credit facility provides commitments of up to$250.0 million, all of which would have been available for futureborrowings as of December 31, 2004. 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 credit agreement and theindentures governing our subsidiaries' existing notes contain anumber of significant covenants that, among other things, restrict ouror our subsidiaries' abilityto:

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

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

28

----

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

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

|              |                                                 |
|--------------|-------------------------------------------------|
| •  | useassets as security in other transactions;and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | sell certain assets or merge with orinto other companies. |

In addition, under the senior creditagreement, Nalco Holdings LLC is required to satisfy and maintainspecified financial ratios and tests. Events beyond our control mayaffect its ability to comply with those provisions and Nalco HoldingsLLC may not be able to meet those ratios and tests. The breach of anyof these covenants would result in a default under the senior creditagreement and the lenders could elect to declare all amounts borrowedunder the senior credit agreement, together with accrued interest, tobe due and payable and could proceed against the collateral securingthat indebtedness.

The terms of Nalco Company'ssenior credit agreement fully prohibit Nalco Holdings LLC and itssubsidiaries from paying dividends or otherwise transferring theirassets to us.

Our operations are conducted through oursubsidiaries and our ability to make payments on any obligations we mayhave is dependent on the earnings and the distribution of funds fromour subsidiaries. However, the terms of Nalco Company's seniorcredit agreement fully prohibit Nalco Holdings LLC and its subsidiariesfrom paying dividends or otherwise transferring their assets to us.Accordingly, under the terms of the credit agreement, Nalco HoldingsLLC and its subsidiaries may not make dividends to Nalco HoldingCompany to enable it to pay dividends on our common stock.

Oursignificant non-U.S. operations expose us to global economic andpolitical changes that could impact our profitability.

We havesignificant operations outside the United States, including jointventures and other alliances. We conduct business in approximately 130countries and, in 2004, 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; |

|              |                                                                                |
|--------------|--------------------------------------------------------------------------------|
| •  | changes in local economicconditions, 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.

29

----

Our overall success as a global businessdepends, in part, upon our ability to succeed in differing economic,social and political conditions. We may not continue to succeed indeveloping and implementing policies and strategies that are effectivein each location where we do business, which could negatively affectour profitability.

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 to therequirements of environmental and occupational safety and health lawsand regulations in the United States and other countries. These includeobligations to investigate and clean up environmental contamination onor from properties or at off-site locations where we are identified asa responsible party. For example, we are currently identified as apotentially responsible party at certain waste management sites.Additionally, the U.S. Environmental Protection Agency is conducting acivil and criminal investigation of environmental practices at ourLouisiana manufacturing facility. No claims or charges have been issuedand we are unable to predict the results of such investigation. We havealso 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.

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.

The activities at our production facilities are subject to a varietyof federal, state, local and foreign laws and regulations("Production Regulations"). Similarly, thesolid, air and liquid waste streams produced from our productionfacilities are subject to a variety of regulations ("WasteRegulations") and many of our products and the handling ofour 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, Waste 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 may notbe able to achieve all of our expected cost savings.

Althoughwe successfully surpassed our 2004 cost savings target, a variety ofrisks could cause us not to achieve the benefits of the expected 2005cost savings, including, among others, the following:

30

----

|              |                                                                 |
|--------------|-----------------------------------------------------------------|
| •  | 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 have experienced,and may continue to experience, difficulties in securing the supply ofcertain raw materials we and our competitors need to manufacture someof our products.

During recent months, certain of the rawmaterials used by us and other chemical companies have faced supplylimitation. In some cases because of unexpectedly large demand and inother instances because of plant and equipment problems, certain of ourraw material vendors have placed us and their other customers"on allocation," proportionately reducing theamounts of raw materials supplied to us as against our pastrequirements. If these limitations continue or become more severe, werisk shortfalls in our sales and the potential of claims from ourcustomers if we are unable to fully meet contractual requirements.Also, limitations on raw materials have resulted in price increases forthese materials, and we risk further price increases for thesematerials.

Our pension plans are currently underfunded and wemay have to make significant cash payments to the plans, reducing thecash available for our business.

We sponsor various pensionplans worldwide that are underfunded and require significant cashpayments. For example, in 2004, we contributed $13.7 million to ourpension plans and in 2003, we contributed $31.2 million to our pensionplans. We are required to contribute at least $21.0 million to the U.S.pension plan in 2005. We may also opt to make additional voluntarycontributions to various pension plans worldwide in 2005.

Additionally, if the performance of the assets in our pension plansdoes not meet our expectations, or if other actuarial assumptions aremodified, our contributions for those years could be even higher thanwe expect.

As of December 31, 2004, our worldwide pension planswere underfunded by $421.7 million (based on the actuarial assumptionsused for purposes of Statement of Financial Accounting Standards (SFAS)No. 87, Employers' Accounting for Pensions). Our U.S.pension plans are subject to the Employee Retirement Income SecurityAct of 1974, or ERISA. Under ERISA, the Pension Benefit GuarantyCorporation, or PBGC, has the authority to terminate an underfundedpension plan under certain circumstances. In the event our U.S. pensionplans are terminated for any reason while the plans are underfunded, wewill incur a liability to the PBGC that may be equal to the entireamount of the underfunding. Prior to the closing of the Acquisition,the PBGC requested and received information from us regarding ourbusiness, the Transactions and our pension plans. The PBGC took nofurther action with respect to their inquiry.

We have recordeda significant amount of goodwill and other identifiable intangibleassets, and we may never realize the full value of our intangibleassets.

We have recorded a significant amount of goodwill andother identifiable intangible assets, including customer relationships,trademarks and developed technologies. Goodwill and other netidentifiable intangible assets were approximately $3.7 billion as ofDecember 31, 2004, 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 $2.4 billion as of December31, 2004, or 40% of our total assets. Goodwill and netidentifiable intangible assets are recorded at fair value on the dateof acquisition and, in accordance with SFAS No. 142, Goodwill andOther Intangible Assets, will be reviewed at least annually forimpairment. Impairment may result from, among other things,deterioration in our performance, adverse market conditions, adversechanges in applicable laws or regulations, including changes thatrestrict the activities of or affect the products and services sold by

31

----

our business, and a variety of other factors.The amount of any quantified impairment must be expensed immediately asa charge to results of operations. Depending on future circumstances,it is possible that we may never realize the full value of ourintangible assets. Any future determination of impairment of asignificant portion of goodwill or other identifiable intangible assetswould have an adverse effect on our financial condition and results ofoperations.

Our future success will depend in part on ourability to protect our intellectual property rights, and our inabilityto 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 on thepatent, trademark, copyright and trade secret laws of the United Statesand 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. andforeign 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 control us and may have conflictsof interest with us or you in the future.

Our Sponsors, TheBlackstone Group, Apollo Management and Goldman Sachs, beneficially ownapproximately 61% of our common stock. In addition,representatives of our Sponsors will occupy six of the seats on ourboard of directors. As a result, our Sponsors have control over ourdecisions to enter into any corporate transaction and will have theability to prevent any transaction that requires the approval of ourboard of directors or the equityholders, regardless of whether or notother members of our board of directors or equityholders believe thatany such transactions are in their own best interests. For example, ourSponsors could cause us to sell revenue-generating assets, which couldimpair our long-term ability to declare dividends or grow our business.Additionally, our Sponsors are in the business of making investments incompanies and may from time 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. So long as our Sponsors continue to hold a majorityof our outstanding common stock through ownership of the majority ofthe equity of our majority equityholder, Nalco LLC, the Sponsors willbe entitled to nominate a majority of our board of directors, and will,through Nalco LLC, have the ability to effectively control the vote inany election of directors. Following a reduction of the equity owned bythe Sponsors through Nalco LLC to below 50% of our outstandingequity, the Sponsors will retain the right to cause the board ofdirectors to nominate a number of Sponsor designees for the board ofdirectors, and continue to be able to significantly influence oreffectively control our decisions.

We are a"controlled company" within the meaning ofthe New York Stock Exchange rules and, as a result, will qualify for,and intend to rely on, exemptions from certain corporate governancerequirements.

Our Sponsors control a majority of ouroutstanding common stock. As a result, we are a"controlled company" within the meaning ofthe New York Stock Exchange corporate governance standards. Under theNew York Stock Exchange rules, a company of which more than 50%of the voting power is held by another company is a"controlled company" and may elect not tocomply with certain New York Stock Exchange corporate governancerequirements, including (1) the requirement that a majority of theboard of directors consist of independent directors, (2) therequirement that we have a nominating/corporate governance committeethat is composed entirely of independent directors with a writtencharter addressing the committee's purpose and responsibilities,(3) the requirement 

32

----

that we have a compensation committee that iscomposed entirely of independent directors with a written charteraddressing the committee's purpose and responsibilities and (4)the requirement for an annual performance evaluation of the nominatingand corporate governance and compensation committees. We intend toutilize these exemptions. As a result, we will not have a majority ofindependent directors nor will our nominating and corporate governanceand compensation committees consist entirely of independent directors.Accordingly, you will not have the same protections afforded tostockholders of companies that are subject to all of the New York StockExchange corporate governance requirements.

Future sales of ourshares could depress the market price of our common stock.

Themarket price of our common stock could decline as a result of sales ofa large number of shares of common stock in the market after theoffering or the perception that such sales could occur. These sales, orthe possibility that these sales may occur, also might make it moredifficult for us to sell equity securities in the future at a time andat a price that we deem appropriate.

We, our directors,executive officers, other members of management who own units under theNalco LLC Unit Plan, Nalco LLC and the Sponsors have agreed with theunderwriters not to sell, dispose of or hedge any shares of our commonstock or securities convertible into or exchangeable for shares of ourcommon stock, subject to specified exceptions, during the period fromNovember 10, 2004 continuing through May 12, 2005, except with theprior written consent of Goldman, Sachs & Co.

The 180-dayrestricted period described in the preceding paragraph will be extendedif:

|              |                                                                                                                                       |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------|
| •  | during the last 17  days ofthe 180-day restricted period we issue an earnings release or announcematerial news or a material event;or |

|              |                                                                                                                                                                                    |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | prior to the expiration of the180-day restricted period, we announce that we will release earningsresults during the 16-day period beginning on the last day of the180-day period, |

in which case the restrictions describedin the preceding paragraph will continue to apply until the expirationof the 18-day period beginning on the issuance of the earnings releaseor the announcement of the material news or material event.

Wehave 141,663,369 shares of common stock outstanding. Of those shares,51,111,111 shares are freely tradable. The 90,552,258 remaining shareswill be eligible for resale from time to time after the expiration ofthe lock-up period, subject to contractual and Securities Actrestrictions. The 90,552,258 shares may be sold subject to the volume,manner of sale and other conditions of Rule 144. After May 12, 2005(expiration of a six-month lock-up period associated with our initialpublic offering), the Sponsors and their affiliates, which collectivelybeneficially own 86,047,133 shares, will have the ability to cause usto register the resale of their shares.

In addition, followingthe lock-up period and subject to certain conditions, certain membersof our management who hold units of Nalco LLC will be able to sell backor "put" to Nalco LLC their class A units,along with those of their class B units, class C units and class Dunits that have vested, in exchange for our shares of common stockowned by Nalco LLC. Prior to the initial public offering, we provided awarrant to Nalco LLC that entitles it to acquire up to 6,191,854 sharesof our common stock for $0.01 per share, which will allow Nalco LLC todeliver our shares in satisfaction of such"put" rights.

The market price of ourcommon stock may be volatile, which could cause the value of yourinvestment to decline.

Securities markets worldwide experiencesignificant price and volume fluctuations. This market volatility, aswell as general economic, market or potential conditions, could reducemarket price of our common stock in spite of our operating performance.In addition, our operating results could be below the expectations ofsecurities analysts and investors, and in response, the market price ofour common stock could decrease significantly.

33

----

Provisions in our amended and restatedcertificate of incorporation and bylaws and Delaware law may discouragea takeover attempt.

Provisions contained in our amended andrestated certificate of incorporation and bylaws and Delaware law couldmake it more difficult for a third party to acquire us, even if doingso might be beneficial to our stockholders. Provisions of our amendedand restated certificate of incorporation and bylaws impose variousprocedural and other requirements, which could make it more difficultfor stockholders to effect certain corporate actions. For example, ouramended and restated certificate of incorporation authorizes our boardof directors to determine the rights, preferences, privileges andrestrictions of unissued series of preferred stock, without any vote oraction by our stockholders. Thus, our board of directors can authorizeand issue shares of preferred stock with voting or conversion rightsthat could adversely affect the voting or other rights of holders ofour common stock. These rights may have the effect of delaying ordeterring a change of control of our company. In addition, a change ofcontrol of our company may be delayed or deterred as a result of ourhaving three classes of directors. Additionally, Section 203 of theDelaware General Corporation Law provides that, subject to specifiedexceptions, a Delaware corporation shall not engage in businesscombinations with any entity that acquires enough shares of our commonstock without the consent of our board of directors to be considered an"interested stockholder" under Delaware lawfor a three-year period following the time that the stockholder becamean interested stockholder. These provisions could limit the price thatcertain investors might be willing to pay in the future for shares ofour common stock.

Impact of the Acquisition and RelatedFinancing Transactions

On November 4, 2003, pursuant to a StockPurchase Agreement between Nalco Holdings LLC, a Delaware limitedliability company, and Suez ("Suez") andcertain of its affiliates, Nalco Holdings LLC (the"Successor") acquired the net assets of OndeoNalco Group (the "Predecessor"). Theaggregate purchase price was $4,105.4 million in cash, after givingeffect to direct costs of the Acquisition, closing date working capitaland indebtedness purchase price adjustments, a post-closing workingcapital and indebtedness purchase price adjustment which was agreed toby us and 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 of privateequity funds controlled by the Blackstone Group, Apollo Management,L.P., and investment partnerships affiliated with The Goldman SachsGroup, Inc.; an equity investment of $10.0 million from Dr. William H.Joyce, our Chairman and Chief Executive Officer; term loans ofapproximately $1,600 million; and the issuance of $665 millionaggregate principal amount of 73⁄4% senior notes due 2011,€200 million aggregate principal amount of73⁄4% senior notes due 2011, $465 million aggregateprincipal amount of 8 7/8% senior subordinatednotes due 2013 and €200 million aggregate principal amountof 9% senior subordinated notes due 2013. As a result, ourinterest expense currently is, and will continue to be, higher than itwas prior to the Acquisition.

The Stock Purchase Agreementprovided for certain adjustments of the purchase price, includingadjustments based on the closing working capital and indebtedness (asboth are defined in the Stock Purchase Agreement) of Ondeo Nalco Groupat the date of the Acquisition. On March 25, 2004, the Company and Suezagreed to a $25.6 million working capital adjustment payable to theCompany plus interest. This adjustment was not reflected in theconsolidated financial statements as of December 31, 2003. We recordedthe purchase price adjustment in 2004 by decreasing goodwill.

Weaccounted for the Acquisition using the purchase method of accountingand, accordingly, the Acquisition resulted in a new basis of accountingfor us. We allocated the purchase price on the basis of our estimate ofthe fair value of the underlying assets acquired and liabilitiesassumed. We retained third party professionals to assist in thedetermination of a fair value of our pension and post retirementobligations. We also engaged independent appraisers to assist indetermining the fair values of property, plant and equipment andintangible assets acquired, including purchased in-process research anddevelopment, trade names, trademarks, developed technology and customerrelationships. We received final values from the appraisers in 2004,and we have completed our allocation of purchase price. The excess ofthe total purchase price over the estimated fair value of the

34

----

net assets acquired at closing has beenallocated to goodwill, and this indefinite lived asset is subject toannual impairment review. Goodwill in the transaction, based on thefinal allocation of the purchase price, totaled $2,224.2 million. Anallocation has been made for the fair value of research and developmentactivities that, as of the date of the Acquisition, had commenced, buthad not yet been completed, and have no alternative future use(in-process research and development). In conjunction with theindependent appraisers, we estimated the fair value of in-processresearch and development and recorded a one-time charge of $122.3million during the year ended December 31, 2004 as a result of thefinal purchase accounting 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, 2004, $31.7 million has been charged against thisaccrual. We expect that we will complete these activities by the end of2005.

Business Optimization Expenses

We incurredsignificant, nonrecurring business optimization expenses as a result ofthe implementation of the redesign and optimization of business andwork processes, global cost reduction programs in sales, marketing,manufacturing and support service functions, and the global integrationof our businesses, asfollows:

|                                                      |  |                          |         |                                        |  |                                      |         |                          |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                 |  | Successor                |         | Predecessor                            |
| (dollarsin millions)                                 |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| Business processoptimization                         |  | $                        | 1.7     |                                   |  | $                                    | — |                     |  | $      | — |   |  | $      | — |   |
| 2002businessrealignment                              |  |                     | — |                                   |  |                                 | 0.8     |                     |  |   | 18.8    |   |  |   | 8.9     |   |
| 2001cost reduction and efficiencyimprovement         |  |                     | — |                                   |  |                                 | — |                     |  |   | — |   |  |   | 10.6    |   |
| Nalco/Exxonintegration                               |  |                     | — |                                   |  |                                 | — |                     |  |   | 1.5     |   |  |   | 7.7     |   |
| Integration-NalcoChemical Company, Aquazur andCalgon |  |                     | — |                                   |  |                                 | — |                     |  |   | — |   |  |   | 5.6     |   |
|                                                 |  | $                        | 1.7     |                                   |  | $                                    | 0.8     |                     |  | $      | 20.3    |   |  | $      | 32.8    |   |
|                                                      |

BusinessProcess Optimization

In addition to our plan to exit orrestructure certain activities that was formulated in conjunction withthe Acquisition, we continue to redesign and optimize our business andwork processes. Business process optimization expenses, representingemployee severance and related costs, were $1.7 million for the yearended December 31, 2004. We expect to incur business processoptimization expenses of between $10 million to $15 million in2005.

Sales and Marketing Integration

During 2002, werealigned our support for the petroleum, petrochemical, pulp and paperindustries to provide integrated process improvement and watertreatment sales and service to key customers, primarily in NorthAmerica. As a result, we incurred expenses for severance, outplacement,and employee relocations for about 100 personnel.

2001Headcount Reduction

We also implemented a plan during thesecond half of 2001 to reduce costs and improve efficiency throughoutour organization and eliminated approximately 200 positions at OndeoNalco Company. Charges incurred included severance and outsideconsulting costs.

Nalco/Exxon Integration

As a resultof acquiring Exxon's interest in the Nalco/Exxon joint venture in2001, we incurred costs related to integrating the operations of thejoint venture with our other operations, including severance, legal andtax fees.

35

----

Nalco Chemical Company, Aquazur andCalgon Integration

In November 1999, Suez acquired NalcoChemical Company and combined Nalco Chemical Company with Aquazur andCalgon, two other subsidiaries of Suez and historical competitors ofNalco Chemical Company. In June 1999, Degremont, a Suez subsidiary,acquired Calgon Corporation for $425.0 million. Aquazur was developedover a ten-year period through organic growth and acquisitions inEurope. At the time of Nalco Chemical Company's acquisition bySuez, Nalco Chemical Company had annual sales of $1,606.0 million.

Beginning in 2000, we implemented a strategic plan to integrate theglobal operations of Nalco Chemical Company, Calgon and Aquazurresulting in significant nonrecurring business optimization expenses.This integration entailed the combination and realignment of themanufacturing, selling, research and administrative support functionsof the three businesses to achieve optimum efficiencies and synergies.Charges incurred consisted of consulting and other outside services,certain severance expenses, retention payments, training, travel,advertising, the integration of data processing and information systemsand facility closure costs. Activities related to the integration werecompleted at the end of 2002.

Critical Accounting Policies andEstimates

Revenue Recognition

Non-ContractBillings.    We use a variety of shipping terms that determinethe passage of title for our products. We have a policy of monitoringdelivery terms and cut-off dates to ensure that revenue is properlyrecorded. In specific cases, when title passage is based upon ultimatereceipt by the customer (FOB destination) using a third-party carrier,it is necessary to estimate the delivery time and the correspondingimpact on revenue recognition.

We issue credit memos for avariety of reasons, including product returns, billing and priceadjustments. The credit memos are often related to a previous billingevent and may impact the amount of revenue recorded. We monitor creditmemo activity levels and include an estimate as a component of therevenue recognition 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 Other ThanIntangibles

We conduct periodic reviews for idle equipment andreview business plans for possible impairment implications. PORTA-FEEDstainless steel containers, utilized to ship chemicals, representapproximately 7.4% of our property, plant and equipment and aremanaged globally to optimize the delivery of chemicals to customer andcompany sites around the world. Due to their high mobility, there is arisk that PORTA-FEEDs could be damaged or lost in transit. We performcontinuous cycle counts of our PORTA-FEEDs and when such counts areinconsistent with our tracking system, we investigate the discrepancyin order to locate the container. If the PORTA-FEED is not found, wewrite off the asset immediately.

We capitalize qualifying costsincurred in the acquisition and development of software for internaluse, including the costs of the software, materials, consultants,interest, and payroll and payroll-related costs for employees dedicatedto the development. We must use our judgment in determining whether thedirect costs of materials and services consumed in developing orobtaining internal-use computer software and an employee's timeand travel expenses directly associated with developing software arerecoverable and should be capitalized. We base our determination on thenature and the extent of the activity that the employee is performing.A significant portion of our capitalized software costs relates to ourSAP implementation and is subject to our expectation that the acquiredand developed software will be completed and placed in service asanticipated.

Goodwill and Other Intangible Assets

Carrying values of goodwill, customer relationships, trademarks,trade names, patents, developed technology and other intangible assetsare reviewed periodically for possible impairment using a 

36

----

discounted cash flow approach. The estimatesand assumptions we use are consistent with the business plans andestimates we use to manage operations and to make acquisition anddivestiture decisions. The use of different assumptions would increaseor decrease the estimated value of future cash flows and would haveincreased or decreased any impairment charge taken. Future outcomes mayalso differ. If we fail to achieve estimated volume and pricingtargets, experience unfavorable market conditions or achieve resultsthat differ from our estimates, then revenue and cost forecasts may notbe achieved, and we may be required to recognize additional impairmentcharges.

Pensions

Accounting for pensions involves theselection of a discount rate and an expected rate of return that weapply to a market-related value of plan assets. This methodologygenerally reduces the volatility of pension expense that would haveotherwise resulted from changes in the value of the pension plan assetsand pension liability discount rates. In estimating the discount rate,we look to rates of return on high quality, fixed-income investmentsthat are expected to be available through the maturity dates of thepension benefits and receive one of the two highest ratings given by arecognized ratings agency, and we review the assumption with ouractuary.

The assets in the principal domestic pension plan arediversified across equity and fixed income  investments. Theinvestment portfolio has target allocations of approximately 64%equity and 36% fixed  income. Other assets such as realestate, hedge funds and private equity may be used judiciouslyto  enhance portfolio returns and diversification.

Theexpected long-term rate of return is established using historicalmarket data for each asset class  as well as the targetallocation. Historical markets are analyzed and long-term historicalrelationships  between equity and fixed income investments arepreserved 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 mostasset classes, which also contributes to the return assumption. Thetotal  weighted-average return on each asset class supports ourlong-term expected rate of return assumption.

We review ourlong-term rate of return assumptions annually through comparison of ourhistorical actual rates of return with our expectations, consultationwith our actuaries regarding the assumptions used by other largecompanies and consultation with our investment managers regarding theirexpectations for future returns. While we believe our assumptions offuture returns are reasonable and appropriate, significant differencesin our actual experience or significant changes in our assumptions maymaterially affect our pension obligations and our future pensionexpense. The expected long-term rate of return is applied to acalculated value of plan assets, which recognizes changes in the fairvalue of plan assets in a systematic manner over five years indetermining pension expense.

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 Postretirement Benefits

Accountingfor other postretirement benefits requires the selection of a discountrate and health care cost trend rates used to value benefitobligations. In estimating the discount rate, we look to rates ofreturn on high quality, fixed-income investments that receive one ofthe two highest ratings given by a recognized ratings agency and wereview the assumption with our actuary. We develop our estimate of thehealth care cost trend rates through review of our recent health carecost trend experience and discussions with our actuary regarding theexperience of similar companies.

Environmental

Ourbusiness and operations are subject to extensive environmental laws andregulations governing, among other things, air emissions, wastewaterdischarges, the use and handling of 

37

----

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 a potentiallyresponsible party, or PRP, by the Environmental Protection Agency orstate enforcement agencies at three waste sites where some financialcontribution is or may be required. These agencies have also identifiedmany other parties who may be responsible for clean up costs at thewaste disposal sites. Our financial contribution to remediate thesesites is expected to be minor. There has been no significant financialimpact on us up to the present, nor is it anticipated that there willbe in the future, as a result of these matters. We have made and willcontinue to make provisions for these costs if our liability becomesprobable and when costs can be reasonably estimated.

Ouroperations at Garyville, Louisiana are the subject of a civil andcriminal investigation by the United States Environmental ProtectionAgency and U.S. Department of Justice which has included interviewswith current and former employees and document subpoenas. We believethe investigation may relate to the storage of used acid and leakagefrom a wastewater treatment tank, but could include other matters. Wedo not believe that any material contamination resulted from thisstorage and leakage. Although we believe a grand jury has not beenempanelled and we would vigorously contest any criminal claims againstus, we cannot predict the outcome of this investigation. We have alsobeen named as a defendant in a number of lawsuits alleging personalinjury due to exposure to hazardous substances, including multi-partylawsuits alleging personal injury in connection with our products andservices. While we do not believe that based upon present informationthat any of these suits will be material to us, there can be noassurance that these environmental matters could not have, eitherindividually or in the aggregate, a material adverse effect on ourfuture financial condition or results of operations.

Historically, our expenditures relating to environmental complianceand clean up activities have not been significant. The environmentalreserves represent our current estimate of our proportional clean upcosts and are based upon negotiation and agreement with enforcementagencies, our previous experience with respect to clean up activities,detailed review of known conditions, and information about other PRPs.The reserves are not reduced by any possible recoveries from insurancecompanies or other PRPs not specifically identified. Although given theevolving nature of environmental regulations, we cannot determinewhether or not a material effect on future operations is reasonablylikely to occur, we believe that the recorded reserve levels areappropriate estimates of the potential liability. Although settlementswill require future cash outlays, it is not expected that such outlayswill materially impact our liquidity position, although there can be noassurance that such impacts could not occur.

Results ofOperations for 2003

The following 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, 2003 through December31, 2003 has been added to the financial data for the period fromJanuary 1, 2003 through November 3, 2003, to arrive at a twelve-monthcombined period ended December 31, 2003. This combined data may bereferred to as "the year ended December 31,2003" or"2003".

38

----

|                                             |  |                                           |         |                                         |  |                             |         |         |  |        |         |         |  |  |
|---------------------------------------------|--|-------------------------------------------|---------|-----------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                        |  | Successor                                 |         | Predecessor                             |  | Combined                    |
| (dollarsin millions)                        |  | November 4, 2003through December 31, 2003 |         | January 1, 2003 throughNovember 3, 2003 |  | Year Ended December 31,2003 |
| Netsales                                    |  | $                                         | 460.1   |                                    |  | $                           | 2,306.5 |    |  | $      | 2,766.6 |    |
| Operatingcosts and expenses:                |  |
| Cost of productsold                         |  |                                      | 248.2   |                                    |  |                        | 1,114.6 |    |  |   | 1,362.8 |    |
| Selling,administrative and researchexpenses |  |                                      | 176.4   |                                    |  |                        | 900.7   |    |  |   | 1,077.1 |    |
| 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  | )  |
|                                             |

ExecutiveLevel Overview

Our growth and cost-reduction results in 2004matched with our priorities of reinvigorating organic growth andimproving our cost structure.

For the year ended December 31,2004, our nominal sales grew 9.6% to $3.03 billion from the 2003base of $2.77 billion. On an organic basis (after adjusting for thefavorable effects of changes in foreign currency translation rates andthe net impact of acquisitions and divestitures), sales grew5.2%.

During 2004, we also exceeded our 2004 costreduction objective of $75 million – delivering savings of $88million, with a full-year run rate impact of $110 million. To reach ourcost objectives, the Company eliminated 380 positions from functionalsupport areas during the past 14 months, and reinvested by adding 230sales engineers and service technicians to our customer-facingteams.

Our net loss was $138.8 million for the year endedDecember 31, 2004 versus a loss of $182.3 million for 2003. Results inboth years were impacted by significant special items. Net income wasreduced in 2004 by a purchase accounting expense of $122.3 million forin-process research and development and by another $55.5 million forexpenses related to the Acquisition, the initial public offering ofcommon stock by Nalco Holding Company, and business optimizationexpenses. In 2003, a $244.4 million goodwill impairment charge reducednet income, as did another $37.9 million for other Acquisition-relatedcharges and business optimization expenses. Net interest expense in2004 was $166.0 million higher than in 2003 as a result of leverageestablished during our November 2003 Acquisition by our principalshareholders.

Nominal sales grew across Nalco's businesssegments during the year. Strong organic sales growth was alsosupported by foreign currency exchange benefits – particularlythe increase in value of the euro compared to the U.S. dollar. EnergyServices led sales growth with an 11.8% increase (9.3%organic), followed by Industrial and Institutional Services at9.4% growth (5.2% organic), and Paper Services at6.5% (2.1% organic). Other segment sales grew15.0%, primarily as a result of sales brought to our KatayamaNalco joint venture in Japan by partner Katayama Chemical Inc. Organicsales in this segment declined 1.0%, mainly as a result of adecision made in late 2003 to reduce sales to a large, low-profitcustomer.

Our 8.5% organic sales increase in the threemonths ended December 31, 2004 marked the fourth straight quarter ofimproved results. On an organic basis, sales grew 3.1% in thefirst quarter, 4.3% in the second quarter and 4.9% in thethird quarter. Looking historically, it is unusual to have fourth

39

----

quarter sales outpace the third quarter. Webelieve we gained less than $10 million in sales in the fourth quarterfrom customers in Europe purchasing early to avoid risking anypotential complications from our conversion to a SAP system in thatregion on January 1, 2005. We also recorded some sales in the fourthquarter in the sugar industry that more typically fall into the thirdquarter – this due to a late harvest and start tosugar-processing campaigns. While we are pleased with the strength ofsales in the three months ended December 31, 2004, we are not yetconvinced that sales growth at that level is sustainable.

Whether looking from a quarterly or annual perspective, our growthwas geographically widespread during 2004. On a nominal sales dollarbasis, sales in North America grew just over 4%. In every otherregion, nominal sales grew double-digits. Europe was up 16% withcurrency impacts playing a key role in growth. Pacific region salesincreased 15%, led by strong growth in China, India and inJapan, where our new Katayama Nalco joint venture is off to a goodstart. In Latin America, sales grew 12% nominally.

NorthAmerica sales now represent 48.4% of Company sales, followed byEurope at 32.6%, the Pacific at 11.7% and Latin Americaat 7.2%. We continue to expand our global business and seedevelopments in China, India, Russia, Eastern Europe and parts of LatinAmerica as key components of our growth plans. We expect growth inthese markets to outpace growth in the United States and Canada on anongoing basis.

Our strong sales growth results from severalfactors.

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | First, the general economycontinues to improve. While we are not a cyclical business, it isalways better for us to operate in an environment where our customersare doing well. This improvement includes stabilization in the NorthAmerican paper market, which had been a drag on growth during the pastseveral years. However, customer performance improvement appearedwidespread, across multiple industries and all geographies. |

|              |                                                                                                                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Second, we reinvested in the business byadding and training new sales engineers and service technicians. Manyof these new employees are supporting high growth rates in the emergingmarkets and in faster growing industry segments such as oilfieldproduction, and food and beverageapplications. |

|              |                                                                                                                                                                                                                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Third, the reorganizationof our sales and marketing organization along the lines of the globalindustry segments we serve has provided sharper focus and improvedgrowth strategies. This reorganization, which began in 2003, wasinitially distracting. However, it really began to positively impactresults in 2004. |

|              |                                                                                                                                                                                                                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Fourth, we were able todevelop solutions that did not require the raw materials that were inshort supply where some of our competitors are lacking this researchand development capability. For example, we were able to displacenearly 40% of our acrylic acid requirements as this raw materialbecame in short supply in late2004. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Finally, we introduced a number ofproprietary technologies that brought true innovation to theapplications or industry segments where they are used. New products andtechnologies are an important factor in our overall growth strategy,helping to support Nalco's image as an innovative problem solverand solutions provider. These innovations often help carry and extendrelated products that are further down the life-cycle curve. |

Sales of 3D TRASAR cooling water stress management systems continueto run ahead of plan after being launched in North America in thesecond quarter. Training of sales engineers for this best-in-classcooling water technology is now underway in other regions. Developmentand deployment of FREEFLOW Low Dose Hydrate Inhibitors (LDHI) helpedNalco expand its flow assurance and asset integrity leadership atDeepwater oil and gas exploration and production sites. A new line ofgrade-based SMART Solutions technologies is being launched in the paperindustry to improve customer operating efficiencies and finishedproduct quality.

While sales were good during 2004, we alsofaced numerous challenges we need to continue to address. We clearlynoticed the impact of raw material cost pressures, significantlyelevated freight 

40

----

costs and mix issues. Pricing improvementonly partially offset these issues. We made progress on obtaining priceincreases during 2004, but clearly not enough progress to keep up withthe pace of cost increases. A number of price increases accepted in thefourth quarter 2004 took effect on January 1 and February 1, 2005. Inlate February 2005, we announced an additional round of price increasesin our Industrial and Institutional Services division. We anticipatecontinued cost increases so our prices will also need to continue torise – and with more discipline and speed than we showed at timesin 2004.

Our performance, combined with some one-time events,allowed us to pay more than $400 million toward our debt. This includesa reduction in our senior discount note debt of $162.3 million that waspaid with a portion of the proceeds from the initial public offering ofcommon stock of Nalco Holding Company. On a full-year basis, thisreduction was more than offset by the January 2004 issuance of seniordiscount notes, the net proceeds of which were used to pay a return ofcapital distribution of $446.9 million.

Debt repayments during2004 were primarily achieved through cash provided by operatingactivities of $237.5 million, of which nearly 40% was used tofund net capital expenditures of $91.8 million. In addition, areduction in cash on hand of $66.7 million, a purchase price adjustmentfor the Acquisition of $25.3 million and a capital injection frommanagement of $9.3 million contributed to debt reduction. Cashgenerated by operating activities for 2004 was reduced by a $35.0million payment to settle a monitoring fee arrangement with ourprincipal shareholders.

2005 Expectations

Even with a good year and good fourth quarter, our expectationsremain the same: 5% base business organic sales growth supportedby additional growth as we begin strategic development of alternatechannels. We expect alternate channels to be adding to our growth rateat a 2% annual run-rate by year-end 2006. We also intend tocontinue delivering double-digit EBITDA growth and to pay down wellover $200 million in debt during the year. We have set an improvedgrowth path for Nalco and intend to continue moving in thisdirection.

The third quarter of 2004, at 4.9% organicgrowth, was just shy of our 5% target. While the fourth quartersurpassed our target with 8.5% organic growth, we believe asignificant part of this above-target performance was likely drawn fromthe first quarter of 2005. We believe customers bought in advance ofour information systems conversion in Europe, and may have also boughtahead in the face of raw material shortages and impending priceincreases. Therefore, we believe that a 5% growth target for ourbase business is still correct.

Nalco successfully completedconversion of the information system in Europe to SAP in early January.This will substantially lower information technology capital demands in2005. The decline in information technology capital spending will beoffset by increased investment in our supply chain and particularly inproviding reactor capacity for some fast-growing product lines. Intotal, our capital spending is expected to continue in the range of$100 million.

Raw material supply shortages and capacityconstraints on a few polymer lines continue to challenge Nalco'ssupply chain, driving higher-than-normal costs. Rapid growth in demandin the third and fourth quarters of 2004 contributed to capacityconstraints for some product lines, although we were able to meet thisrapid demand growth through substantial productivity improvements.

We intend to develop our growth by focusing on select geographies,market segments and technologies that enable faster-than-market growthrates.

Cost control actions will also continue to move forward.We expect to use work process redesign to drive an added cost savingsbenefit of $75 million in 2005. These savings will more than offsetincreased salaries and benefits, one-time and inflationary costincreases, and investments in sales engineers, service technicians andresearch programs. In addition, we expect a bottom-line benefit fromcontinuing sales growth and margin recapture.

Our effective taxrate should be around 50% for 2005. This high effective tax rateresults from the normal repatriation of earnings from our non-U.S.subsidiaries to pay down our Acquisition debt in the United States.

41

----

As for debt repayment expectations for2005, we intend to use our Free Cash Flow to continue to reduce ouroutstanding debt. We intend to focus these payments first on Term LoanA, on which we are paying 250 basis points over LIBOR, beforeproceeding to pay down Term Loan B at 200 basis points over LIBOR. Weare not able to begin reducing some of our higher rate debt until wehave extinguished these term loans. Our current weighted average costof debt is 6.7% with $1.4 billion in variable rate debt and $2.0billion in fixed rate obligations.

Results of Operations

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

Net sales for the years ended December 31, 2004 andDecember 31, 2003 may be compared as follows:

|                                       |  |                  |         |                   |  |                                                |         |                     |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |      |          |  |  |
|---------------------------------------|--|------------------|---------|-------------------|--|------------------------------------------------|---------|---------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|----------|--|--|
|                                  |  | YearEnded        |         |              |  | Attributable to Changesinthe Following Factors |
| (dollars inmillions)                  |  | December 31,2004 |         | December 31, 2003 |  | %Change                                        |         | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial& InstitutionalServices |  | $                | 1,402.0 |              |  | $                                              | 1,282.1 |                |  |                      | 9.4  | %  |  |   | 4.4 | %  |  |   | (0.2 | )%  |  |   | 5.2  | %   |
| EnergyServices                        |  |             | 805.4   |              |  |                                           | 720.1   |                |  |                      | 11.8 | %  |  |   | 3.7 | %  |  |   | (1.2 | )%  |  |   | 9.3  | %   |
| PaperServices                         |  |             | 663.0   |              |  |                                           | 622.8   |                |  |                      | 6.5  | %  |  |   | 3.8 | %  |  |   | 0.6  | %   |  |   | 2.1  | %   |
| Other                                 |  |             | 162.9   |              |  |                                           | 141.6   |                |  |                      | 15.0 | %  |  |   | 4.2 | %  |  |   | 11.8 | %   |  |   | (1.0 | )%  |
| 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 yearended December 31, 2003. After adjusting for the favorable effects ofchanges in 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 in thegeneral economy. |

|              |                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The addition of newsales engineers and service technicians, many of whom are supportinghigh growth rates in the emerging markets and in faster growingindustry segments such as oilfield production and food and beverageapplications. |

|              |                                                                                                                                                                                                      |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The reorganization of theCompany's sales and marketing organization along the lines of theglobal industry segments served, which was initiated in 2003 and beganto positively impact results in2004. |

|              |                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's ability todevelop solutions that did not require raw materials that were in shortsupply, while some of the Company's competitors lacked thisresearch and development capability. |

|              |                                                                                                                                              |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Theintroduction of several proprietary technologies that brought trueinnovation to the applications or industry segments where they areused. |

The Energy Services division reported organic growth insales of 9.3% over last year, with double-digit improvementsposted by both of its upstream business groups. Led by its globalmining business, the Industrial and Institutional Services divisionreported a 5.2% organic increase in sales. Paper Servicesdivision sales were up 2.1% on an organic basis compared to ayear ago, mainly due to new business gained and good growth in thePacific region, Europe and Latin America, offset by the lingeringeffect of price and contract concessions in North America in 2003. Theunfavorable organic growth in "other" ismainly due to the decision made last year to reduce certain low-marginbusiness with a major customer, slightly offset by organic growth inIndia. The effect of this decision also reduced the organic growth oftotal net sales by 0.3%.

Gross profit, definedas the difference between net sales and costs of products sold, of$1,481.1 million for the year ended December 31, 2004 increased by$77.3 million, or 5.5%, over the $1,403.8 

42

----

million reported for the year ended December31, 2003. Adjusted for the favorable effect of changes in foreigncurrency translation rates and the net unfavorable impact ofacquisitions and divestitures, gross profit increased by $18.9 million,or 1.3%. Significant factors contributing to the favorableorganic change in gross profit were the aforementioned increase insales volumes, which favorably impacted gross profit by approximately$79.5 million, but which was partly offset by margin erosion mainly dueto product mix ($48.0 million), raw material cost increases ($20.3million) and freight increases ($7.9 million). Gross profit margin forthe year ended December 31, 2004 declined to 48.8% from50.7% for the same period last year.

Selling,administrative, and research expenses for the year ended December31, 2004 of $1,065.4 million decreased by $11.7 million, or1.1%, from the $1,077.1 million for the year ended December 31,2003. Adjusted for the unfavorable effects of changes in foreigncurrency translation rates and the impact of acquisitions anddivestitures, selling, administrative, and research expenses decreasedby $52.9 million, or 4.9%, primarily due to spending reductionsinitiatives launched in the fourth quarter 2003 and tightened spendingcontrols in 2004.

Impairment of goodwill of $244.4million was recorded by the Predecessor during the period from January1, 2003 through November 3, 2003, and resulted from thePredecessor's evaluation of its goodwill, based on the purchaseprice for the Acquisition and the fair value of its assets andliabilities.

Amortization of intangible assets was$96.3 million and $84.3 million for the year ended December 31, 2004and 2003, respectively. The increase resulted from higher amortizationof intangible assets as a result of the Acquisition.

In-process research and development was a one-time chargeof $122.3 million recorded during the year ended December 31, 2004, asa result of final purchase accounting entries related to theAcquisition. The value of purchased IPR&D was comprised of fiveongoing development 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.

Business optimization expenses of $1.7 million for the yearended December 31, 2004 were attributable to employee severance andrelated costs associated with work process redesign efforts. Businessoptimization expenses of $21.1 million for the year ended December 31,2003 were mostly attributable to the Predecessor's sales andmarketing business realignment launched in 2002.

Otherincome (expense), net was an expense of $57.0 million and $20.1million for the year ended December 31, 2004 and 2003, respectively.This $36.9 million increase is primarily attributable to the payment ofa $35.0 million fee in 2004 for the termination of monitoring servicesprovided by affiliates of the Sponsors under a Monitoring Fee Agreemententered into on the date of the Acquisition. The Company also incurreda $13.7 million loss resulting from the early repayment of seniordiscount notes with an accreted value of $162.3 million, using proceedsfrom the initial public offering of common stock. In addition, Sponsormonitoring fees were $11.2 million for the year ended December 31,2004, whereas Suez management fees paid by the Predecessor and Sponsormonitoring fees paid by the Successor were a combined $4.7 million forthe year ended December 31, 2003. These unfavorable variations fromlast year were partly offset by a $10.4 million charge incurred by thePredecessor in 2003 resulting from the discontinuance of hedgeaccounting for an interest rate swap and a $5.3 million loss on thesale of the Predecessor's South African subsidiary.

Net interest expense, defined as the combination ofinterest income and interest expense, of $240.6 million for the yearended December 31, 2004 increased by $166.0 million from the $74.6million reported for the year ended December 31, 2003. The increase isdue primarily to the interest charges incurred on the new debt used tofinance the Acquisition and the issuance of the senior discount notesby our subsidiary, Nalco Finance Holdings LLC, in January 2004.

The effective tax rate, excluding the impact of theaforementioned charge for purchased IPR&D, was 153.2% forthe year ended December 31, 2004 compared to an effective tax rate in2003 of 47.7%, excluding the impact of the goodwill impairment.The increase in the effective tax rate is primarily caused by onetimetax costs of restructuring to more efficiently repatriate certainforeign earnings.

43

----

|                                               |  |                  |         |                   |  |        |         |         |  |  |
|-----------------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                          |  | Yearended        |
| (dollars inmillions)                          |  | December 31,2004 |         | December 31, 2003 |
| Earnings (loss)before income taxes asreported |  | $                | (102.2  | )            |  | $      | (117.8  | )  |
| Addback:                                      |  |
| In-processR&D                             |  |             | 122.3   |              |  |   | — |    |
| Goodwillimpairment                            |  |             | — |              |  |   | 244.4   |    |
| Adjustedearnings (loss) before incometaxes    |  | $                | 20.1    |              |  | $      | 126.6   |    |
| Incometax provision (benefit) asreported      |  | $                | 30.8    |              |  | $      | 60.4    |    |
| Effectiveincome taxrate                       |  |             | 153.2   | %            |  |   | 47.7    | %  |
|                                               |

OnOctober 22, 2004, President Bush signed into law the American JobsCreation Act of 2004. The Act includes a onetime incentive for Americancompanies to repatriate earnings from their foreign subsidiaries andinvest those earnings in the United States. This incentive takes theform of an 85% dividends received deduction for certaindividends from controlled foreign corporations. Under this legislation,the Company could repatriate in 2005 as much as $500 million ofoverseas earnings that are eligible for the 85% dividendsreceived deduction. If we were to do so, the $500 million of dividendswould be subject to U.S. income tax (and potentially foreignwithholding taxes), thereby potentially increasing our effective taxrate. The amount of dividends we will repatriate and the related taxexpense have not yet been determined.

Minority interestexpense was $1.7 million higher than the $4.1 million for the yearended December 31, 2003, resulting mostly from higher earnings reportedby all of our majority-owned subsidiaries and the addition of our newjoint venture with Katayama Chemical Inc. These increases were partlyoffset by the impact of the sale of the Predecessor's SouthAfrican subsidiary in 2003.

44

----

Year EndedDecember 31, 2003 Compared to the Year Ended December 31,2002

Net sales for the years ended December 31, 2003 andDecember 31, 2002 may be compared asfollows:

|                                       |  |                   |         |         |  |                                                 |         |                           |  |         |     |         |  |        |      |         |  |        |         |          |  |        |      |          |  |  |
|---------------------------------------|--|-------------------|---------|---------|--|-------------------------------------------------|---------|---------------------------|--|---------|-----|---------|--|--------|------|---------|--|--------|---------|----------|--|--------|------|----------|--|--|
| (dollarsin millions)                  |  | YearEnded         |         |    |  | Attributable to Changes inthe Following Factors |
| December31, 2003                      |  | December 31, 2002 |         | %Change |  | CurrencyTranslation                             |         | Acquisitions/Divestitures |  | Organic |     |
| Industrial& InstitutionalServices |  | $                 | 1,282.1 |    |  | $                                               | 1,215.9 |                      |  |    | 5.4 | %  |  |   | 6.3  | %  |  |   | (0.3    | )%  |  |   | (0.6 | )%  |
| EnergyServices                        |  |              | 720.1   |    |  |                                            | 682.5   |                      |  |    | 5.5 | %  |  |   | 2.9  | %  |  |   | — |     |  |   | 2.6  | %   |
| PaperServices                         |  |              | 622.8   |    |  |                                            | 605.8   |                      |  |    | 2.8 | %  |  |   | 4.5  | %  |  |   | 1.3     | %   |  |   | (3.0 | )%  |
| Other                                 |  |              | 141.6   |    |  |                                            | 140.1   |                      |  |    | 1.1 | %  |  |   | 11.9 | %  |  |   | (14.0   | )%  |  |   | 3.2  | %   |
| Netsales                              |  | $                 | 2,766.6 |    |  | $                                               | 2,644.3 |                      |  |    | 4.6 | %  |  |   | 5.3  | %  |  |   | (0.6    | )%  |  |   | (0.1 | )%  |
|                                       |

Netsales for the year ended December 31, 2003 were $2,766.6 million,a $122.3 million, or 4.6%, increase over the $2,644.3 millionreported for the year ended December 31, 2002. After adjusting for thefavorable effects of changes in foreign currency translation rates, netsales were down $18.3 million, or 0.7%, as a result of a $14.7million net decrease attributable to divestitures and acquisitions, aswell as a slight operational decrease of $3.6 million. In addition tothe unspecified volume and price reductions that resulted from thedistractions to our sales force and customers caused by the salesreorganizations in North America and the Pacific region and the sale ofthe Company, specific factors impacting the operational decreaseincluded a $16.2 million sales decrease in Venezuela caused by anational strike due to political turmoil and a $15.0 million decreasein sales due to paper mill shutdowns in North America caused bycustomer bankruptcies and lower demand. These shortfalls were offset bypositive growth in the upstream business of Energy Services, the GlobalMining Business and the Emerging Markets regions of Industrial andInstitutional Services.

Gross profit**,**defined asthe difference between net sales and costs of products sold, of$1,403.8 million for the year ended December 31, 2003 increased by$25.6 million, or 1.9%, over the $1,378.2 million reported forthe year ended December 31, 2002. Adjusted for the favorable effects ofchanges in foreign currency translation rates, gross profit decreasedby $46.5 million, or 3.4%. Nearly half of this decline wasattributable to expensing a portion of the adjustment made to increaseinventories to fair value at the date of the Acquisition. Otherspecific factors that contributed to the decline in gross profitincluded the net effect of divestitures and acquisitions ($6.4million), the effect of pricing concessions made to Paper Servicescustomers in North America ($2.5 million), unfavorable mix resultingfrom increased sales of low margin commodity polymers by Paper Servicesin North America ($1.9 million), and unfavorable mix between upstreamand downstream sales by Energy Services ($3.1 million). Gross profitwas also negatively impacted by inventory disposals and PORTA-FEEDwrite-offs of $1.8 million and $1.0 million, respectively. Lower salesvolumes accounted for $1.9 million of the decrease in gross profit.Other factors contributing to the gross profit decline includedunfavorable mix caused by an increase in legislated Synfuel sales inmining markets served by Industrial and Institutional Services, as wellas general price pressure in most markets. Gross profit margin for theyear ended December 31, 2003 declined to 50.7% from 52.1%for the same period last year, largely as a result of theaforementioned factors. The expensing of a portion of the adjustmentmade to increase inventories to fair value at the date of theAcquisition accounted for more than half of the change in gross profitmargin.

Selling, administrative, and research expensesfor the year ended December 31, 2003 of $1,077.1 million increased by$85.1 million, or 8.6%, from $992.0 million for the year endedDecember 31, 2002. Adjusted for the unfavorable effects of changes inforeign currency translation rates, selling, administrative, andresearch expenses increased by $38.6 million, or 3.9%, primarilydue to the non-recurring costs associated with the sale of the Companyand a non-cash write-off of an asset by the Predecessor.

45

----

Business optimization expensesfor the year ended December 31, 2003 and 2002 were $21.1 million and$32.8 million, respectively. The decrease is due to the completion ofvarious integration processes in 2002, partially offset by costsassociated with the sales and marketing business realignment launchedin 2002.

Amortization of intangible assets was $84.3million and $89.2 million for the year ended December 31, 2003 and2002, respectively. The decrease resulted from the preliminary purchaseaccounting adjustments as a result of the Acquisition.

Goodwill impairment of $244.4 million was recorded by thePredecessor during the period from January 1, 2003 through November 3,2003 in accordance with Statement of Financial Accounting Standards(SFAS) No. 142, Goodwill and Other Intangible Assets. Goodwillwas evaluated for impairment based on the purchase price for thePredecessor.

Other income (expense), net was a netexpense of $20.1 million and a net income of $3.4 million for the yearended December 31, 2003 and 2002, respectively. This change wasprimarily attributable to a $10.4 million charge in 2003 resulting fromthe Predecessor's termination of an interest rate swap due to theAcquisition and a $5.3 million loss on the sale of thePredecessor's South African subsidiary in 2003, and a $12.4million gain on sale of the additives business in 2002. Theseunfavorable variations compared to the year ended December 31, 2002were partially offset by favorable changes in franchise taxes andforeign currency exchange adjustments.

Net interestexpense, defined as the combination of interest income andinterest expense, of $74.6 million for the year ended December 31, 2003increased by $43.9 million from the $30.7 million reported for the yearended December 31, 2002. The increase is due primarily to the interestcharges incurred on the new debt used to finance the acquisition of theCompany.

The effective tax rate**,**excluding theimpact of the aforementioned goodwill impairment charge, was 47.7% for the year ended December 31, 2003 compared to an effectivetax rate of 44.4% for the year ended December 31, 2002. Theeffective tax rate increased primarily due to the sale of thePredecessor's South African subsidiary, which created taxexpense, despite a pretax loss under U.S. GAAP.

|                                               |  |                  |        |                   |  |        |         |         |  |  |  |  |  |  |
|-----------------------------------------------|--|------------------|--------|-------------------|--|--------|---------|---------|--|--|--|--|--|--|
|                                          |  | Yearended        |        |
| (dollarsin millions)                          |  | December 31,2003 |        | December 31, 2002 |  |
| Earnings (loss)before income taxes asreported |  | $                | (117.8 | )            |  | $      | 236.9   |    |  |
| Addback:                                      |  |
| Goodwillimpairment                            |  |             | 244.4  |              |  |   | — |    |  |
| Adjustedearnings (loss) before incometaxes    |  | $                | 126.6  |              |  | $      | 236.9   |    |  |
| Incometax provision (benefit) asreported      |  | $                | 60.4   |              |  | $      | 105.2   |    |  |
| Effectiveincome taxrate                       |  |             | 47.7   | %            |  |   | 44.4    | %  |  |
|                                               |

Minorityinterest expense was $0.8 million higher than the $3.3 million forthe year ended December 31, 2002, reflecting higher earnings reportedby majority-owned subsidiaries in Saudi Arabia and South Africa.

Liquidity and Capital Resources

Operatingactivities.    Historically, the Company's main source ofliquidity has been its solid cash flow generated by operatingactivities. For the year ended December 31, 2004, cash provided byoperating activities was $237.5 million, a $4.4 million increase fromthe same period last year, despite significantly higher interestpayments in 2004 as a result of the Acquisition and higher workingcapital requirements.

For the year ended December 31, 2003, cashprovided by operating activities was $233.1 million (comprised of $88.7million for the period from November 4, 2003 through December 31, 2003and 

46

----

$144.4 million for the Predecessor during theperiod from January 1, 2003 through November 3, 2003), a decrease of$90.0 million from the year ended December 31, 2002. The decrease wasprimarily the result of higher working capital requirements in 2003,most notably income taxes payable to the Predecessor'sshareholder. The Predecessor also had $87.0 million of net cashoutflows for its accounts receivable securitization program during2003. This program was terminated in October 2003. During 2002, thePredecessor contributed $90.0 million to the principal domestic pensionplan.

Investing activities.    Cash used forinvesting activities was $72.2 million for the year ended December 31,2004. Net property additions of $91.8 million were partly offset by a$25.3 million purchase price adjustment related to the Acquisition.Slightly more than one-third of the capital spending was attributableto the Company's implementation of a common information systemsplatform in North America and Europe.

For the year endedDecember 31, 2003, cash used in investing activities was $4,157.4million (comprised of $4,145.1 million for the period from November 4,2003 through December 31, 2003 and $12.3 million for the Predecessorduring the period from January 1, 2003 through November 3, 2003), ofwhich $4,127.1 million was related to the Acquisition. Net propertyadditions were $101.2 million in 2003, slightly lower than the $108.3million for the year ended December 31, 2002. Business acquisitions,net of divestitures, was $10.1 million for the year ended December 31,2003. Business acquisitions in 2003 included $12.5 million to acquirethe remaining interest in the Predecessor's 40%-ownedSwiss affiliate and $10.9 million for the purchase of a company in theU.K. from a related Suez company. Net proceeds from divestiturestotaled $13.3 million during the year ended December 31, 2003, whichwas mostly attributable to the sale of the Predecessor's SouthAfrican subsidiary. Net cash received by the Predecessor from notesreceivable from related parties was $98.3 million during 2003.

For the year ended December 31, 2002, cash used in investingactivities was $126.1 million. During the year, the Predecessorreceived net proceeds of $12.8 million from the sale of a business, andit purchased two businesses for $10.1 million, net of cash acquired.The Predecessor made net cash advances of $36.2 million to relatedparties in 2002.

Financing activities.    Net cashused for financing activities totaled $232.8 million during the yearended December 31, 2004. Capital distributions, net of capitalcontributions and net proceeds from the Company's initial publicoffering of common stock, were $261.7 million. Proceeds from additionalborrowings, net of debt repayments and a redemption premium resultingfrom the early repayment of senior discount notes, were $31.0million.

In January 2004, the Company used the net proceeds fromthe issuance of senior discount notes to make a return of capitaldistribution of $446.9 million to its sole shareholder.

InNovember 2004, the Company completed an initial public offering of 51.1million shares of its common stock, at a price of $15.00 per share. Netproceeds from the offering, after deducting underwriting discounts andoffering expenses, were $720.5 million. Approximately $544.6 million ofthe proceeds were used to pay a return of capital distribution that wasdeclared immediately prior to the consummation of the offering to NalcoLLC, the sole stockholder of the Company on the record date of thedistribution. The remaining $175.9 million of the net proceeds was usedtoward the redemption of a portion of the senior discount notes due2014, including the payment of the applicable redemption premium of$14.6 million.

Net cash provided by financing activities totaled$4,130.3 million during the period from November 4, 2003 throughDecember 31, 2003. This was primarily comprised of net borrowings of$3,221.7 million and a $1,001.9 million capital contribution from theCompany's unitholder which were used to finance the acquisitionof the Company and to pay $92.4 million of costs to obtain the debtfinancing. Net cash used by the Predecessor for financing activitiesduring the period from January 1, 2003 through November 3, 2003 totaled$234.2 million, which was attributable to a net decrease in borrowingsof $280.4 million and dividends paid of $29.0 million, partly offset bycapital contributions of $77.7 million.

47

----

During the year ended December 31, 2002,net cash used by the Predecessor for financing activities totaled$232.7 million. A net decrease in borrowings of $255.4 million anddividend payments of $122.3 million were partly offset by proceeds of$144.8 million from the sale and leaseback of the corporatefacility.

Prior to the Transactions, Ondeo Nalco Group obtainedshort-term financing in the United States from Suez Finance LP, afinance company operated by Suez to provide funding to its NorthAmerican subsidiaries, rather than from external sources. In December2001, Ondeo Nalco Group entered into a $150.0 million off-balance sheetaccounts receivable securitization facility that allowed it toperiodically transfer undivided interests in most of its U.S. tradereceivables. This facility was terminated in October 2003 inanticipation of the sale of Ondeo Nalco Group by Suez.

Since theTransactions, we have been highly leveraged. Our liquidity requirementsare significant, primarily due to debt service requirements as well asresearch and development and capital investment. Our primary source ofliquidity will continue to be cash flow generated from operations, butwe also have availability under a $250 million revolving creditfacility and a $100 million receivables facility, in each case subjectto certain conditions. We believe that our financial position andfinancing structure will provide flexibility in worldwide financingactivities and permit us to respond to changing conditions in creditmarkets.

Senior credit facilities.    Our revolvingcredit facility is part of our senior credit facilities that wereentered into on November 4, 2003. Our senior credit facilities alsoinclude a $300 million term loan A facility (which includes an€88.0 million tranche) maturing on November 4, 2009 and a$1,300 million term loan B facility maturing on November 4, 2010.Borrowings under the senior credit facilities bear interest at afloating base rate plus an applicable margin. The applicable margin forborrowings under the revolving credit facility and the term loan Afacility is 1.50% with respect to base rate borrowings and2.50% with respect to LIBOR or Eurocurrency borrowings and maybe reduced subject to our attaining certain leverage ratios. Theapplicable margin for borrowings under the term loan B facility is1.50% with respect to base rate borrowings and 2.00% withrespect to LIBOR or Eurocurrency borrowings. The applicable margin forborrowings under the term loan B facility is not subject toadjustment.

In addition to paying interest on outstandingprincipal under the senior credit facilities, we are required to pay acommitment fee to the lenders under the revolving credit facility inrespect of the unutilized commitments at a rate equal to 0.50%.We also pay customary letter of credit fees.

The term loan Afacility will amortize each year in quarterly amounts at a rate of5% per annum in year one, 10% per annum in year two,15% per annum in year three, 20% per annum in year fourand 25% per annum in each of years five and six. In addition tothe $15.3 million of scheduled payments due for the year ended December31, 2004, we repaid an additional $82.6 million using cash generatedfrom operations and proceeds from the accounts receivablesecuritization facility.

The term loan B facility will amortizeeach year in an amount equal to 1% per annum in equal quarterlyinstallments for the first six years and nine months, with theremaining amount payable on November 4, 2010. In addition to the $13.0million of scheduled payments due for the year ended December 31, 2004,we repaid an additional $206.0 million using cash generated fromoperations and proceeds from the accounts receivable securitizationfacility.

Principal amounts outstanding under the revolvingcredit facility will be due and payable in full at maturity on November4, 2009. As of December 31, 2004, there were no outstanding borrowingsunder the revolving credit facility. We repaid $15.0 million ofrevolving facility loans during the year ended December 31, 2004 usingcash generated from operations.

The senior credit facilitiescontain a number of covenants that, among other things, restrict,subject to certain exceptions, our ability and our subsidiaries'ability, including Nalco Company, to sell assets, incur additionalindebtedness or issue preferred stock, repay other indebtedness, paydividends and distributions or repurchase certain capital stock, createliens on assets, make investments, loans or advances, make certainacquisitions, engage in mergers or consolidations, enter into sale andleaseback transactions, engage in certain transactions with affiliates,amend certain material agreements 

48

----

governing our indebtedness, change thebusiness conducted by us and our subsidiaries (including Nalco Company)and enter into hedging agreements. In addition, the senior creditfacilities require Nalco Company to maintain the following financialcovenants: a maximum total leverage ratio, a minimum interest coverageratio and a maximum capital expenditures limitation. We were incompliance with all covenants at December 31, 2004.

Seniordiscount notes, senior notes and senior subordinated notes.    Aspart of the Transactions, in November 2003, Nalco Company issued $665million aggregate principal amount of 73⁄4% U.S.dollar-denominated senior notes due 2011, €200 millionaggregate principal amount of 73⁄4% euro-denominated seniornotes due 2011, $465 million aggregate principal amount of8 7/8% U.S. dollar-denominated seniorsubordinated notes due 2013 and €200 million aggregateprincipal amount of 9% euro-denominated senior subordinatednotes due 2013.

On January 21, 2004, our subsidiaries, NalcoFinance Holdings 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 willaccrue on the notes in the form of an increase in the accreted value ofsuch notes. The accreted value of each note will increase from the dateof issuance until February 1, 2009 at a rate of 9.0% per annum,reflecting the accrual of non-cash interest, such that the accretedvalue will equal the principal amount at maturity on February 1, 2009.Cash interest payments on the notes will be due and payable beginningin 2009. Our primary source of liquidity for such payments will be cashflow generated from the operations of subsidiaries, including NalcoHoldings and Nalco Company. However, the terms of Nalco Company'ssenior credit agreement fully prohibit Nalco Holdings and our othersubsidiaries from paying dividends or otherwise transferring assets tothe issuers. In addition, the terms of certain of the indenturesgoverning the existing senior notes and senior subordinated notes ofNalco Company significantly restrict Nalco Company and our othersubsidiaries from paying dividends, making distributions and otherwisetransferring assets to the issuers of the senior discount notes. Inaddition, as a condition to making such payments to the issuers basedon such formula, Nalco Holdings must have an Adjusted EBITDA tointerest expense ratio of at least 2.0 to 1 after giving effect to anysuch payments. Notwithstanding such restrictions, such indenturespermit an aggregate of $50.0 million of such payments to be madewhether or not there is availability under the formula or theconditions to its use are met.

In December 2004, Nalco FinanceHoldings LLC and Nalco Finance Holdings Inc. redeemed a portion of thesenior discount 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 to redeem thenotes. After the partial redemption, the aggregate principal amount atmaturity of the notes declined to $460.8 million from $694.0million.

The indentures governing the senior discount notes, thesenior notes and senior subordinated notes limit our ability and theability of our restricted subsidiaries to:

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

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | pay dividendson or make other distributions or repurchase certain capital stock; |

|              |                           |
|--------------|---------------------------|
| •  | make certain investments; |

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

|              |                                                                  |
|--------------|------------------------------------------------------------------|
| •  | limit dividends or other paymentsby our restricted subsidiaries; |

|              |                                                  |
|--------------|--------------------------------------------------|
| •  | use assets as security in othertransactions; and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | sellcertain assets or merge with or into other companies. |

Subject tocertain exceptions, the indentures governing the senior discount notes,the senior notes and senior subordinated notes permit the Company andour restricted subsidiaries to incur additional indebtedness, includingsecured indebtedness.

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 

49

----

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 used todetermine 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.

Adjusted EBITDA is calculated asfollows:

|                                  |
|----------------------------------|
|                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                             |  | Successor |  | Successor |  | Predecessor |  | Predecessor |
| (dollarsin millions)             |  | Year ended December31, 2004 |  | November 4, 2003 through December 31,2003 |  | January 1, 2003 through November 3,2003 |  | Year ended December 31,2002 |
| Net income(loss)                 |  | $ | (138.8 | )  |  | $ | (24.1 | )  |  | $ | (158.2 | )  |  | $ | 128.4 |   |
| Interest,net                     |  |   | 240.6 |   |  |   | 49.0 |   |  |   | 25.6 |   |  |   | 30.7 |   |
| Incometax provision(benefit)     |  |   | 30.8 |   |  |   | (8.3 | )  |  |   | 68.7 |   |  |   | 105.2 |   |
| Depreciation                     |  |   | 114.3 |   |  |   | 22.5 |   |  |   | 101.8 |   |  |   | 134.7 |   |
| Amortization                     |  |   | 96.3 |   |  |   | 15.4 |   |  |   | 68.9 |   |  |   | 89.2 |   |
| EBITDA                           |  |   | 343.2 |   |  |   | 54.5 |   |  |   | 106.8 |   |  |   | 488.2 |   |
| Non-cashcharges(1)               |  |   | 174.4 |   |  |   | 23.9 |   |  |   | 268.7 |   |  |   | 31.2 |   |
| Businessoptimization expenses(2) |  |   | 1.7 |   |  |   | 0.8 |   |  |   | 20.3 |   |  |   | 32.8 |   |
| Unusualitems(3)                  |  |   | 59.7 |   |  |   | 6.3 |   |  |   | 48.5 |   |  |   | (33.3 | )  |
| Otheradjustments(4)              |  |   | 6.3 |   |  |   | 1.5 |   |  |   | (3.4 | )  |  |   | (2.1 | )  |
| Costsavings(5)                   |  |   | — |   |  |   | 5.0 |   |  |   | 25.0 |   |  |   | 30.0 |   |
| AdjustedEBITDA                   |  | $ | 585.3 |   |  | $ | 92.0 |   |  | $ | 465.9 |   |  | $ | 546.8 |   |
|                                  |

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

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                           |  | Successor |  | Successor |  | Predecessor |  | Predecessor |
| (dollarsin millions)                           |  | Year ended December31, 2004 |  | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November 3,2003 |  | Year ended December 31,2002 |
| Impairment ofgoodwill                          |  | $ | — |   |  | $ | — |   |  | $ | 244.4 |   |  | $ | — |   |
| In-processresearch anddevelopment              |  |   | 122.3 |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Inventorystep-up                               |  |   | 14.6 |   |  |   | 21.2 |   |  |   | — |   |  |   | — |   |
| Assetwrite-offs                                |  |   | 1.1 |   |  |   | — |   |  |   | 4.2 |   |  |   | 18.3 |   |
| Profitsharing expense and 401(k) funded bySuez |  |   | 27.8 |   |  |   | 4.0 |   |  |   | 20.0 |   |  |   | 12.1 |   |
| Other                                          |  |   | 8.6 |   |  |   | (1.3 | )  |  |   | 0.1 |   |  |   | 0.8 |   |
| Non-cashcharges                                |  | $ | 174.4 |   |  | $ | 23.9 |   |  | $ | 268.7 |   |  | $ | 31.2 |   |
|                                                |

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.

50

----

In-process Researchand Development

In-process research anddevelopment was a one time charge of $122.3 million recorded during theyear ended December 31, 2004, as a result of purchase accountingentries related to the Acquisition.

Inventory Step-Up

Asa result of purchase accounting for the Acquisition, we wrote up ourinventory to fair value and subsequently charged the write up to costof sales as the inventory was sold.

ProfitSharing and 401(k) Expense Funded by Suez

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

Other

Other non-cash charges include the non-cash impacton earnings of our equity investments and minority interests. Successornon-cash charges also includes the non-cash portion of rent expenseunder the sublease that we entered into with Suez in conjunction withthe Acquisition.

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (2)  | Business optimizationexpenses for 2004 include costs associated with the redesign andoptimization of business and work processes. Business optimizationexpenses for 2003 and 2002 include cost associated with the integrationof the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) joint ventureand the implementation of global cost reduction programs in the sales,marketing, manufacturing and support services operations. See note 20to Item 8 for more information. |

|  |           |                                                          |
|--|-----------|----------------------------------------------------------|
|  | (3)  | Unusual itemsare further detailed on the followingtable: |

|                                            |  |                             |         |                                           |  |                                         |         |                             |  |        |      |        |  |        |       |         |  |  |
|--------------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|------|--------|--|--------|-------|---------|--|--|
|                                       |  | Successor                   |         | Successor                                 |  | Predecessor                             |         | Predecessor                 |
| (dollarsin millions)                       |  | Year ended December31, 2004 |         | November 4, 2003 through December 31,2003 |  | January 1, 2003 through November 3,2003 |         | Year ended December 31,2002 |
| Pension and OPEB settlement andcurtailment |  | $                           | — |                                      |  | $                                       | (0.1    | )                      |  | $      | 7.9  |   |  | $      | (47.6 | )  |
| Loss(gain) on sales, net ofexpenses        |  |                        | 0.2     |                                      |  |                                    | 1.1     |                        |  |   | 12.4 |   |  |   | (7.8  | )  |
| Otherunusual items(a)                      |  |                        | 59.5    |                                      |  |                                    | 5.3     |                        |  |   | 25.7 |   |  |   | 19.4  |    |
| Suezmanagement fees,net                    |  |                        | — |                                      |  |                                    | — |                        |  |   | 2.5  |   |  |   | 2.7   |    |
|                                       |  | $                           | 59.7    |                                      |  | $                                       | 6.3     |                        |  | $      | 48.5 |   |  | $      | (33.3 | )  |
|                                            |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a)  | Ourresults for 2004 were impacted by the effects of certain other unusualitems, including a $35.0 million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors; a $13.7million charge for the early repayment of senior discount notes;expenses associated with the registration of publicly tradable seniornotes 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. Our results in2002 were impacted by consultancy costs |

51

----

|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |   | for process reengineering studies associatedwith our cost reduction programs and other consultancy servicesperformed on behalf of Suez; one-time pension and benefit expensesprimarily related to the redesign of our Australian benefit plan andthe application of regulatory changes in Germany; and legal andenvironmental 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 insurancepolicy. |

|  |           |                                                                                                                                                                                                                                                                                                                                  |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (4)  | We are required to make adjustmentsto EBITDA 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 financing agreementsalso permit us to adjust EBITDA on a pro forma basis for certain costsavings that we expect to achieve. We initiated a comprehensive costreduction plan that was expected to yield annual savings of at least$30 million on a proforma basis in 2003. We implemented this planimmediately upon consummation of the Acquisition. The remainder of ourcost reduction plan is expected to realize incremental efficienciesthrough work process redesign and other targeted cost improvementprograms, which address inefficiencies in our administrative andoverhead functions, as well as other support functions around theworld. |

Our covenant levels and ratios for the year endedDecember 31, 2004 are asfollows:

|                                                                                                            |  |                                   |       |        |  |        |       |        |  |  |
|------------------------------------------------------------------------------------------------------------|--|-----------------------------------|-------|--------|--|--------|-------|--------|--|--|
|                                                                                                       |  | CovenantLevel at December 31,2004 |       | Ratios |
| **Senior creditfacility** (1)                                                                              |  |
| Minimum Adjusted EBITDA tocash interestratio                                                               |  |                              | 1.65x |   |  |   | 3.01x |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                    |  |                              | 6.75x |   |  |   | 5.27x |   |
| **Indentures**(2)                                                                                          |  |
| Minimum Adjusted EBITDA to fixed charge ratiorequired to incur additional debt pursuant 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 incur additionaldebt and make certain restricted payments under our indentures, subjectto specified exceptions, is tied to an Adjusted EBITDA to fixed chargeratio of at least 2.0 to 1, except that we may incur certain debt andmake certain restricted payments and certain permitted investmentswithout regard to the ratio, such as up to an aggregate principalamount of $1,950 million (including $1,299.4 million that wasoutstanding under our term loan facilities as of December 31, 2004) andinvestments in similar business and other investments equal to6% of Nalco Holding Company consolidated assets. |

Locallines of credit.    Certain of our non-U.S. subsidiaries havelines of credit to support local requirements. As of December 31, 2004,the aggregate outstanding balance under these local lines of credit wasapproximately $14.3 million. Certain of these lines of credit areequally and ratably secured with obligations under our senior creditfacilities.

Receivables facility.    Nalco Companyentered into a receivables facility on June 25, 2004 that provides upto $100.0 million in funding from a commercial paper conduit sponsoredby JPMorgan 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 term loansunder the senior credit facilities.

52

----

In connection with the receivablesfacility we established a wholly owned consolidated bankruptcy-remotespecial purpose subsidiary, Nalco Receivables LLC (the"transferor"), to which Nalco Company and oneof its domestic subsidiaries (the"sellers")sell trade accounts receivable (the"receivables")pursuant to a receivables purchase agreement. Pursuant to a receivablestransfer agreement, the transferor then transfers an undivided interestin the purchased receivables to the commercial paper conduit or therelated bank sponsor (the"transferees")in exchange for cash. The transferor's purchase of receivablesfrom the 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 the receivablescollection agent, services, administers and collects the receivablesunder the receivables transfer agreement for which it receives amonthly servicing fee at a rate of 1% per annum of the averagedaily outstanding balance of receivables. Borrowings under thereceivables facility bear interest at a floating base rate plus a usagefee. The usage fee varies based upon our leverage ratio as calculatedunder the senior credit facilities and is currently 1.10% of theamount funded. In addition, the transferor is required to pay a fee onthe unused portion of the receivables facility that varies based uponthe same ratio and is currently 0.35% of the unused portion ofthe commitments. These rates are per annum and payments of these feesare made to the lenders on the monthly settlement date.

Availability of funding under the receivables facility dependsprimarily upon the outstanding trade accounts receivable balance fromtime to time. Aggregate availability is determined by using a formulathat reduces the gross receivables balance by factors that take intoaccount historical default and dilution rates, excessive concentrationsand average days outstanding and the costs of the facility. Based onthe terms of this facility and on the criteria described above, as ofDecember 31, 2004, approximately $143.8 million of our accountsreceivable balance was considered eligible for financing under theprogram, of which approximately $99.5 million would have been availablefor funding. As of December 31, 2004, we had $97.3 million ofoutstanding borrowings under this facility.

This facility istreated as a general financing agreement resulting in the funding andrelated receivables being shown as liabilities and assets,respectively, on our consolidated balance sheet and the costsassociated with the receivables facility being recorded as interestexpense.

Contractual Obligations and Commitments

Thefollowing table summarizes our expected cash outflows resulting fromour contractual obligations as of December 31,2004:

|                                 |  |                      |         |        |  |            |         |            |  |               |         |        |  |        |         |        |  |        |         |        |  |  |
|---------------------------------|--|----------------------|---------|--------|--|------------|---------|------------|--|---------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                            |  | PaymentsDue ByPeriod |
| (dollarsinmillions)             |  | Total                |         | 2005   |  | 2006to2007 |         | 2008to2009 |  | 2010andbeyond |
| ContractualObligations:         |  |
| Debtobligations:                |  |
| Principal                       |  | $                    | 3,562.2 |   |  | $          | 0.8     |       |  | $             | 157.0   |   |  | $      | 187.8   |   |  | $      | 3,216.6 |   |
| Interest                        |  |                 | 1,631.8 |   |  |       | 197.3   |       |  |          | 395.1   |   |  |   | 402.0   |   |  |   | 637.4   |   |
| Totaldebtobligations            |  | $                    | 5,194.0 |   |  | $          | 198.1   |       |  | $             | 552.1   |   |  | $      | 589.8   |   |  | $      | 3,854.0 |   |
| Operatingleaseobligations(1)    |  |                 | 284.5   |   |  |       | 17.9    |       |  |          | 27.5    |   |  |   | 20.9    |   |  |   | 218.2   |   |
| Purchaseobligations(2)          |  |                 | — |   |  |       | — |       |  |          | — |   |  |   | — |   |  |   | — |   |
| Otherlong-termliabilities(3)(4) |  |                 | 347.6   |   |  |       | 21.0    |       |  |          | 114.6   |   |  |   | 75.2    |   |  |   | 136.8   |   |
| Total                           |  | $                    | 5,826.1 |   |  | $          | 237.0   |       |  | $             | 694.2   |   |  | $      | 685.9   |   |  | $      | 4,209.0 |   |
|                                 |

|     |                                                                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 from the tableare open purchase orders for raw materials and supplies used in thenormal course of business, supply contracts with customers,distribution agreements, joint venture agreements and other contractswithout express funding requirements. |

53

----

|     |                                                                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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-term liabilitiesrepresent our expected minimum pension funding requirements for theprincipal domestic defined benefit pension plan through 2014. Amountsbeyond 2014 are not reasonably estimable. |

Our contractualobligations and commitments over the next several years aresignificant. Our primary  source of liquidity will continue to becash flow generated from operations. In the period January 1, 2002through December 31, 2004 our cumulative cash flow from operations was$793.7 million. We have  availability under a $250 millionrevolving credit facility to assist us, if required, in meeting ourworking  capital needs and other contractual obligations. Thismulti-year revolving credit facility matures in  November 2009.If our cash flow from operations is insufficient to fund our debtservice and other  obligations, we may be forced to reduce ordelay capital expenditures, seek additional capital or seek torestructure or refinance our indebtedness. At December 31, 2004, therewere  no outstanding borrowings under the $250 million revolvingcredit facility, excluding $35.3 million of outstanding letters ofcredit.

We believe that cash flow generated from operations andour borrowing capacity will be adequate to  meet our obligationsand business requirements. Our ability to fund these items and toreduce debt may  be affected by general economic, financial,competitive, legislative and regulatory factors, and the cost oflitigation claims, among other things.

The following tablesummarizes our expected cash outflows resulting from commercialcommitments as of December 31, 2004. Commercial commitments includelines of credit, guarantees and other potential cash outflows resultingfrom a contingent event that requires our performance pursuant to afundingcommitment.

|                              |  |                                          |         |        |  |            |         |            |  |               |         |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------|--|------------------------------------------|---------|--------|--|------------|---------|------------|--|---------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                         |  | Amountof Commitment Expiration PerPeriod |
| (dollarsinmillions)          |  | Total                                    |         | 2005   |  | 2006to2007 |         | 2008to2009 |  | 2010andbeyond |
| CommercialCommitments:       |  |
| Standby letters of credit(1) |  | $                                        | 47.9    |   |  | $          | 46.4    |       |  | $             | 1.4     |   |  | $      | 0.1     |   |  | $      | — |   |
| Guarantees                   |  |                                     | — |   |  |       | — |       |  |          | — |   |  |   | — |   |  |   | — |   |
| Othercommercialcommitments   |  |                                     | 4.8     |   |  |       | 1.5     |       |  |          | 3.3     |   |  |   | — |   |  |   | — |   |
| Total                        |  | $                                        | 52.7    |   |  | $          | 47.9    |       |  | $             | 4.7     |   |  | $      | 0.1     |   |  | $      | — |   |
|                              |

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

Recent Accounting Pronouncements

In December  2004,the Financial Accounting Standards Board (FASB) issued Statement ofFinancial Accounting Standards (SFAS) No.  123(R), Share BasedPayment, which revises SFAS No. 123, Accounting for Stock-BasedCompensation, and supersedes Accounting Principles Board Opinion(APB) No. 25, Accounting for Stock Issued to Employees. SFAS No.123(R) requires all share-based payments to employees, including grantsof employee stock options, to be recognized in the financial statementsbased on their fair values. SFAS No. 123(R) is effective for publiccompanies at the beginning of the first interim or annual periodbeginning after June 15, 2005. Early adoption is encouraged for periodsin which financial statements have not yet been issued.

TheCompany elected to adopt SFAS No. 123(R) as of October 1, 2004, usingthe modified-prospective transition method. Compensation cost chargedto earnings for the Company's equity compensation plan was $0.1million for the year ended December 31, 2004. No share-basedcompensation was charged to earnings by the Successor during the periodfrom November 4, 2003 through December 31, 2003 or by the Predecessorduring the period from January 1, 2003 through November 3, 2003 and theyear ended December 31, 2002, since no share-based compensation plansexisted during those periods.

54

----

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 will not have amaterial effect on the financial statements of the Company.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

We are subject to inherent risks attributed to operatingin a global economy. We may utilize derivative financial instruments asnecessary to manage foreign currency exchange rate risks. We manageforeign currency exchange risk arising from financial activitiespursuant 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.In addition, 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 €200.0million aggregate principal amount of 73⁄4% senior notesdue 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 net investmentin subsidiary companies whose assets, liabilities, and operations aremeasured using the euro as their functional currency. Because of thehigh degree of effectiveness between the hedging instruments and theexposure being hedged, fluctuations in the value of theeuro-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 a quarterlybasis, whether the euro-denominated debt is effective at offsettingchanges in the value of the underlying exposure. For the year endedDecember 31, 2004, we recorded a $44.7 million non-cash pretax loss inthe accumulated foreign currency translation adjustment account relatedto this hedge. No hedge ineffectiveness was recorded in income.

We also manage operational (transactional) foreign currency risk,particularly in emerging markets, by closely managing both pricing andraw material sourcing. Risks associated with foreign exchangetranslation exposures are not hedged.

We have exposure tofluctuations in foreign currency exchange rates. Based on ourderivative foreign currency instruments outstanding at December 31,2004 and 2003, a 10% strengthening or weakening in the value ofthe U.S. dollar relative to the currencies in which those derivativeforeign currency instruments are denominated would result in a gain orloss in fair values of less than $5.1 million and $2.0 million,respectively.

At December 31, 2004, we had $1,408.9 million ofvariable rate debt. A 1% increase in the average interest ratewould increase future interest expense by approximately $14.1 millionper year.

Our sensitivity analysis of the effects of the changesin interest rates and foreign currency exchange rates do not reflectthe effect of such changes on the related hedged transactions or onother operating transactions. The analysis also does not factor in apotential change in the level of variable rate borrowings or derivativeinstruments outstanding that could take place if these hypotheticalconditions prevailed.

We are exposed to credit loss in the eventof nonperformance 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.

55

----

ITEM8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index toFinancial Statements

Nalco Holding Company andSubsidiaries Consolidated and Combined Financial Statements

Year ended December 31, 2004 (Successor) Periodfrom November 4, 2003 through December 31, 2003 (Successor) Periodfrom January 1, 2003 through November 3, 2003 (Predecessor) Yearended December 31, 2002 (Predecessor)

|                                                            |  |        |        |        |  |  |
|------------------------------------------------------------|--|--------|--------|--------|--|--|
| Reportof Independent Registered Public Accounting Firm     |  |   | 57     |   |
| Consolidated and Combined FinancialStatements              |  |   |   |   |
| ConsolidatedBalance Sheets                                 |  |   | 58     |   |
| Consolidated and CombinedStatements of Operations          |  |   | 59     |   |
| Consolidatedand Combined Statements of Shareholders'Equity |  |   | 60     |   |
| Consolidated and CombinedStatements of Cash Flows          |  |   | 61     |   |
| Notes toConsolidated and Combined FinancialStatements      |  |   | 63     |   |
|                                                            |

56

----

Report of Independent Registered PublicAccounting Firm

The Board of Directors and Shareholdersof Nalco Holding Company

We have audited the accompanyingconsolidated balance sheets of Nalco Holding Company and subsidiariesas of December 31, 2004 and 2003, and the related consolidatedstatements of operations, shareholders' equity, and cash flowsfor the year ended December 31, 2004 and for the period from November4, 2003 to December 31, 2003 (Successor), and the combined statementsof operations, shareholders' equity, and cash flows of OndeoNalco Group (companies listed in Note 2) for the period from January 1,2003 to November 3, 2003 and for the year ended December 31, 2002(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. We were not engaged to perform an audit of theCompany's internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting asa basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, andevaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

Inour opinion, the financial statements referred to above present fairly,in all material respects, the consolidated financial position of NalcoHolding Company and subsidiaries as of December 31, 2004 and 2003, andthe consolidated results of their operations and their cash flows forthe year ended December 31, 2004 and for the period from November 4,2003 to December 31, 2003 (Successor), and the combined results ofOndeo Nalco Group's operations and its cash flows for the periodfrom January 1, 2003 to November 3, 2003 and for the year endedDecember 31, 2002 (Predecessor), in conformity with U.S. generallyaccepted accounting principles. Also, in our opinion, the relatedfinancial statement schedules, when considered in relation to the basicfinancial statements taken as a whole, present fairly in all materialrespects the information set forth therein.

/s/ERNST & YOUNG LLP Chicago, Illinois February 4,2005

57

----

Nalco Holding Company andSubsidiaries Consolidated Balance Sheets

(dollars inmillions)

|                                                                                            |  |                  |         |                  |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|--------|--|--|
|                                                                                       |  | December31, 2004 |         | December 31,2003 |
| **Assets**                                                                                 |  |             |    |             |  |   |    |   |
| Currentassets:                                                                             |  |             |    |             |  |   |    |   |
| Cash and cashequivalents                                                                   |  | $                | 33.3    |             |  | $      | 100.0   |   |
| Trade accounts receivable, less allowancesof $21.1 and $21.0 in 2004 and 2003,respectively |  |             | 594.2   |             |  |   | 482.9   |   |
| Inventories                                                                                |  |             | 313.5   |             |  |   | 295.1   |   |
| Deferredincometaxes                                                                        |  |             | 44.2    |             |  |   | 54.6    |   |
| Prepaidexpenses and other currentassets                                                    |  |             | 45.9    |             |  |   | 43.0    |   |
| Totalcurrentassets                                                                         |  |             | 1,031.1 |             |  |   | 975.6   |   |
| Property,plant, and equipment,net                                                          |  |             | 847.3   |             |  |   | 865.6   |   |
| Goodwill                                                                                   |  |             | 2,368.3 |             |  |   | 2,500.1 |   |
| Otherintangible assets,net                                                                 |  |             | 1,323.6 |             |  |   | 1,408.9 |   |
| Deferredfinancing costs                                                                    |  |             | 64.6    |             |  |   | 75.0    |   |
| Receivablefrom formershareholder                                                           |  |             | 87.2    |             |  |   | 117.3   |   |
| Othernoncurrentassets                                                                      |  |             | 211.8   |             |  |   | 221.3   |   |
| Totalassets                                                                                |  | $                | 5,933.9 |             |  | $      | 6,163.8 |   |
| **Liabilitiesand shareholders'equity**                                                     |  |             |    |             |  |   |    |   |
| Currentliabilities:                                                                        |  |             |    |             |  |   |    |   |
| Accountspayable                                                                            |  | $                | 261.9   |             |  | $      | 155.9   |   |
| Accruedexpenses                                                                            |  |             | 168.7   |             |  |   | 193.9   |   |
| Accruedcompensation                                                                        |  |             | 105.8   |             |  |   | 77.1    |   |
| Short-termdebt                                                                             |  |             | 17.7    |             |  |   | 51.9    |   |
| Incometaxes                                                                                |  |             | 37.2    |             |  |   | 50.0    |   |
| Totalcurrentliabilities                                                                    |  |             | 591.3   |             |  |   | 528.8   |   |
| Long-termdebt                                                                              |  |             | 3,424.8 |             |  |   | 3,262.8 |   |
| Deferred incometaxes                                                                       |  |             | 484.8   |             |  |   | 624.0   |   |
| Accrued pensionbenefits                                                                    |  |             | 411.7   |             |  |   | 374.1   |   |
| Otherliabilities                                                                           |  |             | 296.8   |             |  |   | 293.5   |   |
| Minorityinterest                                                                           |  |             | 14.1    |             |  |   | 11.6    |   |
| Commitments andcontingencies                                                               |  |             | — |             |  |   | — |   |
| Shareholders'equity                                                                        |  |             | 710.4   |             |  |   | 1,069.0 |   |
| Totalliabilities and shareholders'equity                                                   |  | $                | 5,933.9 |             |  | $      | 6,163.8 |   |
|                                                                                            |

Seenotes to consolidated and combined financialstatements.

58

----

Nalco Holding Company andSubsidiaries Consolidated and Combined Statements ofOperations

(dollars in millions, except pershareamounts)

|                                              |  |                            |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|----------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Successor                  |         | Predecessor                            |
|                                         |  | YearendedDecember 31, 2004 |         | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |         | YearendedDecember31,2002 |
| Netsales                                     |  | $                          | 3,033.3 |                                   |  | $                                    | 460.1   |                     |  | $      | 2,306.5 |    |  | $      | 2,644.3 |    |
| Operatingcosts and expenses:                 |  |
| Cost ofproductsold                           |  |                       | 1,552.2 |                                   |  |                                 | 248.2   |                     |  |   | 1,114.6 |    |  |   | 1,266.1 |    |
| Selling,administrative, and researchexpenses |  |                       | 1,065.4 |                                   |  |                                 | 176.4   |                     |  |   | 900.7   |    |  |   | 992.0   |    |
| Impairmentofgoodwill                         |  |                       | — |                                   |  |                                 | — |                     |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets              |  |                       | 96.3    |                                   |  |                                 | 15.4    |                     |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment            |  |                       | 122.3   |                                   |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses                 |  |                       | 1.7     |                                   |  |                                 | 0.8     |                     |  |   | 20.3    |    |  |   | 32.8    |    |
| Totaloperating costs andexpenses             |  |                       | 2,837.9 |                                   |  |                                 | 440.8   |                     |  |   | 2,348.9 |    |  |   | 2,380.1 |    |
| Operatingearnings(loss)                      |  |                       | 195.4   |                                   |  |                                 | 19.3    |                     |  |   | (42.4   | )  |  |   | 264.2   |    |
| Otherincome (expense),net                    |  |                       | (57.0   | )                                 |  |                                 | (2.8    | )                   |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                               |  |                       | 10.2    |                                   |  |                                 | 0.6     |                     |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                              |  |                       | (250.8  | )                                 |  |                                 | (49.6   | )                   |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes            |  |                       | (102.2  | )                                 |  |                                 | (32.5   | )                   |  |   | (85.3   | )  |  |   | 236.9   |    |
| Incometax provision(benefit)                 |  |                       | 30.8    |                                   |  |                                 | (8.3    | )                   |  |   | 68.7    |    |  |   | 105.2   |    |
| Minorityinterests                            |  |                       | (5.8    | )                                 |  |                                 | 0.1     |                     |  |   | (4.2    | )  |  |   | (3.3    | )  |
| Netearnings(loss)                            |  | $                          | (138.8  | )                                 |  | $                                    | (24.1   | )                   |  | $      | (158.2  | )  |  | $      | 128.4   |    |
| Net loss pershare:                           |  |
| Basic anddiluted                             |  | $                          | (1.42   | )                                 |  | $                                    | (0.27   | )                   |  |   | n/a     |    |  |   | n/a     |    |
| Weighted-averageshares outstanding(millions) |  |                       | 97.7    |                                   |  |                                 | 90.6    |                     |  |   | n/a     |    |  |   | n/a     |    |
|                                              |

Seenotes to consolidated and combined financialstatements.

59

----

Nalco Holding Company andSubsidiaries Consolidated and Combined Statement ofShareholders' Equity

(dollars inmillions, except per shareamounts)

|                                                                        |  |                 |         |                    |  |                                            |         |             |  |                                      |                                             |                           |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|------------------------------------------------------------------------|--|-----------------|---------|--------------------|--|--------------------------------------------|---------|-------------|--|--------------------------------------|---------------------------------------------|---------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                   |  |            |         |               |  | AccumulatedOtherComprehensive Income(Loss) |         |
|                                                                   |  | CapitalAccounts |         | AccumulatedDeficit |  | MinimumPensionLiabilityAdjustment          |         | Derivatives |  | ForeignCurrencyTranslationAdjustment |                                             | ComprehensiveIncome(Loss) |
| **PredecessorCompany**                                                 |  |
| **Balance at January 1,2002**                                          |  | $               | 4,126.1 |               |  | $                                          | (290.2  | )      |  | $                                    | (17.6                                       | )                    |  | $      | (0.8    | )  |  | $      | (83.1   | )  |  |
| Issuanceof common stock, 1,997,500 shares at $20par                    |  |            | 40.0    |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |
| Mergerwithaffiliate                                                    |  |            | (9.2    | )             |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |
| Netearnings                                                            |  |            | — |               |  |                                       | 128.4   |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  | $      | 128.4  |    |
| Othercomprehensive income:                                             |  |
| Minimum pensionliability adjustment – net of tax benefit of$35.8 |  |            | — |               |  |                                       | — |        |  |                                 | (55.9                                       | )                    |  |   | — |    |  |   | — |    |  |   | (55.9  | )  |
| Losson derivatives – net of tax benefit of$5.0                   |  |            | — |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | (7.7    | )  |  |   | — |    |  |   | (7.7   | )  |
| Currencytranslationadjustments                                         |  |            | — |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | (18.5   | )  |  |   | (18.5  | )  |
| Comprehensiveincome                                                    |  |            |    |               |  |                                       |    |        |  |                                 |                                        |                      |  |   |    |    |  |   |    |    |  | $      | 46.3   |    |
| Distributionstoshareholder                                             |  |            | — |               |  |                                       | (122.3  | )      |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |
| **Balanceat December 31,2002**                                         |  |            | 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):                                      |  |
| Gain onderivatives – 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  | )  |
| Othercomprehensive income:                                             |  |
| Currency translationadjustments – 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                                                   |  |            | 9.3     |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |
| Capital(distributions)                                                 |  |            | (991.5  | )             |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Proceedsfrom offering of common stock,net                              |  |            | 720.5   |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  |
| Netloss                                                                |  |            | — |               |  |                                       | (138.8  | )      |  |                                 | —                                     |                      |  |   | — |    |  |   | — |    |  | $      | (138.8 | )  |
| Othercomprehensive income (loss):                                      |  |
| Loss onderivatives – net of tax benefit of$0.2                   |  |            | — |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | (0.2    | )  |  |   | — |    |  |   | (0.2   | )  |
| Currencytranslation adjustments – net of tax of$7.5              |  |            | — |               |  |                                       | — |        |  |                                 | —                                     |                      |  |   | — |    |  |   | 42.1    |    |  |   | 42.1   |    |
| Comprehensiveloss                                                      |  |            |    |               |  |                                       |    |        |  |                                 |                                        |                      |  |   |    |    |  |   |    |    |  | $      | (96.9  | )  |
| **Balanceat December 31,2004**                                         |  | $               | 740.2   |               |  | $                                          | (162.9  | )      |  | $                                    |       — |                      |  | $      | (0.2    | )  |  | $      | 133.3   |    |  |
|                                                                        |

Seenotes to consolidated and combined financialstatements.

60

----

Nalco Holding Company andSubsidiaries Consolidated and Combined Statements of CashFlows

(dollars inmillions)

|                                                                                          |  |                           |         |                                           |  |                                         |          |                             |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------|--|---------------------------|---------|-------------------------------------------|--|-----------------------------------------|----------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                     |  | Successor                 |         | Predecessor                               |
|                                                                                     |  | YearendedDecember 31,2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |          | Year endedDecember 31, 2002 |
| **Operatingactivities**                                                                  |  |
| Net earnings(loss)                                                                       |  | $                         | (138.8  | )                                    |  | $                                       | (24.1    | )                      |  | $      | (158.2  | )  |  | $      | 128.4   |    |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |
| Depreciation                                                                             |  |                      | 114.3   |                                      |  |                                    | 22.5     |                        |  |   | 101.8   |    |  |   | 134.7   |    |
| Amortization                                                                             |  |                      | 96.3    |                                      |  |                                    | 15.4     |                        |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment                                                        |  |                      | 122.3   |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Impairmentofgoodwill                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 244.4   |    |  |   | — |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |                      | 49.1    |                                      |  |                                    | 17.4     |                        |  |   | — |    |  |   | — |    |
| Losson early extinguishment ofdebt                                                       |  |                      | 13.7    |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Equityin earnings of unconsolidated subsidiaries, net ofdistributions                    |  |                      | 2.8     |                                      |  |                                    | (0.4     | )                      |  |   | (1.8    | )  |  |   | 0.3     |    |
| Deferredincometaxes                                                                      |  |                      | (65.9   | )                                    |  |                                    | (18.4    | )                      |  |   | (17.1   | )  |  |   | (30.2   | )  |
| Securitizedaccounts receivable,net                                                       |  |                      | — |                                      |  |                                    | —  |                        |  |   | (87.0   | )  |  |   | (14.0   | )  |
| Amortizationof unearned employee compensation and accretion ofobligation                 |  |                      | 27.8    |                                      |  |                                    | 4.0      |                        |  |   | 20.0    |    |  |   | 12.1    |    |
| Definedbenefit pension planexpense                                                       |  |                      | 39.8    |                                      |  |                                    | 6.6      |                        |  |   | 43.2    |    |  |   | 27.5    |    |
| Prepaidpensionpayment                                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (90.0   | )  |
| Postretirementbenefit plancurtailment                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (41.6   | )  |
| Other,net                                                                                |  |                      | 2.9     |                                      |  |                                    | (2.7     | )                      |  |   | (22.2   | )  |  |   | (33.8   | )  |
| Changesin current assets andliabilities:                                                 |  |
| Trade accountsreceivable                                                                 |  |                      | (86.4   | )                                    |  |                                    | 11.3     |                        |  |   | 3.7     |    |  |   | 7.3     |    |
| Inventories                                                                              |  |                      | (10.9   | )                                    |  |                                    | 28.7     |                        |  |   | (0.4    | )  |  |   | (11.0   | )  |
| Accountspayable                                                                          |  |                      | 96.3    |                                      |  |                                    | 4.0      |                        |  |   | (44.3   | )  |  |   | 28.6    |    |
| Payabletoshareholder                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 6.2     |    |  |   | 112.2   |    |
| Contributionto profit-sharingtrust                                                       |  |                      | — |                                      |  |                                    | —  |                        |  |   | (24.0   | )  |  |   | (11.8   | )  |
| Otherreceivables from relatedparties                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | (1.9    | )  |  |   | 5.5     |    |
| Other                                                                                    |  |                      | (25.8   | )                                    |  |                                    | 24.4     |                        |  |   | 13.1    |    |  |   | 9.7     |    |
| Netcash provided by operatingactivities                                                  |  |                      | 237.5   |                                      |  |                                    | 88.7     |                        |  |   | 144.4   |    |  |   | 323.1   |    |
| **Investingactivities**                                                                  |  |
| Acquisition of Ondeo NalcoGroup                                                          |  |                      | — |                                      |  |                                    | (4,127.1 | )                      |  |   | — |    |  |   | — |    |
| Purchaseprice adjustment on acquisition of     Ondeo NalcoGroup      |  |                      | 25.3    |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Businesspurchases/sales,net                                                              |  |                      | (2.3    | )                                    |  |                                    | —  |                        |  |   | (10.1   | )  |  |   | 2.7     |    |
| Additionsto property, plant, and equipment,net                                           |  |                      | (91.8   | )                                    |  |                                    | (15.6    | )                      |  |   | (85.6   | )  |  |   | (108.3  | )  |
| Notesreceivable from relatedparties                                                      |  |                      | — |                                      |  |                                    | —  |                        |  |   | 98.3    |    |  |   | (36.2   | )  |
| Investmentsin affiliatedcompanies                                                        |  |                      | — |                                      |  |                                    | —  |                        |  |   | (6.0    | )  |  |   | — |    |
| Otherinvestingactivities                                                                 |  |                      | (3.4    | )                                    |  |                                    | (2.4     | )                      |  |   | (8.9    | )  |  |   | 15.7    |    |
| Netcash used for investingactivities                                                     |  |                      | (72.2   | )                                    |  |                                    | (4,145.1 | )                      |  |   | (12.3   | )  |  |   | (126.1  | )  |
|                                                                                          |

Seenotes to consolidated and combined financialstatements.

61

----

Nalco Holding Company andSubsidiaries Consolidated and Combined Statements of Cash Flows(continued)

(dollars inmillions)

|                                                                    |  |                          |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                               |  | Successor                |         | Predecessor                            |
|                                                               |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| **Financingactivities**                                            |  |
| Cash dividends                                                     |  | $                        | — |                                   |  | $                                    | — |                     |  | $      | (29.0   | )  |  | $      | (122.3  | )  |
| Proceedsfrom long-termdebt                                         |  |                     | 719.7   |                                   |  |                                 | 3,214.2 |                     |  |   | 0.6     |    |  |   | 3.1     |    |
| Paymentsof long-termdebt                                           |  |                     | (639.3  | )                                 |  |                                 | (0.8    | )                   |  |   | (8.3    | )  |  |   | (3.5    | )  |
| Short-termdebt,net                                                 |  |                     | (34.8   | )                                 |  |                                 | 8.3     |                     |  |   | (272.7  | )  |  |   | (255.0  | )  |
| Redemptionpremium on early extinguishment ofdebt                   |  |                     | (14.6   | )                                 |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Proceedsfrom corporate facility sale andleaseback                  |  |                     | — |                                   |  |                                 | — |                     |  |   | — |    |  |   | 144.8   |    |
| Deferredfinancingcosts                                             |  |                     | (1.2    | )                                 |  |                                 | (92.4   | )                   |  |   | — |    |  |   | — |    |
| Capitalcontributions (distributions),net                           |  |                     | (982.2  | )                                 |  |                                 | 1,001.9 |                     |  |   | 77.7    |    |  |   | — |    |
| Proceedsfrom offering of common stock,net                          |  |                     | 720.5   |                                   |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Otherfinancingactivities                                           |  |                     | (0.9    | )                                 |  |                                 | (0.9    | )                   |  |   | (2.5    | )  |  |   | 0.2     |    |
| Netcash provided by (used for) financingactivities                 |  |                     | (232.8  | )                                 |  |                                 | 4,130.3 |                     |  |   | (234.2  | )  |  |   | (232.7  | )  |
| Effectof foreign exchange rate changes on cash and cashequivalents |  |                     | 0.8     |                                   |  |                                 | 1.7     |                     |  |   | 6.0     |    |  |   | 10.2    |    |
| Increase(decrease) in cash and cashequivalents                     |  |                     | (66.7   | )                                 |  |                                 | 75.6    |                     |  |   | (96.1   | )  |  |   | (25.5   | )  |
| Cashand cash equivalents at beginning of theperiod                 |  |                     | 100.0   |                                   |  |                                 | 24.4    |                     |  |   | 120.5   |    |  |   | 146.0   |    |
| Cashand cash equivalents at end of theperiod                       |  | $                        | 33.3    |                                   |  | $                                    | 100.0   |                     |  | $      | 24.4    |    |  | $      | 120.5   |    |
| **Supplemental cash flowsinformation**                             |  |
| Cash paid during theperiodfor:                                     |  |
| Interest                                                           |  | $                        | 206.3   |                                   |  | $                                    | 6.4     |                     |  | $      | 32.4    |    |  | $      | 40.6    |    |
| Incometaxes                                                        |  |                     | 92.3    |                                   |  |                                 | 14.2    |                     |  |   | 43.0    |    |  |   | 40.0    |    |
|                                                                    |

Seenotes to consolidated and combined financialstatements.

62

----

Nalco HoldingCompany and SubsidiariesNotes to Consolidated and CombinedFinancial Statements(dollars in millions, except per shareamounts)December 31, 2004

1.    Descriptionof Business and Change in Ownership

Description ofBusiness

Nalco Holding Company and subsidiaries (the Company orSuccessor) is engaged in the worldwide manufacture and sale of highlyspecialized service chemical programs. This includes production andservice related to the sale and application of chemicals and technologyused in water treatment, pollution control, energy conservation, oilproduction and refining, steelmaking, papermaking, mining, and otherindustrial processes.

Change in Ownership

On November4, 2003, our indirect subsidiary, Nalco Holdings LLC (the Buyer), anewly formed entity controlled by affiliates of The Blackstone Group,L.P., Apollo Management, L.P., and The Goldman Sachs Group, Inc.(collectively, the Sponsors), pursuant to a Stock Purchase Agreement,(as amended, the Stock Purchase Agreement) with Suez S.A. (Suez orSeller) and certain of its affiliates, acquired the net assets of OndeoNalco Group (as defined in Note 2 below) for $4,127.1 million includingdirect costs of the acquisition of $125.6 million, excluding assumeddebt of $30.2 million, and subject to certain closing and post-closingadjustments (the Acquisition).

The Buyer was capitalized byequity investments totaling $991.9 million from the Sponsors and $10.0million from Dr. William H. Joyce, the Chairman and Chief ExecutiveOfficer of the Buyer. The equity investments were made to NalcoInvestment Holdings LLC which, in turn, contributed $1,001.9 million tothe Buyer and was its parent company until January 14, 2004. Fundingfor the Acquisition included the equity investments and the issuance ofsenior notes and senior subordinated notes (the Notes) in a privateoffering, and new revolving credit and term loan facilities by theBuyer, through its 100% owned subsidiary, Nalco Company.

The Stock 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 the Ondeo Nalco Group at the date of the Acquisition. OnMarch 25, 2004, the Buyer and Suez agreed to a $25.6 million workingcapital adjustment payable to the Buyer plus interest. This adjustmentwas not reflected in the consolidated financial statements as ofDecember  31,  2003. The Buyer recorded the purchase priceadjustment in 2004 by decreasing goodwill.

The Stock PurchaseAgreement also provided for adjustments of the purchase price for taxespaid, or tax refunds received, by the Buyer for periods prior to theAcquisition, to the extent not already taken into account in theclosing working capital at the date of the Acquisition. During the yearended December 31, 2004, such purchase price adjustments resulted in anet payment of $0.3 million by the Buyer, which was recorded as anincrease to goodwill. An additional purchase price adjustment of $3.6million paid by the Buyer in January 2005 has also been accrued andreflected as an increase to goodwill.

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 Finance Holdings LLC. The remaining1% interest in Nalco Finance Holdings LLC is held indirectly byNalco Investment Holdings LLC through its wholly owned subsidiary,Nalco Finance Holdings II Inc. As of January 14, 2004, Nalco FinanceHoldings LLC became the direct parent company of the Buyer. Subsequentto that date, the Sponsors and Dr. Joyce engaged in a series oftransactions that ultimately resulted in a newly formed entity, NalcoLLC, becoming the indirect and ultimate parent company of NalcoInvestment Holdings LLC, Nalco Finance Holdings LLC, and the Buyer.Nalco 

63

----

1.    Descriptionof Business and Change in Ownership   (continued)

LLC's interests in Nalco InvestmentHoldings LLC were held through its holdings of 100% of theinterests of each of BCP Nalco I LLC, BCP Nalco II LLC, APV Nalco LLC,GS Nalco LLC and JAG Nalco LLC (collectively, the Sponsor entities),which collectively held 100% of the interests of NalcoInvestment Holdings LLC.

On June 1, 2004, Nalco InvestmentHoldings II LLC was formed as a direct subsidiary of Nalco LLC. On June7, 2004, Nalco Investment Holdings II LLC merged with each of theSponsor entities and 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 was converted into acorporation named Nalco Investment Holdings II Corp. and has since beenrenamed Nalco Holding Company. Because the ultimate ownership of theentities in the Successor company financial statements did not change,such financial statements have been presented as if Nalco HoldingCompany was the parent company since the date of the Acquisition.

2.    Basis ofPresentation

All intercompany balances and transactions areeliminated. Investments in companies or partnerships in which theCompany/Predecessor does not have control, but has the ability toexercise significant influence over operating and financial policies,are reported on the equity method.

Predecessor —The accompanying combined financial statements of the Predecessor priorto the Acquisition include the consolidated financial statements ofOndeo Nalco 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 — The accompanying consolidatedfinancial statements include the accounts of Nalco Holding Company andsubsidiaries (collectively, the Company) subsequent to theAcquisition.

Certain reclassifications have been made to theprior year data to conform to the current year presentation which hadno effect on net income reported for any period.

Theconsolidated financial statements of the Successor as of and for theyear ended December  31,  2004 and as of and for the periodfrom 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 Financial Accounting Standards("SFAS") No.  141, BusinessCombinations.

The following unaudited pro forma financialdata summarizes the results of operations for the years ended December31, 2003 and December 31, 2002 as if the Acquisition had occurred as ofthe beginning of each individual period.

Pro forma adjustmentsinclude adjustments for (1) purchase accounting, including, (i) theelimination of inventory write-up recorded as a result of theAcquisition, (ii) adjustments to depreciation and amortization toreflect the fair value of property, plant and equipment and identifiedintangible assets (with finite lives), (iii) elimination of the pensionand other postretirement benefit amortization of unrecognized actuariallosses, prior service costs and transition obligations and assetslosses, and (2) adjustments for items directly related to thetransaction, including (i) rent expense that we would have incurred hadthe sublease of our Naperville, Illinois headquarters and researchfacility been in place, (ii) elimination of management fees that Suezand its affiliates charged to the Company 

64

----

2.    Basis ofPresentation   (continued)

for general corporate overhead and of chargesto Suez and its 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.

These pro forma amounts are not necessarily indicativeof the results that would have been attained if the Acquisition hadoccurred at the beginning of each period presented or that may beattained in the future.

|                          |  |                                   |         |         |  |        |         |        |  |  |
|--------------------------|--|-----------------------------------|---------|---------|--|--------|---------|--------|--|--|
|                     |  | (Unaudited)YearsEnded December31, |
|                     |  | 2003                              |         | 2002    |
| Netsales                 |  | $                                 | 2,766.6 |    |  | $      | 2,644.3 |   |
| Operatingearnings (loss) |  |                              | 0.2     |    |  |   | 272.1   |   |
| Netearnings(loss)        |  |                              | (237.3  | )  |  |   | 37.7    |   |
|                          |

TheCompany has allocated the purchase price on the basis of the fair valueof the underlying 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                                         |  |                | 2,224.2 |   |
| Intangibleassets                                 |  |                | 1,410.0 |   |
| Purchased in-process researchand development     |  |                | 122.3   |   |
| Other noncurrentassets                           |  |                | 366.0   |   |
| Property, plant andequipment                     |  |                | 833.3   |   |
| Totalassetsacquired                              |  |                | 5,875.9 |   |
| Currentliabilities:                              |  |
| Accountspayable                                  |  |                | 138.7   |   |
| Accruedexpenses                                  |  |                | 269.3   |   |
| Other currentliabilities                         |  |                | 74.4    |   |
| Long-termdebt                                    |  |                | 30.2    |   |
| Deferred incometaxes                             |  |                | 573.8   |   |
| Accrued pension and otherpostretirement benefits |  |                | 539.9   |   |
| Othernoncurrentliabilities                       |  |                | 144.2   |   |
| Totalliabilitiesassumed                          |  |                | 1,770.5 |   |
| Net assetsacquired                               |  | $                   | 4,105.4 |   |
|                                                  |

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 have been allocated based onmanagement's judgments and estimates.

65

----

2.    Basis ofPresentation   (continued)

Deferred income taxes have been providedin the consolidated balance sheet based on the tax versus book basis ofthe assets acquired and liabilities assumed, as adjusted to estimatedfair values. Valuation allowances were established for deferred taxassets related to all of the net operating loss carryforwards for whichutilization is uncertain.

The Company's projected pensionand other postretirement benefit obligations and assets have beenreflected in the allocation of purchase price at the projected benefitobligation less plan assets at fair market value, based onmanagement's computations which included valuations performed byindependent actuaries engaged by the Company.

The Companyengaged independent appraisers to assist in determining the fair valuesof property, plant and equipment and intangible assets acquired,including purchased in-process research and development (IPR&D),trade names, trademarks, developed technology and customerrelationships. The Company has received final values from theappraisers, which have been included in the above table.

TheCompany recorded a one-time charge for purchased IPR&D expenses of$122.3 million during the year ended December 31, 2004. The value ofpurchased IPR&D was comprised of five ongoing development projectsat the date of the Acquisition. Purchased IPR&D was derived byassigning values to those projects identified by management as havingeconomic value, but that had not yet reached technological feasibilityand had no alternative future use. These products had not been releasedto the market as of the date of the Acquisition, but the features andfunctionality of the products had been defined.

During the yearended December 31, 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 and tradenames have been 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 and developedtechnology have been valued based on the relief of royalty approach.This method allocates value based on what the Company would be willingto pay as a royalty to a third-party owner of the patent or technologyin order to exploit the economic benefits. The technologies that havebeen valued under this approach have a value of $100.0  millionwith an estimated weighted average useful life of 10 years.

Customer relationships have been valued using an income approachafter considering a fair return on fixed assets, working capital,patents, trade names, trademarks, technology, and assembled workforce.A value of $480.0  million has been assigned to customerrelationships. As of December 31, 2003, an estimated useful life of 10years had been used based on preliminary information obtained from ourindependent 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 $3.4 billionof goodwill and other intangible assets will not be deductible forincome tax purposes. The primary reasons for the Acquisition and theprimary factors that contributed to a purchase price that resulted inrecognition of goodwill include:

|              |                                                                                                                                                                                                                                                                     |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | TheCompany's leading market position as a global provider ofintegrated water treatment and process improvement services, chemicalsand equipment programs for industrial and institutional applicationsoffers a competitive advantage 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 |

66

----

2.    Basis ofPresentation   (continued)

|        |                                                                                                                                                                 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | competitive advantage in meeting the globalneeds of 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 affecting thevalue 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; |

|              |                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------|
| •  | The historical heavyinvestment in recruiting and continuously training more than 5,500sales 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 for employeeseverance and related costs, in connection with the Company'splan to exit or restructure certain activities. As of December 31,2004, $31.7 million has been charged against this accrual. The Companyexpects that these activities will be completed by the end of 2005.

The consolidated statements of operations for the year endedDecember 31, 2004 and for the period from November 4, 2003 throughDecember 31, 2003 include an additional $14.6 million and $21.2million, respectively, in cost of products sold related to the sale ofinventory that had been revalued at selling price less costs to sell inpurchase accounting.

3.    Summary ofSignificant Accounting Policies

Use of Estimates

Thepreparation of financial statements in conformity with accountingprinciples generally accepted in the United States requires managementto make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

Reclassifications

Certain reclassifications have been madeto the consolidated statement of operations for the period fromNovember 4, 2003 through December 31, 2003 and the combined statementsof operations for the period from January 1, 2003 through November 3,2003 and for the year ended December 31, 2002 to conform to the currentyear presentation. These reclassifications had no effect on net incomereported for any period.

Foreign Currency Translation

Local currencies are the functional currencies for most foreignoperations. Their financial statements are translated at current andaverage exchange rates, with any resulting translation adjustmentsincluded in the currency translation adjustment account inshareholders' equity. The 

67

----

3.    Summary ofSignificant Accounting Policies   (continued)

financial statements of any foreignsubsidiaries that operate in highly inflationary environments aretranslated using a combination of current, average, and historicalexchange rates, with the resulting translation impact included inresults of operations. Transactions executed in different currenciesresulting in exchange adjustments are included in results ofoperations.

Concentration of Credit Risk

Credit riskrepresents the accounting loss that would be recognized at thereporting date if counterparties failed completely to perform ascontracted. Management believes the likelihood of incurring materiallosses due to concentration of credit risk is remote. The principalfinancial instruments subject to credit risk are as follows:

Cash and Cash Equivalents

A formal policy exists of placingthese instruments in investment grade companies and institutions andlimiting the size of an investment with any single entity.

Accounts Receivable

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 risk losses.

Foreign Exchange Contracts and Derivatives

Formal policiesexist, which establish credit limits and investment grade creditcriteria of "A" or better for allcounterparties.

Cash and Cash Equivalents

Cash and cashequivalents include all cash balances and highly liquid investmentswith original maturities of three months or less.

InventoryValuation

Inventories are valued at the lower of cost ormarket. Approximately 54% of the inventories at both December31, 2004 and 2003 are valued using the average cost or first-in,first-out (FIFO) method. The remaining inventories are valued using thelast-in, first-out (LIFO) method. Reported inventory amounts atDecember 31, 2004 would have been approximately $14.5 million lower ifthe FIFO method of accounting had been used for all inventories. As aresult of using a new basis of accounting for the Company due to theAcquisition, the LIFO value of inventories approximated the FIFO valueof inventories at December 31, 2003.

Goodwill

ThePredecessor adopted SFAS No. 142, Goodwill and Other IntangibleAssets, as of January  1,  2002. Under SFAS No. 142,goodwill and intangible assets deemed to have indefinite lives are nolonger amortized but are subject to annual impairment tests. Goodwillis tested for impairment at least annually, and impairment, if any,recorded as expense in the period of impairment.

Intangibles

The Company amortizes customer relationshipsusing an accelerated method to reflect the pattern in which theeconomic benefits of that asset are realized. The straight-line methodis used for all other assets subject to amortization. Customerrelationships and patents and developed technology are being amortizedover estimated useful lives of 16 years and 10 years, respectively.

68

----

3.    Summary ofSignificant Accounting Policies   (continued)

Deferred Financing Costs

Deferredfinancing costs are incurred to obtain long-term financing and areamortized using the effective interest method over the term of therelated debt. The amortization of deferred financing costs, which isclassified in interest expense in the statement of operations, was$11.2 million for the year ended December 31, 2004 and $17.4 millionfor the period from November 4, 2003 through December 31, 2003, whichincluded the immediate write-off of $15.8 million for bridge financingcommitment fees incurred in connection with the Acquisition.

Income Taxes

Income taxes are recognized during the periodin which transactions enter into the determination of financialstatement income, with deferred income taxes being provided for the taxeffect of temporary differences between the carrying amount of assetsand liabilities and their tax bases.

Deferred income taxes areprovided on the undistributed earnings of foreign subsidiaries andaffiliated companies except to the extent such earnings are consideredto be permanently reinvested in the subsidiary or affiliate. In caseswhere foreign tax credits will not offset U.S. income taxes,appropriate provisions are included in the consolidated statement ofoperations.

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 the basis ofaccepted actuarial methods (using the projected unit credit method forthe principal plan) and includes current service costs and amortizationof increases in prior service costs over the expected future service ofactive participants as of the date such costs are first recognized.

The costs of health and life insurance postretirement benefits areaccrued as earned. Annual expense represents a combination of interestand service cost provisions. Most postretirement benefits are notfunded.

Revenue Recognition

Revenue from sales ofproducts, including amounts billed to customers for shipping andhandling costs, is recognized at the time: (1) ownership and all risksof loss have been transferred to the buyer, which is generally uponshipment, (2) the price is fixed and determinable, and (3)collectibility is reasonably assured. Revenue from services isrecognized when the services are provided to the customer.

Shipping and handling costs, including certain warehousing costsincurred by the Company, are included in cost of products sold.

Research and Development

Research and development costs,excluding costs to acquire in-process research and development, totaled$56.5 million, $9.7 million, $50.3 million, and $57.9 million for theyear ended December 31, 2004, the period from November 4, 2003 throughDecember 31, 2003, the period from January 1, 2003 through November 3,2003, and the year ended December 31, 2002, respectively. Research anddevelopment costs are charged to expense as incurred. Purchasedin-process research and development costs were $122.3 million for theyear ended December 31, 2004.

69

----

4.    Acquisitionsand Divestitures

The Company acquired two businesses andcertain patents during 2004 for a combined purchase price of $2.5million, net of cash acquired. Each of these acquisitions was treatedas a purchase, and their results of operations have been included inthe consolidated financial statements since their respective dates ofacquisition. On a preliminary basis, the purchase price exceeded thefair value of tangible net assets by $2.5 million, which was allocatedto other intangible assets and patents and developed technology.

In June 2004, the Company and Katayama Chemical Inc. formed a jointventure in Japan, Katayama Nalco Inc., to provide water treatment andprocess improvement services, chemicals, and equipment to Japaneseindustrial and institutional customers. The results of Katayama NalcoInc. are included in the Company's consolidated financialstatements since it exercises control over this joint venture.

The Company sold a business during 2004 for approximately $0.2million. No gain or loss was recorded on the sale.

During theperiod from January 1, 2003 through November 3, 2003, the Predecessoracquired Aquazur Ltd. from NIS and increased its investment in OekophilAG from 40% to 100%. Each of the acquisitions wasaccounted for as a purchase; however, as disclosed in Note 2, thecombined financial statements of the Predecessor include the results ofAquazur Ltd. prior to its acquisition from NIS. The combined purchaseprice of these acquisitions, net of cash acquired, was $23.4 million.The purchase price exceeded the fair value of the net tangible assetsacquired by $12.9 million, which was allocated to goodwill.

ThePredecessor received net proceeds of $13.3 million and recognized apretax loss of $5.2 million on the sale of its South African subsidiaryand two small businesses during the period from January 1, 2003 throughNovember 3, 2003.

The Predecessor acquired two businesses during2002 for a combined purchase price of $10.1 million, net of cashacquired. The purchase price exceeded the fair value of the nettangible assets acquired by $7.7 million, which was allocated togoodwill and other intangible assets. Each of the acquisitions wasaccounted for as a purchase and, accordingly, their results ofoperations have been included in the combined financial statements ofthe Predecessor since their respective dates of acquisition.

ThePredecessor also sold a business during 2002 for approximately $12.8million, which resulted in a pretax gain of $12.4 million.

Thepro forma impact as if the aforementioned acquisitions had occurred atthe beginning of the respective years is not significant.

5.    Securitizationof Accounts Receivable

In June 2004, the Company entered into athree-year accounts receivable securitization facility with acommercial paper conduit sponsored by one of the lenders under theCompany's senior credit facilities. The facility provides up to$100.0 million in funding, based on availability of eligible tradeaccounts receivable and other customary factors.

In connectionwith the facility, the Company established a bankruptcy-remote, whollyowned, special purpose limited liability company (the"Transferor"), into which Nalco Company andone 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 for cash.

The financing fee charged by the Transferees under the facility isbased on the amount funded and the conduit's cost of funds forissuing commercial paper plus a margin that varies based on theleverage ratio as calculated under the Company's senior creditfacilities. A commitment fee that varies 

70

----

5.    Securitizationof Accounts Receivable   (continued)

based on the same ratio and the unusedportion of the facility is also charged by the conduit. Under thefacility, Nalco Company services, administers and collects theReceivables, for which it receives a monthly servicing fee of 1%per annum of the average daily outstanding balance of Receivables.

Availability of funding under the facility depends primarily uponthe outstanding Receivables balance from time to time. The facility maybe terminated for, among other reasons, material breaches ofrepresentations and warranties, bankruptcies of the Sellers or theTransferor, a judgment or order for the payment of money renderedagainst the Transferor, cross-defaults to the Company's otherdebt, or breach of specified financial covenants. The Company iscurrently in compliance with these covenants.

The facility isaccounted 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 and thecosts associated with the facility being recorded as interest expense.At December 31, 2004, the Company had outstanding borrowings of $97.3million under the facility.

In December 2001, the Predecessorentered into an agreement that allowed it to periodically transferundivided percentage ownership interests in a revolving pool of most ofthe Predecessor's U.S. trade receivables to a multiseller conduit(Conduit) administered by an independent financial institution. Theagreement was terminated in October 2003, and the Predecessorrepurchased $100.7 million of receivables to facilitate thistermination.

Under the terms of the agreement, the Predecessorcould transfer trade accounts receivable to a bankruptcy-remote specialpurpose entity (SPE), and the Conduit, or backup purchasers, wasrequired to purchase from the SPE an undivided ownership interest of upto $150.0  million in those receivables. The percentage ownershipinterest in receivables purchased by the Conduit could increase ordecrease over time, depending on the characteristics of the SPE'sreceivables, including delinquency rates and debtor concentrations. ThePredecessor serviced the receivables transferred to the SPE andreceived a servicing fee, which approximated market compensation forthese services.

Under the terms of the agreement, the Conduitpaid the SPE the face amount of the undivided interest at the time ofpurchase. On a monthly basis, this sales price was adjusted, resultingin payments by the SPE to the Conduit of an amount that varied based onthe interest rate on certain of the Conduit's liabilities and thelength of time the sold receivables remained outstanding. Collectionson sold receivables were used to purchase additional receivables fromthe Predecessor.

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 Financial Assets and Extinguishments ofLiabilities. The Predecessor's loss on the sale of theundivided interests in the receivables was $1.5 million and $1.8million for the period from January 1, 2003 through November 3, 2003and the year ended December 31, 2002, respectively, and was included ininterest expense.

Cash flows from the sale of undividedinterests in the receivables to the Conduit, net of receivablesrepurchased to facilitate termination of the agreement, were reportedby the Predecessor as an operating activity in the statement of cashflows.

71

----

6.    Inventories

Inventories consist of thefollowing:

|                                 |  |                  |       |                  |  |        |       |        |  |  |
|---------------------------------|--|------------------|-------|------------------|--|--------|-------|--------|--|--|
|                            |  | December31, 2004 |       | December 31,2003 |
| Finishedproducts                |  | $                | 245.4 |             |  | $      | 233.6 |   |
| Raw materialsandwork-in-process |  |             | 68.1  |             |  |   | 61.5  |   |
|                            |  | $                | 313.5 |             |  | $      | 295.1 |   |
|                                 |

7.    Goodwill

Changes in the Predecessor's carrying value of goodwill fromJanuary 1, 2003 to November 3, 2003 are summarized below:

|                                       |  |        |         |         |  |  |
|---------------------------------------|--|--------|---------|---------|--|--|
| Balanceat January 1,2003              |  | $      | 2,319.3 |    |
| Acquisitions                          |  |   | 12.9    |    |
| Dispositions                          |  |   | (8.0    | )  |
| Impairment                            |  |   | (244.4  | )  |
| Adjustmentof income tax uncertainties |  |   | (60.0   | )  |
| Foreigncurrency translation andother  |  |   | 24.1    |    |
| Balance at November 3,2003            |  | $      | 2,043.9 |    |
|                                       |

In thesecond quarter of 2003, Suez initiated the sale of the Predecessor.Initial third party offers indicated a potential sales price less thanbook value which triggered the Predecessor to complete the first stepevaluation of goodwill for impairment. The second step evaluation ofgoodwill, in which the fair value is assigned to the assets andliabilities as prescribed under SFAS No. 142, was performed inconnection with purchase accounting related to the Acquisition, and thePredecessor recognized a goodwill impairment charge of $244.4 millionin the combined statement of operations during the period from January1, 2003 through November 3, 2003.

During the period from January1, 2003 through November 3, 2003, the Predecessor reduced its goodwilland deferred tax liabilities by $60.0 million, as a result of changesin the Predecessor's estimate of its deferred tax liabilities asof the date it was acquired by Suez.

The Company initiallyrecorded goodwill of $2,413.9 million as a result of the Acquisition.Changes in the Company's carrying value of goodwill from November4, 2003 to December 31, 2003 are summarizedbelow:

|                             |  |        |         |        |  |  |
|-----------------------------|--|--------|---------|--------|--|--|
| Balance at November 4,2003  |  | $      | 2,413.9 |   |
| Foreign currencytranslation |  |   | 86.2    |   |
| Balance atDecember 31,2003  |  | $      | 2,500.1 |   |
|                             |

Changes inthe carrying value of goodwill from December 31, 2003 to December 31,2004 are summarized below:

72

----

7.    Goodwill   (continued)

|                                                   |  |        |         |         |  |  |
|---------------------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December 31, 2003                    |  | $      | 2,500.1 |    |
| Adjustmentto record purchased IPR&Dexpense    |  |   | (122.3  | )  |
| Adjustment to Ondeo NalcoGroup purchase price     |  |   | (21.7   | )  |
| Revised fairvalue of property, plant andequipment |  |   | 19.6    |    |
| Adjustment to fair value ofother long term assets |  |   | 1.4     |    |
| Adjustment toaccruedliabilities                   |  |   | 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    |    |
| Balance as ofDecember 31,2004                     |  | $      | 2,368.3 |    |
|                                                   |

In itspreliminary purchase price allocation, the Company recorded a $42.8million deferred tax liability related to the $112.7 million receivablerecorded at the date of the Acquisition for the Reimbursement Agreementwith Suez (see Note 9). During 2004, it was determined that thereceivable was not a taxable temporary difference, and the deferred taxliability was reversed. Also during 2004, the Company adjusted certaindeferred state income tax assets and liabilities as of the date of theAcquisition to reflect the tax rate at which it is expected they willbe settled. These adjustments resulted in a $27.9 million decrease ingoodwill. In addition, it was determined during 2004 that the sale ofthe Ondeo Nalco Group to the Sponsors accelerated the recapture ofcertain U.S. tax deductions in the Seller's 2003 tax year. Therecognition of taxable income by the Seller due to an Excess LossAccount restored tax basis for the Company. As a result, the Companyreduced deferred tax liabilities and goodwill by the $22.3 million taximpact.

The Company will evaluate goodwill for impairment in thefourth quarter of each year and whenever a triggering event occurs. TheCompany completed its annual goodwill impairment test in the fourthquarter 2004 and determined that no goodwill was impaired.

8.    OtherIntangible Assets

The Company's intangible assets aresummarized as follows:

|                                           |  |                  |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|-------------------------------------------|--|------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                      |  | December31, 2004 |         | December 31,2003        |
|                                      |  | GrossAmount      |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject to amortization: |  |
| Customerrelationships                     |  | $                | 506.6   |                    |  | $           | (103.5  | )                  |  | $      | 494.4   |   |  | $      | (13.9   | )  |
| Patentsand developedtechnology            |  |             | 100.5   |                    |  |        | (12.2   | )                  |  |   | 100.1   |   |  |   | (1.7    | )  |
| Other                                     |  |             | 2.2     |                    |  |        | — |                    |  |   | — |   |  |   | — |    |
| Intangiblesnot subject to amortization:   |  |
| Trademarks andtradenames                  |  |             | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                      |  | $                | 1,439.3 |                    |  | $           | (115.7  | )                  |  | $      | 1,424.5 |   |  | $      | (15.6   | )  |
|                                           |

Estimatedannual amortization expense for the years ending December 31, 2005through December 31, 2009 is as follows:

73

----

8.    OtherIntangible Assets   (continued)

|                        |  |        |      |        |  |  |
|------------------------|--|--------|------|--------|--|--|
| Year ending December31 |  |
| 2005                   |  | $      | 79.9 |   |
| 2006                   |  |   | 68.4 |   |
| 2007                   |  |   | 58.6 |   |
| 2008                   |  |   | 50.5 |   |
| 2009                   |  |   | 43.8 |   |
|                        |

|          |                                                                                      |
|----------|--------------------------------------------------------------------------------------|
| 9.  | ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreementwith Suez |

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's stock.Preferred shares were allocated to eligible employees based on apercentage of pretax earnings.

At the inception of the ESOP, thePredecessor and a trustee entered into a trust agreement, constitutingthe ESOP Trust, to fund benefits under the Predecessor's ESOP. Aspart of its acquisition of Nalco Chemical Company in November 1999,Suez purchased from the trustee all of the issued and outstandingSeries B ESOP Convertible Preferred Stock at a price of $1,060 pershare. The trustee credited proceeds from the sale of allocated sharesto participants' accounts. Under the terms of an agreement (theContribution Agreement), the Predecessor and the ESOP trustee agreedthat the trustee would use proceeds from the sale of shares held in theloan suspense account to repay the outstanding principal and accruedinterest on the ESOP loans. It was also agreed that all proceedsremaining after the repayment of the loans and accrued interest wouldbe allocated to participants' accounts. In return, thePredecessor agreed to make contributions to the Profit Sharing,Investment and Pay Deferral Plan Trust (the Trust) on or beforeDecember  31, 2010, having a present value equal to $124.6million, the outstanding principal and accrued interest paid on theESOP loans. The plan was amended effective January 1, 2003 to alsopermit matching contributions under the Company's 401(k) plan tocount as contributions to the Trust. The Contribution Agreementprovides for specified minimum annual contributions to be made to theTrust, with interest accruing on the outstanding contribution balanceat an annual rate of 8.5% compounded monthly. The contributioncommitment becomes due and payable in its entirety if one or moreevents that are specified in the Contribution Agreement occur. ThePredecessor, upon the acquisition by Suez, recorded a liability of$139.1 million for this contribution commitment, representing thepresent value of the total expected contributions to the Trust, with acorresponding deferred employee profit sharing asset.

Contributions to the Trust and expenses recorded related to theContribution Agreement are as follows:

|                                                |  |                           |      |                                        |  |                                      |         |                           |  |        |      |        |  |        |      |        |  |  |
|------------------------------------------------|--|---------------------------|------|----------------------------------------|--|--------------------------------------|---------|---------------------------|--|--------|------|--------|--|--------|------|--------|--|--|
|                                           |  | Successor                 |      | Predecessor                            |
|                                           |  | YearendedDecember 31,2004 |      | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |         | Year endedDecember31,2002 |
| Contributions to theTrust                      |  | $                         | 14.2 |                                   |  | $                                    | — |                      |  | $      | 24.0 |   |  | $      | 11.8 |   |
| Expenserecorded:                               |  |
| Amortization of unearned employeeprofitsharing |  | $                         | 20.8 |                                   |  | $                                    | 2.8     |                      |  | $      | 13.8 |   |  | $      | 2.9  |   |
| Accretionof obligation toTrust                 |  |                      | 7.0  |                                   |  |                                 | 1.2     |                      |  |   | 6.2  |   |  |   | 9.2  |   |
| Totalincluded in operatingexpenses             |  | $                         | 27.8 |                                   |  | $                                    | 4.0     |                      |  | $      | 20.0 |   |  | $      | 12.1 |   |
|                                                |

Pursuantto the Stock Purchase Agreement, the Company and Suez entered into anagreement (the Reimbursement Agreement) on November 4, 2003, wherebySuez shall reimburse the Company for all contributions the Companymakes to the Trust in order to satisfy its obligations under the

74

----

|          |                                                                                                         |
|----------|---------------------------------------------------------------------------------------------------------|
| 9.  | ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreementwith Suez   (continued) |

Contribution Agreement. As part of theallocation of the Acquisition purchase price, the Company recorded areceivable from Suez of $112.7 million, equivalent to theCompany's recorded liability to the Trust. Interest accretes onthis receivable at the same rate that it accretes on theCompany's obligation to the Trust.

Payments received fromSuez and income recorded related to the reimbursement arrangement areas follows:

|                                  |  |                           |      |        |  |  |
|----------------------------------|--|---------------------------|------|--------|--|--|
|                             |  | Successor                 |
|                             |  | YearendedDecember 31,2004 |
| Payments receivedfrom Suez       |  | $                         | 14.2 |   |
| Incomerecorded:                  |  |
| Accretion of receivable fromSuez |  | $                         | 7.0  |   |
|                                  |

On November 4,2003, the Company entered into a sublease agreement with Leo HoldingCompany (Leo), a subsidiary of Suez, whereby the Company subleases itscorporate headquarters and research facility from Leo (see Note 14).Under the terms of the Reimbursement Agreement, if the Company fails topay when due any sublease rent (as defined in the sublease agreement),Suez shall have the right to reduce its reimbursement obligations tothe Company pursuant to the Reimbursement Agreement by an amount equalto such shortfall.

10.    Property,Plant, and Equipment

Property, plant, and equipment (includingmajor improvements) are recorded at cost. Depreciation of buildings andequipment is calculated over their estimated useful lives generallyusing the straight-line method.

The estimated useful lives ofthe major 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. Preliminary values and final values from the appraisersare reflected in the amounts at December 31, 2003 and December 31,2004, respectively, in the table below. The Company is depreciating theacquired assets based on the final fair values and the remaining usefullives.

Interest capitalized in connection with the developmentof a new management information system in Europe was $1.6 million, $0.1million, and $0.1 million for the year ended December 31, 2004, theperiod from November 4, 2003 through December 31, 2003, and the periodfrom January 1, 2003 through November 3, 2003, respectively.

75

----

10.    Property,Plant, and Equipment   (continued)

Property, plant, and equipment consist ofthe following:

|                                   |  |                 |        |                 |  |        |       |         |  |  |
|-----------------------------------|--|-----------------|--------|-----------------|--|--------|-------|---------|--|--|
|                              |  | December31,2004 |        | December31,2003 |
| Land                              |  | $               | 80.9   |            |  | $      | 69.0  |    |
| Buildings                         |  |            | 165.4  |            |  |   | 164.9 |    |
| Software                          |  |            | 103.0  |            |  |   | 71.4  |    |
| Equipment                         |  |            | 640.9  |            |  |   | 583.2 |    |
|                              |  |            | 990.2  |            |  |   | 888.5 |    |
| Accumulateddepreciation           |  |            | (142.9 | )          |  |   | (22.9 | )  |
| Property,plant, and equipment,net |  | $               | 847.3  |            |  | $      | 865.6 |    |
|                                   |

11.    IncomeTax

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

|                                   |  |                           |        |                                        |  |                                      |       |                           |  |        |        |         |  |        |       |        |  |  |
|-----------------------------------|--|---------------------------|--------|----------------------------------------|--|--------------------------------------|-------|---------------------------|--|--------|--------|---------|--|--------|-------|--------|--|--|
|                              |  | Successor                 |        | Predecessor                            |
|                              |  | YearendedDecember 31,2004 |        | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |       | Year endedDecember31,2002 |
| UnitedStates                      |  | $                         | (267.7 | )                                 |  | $                                    | (33.0 | )                    |  | $      | (233.1 | )  |  | $      | 100.3 |   |
| Foreign                           |  |                      | 165.5  |                                   |  |                                 | 0.5   |                      |  |   | 147.8  |    |  |   | 136.6 |   |
| Earnings(loss) before incometaxes |  | $                         | (102.2 | )                                 |  | $                                    | (32.5 | )                    |  | $      | (85.3  | )  |  | $      | 236.9 |   |
|                                   |

Thecomponents of the income tax provision (benefit) are as follows:

|                              |  |                           |        |                                        |  |                                      |        |                           |  |        |       |         |  |        |       |         |  |  |
|------------------------------|--|---------------------------|--------|----------------------------------------|--|--------------------------------------|--------|---------------------------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|                         |  | Successor                 |        | Predecessor                            |
|                         |  | YearendedDecember 31,2004 |        | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |        | Year endedDecember31,2002 |
| Current:                     |  |
| UnitedStates                 |  | $                         | 18.3   |                                   |  | $                                    | (0.3   | )                    |  | $      | 23.1  |    |  | $      | 71.3  |    |
| Stateandlocal                |  |                      | 0.2    |                                   |  |                                 | 1.4    |                      |  |   | 6.4   |    |  |   | 10.0  |    |
| Foreign                      |  |                      | 78.2   |                                   |  |                                 | 9.0    |                      |  |   | 56.3  |    |  |   | 54.0  |    |
| Totalcurrent                 |  |                      | 96.7   |                                   |  |                                 | 10.1   |                      |  |   | 85.8  |    |  |   | 135.3 |    |
|                         |  |                      |   |                                   |  |                                 |   |                      |  |
| Deferred:                    |  |
| UnitedStates                 |  |                      | (44.3  | )                                 |  |                                 | (11.8  | )                    |  |   | (16.1 | )  |  |   | (22.8 | )  |
| Stateandlocal                |  |                      | (3.9   | )                                 |  |                                 | 1.0    |                      |  |   | (3.0  | )  |  |   | (4.8  | )  |
| Foreign                      |  |                      | (17.7  | )                                 |  |                                 | (7.6   | )                    |  |   | 2.0   |    |  |   | (2.5  | )  |
| Totaldeferred                |  |                      | (65.9  | )                                 |  |                                 | (18.4  | )                    |  |   | (17.1 | )  |  |   | (30.1 | )  |
| Incometax provision(benefit) |  | $                         | 30.8   |                                   |  | $                                    | (8.3   | )                    |  | $      | 68.7  |    |  | $      | 105.2 |    |
|                              |

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 as follows:

76

----

11.    IncomeTax   (continued)

|                                              |  |                 |         |                 |  |        |         |         |  |  |
|----------------------------------------------|--|-----------------|---------|-----------------|--|--------|---------|---------|--|--|
|                                         |  | December31,2004 |         | December31,2003 |
| Retirementbenefits                           |  | $               | 59.4    |            |  | $      | 50.2    |    |
| Pension                                      |  |            | 119.9   |            |  |   | 124.8   |    |
| UnitedStates net operating losscarryforwards |  |            | 54.3    |            |  |   | 18.1    |    |
| Foreign netoperating losscarryforwards       |  |            | 34.5    |            |  |   | 28.8    |    |
| Leveragedleaseinvestments                    |  |            | 1.9     |            |  |   | — |    |
| Accruals                                     |  |            | 42.8    |            |  |   | 32.4    |    |
| Otherdeferred taxassets                      |  |            | 35.4    |            |  |   | 36.7    |    |
| Totaldeferred taxassets                      |  |            | 348.2   |            |  |   | 291.0   |    |
| Valuationallowance                           |  |            | (44.1   | )          |  |   | (35.6   | )  |
| Netdeferred taxassets                        |  | $               | 304.1   |            |  | $      | 255.4   |    |
| Property                                     |  | $               | (53.9   | )          |  | $      | (67.4   | )  |
| Softwareamortization                         |  |            | (17.8   | )          |  |   | (17.5   | )  |
| Intangibleassets                             |  |            | (617.0  | )          |  |   | (681.3  | )  |
| Leveragedleaseinvestments                    |  |            | — |            |  |   | (22.2   | )  |
| ProfitSharing ReimbursementAgreement         |  |            | — |            |  |   | (42.8   | )  |
| Otherdeferred taxliabilities                 |  |            | (59.3   | )          |  |   | (15.4   | )  |
| Totaldeferred taxliabilities                 |  |            | (748.0  | )          |  |   | (846.6  | )  |
| Netdeferred taxassets                        |  |            | 304.1   |            |  |   | 255.4   |    |
| Totaldeferred incometaxes                    |  | $               | (443.9  | )          |  | $      | (591.2  | )  |
|                                              |

Thesedeferred tax assets and liabilities are classified in the balancesheets based on the balance sheet classification of the related assetsand liabilities.

Pursuant to the Stock Purchase Agreement, Suezhas provided an indemnity for certain contingent taxes that relate toperiods prior to November 4, 2003.

Management believes it ismore likely than not that current and long-term deferred tax assets,with the exception of certain tax carryforwards, will be realizedthrough the reduction of future taxable income. Although realization isnot assured, we have concluded the deferred tax assets for which avaluation allowance was determined to be unnecessary, will be realizedin the ordinary course of operations based on scheduling of deferredtax liabilities. Valuation allowances were established for deferred taxassets related to all of the tax loss carryforwards for whichutilization is uncertain.

The effective rate of the provision(benefit) for income taxes differs from the United States statutory taxrate due to the following items:

77

----

11.    IncomeTax   (continued)

|                                           |  |                           |         |                                        |  |                                       |         |                           |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------|--|---------------------------|---------|----------------------------------------|--|---------------------------------------|---------|---------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                      |  | Successor                 |         | Predecessor                            |
|                                      |  | YearendedDecember 31,2004 |         | November 4,2003throughDecember 31,2003 |  | January 1,2003through November 3,2003 |         | Year endedDecember31,2002 |
| United States statutory taxrate           |  | $                         | (35.8   | )                                 |  | $                                     | (11.4   | )                    |  | $      | (29.9   | )  |  | $      | 82.9    |    |
| Stateincome taxes, net of federalbenefits |  |                      | (2.4    | )                                 |  |                                  | 0.4     |                      |  |   | 3.9     |    |  |   | 1.2     |    |
| Foreigntax ratedifferential               |  |                      | (3.4    | )                                 |  |                                  | 1.5     |                      |  |   | (4.3    | )  |  |   | (2.8    | )  |
| Nondeductible goodwillimpairment          |  |                      | — |                                   |  |                                  | — |                      |  |   | 85.5    |    |  |   | — |    |
| Withholdingtaxes                          |  |                      | 8.7     |                                   |  |                                  | 0.1     |                      |  |   | 3.6     |    |  |   | 1.8     |    |
| In-processresearch anddevelopment         |  |                      | 42.8    |                                   |  |                                  | — |                      |  |   | — |    |  |   | — |    |
| Reorganizationof wholly ownedsubsidiary   |  |                      | — |                                   |  |                                  | — |                      |  |   | — |    |  |   | 6.2     |    |
| Taxon foreignearnings                     |  |                      | 18.7    |                                   |  |                                  | — |                      |  |   | 5.9     |    |  |   | — |    |
| U.S.tax on subsidiaryintegration          |  |                      | — |                                   |  |                                  | — |                      |  |   | — |    |  |   | 8.1     |    |
| U.S.tax on subsidiarydisposition          |  |                      | 1.8     |                                   |  |                                  | — |                      |  |   | 5.2     |    |  |   | — |    |
| Creditsandincentives                      |  |                      | (2.4    | )                                 |  |                                  | (0.2    | )                    |  |   | (0.8    | )  |  |   | (1.1    | )  |
| Prioryearadjustments                      |  |                      | — |                                   |  |                                  | (0.1    | )                    |  |   | 1.3     |    |  |   | 5.9     |    |
| Fixedassetrevaluation                     |  |                      | (2.7    | )                                 |  |                                  | — |                      |  |   | — |    |  |   | — |    |
| Valuationallowance                        |  |                      | 0.2     |                                   |  |                                  | 0.5     |                      |  |   | (3.0    | )  |  |   | 1.2     |    |
| Nondeductibleitems                        |  |                      | 4.4     |                                   |  |                                  | 0.7     |                      |  |   | 2.2     |    |  |   | 9.5     |    |
| Other                                     |  |                      | 0.9     |                                   |  |                                  | 0.2     |                      |  |   | (0.9    | )  |  |   | (7.7    | )  |
| Incometax provision(benefit)              |  | $                         | 30.8    |                                   |  | $                                     | (8.3    | )                    |  | $      | 68.7    |    |  | $      | 105.2   |    |
|                                           |

Noprovision has been made for United States or foreign income taxesrelated to approximately $509.1 million of undistributed earnings offoreign subsidiaries at December 31, 2004, as the Company considersthese earnings to be permanently reinvested. It was not practicable toestimate the additional income taxes and applicable withholding taxesthat would be payable on the remittance of such undistributedearnings.

During the year ended December 31, 2002, thePredecessor made income tax payments of $40.0 million, net of taxrefunds of $0.1 million. The Predecessor made income tax payments of$43.0 million, net of tax refunds of $4.2 million during the periodfrom January 1, 2003 through November 3, 2003.

Through November3, 2003, a portion of the Predecessor's United States operationswere conducted as part of a United States consolidated federal taxgroup that generated tax losses. Without the losses generated by othermembers of the group, the Predecessor would have made additional incometax payments of approximately $51.2 million and $84.0 million duringthe period from January 1, 2003 through November 3, 2003 and the yearended December 31, 2002, respectively.

The Company hasapproximately $106.0 million ($31.8 million tax effect) of U.K. capitallosses that do not expire. The capital losses can only be used tooffset future U.K. capital gains. A full valuation allowance has beenestablished pending the recognition of taxable U.K. capital gains.

The Company has approximately $7.9 million ($2.7 million tax effect)of net operating loss carryforward in Venezuela expiring between 2006and 2008, for which a full valuation allowance has been recorded.

The Company has U.S. federal net operating losses of approximately$144.7 million ($50.6 million tax effect) expiring between 2019 and2023. A valuation allowance has been established on $21.5 million ($7.5million tax effected) of certain separate return limitation yearamounts, that if released would be credited to goodwill.

78

----

11.    IncomeTax   (continued)

The Company has U.S. foreign tax creditsand state loss carryforwards, which could reduce future taxes by $4.8million. A valuation allowance of $2.1 million has been established forthe portion which realization is uncertain.

On October 22, 2004,President Bush signed into law the American Jobs Creation Act of 2004.The Act includes a one-time incentive for American companies torepatriate earnings from their foreign subsidiaries and invest thoseearnings in the United States. This incentive takes the form of an85% dividends received deduction for certain dividends fromcontrolled foreign corporations. Under this legislation, the Companycould repatriate in 2005 as much as $500 million of overseasaccumulated earnings that are eligible for the 85% dividendsreceived deduction. If we were to do so, the $500 million of dividendswould be subject to U.S. income tax (and potentially foreignwithholding taxes), thereby potentially increasing our effective taxrate. The amount of dividends we will repatriate and the related taxexpense have not yet beendetermined.

79

----

12.    Debt

Debt consists of thefollowing:

|                                               |  |                 |         |                 |  |        |         |        |  |  |
|-----------------------------------------------|--|-----------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                          |  | December31,2004 |         | December31,2003 |
| **Short-term**                                |  |            |    |            |  |   |    |   |
| Checksoutstanding and bankoverdrafts          |  | $               | 16.9    |            |  | $      | 19.5    |   |
| Currentmaturities of long-termdebt            |  |            | 0.8     |            |  |   | 30.7    |   |
| Notes payable toaffiliatedcompanies           |  |            | — |            |  |   | 1.7     |   |
|                                          |  | $               | 17.7    |            |  | $      | 51.9    |   |
| **Long-term**                                 |  |            |    |            |  |   |    |   |
| Securitizedtrade accounts receivable facility |  | $               | 97.3    |            |  | $      | — |   |
| Revolving creditfacility                      |  |            | — |            |  |   | 15.0    |   |
| Term loan A,due November 2009                 |  |            | 218.4   |            |  |   | 311.2   |   |
| Termloan B, due November2010                  |  |            | 1,081.0 |            |  |   | 1,300.0 |   |
| Senior notes,due November 2011                |  |            | 937.4   |            |  |   | 917.7   |   |
| Seniorsubordinated notes, due November2013    |  |            | 737.4   |            |  |   | 717.7   |   |
| Unsecured notes,due May 2008                  |  |            | 27.8    |            |  |   | 27.8    |   |
| Seniordiscount notes, due February2014        |  |            | 324.2   |            |  |   | — |   |
| Other                                         |  |            | 2.1     |            |  |   | 4.1     |   |
|                                          |  |            | 3,425.6 |            |  |   | 3,293.5 |   |
| Less:Currentportion                           |  |            | 0.8     |            |  |   | 30.7    |   |
|                                          |  | $               | 3,424.8 |            |  | $      | 3,262.8 |   |
|                                               |

Theweighted-average interest rate on short-term debt was 4.3% and3.8% at December 31, 2004 and December 31, 2003,respectively.

On January 21, 2004, the Company, through its100% owned subsidiaries, Nalco Finance Holdings LLC and NalcoFinance Holdings Inc. (together, the Issuers), issued $694.0 millionaggregate principal amount at maturity of 9.0% senior discountnotes due 2014. Prior to February 1, 2009, interest will accrue on thesenior discount notes in the form of an increase in the accreted valueof such notes. Thereafter, cash interest on the senior discount noteswill accrue and be payable semiannually in arrears on February 1 andAugust 1 of each year, commencing on August 1, 2009, at a rate of9.0% per annum. The accreted value of each note will increasefrom the date of issuance until February 1, 2009 at a rate of9.0% per annum, reflecting the accrual of non-cash interest,such that the accreted value will equal the principal amount atmaturity on February 1, 2009.

In December 2004, the Issuersredeemed a portion of the senior discount notes with an accreted valueof $162.3 million using proceeds from the initial public offering ofcommon stock of Nalco Holding Company. The Issuers paid a $14.6 millionpremium to redeem the notes, and incurred a $13.7 million loss on theextinguishment 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 $694.0million. At December 31, 2004, the senior discount notes had anaccreted value of approximately $698.13 per $1,000 principal amount atmaturity of notes, resulting in a total accreted value of $321.7million. The $2.5 million difference between the carrying value of thenotes and the total accreted value represents a premium, which is beingamortized over the term of the notes.

Nalco Holding Company andthe Issuers do not generate any revenue, and Nalco Finance HoldingsInc. was incorporated solely to accommodate the issuance of the notesby Nalco Finance Holdings LLC. All of the Company's consolidatedassets are owned, and all of the Company's consolidated net salesare earned, by its direct and indirect subsidiaries. As of December 31,2004, the Company's subsidiaries had $1,017.7 million ofrestricted net assets.

80

----

12.    Debt (continued)

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 or Nalco Holding Company. Further, the terms of the indenturesgoverning the senior notes and senior subordinated notes of NalcoCompany significantly restrict Nalco Company and the Issuers'other subsidiaries from paying dividends or otherwise transferringassets to the Issuers or Nalco Holding Company. The ability of NalcoCompany to make such payments is governed by a formula based on itsconsolidated net income, as well as meeting certain other conditions.Notwithstanding such restrictions, such indentures permit an aggregateof $50.0 million of such payments to be made whether or not there isavailability under the formula or the conditions to its use are met.The Issuers' subsidiaries will be permitted under the terms ofthe senior credit facilities and other indebtedness to incur additionalindebtedness that may severely restrict or prohibit the making ofdistributions, the payment of the dividends or the making of loans bysuch subsidiaries to the Issuers or Nalco Holding Company.

Inconnection with the Acquisition, Nalco Company (Nalco), a wholly ownedindirect subsidiary of Nalco Holding Company, issued senior notes andsenior subordinated notes in a private offering and entered into seniorsecured credit facilities.

On November 4, 2003, Nalco issuedsenior notes and senior subordinated notes (Notes). The senior noteswere issued in the principal amount of $665.0 million and€200.0 million and bear interest at 7.75%. Thesenior subordinated notes were issued in the principal amount of $465.0million and €200.0 million and bear interest at8.875% and 9.0%, respectively. Interest is payablesemi-annually on May 15 and November 15. The Notes do not have requiredprincipal payments prior to maturity. Nalco Holding Company's andNalco's direct and indirect domestic subsidiaries that guaranteeits obligations under the senior credit facilities guarantee theNotes.

At its option, Nalco may redeem some or all of the seniornotes and senior subordinated notes, beginning November 15, 2007 andNovember 15, 2008, respectively, at the redemption prices set forthbelow (expressed as percentages of principal amount), plus accruedinterest, if any, if redeemed during the twelve-month period commencingon November 15 of the years set forth below:

|                   |  |                          |         |         |  |                            |  |                     |         |         |  |        |         |         |  |  |  |  |
|-------------------|--|--------------------------|---------|---------|--|----------------------------|--|---------------------|---------|---------|--|--------|---------|---------|--|--|--|--|
| Seniornotes       |  | Senior subordinatednotes |
| Period            |  | RedemptionPrice          |         | Period  |  | U.S.dollar RedemptionPrice |  | EuroRedemptionPrice |
| 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 November 15, 2008, respectively,at a price equal to the principal amount of the notes, plus a specified"make-whole" premium. In addition, on orprior to November 15, 2006, Nalco may redeem up to 35% of eachof the senior notes and senior subordinated notes with the proceeds ofcertain equity offerings.

On November 4, 2003, the Companyentered into senior secured credit facilities which provided for arevolving credit facility and three term loans: a $200.0 million termloan 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 forborrowings up to $250 million, a portion of which may be made availableto the Company's non-U.S. subsidiary borrowers in euros. Therevolving credit facility 

81

----

12.    Debt (continued)

also includes borrowing capacity availablefor letters of credit. The facility bears interest at a rate equal toan applicable margin plus, at the Company's option, either (a) abase rate determined by reference to the greater of (1) the prime rate,(2) the three-month certificate of deposit rate plus 0.5%, and(3) the federal funds rate plus 0.5% or (b) LIBOR or EURIBORplus an applicable margin ranging from 1.0% to 2.5%,depending on the type of borrowing and the leverage ratio of theCompany, as defined in the credit agreement. Interest is generally duequarterly in arrears, and is also due upon expiration of any particularloan. In addition, there is an annual loan commitment fee of0.5% on the unused portion of the revolving credit facility. TheCompany is also required to pay a participation fee in respect of theundrawn portion of the letters of credit, at a rate per annum equal toLIBOR or EURIBOR plus an applicable margin, a fronting fee at a rate of0.25% per annum of the daily average amount, as well ascustomary letter of credit fees. As of December 31, 2004, the Companyhad $35.3 million in outstanding letters of credit, none of which hadbeen drawn against.

Term loan A bears interest at the same rateas the revolving credit facility. The applicable margin for borrowingsunder the term loan B facility is 1.5% with respect to base rateborrowings and 2.0% with respect to LIBOR or Eurocurrencyborrowings. Unlike the term loan A and the revolving credit facility,term loan B is not subject to adjustment based on the leverage ratio(as defined in the credit agreement). In addition to the $28.6 millionof scheduled payments under term loan facilities, Nalco repaid anadditional $288.3 million using cash generated from operations and$92.0 million in proceeds from an accounts receivable securitization.Nalco also repaid $15.0 million of revolving credit facility borrowingsduring the year ended December 31, 2004.

At December 31, 2004,the Company had $1,299.4 million outstanding under the senior securedcredit facilities with a weighted-average interest rate of4.41%. The amounts outstanding, as well as the base rates andapplicable margins, at December 31, 2004 and December 31, 2003 were asfollows:

|                          |  |        |                                    |                         |  |                  |         |         |  |                         |         |                  |  |        |                                    |        |  |        |      |         |  |        |      |         |  |  |
|--------------------------|--|--------|------------------------------------|-------------------------|--|------------------|---------|---------|--|-------------------------|---------|------------------|--|--------|------------------------------------|--------|--|--------|------|---------|--|--------|------|---------|--|--|
|                     |  | 2004   |                                    | 2003                    |
|                     |  | Amount |                                    | WeightedAverageBaseRate |  | ApplicableMargin |         | Amount  |  | WeightedAverageBaseRate |         | ApplicableMargin |
| Revolving creditfacility |  | $      | —                            |                    |  |             | — |    |  |                    | — |             |  | $      | 15.0                               |   |  |   | 1.17 | %  |  |   | 2.50 | %  |
| Termloan A (U.S.dollar)  |  | $      | 130.9                              |                    |  |             | 2.42    | %  |  |                    | 2.46    | %           |  | $      | 200.0                              |   |  |   | 1.17 | %  |  |   | 2.50 | %  |
| Termloan A(euro)         |  | € |      64.2 |                    |  |             | 2.19    | %  |  |                    | 2.50    | %           |  | € |      88.0 |   |  |   | 2.16 | %  |  |   | 2.50 | %  |
| TermloanB                |  | $      | 1,081.0                            |                    |  |             | 2.33    | %  |  |                    | 2.00    | %           |  | $      | 1,300.0                            |   |  |   | 1.17 | %  |  |   | 2.50 | %  |
|                          |

The$27.8 million of unsecured notes bear interest at 6.25% withinterest payments due on May 15 and November 15. The $2.1 million inother long-term debt at December 31, 2004 was borrowed by two foreignsubsidiaries. Of this amount, $1.7 million was borrowed at an interestrate of 10.5%. The remaining $0.4 million is non-interestbearing.

The senior secured credit facilities, senior notes, andsenior subordinated notes contain a number of covenants that, amongother things, restrict, subject to certain exceptions, the ability ofthe Company to sell assets; incur additional indebtedness or issuepreferred stock; repay other indebtedness; pay dividends or repurchasestock; create liens on assets; make investments, loans or advances;make acquisitions, mergers or consolidations; enter into sale andleaseback transactions; engage in certain transactions with affiliates;amend certain material agreements governing our indebtedness; changethe business of the Company; and enter into hedging contracts. Inaddition, the Company must maintain financial covenants including amaximum total leverage ratio, minimum interest coverage ratio, andmaximum capital expenditure limitation. As of December 31, 2004, theCompany was in compliance with all of these covenants.

82

----

12.    Debt (continued)

The following table presents the projectedannual maturities of long-term debt for years after2004:

|            |  |        |         |        |  |  |
|------------|--|--------|---------|--------|--|--|
| 2005       |  | $      | 0.8     |   |
| 2006       |  |   | 4.4     |   |
| 2007       |  |   | 152.6   |   |
| 2008       |  |   | 107.8   |   |
| 2009       |  |   | 80.0    |   |
| Thereafter |  |   | 3,216.6 |   |
|       |  | $      | 3,562.2 |   |
|            |

The$136.6 million difference between the total projected annual maturitiesof long-term debt of $3,562.2 million and the carrying value of$3,425.6 million is mostly attributable to the $139.1 milliondifference between the $460.8 million aggregate principal amount atmaturity of the senior discount notes and their accreted value of$321.7 million. Partly offsetting that difference is the $2.5 millionunamortized premium attributable to those notes.

13.    Leases

The Company leases administrative,research, manufacturing, and warehouse facilities and data processingand other equipment under non-cancelable leases that expire at variousdates through 2027. Rent expense totaled $44.6 million, $9.2 million,$23.8 million, and $25.1 million for the year ended December 31, 2004,the period from November 4, 2003 through December 31, 2003, the periodfrom January 1, 2003 through November 3, 2003, and the year endedDecember 31, 2002, respectively.

Future minimum rental paymentsfor operating leases related to facilities, with initial or remainingterms greater than one year, are asfollows:

|                       |  |        |       |        |  |  |
|-----------------------|--|--------|-------|--------|--|--|
| Yearending December31 |  |   |
| 2005                  |  | $      | 17.9  |   |
| 2006                  |  |   | 14.9  |   |
| 2007                  |  |   | 12.6  |   |
| 2008                  |  |   | 10.8  |   |
| 2009                  |  |   | 10.1  |   |
| Thereafter            |  |   | 218.2 |   |
|                  |  | $      | 284.5 |   |
|                       |

14.    Sale-LeasebackTransaction

In December 2002, the Predecessor entered into anagreement whereby it sold and leased back its corporate headquartersand research facility in Naperville, IL. As a result of the sale, thePredecessor received proceeds of $144.8 million, net of $5.2 million oftransaction costs. The related lease was for an initial term of 25years, and required the Predecessor to make total minimum payments of$264.2  million over the initial lease term. The lease agreementprovided for two fixed rate renewal periods of 5 years each and twofair value renewal periods of 5 years each.

ThePredecessor's payment obligations, along with certain other itemsunder the lease agreement, were fully guaranteed by Suez. Because ofthe guarantee, the Predecessor was precluded from accounting for thistransaction as a sale and leaseback of the property and insteadaccounted for it as a financing, with an effective interest rate of5.5%. The Predecessor provided a cross guarantee to Suez of anypayments made by Suez under its guarantee.

Under the terms of anagreement executed November 4, 2003 between the Company and Leo HoldingCompany (Leo), a subsidiary of Suez, the Company assigned its rightsand obligations under 

83

----

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 the Company'sbalance sheet as part of the allocation of the Acquisition purchaseprice. The Company accounts for the sublease as an operating lease.

On November 4, 2003, the Company entered into a ReimbursementAgreement with Suez whereby Suez shall reimburse the Company for allcontributions the Company makes to the Profit Sharing, Investment andPay Deferral Plan Trust (see Note 9). Under the terms of the subleaseagreement, if Suez fails to pay any of the payments required to be madeunder the Reimbursement Agreement, the Company shall have the right toset off such overdue amounts against the rent due under the subleaseagreement.

15.    Pensionand Other Postretirement Benefit Plans

The Company has severalnoncontributory, defined benefit pension plans covering most employeesin the U.S. and those with certain foreign subsidiaries. The principaldomestic plan represents approximately 59% of the benefitobligation and 54% of the total fair value of plan assets atDecember 31, 2004. The Company also provides a supplementary,nonqualified, unfunded plan for U.S. employees whose pension benefitsexceed ERISA limitations. In addition, the Company has defined benefitpostretirement plans that provide medical, dental, and life insurancebenefits for substantially all U.S. retirees and eligible dependents.In conjunction with the Acquisition, the Company assumed these plansfrom the Predecessor without amendment. The Company retains the rightto change or terminate these benefits, and several amendments were madein 2002 to the principal domestic pension plan and the defined benefitpostretirement medical and dental plans.

At the end of 2002, thedomestic pension plan was amended such that beginning January 2003,pension benefits no longer accrue for those participants in the pensionplan hired or rehired after October 1999 and for those participantshired before November 1999, but with less than five years of vestingservice at the end of 2002. However, these participants will continueto earn vesting service. These plan amendments resulted in acurtailment credit of $7.8 million in 2002. For those participantshired before November 1999 and with more than five years of vestingservice, the pension plan was amended to reduce future benefit accrualsand to increase the reduction factors for early retirement.

Alsoduring 2002, eligibility for participation in the defined benefitpostretirement medical and dental plans was changed from age 55 with atleast ten years of service to age 55 with at least ten years of serviceafter age 45, resulting in a curtailment credit of approximately $29.4million. Also, employees with less than five years of service at theend of 2003 will only be provided access to coverage at retirement; theCompany will not contribute to the cost of the coverage. This amendmentresulted in an additional curtailment credit of $12.2 million. Theplans were also amended such that retirees and their dependents will berequired to pay 50% of plan costs in 2005 and beyond.

ADecember 31 measurement date is used for the defined benefit plans forpension and other postretirement benefits.

84

----

15.    Pensionand Other Postretirement Benefit Plans (continued)

The following tables detail the changes inthe funded status of defined benefit pension and other postretirementbenefit plans and set forth amounts recognized and not recognized inthe balancesheets:

|                                                |  |                                     |         |                                                   |  |                                                   |         |         |  |        |         |         |  |  |
|------------------------------------------------|--|-------------------------------------|---------|---------------------------------------------------|--|---------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                           |  | PensionBenefits                     |
|                                           |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4, 2003throughDecember 31, 2003 |  | PredecessorJanuary 1, 2003throughNovember 3, 2003 |
| **Change inbenefit obligation**                |  |
| Benefit obligation atbeginning ofperiod        |  | $                                   | 706.2   |                                              |  | $                                                 | 711.4   |    |  | $      | 609.2   |    |
| Servicecost                                    |  |                                | 27.2    |                                              |  |                                              | 4.6     |    |  |   | 19.9    |    |
| Interestcost                                   |  |                                | 39.4    |                                              |  |                                              | 6.6     |    |  |   | 31.1    |    |
| Participantcontributions                       |  |                                | 1.6     |                                              |  |                                              | 0.3     |    |  |   | 1.8     |    |
| Planamendments                                 |  |                                | 0.5     |                                              |  |                                              | — |    |  |   | — |    |
| Actuarial(gain)loss                            |  |                                | 27.1    |                                              |  |                                              | (4.0    | )  |  |   | 94.0    |    |
| Benefitspaid                                   |  |                                | (49.6   | )                                            |  |                                              | (32.3   | )  |  |   | (61.9   | )  |
| Specialterminationbenefits                     |  |                                | — |                                              |  |                                              | 1.6     |    |  |   | 1.1     |    |
| Curtailments                                   |  |                                | — |                                              |  |                                              | (0.2    | )  |  |   | (2.8    | )  |
| Other                                          |  |                                | 1.4     |                                              |  |                                              | — |    |  |   | 4.6     |    |
| Foreigncurrency exchange ratechanges           |  |                                | 21.9    |                                              |  |                                              | 18.2    |    |  |   | 14.4    |    |
| Benefitobligation at end ofperiod              |  | $                                   | 775.7   |                                              |  | $                                                 | 706.2   |    |  | $      | 711.4   |    |
| **Changein plan assets**                       |  |
| Fair value of plan assets atbeginning ofperiod |  | $                                   | 346.6   |                                              |  | $                                                 | 342.4   |    |  | $      | 342.6   |    |
| Actualreturn on planassets                     |  |                                | 29.4    |                                              |  |                                              | 13.2    |    |  |   | 34.9    |    |
| Employercontributions                          |  |                                | 13.7    |                                              |  |                                              | 13.6    |    |  |   | 17.6    |    |
| Participantcontributions                       |  |                                | 1.6     |                                              |  |                                              | 0.3     |    |  |   | 1.8     |    |
| Benefitspaid                                   |  |                                | (49.6   | )                                            |  |                                              | (32.3   | )  |  |   | (61.9   | )  |
| Other                                          |  |                                | 1.1     |                                              |  |                                              | — |    |  |   | — |    |
| Foreigncurrency exchange ratechanges           |  |                                | 11.2    |                                              |  |                                              | 9.4     |    |  |   | 7.4     |    |
| Fairvalue of plan assets at end ofperiod       |  | $                                   | 354.0   |                                              |  | $                                                 | 346.6   |    |  | $      | 342.4   |    |
| Fundedstatus                                   |  | $                                   | (421.7  | )                                            |  | $                                                 | (359.6  | )  |  |
| Unrecognizednet actuarial (gain)loss           |  |                                | 10.9    |                                              |  |                                              | (13.3   | )  |  |
| Unrecognized priorservicecosts                 |  |                                | 0.5     |                                              |  |                                              | — |    |  |
| Netamountrecognized                            |  | $                                   | (410.3  | )                                            |  | $                                                 | (372.9  | )  |  |
|                                                |

85

----

15.    Pensionand Other Postretirement Benefit Plans (continued)

|                                                 |  |                                     |         |                                                   |  |                                                   |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|-------------------------------------|---------|---------------------------------------------------|--|---------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | OtherPostretirementBenefits         |
|                                            |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4, 2003throughDecember 31, 2003 |  | PredecessorJanuary 1, 2003throughNovember 3, 2003 |
| **Change inbenefitobligation**                  |  |                                |    |                                              |  |                                              |    |    |  |   |    |    |
| Benefitobligation at beginning ofperiod         |  | $                                   | 166.6   |                                              |  | $                                                 | 165.9   |    |  | $      | 150.2   |    |
| Servicecost                                     |  |                                | 6.2     |                                              |  |                                              | 1.0     |    |  |   | 4.3     |    |
| Interestcost                                    |  |                                | 9.3     |                                              |  |                                              | 1.6     |    |  |   | 7.6     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                              | 0.3     |    |  |   | 2.2     |    |
| Planamendments                                  |  |                                | (18.5   | )                                            |  |                                              | — |    |  |   | — |    |
| Actuarialloss                                   |  |                                | 8.8     |                                              |  |                                              | — |    |  |   | 11.5    |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                              | (2.2    | )  |  |   | (9.9    | )  |
| Benefitobligation at end ofperiod               |  | $                                   | 165.6   |                                              |  | $                                                 | 166.6   |    |  | $      | 165.9   |    |
| **Changein plan assets**                        |  |                                |    |                                              |  |                                              |    |    |  |   |    |    |
| Fairvalue of plan assets at beginning of period |  | $                                   | — |                                              |  | $                                                 | — |    |  | $      | — |    |
| Employercontributions                           |  |                                | 6.8     |                                              |  |                                              | 1.9     |    |  |   | 7.7     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                              | 0.3     |    |  |   | 2.2     |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                              | (2.2    | )  |  |   | (9.9    | )  |
| Fairvalue of plan assets at end of period       |  | $                                   | — |                                              |  | $                                                 | — |    |  | $      | — |    |
| Fundedstatus                                    |  | $                                   | (165.6  | )                                            |  | $                                                 | (166.6  | )  |  |   |    |    |
| Unrecognizednet actuarialloss                   |  |                                | 8.8     |                                              |  |                                              | — |    |  |   |    |    |
| Unrecognizedprior servicecosts                  |  |                                | (16.7   | )                                            |  |                                              | — |    |  |
| Netamountrecognized                             |  | $                                   | (173.5  | )                                            |  | $                                                 | (166.6  | )  |  |
|                                                 |

Amountsrecognized in the balance sheets consistof:

|                                       |  |                  |         |                              |  |                  |         |                   |  |        |         |         |  |        |         |         |  |  |
|---------------------------------------|--|------------------|---------|------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                  |  | PensionBenefits  |         | Other PostretirementBenefits |
|                                  |  | December31, 2004 |         | December 31, 2003            |  | December 31,2004 |         | December 31, 2003 |
| Otherassets                           |  | $                | 1.4     |                         |  | $                | 1.2     |              |  | $      | — |    |  | $      | — |    |
| Accruedexpenses                       |  |             | — |                         |  |             | — |              |  |   | (6.0    | )  |  |   | (9.3    | )  |
| Accruedpension/postretirementbenefits |  |             | (411.7  | )                       |  |             | (374.1  | )            |  |   | (167.5  | )  |  |   | (157.3  | )  |
| Netamountrecognized                   |  | $                | (410.3  | )                       |  | $                | (372.9  | )            |  | $      | (173.5  | )  |  | $      | (166.6  | )  |
|                                       |

Theaccumulated benefit obligation for all defined benefit pension planswas $625.5 million and $545.0 million at December 31, 2004 and 2003,respectively.

The projected benefit obligation, accumulatedbenefit obligation, and fair value of plan assets for all definedbenefit pension plans with projected benefit obligations in excess ofplan assets as of the end of 2004 and 2003 were asfollows:

|                               |  |        |       |        |  |        |       |        |  |  |
|-------------------------------|--|--------|-------|--------|--|--------|-------|--------|--|--|
|                          |  | 2004   |       | 2003   |
| Projectedbenefitobligation    |  | $      | 765.8 |   |  | $      | 697.7 |   |
| Accumulatedbenefit obligation |  |   | 619.4 |   |  |   | 539.5 |   |
| Fairvalue of planassets       |  |   | 342.0 |   |  |   | 336.7 |   |
|                               |

86

----

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 as of the end of 2004 and 2003 were asfollows:

|                               |  |        |       |        |  |        |       |        |  |  |
|-------------------------------|--|--------|-------|--------|--|--------|-------|--------|--|--|
|                          |  | 2004   |       | 2003   |
| Projectedbenefitobligation    |  | $      | 764.3 |   |  | $      | 697.7 |   |
| Accumulatedbenefit obligation |  |   | 618.4 |   |  |   | 539.5 |   |
| Fairvalue of planassets       |  |   | 340.8 |   |  |   | 336.7 |   |
|                               |

Net pension andother postretirement benefit expense for all defined benefit plans wascomprisedof:

|                                    |  |                                     |         |                                                     |  |                                                  |         |                                       |  |        |       |         |  |        |         |         |  |  |
|------------------------------------|--|-------------------------------------|---------|-----------------------------------------------------|--|--------------------------------------------------|---------|---------------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                               |  | PensionBenefits                     |
|                               |  | SuccessorYearendedDecember 31, 2004 |         | Successor November 4, 2003through December 31, 2003 |  | PredecessorJanuary 1,2003throughNovember 3, 2003 |         | PredecessorYearendedDecember 31, 2002 |
| Servicecost                        |  | $                                   | 27.2    |                                                |  | $                                                | 4.6     |                                  |  | $      | 19.9  |    |  | $      | 31.2    |    |
| Interestcost                       |  |                                | 39.4    |                                                |  |                                             | 6.6     |                                  |  |   | 31.1  |    |  |   | 35.5    |    |
| Expectedreturn on planassets       |  |                                | (26.9   | )                                              |  |                                             | (4.5    | )                                |  |   | (27.1 | )  |  |   | (37.3   | )  |
| Amortizationof prior servicecost   |  |                                | — |                                                |  |                                             | — |                                  |  |   | (2.0  | )  |  |   | (3.2    | )  |
| Amortizationof net transitionasset |  |                                | — |                                                |  |                                             | — |                                  |  |   | (0.1  | )  |  |   | (0.1    | )  |
| Recognizednet actuarialloss        |  |                                | — |                                                |  |                                             | — |                                  |  |   | 12.4  |    |  |   | 7.4     |    |
| Specialterminationbenefits         |  |                                | — |                                                |  |                                             | — |                                  |  |   | 1.1   |    |  |   | — |    |
| Settlementcharge                   |  |                                | 0.1     |                                                |  |                                             | 0.1     |                                  |  |   | 5.9   |    |  |   | 1.8     |    |
| Curtailment                        |  |                                | — |                                                |  |                                             | (0.2    | )                                |  |   | 2.0   |    |  |   | (7.8    | )  |
| Netbenefitexpense                  |  | $                                   | 39.8    |                                                |  | $                                                | 6.6     |                                  |  | $      | 43.2  |    |  | $      | 27.5    |    |
|                                    |

|                                  |  |                                     |         |                                                  |  |                                                  |         |                                       |  |        |         |         |  |        |         |         |  |  |
|----------------------------------|--|-------------------------------------|---------|--------------------------------------------------|--|--------------------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                             |  | OtherPostretirementBenefits         |
|                             |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4,2003throughDecember 31, 2003 |  | PredecessorJanuary 1,2003throughNovember 3, 2003 |         | PredecessorYearendedDecember 31, 2002 |
| Servicecost                      |  | $                                   | 6.2     |                                             |  | $                                                | 1.0     |                                  |  | $      | 4.3     |    |  | $      | 4.4     |    |
| Interestcost                     |  |                                | 9.3     |                                             |  |                                             | 1.6     |                                  |  |   | 7.6     |    |  |   | 10.6    |    |
| Amortizationof prior servicecost |  |                                | (1.8    | )                                           |  |                                             | — |                                  |  |   | (8.4    | )  |  |   | (8.2    | )  |
| Recognizednet actuarialloss      |  |                                | — |                                             |  |                                             | — |                                  |  |   | 6.0     |    |  |   | 4.4     |    |
| Specialterminationbenefits       |  |                                | — |                                             |  |                                             | — |                                  |  |   | — |    |  |   | — |    |
| Curtailment                      |  |                                | — |                                             |  |                                             | — |                                  |  |   | — |    |  |   | (41.6   | )  |
| Netbenefit expense(credit)       |  | $                                   | 13.7    |                                             |  | $                                                | 2.6     |                                  |  | $      | 9.5     |    |  | $      | (30.4   | )  |
|                                  |

Theweighted-average assumptions used for the U.S. defined benefit plans asof the end of the last two years were asfollows:

|                                        |  |                                                                 |      |                              |  |        |      |         |  |        |      |         |  |        |      |         |  |  |
|----------------------------------------|--|-----------------------------------------------------------------|------|------------------------------|--|--------|------|---------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                   |  |     PensionBenefits     |      | Other PostretirementBenefits |
|                                   |  | 2004                                                            |      | 2003                         |  | 2004   |      | 2003    |
| Discountrates                          |  |                                                            | 5.75 | %                       |  |   | 6.00 | %  |  |   | 5.75 | %  |  |   | 6.00 | %  |
| Ratesof increase in compensationlevels |  |                                                            | 3.94 | %                       |  |   | 4.19 | %  |  |   | 3.87 | %  |  |   | 4.12 | %  |
|                                        |

87

----

15.    Pensionand Other Postretirement Benefit Plans (continued)

The weighted-average assumptions used forthe foreign defined benefit pension plans as of the end of the last twoyears were asfollows:

|                                        |  |        |      |         |  |        |      |         |  |  |
|----------------------------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                   |  | 2004   |      | 2003    |
| Discountrates                          |  |   | 5.18 | %  |  |   | 5.43 | %  |
| Ratesof increase in compensationlevels |  |   | 3.36 | %  |  |   | 3.35 | %  |
|                                        |

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

|                                          |  |                           |      |                                        |  |                                      |      |                            |  |        |      |         |  |        |       |         |  |  |
|------------------------------------------|--|---------------------------|------|----------------------------------------|--|--------------------------------------|------|----------------------------|--|--------|------|---------|--|--------|-------|---------|--|--|
|                                     |  | Successor                 |      | Predecessor                            |
|                                     |  | YearendedDecember31, 2004 |      | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |      | Year endedDecember 31,2002 |
| Discountrates                            |  |                      | 6.00 | %                                 |  |                                 | 6.00 | %                     |  |   | 6.75 | %  |  |   | 7.25  | %  |
| Ratesof increase in compensation levels: |  |
| Pensionbenefits                          |  |                      | 4.19 | %                                 |  |                                 | 4.19 | %                     |  |   | 4.19 | %  |  |   | 4.19  | %  |
| Otherpostretirementbenefits              |  |                      | 4.12 | %                                 |  |                                 | 4.12 | %                     |  |   | 4.12 | %  |  |   | 4.12  | %  |
| Expectedlong-term return on planassets   |  |                      | 8.50 | %                                 |  |                                 | 8.50 | %                     |  |   | 9.00 | %  |  |   | 10.00 | %  |
|                                          |

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

|                                        |  |                           |      |                                         |  |                                       |      |                           |  |        |      |         |  |        |      |         |  |  |
|----------------------------------------|--|---------------------------|------|-----------------------------------------|--|---------------------------------------|------|---------------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                   |  | Successor                 |      | Predecessor                             |
|                                   |  | YearendedDecember31, 2004 |      | November 4,2003 throughDecember 31,2003 |  | January 1,2003 throughNovember 3,2003 |      | YearendedDecember 31,2002 |
| Discountrates                          |  |                      | 5.42 | %                                  |  |                                  | 5.43 | %                    |  |   | 5.74 | %  |  |   | 5.72 | %  |
| Ratesof increase in compensationlevels |  |                      | 3.35 | %                                  |  |                                  | 3.71 | %                    |  |   | 3.40 | %  |  |   | 3.31 | %  |
| Expectedlong-term return on planassets |  |                      | 8.15 | %                                  |  |                                  | 7.97 | %                    |  |   | 7.75 | %  |  |   | 7.60 | %  |
|                                        |

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 pension plans.

The assets in the principal domestic pension plan are diversifiedacross equity and fixed income investments. The investment portfoliohas target allocations of approximately 64% equity and36% fixed income. Other assets such as real estate, hedge fundsand private equity may be used judiciously to enhance portfolio returnsand diversification. For the fiscal years ended December 31, 2004 andDecember 31, 2003, the plan had an immaterial amount of assets investedin these alternative investment classes. The foreign pension plans havecomparable asset allocation to the principal domestic plan, with somevariances for local practices.

The expected long-term rate ofreturn is established using historical market data for each asset classas well as the target allocation. Historical markets are analyzed andlong-term historical relationships between equity and fixed incomeinvestments are preserved consistent with the widely accepted capitalmarket principle that assets with higher volatility will generate agreater return over the long run. Active management is employed in mostasset classes, which also contributes to the 

88

----

15.    Pensionand Other Postretirement Benefit Plans (continued)

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 by theCompany's principal domestic defined benefit pension plan as ofthe end of the last two years and target allocations were asfollows:

|                       |  |        |       |                   |  |        |       |         |  |        |         |         |  |        |         |         |  |  |
|-----------------------|--|--------|-------|-------------------|--|--------|-------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                  |  | Actual |       | TargetAllocations |
|                  |  | 2004   |       | 2003              |  | 2004   |       | 2003    |
| Equitysecurities      |  |   | 64.8  | %            |  |   | 65.7  | %  |  |   | 64.3    | %  |  |   | 64.3    | %  |
| Fixedincomesecurities |  |   | 33.7  |              |  |   | 34.2  |    |  |   | 35.7    |    |  |   | 35.7    |    |
| Cash                  |  |   | 1.5   |              |  |   | 0.1   |    |  |   | — |    |  |   | — |    |
|                  |  |   | 100.0 | %            |  |   | 100.0 | %  |  |   | 100.0   | %  |  |   | 100.0   | %  |
|                       |

Theassumed health care cost trend rates used as of the end of the last twoyears were asfollows:

|                                                                                 |  |      |  |      |  |  |  |  |  |  |
|---------------------------------------------------------------------------------|--|------|--|------|--|--|--|--|--|--|
|                                                                            |  | 2004 |  | 2003 |
| Healthcare cost trend rate assumed for nextyear                                 |  | 10%  |  | 10%  |
| Rateto which the cost trend rate is assumed to decline (the ultimate trendrate) |  | 5%   |  | 5%   |
| Year thatthe rate reaches the ultimate trendrate                                |  | 2010 |  | 2009 |
|                                                                                 |

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 |  | $                    | 0.6 |     |  | $      | (0.8 | )  |
| Effect onpostretirement benefitobligation             |  |                 | 7.0 |     |  |   | (8.2 | )  |
|                                                       |

On December8, 2003, the Medicare Prescription Drug, Improvement and ModernizationAct of 2003 (the Act) was signed into law. The Act expands Medicare,primarily adding a prescription drug benefit for Medicare-eligibleretirees starting in 2006. The Company has determined that prescriptiondrug benefits that it provides to retirees do not qualify for thefederal subsidy provided by the Act. Accordingly, no accountingrecognition is required.

The Company expects to contribute $33.1million to its pension plans and $8.7 million to its other definedpostretirement benefit plans in 2005.

The following estimatedfuture benefit payments are expected to be paid in the yearsindicated:

|           |  |                 |       |                             |  |        |      |        |  |  |
|-----------|--|-----------------|-------|-----------------------------|--|--------|------|--------|--|--|
| Year      |  | PensionBenefits |       | OtherPostretirementBenefits |
| 2005      |  | $               | 37.4  |                        |  | $      | 8.7  |   |
| 2006      |  |            | 34.4  |                        |  |   | 9.5  |   |
| 2007      |  |            | 36.8  |                        |  |   | 10.3 |   |
| 2008      |  |            | 36.5  |                        |  |   | 10.9 |   |
| 2009      |  |            | 40.8  |                        |  |   | 11.4 |   |
| 2010-2014 |  |            | 267.5 |                        |  |   | 63.5 |   |
|           |

89

----

16.    EquityCompensation Plan

Nalco LLC, the Company's direct parentcompany, established the Nalco LLC 2004 Unit Plan (the"Plan") for purposes of (i) attracting andretaining exceptional officers and other key employees, non-employeedirectors and consultants of Nalco LLC and the Company and (ii)enabling such individuals to acquire an equity interest in Nalco LLCand to participate in the long-term growth and financial success ofNalco LLC and the Company.

During 2004, Nalco LLC grantedcertain officers and key employees of the Company rights to purchase adesignated number of one or more classes of equity interests("Units") in Nalco LLC. Those officers andkey employees who elected to purchase such Units did so at theUnits' fair value, discounted for any vesting provisions, asdetermined by a valuation consultant, since Nalco LLC is a privatecompany and there is no public market for its shares.

The Unitssubject to the Plan include class A, class B, class C, and class DUnits. The class A Units are fully vested at the time of purchase by anemployee and have economic characteristics that are similar to those ofshares of common stock in a private corporation. The class B, class C,and class D Units are subject to vesting provisions, meaning that inorder for such Units to be entitled to distributions or other benefits,an employee will have to continue to provide services for a certainperiod of time. However, with respect to the class C and class D Units,such vesting will be accelerated if the Company achieves certain EBITDAperformance targets. The Units also become fully vested 18 months aftera change in control of the Company, subject to certain otherconditions.

The methods employed to value the class A Units werethe guideline public company method, using multiples of EBITDA andsales, and the income approach, using the discounted free cash flowmethod. The class B, class C, and class D Units are essentiallystructured as options and were valued using the Black-Scholes optionpricing model. The expected option life, risk-free interest rate,expected annual volatility, and dividend yield used to calculate thefair value of the Units was 6.0 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 LLC established thePlan, the Company will account for the Plan since its economicsubstance is substantially the same for the Company and itsemployees.

In December 2004, the 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.

TheCompany elected to adopt SFAS No. 123(R) as of October 1, 2004, usingthe modified-prospective transition method. Compensation cost chargedto earnings for the Plan was $0.1 million for the year ended December31, 2004. Compensation cost is recognized ratably over the estimatedrequisite service periods that the Units vest. No share-basedcompensation was charged to earnings by the Successor during the periodfrom November 4, 2003 through December 31, 2003 or by the Predecessorduring the period from January 1, 2003 through November 3, 2003 and theyear ended December 31, 2002, since no share-based compensation plansexisted during those periods.

As a result of the purchase ofUnits under the Plan by key officers and employees, the Companyreceived an additional contribution of capital of $8.1 million fromNalco LLC.

90

----

17.    Shareholders'Equity

Shareholders' equity consists of thefollowing:

|                                                                                                                |  |                 |         |                  |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------------------------------|--|-----------------|---------|------------------|--|--------|---------|---------|--|--|
|                                                                                                           |  | December31,2004 |         | December 31,2003 |
| Preferredstock, par value $0.01 per share; authorized 100,000,000 shares; noneissued                           |  | $               | — |             |  | $      | — |    |
| Commonstock, par value $0.01 per share; authorized 500,000,000 shares;141,663,369 shares issued andoutstanding |  |            | 1.4     |             |  |   | — |    |
| Additionalpaid-incapital                                                                                       |  |            | 738.8   |             |  |   | 1,001.9 |    |
| Accumulateddeficit                                                                                             |  |            | (162.9  | )           |  |   | (24.1   | )  |
| Accumulatedother comprehensiveincome                                                                           |  |            | 133.1   |             |  |   | 91.2    |    |
|                                                                                                           |  | $               | 710.4   |             |  | $      | 1,069.0 |    |
|                                                                                                                |

Thecapital structure of the Company at December 31, 2003 consisted of oneclass of limited liability company interests represented by Units,which were identical with each other in every respect. There were100,186.7 million Units issued and outstanding, all of which were ownedby the Sponsors and Dr. Joyce. Through a series of transactions asdescribed in Note 1, the Company was converted into a corporation onJune 17, 2004, with 100 shares issued and outstanding. In January 2004,the Company used the net proceeds from the senior discount notes due2014 issued by Nalco Holding Company's subsidiaries, NalcoFinance Holdings LLC and Nalco Finance Holdings Inc., to make a returnof capital distribution of $446.9 million.

The Company receivedadditional capital contributions of $9.3 million from its direct parentcompany, Nalco LLC, during 2004. This resulted from additional capitalcontributions received by Nalco LLC, comprised of an additional equityinvestment of $1.2 million by Dr. Joyce and $8.1 million in proceedsfrom the sale of equity interests to certain officers and key employeesunder the Nalco LLC Unit Plan.

On November 16, 2004, NalcoHolding Company completed an initial public offering of 51,111,111shares of its common stock, including 6,666,667 shares sold pursuant toan underwriters' option to purchase additional shares, at a priceof $15.00 per share. Net proceeds from the offering, after deductingunderwriting discounts and offering expenses, were $720.5 million.

Approximately $544.6 million of the net proceeds was used to pay adividend that was declared immediately prior to the consummation of theoffering to Nalco LLC, the sole stockholder of the Company on therecord date of the dividend. The remaining $175.9 million of the netproceeds was used toward the redemption of a portion of the seniordiscount notes due 2014, including the payment of the applicableredemption premium.

In addition to the cash dividend paid fromthe net proceeds from the offering of shares of its common stock, NalcoHolding Company issued another dividend to Nalco LLC immediately priorto the consummation of the offering. The dividend consisted of90,552,158 shares of Nalco Holding Company common stock and a warrantto purchase, for $0.01 per share, up to 6,191,854 shares of NalcoHolding Company common stock.

The warrant will enable Nalco LLCto deliver shares to members of the Company's management who havethe right to put, or sell, their vested class B, class C and class DUnits to Nalco LLC. Subject to limited exceptions, the warrant becomesexercisable upon the Company's achievement of the same EBITDAtargets and upon the occurrence of the same specified events applicableto the vesting of the Nalco LLC class B Units, class C Units and classD Units (except that there is no service requirement comparable to thatapplicable to the individual holders of the class B, class C and classD Units). The warrant terminates and becomes void as of the date itbecomes exercised in full. At December 31, 2004, up to 6,191,854 sharesof Nalco Holding Company common stock could be purchased by Nalco LLCunder the warrant.

91

----

18.    FinancialInstruments and Risk Management

The Company and its Predecessorhave used derivatives to fix the cost of issuing debt and to managewell-defined interest rate and foreign exchange exposures. Forderivative 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 notional amounts ofderivatives discussed below do not represent amounts exchanged by theparties and, thus, are not a measure of the exposure of the Companythrough its use of derivatives. The amounts exchanged are calculated onthe basis of the notional amounts and the other terms of thederivatives, which relate primarily to interest rates and foreignexchange rates.

The Company is exposed to credit-related lossesin the event of nonperformance by counterparties to financialinstruments, but it does not expect any counterparties to fail to meettheir obligations given their high credit ratings.

InterestRate Risk Management

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 the thirdquarter of 2003, it became probable that the future interest paymentshedged by the swap would not be made because it was expected that therelated debt would be repaid immediately before the sale of thePredecessor 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 other comprehensiveincome was reclassified to earnings during the third quarter 2003. Theswap was terminated in October 2003, ultimately resulting in a pretaxloss of $10.4 million that was reported in other income (expense) forthe period January 1, 2003 through November 3, 2003.

ForeignExchange Risk Management

The Company and its Predecessor haveused various types of foreign exchange contracts, including currencyswaps and forward exchange contracts, to manage foreign exchange risk.In addition, the Company uses certain foreign currency debt as a hedgeof the foreign currency exposure of a portion of its net investment inforeign operations.

Upon issuance, the Company designated the€200.0 million senior notes, the €200.0million senior subordinated notes, and the €88.0 millionterm loan as a hedge of its net investment in subsidiary companieswhose assets, liabilities, and operations are measured using the euroas their functional currency. Because of the high degree ofeffectiveness between the hedging instruments and the exposure beinghedged, fluctuations in the value of the euro-denominated debt due toexchange rate changes are offset by changes in the net investment.Accordingly, changes in the value of the euro-denominated debt arerecognized in foreign currency translation adjustment, a component ofaccumulated other comprehensive income, to offset changes in the valueof the Company's net investment in subsidiary companies whosefinancial statements are measured using the euro as their functionalcurrency.

The Company formally assesses, on a quarterly basis,whether the euro-denominated debt is effective at offsetting changes inthe value of the underlying exposure. Losses of $28.2 million (net ofincome taxes of $16.5 million) and $29.4 million (net of income taxesof $18.0 million) were reported as a component of other comprehensiveloss within the accumulated foreign currency translation adjustmentaccount for the year ended December 31, 2004 and the period fromNovember 4, 2003 through December 31, 2003, respectively. No hedgeineffectiveness was recorded in income.

92

----

18.    FinancialInstruments and Risk Management   (continued)

The Company's forward exchangecontracts at December 31, 2004 were designated as cash flow hedges ofthe variability of the cash flows from certain intercompany foreigncurrency loans and forecasted 2005 royalty payments due to changes inforeign exchange rates. The fair value of these contracts was aliability of $1.3 million and $0.5 million at December 31, 2004 andDecember 31, 2003, respectively. There was a $0.4 million pretax lossattributable to foreign exchange contracts in accumulated othercomprehensive income at December 31, 2004. Of that amount, the Companyexpects $0.3 million to be reclassified to earnings during the nexttwelve months.

In October 2003, the Predecessor terminated threecurrency swap agreements when the intercompany foreign currency loansthey were hedging were settled. The gain on the termination of theswaps was not material.

19.    FairValue of Financial Instruments

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

Cash and cash equivalents and short-term debt

The carrying amount approximates fair value because of theshort-term maturities of such instruments.

Long-term debt

The fair value of the Company's senior notes, seniorsubordinated notes, and senior discount notes at December 31, 2004 wasestimated based on their quoted market prices. The carrying value ofthe Company's senior notes and senior subordinated notesoutstanding at December 31, 2003 was considered to approximate fairvalue due to the proximity of their date of issuance to December 31,2003. 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 debt instruments.

Derivatives

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

93

----

19.    FairValue of Financial Instruments   (continued)

The following table presents the carryingamounts and fair values of financial instruments as of the end of thelast twoyears:

|                          |  |                |         |           |  |                |         |           |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|----------------|---------|-----------|--|----------------|---------|-----------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | 2004           |         | 2003      |
|                     |  | CarryingAmount |         | FairValue |  | CarryingAmount |         | FairValue |
| **Assets**               |  |           |    |      |  |           |    |      |  |   |    |   |  |   |    |   |
| Cashand cashequivalents  |  | $              | 33.3    |      |  | $              | 33.3    |      |  | $      | 100.0   |   |  | $      | 100.0   |   |
| **Liabilities**          |  |           |    |      |  |           |    |      |  |   |    |   |  |   |    |   |
| Short-termdebt           |  | $              | 17.7    |      |  | $              | 17.7    |      |  | $      | 51.9    |   |  | $      | 51.9    |   |
| Long-termdebt            |  |           | 3,424.8 |      |  |           | 3,616.5 |      |  |   | 3,262.8 |   |  |   | 3,265.6 |   |
| Forwardexchangecontracts |  |           | 1.3     |      |  |           | 1.3     |      |  |   | 0.5     |   |  |   | 0.5     |   |
|                          |

20.    BusinessOptimization Expenses

In addition to the Company's planto 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 employee severance and relatedcosts, were $1.7 million for the year ended December 31, 2004.

During 2002, the Predecessor began a program to realign its supportfor the petroleum, petrochemical, pulp, and paper industries to provideone-stop process improvement and water treatment sales and service tothese key customers. As a result, the Predecessor and the Companyincurred expenses during 2002 and 2003, which consisted primarily ofseverance, outplacement, and employee relocations, for about 100personnel.

The Predecessor implemented a plan during 2001 toreduce costs and improve efficiency throughout the organization and asa result, about 200 positions were eliminated. Expenses incurred during2002 primarily consisted of severance and outside consulting costs.

As a result of acquiring Exxon's interest in the Nalco/ExxonEnergy Chemicals, L.P. (Nalco/Exxon) joint venture in 2001, thePredecessor incurred costs related to integrating the operations of thejoint venture with those of the Predecessor. Certain costs totaling$6.0  million, which were related to the integration, includingseverance, employee relocations, and assets impairments, were accruedas a liability on the date of acquisition.

After its acquisitionby Suez in November 1999, Nalco Chemical Company began to integrate itsglobal operations with those of two other businesses owned by Suez:Aquazur and Calgon Corporation. Suez acquired Calgon in July 1999,which, along with the acquisition of Nalco Chemical Company, was partof a strategic plan by Suez to provide its global customers withintegrated services in the water, energy and waste sectors. Theintegration of Suez' Aquazur operations with those of NalcoChemical Company and Calgon was also part of this strategic plan. Thisintegration entailed the combination and realignment of themanufacturing, selling, research and administrative support functionsof the three businesses to achieve optimum efficiencies and synergies.Charges incurred consisted of consulting and other outside services,certain severance expenses, retention payments, training, travel,advertising, the integration of data processing and information systemsand facility closure costs. Activities related to the integration werecompleted at the end of 2002.

The Predecessor also incurredconsulting and other expenses that were charged to businessoptimization expenses during 2002 and 2003.

94

----

20.    BusinessOptimization Expenses   (continued)

Business optimization expenses werecomprised of thefollowing:

|                                                      |  |                          |         |                                        |  |                                      |         |                          |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                 |  | Successor                |         | Predecessor                            |
|                                                 |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| Business processoptimization                         |  | $                        | 1.7     |                                   |  | $                                    | — |                     |  | $      | — |   |  | $      | — |   |
| 2002 businessrealignment                             |  |                     | — |                                   |  |                                 | 0.8     |                     |  |   | 18.8    |   |  |   | 8.9     |   |
| 2001cost reduction and efficiencyimprovement         |  |                     | — |                                   |  |                                 | — |                     |  |   | — |   |  |   | 10.6    |   |
| Nalco/Exxonintegration                               |  |                     | — |                                   |  |                                 | — |                     |  |   | 1.5     |   |  |   | 7.7     |   |
| Integration-NalcoChemical Company, Aquazur andCalgon |  |                     | — |                                   |  |                                 | — |                     |  |   | — |   |  |   | 5.6     |   |
|                                                 |  | $                        | 1.7     |                                   |  | $                                    | 0.8     |                     |  | $      | 20.3    |   |  | $      | 32.8    |   |
|                                                      |

AllPredecessor business optimization plans were completed as of December31, 2003.

21.    Summaryof Other Income (Expense)

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

|                                                 |  |                          |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | Successor                |         | Predecessor                            |
|                                            |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| Gain (loss) on sale ofbusiness                  |  | $                        | — |                                   |  | $                                    | — |                     |  | $      | (5.2    | )  |  | $      | 12.4    |    |
| Loss on earlyextinguishment ofdebt              |  |                     | (13.7   | )                                 |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Suezmanagementfees                              |  |                     | — |                                   |  |                                 | — |                     |  |   | (2.9    | )  |  |   | (3.1    | )  |
| Sponsormonitoringfees                           |  |                     | (11.2   | )                                 |  |                                 | (1.8    | )                   |  |   | — |    |  |   | — |    |
| Sponsormonitoring agreement terminationfee      |  |                     | (35.0   | )                                 |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Franchisetaxes                                  |  |                     | (2.2    | )                                 |  |                                 | (0.5    | )                   |  |   | (0.3    | )  |  |   | (4.4    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                     | 3.2     |                                   |  |                                 | 0.4     |                     |  |   | 2.0     |    |  |   | 3.6     |    |
| Foreigncurrency exchangeadjustments             |  |                     | (1.5    | )                                 |  |                                 | (0.9    | )                   |  |   | 3.0     |    |  |   | 0.8     |    |
| Swapsettlement                                  |  |                     | — |                                   |  |                                 | — |                     |  |   | (10.4   | )  |  |   | — |    |
| Otherincome (expense),net                       |  |                     | 3.4     |                                   |  |                                 | — |                     |  |   | (3.5    | )  |  |   | (5.9    | )  |
|                                            |  | $                        | (57.0   | )                                 |  | $                                    | (2.8    | )                   |  | $      | (17.3   | )  |  | $      | 3.4     |    |
|                                                 |

22.    LossPer Share

Basic loss per share is computed by dividing the netloss by the weighted-average number of common shares outstanding duringthe period. Diluted loss per share reflects the potential dilution thatcould occur if securities or other contracts to issue common stock wereexercised or converted into common stock or resulted in the issuance ofcommon stock.

The weighted-average shares used in the basic lossper share computation were 97.7 million and 90.6 million for the yearended December 31, 2004 and the period from November 4, 2003 throughDecember 31, 2003, respectively. The potential dilutive effect of thestock purchase warrant for 6,191,854 shares of common stock held by theCompany's direct parent company, Nalco LLC, was not included inthe computation of diluted loss per share as it would have beenanti-dilutive.

95

----

23.    RelatedParty Transactions

On November 4, 2003, the Company enteredinto a Monitoring Fee Agreement with affiliates of the Sponsors formonitoring, advisory and consulting services in relation to the affairsof the Company, including debt and equity offerings, relationships withbankers and lenders, corporate strategy, acquisitions and dispositions,and other matters as may be requested. The Company agreed to pay anannual monitoring fee of at least $10.0 million for these services. Thefee could be increased depending on the Company's earnings.During the year ended December 31, 2004 and the period from November 4,2003 through December 31, 2003, the Company paid $11.2 million and $1.8million, respectively, for these services.

In connection withthe public offering of common stock by Nalco Holding Company inNovember 2004, the Company amended and restated the Monitoring FeeAgreement, pursuant to which the Company terminated the monitoringservices provided to the Company by the Sponsors' affiliates. Atermination fee of $35.0 million was paid to the Sponsors'affiliates, which was charged to other income (expense). The amendedand restated agreement will provide the Sponsors' affiliates witha right of first refusal to provide us with financial advisory servicesin exchange for mutually agreeable compensation. This right of firstrefusal will terminate when the Sponsors directly or indirectly holdless than 5% of Nalco Holding Company's outstanding commonstock.

As part of the Acquisition, the Company executed aTransaction Fee Agreement whereby the Company agreed to pay affiliatesof the Sponsors for the financial and structural analysis, duediligence investigations, other advice and negotiation assistancenecessary in order to enable the Acquisition to be consummated.Pursuant to this agreement, the Company paid affiliates of the Sponsorsa transaction fee of $75.0 million during the period from November 4,2003 through December 31, 2003. The Company also reimbursed affiliatesof the Sponsors $1.1 million for 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 through November 3,2003 and the year ended December 31, 2002 were $0.3 million and $1.4million, respectively. In addition, the Predecessor paid Suezmanagement fees of $2.9 million and $3.1 million for the period fromJanuary 1, 2003 through November 3, 2003 and the year ended December31, 2002, respectively.

The Predecessor lent funds to variousother subsidiaries of Suez. Interest earned from related companies was$1.0 million and $2.4 million for the period from January 1, 2003through November 3, 2003 and the year ended December 31, 2002,respectively.

The Predecessor also borrowed funds from othersubsidiaries of Suez. Interest expense to related companies was $13.5million and $24.9 million for the period from January 1, 2003 throughNovember 3, 2003 and the year ended December 31, 2002,respectively.

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 $10.4 million duringthe period from January 1, 2003 through November 3,2003.

96

----

24.    SegmentInformation

The Company provides integrated water treatment andprocess improvement services for industrial and institutionalapplications, using technologically advanced solutions, combiningchemical products and equipment, and consistent, reliable on-siteservice 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 the endmarkets it serves. The organization is comprised of the followingreportable segments:

Industrial and Institutional Services– This segment serves the global water treatment and processchemical needs of the industrial, institutional, and municipalmarkets.

Energy Services – This segment servesthe process chemicals and water treatment needs of the global petroleumand petrochemical industries in both upstream and downstreamapplications.

Paper Services – This segmentserves the process chemicals and water treatment needs of the globalpulp and paper industry.

Other – This segmentserves the alternative channels to market, supply chain activities, andcertain other operating expenses not allocated to a segment. It alsoincludes the Company's subsidiary in India and the Katayama Nalcojoint venture.

During 2004, the Company began reporting Pacificregion results related to the Industrial and Institutional Servicessegment and the Paper Services segment with those segments. Theseresults had previously been reported in the Other segment. Amounts forprior periods have been restated to conform with this change in thecomposition of the Company's reportable segments.

TheCompany evaluates the performance of its segments based on"direct contribution", which is defined asnet sales, less cost of products sold (excluding variances to standardcosts), selling and service expenses, marketing expenses and researchexpenses directly attributable to each segment. There are nointersegment revenues. Prior year data have been reclassified betweensegments to conform to the current year presentation.

Net salesby reportable segment were asfollows:

|                                      |  |                            |         |                                           |  |                                         |       |                            |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------------|-------|----------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                 |  | Successor                  |         | Predecessor                               |
|                                 |  | YearendedDecember 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |       | Year endedDecember31, 2002 |
| Industrial and InstitutionalServices |  | $                          | 1,402.0 |                                      |  | $                                       | 214.3 |                       |  | $      | 1,067.8 |   |  | $      | 1,215.9 |   |
| EnergyServices                       |  |                       | 805.4   |                                      |  |                                    | 123.7 |                       |  |   | 596.4   |   |  |   | 682.5   |   |
| PaperServices                        |  |                       | 663.0   |                                      |  |                                    | 104.3 |                       |  |   | 518.5   |   |  |   | 605.8   |   |
| Other                                |  |                       | 162.9   |                                      |  |                                    | 17.8  |                       |  |   | 123.8   |   |  |   | 140.1   |   |
| Netsales                             |  | $                          | 3,033.3 |                                      |  | $                                       | 460.1 |                       |  | $      | 2,306.5 |   |  | $      | 2,644.3 |   |
|                                      |

97

----

24.    SegmentInformation   (continued)

The following table presents directcontribution by reportable segment and reconciles the total segmentdirect contribution to earnings (loss) before incometaxes:

|                                      |  |                             |         |                                           |  |                                         |         |                            |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                 |  | Successor                   |         | Predecessor                               |
|                                 |  | Yearended December 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year endedDecember31, 2002 |
| Segment directcontribution:          |  |
| Industrial and InstitutionalServices |  | $                           | 351.7   |                                      |  | $                                       | 47.5    |                       |  | $      | 271.2   |    |  | $      | 286.5   |    |
| EnergyServices                       |  |                        | 167.2   |                                      |  |                                    | 23.8    |                       |  |   | 131.1   |    |  |   | 159.8   |    |
| PaperServices                        |  |                        | 151.3   |                                      |  |                                    | 23.4    |                       |  |   | 120.2   |    |  |   | 146.0   |    |
| Other                                |  |                        | (64.1   | )                                    |  |                                    | (22.9   | )                     |  |   | (49.6   | )  |  |   | (35.3   | )  |
| Totalsegment directcontribution      |  |                        | 606.1   |                                      |  |                                    | 71.8    |                       |  |   | 472.9   |    |  |   | 557.0   |    |
| Expensesnot allocated to segments:   |  |
| Administrativeexpenses               |  |                        | 190.4   |                                      |  |                                    | 36.3    |                       |  |   | 181.7   |    |  |   | 170.8   |    |
| Impairmentofgoodwill                 |  |                        | — |                                      |  |                                    | — |                       |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets      |  |                        | 96.3    |                                      |  |                                    | 15.4    |                       |  |   | 68.9    |    |  |   | 89.2    |    |
| Inprocess research anddevelopment    |  |                        | 122.3   |                                      |  |                                    | — |                       |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses         |  |                        | 1.7     |                                      |  |                                    | 0.8     |                       |  |   | 20.3    |    |  |   | 32.8    |    |
| Operatingearnings(loss)              |  |                        | 195.4   |                                      |  |                                    | 19.3    |                       |  |   | (42.4   | )  |  |   | 264.2   |    |
| Otherincome (expense),net            |  |                        | (57.0   | )                                    |  |                                    | (2.8    | )                     |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                       |  |                        | 10.2    |                                      |  |                                    | 0.6     |                       |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                      |  |                        | (250.8  | )                                    |  |                                    | (49.6   | )                     |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes    |  | $                           | (102.2  | )                                    |  | $                                       | (32.5   | )                     |  | $      | (85.3   | )  |  | $      | 236.9   |    |
|                                      |

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.

Net sales by geographic region were asfollows:

|                |  |                           |         |                                        |  |                                      |       |                           |  |        |         |        |  |        |         |        |  |  |
|----------------|--|---------------------------|---------|----------------------------------------|--|--------------------------------------|-------|---------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|           |  | Successor                 |         | Predecessor                            |
|           |  | YearendedDecember 31,2004 |         | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |       | Year endedDecember31,2002 |
| UnitedStates   |  | $                         | 1,375.8 |                                   |  | $                                    | 212.0 |                      |  | $      | 1,110.6 |   |  | $      | 1,369.2 |   |
| Othercountries |  |                      | 1,657.5 |                                   |  |                                 | 248.1 |                      |  |   | 1,195.9 |   |  |   | 1,275.1 |   |
|           |  | $                         | 3,033.3 |                                   |  | $                                    | 460.1 |                      |  | $      | 2,306.5 |   |  | $      | 2,644.3 |   |
|                |

Long-livedassets by geographic region were asfollows:

|                |  |                 |         |                  |  |        |         |        |  |  |
|----------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--|
|           |  | December31,2004 |         | December 31,2003 |
| UnitedStates   |  | $               | 2,903.0 |             |  | $      | 3,185.2 |   |
| Othercountries |  |            | 1,999.8 |             |  |   | 2,003.0 |   |
|           |  | $               | 4,902.8 |             |  | $      | 5,188.2 |   |
|                |

98

----

24.    SegmentInformation   (continued)

Net sales by geographic area weredetermined based on origin of sale. Geographic data on long-livedassets is based on physical location of those assets. There were nosales from a single foreign country that were material to theconsolidated net sales of the Company or the combined net sales of thePredecessor.

25.    Contingenciesand Litigation

Various claims, lawsuits and administrativeproceedings are pending or threatened against the Company and itssubsidiaries, arising from the ordinary course of business with respectto commercial, intellectual property, product liability, employee andenvironmental matters. Historically, these matters have not had amaterial impact on the consolidated financial position of the Company.However, the Company cannot predict the outcome of any litigation orthe potential for future litigation.

The Company has been namedas a potentially responsible party (PRP) by the EnvironmentalProtection Agency or state enforcement agencies at three waste siteswhere some financial contribution is or may be required. These agencieshave also identified many other parties who may be responsible forclean up costs at these waste disposal sites. The Company'sfinancial contribution to remediate these sites is expected to beminor. There has been no significant financial impact on the Company upto the present, nor is it anticipated that there will be in the future,as a result of these matters. The Company has made and will continue tomake provisions for these costs if the Company's liabilitybecomes probable and when costs can be reasonably estimated. TheCompany's undiscounted reserves for known environmental clean upcosts were $2.0 million at December 31, 2004.

Theseenvironmental reserves represent management's current estimate ofits proportional clean-up costs and are based upon negotiation andagreement with enforcement agencies, its previous experience withrespect to clean-up activities, a detailed review by the Company ofknown conditions, and information about other PRPs. They are notreduced by any possible recoveries from insurance companies or otherPRPs not specifically identified. Although management cannot determinewhether or not a material effect on future operations is reasonablylikely to occur, given the evolving nature of environmentalregulations, it believes that the recorded reserve levels areappropriate estimates of the potential liability. Although settlementwill require future cash outlays, it is not expected that such outlayswill materially impact the Company's liquidity position.Expenditures for the year ended December 31, 2004, relating toenvironmental compliance and clean up activities, were notsignificant.

The Company has been named as a defendant inlawsuits based on claimed involvement in the supply of allegedlydefective or hazardous materials. 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 the future.

The Company has received subpoenas from the U.S. Department ofJustice for documents and testimony relating to its storage of claimedhazardous materials, the claimed leakage of wastewater and othermatters at its plant in Garyville, Louisiana. No charges or indictmentshave been filed, but the outcome of this investigation is unknown tothe Company.

In the ordinary course of its business, the Companyis also a party to a number of lawsuits and is subject to variousclaims relating to trademarks, employee matters, contracts,transactions, chemicals and other matters, the outcome of which, in theopinion of management, should not have a material effect on theconsolidated financial position of the Company. However, we cannotpredict the outcome of any litigation or the potential for futurelitigation. Were an unfavorable ruling to occur, there exists thepossibility of a material adverse impact on the results of operationsfor the period in which the ruling occurs. The Company maintainsaccruals where the outcome of the matter is probable and can bereasonably estimated.

99

----

26.    QuarterlyResults of Operations(Unaudited)

|                                             |  |                 |         |                  |  |               |         |                  |  |        |         |        |  |        |       |         |  |  |
|---------------------------------------------|--|-----------------|---------|------------------|--|---------------|---------|------------------|--|--------|---------|--------|--|--------|-------|---------|--|--|
|                                        |  | Successor       |
|                                        |  | FirstQuarter(1) |         | SecondQuarter(2) |  | Third Quarter |         | FourthQuarter(3) |
| **2004**                                    |  |
| Netsales                                    |  | $               | 713.3   |             |  | $             | 740.4   |             |  | $      | 774.2   |   |  | $      | 805.4 |    |
| Costof productsold                          |  |            | 368.2   |             |  |          | 365.5   |             |  |   | 394.7   |   |  |   | 423.8 |    |
| Businessoptimizationexpenses                |  |            | — |             |  |          | — |             |  |   | — |   |  |   | 1.7   |    |
| Earnings(loss) before incometaxes           |  |            | (122.7  | )           |  |          | 19.9    |             |  |   | 30.9    |   |  |   | (30.3 | )  |
| Netearnings(loss)                           |  |            | (126.7  | )           |  |          | 2.4     |             |  |   | 2.0     |   |  |   | (16.5 | )  |
| Basicand diluted earnings (loss) per share: |  |
| Netearnings(loss)(8)                        |  | $               | (1.40   | )           |  | $             | 0.03    |             |  | $      | 0.02    |   |  | $      | (0.14 | )  |
|                                             |

|                                             |  |              |       |                  |  |                 |        |                                |  |                                 |       |        |  |        |       |         |  |        |       |         |  |  |
|---------------------------------------------|--|--------------|-------|------------------|--|-----------------|--------|--------------------------------|--|---------------------------------|-------|--------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|                                        |  | Predecessor  |       | Successor        |
|                                        |  | FirstQuarter |       | SecondQuarter(4) |  | ThirdQuarter(5) |        | October1 through November 3(6) |  | November 4through December31(7) |
| **2003**                                    |  |
| Netsales                                    |  | $            | 658.2 |             |  | $               | 694.5  |                           |  | $                               | 711.4 |   |  | $      | 242.4 |    |  | $      | 460.1 |    |
| Costof productsold                          |  |         | 323.7 |             |  |            | 331.2  |                           |  |                            | 337.9 |   |  |   | 121.8 |    |  |   | 248.2 |    |
| Businessoptimizationexpenses                |  |         | 2.5   |             |  |            | 7.2    |                           |  |                            | 5.5   |   |  |   | 5.1   |    |  |   | 0.8   |    |
| Earnings(loss) before incometaxes           |  |         | 42.4  |             |  |            | (186.5 | )                         |  |                            | 64.6  |   |  |   | (5.8  | )  |  |   | (32.5 | )  |
| Netearnings(loss)                           |  |         | 24.4  |             |  |            | (212.1 | )                         |  |                            | 33.7  |   |  |   | (4.2  | )  |  |   | (24.1 | )  |
| Basicand diluted earnings (loss) per share: |  |
| Netearnings(loss)(8)                        |  |         | n/a   |             |  |            | n/a    |                           |  |                            | n/a   |   |  |   | n/a   |    |  | $      | (0.27 | )  |
|                                             |

|  |
|--|
|  |  |
|  |

|           |                                                                                                                                                                                                                                                                                                                     |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Earnings(loss) before income 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 saleof inventory that had been revalued at selling price less costs to sellin purchaseaccounting. |

|           |                                                                                                                                                                                                             |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Earnings(loss) before income 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. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | Earnings(loss) before income 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 ($8.7 millionafter tax) for the early repayment of senior discount notes, and a $0.1million charge ($0.1 million after tax) related to the sale ofinventory that had been revalued at selling price less costs to sell inpurchaseaccounting. |

|           |                                                                                                                       |
|-----------|-----------------------------------------------------------------------------------------------------------------------|
| (4)  | Earnings(loss) before income taxes includes a $244.4 million charge ($244.4million after tax) for goodwillimpairment. |

|           |                                                                                                                                                                         |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Earnings(loss) before income taxes includes a $10.9 million charge ($6.8million after tax) to provide for the estimated loss on the terminationof an interest rateswap. |

|           |                                                                                                                                                                                     |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)  | Earnings (loss)before income taxes includes a $0.5 million credit ($0.3 million aftertax) to adjust the provision for termination of an interest rate swapto actual settlementcost. |

|           |                                                                                                                                                                                                               |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)  | Earnings (loss)before income taxes includes a $21.2 million charge ($14.8 millionafter tax) related to the sale of inventory that had been revalued atselling price less costs to sell in purchaseaccounting. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)  | Net earnings(loss) per share had not been previously reported in theCompany's Quarterly Reports on Form 10-Q. However, as a result ofthe dividend consisting of 90,552,158 shares of Nalco Holding Companycommon stock that was issued to Nalco LLC immediately prior to theconsummation of the initial public offering of Nalco Holding Companycommon stock in November 2004, net earnings (loss) per share forSuccessor periods prior to the fourth quarter 2004 has been adjustedretroactively to reflect this stock dividend. |

100

----

|               |                                                                                    |
|---------------|------------------------------------------------------------------------------------|
| ITEM 9.  | CHANGES INAND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE |

None.

ITEM 9A.    CONTROLS ANDPROCEDURES

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation ofdisclosure 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)  | Changes in internalcontrols over financial reporting. |

There were nochanges in the Company's internal controls over financialreporting that occurred during the fourth quarter of 2004 that havematerially affected, or are reasonably likely to materially affect, theCompany's internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION

There was no informationrequired to be disclosed in a report on Form 8-K during the fourthquarter of 2004 that was not previouslyreported.

101

----

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT

Information regarding the Company's executiveofficers is included in Item 1 of Part I of this report.

Information with respect to directors of the Company, included underthe headings "What is the composition of the Board ofDirectors and how often are members elected?","Who are this year's nominees?","Class II Directors—Terms Expiring in2006," and "Class III Directors—TermsExpiring in 2007" in the Proxy Statement, is incorporatedherein by reference.

Information with respect to the AuditCommittee, included under the heading "What are thecommittees of the board?" in the Proxy Statement, isincorporated herein by reference.

Information regarding Section16(a) compliance, included under the heading "Section16(a) Beneficial Ownership Reporting Compliance" in theProxy Statement, is incorporated herein by reference.

Information regarding the Company's code of ethics, includedunder the heading "Code of Ethical Business Conduct andOfficer Code of Ethics" in the Proxy Statement, isincorporated herein by reference.

ITEM 11.    EXECUTIVECOMPENSATION

Information with respect to compensation ofexecutive officers and directors of the Company, included under theheadings "EXECUTIVE COMPENSATION,""COMPENSATION COMMITTEE REPORT," and"How are directors compensated?" in the ProxyStatement, is incorporated herein by reference.

|               |                                                               |
|---------------|---------------------------------------------------------------|
| ITEM12.  | SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT |

Information with respect to securityownership of certain beneficial owners and management, included underthe heading "STOCK OWNERSHIP INFORMATION" inthe Proxy Statement, is incorporated herein by reference.

Thefollowing table summarizes the number of shares of the Company'scommon stock that could be issued under equity compensation plans as ofDecember 31, 2004:

|                                                          |  |                                                                                               |           |                                                                               |  |                                                                                                                                              |         |        |  |        |           |        |  |  |
|----------------------------------------------------------|--|-----------------------------------------------------------------------------------------------|-----------|-------------------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|--|--------|-----------|--------|--|--|
| PlanCategory                                             |  | Number of securities to be issued uponexercise of outstanding options, warrants and rights(a) |           | Weighted-average exercise price of outstandingoptions, warrants and rights(b) |  | Number of securitiesremaining available for future issuance under equitycompensation plans (excluding securities reflected in column(a)) (c) |
| Equity compensation plans approved bysecurityholders     |  |                                                                                          | 6,191,854 |                                                                          |  | $                                                                                                                                            | 0.01    |   |  |   | 7,500,000 |   |
| Equitycompensation plans not approved by securityholders |  |                                                                                          | —   |                                                                          |  |                                                                                                                                         | — |   |  |   | —   |   |
| Total                                                    |  |                                                                                          | 6,191,854 |                                                                          |  | $                                                                                                                                            | 0.01    |   |  |   | 7,500,000 |   |
|                                                          |

ITEM13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and relatedtransactions, included under the heading "Are there anyother material business relationships with entities associated with ourdirectors?" in the Proxy Statement, is incorporated hereinby reference.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES ANDSERVICES

Information with respect to principalaccounting fees and services, included under the heading"What fees did we pay to Ernst & Young LLP for auditand other services for fiscal years 2004 and 2003?" in theProxy Statement, is incorporated herein byreference.

102

----

PART IV

ITEM 15.    EXHIBITS,FINANCIAL STATEMENT SCHEDULES

(a) (1)    FinancialStatements

The following consolidated andcombined financial statements of Nalco Holding Company and subsidiariesare filed as part of this report under Item 8—FinancialStatements and Supplementary Data:

Consolidated Balance Sheets—December 31,2004 and 2003

Consolidated and CombinedStatements of Operations—Year ended December 31, 2004(Successor), Period from November 4, 2003 through December 31, 2003(Successor), Period from January 1, 2003 through November 3, 2003(Predecessor), and Year ended December 31, 2002 (Predecessor)

Consolidated and Combined Statement ofShareholders' Equity—Year ended December 31, 2004(Successor), Period from November 4, 2003 through December 31, 2003(Successor), Period from January 1, 2003 through November 3, 2003(Predecessor), and Year ended December 31, 2002 (Predecessor)

Consolidated and Combined Statements of CashFlows—Year ended December 31, 2004 (Successor), Period fromNovember 4, 2003 through December 31, 2003 (Successor), Period fromJanuary 1, 2003 through November 3, 2003 (Predecessor), and Year endedDecember 31, 2002 (Predecessor)

Notes toConsolidated and Combined Financial Statements

(a) (2)Financial statement schedules:

ScheduleI—Condensed Financial Information ScheduleII—Valuation and Qualifying Accounts

All other financialstatement schedules are not required under the relevant instructions orare inapplicable and therefore have been omitted.

103

----

Schedule I — Condensed FinancialInformation

Nalco Holding Company (Parent Company Only)

Condensed Balance Sheets December 31, 2004 and 2003(dollars inmillions)

|                                              |  |                  |       |                  |  |        |         |        |  |  |
|----------------------------------------------|--|------------------|-------|------------------|--|--------|---------|--------|--|--|
|                                         |  | December31, 2004 |       | December 31,2003 |
| Cash                                         |  | $                | 0.1   |             |  | $      | — |   |
| Investment insubsidiaries                    |  |             | 694.3 |             |  |   | 1,069.0 |   |
| Deferredtaxasset                             |  |             | 16.7  |             |  |   | — |   |
| **TotalAssets**                              |  | $                | 711.1 |             |  | $      | 1,069.0 |   |
| Notespayable to subsidiaries                 |  | $                | 0.7   |             |  | $      | — |   |
| Total shareholders'equity                    |  |             | 710.4 |             |  |   | 1,069.0 |   |
| **TotalLiabilities and Shareholders'Equity** |  | $                | 711.1 |             |  | $      | 1,069.0 |   |
|                                              |

Seeaccompanying note to condensed financial statements.

104

----

Schedule I — Condensed FinancialInformation – Continued

Nalco Holding Company (ParentCompany Only)

Condensed Statements of Operations Yearended December 31, 2004 Period from November 4, 2003 throughDecember 31, 2003 (dollars inmillions)

|                                              |  |                             |         |                                                       |  |        |         |         |  |  |
|----------------------------------------------|--|-----------------------------|---------|-------------------------------------------------------|--|--------|---------|---------|--|--|
|                                         |  | Yearended December 31, 2004 |         | Period from November 4, 2003through December 31, 2003 |
| **NetSales**                                 |  | $                           | — |                                                  |  | $      | — |    |
| Operating costs andexpenses:                 |  |                        |    |                                                  |  |   |    |    |
| Selling, administrative,and researchexpenses |  |                        | — |                                                  |  |   | — |    |
| Totaloperating costs andexpenses             |  |                        | — |                                                  |  |   | — |    |
| Operatingearnings(loss)                      |  |                        | — |                                                  |  |   | — |    |
| Equity inlosses ofsubsidiaries               |  |                        | (155.9  | )                                                |  |   | (24.0   | )  |
| Interestincome fromsubsidiaries              |  |                        | 0.4     |                                                  |  |   | — |    |
| Earnings(loss) before incometaxes            |  |                        | (155.5  | )                                                |  |   | (24.0   | )  |
| Income taxprovision(benefit)                 |  |                        | (16.7   | )                                                |  |   | — |    |
| **Netloss**                                  |  | $                           | (138.8  | )                                                |  | $      | (24.0   | )  |
|                                              |

Seeaccompanying note to condensed financial statements.

105

----

Schedule I — Condensed FinancialInformation – Continued

Nalco Holding Company (ParentCompany Only)

Condensed Statements of Cash Flows Yearended December 31, 2004 Period from November 4, 2003 throughDecember 31, 2003 (dollars inmillions)

|                                                    |  |                             |         |                                                      |  |        |          |         |  |  |
|----------------------------------------------------|--|-----------------------------|---------|------------------------------------------------------|--|--------|----------|---------|--|--|
|                                               |  | Yearended December 31, 2004 |         | Period from November 4, 2003through December 31,2003 |
| **Operatingactivities**                            |  |                        |    |                                                 |  |   |     |    |
| Netloss                                            |  | $                           | (138.8  | )                                               |  | $      | (24.0    | )  |
| Non-cashadjustments                                |  |                        | 139.2   |                                                 |  |   | 23.6     |    |
| Netcash provided by (used for) operatingactivities |  |                        | 0.4     |                                                 |  |   | (0.4     | )  |
| **Investingactivities**                            |  |                        |    |                                                 |  |   |     |    |
| Acquisition ofOndeo NalcoGroup                     |  |                        | — |                                                 |  |   | (1,001.5 | )  |
| Investmentinsubsidiaries                           |  |                        | (186.2  | )                                               |  |   | —  |    |
| Advancesfromsubsidiaries                           |  |                        | 0.7     |                                                 |  |   | —  |    |
| Netcash used for the investingactivities           |  |                        | (185.5  | )                                               |  |   | (1,001.5 | )  |
| **Financingactivities**                            |  |                        |    |                                                 |  |   |     |    |
| Proceeds fromoffering of common stock,net          |  |                        | 720.5   |                                                 |  |   | —  |    |
| Capitalcontributions (distributions),net           |  |                        | (535.3  | )                                               |  |   | 1,001.9  |    |
| Netcash provided by financingactivities            |  |                        | 185.2   |                                                 |  |   | 1,001.9  |    |
| Increasein cash                                    |  |                        | 0.1     |                                                 |  |   | —  |    |
| Cash atbeginning ofperiod                          |  |                        | — |                                                 |  |   | —  |    |
| Cashat the end of period                           |  | $                           | 0.1     |                                                 |  | $      | —  |    |
|                                                    |

See accompanying note to condensedfinancial statements.

106

----

Schedule I — Condensed FinancialInformation – Continued

Nalco Holding Company (ParentCompany Only)

Note to Condensed Financial StatementsDecember 31, 2004

1.    Basis of Presentation

Underthe terms of agreements governing indebtedness of certain subsidiariesof Nalco Holding Company (the "Company"),such subsidiaries are restricted from making dividend payments, loansor advances to the Company. Although the Company was not formed untilJune 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 derived from thefinancial statements of Nalco Holdings LLC, which was the previousparent company as of December 31, 2003, which Nalco Finance HoldingsLLC owns 100% subsequent to January 14, 2004.

Theunaudited financial statements for Nalco Holding Company (ParentCompany Only) summarize the results of operations for the year endedDecember 31, 2004 and for the period November 4, 2003 through December31, 2003 and as of December 31, 2004 and 2003. In these statements,Nalco Holding Company's investment in subsidiaries is stated atcost plus equity in undistributed earnings of subsidiaries since thedate of acquisition, November 4, 2003. Nalco Holding Company'sshare of net income of its unconsolidated subsidiaries is included inconsolidated income using the equity method. The Nalco Holding Companystatements should be read in conjunction with the Company'sfinancial statements.

107

----

Schedule II — Valuation andQualifying Accounts Year Ended December 31, 2004 (Successor),Period from November 4, 2003 through December 31, 2003(Successor),Period from January 1, 2003 through November 3, 2003(Predecessor)and Year Ended December 31, 2002(Predecessor)

|                                                                       |  |                             |      |                              |  |                        |         |            |  |                       |         |           |  |        |         |           |  |        |      |        |  |  |
|-----------------------------------------------------------------------|--|-----------------------------|------|------------------------------|--|------------------------|---------|------------|--|-----------------------|---------|-----------|--|--------|---------|-----------|--|--------|------|--------|--|--|
|                                                                  |  |                        |      | Additions                    |  |                   |         |       |
| (dollarsin millions)                                                  |  | BalanceatBeginningof Period |      | Charged to Costs andExpenses |  | ChargedtoOtherAccounts |         | Deductions |  | Balance atEndofPeriod |
| **Year Ended December 31,2004 (Successor):**                          |  |
| Allowance for doubtfulaccounts                                        |  | $                           | 21.0 |                         |  | $                      | 2.9     |       |  | $                     | 0.6     | (1)  |  | $      | (3.4)   | (2)  |  | $      | 21.1 |   |
| Deferred tax assetvaluation allowance                                 |  |                        | 35.6 |                         |  |                   | 0.2     |       |  |                  | 8.3     | (3)  |  |   | — |      |  |   | 44.1 |   |
| **Periodfrom November 4, 2003 through December 31, 2003(Successor):** |  |
| Allowance for doubtfulaccounts                                        |  | $                           | 21.6 |                         |  | $                      | 1.5     |       |  | $                     | 0.8     | (1)  |  | $      | (2.9)   | (2)  |  | $      | 21.0 |   |
| Deferred tax asset valuationallowance                                 |  |                        | 28.1 |                         |  |                   | — |       |  |                  | 7.5     | (4)  |  |   | — |      |  |   | 35.6 |   |
| **Periodfrom January 1, 2003 through November 3, 2003(Predecessor):** |  |
| Allowance for doubtfulaccounts                                        |  | $                           | 24.8 |                         |  | $                      | 5.4     |       |  | $                     | 0.9     | (1)  |  | $      | (9.5)   | (2)  |  | $      | 21.6 |   |
| Deferred tax assetvaluationallowance                                  |  |                        | 30.3 |                         |  |                   | (2.2    | )     |  |                  | — |      |  |   | — |      |  |   | 28.1 |   |
| **YearEnded December 31, 2002 (Predecessor):**                        |  |
| Allowancefor doubtful accounts                                        |  | $                           | 26.2 |                         |  | $                      | 10.7    |       |  | $                     | 1.2     | (1)  |  | $      | (13.3)  | (2)  |  | $      | 24.8 |   |
| Deferred tax assetvaluationallowance                                  |  |                        | 29.1 |                         |  |                   | 1.2     |       |  |                  | — |      |  |   | — |      |  |   | 30.3 |   |
|                                                                       |

|  |
|--|
|  |  |
|  |

|     |                                         |
|-----|-----------------------------------------|
| (1) | Foreigncurrency translationadjustments. |

|     |                                     |
|-----|-------------------------------------|
| (2) | Accountwrite-offs net ofrecoveries. |

|     |                                                                                                      |
|-----|------------------------------------------------------------------------------------------------------|
| (3) | Foreign currencytranslation adjustments of $4.6 and reclassification of $3.7 fromdeferred taxassets. |

|     |                                                                         |
|-----|-------------------------------------------------------------------------|
| (4) | Additional allowanceresulting from the Acquisition charged to goodwill. |

108

----

|              |                                                           |
|--------------|-----------------------------------------------------------|
| (a)(3)  | Exhibitrequired to 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 isincorporated herein by reference from Exhibit 2.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560). |
|   3.1 |  | Amended and RestatedCertificate of Incorporation of Nalco Holding Company, which isincorporated herein by reference from Exhibit 3.1 on Form 8-K of NalcoHolding Company filed on November 18, 2004 (File No.001-32342).                                                                                                                                        |
|   3.2 |  | Amended and RestatedBylaws of Nalco Holding Company, which are incorporated herein byreference from Exhibit 3.2 on Form 8-K of Nalco Holding Company filedon November 18, 2004 (File No.001-32342).                                                                                                                                                             |
|   4.1 |  | Form of Certificateof Common Stock, which is incorporated herein by reference from Exhibit4.1 of Amendment No.  2 to the Registration Statement onForm  S-1 of Nalco Holding Company filed on October 13, 2004(File No.333-118583).                                                                                                                             |
|   4.2 |  | Indenture, dated asof May 1, 1998, between Nalco Chemical Company and The Chase ManhattanBank, which is incorporated herein by reference from Exhibit 4.1 of theRegistration Statement on Form S-4 of Nalco Company filed on May 17,2004 (File No. 333-115560).                                                                                                 |
|   4.3 |  | FirstSupplemental Indenture, dated as of December 3, 1999, by and betweenNalco Chemical Company and The Chase Manhattan Bank, which isincorporated herein by reference from Exhibit 4.2 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                   |
|   4.4 |  | Senior NotesIndenture, dated as of November 4, 2003, among Nalco Company, theGuarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.3 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                     |
|   4.5 |  | Senior NotesSupplemental Indenture, dated as of November 12, 2003, among NalcoCompany, the guarantors named therein and The Bank of New York, asTrustee, which is incorporated herein by reference from Exhibit 4.4 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                        |
|   4.6 |  | Senior SubordinatedNotes Indenture, dated as of November 4, 2003, among Nalco Company, theGuarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                        |
|   4.7 |  | Senior SubordinatedNotes Supplemental Indenture, dated as of November 12, 2003, amongNalco Company, the guarantors named therein and The Bank of New York,as Trustee, which is incorporated herein by reference from Exhibit 4.6of the Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                           |
|   4.8 |  | Indenture, dated asof January 21, 2004 among Nalco Finance Holdings LLC, Nalco FinanceHoldings Inc. and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.7 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                       |
|                 |

109

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |
| 10.1          |  | Credit Agreement,dated as of November 4, 2003, among Nalco Holdings LLC, Nalco Company,as U.S. Borrower, the Foreign Subsidiary Borrowers from time to timeparty thereto, the Lenders party thereto, Citigroup Global Markets Inc.and Banc of America Securities LLC, as Global Coordinators, CiticorpNorth America, Inc., as Administrative Agent, Bank of America, N.A., asDocumentation Agent, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Co-Syndication Agents, Citigroup Global Markets Inc., Banc ofAmerica Securities LLC, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Joint Lead Arrangers and Joint Book Managers, which isincorporated herein by reference from Exhibit 10.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560). |
| 10.2          |  | U.S. Guarantee andCollateral Agreement, dated as of November 4, 2003, among NalcoHoldings LLC, Nalco Company, each domestic subsidiary of Nalco HoldingsLLC named therein and Citicorp North America, Inc., as CollateralAgent, which is incorporated herein by reference from Exhibit 10.2 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.3          |  | Guarantee Agreement, datedas of August 31, 2003, between Suez and Blackstone/Neptune AcquisitionCompany L.L.C., which is incorporated herein by reference from Exhibit10.3 of the Registration Statement on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.4          |  | Non-Competition Agreement,dated as of November 4, 2003 between Suez and Blackstone/NeptuneAcquisition Company L.L.C., which is incorporated herein by referencefrom Exhibit 10.4 of the Registration Statement on Form S-4 of NalcoCompany filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.5          |  | Reimbursement Agreement,dated as of November 4, 2003 between Suez and Nalco Company, which isincorporated herein by reference from Exhibit 10.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.6          |  | Sublease Agreement, datedas of November 4, 2003 between Leo Holding Company, as sublandlord andOndeo Nalco Company, as subtenant, which is incorporated herein byreference from Exhibit 10.6 of the Registration Statement on Form S-4of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.7          |  | Transaction Fee Agreement,dated as of November 4, 2003, among Nalco Company, Goldman, Sachs &Co., Apollo Management V, L.P., and Blackstone Management Partners IVL.L.C., which is incorporated herein by reference from Exhibit 10.7 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.8          |  | Monitoring Fee Agreement,dated as of November 4, 2003, between Nalco Company, BlackstoneManagement Partners IV L.L.C., Apollo Management V, L.P. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit10.8 of the Registration Statement on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.9          |  | Amendment No. 1, dated asof November 4, 2003 to the Monitoring Fee Agreement, dated as ofNovember 4, 2003, among Nalco Company, Blackstone Management PartnersIV L.L.C., Apollo Management V, L.P. and Goldman, Sachs & Co. whichis incorporated herein by reference from Exhibit 10.9 of theRegistration Statement on Form S-4 of Nalco Company filed on May 17,2004 (File No. 333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|               |

110

----

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |
| 10.10         |  | Sponsor ServicesAgreement, dated as of November 16, 2004, amending and restating theMonitoring Fee Agreement, among Nalco Company, Blackstone ManagementPartners IV L.L.C., Apollo Management V, L.P. and Goldman, Sachs &Co., which is incorporated herein by reference from Exhibit 10.2 onForm 8-K of Nalco Holding Company filed on November 18, 2004 (FileNo.001-32342).              |
| 10.11         |  | SeveranceAgreement, effective as of January 1, 2004, between Nalco Company andWilliam J. Roe, which is incorporated herein by reference from Exhibit10.10 of Amendment No. 2 to the Registration Statement on Form S-4 ofNalco Company filed on August 11, 2004 (File No.333-115560).                                                                                                          |
| 10.12         |  | Employment Agreement,effective as of November 1, 2003, between Nalco Company and Bradley J.Bell, which is incorporated herein by reference from Exhibit 10.11 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                             |
| 10.13         |  | Severance Agreement,effective as of January 1, 2004, between Nalco Company and Daniel M.Harker.                                                                                                                                                                                                                                                                                                |
| 10.14         |  | Severance Agreement, effectiveas of January 1, 2004, between Nalco Company and Lou L. Loosbrock,which is incorporated herein by reference from Exhibit 10.13 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August 11, 2004 (File No.333-115560).                                                                                                        |
| 10.15         |  | Receivables PurchaseAgreement, dated as of June 25, 2004, among Nalco Company, Nalco EnergyServices, L.P. and Nalco Receivables LLC, which is incorporated hereinby reference from Exhibit 10.16 of Amendment No. 2 to the RegistrationStatement on Form S-4 of Nalco Company filed on August 11, 2004 (FileNo. 333-115560).                                                                   |
| 10.16         |  | Receivables TransferAgreement, dated as of June 25, 2004, among Nalco Receivables LLC,Nalco Company, JPMorgan Chase Bank and the several transferees andfunding agents party hereto from time to time, which is incorporatedherein by reference from Exhibit 10.17 of Amendment No. 2 to theRegistration Statement on Form S-4 of Nalco Company filed on August 11,2004 (File No. 333-115560). |
| 10.17         |  | EmploymentAgreement, dated as of August 3, 2004, between Nalco LLC and William H.Joyce, which is incorporated herein by reference from Exhibit 10.18 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August 11, 2004 (File No.333-115560).                                                                                                                |
| 10.18         |  | Nalco LLC 2004 Unit Plan,which is incorporated herein by reference from Exhibit 10.24 of theRegistration Statement on Form  S-1 of Nalco Holding Companyfiled on August 26, 2004 (File No.333-118583).                                                                                                                                                                                         |
| 10.19         |  | Nalco LLC LimitedLiability Company Operating Agreement, dated May 17, 2004, which isincorporated herein by reference from Exhibit 10.25 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).                                                                                                                                       |
| 10.20         |  | Warrant Agreement, whichis incorporated herein by reference from Exhibit 10.4 on Form 8-K ofthe Nalco Holding Company filed on November 18, 2004 (File No.001-32342).                                                                                                                                                                                                                          |
| 10.21         |  | Registration RightsAgreement, dated as of November 16, 2004, among Nalco Holding Company,Nalco LLC and the other parties named therein, which is incorporatedherein by reference from Exhibit 10.1 on Form 8-K of the Nalco HoldingCompany filed on November 18, 2004 (File No.001-32342).                                                                                                     |
|               |

111

----

|               |  |                                                                                                                                                                                                                                                                                                                    |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |
| 10.22         |  | StockholdersAgreement, dated as of November 16, 2004, between Nalco Holding Companyand Nalco LLC, which is incorporated herein by reference from Exhibit10.3 on Form 8-K of the Nalco Holding Company filed on November 18,2004 (File No.001-32342).                                                               |
| 10.23         |  | Nalco Holding Company 2004Stock Incentive Plan, which is incorporated herein by reference fromExhibit 10.5 on Form 8-K of Nalco Holding Company filed on November 18,2004 (File No.001-32342).                                                                                                                     |
| 10.24         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand William H. Joyce, which is incorporated herein by reference fromExhibit 10.30 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                       |
| 10.25         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Bradley J. Bell, which is incorporated herein by reference fromExhibit 10.31 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                        |
| 10.26         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand William J. Roe, which is incorporated herein by reference fromExhibit 10.32 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                         |
| 10.27         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Lou L. Loosbrock, which is incorporated herein by reference fromExhibit 10.34 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                       |
| 10.28         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William H. Joyce, which is incorporatedherein by reference from Exhibit 10.35 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583). |
| 10.29         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Bradley J. Bell, which isincorporated herein by reference from Exhibit 10.36 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).    |
| 10.30         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William J. Roe, which is incorporatedherein by reference from Exhibit 10.37 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583).   |
| 10.31         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Lou L. Loosbrock, which isincorporated herein by reference from Exhibit 10.39 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).   |
| 10.32         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Daniel M. Harker.                                                                                                                                                                                                     |
| 10.33         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Daniel M.Harker.                                                                                                                                                                                 |
| 10.34         |  | Form of Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement, which isincorporated herein by reference from Exhibit 99.2 on Form S-8 of NalcoHolding Company filed on February 7, 2005 (File No.333-122582).                                                                             |
|               |

112

----

|               |  |                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |
| 10.35         |  | Management IncentivePlan of Nalco Company, which is incorporated herein by reference fromExhibit 99.1 on Form 8-K of Nalco Holding Company filed on March 1,2005 (File No.  001-32342).                                                                          |
| 10.36         |  | 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 (File No.001-32342).                                                                        |
| 10.37         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Daniel S.Sanders.                                                                                                  |
| 10.38         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Douglas A.Pertz.                                                                                                   |
| 10.39         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Leon D.Black.                                                                                                      |
| 10.40         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Paul H.O'Neill.                                                                                                    |
| 10.41         |  | Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and ChinhChu.                                                                                                          |
| 10.42         |  | Nalco Holding Company 2004 StockIncentive Plan Restricted Stock Unit Agreement, effective February 18,2005, between Nalco Holding Company and JoshuaHarris.                                                                                                      |
| 21.1          |  | Active Subsidiaries of NalcoHolding Company.                                                                                                                                                                                                                     |
| 23.1          |  | Consent of Ernst &Young LLP                                                                                                                                                                                                                                  |
| 31.1          |  | Certification of the Chairmanand Chief Executive Officer pursuant to Rule 13a-14(a) of SecuritiesExchange Act of 1934, as adopted pursuant to Section 302 of theSarbanes-Oxley Act of2002.                                                                       |
| 31.2          |  | Certification of the ExecutiveVice President and Chief Financial Officer pursuant to Rule 13a-14(a)of Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of2002.                                                       |
| 32.1          |  | Certification of William H.Joyce, our Chairman and Chief Executive Officer, and Bradley J. Bell,our Executive Vice President and Chief Financial Officer, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of2002. |
|               |

113

----

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

|        |  |                                                                                  |  |                    |  |  |  |  |  |  |
|--------|--|----------------------------------------------------------------------------------|--|--------------------|--|--|--|--|--|--|
|   |  | NALCOHOLDING COMPANY (Registrant)                                                |
|   |  | By:                                                                              |  | /s/ BRADLEY J.BELL |
|   |  |                                                                             |  | BradleyJ.Bell      |
|   |  | ExecutiveVice President and Chief Financial Officer (Principal FinancialOfficer) |
|        |

Date: March 24, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf ofthe registrant and in the capacities indicated on March  24,2005.

|                        |  |                                                               |  |  |
|------------------------|--|---------------------------------------------------------------|--|--|
| Signature              |  | Title                                                         |  |  |
|                        |
| /s/ WILLIAM H.JOYCE    |  | Chairman of theBoard and Chief ExecutiveOfficer               |  |  |
|                        |
| William H. Joyce       |
|                        |
| /s/ BRADLEY J.BELL     |  | Executive VicePresident, Chief Financial Officer andTreasurer |  |  |
|                        |
| Bradley J. Bell        |
|                        |
| /s/ BRUNOLAVANDIER     |  | Controller                                                    |  |  |
|                        |
| BrunoLavandier         |
|                        |
| /s/LEON D. BLACK       |  | Director                                                      |  |  |
|                        |
| Leon D.Black           |
|                        |
| /s/CHINH E. CHU        |  | Director                                                      |  |  |
|                        |
| Chinh E. Chu           |
|                        |
| /s/ RICHARDA. FRIEDMAN |  | Director                                                      |  |  |
|                        |
| Richard A. Friedman    |
|                        |
| /s/ JOSHUAJ. HARRIS    |  | Director                                                      |  |  |
|                        |
| Joshua J. Harris       |
|                        |
| /s/ SANJEEVK. MEHRA    |  | Director                                                      |  |  |
|                        |
| Sanjeev K. Mehra       |
|                        |
| /s/ PAUL H.O'NEILL     |  | Director                                                      |  |  |
|                        |
| Paul H. O'Neill        |
|                        |
| /s/ DOUGLASA. PERTZ    |  | Director                                                      |  |  |
|                        |
| Douglas A. Pertz       |
|                        |
| /s/ DANIELS. SANDERS   |  | Director                                                      |  |  |
|                        |
| Daniel S. Sanders      |
|                        |

114

----