UNITEDSTATESSECURITIES AND EXCHANGECOMMISSIONWashington, DC20549

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

FORM10-K

(MarkOne)

|        |                                                                                    |
|--------|------------------------------------------------------------------------------------|
|   | ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

|        |                                            |
|--------|--------------------------------------------|
|   | For the fiscal year endedDecember  31,2006 |

or

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

|        |                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For the transition periodfrom                              to                            . |

CommissionFile No.333-119231

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

NALCOFINANCE HOLDINGS LLC

(Exact name ofregistrant as specified in itscharter)

|                                                              |  |  |                                       |
|--------------------------------------------------------------|--|--|---------------------------------------|
| Delaware                                                     |  |  | 61-1464558                            |
| (State or other jurisdictionofIncorporation or Organization) |  |  | (I.R.S.EmployerIdentification Number) |
|                                                              |

1601West Diehl RoadNaperville, 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:None

Securitiesregistered pursuant to Section 12(g) of theAct:None

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.Yes        No    

Indicateby check mark if the registrant is not required to file reportspursuant to Section 13 or Section 15(d) of the Act.Yes        No    

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    

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405of Regulation S-K (§ 229.405 of this chapter) is not containedherein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to thisForm 10-K. 

Indicate by check mark whether theregistrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of ‘‘acceleratedfiler and large accelerated filer’’ in Rule 12b-2 of theExchange Act.

Large accelerated filer        Accelerated filer        Non-acceleratedfiler    

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

None ofthe Company’s limited liability company units is held bynon-affiliates. As of January  31,  2007 there were 100units outstanding.

DOCUMENTS INCORPORATED BYREFERENCE

None

The registrant meets thecondition set forth in General Instruction I(1)(a) and (b) of Form 10-Kand is therefore filing this Form with the reduced disclosureformat

----

FORM10-KNALCO FINANCE HOLDINGS LLCTABLE OFCONTENTS

|            |  |  |                                                                                                                  |  |     |  |  |     |  |
|------------|--|--|------------------------------------------------------------------------------------------------------------------|--|-----|--|--|-----|--|
| PartI      |
| Item1.     |  |  | Business                                                                                                         |  |     |  |  | 2   |  |
| Item1A.    |  |  | Risk Factors                                                                                                     |  |     |  |  | 20  |  |
| Item1B.    |  |  | Unresolved StaffComments                                                                                         |  |     |  |  | 25  |  |
| Item2.     |  |  | Properties                                                                                                       |  |     |  |  | 25  |  |
| Item3.     |  |  | LegalProceedings                                                                                                 |  |     |  |  | 25  |  |
| Item4.     |  |  | Submission of Matters to a Vote of SecurityHolders*                                                              |  |     |  |  | 26  |  |
| PartII     |
| Item5.     |  |  | Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of EquitySecurities |  |     |  |  | 27  |  |
| Item6.     |  |  | Selected FinancialData                                                                                           |  |     |  |  | 27  |  |
| Item7.     |  |  | Management’s Discussion and Analysis of FinancialCondition and Results ofOperations                        |  |     |  |  | 33  |  |
| Item7A.    |  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                        |  |     |  |  | 56  |  |
| Item 8.    |  |  | FinancialStatements and SupplementaryData                                                                        |  |     |  |  | 57  |  |
| Item 9.    |  |  | Changes inand Disagreements with Accountants on Accounting and FinancialDisclosure                               |  |     |  |  | 99  |  |
| Item9A.    |  |  | Controls andProcedures                                                                                           |  |     |  |  | 99  |  |
| Item9B.    |  |  | OtherInformation                                                                                                 |  |     |  |  | 99  |  |
| PartIII    |
| Item10.    |  |  | Directors, Executive Officers and CorporateGovernance*                                                           |  |     |  |  | 100 |  |
| Item11.    |  |  | ExecutiveCompensation*                                                                                           |  |     |  |  | 100 |  |
| Item12.    |  |  | Security Ownership of Certain Beneficial Owners andManagement and Related StockholderMatters*                    |  |     |  |  | 100 |  |
| Item13.    |  |  | Certain Relationships and Related Transactions, andDirector Independence*                                        |  |     |  |  | 100 |  |
| Item14.    |  |  | Principal Accounting Fees andServices                                                                            |  |     |  |  | 100 |  |
| PartIV     |
| Item15.    |  |  | Exhibits, Financial StatementSchedules                                                                           |  |     |  |  | 102 |  |
| Signatures |  |  |                                                                                                                  |  | 118 |  |
|            |

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

1

----

Table of Contents

PARTI

ITEM 1.    BUSINESS

Overview

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

All references in this report to‘‘Nalco,’’ the‘‘Company,’’‘‘we,’’‘‘our,’’ and‘‘us’’ mean, unless the context indicatesotherwise, (1) Nalco Finance Holdings LLC 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.

3DTRASAR®, ACTRENE®,ADOMITE®, AQUAMAXTM,BIO-MANAGE®, BRIGHT WATER®,ControlBrom®, Core Shell®,COKE-LESS®, EN/ACT®,ENERCEPT®, ENERSPERSE®, EXTRAWHITE®, FREEFLOW®, NalcoACT®, NALMET®, NEOSTARSM, NexGuard®, OdorTech®,PARETOTM, PORTA-FEED®,PROSPEC® Treat Service, PT TRASAR, ROTRASAR®, SCORPION® II, SMARTSolutions®, STA•BR•EX®,SULFA-CHECK®, SurFlo Certified®,THERMOGAIN®, TRASAR®,Tri-ACT®, ULTIMER® ,UltraTreat®, ULTRION®,VALUELINE®, VANTAGE®,WaterServTM and certain other products and services named in thisdocument are our registered trademarks and service marks.FiltreteTM is a trademark of 3M.

We are the leadingglobal provider of integrated water treatment and process improvementservices, chemicals and equipment programs for industrial andinstitutional applications. We are organized into three primarysegments that correspond to the end markets we serve: Industrial andInstitutional Services, Energy Services and Paper Services. Ourproducts and services are typically used in water treatmentapplications to prevent corrosion, contamination and the buildup ofharmful deposits, or in production processes to enhance processefficiency and improve our customers’ endproducts.

Through our sales, service, research andmarketing team of more than 7,000 technically trained professionals, weserve more than 70,000 customer locations. We focus on providing ourcustomers with technologically advanced engineered solutions andservices. These technologically advanced engineered solutions andservices enable our customers to improve their business by increasingproduction yields, lowering manufacturing costs, extending asset livesand maintaining environmental standards. The cost of ourtechnologically advanced engineered solutions and services represents asmall share of our customers’ overall productionexpense.

We derive our strength and stability from thequality of the products and services we provide and the diversity ofour revenues. We serve a broad range of end markets, includingaerospace, paper, chemical, pharmaceutical, petroleum, steel, power,food and beverage, medium and light manufacturing, metalworking andinstitutions such as hospitals, universities and hotels. We believe weoffer the broadest product portfolio in our industry, including morethan 13,000 products and 7,500 unique formulations. We have alsoestablished a global presence, with about 11,100 employees operating inmore than 130 countries, supported by a comprehensive network ofmanufacturing facilities, sales offices and research centers. Thisglobal presence provides a competitive advantage by enabling us tooffer a consistently high level of service to our local, regional andmultinational customers.

2

----

Table of Contents

Our CompetitiveStrengths

Our company has benefited from the followingcompetitive strengths:

Leading MarketPositions.    We are the #1 provider of water treatmentservices to industrial and institutional end markets. We are also aleading provider of integrated water treatment and process improvementservices, maintaining the #1 position in the petroleum andpetrochemical markets and a #3 position in the pulp and paper market.We believe that our leading positions across our primary marketsprovide a competitive advantage in retaining existing business andcompeting for new business. Although our market position in pulp andpaper was lowered by the 2004 acquisition of Raisio by Ciba, we believethe proximity of sales between the three market leaders allows us allto operate as market leaders.

Diverse Customers andIndustries Served.    We provide products and services to morethan 70,000 customer locations across a broad range of industries andinstitutions, including about 65% of Industry Weekmagazine’s top 500 U.S. manufacturers and all of the Euro Stoxx50 companies. In 2006, no single customer accounted for more than3% of our net sales. Our business is also diversifiedgeographically. In 2006, 48% of total sales were in NorthAmerica, 29% in Europe, Africa and the Middle East, 9% inLatin America and 14% in the Pacific region. We believe thisdiversification minimizes the potential impact of volatility from anyone customer, industry or geographic area.

GlobalReach.    We have a direct sales and marketing presence in 130countries across six continents. This enables us to provide aconsistently high level of service to local, regional and multinationalcustomers. We believe our global presence offers us a competitiveadvantage in meeting the global needs of our multinational customers,which are increasingly seeking single-source suppliers and positions usto extend our reach to higher growth markets. Our geographicaldiversity also mitigates the potential impact of volatility in anyindividual country or region. In 2006, we derived approximately$1,976  million, or 55% of our net sales, from ournon-U.S. subsidiaries (excluding sales to our U.S.operations).

World Class SalesTeam.    Through the expertise of our more than 6,000 salesengineers and service technicians, we provide our customers withrelevant industry knowledge and experience in order to solvetechnically challenging and dynamic problems. Our team of experts hassignificant experience with 40% of our approximately2,000-person North American sales team having more than ten years ofservice with our Company. We believe this contributes significantly tothe number and strength of relationships with our customers. We alsoinvest heavily in recruiting and continuously training our salesprofessionals. For example, new hires spend more than half of theirfirst year on training. Sales and marketing expense was $843.8million, $795.0  million and $791.4  million for the years2006, 2005, and 2004, respectively. Of those amounts, approximately91% represented the average cost of our sales and service forceduring these time periods.

Integrated Technology,Sales and Service.    We combine on-site service, innovativetechnology and engineering excellence to create value for ourcustomers. Our technical sales professionals identify problems andopportunities at the customer’s plant and our research teamsthen work to develop effective solutions to these needs, often workingjointly with our customers. Many of our customers specify ourformulations into their processes and products. This approach has ledto over 7,500 unique formulations, the development of more than 2,000active patents worldwide and a high degree of customerloyalty.

Stable and Significant Cash FlowGeneration.    We have produced consistent cash flows andmaintained high margins over a sustained period of time. We attributethis to (1) the diversity of our revenues, (2) the service nature ofour business, (3) the high value we offer our customers, (4) thestrength of our customer relationships, (5) our limited dependency onany single raw material and (6)  our low capital 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 and Chief ExecutiveOfficer of Hercules Incorporated, became our Chairman and ChiefExecutive Officer, and Bradley J. 

3

----

Table of Contents

Bell, former Chief Financial Officer of Rohmand Haas Company, became our Chief Financial Officer. Dr.  Joyceand Mr.  Bell bring additional leadership and industry experienceto our management team. Our 9 executive officers have an average of 9years of service with our Company and 34 years of industry experience.Moreover, our senior management team is supported by business managerswho have extensive experience within their respective operatingdivisions.

Business Strategy

We havehistorically experienced sales growth in excess of industrialproduction growth in our core markets. We are pursuing a strategydesigned to generate real sales growth at 5% annually for ourbase business. In addition, we are developing alternate channels tomarket intended to further accelerate our growth. Earnings and cashflow growth are targeted to grow at faster rates than our underlyingsales growth as we improve productivity and working capital management.The key elements of this strategy are:

PursueHigh-Growth Markets.    We intend to continue to focus onhigh-growth markets and segments. Geographically, we plan to leverageour global reach by capitalizing on our presence in high-growthemerging markets including Asia, Eastern Europe and Latin America. Forexample, in Asia, we are focusing significant attention on thehigh-growth China and India markets, with a substantial effort to hireand train outstanding sales engineers and service technicians to meetgrowing customer demand. In China, our focus has resulted in over25% compound annual growth in sales since 1999. We are alsoforming new ventures in West Africa and Eastern Europe, which willpermit us to pursue energy services opportunities at new customerproduction facilities planned in these areas.

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 15 years we have developed several generationsof our TRASAR automated feed and control technology for cooling watertreatment programs. We launched the latest generation of thistechnology, our 3D TRASAR cooling water stress management program, in2004. Our engineers will continue to work closely with our customers inan effort to identify new product opportunities and jointly develop newtechnologies.

Pursue High-Growth IndustrySegments.    While we have shown the ability to exceed marketgrowth rates even in many mature markets through innovative technologyand advanced engineering, monitoring and control services, we believethat selecting the right industries on which to focus resources helpsus exceed underlying market growth rates. In the late 1990s, we decidedto disproportionately invest in research, development and trainingresources to support fast growth in the deepwater oil productionindustry. As a result, we are capturing well over 60% ofbusiness on these large platforms, exceeding our average market sharein our overall Energy Services business. In Paper Services, we believethat the tissue and towel and digital printing segments will grow morerapidly than other Paper segments, and have invested disproportionatelyin these areas. In tissue and towel, we grew nominal sales nearly40% in 2006 to establish ourselves as the clear #2 supplier tothese customers. We have also expanded our business to provide hygienewater and air services by developing diagnostic and on-site servicecapabilities to reduce the health risks customers face due to pathogensin water and air. Interest in these applications has grown across manyindustry segments.

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.

Expand Supportof Multinational Customers.    As one of a small number ofcompanies that can provide turnkey water management solutions on aglobal basis, we seek to leverage our relationships 

4

----

Table of Contents

with multinational companies by servicing themglobally. We expect to benefit significantly as larger customersfurther consolidate their supplier base and increase their reliance onfull service providers, such as our Company.

Continueto Reduce Costs.    We have initiated a comprehensive costreduction plan that yielded savings in 2004 of $88  millioncompared to 2003. In 2005, we generated additional savings versus 2004of $89  million and in 2006, our savings totaled $71million compared to 2005 — just shy of our $75  millionannual cost savings target. 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 CashFlow.    We believe that there are significant opportunitiesto increase our cash flow. We believe that while the capitalexpenditures required to maintain our business are low relative to oursales, we can generally maintain capital expenditures at about$100  million annually. In 2007, however, we expect to spend morethan $100  million as projects delayed from targeted 2006completion are concluded along with our normal projects for 2007. Whilemanagement has historically focused on particular components of workingcapital, the large increase in raw material costs and commensurateprice increases we achieved have driven up working capital requirementsduring the past two years. We believe there is an opportunity to reduceour working capital needs, particularly in the areas of accountsreceivable and inventories. During the year ended December31,  2006, we used Free Cash Flow of $183.8  million mostlyfor debt reduction. Reported net debt did not decrease by this fullamount, due to currency fluctuations and accretion of non-cash-interestbearing senior discount notes.

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

OurDivisions

|                       |                  |  |                                                                                                             |                  |  |                                                                         |                  |  |                                                                           |
|-----------------------|------------------|--|-------------------------------------------------------------------------------------------------------------|------------------|--|-------------------------------------------------------------------------|------------------|--|---------------------------------------------------------------------------|
|                  |                  |  | IndustrialandInstitutional Services                                                                         |                  |  | Energy Services                                                         |                  |  | PaperServices                                                             |
| MarketPositions       |                  |  | $6.9billion globalmarket(1)(2)                                                                              |                  |  | $3.5billion globalmarket(1)                                             |                  |  | $8.2billion globalmarket(1)                                               |
|                       | #1MarketPosition |  |                                                                                                             | #1MarketPosition |  |                                                                         | #3MarketPosition |
| MarketShare(3)        |                  |  | 18%                                                                                                         |                  |  | 32%                                                                     |                  |  | 9%                                                                        |
| 2006NetSales(4)       |                  |  | $1,593million                                                                                               |                  |  | $1,052million                                                           |                  |  | $722million                                                               |
| RepresentativeMarkets |                  |  | Foodand BeverageBuildings, Hotels, HospitalsChemicals,PharmaceuticalsManufacturing, Metals,Utilities,Mining |                  |  | ExplorationFieldDevelopmentProductionRefiningPetrochemicalManufacturing |                  |  | FinePaperUncoated Free SheetCoated FreeSheetNewsprintTissueContainerboard |
|                       |

|  |
|--|
|  |  |
|  |

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

|     |                                                                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents the watertreatment and services markets, which accounted for approximately78% of our Industrial and Institutional Servicesdivision’s net sales in2006. |

|     |                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Market share calculationsinclude segment sales from India and Japan, as well as end-marketallocations from an all-inclusive Emerging Market business unit withinI&IS. |

|     |                                                                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Divisional net salesexclude approximately $236  million of sales reflected in ourOther segment, including our sales in India, Japan, and an IntegratedChannels Group. |

5

----

Table of Contents

Industrial and InstitutionalServices

Our Industrial and Institutional ServicesDivision provides products and services in two general areas: 1)utility-side water treatment applications, and 2) industrial processapplications. In virtually every industrial manufacturing or processingplant, we can provide raw water preparation for the process, wastewatertreatment, cooling system and boiler treatment programs, and membranecare treatment. Proper control of corrosion, scale formation, andmicrobiological fouling is essential in cooling systems of all sizes,to both protect the useful life of the asset as well as minimize costsassociated with water and energy. The same is true in boiler operation.Our water treatment programs are used by customers to assure assetreliability and reduce total cost of operation in smaller applicationslike institutional facilities, as well as in large, complex systemstypical of nuclear power plants, steel mills, and chemical processingplants. Our total water management and process additive capabilitiesposition us to serve customers across a broad spectrum of industriesand markets including aerospace, steel, mining, chemicals, powergeneration, food and beverage, pharmaceuticals,electronics/semiconductors, light manufacturing, commercial buildingsand other institutional facilities. Our Industrial and InstitutionalServices segment generated net sales of $1.593  billion in 2006,representing 44% of net sales.

Water TreatmentApplications

Our water treatment capabilities areapplied across our three core divisions. In our Industrial andInstitutional Services division, water treatment programs accounted for78% of our net sales in 2006. These water applications alsoaccounted for 17% of our Energy Services net sales and17% of our Paper Services net sales in 2006. The followingdescriptions include water treatment applications in the Industrial andInstitutional Services division, but these boiler water, cooling water,raw water and wastewater programs are also used in our Paper Servicesand Energy Services segments.

Boiler WaterApplications. We have specialized in boiler water applications formore than 75 years. Corrosion and scale buildup are the most commonproblems addressed by our boiler water programs. We have helped ourcustomers overcome various boiler challenges by providing integratedchemical solutions, 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 conjunction with anumber of our boiler water treatment programs, such as NexGuard.NexGuard combines the most advanced boiler internal treatment chemistrywith TRASAR technology and advanced diagnostic, monitoring, feed andcontrol equipment. Other applications of TRASAR include TRASAR RecoveryBoiler Leak Indication, which is designed to determine when a loss ofconcentrated boiler water occurs in operating boilers. We also developcondensate treatment programs designed to prevent corrosion,overheating and rupture of boilers. Two examples of these programs areNalco ACT and Tri-ACT. In 2000, we were awarded a Research andDevelopment 100 Award for Nalco ACT, our revolutionary condensatetreatment comprised of food industry ingredients, making Nalco ACTunique in both its technical and safety merits. Tri-ACT is a series ofcorrosion inhibitors that includes blends of neutralizers, filmers andoxygen scavengers to provide uniform protection of the condensatesystem.

Cooling Water Applications. Our coolingwater treatment programs are designed to control the main problemsassociated with cooling water systems — corrosion, scale andmicrobial 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, automation and control builds on thestrengths of our TRASAR technology offering and is an effective toolused to prevent problems, identify efficiency improvements and improvecontrol in cooling water systems. 3D TRASAR detects system upsets,responds in real-time and communicates with users via theInternet.

Our award-winning STA•BR•EX technologyis the world’s first stable, liquid bromine-based anti-microbialdesigned to control biofilms caused by microorganisms in cooling tower,condenser and 

6

----

Table of Contents

heat exchanger systems. In 2006, we introducedControlBrom stabilized bromine offerings to provide customers with theadvantages of stabilized bromine and the benefits of flexible andcost-efficient on-site activation.

WastewaterApplications. Our wastewater products and programs focus onimproving overall plant economics, addressing compliance issues,optimizing equipment efficiency and improving operator capabilities andeffectiveness. This is accomplished by combining our highly trainedsales engineers, marketing, and technical support staff members withkey Nalco products, such as ULTRION, liquid cationic coagulants thatclarify water more effectively than alum. The benefits of ULTRIONinclude a reduction in treated water suspended solids, increasedefficiency of water clarification systems, reduction or elimination ofthe need for pH adjustment and decreased settled sludge volume. Forremoving heavy metals from wastewater, we use our patented NALMETtechnology, which can reduce regulated metals to below-compliancelimits in one step. To improve sludge dryness and reduce sludgehandling costs, we use our proprietary Core Shell high-activityflocculants. We also offer our dispersion technology, ULTIMER, forwhich we won a United States Presidential Green Chemistry ChallengeAward and a Research and Development 100 Award in 1999. ULTIMERpolymers are water-based, yielding a more stable, soluble,user-friendly product. To address plant odor or foaming issues, we alsooffer a complete line of odor control products andantifoams.

Mining and Mineral ProcessingApplications

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

Colloidal TechnologiesApplications

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

Finishing TechnologiesApplications

As a leading innovator in metalworkingand surface finishing products and services for manufacturers aroundthe globe, the Finishing Technologies Group works closely withcustomers to optimize their production processes. We serve a broadrange of manufacturers, including makers of automotive, aerospace,truck, and recreational vehicle components. Utilizing specializedprocess simulation facilities, our experienced sales engineerscollaborate with our dedicated research department to deliver processimprovements that positively impact the cost of our customers’operations. Finishing Technologies counts among its customers many ofthe world’s most recognized brand names. Our extensive productline includes metalworking fluids, conversion coatings, cleaners, andcorrosion inhibitors.

7

----

Table of Contents

Our growth continues to be fueled byproduct innovation and investment in the technical training of oursales force. R&D in the areas of polymeric surface treatments andproducts and programs for the control and mitigation of pathogens inthe metalworking environment will generate new offerings in2007.

Membrane TechnologiesApplications

Membrane technology is being adopted atan ever-increasing rate as a cost-effective technology for purifyingwater for both industrial and potable applications. Our productsaddress the needs of all types of membrane systems, ranging fromseawater desalination; well and surface water purification, to advancedwater recycle processes and wastewater treatment.

Ourunique RO TRASAR technology, in combination with our state of the artchemistry, provides added protection against the formation of mineralscale and allows reverse osmosis systems to operate without unscheduleddowntime. RO TRASAR uses only the exact required amount of antiscalant,even at high recovery rates and using difficult water sources.Furthermore, RO TRASAR provides an added benefit in that it allows forenhanced trouble shooting and leak detection in membranesystems.

To combat microbial fouling — the mostcommon and difficult problems to treat in a membrane system —our product range includes non-oxidizing biocides that control a widespectrum of microorganisms. Using our novel PT TRASAR technology, it isnow possible to safely reduce incidences of particulate fouling, bycontinuously monitoring, controlling and optimizing the addition ofproprietary filter aid polymers that enhance the performance of thepretreatment to the RO membranes.

Our innovativeperformance-enhancing polymer chemistries can more than double thethroughput of membrane-based wastewater treatment systems. This in turnallows for the design of cheaper and more compact wastewater treatmentsystems for both industrial and municipal applications.

OdorControl Applications

We offer programs to combatodor centering around three approaches: odor neutralization,precipitation and biological hydrogen sulfide prevention. Our odorneutralization technology focuses on OdorTech, one of the mostversatile odor solutions we offer. OdorTech products are applied by anatomized mist at the point of release of the airborne odor andeffectively neutralize common odors, such as ammonia, amines,mercaptans, hydrogen sulfide and sulfur dioxide. Common applicationsinclude roof vents, truck wash staging areas, landfills, garbage areas,HVAC equipment, automotive interiors and storage areas. Ourprecipitation products are specially designed for hydrogen sulfide foraqueous applications and may also serve as coagulants or clarificationaides. 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.

AlternateChannels

One of our strategic goals is to developalternate channels to market. One new channel is WaterServ, a programof products and services that takes technology created for larger,industrial customers and adapts it to meet the needs of smallercustomers using an appropriately scaled business model. ThroughWaterServ, smaller customers can take advantage of many of ourwater-centric programs, including boiler water, HVAC, facility care andautomation programs.

WaterServ is run via hubs indifferent cities building on the success of a test hub initiated inChicago in 2005 and several additional hubs developed in 2006. Fromthese hubs, a specially trained team can sell and service smallercustomers, creating a stronger relationship with the customer. Usingstandardized equipment and service packages, we can streamline andlower costs to serve and maintain these accounts. The CRM softwareenables our customers to use real, 

8

----

Table of Contents

data-driven information to develop salesefficiency and effectiveness key performance indicators (KPIs). TRASARtechnology with remote 24-hour monitoring and alarming capability isthe key differentiator to provide results with reduced sales engineerinvolvement in routine maintenance activities, while providingperformance superior to competitive offerings currentlyavailable.

Energy Services

Our EnergyServices division provides on-site, technology driven solutions to theglobal natural gas, petroleum and petrochemical industries. In additionto recovery, production and process enhancements, we deliver a fullrange 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 nearly all of the largest publicly traded oilcompanies. Nine of our ten largest Energy Services customers in 2006have been with us for more than ten years, with most more than 20years. Our Energy Services division generated 2006 net sales of$1.052  billion, representing 29% of our net sales. Wecontinue to emphasize safety and environmental leadership in ourproduct development and implementation efforts.

Our EnergyServices division is divided into a Downstream refinery andpetrochemical processing service business and an Upstream groupcomposed of our Oilfield Chemicals and Adomitebusiness.

Adomite Well ServiceApplications

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

OilfieldApplications

Oil and natural gas production isincreasing in harsh environments: extreme temperature and pressure inremote locations. Exploration and production projects are gaining inscope and size, and with elevated oil prices, the stakes have increasedin flow assurance and infrastructure protection. Focusing on these newchallenges, the Oilfield Chemicals group offers solutions to productionflow challenges such as hydrate formation, paraffin deposition andemulsified streams.

We are the technology leader in theoffshore marketplace and are the only supplier of SurFlo Certifiedproducts that have undergone aggressive testing to ensure safety andeffectiveness in offshore, deepwater and ultra-deepwater environments.Our FREEFLOW natural gas hydrate inhibition program represents anindustry step-change, economically and safely displacing traditionalhydrate control methods. Our expertise in new production techniques,such as seawater flood injection, helps our customers maximize theproduction of their operation while ensuring the safety and reliabilityof their infrastructure. Produced oil contains water that is costly totransport and 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 the waterand make it safe for environmentalre-introduction.

Capital expenditure investments in theheavy oil and tar sands market by large, integrated energy companiesare expected to grow significantly in the coming years. For thisreason, we are investing heavily in the development of new technologiesto address the many challenges in these areas. For example, our novelStatistical Bottle Test approach reduces trial and error by helping usmore accurately select the chemistries that will perform best in thefield. This enables us to quickly identify solutions and to understandwhich new technologies will be applicable in the heavy oil and tarsands market. As a result, a new, patented class of chemistry has beendeveloped and successfully tested in 2006 for deployment in2007.

9

----

Table of Contents

Downstream RefiningApplications

Our industry-focused sales engineersprovide process and water treatment applications specific to thepetroleum refining and fuels industry, enabling our customers toprofitably refine and upgrade hydrocarbons. Our heavy oil upgradingprograms minimize operation costs and mitigate fouling, corrosion,foaming and the effects of heavy metals when refining lower-qualitycrude oils.

The SCORPION II program combats napthenic acidcorrosion problems, allowing refiners to take advantage of discountedhigh acid crudes through combined chemistry, novel monitoring andsimulation technologies. Our proprietary NEOSTAR crude oil database andour newly patented chemistries are coupled with over 20 years ofexperience in the treatment of high-temperature corrosion. As energycosts continue to rise, refiners are looking at innovative ways toreduce consumption. We partner with our customers to deliver energyutilization efficiency.

Crude unit fouling can increaseenergy and maintenance costs, while reducing crude output. OurTHERMOGAIN program includes unique chemistries and patented crudestability tests to prevent crude unit fouling.

Our totalsystems approach to water and process enables our customers to maximizeenergy on the utilities side. With advances in monitoring, chemistryand application, the 3D TRASAR cooling water stress management programhas reduced shutdowns for customers, resulting in maximum operationalefficiency.

The refining industry is also addressing cleanfuels regulations that require drastic reduction in the level of sulfurallowed in fuels. Our H2S Scavengers, such as theSULFA-CHECK system, help our customers to meet regulatory standards.Hydro-processing to meet low-sulfur fuel specifications can increasethe corrosiveness of fuels. We offer an entire line of fuel additives,including corrosion inhibitors, to protect engine fuel systems andpre-market underground storage tanks and piping. In addition, we offerfuel stabilizers, pour point depressants, cetane improvers, detergentsand antioxidants for home heating oil and premium diesel and gasolinepackages. The PROSPEC Treat Service combines our knowledge of fuelspecifications, test requirements, product selection, applicationtechnology and on-site coordination to solve expensive finished productproblems in refinery tank farms, third party terminals andports.

Downstream Chemical ProcessingApplications

Our industry-focused sales engineersprovide on-site technical service and innovative chemical processingand water treatment 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 controlprogram represents a significant advancement in the olefins chemicalprocess industry, 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.

Water Applications

We providetotal water management solutions specific to customers’ refiningand chemical processing needs in the areas of water clarification,boiler treatment, cooling water treatment and wastewater treatment. See‘‘— Industrial and Institutional Services —Water Treatment Applications.’’

PaperServices

Our Paper Services division offers acomprehensive portfolio of programs that are used in all principalsteps of the papermaking process and across all grades of paper,including graphic grades, board and 

10

----

Table of Contents

packaging, and tissue and towel. Ourcustomers include the 20 largest paper companies in the world. Eight ofour ten largest Paper Services customers in 2006 have been with us formore than 15 years. Our Paper Services segment generated 2006 net salesof $722  million, representing 20% of our net sales.

Today’s pulp and papermakers are under pressure toimprove the overall efficiency of their operations in the face ofcapacity challenges, shifting market demand for their finished productsand escalating costs. Their customers demand that end productproperties — such as brightness, tissue softness, or paperstrength — perform to increasingly challenging specifications ina very competitive environment. To help our customers excel, wedeveloped our SMART Solutions program, a grade-based approach forimproving customers’ end product performance and optimizingoperational efficiency. It is through the dedication of ourwell-trained sales engineers, technical industry consultants, andresearch and development teams that we are able to successfullyimplement our SMART Solutions program and innovativetechnology.

Pulp Applications

Carefulmanagement of fiber and energy resources is critical to both thequality and the efficiency of the pulping operation, especially as woodand energy costs are elevated and manufacturers are forced to usevariable sources of fiber. Our SMART Solutions for Fiber and EnergyManagement provides pulp manufacturers the answers to increaseefficiency, improve pulp quality and decrease the total cost ofoperation.

Our SMART Solutions for Fiber and EnergyManagement impact every grade of paper produced, providing thesustainability benefits and cost competitiveness our customers need tosurvive in today’s marketplace. Whether it is the mechanical,chemical, or de-inked pulping process, our programs and services aredesigned and tailored to meet the individual customer’s needsfor every phase of the pulping and bleaching process.

Weoffer complete programs to manage organic and inorganic contaminantsand entrained air in the pulping process to avoid off-quality pulp orconnected process problems. Our programs maximize process efficiencyand increase pulp cleanliness and brightness in bleaching operations,as well as predict and monitor scaling potential utilizing on-linemonitoring to design effective treatment programs and avoid costlyfailures.

Paper Applications

As weapproach the papermaking process, we take into account the varyingneeds of producers of different paper grades. Manufacturers of boardand packaging, graphic papers, and tissue and towel have very differentneeds based on the demands of their customers. For example, maintainingstrength in board and packaging is achieved very differently than thesoftness demanded by consumers of tissue and towelproducts.

In addition, different paper segments havevarying needs based on current market trends. A papermaker in a segmentexperiencing strong growth may need to maximize production rates,optimize finished sheet quality and minimize paper machine down time.For a segment facing slower growth, we may instead be asked to focus onimproving operating efficiencies and reducing the total cost of acustomer’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,felt cleaning, increased paper strength, prevention of surface pitchand stickies deposition, and chemical fiber de-inking. Advancedsensing, monitoring and automation technologies are incorporated intothe applications to optimize program effectiveness and minimizerisk.

Specific to each grade segment, our programs delivervalue in the form of improved brightness, lower basis weight, improvedbulk and softness, improved printability and many other key businessdrivers 

11

----

Table of Contents

that our customers determine are critical tothe success of their business. We integrate the entire papermakingprocess through mechanical, operational and chemical means toconcentrate specifically on what our customers need to succeed in theirmarket segments and improve overall operationalefficiency.

Focusing on Growth Areas

Werecently announced the launch of EXTRA WHITE Brightness Technology asthe first in a series of advancements that form the foundation of SMARTSolutions for Opticals Management. This innovative new technologydelivers cost-effective brightness and whiteness development in anenvironmentally friendly and safe manner, while having a positiveimpact on operational efficiency as compared to traditional brightnessdevelopment methods.

Additionally, the PARETO Wet-EndOptimization Technology offering is used to improve and optimize thedelivery of retention aid chemicals to the paper machine. An integralpart of SMART Solutions for Efficiency, PARETO technology focuses onthe many variables that impact quality and efficiency in modernpapermaking, delivering optimization of key system inputs. PARETOtechnology can provide significant improvement in chemical efficienciesat minimized consumption of key resources such as water andenergy.

Our SMART Solutions for Efficiency offering isalso supported by an exclusive global distributor agreement withHelioJET Cleaning Technologies, Inc., a manufacturer of high-pressure,high-temperature water delivery systems. The Nalco/HelioJET programcombines engineering, operational and chemical elements with anunsurpassed knowledge base to ensure that the unit operations offorming, pressing and drying and their associated parts perform totheir design specifications.

Our Paper Servicesdivision’s SMART Solutions offering helps create significantadditional growth opportunities. Our grade-based approach led to afocused initiative in the high-value tissue and towel segment. With theappropriate alignment of technical support resources, and anunprecedented investment in innovation we have developed an exceptionalprogram portfolio for tissue and towel customers.

Anexample of these programs is our SMART Solutions for Coatings, whichresults in the proper balance of mechanical, operational and chemicalcomponents to achieve the desired sheet characteristics and to maximizemachine runnability.

WaterApplications

We bring a comprehensive focus towater-related problems in all areas of pulp and paper mills. Water isone of the primary components of the papermaking system. For each tonof paper produced, thousands of gallons of water are used. Carefulmanagement of the water throughout the process not only significantlyimpacts the water, fiber and energy costs of an operation, but alsosignificantly influences the final properties of the sheet and machineefficiency. Using an engineering approach — evaluating themechanical, operational and chemical aspects of an application —our sales engineers effectively demonstrate how sustainable improvementprojects can be identified and implemented. See ‘‘—Industrial and Institutional Services-Water TreatmentApplications.’’

Our Services

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

Analytical Services

Our highlytrained analytical researchers combine in-field work and laboratoryanalysis to develop recommendations. Our ISO 9001:2000-certifiedlaboratories use state-of-the-art equipment, including 

12

----

Table of Contents

mass and nuclear magnetic resonancespectrometers and scanning electron microscopes, to conduct sampletesting and process failure analysis for water treatment, paper processand energy process applications. We have provided analytical servicesfor more than 50 years and our more than 100 analytical researchershave an average of more than ten years of experience in this field. 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 and FieldServices

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.

EnvironmentalHygiene Services

We offer a complete line ofspecialized services designed to assess, control and reduce risk fromwater-borne pathogens such as legionella. Trained hygiene servicespecialists perform risk assessments to identify areas within thedomestic cold and hot water, process water, cooling tower, emergencywater and other systems that could be at risk for pathogenproliferation. We then develop prioritized recommendations and aremediation plan to reduce the risk of pathogen exposure that can leadto illnesses such as Legionnaires’ Disease. Our protocols helpour customers comply with guidelines created by professionalorganizations, state and federal government agencies, or localgovernments.

We additionally offer an air-focused BuildingEnvironment Solutions program. It focuses on lowering buildingoperating expenses such as energy costs, and increasing tenantsatisfaction through improved indoor air quality. Our COIL-FLO coilcleaning program removes microbial contamination, dust and debris soHVAC units operate more efficiently and without odor. Our line ofFiltrete Commercial High Performance HVAC filters from 3M reducesparticles so building air is fresh and coils stay cleaner. The lowairflow resistance of the filters reduces fan energy consumption. Wethen implement a monitoring program around air particles, energyconsumption, and efficiency goals.

CustomerTraining

In order to educate our customers andpromote more efficient and effective systems and processes in theiroperations, we have developed various training programs and interactiveonline training that teach operators and engineers how to work moreeffectively and efficiently. We conduct water treatment seminars toformally train our customers how to use our equipment and chemicals andhow to implement best practices. For example, we provide watertreatment workshops in a classroom setting where attendees discusstechnical and industry-related issues among their peers and are able to

13

----

Table of Contents

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

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

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

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

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

Joint Ventures

Duringour history, we have entered into general partnerships or jointventures for limited scope business opportunities. For example, weconducted our energy services business through a joint venture withExxon Chemical Company, a division of Exxon Mobil Corporation, until2001 when we redeemed Exxon’s interest in the joint venture andit became a wholly owned subsidiary of our Company. We re-established ajoint venture relationship with USFilter Corporation, Treated WaterOutsourcing, to pursue process water treatment outsourcing projects andto supply standard water 

14

----

Table of Contents

treatment equipment packages with ourchemicals and service offerings. In June  2004, we entered into ajoint venture with Katayama Chemical, Inc., or KCI, for the marketingand sale of our water treatment and process chemicals in Japan. KCI isa leading participant in these markets in Japan and the venture willpermit the combination of our broad product portfolio with KCI’sstrong market presence. This joint venture will not includemanufacturing, research and administrative resources, which willcontinue to be provided to the joint venture by the parents. InDecember  2004, we announced an industry-leading alliance withJohnsonDiversey that will help customers in the food, beverage,pharmaceutical and institutional industries reduce their totaloperating costs, improve operating efficiency and reduce environmentalimpacts. This total-site program called Responsible Resource Solutionstakes a comprehensive approach to a facility’s operations, anddelivers solutions to better manage key resources such as water, energyand waste. Additionally, we maintain longstanding partnerships in SaudiArabia, relating to base-water treatment, and in Spain, relating tooil-free emulsion polymers.

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

Competition

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

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 sophisticatedapplications.

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

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

Research and Development

Webenefit from a high quality research and development effort consistingof more than 450 personnel worldwide, more than 160 of whom havePh.D.s, dedicated to developing new technology and providing support.Our laboratories, which are located in the United States, theNetherlands and Singapore, are involved in the research and developmentof chemical products and in providing technical support, includingchemical analyses of water and process samples. Research anddevelopment spending was $61.6  million for the year endedDecember  31,  2006. Spending on research and developmentwas $58.5  million and $56.7  million for the years endedDecember  31,  2005 and 2004, respectively. In recentyears, we have received numerous research and development awards,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 purchased in-process research and 

15

----

Table of Contents

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, andmicrobial fouling) by providing an integrated system of patentedchemicals and equipment to inhibit these conditions. Bright Waterentails the development of a polymer that will enhance the yield of oilfrom wells, while decreasing the amount of water produced with the oil.Commercialization of the 3D TRASAR began in 2004 and commercializationof Bright Water projects is planned for 2007.

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

Intellectual Property

Weown or have licenses to use a large number of patents relating to alarge number of products and processes. We currently have more than 600patents in the United States and more than 2,000 worldwide withremaining durations ranging from less than one year to 20 years. Theaverage remaining duration is approximately nine years. We also haveover 300 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 and 3D TRASAR technology and trademarks related to Nalco Companyand Calgon are considered material to our business. We believe that noother patent, trademark or license is material to ourbusiness.

Raw Materials

We purchase morethan 6,900 raw materials, with the largest single raw materialrepresenting just over 1% of sales, or about 4% of rawmaterial purchases. While single raw material purchases are notsignificant to us, we do purchase similar categories of products inmany cases. Four categories of raw material purchases represented morethan 10% of our total North American purchases in 2006:Organics; Monomers; Polymers; and Solvents, Oils and Alcohols. Inaddition, another three categories of raw materials account for morethan 5% of our raw material spend: Amines; Surfactants; andInorganics and Salts. Our raw material purchases also include a varietyof biocides, packages, bases, defoamers, fatty acids and phosphonates,among many other types of materials. For the years endedDecember  31,  2006, 2005 and 2004, we purchased directmaterials valued at $1,053  million, $923  million and$768  million, respectively. In addition, joint venturesconsolidated by us made direct material purchases valued at$60.6  million and $63.4  million in the years endedDecember  31,  2006 and 2005, respectively.

WorkingCapital

To better serve and meet the needs of ourcustomers, approximately 15% of our inventories are maintainedat customer sites as consignment inventories. Although the consignmentinventory model is in place throughout the world, its use is mostprevalent in North America. The decision to put inventory at acustomer’s site is usually based on a request from the customer.Tracking systems are in place to follow movements, and inventoryquantities at each site are monitored to prevent inventory build-ups.Periodic physical counts are performed to validate the tracking systemsand to ensure that the accounting records are properlystated.

Employees

As of December  31,2006, we had about 11,100 employees, of whom approximately 4,600 wereemployed in North America, approximately 3,000 were employed in Europe,the Middle East and Africa, approximately 1,600 were employed in LatinAmerica and approximately 1,900 were employed in the Pacific region. Weconsider relations with our employees to be good.

16

----

Table of Contents

EnvironmentalMatters

Governmental provisions regulating the dischargeof materials into the environment or otherwise relating to theprotection of the environment, have had, and will continue to have, aneffect on us and on our operations. Under some environmental laws, wemay be jointly and severally liable for the costs of environmentalcontamination on or emanating from our properties and at off-sitelocations where we disposed or arranged for the disposal or treatmentof regulated materials, and may also incur liability for damages tonatural resources. We have made and continue to make expenditures forprojects relating to the environment. We are currently identified as apotentially responsible party at certain contaminated waste disposalsites. We do not anticipate that these matters will result in materialliabilities; however, there can be no assurance that discovery ofpreviously unknown conditions or other circumstances will not requiresignificant expenditures by us.

We do not believe thatcompliance with environmental protection laws and regulations will havea material effect upon our capital expenditures, earnings orcompetitive position, although there can be no assurance to thateffect. Our capital expenditures for environmental control facilitiesduring 2007 and future periods are not presently expected to bematerial to us. We believe that any liability that may result from theresolution of environmental matters for which sufficient information isavailable to support cost estimates will not have a material adverseeffect on our financial position or results of operations. However, wecannot predict the effect on our financial position of expenditures foraspects of certain matters for which there is insufficient information.In addition, we cannot predict the effect of compliance withenvironmental laws and regulations with respect to unknownenvironmental matters or future environmental requirements on ourfinancial position, results of operations, liquidity or cashflow.

We have been named as a defendant in multi-partylawsuits based on our claimed involvement in the supply of allegedlyhazardous materials. The plaintiffs seek damages for alleged personalinjury or the potential of personal injury resulting from exposure tovarious chemicals. These matters have had de minimis impact onour business historically, and we do not anticipate that these matterspresent any material risk to our business or competitive position inthe future. Notwithstanding our past experience, we cannot predict withcertainty the outcome of any such tort claims or the involvement wemight have in such matters in the future.

We are alsosubject to a variety of regulations relating to the production andhandling of our products, as well as the conduct and condition of ourproduction facilities. We do not believe that these regulatoryrequirements will have a material effect on capital expenditures,earnings or competitive position. Recently adopted chemicalregistration regulations in the European Union, referred to as REACH,will result in additional costs to us and our competitors. These costsare presently not anticipated to materially impact earnings or ourcompetitive position, but we have not yet determined their full impacton our business.

ExecutiveOfficers

|                    |  |  |                                                                                                               |  |  |     |  |    |  |
|--------------------|--|--|---------------------------------------------------------------------------------------------------------------|--|--|-----|--|----|--|
| Name               |  |  | Title                                                                                                         |  |  | Age |
| Dr.William H.Joyce |  |  | Director,Chairman of the Board and Chief ExecutiveOfficer                                                     |  |  |     |  | 71 |  |
| William J. Roe     |  |  | ExecutiveVice President, Chief Operating Officer and President, Industrial andInstitutional Services division |  |  |     |  | 53 |  |
| BradleyJ. Bell     |  |  | Executive Vice President and Chief FinancialOfficer                                                           |  |  |     |  | 54 |  |
| Daniel M.Harker    |  |  | Senior Vice President, Global SupplyChain                                                                     |  |  |     |  | 54 |  |
| John L. Gigerich   |  |  | VicePresident, Administration                                                                                 |  |  |     |  | 64 |  |
| Louis L.Loosbrock  |  |  | Group Vice President and President, Pacificdivision                                                           |  |  |     |  | 53 |  |
| Scott C. Mason     |  |  | GroupVice President and President, Alternate Channels and OperationsPlanning                                  |  |  |     |  | 48 |  |
| Gregory N. Nelson  |  |  | GroupVice President and President, Services andEquipment                                                      |  |  |     |  | 51 |  |
| John P. Yimoyines  |  |  | GroupVice President and President, Paper Servicesdivision                                                     |  |  |     |  | 58 |  |
|                    |

17

----

Table of Contents

Dr. William H. Joyce hasbeen our Chairman and Chief Executive Officer since joining us inNovember  2003. Dr.  Joyce was formerly the Chairman andChief Executive Officer of Hercules Incorporated, a position he took inMay  2001. Dr.  Joyce had been Chairman, President andChief Executive Officer of Union Carbide Corporation from 1996 throughMay  2001. From 1995 to 1996, Dr.  Joyce was President andChief Executive Officer, and from 1993 to 1995 he was President ofUnion Carbide. Prior to that, he had been Chief Operating Officer ofUnion Carbide since 1992.

William J. Roe is ourExecutive Vice President, Chief Operating Officer and President,Industrial and Institutional Services division. Mr.  Roe hasserved as Chief Operating Officer since 2001 and as Executive VicePresident, Industrial and Institutional Services division, sinceNovember  2003. Prior to that, in 1999, Mr.  Roe waselected Group Vice President and President of the Pacific and Processdivisions. 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.  Roejoined us in 1978 as an Assistant Chemist in Research. Mr.  Roewas promoted to Chemist in 1979, Senior Chemist and Group Leader in1981 and to Technical Director in 1985.

Bradley J.Bell has been our Executive Vice President and Chief FinancialOfficer since joining us in November  2003. From 1997 to 2003,Mr.  Bell served as Senior Vice President and Chief FinancialOfficer of Rohm and Haas Company. Prior to that, Mr.  Bell servedas Vice President and Treasurer of both the Whirlpool Corporation, from1987 to 1997, and the Bundy Corporation, from 1980 to 1987.

Daniel M.  Harker is our Senior Vice President,Global Supply Chain. Mr.  Harker has served in this capacitysince 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.  Harkerserved as Vice President of Global Operations for Calgon. Prior tothat, Mr.  Harker was with Rhone Poulenc from 1993 to 1998, andUnion Carbide from 1975 to 1993.

John L. Gigerichis our Vice President, Administration, joining us in July  2004.Between 2000 and June  2004, Mr.  Gigerich was anindependent consultant to major companies for information technology,procurement and logistics projects. From 1993 through 1999, Mr.Gigerich was Vice President for Union Carbide Corporation, managing itsinformation technology, procurement, and product distribution. Beforethat, Mr.  Gigerich spent 28 years in the banking industry. He isa Certified Public Accountant.

Louis L. Loosbrockis our Group Vice President and President of our Pacific division.Mr.  Loosbrock has been President of the Pacific division sinceApril  2003. Prior to that, Mr.  Loosbrock served as GroupVice President and President of our Pulp and Paper division fromApril  2002 to April  2003. Mr.  Loosbrock served asGeneral Manager, Global Mining from 1998 to 2002; Sales Manager from1986 to 1989 and 1991 to 1998; and Marketing Manager from 1989 to 1991.He began his career with us in 1977 as a Sales Representative in theMining Group and in 1981 was named District Manager.

Scott C. Mason joined us in January  2006 asGroup Vice President and President, Alternate Channels and OperationsPlanning. Mr.  Mason was formerly Vice President of GrafTechInternational Ltd. and served as President, Advanced Carbon Solutions(2005). He was President, Graphite Power Systems from 2003 to 2005.From 2000 to 2002, Mr.  Mason was President, Advanced EnergyTechnologies. He was elected Chief Executive Officer and Chairman ofCarbon Savoie (France) from 2003 to 2005, and he was elected ChiefExecutive Officer and President, UCAR SpA (Italy) from 2003 to 2005.Prior to that, Mr.  Mason held numerous positions with UnionCarbide Corporation, where he began his career in1981.

Gregory N. Nelson is our Group Vice Presidentand President, Services and Equipment. He is also our ManagingDirector, European Operations. Mr.  Nelson joined us inJanuary  2005 as President, Alternate Channels and GlobalServices. Prior to joining us, Mr.  Nelson was Chief ProcurementOfficer and Vice President for Supply Chain at Sun Chemical from 2003to 2004 and Vice President for Global Procurement at Dow Chemical andUnion Carbide from 1997 to 2003. Mr.  Nelson started his careerat ExxonMobil Chemical Company in 1977 as an engineer and held severalpositions in manufacturing, logistics and strategic business planninguntil 1997.

18

----

Table of Contents

John P. Yimoyines is ourGroup Vice President and President, Paper Services division. Mr.Yimoyines has served in this capacity since June  2006. Prior tojoining us, Mr.  Yimoyines spent 35 years in the chemicalindustry working first for Union Carbide and then Dow after theacquisition of Union Carbide by Dow. He was named VicePresident-Corporate Ventures at Union Carbide in 1994 and became VicePresident, General Manager, Specialty Polyolefins in 1998. He carriedthis title into Dow in 2001, where he was later named Vice President,Technology Licensing and Catalysts in 2004. Mr.  Yimoyines hasbeen instrumental in the formation of several international jointventures.

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, nominating andcorporate governance and safety, health and environment committees ofthe Board of Directors.

19

----

Table of Contents

ITEM1A.    RISK FACTORS

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

We havehistorically been able to maintain our market positions and marginsthrough continuous innovation of products and development of newofferings to create value for our customers. Recent innovations anddevelopments 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 in developingnew products or systems or bringing them to market in a timelymanner; |

|  |              |                                                                                                       |
|--|--------------|-------------------------------------------------------------------------------------------------------|
|  | •  | products or technologies developedby others will not render our offerings obsolete ornon-competitive; |

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

|  |              |                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------|
|  | •  | our competitors will notbe able to produce our core non-patented products at a lowercost; |

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

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

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

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

We are a highly leveraged company. Sinceissuing senior discount notes in January  2004 to pay a specialdividend to our Sponsors, we have made net repayments of debt of$697.7  million, which included $162.3  million that waspaid using a portion of the proceeds from the initial public offeringof Nalco Holding Company’s common stock. As of December31,  2006, our total consolidated indebtedness was$3,188.8  million and we had $250.0  million of borrowingcapacity available under our revolving credit facility (excluding$27.7  million of outstanding letters ofcredit).

20

----

Table of Contents

Our high degree of leverage couldhave important consequences 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 ability toadjust 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 may bemore vulnerable than a less leveraged company to a downturn in generaleconomic conditions or in our business, or we may be unable to carryout capital spending that is important to our growth. |

AtDecember  31,  2006, we had $1,116.4  million ofvariable rate debt. A 1% increase in the average interest ratewould increase future interest expense by approximately $11.2million per year.

Despite our current leverage, we maystill be able to substantially increase our indebtedness. This couldfurther exacerbate the risks that we and our subsidiariesface.

We and our subsidiaries may be able tosubstantially increase our indebtedness in the future. The terms of theindentures governing our subsidiaries’ notes do not fullyprohibit our subsidiaries or us from doing so. Nalco Company’srevolving credit facility provides commitments of up to $250.0million, all of which would have been available for future borrowingsas of December  31,  2006 (excluding $27.7  millionof outstanding letters of credit). If new debt is added to our currentdebt levels, the related risks that we and our subsidiaries now facecould intensify.

Our subsidiaries’ debtagreements contain restrictions that limit our flexibility in operatingour business.

Nalco Company’s senior creditagreement and the indentures governing our subsidiaries’existing notes contain a number of significant covenants that, amongother things, restrict our or our subsidiaries’ abilityto:

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

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

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

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

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

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

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

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

21

----

Table of Contents

The terms of NalcoCompany’s senior credit agreement limit Nalco Holdings LLC andits subsidiaries from paying dividends or otherwise transferring theirassets to us.

Our operations are conducted throughour subsidiaries and our ability to make payments on any obligations wemay have is dependent on the earnings and the distribution of fundsfrom our subsidiaries. However, the terms of Nalco Company’ssenior credit agreement limit the amount of dividends and othertransfers by Nalco Holdings LLC and its subsidiaries to us.

Our significant non-U.S. operations expose us to globaleconomic and political changes that could impact ourprofitability.

We have significant operations outsidethe United States, including joint ventures and other alliances. Weconduct business in approximately 130 countries and, in 2006,approximately 55% of our net sales originated outside the UnitedStates. There are inherent risks in our international operations,including:

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

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | currencyfluctuations and devaluations; |

|  |              |                            |
|--|--------------|----------------------------|
|  | •  | tariffsand trade barriers; |

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

|  |              |                                      |
|--|--------------|--------------------------------------|
|  | •  | changes in local economicconditions; |

|  |              |                                 |
|--|--------------|---------------------------------|
|  | •  | 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, which has impacted our business in thesecountries. Other risks in international business also includedifficulties in staffing and managing local operations, including ourobligations to design local solutions to manage credit risk to localcustomers and distributors.

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

Environmental, safety and productionand product regulations or concerns could subject us to liability forfines or damages, require us to modify our operations and increase ourmanufacturing and delivery costs.

We are subject tothe requirements of environmental and occupational safety and healthlaws and regulations in the United States and other countries. Theseinclude obligations to investigate and clean up environmentalcontamination on or from properties or at off-site locations where weare identified as a responsible party. For example, we are currentlyidentified as a potentially responsible party at certain wastemanagement sites. We have also been named as a defendant in a series ofmulti-party and individual lawsuits based on claims of exposure tohazardous materials. We cannot predict with certainty the outcome ofany such tort claims or the involvement we might have in such mattersin the future and there can be no assurance that the discovery ofpreviously unknown conditions will not require significantexpenditures. In each of these chemical exposure cases, our insurancecarriers have accepted the claims on our behalf (with or withoutreservation) and our financial exposure should be 

22

----

Table of Contents

limited to the amount of our deductible;however, we cannot predict the number of claims that we may have todefend in the future and we may not be able to continue to maintainsuch insurance.

On November  27,  2006, theU.K. Health and Safety Executive (‘‘HSE’’)issued a summons charging one of our subsidiaries with a violation ofthe Health and Safety at Work Act. The charge relates to a legionellaoutbreak that is claimed to have originated at cooling towers owned byone of the subsidiary’s customers. The legionella outbreak isbelieved to have resulted in two fatalities and multiple injuries. Thecustomer is also charged.

On January  2,2007, the HSE issued a second criminal summons charging the subsidiarywith a violation of the Health and Safety at Work Act. The secondcharge relates to the entry of one of the subsidiary’s employeesinto a claimed confined space at a customer site. The employee claimsinjuries as a result of entry into the confined space. The customer isalso charged.

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 avariety of federal, state, local and foreign laws and regulations(‘‘production regulations’’). Similarly,the solid, air and liquid waste streams produced from our productionfacilities are subject to a variety of regulations(‘‘waste regulations’’) and many of ourproducts and the handling of our products are governmentally regulatedor registered (‘‘product regulations’’).Each of the production, waste and product regulations is subject toexpansion or enhancement. Any new or tightened regulations could leadto increases in the direct and indirect costs we incur in manufacturingand delivering products to our customers. For example, the EuropeanCommission has imposed new chemical registration requirements on themanufacturers and users of all chemicals, not just those which areconsidered to be harmful or hazardous. Such regulations, referred to asREACH, will cause all chemical companies to incur additional costs toconduct their businesses in European Commission countries. Similarly,certain of our products are used to assist in the generation of taxcredits for our customers, and the termination or expiration of suchtax credits could impact the sale of these products. In addition to anincrease in costs in manufacturing and delivering products, a change inproduction regulations or product regulations could result ininterruptions to our business and potentially cause economic orconsequential losses should we be unable to meet the demands of ourcustomers for products.

We may not be able to achieveall of our expected cost savings.

For the years 2004through 2006, our average annual cost savings were $83  million.In 2006, we achieved cost savings of $71  million, which wasslightly lower than our target of $75  million. A variety ofrisks could cause us not to achieve the benefits of our expected costsavings, including, among others, thefollowing:

|  |              |                                                                 |
|--|--------------|-----------------------------------------------------------------|
|  | •  | higher than expectedseverance 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. |

23

----

Table of Contents

We have experienced in thepast, and could again experience in the future, difficulties insecuring the supply of certain raw materials we and our competitorsneed to manufacture some of our products, and we have also beenimpacted by significant increases in raw materialcosts.

In 2004 and 2005, certain of the raw materialsused by us and other chemical companies faced supply limitation. Ifthese limitations occur again in the future, we risk shortfalls in oursales and the potential of claims from our customers if we are unableto fully meet contractual requirements.

Also, limitationson raw materials and rising prices for underlying products haveresulted in the past, and could result in the future, in priceincreases for raw materials we purchase. In the past, our margins havebeen impacted by such raw materials price increases, and our marginscould be similarly impacted in the future if we are unable to pass anyfuture raw material price increases through to ourcustomers.

Our pension plans are currently underfundedand we may have to make significant cash payments to the plans,reducing the cash available for our business.

Wesponsor various pension plans worldwide that are underfunded andrequire significant cash payments. For example, in 2005 and 2006, wecontributed $30.0  million and $70.8  million,respectively, to our pension plans. We are required to contribute atleast $53.2  million to the U.S. pension plan in 2007. We mayalso opt to make additional voluntary contributions to various pensionplans worldwide in 2007. If the performance of the assets in ourpension plans does not meet our expectations, or if other actuarialassumptions are modified, our contributions could be even higher thanwe expect. If our cash flow from operations is insufficient to fund ourworldwide pension liability, we may be forced to reduce or delaycapital expenditures, seek additional capital or seek to restructure orrefinance our indebtedness.

As of December31,  2006, our worldwide pension plans were underfunded by$434.2  million (based on the actuarial assumptions used forpurposes of Statement of Financial Accounting Standards (SFAS) No. 87,Employers’ Accounting for Pensions). Our U.S. pensionplans are subject to the Employee Retirement Income Security Act of1974, or ERISA. Under ERISA, the Pension Benefit Guaranty Corporation,or PBGC, has the authority to terminate an underfunded pension planunder certain circumstances. In the event our U.S. pension plans areterminated for any reason while the plans are underfunded, we willincur a liability to the PBGC that may be equal to the entire amount ofthe underfunding. Prior to the closing of the Acquisition, the PBGCrequested and received information from us regarding our business, theTransactions and our pension plans. The PBGC took no further actionwith respect to their inquiry.

On August  17,2006, the President signed into law a new pension reform bill —the Pension Protection Act of 2006 (PPA). The PPA affects definedbenefit and defined contribution plans, the employers who sponsor suchplans, and plan participants. The PPA will influence the amount andtiming of our pension funding requirements, our decisions regardingpension funding, and the timing of payouts to those of our employeeswho are plan participants. The changes resulting from the PPA mightalso impact our employees and influence their employment decisions.

We have recorded a significant amount of goodwill andother identifiable intangible assets, and we may never realize the fullvalue of our intangible assets.

We have recorded asignificant amount of goodwill and other identifiable intangibleassets, including customer relationships, trademarks and developedtechnologies. Goodwill and other net identifiable intangible assetswere approximately $3.5  billion as of December  31,2006, or approximately 61% of our total assets. Goodwill, whichrepresents the excess of cost over the fair value of the net assets ofthe businesses acquired, was approximately $2.3  billion as ofDecember  31,  2006, or 41% of our total assets.Goodwill and net identifiable intangible assets are recorded at fairvalue on the date of acquisition and, in accordance with SFAS No. 142,Goodwill and Other Intangible Assets, will be reviewed at leastannually for impairment. Impairment may result from, among otherthings, deterioration in our performance, adverse market conditions,adverse changes in applicable laws or regulations, including changesthat restrict the activities of or affect the products and servicessold by our business, and a variety of other factors. Some of theproducts and services we sell to our 

24

----

Table of Contents

customers, including but not limited to thosein the synthetic fuel industry, are dependent upon laws andregulations, and changes to such laws or regulations could impact thedemand for our products and services. The amount of any quantifiedimpairment must be expensed immediately as a charge to results ofoperations. Depending on future circumstances, it is possible that wemay never realize the full value of our intangible assets. Any futuredetermination of impairment of a significant portion of goodwill orother identifiable intangible assets would have an adverse effect onour financial condition and results of operations.

Ourfuture success will depend in part on our ability to protect ourintellectual property rights, and our inability to enforce these rightscould permit others to offer products competitive with ours, whichcould reduce our ability to maintain our market position and maintainour margins.

We rely on the patent, trademark,copyright and trade secret laws of the United States and othercountries to protect our intellectual property rights. However, we maybe unable to prevent third parties from using our intellectual propertywithout authorization. The use of our intellectual property by otherscould reduce any competitive advantage we have developed or otherwiseharm our business. If we had to litigate to protect these rights, anyproceedings could be costly, and we may not prevail.

Wehave obtained and applied for several U.S. and foreign trademarkregistrations, and will continue to evaluate the registration ofadditional service marks and trademarks, as appropriate. Our pendingapplications may not be approved by the applicable governmentalauthorities and, even if the applications are approved, third partiesmay seek to oppose or otherwise challenge these registrations. Afailure to obtain trademark registrations in the United States and inother countries could limit our ability to protect our trademarks andimpede our marketing efforts in those jurisdictions.

ITEM1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM2.    PROPERTIES

Our principal administrative officesand 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 19 plants in North America, 6 plants in LatinAmerica, 11 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, contract, intellectual property, product liability,employee, environmental and other matters. Historically, we have notfaced any litigation matters or series of litigation matters that havehad a material adverse impact on our business. In addition, we do notbelieve that there is any pending or reasonably predictable litigation,either individually or in the aggregate, that is likely to have amaterial adverse effect on our financial condition, results ofoperations, liquidity or cash flow. However, we cannot predict withcertainty the outcome of any litigation or the potential for futurelitigation.

On November  27,  2006, the U.K.Health and Safety Executive (‘‘HSE’’)issued a criminal summons charging our U.K. subsidiary with a violationof the Health and Safety at Work Act. The charge relates to alegionella outbreak that is claimed to have originated at coolingtowers at the subsidiary’s customers. The legionella outbreak isbelieved to have resulted in two fatalities and multiple injuries. Thecustomer is also charged. We have not yet received a specification ofthe claim or a description of the relief being sought by the HSE,though the amount at issue is not expected to bematerial.

25

----

Table of Contents

On January  2,  2007,the HSE issued a second criminal summons charging our U.K. subsidiarywith a violation of the Health and Safety at Work Act. The secondcharge relates to the entry of one of our subsidiary’s employeesinto a claimed confined space at a customer site. The employee claimsinjuries as a result of entry into the confined space. The customer isalso charged. We believe the relief being sought against us and ourcustomer is an amount in excess of £20,000, but the amount atissue is not expected to be material.

ITEM 4.    SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS

Omitted pursuant toGeneral Instruction I(2)(c) to Form10-K.

26

----

Table of Contents

PARTII

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

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

|              |                         |
|--------------|-------------------------|
| ITEM6.  | SELECTED FINANCIAL DATA |

TheSuccessor financial statements include the consolidated auditedfinancial statements of Nalco Finance Holdings LLC and itssubsidiaries. The Predecessor financial statements include the combinedfinancial statements of Ondeo Nalco Group, which include theconsolidated financial statements of Ondeo Nalco Company and thecombined financial statements of the Nalco International SASSubsidiaries.

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

27

----

Table of Contents

|                                                          |      |  |                       |      |         |                                           |      |  |                                         |   |         |                             |  |  |  |   |         |   |  |  |  |   |          |   |  |  |  |   |         |   |  |  |  |   |         |   |
|----------------------------------------------------------|------|--|-----------------------|------|---------|-------------------------------------------|------|--|-----------------------------------------|---|---------|-----------------------------|--|--|--|---|---------|---|--|--|--|---|----------|---|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                                     |      |  | Successor             |      |         | Predecessor                               |
| (dollarsin millions)                                     |      |  | Year ended December31 |      |         | November 4, 2003 through December 31,2003 |      |  | January 1, 2003 through November 3,2003 |   |         | Year ended December 31,2002 |
|                                                          | 2006 |  |                       | 2005 |         |                                           | 2004 |
| Statementof OperationsData:                              |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |  |  |  |   |    |   |
| Netsales                                                 |      |  |                       | $    | 3,602.6 |                                           |      |  |                                         | $ | 3,312.4 |                             |  |  |  | $ | 3,033.3 |   |  |  |  | $ | 460.1    |   |  |  |  | $ | 2,306.5 |   |  |  |  | $ | 2,644.3 |   |
| Operatingcosts andexpenses:                              |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |
| Costsof productsold                                      |      |  |                       |      | 1,976.5 |                                           |      |  |                                         |   | 1,832.2 |                             |  |  |  |   | 1,578.8 |   |  |  |  |   | 249.9    |   |  |  |  |   | 1,122.9 |   |  |  |  |   | 1,276.0 |   |
| Selling,administrative, and researchexpenses             |      |  |                       |      | 1,113.5 |                                           |      |  |                                         |   | 1,028.7 |                             |  |  |  |   | 1,038.8 |   |  |  |  |   | 174.7    |   |  |  |  |   | 892.4   |   |  |  |  |   | 982.1   |   |
| Impairmentof goodwill(1)                                 |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | — |   |  |  |  |   | —  |   |  |  |  |   | 244.4   |   |  |  |  |   | — |   |
| Amortizationof intangibleassets(1)                       |      |  |                       |      | 70.1    |                                           |      |  |                                         |   | 81.6    |                             |  |  |  |   | 96.3    |   |  |  |  |   | 15.4     |   |  |  |  |   | 68.9    |   |  |  |  |   | 89.2    |   |
| In-processresearch and development(6)                    |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | 122.3   |   |  |  |  |   | —  |   |  |  |  |   | — |   |  |  |  |   | — |   |
| Businessoptimization expenses(2)                         |      |  |                       |      | 9.5     |                                           |      |  |                                         |   | 25.6    |                             |  |  |  |   | 1.7     |   |  |  |  |   | 0.8      |   |  |  |  |   | 20.3    |   |  |  |  |   | 32.8    |   |
| Sponsormonitoringfees                                    |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | 11.2    |   |  |  |  |   | 1.8      |   |  |  |  |   | — |   |  |  |  |   | — |   |
| Sponsormonitoring agreement termination fee(7)           |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | 35.0    |   |  |  |  |   | —  |   |  |  |  |   | — |   |  |  |  |   | — |   |
| Suezmanagementfees                                       |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | — |   |  |  |  |   | —  |   |  |  |  |   | 2.9     |   |  |  |  |   | 3.1     |   |
| Loss(gain) on sale ofbusiness                            |      |  |                       |      | — |                                           |      |  |                                         |   | — |                             |  |  |  |   | — |   |  |  |  |   | —  |   |  |  |  |   | 5.2     |   |  |  |  |   | (10.9   | ) |
| Operatingcosts andexpenses                               |      |  |                       |      | 3,169.6 |                                           |      |  |                                         |   | 2,968.1 |                             |  |  |  |   | 2,884.1 |   |  |  |  |   | 442.6    |   |  |  |  |   | 2,357.0 |   |  |  |  |   | 2,372.3 |   |
| Operatingearnings(loss)                                  |      |  |                       |      | 433.0   |                                           |      |  |                                         |   | 344.3   |                             |  |  |  |   | 149.2   |   |  |  |  |   | 17.5     |   |  |  |  |   | (50.5   | ) |  |  |  |   | 272.0   |   |
| Otherincome (expense), net(3)                            |      |  |                       |      | (4.3    | )                                         |      |  |                                         |   | 4.0     |                             |  |  |  |   | (10.8   | ) |  |  |  |   | (1.0     | ) |  |  |  |   | (9.2    | ) |  |  |  |   | (4.4    | ) |
| Interestincome                                           |      |  |                       |      | 9.1     |                                           |      |  |                                         |   | 8.5     |                             |  |  |  |   | 10.1    |   |  |  |  |   | 0.6      |   |  |  |  |   | 7.1     |   |  |  |  |   | 7.8     |   |
| Interestexpense                                          |      |  |                       |      | (271.8  | )                                         |      |  |                                         |   | (258.0  | )                           |  |  |  |   | (251.1  | ) |  |  |  |   | (49.6    | ) |  |  |  |   | (32.7   | ) |  |  |  |   | (38.5   | ) |
| Earnings(loss) before income taxes and minorityinterests |      |  |                       |      | 166.0   |                                           |      |  |                                         |   | 98.8    |                             |  |  |  |   | (102.6  | ) |  |  |  |   | (32.5    | ) |  |  |  |   | (85.3   | ) |  |  |  |   | 236.9   |   |
| Incometax provision(benefit)                             |      |  |                       |      | 69.8    |                                           |      |  |                                         |   | 54.3    |                             |  |  |  |   | 47.5    |   |  |  |  |   | (8.3     | ) |  |  |  |   | 68.7    |   |  |  |  |   | 105.2   |   |
| Minorityinterests                                        |      |  |                       |      | (7.9    | )                                         |      |  |                                         |   | (5.7    | )                           |  |  |  |   | (5.8    | ) |  |  |  |   | 0.1      |   |  |  |  |   | (4.2    | ) |  |  |  |   | (3.3    | ) |
| Netearnings(loss)                                        |      |  |                       | $    | 88.3    |                                           |      |  |                                         | $ | 38.8    |                             |  |  |  | $ | (155.9  | ) |  |  |  | $ | (24.1    | ) |  |  |  | $ | (158.2  | ) |  |  |  | $ | 128.4   |   |
| NetEarnings (Loss) Per Share(4)                          |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |
| Statementof Cash FlowsData:                              |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |
| Netcash provided by (usedfor):                           |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |
| Operatingactivities                                      |      |  |                       | $    | 285.1   |                                           |      |  |                                         | $ | 201.8   |                             |  |  |  | $ | 237.1   |   |  |  |  | $ | 88.7     |   |  |  |  | $ | 144.4   |   |  |  |  | $ | 323.1   |   |
| Investingactivities                                      |      |  |                       |      | (99.9   | )                                         |      |  |                                         |   | (77.7   | )                           |  |  |  |   | (72.9   | ) |  |  |  |   | (4,145.1 | ) |  |  |  |   | (12.3   | ) |  |  |  |   | (126.1  | ) |
| Financingactivities                                      |      |  |                       |      | (179.6  | )                                         |      |  |                                         |   | (125.9  | )                           |  |  |  |   | (231.8  | ) |  |  |  |   | 4,130.3  |   |  |  |  |   | (234.2  | ) |  |  |  |   | (232.7  | ) |
| OtherFinancial Data(unaudited):                          |      |  |                       |      |    |                                           |      |  |                                         |   |    |                             |  |  |  |   |    |   |  |  |  |   |     |   |  |  |  |   |    |   |
| EBITDA(5)                                                |      |  |                       | $    | 621.9   |                                           |      |  |                                         | $ | 557.5   |                             |  |  |  | $ | 343.2   |   |  |  |  | $ | 54.5     |   |  |  |  | $ | 106.8   |   |  |  |  | $ | 488.2   |   |
| Non-cashcharges included in EBITDA(6)                    |      |  |                       |      | 35.5    |                                           |      |  |                                         |   | 19.8    |                             |  |  |  |   | 174.4   |   |  |  |  |   | 23.9     |   |  |  |  |   | 268.7   |   |  |  |  |   | 31.2    |   |
| Unusualitems included inEBITDA(7)                        |      |  |                       |      | 19.1    |                                           |      |  |                                         |   | 6.4     |                             |  |  |  |   | 59.7    |   |  |  |  |   | 6.3      |   |  |  |  |   | 48.5    |   |  |  |  |   | (33.3   | ) |
| Capitalexpenditures, net(8)                              |      |  |                       |      | 93.4    |                                           |      |  |                                         |   | 74.6    |                             |  |  |  |   | 91.8    |   |  |  |  |   | 15.6     |   |  |  |  |   | 85.6    |   |  |  |  |   | 108.3   |   |
| Depreciation                                             |      |  |                       |      | 131.0   |                                           |      |  |                                         |   | 133.3   |                             |  |  |  |   | 114.3   |   |  |  |  |   | 22.5     |   |  |  |  |   | 101.8   |   |  |  |  |   | 134.7   |   |
| Amortizationof intangibleassets                          |      |  |                       |      | 70.1    |                                           |      |  |                                         |   | 81.6    |                             |  |  |  |   | 96.3    |   |  |  |  |   | 15.4     |   |  |  |  |   | 68.9    |   |  |  |  |   | 89.2    |   |
|                                                          |

28

----

Table of Contents

|                                                                                              |  |  |                  |   |         |                      |  |  |      |   |         |      |  |  |  |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|----------------------------------------------------------------------------------------------|--|--|------------------|---|---------|----------------------|--|--|------|---|---------|------|--|--|--|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                                                                                         |  |  | Successor        |   |         | Predecessor          |
|                                                                                         |  |  | Asof December 31 |   |         | As ofDecember31,2002 |
| (dollarsinmillions)                                                                          |  |  | 2006             |   |         | 2005                 |  |  | 2004 |   |         | 2003 |
| BalanceSheet Data:                                                                           |  |  |                  |   |    |                      |  |  |      |   |    |      |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Cash andcashequivalents                                                                      |  |  |                  | $ | 37.3    |                      |  |  |      | $ | 30.8    |      |  |  |  | $ | 33.2    |  |  |  |  | $ | 100.0   |  |  |  |  | $ | 120.5   |  |
| Workingcapital(9)                                                                            |  |  |                  |   | 560.9   |                      |  |  |      |   | 498.1   |      |  |  |  |   | 424.2   |  |  |  |  |   | 398.7   |  |  |  |  |   | 240.8   |  |
| Property,plant and equipment, net(10)                                                        |  |  |                  |   | 743.4   |                      |  |  |      |   | 755.3   |      |  |  |  |   | 847.3   |  |  |  |  |   | 865.6   |  |  |  |  |   | 823.2   |  |
| Totalassets                                                                                  |  |  |                  |   | 5,659.4 |                      |  |  |      |   | 5,554.9 |      |  |  |  |   | 5,934.5 |  |  |  |  |   | 6,163.8 |  |  |  |  |   | 6,486.4 |  |
| Totaldebt (including capital lease obligations and current portion oflong-term debt)(10)(11) |  |  |                  |   | 3,188.8 |                      |  |  |      |   | 3,266.8 |      |  |  |  |   | 3,442.5 |  |  |  |  |   | 3,314.7 |  |  |  |  |   | 776.2   |  |
| Totalunitholder’s/shareholders’equity                                            |  |  |                  |   | 855.2   |                      |  |  |      |   | 680.4   |      |  |  |  |   | 694.3   |  |  |  |  |   | 1,069.0 |  |  |  |  |   | 3,589.2 |  |
| Offbalance sheet receivables facility(11)                                                    |  |  |                  |   | — |                      |  |  |      |   | — |      |  |  |  |   | — |  |  |  |  |   | — |  |  |  |  |   | 87.0    |  |
|                                                                                              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | ThePredecessor adopted Statement of Financial Accounting Standards (SFAS)No. 142, Goodwill and Other Intangible Assets, as ofJanuary  1,  2002. Under SFAS No. 142, goodwill andintangible assets deemed to have indefinite lives are no longeramortized but are subject to annual impairment tests. In the periodfrom January  1,  2003 through November  3,2003, the Predecessor recorded a goodwill impairment charge of$244.4  million based on the price paid in theAcquisition. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The Successorincurs business optimization expenses, representing mostly employeeseverance and related costs, in connection with its programs toredesign and optimize its business and work processes. The Predecessorincurred significant business optimization expenses as a result of theglobal integration of the Nalco/Exxon Energy Chemicals, L.P.(Nalco/Exxon) joint venture and the implementation of global costreduction programs in the sales, marketing, manufacturing and supportservices operations. The costs incurred included severance, assetwrite-offs, facility closing costs and otheritems. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Other income (expense),net consists of gains/(losses) on the disposals of assets, franchisetaxes, equity earnings of unconsolidated subsidiaries, recognized gainsand losses on foreign currency transactions and other miscellaneousincome (expense). Also included for the year ended December31,  2004 was a $13.7  million charge for the earlyrepayment of senior discount notes. A $10.4  million charge forthe settlement of an interest rate swap was also included during theperiod from January  1,  2003 through November3,  2003. |

|     |               |
|-----|---------------|
| (4) | Notapplicable |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | EBITDA, a measureused by management to measure operating performance, is defined as netearnings plus interest, taxes, depreciation and amortization. EBITDA isreconciled to net earnings (loss) in the following table. Ourmanagement believes EBITDA is useful to the investors because it isfrequently used by securities analysts, investors and other interestedparties in the evaluation of companies in our industry. EBITDA is not arecognized term under U.S. GAAP and does not purport to be analternative to net earnings (loss) as an indicator of operatingperformance or to cash flows from operating activities as a measure ofliquidity. Because not all companies use identical calculations, thispresentation of EBITDA may not be comparable to other similarly titledmeasures of other companies. Additionally, EBITDA is not intended to bea measure of free cash flow for management’s discretionary use,as it does not consider certain cash requirements such as interestpayments, tax payments and debt service requirements. The amounts shownfor EBITDA as presented herein differ from the amounts calculated underthe definition of EBITDA used in our debt instruments. The definitionof EBITDA used in our debt instruments is further adjusted for certaincash and non-cash charges and is used to determine compliance withfinancial covenants and our ability to engage in certain activitiessuch as incurring additional debt and making certain payments. |

29

----

Table of Contents

The following is a reconciliationof net earnings (loss) toEBITDA:

|                                 |  |  |                       |   |       |                                       |  |  |                                      |   |       |                          |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |   |        |   |  |  |  |   |       |  |
|---------------------------------|--|--|-----------------------|---|-------|---------------------------------------|--|--|--------------------------------------|---|-------|--------------------------|--|--|--|---|--------|---|--|--|--|---|-------|---|--|--|--|---|--------|---|--|--|--|---|-------|--|
|                            |  |  | Successor             |   |       | Predecessor                           |
|                            |  |  | Yearended December 31 |   |       | November4,2003 throughDecember31,2003 |  |  | January 1,2003throughNovember 3,2003 |   |       | YearendedDecember31,2002 |
| (dollarsinmillions)             |  |  | 2006                  |   |       | 2005                                  |  |  | 2004                                 |
| Netearnings(loss)               |  |  |                       | $ | 88.3  |                                       |  |  |                                      | $ | 38.8  |                          |  |  |  | $ | (155.9 | ) |  |  |  | $ | (24.1 | ) |  |  |  | $ | (158.2 | ) |  |  |  | $ | 128.4 |  |
| Interestexpense,net             |  |  |                       |   | 262.7 |                                       |  |  |                                      |   | 249.5 |                          |  |  |  |   | 241.0  |   |  |  |  |   | 49.0  |   |  |  |  |   | 25.6   |   |  |  |  |   | 30.7  |  |
| Incometax provision(benefit)    |  |  |                       |   | 69.8  |                                       |  |  |                                      |   | 54.3  |                          |  |  |  |   | 47.5   |   |  |  |  |   | (8.3  | ) |  |  |  |   | 68.7   |   |  |  |  |   | 105.2 |  |
| Depreciation                    |  |  |                       |   | 131.0 |                                       |  |  |                                      |   | 133.3 |                          |  |  |  |   | 114.3  |   |  |  |  |   | 22.5  |   |  |  |  |   | 101.8  |   |  |  |  |   | 134.7 |  |
| Amortizationof intangibleassets |  |  |                       |   | 70.1  |                                       |  |  |                                      |   | 81.6  |                          |  |  |  |   | 96.3   |   |  |  |  |   | 15.4  |   |  |  |  |   | 68.9   |   |  |  |  |   | 89.2  |  |
| EBITDA                          |  |  |                       | $ | 621.9 |                                       |  |  |                                      | $ | 557.5 |                          |  |  |  | $ | 343.2  |   |  |  |  | $ | 54.5  |   |  |  |  | $ | 106.8  |   |  |  |  | $ | 488.2 |  |
|                                 |

|     |                                                                                                                 |
|-----|-----------------------------------------------------------------------------------------------------------------|
| (6) | EBITDA,as defined above, was reduced by the following non-cash charges, eachof which is further discussedbelow: |

|                                                |  |  |                       |   |         |                                       |  |  |                                       |   |         |                          |  |  |  |   |         |  |  |  |  |   |         |   |  |  |  |   |         |  |  |  |  |   |         |  |
|------------------------------------------------|--|--|-----------------------|---|---------|---------------------------------------|--|--|---------------------------------------|---|---------|--------------------------|--|--|--|---|---------|--|--|--|--|---|---------|---|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                                           |  |  | Successor             |   |         | Predecessor                           |
|                                           |  |  | Yearended December 31 |   |         | November4,2003 throughDecember31,2003 |  |  | January 1,2003throughNovember 3, 2003 |   |         | YearendedDecember31,2002 |
| (dollarsinmillions)                            |  |  | 2006                  |   |         | 2005                                  |  |  | 2004                                  |
| Impairmentofgoodwill                           |  |  |                       | $ | — |                                       |  |  |                                       | $ | — |                          |  |  |  | $ | — |  |  |  |  | $ | — |   |  |  |  | $ | 244.4   |  |  |  |  | $ | — |  |
| In-processresearch anddevelopment              |  |  |                       |   | — |                                       |  |  |                                       |   | — |                          |  |  |  |   | 122.3   |  |  |  |  |   | — |   |  |  |  |   | — |  |  |  |  |   | — |  |
| Inventorystep-up                               |  |  |                       |   | — |                                       |  |  |                                       |   | — |                          |  |  |  |   | 14.6    |  |  |  |  |   | 21.2    |   |  |  |  |   | — |  |  |  |  |   | — |  |
| Assetwrite-offs                                |  |  |                       |   | 2.5     |                                       |  |  |                                       |   | 2.8     |                          |  |  |  |   | 1.1     |  |  |  |  |   | — |   |  |  |  |   | 4.2     |  |  |  |  |   | 18.3    |  |
| Profitsharing and 401(k) expense funded bySuez |  |  |                       |   | 25.6    |                                       |  |  |                                       |   | 13.2    |                          |  |  |  |   | 27.8    |  |  |  |  |   | 4.0     |   |  |  |  |   | 20.0    |  |  |  |  |   | 12.1    |  |
| Other                                          |  |  |                       |   | 7.4     |                                       |  |  |                                       |   | 3.8     |                          |  |  |  |   | 8.6     |  |  |  |  |   | (1.3    | ) |  |  |  |   | 0.1     |  |  |  |  |   | 0.8     |  |
|                                           |  |  |                       | $ | 35.5    |                                       |  |  |                                       | $ | 19.8    |                          |  |  |  | $ | 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.

In-process Research andDevelopment

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

Inventory StepUp

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

AssetWrite-Offs

In conjunction with integration and processimprovement initiatives, the Predecessor wrote off assets consistingprimarily of a $5.0  million investment in start up ventures in2003 and $9.6  million of assets related to obsolete softwaresystems in 2002.

Profit Sharing and 401(k) ExpenseFunded by Suez

In conjunction with the Acquisition, theSuccessor entered into an agreement with Suez whereby Suez willreimburse the Successor for certain profit sharing and 401(k) matchingcontributions made to the Profit-Sharing Trust.

30

----

Table of Contents

Other

Othernon-cash charges include the non-cash impact on earnings of our equityinvestments and minority interests. Successor non-cash charges includethe non-cash portion of rent expense under the sublease that theSuccessor entered into with a Suez subsidiary in conjunction with theAcquisition.

|     |                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | In addition toincurring non-cash charges and business optimization expenses, ourEBITDA was impacted by the following unusual (income) expenses, each ofwhich is further discussedbelow: |

|                                                          |  |  |                       |   |         |                                        |  |  |                                     |   |         |                           |  |  |  |   |         |  |  |  |  |   |         |   |  |  |  |   |      |  |  |  |  |   |       |   |
|----------------------------------------------------------|--|--|-----------------------|---|---------|----------------------------------------|--|--|-------------------------------------|---|---------|---------------------------|--|--|--|---|---------|--|--|--|--|---|---------|---|--|--|--|---|------|--|--|--|--|---|-------|---|
|                                                     |  |  | Successor             |   |         | Predecessor                            |
|                                                     |  |  | Yearended December 31 |   |         | November4,2003 throughDecember 31,2003 |  |  | January1,2003 throughNovember3,2003 |   |         | Year endedDecember31,2002 |
| (dollarsinmillions)                                      |  |  | 2006                  |   |         | 2005                                   |  |  | 2004                                |
| Loss(gain) on pension and OPEB settlement andcurtailment |  |  |                       | $ | 1.7     |                                        |  |  |                                     | $ | 0.5     |                           |  |  |  | $ | 0.1     |  |  |  |  | $ | (0.1    | ) |  |  |  | $ | 7.9  |  |  |  |  | $ | (47.6 | ) |
| Loss(gain) on sales, net ofexpenses                      |  |  |                       |   | 6.0     |                                        |  |  |                                     |   | 4.1     |                           |  |  |  |   | 0.2     |  |  |  |  |   | 1.1     |   |  |  |  |   | 12.4 |  |  |  |  |   | (7.8  | ) |
| Otherunusualitems                                        |  |  |                       |   | 11.4    |                                        |  |  |                                     |   | 1.8     |                           |  |  |  |   | 59.4    |  |  |  |  |   | 5.3     |   |  |  |  |   | 25.7 |  |  |  |  |   | 19.4  |   |
| Suezmanagement fees,net                                  |  |  |                       |   | — |                                        |  |  |                                     |   | — |                           |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | 2.5  |  |  |  |  |   | 2.7   |   |
|                                                     |  |  |                       | $ | 19.1    |                                        |  |  |                                     | $ | 6.4     |                           |  |  |  | $ | 59.7    |  |  |  |  | $ | 6.3     |   |  |  |  | $ | 48.5 |  |  |  |  | $ | (33.3 | ) |
|                                                          |

Pensionand Other Postretirement Benefits (OPEB) Settlement andCurtailment

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

Loss (Gain) on Sales, Net ofExpenses

For the year ended December  31,2006, the Successor recorded a loss of $2.1  million from thesale-leaseback of its facility in Austria, and it also recognizedlosses of $1.2  million from the disposal of equipment at a plantin the U.K. In 2005, the Successor recognized an impairment loss of$2.4  million on a business that was held forsale.

In 2003, the Predecessor recorded a loss of$5.3  million on the sale of its South African operations as wellas $8.1  million of onetime costs associated with theAcquisition. In 2002, the Predecessor sold its performance additivesbusiness, resulting in a gain of $12.4  million, and incurred$1.5  million of disposal costs and losses associated with itsdivestiture of Hydrosan.

Other UnusualItems

For the year ended December  31,2006, the most significant other unusual items included $3.8million of consultancy fees in connection with the Successor’swork process redesign initiatives and $5.2  million of consultingand legal fees associated with the legal entity restructure.

In 2005, the Successor wrote off $1.1  million ofinventory, which pre-dated the Acquisition.

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

31

----

Table of Contents

During the period fromNovember  4,  2003 through December  31,  2003,the Successor’s results were impacted by the effects of certainother unusual items, most notably $3.3  million of legal andenvironmental costs related to events that occurred prior toSuez’ 1999 acquisition of Nalco Chemical Company and litigationcosts not covered by excess liability insurance.

Themost significant other unusual item affecting the Predecessor’sresults during the period from January  1,  2003 throughNovember  3,  2003 was a $10.4  million charge forthe settlement of an interest rate swap. Other unusual items for theyear ended December  31,  2002 included legal andenvironmental expenses of $6.5  million, consultancy costs forprocess reengineering studies associated with our cost reductionprograms and other consultancy services performed on behalf of Suez of$7.1  million, and onetime pension and benefit expenses primarilyrelated to the redesign of our Australian benefit plan and theapplication of regulatory changes in Germany of $4.7million.

Suez Management Fees, Net

Inconnection with the Acquisition, agreements under which fees were paidby the Predecessor to Suez, or received from Suez, wereterminated.

|     |                                                                 |
|-----|-----------------------------------------------------------------|
| (8) | Capital expenditures arenet of proceeds from disposal ofassets. |

|     |                                                                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (9) | 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 ofDecember31,2002 |
| (dollarsinmillions)                       |  |  | 2006             |   |         | 2005                 |  |  | 2004 |   |         | 2003 |
| Currentassets less currentliabilities     |  |  |                  | $ | 448.0   |                      |  |  |      | $ | 506.3   |      |  |  |  | $ | 439.7   |   |  |  |  | $ | 446.8   |   |  |  |  | $ | (275.0 | ) |
| Lesscash and cashequivalents              |  |  |                  |   | (37.3   | )                    |  |  |      |   | (30.8   | )    |  |  |  |   | (33.2   | ) |  |  |  |   | (100.0  | ) |  |  |  |   | (120.5 | ) |
| Lessrelated party receivables andpayables |  |  |                  |   | — |                      |  |  |      |   | — |      |  |  |  |   | — |   |  |  |  |   | — |   |  |  |  |   | 48.4   |   |
| Plusshort-termdebt                        |  |  |                  |   | 150.2   |                      |  |  |      |   | 22.6    |      |  |  |  |   | 17.7    |   |  |  |  |   | 51.9    |   |  |  |  |   | 587.9  |   |
| Workingcapital asdefined                  |  |  |                  | $ | 560.9   |                      |  |  |      | $ | 498.1   |      |  |  |  | $ | 424.2   |   |  |  |  | $ | 398.7   |   |  |  |  | $ | 240.8  |   |
|                                           |

|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10) | InDecember  2002, Ondeo Nalco Company entered into a sale-leasebackof its Naperville, Illinois headquarters and research facility that wastreated as a financing lease for accounting purposes. Concurrent withthe Acquisition, on November  4,  2003, the lease wasassigned to another Suez subsidiary that subleased the property to theSuccessor. The Successor accounts for the sublease as an operatinglease and has excluded the headquarters and research facility fromproperty, plant andequipment. |

|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11) | Total debt does notinclude the Predecessor’s historical off balance sheetreceivables facility. In December  2001, Ondeo Nalco Companyentered into an agreement that allowed it to periodically transferundivided percentage ownership interests in a revolving pool of most ofits U.S. trade receivables to a multi-seller conduit administered by anindependent financial institution. The Predecessor accounted for thetransfer of undivided percentage ownership interest in the receivablesto the conduit as sales under SFAS No. 140, Accounting for Transfersand Servicing of Financial Assets and Extinguishments ofLiabilities. The loss on the sale of the undivided interests in thereceivables was $1.5  million and $1.8  million for theperiod from January  1,  2003 through November3,  2003 and the year ended December  31,  2002,respectively, and is included in interest expense. The undividedinterest in receivables that were transferred but not ultimately soldto the conduit (‘‘retained interest’’) isclassified in trade accounts receivable in the balance sheet. Theretained interest was $56.6  million at December31,  2002. 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. |

32

----

Table of Contents

|               |                                                                                           |
|---------------|-------------------------------------------------------------------------------------------|
| ITEM7.   | MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OFOPERATIONS |

The following discussion andanalysis of our financial condition and results of operations includesreferences to the Transactions, defined as the acquisition of OndeoNalco Group, comprised of Nalco Company and Nalco International SASSubsidiaries, by Nalco Holdings from Suez(‘‘Suez’’) and the related financings inconnection with such acquisition (the‘‘Acquisition’’).

‘‘Safe Harbor’’ Statement Under PrivateSecurities Litigation Reform Act of 1995

ThisAnnual Report for the fiscal year ended December  31,  2006(the ‘‘Annual Report’’) includes‘‘forward-looking statements’’ within themeaning of Section 27A of the Securities Act of 1933 and Section 21E ofthe Securities Exchange Act of 1934. These forward-looking statementsinclude statements concerning our plans, objectives, goals, strategies,future events, future revenue or performance, capital expenditures,financing needs, plans or intentions relating to acquisitions, businesstrends and other information that is not historical information. Whenused in this Annual Report, the words‘‘estimates,’’‘‘expects,’’‘‘anticipates,’’‘‘projects,’’‘‘plans,’’‘‘intends,’’‘‘ believes,’’‘‘forecasts,’’ or future or conditionalverbs, such as ‘‘will,’’‘‘should,’’‘‘could’’ or‘‘may,’’ and variations of such words orsimilar expressions are intended to identify forward-lookingstatements. All forward-looking statements, including, withoutlimitation, management’s examination of historical operatingtrends and data are based upon our current expectations and variousassumptions. Our expectations, beliefs and projections are expressed ingood faith and we believe there is a reasonable basis for them.However, there can be no assurance that management’sexpectations, beliefs and projections will be achieved.

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

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | oursubstantial leverage; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | limitations onflexibility in operating 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; |

|  |              |                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------|
|  | •  | 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; and |

|  |              |                                                         |
|--|--------------|---------------------------------------------------------|
|  | •  | our ability to protect our intellectualproperty rights. |

There may be other factors thatmay cause our actual results to differ materially from theforward-looking statements.

33

----

Table of Contents

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

Use of Non-GAAP FinancialMeasures

EBITDA, Adjusted EBITDA and FreeCash Flow are measures used by management to measure operatingperformance. Adjusted EBITDA is also used to determine our compliancewith financial covenants and our ability to engage in certainactivities such as incurring additional debt and making certainpayments.

EBITDA is defined as net earnings plusinterest, taxes, depreciation and amortization. Adjusted EBITDA isdefined as EBITDA further adjusted for certain cash and non-cashcharges, as permitted under our senior discount note, senior note andsenior subordinated note indentures and our senior credit facility.Free Cash Flow is defined as net cash provided by operating activities,less capital expenditures and minority interest charges.

We believe EBITDA is useful to the investors becauseit is frequently used by securities analysts, investors and otherinterested parties in the evaluation of companies in our industry. Weconsider the inclusion of supplementary adjustments to EBITDA appliedin presenting Adjusted EBITDA appropriate to provide additionalinformation to investors to demonstrate compliance with our financingcovenants. We believe Free Cash Flow provides investors with a measureof our ability to generate cash for the repayment ofdebt.

EBITDA, Adjusted EBITDA and Free Cash Floware not recognized terms under U.S. GAAP and do not purport to bealternatives to net earnings (loss) as an indicator of operatingperformance or to cash flows from operating activities as a measure ofliquidity. The most direct comparable GAAP financial measures of eachnon-GAAP financial measure, as well as the reconciliation between eachnon-GAAP financial measure and the GAAP financial measure, arepresented in the discussions of the non-GAAP financial measures below.Because not all companies use identical calculations, our measures maynot be comparable to other similarly titled measures of othercompanies.

Critical Accounting Policies andEstimates

Revenue Recognition

Revenuefrom sales of products, including chemicals and equipment, isrecognized at the time: (1)  persuasive evidence of anarrangement exists, (2) ownership and all risks of loss have beentransferred to the buyer, which is generally upon shipment, (3) theprice is fixed and determinable, and (4) collectibility is reasonablyassured. Revenue from services is recognized when the services areprovided to the customer.

Significant estimates used inrecognizing revenues include (1) the delay between the time thatchemicals/equipment are shipped and when they are received by customersand title transfers and (2)  the amount of credit memos to beissued in subsequent periods.

We provide our chemical andequipment offerings to our customers using various commercialarrangements, but the following are most commonlyused:

Ship-and-bill arrangements.    Followingthe receipt of a purchase order from the customer, we invoice thecustomer at the time that the chemicals/equipment are shipped, based onagreed pricing and the volume of chemicals shipped or units ofequipment shipped. At the end of each period, for those shipments wheretitle to the product and the risks of loss and rewards of ownership donot transfer until the product has been received by the customer,adjustments to revenues and cost of product sold are made to accountfor the delay between the time that the chemicals/equipment are shippedand when they are received by the customer. Our sales policy does notprovide for general rights of return and does not contain customeracceptance clauses.

34

----

Table of Contents

Usage with level billingarrangements.    At the beginning of the contractualrelationship, we prepare an estimate of the chemicals that will be usedby the customer. As agreed with the customer, a fixed amount isinvoiced monthly based on this estimate. At the end of each quarter, wereconcile the actual amount of chemicals used by the customer and billthe customer for products actually used during that period. Revenue isrecognized to reflect actual usage. For any products not consumed inthe customer’s operations in a particular period, we retainownership of such products on a consigned basis and do not recognizeany revenue.

Fixed-fee arrangements.    At thebeginning of the contractual relationship, we prepare an estimate ofthe chemicals that will be used by the customer during the contractualperiod, which is usually twelve months. A fixed amount is automaticallyinvoiced to the customer on a periodic basis, typically monthly. Weretain ownership, on a consigned basis, of any inventory at thecustomer site that is not consumed in the customer’s operationsin a particular period. Revenue is recognized on a ratable basis overthe contractual period, which is generally consistent with thecustomer’s usage of the chemicals.

Under thesearrangements, as part of the sales cycle for our chemical programs, ourtechnical and sales representatives may visit our customers’facilities to develop and monitor the chemical programs. Typically,there is no contractual obligation for these visits, or any penalty fornot visiting the customer sites. During these visits, our employeesperform routine testing activities to ensure that our chemicalproducts’ functionalities are having the desired effect on thecustomers’ equipment (e.g.,  boilers, chillers and watertreatment plants). In the majority of instances, our customers performthe on-going application of the chemicals. At the same time, the salesrepresentatives investigate and determine whether the customers haveneeds for additional applications from Nalco. We consider our technicaland sales representatives’ activities in this regard to be anintegral and inherent part of our selling process and not a separatedeliverable for revenue recognition purposes.

Some of ourcustomers, however, look to us for our technical expertise only,without the purchase of chemicals/equipment. We offer specializedservices designed to assess, control, and reduce risk from water-bornepathogens such as legionella, and we provide other technical andanalytical services.

We invoice for our services usingvarious commercial arrangements, but the following arrangements are themost common:

Perform-and-billarrangements.    Revenue is recognized in the same period thatthe related service is performed, based on the agreed pricing, whichcan be either a price per hour or a fixed fee.

Fixed-fee arrangements.    At the beginning of thecontractual relationship, we estimate the saleable service that will beperformed during a given period, usually twelve months. A fixed amountis automatically invoiced to the customer on a periodic basis, whichmay be monthly, quarterly, or annually, either in arrears or in advanceof the services provided. Because an unspecified number of similar actsare performed within a fixed period of performance, revenue isrecognized ratably over the period of performance.

Timeand material arrangements.    The fee with the customer isstructured on a time and material basis, and revenue is recognized inthe same period that the work is completed.

In certainarrangements, which are usually reserved for our largest customers, weprovide some combination or all of the following deliverables: (1)chemicals, (2) equipment and (3) on-site technical expertise. In thesearrangements, we usually remain the owner of any equipment at thecustomer site. At the end of the contractual relationship, theequipment is either recovered or sold to the customer or a competitor.Additionally, our representatives may have a regular presence at acustomer’s facility, which is provided under a contract. Overtime, the representatives have gained a true expertise in theparticular production/water treatment process at the customer’sfacility, and are able to selectively apply our specific chemicalprograms given the customer environment (water quality, equipment type,etc.). The regular presence of the representative permits us to closelytrack the results of the program and to make modifications to theprogram as necessary for the highest efficiency.

35

----

Table of Contents

The following two types ofcommercial arrangements are the most commonly used for the sale ofmultiple deliverables:

Production-basedarrangements.    Our billing is based on a customer’sproduction-based formula (e.g.,  dollars per ton of paperproduced) within certain technical parameters. We use a combination ofour service chemicals, on-site technical expertise and equipment tosatisfy the customer requirement. The chemicals and equipment used andon-site technical expertise required are highly correlated with thecustomer’s production. Revenue is recognized monthly based onthe production-based formula.

Usage-basedarrangements.    For these arrangements, we invoice accordingto the consumption of chemicals by the customer. The agreed price bykilogram or pound of chemical consumed also includes the availabilityof on-site expertise and the use of equipment to satisfy the customerrequirement. Revenue is recognized monthly based on the usage-basedformula.

For all of our commercial arrangements, we alsorecord estimated reserves for anticipated non-collectible accounts andfor product returns and other credits at the time revenue isrecognized.

Impairment of Long-Lived Assets Other ThanIntangibles

We conduct periodic reviews for idleequipment and review business plans for possible impairmentimplications. PORTA-FEED stainless steel containers, utilized to shipchemicals, represent approximately 6.9% of our property, plantand equipment and are managed globally to optimize the delivery ofchemicals to customer and company sites around the world. Due to theirhigh mobility, there is a risk that PORTA-FEEDs could be damaged orlost in transit. We perform continuous cycle counts of our PORTA-FEEDsand when such counts are inconsistent with our tracking system, weinvestigate the discrepancy in order to locate the container. If thePORTA-FEED is not found, we write off the assetimmediately.

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

Goodwill and Other IntangibleAssets

Carrying values of goodwill, customerrelationships, trademarks, trade names, patents, developed technologyand other intangible assets are reviewed periodically for possibleimpairment using a discounted cash flow approach. The estimates andassumptions we use are consistent with the business plans and estimateswe use to manage operations and to make acquisition and divestituredecisions. The use of different assumptions could impact whether animpairment charge is required and, if so, the amount of suchimpairment. Future outcomes may also differ. If we fail to achieveestimated volume and pricing targets, experience unfavorable marketconditions or achieve results that differ from our estimates, thenrevenue and cost forecasts may not be achieved, and we may be requiredto recognize impairmentcharges.

Pensions

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

36

----

Table of Contents

The assets in the principaldomestic pension plan are diversified across equity and fixedincome investments. The investment portfolio has targetallocations of approximately 53% equity, 32%  fixedincome and 15% alternative investments such as hedge funds andprivate equity. Other assets such as real estate may be usedjudiciously to enhance portfolio returns anddiversification.

The expected long-term rate of return isestablished using historical market data for each asset class aswell as the target allocation. Historical markets are analyzed andlong-term historical relationships between equity and fixedincome investments are preserved consistent with the widely acceptedcapital market principle that assets with higher volatility willgenerate a greater return over the long run. Active managementis employed in most asset classes, which also contributes to the returnassumption. The total weighted-average return on each assetclass supports our long-term expected rate of returnassumption.

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

Other PostretirementBenefits

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

Income Taxes

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

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

The tax positions wetake are based on our interpretations of tax laws and regulations inthe applicable federal, state and international jurisdictions. Webelieve that our tax returns properly reflect the tax consequences ofour operations, and that our reserves for tax contingencies areappropriate and sufficient for the positions taken. However, thesepositions are subject to audit and review by the tax authorities, whichmay result in future taxes, interest and penalties. Because of theuncertainty of the final outcome of these examinations, we havereserved tax contingencies (including related interest) for positionsthat we consider the likelihood of being sustained to be less thanprobable. The tax reserves are reevaluated throughout the year, takinginto account new legislation, regulations, case law and auditresults.

37

----

Table of Contents

Environmental

Ourbusiness and operations are subject to extensive environmental laws andregulations governing, among other things, air emissions, wastewaterdischarges, the use and handling of hazardous substances, wastedisposal and the investigation and remediation of soil and groundwatercontamination. As with other companies engaged in similar manufacturingactivities and providing similar services, some risk of environmentalliability is inherent in our operations.

We have beennamed as a potentially responsible party, or 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 the waste disposal sites. Our financial contributionto remediate these sites is expected to be minor. There has been nosignificant financial impact on us up to the present, nor is itanticipated that there will be in the future, as a result of thesematters. We have made and will continue to make provisions for thesecosts if our liability becomes probable and when costs can bereasonably estimated.

We have also been named as adefendant in a number of lawsuits alleging personal injury due toexposure to hazardous substances, including multi-party lawsuitsalleging personal injury in connection with our products and services.While we do not believe that based upon present information that any ofthese suits will be material to us, there can be no assurance thatthese environmental matters could not have, either individually or inthe aggregate, a material adverse effect on our future financialcondition or results of operations.

Historically, ourexpenditures relating to environmental compliance and clean upactivities have not been significant. The environmental reservesrepresent our current estimate of our proportional clean up costs andare based upon negotiation and agreement with enforcement agencies, ourprevious experience with respect to clean up activities, detailedreview of known conditions, and information about other PRPs. Thereserves 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.

ExecutiveLevel Overview

In 2006, we met our key objectives onsales, earnings and cash generation.

Sales increased8.8% to $3.6  billion in 2006 from $3.3  billion inthe year ended December  31,  2005. On an organic basis,which excludes the impacts of changes in foreign currency translationrates and acquisitions and divestitures, sales increased 7.8%,including 3.6% real growth. We define real growth as organicgrowth less price increases that are passed on to simply recover highercosts. Foreign currency impacts added 1.0% to revenue growth in2006.

Net earnings increased 127.6% to $88.3million. Adjusted EBITDA of $680.1  million was up 12.8%from $603.0  million generated in 2005. We generated Free CashFlow of $183.8  million in 2006, a solid improvement over the$121.5  million reported for 2005. Net cash provided by operatingactivities is reconciled to Free Cash Flow asfollows:

|                                                |  |  |                     |   |       |      |  |  |  |   |       |   |
|------------------------------------------------|--|--|---------------------|---|-------|------|--|--|--|---|-------|---|
|                                           |  |  | YearendedDecember31 |
| (dollarsinmillions)                            |  |  | 2006                |   |       | 2005 |
| Netcash provided by operatingactivities        |  |  |                     | $ | 285.1 |      |  |  |  | $ | 201.8 |   |
| Minorityinterests                              |  |  |                     |   | (7.9  | )    |  |  |  |   | (5.7  | ) |
| Additions toproperty, plant, and equipment,net |  |  |                     |   | (93.4 | )    |  |  |  |   | (74.6 | ) |
| Freecashflow                                   |  |  |                     | $ | 183.8 |      |  |  |  | $ | 121.5 |   |
|                                                |

38

----

Table of Contents

The business segments performedquite well in 2006, with Energy Services having an excellent year. Forthe year, Energy Services organic sales growth was 15.7%, withreal growth contributing about two-thirds of that improvement. TheUpstream Adomite business grew better than 25% organically, andboth our Upstream Oil Field and Downstream businesses also grew atdouble-digit rates.

Growth in Energy Services has beendriven by investments in innovative products and services as well as inhiring and training people ahead of expansion of the business. We did asignificant amount of hiring and training at the beginning of the yearto ensure we could handle the growth we saw coming. This enabled us tomaintain business strength through the year. However, the pace of ourgrowth was even better than expected. In 2007, we are again makingsizable investments in hiring and training new sales and serviceengineers in select geographies.

The Industrial andInstitutional Services (I&IS) business also had a good year in2006, delivering 6.4%  organic growth that included verygood price gains. In North America, we performed particularly well inthe Power, Chemicals, Food and Beverage, and Mining markets, withstrong growth also taking place geographically in Latin America,Eastern Europe, the Middle East, and Africa. Process service businessgroups that produce personal care ingredients and colloidalmicro-particle products used in investment casting, semiconductors, andcatalyst systems also performed well. In I&IS as a whole, we arelooking forward to expanding our pace of real growth as we are able tofocus our sales engineers on expansion opportunities as we move through2007.

Our 3D TRASAR cooling water technology continues tobe a key advantage. Installations during 2006 surpassed the numberduring the prior 18 months and we now have more than 3,500 unitsinstalled. We have the greatest rate of success with our largestcustomers, but have significant room to grow our business withmid-sized and small customers. Only about 20% of ourapplications have come from competitively held accounts, while morethan 80% of the water treatment business is served bycompetitors. As we improve our penetration with existing customers— who are our first priority with any new program — wecan shift our attention to competitively held accounts. We believe wewill continue to reap the benefits of improved margins and competitiveadvantage for several more years with 3D TRASAR, and have yet to seeany real competitive response. In 2007, we intend to focus on fastermarket penetration with 3D TRASAR in Europe, Latin America, andAsia/Pacific.

One of the key levers we are pulling in2007 is a change to profit-based compensation for the remainder of oursales force. This should also help improve our speed-to-market with 3DTRASAR. Our latest technology always offers greater net benefits to ourcustomers, as well as better profitability for Nalco. So, aprofit-oriented sales engineer will be more apt to learn and sell ournewest technology than a revenue-compensated salesengineer.

Our Paper Services business had a challengingyear, with sales up 2.2% organically, but ended with a strongfourth quarter and full innovation pipeline that provide reason foroptimism. Cost increases have been the greatest on products used by ourpaper customers, including increases that occurred into the fourthquarter. Because of this, and market conditions, we have more work todo on price increases in this business. Innovation will play a key rolein helping to improve sales and margins in our Paper business, andseveral new offerings are being met with good customerreception.

From the standpoint of Paper sales growth, weperformed best in Latin America. We grew a bit more slowly inAsia/Pacific than in recent years, as we absorbed and stabilized thenew paper machine business in China that we captured in 2005. Highergrowth rates are expected once again in Paper in Asia/Pacific, asevidenced by new business run rates as we exited 2006.

Thenew leadership team brought to this business mid-year is focused onimproving our speed-to-market with product innovation. We have animpressive and growing suite of value-added technologies to bring toour Paper customers, but had been slow in the past in thecommercialization process. We are particularly pleased with initialprogress in a new EXTRA White brightness enhancing technology and ourPARETO wet-end optimization technology, which can save customerssignificant amounts of energy and water.

On a totalCompany basis, price increases were greater than the new costs incurredin 2006, making up for 2004 and 2005, during which our priceachievement trailed the purchased material and freight 

39

----

Table of Contents

cost increases we absorbed. Other costincreases, for the carrying costs of inventory and receivables, and forhigher service and other operating expenses, still need to be coveredwith additional pricing. The pricing actions that are planned and beingexecuted in 2007 will address these remaining issues.

Ourprincipal business concern continues to be Europe. The challenges facedthere are driven by the fact that we have continued to operate highlyfragmented European entities since our integration in 1999 with Calgonand the collection of European water treatment companies then owned bySuez that were called Aquazur. The integration of these operations wasnever fully completed, including actions such as establishing sharedservice centers for finance, customer service and other activities. Weremain in the process of making these changes, and can see progressbeing made each day. We look forward to serving our customers with amuch better platform, and our business plans reflect expected steadyimprovement in our financial results in Europe as we progress in2007.

Revenue growth in 2006 played an important role inour substantial earnings improvements, but net earnings also benefitedfrom several other notableaccomplishments:

|  |              |                                                                             |
|--|--------------|-----------------------------------------------------------------------------|
|  | •  | Real growth of3.6% was up from 2005’s hurricane and cost plagued2.2%; |

|  |              |                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Margin restoration effortsmade good progress. Our operating margin was 12.0% for 2006,compared to 2005’s 10.4%, with the fourth quarter sharplyhigher; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                 |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Our effective tax rate hascontinued to improve. Our effective rate for 2006 was 42.0%,down from 55.0% in 2005. We made important improvements to ourforeign ownership structures and debt placements. However, the adoptionof Financial Accounting Standards Board Interpretation No. 48 effectiveJanuary  1,  2007 brings the potential for greaterquarter-to-quarter tax rate volatility; and |

|  |              |                                                                                                                                                                                                                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Cost savings of $71  million for theyear fell just short of our annual target of $75  million. Delaysin two large work process improvement projects prevented us fromachieving our target. Our actual result drove our average annualsavings over the past three years down to $83million. |

Cost savings more than offset additionalcompensation (excluding the impact of restoring our variablecompensation program), benefits and investments we made during the yearto expand research and development and our selling and service teams.The strength of the Energy Services business was a key part of ourplan, so we invested in hiring and training new sales engineers,particularly in the first quarter. Those investments, which exceededthe levels we initially planned in the year, were rewarded withcontinued strong momentum through the year and a solid growth platformfor 2007.

Following the twin difficulties in 2005 ofunusually significant raw material cost increases and the U.S.Gulf Coast hurricanes, our 2006 results represented a return to solid,stable growth. This success was expected, and it was also important.While 2005 proved the strength of our business model, as we grewAdjusted EBITDA 3.0% despite difficult obstacles, wedemonstrated in 2006 that we could quickly return to our long-termimprovement targets.

2007 Outlook

Realgrowth in sales is expected to average about 4% in 2007, upmodestly from the 3.6% achieved in 2006. Price is expected toplay a more modest role in our sales gains in 2007, bringing our totalorganic growth to more than 5%. This comes after two years inwhich rapid increases in purchased materials and freight made costrecovery through pricing a critical part of our objectives.

Adjusted EBITDA should grow faster than revenues, with ourgrowth target set at 10%. Year over year price increases willoutpace costs as we catch up on some of the ancillary costs we haveabsorbed in the past, such as the indirect costs that come from rapidraw material cost moves — including the carrying costs ofinventory.

In order to hit our aggressive earningsobjectives, we again plan to gain $75  million in cost savingsduring 2007, with a modest bottom-line benefit after subtracting higheremployee compensation and benefit costs and investments in expandingselling, service and research and development activities.

40

----

Table of Contents

Free Cash Flow is targeted atbetter than 30% improvement, aided by earnings growth, strongimprovements in operating working capital and lower tax paymentsoutside the United States, partially offset by increased capitalexpenditures and non-operating working capital requirements for itemssuch as variable incentive payments that will be paid in the firstquarter of 2007.

Several key components in derivingAdjusted EBITDA and Free Cash Flow in 2007 are expected to be asfollows:

|  |              |                                                   |
|--|--------------|---------------------------------------------------|
|  | •  | Amortization expected atapproximately $60million; |

|  |              |                                            |
|--|--------------|--------------------------------------------|
|  | •  | Depreciation should be about$130  million; |

|  |              |                                                                                                             |
|--|--------------|-------------------------------------------------------------------------------------------------------------|
|  | •  | Cash interest istargeted at approximately $220  million, out of total interestexpense of about $265million; |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | Cash taxes are projected at$100  million; |

|  |              |                                                                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Capitalexpenditures are expected to be about $120  million. Normally, wewould expect capital expenditures to run about $100  million. Thetemporary elevation to $120  million reflects projects we hadplanned to complete in 2005 and 2006, but that were delayed due to landtitle, permit and other issues; |

|  |              |                                                     |
|--|--------------|-----------------------------------------------------|
|  | •  | Pensionfunding should be $20  million aboveexpense; |

|  |              |                                                                                |
|--|--------------|--------------------------------------------------------------------------------|
|  | •  | Business process optimizationcash costs are targeted at about $5  million; and |

|  |              |                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Net working capital is expected to be flat,as operating working capital gains are offset by uses of cash innon-operating working capital. |

Results of Operations

Year Ended December  31,  2006 Compared to the YearEnded December  31,2005

Consolidated

Netsales for the year ended December  31,  2006 were$3,602.6  million, an 8.8% increase from the$3,312.4  million reported for the year ended December31,  2005. On an organic basis, which excludes the impacts ofchanges in foreign currency translation rates and acquisitions anddivestitures, net sales were up 7.8%. Of this improvement,4.2% was attributed to price increase, while the remaining3.6%  was driven by real growth.

Grossprofit, defined as the difference between net sales and cost ofproduct sold, of $1,626.1  million for the year endedDecember  31,  2006 increased by $145.9  million, or9.9%, over the $1,480.2  million for the year endedDecember  31,  2005. On an organic basis, gross profitincreased by 8.8%. Higher sales volume and the impact of higherselling prices, partly offset by the effect of increased costs of rawand other purchased materials, contributed to this change. Theimprovement was also partly attributable to an inventory write-off of$9.0  million during the year ended December  31,2005. In 2006, we recognized partial business interruption insurancerecoveries of $2.5  million related to last year’shurricanes. Gross profit margin for the year ended December31,  2006 was 45.1% compared to 44.7% for theyear-ago period.

Selling, administrative, and researchexpenses for the year ended December  31,  2006 of$1,113.5  million increased $84.8  million, or 8.2%,from $1,028.7  million for the year ended December31,  2005. On an organic basis, selling, administrative, andresearch expenses increased 7.4%. Slightly more than half ofthis increase was attributable to selling expense, which was primarilydue to higher salaries, commission expenses, employee benefits, baddebts, and outside services. Administrative expenses increased from theyear-ago period due to higher employee incentive plan expenses,employee benefits, and outside consulting related to our work processredesign initiatives and the rationalization of our legal entitystructure.

Amortization of intangible assets was$70.1  million and $81.6  million for the year endedDecember  31,  2006 and 2005, respectively. The decreasewas attributable to lower amortization of customer relationships, whichare amortized using an accelerated method.

41

----

Table of Contents

Business optimizationexpenses, representing mostly employee severance and related costsassociated with the continuing redesign and optimization of businessand work processes, were $9.5  million for the year endedDecember  31,  2006. Business optimization expenses were$25.6  million for the year ended December  31,2005, which included a $14.2  million charge to support a plan tode-layer our management structure and reduce costs in lower-performingbusiness units.

Other income (expense), netunfavorably changed by $8.3  million from the net other income of$4.0  million for the year ended December  31,  2005.An unfavorable change in foreign exchange gains and losses of$8.8  million due mostly to the weakening of the U.S. dollarversus the euro during 2006 accounted for most of thevariation.

Net interest expense, defined as thecombination of interest income and interest expense, of $262.7million for the year ended December  31,  2006 increased by$13.2  million from the $249.5  million reported for theyear ended December  31,  2005. The impact of higherinterest rates on variable rate borrowings more than offset the impactof a lower average debt level compared to the year-agoperiod.

The effective tax rate for the year endedDecember  31,  2006 was 42.0% compared to aneffective tax rate for the year ended December  31,  2005of 55.0%. The reduction in the effective tax rate is primarilycaused by the growth in pretax earnings and the restructuring of ourforeign operations to facilitate the tax-efficient repatriation of cashto the U.S.

Minority interest expense was$2.2  million higher than the $5.7  million for the yearended December  31,  2005, reflecting improved results forthe Company’s non-wholly owned subsidiaries in Spain, SaudiArabia, and Japan.

SegmentReporting

Net sales by reportablesegment for the years ended December  31,  2006 and 2005may be compared asfollows:

|                                       |  |  |                      |   |         |        |  |  |                                               |   |         |                     |  |  |                           |  |      |         |  |  |        |  |  |  |  |         |  |  |  |  |  |      |   |
|---------------------------------------|--|--|----------------------|---|---------|--------|--|--|-----------------------------------------------|---|---------|---------------------|--|--|---------------------------|--|------|---------|--|--|--------|--|--|--|--|---------|--|--|--|--|--|------|---|
|                                  |  |  | YearEnded December31 |   |         |   |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsinmillions)                   |  |  | 2006                 |   |         | 2005   |  |  | %Change                                       |   |         | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic |
| Industrial &InstitutionalServices |  |  |                      | $ | 1,593.1 |        |  |  |                                               | $ | 1,482.1 |                     |  |  |                           |  | 7.5  | %       |  |  | 1.1%   |  |  |  |  | — |  |  |  |  |  | 6.4  | % |
| EnergyServices                        |  |  |                      |   | 1,052.2 |        |  |  |                                               |   | 899.7   |                     |  |  |                           |  | 17.0 | %       |  |  | 1.3%   |  |  |  |  | — |  |  |  |  |  | 15.7 | % |
| PaperServices                         |  |  |                      |   | 721.6   |        |  |  |                                               |   | 698.1   |                     |  |  |                           |  | 3.4  | %       |  |  | 1.2%   |  |  |  |  | — |  |  |  |  |  | 2.2  | % |
| Other                                 |  |  |                      |   | 235.7   |        |  |  |                                               |   | 232.5   |                     |  |  |                           |  | 1.4  | %       |  |  | (1.6)% |  |  |  |  | — |  |  |  |  |  | 3.0  | % |
| Netsales                              |  |  |                      | $ | 3,602.6 |        |  |  |                                               | $ | 3,312.4 |                     |  |  |                           |  | 8.8  | %       |  |  | 1.0%   |  |  |  |  | — |  |  |  |  |  | 7.8  | % |
|                                       |

TheIndustrial and Institutional Services division posted sales of$1,593.1  million for the year ended December  31,2006, an increase of 7.5% over the $1,482.1  million forthe year-ago period. Price increases accounted for almost three-fourthsof the 6.4% organic increase in sales. Solid improvements weremade in the Power, Chemical and Food and Beverage markets in NorthAmerica, and strong growth was reported in Latin America, the emergingmarkets in Eastern Europe, the Middle East and Africa, and the AsianMining market. Business units within the division that produce personalcare ingredients and colloidal micro-particle products also postedexceptional sales gains.

The Energy Services divisionreported sales of $1,052.2  million for the year endedDecember  31,  2006, a 17.0% gain over the$899.7  million for the year ended December  31,2005. Sales improved by 15.7%  on an organic basis, withmore than two-thirds of this improvement attributed to real growth. Allthree business units within the division — Adomite, Downstream,and OFC — reported double-digit organicimprovements.

The Paper Services division posted sales of$721.6  million for the year ended December  31,2006, a 3.4% increase over the $698.1  million reportedfor the year-ago period, with 2.2% attributed to organic growth.The North American region reported positive organic growth as a resultof price increases, while organic improvements in Latin America andAsia were primarily the result of real growth. These organic growthgains were partly offset by a decline in the Europeanregion.

42

----

Table of Contents

The 3.0% organic growth insales reported by the ‘‘Other’’ segment wasattributable to price gains made by our alternate channels business andKatayama Nalco joint venture, and real growth by our subsidiary inIndia.

Direct contribution is defined as thedifference between net sales and operating costs, including cost ofproduct sold, selling and service expenses, marketing expenses,research expenses and capital charges. Direct contribution isreconciled to consolidated earnings (loss) before income taxes andminority interests in Note 22 of our consolidated financial statementsincluded in Item 8 of this Annual Report. Direct contribution byreportable segment for the years ended December  31,  2006and 2005 may be compared asfollows:

|                                       |  |  |                      |   |       |        |  |  |                                               |   |       |                     |  |  |                           |  |      |         |  |  |        |  |  |  |  |         |  |  |  |  |  |      |    |
|---------------------------------------|--|--|----------------------|---|-------|--------|--|--|-----------------------------------------------|---|-------|---------------------|--|--|---------------------------|--|------|---------|--|--|--------|--|--|--|--|---------|--|--|--|--|--|------|----|
|                                  |  |  | YearEnded December31 |   |       |   |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsinmillions)                   |  |  | 2006                 |   |       | 2005   |  |  | %Change                                       |   |       | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic |
| Industrial &InstitutionalServices |  |  |                      | $ | 360.9 |        |  |  |                                               | $ | 322.5 |                     |  |  |                           |  | 11.9 | %       |  |  | 1.2%   |  |  |  |  | — |  |  |  |  |  | 10.7 | %  |
| EnergyServices                        |  |  |                      |   | 224.1 |        |  |  |                                               |   | 173.0 |                     |  |  |                           |  | 29.5 | %       |  |  | 1.6%   |  |  |  |  | — |  |  |  |  |  | 27.9 | %  |
| PaperServices                         |  |  |                      |   | 113.8 |        |  |  |                                               |   | 118.0 |                     |  |  |                           |  | (3.6 | )%      |  |  | 1.4%   |  |  |  |  | — |  |  |  |  |  | (5.0 | )% |
| Other                                 |  |  |                      |   | (55.2 | )      |  |  |                                               |   | (65.9 | )                   |  |  |                           |  | 16.2 | %       |  |  | (2.0)% |  |  |  |  | — |  |  |  |  |  | 18.2 | %  |
|                                       |

Directcontribution of the Industrial and Institutional Services division was$360.9  million for the year ended December  31,2006, an increase of 11.9% over the $322.5  millionreported for the year ended December  31,  2005.Organically, direct contribution improved 10.7%. The Industrialand Institutional Services division’s success in implementingprice increases contributed to most of the improvement.

The Energy Services division reported direct contribution of$224.1  million for the year ended December  31,2006, a 29.5% increase over the $173.0  million reportedfor 2005. On an organic basis, direct contribution increased27.9%. Higher sales volume and the impact of price increasesaccounted for most of the improvement. Partial business interruptioninsurance recoveries of $2.5  million related to lastyear’s hurricanes recognized in 2006 also contributed to theincrease. Operating expenses were up 7.9% organically from 2005mainly as a result of higher salaries, commissions and benefitexpenses.

The Paper Services division reported directcontribution of $113.8  million for the year endedDecember  31,  2006, a 3.6% decrease from the$118.0  million reported for 2005. Organically, directcontribution was down 5.0%, as costs of raw and other purchasedmaterials continued to exceed price increases. Due to tight controls onspending, operating expenses were flat on an organicbasis.

The direct contribution loss of $55.2million reported in ‘‘Other’’ for the yearended December  31,  2006, represented an improvement of$10.7  million from the $65.9  million direct contributionloss reported for the year ended December  31,  2005.Significant contributors to the year-over-year change include supplychain variances that benefited 2006 results, unfavorable supply chainvariances in 2005 due to the Gulf hurricanes, and favorable adjustmentsin 2005 for commissions and insurance/legal claims that did not recurin 2006.

Year Ended December  31,  2005 Comparedto the Year Ended December  31,2004

Consolidated

Netsales for the year ended December  31,  2005 were$3,312.4  million, a 9.2% increase from the$3,033.3  million reported for the year ended December31,  2004. On an organic basis, net sales were up 7.2%. Ofthis improvement, 5.0% was attributed to price increases, whilethe remaining 2.2% was driven by favorable sales growth broadlyspread across our customer base.

Grossprofit, defined as the difference between net sales andcost of product sold, of $1,480.2  million for the year endedDecember  31,  2005 increased by $25.7  million, or1.8%, over the $1,454.5  million reported for the yearended December  31,  2004. On an organic basis andexcluding the impact of a $14.6  million charge to cost ofproduct sold during the year ended December  31,  2004resulting from the sale of inventory that had been revalued at sellingprice less costs to sell in purchase accounting at 

43

----

Table of Contents

the date of the Acquisition, gross profitdecreased by $16.0  million. This was primarily attributable tohigher costs of raw and other purchased materials, totalingapproximately $166.0  million in 2005, that grew at a faster pacethan the impact of increases in the selling prices of our products ofnearly $150.0  million. Gross profit margin for the year endedDecember  31,  2005 was 44.7% compared to48.0% for the year ended December  31,  2004. Grossprofit margin for the year ended December  31, 2004 was reducedapproximately 48 basis points as a result of the aforementioned$14.6  million charge resulting from purchaseaccounting.

Selling, administrative, and researchexpenses for the year ended December  31,  2005 of$1,028.7  million decreased by $10.1  million, or1.0%, from $1,038.8  million for the year endedDecember  31,  2004. On an organic basis, selling,administrative, and research expenses decreased by $29.3million, or 2.8%,  reflecting significantly lowerincentive plan expenses. This decrease was offset by the effect ofchanges in foreign currency translation rates and the incrementalimpact of expenses of our Japanese joint venture, Katayama Nalco, forthe first five months of 2005. The joint venture was formed onJune  1,  2004.

Amortization of intangibleassets was $81.6  million and $96.3  million for theyear ended December  31, 2005 and 2004, respectively. Thedecrease was attributable to lower amortization of customerrelationships, which are amortized using an acceleratedmethod.

In-process research and development was aonetime charge of $122.3  million recorded during the year endedDecember  31,  2004, as a result of purchase accountingrelated to the Acquisition. The value of purchased IPR&D wascomprised of five ongoing development projects at the date of theAcquisition. Purchased IPR&D was derived by assigning values tothose projects identified by management as having economic value, butthat had not yet reached technological feasibility and had noalternative future use.

Business optimizationexpenses, representing mostly employee severance and relatedcosts, were $25.6  million for the year ended December31,  2005, and included a $14.2  million charge to supporta plan to de-layer our management structure and reduce costs inlower-performing business units.

Sponsor monitoringfees of $11.2  million were recorded during the year endedDecember  31,  2004, which covered monitoring, advisory andconsulting services provided by affiliates of the Sponsors in relationto our affairs, including debt and equity offerings, relationships withbankers and lenders, and corporate strategy.

Sponsormonitoring agreement termination fee was a one-time charge of$35.0  million recorded during the year ended December31,  2004. In connection with the public offering of our commonstock in November  2004, the Monitoring Fee Agreement that hadbeen entered into with affiliates of the Sponsors in November2003 was amended and restated, pursuant to which we terminated themonitoring services provided by the Sponsors’affiliates.

Other income (expense), net was a netincome of $4.0  million and a net expense of $10.8  millionfor the year ended December  31,  2005 and 2004,respectively. This $14.8  million favorable variation is dueprimarily to a $13.7  million loss in 2004, resulting from theearly repayment of senior discount notes with an accreted value of$162.3  million, using proceeds from the initial public offeringof common stock. Also contributing was a favorable change in foreigncurrency transaction gains and losses of $6.7  million. This waspartly offset by an increase in losses from asset write-offs anddisposals of $4.2  million and a $1.6  million decrease inequity in earnings of unconsolidated subsidiaries.

Netinterest expense, defined as the combination of interest incomeand interest expense, of $249.5  million for the year endedDecember  31,  2005 increased by $8.5  million fromthe $241.0  million reported for the year ended December31,  2004. The impact of higher interest rates on variable rateborrowings in 2005 more than offset the impact of a lower average debtlevel compared to 2004.

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

Nalco FinanceHoldings LLC is treated as a pass-through entity for U.S. income taxpurposes; therefore, the taxable income and expense of the entity flowto its owners. Because Nalco Finance 

44

----

Table of Contents

Holdings LLC has taxable losses, the passthrough results in an increase to the effective tax rates for us.During 2005 and 2004, approximately $29.4  million and$51.8  million of expense, or $10.3  million and$18.1  million of tax benefit, respectively, flowed to theowners.

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

The effectivetax rate in 2005 is lower than 2004 primarily because of the reductionof interest expense that flowed to the owners and our increased pre-taxearnings. In addition, the tax cost related to the prior yearrestructuring does not repeat in 2005. The 2005 taxable repatriation offoreign earnings was also reduced, in part, because of therestructuring.

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

TheAmerican Jobs Creation Act of 2004 (the Jobs Creation Act) created aonetime incentive for American companies to repatriate earnings fromtheir foreign subsidiaries. During 2005, we completed a comparison ofthe benefits available to us under the Jobs Creation Act to those underother strategies for global cash and debt management, and we comparedthe benefits of implementing the incentive to the costs required toimplement it. Based upon this analysis, we decided not to structure ourearnings repatriation under the provisions of the Jobs CreationAct.

Minority interest expense was $0.1million lower than the $5.8  million for the year endedDecember  31,  2004. Higher earnings were reported by theCompany’s non-wholly owned subsidiaries in India and Japan;however, these were more than offset by lower earnings of ournon-wholly owned subsidiaries in Saudi Arabia, Malaysia and Spain.

Segment Reporting

Net salesby reportable segment for the years ended December  31,2005 and 2004 may be compared asfollows:

|                                       |  |  |                      |   |         |        |  |  |                                               |   |         |                      |  |  |                           |  |      |         |  |  |      |  |  |  |  |      |    |  |  |  |  |      |   |
|---------------------------------------|--|--|----------------------|---|---------|--------|--|--|-----------------------------------------------|---|---------|----------------------|--|--|---------------------------|--|------|---------|--|--|------|--|--|--|--|------|----|--|--|--|--|------|---|
|                                  |  |  | YearEnded December31 |   |         |   |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsinmillions)                   |  |  | 2005                 |   |         | 2004   |  |  | %Change                                       |   |         | Currency Translation |  |  | Acquisitions/Divestitures |  |      | Organic |
| Industrial &InstitutionalServices |  |  |                      | $ | 1,482.1 |        |  |  |                                               | $ | 1,389.1 |                      |  |  |                           |  | 6.7  | %       |  |  | 1.2% |  |  |  |  | (0.1 | )% |  |  |  |  | 5.6  | % |
| EnergyServices                        |  |  |                      |   | 899.7   |        |  |  |                                               |   | 806.7   |                      |  |  |                           |  | 11.5 | %       |  |  | 1.3% |  |  |  |  | (0.7 | )% |  |  |  |  | 10.9 | % |
| PaperServices                         |  |  |                      |   | 698.1   |        |  |  |                                               |   | 662.9   |                      |  |  |                           |  | 5.3  | %       |  |  | 1.4% |  |  |  |  | (0.5 | )% |  |  |  |  | 4.4  | % |
| Other                                 |  |  |                      |   | 232.5   |        |  |  |                                               |   | 174.6   |                      |  |  |                           |  | 33.2 | %       |  |  | 0.7% |  |  |  |  | 19.5 | %  |  |  |  |  | 13.0 | % |
| Netsales                              |  |  |                      | $ | 3,312.4 |        |  |  |                                               | $ | 3,033.3 |                      |  |  |                           |  | 9.2  | %       |  |  | 1.3% |  |  |  |  | 0.7  | %  |  |  |  |  | 7.2  | % |
|                                       |

TheIndustrial and Institutional Services division reported organic growthof 5.6% in 2005, the majority of which was attributable to priceincreases, with solid gains, exclusive of price increases, posted byour water treatment business in the Latin American and Pacific regions,as well as our marine and Pacific region mining businesses. These gainswere offset by sales declines, exclusive of price increases, in NorthAmerica and, more notably, Europe. Difficulties in adapting workprocesses following our SAP system conversion in Europe onJanuary  1,  2005 and the generally slower economy

45

----

Table of Contents

in our largest western European markets wereamong the causes of the sales decline in Europe. Higher sales duringthe three months ended December  31,  2004 was anothercontributing factor, as European customers purchased in advance toavoid risking any potential complications from the systemconversion.

Despite lost sales in the Gulf of Mexico dueto unusually disruptive hurricanes during 2005, the Energy Servicesdivision reported a strong organic improvement in sales of 10.9%in 2005, more than half of which represented real growth. Strongperformances were made by the Oil Field business, Downstream refining,and our petrochemical business.

Solid growth in LatinAmerica, rapid growth in the Pacific region, and a more modestimprovement in North America contributed to the 4.4% organicgrowth in Paper Services division sales in 2005. These improvementswere partly offset by lower Paper Services sales in Europe, resultingfrom labor strikes faced by our Finnish customers earlier in the yearand the aforementioned factors that affected Industrial andInstitutional Services sales in the region.

Most of theorganic improvement in ‘‘Other’’ sales in2005 was attributable to alternate channel sales, our subsidiarycompany in India, and our Japanese joint venture, Katayama Nalco. Theincrease in ‘‘Other’’ sales attributable toacquisitions/divestitures represents the incremental impact of salesfor the first five months of 2005 by Katayama Nalco, which was formedwith Katayama Chemical Inc. on June  1,2004.

Direct contribution by reportable segmentfor the years ended December  31,  2005 and 2004 may becompared asfollows:

|                                       |  |  |                      |   |       |        |  |  |                                               |   |       |                      |  |  |                           |  |       |         |  |  |  |  |      |    |  |  |  |  |         |    |  |  |  |  |       |    |
|---------------------------------------|--|--|----------------------|---|-------|--------|--|--|-----------------------------------------------|---|-------|----------------------|--|--|---------------------------|--|-------|---------|--|--|--|--|------|----|--|--|--|--|---------|----|--|--|--|--|-------|----|
|                                  |  |  | YearEnded December31 |   |       |   |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsinmillions)                   |  |  | 2005                 |   |       | 2004   |  |  | %Change                                       |   |       | Currency Translation |  |  | Acquisitions/Divestitures |  |       | Organic |
| Industrial &InstitutionalServices |  |  |                      | $ | 322.5 |        |  |  |                                               | $ | 314.5 |                      |  |  |                           |  | 2.5   | %       |  |  |  |  | 1.1  | %  |  |  |  |  | — |    |  |  |  |  | 1.4   | %  |
| EnergyServices                        |  |  |                      |   | 173.0 |        |  |  |                                               |   | 156.5 |                      |  |  |                           |  | 10.5  | %       |  |  |  |  | 1.6  | %  |  |  |  |  | (1.2    | )% |  |  |  |  | 10.1  | %  |
| PaperServices                         |  |  |                      |   | 118.0 |        |  |  |                                               |   | 138.9 |                      |  |  |                           |  | (15.0 | )%      |  |  |  |  | 1.6  | %  |  |  |  |  | (1.0    | )% |  |  |  |  | (15.6 | )% |
| Other                                 |  |  |                      |   | (65.9 | )      |  |  |                                               |   | (76.4 | )                    |  |  |                           |  | 13.7  | %       |  |  |  |  | (0.7 | )% |  |  |  |  | 6.4     | %  |  |  |  |  | 8.0   | %  |
|                                       |

TheIndustrial and Institutional Services division reported directcontribution of $322.5  million for the year endedDecember  31,  2005, an increase of 2.5% over the$314.5  million reported for the year ended December31,  2004. Organically, direct contribution improved 1.4%.Although the Industrial and Institutional Services division did well incapturing price increases during 2005, our sales force was distractedfrom focusing on real growth. As a result, most of the organic growthin sales was offset by higher raw material and freightcosts.

The Energy Services division reported directcontribution of $173.0  million for the year endedDecember  31,  2005, a 10.5% increase over the$156.5  million reported for 2004. On an organic basis, directcontribution increased 10.1%. Higher sales volume and the impactof price increases accounted for most of the improvement, partly offsetby increased raw material and freight costs.

The PaperServices division reported direct contribution of $118.0  millionfor the year ended December  31, 2005, a 15.0% decreasefrom the $138.9  million reported for 2004. Organically, directcontribution was down 15.6%, as a competitive environment thatwas slower to respond to the rising raw and other purchased materialcosts challenged our ability to obtain priceincreases.

The direct contribution loss of $65.9million reported in ‘‘Other’’ for the yearended December  31, 2005, represented a decrease of $10.5million from the $76.4  million direct contribution loss reportedfor 2004. Organically, direct contribution improved 8.0%. Thisreflected the favorable impact of a $14.6  million charge to costof product sold in 2004 resulting from the sale of inventory that hadbeen revalued at selling price less costs to sell in purchaseaccounting at the date of the Acquisition. This was partly offset byunfavorable supply chain variances attributable to the Gulf hurricanes.The change in ‘‘Other’’ direct contributionattributable to acquisitions/divestitures represents the incrementalimpact of Katayama Nalco for the first five months of 2005.

46

----

Table of Contents

Liquidity and Capital Resources

Operating activities.    Historically, our mainsource of liquidity has been our solid cash flow generated by operatingactivities. For the year ended December  31,  2006, cashprovided by operating activities was $285.1  million, an increaseof $83.3  million from 2005. The improvement was mainly theresult of the increase in net earnings and not making any payments in2006 for 2005 variable incentive plans. Partly offsetting theseimprovements were higher contributions to the principal U.S. pensionplan and higher cash requirements for inventories and accountspayable.

For the year ended December  31,2005, cash provided by operating activities was $201.8  million,a $35.3  million decrease from the $237.1  million in 2004.Year-over-year, higher working capital requirements more than offsetthe increase in cash generated by earnings.

Investingactivities.    Cash used for investing activities was$99.9  million for the year ended December  31, 2006, mostof which was attributable to net property additions of $93.4million. Of the remainder, $6.4  million relates to net cash usedto increase the investment in our subsidiary in India.

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

Financing activities.    Net cash used forfinancing activities totaled $179.6  million and $125.9million for the years ended December  31,  2006 and 2005,respectively, which was mostly attributable to a net decrease inborrowings. In 2006, we prepaid the remaining balance of $31.9million on the U.S. dollar portion of our term loan A debt, made ascheduled payment on our euro-denominated term loan A debt of$3.2  million, and prepaid $170.0  million of our term loanB borrowings.

Most of the $125.9  million of cashused for financing activities during the year ended December31,  2005 was attributable to prepayments of our term loan A debttotaling $99.0  million and a $22.0  million reduction inborrowings from our receivables facility.

Net cash usedfor financing activities totaled $231.8  million during the yearended December  31,  2004. Capital distributions, net ofcapital contributions, were $260.7  million. Proceeds fromadditional borrowings, net of debt repayments and a redemption premiumresulting from the early repayment of senior discount notes, were$31.0  million.

In January  2004, we used thenet proceeds from the issuance of senior discount notes to make areturn of capital distribution of $446.9  million to our parent,Nalco Investment Holdings LLC, which, in turn, made a distribution tothe holders of its membership interests.

Also during theyear ended December  31,  2004, we received additionalcapital contributions of $186.2  million from our direct parentcompany. Of this amount, $176.9  million resulted from theNovember  2004 public stock offering made by our parent company,Nalco Holding Company. The remaining $9.3  million representedcapital contributions received by our ultimate parent company at thetime, Nalco LLC, and was comprised of an additional equity investmentof $1.2  million by Dr. William H. Joyce, our Chairman and ChiefExecutive Officer, and $8.1  million in proceeds from the sale ofequity interests to certain officers and key employees under the NalcoLLC 2004 Unit Plan.

Since the Transactions, we have beenhighly leveraged. Our liquidity requirements are significant, primarilydue to debt service requirements as well as research and developmentand capital investment. Our primary source of liquidity will continueto be cash flow generated from operations, but we also haveavailability under a $250  million revolving credit facility anda $100  million receivables facility, in each case subject tocertain 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.    Ourrevolving credit facility is part of our senior credit facilities thatwere entered into on November  4,  2003. Our senior creditfacilities initially included a $300  million term 

47

----

Table of Contents

loan A facility (including an€88.0  million tranche) maturing on November4,  2009 and a $1,300  million term loan B facilitymaturing on November  4,  2010. Borrowings under the seniorcredit facilities bear interest at a floating base rate plus anapplicable margin. The applicable margin for borrowings under therevolving credit facility and the term loan A facility is 1.25%with respect to base rate borrowings and 2.25% with respect toLIBOR or Eurocurrency borrowings and may be reduced subject to ourattaining certain leverage ratios. The applicable margin for borrowingsunder the term loan B facility is 0.75% with respect to baserate borrowings and 1.75% with respect to LIBOR or Eurocurrencyborrowings. The applicable margin for borrowings under the term loan Bfacility is not subject to adjustment.

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

The term loan A facility wasscheduled to amortize each year in quarterly amounts at a rate of5%  per annum in year one, 10% per annum in yeartwo, 15% per annum in year three, 20% per annum in yearfour and 25% per annum in each of years five and six. Inaddition to the $15.3  million of scheduled payments due for theyear ended December  31,  2004, we repaid an additional$82.6  million using cash generated from operations and proceedsfrom the accounts receivable securitization facility. An additional$99.0  million and $35.1  million was repaid during theyears ended December  31,  2005 and 2006, respectively,using cash provided by operations.

The term loan Bfacility was scheduled to amortize each year in an amount equal to1% per annum in equal quarterly installments for the first sixyears and nine months, with the remaining amount payable onNovember  4,  2010. In addition to the $13.0  millionof scheduled payments due for the year ended December  31,2004, we repaid an additional $206.0  million using cashgenerated from operations and proceeds from the accounts receivablesecuritization facility. An additional $170.0  million was repaidduring the year ended December  31,  2006, using mostlycash provided by operations.

Principal amounts outstandingunder the revolving credit facility will be due and payable in full atmaturity on November  4,  2009. As of December31,  2006, there were no outstanding borrowings under therevolving credit facility.

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 governing our indebtedness, changethe business conducted by us and our subsidiaries (including NalcoCompany) and enter into hedging agreements. In addition, the seniorcredit facilities require Nalco Company to maintain the followingfinancial covenants: a maximum total leverage ratio, a minimum interestcoverage ratio and a maximum capital expenditures limitation. We werein compliance with all covenants at December  31,2006.

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

On January  21,  2004, Nalco FinanceHoldings LLC and Nalco Finance Holdings Inc. issued $694.0million aggregate principal amount at maturity of 9.0% seniordiscount notes due 2014. Prior to February  1,  2009,interest will accrue on the notes in the form of an increase in theaccreted value of such notes. The accreted value of each note willincrease from the date of issuance until February  1,  2009at a rate of 9.0% per annum, reflecting the accrual of non-cashinterest, such that the 

48

----

Table of Contents

accreted value will equal the principalamount at maturity on February  1,  2009. Cash interestpayments on the notes will be due and payable beginning in 2009. Ourprimary source of liquidity for such payments will be cash flowgenerated from the operations of subsidiaries, including Nalco Holdingsand Nalco Company. However, the terms of Nalco Company’s seniorcredit agreement limit the amount of dividends and other transfers byNalco Holdings LLC and our other subsidiaries to the issuers of thesenior discount notes. In addition, the terms of certain of theindentures governing the existing senior notes and senior subordinatednotes of Nalco Company significantly restrict Nalco Company and ourother subsidiaries from paying dividends, making distributions andotherwise transferring assets to the issuers. The ability of NalcoCompany to make such payments is governed by a formula based on itsconsolidated net income. In addition, as a condition to making suchpayments to the issuers based on such formula, Nalco Holdings must havean Adjusted EBITDA to interest expense ratio of at least 2.0 to 1 aftergiving effect to any such payments. Notwithstanding such restrictions,such indentures permit an aggregate of $50.0  million of suchpayments to be made whether or not there is availability under theformula or the conditions to its use are met.

InDecember  2004, Nalco Finance Holdings LLC and Nalco FinanceHoldings Inc. redeemed a portion of the senior discount notes with anaccreted value of $162.3  million using proceeds from the initialpublic offering of common stock of Nalco Holding Company. The issuerspaid a $14.6  million premium to redeem the notes. After thepartial redemption, the aggregate principal amount at maturity of thenotes declined to $460.8  million from $694.0  million.

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

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

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

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

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

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

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

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | sell certainassets 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 our restrictedsubsidiaries and us to incur additional indebtedness, including securedindebtedness.

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

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

49

----

Table of Contents

Adjusted EBITDA is calculated asfollows:

|                                  |  |  |                        |   |       |      |  |  |      |   |       |   |  |  |  |   |        |   |
|----------------------------------|--|--|------------------------|---|-------|------|--|--|------|---|-------|---|--|--|--|---|--------|---|
|                             |  |  | Yearended December  31 |
| (dollars inmillions)             |  |  | 2006                   |   |       | 2005 |  |  | 2004 |
| Netearnings(loss)                |  |  |                        | $ | 88.3  |      |  |  |      | $ | 38.8  |   |  |  |  | $ | (155.9 | ) |
| Interest,net                     |  |  |                        |   | 262.7 |      |  |  |      |   | 249.5 |   |  |  |  |   | 241.0  |   |
| Incometaxprovision               |  |  |                        |   | 69.8  |      |  |  |      |   | 54.3  |   |  |  |  |   | 47.5   |   |
| Depreciation                     |  |  |                        |   | 131.0 |      |  |  |      |   | 133.3 |   |  |  |  |   | 114.3  |   |
| Amortization                     |  |  |                        |   | 70.1  |      |  |  |      |   | 81.6  |   |  |  |  |   | 96.3   |   |
| EBITDA                           |  |  |                        |   | 621.9 |      |  |  |      |   | 557.5 |   |  |  |  |   | 343.2  |   |
| Non-cashcharges(1)               |  |  |                        |   | 35.5  |      |  |  |      |   | 19.8  |   |  |  |  |   | 174.4  |   |
| Businessoptimization expenses(2) |  |  |                        |   | 9.5   |      |  |  |      |   | 25.6  |   |  |  |  |   | 1.7    |   |
| Unusualitems(3)                  |  |  |                        |   | 19.1  |      |  |  |      |   | 6.4   |   |  |  |  |   | 59.7   |   |
| Otheradjustments(4)              |  |  |                        |   | (5.9  | )    |  |  |      |   | (6.3  | ) |  |  |  |   | 6.3    |   |
| AdjustedEBITDA                   |  |  |                        | $ | 680.1 |      |  |  |      | $ | 603.0 |   |  |  |  | $ | 585.3  |   |
|                                  |

|  |
|--|
|  |  |
|  |

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

|                                                |  |  |                        |   |         |      |  |  |      |   |         |  |  |  |  |   |       |  |
|------------------------------------------------|--|--|------------------------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|-------|--|
|                                           |  |  | Yearended December  31 |
| (dollars inmillions)                           |  |  | 2006                   |   |         | 2005 |  |  | 2004 |
| In-processresearch anddevelopment              |  |  |                        | $ | — |      |  |  |      | $ | — |  |  |  |  | $ | 122.3 |  |
| Inventorystep-up                               |  |  |                        |   | — |      |  |  |      |   | — |  |  |  |  |   | 14.6  |  |
| Assetwrite-offs                                |  |  |                        |   | 2.5     |      |  |  |      |   | 2.8     |  |  |  |  |   | 1.1   |  |
| Profitsharing and 401(k) expense funded bySuez |  |  |                        |   | 25.6    |      |  |  |      |   | 13.2    |  |  |  |  |   | 27.8  |  |
| Other                                          |  |  |                        |   | 7.4     |      |  |  |      |   | 3.8     |  |  |  |  |   | 8.6   |  |
| Non-cashcharges                                |  |  |                        | $ | 35.5    |      |  |  |      | $ | 19.8    |  |  |  |  | $ | 174.4 |  |
|                                                |

In-processResearch and Development

In-process research anddevelopment was a one-time charge of $122.3  million recordedduring the year ended December  31,  2004, as a result ofpurchase accounting entries related to the Acquisition.

Inventory Step-Up

As a result of purchaseaccounting for the Acquisition, we wrote up our inventory to fair valueand subsequently charged the write up to cost of product sold as theinventory was sold.

Profit Sharing and 401(k) ExpenseFunded by Suez

In conjunction with the Acquisition, weentered into an agreement with Suez whereby Suez will reimburse us forcertain profit-sharing and 401(k) matching contributions made by us tothe Profit-Sharing Trust.

Other

Othernon-cash charges include the non-cash impact on earnings of our equityinvestments and minority interests. Non-cash charges also include thenon-cash portion of rent expense under the sublease that we enteredinto with Suez in conjunction with the Acquisition.

|           |                                                                                                                                                                                             |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Business optimization expenses for2006, 2005 and 2004 include costs associated with the redesign andoptimization of business and work processes. See Note 19 to Item 8 formore information. |

50

----

Table of Contents

|           |                                                          |
|-----------|----------------------------------------------------------|
| (3)  | Unusualitems are further detailed on the followingtable: |

|                                     |  |  |                      |   |      |      |  |  |      |   |     |  |  |  |  |   |      |  |
|-------------------------------------|--|--|----------------------|---|------|------|--|--|------|---|-----|--|--|--|--|---|------|--|
|                                |  |  | Yearended December31 |
| (dollarsinmillions)                 |  |  | 2006                 |   |      | 2005 |  |  | 2004 |
| Pensionsettlements andcurtailments  |  |  |                      | $ | 1.7  |      |  |  |      | $ | 0.5 |  |  |  |  | $ | 0.1  |  |
| Loss(gain) on sales, net ofexpenses |  |  |                      |   | 6.0  |      |  |  |      |   | 4.1 |  |  |  |  |   | 0.2  |  |
| Otherunusual items                  |  |  |                      |   | 11.4 |      |  |  |      |   | 1.8 |  |  |  |  |   | 59.4 |  |
|                                |  |  |                      | $ | 19.1 |      |  |  |      | $ | 6.4 |  |  |  |  | $ | 59.7 |  |
|                                     |

Loss(Gain) on Sales, Net of Expenses

For the year endedDecember  31,  2006, we recorded a loss of $2.1million from the sale-leaseback of our facility in Austria, and we alsorecognized losses of $1.2  million from the disposal of equipmentat a plant in the U.K.

In 2005, we recognized animpairment loss of $2.4  million on a business that was held forsale.

Other Unusual Items

For the yearended December  31,  2006, the most significant otherunusual items included $3.8  million of consultancy fees inconnection with our work process redesign initiatives and $5.2million of consulting and legal fees associated with our legal entityrestructure.

In 2005, we wrote off $1.1  millionof inventory, which pre-dated the Acquisition.

Ourresults for 2004 were impacted by the effects of certain other unusualitems, including a $35.0  million charge for the termination ofthe Monitoring Fee Agreement with affiliates of the Sponsors; a$13.7  million charge for the early repayment of senior discountnotes; expenses associated with the registration of publicly tradablesenior notes and senior subordinated notes that were exchanged for theprivately placed notes issued in connection with the Transactions;costs related to changing the name of our operating company from OndeoNalco Company to Nalco Company; and other Transaction-relatedexpenses.

|           |                                                                                                                                          |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | We are required to makeadjustments to EBITDA for monitoring fees paid to the Sponsors,franchise taxes and 401(k) matching contributions. |

Ourcovenant levels and ratios for the year ended December31,  2006 are asfollows:

|                                                                                                           |  |  |                                |  |        |              |  |  |  |  |        |  |
|-----------------------------------------------------------------------------------------------------------|--|--|--------------------------------|--|--------|--------------|--|--|--|--|--------|--|
|                                                                                                      |  |  | CovenantLevelatDecember31,2006 |  |        | ActualRatios |
| Seniorcredit facility(1)                                                                                  |  |  |                                |  |   |              |  |  |  |  |   |  |
| Minimum Adjusted EBITDAto cash interestratio                                                              |  |  |                                |  | 1.75x  |              |  |  |  |  | 3.11x  |  |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |  |                                |  | 6.00x  |              |  |  |  |  | 4.07x  |  |
| Indentures(2)                                                                                             |  |  |                                |  |   |              |  |  |  |  |   |  |
| Minimum Adjusted EBITDAto fixed charge ratio required to incur additional debt pursuant toratioprovisions |  |  |                                |  | 2.00x  |              |  |  |  |  | 2.71x  |  |
|                                                                                                           |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Oursenior credit facility requires us to maintain an Adjusted EBITDA tocash interest ratio which started at a minimum of 1.65x and a net debtto Adjusted EBITDA ratio which started at a maximum of 6.75x, in eachcase for the most recent four quarter period. Failure to satisfy theseratio requirements 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 |

51

----

Table of Contents

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | to 1, except that we may incur certain debtand make certain restricted payments and certain permitted investmentswithout regard to the ratio, such as up to an aggregate principalamount of $1,950  million (including $992.0  million thatwas outstanding under our term loan facilities as of December31,  2006) and investments in similar business and otherinvestments equal to 6% of Nalco Finance Holdings LLCconsolidated assets. |

Local lines ofcredit.    Certain of our non-U.S. subsidiaries have lines ofcredit to support local requirements. As of December  31,2006, the aggregate outstanding balance under these local lines ofcredit was approximately $24.9  million. Certain of these linesof credit are equally and ratably secured with obligations under oursenior credit facilities.

Receivablesfacility.    Nalco Company entered into a three-yearreceivables facility on June  25,  2004 that provides up to$100.0  million in funding from a commercial paper conduitsponsored by JPMorgan Chase Bank, one of the lenders under NalcoCompany’s senior credit facilities, based on availability ofeligible receivables and satisfaction of other customary conditions. Atthe closing, we received $92.0  million in proceeds, which weused to repay term loans under the senior creditfacilities.

In connection with the receivables facility,we established a wholly owned consolidated bankruptcy-remote specialpurpose subsidiary, Nalco Receivables LLC (the‘‘transferor’’), to which Nalco Company(the ‘‘seller’’) sells trade accountsreceivable (the ‘‘receivables’’) pursuantto a receivables purchase agreement. Pursuant to a receivables transferagreement, the transferor then transfers an undivided interest in thepurchased receivables to the commercial paper conduit or the relatedbank sponsor (the ‘‘transferees’’) inexchange for cash. The transferor’s purchase of receivables fromthe seller 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 sellerunder an intercompany note.

Nalco Company, as thereceivables collection agent, services, administers and collects thereceivables under the receivables transfer agreement for which itreceives a monthly servicing fee at a rate of 1%  perannum of the average daily outstanding balance of receivables.Borrowings under the receivables facility bear interest at a floatingbase rate plus a usage fee. The usage fee varies based upon ourleverage ratio as calculated under the senior credit facilities and iscurrently 0.90% of the amount funded. In addition, thetransferor is required to pay a fee on the unused portion of thereceivables facility that varies based upon the same ratio and iscurrently 0.30% of the unused portion of the commitments. Theserates are per annum and payments of these fees are made to the lenderson the monthly settlement date.

Availability of fundingunder the receivables facility depends primarily upon the outstandingtrade accounts receivable balance from time to time. Aggregateavailability is determined by using a formula that reduces the grossreceivables balance by factors that take into account historicaldefault and dilution rates, excessive concentrations and average daysoutstanding and the costs of the facility. Based on the terms of thisfacility and on the criteria described above, as of December31,  2006, approximately $187.2  million of our accountsreceivable balance was considered eligible for financing under theprogram, of which approximately $135.2  million would have beenavailable for funding. As of December  31,  2006, we had$100.0  million of outstanding borrowings under thisfacility.

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

52

----

Table of Contents

Contractual Obligations andCommitments

The following table summarizes our expectedcash outflows resulting from our contractual obligations as ofDecember  31,2006:

|                                  |  |  |                       |   |         |      |  |  |            |   |         |            |  |  |               |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|----------------------------------|--|--|-----------------------|---|---------|------|--|--|------------|---|---------|------------|--|--|---------------|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                             |  |  | PaymentsDue By Period |
| (dollars inmillions)             |  |  | Total                 |   |         | 2007 |  |  | 2008to2009 |   |         | 2010to2011 |  |  | 2012andbeyond |
| ContractualObligations:          |  |  |                       |   |    |      |  |  |            |   |    |            |  |  |               |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Debtobligations:                 |  |  |                       |   |    |      |  |  |            |   |    |            |  |  |               |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Principal                        |  |  |                       | $ | 3,237.3 |      |  |  |            | $ | 123.5   |            |  |  |               | $ | 85.8    |  |  |  |  | $ | 1,839.1 |  |  |  |  | $ | 1,188.9 |  |
| Interest                         |  |  |                       |   | 1,277.0 |      |  |  |            |   | 212.2   |            |  |  |               |   | 447.9   |  |  |  |  |   | 401.4   |  |  |  |  |   | 215.5   |  |
| Totaldebtobligations             |  |  |                       |   | 4,514.3 |      |  |  |            |   | 335.7   |            |  |  |               |   | 533.7   |  |  |  |  |   | 2,240.5 |  |  |  |  |   | 1,404.4 |  |
| Operatinglease obligations(1)    |  |  |                       |   | 264.3   |      |  |  |            |   | 16.5    |            |  |  |               |   | 25.9    |  |  |  |  |   | 54.9    |  |  |  |  |   | 167.0   |  |
| Purchaseobligations(2)           |  |  |                       |   | — |      |  |  |            |   | — |            |  |  |               |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Otherlong-term liabilities(3)(4) |  |  |                       |   | 297.7   |      |  |  |            |   | 53.2    |            |  |  |               |   | 87.8    |  |  |  |  |   | 63.6    |  |  |  |  |   | 93.1    |  |
| Total                            |  |  |                       | $ | 5,076.3 |      |  |  |            | $ | 405.4   |            |  |  |               | $ | 647.4   |  |  |  |  | $ | 2,359.0 |  |  |  |  | $ | 1,664.5 |  |
|                                  |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                           |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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. |

|     |                                                                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Doesnot reflect obligations under the Contribution Agreement relating toour Profit Sharing and Savings Plan, for which Suez has agreed toreimburse us. |

|     |                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The amounts in long-termliabilities represent our expected minimum pension funding requirementsfor the principal domestic defined benefit pension plan through 2016.Minimum pension funding is defined by the current law in place withoutconsideration of any past temporary pension funding relief or futureproposed pension legislation. Amounts beyond 2016 are not reasonablyestimable. |

Our contractual obligations andcommitments over the next several years are significant. Ourprimary source of liquidity will continue to be cash flowgenerated from operations. In the period January  1,  2004through December  31,  2006, our cumulative cash flow fromoperations was $724.0  million. We have availability undera $250  million revolving credit facility to assist us, ifrequired, in meeting our working capital needs and othercontractual obligations. This multi-year revolving credit facilitymatures in November 2009. If our cash flow from operations isinsufficient to fund our debt service and other obligations, wemay be forced to reduce or delay capital expenditures, seek additionalcapital or seek to restructure or refinance our indebtedness. AtDecember  31,  2006, there were no outstandingborrowings under the $250  million revolving credit facility,excluding $27.7  million of outstanding letters ofcredit.

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

53

----

Table of Contents

The following table summarizes ourexpected cash outflows resulting from commercial commitments as ofDecember  31,  2006. Commercial commitments include linesof credit, guarantees and other potential cash outflows resulting froma contingent event that requires our performance pursuant to a fundingcommitment.

|                             |  |  |                                           |   |         |      |  |  |            |   |         |            |  |  |               |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|-----------------------------|--|--|-------------------------------------------|---|---------|------|--|--|------------|---|---------|------------|--|--|---------------|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                        |  |  | Amountof Commitment Expiration Per Period |
| (dollars inmillions)        |  |  | Total                                     |   |         | 2007 |  |  | 2008to2009 |   |         | 2010to2011 |  |  | 2012andbeyond |
| CommercialCommitments:      |  |  |                                           |   |    |      |  |  |            |   |    |            |  |  |               |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| Standbyletters of credit(1) |  |  |                                           | $ | 43.4    |      |  |  |            | $ | 37.6    |            |  |  |               | $ | 5.6     |  |  |  |  | $ | 0.2     |  |  |  |  | $ | — |  |
| Guarantees                  |  |  |                                           |   | — |      |  |  |            |   | — |            |  |  |               |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Othercommercialcommitments  |  |  |                                           |   | 3.5     |      |  |  |            |   | 3.2     |            |  |  |               |   | 0.3     |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Total                       |  |  |                                           | $ | 46.9    |      |  |  |            | $ | 40.8    |            |  |  |               | $ | 5.9     |  |  |  |  | $ | 0.2     |  |  |  |  | $ | — |  |
|                             |

|  |
|--|
|  |  |
|  |

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

Off-Balance Sheet Arrangements

We donot have any off-balance sheet financing or unconsolidated specialpurpose entities.

Recent AccountingPronouncements

In February  2007, the FinancialAccounting Standards Board (FASB) issued SFAS No. 159, TheFair Value Option for Financial Assets and Financial Liabilities— Including an amendment of FASB Statement No. 115. Thisstatement is intended to improve financial reporting by providingentities with the opportunity to mitigate volatility in reportedearnings caused by measuring related assets and liabilities differentlywithout having to apply complex hedge accounting provisions. It alsoestablishes presentation and disclosure requirements designed tofacilitate comparisons between entities that choose differentmeasurement attributes for similar types of assets and liabilities. Thestatement does not affect any existing accounting literature thatrequires certain assets and liabilities to be carried at fair value,and it does not establish requirements for recognizing dividend income,interest income or interest expense. It also does not eliminatedisclosure requirements included in other accounting standards. We arerequired to adopt SFAS No. 159 as of the beginning of our fiscal yearended December  31,  2008. We are in the process ofdetermining the effects, if any, that adoption of SFAS No. 159 willhave on our financial statements.

In June  2006,FASB issued Interpretation No. 48 (FIN 48), Accounting forUncertainty in Income Taxes, an interpretation of SFAS No. 109,Accounting for Income Taxes. The interpretation clarifies theaccounting for uncertainty in income taxes recognized in anenterprise’s financial statements by prescribing a recognitionthreshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to betaken in a tax return. FIN 48 also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure, and transition. FIN 48 is effective for fiscal yearsbeginning after December  15,  2006, and we will adopt FIN48 as of January  1,  2007, as required. Because we areindemnified by Suez for material tax exposures that originate inperiods prior to November  4,  2003, the cumulative effectof adopting FIN 48 will be recorded by adjusting our tax contingencies,long-term receivable for the indemnity, and accumulated deficit. We arein the process of determining the effects that adoption of FIN 48 willhave on our financial statements, but we do not expect that it will bematerial.

In September  2006, the FASB issued SFASNo. 157, Fair Value Measurements, which defines fair value,establishes a framework for measuring fair value, and expandsdisclosures about fair value measurements. We are required to adopt theprovisions of SFAS No. 157 as of the beginning of our fiscal year endedDecember  31,  2008. We are in the process of determiningthe effects, if any, that adoption of SFAS No. 157 will have on ourfinancial statements.

In September  2006, the FASBissued SFAS No. 158, Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans — an amendment ofFASB Statements No. 87, 88, 106 and 

54

----

Table of Contents

132(R). SFAS No. 158 requires anemployer to recognize in its balance sheet an asset for a plan’soverfunded status or a liability for a plan’s underfundedstatus, measure a plan’s assets and its obligations thatdetermine its funded status as of the end of the employer’sfiscal year, and recognize changes in the funded status of a definedbenefit postretirement plan in the year in which the changes occur.Those changes are to be reported in comprehensive income and as aseparate component of unitholder’s equity. SFAS No. 158 does notchange the amount of net periodic benefit cost included in netearnings. We adopted the recognition provisions of SFAS No. 158 as ofDecember  31,  2006, as required. The impact on ourconsolidated balance sheet was not material. We are required to adoptthe measurement date provisions of SFAS No. 158 no later thanDecember  31,  2008. Retrospective application of both therecognition and measurement date provisions of SFAS No. 158 is notpermitted.

In September  2006, the Securities andExchange Commission (‘‘SEC’’) issued StaffAccounting Bulletin No. 108 (SAB 108), Considering theEffects of Prior Year Misstatements when Quantifying Misstatements inCurrent Year Financial Statements, to address diversity in practicein quantifying financial statement misstatements. SAB 108 providesinterpretive guidance on the consideration of the effects of prior yearmisstatements in quantifying current year misstatements for the purposeof a materiality assessment. We began applying the provisions of SAB108 to our financial statements for the year ended December31,  2006, as required, which had no effect on our financialstatements.

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

We elected to adopt SFAS No. 123(R) as ofOctober  1,  2004, using the modified-prospectivetransition method. Compensation cost charged to earnings for our equitycompensation plans was $1.8  million, $0.3  million and$0.1  million for the years ended December  31,2006, 2005 and 2004, respectively.

InNovember  2004, the FASB issued SFAS No. 151, InventoryCosts. This statement clarifies the accounting for the abnormalamount of idle facilities expense, freight, handling costs and wastedmaterial. This statement requires that those items be recognized ascurrent-period expense. In addition, SFAS No. 151 requires thatallocation of fixed overhead to the cost of conversion be based on thenormal capacity of the production facilities. This statement waseffective for inventory costs incurred after December  31,2005. Adoption of this statement did not have a material effect on ourfinancial statements.

55

----

Table of Contents

ITEM 7A.    QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subjectto inherent risks attributed to operating in a global economy. We mayutilize derivative financial instruments as necessary to manage foreigncurrency exchange rate risks. We manage foreign currency exchange riskarising from financial activities pursuant to our corporate guidelines.Forward contracts and, occasionally, swaps and options are utilized toprotect these cash flows from adverse movements in exchange rates, andwe account for these instruments by marking them to market at eachbalance sheet date. We may also employ hedge accounting as permitted bySFAS No. 133, Accounting for Derivative Instruments and HedgingActivities. In addition, we use certain foreign currency debt as ahedge of the foreign currency exposure of a portion of our netinvestment in foreign operations.

Upon issuance, wedesignated the €200.0  million aggregate principalamount of 73⁄4% senior notes due 2011, the€200.0  million aggregate principal amount of9% senior subordinated notes due 2013, and the€88.0  million term loan as a hedge of our netinvestment in subsidiary companies whose assets, liabilities, andoperations are measured using the euro as their functional currency.Because of the high degree of effectiveness between the hedginginstruments and the exposure being hedged, fluctuations in the value ofthe euro-denominated debt due to exchange rate changes are offset bychanges in the net investment. Accordingly, changes in the value of theeuro-denominated debt are recognized in foreign currency translationadjustment, a component of accumulated other comprehensive income, tooffset changes in the value of our net investment in subsidiarycompanies whose financial statements are measured using the euro astheir functional currency.

We formally assess, on aquarterly basis, whether the euro-denominated debt is effective atoffsetting changes in the value of the underlying exposure. For theyear ended December  31,  2006, we recorded a $63.3million non-cash pretax gain in the accumulated foreign currencytranslation adjustment account related to this hedge. No hedgeineffectiveness was recorded in income.

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

We have exposure to fluctuations inforeign currency exchange rates. Based on our derivative foreigncurrency instruments outstanding at December  31,  2006 and2005, a 10% strengthening or weakening in the value of the U.S.dollar relative to the currencies in which those derivative foreigncurrency instruments are denominated would result in a gain or loss infair values of less than $2.0  million and $1.3  million,respectively.

At December  31,  2006, NalcoCompany’s 2007 forecasted natural gas utility requirements wereapproximately 70% hedged utilizing natural gas forward contractsat an average cost of $9.21 per MMBTU. These contracts had a notionalvalue of $9.9  million and have delivery dates fromJanuary  2007 through December  2007. Based on year-endNYMEX prices, we had a net unrealized loss on our natural gas forwardcontracts at December  31,  2006 of $2.4  million.Assuming that year-end natural gas prices were to increase or decreaseby 10%, the gain or loss in fair value would be less than$0.8  million.

At December  31,  2006,we had $1,116.4  million of variable rate debt. A 1%increase in the average interest rate would increase future interestexpense by approximately $11.2  million peryear.

Our sensitivity analysis of the effects of thechanges in interest rates and foreign currency exchange rates do notreflect the effect of such changes on the related hedged transactionsor on other operating transactions. The analysis also does not factorin a potential change in the level of variable rate borrowings orderivative instruments outstanding that could take place if thesehypothetical conditions prevailed.

We are exposed tocredit loss in the event of nonperformance by the other party to thederivative financial instruments. We limit this exposure by enteringinto agreements directly with a number of major financial institutionsthat meet our credit standards and that are expected to satisfy fullytheir obligations under the contracts. We view derivative financialinstruments as a risk management tool and do not use them forspeculative or trading purposes.

56

----

ITEM8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Indexto Financial Statements

Nalco Finance Holdings LLC andSubsidiariesConsolidated FinancialStatements

|                                                                                                        |  |  |  |  |        |  |
|--------------------------------------------------------------------------------------------------------|--|--|--|--|--------|--|
| Reportof Independent Registered Public AccountingFirm                                                  |  |  |  |  | 58     |  |
| Report ofIndependent Registered Public AccountingFirm                                                  |  |  |  |  | 59     |  |
| Consolidated FinancialStatements:                                                                      |  |  |  |  |   |  |
| ConsolidatedBalance Sheets as of December 31, 2006 and2005                                             |  |  |  |  | 60     |  |
| Consolidated Statements ofOperations for the years ended December 31, 2006, 2005and 2004               |  |  |  |  | 61     |  |
| Consolidated Statementsof Unitholder’s Equity for the years ended December31, 2006, 2005 and2004 |  |  |  |  | 62     |  |
| Consolidated Statements of CashFlows for the years ended December 31, 2006, 2005 and2004               |  |  |  |  | 63     |  |
| Notes to Consolidated FinancialStatements                                                              |  |  |  |  | 64     |  |
|                                                                                                        |

57

----

Table of Contents

Report of Independent Registered PublicAccounting Firm

The Board of Directors and Unitholder ofNalco Finance Holdings LLC

We have audited theaccompanying consolidated balance sheets of Nalco Finance Holdings LLCand subsidiaries (Company) as of December  31,  2006 and2005, and the related consolidated statements of operations,unitholder’s equity, and cash flows for each of the three yearsin the period ended December  31,  2006. Our audits alsoincluded the financial statement schedules listed in the Index at Item15(a)(2). These financial statements and schedules are theresponsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements and schedules basedon our audits.

We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for ouropinion.

In our opinion, the financial statements referredto above present fairly, in all material respects, the consolidatedfinancial position of Nalco Finance Holdings LLC and subsidiaries atDecember  31,  2006 and 2005, and the consolidated resultsof their operations and their cash flows for each of the three years inthe period ended December  31,  2006, in conformity withU.S. generally accepted accounting principles. Also, in our opinion,the related financial statement schedules, when considered in relationto the basic financial statements taken as a whole, present fairly inall material respects the information set forththerein.

As discussed in Notes 2 and 14 to theconsolidated financial statements, the Company adopted the recognitionand disclosure provisions of Statement of Financial AccountingStandards No. 158, Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans — an amendment ofFASB Statements No. 87, 88, 106 and 132(R), as of December31,  2006.

We also have audited, in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates), the effectiveness of Nalco Finance Holdings LLC’sinternal control over financial reporting as of December31,  2006, based on criteria established in InternalControl-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission and our report datedMarch  1,  2007 expressed an unqualified opinionthereon.

/s/ ERNST & YOUNG LLPChicago,IllinoisMarch  1,  2007

58

----

Table of Contents

Report of Independent Registered PublicAccounting Firm

The Board of Directors and Unitholder ofNalco Finance Holdings LLC

We have auditedmanagement’s assessment, included in the accompanyingManagement’s Report on Internal Control Over FinancialReporting, that Nalco Finance Holdings LLC maintained effectiveinternal control over financial reporting as of December31,  2006, based on criteria established in Internal Control— Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (the COSO criteria). NalcoFinance Holdings LLC’s management is responsible for maintainingeffective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financialreporting. Our responsibility is to express an opinion onmanagement’s assessment and an opinion on the effectiveness ofthe company’s internal control over financial reporting based onour audit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal controlover financial reporting was maintained in all material respects. Ouraudit included obtaining an understanding of internal control overfinancial reporting, evaluating management’s assessment, testingand evaluating the design and operating effectiveness of internalcontrol, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.

A company’sinternal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets thatcould have a material effect on the financialstatements.

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

In our opinion, management’sassessment that Nalco Finance Holdings LLC maintained effectiveinternal control over financial reporting as of December31,  2006, is fairly stated, in all material respects, based onthe COSO criteria. Also, in our opinion, Nalco Finance Holdings LLCmaintained, in all material respects, effective internal control overfinancial reporting as of December  31,  2006, based on theCOSO criteria.

We also have audited, in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates), the consolidated balance sheets of Nalco Finance Holdings LLCand subsidiaries as of December  31,  2006 and 2005, andthe related consolidated statements of operations, unitholder’sequity, and cash flows for each of the three years in the period endedDecember  31,  2006, and our report dated March1,  2007 expressed an unqualified opinionthereon.

/s/ ERNST & YOUNG LLPChicago,IllinoisMarch  1,  2007

59

----

Table of Contents

Nalco Finance Holdings LLC andSubsidiariesConsolidated Balance Sheets(dollars inmillions)

|                                                                                           |  |  |                 |   |         |                 |  |  |  |   |         |  |
|-------------------------------------------------------------------------------------------|--|--|-----------------|---|---------|-----------------|--|--|--|---|---------|--|
|                                                                                      |  |  | December31,2006 |   |         | December31,2005 |
| Assets                                                                                    |  |  |                 |   |    |                 |  |  |  |   |    |  |
| Currentassets:                                                                            |  |  |                 |   |    |                 |  |  |  |   |    |  |
| Cash and cashequivalents                                                                  |  |  |                 | $ | 37.3    |                 |  |  |  | $ | 30.8    |  |
| Tradeaccounts receivable, less allowances of $19.0 and $16.6 in 2006 and2005,respectively |  |  |                 |   | 695.3   |                 |  |  |  |   | 622.3   |  |
| Inventories                                                                               |  |  |                 |   | 340.7   |                 |  |  |  |   | 313.2   |  |
| Deferredincometaxes                                                                       |  |  |                 |   | 29.0    |                 |  |  |  |   | 21.1    |  |
| Prepaidexpenses and other currentassets                                                   |  |  |                 |   | 65.1    |                 |  |  |  |   | 62.0    |  |
| Totalcurrentassets                                                                        |  |  |                 |   | 1,167.4 |                 |  |  |  |   | 1,049.4 |  |
| Property,plant, and equipment,net                                                         |  |  |                 |   | 743.4   |                 |  |  |  |   | 755.3   |  |
| Goodwill                                                                                  |  |  |                 |   | 2,299.9 |                 |  |  |  |   | 2,196.7 |  |
| Otherintangible assets, net                                                               |  |  |                 |   | 1,169.5 |                 |  |  |  |   | 1,227.5 |  |
| Deferred financingcosts                                                                   |  |  |                 |   | 44.3    |                 |  |  |  |   | 55.0    |  |
| Receivable fromformer shareholder                                                         |  |  |                 |   | 60.0    |                 |  |  |  |   | 73.2    |  |
| Othernoncurrentassets                                                                     |  |  |                 |   | 174.9   |                 |  |  |  |   | 197.8   |  |
| Totalassets                                                                               |  |  |                 | $ | 5,659.4 |                 |  |  |  | $ | 5,554.9 |  |
| Liabilitiesand unitholder’sequity                                                   |  |  |                 |   |    |                 |  |  |  |   |    |  |
| Currentliabilities:                                                                       |  |  |                 |   |    |                 |  |  |  |   |    |  |
| Accountspayable                                                                           |  |  |                 | $ | 288.2   |                 |  |  |  | $ | 285.4   |  |
| Accruedexpenses                                                                           |  |  |                 |   | 137.5   |                 |  |  |  |   | 135.7   |  |
| Accruedcompensation                                                                       |  |  |                 |   | 108.8   |                 |  |  |  |   | 67.5    |  |
| Short-termdebt                                                                            |  |  |                 |   | 150.2   |                 |  |  |  |   | 22.6    |  |
| Incometaxes                                                                               |  |  |                 |   | 34.7    |                 |  |  |  |   | 31.9    |  |
| Totalcurrentliabilities                                                                   |  |  |                 |   | 719.4   |                 |  |  |  |   | 543.1   |  |
| Long-termdebt                                                                             |  |  |                 |   | 3,038.6 |                 |  |  |  |   | 3,244.2 |  |
| Deferred incometaxes                                                                      |  |  |                 |   | 352.9   |                 |  |  |  |   | 380.7   |  |
| Accrued pensionbenefits                                                                   |  |  |                 |   | 430.7   |                 |  |  |  |   | 416.4   |  |
| Otherliabilities                                                                          |  |  |                 |   | 250.0   |                 |  |  |  |   | 278.9   |  |
| Minorityinterest                                                                          |  |  |                 |   | 12.6    |                 |  |  |  |   | 11.2    |  |
| Unitholder’sequity                                                                  |  |  |                 |   | 855.2   |                 |  |  |  |   | 680.4   |  |
| Totalliabilities and unitholder’sequity                                             |  |  |                 | $ | 5,659.4 |                 |  |  |  | $ | 5,554.9 |  |
|                                                                                           |

Seenotes to consolidated financialstatements.

60

----

Table of Contents

Nalco Finance Holdings LLC andSubsidiariesConsolidated Statements of Operations(dollarsinmillions)

|                                                          |  |  |                      |   |         |      |  |  |      |   |         |   |  |  |  |   |         |   |
|----------------------------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                                                     |  |  | Yearended December31 |
|                                                     |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| Netsales                                                 |  |  |                      | $ | 3,602.6 |      |  |  |      | $ | 3,312.4 |   |  |  |  | $ | 3,033.3 |   |
| Operatingcosts and expenses:                             |  |  |                      |   |    |      |  |  |      |   |    |   |
| Cost ofproduct sold                                      |  |  |                      |   | 1,976.5 |      |  |  |      |   | 1,832.2 |   |  |  |  |   | 1,578.8 |   |
| Selling,administrative and researchexpenses              |  |  |                      |   | 1,113.5 |      |  |  |      |   | 1,028.7 |   |  |  |  |   | 1,038.8 |   |
| Amortizationof intangibleassets                          |  |  |                      |   | 70.1    |      |  |  |      |   | 81.6    |   |  |  |  |   | 96.3    |   |
| In-processresearch anddevelopment                        |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 122.3   |   |
| Businessoptimizationexpenses                             |  |  |                      |   | 9.5     |      |  |  |      |   | 25.6    |   |  |  |  |   | 1.7     |   |
| Sponsormonitoringfees                                    |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 11.2    |   |
| Sponsormonitoring agreement terminationfee               |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 35.0    |   |
| Totaloperating costs and expenses                        |  |  |                      |   | 3,169.6 |      |  |  |      |   | 2,968.1 |   |  |  |  |   | 2,884.1 |   |
| Operatingearnings                                        |  |  |                      |   | 433.0   |      |  |  |      |   | 344.3   |   |  |  |  |   | 149.2   |   |
| Otherincome (expense),net                                |  |  |                      |   | (4.3    | )    |  |  |      |   | 4.0     |   |  |  |  |   | (10.8   | ) |
| Interestincome                                           |  |  |                      |   | 9.1     |      |  |  |      |   | 8.5     |   |  |  |  |   | 10.1    |   |
| Interestexpense                                          |  |  |                      |   | (271.8  | )    |  |  |      |   | (258.0  | ) |  |  |  |   | (251.1  | ) |
| Earnings(loss) before income taxes and minorityinterests |  |  |                      |   | 166.0   |      |  |  |      |   | 98.8    |   |  |  |  |   | (102.6  | ) |
| Incometax provision                                      |  |  |                      |   | 69.8    |      |  |  |      |   | 54.3    |   |  |  |  |   | 47.5    |   |
| Minorityinterests                                        |  |  |                      |   | (7.9    | )    |  |  |      |   | (5.7    | ) |  |  |  |   | (5.8    | ) |
| Netearnings(loss)                                        |  |  |                      | $ | 88.3    |      |  |  |      | $ | 38.8    |   |  |  |  | $ | (155.9  | ) |
|                                                          |

Seenotes to consolidated financialstatements.

61

----

Table of Contents

Nalco Finance Holdings LLC andSubsidiariesConsolidated Statements of Unitholder’sEquity(dollars inmillions)

|                                                                       |  |  |                |   |         |                                      |  |  |                                       |   |         |                            |  |  |  |   |         |   |  |  |  |   |        |   |
|-----------------------------------------------------------------------|--|--|----------------|---|---------|--------------------------------------|--|--|---------------------------------------|---|---------|----------------------------|--|--|--|---|---------|---|--|--|--|---|--------|---|
|                                                                  |  |  | CapitalAccount |   |         | RetainedEarnings(AccumulatedDeficit) |  |  | AccumulatedOther Comprehensive Income |   |         | Comprehensive Income(Loss) |
| Balanceat January 1,2004                                              |  |  |                | $ | 1,001.9 |                                      |  |  |                                       | $ | (24.1   | )                          |  |  |  | $ | 91.2    |   |  |  |  |   |   |   |
| Capitalcontributions                                                  |  |  |                |   | 186.2   |                                      |  |  |                                       |   | — |                            |  |  |  |   | — |   |  |  |  |   |   |   |
| Capitaldistributions                                                  |  |  |                |   | (446.9  | )                                    |  |  |                                       |   | — |                            |  |  |  |   | — |   |  |  |  |   |   |   |
| Netloss                                                               |  |  |                |   | — |                                      |  |  |                                       |   | (155.9  | )                          |  |  |  |   | — |   |  |  |  | $ | (155.9 | ) |
| Othercomprehensive income(loss):                                      |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  |   |   |   |
| Losson derivatives – net of tax benefit of$0.2                  |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | (0.2    | ) |  |  |  |   | (0.2   | ) |
| Currencytranslation adjustments – net of  tax of$7.5            |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | 42.1    |   |  |  |  |   | 42.1   |   |
| Comprehensiveloss                                                     |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  | $ | (114.0 | ) |
| Balanceat December  31,2004                                           |  |  |                |   | 741.2   |                                      |  |  |                                       |   | (180.0  | )                          |  |  |  |   | 133.1   |   |  |  |  |   |   |   |
| Share-basedcompensation                                               |  |  |                |   | 0.3     |                                      |  |  |                                       |   | — |                            |  |  |  |   | — |   |  |  |  |   |   |   |
| Netearnings                                                           |  |  |                |   | — |                                      |  |  |                                       |   | 38.8    |                            |  |  |  |   | — |   |  |  |  | $ | 38.8   |   |
| Othercomprehensive income(loss):                                      |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  |   |   |   |
| Minimumpension liability adjustment – net of tax benefit of$0.8 |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | (1.8    | ) |  |  |  |   | (1.8   | ) |
| Gainon derivatives – net of tax of$0.2                          |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | 0.2     |   |  |  |  |   | 0.2    |   |
| Currencytranslation adjustments – net of  tax of$7.9            |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | (51.4   | ) |  |  |  |   | (51.4  | ) |
| Comprehensiveloss                                                     |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  | $ | (14.2  | ) |
| Balanceat December  31,2005                                           |  |  |                |   | 741.5   |                                      |  |  |                                       |   | (141.2  | )                          |  |  |  |   | 80.1    |   |  |  |  |   |   |   |
| Share-basedcompensation                                               |  |  |                |   | 1.8     |                                      |  |  |                                       |   | — |                            |  |  |  |   | — |   |  |  |  |   |   |   |
| Netearnings                                                           |  |  |                |   | — |                                      |  |  |                                       |   | 88.3    |                            |  |  |  |   | — |   |  |  |  | $ | 88.3   |   |
| Othercomprehensive income(loss):                                      |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  |   |   |   |
| Minimumpension liability adjustment – net of tax of$0.4         |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | 0.8     |   |  |  |  |   | 0.8    |   |
| Losson derivatives – net of tax benefit of$0.8                  |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | (1.3    | ) |  |  |  |   | (1.3   | ) |
| Currencytranslation adjustments – net of  tax benefit of$17.4   |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | 87.0    |   |  |  |  |   | 87.0   |   |
| Comprehensiveincome                                                   |  |  |                |   |    |                                      |  |  |                                       |   |    |                            |  |  |  |   |    |   |  |  |  | $ | 174.8  |   |
| Adjustmentto adopt FAS 158 – net of tax benefit of$5.6          |  |  |                |   | — |                                      |  |  |                                       |   | — |                            |  |  |  |   | (1.8    | ) |  |  |  |   |   |   |
| Balanceat December  31,2006                                           |  |  |                | $ | 743.3   |                                      |  |  |                                       | $ | (52.9   | )                          |  |  |  | $ | 164.8   |   |  |  |  |   |   |   |
|                                                                       |

Seenotes to consolidated financial statements.

62

----

Table of Contents

Nalco Finance Holdings LLC andSubsidiariesConsolidated Statements of Cash Flows(dollarsinmillions)

|                                                                                          |  |  |                      |   |         |      |  |  |      |   |         |   |  |  |  |   |        |   |
|------------------------------------------------------------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|--------|---|
|                                                                                     |  |  | Yearended December31 |
|                                                                                     |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| Operatingactivities                                                                      |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Netearnings(loss)                                                                        |  |  |                      | $ | 88.3    |      |  |  |      | $ | 38.8    |   |  |  |  | $ | (155.9 | ) |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Depreciation                                                                             |  |  |                      |   | 131.0   |      |  |  |      |   | 133.3   |   |  |  |  |   | 114.3  |   |
| Amortization                                                                             |  |  |                      |   | 70.1    |      |  |  |      |   | 81.6    |   |  |  |  |   | 96.3   |   |
| In-processresearch anddevelopment                                                        |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 122.3  |   |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |  |                      |   | 43.5    |      |  |  |      |   | 40.2    |   |  |  |  |   | 49.1   |   |
| Losson early extinguishment ofdebt                                                       |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 13.7   |   |
| Equityin earnings of unconsolidated subsidiaries, net ofdistributions                    |  |  |                      |   | 1.9     |      |  |  |      |   | 2.5     |   |  |  |  |   | 2.8    |   |
| Deferredincometaxes                                                                      |  |  |                      |   | (19.1   | )    |  |  |      |   | (28.2   | ) |  |  |  |   | (49.2  | ) |
| Amortizationof unearned employee compensation and accretion ofobligation                 |  |  |                      |   | 25.6    |      |  |  |      |   | 13.2    |   |  |  |  |   | 27.8   |   |
| Definedbenefit pension planexpense                                                       |  |  |                      |   | 44.9    |      |  |  |      |   | 43.9    |   |  |  |  |   | 39.8   |   |
| Definedbenefit pension plancontributions                                                 |  |  |                      |   | (70.8   | )    |  |  |      |   | (30.0   | ) |  |  |  |   | (13.7  | ) |
| Other,net                                                                                |  |  |                      |   | 21.6    |      |  |  |      |   | 17.3    |   |  |  |  |   | 16.6   |   |
| Changesin current assets andliabilities:                                                 |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Tradeaccountsreceivable                                                                  |  |  |                      |   | (40.6   | )    |  |  |      |   | (59.9   | ) |  |  |  |   | (86.4  | ) |
| Inventories                                                                              |  |  |                      |   | (15.4   | )    |  |  |      |   | (8.1    | ) |  |  |  |   | (10.9  | ) |
| Accountspayable                                                                          |  |  |                      |   | (8.8    | )    |  |  |      |   | 29.8    |   |  |  |  |   | 96.3   |   |
| Other                                                                                    |  |  |                      |   | 12.9    |      |  |  |      |   | (72.6   | ) |  |  |  |   | (25.8  | ) |
| Netcash provided by operatingactivities                                                  |  |  |                      |   | 285.1   |      |  |  |      |   | 201.8   |   |  |  |  |   | 237.1  |   |
| Investingactivities                                                                      |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Purchaseprice adjustment on acquisition of Ondeo NalcoGroup                              |  |  |                      |   | — |      |  |  |      |   | (3.2    | ) |  |  |  |   | 25.3   |   |
| Businesspurchases/sales,net                                                              |  |  |                      |   | (6.4    | )    |  |  |      |   | — |   |  |  |  |   | (2.3   | ) |
| Additionsto property, plant, and equipment,net                                           |  |  |                      |   | (93.4   | )    |  |  |      |   | (74.6   | ) |  |  |  |   | (91.8  | ) |
| Otherinvestingactivities                                                                 |  |  |                      |   | (0.1    | )    |  |  |      |   | 0.1     |   |  |  |  |   | (4.1   | ) |
| Netcash used for investingactivities                                                     |  |  |                      |   | (99.9   | )    |  |  |      |   | (77.7   | ) |  |  |  |   | (72.9  | ) |
| Financingactivities                                                                      |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Proceedsfrom long-termdebt                                                               |  |  |                      |   | — |      |  |  |      |   | 24.3    |   |  |  |  |   | 719.7  |   |
| Paymentsof long-termdebt                                                                 |  |  |                      |   | (205.6  | )    |  |  |      |   | (145.8  | ) |  |  |  |   | (639.3 | ) |
| Short-termdebt,net                                                                       |  |  |                      |   | 30.8    |      |  |  |      |   | 2.9     |   |  |  |  |   | (34.8  | ) |
| Redemptionpremium on early extinguishment ofdebt                                         |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | (14.6  | ) |
| Deferredfinancingcosts                                                                   |  |  |                      |   | (0.8    | )    |  |  |      |   | (1.3    | ) |  |  |  |   | (1.2   | ) |
| Capitalcontributions                                                                     |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 186.2  |   |
| Capitaldistributions                                                                     |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | (446.9 | ) |
| Otherfinancingactivities                                                                 |  |  |                      |   | (4.0    | )    |  |  |      |   | (6.0    | ) |  |  |  |   | (0.9   | ) |
| Netcash used for financingactivities                                                     |  |  |                      |   | (179.6  | )    |  |  |      |   | (125.9  | ) |  |  |  |   | (231.8 | ) |
| Effectof foreign exchange rate changes on cash and cashequivalents                       |  |  |                      |   | 0.9     |      |  |  |      |   | (0.6    | ) |  |  |  |   | 0.8    |   |
| Increase(decrease) in cash and cashequivalents                                           |  |  |                      |   | 6.5     |      |  |  |      |   | (2.4    | ) |  |  |  |   | (66.8  | ) |
| Cashand cash equivalents at beginning of theperiod                                       |  |  |                      |   | 30.8    |      |  |  |      |   | 33.2    |   |  |  |  |   | 100.0  |   |
| Cashand cash equivalents at end of theperiod                                             |  |  |                      | $ | 37.3    |      |  |  |      | $ | 30.8    |   |  |  |  | $ | 33.2   |   |
| Supplementalcash flowsinformation                                                        |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Cashpaid during the periodfor:                                                           |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Interest                                                                                 |  |  |                      | $ | 226.3   |      |  |  |      | $ | 217.6   |   |  |  |  | $ | 206.7  |   |
| Incometaxes                                                                              |  |  |                      |   | 88.6    |      |  |  |      |   | 80.4    |   |  |  |  |   | 92.3   |   |
|                                                                                          |

Seenotes to consolidated financialstatements.

63

----

Table of Contents

NalcoFinance Holdings LLC and SubsidiariesNotes to ConsolidatedFinancial Statements(dollars inmillions)December  31,2006

1.    Description of Business and Change inOwnership

Description of Business

We areengaged in the worldwide manufacture and sale of highly specializedservice chemical programs. This includes production and service relatedto the sale and application of chemicals and technology used in watertreatment, pollution control, energy conservation, oil production andrefining, steelmaking, papermaking, mining, and other industrialprocesses.

Change in Ownership

OnNovember  4,  2003, our subsidiary, Nalco Holdings LLC (theBuyer), a newly formed entity controlled by affiliates of TheBlackstone Group, L.P., Apollo Management, L.P., and The Goldman SachsGroup, Inc. (collectively, the Sponsors), pursuant to a Stock PurchaseAgreement (as amended, the Stock Purchase Agreement) with Suez S.A.(Suez or Seller) and certain of its affiliates, acquired the net assetsof Ondeo Nalco Group (as defined below) for $4,127.1  millionincluding direct costs of the acquisition of $125.6  million,excluding assumed debt of $30.2  million, and subject to certainclosing and post-closing adjustments (the Acquisition).

The Ondeo Nalco Group (the Predecessor) included Ondeo NalcoCompany and subsidiaries (ONC) and certain subsidiaries of NalcoInternational SAS (NIS) plus Calgon Europe Limited (UK), owned byDegremont (a former related party). Ondeo Industrial Solutions NorthAmerica, a subsidiary of ONC, was excluded from the Predecessor, as theBuyer did not acquireit.

2.    Summaryof Significant Accounting Policies

Basis of Presentation

All intercompany balances and transactions are eliminated.Investments in companies or partnerships in which we do not havecontrol, but have the ability to exercise significant influence overoperating and financial policies, are reported using the equitymethod.

Use of Estimates

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from thoseestimates.

Reclassifications

Certainreclassifications have been made to the consolidated statements ofoperations for the years ended December  31,  2005 and 2004and to the consolidated balance sheet at December  31,2005 to conform to the current year presentation.

Thesereclassifications had no effect on net earnings (loss) reported for anyperiod.

Foreign Currency Translation

Localcurrencies are the functional currencies for most foreign operations.Their balance sheets and income statements are translated at currentand average exchange rates, respectively, with any resultingtranslation adjustments included in the currency translation adjustmentaccount in 

64

----

Table of Contents

2.    Summaryof Significant Accounting Policies (continued)

unitholder’s equity. The financialstatements of any foreign subsidiaries that operate in highlyinflationary environments are translated using a combination ofcurrent, average, and historical exchange rates, with the resultingtranslation impact included in results of operations. Exchangeadjustments resulting from transactions executed in differentcurrencies are included in other income (expense) in the statements ofoperations.

Concentration of Credit Risk

Creditrisk represents the accounting loss that would be recognized at thereporting date if counterparties failed completely to perform ascontracted. We believe the likelihood of incurring material losses dueto concentration of credit risk is remote. The principal financialinstruments subject to credit risk are as follows:

Cash andCash Equivalents

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

Accounts Receivable

A large numberof customers in diverse industries and geographies, as well as thepractice of establishing reasonable credit lines, limits credit risk.The allowance for doubtful accounts is adequate to cover potentialcredit risk losses.

Foreign Exchange Contracts andDerivatives

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

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for DoubtfulAccounts

Accounts receivable are carried at their faceamounts less an allowance for doubtful accounts. On a periodic basis,we evaluate our accounts receivable and establish the allowance fordoubtful accounts based on a combination of specific customercircumstances and credit conditions and based on a history ofwrite-offs and collections. Our policy is generally to not chargeinterest on trade receivables after the invoice becomes past due. Areceivable is considered past due if payments have not been receivedwithin agreed upon invoice terms.

InventoryValuation

Inventories are valued at the lower of cost ormarket. Approximately 57% and 56% of the inventories atDecember  31,  2006 and 2005, respectively, are valuedusing the average cost or first-in, first-out (FIFO) method. Theremaining inventories are valued using the last-in, first-out (LIFO)method. Reported inventory amounts would have been $1.3  millionlower at December  31,  2006 and $2.4  million higherat December  31,  2005, if the FIFO method of accountinghad been used for all inventories.

The LIFO method is usedonly in the United States. Most of the countries outside of the UnitedStates where we have subsidiaries do not permit the use of the LIFOmethod. In those countries where its use is permitted, we have notadopted the LIFO method of inventory valuation because the value of theinventories in those countries is not significant.

65

----

Table of Contents

2.    Summaryof Significant Accounting Policies (continued)

Goodwill and Other IntangibleAssets

Goodwill and indefinite-lived intangible assetsare tested for impairment at least annually, and impairment, if any,recorded as expense in the period of impairment.

Weamortize customer relationships using a declining-balance method overan estimated useful life of 16 years to reflect the pattern in whichthe economic benefits of that asset are realized. This amortizationmethod considers the expected rate of customer attrition, which wasbased on historical attrition data that was also used in estimating thefair value of the customer relationship intangible acquired at theAcquisition date.

The straight-line method is used forall other assets subject to amortization. Patents and developedtechnology are being amortized over an estimated useful life of 10years.

Deferred Financing Costs

Deferred financingcosts are incurred to obtain long-term financing and are amortizedusing the effective interest method over the term of the related debt.The amortization of deferred financing costs, which is classified asinterest expense in the statement of operations, was $11.4million, $10.9  million and $11.2  million for the yearsended December  31,  2006, 2005 and 2004,respectively.

Asset Retirement Obligations

Thefair value of a liability for an asset retirement obligation isrecognized in the period in which it is incurred. The liability isadjusted to its present value in subsequent periods as accretionexpense is recorded. The corresponding asset retirement costs arecapitalized as part of the carrying amount of the related long-livedasset and depreciated over the asset’s useful life.

Income Taxes

Income taxes are recognized during theperiod in 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 incometaxes are provided on the undistributed earnings of foreignsubsidiaries and affiliated companies except to the extent suchearnings are considered to be permanently reinvested in the subsidiaryor affiliate. In cases where foreign tax credits will not offset U.S.income taxes, appropriate provisions are included in the consolidatedstatement of operations.

Valuation allowances aredetermined based on the realizability of the deferred tax assets.Relevant factors to determine the realizability of the assets includefuture taxable income, the expected timing of the reversal of temporarydifferences, tax planning strategies and the expiration dates of thevarious tax attributes. Valuation allowances are established for thoseassets that are determined to be more likely than not to expire withoutbenefit, or for which income of the proper character is notanticipated.

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

We reserve taxcontingencies (including related interest) for tax positions taken forwhich the likelihood of being sustained is considered to be less thanprobable. The tax reserves are reevaluated throughout the year, takinginto account new legislation, regulations, case law and auditresults.

Derivative Instruments

In accordance withthe provisions of Statement of Financial Accounting Standards (SFAS)No. 133, Accounting for Derivative Instruments and HedgingActivities, as amended by SFAS No. 138, 

66

----

Table of Contents

2.    Summaryof Significant Accounting Policies (continued)

Accounting for Certain DerivativeInstruments and Certain Hedging Activities, derivatives arerecognized as either assets or liabilities in the balance sheets atfair value.

Revenue Recognition

Revenue from salesof products, including amounts billed to customers for shipping andhandling costs, is recognized at the time: (1) persuasive evidence ofan arrangement exists, (2) ownership and all risks of loss have beentransferred to the buyer, which is generally upon shipment, (3) theprice is fixed and determinable, and (4) collectibility is reasonablyassured. Revenue from services is recognized when the services areprovided to the customer.

Cost of ProductSold

Cost of product sold includes the cost of inventory(materials and conversion costs) sold to customers, shipping andhandling costs, and certain warehousing costs. It also includes inboundfreight charges, purchasing and receiving costs, packaging, qualityassurance costs, internal transfer costs, and other costs of ourdistribution network. It also includes supply chain administration,safety, health and environmental administration, and the costs of laborfor services provided, whether as saleable services or as part of amultiple deliverables arrangement.

Selling, Administrative andResearch Expenses

Selling expenses, which include thecost of our sales force and marketing staff and their related expenses,were $843.8  million, $795.0  million and $791.4million for the years ended December  31,  2006, 2005 and2004, respectively.

Administrative expenses primarilyrepresent the cost of support functions, including informationtechnology, finance, human resources and legal, as well as expenses forsupport facilities, executive management and management incentiveplans. Administrative expenses were $208.1  million,$175.2  million and $190.7  million for the years endedDecember  31,  2006, 2005 and 2004, respectively.

Research and development expenses represent the cost of ourresearch and development personnel and their related expenses,including research facilities in the United States, the Netherlands andSingapore. Research and development expenses, excluding costs toacquire in-process research and development, totaled $61.6million, $58.5  million and $56.7  million for the yearsended December  31,  2006, 2005 and 2004, respectively.

Research and development costs are charged to expense asincurred. Purchased in-process research and development costs were$122.3  million for the year ended December  31,2004.

Recent Accounting Pronouncements

InNovember  2004, the Financial Accounting Standards Board (FASB)issued SFAS No. 151, Inventory Costs. This statementclarifies the accounting for the abnormal amount of idle facilitiesexpense, freight, handling costs and wasted material. This statementrequires that those items be recognized as current-period expense. Inaddition, SFAS No. 151 requires that allocation of fixed overhead tothe cost of conversion be based on the normal capacity of theproduction facilities. This statement was effective for inventory costsincurred after December  31,  2005. Adoption of thisstatement did not have a material effect on our financialstatements.

In June  2006, the FASB issuedInterpretation No. 48 (FIN 48), Accounting for Uncertainty in IncomeTaxes, an interpretation of SFAS No. 109, Accounting for IncomeTaxes. The interpretation clarifies the accounting for uncertaintyin income taxes recognized in an enterprise’s financialstatements by prescribing a recognition threshold and measurementattribute for the financial statement recognition and measurement of atax position taken or expected to be taken in a tax return. FIN 48 alsoprovides 

67

----

Table of Contents

2.    Summaryof Significant Accounting Policies (continued)

guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure andtransition. FIN 48 is effective for fiscal years beginning afterDecember  15,  2006, and we will adopt FIN 48 as ofJanuary  1,  2007, as required. Because we are indemnifiedby Suez for material tax exposures that originate in periods prior toNovember  4,  2003, the cumulative effect of adopting FIN48 will be recorded by adjusting our tax contingencies, long-termreceivable for the indemnity and accumulated deficit. We are in theprocess of determining the effects that adoption of FIN 48 will have onour financial statements, but we do not expect that it will bematerial.

In September  2006, the FASB issued SFASNo. 157, Fair Value Measurements, which defines fair value,establishes a framework for measuring fair value, and expandsdisclosures about fair value measurements. We are required to adopt theprovisions of SFAS No. 157 as of the beginning of our fiscal year endedDecember  31,  2008. We are in the process of determiningthe effects, if any, that adoption of SFAS No. 157 will have on ourfinancial statements.

In September  2006, the FASBissued SFAS No. 158, Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans — an amendment ofFASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requiresan employer to recognize in its balance sheet an asset for aplan’s overfunded status or a liability for a plan’sunderfunded status, measure a plan’s assets and its obligationsthat determine its funded status as of the end of the employer’sfiscal year, and recognize changes in the funded status of a definedbenefit postretirement plan in the year in which the changes occur.Those changes are to be reported in comprehensive income and as aseparate component of unitholder’s equity. SFAS No. 158 does notchange the amount of net periodic benefit cost included in netearnings. We adopted the recognition and disclosure provisions of SFASNo. 158 as of December  31,  2006, as required. The impacton our consolidated balance sheet is disclosed in Note 14. We arerequired to adopt the measurement date provisions of SFAS No. 158 nolater than December  31,  2008. Retrospective applicationof both the recognition and measurement date provisions of SFAS No. 158is not permitted.

In September  2006, theSecurities and Exchange Commission (SEC) issued Staff AccountingBulletin No. 108 (SAB 108), Considering the Effects of PriorYear Misstatements when Quantifying Misstatements in Current YearFinancial Statements, to address diversity in practice inquantifying financial statement misstatements. SAB 108 providesinterpretive guidance on the consideration of the effects of prior yearmisstatements in quantifying current year misstatements for the purposeof a materiality assessment. We began applying the provisions of SAB108 to our financial statements for the year ended December31,  2006, as required, which had no effect on our financialstatements.

In February  2007, the FASB issued SFASNo. 159, The Fair Value Option for Financial Assets andFinancial Liabilities — Including an amendment of FASB StatementNo. 115. This statement is intended to improve financial reportingby providing entities with the opportunity to mitigate volatility inreported earnings caused by measuring related assets and liabilitiesdifferently without having to apply complex hedge accountingprovisions. It also establishes presentation and disclosurerequirements designed to facilitate comparisons between entities thatchoose different measurement attributes for similar types of assets andliabilities. The statement does not affect any existing accountingliterature that requires certain assets and liabilities to be carriedat fair value, and it does not establish requirements for recognizingdividend income, interest income or interest expense. It also does noteliminate disclosure requirements included in other accountingstandards. We are required to adopt SFAS No. 159 as of the beginning ofour fiscal year ended December  31,  2008. We are in theprocess of determining the effects, if any, that adoption of SFAS No.159 will have on our financialstatements

3.    Acquisitionsand Divestitures

In November  2006, we increasedthe investment in our subsidiary in India from 80% to more than97%. The purchase price for this additional investment was$6.4  million, net of a reimbursement of $8.3  millionreceived from Suez pursuant to the terms of the Stock PurchaseAgreement. A tender 

68

----

Table of Contents

3.    Acquisitionsand Divestitures (continued)

offer is outstanding for the remaining sharesnot owned by us. The purchase price exceeded the fair value of the nettangible assets acquired by $3.9  million, which was allocated togoodwill.

We acquired two businesses and certain patentsduring 2004 for a combined purchase price of $2.5  million, netof cash acquired. Each of these acquisitions was treated as a purchase,and their results of operations have been included in the consolidatedfinancial statements since their respective dates of acquisition. Thepurchase price exceeded the fair value of tangible net assets by$2.5  million, which was allocated to other intangible assets andpatents and developed technology.

In June  2004, weformed a joint venture in Japan with Katayama Chemical Inc. to providewater treatment and process improvement services, chemicals, andequipment to Japanese industrial and institutional customers. Theresults of this joint venture, Katayama Nalco Inc., are included in ourconsolidated financial statements since we exercise control overit.

We sold a business during 2004 for approximately$0.2  million. No gain or loss was recorded on thesale.

The pro forma impact as if the aforementionedacquisitions had occurred at the beginning of the respective years isnotsignificant.

4.    Securitizationof Accounts Receivable

In June  2004, we enteredinto a three-year accounts receivable securitization facility with acommercial paper conduit sponsored by one of the lenders under oursenior credit facilities. The facility provides up to $100.0million in funding, based on availability of eligible trade accountsreceivable and other customary factors.

In connection withthe facility, we established a bankruptcy-remote, wholly owned, specialpurpose limited liability company (the‘‘Transferor’’), into which Nalco Company,a wholly owned subsidiary of Nalco Holdings LLC, (the‘‘Seller’’) transfers all eligible tradeaccounts receivable (the ‘‘Receivables’’).Pursuant to a Receivables Transfer Agreement, the Transferor thentransfers an undivided interest in the Receivables to the commercialpaper conduit or the related bank sponsor (the‘‘Transferees’’) in exchange forcash.

The financing fee charged by the Transferees underthe facility is based on the amount funded and the conduit’scost of funds for issuing commercial paper plus a margin that variesbased on the leverage ratio as calculated under our senior creditfacilities. A commitment fee that varies based on the same ratio andthe unused portion of the facility is also charged by the conduit.Under the facility, Nalco Company services, administers and collectsthe Receivables, for which it receives a monthly servicing fee of1% per annum of the average daily outstanding balance ofReceivables.

Availability of funding under the facilitydepends primarily upon the outstanding Receivables balance from time totime. The facility may be terminated for, among other reasons, materialbreaches of representations and warranties, bankruptcies of the Selleror the Transferor, a judgment or order for the payment of moneyrendered against the Transferor, cross-defaults to our other debt, orbreach of specified financial covenants. We are currently in compliancewith these covenants.

The facility is accounted for as asecured borrowing, resulting in the funding and related Receivablesbeing shown as liabilities and assets, respectively, on ourconsolidated balance sheet and the costs associated with the facilitybeing recorded as interest expense. We had outstanding borrowings of$100.0  million and $75.3  million at December31,  2006 and 2005, respectively, under thefacility.

69

----

Table of Contents

5.    Inventories

Inventoriesconsist of thefollowing:

|                                 |  |  |                 |   |       |                   |  |  |  |   |       |  |
|---------------------------------|--|--|-----------------|---|-------|-------------------|--|--|--|---|-------|--|
|                            |  |  | December31,2006 |   |       | December 31, 2005 |
| Finishedproducts                |  |  |                 | $ | 264.5 |                   |  |  |  | $ | 242.6 |  |
| Rawmaterials andwork-in-process |  |  |                 |   | 76.2  |                   |  |  |  |   | 70.6  |  |
|                            |  |  |                 | $ | 340.7 |                   |  |  |  | $ | 313.2 |  |
|                                 |

6.    Goodwill

Changesin the carrying value of goodwill from January  1,  2005 toDecember  31,  2006 are summarizedbelow:

|                                               |  |  |  |   |         |   |
|-----------------------------------------------|--|--|--|---|---------|---|
| Balanceas of January  1,2005                  |  |  |  | $ | 2,368.3 |   |
| Adjustments to deferred incometaxes           |  |  |  |   | (71.6   | ) |
| Adjustment to Ondeo Nalco Grouppurchase price |  |  |  |   | (2.5    | ) |
| Excess accruals forcosts to exit activities   |  |  |  |   | (0.4    | ) |
| Effect offoreign currencytranslation          |  |  |  |   | (97.1   | ) |
| Balanceas of December  31,2005                |  |  |  |   | 2,196.7 |   |
| Acquisitions                                  |  |  |  |   | 3.9     |   |
| Excessaccruals for costs to exitactivities    |  |  |  |   | (1.0    | ) |
| Other                                         |  |  |  |   | (2.2    | ) |
| Effectof foreign currencytranslation          |  |  |  |   | 102.5   |   |
| Balanceas of December  31,2006                |  |  |  | $ | 2,299.9 |   |
|                                               |

During2005, we adjusted certain deferred tax liabilities related to purchaseaccounting, primarily related to intangible assets. As a result,goodwill and deferred tax liabilities were reduced by $71.6million.

We will evaluate goodwill for impairment in thefourth quarter of each year and whenever a triggering event occurs. Wecompleted our annual goodwill impairment test in the fourth quarter2006 and determined that no goodwill was impaired.

 7.    OtherIntangible Assets

Intangible assets are summarized asfollows:

|                                          |  |  |                  |   |         |                         |  |  |             |   |         |                         |  |  |  |   |         |  |  |  |  |   |         |   |
|------------------------------------------|--|--|------------------|---|---------|-------------------------|--|--|-------------|---|---------|-------------------------|--|--|--|---|---------|--|--|--|--|---|---------|---|
|                                     |  |  | December31, 2006 |   |         | December 31,2005        |
|                                     |  |  | GrossAmount      |   |         | AccumulatedAmortization |  |  | GrossAmount |   |         | AccumulatedAmortization |
| Intangibleassets subject toamortization: |  |  |                  |   |    |                         |  |  |             |   |    |                         |  |  |  |   |    |  |  |  |  |   |    |   |
| Customerrelationships                    |  |  |                  | $ | 507.2   |                         |  |  |             | $ | (237.9  | )                       |  |  |  | $ | 486.4   |  |  |  |  | $ | (169.8  | ) |
| Patentsand developedtechnology           |  |  |                  |   | 100.6   |                         |  |  |             |   | (32.3   | )                       |  |  |  |   | 100.5   |  |  |  |  |   | (22.2   | ) |
| Other                                    |  |  |                  |   | 2.5     |                         |  |  |             |   | (0.6    | )                       |  |  |  |   | 2.4     |  |  |  |  |   | (0.3    | ) |
| Intangiblesnot subject toamortization:   |  |  |                  |   |    |                         |  |  |             |   |    |                         |  |  |  |   |    |  |  |  |  |   |    |   |
| Trademarksand tradenames                 |  |  |                  |   | 830.0   |                         |  |  |             |   | — |                         |  |  |  |   | 830.0   |  |  |  |  |   | — |   |
| Pensionasset                             |  |  |                  |   | — |                         |  |  |             |   | — |                         |  |  |  |   | 0.5     |  |  |  |  |   | — |   |
|                                     |  |  |                  | $ | 1,440.3 |                         |  |  |             | $ | (270.8  | )                       |  |  |  | $ | 1,419.8 |  |  |  |  | $ | (192.3  | ) |
|                                          |

70

----

Table of Contents

 7.    OtherIntangible Assets (continued)

Estimated annual amortizationexpense for the years 2007 through 2011 is asfollows:

|                       |  |  |  |   |        |  |
|-----------------------|--|--|--|---|--------|--|
| Yearending December31 |  |  |  |   |   |  |
| 2007                  |  |  |  | $ | 60.7   |  |
| 2008                  |  |  |  |   | 52.1   |  |
| 2009                  |  |  |  |   | 45.0   |  |
| 2010                  |  |  |  |   | 39.1   |  |
| 2011                  |  |  |  |   | 34.2   |  |
|                       |

|          |                                                                                      |
|----------|--------------------------------------------------------------------------------------|
| 8.  | ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreement withSuez |

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

At the inception of theESOP, the Predecessor and a trustee entered into a trust agreement,constituting the ESOP Trust, to fund benefits under thePredecessor’s ESOP. As part of its acquisition of Nalco ChemicalCompany in November  1999, Suez purchased from the trustee all ofthe issued and outstanding Series B ESOP Convertible Preferred Stock ata price of $1,060 per share. The trustee credited proceeds from thesale of allocated shares to participants’ accounts. Under theterms of an agreement (the Contribution Agreement), the Predecessor andthe ESOP trustee agreed that the trustee would use proceeds from thesale of shares held in the loan suspense account to repay theoutstanding principal and accrued interest on the ESOP loans. It wasalso agreed that all proceeds remaining after the repayment of theloans and accrued interest would be allocated to participants’accounts. In return, the Predecessor agreed to make contributions tothe Profit Sharing, Investment and Pay Deferral Plan Trust (the Trust)on or before December 31, 2010, having a present value equal to$124.6  million, the outstanding principal and accrued interestpaid on the ESOP loans. The plan was amended effective January1,  2003 to also permit matching contributions under theCompany’s 401(k) plan to count as contributions to the Trust.The Contribution Agreement provides for specified minimum annualcontributions to be made to the Trust, with interest accruing on theoutstanding contribution balance at an annual rate of 8.5%compounded monthly. The contribution commitment becomes due and payablein its entirety if one or more events that are specified in theContribution Agreement occur.

Pursuant to the StockPurchase Agreement, we entered into an agreement (the ReimbursementAgreement) with Suez on November  4,  2003, whereby Suezshall reimburse us for all contributions we make to the Trust in orderto satisfy our obligations under the Contribution Agreement. As part ofthe allocation of the Acquisition purchase price, we recorded areceivable from Suez of $112.7  million, equivalent to ourrecorded liability to the Trust, and recorded a $115.0  millionunearned employee profit sharing asset, which is being amortized toreflect profit sharing expense in the period earned by employees.Interest accretes on this receivable at the same rate that it accreteson our obligation to the Trust. The receivable does not have specificdue dates, but under the terms of the Reimbursement Agreement, Suez isrequired to reimburse us immediately after we make any contributions tothe Trust. The receivable is not secured by any Suez asset. However,under the terms of a sublease agreement with Leo Holding Company (Leo),a subsidiary of Suez, whereby we sublease our corporate headquartersand research facility from Leo, if Suez fails to pay any of thepayments it is required to make under the Reimbursement Agreement, wehave the right to set off such overdue amounts against the rent dueunder the sublease agreement (see Note 13). Conversely, under the termsof the Reimbursement Agreement, if we fail to pay when due any subleaserent (as defined in the sublease agreement), Suez shall have the rightto reduce its reimbursement obligations to us pursuant to theReimbursement Agreement by an amount equal to suchshortfall.

Contributions to the Trust and expensesrecorded related to the Contribution Agreement are asfollows:

71

----

Table of Contents

|          |                                                                                                       |
|----------|-------------------------------------------------------------------------------------------------------|
| 8.  | ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreement withSuez (continued) |

|                                                 |  |  |                      |   |        |      |  |  |      |   |        |  |  |  |  |   |        |  |
|-------------------------------------------------|--|--|----------------------|---|--------|------|--|--|------|---|--------|--|--|--|--|---|--------|--|
|                                            |  |  | Yearended December31 |
|                                            |  |  | 2006                 |   |        | 2005 |  |  | 2004 |
| Contributionsto theTrust                        |  |  |                      | $ | 16.9   |      |  |  |      | $ | 21.5   |  |  |  |  | $ | 14.2   |  |
| Expenserecorded:                                |  |  |                      |   |   |      |  |  |      |   |   |  |  |  |  |   |   |  |
| Amortizationof unearned employee profit sharing |  |  |                      | $ | 20.5   |      |  |  |      | $ | 7.0    |  |  |  |  | $ | 20.8   |  |
| Accretionof obligation toTrust                  |  |  |                      |   | 5.1    |      |  |  |      |   | 6.2    |  |  |  |  |   | 7.0    |  |
| Totalincluded in operatingexpenses              |  |  |                      | $ | 25.6   |      |  |  |      | $ | 13.2   |  |  |  |  | $ | 27.8   |  |
|                                                 |

Paymentsreceived from Suez and income recorded related to the reimbursementarrangement are asfollows:

|                                 |  |  |                      |   |        |      |  |  |      |   |        |  |  |  |  |   |        |  |
|---------------------------------|--|--|----------------------|---|--------|------|--|--|------|---|--------|--|--|--|--|---|--------|--|
|                            |  |  | Year endedDecember31 |
|                            |  |  | 2006                 |   |        | 2005 |  |  | 2004 |
| Paymentsreceived fromSuez       |  |  |                      | $ | 16.9   |      |  |  |      | $ | 21.5   |  |  |  |  | $ | 14.2   |  |
| Incomerecorded:                 |  |  |                      |   |   |      |  |  |      |   |   |  |  |  |  |   |   |  |
| Accretionof receivable fromSuez |  |  |                      | $ | 5.1    |      |  |  |      | $ | 6.2    |  |  |  |  | $ | 7.0    |  |
|                                 |

9.    Property,Plant, and Equipment

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

The estimateduseful lives of the major classes of depreciable assets acquired sincethe date of the Acquisition are as follows: buildings – 33 to 40years; software – 5 years; equipment – 3 to 15years.

Interest capitalized during 2006, 2005 and 2004 was$0.5  million, $0.2  million and $1.6  million,respectively.

Property, plant, and equipment consist ofthefollowing:

|                                   |  |  |                  |   |         |                  |  |  |  |   |         |   |
|-----------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------|---|
|                              |  |  | December31, 2006 |   |         | December 31,2005 |
| Land                              |  |  |                  | $ | 76.0    |                  |  |  |  | $ | 74.8    |   |
| Buildings                         |  |  |                  |   | 175.6   |                  |  |  |  |   | 164.3   |   |
| Software                          |  |  |                  |   | 117.9   |                  |  |  |  |   | 104.0   |   |
| Equipment                         |  |  |                  |   | 791.4   |                  |  |  |  |   | 697.1   |   |
|                              |  |  |                  |   | 1,160.9 |                  |  |  |  |   | 1,040.2 |   |
| Accumulateddepreciation           |  |  |                  |   | (417.5  | )                |  |  |  |   | (284.9  | ) |
| Property,plant, and equipment,net |  |  |                  | $ | 743.4   |                  |  |  |  | $ | 755.3   |   |
|                                   |

During2006, we recognized $3.6  million of asset retirement obligationsfor remediation and demolition activities at certain manufacturingsites where legal obligations associated with the retirement oftangible long-lived assets exist and a range of potential settlementdates for the obligations can be determined. The liability for otherasset retirement obligations cannot currently be measured as theretirement dates are not yet determinable. We will recognize theliability when sufficient information exists to estimate a range ofpotential settlement dates.

72

----

Table of Contents

10.    IncomeTax

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

|                                                          |  |  |                      |   |       |      |  |  |      |   |       |   |  |  |  |   |        |   |
|----------------------------------------------------------|--|--|----------------------|---|-------|------|--|--|------|---|-------|---|--|--|--|---|--------|---|
|                                                     |  |  | Year endedDecember31 |
|                                                     |  |  | 2006                 |   |       | 2005 |  |  | 2004 |
| UnitedStates                                             |  |  |                      | $ | (24.8 | )    |  |  |      | $ | (91.7 | ) |  |  |  | $ | (268.1 | ) |
| Foreign                                                  |  |  |                      |   | 190.8 |      |  |  |      |   | 190.5 |   |  |  |  |   | 165.5  |   |
| Earnings(loss) before income taxes and minorityinterests |  |  |                      | $ | 166.0 |      |  |  |      | $ | 98.8  |   |  |  |  | $ | (102.6 | ) |
|                                                          |

Thecomponents of the income tax provision are asfollows:

|                     |  |  |                      |   |        |      |  |  |      |   |        |   |  |  |  |   |        |   |
|---------------------|--|--|----------------------|---|--------|------|--|--|------|---|--------|---|--|--|--|---|--------|---|
|                |  |  | Year endedDecember31 |
|                |  |  | 2006                 |   |        | 2005 |  |  | 2004 |
| Current:            |  |  |                      |   |   |      |  |  |      |   |   |   |  |  |  |   |   |   |
| UnitedStates        |  |  |                      | $ | (0.3   | )    |  |  |      | $ | (4.6   | ) |  |  |  | $ | 18.3   |   |
| Stateandlocal       |  |  |                      |   | 0.8    |      |  |  |      |   | 0.6    |   |  |  |  |   | 0.2    |   |
| Foreign             |  |  |                      |   | 88.4   |      |  |  |      |   | 86.5   |   |  |  |  |   | 78.2   |   |
| Totalcurrent        |  |  |                      |   | 88.9   |      |  |  |      |   | 82.5   |   |  |  |  |   | 96.7   |   |
| Deferred:           |  |  |                      |   |   |      |  |  |      |   |   |   |  |  |  |   |   |   |
| UnitedStates        |  |  |                      |   | 1.1    |      |  |  |      |   | (10.0  | ) |  |  |  |   | (27.6  | ) |
| Stateandlocal       |  |  |                      |   | (1.4   | )    |  |  |      |   | (0.7   | ) |  |  |  |   | (3.9   | ) |
| Foreign             |  |  |                      |   | (18.8  | )    |  |  |      |   | (17.5  | ) |  |  |  |   | (17.7  | ) |
| Totaldeferred       |  |  |                      |   | (19.1  | )    |  |  |      |   | (28.2  | ) |  |  |  |   | (49.2  | ) |
| Incometax provision |  |  |                      | $ | 69.8   |      |  |  |      | $ | 54.3   |   |  |  |  | $ | 47.5   |   |
|                     |

73

----

Table of Contents

10.    IncomeTax (continued)

Deferred tax assets andliabilities are recognized for the expected future tax consequences oftemporary differences between the financial statement basis and the taxbasis of assets and liabilities using enacted statutory tax ratesapplicable to future years. Net deferred income tax assets(liabilities) are asfollows:

|                                                  |  |  |                 |   |        |                 |  |  |  |   |        |   |
|--------------------------------------------------|--|--|-----------------|---|--------|-----------------|--|--|--|---|--------|---|
|                                             |  |  | December31,2006 |   |        | December31,2005 |
| Retirementbenefits                               |  |  |                 | $ | 65.7   |                 |  |  |  | $ | 50.9   |   |
| Pension                                          |  |  |                 |   | 120.0  |                 |  |  |  |   | 136.1  |   |
| UnitedStates net operating losscarryforwards     |  |  |                 |   | 56.2   |                 |  |  |  |   | 55.8   |   |
| Foreign taxlosscarryforwards                     |  |  |                 |   | 48.6   |                 |  |  |  |   | 38.7   |   |
| Leveragedleaseinvestments                        |  |  |                 |   | 6.7    |                 |  |  |  |   | 4.1    |   |
| Accruals                                         |  |  |                 |   | 29.0   |                 |  |  |  |   | 18.1   |   |
| Otherdeferred taxassets                          |  |  |                 |   | 73.5   |                 |  |  |  |   | 50.1   |   |
| Totaldeferred taxassets                          |  |  |                 |   | 399.7  |                 |  |  |  |   | 353.8  |   |
| Valuationallowance                               |  |  |                 |   | (75.2  | )               |  |  |  |   | (51.4  | ) |
| Netdeferred taxassets                            |  |  |                 | $ | 324.5  |                 |  |  |  | $ | 302.4  |   |
| Property                                         |  |  |                 | $ | (122.8 | )               |  |  |  | $ | (129.3 | ) |
| Softwareamortization                             |  |  |                 |   | (5.4   | )               |  |  |  |   | (7.7   | ) |
| Intangibleassets                                 |  |  |                 |   | (479.4 | )               |  |  |  |   | (468.2 | ) |
| Otherdeferred taxliabilities                     |  |  |                 |   | (40.8  | )               |  |  |  |   | (56.8  | ) |
| Totaldeferred taxliabilities                     |  |  |                 |   | (648.4 | )               |  |  |  |   | (662.0 | ) |
| Netdeferred taxassets                            |  |  |                 |   | 324.5  |                 |  |  |  |   | 302.4  |   |
| Totaldeferred incometaxes                        |  |  |                 | $ | (323.9 | )               |  |  |  | $ | (359.6 | ) |
| Includedin:                                      |  |  |                 |   |   |                 |  |  |  |   |   |   |
| Deferred income taxes– currentasset        |  |  |                 | $ | 29.0   |                 |  |  |  | $ | 21.1   |   |
| Deferredincome taxes – noncurrentliability |  |  |                 |   | (352.9 | )               |  |  |  |   | (380.7 | ) |
|                                             |  |  |                 | $ | (323.9 | )               |  |  |  | $ | (359.6 | ) |
|                                                  |

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,Suez has provided an indemnity for certain contingent taxes that relateto periods prior to November  4,  2003.

74

----

Table of Contents

10.    IncomeTax (continued)

The effective rate of theprovision for income taxes differs from the United States statutoryfederal tax rate due to the followingitems:

|                                           |  |  |                      |   |         |      |  |  |      |   |         |   |  |  |  |   |       |   |
|-------------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|-------|---|
|                                      |  |  | Year endedDecember31 |
|                                      |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| UnitedStates statutory federal taxrate    |  |  |                      | $ | 58.1    |      |  |  |      | $ | 34.5    |   |  |  |  | $ | (35.9 | ) |
| Stateincome taxes, net of federalbenefits |  |  |                      |   | (0.6    | )    |  |  |      |   | (0.1    | ) |  |  |  |   | (2.4  | ) |
| Foreigntax ratedifferential               |  |  |                      |   | (13.0   | )    |  |  |      |   | (7.7    | ) |  |  |  |   | (3.4  | ) |
| Withholdingtaxes                          |  |  |                      |   | 8.1     |      |  |  |      |   | 6.4     |   |  |  |  |   | 8.7   |   |
| Interestdeducted byowners                 |  |  |                      |   | 11.2    |      |  |  |      |   | 10.3    |   |  |  |  |   | 18.1  |   |
| In-processresearch anddevelopment         |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 42.8  |   |
| U.S.tax on foreignearnings                |  |  |                      |   | 3.8     |      |  |  |      |   | 9.7     |   |  |  |  |   | 18.7  |   |
| U.S.tax on subsidiarydisposition          |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 1.8   |   |
| Creditsandincentives                      |  |  |                      |   | (1.7    | )    |  |  |      |   | (1.3    | ) |  |  |  |   | (2.4  | ) |
| Fixedassetrevaluation                     |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | (2.7  | ) |
| Changesin valuationallowances             |  |  |                      |   | (2.4    | )    |  |  |      |   | (1.8    | ) |  |  |  |   | 0.2   |   |
| Taxcontingencyaccrual                     |  |  |                      |   | 3.1     |      |  |  |      |   | 1.2     |   |  |  |  |   | 0.2   |   |
| Nondeductibleitems                        |  |  |                      |   | 5.8     |      |  |  |      |   | 5.1     |   |  |  |  |   | 4.4   |   |
| Other                                     |  |  |                      |   | (2.6    | )    |  |  |      |   | (2.0    | ) |  |  |  |   | (0.6  | ) |
| Incometax provision                       |  |  |                      | $ | 69.8    |      |  |  |      | $ | 54.3    |   |  |  |  | $ | 47.5  |   |
|                                           |

Noprovision has been made for United States or foreign income taxesrelated to approximately $573.0  million of undistributedearnings of foreign subsidiaries at December  31,  2006, aswe consider these earnings to be permanently reinvested. It is notpracticable to estimate the additional income taxes and applicablewithholding taxes that would be payable on the remittance of suchundistributed earnings.

Nalco Finance Holdings LLC istreated as a pass-through entity for U.S. tax purposes; therefore, thetaxable income and expenses of the entity flow directly to the owners.In 2006, approximately $32.1  million of interest and otherdeductions ($11.2  million of tax benefit) flowed to the ownersand were not deductible by the Company.

The InternalRevenue Service (the Service) has completed its examination of theconsolidated federal income tax returns of our subsidiary, NalcoCompany, and Nalco Company’s subsidiaries for the years 2003 and2004. The Service has disallowed federal tax deductions for a series ofexpenses, some of which will continue to amortize for tax purposesthrough 2011. These expenses relate to fees paid to the Sponsors andfinancial institutions for debt issuance and consulting services. Webelieve that the deductions as reflected in our audited financialstatements are proper, and no reserve has been taken for these amounts.We intend to vigorously pursue all of our remedies, includinglitigation if necessary, with the expectation that the deductionsshould be sustained on their merits. Nonetheless, should the Serviceprevail on the disallowance of any of these expenses, any incrementaltax would offset existing net operating loss carryforwards, rather thanrequire an immediate cash payment. Because a substantial portion of thedisputed deductions create temporary differences, that portion of thedisallowed tax benefits would be charged to deferred tax liabilitiesand not the taxprovision.

|                                               |  |  |  |   |       |  |
|-----------------------------------------------|--|--|--|---|-------|--|
| Portiondeducted through December  31,2006     |  |  |  | $ | 85.9  |  |
| Remaining deductions throughDecember  31,2011 |  |  |  |   | 30.3  |  |
| Totaldeductionsdisputed                       |  |  |  | $ | 116.2 |  |
|                                               |

Wehave United States federal net operating losses of approximately$129.1  million ($45.2  million tax effect) expiringbetween 2020 and 2027. A valuation allowance has been established on$23.1  million ($8.1  million tax effect) of certain returnlimitation year amounts, that if released would be credited to

75

----

Table of Contents

10.    IncomeTax (continued)

goodwill. The earliest expiration of the netoperating loss carryforward that does not have a valuation allowance is2024. We have identified a tax planning strategy that would beimplemented prior to 2024 in order to utilize the losses if futuretaxable income does not otherwise utilize the operating losscarryforwards.

We have state net operating losscarryforwards, which could reduce future taxes by $11.0  million.A valuation allowance of $3.3  million has been established forthe portion of which realization is uncertain due to relatively shortcarryforward periods. Implementation of the tax planning strategy forthe United States federal losses would also utilize the losses of thestates with longer carryforward periods.

We have UnitedStates foreign tax credit carryforwards of $19.9  million. A fullvaluation allowance has been established, as it is uncertain that wewill be eligible to utilize the credits.

We haveapproximately $113.7  million ($34.1  million tax effect)of U.K. capital loss carryforwards that do not expire. The losses canonly be used to offset future capital gains in the U.K. A fullvaluation allowance has been established pending the recognition oftaxable U.K. capital gains.

We have a net operating losscarryforward in Brazil of approximately $16.5  million($5.6  million tax effect), which does not expire. A fullvaluation allowance has been established, as we do not foresee futuretaxable income to utilize the loss carryforward in thisentity.

We have net operating loss carryforwards in TheNetherlands of approximately $29.8  million ($7.6  milliontax effect) that do not expire under current law. A valuation allowancehas been established on $16.5  million ($4.2  million taxeffect) associated with a fiscal unity that is not expected to generatetaxable income to utilize the loss carryforward.

We haveother foreign net operating loss carryforwards with approximately$1.4  million tax effect that expire no sooner than 2015, forwhich no valuation allowance is considerednecessary.

76

----

Table of Contents

11.    Debt

Debtconsists of thefollowing:

|                                              |  |  |                  |   |         |                  |  |  |  |   |         |  |
|----------------------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------|--|
|                                         |  |  | December31, 2006 |   |         | December 31,2005 |
| Short-term                                   |  |  |                  |   |    |                  |  |  |  |   |    |  |
| Checksoutstanding and bankoverdrafts         |  |  |                  | $ | 25.8    |                  |  |  |  | $ | 17.9    |  |
| Notes payableto banks                        |  |  |                  |   | 0.9     |                  |  |  |  |   | 0.9     |  |
| Current maturitiesof long-termdebt           |  |  |                  |   | 23.5    |                  |  |  |  |   | 3.8     |  |
| Securitized tradeaccounts receivablefacility |  |  |                  |   | 100.0   |                  |  |  |  |   | — |  |
|                                         |  |  |                  | $ | 150.2   |                  |  |  |  | $ | 22.6    |  |
| Long-term                                    |  |  |                  |   |    |                  |  |  |  |   |    |  |
| Securitizedtrade accounts receivablefacility |  |  |                  | $ | — |                  |  |  |  | $ | 75.3    |  |
| Term loanA, due November2009                 |  |  |                  |   | 81.0    |                  |  |  |  |   | 107.6   |  |
| Term loan B, dueNovember2010                 |  |  |                  |   | 911.0   |                  |  |  |  |   | 1,081.0 |  |
| Senior notes, dueNovember2011                |  |  |                  |   | 928.1   |                  |  |  |  |   | 900.7   |  |
| Senior subordinatednotes, due November2013   |  |  |                  |   | 728.1   |                  |  |  |  |   | 700.7   |  |
| Unsecured notes,due May  2008                |  |  |                  |   | 27.8    |                  |  |  |  |   | 27.8    |  |
| Seniordiscount notes, due February2014       |  |  |                  |   | 385.6   |                  |  |  |  |   | 353.5   |  |
| Other                                        |  |  |                  |   | 0.5     |                  |  |  |  |   | 1.4     |  |
|                                         |  |  |                  |   | 3,062.1 |                  |  |  |  |   | 3,248.0 |  |
| Less:Currentportion                          |  |  |                  |   | 23.5    |                  |  |  |  |   | 3.8     |  |
|                                         |  |  |                  | $ | 3,038.6 |                  |  |  |  | $ | 3,244.2 |  |
|                                              |

Theweighted-average interest rate on short-term debt was 5.5% and4.6% at December  31,  2006 and December31,  2005, respectively.

In January  2004,Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. (together,the Issuers) issued $694.0  million aggregate principal amount atmaturity of 9.0% senior discount notes due 2014.

Prior to February  1,  2009, interest will accrueon the senior discount notes in the form of an increase in the accretedvalue of such notes. Thereafter, cash interest on the senior discountnotes will accrue and be payable semiannually in arrears onFebruary  1 and August  1 of each year, commencing onAugust  1,  2009, at a rate of 9.0% per annum. Theaccreted value of each note will increase from the date of issuanceuntil February  1,  2009 at a rate of 9.0% perannum, reflecting the accrual of non-cash interest, such that theaccreted value will equal the principal amount at maturity onFebruary  1,  2009.

In December  2004,the Issuers redeemed a portion of the senior discount notes with anaccreted value of $162.3  million using proceeds from the initialpublic offering of common stock of Nalco Holding Company. The Issuerspaid a $14.6  million premium to redeem the notes, and incurred a$13.7  million loss on the extinguishment of these notes, whichis included in other income (expense). After the partial redemption,the aggregate principal amount at maturity of the notes declined to$460.8  million from $694.0  million.

AtDecember  31,  2006, the senior discount notes had anaccreted value of approximately $832.54 per $1,000 principal amount atmaturity of notes, resulting in a total accreted value of $383.7million. The $1.9  million difference between the carrying valueof the notes and the total accreted value represents a premium, whichis being amortized over the term of the notes.

The Issuersdo not generate any revenue, and Nalco Finance Holdings Inc. wasincorporated solely to accommodate the issuance of the notes by NalcoFinance Holdings LLC. All of the Issuers’ consolidated assetsare owned, and all of the Issuers’ consolidated net sales areearned, by its direct and indirect subsidiaries. As of December31,  2006, the Issuers’ subsidiaries had $943.7million of restricted net assets.

The terms of the seniorcredit facilities of Nalco Company, a wholly owned subsidiary of NalcoHoldings LLC, limit the amount of dividends and other transfers byNalco Holdings LLC and its 

77

----

Table of Contents

11.    Debt (continued)

subsidiaries to the Issuers. Further, theterms of the indentures governing the senior notes and seniorsubordinated notes of Nalco Company significantly restrict NalcoCompany and the Issuers’ other subsidiaries from payingdividends or otherwise transferring assets to the Issuers. The abilityof Nalco Company to make such payments is governed by a formula basedon its consolidated net income, as well as meeting certain otherconditions. Notwithstanding such restrictions, such indentures permitan 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.

The Issuers’subsidiaries will be permitted under the terms of the senior creditfacilities and other indebtedness to incur additional indebtedness thatmay severely restrict or prohibit the making of distributions, thepayment of the dividends or the making of loans by such subsidiaries tothe Issuers.

In connection with the Acquisition, NalcoCompany issued senior notes and senior subordinated notes in a privateoffering and entered into senior secured creditfacilities.

On November  4,  2003, NalcoCompany issued senior notes and senior subordinated notes (Notes). Thesenior notes were issued in the principal amount of $665.0million and €200.0  million and bear interest at7.75%. The senior subordinated notes were issued in theprincipal amount of $465.0  million and€200.0  million and bear interest at 8.875%and 9.0%, respectively. Interest is payable semi-annually onMay  15 and November  15. The Notes do not have requiredprincipal payments prior to maturity. Nalco Holdings LLC’s andNalco Company’s direct and indirect domestic subsidiaries thatguarantee its obligations under the senior credit facilities guaranteethe Notes.

At its option, Nalco Company may redeem someor all of the senior notes and senior subordinated notes, beginningNovember  15,  2007 and November  15,  2008,respectively, at the redemption prices set forth below (expressed aspercentages of principal amount), plus accrued interest, if any, ifredeemed during the twelve-month period commencing on November15 of the years set forth below:

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

NalcoCompany may redeem some or all of the senior notes and seniorsubordinated notes, prior to November  15,  2007 andNovember  15,  2008, respectively, at a price equal to theprincipal amount of the notes, plus a specified‘‘make-whole’’ premium.

OnNovember  4,  2003, Nalco Company entered into seniorsecured credit facilities which provided for a revolving creditfacility and three term loans: a $200.0  million term loan A, a€88.0  million term loan A, and a $1,300.0million term loan B. The senior secured credit facilities areunconditionally guaranteed by Nalco Holdings LLC, Nalco Company, andcertain domestic subsidiaries of Nalco Holdings LLC (collectively, theGuarantors). The repayment of these facilities is secured bysubstantially all the assets of the Guarantors, including, but notlimited to, a pledge of their capital stock and 65% of thecapital stock of each non-U.S. subsidiary owned by the Guarantors. Therevolving credit facility, which expires in November  2009,provides for borrowings up to $250  million, a portion of whichmay be made available to Nalco Company’s non-U.S. subsidiaryborrowers in euros. The revolving credit facility also includesborrowing capacity available for letters of credit. The facility bearsinterest at a rate equal to an applicable margin plus, at our option,either (a) a base rate determined by reference to the greater of (1)the prime rate, (2) the three-month certificate of deposit rate plus0.5%, and (3) the federal funds rate plus 0.5% or (b)LIBOR or EURIBOR plus an applicable margin ranging from 1.0% to2.5%, depending on the type of borrowing and our leverage ratio,as defined in the credit agreement.

78

----

Table of Contents

11.    Debt (continued)

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. Weare also required to pay a participation fee in respect of the undrawnportion of the letters of credit, at a rate per annum equal to LIBOR orEURIBOR 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,  2006,we had $27.7  million in outstanding letters of credit, none ofwhich had been drawn against.

Term loan A bears interestat the same rate as the revolving credit facility. The applicablemargin for borrowings under the term loan B facility is 0.75%with respect to base rate borrowings and 1.75% with respect toLIBOR or Eurocurrency borrowings. Unlike the term loan A and therevolving credit facility, term loan B is not subject to adjustmentbased on our leverage ratio (as defined in the credit agreement).

Using mostly cash generated from operations during 2006, wemade scheduled payments under our term loan facilities of $3.2million, and we prepaid an additional $201.9  million of termloan borrowings. We prepaid $99.0  million of term loanborrowings during 2005 using cash generated from operations. Inaddition to the $28.6  million of scheduled payments in 2004under term loan facilities, we repaid an additional $288.3million using cash generated from operations and $92.0  millionin proceeds from an accounts receivable securitization. We also prepaid$15.0  million of revolving credit facility borrowings during theyear ended December  31,  2004.

AtDecember  31,  2006, we had $992.0  millionoutstanding under the senior secured credit facilities with aweighted-average interest rate of 7.08%. The amountsoutstanding, as well as the base rates and applicable margins, atDecember  31,  2006 and December  31,  2005were asfollows:

|                         |  |  |        |        |         |                         |  |  |                  |  |         |        |  |  |                         |  |         |                  |  |  |  |        |         |  |  |  |  |  |      |   |  |  |  |  |      |   |
|-------------------------|--|--|--------|--------|---------|-------------------------|--|--|------------------|--|---------|--------|--|--|-------------------------|--|---------|------------------|--|--|--|--------|---------|--|--|--|--|--|------|---|--|--|--|--|------|---|
|                    |  |  | 2006   |        |         | 2005                    |
|                    |  |  | Amount |        |         | WeightedAverageBaseRate |  |  | ApplicableMargin |  |         | Amount |  |  | WeightedAverageBaseRate |  |         | ApplicableMargin |
| Termloan A (U.S.dollar) |  |  |        |        | — |                         |  |  |                  |  | — |        |  |  |                         |  | — |                  |  |  |  | $      | 31.9    |  |  |  |  |  | 7.25 | % |  |  |  |  | 1.50 | % |
| Termloan A(euro)        |  |  |        | € | 61.6    |                         |  |  |                  |  | 3.75    | %      |  |  |                         |  | 2.25    | %                |  |  |  | € | 64.2    |  |  |  |  |  | 2.53 | % |  |  |  |  | 2.50 | % |
| TermloanB               |  |  |        | $      | 911.0   |                         |  |  |                  |  | 5.43    | %      |  |  |                         |  | 1.75    | %                |  |  |  | $      | 1,081.0 |  |  |  |  |  | 4.34 | % |  |  |  |  | 1.98 | % |
|                         |

The$27.8  million of unsecured notes bear interest at 6.25%with interest payments due on May  15 and November  15. The$0.5  million in other long-term debt at December31,  2006 was borrowed by two foreign subsidiaries. Of thisamount, $0.3  million was borrowed at an interest rate of10.5%. The remaining $0.2  million is non-interestbearing.

The senior secured credit facilities, seniornotes, and senior subordinated notes contain a number of covenantsthat, among other things, restrict, subject to certain exceptions, ourability 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; changeour business; and enter into hedging contracts. In addition, we mustmaintain financial covenants including a maximum total leverage ratio,minimum interest coverage ratio, and maximum capital expenditurelimitation. As of December  31,  2006, we were incompliance with all of these covenants.

79

----

Table of Contents

11.    Debt (continued)

The following table presents theprojected annual maturities of long-term debt for years after2006:

|                       |  |  |  |   |         |  |
|-----------------------|--|--|--|---|---------|--|
| Yearending December31 |  |  |  |   |    |  |
| 2007                  |  |  |  | $ | 23.5    |  |
| 2008                  |  |  |  |   | 56.8    |  |
| 2009                  |  |  |  |   | 29.0    |  |
| 2010                  |  |  |  |   | 911.0   |  |
| 2011                  |  |  |  |   | 928.1   |  |
| Thereafter            |  |  |  |   | 1,188.9 |  |
|                  |  |  |  | $ | 3,137.3 |  |
|                       |

The$75.2  million difference between the total projected annualmaturities of long-term debt of $3,137.3  million and thecarrying value of $3,062.1  million is mostly attributable to the$77.1  million difference between the $460.8  millionaggregate principal amount at maturity of the senior discount notes andtheir accreted value of $383.7  million. Partly offsetting thatdifference is the $1.9  million unamortized premium attributableto those notes.

12.    Leases

We leaseadministrative, research, manufacturing, and warehouse facilities anddata processing and other equipment under non-cancelable leases thatexpire at various dates through 2027. Rent expense totaled $36.7million, $39.1  million and $44.6  million for the yearsended December  31,  2006, 2005 and 2004,respectively.

Future minimum rental payments for operatingleases related to facilities, with initial or remaining terms greaterthan one year, are asfollows:

|                       |  |  |  |   |        |  |
|-----------------------|--|--|--|---|--------|--|
| Yearending December31 |  |  |  |   |   |  |
| 2007                  |  |  |  | $ | 16.5   |  |
| 2008                  |  |  |  |   | 13.3   |  |
| 2009                  |  |  |  |   | 12.6   |  |
| 2010                  |  |  |  |   | 19.2   |  |
| 2011                  |  |  |  |   | 35.7   |  |
| Thereafter            |  |  |  |   | 167.0  |  |
|                  |  |  |  | $ | 264.3  |  |
|                       |

13.    Sale-LeasebackTransaction

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

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

Under the terms of an agreement executedNovember  4,  2003 between Leo Holding Company (Leo), asubsidiary of Suez, and us, we assigned our rights and obligationsunder the lease agreement to Leo. Simultaneously, Suez was releasedfrom its guarantee, and we entered into an agreement with Leo

80

----

Table of Contents

13.    Sale-LeasebackTransaction (continued)

whereby we sublease our 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 our balance sheetas part of the allocation of the Acquisition purchase price. We accountfor the sublease as an operating lease.

On November4,  2003, we entered into a Reimbursement Agreement with Suezwhereby Suez shall reimburse us for all contributions we make to theProfit Sharing, Investment and Pay Deferral Plan Trust (see Note 8).Under the terms of the sublease agreement, if Suez fails to pay any ofthe payments required to be made under the Reimbursement Agreement, weshall have the right to set off such overdue amounts against the rentdue under the subleaseagreement.

81

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans

We have severalnoncontributory, defined benefit pension plans covering most employeesin the U.S. and those with certain foreign subsidiaries. The principaldomestic plan represents approximately 55%  of the benefitobligation and 52% of the total fair value of plan assets atDecember  31,  2006. We also provide a supplementary,nonqualified, unfunded plan for U.S. employees whose pension benefitsexceed ERISA limitations. In addition, we have defined benefitpostretirement plans that provide medical, dental, and life insurancebenefits for substantially all U.S. retirees and eligible dependents.We retain the right to change or terminate thesebenefits.

At the end of 2002, the domestic pension planwas amended such that beginning January  2003, pension benefitsno longer accrue for those participants in the pension plan hired orrehired after October  1999 and for those participants hiredbefore November  1999, but with less than five years of vestingservice at the end of 2002. However, these participants will continueto earn vesting service. For those participants hired beforeNovember  1999 and with more than five years of vesting service,the pension plan was amended to reduce future benefit accruals and toincrease 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. Also, employees with less than five years of service atthe end of 2003 will only be provided access to coverage at retirement;we will not contribute to the cost of the coverage. The plans were alsoamended such that retirees and their dependents are required to pay50% of plan costs in 2005 and beyond.

Beginning in2005, a November  30 measurement date was used for the definedbenefit plans for pension and other postretirement benefits. ADecember  31 measurement date had been used in prioryears.

On December  31,  2006, we adopted therecognition and disclosure provisions of SFAS No. 158, which requiredus to recognize the funded status of our pension and otherpostretirement benefit plans in our consolidated balance sheet atDecember  31,  2006, with a corresponding adjustment toaccumulated other comprehensive income, net of income taxes. Theadjustment to accumulated other comprehensive income at adoptionrepresents the net unrecognized prior service costs and credits and thenet unrecognized actuarial gains and losses which were previouslynetted against the funded status of the plans in our consolidatedbalance sheet pursuant to the provisions of SFAS No. 87 and SFAS No.106. These amounts will be subsequently recognized in net pension andother postretirement benefit expense in accordance with our historicalaccounting policy for amortizing such amounts. Additionally, priorservice costs and credits and actuarial gains and losses that arise insubsequent periods and that are not recognized as net pension and otherpostretirement benefit expense in the same periods will be recognizedas a component of other comprehensive income. Those amounts will besubsequently recognized as a component of net pension and otherpostretirement benefit expense on the same basis as the amountsrecognized in accumulated other comprehensive income at adoption ofSFAS No. 158.

The incremental effects of adopting theprovisions of SFAS No. 158 on our consolidated balance sheet atDecember  31,  2006 are presented in the following table.The adoption of SFAS No. 158 had no effect on our consolidatedstatement of operations for the year ended December  31,2006, or for any prior period presented, and it will not affect ouroperating results in future periods. Had we not been required to adoptSFAS No. 158 at December  31,  2006, we would haverecognized an additional minimum liability pursuant to the provisionsof SFAS No. 87. The effect of recognizing the additional minimumliability is included in the table below in the column labeled‘‘Prior to Adopting SFAS No.158.’’

82

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

|                                      |  |  |                             |   |         |                              |  |  |                               |   |       |   |  |  |  |   |         |  |
|--------------------------------------|--|--|-----------------------------|---|---------|------------------------------|--|--|-------------------------------|---|-------|---|--|--|--|---|---------|--|
|                                 |  |  | Priorto AdoptingSFASNo. 158 |   |         | Effect ofAdoptingSFASNo. 158 |  |  | As Reported atDecember31,2006 |
| Other intangible assets,net          |  |  |                             | $ | 1,170.0 |                              |  |  |                               | $ | (0.5  | ) |  |  |  | $ | 1,169.5 |  |
| Othernoncurrentassets                |  |  |                             |   | 177.1   |                              |  |  |                               |   | (2.2  | ) |  |  |  |   | 174.9   |  |
| Accruedcompensation                  |  |  |                             |   | 104.6   |                              |  |  |                               |   | 4.2   |   |  |  |  |   | 108.8   |  |
| Deferredincometaxes                  |  |  |                             |   | 358.5   |                              |  |  |                               |   | (5.6  | ) |  |  |  |   | 352.9   |  |
| Accruedpensionbenefits               |  |  |                             |   | 408.5   |                              |  |  |                               |   | 22.2  |   |  |  |  |   | 430.7   |  |
| Otherliabilities                     |  |  |                             |   | 271.7   |                              |  |  |                               |   | (21.7 | ) |  |  |  |   | 250.0   |  |
| Accumulatedother comprehensiveincome |  |  |                             |   | 166.6   |                              |  |  |                               |   | (1.8  | ) |  |  |  |   | 164.8   |  |
|                                      |

Thefollowing tables detail the changes in the funded status of definedbenefit pension and other postretirement benefitplans:

|                                                     |  |  |                 |   |         |      |  |  |  |   |         |   |
|-----------------------------------------------------|--|--|-----------------|---|---------|------|--|--|--|---|---------|---|
|                                                |  |  | PensionBenefits |
|                                                |  |  | 2006            |   |         | 2005 |
| Changein benefit obligation                         |  |  |                 |   |    |      |  |  |  |   |    |   |
| Benefitobligation at beginning ofyear               |  |  |                 | $ | 793.1   |      |  |  |  | $ | 775.7   |   |
| Servicecost                                         |  |  |                 |   | 29.5    |      |  |  |  |   | 28.2    |   |
| Interestcost                                        |  |  |                 |   | 42.7    |      |  |  |  |   | 40.2    |   |
| Participantcontributions                            |  |  |                 |   | 1.5     |      |  |  |  |   | 1.4     |   |
| Planamendments                                      |  |  |                 |   | — |      |  |  |  |   | 0.4     |   |
| Settlementsandcurtailments                          |  |  |                 |   | (1.5    | )    |  |  |  |   | — |   |
| Actuarialloss                                       |  |  |                 |   | 13.3    |      |  |  |  |   | 12.7    |   |
| Benefitspaid                                        |  |  |                 |   | (56.9   | )    |  |  |  |   | (35.7   | ) |
| Other                                               |  |  |                 |   | 1.9     |      |  |  |  |   | 9.4     |   |
| Foreigncurrency exchange ratechanges                |  |  |                 |   | 42.8    |      |  |  |  |   | (39.2   | ) |
| Benefitobligation at end ofyear                     |  |  |                 |   | 866.4   |      |  |  |  |   | 793.1   |   |
| Changein plan assets                                |  |  |                 |   |    |      |  |  |  |   |    |   |
| Fair value ofplan assets at beginning ofyear        |  |  |                 |   | 358.9   |      |  |  |  |   | 354.0   |   |
| Actual return onplan assets                         |  |  |                 |   | 34.0    |      |  |  |  |   | 25.7    |   |
| Employercontributions                               |  |  |                 |   | 70.8    |      |  |  |  |   | 30.0    |   |
| Participantcontributions                            |  |  |                 |   | 1.5     |      |  |  |  |   | 1.4     |   |
| Settlements                                         |  |  |                 |   | (1.4    | )    |  |  |  |   | — |   |
| Benefitspaid                                        |  |  |                 |   | (56.9   | )    |  |  |  |   | (35.7   | ) |
| Other                                               |  |  |                 |   | 2.2     |      |  |  |  |   | 3.2     |   |
| Foreigncurrency exchange ratechanges                |  |  |                 |   | 23.1    |      |  |  |  |   | (19.7   | ) |
| Fairvalue of plan assets at end ofyear              |  |  |                 |   | 432.2   |      |  |  |  |   | 358.9   |   |
| Fundedstatus at measurementdate                     |  |  |                 |   | (434.2  | )    |  |  |  |   | (434.2  | ) |
| Employercontributions subsequent to measurementdate |  |  |                 |   | 1.6     |      |  |  |  |   | 0.9     |   |
| Fundedstatus at December31                          |  |  |                 | $ | (432.6  | )    |  |  |  | $ | (433.3  | ) |
|                                                     |

83

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

|                                                     |  |  |                             |   |         |      |  |  |  |   |         |   |
|-----------------------------------------------------|--|--|-----------------------------|---|---------|------|--|--|--|---|---------|---|
|                                                |  |  | OtherPostretirementBenefits |
|                                                |  |  | 2006                        |   |         | 2005 |
| Changein benefit obligation                         |  |  |                             |   |    |      |  |  |  |   |    |   |
| Benefitobligation at beginning ofyear               |  |  |                             | $ | 161.8   |      |  |  |  | $ | 165.6   |   |
| Servicecost                                         |  |  |                             |   | 5.6     |      |  |  |  |   | 5.5     |   |
| Interestcost                                        |  |  |                             |   | 8.2     |      |  |  |  |   | 8.7     |   |
| Participantcontributions                            |  |  |                             |   | 5.9     |      |  |  |  |   | 5.7     |   |
| Medicaresubsidy                                     |  |  |                             |   | 0.4     |      |  |  |  |   | — |   |
| Planamendments                                      |  |  |                             |   | (3.5    | )    |  |  |  |   | (2.2    | ) |
| Actuarial(gain)loss                                 |  |  |                             |   | (4.9    | )    |  |  |  |   | (9.6    | ) |
| Other                                               |  |  |                             |   | 1.9     |      |  |  |  |   | — |   |
| Benefitspaid                                        |  |  |                             |   | (11.6   | )    |  |  |  |   | (11.9   | ) |
| Benefitobligation at end ofyear                     |  |  |                             |   | 163.8   |      |  |  |  |   | 161.8   |   |
| Changein plan assets                                |  |  |                             |   |    |      |
| Fair value of planassets at beginning ofyear        |  |  |                             |   | — |      |  |  |  |   | — |   |
| Employercontributions                               |  |  |                             |   | 5.7     |      |  |  |  |   | 6.2     |   |
| Participantcontributions                            |  |  |                             |   | 5.9     |      |  |  |  |   | 5.7     |   |
| Benefitspaid                                        |  |  |                             |   | (11.6   | )    |  |  |  |   | (11.9   | ) |
| Fairvalue of plan assets at end ofyear              |  |  |                             |   | — |      |  |  |  |   | — |   |
| Fundedstatus at measurementdate                     |  |  |                             |   | (163.8  | )    |  |  |  |   | (161.8  | ) |
| Employercontributions subsequent to measurementdate |  |  |                             |   | 0.6     |      |  |  |  |   | 0.7     |   |
| Fundedstatus at December  31                        |  |  |                             | $ | (163.2  | )    |  |  |  | $ | (161.1  | ) |
|                                                     |

Amountsrecognized in the balance sheets consistof:

|                                       |  |  |                  |   |         |                              |  |  |                  |   |         |                  |  |  |  |   |         |   |  |  |  |   |         |   |
|---------------------------------------|--|--|------------------|---|---------|------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                  |  |  | PensionBenefits  |   |         | Other PostretirementBenefits |
|                                  |  |  | December31, 2006 |   |         | December 31, 2005            |  |  | December 31,2006 |   |         | December 31,2005 |
| Otherassets                           |  |  |                  | $ | 0.5     |                              |  |  |                  | $ | 2.0     |                  |  |  |  | $ | — |   |  |  |  | $ | — |   |
| Accruedcompensation                   |  |  |                  |   | (2.4    | )                            |  |  |                  |   | — |                  |  |  |  |   | (7.8    | ) |  |  |  |   | (6.0    | ) |
| Accruedpension/postretirementbenefits |  |  |                  |   | (430.7  | )                            |  |  |                  |   | (416.4  | )                |  |  |  |   | (155.4  | ) |  |  |  |   | (170.8  | ) |
| Intangibleassets                      |  |  |                  |   | — |                              |  |  |                  |   | 0.5     |                  |  |  |  |   | — |   |  |  |  |   | — |   |
| Accumulatedother comprehensiveincome  |  |  |                  |   | — |                              |  |  |                  |   | 2.6     |                  |  |  |  |   | — |   |  |  |  |   | — |   |
| Netamountrecognized                   |  |  |                  | $ | (432.6  | )                            |  |  |                  | $ | (411.3  | )                |  |  |  | $ | (163.2  | ) |  |  |  | $ | (176.8  | ) |
|                                       |

Thefunded status of defined benefit pension and other postretirement plansat December  31,  2005, is reconciled to the net amountsrecognized in the balance sheet asfollows:

|                                           |  |  |                 |   |        |                             |  |  |  |   |        |   |
|-------------------------------------------|--|--|-----------------|---|--------|-----------------------------|--|--|--|---|--------|---|
|                                      |  |  | PensionBenefits |   |        | OtherPostretirementBenefits |
| Funded status atDecember  31,2005         |  |  |                 | $ | (433.3 | )                           |  |  |  | $ | (161.1 | ) |
| Unrecognizednet actuarial (gains)losses   |  |  |                 |   | 20.6   |                             |  |  |  |   | (0.8   | ) |
| Unrecognized priorservice costs(credits)  |  |  |                 |   | 1.4    |                             |  |  |  |   | (14.9  | ) |
| Netamount recognized at December  31,2005 |  |  |                 | $ | (411.3 | )                           |  |  |  | $ | (176.8 | ) |
|                                           |

84

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

The following amounts that have notyet been recognized in net pension expense and net other postretirementbenefit expense are included in accumulated other comprehensive incomeat December  31,2006:

|                             |  |  |                               |   |       |                         |  |  |  |   |      |   |
|-----------------------------|--|--|-------------------------------|---|-------|-------------------------|--|--|--|---|------|---|
|                        |  |  | NetPrior ServiceCost (Credit) |   |       | Net ActuarialLoss(Gain) |
| Pensionbenefits             |  |  |                               | $ | 1.3   |                         |  |  |  | $ | 27.4 |   |
| Otherpostretirementbenefits |  |  |                               |   | (14.4 | )                       |  |  |  |   | (5.4 | ) |
|                             |

Theaccumulated benefit obligation for all defined benefit pension planswas $723.7  million and $656.7  million at November30,  2006 and 2005, respectively.

The projectedbenefit obligation, accumulated benefit obligation, and fair value ofplan assets for all defined benefit pension plans with projectedbenefit obligations in excess of plan assets were asfollows:

|                               |  |  |      |   |       |      |  |  |  |   |       |  |
|-------------------------------|--|--|------|---|-------|------|--|--|--|---|-------|--|
|                          |  |  | 2006 |   |       | 2005 |
| Projectedbenefitobligation    |  |  |      | $ | 854.0 |      |  |  |  | $ | 781.9 |  |
| Accumulatedbenefit obligation |  |  |      |   | 716.2 |      |  |  |  |   | 649.9 |  |
| Fairvalue of planassets       |  |  |      |   | 419.2 |      |  |  |  |   | 347.3 |  |
|                               |

Theprojected benefit obligation, accumulated benefit obligation, and fairvalue of plan assets for all defined benefit pension plans withaccumulated benefit obligations in excess of plan assets were asfollows:

|                               |  |  |      |   |       |      |  |  |  |   |       |  |
|-------------------------------|--|--|------|---|-------|------|--|--|--|---|-------|--|
|                          |  |  | 2006 |   |       | 2005 |
| Projectedbenefitobligation    |  |  |      | $ | 851.4 |      |  |  |  | $ | 778.9 |  |
| Accumulatedbenefit obligation |  |  |      |   | 714.3 |      |  |  |  |   | 648.1 |  |
| Fairvalue of planassets       |  |  |      |   | 417.1 |      |  |  |  |   | 345.0 |  |
|                               |

Netpension expense for all defined benefit pension plans was comprisedof:

|                                  |  |  |                      |   |       |      |  |  |      |   |         |   |  |  |  |   |         |   |
|----------------------------------|--|--|----------------------|---|-------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                             |  |  | Yearended December31 |
|                             |  |  | 2006                 |   |       | 2005 |  |  | 2004 |
| Servicecost                      |  |  |                      | $ | 29.5  |      |  |  |      | $ | 28.2    |   |  |  |  | $ | 27.2    |   |
| Interestcost                     |  |  |                      |   | 42.7  |      |  |  |      |   | 40.2    |   |  |  |  |   | 39.4    |   |
| Expectedreturn on planassets     |  |  |                      |   | (29.6 | )    |  |  |      |   | (25.1   | ) |  |  |  |   | (26.9   | ) |
| Amortizationof prior servicecost |  |  |                      |   | 0.1   |      |  |  |      |   | 0.1     |   |  |  |  |   | — |   |
| Amortizationof net actuarialloss |  |  |                      |   | 0.5   |      |  |  |      |   | — |   |  |  |  |   | — |   |
| Settlementsandcurtailments       |  |  |                      |   | 1.7   |      |  |  |      |   | 0.5     |   |  |  |  |   | 0.1     |   |
| Netbenefit expense               |  |  |                      | $ | 44.9  |      |  |  |      | $ | 43.9    |   |  |  |  | $ | 39.8    |   |
|                                  |

Netother postretirement benefit expense was comprisedof:

|                                    |  |  |                      |   |      |      |  |  |      |   |         |   |  |  |  |   |         |   |
|------------------------------------|--|--|----------------------|---|------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                               |  |  | Yearended December31 |
|                               |  |  | 2006                 |   |      | 2005 |  |  | 2004 |
| Servicecost                        |  |  |                      | $ | 5.6  |      |  |  |      | $ | 5.5     |   |  |  |  | $ | 6.2     |   |
| Interestcost                       |  |  |                      |   | 8.2  |      |  |  |      |   | 8.7     |   |  |  |  |   | 9.3     |   |
| Amortizationof prior servicecredit |  |  |                      |   | (4.0 | )    |  |  |      |   | (4.0    | ) |  |  |  |   | (1.8    | ) |
| Amortizationof net actuarialgain   |  |  |                      |   | (0.3 | )    |  |  |      |   | — |   |  |  |  |   | — |   |
| Netbenefit expense                 |  |  |                      | $ | 9.5  |      |  |  |      | $ | 10.2    |   |  |  |  | $ | 13.7    |   |
|                                    |

85

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

The following amounts included inaccumulated other comprehensive income at December  31,2006 are expected to be recognized in net pension expense and net otherpostretirement benefit expense during the year ended December31,2007:

|                                        |  |  |                              |   |      |                         |  |  |  |   |         |  |
|----------------------------------------|--|--|------------------------------|---|------|-------------------------|--|--|--|---|---------|--|
|                                   |  |  | Net PriorServiceCost(Credit) |   |      | Net ActuarialLoss(Gain) |
| Net pensionexpense                     |  |  |                              | $ | 0.1  |                         |  |  |  | $ | 0.5     |  |
| Net otherpostretirement benefitexpense |  |  |                              |   | (4.4 | )                       |  |  |  |   | — |  |
|                                        |

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

|                                        |  |  |                 |  |  |                              |  |  |      |  |      |      |  |  |  |  |      |   |
|----------------------------------------|--|--|-----------------|--|--|------------------------------|--|--|------|--|------|------|--|--|--|--|------|---|
|                                   |  |  | PensionBenefits |  |  | Other PostretirementBenefits |
|                                   |  |  | 2006            |  |  | 2005                         |  |  | 2006 |  |      | 2005 |
| Discountrates                          |  |  | 5.65%           |  |  | 5.75%                        |  |  |      |  | 5.65 | %    |  |  |  |  | 5.75 | % |
| Ratesof increase in compensationlevels |  |  | 3.94%           |  |  | 3.94%                        |  |  |      |  | 3.87 | %    |  |  |  |  | 3.87 | % |
|                                        |

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

|                                        |  |  |      |  |      |      |  |  |  |  |      |   |
|----------------------------------------|--|--|------|--|------|------|--|--|--|--|------|---|
|                                   |  |  | 2006 |  |      | 2005 |
| Discountrates                          |  |  |      |  | 4.78 | %    |  |  |  |  | 4.76 | % |
| Ratesof increase in compensationlevels |  |  |      |  | 3.58 | %    |  |  |  |  | 3.36 | % |
|                                        |

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

|                                         |  |  |                      |  |        |      |  |  |      |  |        |   |  |  |  |  |        |   |
|-----------------------------------------|--|--|----------------------|--|--------|------|--|--|------|--|--------|---|--|--|--|--|--------|---|
|                                    |  |  | Yearended December31 |
|                                    |  |  | 2006                 |  |        | 2005 |  |  | 2004 |
| Discountrates                           |  |  |                      |  | 5.75   | %    |  |  |      |  | 5.75   | % |  |  |  |  | 6.00   | % |
| Ratesof increase in compensationlevels: |  |  |                      |  |   |      |  |  |      |  |   |   |  |  |  |  |   |   |
| Pensionbenefits                         |  |  |                      |  | 3.94   | %    |  |  |      |  | 3.94   | % |  |  |  |  | 4.19   | % |
| Otherpostretirementbenefits             |  |  |                      |  | 3.87   | %    |  |  |      |  | 3.87   | % |  |  |  |  | 4.12   | % |
| Expectedlong-term return on planassets  |  |  |                      |  | 8.50   | %    |  |  |      |  | 8.50   | % |  |  |  |  | 8.50   | % |
|                                         |

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

|                                        |  |  |                      |  |      |      |  |  |      |  |      |   |  |  |  |  |      |   |
|----------------------------------------|--|--|----------------------|--|------|------|--|--|------|--|------|---|--|--|--|--|------|---|
|                                   |  |  | Yearended December31 |
|                                   |  |  | 2006                 |  |      | 2005 |  |  | 2004 |
| Discountrates                          |  |  |                      |  | 4.80 | %    |  |  |      |  | 5.17 | % |  |  |  |  | 5.42 | % |
| Ratesof increase in compensationlevels |  |  |                      |  | 3.40 | %    |  |  |      |  | 3.36 | % |  |  |  |  | 3.35 | % |
| Expectedlong-term return on planassets |  |  |                      |  | 6.48 | %    |  |  |      |  | 6.74 | % |  |  |  |  | 8.15 | % |
|                                        |

Theassets in the principal domestic pension plan are invested to obtain areasonable long-term rate of return at an acceptable level ofinvestment risk. Risk tolerance is established through carefulconsideration of plan liabilities, plan funded status, and corporatefinancial condition. Investment risk is measured and monitored on anongoing basis through periodic investment portfolio reviews, liabilitymeasurements and asset/liability studies. A similar approach toassessing investment risk and obtaining reasonable investment returnsis employed for the foreign pension plans.

The assets inthe principal domestic pension plan are diversified across equity,fixed income and alternative investments such as hedge funds andprivate equity. The investment portfolio has target allocations ofapproximately 53% equity, 32% fixed income and 15%alternative investments. Other assets such as real estate may be usedjudiciously to enhance portfolio returns and diversification. Theforeign pension plans have comparable asset allocation to the principaldomestic plan, with some variances for localpractices.

86

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

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 return assumption. Thetotal weighted-average return on each asset class supports thelong-term expected rate of return assumption.

Thepercentages of each major class of plan assets held by the principaldomestic defined benefit pension plan as of the measurement date foreach of the last two years and target allocations were asfollows:

|                        |  |  |        |  |       |                   |  |  |      |  |         |      |  |  |  |  |         |   |  |  |  |  |         |   |
|------------------------|--|--|--------|--|-------|-------------------|--|--|------|--|---------|------|--|--|--|--|---------|---|--|--|--|--|---------|---|
|                   |  |  | Actual |  |       | TargetAllocations |
|                   |  |  | 2006   |  |       | 2005              |  |  | 2006 |  |         | 2005 |
| Equitysecurities       |  |  |        |  | 61.1  | %                 |  |  |      |  | 67.6    | %    |  |  |  |  | 53.0    | % |  |  |  |  | 64.3    | % |
| Fixedincomesecurities  |  |  |        |  | 31.2  |                   |  |  |      |  | 31.7    |      |  |  |  |  | 32.0    |   |  |  |  |  | 35.7    |   |
| Alternativeinvestments |  |  |        |  | 5.9   |                   |  |  |      |  | — |      |  |  |  |  | 15.0    |   |  |  |  |  | — |   |
| Cash                   |  |  |        |  | 1.8   |                   |  |  |      |  | 0.7     |      |  |  |  |  | — |   |  |  |  |  | — |   |
|                   |  |  |        |  | 100.0 | %                 |  |  |      |  | 100.0   | %    |  |  |  |  | 100.0   | % |  |  |  |  | 100.0   | % |
|                        |

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

|                                                  |  |  |        |  |  |        |
|--------------------------------------------------|--|--|--------|--|--|--------|
|                                             |  |  | 2006   |  |  | 2005   |
| Healthcare cost trend rate assumed for nextyear  |  |  |   |  |  |   |
| Pre-age65                                        |  |  | 10%    |  |  | 10%    |
| Post-age65                                       |  |  | 11%    |  |  | 10%    |
| Ultimatetrend rate                               |  |  |   |  |  |   |
| Pre-age65                                        |  |  | 6%     |  |  | 5%     |
| Post-age65                                       |  |  | 7%     |  |  | 5%     |
| Year that therate reaches the ultimate trendrate |  |  | 2011   |  |  | 2011   |
|                                                  |

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 |          |  |  |  | $ | (0.6 | ) |
| Effect onpostretirement benefitobligation             |  |  |                      |   | 5.4 |          |  |  |  |   | (5.2 | ) |
|                                                       |

Weexpect to contribute $69.7  million to our pension plans and$8.1  million to our other defined postretirement benefit plansin 2007.

87

----

Table of Contents

14.    Pensionand Other Postretirement Benefit Plans (continued)

The following estimated futurebenefit payments are expected to be paid in the yearsindicated:

|                 |  |  |                 |   |       |                             |  |  |                 |   |      |     |  |  |  |   |     |  |  |  |  |   |      |  |
|-----------------|--|--|-----------------|---|-------|-----------------------------|--|--|-----------------|---|------|-----|--|--|--|---|-----|--|--|--|--|---|------|--|
|            |  |  |            |   |       | OtherPostretirementBenefits |
| Year            |  |  | PensionBenefits |   |       | Gross                       |  |  | MedicareSubsidy |   |      | Net |
| 2007            |  |  |                 | $ | 43.4  |                             |  |  |                 | $ | 8.7  |     |  |  |  | $ | 0.6 |  |  |  |  | $ | 8.1  |  |
| 2008            |  |  |                 |   | 42.6  |                             |  |  |                 |   | 9.4  |     |  |  |  |   | 0.7 |  |  |  |  |   | 8.7  |  |
| 2009            |  |  |                 |   | 40.2  |                             |  |  |                 |   | 9.9  |     |  |  |  |   | 0.8 |  |  |  |  |   | 9.1  |  |
| 2010            |  |  |                 |   | 43.7  |                             |  |  |                 |   | 10.5 |     |  |  |  |   | 1.0 |  |  |  |  |   | 9.5  |  |
| 2011            |  |  |                 |   | 46.7  |                             |  |  |                 |   | 10.9 |     |  |  |  |   | 1.0 |  |  |  |  |   | 9.9  |  |
| 2012–2016 |  |  |                 |   | 289.6 |                             |  |  |                 |   | 60.0 |     |  |  |  |   | 7.2 |  |  |  |  |   | 52.8 |  |
|                 |

88

----

Table of Contents

15.    EquityCompensation Plans

In December  2004, the FASBissued SFAS No. 123(R), Share Based Payment, which revises SFASNo. 123, Accounting for Stock-Based Compensation, and supersedesAccounting Principles Board Opinion (APB) No. 25, Accounting forStock Issued to Employees. SFAS No. 123(R) requires all share-basedpayments to employees, including grants of employee stock options, tobe recognized in the financial statements based on their fair values.SFAS No. 123(R) was effective for public companies at the beginning ofthe first interim or annual period beginning after June15,  2005. Early adoption was encouraged for periods in whichfinancial statements had not yet been issued. We elected to adopt SFASNo. 123(R) as of October  1,  2004, using themodified-prospective transition method.

Nalco HoldingCompany, our parent company, adopted the Nalco Holding Company 2004Stock Incentive Plan (the ‘‘Plan’’) to aidus in recruiting and retaining key employees, directors and consultantsand to motivate them to exert their best efforts on our behalf. ThePlan permits the grant of stock options, stock appreciation rights,restricted stock and other stock-based awards for up to 7.5million shares of Nalco Holding Company common stock.

Stock option awards granted in 2005 and 2006 have acontractual term of ten years, and vest ratably over four years. Optionawards granted in 2005 began vesting on the first anniversary of thegrant date, and will continue vesting on the anniversary date in thesucceeding three years. Option awards granted in 2006 began vesting onDecember  31,  2006, and will continue vesting onDecember  31 of the following three years. The exercise price ofoption awards is equal to the market price of Nalco Holding Companycommon stock on the date the awards are approved by Nalco HoldingCompany’s Board of Directors. The related grant date isdetermined pursuant to the provisions of SFAS No.123(R).

The fair value of option awards was estimatedusing the Black-Scholes option-pricing model and the followingassumptions:

|                       |  |  |      |  |       |      |  |  |  |  |       |   |
|-----------------------|--|--|------|--|-------|------|--|--|--|--|-------|---|
|                  |  |  | 2006 |  |       | 2005 |
| Expectedlife (years)  |  |  |      |  | 6.25  |      |  |  |  |  | 6.25  |   |
| Risk-freeinterestrate |  |  |      |  | 4.96  | %    |  |  |  |  | 3.88  | % |
| Expectedvolatility    |  |  |      |  | 34.15 | %    |  |  |  |  | 30.30 | % |
| Expecteddividendyield |  |  |      |  | 0.73  | %    |  |  |  |  | 0.50  | % |
|                       |

BecauseNalco Holding Company has been a public company only sinceNovember  2004, there is limited historical data on thevolatility of its common stock. As a result, the expected volatility ofthe 2005 option awards was estimated based on the average volatility ofthe common stock of a peer group of companies. The expected volatilityof the 2006 option awards was estimated using an implied volatilityfrom traded options on Nalco Holding Company common stock. Sincehistorical information concerning option exercise behavior by ouremployees is non-existent and such information is not readily availablefrom a peer group of companies, the expected life was estimated usingthe ‘‘simplified method’’ permitted byStaff Accounting Bulletin No. 107 issued by the SEC.

Thefollowing table summarizes the status of option awards as ofDecember  31,  2006, and changes during the year thenended:

|                                 |  |  |                |  |         |                                 |  |  |                                             |   |         |                          |  |  |          |  |  |  |   |        |  |
|---------------------------------|--|--|----------------|--|---------|---------------------------------|--|--|---------------------------------------------|---|---------|--------------------------|--|--|----------|--|--|--|---|--------|--|
|                            |  |  | NumberofShares |  |         | Weighted- Average ExercisePrice |  |  | Weighted- Average RemainingContractual Term |   |         | Aggregate IntrinsicValue |
| Outstanding at January  1,2006  |  |  |                |  | 76,260  |                                 |  |  |                                             | $ | 17.25   |                          |  |  |     |  |  |  |   |   |  |
| Granted                         |  |  |                |  | 151,923 |                                 |  |  |                                             |   | 17.80   |                          |  |  |     |  |  |  |   |   |  |
| Exercised                       |  |  |                |  | — |                                 |  |  |                                             |   | — |                          |  |  |     |  |  |  |   |   |  |
| Forfeited                       |  |  |                |  | — |                                 |  |  |                                             |   | — |                          |  |  |     |  |  |  |   |   |  |
| Outstandingat December  31,2006 |  |  |                |  | 228,183 |                                 |  |  |                                             |   | 17.62   |                          |  |  | 9.1years |  |  |  | $ | 0.6    |  |
| Exercisableat December  31,2006 |  |  |                |  | 57,046  |                                 |  |  |                                             |   | 17.62   |                          |  |  | 9.1years |  |  |  | $ | 0.2    |  |
|                                 |

89

----

Table of Contents

15.    EquityCompensation Plans (continued)

The weighted-average grant-datefair value of options granted during 2006 and 2005 was $6.48 and $6.22,respectively. No option awards were granted in2004.

Restricted stock awards are granted tonon-management directors and certain key employees. Awards granted tonon-management directors vest approximately two years after the grantdate. Awards granted to key employees vest ratably over a period ofthree to four years following the grant date. The fair value ofrestricted stock awards is determined based on the market price ofNalco Holding Company common stock on the date of grant. Theweighted-average grant-date fair value of restricted stock awardsgranted during 2006 and 2005 was $17.83 and $19.18, respectively. Norestricted stock awards were granted in 2004.

Thefollowing table summarizes the status of restricted stock awards as ofDecember  31,  2006, and changes during the year thenended:

|                                             |  |  |                 |  |        |                                      |  |  |  |   |       |  |
|---------------------------------------------|--|--|-----------------|--|--------|--------------------------------------|--|--|--|---|-------|--|
|                                        |  |  | Numberof Shares |  |        | Weighted- AverageGrant-DateFairValue |
| Restricted stock awards at January1,2006    |  |  |                 |  | 16,000 |                                      |  |  |  | $ | 19.07 |  |
| Granted                                     |  |  |                 |  | 68,643 |                                      |  |  |  |   | 17.83 |  |
| Vested                                      |  |  |                 |  | (6,645 | )                                    |  |  |  |   | 18.81 |  |
| Restrictedstock awards at December  31,2006 |  |  |                 |  | 77,998 |                                      |  |  |  |   | 18.00 |  |
|                                             |

Werecognize compensation expense related to option and restricted stockawards on a straight-line basis over the vesting periods. As ofDecember  31,  2006, there was $1.8  million of totalunrecognized compensation cost related to nonvested option andrestricted stock awards. We expect to recognize that cost over aweighted-average period of 2.4 years. The fair value of restrictedstock awards that vested during 2006 was $0.1  million. Norestricted stock awards vested in 2005, and no option awards werevested or exercised in 2005.

Performance share awardsprovide for the issuance of Nalco Holding Company common stock tocertain key employees if specified performance targets are achieved.The number of common shares that will be issued is dependent uponvesting and actual performance of the Company relative to certainfinancial targets approved by the Nalco Holding Company Board ofDirectors, and could range from 0% to 150% of theperformance shares granted. The performance shares vest over periodsranging from six to thirty months following the grant date. The fairvalue of performance share grants is determined based on the marketprice of Nalco Holding Company common stock on the date of grant, andthe amount of compensation expense recognized reflects estimatedforfeiture rates and management’s assessment of the probabilitythat performance goals will be achieved. We recognize compensationexpense related to performance share grants ratably over the vestingperiods.

The following table summarizes the status ofperformance share awards as of December  31,  2006, andchanges during the year thenended:

|                                              |  |  |                 |  |          |                                      |  |  |  |   |         |  |
|----------------------------------------------|--|--|-----------------|--|----------|--------------------------------------|--|--|--|---|---------|--|
|                                         |  |  | Numberof Shares |  |          | Weighted- AverageGrant-DateFairValue |
| Performance share awards at January1,2006    |  |  |                 |  | —  |                                      |  |  |  | $ | — |  |
| Granted                                      |  |  |                 |  | 334,760  |                                      |  |  |  |   | 16.86   |  |
| Vested                                       |  |  |                 |  | (20,051  | )                                    |  |  |  |   | 16.86   |  |
| Forfeited                                    |  |  |                 |  | (124,114 | )                                    |  |  |  |   | 16.86   |  |
| Performanceshare awards at December  31,2006 |  |  |                 |  | 190,595  |                                      |  |  |  |   | 16.86   |  |
|                                              |

90

----

Table of Contents

15.    EquityCompensation Plans (continued)

There was $2.6  million oftotal unrecognized compensation cost related to performance shareawards as of December  31,  2006, which we expect torecognize over a weighted-average period of 1.7 years. The fair valueof performance share awards that vested during 2006 was $0.4million.

During 2004, Nalco LLC, wholly owned by theSponsors and our indirect parent company at the time, established theNalco LLC 2004 Unit Plan (the ‘‘UnitPlan’’) for purposes of (i) attracting and retainingexceptional officers and other key employees, non-employee directorsand consultants and (ii) enabling such individuals to acquire an equityinterest in Nalco LLC and to participate in its and our long-termgrowth and financial success.

During 2004, Nalco LLCgranted certain of our officers and key employees rights to purchase adesignated number of one or more classes of equity interests(‘‘Units’’) in Nalco LLC. Those officersand key 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.

TheUnits subject to the Unit Plan include class A, class B, class C, andclass D Units. The class A Units were fully vested at the time ofpurchase by an employee and have economic characteristics that aresimilar to those of shares of common stock in a private corporation.The class B, class C, and class D Units are subject to vestingprovisions, meaning that in order for such Units to be entitled todistributions or other benefits, an employee will have to continue toprovide services for a certain period of time. The Units also becomefully vested 18 months after a change in control of the Company,subject to certain other conditions. The Unit Plan was modified in 2006to reduce the vesting period for class C and class D Units and toeliminate provisions that accelerated the vesting of those Units ifspecified EBITDA performance targets were achieved. The modificationsdid not result in incremental compensation expense.

Themethods employed to value the class A Units were the guideline publiccompany method, using multiples of EBITDA and sales, and the incomeapproach, using the discounted free cash flow method. The class B,class C, and class D Units are essentially structured as options andwere valued using the Black-Scholes option pricing model. The expectedoption life, risk-free interest rate, expected annual volatility, anddividend yield used to calculate the fair value of the Units was 6.0years, 3.15%, 19.6%, and 0.0%, respectively. Theexpected annual volatility was estimated using a group of guidelinepublic companies as a proxy, since the Units are not publicly traded. Aminority interest discount and various marketability discounts alsoaffected the fair value of the class B, class C, and class D Units.

As of December  31,  2006, there was $0.2million of total unrecognized compensation cost related to the UnitPlan, which we expect to recognize over a weighted-average period of2.0 years. As a result of the purchase of Units under the Unit Plan bykey officers and employees, we received an additional contribution ofcapital of $8.1  million from Nalco LLC in2004.

Though Nalco Holding Company and Nalco LLCestablished the Plan and the Unit Plan, respectively, we account forthe Plan and the Unit Plan since their economic substance issubstantially the same for our employees and us.

Compensation cost charged to earnings for all equitycompensation plans was $1.8  million, $0.3  million and$0.1  million for 2006, 2005 and 2004, respectively. The totalincome tax benefit recognized in the statement of operations was$0.7  million, $0.1  million and $0.1  million for2006, 2005 and 2004, respectively.

91

----

Table of Contents

16.    Unitholder’sEquity

Unitholder’s equity consists of thefollowing:

|                                       |  |  |                  |   |         |                   |  |  |  |   |         |   |
|---------------------------------------|--|--|------------------|---|---------|-------------------|--|--|--|---|---------|---|
|                                  |  |  | December31, 2006 |   |         | December 31, 2005 |
| Capitalaccount                        |  |  |                  | $ | 743.3   |                   |  |  |  | $ | 741.5   |   |
| Accumulateddeficit                    |  |  |                  |   | (52.9   | )                 |  |  |  |   | (141.2  | ) |
| Accumulatedother comprehensiveincome: |  |  |                  |   |    |                   |  |  |  |   |    |   |
| Minimum pensionliabilityadjustment    |  |  |                  |   | — |                   |  |  |  |   | (1.8    | ) |
| Unrecognizednet prior servicecredits  |  |  |                  |   | 8.6     |                   |  |  |  |   | — |   |
| Unrecognizednet actuariallosses       |  |  |                  |   | (11.4   | )                 |  |  |  |   | — |   |
| Derivatives                           |  |  |                  |   | (1.3    | )                 |  |  |  |   | — |   |
| Currencytranslationadjustments        |  |  |                  |   | 168.9   |                   |  |  |  |   | 81.9    |   |
|                                  |  |  |                  |   | 164.8   |                   |  |  |  |   | 80.1    |   |
|                                  |  |  |                  | $ | 855.2   |                   |  |  |  | $ | 680.4   |   |
|                                       |

Ourcapital structure consists of one class of limited liability companyinterests represented by Units, which are identical with each other inevery respect. At December  31,  2006 and 2005, there were100 Units issued and outstanding, all of which were owned by NalcoHolding Company.

At January  1,  2004, NalcoInvestment Holdings LLC was our sole member and owned all outstandingUnits as a result of its $1,001.9  million capital contributionto us on November  4,  2003. On January  14,2004, Nalco Investment Holdings LLC contributed its 100%interest in Nalco Holdings LLC in exchange for a 100% interestin a newly formed company, Nalco Finance Holdings LLC. As of that date,Nalco Finance Holdings LLC became the parent company of Nalco HoldingsLLC.

During the year ended December  31,2004, we used the net proceeds from the issuance of the senior discountnotes due 2014 to make a return of capital distribution of$446.9  million to our parent, Nalco Investment Holdings LLC,which, in turn, made a distribution to the holders of its membershipinterests.

Also during the year ended December31,  2004, we received additional capital contributions of$186.2  million from our direct parent company, Nalco InvestmentHoldings LLC. Of this amount, $176.9  million resulted from theNovember  2004 public stock offering made by our indirect parentcompany, Nalco Holding Company. The remaining $9.3  millionrepresented capital contributions received by our ultimate parentcompany at the time, Nalco LLC, and was comprised of an additionalequity investment of $1.2  million by Dr. William H. Joyce, ourChairman and Chief Executive Officer, and $8.1  million inproceeds from the sale of equity interests to certain officers and keyemployees under the Nalco LLC 2004 Unit Plan.

InJanuary  2005, Nalco Investment Holdings LLC and Nalco FinanceHoldings II, Inc. were liquidated into their parent company, NalcoHolding Company. As of that date, Nalco Holding Company became thedirect parent company of Nalco Finance Holdings LLC.

17.    FinancialInstruments and Risk Management

We use derivativeinstruments to manage well-defined foreign exchange and energy costexposures. All derivative instruments are recognized in theconsolidated balance sheets at fair value. Changes in the fair value ofderivatives that are not hedges are recognized in income as they occur.If the derivative instruments are designated as hedges, depending ontheir nature, the effective portions of changes in their fair valuesare either offset in income against the changes in the fair values ofthe items being hedged, or reflected initially as a separate componentof shareholders’ equity and subsequently recognized in incomewhen the hedged items are recognized in income. The ineffectiveportions of changes in the fair values of derivative instrumentsdesignated as hedges are immediately recognized in income. Derivativeinstruments are not held or issued for trading or speculativepurposes.

92

----

Table of Contents

17.    FinancialInstruments and Risk Management (continued)

We are exposed to credit-relatedlosses in the event of nonperformance by counterparties to derivativefinancial instruments, but we do not expect any counterparties to failto meet their obligations given their high creditratings.

Foreign Exchange RiskManagement

We have used various types of foreignexchange contracts, including currency swaps and forward exchangecontracts, to manage foreign exchange risk. In addition, we use certainforeign currency debt as a hedge of the foreign currency exposure of aportion of our net investment in foreign operations.

Uponissuance, we designated the €200.0  million seniornotes, the €200.0  million senior subordinatednotes, and the €88.0  million term loan as a hedgeof our net investment in subsidiary companies whose assets,liabilities, and operations are measured using the euro as theirfunctional currency. Because of the high degree of effectivenessbetween the hedging instruments and the exposure being hedged,fluctuations in the value of the euro-denominated debt due to exchangerate changes are offset by changes in the net investment. Accordingly,changes in the value of the euro-denominated debt are recognized inforeign currency translation adjustment, a component of accumulatedother comprehensive income, to offset changes in the value of our netinvestment in subsidiary companies whose financial statements aremeasured using the euro as their functional currency.

Weformally assess, on a quarterly basis, whether the euro-denominateddebt is effective at offsetting changes in the value of the underlyingexposure. No hedge ineffectiveness was recorded in income during 2006,2005 and 2004. Gains and losses from the net investment hedge reportedas a component of other comprehensive income in the foreign currencytranslation adjustment account were asfollows:

|                      |  |  |                      |   |       |      |  |  |      |   |      |  |  |  |  |   |       |   |
|----------------------|--|--|----------------------|---|-------|------|--|--|------|---|------|--|--|--|--|---|-------|---|
|                 |  |  | Yearended December31 |
|                 |  |  | 2006                 |   |       | 2005 |  |  | 2004 |
| Gain(loss) beforetax |  |  |                      | $ | (63.3 | )    |  |  |      | $ | 85.3 |  |  |  |  | $ | (44.7 | ) |
| Incometax(benefit)   |  |  |                      |   | (24.1 | )    |  |  |      |   | 31.9 |  |  |  |  |   | (16.5 | ) |
| Netgain(loss)        |  |  |                      | $ | (39.2 | )    |  |  |      | $ | 53.4 |  |  |  |  | $ | (28.2 | ) |
|                      |

Certainof our forward exchange contracts at December  31,  2006and 2005 were designated as cash flow hedges of the variability of thecash flows from forecasted 2007 royalty payments due to changes inforeign exchange rates.

The fair value of all forwardexchange contracts was a net asset of $0.4  million atDecember  31,  2006, and a net liability of $0.1million at December  31,  2005. We expect to reclassify$0.3  million of pretax gains on cash flow hedges of anticipatedforeign currency transactions from accumulated other comprehensiveincome to earnings during 2007, when the hedged transaction affectsearnings. Amounts reclassified from accumulated other comprehensiveincome are recorded with foreign currency exchange adjustments in otherincome (expense).

Energy Cost RiskManagement

During 2006, we began enteringinto derivative instruments such as commodity forward contracts tomanage our exposure to fluctuations in the cost of natural gas used inour business. These instruments are designated as cash flow hedges,with changes in their fair values included in other comprehensiveincome to the extent the hedges are effective. Amounts included inother comprehensive income are reclassified into cost of product soldin the period during which the hedged transaction is recognized inearnings. Hedge ineffectiveness was immaterial in 2006. The fair valueof these contracts was a net liability of $2.4  million atDecember  31,  2006, and we expect to reclassify$2.4  million of pretax losses on cash flow hedges of anticipated2007 natural gas purchases from accumulated other comprehensive incometo earnings during 2007.

93

----

Table of Contents

18.    FairValue of Financial Instruments

The carrying values ofcash and cash equivalents, trade accounts receivable, accounts payableand short-term debt approximate their fair values at December31,  2006 and 2005, because of the short-term maturities andnature of these balances.

Long-termdebt

The fair value of our senior notes, seniorsubordinated notes and senior discount notes was estimated based ontheir quoted market prices. The carrying value of amounts outstandingunder our senior secured credit facilities is considered to approximatefair value because interest accrues at rates which fluctuate withinterest rate trends. The carrying value of other long-term debtoutstanding, other than the 6.25% fixed rate unsecured notes,also approximates fair value due to the variable nature of theirinterest rates. The fair value of the 6.25% fixed rate unsecurednotes was based on the quoted market price for similar debtinstruments.

The estimated fair value of long-term debt atDecember  31,  2006 and 2005 was $3,117.6  millionand $3,323.1  million, respectively, and the related carryingvalue was $3,038.6  million and $3,244.2  million,respectively.

Derivatives

Thefair values of derivative financial instruments, as disclosed in Note17, were estimated based on current settlement prices and quoted marketprices of comparable contracts and represent their carryingvalues.

19.    Business Optimization Expenses

Wecontinuously redesign and optimize our business and work processes.Business process optimization expenses, representing mostly employeeseverance and related costs, were $9.5  million, $25.6million and $1.7  million for the years ended December31,  2006, 2005 and 2004, respectively.

20.    Summaryof Other Income (Expense)

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

    

|                                                 |  |  |                      |   |         |      |  |  |      |   |         |   |  |  |  |   |       |   |
|-------------------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|-------|---|
|                                            |  |  | Yearended December31 |
|                                            |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| Losson early extinguishment ofdebt              |  |  |                      | $ | — |      |  |  |      | $ | — |   |  |  |  | $ | (13.7 | ) |
| Franchisetaxes                                  |  |  |                      |   | (2.5    | )    |  |  |      |   | (1.4    | ) |  |  |  |   | (2.2  | ) |
| Equityin earnings of unconsolidatedsubsidiaries |  |  |                      |   | 3.5     |      |  |  |      |   | 1.6     |   |  |  |  |   | 3.2   |   |
| Foreigncurrency exchange adjustments            |  |  |                      |   | (3.6    | )    |  |  |      |   | 5.2     |   |  |  |  |   | (1.5  | ) |
| Other income(expense),net                       |  |  |                      |   | (1.7    | )    |  |  |      |   | (1.4    | ) |  |  |  |   | 3.4   |   |
|                                            |  |  |                      | $ | (4.3    | )    |  |  |      | $ | 4.0     |   |  |  |  | $ | (10.8 | ) |
|                                                 |

21.    RelatedParty Transactions

We paid certain costs on behalf ofNalco Holding Company in connection with its initial public offering ofcommon stock in 2004 and a secondary offering in 2005. We had areceivable of $2.9  million and $2.5  million from NalcoHolding Company for these costs at December  31,  2006 andDecember  31,  2005, respectively, which was classifiedwith other noncurrent assets. Interest earned on this receivable was$0.2  million and $0.1  million during the years endedDecember  31,  2006 and 2005, respectively.

Weborrowed certain excess cash amounts from Nalco Holding Company duringthe year ended December  31,  2004, and interest expense onthese borrowings was $0.3  million.

OnNovember  4,  2003, we entered into a Monitoring FeeAgreement with affiliates of the Sponsors for monitoring, advisory andconsulting services in relation to our affairs, including debt andequity 

94

----

Table of Contents

21.    RelatedParty Transactions (continued)

offerings, relationships with bankers andlenders, corporate strategy, acquisitions and dispositions, and othermatters as may be requested. We agreed to pay an annual monitoring feeof at least $10.0  million for these services. The fee could beincreased depending on our earnings. During the year endedDecember  31,  2004, we paid $11.2  million for theseservices.

In connection with the publicoffering of common stock by Nalco Holding Company in November2004, the Monitoring Fee Agreement was amended and restated, pursuantto which we terminated the monitoring services provided by theSponsors’ affiliates. A termination fee of $35.0  millionwas paid to the Sponsors’ affiliates. The amended and restatedagreement provides the Sponsors’ affiliates with a right offirst refusal to provide us with financial advisory services inexchange for mutually agreeable compensation. This right of firstrefusal terminated on February  15,  2007, when theSponsors directly or indirectly held less than 5% of NalcoHolding Company’s outstanding commonstock.

22.    SegmentInformation

We provide 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 ourcustomers to improve production yields, lower manufacturing costs,extend asset lives and maintain environmental standards at costs thatrepresent a small share of their overall productionexpense.

We are organized based on the end markets weserve. The organization is comprised of the following reportablesegments:

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

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

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

Other   –   Thissegment serves the alternative channels to market, supply chainactivities, and certain other operating expenses not allocated to asegment. It also includes our subsidiary in India and the KatayamaNalco joint venture.

We evaluate the performance of oursegments based on ‘‘direct contribution’’,which is defined as net sales, less cost of product sold (excludingvariances to standard costs), selling and service expenses, marketingexpenses, research expenses and ‘‘capitalcharges’’ directly attributable to each segment. Eachsegment is assessed an internal non-GAAP ‘‘capitalcharge’’ based on trade accounts receivable, inventoriesand equipment specifically identifiable to the segment. The capitalcharges included in each segment’s direct contribution areeliminated to arrive at our consolidated direct contribution. There areno intersegment revenues. Our segment reporting was changed in thefirst quarter of 2006 to reflect the aforementioned capital charge inthe reported direct contribution of each segment. Prior year data havebeen reclassified between segments to conform to the current yearpresentation.

95

----

Table of Contents

22.    SegmentInformation (continued)

Net sales by reportable segmentwere asfollows:

|                                     |  |  |                      |   |         |      |  |  |      |   |         |  |  |  |  |   |         |  |
|-------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|---------|--|
|                                |  |  | Yearended December31 |
|                                |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| Industrialand InstitutionalServices |  |  |                      | $ | 1,593.1 |      |  |  |      | $ | 1,482.1 |  |  |  |  | $ | 1,389.1 |  |
| EnergyServices                      |  |  |                      |   | 1,052.2 |      |  |  |      |   | 899.7   |  |  |  |  |   | 806.7   |  |
| PaperServices                       |  |  |                      |   | 721.6   |      |  |  |      |   | 698.1   |  |  |  |  |   | 662.9   |  |
| Other                               |  |  |                      |   | 235.7   |      |  |  |      |   | 232.5   |  |  |  |  |   | 174.6   |  |
| Netsales                            |  |  |                      | $ | 3,602.6 |      |  |  |      | $ | 3,312.4 |  |  |  |  | $ | 3,033.3 |  |
|                                     |

Thefollowing table presents direct contribution by reportable segment andreconciles the total segment direct contribution to earnings (loss)before income taxes and minorityinterests:

|                                                          |  |  |                      |   |         |      |  |  |      |   |         |   |  |  |  |   |        |   |
|----------------------------------------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|--------|---|
|                                                     |  |  | Yearended December31 |
|                                                     |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| Segmentdirectcontribution:                               |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Industrialand InstitutionalServices                      |  |  |                      | $ | 360.9   |      |  |  |      | $ | 322.5   |   |  |  |  | $ | 314.5  |   |
| EnergyServices                                           |  |  |                      |   | 224.1   |      |  |  |      |   | 173.0   |   |  |  |  |   | 156.5  |   |
| PaperServices                                            |  |  |                      |   | 113.8   |      |  |  |      |   | 118.0   |   |  |  |  |   | 138.9  |   |
| Other                                                    |  |  |                      |   | (55.2   | )    |  |  |      |   | (65.9   | ) |  |  |  |   | (76.4  | ) |
| Capitalchargeelimination                                 |  |  |                      |   | 77.1    |      |  |  |      |   | 79.1    |   |  |  |  |   | 72.9   |   |
| Totalsegment directcontribution                          |  |  |                      |   | 720.7   |      |  |  |      |   | 626.7   |   |  |  |  |   | 606.4  |   |
| Expensesnot allocated tosegments:                        |  |  |                      |   |    |      |  |  |      |   |    |   |  |  |  |   |   |   |
| Administrativeexpenses                                   |  |  |                      |   | 208.1   |      |  |  |      |   | 175.2   |   |  |  |  |   | 190.7  |   |
| Amortizationof intangibleassets                          |  |  |                      |   | 70.1    |      |  |  |      |   | 81.6    |   |  |  |  |   | 96.3   |   |
| In-processresearch anddevelopment                        |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 122.3  |   |
| Businessoptimizationexpenses                             |  |  |                      |   | 9.5     |      |  |  |      |   | 25.6    |   |  |  |  |   | 1.7    |   |
| Sponsormonitoringfees                                    |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 11.2   |   |
| Sponsormonitoring agreement terminationfee               |  |  |                      |   | — |      |  |  |      |   | — |   |  |  |  |   | 35.0   |   |
| Operatingearnings(loss)                                  |  |  |                      |   | 433.0   |      |  |  |      |   | 344.3   |   |  |  |  |   | 149.2  |   |
| Otherincome (expense),net                                |  |  |                      |   | (4.3    | )    |  |  |      |   | 4.0     |   |  |  |  |   | (10.8  | ) |
| Interestincome                                           |  |  |                      |   | 9.1     |      |  |  |      |   | 8.5     |   |  |  |  |   | 10.1   |   |
| Interestexpense                                          |  |  |                      |   | (271.8  | )    |  |  |      |   | (258.0  | ) |  |  |  |   | (251.1 | ) |
| Earnings(loss) before income taxes and minorityinterests |  |  |                      | $ | 166.0   |      |  |  |      | $ | 98.8    |   |  |  |  | $ | (102.6 | ) |
|                                                          |

Administrativeexpenses primarily represent the cost of support functions, includinginformation technology, finance, human resources and legal, as well asexpenses for support facilities, executive management and managementincentive plans.

We have a single supply chainorganization that serves all the reportable segments. As such, assetand capital expenditure information by reportable segment has not beenreported and is not available, since we do not produce such informationinternally. In addition, although depreciation expense is a componentof each reportable segment’s direct contribution, it is notdiscretely identifiable.

96

----

Table of Contents

22.    SegmentInformation (continued)

Net sales by geographic region wereasfollows:

|                          |  |  |                      |   |         |      |  |  |      |   |         |  |  |  |  |   |         |  |
|--------------------------|--|--|----------------------|---|---------|------|--|--|------|---|---------|--|--|--|--|---|---------|--|
|                     |  |  | Yearended December31 |
|                     |  |  | 2006                 |   |         | 2005 |  |  | 2004 |
| UnitedStates             |  |  |                      | $ | 1,626.3 |      |  |  |      | $ | 1,494.3 |  |  |  |  | $ | 1,375.8 |  |
| OtherAmericas            |  |  |                      |   | 441.8   |      |  |  |      |   | 380.7   |  |  |  |  |   | 326.6   |  |
| Europe/MiddleEast/Africa |  |  |                      |   | 1,036.0 |      |  |  |      |   | 977.5   |  |  |  |  |   | 979.8   |  |
| Asia/Pacific             |  |  |                      |   | 498.5   |      |  |  |      |   | 459.9   |  |  |  |  |   | 351.1   |  |
|                     |  |  |                      | $ | 3,602.6 |      |  |  |      | $ | 3,312.4 |  |  |  |  | $ | 3,033.3 |  |
|                          |

Long-livedassets by geographic region were asfollows:

|                          |  |  |                  |   |         |                   |  |  |  |   |         |  |
|--------------------------|--|--|------------------|---|---------|-------------------|--|--|--|---|---------|--|
|                     |  |  | December31, 2006 |   |         | December 31, 2005 |
| UnitedStates             |  |  |                  | $ | 2,591.7 |                   |  |  |  | $ | 2,687.6 |  |
| OtherAmericas            |  |  |                  |   | 396.2   |                   |  |  |  |   | 398.9   |  |
| Europe/MiddleEast/Africa |  |  |                  |   | 1,133.9 |                   |  |  |  |   | 1,062.9 |  |
| Asia/Pacific             |  |  |                  |   | 370.2   |                   |  |  |  |   | 356.1   |  |
|                     |  |  |                  | $ | 4,492.0 |                   |  |  |  | $ | 4,505.5 |  |
|                          |

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

23.    Contingenciesand Litigation

Various claims, lawsuits andadministrative proceedings are pending or threatened against us,arising from the ordinary course of business with respect tocommercial, contract, intellectual property, product liability,employee, environmental and other matters. Historically, these mattershave not had a material impact on our consolidated financial position.However, we cannot predict the outcome of any litigation or thepotential for future litigation.

We have been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three pending waste sites wheresome financial contribution is or may be required. These agencies havealso identified many other parties who may be responsible for clean upcosts at these waste disposal sites. We are also remediating a smallground contamination that we discovered at our plant in Colombia, andwe cleaned a raw material spill at our plant near Botany, Australia.Our financial contribution to remediate these sites is not expected tobe material. There has been no significant financial impact on us up tothe present, nor is it anticipated that there will be in the future, asa result of these matters. We have made and will continue to makeprovisions for these costs if our liability becomes probable and whencosts can be reasonably estimated.

Our undiscountedreserves for known environmental clean up costs were $2.3million at December  31,  2006. These environmentalreserves represent our current estimate of our proportional clean-upcosts (and the cost to remediate the Colombia site) and are based uponnegotiation and agreement with enforcement agencies, our previousexperience with respect to clean-up activities, a detailed review by usof known conditions, and information about other PRPs. They are notreduced by any possible recoveries from insurance companies or otherPRPs not specifically identified. Although we cannot determine whetheror not a material effect on future operations is reasonably likely tooccur, given the evolving nature of environmental regulations, webelieve that the recorded reserve levels are appropriate estimates ofthe potential liability. Although settlement will require future cashoutlays, it is not expected that such outlays will materially impactour liquidity position.

Expenditures for the year endedDecember  31,  2006, relating to environmental complianceand clean up activities, were not significant.

97

----

Table of Contents

23.    Contingenciesand Litigation (continued)

We have been named as a defendantin lawsuits based on claimed involvement in the supply of allegedlydefective or hazardous materials and the claimed presence of hazardoussubstances at our plants. The plaintiffs in these cases seek damagesfor alleged personal injury or potential injury resulting from exposureto our products or other chemicals. These matters have had a de minimisimpact on our business historically and we do not anticipate thesematters will present any material risk to our business in the future.Notwithstanding, we cannot predict the outcome of any such lawsuits orthe involvement we might have in these matters in thefuture.

On November  27,  2006, the U.K.Health and Safety Executive (‘‘HSE’’)issued a criminal summons charging our U.K. subsidiary with a violationof the Health and Safety at Work Act. The charge relates to alegionella outbreak that is claimed to have originated at coolingtowers owned by one of the subsidiary’s customers. Thelegionella outbreak is believed to have resulted in two fatalities andmultiple injuries. The customer is also charged.

OnJanuary  2,  2007, the HSE issued a second criminal summonscharging our U.K. subsidiary with a violation of the Health and Safetyat Work Act. The second charge relates to the entry of one of thesubsidiary’s employees into a claimed confined space at acustomer site. The employee claims injuries as a result of entry intothe confined space. The customer is alsocharged.

Beginning on May  16,  2003, wereceived subpoenas from the U.S. Department of Justice for documentsand testimony relating to our storage of claimed hazardous materials,the claimed leakage of wastewater and other matters at our plant inGaryville, Louisiana. We have settled this matter in principal,admitting no fault, but making a payment of less than $0.1million to the Louisiana Department of EnvironmentalQuality.

In the ordinary course of ourbusiness, we are also a party to a number of lawsuits and are subjectto various claims relating to trademarks, employee matters, contracts,transactions, chemicals and other matters, the outcome of which, in ouropinion, should not have a material effect on our consolidatedfinancial position. However, we cannot predict the outcome of anylitigation or the potential for future litigation. Were an unfavorableruling to occur, there exists the possibility of a material adverseimpact on the results of operations for the period in which the rulingoccurs. We maintain accruals where the outcome of the matter isprobable and can be reasonably estimated.

24.    QuarterlyResults of Operations(Unaudited)

|                                                   |  |  |              |   |        |               |  |  |              |   |        |               |  |  |  |   |        |  |  |  |  |   |        |  |
|---------------------------------------------------|--|--|--------------|---|--------|---------------|--|--|--------------|---|--------|---------------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                                              |  |  | FirstQuarter |   |        | SecondQuarter |  |  | ThirdQuarter |   |        | FourthQuarter |
| 2006                                              |  |  |              |   |   |               |  |  |              |   |   |               |  |  |  |   |   |  |  |  |  |   |   |  |
| Netsales                                          |  |  |              | $ | 849.4  |               |  |  |              | $ | 891.0  |               |  |  |  | $ | 915.4  |  |  |  |  | $ | 946.8  |  |
| Costof productsold                                |  |  |              |   | 471.1  |               |  |  |              |   | 495.6  |               |  |  |  |   | 502.3  |  |  |  |  |   | 507.5  |  |
| Businessoptimizationexpenses                      |  |  |              |   | 3.8    |               |  |  |              |   | 1.8    |               |  |  |  |   | 3.0    |  |  |  |  |   | 0.9    |  |
| Earningsbefore income taxes and minorityinterests |  |  |              |   | 18.5   |               |  |  |              |   | 37.8   |               |  |  |  |   | 48.6   |  |  |  |  |   | 61.1   |  |
| Netearnings                                       |  |  |              |   | 7.6    |               |  |  |              |   | 19.0   |               |  |  |  |   | 27.5   |  |  |  |  |   | 34.2   |  |
|                                                   |

|                                                          |  |  |              |   |        |                  |  |  |              |   |        |               |  |  |  |   |        |  |  |  |  |   |        |  |
|----------------------------------------------------------|--|--|--------------|---|--------|------------------|--|--|--------------|---|--------|---------------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                                                     |  |  | FirstQuarter |   |        | SecondQuarter(1) |  |  | ThirdQuarter |   |        | FourthQuarter |
| 2005                                                     |  |  |              |   |   |                  |  |  |              |   |   |               |  |  |  |   |   |  |  |  |  |   |   |  |
| Netsales                                                 |  |  |              | $ | 777.6  |                  |  |  |              | $ | 836.3  |               |  |  |  | $ | 834.9  |  |  |  |  | $ | 863.6  |  |
| Costof productsold                                       |  |  |              |   | 412.8  |                  |  |  |              |   | 480.3  |               |  |  |  |   | 457.9  |  |  |  |  |   | 481.2  |  |
| Businessoptimizationexpenses                             |  |  |              |   | 0.8    |                  |  |  |              |   | 17.0   |               |  |  |  |   | 3.5    |  |  |  |  |   | 4.3    |  |
| Earnings(loss) before income taxes and minorityinterests |  |  |              |   | 23.1   |                  |  |  |              |   | (7.8   | )             |  |  |  |   | 38.3   |  |  |  |  |   | 45.2   |  |
| Netearnings(loss)                                        |  |  |              |   | 10.0   |                  |  |  |              |   | (5.5   | )             |  |  |  |   | 13.7   |  |  |  |  |   | 20.6   |  |
|                                                          |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                             |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Earnings(loss) before income taxes and minority interests include a$10.7  million charge ($6.6  million after tax) forinventory write-offs. |

98

----

Table of Contents

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

None.

|                |                        |
|----------------|------------------------|
| ITEM 9A.  | CONTROLS ANDPROCEDURES |

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation ofdisclosure controls and procedures. |

Our chief executiveofficer and chief financial officer, after evaluating the effectivenessof our ‘‘disclosure controls andprocedures’’ (as defined in the Securities Exchange Actof 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period,have concluded that our disclosure controls and procedures wereeffective and designed to ensure that material information relating toNalco Finance Holdings LLC and its consolidated subsidiaries would bemade known to them by others within those entities as appropriate toallow timely decisions regarding requireddisclosures.

|           |                                                                       |
|-----------|-----------------------------------------------------------------------|
| (b)  | Management’sReport on Internal Control over Financial Reporting |

Ourmanagement is responsible for establishing and maintaining adequateinternal control over financial reporting, as such term is defined inSecurities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f). Underthe supervision and with the participation of our management, includingthe Chief Executive Officer and Chief Financial Officer, an evaluationof the effectiveness of our internal control over financial reportingwas conducted as of December  31,  2006 based on theframework in Internal Control Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission(COSO). Based on that evaluation, management concluded that ourinternal control over financial reporting was effective as ofDecember  31,  2006.

Management’s assessment of the effectivenessof our internal control over financial reporting as of December31,  2006 has been audited by Ernst & Young LLP, anindependent registered public accounting firm, as stated in theirreport, which is included in Item8.

|           |                                                       |
|-----------|-------------------------------------------------------|
| (c)  | Changes in internal controlsover financial reporting. |

There were no changes in ourinternal controls over financial reporting that occurred during thefourth quarter of 2006 that have materially affected, or are reasonablylikely to materially affect, our internal controls over financialreporting.

|                 |                  |
|-----------------|------------------|
| ITEM 9B.   | OTHERINFORMATION |

There was no information required to bedisclosed in a report on Form 8-K during the fourth quarter of 2006that was not previously reported.

99

----

Table of Contents

PARTIII

|                 |                                                       |
|-----------------|-------------------------------------------------------|
| ITEM 10.   | DIRECTORS, EXECUTIVE OFFICERSAND CORPORATE GOVERNANCE |

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

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

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

|                |                                                                                               |
|----------------|-----------------------------------------------------------------------------------------------|
| ITEM 12.  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS |

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

|                |                                                                          |
|----------------|--------------------------------------------------------------------------|
| ITEM 13.  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, ANDDIRECTOR INDEPENDENCE |

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

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

The following table presents fees forprofessional services rendered by Ernst & Young LLP for the auditof our annual financial statements for 2006 and 2005, and fees billedfor audit-related services, tax services and all other servicesrendered by Ernst & Young LLP for 2006 and 2005.

|                             |  |  |      |   |         |      |  |  |  |   |         |  |
|-----------------------------|--|--|------|---|---------|------|--|--|--|---|---------|--|
| (dollarsinmillions)         |  |  | 2006 |   |         | 2005 |
| Auditfees (1)               |  |  |      | $ | 5.4     |      |  |  |  | $ | 5.6     |  |
| Audit-relatedfees(2)        |  |  |      |   | — |      |  |  |  |   | 0.1     |  |
| Auditand audit-related fees |  |  |      |   | 5.4     |      |  |  |  |   | 5.7     |  |
| Taxfees (3)                 |  |  |      |   | 0.1     |      |  |  |  |   | 0.2     |  |
| All otherfees               |  |  |      |   | — |      |  |  |  |   | — |  |
| Totalfees(4)                |  |  |      | $ | 5.5     |      |  |  |  | $ | 5.9     |  |
|                             |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Auditfees for 2006 and 2005 include fees for the audit of the annualconsolidated financial statements, reviews of the condensedconsolidated financial statements included in our quarterly reports,and statutory audits. Additionally, audit fees for 2006 and 2005include fees for reviews of registration statements and issuances ofrelated letters to underwriters andconsents. |

|     |                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------|
| (2) | Audit-related fees for 2005consisted primarily of fees for general assistance related to Section404 of the Sarbanes-Oxley Act. |

|     |                                                                                   |
|-----|-----------------------------------------------------------------------------------|
| (3) | Tax fees for2006 and 2005 consisted principally of fees for tax advisoryservices. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (4) | Ernst & Young LLP full time,permanent employees performed all of the professional servicesdescribed in this chart. |

Our Pre-Approval Policysetting forth our policy for pre-approval of audit and non-auditservices can be found at our Web site at www.nalco.com.

Tosafeguard the continued independence of the independent auditors, theAudit Committee has adopted a policy that prevents the independentauditors from providing services to us that are prohibited underSection 10A(g) of the Securities Exchange Act of 1934, asamended. This policy also provides that independent auditors are onlypermitted to provide services to us that have been pre-approved by theAudit Committee. Pursuant to the policy, all audit services requireadvance approval by the Audit Committee. All other services by theindependent auditors that fall within certain designated dollarthresholds, both per engagement as well as annual aggregate, have been

100

----

Table of Contents

pre-approved under the policy. Differentdollar thresholds apply to the three categories of pre-approvedservices specified in the policy (Audit-Related services, Tax servicesand Other services). All services that exceed the dollar thresholdsmust be approved in advance by the Audit Committee. Pursuant toapplicable provisions of the Securities Exchange Act of 1934, asamended, the Audit Committee has delegated approval authority to theChairman of the Audit Committee, who is an independent director. TheChairman has presented all approval decisions to the full AuditCommittee.

101

----

Table of Contents

PART IV

|                |                                        |
|----------------|----------------------------------------|
| ITEM 15.  | EXHIBITS, FINANCIAL STATEMENTSCHEDULES |

(a) (1)    FinancialStatements

The following consolidated financialstatements of Nalco Finance Holdings LLC and subsidiaries are filed aspart of this report under Item 8 — Financial Statements andSupplementary Data:

Consolidated Balance Sheets —December  31,  2006 and 2005

ConsolidatedStatements of Operations — Years ended December31,  2006, 2005 and 2004

Consolidated Statementsof Unitholder’s Equity — Years ended December31,  2006, 2005 and 2004

Consolidated Statementsof Cash Flows — Years ended December  31,  2006,2005 and 2004

Notes to Consolidated FinancialStatements

(a) (2)    Financial statementschedules:

Schedule I – Condensed FinancialInformation

Schedule II – Valuation and QualifyingAccounts

All other financial statement schedules are notrequired under the relevant instructions or are inapplicable andtherefore have been omitted.

102

----

Table of Contents

Schedule I – Condensed FinancialInformation

Nalco Finance Holdings LLC (Parent CompanyOnly)

Condensed Balance SheetsDecember  31,2006 and 2005(dollars inmillions)

|                                               |  |  |                  |   |         |                   |  |  |  |   |         |  |
|-----------------------------------------------|--|--|------------------|---|---------|-------------------|--|--|--|---|---------|--|
|                                          |  |  | December31, 2006 |   |         | December 31, 2005 |
| Investment insubsidiaries                     |  |  |                  | $ | 1,240.1 |                   |  |  |  | $ | 1,033.2 |  |
| Debtissuecost                                 |  |  |                  |   | 0.7     |                   |  |  |  |   | 0.7     |  |
| TotalAssets                                   |  |  |                  | $ | 1,240.8 |                   |  |  |  | $ | 1,033.9 |  |
| Long-termdebt                                 |  |  |                  | $ | 385.6   |                   |  |  |  | $ | 353.5   |  |
| Totalunitholder’sequity                 |  |  |                  |   | 855.2   |                   |  |  |  |   | 680.4   |  |
| TotalLiabilities and Unitholder’sEquity |  |  |                  | $ | 1,240.8 |                   |  |  |  | $ | 1,033.9 |  |
|                                               |

Seeaccompanying note to condensed financialstatements.

103

----

Table of Contents

Schedule I – Condensed FinancialInformation – Continued

Nalco Finance Holdings LLC(Parent Company Only)

Condensed Statements ofOperationsYear ended December  31,  2006, 2005 and2004 (dollars inmillions)

|                                              |  |  |                        |   |         |      |  |  |      |   |         |   |  |  |  |   |         |   |
|----------------------------------------------|--|--|------------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                                         |  |  | Yearended December  31 |
|                                         |  |  | 2006                   |   |         | 2005 |  |  | 2004 |
| NetSales                                     |  |  |                        | $ | — |      |  |  |      | $ | — |   |  |  |  | $ | — |   |
| Operatingcosts andexpenses:                  |  |  |                        |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Selling,administrative, and researchexpenses |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | 0.1     |   |
| Totaloperating costs andexpenses             |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | 0.1     |   |
| Operatingearnings(loss)                      |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (0.1    | ) |
| Equityin earnings (losses) ofsubsidiaries    |  |  |                        |   | 120.4   |      |  |  |      |   | 68.2    |   |  |  |  |   | (104.2  | ) |
| Losson early repayment ofdebt                |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (13.7   | ) |
| Interestexpense                              |  |  |                        |   | (32.1   | )    |  |  |      |   | (29.4   | ) |  |  |  |   | (37.9   | ) |
| Earnings(loss) before incometaxes            |  |  |                        |   | 88.3    |      |  |  |      |   | 38.8    |   |  |  |  |   | (155.9  | ) |
| Incometax provision(benefit)                 |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | — |   |
| Netearnings(loss)                            |  |  |                        | $ | 88.3    |      |  |  |      | $ | 38.8    |   |  |  |  | $ | (155.9  | ) |
|                                              |

Seeaccompanying note to condensed financialstatements.

104

----

Table of Contents

Schedule I – Condensed FinancialInformation – Continued

Nalco Finance Holdings LLC(Parent Company Only)

Condensed Statements of CashFlowsYear ended December  31,  2006, 2005 and2004 (dollars inmillions)

|                                                    |  |  |                        |   |         |      |  |  |      |   |         |   |  |  |  |   |         |   |
|----------------------------------------------------|--|--|------------------------|---|---------|------|--|--|------|---|---------|---|--|--|--|---|---------|---|
|                                               |  |  | Yearended December  31 |
|                                               |  |  | 2006                   |   |         | 2005 |  |  | 2004 |
| Operatingactivities                                |  |  |                        |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Netearnings(loss)                                  |  |  |                        | $ | 88.3    |      |  |  |      | $ | 38.8    |   |  |  |  | $ | (155.9  | ) |
| Non-cashadjustments                                |  |  |                        |   | (88.3   | )    |  |  |      |   | (38.8   | ) |  |  |  |   | 155.8   |   |
| Netcash used for operatingactivities               |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (0.1    | ) |
| Investingactivities                                |  |  |                        |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Acquisitionof Ondeo NalcoGroup                     |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | — |   |
| Investmentinsubsidiaries                           |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (11.0   | ) |
| Netcash provided by (used for) investingactivities |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (11.0   | ) |
|                                               |  |  |                        |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Financingactivities                                |  |  |                        |   |    |      |  |  |      |   |    |   |  |  |  |   |    |   |
| Capitalcontributions (distributions),net           |  |  |                        |   |    |      |  |  |      |   | — |   |  |  |  |   | (260.7  | ) |
| Proceedsfrom long-termdebt                         |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | 449.9   |   |
| Paymentsof long-termdebt                           |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (162.3  | ) |
| Other                                              |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | (15.8   | ) |
| Netcash provided by financingactivities            |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | 11.1    |   |
| Increaseincash                                     |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | — |   |
| Cashat beginning ofperiod                          |  |  |                        |   | — |      |  |  |      |   | — |   |  |  |  |   | — |   |
| Cashat the end ofperiod                            |  |  |                        | $ | — |      |  |  |      | $ | — |   |  |  |  | $ | — |   |
|                                                    |

Seeaccompanying note to condensed financialstatements.

105

----

Table of Contents

ScheduleI – Condensed Financial Information –Continued

Nalco Finance Holdings LLC (Parent CompanyOnly)

Note to Condensed FinancialStatementsDecember  31,  2006

1.    Basis ofPresentation

Under the terms of agreements governingindebtedness of certain subsidiaries of Nalco Finance Holdings LLC (the‘‘Company’’), such subsidiaries arerestricted from making dividend payments, loans or advances to theCompany. Although the Company was not formed until January  2004,if the Company had been in existence as of December  31,2003, these restrictions would have resulted in the restricted netassets (as defined in Rule 4-03(e)(3) of Regulation S-X) of theCompany’s subsidiaries exceeding 25% of the consolidatednet assets of the Company and its subsidiaries. Schedule I presents thecondensed financial information of the Company as if it had been inexistence as of December  31,  2003. Schedule I is derivedfrom the financial statements of Nalco Holdings LLC, which was theprevious parent company as of December  31,  2003, whichNalco Finance Holdings LLC owns 100% subsequent toJanuary  14,  2004.

The unaudited financialstatements for Nalco Finance Holdings LLC (Parent Company Only)summarize the results of operations and cash flows for the years endedDecember  31,  2006, 2005 and 2004, and the financialposition as of December  31,  2006 and 2005. In thesestatements, the Company’s investment in subsidiaries is statedat cost plus equity in undistributed earnings of subsidiaries since thedate of acquisition, November  4,  2003. TheCompany’s share of net income of its unconsolidated subsidiariesis included in consolidated income using the equity method. The NalcoFinance Holdings LLC statements should be read in conjunction with theconsolidated financial statements of Nalco Finance Holdings LLC andsubsidiaries.

106

----

Table of Contents

Schedule II – Valuation andQualifying AccountsYears Ended December  31,  2006,2005 and2004

|                                      |  |  |                              |   |        |                             |  |  |                                |   |        |                                 |  |  |       |   |         |                       |  |  |  |   |        |   |  |  |  |   |         |      |  |  |  |   |        |  |
|--------------------------------------|--|--|------------------------------|---|--------|-----------------------------|--|--|--------------------------------|---|--------|---------------------------------|--|--|-------|---|---------|-----------------------|--|--|--|---|--------|---|--|--|--|---|---------|------|--|--|--|---|--------|--|
|                                 |  |  |                         |   |        | Additions                   |  |  | OtherChangesIncrease(Decrease) |   |        |                            |
| (dollarsin millions)                 |  |  | Balance atBeginningof Period |   |        | Charged toCosts andExpenses |  |  | ChargedtoOtherAccounts         |   |        | Currency TranslationAdjustments |  |  | Other |   |         | Balance atEndofPeriod |
| Year Ended December 31,2006          |  |  |                              |   |   |                             |  |  |                                |   |   |                                 |  |  |       |   |    |                       |  |  |  |   |   |   |  |  |  |   |    |      |  |  |  |   |   |  |
| Allowancefor doubtfulaccounts        |  |  |                              | $ | 16.6   |                             |  |  |                                | $ | 5.1    |                                 |  |  |       | $ | — |                       |  |  |  | $ | 1.1    |   |  |  |  | $ | (3.8    | )(1) |  |  |  | $ | 19.0   |  |
| Deferredtax asset valuationallowance |  |  |                              |   | 51.4   |                             |  |  |                                |   | (2.4   | )                               |  |  |       |   | 22.1    | (2)                   |  |  |  |   | 4.1    |   |  |  |  |   | — |      |  |  |  |   | 75.2   |  |
| YearEnded December  31,  2005        |  |  |                              |   |   |                             |  |  |                                |   |   |                                 |  |  |       |   |    |                       |  |  |  |   |   |   |  |  |  |   |    |      |  |  |  |   |   |  |
| Allowancefor doubtfulaccounts        |  |  |                              | $ | 21.1   |                             |  |  |                                | $ | 2.8    |                                 |  |  |       | $ | — |                       |  |  |  |   | (0.9   | ) |  |  |  |   | (6.4    | )(1) |  |  |  | $ | 16.6   |  |
| Deferredtax asset valuationallowance |  |  |                              |   | 44.1   |                             |  |  |                                |   | (1.8   | )                               |  |  |       |   | 11.9    | (3)                   |  |  |  |   | (2.8   | ) |  |  |  |   | — |      |  |  |  |   | 51.4   |  |
| YearEnded December  31,  2004        |  |  |                              |   |   |                             |  |  |                                |   |   |                                 |  |  |       |   |    |                       |  |  |  |   |   |   |  |  |  |   |    |      |  |  |  |   |   |  |
| Allowancefor doubtfulaccounts        |  |  |                              | $ | 21.0   |                             |  |  |                                | $ | 2.9    |                                 |  |  |       | $ | — |                       |  |  |  |   | 0.6    |   |  |  |  |   | (3.4    | )(1) |  |  |  | $ | 21.1   |  |
| Deferredtax asset valuationallowance |  |  |                              |   | 35.6   |                             |  |  |                                |   | 0.2    |                                 |  |  |       |   | 3.7     | (2)                   |  |  |  |   | 4.6    |   |  |  |  |   | — |      |  |  |  |   | 44.1   |  |
|                                      |

|  |
|--|
|  |  |
|  |

|     |                                     |
|-----|-------------------------------------|
| (1) | Accountwrite-offs net ofrecoveries. |

|     |                                           |
|-----|-------------------------------------------|
| (2) | Reclassification from deferredtax assets. |

|     |                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Additional allowance resultingfrom the Acquisition charged to goodwill of $0.6 and reclassificationfrom deferred tax assets of $11.3. |

107

----

Table of Contents

|              |                                                            |
|--------------|------------------------------------------------------------|
| (a)(3)  | Exhibitsrequired 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 is incorporated herein by reference from Exhibit 2.1 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.1           |  |  | Certificateof Formation of Nalco Finance Holdings LLC, which is incorporatedherein by reference from Exhibit 3.1 on Form S-4 of Nalco FinanceHoldings LLC and Nalco Finance Holdings, Inc. filed on September23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.2           |  |  | LimitedLiability Agreement of Nalco Finance Holdings LLC, which isincorporated herein by reference from Exhibit 3.2 on Form S-4 of NalcoFinance Holdings LLC and Nalco Finance Holdings, Inc. filed onSeptember  23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.3           |  |  | Certificateof Incorporation of Nalco Finance Holdings, Inc., which is incorporatedherein by reference from Exhibit 3.3 on Form S-4 of Nalco FinanceHoldings LLC and Nalco Finance Holdings, Inc. filed on September23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.4           |  |  | By-lawsof Nalco Finance Holdings, Inc., which is incorporated herein byreference from Exhibit 3.4 on Form S-4 of Nalco Finance Holdings LLCand Nalco Finance Holdings, Inc. filed on September  23,2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.1           |  |  | SeniorDiscount Notes Indenture, dated as of January  21,  2004among Nalco Finance Holdings LLC, Nalco Finance Holdings Inc. and TheBank of New York, as Trustee, which is incorporated herein by referencefrom Exhibit 4.1 on Form S-4 of Nalco Finance Holdings LLC and NalcoFinance Holdings, Inc. filed on September  23,  2004 (FileNo.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.2           |  |  | SeniorDiscount Notes Registration Rights Agreement, dated as ofJanuary  21,  2004, among Nalco Finance Holdings LLC, NalcoFinance Holdings Inc. and Goldman, Sachs & Co., which isincorporated herein by reference from Exhibit 4.2 on Form S-4 of NalcoFinance Holdings LLC and Nalco Finance Holdings, Inc. filed onSeptember  23,  2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1          |  |  | CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBook Managers, which is incorporated herein by reference from Exhibit10.1 of the Registration Statement on Form S-4 of Nalco Company filedon May  17,  2004 (File No.  333-115560). |
| 10.2          |  |  | U.S. Guarantee andCollateral Agreement, dated as of November  4,  2003, amongNalco Holdings LLC, Nalco Company, each domestic subsidiary of NalcoHoldings LLC named therein and Citicorp North America, Inc., asCollateral Agent, which is incorporated herein by reference fromExhibit 10.2 of the Registration Statement on Form S-4 of Nalco Companyfiled on May  17,  2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|               |

108

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------------|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.3          |  |  | GuaranteeAgreement, dated as of August  31,  2003, between Suez andBlackstone/Neptune Acquisition Company L.L.C., which is incorporatedherein by reference from Exhibit 10.3 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                                  |
| 10.4          |  |  | Non-CompetitionAgreement, dated as of November  4,  2003 between Suez andBlackstone/Neptune Acquisition Company L.L.C., which is incorporatedherein by reference from Exhibit 10.4 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                            |
| 10.5          |  |  | ReimbursementAgreement, dated as of November  4,  2003 between Suez andNalco Company, which is incorporated herein by reference from Exhibit10.5 of the Registration Statement on Form S-4 of Nalco Company filedon May  17,  2004 (File No.333-115560).                                                                                                                                              |
| 10.6          |  |  | SubleaseAgreement, dated as of November  4,  2003 between LeoHolding Company, as sublandlord and Ondeo Nalco Company, as subtenant,which is incorporated herein by reference from Exhibit 10.6 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                                                                  |
| 10.7          |  |  | TransactionFee Agreement, dated as of November  4,  2003, among NalcoCompany, Goldman, Sachs & Co., Apollo Management V, L.P., andBlackstone Management Partners IV L.L.C., which is incorporated hereinby reference from Exhibit 10.7 of the Registration Statement on FormS-4 of Nalco Company filed on May  17,  2004 (FileNo.333-115560).                                                     |
| 10.8          |  |  | MonitoringFee Agreement, dated as of November  4,  2003, betweenNalco Company, Blackstone Management Partners IV L.L.C., ApolloManagement V, L.P. and Goldman, Sachs & Co., which is incorporatedherein by reference from Exhibit 10.8 of the Registration Statement onForm S-4 of Nalco Company filed on May  17,  2004 (FileNo.333-115560).                                                     |
| 10.9          |  |  | AmendmentNo. 1, dated as of November  4,  2003 to the Monitoring FeeAgreement, dated as of November  4,  2003, among NalcoCompany, Blackstone Management Partners IV L.L.C., Apollo Management V,L.P. and Goldman, Sachs & Co. which is incorporated herein byreference from Exhibit 10.9 of the Registration Statement on Form S-4of Nalco Company filed on May  17,  2004 (File No.333-115560). |
| 10.10         |  |  | SponsorServices Agreement, dated as of November  16,  2004,amending and restating the Monitoring Fee Agreement, among NalcoCompany, Blackstone Management Partners IV L.L.C., Apollo Management V,L.P. and Goldman, Sachs & Co., which is incorporated herein byreference from Exhibit 10.2 on Form 8-K of Nalco Holding Company filedon November  18,  2004 (FileNo. 001-32342).            |
| 10.11         |  |  | SeveranceAgreement, effective as of January  1,  2004, between NalcoCompany and William J. Roe, which is incorporated herein by referencefrom Exhibit 10.10 of Amendment No. 2 to the Registration Statement onForm S-4 of Nalco Company filed on August  11,  2004 (FileNo.333-115560).                                                                                                              |
| 10.12         |  |  | EmploymentAgreement, effective as of November  1,  2003, betweenNalco Company and Bradley J. Bell, which is incorporated herein byreference from Exhibit 10.11 of the Registration Statement on Form S-4of Nalco Company filed on May  17,  2004 (File No.333-115560).                                                                                                                                |
| 10.13*        |  |  | SeveranceAgreement, effective as of July  1,  2005, between NalcoCompany and Gregory N. Nelson.                                                                                                                                                                                                                                                                                                       |
|               |

109

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                                   |
|---------------|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.14         |  |  | ReceivablesPurchase Agreement, dated as of June  25,  2004, amongNalco Company, Nalco Energy Services, L.P. and Nalco Receivables LLC,which is incorporated herein by reference from Exhibit 10.16 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August  11,  2004 (File No.333-115560).                                                                   |
| 10.15         |  |  | ReceivablesTransfer Agreement, dated as of June  25,  2004, amongNalco Receivables LLC, Nalco Company, JPMorgan Chase Bank and theseveral transferees and funding agents party hereto from time to time,which is incorporated herein by reference from Exhibit 10.17 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August  11,  2004 (File No.333-115560). |
| 10.16         |  |  | EmploymentAgreement, dated as of August  3,  2004, between Nalco LLCand William H. Joyce, which is incorporated herein by reference fromExhibit 10.18 of Amendment No. 2 to the Registration Statement on FormS-4 of Nalco Company filed on August  11,  2004 (File No.333-115560).                                                                                                               |
| 10.17         |  |  | NalcoLLC 2004 Unit Plan, which is incorporated herein by reference fromExhibit 10.24 of the Registration Statement on Form S-1 of NalcoHolding Company filed on August  26,  2004 (FileNo. 333-118583).                                                                                                                                                                                 |
| 10.18         |  |  | NalcoLLC Limited Liability Company Operating Agreement, dated May17,  2004, which is incorporated herein by reference from Exhibit10.25 of the Registration Statement on Form S-1 of Nalco HoldingCompany filed on August  26,  2004 (FileNo. 333-118583).                                                                                                                              |
| 10.19         |  |  | Warrant Agreement, whichis incorporated herein by reference from Exhibit 10.4 on Form 8-K ofthe Nalco Holding Company filed on November  18,  2004(FileNo. 001-32342).                                                                                                                                                                                                                       |
| 10.20         |  |  | RegistrationRights Agreement, dated as of November  16,  2004, amongNalco Holding Company, Nalco LLC and the other parties named therein,which is incorporated herein by reference from Exhibit 10.1 on Form 8-Kof the Nalco Holding Company filed on November  18,  2004(FileNo. 001-32342).                                                                                                |
| 10.21         |  |  | StockholdersAgreement, dated as of November  16,  2004, between NalcoHolding Company and Nalco LLC, which is incorporated herein byreference from Exhibit 10.3 on Form 8-K of the Nalco Holding Companyfiled on November  18,  2004 (FileNo. 001-32342).                                                                                                                                     |
| 10.22         |  |  | NalcoHolding Company 2004 Stock Incentive Plan, which is incorporated hereinby reference from Exhibit 10.5 on Form 8-K of Nalco Holding Companyfiled on November  18,  2004 (FileNo. 001-32342).                                                                                                                                                                                             |
| 10.23         |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and William H. Joyce, which is incorporatedherein by reference from Exhibit 10.30 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                                                                                            |
| 10.24         |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and Bradley J. Bell, which is incorporatedherein by reference from Exhibit 10.31 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (File No. 333-118583).                                                                                            |
|               |

110

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                       |
|---------------|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                  |
| 10.25         |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and William J. Roe, which is incorporatedherein by reference from Exhibit 10.32 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                                  |
| 10.26         |  |  | ManagementMembers Agreement (Class B, C and D units), dated as of June11,  2004, between Nalco LLC and William H. Joyce, which isincorporated herein by reference from Exhibit 10.35 of the RegistrationStatement on Form S-1 of Nalco Holding Company filed onAugust  26,  2004 (File No. 333-118583).                     |
| 10.27         |  |  | Management MembersAgreement (Class B, C and D units), dated as of June  11,2004, between Nalco LLC and Bradley J. Bell, which is incorporatedherein by reference from Exhibit 10.36 of the Registration Statement onForm S-1 of Nalco Holding Company filed on August26,  2004 (FileNo. 333-118583).                        |
| 10.28         |  |  | ManagementMembers Agreement (Class B, C and D units), dated as of June11,  2004, between Nalco LLC and William J. Roe, which isincorporated herein by reference from Exhibit 10.37 of the RegistrationStatement on Form S-1 of Nalco Holding Company filed onAugust  26,  2004 (File No. 333-118583).                       |
| 10.29*        |  |  | Non-Qualified StockOption Agreement, dated as of May  6,  2005, between NalcoHolding Company and Gregory N. Nelson.                                                                                                                                                                                                                   |
| 10.30*        |  |  | Form of Nalco CompanyDeath Benefit Agreement and Addendum to Death Benefit Agreement,effective May  6,  2005, between Nalco Company and GregoryN.Nelson.                                                                                                                                                                              |
| 10.31         |  |  | Formof Nalco Holding Company 2004 Stock Incentive Plan Restricted StockUnit Agreement, which is incorporated herein by reference from Exhibit99.2 on Form S-8 of Nalco Holding Company filed on February7,  2005 (FileNo. 333-122582).                                                                                           |
| 10.32         |  |  | ManagementIncentive Plan of Nalco Company (as amended and restated May4,  2006), which is incorporated herein by reference from Exhibit99.1 on Form 8-K of Nalco Holding Company filed on May  8,2006 (FileNo. 001-32342).                                                                                                       |
| 10.33         |  |  | LongTerm Cash Incentive Plan of Nalco Company, which is incorporated hereinby reference from Exhibit 99.2 on Form 8-K of Nalco Holding Companyfiled on March  1,  2005 (FileNo. 001-32342).                                                                                                                                      |
| 10.34         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Daniel S. Sanders, which is incorporated herein byreference from Exhibit 10.37 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342). |
| 10.35         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Douglas A. Pertz, which is incorporated herein byreference from Exhibit 10.38 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).  |
| 10.36         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Leon D. Black, which is incorporated herein byreference from Exhibit 10.39 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).     |
|               |

111

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                          |
|---------------|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                     |
| 10.37         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Paul H. O’Neill, which is incorporatedherein by reference from Exhibit 10.40 of the Annual ReportForm 10-K Nalco Holding Company filed on March  24,2005 (File No.001-32342).                  |
| 10.38         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Chinh Chu, which is incorporated herein byreference from Exhibit 10.41 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).                            |
| 10.39         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February  18,  2005, between NalcoHolding Company and Joshua Harris, which is incorporated herein byreference from Exhibit 10.42 of the Annual Report Form 10-KNalco Holding Company filed on March  24,  2005 (File No.001-32342).                        |
| 10.40         |  |  | Indenture,dated as of May  1,  1998, between Nalco Chemical Companyand The Chase Manhattan Bank, which is incorporated herein by referencefrom Exhibit 4.1 of the Registration Statement on Form S-4 of NalcoCompany filed on May  17,  2004 (File No.333-115560).                                                                                       |
| 10.41         |  |  | FirstSupplemental Indenture, dated as of December  3,  1999, byand between Nalco Chemical Company and The Chase Manhattan Bank, whichis incorporated herein by reference from Exhibit 4.2 of theRegistration Statement on Form S-4 of Nalco Company filed on May17,  2004 (File No.333-115560).                                                          |
| 10.42         |  |  | SeniorNotes Indenture, dated as of November  4,  2003, amongNalco Company, the Guarantors named therein and The Bank of New York,as Trustee, which is incorporated herein by reference from Exhibit 4.3of the Registration Statement on Form S-4 of Nalco Company filed onMay  17,  2004 (File No.333-115560).                                           |
| 10.43         |  |  | SeniorNotes Supplemental Indenture, dated as of November  12,2003, among Nalco Company, the guarantors named therein and The Bank ofNew York, as Trustee, which is incorporated herein by reference fromExhibit 4.4 of the Registration Statement on Form S-4 of Nalco Companyfiled on May  17,  2004 (File No. 333-115560).                             |
| 10.44         |  |  | Senior SubordinatedNotes Indenture, dated as of November  4,  2003, amongNalco Company, the Guarantors named therein and The Bank of New York,as Trustee, which is incorporated herein by reference from Exhibit 4.5of the Registration Statement on Form S-4 of Nalco Company filed onMay  17,  2004 (File No. 333-115560).                             |
| 10.45         |  |  | Senior SubordinatedNotes Supplemental Indenture, dated as of November  12,2003, among Nalco Company, the guarantors named therein and The Bank ofNew York, as Trustee, which is incorporated herein by reference fromExhibit 4.6 of the Registration Statement on Form S-4 of Nalco Companyfiled on May  17,  2004 (File No.333-115560).                 |
| 10.46         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective November  14,  2005, between NalcoHolding Company and Sanjeev Mehra, assigned to Goldman Sachs Group,Inc., which is incorporated herein by reference from Exhibit 99.1 onForm 8-K of Nalco Holding Company filed on November  15,2005 (FileNo. 001-32342). |
| 10.47         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective May  26,  2005, between Nalco HoldingCompany and Rodney F. Chase, which is incorporated herein by referencefrom Exhibit 99.1 on Form 8-K of Nalco Holding Company filed onMay  27,  2005 (FileNo. 001-32342).                                              |
|               |

112

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.48         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective May  26,  2005, between Nalco HoldingCompany and Richard B. Marchese, which is incorporated herein byreference from Exhibit 99.2 on Form 8-K of Nalco Holding Company filedon May  27,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.49         |  |  | DeathBenefit Agreement and Addendum, effective May  26,  2005,between Nalco Company and William H. Joyce, which is incorporatedherein by reference from Exhibit 99.3 on Form 8-K of Nalco HoldingCompany filed on May  27,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.50         |  |  | TheNalco Company Supplemental Profit Sharing Plan, effective May1,  2005, between Nalco Holding Company and William H. Joyce,which is incorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on May  11,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.51         |  |  | Formof Nalco Company Death Benefit Agreement and Addendum to Death BenefitAgreement, which is incorporated herein by reference from Exhibit 99.2on Form 8-K of Nalco Holding Company filed on May  11,2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.52         |  |  | Changeof Control Employment Agreement, effective May  10,  2005,between Nalco Holding Company and William H. Joyce, which isincorporated herein by reference from Exhibit 99.3 on Form 8-K of NalcoHolding Company filed on May  11,  2005 (FileNo. 001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.53         |  |  | Formof Nalco Holding Company 2004 Stock Incentive Plan Restricted StockUnit Agreement, which is incorporated herein by reference from Exhibit99-1 on Form 8-K of Nalco Holding Company filed on February15,  2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.54         |  |  | AmendmentNo. 3, dated as of October  19,  2005, to the CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBook Managers, which is incorporated herein by reference from Exhibit10.2 on the Quarterly Report on Form 10-Q of Nalco HoldingCompany filed on November  14,  2005 (File No.001-32342). |
| 10.55         |  |  | AmendmentNo. 2, dated as of May  31,  2005, to the ReceivablesTransfer Agreement dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time to time, which isincorporated herein by reference from Exhibit 10.1 on the QuarterlyReport on Form 10-Q of Nalco Holding Company filed onAugust  15,  2005 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.56         |  |  | AmendmentNo. 3, dated as of September  30,  2005, to the ReceivablesTransfer Agreement dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time to time, which isincorporated herein by reference from Exhibit 10.1 on the QuarterlyReport on Form 10-Q of Nalco Holding Company filed onNovember  14,  2005 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|               |

113

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                   |
|---------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                              |
| 10.57         |  |  | AmendmentNo. 1, dated as of December  30,  2005, to the Nalco LLCLimited Liability Company Operating Agreement, dated May17,  2004, which is incorporated herein by reference from Exhibit10.51 of the Annual Report Form 10-K Nalco Holding Company filedon March  2,  2006 (File No. 001-32342).                                                                           |
| 10.58         |  |  | Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement (2006 Grant),effective February  15,  2006, between Nalco HoldingCompany and Chinh E. Chu, which is incorporated herein by referencefrom Exhibit 10.52 of the Annual Report Form 10-K Nalco HoldingCompany filed on March  2,  2006 (File No.001-32342).                                      |
| 10.59         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Joshua J. Harris, which isincorporated herein by reference from Exhibit 10.53 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                                    |
| 10.60         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Sanjeev Mehra, assigned to GoldmanSachs Group, Inc, which is incorporated herein by reference fromExhibit 10.54 of the Annual Report Form 10-K Nalco HoldingCompany filed on March  2,  2006 (File No.001-32342) |
| 10.61         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Rodney F. Chase, which isincorporated herein by reference from Exhibit 10.55 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                                     |
| 10.62         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Richard B. Marchese, which isincorporated herein by reference from Exhibit 10.56 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                                 |
| 10.63         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Paul H. O’Neill, which isincorporated herein by reference from Exhibit 10.57 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                               |
| 10.64         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Douglas A. Pertz, which isincorporated herein by reference from Exhibit 10.58 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                                    |
| 10.65         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2006 Grant), effective February  15,  2006,between Nalco Holding Company and Daniel S. Sanders, which isincorporated herein by reference from Exhibit 10.59 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No. 001-32342).                                  |
|               |

114

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.66         |  |  | OmnibusAmendment, dated as of December  31,  2005, Amendment No.1to the Receivables Purchase Agreement, dated as of June25,  2004, among Nalco Company, Nalco Energy Services, L.P. andNalco Receivables LLC, and Amendment No. 4 to the Receivables TransferAgreement, dated as of June  25,  2004, among NalcoReceivables LLC, Nalco Company, JPMorgan Chase Bank and the severaltransferees and funding agents party hereto from time to time, which isincorporated herein by reference from Exhibit 10.60 of the AnnualReport Form 10-K Nalco Holding Company filed on March2,  2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.67         |  |  | AmendmentNo. 5, dated as of December  31,  2005, to the ReceivablesTransfer Agreement, dated as of June  25,  2004, amongNalco Receivables LLC, Nalco Company, JPMorgan Chase Bank and theseveral transferees and funding agents party hereto from time to time,which is incorporated herein by reference from Exhibit 10.61 of theAnnual Report Form 10-K Nalco Holding Company filed onMarch  2,  2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.68         |  |  | AmendmentNo. 4, dated as of February  22,  2006, to the CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBook Managers, which is incorporated herein by reference from Exhibit10.62 of the Annual Report Form 10-K Nalco Holding Company filedon March  2,  2006 (File No.001-32342). |
| 10.69         |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and John L. Gigerich, which is incorporatedherein by reference from Exhibit 10.63 of the Annual ReportForm 10-K Nalco Holding Company filed on March  2,2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.70         |  |  | ConsultingAgreement, effective as of July  19,  2006, between NalcoCompany and John L. Gigerich, which is incorporated herein by referencefrom Exhibit 99.1 of Form 8-K Nalco Holding Company filed onJuly  20,  2006 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.71         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Chinh E. Chu, which is incorporatedherein by reference from Exhibit 99.1 on Form 8-K of NalcoHolding Company filed on February  20,  2007 (File No.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.72         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Joshua J. Harris, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.73         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Sanjeev Mehra, assigned to GoldmanSachs Group, Inc, which is incorporated herein by reference fromExhibit 99.1 on Form 8-K of Nalco Holding Company filed onFebruary  20,  2007 (File No.001-32342)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|               |

115

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                         |
|---------------|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                    |
| 10.74         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Rodney F. Chase, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342).       |
| 10.75         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Richard B. Marchese, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342).   |
| 10.76         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Paul H. O’Neill, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342). |
| 10.77         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Douglas A. Pertz, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342).      |
| 10.78         |  |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement (2007 Grant), effective February  15,  2007,between Nalco Holding Company and Daniel S. Sanders, which isincorporated herein by reference from Exhibit 99.1 on Form 8-Kof Nalco Holding Company filed on February  20,  2007 (FileNo.001-32342).     |
| 10.79*        |  |  | SeparationAgreement, dated as of June  30,  2006, between NalcoCompany and Philippe F.Creteur.                                                                                                                                                                                                                                          |
| 10.80*        |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and Philippe F.Creteur.                                                                                                                                                                                                                       |
| 10.81*        |  |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune  11,  2004, between Nalco LLC and Philippe F.Creteur.                                                                                                                                                                                                 |
| 10.82*        |  |  | Amendmentto the Management Members Agreement, dated as of June  30,2006, between Nalco LLC and Philippe F.Creteur.                                                                                                                                                                                                                      |
| 10.83*        |  |  | SeparationAgreement, dated as of July  14,  2006, between NalcoCompany and Mark W.Irwin.                                                                                                                                                                                                                                                |
| 10.84*        |  |  | ManagementMembers Agreement (Class A units), dated as of June  11,2004, between Nalco LLC and Mark W.Irwin.                                                                                                                                                                                                                             |
| 10.85*        |  |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune  11,  2004, between Nalco LLC and Mark W.Irwin.                                                                                                                                                                                                       |
| 10.86*        |  |  | Amendmentto the Management Members Agreement, dated as of June  1,2006, between Nalco LLC and Mark W. Irwin.                                                                                                                                                                                                                            |
|               |

116

----

Table of Contents

|               |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.87*        |  |  | AmendmentNo. 5, dated as of December  15,  2006, to the CreditAgreement, dated as of November  4,  2003, among NalcoHoldings LLC, Nalco Company, as U.S. Borrower, the Foreign SubsidiaryBorrowers from time to time party thereto, the Lenders party thereto,Citigroup Global Markets Inc. and Banc of America Securities LLC, asGlobal Coordinators, Citicorp North America, Inc., as AdministrativeAgent, Bank of America, N.A., as Documentation Agent, Deutsche BankSecurities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Co-Syndication Agents,Citigroup Global Markets Inc., Banc of America Securities LLC, DeutscheBank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs CreditPartners L.P. and UBS Securities LLC, as Joint Lead Arrangers and JointBookManagers. |
| 10.88*        |  |  | ExpatriateAgreement, dated as of November  15,  2005, between NalcoCompany and Gregory N.Nelson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.89*        |  |  | SeveranceAgreement, effective as of January  1,  2004, between NalcoCompany and PhilippeCreteur                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.90*        |  |  | SeveranceAgreement, effective as of January  1,  2004, between NalcoCompany and MarkIrwin                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 23.1*         |  |  | Consentof Ernst & YoungLLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1*         |  |  | Certificationof the Chairman and Chief Executive Officer pursuant to Rule 13a-14(a)of Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2*         |  |  | Certificationof the Executive Vice President and Chief Financial Officer pursuant toRule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuantto Section 302 of the Sarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1*         |  |  | Certificationof William H. Joyce, our Chairman and Chief Executive Officer, andBradley J. Bell, our Executive Vice President and Chief FinancialOfficer, pursuant to 18  U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|               |

|   |               |
|---|---------------|
| * | filedherewith |

Copies of Exhibits may be obtained withoutcharge upon written request to the Corporate Secretary, Nalco FinanceHoldings LLC, 1601 West Diehl Road, Naperville, IL60563.

117

----

Table of Contents

SIGNATURES

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

|  | NALCO FINANCE HOLDINGSLLC(Registrant) |
|--|---------------------------------------|

|        |  |  |        |  |  |                                                     |
|--------|--|--|--------|--|--|-----------------------------------------------------|
|   |  |  | By:    |  |  | /s/BRADLEY J. BELL                                  |
|   |  |  |   |  |  | Bradley J.Bell                                      |
|   |  |  |   |  |  | Executive Vice Presidentand Chief Financial Officer |
|   |  |  |   |  |  | (Principal FinancialOfficer)                        |
|        |

Date: March  5,2007

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacitiesindicated on March  5,  2007.

|                          |  |                                                              |
|--------------------------|--|--------------------------------------------------------------|
| Signature                |  | Title                                                        |
|                          |
| /s/WILLIAM H. JOYCE      |  | Chairman of the Boardand Chief Executive Officer             |
|                          |
| William H.Joyce          |
|                          |
| /s/ BRADLEY J.BELL       |  | Executive VicePresident,Chief Financial Officer andTreasurer |
|                          |
| Bradley J. Bell          |
|                          |
| /s/ FREDERICJUNG         |  | Controller                                                   |
|                          |
| FredericJung             |
|                          |
| /s/ RODNEY F.CHASE       |  | Director                                                     |
|                          |
| Rodney F.Chase           |
|                          |
| /s/ CHINH E.CHU          |  | Director                                                     |
|                          |
| Chinh E.Chu              |
|                          |
| /s/ JOSHUA J.HARRIS      |  | Director                                                     |
|                          |
| Joshua J.Harris          |
|                          |
| /s/ RICHARD B.MARCHESE   |  | Director                                                     |
|                          |
| Richard B.Marchese       |
|                          |
| /s/ SANJEEVK. MEHRA      |  | Director                                                     |
|                          |
| Sanjeev K.Mehra          |
|                          |
| /s/ PAUL H.O’NEILL |  | Director                                                     |
|                          |
| Paul H.O’Neill     |
|                          |
| /s/DOUGLAS A. PERTZ      |  | Director                                                     |
|                          |
| Douglas A.Pertz          |
|                          |
| /s/ DANIEL S.SANDERS     |  | Director                                                     |
|                          |
| Daniel S.Sanders         |
|                          |

118

----