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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC20549

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FORM 10-K

(Mark One)

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|   | ANNUAL REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

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

or

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|   | TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

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|   | For the transition period from                 to                 . |

Commission File No.333-119231

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NALCOFINANCE HOLDINGS LLC

(Exact nameof registrant as specified in itscharter)

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| Delaware                                                    |  | 61-1464558                           |
| (Stateor other jurisdiction ofIncorporation orOrganization) |  | (I.R.S.EmployerIdentificationNumber) |
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1601 West 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

Securities registered pursuant to Section 12(g) of theAct:

None

Indicate by check markwhether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes   No   

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

Indicate by check mark whether the registrant isan accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)Yes    No   

None of theCompany's limited liability company units is held bynon-affiliates. As of March 24, 2005 there were 100 unitsoutstanding.

DOCUMENTS INCORPORATED BYREFERENCE

None

**The registrant meetsthe condition set forth in General Instruction I(1)(a) and (b) of Form10-K and is therefore filing this Form with the reduced disclosureformat.**

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FORM 10-KNALCO FINANCE HOLDINGS LLC TABLE OFCONTENTS

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| **PartI**   |
| Item1.      |  | Business                                                                                                  |  |   | 2   |
| Item2.      |  | Properties                                                                                                |  |   | 17  |
| Item3.      |  | Legal Proceedings                                                                                         |  |   | 17  |
| Item4.      |  | Submission of Matters to a Vote of Security Holders*                                                      |  |   | 17  |
| **PartII**  |
| Item 5.     |  | Market for Registrant'sCommon Equity, Related Stockholder Matters and Issuer Purchases ofEquitySecurities |  |   | 18  |
| Item6.      |  | Selected Financial Data                                                                                   |  |   | 18  |
| Item7.      |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                       |  |   | 24  |
| Item7A.     |  | Quantitative and Qualitative Disclosures About MarketRisk                                                 |  |   | 52  |
| Item 8.     |  | Financial Statementsand Supplementary Data                                                                |  |   | 53  |
| Item9.      |  | Changes in and Disagreements with Accountants on Accountingand FinancialDisclosure                        |  |   | 99  |
| Item9A.     |  | Controls and Procedures                                                                                   |  |   | 99  |
| Item9B.     |  | OtherInformation                                                                                          |  |   | 99  |
| **PartIII** |  |                                                                                                      |  |   |
| Item 10.    |  | Directorsand Executive Officers of the Registrant*                                                        |  |   | 99  |
| Item 11.    |  | Executive Compensation*                                                                                   |  |   | 99  |
| Item 12.    |  | Security Ownership ofCertain Beneficial Owners and Management*                                            |  |   | 99  |
| Item 13.    |  | Certain Relationshipsand Related Transactions *                                                           |  |   | 99  |
| Item14.     |  | Principal Accountant Fees andServices                                                                     |  |   | 99  |
| **PartIV**  |
| Item 15.    |  | Exhibits, FinancialStatementSchedules                                                                     |  |   | 101 |
| Signatures  |  |                                                                                                      |  |   | 112 |
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| * | Itemis omitted pursuant to the reduced disclosure format, as set forth onthe cover page of this filing, since all equity securities of theregistrant are owned directly by Nalco HoldingCompany. |

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PART I

ITEM 1.    BUSINESS

Overview

NalcoFinance Holdings LLC is a direct wholly owned subsidiary of NalcoHolding Company. On August 31, 2003, Nalco Holdings LLC, our subsidiaryand a company formed by The Blackstone Group, Apollo Management, L.P.and GS Capital 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 $4,105.4 million in cash, after givingeffect to direct costs of the Acquisition, closing date working capitaland indebtedness purchase price adjustments, a post-closing workingcapital and indebtedness purchase price adjustment, and certain otherpost-closing adjustments. The Transactions closed on November 4, 2003.In this report, we refer to this acquisition as the"Acquisition," and the term"Transactions" means, collectively, theAcquisition and the related financings to fund the Acquisition.

All references in this report to "Nalco,"the "Company,""we," "our," and"us" mean, unless the context indicatesotherwise, (1) Nalco 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.

3D TRASARTM,ACTRENE®, ADOMITE®, AQUAMAXTM,BIO-MANAGE®, BRIGHT WATERTM,COKE-LESS®, EN/ACTTM,ENERCEPT®, ENERSPERSE®, NalcoACT®, NALMET®, NEOSTARSM,NexGuard®, OdorTech®,PORTA-FEED®, PROSPECTM Treat Service,SCORPION® II, SMART SolutionsTM,STA•BR•EX®, SULFA-CHECK®,SurFloSM Certified, THERMOGAINSM,TRASAR®, Tri-ACT®,ULTIMER®, UltraTreat®,ULTRION®, VALUELINE®,VANTAGE®, and certain other products and services namedin this document are our registered trademarks and service marks.

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

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

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

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Our Competitive Strengths

Ourcompany has benefited from the following competitive strengths:

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

DiverseCustomers and Industries Served.    We provide products andservices to more than 60,000 customer locations across a broad range ofindustries and institutions. In 2004, no single customer accounted formore than 3% of our net sales. Our business is also diversifiedgeographically. In 2004, 48% of total sales were in NorthAmerica, 33% in Europe, Africa and the Middle East, 7% inLatin America and 12% in the Pacific region. We believe thisdiversification minimizes the potential impact of volatility from anyone customer, industry or geographic area.

GlobalReach.    We have a direct sales and marketing presence in 130countries across six continents. This enables us to provide aconsistently high level of service to local, regional and multinationalcustomers. We believe our global presence offers us a competitiveadvantage in meeting the global needs of our multinational customers,which are increasingly seeking single-source suppliers and positions usto extend our reach to higher growth markets. Our geographicaldiversity also mitigates the potential impact of volatility in anyindividual country or region. In 2004, we derived approximately $1,658million, or 55% of our net sales, from our non-U.S. subsidiaries(excluding sales to our U.S. operations).

World Class SalesTeam.    Through the expertise of our more than 5,500 salesengineers and service technicians, we provide our customers withrelevant industry knowledge and experience in order to solvetechnically challenging and dynamic problems. Our team of experts hassignificant experience with more than 40% of our approximately2,100-person North American sales team having more than ten years ofservice with our Company. We believe this contributes significantly tothe number and strength of relationships with our customers. We alsoinvest heavily in recruiting and continuously training our salesprofessionals. For example, new hires spend more than half of theirfirst year on training. Sales and marketing expense was $818.5 million,$799.1 million, and $763.4 million for the years 2004, 2003, and 2002,respectively. In 2003, the total expense was comprised of $668.7million for the period from January 1, 2003 through November 3, 2003and $130.4 million for the period from November 4, 2003 throughDecember 31, 2003. Of those amounts, approximately 90%represented the average cost of our sales and service force duringthese time periods.

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

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

Premier ManagementTeam.    Our senior management team consists of professionalswith significant experience within our Company and the water treatmentand industrial process improvement industry. In connection with theAcquisition, Dr. William H. Joyce, former Chairman 

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

Business Strategy

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

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

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

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

Follow the Global Expansion of MultinationalCustomers.    As one of a small number of companies that canprovide turnkey water management solutions on a global basis, we seekto leverage our relationships with multinational companies by servicingthem globally. For example, our Paper Services division gained over $10million in new business in Europe when one of our large customersexpanded its geographic reach beyond North America. We expect tobenefit significantly as larger customers further consolidate theirsupplier base and increase their reliance on full service providers,such as our Company.

Continue to Reduce Costs.    Wehave initiated a comprehensive cost reduction plan that yielded savingsin 2004 of $88 million compared to 2003, with a year-end run rate tothose savings of 

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$110  million. In 2005, we intend togenerate additional savings versus 2004 of $75 million, which includethe run-rate benefit of 2004 projects. We expect our cost reductionplan to achieve incremental efficiencies through work process redesignand other targeted cost improvements, which address inefficiencies inour administrative and overhead functions, as well as other support andservice functions around the world.

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

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

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|                  |  | OurDivisions                                                                                                 |
|                  |  | IndustrialandInstitutional Services                                                                          |  | Energy Services                                                          |  | PaperServices                                                              |
| MarketPositions       |  | $5.7billion global market(1)(2)#1 MarketPosition                                                             |  | $3.1 billion global market(1)#1 MarketPosition                           |  | $7.7 billion global market(1)#3 MarketPosition                             |
| MarketShare           |  | 19%                                                                                                          |  | 26%                                                                      |  | 9%                                                                         |
| 2004NetSales(3)       |  | $1,402 million                                                                                               |  | $805million                                                              |  | $663million                                                                |
| RepresentativeMarkets |  | Foodand BeverageBuildings, Hotels, HospitalsChemicals,PharmaceuticalsManufacturing, Metals, Utilities,Mining |  | ExplorationField DevelopmentProductionRefiningPetrochemicalManufacturing |  | FinePaperUncoated Free SheetCoated Free SheetNewsprintTissueContainerboard |
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| (1) | Approximatemarket size based on internal estimates and industry publications andsurveys. |

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

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| (3) | Divisional net sales excludeapproximately $163 million of sales allocated to our Other segment,including our sales in India, Japan, and an Integrated ChannelsGroup. |

Industrial and Institutional Services

OurIndustrial and Institutional Services division provides products andservices that are principally utilized in water treatment applicationssuch as raw water treatment, wastewater treatment, cooling programs andboiler treatment programs to control corrosion, the build up of scaleand microbial fouling. Variations of these applications can be usedfrom small boilers at a commercial building up to large industrialboiler and cooling water systems such as those found in steel mills andpower plants. Customers use our water treatment programs to extend theuseful life of their assets, 

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minimize downtime of their facilities andconserve water and energy. We serve companies across a broad spectrumof industries, including aerospace, chemical, pharmaceutical, steel,power, food and beverage, medium and light manufacturing, metalworkingand institutions such as hospitals, universities and hotels. Six of ourten largest Industrial and Institutional Services customers in 2004have been with us for more than ten years. Our Industrial andInstitutional Services segment generated 2004 net sales of $1,402million, representing 46% of our net sales.

Water Treatment Applications

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

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

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

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

Raw WaterApplications.    Through our patented products and innovativechemical and service solutions, we assist industries in properlymanaging raw water. The NALMET program removes heavy metal dischargefrom the water supply and the BIO-MANAGE program is part of ourcomprehensive bio-control service that controls microbial growth inwater. Our boiler water pretreatment system prepares raw water beforeentering a boiler by reducing or removing unwanted impurities such asclay, silt and other organic materials from the water through lime-sodasoftening, filtration, ion exchange 

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and reverse osmosis. Our water clarificationprograms are specifically designed to enhance the removal of biologicaland chemical substances that deplete oxygen in water, minimize sludgevolume, help with environmental compliance and improve the use ofexisting mechanical treatment methods with chemical precipitation.

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

Mining and Mineral Processing Applications

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

Colloidal TechnologiesApplications

We invented the original commercial process tomake stable concentrated silica solutions and we were granted theoriginal silica patent in 1941. Today, we operate one of the singlelargest colloidal silica facilities in the world and our broad range ofcolloidal silica products is used in applications in 39 countries. Wemanufacture colloidal silica, specialty silica solutions andcomplementary process chemicals used in precision investment casting ofmetal parts, the polishing of silicon wafers, memory disks and otherelectronic substrates, vacuum formed shapes and high temperaturerefractories, wine and juice clarification and specialty coatings. Weoffer a wide range of products and programs for the investment castingindustry, including colloidal silica binders, polymers, wetting agents,antifoams, wax cleaners, biocides and refractories designed to shortendrying cycles, increase prime coat adhesion, improve casting surfacequality and reduce casting defects.

FinishingTechnologies Applications

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

Membrane TechnologiesApplications

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

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

Odor Control Applications

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

Energy Services

OurEnergy Services division provides on-site, technology driven solutionsto the global natural gas, petroleum and petrochemical industries. Inaddition to recovery, production and process enhancements, we deliver afull range of water treatment offerings to refineries and petrochemicalplants. Our upstream process applications improve oil and gas recoveryand production, extend production equipment life and decrease operatingcosts through services that include scale, paraffin and corrosioncontrol, oil and water separation, and gas hydrate managementsolutions. Our downstream process applications increase refinery andpetrochemical plant efficiency and the useful lives of customer assets,while improving refined and petrochemical product quality and yields.Our customers include the fifteen largest publicly traded oilcompanies. Our ten largest Energy Services customers in 2004 have beenwith us for more than twenty years. Our Energy Services divisiongenerated 2004 net sales of $805 million, representing 27% ofour net sales. We continue to emphasize safety and environmentalleadership in our product development and implementation efforts.

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

OilfieldApplications

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

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

Downstream Refining Applications

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

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

Downstream Chemical Processing Applications

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

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

Adomite Well ServiceApplications

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

WaterApplications

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

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Paper Services

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

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

Pulp Applications

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

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

PaperApplications

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

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

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

Specific to each grade segment, our programs deliver valuein the form of improved brightness, lower basis weight, improved bulkand softness, improved printability and many other key business driverswhich our customers determine are critical to the success of theirbusiness.

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

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Water Applications

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

Our Services

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

AnalyticalServices

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

Consulting Services

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

Technical andField Services

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

Environmental Hygiene Services

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

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to identify areas within the domestic coldand hot water, process water, cooling tower, emergency water and othersystems that could be at risk for pathogen proliferation. We thendevelop prioritized recommendations and a remediation plan to reducethe risk of pathogen exposure that can lead to illnesses such asLegionnaires' Disease. Our protocols help our customers complywith guidelines created by professional organizations, state andfederal government agencies, or local governments.

Customer Training

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

Equipment

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

We recognize the importance ofaccurate, reliable chemical feed to the success of manufacturingprocess and water treatment programs. Pre-packaged chemical feedsystems ensure easy installation, start-up and reliable chemical feed,including our ValueLine Polymer Feeders and a line of modular pump andcontrol systems. These chemical feed systems are used to pump chemicalsinto a customer's manufacturing and/or water treatment process.Some feed systems also have mixing technologies that producehigh-quality solutions without using mechanical agitators.Additionally, we have set the standard for returnable chemical deliverysystems and "hands-off" chemical handling.Our PORTA-FEED container units are returnable shipping containers setup at a customer's plant to feed our chemicals into thecustomer's system. When the chemical level is low, a refill unitis delivered to the plant and we take the empty PORTA-FEED unit backfor cleaning and re-use. Since the introduction of the PORTA-FEEDprogram in 1985, we have eliminated the disposal of over three millionchemical drums.

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

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

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

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

Joint Ventures

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

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

Competition

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

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

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

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

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Research and Development

Webenefit from a high quality research and development effort consistingof more than 400 personnel worldwide, more than 135 of whom havePh.D.s, dedicated to developing new technology and providing support.Our laboratories, which are located in the United States, theNetherlands and Singapore, are involved in the research and developmentof chemical products and in providing technical support, includingchemical analyses of water and process samples. Research anddevelopment spending was $56.5 million for the year ended December 31,2004, with work process improvements and management layer reductionsmore than offsetting incremental spending on new technologydevelopment. Spending on research and development was $9.7 million,$50.3 million, and $57.9 million for the period from November 4, 2003through December 31, 2003, the period from January 1, 2003 throughNovember 3, 2003, and the year ended December 31, 2002, respectively.In recent years, we have received numerous research and developmentawards, including awards for ULTIMER 00LT053, ULTIMER, Nalco ACT,NALCO98DF063, TRASAR3000, our high stress polymers andSTA•BR•EX•.

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

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

Intellectual Property

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

RawMaterials

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

Working Capital

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

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is in place throughout the world, its use ismost prevalent in North America. The decision to put inventory at acustomer's site is usually based on a request from the customer.Tracking systems are in place to follow movements, and inventoryquantities at each site are monitored to prevent inventory build-ups.Periodic physical counts are performed to validate the tracking systemsand to ensure that the accounting records are properly stated.

Employees

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

EnvironmentalMatters

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

We do not believethat compliance with environmental protection laws and regulations willhave a material effect upon our capital expenditures, results ofoperations or competitive position although there can be no assuranceto that effect. Our capital expenditures for environmental controlfacilities during 2005 are not expected to be material to us. Webelieve that any liability that may result from the resolution ofenvironmental matters for which sufficient information is available tosupport cost estimates will not have a material adverse effect on ourfinancial position or results of operations. However, we cannot predictthe effect on our financial position of expenditures for aspects ofcertain matters for which there is insufficient information. Inaddition, we cannot predict the effect of compliance with environmentallaws and regulations with respect to unknown environmental matters orfuture environmental requirements on our financial position, results ofoperations liquidity or cash flow.

We have been named as adefendant in a series of multi-party lawsuits based on our claimedinvolvement in the supply of allegedly hazardous materials. Theplaintiffs seek damages for alleged personal injury resulting fromexposure to various chemicals. Certain of our operations at Garyville,Louisiana are also the subject of an ongoing environmental, civil andcriminal investigation. We believe the investigation may relate to thestorage of used acid and leakage from a wastewater treatment tank, butcould include other matters. We do not believe that any materialcontamination resulted from this storage and leakage. Although webelieve a grand jury has not been empanelled and we would vigorouslycontest any criminal claims against us, we cannot predict the outcomeof this investigation. These matters have had de minimis impact on ourbusiness historically and we do not anticipate that these matterspresent any material risk to our business in the future.Notwithstanding our past experience, we cannot predict with certaintythe outcome of any such investigations, toxic tort claims or theinvolvement we might have in such matters in the future.

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

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ExecutiveOfficers

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

**Dr. William H. Joyce**has been our Chairman and Chief Executive Officer since joining usin November 2003. Dr. Joyce was formerly the Chairman and ChiefExecutive Officer of Hercules Incorporated, a position he took in May2001. Dr. Joyce had been Chairman, President and Chief ExecutiveOfficer of Union Carbide Corporation from 1996 through May 2001. From1995 to 1996, Dr. Joyce was President and Chief Executive Officer, andfrom 1993 to 1995 he was President of Union Carbide. Prior to that, hehad been Chief Operating Officer of Union Carbide since 1992.

**William J. Roe**is our Executive Vice President, ChiefOperating Officer and President, Industrial and Institutional Servicesdivision. Mr. Roe has served as Chief Operating Officer since 2001 andas Executive Vice President, Industrial and Institutional Servicesdivision, since November 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 and President ofthe Process division. He was named District Manager for the Mining andMineral Processing Chemicals Group in 1989, Marketing Manager in 1991and promoted to General Manager in 1994. Mr. Roe joined our Company in1978 as an Assistant Chemist in Research. Mr. Roe was promoted toChemist in 1979, Senior Chemist and Group Leader in 1981 and toTechnical Director in 1985.

**Bradley J. Bell**has been ourExecutive Vice President and Chief Financial Officer since joining usin November 2003. From 1997 to 2003, Mr. Bell served as Senior VicePresident and Chief Financial Officer of Rohm and Haas Company. Priorto that, Mr. Bell served as Vice President and Treasurer of both theWhirlpool Corporation, from 1987 to 1997, and the Bundy Corporation,from 1980 to 1987.

**Daniel M. Harker**is our Senior VicePresident, Supply Chain. Mr. Harker has served in this capacity since2003. In 2001, Mr. Harker became Vice President, Supply Chain, afterjoining Nalco from Calgon in 2000 as Vice President, Manufacturing andLogistics. From 1998 to 2000, Mr. Harker served as Vice President ofGlobal Operations for Calgon. Prior to that, Mr. Harker was with RhonePoulenc from 1993 to 1998, and Union Carbide from 1975 to 1993.

**Mark L. Bosanko**is our Group Vice President and President ofour Energy Services division. Mr. Bosanko has served in this capacitysince 2001. Mr. Bosanko was named Senior Vice President of Operationsfor the division's predecessor Nalco/Exxon Energy Chemicals, L.P.joint venture in 1999. Prior to that, Mr. Bosanko served as VicePresident, Oil Field Chemicals Worldwide. In 1995, Mr. Bosanko wasnamed Vice President, Oil Field Chemicals, responsible for NorthAmerica and West Africa. Mr. Bosanko became General Manager, AdditivesWorldwide for Nalco/Exxon Energy Chemicals, L.P. after the jointventure was formed in 1994. Prior to that, Mr. Bosanko served asDistrict Manager and Sales Manager before he was named General Manager,Additives Group in 1993. From 1984 to 1993, Mr. Bosanko served as AreaSales manager. Mr. Bosanko joined our Company in 1981 as a ViscoDistrict Representative.

**Mark W. Irwin**is our Group VicePresident and President of our Paper Services division. Mr. Irwinjoined our Paper Services division in January 2003 as StrategicBusiness Unit Leader for Global Accounts, and three months later wasnamed Group Vice President and President, Paper Services division. Mr.Irwin most recently served as Global Business Leader of GeneralElectric Specialty Materials' Silicones Group from 1997 to 2003.Prior to that, Mr. Irwin was a National Product Manager, Silicones andSilanes, for Witco Australia – OSi Specialties from 1995 to 1997.Mr. Irwin served from 1987 to 1995 as Regional Sales Manager,Industrial Chemicals for ICI Australia.

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**Louis L. Loosbrock**is our GroupVice President and President of our Pacific division. Mr. Loosbrock hasbeen President of the Pacific division since April 2003. Prior to that,Mr. Loosbrock served as Group Vice President and President of our Pulpand Paper division from April 2002 to April 2003. Mr. Loosbrock servedas General 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 our Company in 1977 as a Sales Representativein the Mining Group and in 1981 was named District Manager.

WebSite

The Company's Web site address is www.nalco.com. TheCompany makes available free of charge on or through its Web site itsCode of Ethical Business Conduct, Officer Code of Ethics, annual reporton Form 10-K, quarterly reports on Form 10-Q, current reports on Form8-K, and all amendments to those reports as soon as reasonablypracticable after such material is electronically filed with orfurnished to the Securities and Exchange Commission. The Web site alsoincludes the Company's corporate governance guidelines and thecharters for the audit, compensation, and nominating and corporategovernance committees of the Board of Directors.

ITEM2.    PROPERTIES

Our principal administrative offices andresearch center are located in Naperville, Illinois. These facilitiesare leased. We maintain administrative and research facilities in SugarLand, Texas and Leiden, Netherlands, both of which we own, and inSingapore, which we lease. We position our manufacturing locations andwarehouses in a manner to permit ready access to our customers. Weoperate 18 plants in North America, 6 plants in Latin America, 12plants in Europe and the Middle East and 13 plants in the Pacificregion. We own all of our major manufacturing facilities and we alsohave a network of small leased sales offices in the United States and,to a lesser extent, in other parts of the world.

ITEM3.    LEGAL PROCEEDINGS

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

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

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

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PART II

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

The Company is a direct wholly owned subsidiary ofNalco Holding Company and, accordingly, there is no market for theCompany's limited liability company interests represented byunits.

ITEM 6.    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.

The following selected financial data has beenderived from the audited consolidated and combined financial statementsof Nalco Finance Holdings LLC and its subsidiaries as of December 31,2004, 2003 and 2002, and for the periods from January 1, 2004 toDecember 31, 2004, November 4, 2003 to December 31, 2003, January 1,2003 to November 3, 2003, January 1, 2002 to December 31, 2002, andJanuary 1, 2001 to December 31, 2001. The selected financial data as ofDecember 31, 2001 and as of and for the years ended December 31, 2000and December 31, 1999 has been derived from the Company'sunaudited internal financial reporting to Suez.

You should readthe following data in conjunction with "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations" and the consolidated and combined financialstatements included elsewhere in this Annual Report.

|                                              |  |                            |         |                                           |  |                                   |         |                        |  |        |         |             |  |             |         |         |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------|---------|------------------------|--|--------|---------|-------------|--|-------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                         |  | Successor                  |         | Predecessor                               |
| (dollarsin millions)                         |  | YearendedDecember 31, 2004 |         | November 4, 2003 throughDecember 31, 2003 |  | January 1 through November3, 2003 |         | Year ended December31, |
| 2002                                         |  | 2001                       |         | 2000(1)                                   |  | 1999(1)                           |         |
|                                         |  |                       |         |                                      |  |                              |         |                   |  |   |         | (unaudited) |  | (unaudited) |
| **Statementof Operations Data:**             |  |
| Netsales                                     |  | $                          | 3,033.3 |                                      |  | $                                 | 460.1   |                   |  | $      | 2,306.5 |        |  | $           | 2,644.3 |    |  | $      | 2,619.7 |    |  | $      | 2,147.1 |    |  | $      | 601.2  |    |
| Operatingcosts andexpenses:                  |  |                       |    |                                      |  |                              |    |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Costsof productsold                          |  |                       | 1,552.2 |                                      |  |                              | 248.2   |                   |  |   | 1,114.6 |        |  |        | 1,266.1 |    |  |   | 1,268.1 |    |  |   |    |    |  |   |   |    |
| Selling,administrative, and researchexpenses |  |                       | 1,065.4 |                                      |  |                              | 176.4   |                   |  |   | 900.7   |        |  |        | 992.0   |    |  |   | 1,041.1 |    |  |   |    |    |  |   |   |    |
| Impairmentof goodwill(2)                     |  |                       | — |                                      |  |                              | — |                   |  |   | 244.4   |        |  |        | — |    |  |   | — |    |  |   |    |    |  |   |   |    |
| Amortizationof intangible assets(2)          |  |                       | 96.3    |                                      |  |                              | 15.4    |                   |  |   | 68.9    |        |  |        | 89.2    |    |  |   | 171.3   |    |  |   |    |    |  |   |   |    |
| In-processresearch anddevelopment            |  |                       | 122.3   |                                      |  |                              | — |                   |  |   | — |        |  |        | — |    |  |   | 1.3     |    |  |   |    |    |  |   |   |    |
| Businessoptimization expenses(3)             |  |                       | 1.7     |                                      |  |                              | 0.8     |                   |  |   | 20.3    |        |  |        | 32.8    |    |  |   | 172.3   |    |  |   |    |    |  |   |   |    |
| Operatingcosts andexpenses                   |  |                       | 2,837.9 |                                      |  |                              | 440.8   |                   |  |   | 2,348.9 |        |  |        | 2,380.1 |    |  |   | 2,654.1 |    |  |   | 2,156.5 |    |  |   | 868.4  |    |
| Operatingearnings(loss)                      |  |                       | 195.4   |                                      |  |                              | 19.3    |                   |  |   | (42.4   | )      |  |        | 264.2   |    |  |   | (34.4   | )  |  |   | (9.4    | )  |  |   | (267.2 | )  |
| Otherincome (expense), net(4)                |  |                       | (57.0   | )                                    |  |                              | (2.8    | )                 |  |   | (17.3   | )      |  |        | 3.4     |    |  |   | (12.4   | )  |  |   |    |    |  |   |   |    |
| Interestincome                               |  |                       | 10.1    |                                      |  |                              | 0.6     |                   |  |   | 7.1     |        |  |        | 7.8     |    |  |   | 8.8     |    |  |   |    |    |  |   |   |    |
| Interestexpense                              |  |                       | (251.1  | )                                    |  |                              | (49.6   | )                 |  |   | (32.7   | )      |  |        | (38.5   | )  |  |   | (44.4   | )  |  |   |    |    |  |   |   |    |
| Earnings(loss) before incometaxes            |  |                       | (102.6  | )                                    |  |                              | (32.5   | )                 |  |   | (85.3   | )      |  |        | 236.9   |    |  |   | (82.4   | )  |  |   |    |    |  |   |   |    |
| Incometax provision(benefit)                 |  |                       | 47.5    |                                      |  |                              | (8.3    | )                 |  |   | 68.7    |        |  |        | 105.2   |    |  |   | (1.8    | )  |  |   |    |    |  |   |   |    |
| Minorityinterests                            |  |                       | (5.8    | )                                    |  |                              | 0.1     |                   |  |   | (4.2    | )      |  |        | (3.3    | )  |  |   | (3.4    | )  |  |   |    |    |  |   |   |    |
| Netearnings(loss)                            |  | $                          | (155.9  | )                                    |  | $                                 | (24.1   | )                 |  | $      | (158.2  | )      |  | $           | 128.4   |    |  | $      | (84.0   | )  |  | $      | (58.4   | )  |  | $      | (213.6 | )  |
|                                              |

18

----

|                                             |  |                            |        |                                           |  |                                   |          |                        |  |        |        |             |  |             |        |         |  |        |        |         |  |        |        |        |  |        |        |        |  |  |
|---------------------------------------------|--|----------------------------|--------|-------------------------------------------|--|-----------------------------------|----------|------------------------|--|--------|--------|-------------|--|-------------|--------|---------|--|--------|--------|---------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                        |  | Successor                  |        | Predecessor                               |
| (dollarsin millions)                        |  | YearendedDecember 31, 2004 |        | November 4, 2003 throughDecember 31, 2003 |  | January 1 through November3, 2003 |          | Year ended December31, |
| 2002                                        |  | 2001                       |        | 2000(1)                                   |  | 1999(1)                           |          |
|                                        |  |                       |        |                                      |  |                              |          |                   |  |   |        | (unaudited) |  | (unaudited) |
| **Net Earnings (Loss) PerShare Data(5)**    |  |                       |   |                                      |  |                              |     |                   |  |   |   |        |  |        |   |    |  |   |   |    |  |   |   |   |  |   |   |   |
| **Statementof Cash FlowsData:**             |  |                       |   |                                      |  |                              |     |                   |  |   |   |        |  |        |   |    |  |   |   |    |  |   |   |   |  |   |   |   |
| Netcash provided by (usedfor):              |  |                       |   |                                      |  |                              |     |                   |  |   |   |        |  |        |   |    |  |   |   |    |  |   |   |   |  |   |   |   |
|     Operatingactivities |  | $                          | 237.1  |                                      |  | $                                 | 88.7     |                   |  | $      | 144.4  |        |  | $           | 323.1  |    |  | $      | 414.3  |    |  |   |   |   |  |   |   |   |
|     Investingactivities |  |                       | (72.9  | )                                    |  |                              | (4,145.1 | )                 |  |   | (12.3  | )      |  |        | (126.1 | )  |  |   | (463.5 | )  |  |   |   |   |  |   |   |   |
|     Financingactivities |  |                       | (231.8 | )                                    |  |                              | 4,130.3  |                   |  |   | (234.2 | )      |  |        | (232.7 | )  |  |   | 133.9  |    |  |   |   |   |  |   |   |   |
| **OtherFinancial Data(unaudited):**         |  |                       |   |                                      |  |                              |     |                   |  |   |   |        |  |        |   |    |  |   |   |    |  |   |   |   |  |   |   |   |
| EBITDA(6)                                   |  | $                          | 343.2  |                                      |  | $                                 | 54.5     |                   |  | $      | 106.8  |        |  | $           | 488.2  |    |  | $      | 245.7  |    |  |   |   |   |  |   |   |   |
| Non-cashcharges included in EBITDA(7)       |  |                       | 174.4  |                                      |  |                              | 23.9     |                   |  |   | 268.7  |        |  |        | 31.2   |    |  |   | 31.1   |    |  |   |   |   |  |   |   |   |
| Unusualitems included in EBITDA(8)          |  |                       | 59.7   |                                      |  |                              | 6.3      |                   |  |   | 48.5   |        |  |        | (33.3  | )  |  |   | 9.9    |    |  |   |   |   |  |   |   |   |
| Capitalexpenditures, net(9)                 |  |                       | 91.8   |                                      |  |                              | 15.6     |                   |  |   | 85.6   |        |  |        | 108.3  |    |  |   | 114.8  |    |  |   |   |   |  |   |   |   |
| Depreciation                                |  |                       | 114.3  |                                      |  |                              | 22.5     |                   |  |   | 101.8  |        |  |        | 134.7  |    |  |   | 124.6  |    |  |   |   |   |  |   |   |   |
| Amortization                                |  |                       | 96.3   |                                      |  |                              | 15.4     |                   |  |   | 68.9   |        |  |        | 89.2   |    |  |   | 171.3  |    |  |   |   |   |  |   |   |   |
|                                             |

|                                                                                      |  |                   |         |                   |  |        |         |        |  |             |         |             |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|-------------|---------|-------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                 |  | Successor         |         | Predecessor       |
|                                                                                 |  | Asof December 31, |         | As of December31, |
| (dollars inmillions)                                                                 |  | 2004              |         | 2003              |  | 2002   |         | 2001   |  | 2000(1)     |         | 1999(1)     |
|                                                                                 |  |              |         |              |  |   |         |   |  | (unaudited) |         | (unaudited) |
| **BalanceSheet Data:**                                                               |  |
| Cash and cashequivalents                                                             |  | $                 | 33.2    |              |  | $      | 100.0   |   |  | $           | 120.5   |        |  | $      | 146.0   |   |  | $      | 71.6    |   |  | $      | 80.0    |   |
| Workingcapital(10)                                                                   |  |              | 424.2   |              |  |   | 398.7   |   |  |        | 240.8   |        |  |   | 208.0   |   |  |   | 193.8   |   |  |   | 298.6   |   |
| Property,plant and equipment, net(11)                                                |  |              | 847.3   |              |  |   | 865.6   |   |  |        | 823.2   |        |  |   | 856.2   |   |  |   | 821.6   |   |  |   | 573.0   |   |
| Totalassets                                                                          |  |              | 5,934.5 |              |  |   | 6,163.8 |   |  |        | 6,486.4 |        |  |   | 6,512.2 |   |  |   | 6,406.6 |   |  |   | 5,529.3 |   |
| Totaldebt (including lease obligation and current portion of long-term debt)(11)(12) |  |              | 3,442.5 |              |  |   | 3,314.7 |   |  |        | 776.2   |        |  |   | 859.2   |   |  |   | 526.1   |   |  |   | 500.0   |   |
| Totalstockholders'investment                                                         |  |              | 694.3   |              |  |   | 1,069.0 |   |  |        | 3,589.2 |        |  |   | 3,734.4 |   |  |   | 4,011.8 |   |  |   | 4,264.0 |   |
| Offbalance sheet receivables facility(12)                                            |  |              | — |              |  |   | — |   |  |        | 87.0    |        |  |   | 101.0   |   |  |   | — |   |  |   | — |   |
|                                                                                      |

|  |
|--|
|  |  |
|  |

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

|           |                                                                                                                                                                                                                                                                                |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | ThePredecessor adopted Statement of Financial Accounting Standards (SFAS)No. 142, Goodwill and Other Intangible Assets, as ofJanuary 1, 2002. Under SFAS No. 142, goodwill and intangible assetsdeemed to have indefinite lives are no longer amortized but are subjectto |

19

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|        |                                                                                                                                                                                                    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | annual impairment tests. In the period fromJanuary 1, 2003 through November 3, 2003, the Predecessor took agoodwill impairment charge of $244.4 million based on the price paid inthe Acquisition. |

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

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | Otherincome (expense), net consists of monitoring fees paid by the Successorto affiliates of the Sponsors, management fees paid by the Predecessorto Suez, capital gains/(losses) on the disposals of assets, franchisetaxes, equity earnings of unconsolidated subsidiaries, recognized gainsand losses on foreign currency transactions and other miscellaneousincome (expense). Also included for the year ended December 31, 2004were a $35.0 million charge for the termination of the Monitoring FeeAgreement with affiliates of the Sponsors and a $13.7 million chargefor the early repayment of senior discount notes. |

|           |                |
|-----------|----------------|
| (5)  | Not applicable |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)  | EBITDA, a measure used by management to measureoperating performance, is defined as net earnings plus interest, taxes,depreciation and amortization. EBITDA is reconciled to net earnings(loss) in the following table. Our management believes EBITDA is usefulto the investors because it is frequently used by securities analysts,investors and other interested parties in the evaluation of companiesin our industry. EBITDA is not a recognized term under U.S. GAAP anddoes not purport to be an alternative to net earnings (loss) as anindicator of operating performance or to cash flows from operatingactivities as a measure of liquidity. Because not all companies useidentical calculations, this presentation of EBITDA may not becomparable to other similarly titled measures of other companies.Additionally, EBITDA is not intended to be a measure of free cash flowfor management's discretionary use, as it does not considercertain cash requirements such as interest payments, tax payments anddebt service requirements. The amounts shown for EBITDA as presentedherein differ from the amounts calculated under the definition ofEBITDA used in our debt instruments. The definition of EBITDA used inour debt instruments is further adjusted for certain cash and non-cashcharges and is used to determine compliance with financial covenantsand our ability to engage in certain activities such as incurringadditional debt and making certain payments. |

Thefollowing is a reconciliation of net earnings (loss) toEBITDA:

|                                 |  |                            |        |                                           |  |                                         |       |                        |  |        |        |         |  |        |       |        |  |        |       |         |  |  |
|---------------------------------|--|----------------------------|--------|-------------------------------------------|--|-----------------------------------------|-------|------------------------|--|--------|--------|---------|--|--------|-------|--------|--|--------|-------|---------|--|--|
|                            |  | Successor                  |        | Predecessor                               |
| (dollarsin millions)            |  | YearendedDecember 31, 2004 |        | November 4, 2003 throughDecember 31, 2003 |  | January 1, 2003 throughNovember 3, 2003 |       | Year ended December31, |
| 2002                            |  | 2001                       |        |
| Netearnings(loss)               |  | $                          | (155.9 | )                                    |  | $                                       | (24.1 | )                 |  | $      | (158.2 | )  |  | $      | 128.4 |   |  | $      | (84.0 | )  |
| Interestexpense,net             |  |                       | 241.0  |                                      |  |                                    | 49.0  |                   |  |   | 25.6   |    |  |   | 30.7  |   |  |   | 35.6  |    |
| Incometax provision(benefit)    |  |                       | 47.5   |                                      |  |                                    | (8.3  | )                 |  |   | 68.7   |    |  |   | 105.2 |   |  |   | (1.8  | )  |
| Depreciation                    |  |                       | 114.3  |                                      |  |                                    | 22.5  |                   |  |   | 101.8  |    |  |   | 134.7 |   |  |   | 124.6 |    |
| Amortizationof intangibleassets |  |                       | 96.3   |                                      |  |                                    | 15.4  |                   |  |   | 68.9   |    |  |   | 89.2  |   |  |   | 171.3 |    |
| EBITDA                          |  | $                          | 343.2  |                                      |  | $                                       | 54.5  |                   |  | $      | 106.8  |    |  | $      | 488.2 |   |  | $      | 245.7 |    |
|                                 |

20

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|           |                                                                                                                 |
|-----------|-----------------------------------------------------------------------------------------------------------------|
| (7)  | EBITDA, asdefined above, was reduced by the following non-cash charges, each ofwhich is further discussedbelow: |

|                                                |  |                            |         |                                           |  |                                         |         |                        |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                           |  | Successor                  |         | Predecessor                               |
| (dollarsin millions)                           |  | YearendedDecember 31, 2004 |         | November 4, 2003 throughDecember 31, 2003 |  | January 1, 2003 throughNovember 3, 2003 |         | Year ended December31, |
| 2002                                           |  | 2001                       |         |
| Impairmentof goodwill                          |  | $                          | — |                                      |  | $                                       | — |                   |  | $      | 244.4   |   |  | $      | — |   |  | $      | — |   |
| In-process research anddevelopment             |  |                       | 122.3   |                                      |  |                                    | — |                   |  |   | — |   |  |   | — |   |  |   | 1.3     |   |
| Inventorystep-up                               |  |                       | 14.6    |                                      |  |                                    | 21.2    |                   |  |   | — |   |  |   | — |   |  |   | — |   |
| Assetwrite-offs                                |  |                       | 1.1     |                                      |  |                                    | — |                   |  |   | 4.2     |   |  |   | 18.3    |   |  |   | 17.8    |   |
| Profitsharing and 401(k) expense funded bySuez |  |                       | 27.8    |                                      |  |                                    | 4.0     |                   |  |   | 20.0    |   |  |   | 12.1    |   |  |   | 12.0    |   |
| Other                                          |  |                       | 8.6     |                                      |  |                                    | (1.3    | )                 |  |   | 0.1     |   |  |   | 0.8     |   |  |   | — |   |
|                                           |  | $                          | 174.4   |                                      |  | $                                       | 23.9    |                   |  | $      | 268.7   |   |  | $      | 31.2    |   |  | $      | 31.1    |   |
|                                                |

Impairmentof Goodwill

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

In-process Research and Development

In-process research and development was a one-time charge of$122.3 million recorded during the year ended December 31, 2004, as aresult of purchase accounting entries related to the Acquisition. In2001, the Predecessor recorded $1.3 million of purchased in-processresearch and development, resulting from the redemption ofExxon's 40% interest in the Nalco/Exxon joint venture.

Inventory Step Up

As a result of purchaseaccounting for the Acquisition, the Successor wrote up its inventory tofair value and subsequently charged the write up to cost of sales asthe inventory was sold. The Successor statements of operations reflectthe inventory step-up in cost of product sold.

AssetWrite-Offs

In conjunction with our integration andprocess improvement initiatives, the Predecessor wrote off assetsconsisting primarily of a $5.0 million investment in start up venturesin 2003, $9.6 million of assets related to obsolete software systems in2002 and $17.8 million of PORTA-FEED stainless steel containers in 2001as a result of a physical inventory.

Profit Sharing and401(k) Expense Funded by Suez

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

Other

Other non-cash chargesinclude the non-cash impact on earnings of our equity investments andminority interests. Successor non-cash charges includes the non-cashportion of rent expense under the sublease that the Successor enteredinto with Suez in conjunction with theAcquisition.

21

----

|           |                                                                                                                                                                                         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)  | In additionto incurring non-cash charges and business optimization expenses, ourEBITDA was impacted by the following unusual (income) expenses, each ofwhich is further discussedbelow: |

|                                            |  |                            |         |                                           |  |                                         |         |                        |  |        |      |        |  |        |       |         |  |        |     |        |  |  |
|--------------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|------------------------|--|--------|------|--------|--|--------|-------|---------|--|--------|-----|--------|--|--|
|                                       |  | Successor                  |         | Predecessor                               |
| (dollarsin millions)                       |  | YearEndedDecember 31, 2004 |         | November 4, 2003 throughDecember 31, 2003 |  | January 1, 2003 throughNovember 3, 2003 |         | Year Ended December31, |
| 2002                                       |  | 2001                       |         |
| Pensionand OPEB settlement and curtailment |  | $                          | — |                                      |  | $                                       | (0.1    | )                 |  | $      | 7.9  |   |  | $      | (47.6 | )  |  | $      | 0.4 |   |
| Loss(gain) on sales, net ofexpenses        |  |                       | 0.2     |                                      |  |                                    | 1.1     |                   |  |   | 12.4 |   |  |   | (7.8  | )  |  |   | 0.9 |   |
| Otherunusualitems                          |  |                       | 59.5    |                                      |  |                                    | 5.3     |                   |  |   | 25.7 |   |  |   | 19.4  |    |  |   | 6.6 |   |
| Suezmanagement fees,net                    |  |                       | — |                                      |  |                                    | — |                   |  |   | 2.5  |   |  |   | 2.7   |    |  |   | 2.0 |   |
|                                       |  | $                          | 59.7    |                                      |  | $                                       | 6.3     |                   |  | $      | 48.5 |   |  | $      | (33.3 | )  |  | $      | 9.9 |   |
|                                            |

Pensionand Other Postretirement Benefits (OPEB) Settlement andCurtailment

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

Loss (Gain) on Sales, Net of Expenses

In2003, the Predecessor recorded a loss of $5.3 million on the sale ofits South African operations as well as $8.1 million of one-time costsassociated with the Acquisition. In 2002, the Predecessor sold itsperformance additives business, resulting in a gain of $12.4 million,and incurred $1.5 million of disposal costs and losses associated withits divestiture of Hydrosan. In 2001, the Predecessor incurred a $9.0million loss on the sale of Calgon's former headquarters facilitythat was partially offset by a $7.0 million gain on the sale of thePredecessor's corporate aircraft.

Other UnusualItems

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

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

Themost significant other unusual item affecting the Predecessor'sresults during the period from January 1, 2003 through November 3, 2003was a $10.4 million charge for the settlement of an interest rate swap.Other unusual items for the year ended December 31, 2002 included legaland environmental 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 one-time pension and benefit expenses primarilyrelated to the 

22

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redesign of our Australian benefit plan andthe application of regulatory changes in Germany of $4.7 million.Executive severance and relocation expense of $5.8 million accountedfor most of the other unusual items during the year ended December 31,2001.

Suez Management Fees, Net

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

|           |                                                                 |
|-----------|-----------------------------------------------------------------|
| (9)  | Capital expenditures arenet of proceeds from disposal ofassets. |

|            |                                                                                                                                                                                                                                      |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10)  | Working capital is definedas current assets (excluding cash and cash equivalents) less currentliabilities (excluding short-term debt and current portion of long-termdebt) and excluding intercompany balances calculated asfollows: |

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

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Asa result of the Acquisition, the Successor engaged independentappraisers to assist in determining the fair value of property, plantand equipment in connection with our allocation of purchase price.Preliminary and final valuations from the appraisers are included inthe balances at December 31, 2003 and 2004, respectively. In December2002, Ondeo Nalco Company entered into a sale-leaseback of itsNaperville, Illinois headquarters and research facility that wastreated as a financing lease for accounting purposes. Concurrent withthe Acquisition, on November 4, 2003, the lease was assigned to anotherSuez subsidiary that subleased the property back to the Successor. TheSuccessor accounts for the sublease as an operating lease and hasexcluded the headquarters and research facility from property, plantand equipment. |

|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12)  | Total debt does notinclude the Predecessor's historical off balance sheetreceivables facility. In December 2001, Ondeo Nalco Company enteredinto an agreement that allowed it to periodically transfer undividedpercentage ownership interests in a revolving pool of most of its U.S.trade receivables to a multi-seller conduit administered by anindependent financial institution. The Predecessor accounted for thetransfer of undivided percentage ownership interest in the receivablesto the conduit as sales under SFAS No. 140, Accounting for Transfersand Servicing of Financial Assets and Extinguishments ofLiabilities. The loss on the sale of the undivided interests in thereceivables was $1.5 million and $1.8 million for the period fromJanuary 1, 2003 through November 3, 2003 and the year ended December31, 2002, respectively, and is included in interest expense. Theundivided interest in receivables that were transferred but notultimately sold to the conduit ("retainedinterest") is classified in trade accounts receivable inthe balance sheet. The retained interest was $56.6 million at December31, 2002 and $49.0 million at December 31, 2001. This program wasunwound prior to closing of the Acquisition. The Successor treats itsnew receivables facility as a general financing agreement resulting inthe funding and related receivables being shown as liabilities andassets, respectively, on its consolidated balance sheet and the costsassociated with the receivables facility being recorded as interestexpense. |

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

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

"Safe Harbor" Statement Under PrivateSecurities Litigation Reform Act of 1995

This Annual Report forthe fiscal year ended December 31, 2004 (the "AnnualReport") includes "forward-lookingstatements" within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. These forward-looking statements include statements concerningour plans, objectives, goals, strategies, future events, future revenueor performance, capital expenditures, financing needs, plans orintentions relating to acquisitions, business trends and otherinformation that is not historical information. When used in thisAnnual Report, the words "estimates,""expects,""anticipates,""projects,""plans," "intends,"" believes,""forecasts," or future or conditional verbs,such as "will,""should," "could"or "may," and variations of such words orsimilar expressions are intended to identify forward-lookingstatements. All forward-looking statements, including, withoutlimitation, management's examination of historical operatingtrends and data are based upon our current expectations and variousassumptions. Our expectations, beliefs and projections are expressed ingood faith and we believe there is a reasonable basis for them.However, there can be no assurance that management'sexpectations, beliefs and projections will be achieved.

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

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

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

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

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

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

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

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

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

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

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

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

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

24

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

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

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

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

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

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

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

Risk Factors

If we are unable to respond to the changingneeds of a particular industry and to anticipate, respond to or utilizechanging technologies and develop new offerings, it could become moredifficult for us to respond to our customers' needs and cause usto be less competitive.

We have historically been able tomaintain our market positions and margins through continuous innovationof products and development of new offerings to create value for ourcustomers. Recent innovations and development that we have relied oninclude our 3D TRASAR system for controlling and monitoring chemicalfeed and our recent relationship with USFilter, which permits us tosell equipment solutions as part of a bundled offering to our watertreatment customers. We may not be successful in continuing to makesimilar innovations in the future. Our future operating results willdepend to a significant extent on our ability to continue to introducenew products and applications and to develop new offerings that offerdistinct value for our customers. Many of our products may be affectedby rapid technological change and new product introductions andenhancements. We expect to continue to enhance our existing productsand identify, develop and manufacture new products with improvedcapabilities and make improvements in our productivity in order tomaintain our competitive position. We intend to devote sizeableresources to the development of new technologically advanced productsand systems and to continue to devote a substantial amount ofexpenditures to the research and development functions of our business.However, we cannot assure youthat:

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

|              |                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------|
| •  | products ortechnologies developed by others will not render our offerings obsoleteor non-competitive; |

|              |                                        |
|--------------|----------------------------------------|
| •  | the marketwill accept our innovations; |

|              |                                                                                           |
|--------------|-------------------------------------------------------------------------------------------|
| •  | ourcompetitors will not be able to produce our core non-patented productsat a lower cost; |

|              |                                                                                                        |
|--------------|--------------------------------------------------------------------------------------------------------|
| •  | we will havesufficient resources to research and develop all promising newtechnologies and products;or |

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

Our ability to anticipate, respond to and utilizechanging technologies is crucial because we compete with many companiesin each of the markets in which we operate. For example, we competewith hundreds of companies in the water treatment chemicals market,including our largest global 

25

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

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

We are highly leveraged. As of December 31, 2004,our total consolidated indebtedness was $3,442.5 million and we had$250.0 million of borrowing capacity available under our revolvingcredit facility (excluding $35.3 million of outstanding letters ofcredit).

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

|              |                                                                                                                                                                                                                                                        |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | It may limit our andour subsidiaries' ability to obtain additional financing forworking capital, capital expenditures, product development, debtservice requirements, acquisitions and general corporate or otherpurposes on favorable terms or atall; |

|              |                                                                                                                                                                                                                                                                                            |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | A substantial portion ofour subsidiaries' cash flows from operations must be dedicated tothe payment of principal and interest on their and our indebtedness andthus will not be available for other purposes, including operations,capital expenditures and future businessopportunities; |

|              |                                                                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | It may limit ourability to adjust to changing market conditions and place us at acompetitive disadvantage compared to those of our competitors that areless highly-leveraged; |

|              |                                                                                                             |
|--------------|-------------------------------------------------------------------------------------------------------------|
| •  | It mayrestrict our ability to make strategic acquisitions or cause us to makenon-strategic divestitures;and |

|              |                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may be more vulnerablethan a less leveraged company to a downturn in general economicconditions or in our business, or we may be unable to carry out capitalspending that is important to our growth. |

At December 31, 2004,we had $1,408.9 million of variable rate debt. A 1% increase inthe average interest rate would increase future interest expense byapproximately $14.1 million per year.

Despite ourcurrent leverage, we may still be able to incur substantially moredebt. This could further exacerbate the risks that we and oursubsidiaries face.

We and our subsidiaries may be able toincur substantial additional indebtedness in the future. The terms ofthe indentures governing our subsidiaries' notes do not fullyprohibit us or our subsidiaries from doing so. Nalco Company'srevolving credit facility provides commitments of up to $250.0 million,all of which would have been available for future borrowings as ofDecember 31, 2004. If new debt is added to our current debt levels, therelated risks that we and our subsidiaries now face couldintensify.

Our subsidiaries' debt agreements containrestrictions that limit our flexibility in operating ourbusiness.

Nalco Company's senior credit agreement andthe indentures governing our subsidiaries' existing notes containa number of significant covenants that, among other things, restrictour or our subsidiaries' abilityto:

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

26

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|              |                                                                                 |
|--------------|---------------------------------------------------------------------------------|
| •  | paydividends on or make other distributions or repurchase certain capitalstock; |

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

|              |                                                             |
|--------------|-------------------------------------------------------------|
| •  | enter into certaintypes of transactions with ouraffiliates; |

|              |                                                 |
|--------------|-------------------------------------------------|
| •  | use assets assecurity in other transactions;and |

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | sell certain assets or mergewith or into other companies. |

In addition, under the seniorcredit agreement, Nalco Holdings LLC is required to satisfy andmaintain specified financial ratios and tests. Events beyond ourcontrol may affect its ability to comply with those provisions andNalco Holdings LLC may not be able to meet those ratios and tests. Thebreach of any of these covenants would result in a default under thesenior credit agreement and the lenders could elect to declare allamounts borrowed under the senior credit agreement, together withaccrued interest, to be due and payable and could proceed against thecollateral securing that indebtedness.

Theterms of Nalco Company's senior credit agreement fully prohibitNalco Holdings LLC and its subsidiaries from paying dividends orotherwise transferring their assets to us.

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

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

Wehave significant operations outside the United States, including jointventures and other alliances. We conduct business in approximately 130countries and, in 2004, approximately 55% of our net salesoriginated outside the United States. There are inherent risks in ourinternational operations,including:

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

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

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

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

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

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

|              |                                                                                                |
|--------------|------------------------------------------------------------------------------------------------|
| •  | difficulties inmanaging international operations and the burden of complying withforeign laws; |

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | exposure topossible expropriation or other governmentactions; |

|              |                                                                              |
|--------------|------------------------------------------------------------------------------|
| •  | restrictions on ourability to repatriate dividends from our subsidiaries;and |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | unsettled politicalconditions and possible terrorist attacks against Americaninterests. |

Our international operations also expose us todifferent local political and business risks and challenges. Forexample, in certain countries we are faced with periodic politicalissues that could result in currency risks or the risk that we arerequired to include local ownership or management in our businesses. Weare also periodically faced with the risk of economic uncertainty, suchas recent strikes and currency exchange controls in Venezuela, whichhas impacted our business in these countries. Other risks ininternational business also include difficulties in staffing andmanaging local operations, including our obligations to design localsolutions to manage credit risk to local customers anddistributors.

27

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

Environmental safety andproduction and product regulations or concerns could subject us toliability for fines or damages, require us to modify our operations andincrease our manufacturing and delivery costs.

We aresubject to the requirements of environmental and occupational safetyand health laws and regulations in the United States and othercountries. These include obligations to investigate and clean upenvironmental contamination on or from properties or at off-sitelocations where we are identified as a responsible party. For example,we are currently identified as a potentially responsible party atcertain waste management sites. Additionally, the U.S. EnvironmentalProtection Agency is conducting a civil and criminal investigation ofenvironmental practices at our Louisiana manufacturing facility. Noclaims or charges have been issued and we are unable to predict theresults of such investigation. We have also been named as a defendantin a series of multi-party and individual lawsuits based on claims ofexposure to hazardous materials. We cannot predict with certainty theoutcome of any such tort claims or the involvement we might have insuch matters in the future and there can be no assurance that thediscovery of previously unknown conditions will not require significantexpenditures. In each of these chemical exposure cases, our insurancecarriers have accepted the claims on our behalf and our financialexposure is limited to the amount of our deductible; however, we cannotpredict the number of claims that we may have to defend in the futureand we may not be able to continue to maintain such insurance.

We have made and will continue to make capital and otherexpenditures to comply with environmental requirements. Although webelieve we are in material compliance with environmental lawrequirements, we may not have been and will not at all times be incomplete compliance with all of these requirements, and may incurmaterial costs, including fines or damages, or liabilities inconnection with these requirements in excess of amounts we havereserved. In addition, these requirements are complex, changefrequently and have tended to become more stringent over time. In thefuture, we may discover previously unknown contamination that couldsubject us to additional expense and liability. In addition, futurerequirements could be more onerous than current requirements.

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

We may not be able to achieve all of ourexpected cost savings.

Although we successfully surpassedour 2004 cost savings target, a variety of risks could cause us not toachieve the benefits of the expected 2005 cost savings, including,among others, the following:

28

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|              |                                                                 |
|--------------|-----------------------------------------------------------------|
| •  | higherthan expected severance costs related to staffreductions; |

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

|              |                                                                                                                                                                          |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | delays in theanticipated timing of activities related to our cost-saving plan,including the reduction of inefficiencies in our administrative andoverhead functions; and |

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | otherunexpected costs associated with operating the business. |

We have experienced, and may continue toexperience, difficulties in securing the supply of certain rawmaterials we and our competitors need to manufacture some of ourproducts.

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

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

Wesponsor various pension plans worldwide that are underfunded andrequire significant cash payments. For example, in 2004, we contributed$13.7 million to our pension plans and in 2003, we contributed $31.2million to our pension plans. We are required to contribute at least$21.0 million to the U.S. pension plan in 2005. We may also opt to makeadditional voluntary contributions to various pension plans worldwidein 2005.

Additionally, if the performance of the assets in ourpension plans does not meet our expectations, or if other actuarialassumptions are modified, our contributions for those years could beeven higher than we expect.

As of December 31, 2004, ourworldwide pension plans were underfunded by $421.7 million (based onthe actuarial assumptions used for purposes of Statement of FinancialAccounting Standards (SFAS) No. 87, Employers' Accounting forPensions). Our U.S. pension plans are subject to the EmployeeRetirement Income Security Act of 1974, or ERISA. Under ERISA, thePension Benefit Guaranty Corporation, or PBGC, has the authority toterminate an underfunded pension plan under certain circumstances. Inthe event our U.S. pension plans are terminated for any reason whilethe plans are underfunded, we will incur a liability to the PBGC thatmay be equal to the entire amount of the underfunding. Prior to theclosing of the Acquisition, the PBGC requested and received informationfrom us regarding our business, the Transactions and our pension plans.The PBGC took no further action with respect to their inquiry.

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 $3.7 billion as of December 31, 2004, or 62%of our total assets. Goodwill, which represents the excess of cost overthe fair value of the net assets of the businesses acquired, wasapproximately $2.4 billion as of December 31, 2004, or 40% ofour total assets. Goodwill and net identifiable intangible assets arerecorded at fair value on the date of acquisition and, in accordancewith SFAS No. 142, Goodwill and Other Intangible Assets, will bereviewed at least annually for impairment. Impairment may result from,among other things, deterioration in our performance, adverse marketconditions, adverse changes in applicable laws or regulations,including changes that restrict the activities of or affect theproducts and services sold by 

29

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

Our future success will dependin part on our ability to protect our intellectual property rights, andour inability to enforce these rights could permit others to offerproducts competitive with ours, which could reduce our ability tomaintain our market position and maintain our margins.

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

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

Our Sponsors control us and may haveconflicts of interest with us or you in the future.

OurSponsors, The Blackstone Group, Apollo Management and Goldman Sachs,beneficially own approximately 61% of our equity. In addition,representatives of our Sponsors will occupy six of the seats on ourboard of directors. As a result, our Sponsors have control over ourdecisions to enter into any corporate transaction and will have theability to prevent any transaction that requires the approval of ourboard of directors or the equityholders, regardless of whether or notother members of our board of directors or equityholders believe thatany such transactions are in their own best interests. For example, ourSponsors could cause us to sell revenue-generating assets, which couldimpair our long-term ability to declare dividends or grow our business.Additionally, our Sponsors are in the business of making investments incompanies and may from time to time acquire and hold interests inbusinesses that compete directly or indirectly with us. Our Sponsorsmay also pursue acquisition opportunities that may be complementary toour business, and as a result, those acquisition opportunities may notbe available to us. So long as our Sponsors continue to hold a majorityof our equity through ownership of the majority of the equity of NalcoHolding Company's majority equityholder, Nalco LLC, the Sponsorswill be entitled to nominate a majority of our board of directors, andwill, through Nalco LLC, have the ability to effectively control thevote in any election of directors. Following a reduction of the equityowned by the Sponsors through Nalco LLC to below 50% of ouroutstanding equity, the Sponsors will retain the right to cause theboard of directors to nominate a number of Sponsor designees for theboard of directors, and continue to be able to significantly influenceor effectively control our decisions.

Impact of the Acquisitionand Related Financing Transactions

On November 4, 2003,pursuant to a Stock Purchase Agreement between Nalco Holdings LLC, aDelaware limited liability company, and Suez("Suez") and certain of its affiliates, NalcoHoldings LLC (the "Successor") acquired thenet assets of Ondeo Nalco Group (the"Predecessor"). The aggregate purchase pricewas $4,105.4 million in cash, after giving effect to direct costs ofthe Acquisition, closing date working capital and indebtedness purchaseprice adjustments, a post-closing working capital and indebtednesspurchase price adjustment which was agreed to by us and Suez on March25, 2004, and additional purchase price adjustments related to taxespaid or tax refunds received by us for periods prior to theAcquisition. The purchase price was financed by equity investmentstotaling $991.9 million from a consortium of private equity fundscontrolled by the 

30

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Blackstone Group, Apollo Management, L.P.,and investment partnerships affiliated with The Goldman Sachs Group,Inc.; an equity investment of $10.0 million from Dr. William H. Joyce,our Chairman and Chief Executive Officer; term loans of approximately$1,600 million; and the issuance of $665 million aggregate principalamount of 73⁄4% senior notes due 2011, €200million aggregate principal amount of 73⁄4% senior notesdue 2011, $465 million aggregate principal amount of8 7/8% senior subordinated notes due 2013 and€200 million aggregate principal amount of 9%senior subordinated notes due 2013. As a result, our interest expensecurrently is, and will continue to be, higher than it was prior to theAcquisition.

The Stock Purchase Agreement provided for certainadjustments of the purchase price, including adjustments based on theclosing working capital and indebtedness (as both are defined in theStock Purchase Agreement) of Ondeo Nalco Group at the date of theAcquisition. On March 25, 2004, the Company and Suez agreed to a $25.6million working capital adjustment payable to the Company plusinterest. This adjustment was not reflected in the consolidatedfinancial statements as of December 31, 2003. We recorded the purchaseprice adjustment in 2004 by decreasing goodwill.

We accountedfor the Acquisition using the purchase method of accounting and,accordingly, the Acquisition resulted in a new basis of accounting forus. We allocated the purchase price on the basis of our estimate of thefair value of the underlying assets acquired and liabilities assumed.We retained third party professionals to assist in the determination ofa fair value of our pension and post retirement obligations. We alsoengaged independent appraisers to assist in determining the fair valuesof property, plant and equipment and intangible assets acquired,including purchased in-process research and development, trade names,trademarks, developed technology and customer relationships. Wereceived final values from the appraisers in 2004, and we havecompleted our allocation of purchase price. The excess of the totalpurchase price over the estimated fair value of the net assets acquiredat closing has been allocated to goodwill, and this indefinite livedasset is subject to annual impairment review. Goodwill in thetransaction, based on the final allocation of the purchase price,totaled $2,224.2 million. An allocation has been made for the fairvalue of research and development activities that, as of the date ofthe Acquisition, had commenced, but had not yet been completed, andhave no alternative future use (in-process research and development).In conjunction with the independent appraisers, we estimated the fairvalue of in-process research and development and recorded a one-timecharge of $122.3 million during the year ended December 31, 2004 as aresult of the final purchase accounting entries related to theAcquisition.

In conjunction with the Acquisition, we formulateda plan to exit or restructure certain activities. We recordedliabilities of $35.5 million, primarily for employee severance andrelated costs, in connection with our plan to exit or restructurecertain activities. As of December 31, 2004, $31.7 million has beencharged against this accrual. We expect that we will complete theseactivities by the end of 2005.

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Business Optimization Expenses

Weincurred significant, nonrecurring business optimization expenses as aresult of the implementation of the redesign and optimization ofbusiness and work processes, global cost reduction programs in sales,marketing, manufacturing and support service functions, and the globalintegration of our businesses, asfollows:

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

BusinessProcess Optimization

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

Sales and Marketing Integration

During 2002, we realigned our support for the petroleum,petrochemical, pulp and paper industries to provide integrated processimprovement and water treatment sales and service to key customers,primarily in North America. As a result, we incurred expenses forseverance, outplacement, and employee relocations for about 100personnel.

2001 Headcount Reduction

Wealso implemented a plan during the second half of 2001 to reduce costsand improve efficiency throughout our organization and eliminatedapproximately 200 positions at Ondeo Nalco Company. Charges incurredincluded severance and outside consulting costs.

Nalco/Exxon Integration

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

Nalco Chemical Company, Aquazur and CalgonIntegration

In November 1999, Suez acquired Nalco ChemicalCompany and combined Nalco Chemical Company with Aquazur and Calgon,two other subsidiaries of Suez and historical competitors of NalcoChemical Company. In June 1999, Degremont, a Suez subsidiary, acquiredCalgon Corporation for $425.0 million. Aquazur was developed over aten-year period through organic growth and acquisitions in Europe. Atthe time of Nalco Chemical Company's acquisition by Suez, NalcoChemical Company had annual sales of $1,606.0 million.

Beginningin 2000, we implemented a strategic plan to integrate the globaloperations of Nalco Chemical Company, Calgon and Aquazur resulting insignificant nonrecurring business optimization 

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expenses. This integration entailed thecombination and realignment of the manufacturing, selling, research andadministrative support functions of the three businesses to achieveoptimum efficiencies and synergies. Charges incurred consisted ofconsulting and other outside services, certain severance expenses,retention payments, training, travel, advertising, the integration ofdata processing and information systems and facility closure costs.Activities related to the integration were completed at the end of2002.

Critical Accounting Policies and Estimates

Revenue Recognition

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

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

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

Impairment of Long-Lived AssetsOther Than Intangibles

We conduct periodic reviews foridle equipment and review business plans for possible impairmentimplications. PORTA-FEED stainless steel containers, utilized to shipchemicals, represent approximately 7.4% 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 asset immediately.

Wecapitalize qualifying costs incurred in the acquisition and developmentof software for internal use, including the costs of the software,materials, consultants, interest, and payroll and payroll-related costsfor employees dedicated to the development. We must use our judgment indetermining whether the direct costs of materials and services consumedin developing or obtaining internal-use computer software and anemployee's time and travel expenses directly associated withdeveloping software are recoverable and should be capitalized. We baseour determination on the nature and the extent of the activity that theemployee is performing. A significant portion of our capitalizedsoftware costs relates to our SAP implementation and is subject to ourexpectation that the acquired and developed software will be completedand placed in service as anticipated.

Goodwill andOther Intangible Assets

Carrying values of goodwill,customer relationships, trademarks, trade names, patents, developedtechnology and other intangible assets are reviewed periodically forpossible impairment using a discounted cash flow approach. Theestimates and assumptions we use are consistent with the business plansand estimates we use to manage operations and to make acquisition anddivestiture decisions. The use of different assumptions would increaseor decrease the estimated value of future cash flows and would haveincreased or decreased any impairment charge taken. Future outcomes mayalso differ. If we fail to achieve estimated volume and pricingtargets, experience unfavorable market conditions or achieve resultsthat differ from our estimates, then revenue and cost forecasts may notbe achieved, and we may be required to recognize additional impairmentcharges.

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We capitalize qualifying costs incurredin the acquisition and development of software for internal use,including the costs of the software, materials, consultants, interest,and payroll 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 and is subject to our expectation that the acquiredand developed software will be completed and placed in service asanticipated.

Pensions

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

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

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

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

The net effect of changes in actuarial assumptions andexperience has been deferred historically. As a result of theAcquisition and the application of purchase accounting, all unamortizeddeferrals were eliminated as of the date of the Acquisition.

Other Postretirement Benefits

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

Environmental

Our business and operationsare subject to extensive environmental laws and regulations governing,among other things, air emissions, wastewater discharges, the use andhandling of 

34

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hazardous substances, waste disposal and theinvestigation and remediation of soil and groundwater contamination. Aswith other companies engaged in similar manufacturing activities andproviding similar services, some risk of environmental liability isinherent in our operations.

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

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

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

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Results of Operations for 2003

The following discussion and analysis of financial condition andresults of operations covers periods for the fiscal year ended December31. For ease of comparison purposes, financial data for the period fromNovember 4, 2003 through December 31, 2003 has been added to thefinancial data for the period from January 1, 2003 through November 3,2003, to arrive at a twelve-month combined period ended December 31,2003. This combined data may be referred to as "the yearended December 31, 2003" or"2003".

|                                             |  |                                           |         |                                         |  |                             |         |         |  |        |         |         |  |  |
|---------------------------------------------|--|-------------------------------------------|---------|-----------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                        |  | Successor                                 |         | Predecessor                             |  | Combined                    |
| (dollarsin millions)                        |  | November 4, 2003through December 31, 2003 |         | January 1, 2003 throughNovember 3, 2003 |  | Year Ended December 31,2003 |
| Netsales                                    |  | $                                         | 460.1   |                                    |  | $                           | 2,306.5 |    |  | $      | 2,766.6 |    |
| Operatingcosts andexpenses:                 |  |                                      |    |                                    |  |                        |    |    |  |   |    |    |
| Cost ofproductsold                          |  |                                      | 248.2   |                                    |  |                        | 1,114.6 |    |  |   | 1,362.8 |    |
| Selling,administrative and researchexpenses |  |                                      | 176.4   |                                    |  |                        | 900.7   |    |  |   | 1,077.1 |    |
| Impairmentofgoodwill                        |  |                                      | — |                                    |  |                        | 244.4   |    |  |   | 244.4   |    |
| Amortizationof intangibleassets             |  |                                      | 15.4    |                                    |  |                        | 68.9    |    |  |   | 84.3    |    |
| Businessoptimizationexpenses                |  |                                      | 0.8     |                                    |  |                        | 20.3    |    |  |   | 21.1    |    |
| Operatingexpenses                           |  |                                      | 440.8   |                                    |  |                        | 2,348.9 |    |  |   | 2,789.7 |    |
| Operatingearnings(loss)                     |  |                                      | 19.3    |                                    |  |                        | (42.4   | )  |  |   | (23.1   | )  |
| Otherincome (expense),net                   |  |                                      | (2.8    | )                                  |  |                        | (17.3   | )  |  |   | (20.1   | )  |
| Interestincome (expense),net                |  |                                      | (49.0   | )                                  |  |                        | (25.6   | )  |  |   | (74.6   | )  |
| Lossbefore incometaxes                      |  |                                      | (32.5   | )                                  |  |                        | (85.3   | )  |  |   | (117.8  | )  |
| Incometax provision(benefit)                |  |                                      | (8.3    | )                                  |  |                        | 68.7    |    |  |   | 60.4    |    |
| Minorityinterests                           |  |                                      | 0.1     |                                    |  |                        | (4.2    | )  |  |   | (4.1    | )  |
| Netloss                                     |  | $                                         | (24.1   | )                                  |  | $                           | (158.2  | )  |  | $      | (182.3  | )  |
|                                             |

ExecutiveLevel Overview

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

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

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

Our net loss was $155.9 million for the year endedDecember 31, 2004 versus a loss of $182.3 million for 2003. Results inboth years were impacted by significant special items. Net income wasreduced in 2004 by a purchase accounting expense of $122.3 million forin-process research and development and by another $60.5 million forexpenses related to the Acquisition, the initial public offering ofcommon stock by Nalco Holding Company, and business optimizationexpenses. In 2003, a $244.4 million goodwill impairment charge reducednet income, as did another $37.9 million for other Acquisition-relatedcharges and business optimization expenses. Net interest expense in2004 was $166.4 million higher than in 2003 as a result of leverageestablished during our November 2003 Acquisition by our principalshareholders.

Nominal sales grew across Nalco's businesssegments during the year. Strong organic sales growth was alsosupported by foreign currency exchange benefits – particularlythe increase in value of the euro compared to the U.S. dollar. EnergyServices led sales growth with an 11.8% increase (9.3%

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organic), followed by Industrial andInstitutional Services at 9.4% growth (5.2% organic), andPaper Services at 6.5% (2.1% organic). Other segmentsales grew 15.0%, primarily as a result of sales brought to ourKatayama Nalco joint venture in Japan by partner Katayama Chemical Inc.Organic sales in this segment declined 1.0%, mainly as a resultof a decision made in late 2003 to reduce sales to a large, low-profitcustomer.

Our 8.5% organic sales increase in the threemonths ended December 31, 2004 marked the fourth straight quarter ofimproved results. On an organic basis, sales grew 3.1% in thefirst quarter, 4.3% in the second quarter and 4.9% in thethird quarter. Looking historically, it is unusual to have fourthquarter sales outpace the third quarter. We believe we gained less than$10 million in sales in the fourth quarter from customers in Europepurchasing early to avoid risking any potential complications from ourconversion to a SAP system in that region on January 1, 2005. We alsorecorded some sales in the fourth quarter in the sugar industry thatmore typically fall into the third quarter – this due to a lateharvest and start to sugar-processing campaigns. While we are pleasedwith the strength of sales in the three months ended December 31, 2004,we are not yet convinced that sales growth at that level issustainable.

Whether looking from a quarterly or annualperspective, our growth was geographically widespread during 2004. On anominal sales dollar basis, sales in North America grew just over4%. In every other region, nominal sales grew double-digits.Europe was up 16% with currency impacts playing a key role ingrowth. Pacific region sales increased 15%, led by strong growthin China, India and in Japan, where our new Katayama Nalco jointventure is off to a good start. In Latin America, sales grew 12%nominally.

North America sales now represent 48.4% ofCompany sales, followed by Europe at 32.6%, the Pacific at11.7% and Latin America at 7.2%. We continue to expandour global business and see developments in China, India, Russia,Eastern Europe and parts of Latin America as key components of ourgrowth plans. We expect growth in these markets to outpace growth inthe United States and Canada on an ongoing basis.

Our strongsales growth results from severalfactors.

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | First, the generaleconomy continues to improve. While we are not a cyclical business, itis always better for us to operate in an environment where ourcustomers are doing well. This improvement includes stabilization inthe North American paper market, which had been a drag on growth duringthe past several years. However, customer performance improvementappeared widespread, across multiple industries and allgeographies. |

|              |                                                                                                                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Second, wereinvested in the business by adding and training new sales engineersand service technicians. Many of these new employees are supportinghigh growth rates in the emerging markets and in faster growingindustry segments such as oilfield production, and food and beverageapplications. |

|              |                                                                                                                                                                                                                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Third, thereorganization of our sales and marketing organization along the linesof the global industry segments we serve has provided sharper focus andimproved growth strategies. This reorganization, which began in 2003,was initially distracting. However, it really began to positivelyimpact results in 2004. |

|              |                                                                                                                                                                                                                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Fourth,we were able to develop solutions that did not require the rawmaterials that were in short supply where some of our competitors arelacking this research and development capability. For example, we wereable to displace nearly 40% of our acrylic acid requirements asthis raw material became in short supply in late2004. |

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

Sales of 3D TRASAR cooling water stress management systems continueto run ahead of plan after being launched in North America in thesecond quarter. Training of sales engineers for this 

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best-in-class cooling water technology isnow underway in other regions. Development and deployment of FREEFLOWLow Dose Hydrate Inhibitors (LDHI) helped Nalco expand its flowassurance and asset integrity leadership at Deepwater oil and gasexploration and production sites. A new line of grade-based SMARTSolutions technologies is being launched in the paper industry toimprove customer operating efficiencies and finished productquality.

While sales were good during 2004, we also facednumerous challenges we need to continue to address. We clearly noticedthe impact of raw material cost pressures, significantly elevatedfreight costs and mix issues. Pricing improvement only partially offsetthese issues. We made progress on obtaining price increases during2004, but clearly not enough progress to keep up with the pace of costincreases. A number of price increases accepted in the fourth quarter2004 took effect on January 1 and February 1, 2005. In late February2005, we announced an additional round of price increases in ourIndustrial and Institutional Services division. We anticipate continuedcost increases so our prices will also need to continue to rise –and with more discipline and speed than we showed at times in 2004.

Our performance, combined with some one-time events, allowed us topay more than $400 million toward our debt. This includes a reductionin our senior discount note debt of $162.3 million that was paid with aportion of the proceeds from the initial public offering of commonstock of Nalco Holding Company. On a full-year basis, this reductionwas more than offset by the January 2004 issuance of senior discountnotes, the net proceeds of which were used to pay a return of capitaldistribution of $446.9 million.

Debt repayments during 2004 wereprimarily achieved through cash provided by operating activities of$237.1 million, of which nearly 40% was used to fund net capitalexpenditures of $91.8 million. In addition, a reduction in cash on handof $66.8 million, a purchase price adjustment for the Acquisition of$25.3 million and a capital injection from management of $9.3 millioncontributed to debt reduction. Cash generated by operating activitiesfor 2004 was reduced by a $35.0 million payment to settle a monitoringfee arrangement with our principal shareholders.

2005Expectations

Even with a good year and good fourth quarter,our expectations remain the same: 5% base business organic salesgrowth supported by additional growth as we begin strategic developmentof alternate channels. We expect alternate channels to be adding to ourgrowth rate at a 2% annual run-rate by year-end 2006. We alsointend to continue delivering double-digit EBITDA growth and to paydown well over $200 million in debt during the year. We have set animproved growth path for Nalco and intend to continue moving in thisdirection.

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

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

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

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

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Cost control actions will also continueto move forward. We expect to use work process redesign to drive anadded cost savings benefit of $75 million in 2005. These savings willmore than offset increased salaries and benefits, one-time andinflationary cost increases, and investments in sales engineers,service technicians and research programs. In addition, we expect abottom-line benefit from continuing sales growth and marginrecapture.

As for debt repayment expectations for 2005, weintend to use our Free Cash Flow to continue to reduce our outstandingdebt. We intend to focus these payments first on Term Loan A, on whichwe are paying 250 basis points over LIBOR, before proceeding to paydown Term Loan B at 200 basis points over LIBOR. We are not able tobegin reducing some of our higher rate debt until we have extinguishedthese term loans. Our current weighted average cost of debt is6.7% with $1.4 billion in variable rate debt and $2.0 billion infixed rate obligations.

Results of Operations

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

Net sales for the years ended December31, 2004 and December 31, 2003 may be compared as follows:

|                                       |  |                  |         |                   |  |                                               |         |                     |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |      |          |  |  |
|---------------------------------------|--|------------------|---------|-------------------|--|-----------------------------------------------|---------|---------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|----------|--|--|
|                                  |  | YearEnded        |         |              |  | Attributableto Changesin the FollowingFactors |
| (dollars inmillions)                  |  | December 31,2004 |         | December 31, 2003 |  | %Change                                       |         | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial& InstitutionalServices |  | $                | 1,402.0 |              |  | $                                             | 1,282.1 |                |  |                      | 9.4  | %  |  |   | 4.4 | %  |  |   | (0.2 | )%  |  |   | 5.2  | %   |
| EnergyServices                        |  |             | 805.4   |              |  |                                          | 720.1   |                |  |                      | 11.8 | %  |  |   | 3.7 | %  |  |   | (1.2 | )%  |  |   | 9.3  | %   |
| PaperServices                         |  |             | 663.0   |              |  |                                          | 622.8   |                |  |                      | 6.5  | %  |  |   | 3.8 | %  |  |   | 0.6  | %   |  |   | 2.1  | %   |
| Other                                 |  |             | 162.9   |              |  |                                          | 141.6   |                |  |                      | 15.0 | %  |  |   | 4.2 | %  |  |   | 11.8 | %   |  |   | (1.0 | )%  |
| Netsales                              |  | $                | 3,033.3 |              |  | $                                             | 2,766.6 |                |  |                      | 9.6  | %  |  |   | 4.1 | %  |  |   | 0.3  | %   |  |   | 5.2  | %   |
|                                       |

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

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

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

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

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

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

TheEnergy Services division reported organic growth in sales of9.3% over last year, with double-digit improvements posted byboth of its upstream business groups. Led by its global miningbusiness, the Industrial and Institutional Services division reported a5.2% organic increase in sales. Paper Services division saleswere up 2.1% on an organic basis compared to a year ago, mainlydue to new business gained and good growth in the Pacific region,Europe and Latin America, offset by the lingering effect of price andcontract concessions in North America in 2003. The unfavorable organicgrowth in "other" is mainly due to thedecision made last year to reduce certain low-margin business with amajor customer, slightly offset by organic growth in India. The effectof this decision also reduced the organic growth of total net sales by0.3%.

39

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Gross profit, defined as thedifference between net sales and costs of products sold, of $1,481.1million for the year ended December 31, 2004 increased by $77.3million, or 5.5%, over the $1,403.8 million reported for theyear ended December 31, 2003. Adjusted for the favorable effect ofchanges in foreign currency translation rates and the net unfavorableimpact of acquisitions and divestitures, gross profit increased by$18.9 million, or 1.3%. Significant factors contributing to thefavorable organic change in gross profit were the aforementionedincrease in sales volumes, which favorably impacted gross profit byapproximately $79.5 million, but which was partly offset by marginerosion mainly due to product mix ($48.0 million), raw material costincreases ($20.3 million) and freight increases ($7.9 million). Grossprofit margin for the year ended December 31, 2004 declined to48.8% from 50.7% for the same period last year.

Selling, administrative, and research expenses for the yearended December 31, 2004 of $1,065.4 million decreased by $11.7 million,or 1.1%, from the $1,077.1 million for the year ended December31, 2003. Adjusted for the unfavorable effects of changes in foreigncurrency translation rates and the impact of acquisitions anddivestitures, selling, administrative, and research expenses decreasedby $52.9 million, or 4.9%, primarily due to spending reductionsinitiatives launched in the fourth quarter 2003 and tightened spendingcontrols in 2004.

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

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

In-process research and development was a one-time chargeof $122.3 million recorded during the year ended December 31, 2004, asa result of final purchase accounting entries related to theAcquisition. The value of purchased IPR&D was comprised of fiveongoing development projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative future use.

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

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

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

The effective tax rate, excluding theimpact of the aforementioned charge for purchased IPR&D, was241.1% for the year ended December 31, 2004 compared to aneffective tax rate in 2003 of 47.7%, 

40

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excluding the impact of the goodwillimpairment. The increase in the effective tax rate is primarily causedby onetime tax costs of restructuring to more efficiently repatriatecertain foreign earnings and the loss of certain interest deductionsthat flowed to the Company's owners.

Nalco FinanceHoldings LLC is treated as a partnership for U.S. tax purposes;therefore, the taxable income and expenses of the entity flow directlyto the owners. In 2004, approximately $51.8 million of interestdeductions ($18.1 million of tax benefit) flowed to the owners and werenot deductible by theCompany.

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

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

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

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

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

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

Netsales for the year ended December 31, 2003 were $2,766.6 million,a $122.3 million, or 4.6%, increase over the $2,644.3 millionreported for the year ended December 31, 2002. After adjusting for thefavorable effects of changes in foreign currency translation rates, netsales were down $18.3 million, or 0.7%, as a result of a $14.7million net decrease attributable to divestitures and acquisitions, aswell as a slight operational decrease of $3.6 million. In addition tothe unspecified volume and price 

41

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reductions that resulted from thedistractions to our sales force and customers caused by the salesreorganizations in North America and the Pacific region and the sale ofthe Company, specific factors impacting the operational decreaseincluded a $16.2 million sales decrease in Venezuela caused by anational strike due to political turmoil and a $15.0 million decreasein sales due to paper mill shutdowns in North America caused bycustomer bankruptcies and lower demand. These shortfalls were offset bypositive growth in the upstream business of Energy Services, the GlobalMining Business and the Emerging Markets regions of Industrial andInstitutional Services.

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

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

Business optimization expenses for the year ended December31, 2003 and 2002 were $21.1 million and $32.8 million, respectively.The decrease is due to the completion of various integration processesin 2002, partially offset by costs associated with the sales andmarketing business realignment launched in 2002.

Amortization of intangible assets was $84.3 million and$89.2 million for the year ended December 31, 2003 and 2002,respectively. The decrease resulted from the preliminary purchaseaccounting adjustments as a result of the Acquisition.

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

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

Net interestexpense, defined as the combination of interest income andinterest expense, of $74.6 million for the year ended December 31, 2003increased by $43.9 million from the $30.7 million 

42

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reported for the year ended December 31,2002. The increase is due primarily to the interest charges incurred onthe new debt used to finance the acquisition of the Company.

The effective tax rate**,**excluding the impact of theaforementioned goodwill impairment charge, was 47.7 % for theyear ended December 31, 2003 compared to an effective tax rate of44.4% for the year ended December 31, 2002. The effective taxrate increased primarily due to the sale of the Predecessor'sSouth African subsidiary, which created tax expense, despite a pretaxloss under U.S. GAAP.

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

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

Liquidity and Capital Resources

Operatingactivities.    Historically, the Company's main source ofliquidity has been its solid cash flow generated by operatingactivities. For the year ended December 31, 2004, cash provided byoperating activities was $237.1 million, a $4.0 million increase fromthe same period last year, despite significantly higher interestpayments in 2004 as a result of the Acquisition and higher workingcapital requirements.

For the year ended December 31, 2003, cashprovided by operating activities was $233.1 million (comprised of $88.7million for the period from November 4, 2003 through December 31, 2003and $144.4 million for the Predecessor during the period from January1, 2003 through November 3, 2003), a decrease of $90.0 million from theyear ended December 31, 2002. The decrease was primarily the result ofhigher working capital requirements in 2003, most notably income taxespayable to the Predecessor's shareholder. The Predecessor alsohad $87.0 million of net cash outflows for its accounts receivablesecuritization program during 2003. This program was terminated inOctober 2003. During 2002, the Predecessor contributed $90.0 million tothe principal domestic pension plan.

Investingactivities.    Cash used for investing activities was $72.9million for the year ended December 31, 2004. Net property additions of$91.8 million were partly offset by a $25.3 million purchase priceadjustment related to the Acquisition. Slightly more than one-third ofthe capital spending was attributable to the Company'simplementation of a common information systems platform in NorthAmerica and Europe.

For the year ended December 31, 2003, cashused in investing activities was $4,157.4 million (comprised of$4,145.1 million for the period from November 4, 2003 through December31, 2003 and $12.3 million for the Predecessor during the period fromJanuary 1, 2003 through November 3, 2003), of which $4,127.1 millionwas related to the Acquisition. Net property additions were $101.2million in 2003, slightly lower than the $108.3 million for the yearended December 31, 2002. Business acquisitions, net of divestitures,was $10.1 million for the year ended December 31, 2003. Businessacquisitions in 2003 included $12.5 million to acquire the remaininginterest in the Predecessor's 40%-owned Swiss affiliateand $10.9 million for the purchase of a company in the U.K. from arelated Suez company. Net proceeds from divestitures totaled $13.3million during the year ended 

43

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December  31, 2003, which was mostlyattributable to the sale of the Predecessor's South Africansubsidiary. Net cash received by the Predecessor from notes receivablefrom related parties was $98.3 million during 2003.

For the yearended December 31, 2002, cash used in investing activities was $126.1million. During the year, the Predecessor received net proceeds of$12.8 million from the sale of a business, and it purchased twobusinesses for $10.1 million, net of cash acquired. The Predecessormade net cash advances of $36.2 million to related parties in 2002.

Financing activities.    Net cash used for financingactivities totaled $231.8 million during the year ended December 31,2004. Capital distributions, net of capital contributions, were $260.7million. Proceeds from additional borrowings, net of debt repaymentsand a redemption premium resulting from the early repayment of seniordiscount notes, were $31.0 million.

In January 2004, the Companyused the net proceeds from the issuance of senior discount notes tomake a return of capital distribution of $446.9 million to its parent,Nalco Investment Holdings LLC, which, in turn, made a distribution tothe holders of its membership interests.

Also during the yearended December 31, 2004, the Company received additional capitalcontributions of $186.2 million from its direct parent company. Of thisamount, $176.9 million resulted from the November 2004 public stockoffering made by the Company's indirect parent company, NalcoHolding Company. The remaining $9.3 million represented capitalcontributions received by the Company's ultimate parent company,Nalco LLC, and was comprised of an additional equity investment of $1.2million by Dr. William H. Joyce and $8.1 million in proceeds from thesale of equity interests to certain officers and key employees underthe Nalco LLC 2004 Unit Plan.

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

Net cashprovided by financing activities totaled $4,130.3 million during theperiod from November 4, 2003 through December 31, 2003. This wasprimarily comprised of net borrowings of $3,221.7 million and a$1,001.9 million capital contribution from the Company'sunitholder which were used to finance the acquisition of the Companyand to pay $92.4 million of costs to obtain the debt financing. Netcash used by the Predecessor for financing activities during the periodfrom January 1, 2003 through November 3, 2003 totaled $234.2 million,which was attributable to a net decrease in borrowings of $280.4million and dividends paid of $29.0 million, partly offset by capitalcontributions of $77.7 million.

During the year ended December31, 2002, net cash used by the Predecessor for financing activitiestotaled $232.7 million. A net decrease in borrowings of $255.4 millionand dividend payments of $122.3 million were partly offset by proceedsof $144.8 million from the sale and leaseback of the corporatefacility.

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

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

Senior credit facilities.    Our revolvingcredit facility is part of our senior credit facilities that wereentered into on November 4, 2003. Our senior credit facilities alsoinclude a $300 million term loan A 

44

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

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

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

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

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

The senior credit facilitiescontain a number of covenants that, among other things, restrict,subject to certain exceptions, our ability and our subsidiaries'ability, including Nalco Company, to sell assets, incur additionalindebtedness or issue preferred stock, repay other indebtedness, paydividends and distributions or repurchase certain capital stock, createliens on assets, make investments, loans or advances, make certainacquisitions, engage in mergers or consolidations, enter into sale andleaseback transactions, engage in certain transactions with affiliates,amend certain material agreements 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, 2004.

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

On January 21, 2004, Nalco Finance Holdings LLCand Nalco Finance Holdings Inc. issued $694.0 million aggregateprincipal amount at maturity of 9.0% senior discount notes due2014. Prior to February 1, 2009, interest will accrue on the notes inthe form of an increase in the accreted value of such notes. Theaccreted value of each note will increase from the date of issuanceuntil February 1, 2009 at a rate of 9.0% per annum, reflectingthe accrual of non-cash interest, such that the accreted value willequal the principal amount at maturity on February 1, 2009. Cashinterest payments on the notes will be due and payable beginning in2009. Our primary source of liquidity for such payments will be cashflow generated from the operations of subsidiaries, including NalcoHoldings and Nalco 

45

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Company. However, the terms of NalcoCompany's senior credit agreement fully prohibit Nalco Holdingsand our other subsidiaries from paying dividends or otherwisetransferring assets to the issuers. In addition, the terms of certainof the indentures governing the existing senior notes and seniorsubordinated notes of Nalco Company significantly restrict NalcoCompany and our other subsidiaries from paying dividends, makingdistributions and otherwise transferring assets to the issuers of thesenior discount notes. 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 such paymentsto be made whether or not there is availability under the formula orthe conditions to its use are met.

In December 2004, NalcoFinance Holdings LLC and Nalco Finance Holdings Inc. redeemed a portionof the senior discount notes with an accreted value of $162.3 millionusing proceeds from the initial public offering of common stock ofNalco Holding Company. The issuers paid a $14.6 million premium toredeem the notes. After the partial redemption, the aggregate principalamount at maturity of the notes declined to $460.8 million from $694.0million.

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

|              |                                |
|--------------|--------------------------------|
| •  | incur additional indebtedness; |

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | pay dividends on or make otherdistributions or repurchase certain capital stock; |

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

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | enter into certain types of transactionswith affiliates; |

|              |                                                                  |
|--------------|------------------------------------------------------------------|
| •  | limit dividends orother payments by our restricted subsidiaries; |

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

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | sell certain assetsor merge with or into other companies. |

Subject to certainexceptions, the indentures governing the senior discount notes, thesenior notes and senior subordinated notes permit the Company and ourrestricted subsidiaries to incur additional indebtedness, includingsecured indebtedness.

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

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

46

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Adjusted EBITDA iscalculated asfollows:

|                                  |  |                             |         |                                           |  |                                         |       |                             |  |        |        |         |  |        |       |         |  |  |
|----------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|-------|-----------------------------|--|--------|--------|---------|--|--------|-------|---------|--|--|
|                             |  | Successor                   |         | Successor                                 |  | Predecessor                             |       | Predecessor                 |
| (dollarsin millions)             |  | Year ended December31, 2004 |         | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November3, 2003 |       | Year ended December 31,2002 |
| Net income(loss)                 |  | $                           | (155.9  | )                                    |  | $                                       | (24.1 | )                      |  | $      | (158.2 | )  |  | $      | 128.4 |    |
| Interest,net                     |  |                        | 241.0   |                                      |  |                                    | 49.0  |                        |  |   | 25.6   |    |  |   | 30.7  |    |
| Incometax provision(benefit)     |  |                        | 47.5    |                                      |  |                                    | (8.3  | )                      |  |   | 68.7   |    |  |   | 105.2 |    |
| Depreciation                     |  |                        | 114.3   |                                      |  |                                    | 22.5  |                        |  |   | 101.8  |    |  |   | 134.7 |    |
| Amortization                     |  |                        | 96.3    |                                      |  |                                    | 15.4  |                        |  |   | 68.9   |    |  |   | 89.2  |    |
| EBITDA                           |  |                        | 343.2   |                                      |  |                                    | 54.5  |                        |  |   | 106.8  |    |  |   | 488.2 |    |
| Non-cashcharges(1)               |  |                        | 174.4   |                                      |  |                                    | 23.9  |                        |  |   | 268.7  |    |  |   | 31.2  |    |
| Businessoptimization expenses(2) |  |                        | 1.7     |                                      |  |                                    | 0.8   |                        |  |   | 20.3   |    |  |   | 32.8  |    |
| Unusualitems(3)                  |  |                        | 59.7    |                                      |  |                                    | 6.3   |                        |  |   | 48.5   |    |  |   | (33.3 | )  |
| Otheradjustments(4)              |  |                        | 6.3     |                                      |  |                                    | 1.5   |                        |  |   | (3.4   | )  |  |   | (2.1  | )  |
| Costsavings(5)                   |  |                        | — |                                      |  |                                    | 5.0   |                        |  |   | 25.0   |    |  |   | 30.0  |    |
| AdjustedEBITDA                   |  | $                           | 585.3   |                                      |  | $                                       | 92.0  |                        |  | $      | 465.9  |    |  | $      | 546.8 |    |
|                                  |

|  |
|--|
|  |  |
|  |

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

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                           |  | Successor |  | Successor |  | Predecessor |  | Predecessor |
| (dollarsin millions)                           |  | Year ended December31, 2004 |  | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November3, 2003 |  | Year ended December 31,2002 |
| Impairment ofgoodwill                          |  | $ | — |   |  | $ | — |   |  | $ | 244.4 |   |  | $ | — |   |
| In-processresearch anddevelopment              |  |   | 122.3 |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Inventorystep-up                               |  |   | 14.6 |   |  |   | 21.2 |   |  |   | — |   |  |   | — |   |
| Assetwrite-offs                                |  |   | 1.1 |   |  |   | — |   |  |   | 4.2 |   |  |   | 18.3 |   |
| Profitsharing expense and 401(k) funded bySuez |  |   | 27.8 |   |  |   | 4.0 |   |  |   | 20.0 |   |  |   | 12.1 |   |
| Other                                          |  |   | 8.6 |   |  |   | (1.3 | )  |  |   | 0.1 |   |  |   | 0.8 |   |
| Non-cashcharges                                |  | $ | 174.4 |   |  | $ | 23.9 |   |  | $ | 268.7 |   |  | $ | 31.2 |   |
|                                                |

Impairmentof goodwill

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

In-process Research and Development

|        |                                                                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In-process research and development was a onetime charge of $122.3 million recorded during the year ended December31, 2004, as a result of purchase accounting entries related to theAcquisition. |

Inventory Step-Up

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

Profit Sharing and 401(k) Expense Funded 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. |

47

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Other

|        |                                                                                                                                                                                                                                                                                   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Other non-cash charges include the non-cashimpact on earnings of our equity investments and minority interests.Successor non-cash charges also includes the non-cash portion of rentexpense under the sublease that we entered into with Suez inconjunction with the Acquisition. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Business optimization expenses for2004 include costs associated with the redesign and optimization ofbusiness and work processes. Business optimization expenses for 2003and 2002 include cost associated with the integration of theNalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon) joint venture and theimplementation of global cost reduction programs in the sales,marketing, manufacturing and support services operations. See note 20to Item 8 for moreinformation. |

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

|                                            |  |                             |         |                                           |  |                                         |         |                             |  |        |      |        |  |        |       |         |  |  |
|--------------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|------|--------|--|--------|-------|---------|--|--|
|                                       |  | Successor                   |         | Successor                                 |  | Predecessor                             |         | Predecessor                 |
| (dollarsin millions)                       |  | Year ended December31, 2004 |         | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November3, 2003 |         | Year ended December 31,2002 |
| Pension and OPEB settlement andcurtailment |  | $                           | — |                                      |  | $                                       | (0.1    | )                      |  | $      | 7.9  |   |  | $      | (47.6 | )  |
| Loss(gain) on sales, net ofexpenses        |  |                        | 0.2     |                                      |  |                                    | 1.1     |                        |  |   | 12.4 |   |  |   | (7.8  | )  |
| Otherunusual items(a)                      |  |                        | 59.5    |                                      |  |                                    | 5.3     |                        |  |   | 25.7 |   |  |   | 19.4  |    |
| Suezmanagement fees,net                    |  |                        | — |                                      |  |                                    | — |                        |  |   | 2.5  |   |  |   | 2.7   |    |
|                                       |  | $                           | 59.7    |                                      |  | $                                       | 6.3     |                        |  | $      | 48.5 |   |  | $      | (33.3 | )  |
|                                            |

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

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | Ourresults for 2004 were impacted by the effects of certain other unusualitems, including a $35.0 million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors; a $13.7million charge for the early repayment of senior discount notes;expenses associated with the registration of publicly tradable seniornotes and senior subordinated notes that were exchanged for theprivately placed notes issued in connection with the Transactions;costs related to changing the name of our operating company from OndeoNalco Company to Nalco Company; and other Transaction-related expenses.In 2003, our results were impacted by the effects of certain otherunusual items including a termination charge for the settlement of aninterest rate swap; executive severance and relocation expenses; legaland environmental expenses that mainly related to events that occurredprior to Suez's 1999 acquisition of Nalco Chemical Company andlitigation costs not covered by our excess liability insurance policy;and consultancy expenses incurred on behalf of Suez. Our results in2002 were impacted by consultancy costs for process reengineeringstudies associated with our cost reduction programs and otherconsultancy services performed on behalf of Suez; one-time pension andbenefit expenses primarily related to the redesign of our Australianbenefit plan and the application of regulatory changes in Germany; andlegal and environmental expenses that mainly related to events thatoccurred prior to Suez's 1999 acquisition of Nalco ChemicalCompany and litigation costs not covered by our excess liabilityinsurance policy. |

|           |                                                                                                                                                                                                                                                                                                                                  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | We arerequired to make adjustments to EBITDA for monitoring fees paid to theSponsors, franchise taxes, 401(k) matching contributions and other proforma adjustments. These pro forma adjustments include purchaseaccounting adjustments for pensions and the incremental rent expense wewill incur under our sublease with Suez. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Our financing agreements also permitus to adjust EBITDA on a pro forma basis for certain cost savings thatwe expect to achieve. We initiated a comprehensive cost reduction planthat was expected to yield annual savings of at least $30 million on aproforma basis in 2003. We implemented this plan immediately uponconsummation of the Acquisition. The remainder of our cost reductionplan is expected to realize incremental efficiencies through workprocess redesign |

48

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|        |                                                                                                                                                                             |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | and other targeted cost improvement programs,which address inefficiencies in our administrative and overheadfunctions, as well as other support functions around the world. |

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

|                                                                                                           |  |                                   |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|-----------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                                                                                      |  | CovenantLevel at December 31,2004 |        | Ratios |
| **Senior creditfacility (1)**                                                                             |  |                              |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to cash interestratio                                                              |  |                              | 1.65x  |   |  |   | 3.01x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |                              | 6.75x  |   |  |   | 5.27x  |   |
| **Indentures(2)**                                                                                         |  |                              |   |   |  |   |   |   |
| Minimum AdjustedEBITDA to fixed charge ratio required to incur additional debt pursuantto ratioprovisions |  |                              | 2.00x  |   |  |   | 2.52x  |   |
|                                                                                                           |

|  |
|--|
|  |  |
|  |

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

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Our ability toincur additional debt and make certain restricted payments under ourindentures, subject to specified exceptions, is tied to an AdjustedEBITDA to fixed charge ratio of at least 2.0 to 1, except that we mayincur certain debt and make certain restricted payments and certainpermitted investments without regard to the ratio, such as up to anaggregate principal amount of $1,950 million (including $1,299.4million that was outstanding under our term loan facilities as ofDecember 31, 2004) 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, 2004, theaggregate outstanding balance under these local lines of credit wasapproximately $14.3 million. Certain of these lines of credit areequally and ratably secured with obligations under our senior creditfacilities.

Receivables facility.    Nalco Companyentered into a receivables facility on June 25, 2004 that provides upto $100.0 million in funding from a commercial paper conduit sponsoredby JPMorgan Chase Bank, one of the lenders under Nalco Company'ssenior credit facilities, based on availability of eligible receivablesand satisfaction of other customary conditions. At the closing, wereceived $92.0 million in proceeds, which we used to repay term loansunder the senior credit facilities.

In connection with thereceivables facility we established a wholly owned consolidatedbankruptcy-remote special purpose subsidiary, Nalco Receivables LLC(the"transferor"),to which Nalco Company and one of its domestic subsidiaries (the"sellers")sell trade accounts receivable (the"receivables")pursuant to a receivables purchase agreement. Pursuant to a receivablestransfer agreement, the transferor then transfers an undivided interestin the purchased receivables to the commercial paper conduit or therelated bank sponsor (the "transferees") inexchange for cash. The transferor's purchase of receivables fromthe sellers is financed through the simultaneous transfer of thisundivided interest in the purchased receivables, together with cashcontributed to it by Nalco Company and the advances made by the sellersunder an intercompany note.

Nalco Company, as the receivablescollection agent, services, administers and collects the receivablesunder the receivables transfer agreement for which it receives amonthly servicing fee at a rate of 1% per annum of the averagedaily outstanding balance of receivables. Borrowings under thereceivables facility bear interest at a floating base rate plus a usagefee. The usage fee varies based upon our leverage ratio as calculatedunder the senior credit facilities and is currently 1.10% of theamount funded. In addition, the transferor is required to pay a fee onthe unused portion of the 

49

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receivables facility that varies based uponthe same ratio and is currently 0.35% of the unused portion ofthe commitments. These rates are per annum and payments of these feesare made to the lenders on the monthly settlement date.

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

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

Contractual Obligations and Commitments

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

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

|  |
|--|
|  |  |
|  |

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

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

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

|     |                                                                                                                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The amounts in long-term liabilitiesrepresent our expected minimum pension funding requirements for theprincipal domestic defined benefit pension plan through 2014. Amountsbeyond 2014 are not reasonably estimable. |

Our contractualobligations and commitments over the next several years aresignificant. Our primary  source of liquidity will continue to becash flow generated from operations. In the period January 1, 2002through December 31, 2004 our cumulative cash flow from operations was$793.3 million. We have  availability under a $250 millionrevolving credit facility to assist us, if required, in meeting ourworking  capital needs and other contractual obligations. Thismulti-year revolving credit facility matures in  November 2009.If our cash flow from operations is insufficient to fund our debt

50

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service and other  obligations, we maybe forced to reduce or delay capital expenditures, seek additionalcapital or seek to  restructure or refinance our indebtedness. AtDecember 31, 2004, there were  no outstanding borrowings underthe $250 million revolving credit facility, excluding $35.3 million ofoutstanding letters of credit.

We believe that cash flowgenerated from operations and our borrowing capacity will be adequateto  meet our obligations and business requirements. Our abilityto fund these items and to reduce debt may  be affected bygeneral economic, financial, competitive, legislative and regulatoryfactors, and the cost of  litigation claims, among otherthings.

The following table summarizes our expected cashoutflows resulting from commercial commitments as of December 31, 2004.Commercial commitments include lines of credit, guarantees and otherpotential cash outflows resulting from a contingent event that requiresour performance pursuant to a fundingcommitment.

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

|  |
|--|
|  |  |
|  |

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

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

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

In November 2004, the FASB issuedSFAS No.  151, Inventory Costs. This statement clarifiesthe accounting for the abnormal amount of idle facilities expense,freight, handling costs and wasted material. This statement requiresthat those items be recognized as current-period expense. In addition,SFAS No. 151 requires that allocation of fixed overhead to the cost ofconversion be based on the normal capacity of the productionfacilities. This statement is effective for inventory costs incurredafter December 31, 2005. Adoption of this statement will not have amaterial effect on the financial statements of the Company.

51

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ITEM 7A.    QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject toinherent 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. In addition, we use certain foreign currency debtas a hedge of the foreign currency exposure of a portion of our netinvestment in foreign operations.

Upon issuance, we designatedthe €200.0 million aggregate principal amount of73⁄4% senior notes due 2011, the €200.0million aggregate principal amount of 9% senior subordinatednotes due 2013, 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. For the year ended December 31, 2004, we recorded a $44.7million non-cash pretax loss 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 in foreigncurrency exchange rates. Based on our derivative foreign currencyinstruments outstanding at December 31, 2004 and 2003, a 10%strengthening or weakening in the value of the U.S. dollar relative tothe currencies in which those derivative foreign currency instrumentsare denominated would result in a gain or loss in fair values of lessthan $5.1 million and $2.0 million, respectively.

At December31, 2004, we had $1,408.9 million of variable rate debt. A 1%increase in the average interest rate would increase future interestexpense by approximately $14.1 million per year.

Our sensitivityanalysis of the effects of the changes in interest rates and foreigncurrency exchange rates do not reflect the effect of such changes onthe related hedged transactions or on other operating transactions. Theanalysis also does not factor in a potential change in the level ofvariable rate borrowings or derivative instruments outstanding thatcould take place if these hypothetical conditions prevailed.

Weare exposed to credit loss in the event of nonperformance by the otherparty to the derivative financial instruments. We limit this exposureby entering into agreements directly with a number of major financialinstitutions that meet our credit standards and that are expected tosatisfy fully their obligations under the contracts. We view derivativefinancial instruments as a risk management tool and do not use them forspeculative or trading purposes.

52

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ITEM 8. FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

Index to FinancialStatements

Nalco Finance Holdings LLC and SubsidiariesConsolidated and Combined Financial Statements

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

|                                                                             |  |        |        |        |  |  |
|-----------------------------------------------------------------------------|--|--------|--------|--------|--|--|
| Reportof Independent Registered Public AccountingFirm                       |  |   | 54     |   |
| Consolidated and CombinedFinancialStatements                                |  |   |   |   |
| ConsolidatedBalance Sheets                                                  |  |   | 55     |   |
| Consolidated and CombinedStatements of Operations                           |  |   | 56     |   |
| Consolidated andCombined Statements of Unitholders' and Shareholders'Equity |  |   | 57     |   |
| Consolidated and CombinedStatements of Cash Flows                           |  |   | 58     |   |
| Notes toConsolidated and Combined FinancialStatements                       |  |   | 60     |   |
|                                                                             |

53

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Report of Independent Registered PublicAccounting Firm

The Board of Directors and Unitholdersof Nalco Finance Holdings LLC

We have audited the accompanyingconsolidated balance sheets of Nalco Finance Holdings LLC andsubsidiaries as of December 31, 2004 and 2003, and the relatedconsolidated statements of operations, unitholders' equity, andcash flows for the year ended December 31, 2004 and for the period fromNovember 4, 2003 to December 31, 2003 (Successor), and the combinedstatements of operations, shareholders' equity, and cash flows ofOndeo Nalco Group (companies listed in Note 2) for the period fromJanuary 1, 2003 to November 3, 2003 and for the year ended December 31,2002 (Predecessor). Our audits also included the financial statementschedules listed in the Index at Item 15(a)(2). These financialstatements and schedules are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements and schedules based on our audits.

Weconducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of theCompany's internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting asa basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, andevaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

Inour opinion, the financial statements referred to above present fairly,in all material respects, the consolidated financial position of NalcoFinance Holdings LLC and subsidiaries as of December 31, 2004 and 2003,and the consolidated results of their operations and their cash flowsfor the year ended December 31, 2004 and for the period from November4, 2003 to December 31, 2003 (Successor), and the combined results ofOndeo Nalco Group's operations and its cash flows for the periodfrom January 1, 2003 to November 3, 2003 and for the year endedDecember 31, 2002 (Predecessor), in conformity with U.S. generallyaccepted accounting principles. Also, in our opinion, the relatedfinancial statement schedules, when considered in relation to the basicfinancial statements taken as a whole, present fairly in all materialrespects the information set forth therein.

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

54

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Nalco Finance Holdings LLC andSubsidiaries Consolidated Balance Sheets(dollars inmillions)

|                                                                                            |  |                  |         |                  |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|--------|--|--|
|                                                                                       |  | December31, 2004 |         | December 31,2003 |
| **Assets**                                                                                 |  |             |    |             |  |   |    |   |
| Currentassets:                                                                             |  |             |    |             |  |   |    |   |
| Cash and cashequivalents                                                                   |  | $                | 33.2    |             |  | $      | 100.0   |   |
| Trade accounts receivable, less allowancesof $21.1 and $21.0 in 2004 and 2003,respectively |  |             | 594.2   |             |  |   | 482.9   |   |
| Inventories                                                                                |  |             | 313.5   |             |  |   | 295.1   |   |
| Deferredincometaxes                                                                        |  |             | 44.2    |             |  |   | 54.6    |   |
| Prepaidexpenses and other currentassets                                                    |  |             | 45.9    |             |  |   | 43.0    |   |
| Totalcurrentassets                                                                         |  |             | 1,031.0 |             |  |   | 975.6   |   |
| Property,plant, and equipment,net                                                          |  |             | 847.3   |             |  |   | 865.6   |   |
| Goodwill                                                                                   |  |             | 2,368.3 |             |  |   | 2,500.1 |   |
| Otherintangible assets,net                                                                 |  |             | 1,323.6 |             |  |   | 1,408.9 |   |
| Deferredfinancing costs                                                                    |  |             | 64.6    |             |  |   | 75.0    |   |
| Receivablefrom formershareholder                                                           |  |             | 87.2    |             |  |   | 117.3   |   |
| Othernoncurrentassets                                                                      |  |             | 212.5   |             |  |   | 221.3   |   |
| Totalassets                                                                                |  | $                | 5,934.5 |             |  | $      | 6,163.8 |   |
| **Liabilitiesand unitholders'equity**                                                      |  |             |    |             |  |   |    |   |
| Currentliabilities:                                                                        |  |             |    |             |  |   |    |   |
| Accountspayable                                                                            |  | $                | 261.9   |             |  | $      | 155.9   |   |
| Accruedexpenses                                                                            |  |             | 168.7   |             |  |   | 193.9   |   |
| Accruedcompensation                                                                        |  |             | 105.8   |             |  |   | 77.1    |   |
| Short-termdebt                                                                             |  |             | 17.7    |             |  |   | 51.9    |   |
| Incometaxes                                                                                |  |             | 37.2    |             |  |   | 50.0    |   |
| Totalcurrentliabilities                                                                    |  |             | 591.3   |             |  |   | 528.8   |   |
| Long-termdebt                                                                              |  |             | 3,424.8 |             |  |   | 3,262.8 |   |
| Deferred incometaxes                                                                       |  |             | 501.5   |             |  |   | 624.0   |   |
| Accrued pensionbenefits                                                                    |  |             | 411.7   |             |  |   | 374.1   |   |
| Otherliabilities                                                                           |  |             | 296.8   |             |  |   | 293.5   |   |
| Minorityinterest                                                                           |  |             | 14.1    |             |  |   | 11.6    |   |
| Commitments andcontingencies                                                               |  |             | — |             |  |   | — |   |
| Unitholders'equity                                                                         |  |             | 694.3   |             |  |   | 1,069.0 |   |
| Totalliabilities and unitholders'equity                                                    |  | $                | 5,934.5 |             |  | $      | 6,163.8 |   |
|                                                                                            |

Seenotes to consolidated and combined financial statements.

55

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Nalco Finance Holdings LLC andSubsidiaries Consolidated and Combined Statements ofOperations(dollars inmillions)

|                                              |  |                            |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|----------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Successor                  |         | Predecessor                            |
|                                         |  | YearendedDecember 31, 2004 |         | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |         | YearendedDecember31,2002 |
| Netsales                                     |  | $                          | 3,033.3 |                                   |  | $                                    | 460.1   |                     |  | $      | 2,306.5 |    |  | $      | 2,644.3 |    |
| Operatingcosts andexpenses:                  |  |                       |    |                                   |  |                                 |    |                     |  |   |    |    |  |   |    |    |
| Costof productsold                           |  |                       | 1,552.2 |                                   |  |                                 | 248.2   |                     |  |   | 1,114.6 |    |  |   | 1,266.1 |    |
| Selling,administrative, and researchexpenses |  |                       | 1,065.4 |                                   |  |                                 | 176.4   |                     |  |   | 900.7   |    |  |   | 992.0   |    |
| Impairmentofgoodwill                         |  |                       | — |                                   |  |                                 | — |                     |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets              |  |                       | 96.3    |                                   |  |                                 | 15.4    |                     |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment            |  |                       | 122.3   |                                   |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses                 |  |                       | 1.7     |                                   |  |                                 | 0.8     |                     |  |   | 20.3    |    |  |   | 32.8    |    |
| Totaloperating costs andexpenses             |  |                       | 2,837.9 |                                   |  |                                 | 440.8   |                     |  |   | 2,348.9 |    |  |   | 2,380.1 |    |
|                                         |  |                       |    |                                   |  |
| Operatingearnings(loss)                      |  |                       | 195.4   |                                   |  |                                 | 19.3    |                     |  |   | (42.4   | )  |  |   | 264.2   |    |
|                                         |  |                       |    |                                   |  |
| Otherincome (expense),net                    |  |                       | (57.0   | )                                 |  |                                 | (2.8    | )                   |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                               |  |                       | 10.1    |                                   |  |                                 | 0.6     |                     |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                              |  |                       | (251.1  | )                                 |  |                                 | (49.6   | )                   |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes            |  |                       | (102.6  | )                                 |  |                                 | (32.5   | )                   |  |   | (85.3   | )  |  |   | 236.9   |    |
|                                         |  |                       |    |                                   |  |
| Incometax provision(benefit)                 |  |                       | 47.5    |                                   |  |                                 | (8.3    | )                   |  |   | 68.7    |    |  |   | 105.2   |    |
|                                         |  |                       |    |                                   |  |
| Minorityinterests                            |  |                       | (5.8    | )                                 |  |                                 | 0.1     |                     |  |   | (4.2    | )  |  |   | (3.3    | )  |
| Netearnings(loss)                            |  | $                          | (155.9  | )                                 |  | $                                    | (24.1   | )                   |  | $      | (158.2  | )  |  | $      | 128.4   |    |
|                                              |

See notesto consolidated and combined financialstatements.

56

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Nalco FinanceHoldings LLC and Subsidiaries Consolidated and Combined Statementof Unitholders' and Shareholders' Equity(dollarsin millions, except per shareamounts)

|                                                                        |  |                 |         |                    |  |                                            |         |             |  |                                      |         |                           |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|------------------------------------------------------------------------|--|-----------------|---------|--------------------|--|--------------------------------------------|---------|-------------|--|--------------------------------------|---------|---------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                   |  |            |         |               |  | AccumulatedOtherComprehensive Income(Loss) |         |        |
|                                                                   |  | CapitalAccounts |         | AccumulatedDeficit |  | MinimumPensionLiabilityAdjustment          |         | Derivatives |  | ForeignCurrencyTranslationAdjustment |         | ComprehensiveIncome(Loss) |
| **PredecessorCompany**                                                 |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| **Balanceat January 1,2002**                                           |  | $               | 4,126.1 |               |  | $                                          | (290.2  | )      |  | $                                    | (17.6   | )                    |  | $      | (0.8    | )  |  | $      | (83.1   | )  |  |   |   |    |
| Issuanceof common stock, 1,997,500 shares at $20par                    |  |            | 40.0    |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Mergerwithaffiliate                                                    |  |            | (9.2    | )             |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Netearnings                                                            |  |            | — |               |  |                                       | 128.4   |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  | $      | 128.4  |    |
| Othercomprehensiveincome:                                              |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| Minimumpension liability adjustment – net of tax benefit of$35.8 |  |            | — |               |  |                                       | — |        |  |                                 | (55.9   | )                    |  |   | — |    |  |   | — |    |  |   | (55.9  | )  |
| Losson derivatives – net of tax benefit of$5.0                   |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | (7.7    | )  |  |   | — |    |  |   | (7.7   | )  |
| Currencytranslationadjustments                                         |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | (18.5   | )  |  |   | (18.5  | )  |
| Comprehensiveincome                                                    |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  | $      | 46.3   |    |
| Distributionstoshareholder                                             |  |            | — |               |  |                                       | (122.3  | )      |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| **Balanceat December 31,2002**                                         |  |            | 4,156.9 |               |  |                                       | (284.1  | )      |  |                                 | (73.5   | )                    |  |   | (8.5    | )  |  |   | (101.6  | )  |  |   |   |    |
| Netloss                                                                |  |            |    |               |  |                                       | (158.2  | )      |  |                                 |    |                      |  |   |    |    |  |   |    |    |  | $      | (158.2 | )  |
| Capitalcontribution                                                    |  |            | 77.7    |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Acquisitionof AquazurLimited                                           |  |            | (2.8    | )             |  |                                       | (8.1    | )      |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Othercomprehensive income(loss):                                       |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| Gainon derivatives – net of tax of$5.4                           |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | 8.5     |    |  |   | — |    |  |   | 8.5    |    |
| Currencytranslationadjustments                                         |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | 54.1    |    |  |   | 54.1   |    |
| Comprehensiveloss                                                      |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  | $      | (95.6  | )  |
| Distributionstoshareholder                                             |  |            | — |               |  |                                       | (29.0   | )      |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| **Balanceat November 3,2003**                                          |  | $               | 4,231.8 |               |  | $                                          | (479.4  | )      |  | $                                    | (73.5   | )                    |  | $      | — |    |  | $      | (47.5   | )  |  |   |   |    |
| **SuccessorCompany**                                                   |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| Capitalcontribution                                                    |  | $               | 1,001.9 |               |  | $                                          | — |        |  | $                                    | — |                      |  | $      | — |    |  | $      | — |    |  |   |   |    |
| Netloss                                                                |  |            | — |               |  |                                       | (24.1   | )      |  |                                 | — |                      |  |   | — |    |  |   | — |    |  | $      | (24.1  | )  |
| Othercomprehensiveincome:                                              |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| Currencytranslation adjustments – net of tax benefit of$18.0     |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | 91.2    |    |  |   | 91.2   |    |
| Comprehensiveincome                                                    |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  | $      | 67.1   |    |
| **Balanceat December 31,2003**                                         |  |            | 1,001.9 |               |  |                                       | (24.1   | )      |  |                                 | — |                      |  |   | — |    |  |   | 91.2    |    |  |   |   |    |
| Capitalcontributions                                                   |  |            | 186.2   |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Capitaldistributions                                                   |  |            | (446.9  | )             |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | — |    |  |   |   |    |
| Netloss                                                                |  |            | — |               |  |                                       | (155.9  | )      |  |                                 | — |                      |  |   | — |    |  |   | — |    |  | $      | (155.9 | )  |
| Othercomprehensive income(loss):                                       |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  |   |   |    |
| Losson derivatives – net of tax benefit of$0.2                   |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | (0.2    | )  |  |   | — |    |  |   | (0.2   | )  |
| Currencytranslation adjustments – net of tax of$7.5              |  |            | — |               |  |                                       | — |        |  |                                 | — |                      |  |   | — |    |  |   | 42.1    |    |  |   | 42.1   |    |
| Comprehensiveloss                                                      |  |            |    |               |  |                                       |    |        |  |                                 |    |                      |  |   |    |    |  |   |    |    |  | $      | (114.0 | )  |
| **Balanceat December 31,2004**                                         |  | $               | 741.2   |               |  | $                                          | (180.0  | )      |  | $                                    | — |                      |  | $      | (0.2    | )  |  | $      | 133.3   |    |  |   |   |    |
|                                                                        |

Seenotes to consolidated and combined financialstatements.

57

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Nalco FinanceHoldings LLC and Subsidiaries Consolidated and Combined Statementsof Cash Flows(dollars inmillions)

|                                                                                          |  |                           |         |                                           |  |                                         |          |                             |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------|--|---------------------------|---------|-------------------------------------------|--|-----------------------------------------|----------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                     |  | Successor                 |         | Predecessor                               |
|                                                                                     |  | YearendedDecember 31,2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |          | Year endedDecember 31, 2002 |
| **Operatingactivities**                                                                  |  |                      |    |                                      |  |                                    |     |                        |  |   |    |    |  |   |    |    |
| Netearnings(loss)                                                                        |  | $                         | (155.9  | )                                    |  | $                                       | (24.1    | )                      |  | $      | (158.2  | )  |  | $      | 128.4   |    |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |                      |    |                                      |  |                                    |     |                        |  |   |    |    |  |   |    |    |
| Depreciation                                                                             |  |                      | 114.3   |                                      |  |                                    | 22.5     |                        |  |   | 101.8   |    |  |   | 134.7   |    |
| Amortization                                                                             |  |                      | 96.3    |                                      |  |                                    | 15.4     |                        |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment                                                        |  |                      | 122.3   |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Impairmentofgoodwill                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 244.4   |    |  |   | — |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |                      | 49.1    |                                      |  |                                    | 17.4     |                        |  |   | — |    |  |   | — |    |
| Losson early extinguishment ofdebt                                                       |  |                      | 13.7    |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Equityin earnings of unconsolidated subsidiaries, net ofdistributions                    |  |                      | 2.8     |                                      |  |                                    | (0.4     | )                      |  |   | (1.8    | )  |  |   | 0.3     |    |
| Deferredincometaxes                                                                      |  |                      | (49.2   | )                                    |  |                                    | (18.4    | )                      |  |   | (17.1   | )  |  |   | (30.2   | )  |
| Securitizedaccounts receivable,net                                                       |  |                      | — |                                      |  |                                    | —  |                        |  |   | (87.0   | )  |  |   | (14.0   | )  |
| Amortizationof unearned employee compensation and accretion ofobligation                 |  |                      | 27.8    |                                      |  |                                    | 4.0      |                        |  |   | 20.0    |    |  |   | 12.1    |    |
| Definedbenefit pension planexpense                                                       |  |                      | 39.8    |                                      |  |                                    | 6.6      |                        |  |   | 43.2    |    |  |   | 27.5    |    |
| Prepaidpensionpayment                                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (90.0   | )  |
| Postretirementbenefit plancurtailment                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (41.6   | )  |
| Other,net                                                                                |  |                      | 2.9     |                                      |  |                                    | (2.7     | )                      |  |   | (22.2   | )  |  |   | (33.8   | )  |
| Changesin current assets andliabilities:                                                 |  |                      |    |                                      |  |                                    |     |                        |  |   |    |    |  |   |    |    |
| Tradeaccountsreceivable                                                                  |  |                      | (86.4   | )                                    |  |                                    | 11.3     |                        |  |   | 3.7     |    |  |   | 7.3     |    |
| Inventories                                                                              |  |                      | (10.9   | )                                    |  |                                    | 28.7     |                        |  |   | (0.4    | )  |  |   | (11.0   | )  |
| Accountspayable                                                                          |  |                      | 96.3    |                                      |  |                                    | 4.0      |                        |  |   | (44.3   | )  |  |   | 28.6    |    |
| Payabletoshareholder                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 6.2     |    |  |   | 112.2   |    |
| Contributionto profit—sharingtrust                                                 |  |                      | — |                                      |  |                                    | —  |                        |  |   | (24.0   | )  |  |   | (11.8   | )  |
| Otherreceivables from relatedparties                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | (1.9    | )  |  |   | 5.5     |    |
| Other                                                                                    |  |                      | (25.8   | )                                    |  |                                    | 24.4     |                        |  |   | 13.1    |    |  |   | 9.7     |    |
| Netcash provided by operatingactivities                                                  |  |                      | 237.1   |                                      |  |                                    | 88.7     |                        |  |   | 144.4   |    |  |   | 323.1   |    |
| **Investingactivities**                                                                  |  |                      |    |                                      |  |                                    |     |                        |  |   |    |    |  |   |    |    |
| Acquisitionof Ondeo NalcoGroup                                                           |  |                      | — |                                      |  |                                    | (4,127.1 | )                      |  |   | — |    |  |   | — |    |
| Purchaseprice adjustment on acquisition of Ondeo NalcoGroup                              |  |                      | 25.3    |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Businesspurchases/sales,net                                                              |  |                      | (2.3    | )                                    |  |                                    | —  |                        |  |   | (10.1   | )  |  |   | 2.7     |    |
| Additionsto property, plant, and equipment,net                                           |  |                      | (91.8   | )                                    |  |                                    | (15.6    | )                      |  |   | (85.6   | )  |  |   | (108.3  | )  |
| Notesreceivable from relatedparties                                                      |  |                      | — |                                      |  |                                    | —  |                        |  |   | 98.3    |    |  |   | (36.2   | )  |
| Investmentsin affiliatedcompanies                                                        |  |                      | — |                                      |  |                                    | —  |                        |  |   | (6.0    | )  |  |   | — |    |
| Otherinvestingactivities                                                                 |  |                      | (4.1    | )                                    |  |                                    | (2.4     | )                      |  |   | (8.9    | )  |  |   | 15.7    |    |
| Netcash used for investingactivities                                                     |  |                      | (72.9   | )                                    |  |                                    | (4,145.1 | )                      |  |   | (12.3   | )  |  |   | (126.1  | )  |
|                                                                                          |

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

|                                                                    |  |                           |         |                                           |  |                                         |         |                            |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|---------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                               |  | Successor                 |         | Predecessor                               |
|                                                               |  | YearendedDecember 31,2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year endedDecember 31,2002 |
| **Financingactivities**                                            |  |                      |    |                                      |  |                                    |    |                       |  |   |    |    |  |   |    |    |
| Cashdividends                                                      |  | $                         | — |                                      |  | $                                       | — |                       |  | $      | (29.0   | )  |  | $      | (122.3  | )  |
| Proceedsfrom long-termdebt                                         |  |                      | 719.7   |                                      |  |                                    | 3,214.2 |                       |  |   | 0.6     |    |  |   | 3.1     |    |
| Paymentsof long-termdebt                                           |  |                      | (639.3  | )                                    |  |                                    | (0.8    | )                     |  |   | (8.3    | )  |  |   | (3.5    | )  |
| Short-termdebt,net                                                 |  |                      | (34.8   | )                                    |  |                                    | 8.3     |                       |  |   | (272.7  | )  |  |   | (255.0  | )  |
| Redemptionpremium on early extinguishment ofdebt                   |  |                      | (14.6   | )                                    |  |                                    | — |                       |  |   | — |    |  |   | — |    |
| Proceedsfrom corporate facility sale andleaseback                  |  |                      | — |                                      |  |                                    | — |                       |  |   | — |    |  |   | 144.8   |    |
| Deferredfinancingcosts                                             |  |                      | (1.2    | )                                    |  |                                    | (92.4   | )                     |  |   | — |    |  |   | — |    |
| Capitalcontributions (distributions),net                           |  |                      | (260.7  | )                                    |  |                                    | 1,001.9 |                       |  |   | 77.7    |    |  |   | — |    |
| Otherfinancingactivities                                           |  |                      | (0.9    | )                                    |  |                                    | (0.9    | )                     |  |   | (2.5    | )  |  |   | 0.2     |    |
| Netcash provided by (used for) financingactivities                 |  |                      | (231.8  | )                                    |  |                                    | 4,130.3 |                       |  |   | (234.2  | )  |  |   | (232.7  | )  |
| Effectof foreign exchange rate changes on cash and cashequivalents |  |                      | 0.8     |                                      |  |                                    | 1.7     |                       |  |   | 6.0     |    |  |   | 10.2    |    |
| Increase(decrease) in cash and cashequivalents                     |  |                      | (66.8   | )                                    |  |                                    | 75.6    |                       |  |   | (96.1   | )  |  |   | (25.5   | )  |
| Cashand cash equivalents at beginning of theperiod                 |  |                      | 100.0   |                                      |  |                                    | 24.4    |                       |  |   | 120.5   |    |  |   | 146.0   |    |
| Cashand cash equivalents at end of theperiod                       |  | $                         | 33.2    |                                      |  | $                                       | 100.0   |                       |  | $      | 24.4    |    |  | $      | 120.5   |    |
| **Supplementalcash flowsinformation**                              |  |                      |    |                                      |  |                                    |    |                       |  |   |    |    |  |   |    |    |
| Cashpaid during the periodfor:                                     |  |                      |    |                                      |  |                                    |    |                       |  |   |    |    |  |   |    |    |
| Interest                                                           |  | $                         | 206.7   |                                      |  | $                                       | 6.4     |                       |  | $      | 32.4    |    |  | $      | 40.6    |    |
| Incometaxes                                                        |  |                      | 92.3    |                                      |  |                                    | 14.2    |                       |  |   | 43.0    |    |  |   | 40.0    |    |
|                                                                    |

Seenotes to consolidated and combined financialstatements.

59

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements(dollars in millions,except per share amounts) December 31,2004

1.    Description of Business andChange in Ownership

Description of Business

NalcoFinance Holdings LLC and subsidiaries (the Company or Successor) isengaged 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

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

The Buyer was capitalized by equity investments totaling $991.9million from the Sponsors and $10.0 million from Dr. William H. Joyce,the Chairman and Chief Executive Officer of the Buyer. The equityinvestments were made to Nalco Investment Holdings LLC which, in turn,contributed $1,001.9 million to the Buyer and was its parent companyuntil January 14, 2004. Funding for the Acquisition included the equityinvestments and the issuance of senior notes and senior subordinatednotes (the Notes) in a private offering, and new revolving credit andterm loan facilities by the Buyer, through its 100% ownedsubsidiary, Nalco Company.

The Stock Purchase Agreement providedfor certain adjustments of the purchase price, including adjustmentsbased on the closing working capital and indebtedness (as both aredefined in the Stock Purchase Agreement) of the Ondeo Nalco Group atthe date of the Acquisition. On March 25, 2004, the Buyer and Suezagreed to a $25.6 million working capital adjustment payable to theBuyer plus interest. This adjustment was not reflected in theconsolidated financial statements as of December 31, 2003. The Buyerrecorded the purchase price adjustment in 2004 by decreasinggoodwill.

The Stock Purchase Agreement also provided foradjustments of the purchase price for taxes paid, or tax refundsreceived, by the Buyer for periods prior to the Acquisition, to theextent not already taken into account in the closing working capital atthe date of the Acquisition. During the year ended December 31, 2004,such purchase price adjustments resulted in a net payment of $0.3million by the Buyer, which was recorded as an increase to goodwill. Anadditional purchase price adjustment of $3.6 million paid by the Buyerin January 2005 has also been accrued and reflected as an increase togoodwill.

On January 14, 2004, Nalco Investment Holdings LLCcontributed its 100% interest in the Buyer to a newly formedentity, Nalco Finance Holdings LLC, in exchange for a 99%interest in Nalco Holdings LLC. The remaining 1% interest inNalco Holdings LLC is held indirectly by Nalco Investment Holdings LLCthrough its wholly owned subsidiary, Nalco Finance Holdings II Inc. Asof January 14, 2004, Nalco Finance Holdings LLC became the directparent company of the Buyer. Subsequent to that date, the Sponsors andDr. Joyce engaged in a series of transactions that ultimately resultedin a newly formed entity, Nalco LLC, becoming the indirect and ultimateparent company of Nalco Investment Holdings LLC, Nalco Finance HoldingsLLC, and the Buyer. Nalco LLC's interests in Nalco InvestmentHoldings LLC were held through its holdings of 100% of theinterests of each of BCP Nalco I LLC, BCP Nalco II LLC, APV Nalco LLC,GS Nalco LLC and JAG Nalco LLC (collectively, the Sponsor entities),which collectively held 100% of the interests of NalcoInvestment Holdings LLC.

60

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

On June 1, 2004, Nalco Investment HoldingsII LLC was formed as a direct subsidiary of Nalco LLC. On June 7, 2004,Nalco Investment Holdings II LLC merged with each of the Sponsorentities and was the surviving entity of such merger. As a result ofthe merger, Nalco Investment Holdings II LLC owned 100% of theequity interests of Nalco Investment Holdings LLC. On June 17, 2004,Nalco Investment Holdings II LLC was converted into a corporation namedNalco Investment Holdings II Corp. and has since been renamed NalcoHolding Company. As entities under common control, the contribution ofNalco Holdings LLC to Nalco Finance Holdings LLC was accounted for in amanner similar to a pooling of interests. Therefore, the results forthe period prior to January 14, 2004 (date of inception) include theconsolidated results of Nalco Holdings LLC and subsidiaries.

2.    Basis of Presentation

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

Predecessor– The accompanying combined financial statements of thePredecessor prior to the Acquisition include the consolidated financialstatements of Ondeo Nalco Company and subsidiaries (ONC) and thecombined financial statements of certain subsidiaries of NalcoInternational SAS (NIS) plus Calgon Europe Limited (UK), owned byDegremont (a former related party). The combined financial statementsof NIS subsidiaries are a combination of the consolidated financialstatements of Ondeo Nalco France, the consolidated financial statementsof Aquazur Ltd., and the consolidated financial statements of NalcoDutch Holdings B.V., Ondeo Nalco Belgium NV/SA, Wyss Wassertechnik AG,Ondeo Nalco (Shanghai) Trading Co., Ltd., and Nalco Portuguesa (QuimicaIndustrial) Ltd. Ondeo Industrial Solutions North America, a subsidiaryof ONC, has been excluded from the Predecessor, as it was not acquiredby the Company.

Successor – The accompanyingconsolidated financial statements include the accounts of Nalco FinanceHoldings LLC and subsidiaries (collectively, the Company) subsequent tothe Acquisition.

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

Theconsolidated financial statements of the Successor as of and for theyear ended December 31, 2004 and as of and for the period from November4, 2003 through December 31, 2003 reflect the Acquisition under thepurchase method of accounting, in accordance with the FinancialAccounting Standards Board ("FASB") Statementof Financial Accounting Standards ("SFAS")No.  141, Business Combinations.

The followingunaudited pro forma financial data summarizes the results of operationsfor the years ended December 31, 2003 and December 31, 2002 as if theAcquisition had occurred as of the beginning of each individualperiod.

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

61

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

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

TheCompany has allocated the purchase price on the basis of the fair valueof the underlying assets acquired and liabilities assumed asfollows:

|                                                  |  |                      |         |        |  |  |
|--------------------------------------------------|--|----------------------|---------|--------|--|--|
|                                             |  | AsofNovember 4, 2003 |
| Currentassets:                                   |  |                 |    |   |
| Cash and cashequivalents                         |  | $                    | 24.3    |   |
| Trade accountsreceivable                         |  |                 | 477.5   |   |
| Inventories                                      |  |                 | 316.5   |   |
| Othercurrentassets                               |  |                 | 101.8   |   |
| Goodwill                                         |  |                 | 2,224.2 |   |
| Intangibleassets                                 |  |                 | 1,410.0 |   |
| Purchased in-process researchand development     |  |                 | 122.3   |   |
| Other noncurrentassets                           |  |                 | 366.0   |   |
| Property, plant andequipment                     |  |                 | 833.3   |   |
| Totalassetsacquired                              |  |                 | 5,875.9 |   |
| Currentliabilities:                              |  |                 |    |   |
| Accountspayable                                  |  |                 | 138.7   |   |
| Accruedexpenses                                  |  |                 | 269.3   |   |
| Other currentliabilities                         |  |                 | 74.4    |   |
| Long-termdebt                                    |  |                 | 30.2    |   |
| Deferred incometaxes                             |  |                 | 573.8   |   |
| Accrued pension and otherpostretirement benefits |  |                 | 539.9   |   |
| Othernoncurrentliabilities                       |  |                 | 144.2   |   |
| Totalliabilitiesassumed                          |  |                 | 1,770.5 |   |
| Netassetsacquired                                |  | $                    | 4,105.4 |   |
|                                                  |

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

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

Deferred incometaxes have been provided in the consolidated balance sheet based on thetax versus book basis of the assets acquired and liabilities assumed,as adjusted to estimated fair values. 

62

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Valuation allowances were established fordeferred tax assets related to all of the net operating losscarryforwards for which utilization is uncertain.

TheCompany's projected pension and other postretirement benefitobligations and assets have been reflected in the allocation ofpurchase price at the projected benefit obligation less plan assets atfair market value, based on management's computations whichincluded valuations performed by independent actuaries engaged by theCompany.

The Company engaged independent appraisers to assist indetermining the fair values of property, plant and equipment andintangible assets acquired, including purchased in-process research anddevelopment (IPR&D), trade names, trademarks, developed technologyand customer relationships. The Company has received final values fromthe appraisers, which have been included in the above table.

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

During the yearended December 31, 2004, the Company reduced by $19.6 million the fairvalue of property, plant and equipment to reflect the final valuationprovided by its independent appraisers.

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

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

Customer relationships have been valued using an income approachafter considering a fair return on fixed assets, working capital,patents, trade names, trademarks, technology, and assembled workforce.A value of $480.0  million has been assigned to customerrelationships. As of December 31, 2003, an estimated useful life of 10years had been used based on preliminary information obtained from ourindependent appraisers.

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

Based on the final valuation, approximately $3.4 billionof goodwill and other intangible assets will not be deductible forincome tax purposes. The primary reasons for the Acquisition and theprimary factors that contributed to a purchase price that resulted inrecognition of goodwill include:

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

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

Other considerations affecting thevalue of goodwill include:

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

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

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

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

In conjunction with the Acquisition, the Companyformulated a plan to exit or restructure certain activities. TheCompany recorded liabilities of $35.5 million, primarily for employeeseverance and related costs, in connection with the Company'splan to exit or restructure certain activities. As of December 31,2004, $31.7 million has been charged against this accrual. The Companyexpects that these activities will be completed by the end of 2005.

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

3.    Summary of Significant AccountingPolicies

Use of Estimates

The preparation of financialstatements in conformity with accounting principles generally acceptedin 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

Certain reclassificationshave been made to the consolidated statement of operations for theperiod from November 4, 2003 through December 31, 2003 and the combinedstatements of operations for the period from January 1, 2003 throughNovember 3, 2003 and for the year ended December 31, 2002 to conform tothe current year presentation. These reclassifications had no effect onnet income reported for any period.

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Foreign Currency Translation

Local currencies are the functional currencies for most foreignoperations. Their financial statements are translated at current andaverage exchange rates, with any resulting translation adjustmentsincluded in the currency translation adjustment account inunitholders' equity. The financial statements of any foreignsubsidiaries that operate in highly inflationary environments aretranslated using a combination of current, average, and historicalexchange rates, with the resulting translation impact included inresults of operations. Transactions executed in different currenciesresulting in exchange adjustments are included in results ofoperations.

Concentration of Credit Risk

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

Cash and Cash Equivalents

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

Accounts Receivable

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

Foreign Exchange Contracts and Derivatives

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

Cash and Cash Equivalents

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

InventoryValuation

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

Goodwill

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

65

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Intangibles

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

Deferred Financing Costs

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

Income Taxes

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

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

Derivative Instruments

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

RetirementPlans

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

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

Revenue Recognition

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

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Research and Development

Researchand development costs, excluding costs to acquire in-process researchand development, totaled $56.5 million, $9.7 million, $50.3 million,and $57.9 million for the year ended December 31, 2004, the period fromNovember 4, 2003 through December 31, 2003, the period from January 1,2003 through November 3, 2003, and the year ended December 31, 2002,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.

4.    Acquisitions and Divestitures

The Company acquiredtwo businesses and certain patents during 2004 for a combined purchaseprice of $2.5 million, net of cash acquired. Each of these acquisitionswas treated as a purchase, and their results of operations have beenincluded in the consolidated financial statements since theirrespective dates of acquisition. On a preliminary basis, the purchaseprice exceeded the fair value of tangible net assets by $2.5 million,which was allocated to other intangible assets and patents anddeveloped technology.

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

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

During the period from January 1, 2003 through November 3,2003, the Predecessor acquired Aquazur Ltd. from NIS and increased itsinvestment in Oekophil AG from 40% to 100%. Each of theacquisitions was accounted for as a purchase; however, as disclosed inNote 2, the combined financial statements of the Predecessor includethe results of Aquazur Ltd. prior to its acquisition from NIS. Thecombined purchase price of these acquisitions, net of cash acquired,was $23.4 million. The purchase price exceeded the fair value of thenet tangible assets acquired by $12.9 million, which was allocated togoodwill.

The Predecessor received net proceeds of $13.3 millionand recognized a pretax loss of $5.2 million on the sale of its SouthAfrican subsidiary and two small businesses during the period fromJanuary 1, 2003 through November 3, 2003.

The Predecessoracquired two businesses during 2002 for a combined purchase price of$10.1 million, net of cash acquired. The purchase price exceeded thefair value of the net tangible assets acquired by $7.7 million, whichwas allocated to goodwill and other intangible assets. Each of theacquisitions was accounted for as a purchase and, accordingly, theirresults of operations have been included in the combined financialstatements of the Predecessor since their respective dates ofacquisition.

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

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

5.    Securitization of AccountsReceivable

In June 2004, the Company entered into a three-yearaccounts receivable securitization facility with a commercial paperconduit sponsored by one of the lenders under the Company'ssenior credit 

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

facilities. The facility provides up to$100.0 million in funding, based on availability of eligible tradeaccounts receivable and other customary factors.

In connectionwith the facility, the Company established a bankruptcy-remote, whollyowned, special purpose limited liability company (the"Transferor"), into which Nalco Company andone of its domestic subsidiaries (the"Sellers") transfer all eligible tradeaccounts receivable (the "Receivables").Pursuant to a Receivables Transfer Agreement, the Transferor thentransfers an undivided interest in the Receivables to the commercialpaper conduit or the related bank sponsor (the"Transferees") in exchange for cash.

The financing fee charged by the Transferees under the facility isbased on the amount funded and the conduit's cost of funds forissuing commercial paper plus a margin that varies based on theleverage ratio as calculated under the Company's senior creditfacilities. A commitment fee that varies 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 facility dependsprimarily upon the outstanding Receivables balance from time to time.The facility may be terminated for, among other reasons, materialbreaches of representations and warranties, bankruptcies of the Sellersor the Transferor, a judgment or order for the payment of moneyrendered against the Transferor, cross-defaults to the Company'sother debt, or breach of specified financial covenants. The Company iscurrently in compliance with these covenants.

The facility isaccounted for as a secured borrowing, resulting in the funding andrelated Receivables being shown as liabilities and assets,respectively, on the Company's consolidated balance sheet and thecosts associated with the facility being recorded as interest expense.At December 31, 2004, the Company had outstanding borrowings of $97.3million under the facility.

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

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

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

The Predecessor accounted for the transfer ofundivided percentage ownership interest in the receivables to theConduit as sales under SFAS No.  140, Accounting for Transfersand Servicing of Financial Assets and Extinguishments ofLiabilities. The Predecessor's loss on the sale of theundivided interests in the receivables was $1.5 million and $1.8million for the period from January 1, 2003 through November 3, 2003and the year ended December 31, 2002, respectively, and was included ininterest expense.

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

6.    Inventories

Inventories consist of thefollowing:

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

7.    Goodwill

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

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

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

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

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

|                             |  |        |         |        |  |  |
|-----------------------------|--|--------|---------|--------|--|--|
| Balanceat November 4, 2003  |  | $      | 2,413.9 |   |
| Foreigncurrency translation |  |   | 86.2    |   |
| Balanceat December 31,2003  |  | $      | 2,500.1 |   |
|                             |

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Changes in the carrying value of goodwillfrom December 31, 2003 to December 31, 2004 are summarizedbelow:

|                                                   |  |        |         |         |  |  |
|---------------------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December 31, 2003                    |  | $      | 2,500.1 |    |
| Adjustmentto record purchased IPR&Dexpense    |  |   | (122.3  | )  |
| Adjustment to Ondeo NalcoGroup purchase price     |  |   | (21.7   | )  |
| Revised fairvalue of property, plant andequipment |  |   | 19.6    |    |
| Adjustment to fair value ofother long term assets |  |   | 1.4     |    |
| Adjustment toaccruedliabilities                   |  |   | 25.2    |    |
| Adjustments todeferred income taxes:              |  |   |    |    |
| ReimbursementAgreement with Suez                  |  |   | (42.8   | )  |
| Stateincome tax rates                             |  |   | (27.9   | )  |
| Excess LossAccount                                |  |   | (22.3   | )  |
| Other                                             |  |   | 1.1     |    |
| Reclassificationfor business held for sale        |  |   | (4.8    | )  |
| Effect offoreign currencytranslation              |  |   | 62.7    |    |
| Balance as ofDecember 31, 2004                    |  | $      | 2,368.3 |    |
|                                                   |

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

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

8.    Other Intangible Assets

The Company's intangible assets are summarized asfollows:

|                                           |  |                  |         |                          |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|-------------------------------------------|--|------------------|---------|--------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                      |  | December31, 2004 |         | December 31,2003         |
|                                      |  | GrossAmount      |         | Accumulated Amortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangible assets subject toamortization: |  |             |    |                     |  |        |    |                    |  |   |    |   |  |   |    |    |
| Customerrelationships                     |  | $                | 506.6   |                     |  | $           | (103.5  | )                  |  | $      | 494.4   |   |  | $      | (13.9   | )  |
| Patentsand developedtechnology            |  |             | 100.5   |                     |  |        | (12.2   | )                  |  |   | 100.1   |   |  |   | (1.7    | )  |
| Other                                     |  |             | 2.2     |                     |  |        | — |                    |  |   | — |   |  |   | — |    |
| Intangiblesnot subject toamortization:    |  |             |    |                     |  |        |    |                    |  |   |    |   |  |   |    |    |
| Trademarksand tradenames                  |  |             | 830.0   |                     |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                      |  | $                | 1,439.3 |                     |  | $           | (115.7  | )                  |  | $      | 1,424.5 |   |  | $      | (15.6   | )  |
|                                           |

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

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

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

The Predecessor previously had an Employee Stock OwnershipPlan (ESOP), which gave most U.S. employees an additional opportunityto share in the ownership of the Predecessor's stock. Preferredshares were allocated to eligible employees based on a percentage ofpretax earnings.

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

|                                                |  |                             |        |                                           |  |                                         |         |                             |  |        |        |        |  |        |        |        |  |  |
|------------------------------------------------|--|-----------------------------|--------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                                           |  | Successor                   |        | Predecessor                               |
|                                           |  | Yearended December 31, 2004 |        | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year ended December31, 2002 |
| Contributions to theTrust                      |  | $                           | 14.2   |                                      |  | $                                       | — |                        |  | $      | 24.0   |   |  | $      | 11.8   |   |
| Expenserecorded:                               |  |                        |   |                                      |  |                                    |    |                        |  |   |   |   |  |   |   |   |
| Amortizationof unearned employee profitsharing |  | $                           | 20.8   |                                      |  | $                                       | 2.8     |                        |  | $      | 13.8   |   |  | $      | 2.9    |   |
| Accretionof obligation toTrust                 |  |                        | 7.0    |                                      |  |                                    | 1.2     |                        |  |   | 6.2    |   |  |   | 9.2    |   |
| Totalincluded in operatingexpenses             |  | $                           | 27.8   |                                      |  | $                                       | 4.0     |                        |  | $      | 20.0   |   |  | $      | 12.1   |   |
|                                                |

Pursuantto the Stock Purchase Agreement, the Company and Suez entered into anagreement (the Reimbursement Agreement) on November 4, 2003, wherebySuez shall reimburse the Company for all contributions the Companymakes to the Trust in order to satisfy its obligations under theContribution Agreement. As part of the allocation of the Acquisitionpurchase price, the Company recorded a receivable from Suez of $112.7million, equivalent to the Company's recorded liability to theTrust. Interest accretes on this receivable at the same rate that itaccretes on the Company's obligation to the Trust.

Payments received from Suez and income recorded related to thereimbursement arrangement are asfollows:

|                                  |  |                             |        |        |  |  |
|----------------------------------|--|-----------------------------|--------|--------|--|--|
|                             |  | Successor                   |
|                             |  | Yearended December 31, 2004 |
| Payments receivedfrom Suez       |  | $                           | 14.2   |   |
| Incomerecorded:                  |  |                        |   |   |
| Accretion of receivablefrom Suez |  | $                           | 7.0    |   |
|                                  |

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

10.    Property, Plant, and Equipment

Property, plant, and equipment (including major improvements) arerecorded at cost. Depreciation of buildings and equipment is calculatedover their estimated useful lives generally using the straight-linemethod. The estimated useful lives of the major classes of depreciableassets acquired since the date of the Acquisition are as follows:buildings – 33 to 40 years; software – 5 years; equipment– 3 to 15 years.

The Company engaged independentappraisers to assist in determining the fair values of property, plantand equipment as of the date of the Acquisition. Preliminary values andfinal values from the 

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

appraisers are reflected in the amounts atDecember 31, 2003 and December 31, 2004, respectively, in the tablebelow. The Company is depreciating the acquired assets based on thefinal fair values and the remaining useful lives.

Interestcapitalized in connection with the development of a new managementinformation system in Europe was $1.6 million, $0.1 million, and $0.1million for the year ended December 31, 2004, the period from November4, 2003 through December 31, 2003, and the period from January 1, 2003through November 3, 2003, respectively.

Property, plant, andequipment consist of thefollowing:

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

11.    IncomeTax

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

|                                   |  |                             |        |                                           |  |                                         |       |                             |  |        |        |         |  |        |       |        |  |  |
|-----------------------------------|--|-----------------------------|--------|-------------------------------------------|--|-----------------------------------------|-------|-----------------------------|--|--------|--------|---------|--|--------|-------|--------|--|--|
|                              |  | Successor                   |        | Predecessor                               |
|                              |  | Yearended December 31, 2004 |        | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |       | Year ended December31, 2002 |
| UnitedStates                      |  | $                           | (268.1 | )                                    |  | $                                       | (33.0 | )                      |  | $      | (233.1 | )  |  | $      | 100.3 |   |
| Foreign                           |  |                        | 165.5  |                                      |  |                                    | 0.5   |                        |  |   | 147.8  |    |  |   | 136.6 |   |
| Earnings(loss) before incometaxes |  | $                           | (102.6 | )                                    |  | $                                       | (32.5 | )                      |  | $      | (85.3  | )  |  | $      | 236.9 |   |
|                                   |

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

|                              |  |                             |        |                                           |  |                                         |        |                            |  |        |        |         |  |        |        |         |  |  |
|------------------------------|--|-----------------------------|--------|-------------------------------------------|--|-----------------------------------------|--------|----------------------------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                         |  | Successor                   |        | Predecessor                               |
|                         |  | Yearended December 31, 2004 |        | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |        | Year ended December31,2002 |
| Current:                     |  |                        |   |                                      |  |                                    |   |                       |  |   |   |    |  |   |   |    |
| UnitedStates                 |  | $                           | 18.3   |                                      |  | $                                       | (0.3   | )                     |  | $      | 23.1   |    |  | $      | 71.3   |    |
| Stateandlocal                |  |                        | 0.2    |                                      |  |                                    | 1.4    |                       |  |   | 6.4    |    |  |   | 10.0   |    |
| Foreign                      |  |                        | 78.2   |                                      |  |                                    | 9.0    |                       |  |   | 56.3   |    |  |   | 54.0   |    |
| Totalcurrent                 |  |                        | 96.7   |                                      |  |                                    | 10.1   |                       |  |   | 85.8   |    |  |   | 135.3  |    |
| Deferred:                    |  |                        |   |                                      |  |                                    |   |                       |  |   |   |    |  |   |   |    |
| UnitedStates                 |  |                        | (27.6  | )                                    |  |                                    | (11.8  | )                     |  |   | (16.1  | )  |  |   | (22.8  | )  |
| Stateandlocal                |  |                        | (3.9   | )                                    |  |                                    | 1.0    |                       |  |   | (3.0   | )  |  |   | (4.8   | )  |
| Foreign                      |  |                        | (17.7  | )                                    |  |                                    | (7.6   | )                     |  |   | 2.0    |    |  |   | (2.5   | )  |
| Totaldeferred                |  |                        | (49.2  | )                                    |  |                                    | (18.4  | )                     |  |   | (17.1  | )  |  |   | (30.1  | )  |
| Incometax provision(benefit) |  | $                           | 47.5   |                                      |  | $                                       | (8.3   | )                     |  | $      | 68.7   |    |  | $      | 105.2  |    |
|                              |

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

|                                              |  |                  |         |                  |  |        |         |         |  |  |
|----------------------------------------------|--|------------------|---------|------------------|--|--------|---------|---------|--|--|
|                                         |  | December31, 2004 |         | December 31,2003 |
| Retirementbenefits                           |  | $                | 59.4    |             |  | $      | 50.2    |    |
| Pension                                      |  |             | 119.9   |             |  |   | 124.8   |    |
| UnitedStates net operating losscarryforwards |  |             | 37.6    |             |  |   | 18.1    |    |
| Foreign netoperating losscarryforwards       |  |             | 34.5    |             |  |   | 28.8    |    |
| Leveragedleaseinvestments                    |  |             | 1.9     |             |  |   | — |    |
| Accruals                                     |  |             | 42.8    |             |  |   | 32.4    |    |
| Otherdeferred taxassets                      |  |             | 35.4    |             |  |   | 36.7    |    |
| Totaldeferred taxassets                      |  |             | 331.5   |             |  |   | 291.0   |    |
| Valuationallowance                           |  |             | (44.1   | )           |  |   | (35.6   | )  |
| Netdeferred taxassets                        |  | $                | 287.4   |             |  | $      | 255.4   |    |
| Property                                     |  | $                | (53.9   | )           |  | $      | (67.4   | )  |
| Softwareamortization                         |  |             | (17.8   | )           |  |   | (17.5   | )  |
| Intangibleassets                             |  |             | (617.0  | )           |  |   | (681.3  | )  |
| Leveragedleaseinvestments                    |  |             | — |             |  |   | (22.2   | )  |
| ProfitSharing ReimbursementAgreement         |  |             | — |             |  |   | (42.8   | )  |
| Otherdeferred taxliabilities                 |  |             | (59.3   | )           |  |   | (15.4   | )  |
| Totaldeferred taxliabilities                 |  |             | (748.0  | )           |  |   | (846.6  | )  |
| Netdeferred taxassets                        |  |             | 287.4   |             |  |   | 255.4   |    |
| Totaldeferred incometaxes                    |  | $                | (460.6  | )           |  | $      | (591.2  | )  |
|                                              |

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

These deferred tax assets and liabilitiesare classified in the balance sheets based on the balance sheetclassification of the related assets and liabilities.

Pursuantto the Stock Purchase Agreement, Suez has provided an indemnity forcertain contingent taxes that relate to periods prior to November 4,2003.

Management believes it is more likely than not thatcurrent and long-term deferred tax assets, with the exception ofcertain tax carryforwards, will be realized through the reduction offuture taxable income. Although realization is not assured, we haveconcluded the deferred tax assets for which a valuation allowance wasdetermined to be unnecessary, will be realized in the ordinary courseof operations based on scheduling of deferred tax liabilities.Valuation allowances were established for deferred tax assets relatedto all of the tax loss carryforwards for which utilization isuncertain.

The effective rate of the provision (benefit) forincome taxes differs from the United States statutory tax rate due tothe followingitems:

|                                           |  |                             |         |                                           |  |                                         |         |                             |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                      |  | Successor                   |         | Predecessor                               |
|                                      |  | Yearended December 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year ended December31, 2002 |
| United States statutory taxrate           |  | $                           | (35.9   | )                                    |  | $                                       | (11.4   | )                      |  | $      | (29.9   | )  |  | $      | 82.9    |    |
| Stateincome taxes, net of federalbenefits |  |                        | (2.4    | )                                    |  |                                    | 0.4     |                        |  |   | 3.9     |    |  |   | 1.2     |    |
| Foreigntax ratedifferential               |  |                        | (3.4    | )                                    |  |                                    | 1.5     |                        |  |   | (4.3    | )  |  |   | (2.8    | )  |
| Nondeductible goodwillimpairment          |  |                        | — |                                      |  |                                    | — |                        |  |   | 85.5    |    |  |   | — |    |
| Withholdingtaxes                          |  |                        | 8.7     |                                      |  |                                    | 0.1     |                        |  |   | 3.6     |    |  |   | 1.8     |    |
| In-processresearch anddevelopment         |  |                        | 42.8    |                                      |  |                                    | — |                        |  |   | — |    |  |   | — |    |
| Interestdeducted byowners                 |  |                        | 18.1    |                                      |  |                                    | — |                        |  |   | — |    |  |   | — |    |
| Reorganizationof wholly ownedsubsidiary   |  |                        | — |                                      |  |                                    | — |                        |  |   | — |    |  |   | 6.2     |    |
| Taxon foreignearnings                     |  |                        | 18.7    |                                      |  |                                    | — |                        |  |   | 5.9     |    |  |   | — |    |
| U.S.tax on subsidiaryintegration          |  |                        | — |                                      |  |                                    | — |                        |  |   | — |    |  |   | 8.1     |    |
| U.S.tax on subsidiarydisposition          |  |                        | 1.8     |                                      |  |                                    | — |                        |  |   | 5.2     |    |  |   | — |    |
| Creditsandincentives                      |  |                        | (2.4    | )                                    |  |                                    | (0.2    | )                      |  |   | (0.8    | )  |  |   | (1.1    | )  |
| Prioryearadjustments                      |  |                        | — |                                      |  |                                    | (0.1    | )                      |  |   | 1.3     |    |  |   | 5.9     |    |
| Fixedassetrevaluation                     |  |                        | (2.7    | )                                    |  |                                    | — |                        |  |   | — |    |  |   | — |    |
| Valuationallowance                        |  |                        | 0.2     |                                      |  |                                    | 0.5     |                        |  |   | (3.0    | )  |  |   | 1.2     |    |
| Nondeductibleitems                        |  |                        | 4.4     |                                      |  |                                    | 0.7     |                        |  |   | 2.2     |    |  |   | 9.5     |    |
| Other                                     |  |                        | (0.4    | )                                    |  |                                    | 0.2     |                        |  |   | (0.9    | )  |  |   | (7.7    | )  |
| Incometax provision(benefit)              |  | $                           | 47.5    |                                      |  | $                                       | (8.3    | )                      |  | $      | 68.7    |    |  | $      | 105.2   |    |
|                                           |

NalcoFinance Holdings LLC is treated as a partnership for U.S. tax purposes;therefore, the taxable income and expenses of the entity flow directlyto the owners. In 2004, approximately $51.8 million of interestdeductions ($18.1 million of tax benefit) flowed to the owners and werenot deductible by the Company.

No provision has been made forUnited States or foreign income taxes related to approximately $509.1million of undistributed earnings of foreign subsidiaries at December31, 2004, as the Company considers these earnings to be permanentlyreinvested. It was not practicable to estimate the additional incometaxes and applicable withholding taxes that would be payable on theremittance of such undistributed earnings.

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

ThroughNovember 3, 2003, a portion of the Predecessor's United Statesoperations were conducted as part of a United States consolidatedfederal tax group that generated tax losses. Without the lossesgenerated by other members of the group, the Predecessor would havemade additional income tax payments of approximately $51.2 million and$84.0 million during the period from January  1, 2003 throughNovember 3, 2003 and the year ended December 31, 2002,respectively.

The Company has approximately $106.0 million($31.8 million tax effect) of U.K. capital losses that do not expire.The capital losses can only be used to offset future U.K. capitalgains. A full valuation allowance has been established pending therecognition of taxable U.K. capital gains.

The Company hasapproximately $7.9 million ($2.7 tax effect) of net operating losscarryforward in Venezuela expiring between 2006 and 2008, for which afull valuation allowance has been recorded.

The Company has U.S.federal net operating losses of approximately $96.7 million ($33.9million tax effect) expiring between 2019 and 2023. A valuationallowance has been established on $21.5 million ($7.5 million taxeffected) of certain separate return limitation year amounts, that ifreleased would be credited to goodwill.

The Company has U.S.foreign tax credits and state loss carryforwards, which could reducefuture taxes by $4.8 million. A valuation allowance of $2.1 million hasbeen established for the portion which realization is uncertain.

On October 22, 2004, President Bush signed into law the AmericanJobs Creation Act of 2004. The Act includes a one-time incentive forAmerican companies to repatriate earnings from their foreignsubsidiaries and invest those earnings in the United States. Thisincentive takes the form of an 85% dividends received deductionfor certain dividends from controlled foreign corporations. Under thislegislation, the Company could repatriate in 2005 as much as $500million of overseas accumulated earnings that are eligible for the85% dividends received deduction. If we were to do so, the $500million of dividends would be subject to U.S. income tax (andpotentially foreign withholding taxes), thereby potentially increasingour effective tax rate. The amount of dividends we will repatriate andthe related tax expense have not yet been determined.

76

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

12.    Debt

Debt consists ofthefollowing:

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

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

On January 21, 2004, Nalco Finance Holdings LLCand its 100% owned subsidiary, Nalco Finance Holdings Inc.(together, the Issuers), issued $694.0 million aggregate principalamount at maturity of 9.0% senior discount notes due 2014. Priorto February 1, 2009, interest will accrue on the senior discount notesin the form of an increase in the accreted value of such notes.Thereafter, cash interest on the senior discount notes will accrue andbe payable semiannually in arrears on February 1 and August 1 of eachyear, commencing on August 1, 2009, at a rate of 9.0% per annum.The accreted value of each note will increase from the date of issuanceuntil February 1, 2009 at a rate of 9.0% per annum, reflectingthe accrual of non-cash interest, such that the accreted value willequal the principal amount at maturity on February 1, 2009.

InDecember 2004, the Issuers redeemed a portion of the senior discountnotes with an accreted value of $162.3 million using proceeds from theinitial public offering of common stock of Nalco Holding Company. TheIssuers paid a $14.6 million premium to redeem the notes, and incurreda $13.7 million loss on the extinguishment of these notes, which isincluded in other income (expense). After the partial redemption, theaggregate principal amount at maturity of the notes declined to $460.8million from $694.0 million.

At December 31, 2004, the seniordiscount notes had an accreted value of approximately $698.13 per$1,000 principal amount at maturity of notes, resulting in a totalaccreted value of $321.7 million. The $2.5 million difference betweenthe carrying value of the notes and the total accreted value representsa premium, which is being amortized over the term of the notes.

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The Issuers do not generate any revenue,and Nalco Finance Holdings Inc. was incorporated solely to accommodatethe issuance of the notes by Nalco Finance Holdings LLC. All of theIssuers' consolidated assets are owned, and all of theIssuers' consolidated net sales are earned, by its direct andindirect subsidiaries. As of December 31, 2004, the Issuers'subsidiaries had $1,017.7 million of restricted net assets.

Theterms of Nalco Company's senior credit agreement fully prohibitNalco Holdings LLC and its subsidiaries from paying dividends orotherwise transferring their assets to the Issuers. Further, the termsof the indentures governing the senior notes and senior subordinatednotes of Nalco Company significantly restrict Nalco Company and theIssuers' other subsidiaries from paying dividends or otherwisetransferring assets to the Issuers. The ability of Nalco Company tomake such payments is governed by a formula based on its consolidatednet income, as well as meeting certain other conditions.Notwithstanding such restrictions, such indentures permit an aggregateof $50.0 million of such payments to be made whether or not there isavailability under the formula or the conditions to its use are met.The Issuers' subsidiaries will be permitted under the terms ofthe senior credit facilities and other indebtedness to incur additionalindebtedness that may severely restrict or prohibit the making ofdistributions, the payment of the dividends or the making of loans bysuch subsidiaries to the Issuers.

In connection with theAcquisition, Nalco Company (Nalco), a wholly owned indirect subsidiaryof Nalco Finance Holdings LLC, issued senior notes and seniorsubordinated notes in a private offering and entered into seniorsecured credit facilities.

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

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

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

Nalcomay redeem some or all of the senior notes and senior subordinatednotes, prior to November 15, 2007 and November 15, 2008, respectively,at a price equal to the principal amount of the notes, plus a specified"make-whole" premium. In addition, on orprior to November 15, 2006, Nalco may redeem up to 35% of eachof the senior notes and senior subordinated notes with the proceeds ofcertain equity offerings.

On November 4, 2003, the Companyentered into senior secured credit facilities which provided for arevolving credit facility and three term loans: a $200.0 million termloan A, a €88.0 million term 

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

loan A, and a $1,300.0 million term loan B.The senior secured credit facilities are unconditionally guaranteed byNalco Holdings LLC, Nalco, and certain domestic subsidiaries of NalcoHoldings LLC (collectively, the Guarantors). The repayment of thesefacilities is secured by substantially all the assets of theGuarantors, including, but not limited to, a pledge of their capitalstock and 65% of the capital stock of each non-U.S. subsidiaryowned by the Guarantors. The revolving credit facility, which expiresin November 2009, provides for borrowings up to $250 million, a portionof which may be made available to the Company's non-U.S.subsidiary borrowers in euros. The revolving credit facility alsoincludes borrowing capacity available for letters of credit. Thefacility bears interest at a rate equal to an applicable margin plus,at the Company's option, either (a) a base rate determined byreference to the greater of (1) the prime rate, (2) the three-monthcertificate of deposit rate plus 0.5%, and (3) the federal fundsrate plus 0.5% or (b) LIBOR or EURIBOR plus an applicable marginranging from 1.0% to 2.5%, depending on the type ofborrowing and the leverage ratio of the Company, as defined in thecredit agreement. Interest is generally due quarterly in arrears, andis also due upon expiration of any particular loan. In addition, thereis an annual loan commitment fee of 0.5% on the unused portionof the revolving credit facility. The Company is also required to pay aparticipation fee in respect of the undrawn portion of the letters ofcredit, at a rate per annum equal to LIBOR or EURIBOR plus anapplicable margin, a fronting fee at a rate of 0.25% per annumof the daily average amount, as well as customary letter of creditfees. As of December 31, 2004, the Company had $35.3 million inoutstanding letters of credit, none of which had been drawnagainst.

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

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

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

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

The senior secured credit facilities, senior notes, andsenior subordinated notes contain a number of covenants that, amongother things, restrict, subject to certain exceptions, the ability ofthe Company to sell assets; incur additional indebtedness or issuepreferred stock; repay other indebtedness; pay dividends or repurchasestock; create liens on assets; make investments, loans or advances;make acquisitions, mergers or consolidations; enter into sale andleaseback transactions; 

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

engage in certain transactions withaffiliates; amend certain material agreements governing ourindebtedness; change the business of the Company; and enter intohedging contracts. In addition, the Company must maintain financialcovenants including a maximum total leverage ratio, minimum interestcoverage ratio, and maximum capital expenditure limitation. As ofDecember 31, 2004, the Company was in compliance with all of thesecovenants.

The following table presents the projected annualmaturities of long-term debt for years after2004:

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

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

13.    Leases

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

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

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

14.    Sale-LeasebackTransaction

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The Predecessor's paymentobligations, along with certain other items under the lease agreement,were fully guaranteed by Suez. Because of the guarantee, thePredecessor was precluded from accounting for this transaction as asale and leaseback of the property and instead accounted for it as afinancing, with an effective interest rate of 5.5%. ThePredecessor provided a cross guarantee to Suez of any payments made bySuez under its guarantee.

Under the terms of an agreementexecuted November 4, 2003 between the Company and Leo Holding Company(Leo), a subsidiary of Suez, the Company assigned its rights andobligations under the lease agreement to Leo. Simultaneously, Suez wasreleased from its guarantee, and the Company and Leo entered into anagreement whereby the Company subleases its corporate headquarters andresearch facility from Leo. The terms of the sublease agreement aregenerally identical to those of the lease agreement that was assignedto Leo. As a result of these transactions, the leased property, theremaining obligation under the lease assigned to Leo, and the relateddeferred income taxes were removed from the Company's balancesheet as part of the allocation of the Acquisition purchase price. TheCompany accounts for the sublease as an operating lease.

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

15.    Pension and Other Postretirement BenefitPlans

The Company has several noncontributory, defined benefitpension plans covering most employees in the U.S. and those withcertain foreign subsidiaries. The principal domestic plan representsapproximately 59% of the benefit obligation and 54% ofthe total fair value of plan assets at December 31, 2004. The Companyalso provides a supplementary, nonqualified, unfunded plan for U.S.employees whose pension benefits exceed ERISA limitations. In addition,the Company has defined benefit postretirement plans that providemedical, dental, and life insurance benefits for substantially all U.S.retirees and eligible dependents. In conjunction with the Acquisition,the Company assumed these plans from the Predecessor without amendment.The Company retains the right to change or terminate these benefits,and several amendments were made in 2002 to the principal domesticpension plan and the defined benefit postretirement medical and dentalplans.

At the end of 2002, the domestic pension plan was amendedsuch that beginning January 2003, pension benefits no longer accrue forthose participants in the pension plan hired or rehired after October1999 and for those participants hired before November 1999, but withless than five years of vesting service at the end of 2002. However,these participants will continue to earn vesting service. These planamendments resulted in a curtailment credit of $7.8 million in 2002.For those participants hired before November 1999 and with more thanfive years of vesting service, the pension plan was amended to reducefuture benefit accruals and to increase the reduction factors for earlyretirement.

Also during 2002, eligibility for participation inthe defined benefit postretirement medical and dental plans was changedfrom age 55 with at least ten years of service to age 55 with at leastten years of service after age 45, resulting in a curtailment credit ofapproximately $29.4 million. Also, employees with less than five yearsof service at the end of 2003 will only be provided access to coverageat retirement; the Company will not contribute to the cost of thecoverage. This amendment resulted in an additional curtailment creditof $12.2 million. The plans were also amended such that retirees andtheir dependents will be required to pay 50% of plan costs in2005 and beyond.

A December 31 measurement date is used for thedefined benefit plans for pension and other postretirementbenefits.

81

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The following tables detail the changesin the funded status of defined benefit pension and otherpostretirement benefit plans and set forth amounts recognized and notrecognized in the balancesheets:

|                                                |  |                                     |         |                                                   |  |                                                 |         |         |  |        |         |         |  |  |
|------------------------------------------------|--|-------------------------------------|---------|---------------------------------------------------|--|-------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                           |  | PensionBenefits                     |
|                                           |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4, 2003throughDecember 31, 2003 |  | PredecessorJanuary 12003 throughNovember 3,2003 |
| **Change in benefitobligation**                |  |                                |    |                                              |  |                                            |    |    |  |   |    |    |
| Benefitobligation at beginning ofperiod        |  | $                                   | 706.2   |                                              |  | $                                               | 711.4   |    |  | $      | 609.2   |    |
| Servicecost                                    |  |                                | 27.2    |                                              |  |                                            | 4.6     |    |  |   | 19.9    |    |
| Interestcost                                   |  |                                | 39.4    |                                              |  |                                            | 6.6     |    |  |   | 31.1    |    |
| Participantcontributions                       |  |                                | 1.6     |                                              |  |                                            | 0.3     |    |  |   | 1.8     |    |
| Planamendments                                 |  |                                | 0.5     |                                              |  |                                            | — |    |  |   | — |    |
| Actuarial(gain)loss                            |  |                                | 27.1    |                                              |  |                                            | (4.0    | )  |  |   | 94.0    |    |
| Benefitspaid                                   |  |                                | (49.6   | )                                            |  |                                            | (32.3   | )  |  |   | (61.9   | )  |
| Specialterminationbenefits                     |  |                                | — |                                              |  |                                            | 1.6     |    |  |   | 1.1     |    |
| Curtailments                                   |  |                                | — |                                              |  |                                            | (0.2    | )  |  |   | (2.8    | )  |
| Other                                          |  |                                | 1.4     |                                              |  |                                            | — |    |  |   | 4.6     |    |
| Foreigncurrency exchange ratechanges           |  |                                | 21.9    |                                              |  |                                            | 18.2    |    |  |   | 14.4    |    |
| Benefitobligation at end ofperiod              |  | $                                   | 775.7   |                                              |  | $                                               | 706.2   |    |  | $      | 711.4   |    |
| **Changein plan assets**                       |  |                                |    |                                              |  |                                            |    |    |  |   |    |    |
| Fairvalue of plan assets at beginning ofperiod |  | $                                   | 346.6   |                                              |  | $                                               | 342.4   |    |  | $      | 342.6   |    |
| Actualreturn on planassets                     |  |                                | 29.4    |                                              |  |                                            | 13.2    |    |  |   | 34.9    |    |
| Employercontributions                          |  |                                | 13.7    |                                              |  |                                            | 13.6    |    |  |   | 17.6    |    |
| Participantcontributions                       |  |                                | 1.6     |                                              |  |                                            | 0.3     |    |  |   | 1.8     |    |
| Benefitspaid                                   |  |                                | (49.6   | )                                            |  |                                            | (32.3   | )  |  |   | (61.9   | )  |
| Other                                          |  |                                | 1.1     |                                              |  |                                            | — |    |  |   | — |    |
| Foreigncurrency exchange ratechanges           |  |                                | 11.2    |                                              |  |                                            | 9.4     |    |  |   | 7.4     |    |
| Fairvalue of plan assets at end ofperiod       |  | $                                   | 354.0   |                                              |  | $                                               | 346.6   |    |  | $      | 342.4   |    |
| Fundedstatus                                   |  | $                                   | (421.7  | )                                            |  | $                                               | (359.6  | )  |  |   |    |    |
| Unrecognizednet actuarial (gain)loss           |  |                                | 10.9    |                                              |  |                                            | (13.3   | )  |  |   |    |    |
| Unrecognizedprior servicecosts                 |  |                                | 0.5     |                                              |  |                                            | — |    |  |   |    |    |
| Netamountrecognized                            |  | $                                   | (410.3  | )                                            |  | $                                               | (372.9  | )  |  |   |    |    |
|                                                |

82

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

|                                                 |  |                                     |         |                                                   |  |                                                 |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|-------------------------------------|---------|---------------------------------------------------|--|-------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | OtherPostretirementBenefits         |
|                                            |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4, 2003throughDecember 31, 2003 |  | PredecessorJanuary 12003 throughNovember 3,2003 |
| **Change in benefitobligation**                 |  |                                |    |                                              |  |                                            |    |    |  |   |    |    |
| Benefitobligation at beginning ofperiod         |  | $                                   | 166.6   |                                              |  | $                                               | 165.9   |    |  | $      | 150.2   |    |
| Servicecost                                     |  |                                | 6.2     |                                              |  |                                            | 1.0     |    |  |   | 4.3     |    |
| Interestcost                                    |  |                                | 9.3     |                                              |  |                                            | 1.6     |    |  |   | 7.6     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                            | 0.3     |    |  |   | 2.2     |    |
| Planamendments                                  |  |                                | (18.5   | )                                            |  |                                            | — |    |  |   | — |    |
| Actuarialloss                                   |  |                                | 8.8     |                                              |  |                                            | — |    |  |   | 11.5    |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                            | (2.2    | )  |  |   | (9.9    | )  |
| Benefitobligation at end ofperiod               |  | $                                   | 165.6   |                                              |  | $                                               | 166.6   |    |  | $      | 165.9   |    |
| **Changein plan assets**                        |  |                                |    |                                              |  |                                            |    |    |  |   |    |    |
| Fairvalue of plan assets at beginning of period |  | $                                   | — |                                              |  | $                                               | — |    |  | $      | — |    |
| Employercontributions                           |  |                                | 6.8     |                                              |  |                                            | 1.9     |    |  |   | 7.7     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                            | 0.3     |    |  |   | 2.2     |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                            | (2.2    | )  |  |   | (9.9    | )  |
| Fairvalue of plan assets at end of period       |  | $                                   | — |                                              |  | $                                               | — |    |  | $      | — |    |
| Fundedstatus                                    |  | $                                   | (165.6  | )                                            |  | $                                               | (166.6  | )  |  |   |    |    |
| Unrecognizednet actuarialloss                   |  |                                | 8.8     |                                              |  |                                            | — |    |  |   |    |    |
| Unrecognizedprior servicecosts                  |  |                                | (16.7   | )                                            |  |                                            | — |    |  |   |    |    |
| Netamountrecognized                             |  | $                                   | (173.5  | )                                            |  | $                                               | (166.6  | )  |  |   |    |    |
|                                                 |

Amountsrecognized in the balance sheets consistof:

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

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

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

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

83

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The projected benefit obligation,accumulated benefit obligation, and fair value of plan assets for alldefined benefit pension plans with accumulated benefit obligations inexcess of plan assets as of the end of 2004 and 2003 were asfollows:

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

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

|                                    |  |                                    |         |                                                    |  |                                                  |         |                                      |  |        |       |         |  |        |         |         |  |  |
|------------------------------------|--|------------------------------------|---------|----------------------------------------------------|--|--------------------------------------------------|---------|--------------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                               |  | PensionBenefits                    |
|                               |  | SuccessorYearendedDecember 31,2004 |         | Successor November 4,2003 through December 31,2003 |  | PredecessorJanuary 1, 2003throughNovember3, 2003 |         | PredecessorYear endedDecember31,2002 |
| Servicecost                        |  | $                                  | 27.2    |                                               |  | $                                                | 4.6     |                                 |  | $      | 19.9  |    |  | $      | 31.2    |    |
| Interestcost                       |  |                               | 39.4    |                                               |  |                                             | 6.6     |                                 |  |   | 31.1  |    |  |   | 35.5    |    |
| Expectedreturn on planassets       |  |                               | (26.9   | )                                             |  |                                             | (4.5    | )                               |  |   | (27.1 | )  |  |   | (37.3   | )  |
| Amortizationof prior servicecost   |  |                               | — |                                               |  |                                             | — |                                 |  |   | (2.0  | )  |  |   | (3.2    | )  |
| Amortizationof net transitionasset |  |                               | — |                                               |  |                                             | — |                                 |  |   | (0.1  | )  |  |   | (0.1    | )  |
| Recognizednet actuarialloss        |  |                               | — |                                               |  |                                             | — |                                 |  |   | 12.4  |    |  |   | 7.4     |    |
| Specialterminationbenefits         |  |                               | — |                                               |  |                                             | — |                                 |  |   | 1.1   |    |  |   | — |    |
| Settlementcharge                   |  |                               | 0.1     |                                               |  |                                             | 0.1     |                                 |  |   | 5.9   |    |  |   | 1.8     |    |
| Curtailment                        |  |                               | — |                                               |  |                                             | (0.2    | )                               |  |   | 2.0   |    |  |   | (7.8    | )  |
| Netbenefitexpense                  |  | $                                  | 39.8    |                                               |  | $                                                | 6.6     |                                 |  | $      | 43.2  |    |  | $      | 27.5    |    |
|                                    |

|                                  |  |                                    |         |                                                  |  |                                                  |         |                                       |  |        |         |         |  |        |         |         |  |  |
|----------------------------------|--|------------------------------------|---------|--------------------------------------------------|--|--------------------------------------------------|---------|---------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                             |  | OtherPostretirementBenefits        |
|                             |  | SuccessorYearendedDecember 31,2004 |         | SuccessorNovember 4,2003throughDecember 31, 2003 |  | PredecessorJanuary1, 2003throughNovember 3, 2003 |         | PredecessorYearendedDecember 31, 2002 |
| Servicecost                      |  | $                                  | 6.2     |                                             |  | $                                                | 1.0     |                                  |  | $      | 4.3     |    |  | $      | 4.4     |    |
| Interestcost                     |  |                               | 9.3     |                                             |  |                                             | 1.6     |                                  |  |   | 7.6     |    |  |   | 10.6    |    |
| Amortizationof prior servicecost |  |                               | (1.8    | )                                           |  |                                             | — |                                  |  |   | (8.4    | )  |  |   | (8.2    | )  |
| Recognizednet actuarialloss      |  |                               | — |                                             |  |                                             | — |                                  |  |   | 6.0     |    |  |   | 4.4     |    |
| Specialterminationbenefits       |  |                               | — |                                             |  |                                             | — |                                  |  |   | — |    |  |   | — |    |
| Curtailment                      |  |                               | — |                                             |  |                                             | — |                                  |  |   | — |    |  |   | (41.6   | )  |
| Netbenefit expense(credit)       |  | $                                  | 13.7    |                                             |  | $                                                | 2.6     |                                  |  | $      | 9.5     |    |  | $      | (30.4   | )  |
|                                  |

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

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

84

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The weighted-average assumptionsused for the foreign defined benefit pension plans as of the end of thelast two years were asfollows:

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

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

|                                         |  |                          |        |                                        |  |                                      |        |                           |  |        |        |         |  |        |        |         |  |  |
|-----------------------------------------|--|--------------------------|--------|----------------------------------------|--|--------------------------------------|--------|---------------------------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                                    |  | Successor                |        | Predecessor                            |
|                                    |  | YearendedDecember31,2004 |        | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |        | Year endedDecember31,2002 |
| Discountrates                           |  |                     | 6.00   | %                                 |  |                                 | 6.00   | %                    |  |   | 6.75   | %  |  |   | 7.25   | %  |
| Ratesof increase in compensationlevels: |  |                     |   |                                   |  |                                 |   |                      |  |   |   |    |  |   |   |    |
| Pensionbenefits                         |  |                     | 4.19   | %                                 |  |                                 | 4.19   | %                    |  |   | 4.19   | %  |  |   | 4.19   | %  |
| Otherpostretirementbenefits             |  |                     | 4.12   | %                                 |  |                                 | 4.12   | %                    |  |   | 4.12   | %  |  |   | 4.12   | %  |
| Expectedlong-term return on planassets  |  |                     | 8.50   | %                                 |  |                                 | 8.50   | %                    |  |   | 9.00   | %  |  |   | 10.00  | %  |
|                                         |

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

|                                        |  |                          |      |                                        |  |                                      |      |                          |  |        |      |         |  |        |      |         |  |  |
|----------------------------------------|--|--------------------------|------|----------------------------------------|--|--------------------------------------|------|--------------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|                                   |  | Successor                |      | Predecessor                            |
|                                   |  | YearEndedDecember31,2004 |      | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |      | YearendedDecember31,2002 |
| Discountrates                          |  |                     | 5.42 | %                                 |  |                                 | 5.43 | %                   |  |   | 5.74 | %  |  |   | 5.72 | %  |
| Ratesof increase in compensationlevels |  |                     | 3.35 | %                                 |  |                                 | 3.71 | %                   |  |   | 3.40 | %  |  |   | 3.31 | %  |
| Expectedlong-term return on planassets |  |                     | 8.15 | %                                 |  |                                 | 7.97 | %                   |  |   | 7.75 | %  |  |   | 7.60 | %  |
|                                        |

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

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

85

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The expected long-term rate of return isestablished using historical market data for each asset class as wellas the target allocation. Historical markets are analyzed and long-termhistorical relationships between equity and fixed income investmentsare preserved consistent with the widely accepted capital marketprinciple that assets with higher volatility will generate a greaterreturn over the long run. Active management is employed in most assetclasses, which also contributes to the return assumption. The totalweighted-average return on each asset class supports theCompany's long-term expected rate of return assumption.

The percentages of each major class of plan assets held by theCompany's principal domestic defined benefit pension plan as ofthe end of the last two years and target allocations were asfollows:

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

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

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

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

|                                                       |  |                      |     |          |  |        |      |         |  |  |
|-------------------------------------------------------|--|----------------------|-----|----------|--|--------|------|---------|--|--|
|                                                  |  | One-Percentage-Point |
|                                                  |  | Increase             |     | Decrease |
| Effecton total of service and interest costcomponents |  | $                    | 0.6 |     |  | $      | (0.8 | )  |
| Effect onpostretirement benefitobligation             |  |                 | 7.0 |     |  |   | (8.2 | )  |
|                                                       |

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

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

86

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

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

16.    EquityCompensation Plan

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

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

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

The methods employed to value the class A Units werethe guideline public company method, using multiples of EBITDA andsales, and the income approach, using the discounted free cash flowmethod. The class B, class C, and class D Units are essentiallystructured as options and were valued using the Black-Scholes optionpricing model. The expected option life, risk-free interest rate,expected annual volatility, and dividend yield used to calculate thefair value of the Units was 6.0 years, 3.15%, 19.6%, and0.0%, respectively. The expected annual volatility was estimatedusing a group of guideline public companies as a proxy, since the Unitsare not publicly traded. A minority interest discount and variousmarketability discounts also affected the fair value of the class B,class C, and class D Units.

Though Nalco LLC established thePlan, the Company will account for the Plan since its economicsubstance is substantially the same for the Company and itsemployees.

In December 2004, the FASB issued SFAS No. 123(R),Share-Based Payment, which revises SFAS No. 123, Accountingfor Stock-Based Compensation, and supersedes Accounting PrinciplesBoard Opinion (APB) No. 25, Accounting for Stock Issued toEmployees. SFAS No. 123(R) requires all share-based payments toemployees, including grants of employee stock options, to be recognizedin the financial statements based on their fair values.

87

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

The Company elected to adopt SFAS No.123(R) as of October 1, 2004, using the modified-prospective transitionmethod. Compensation cost charged to earnings for the Plan was $0.1million for the year ended December 31, 2004. Compensation cost isrecognized ratably over the estimated requisite service periods thatthe Units vest. No share-based compensation was charged to earnings bythe Successor during the period from November 4, 2003 through December31, 2003 or by the Predecessor during the period from January 1, 2003through November 3, 2003 and the year ended December 31, 2002, since noshare-based compensation plans existed during those periods.

Asa result of the purchase of Units under the Plan by key officers andemployees, the Company received an additional contribution of capitalof $8.1 million from Nalco LLC.

17.    Unitholders'Equity

Unitholders' equity consists of thefollowing:

|                                      |  |                  |        |                   |  |        |         |         |  |  |
|--------------------------------------|--|------------------|--------|-------------------|--|--------|---------|---------|--|--|
|                                 |  | December31, 2004 |        | December 31, 2003 |
| Capitalaccount                       |  | $                | 741.2  |              |  | $      | 1,001.9 |    |
| Accumulateddeficit                   |  |             | (180.0 | )            |  |   | (24.1   | )  |
| Accumulatedother comprehensiveincome |  |             | 133.1  |              |  |   | 91.2    |    |
|                                 |  | $                | 694.3  |              |  | $      | 1,069.0 |    |
|                                      |

Thecapital structure of the Company at December 31, 2004 consisted of oneclass of limited liability company interests represented by Units,which were identical with each other in every respect. There were 100Units issued and outstanding, of which 99 were owned by NalcoInvestment Holdings LLC and 1 was owned by Nalco Finance Holdings II,Inc.

At December 31, 2003, Nalco Investment Holdings LLC was thesole member of the Company and owned all outstanding Units as a resultof its $1,001.9 million capital contribution to the Company on November4, 2003. On January 14, 2004, Nalco Investment Holdings LLC contributedits 100% interest in Nalco Holdings LLC in exchange for a100% interest in a newly formed company, Nalco Finance HoldingsLLC. As of that date, Nalco Finance Holdings LLC became the parentcompany of Nalco Holdings LLC.

During the year ended December31, 2004, Nalco Finance Holdings LLC used the net proceeds from theissuance of the senior discount notes due 2014 to make a return ofcapital distribution of $446.9 million to its parent, Nalco InvestmentHoldings LLC, which in turn made a distribution to the holders of itsmembership interests.

Also during the year ended December 31,2004, the Company received additional capital contributions of $186.2million from its direct parent company, Nalco Investment Holdings LLC.Of this amount, $176.9 million resulted from the November 2004 publicstock offering made by the Company's indirect parent company,Nalco Holding Company. The remaining $9.3 million represented capitalcontributions received by the Company's ultimate parent company,Nalco LLC, and was comprised of an additional equity investment of $1.2million by Dr. William H. Joyce and $8.1 million in proceeds from thesale of equity interests to certain officers and key employees underthe Nalco LLC 2004 Unit Plan.

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

88

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

18.    Financial Instruments and RiskManagement

The Company and its Predecessor have usedderivatives to fix the cost of issuing debt and to manage well-definedinterest rate and foreign exchange exposures. For derivativeinstruments not designated as hedging instruments, the unrealized gainor loss is recognized in other income (expense) in current earningsduring the period of change.

Notional Amount and CreditExposures of Derivatives

The notional amounts of derivativesdiscussed below do not represent amounts exchanged by the parties and,thus, are not a measure of the exposure of the Company through its useof derivatives. The amounts exchanged are calculated on the basis ofthe notional amounts and the other terms of the derivatives, whichrelate primarily to interest rates and foreign exchange rates.

The Company is exposed to credit-related losses in the event ofnonperformance by counterparties to financial instruments, but it doesnot expect any counterparties to fail to meet their obligations giventheir high credit ratings.

Interest Rate Risk Management

Interest rate swap agreements were used by the Predecessor to reducethe potential impact of increases in interest rates on floating ratedebt. During 2001, the Predecessor entered into an interest rate swapagreement with a former related party. This interest rate swap wasdesignated as a hedge of future cash flows related to certain variableinterest rate borrowings. Changes in fair value of the interest rateswap were recognized in other comprehensive income and subsequentlyreclassified into interest expense as payments became due and the swapapproached maturity.

During the third quarter of 2003, it becameprobable that the future interest payments hedged by the swap would notbe made because it was expected that the related debt would be repaidimmediately before the sale of the Predecessor during the fourthquarter of 2003. As a result, the Predecessor discontinued accountingfor the swap as a hedge, and a $10.9 million pretax loss reported inaccumulated other comprehensive income was reclassified to earningsduring the third quarter 2003. The swap was terminated in October 2003,ultimately resulting in a pretax loss of $10.4 million that wasreported in other income (expense) for the period January 1, 2003through November 3, 2003.

Foreign Exchange Risk Management

The Company and its Predecessor have used various types of foreignexchange contracts, including currency swaps and forward exchangecontracts, to manage foreign exchange risk. In addition, the Companyuses certain foreign currency debt as a hedge of the foreign currencyexposure of a portion of its net investment in foreign operations.

Upon issuance, the Company designated the €200.0million senior notes, the €200.0 million seniorsubordinated notes, and the €88.0 million term loan as ahedge of its net investment in subsidiary companies whose assets,liabilities, and operations are measured using the euro as theirfunctional currency. Because of the high degree of effectivenessbetween the hedging instruments and the 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 theCompany's net investment in subsidiary companies whose financialstatements are measured using the euro as their functionalcurrency.

The Company formally assesses, on a quarterly basis,whether the euro-denominated debt is effective at offsetting changes inthe value of the underlying exposure. Losses of $28.2 million (net of

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

income taxes of $16.5 million) and $29.4million (net of income taxes of $18.0 million) were reported as acomponent of other comprehensive loss within the accumulated foreigncurrency translation adjustment account for the year ended December 31,2004 and the period from November 4, 2003 through December 31, 2003,respectively. No hedge ineffectiveness was recorded in income.

The Company's forward exchange contracts at December 31, 2004were designated as cash flow hedges of the variability of the cashflows from certain intercompany foreign currency loans and forecasted2005 royalty payments due to changes in foreign exchange rates. Thefair value of these contracts was a liability of $1.3 million and $0.5million at December 31, 2004 and December 31, 2003, respectively. Therewas a $0.4 million pretax loss attributable to foreign exchangecontracts in accumulated other comprehensive income at December 31,2004. Of that amount, the Company expects $0.3 million to bereclassified to earnings during the next twelve months.

InOctober 2003, the Predecessor terminated three currency swap agreementswhen the intercompany foreign currency loans they were hedging weresettled. The gain on the termination of the swaps was not material.

19.    Fair Value of Financial Instruments

The followingmethods and assumptions were used to estimate the fair values offinancial instruments:

Cash and cash equivalents and short-termdebt

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

Long-term debt

The fair value of the Company's senior notes, seniorsubordinated notes, and senior discount notes at December 31, 2004 wasestimated based on their quoted market prices. The carrying value ofthe Company's senior notes and senior subordinated notesoutstanding at December 31, 2003 was considered to approximate fairvalue due to the proximity of their date of issuance to December 31,2003. The carrying value of amounts outstanding under theCompany's senior secured credit facilities is considered toapproximate fair value because interest accrues at rates whichfluctuate with interest rate trends. The carrying value of otherlong-term debt outstanding, other than the 6.25% fixed rateunsecured notes, also approximates fair value due to the variablenature of their interest rates.

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

Derivatives

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

|                          |  |                |         |           |  |                |         |           |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|----------------|---------|-----------|--|----------------|---------|-----------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | 2004           |         | 2003      |
|                     |  | CarryingAmount |         | FairValue |  | CarryingAmount |         | FairValue |
| **Assets**               |  |           |    |      |  |           |    |      |  |   |    |   |  |   |    |   |
| Cashand cashequivalents  |  | $              | 33.2    |      |  | $              | 33.2    |      |  | $      | 100.0   |   |  | $      | 100.0   |   |
| **Liabilities**          |  |           |    |      |  |           |    |      |  |   |    |   |  |   |    |   |
| Short-termdebt           |  | $              | 17.7    |      |  | $              | 17.7    |      |  | $      | 51.9    |   |  | $      | 51.9    |   |
| Long-termdebt            |  |           | 3,424.8 |      |  |           | 3,616.5 |      |  |   | 3,262.8 |   |  |   | 3,265.6 |   |
| Forwardexchangecontracts |  |           | 1.3     |      |  |           | 1.3     |      |  |   | 0.5     |   |  |   | 0.5     |   |
|                          |

20.    BusinessOptimization Expenses

In addition to the Company's planto exit or restructure certain activities that was formulated inconjunction with the Acquisition, the Company is continuing to redesignand optimize its business and work processes. Business processoptimization expenses, representing employee severance and relatedcosts, were $1.7 million for the year ended December 31, 2004.

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

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

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

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

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Business optimization expenses werecomprised of thefollowing:

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

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

21.    Summary of Other Income (Expense)

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

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

22.    RelatedParty Transactions

On November 4, 2003, the Company enteredinto a Monitoring Fee Agreement with affiliates of the Sponsors formonitoring, advisory and consulting services in relation to the affairsof the Company, including debt and equity offerings, relationships withbankers and lenders, corporate strategy, acquisitions and dispositions,and other matters as may be requested. The Company agreed to pay anannual monitoring fee of at least $10.0 million for these services. Thefee could be increased 

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

depending on the Company's earnings.During the year ended December 31, 2004 and the period from November 4,2003 through December 31, 2003, the Company paid $11.2 million and $1.8million, respectively, for these services.

In connection withthe public offering of common stock by the Company's indirectparent company, Nalco Holding Company, in November 2004, the Companyamended and restated the Monitoring Fee Agreement, pursuant to whichthe Company terminated the monitoring services provided to the Companyby the Sponsors' affiliates. A termination fee of $35.0 millionwas paid to the Sponsors' affiliates, which was charged to otherincome (expense). The amended and restated agreement will provide theSponsors' affiliates with a right of first refusal to provide uswith financial advisory services in exchange for mutually agreeablecompensation. This right of first refusal will terminate when theSponsors directly or indirectly hold less than 5% of NalcoHolding Company's outstanding common stock.

The Companyborrowed certain excess cash amounts from Nalco Holding Company duringthe year ended December 31, 2004, and interest expense on theseborrowings was $0.3 million.

The Company paid certain costs onbehalf of Nalco Holding Company in connection with its public offeringof common stock. At December 31, 2004, the Company had a receivable of$0.7 million from Nalco Holding Company for these costs, which wasclassified with other noncurrent assets.

As part of theAcquisition, the Company executed a Transaction Fee Agreement wherebythe Company agreed to pay affiliates of the Sponsors for the financialand structural analysis, due diligence investigations, other advice andnegotiation assistance necessary in order to enable the Acquisition tobe consummated. Pursuant to this agreement, the Company paid affiliatesof the Sponsors a transaction fee of $75.0 million during the periodfrom November 4, 2003 through December 31, 2003. The Company alsoreimbursed affiliates of the Sponsors $1.1 million for miscellaneousexpenses incurred in connection with the Acquisition. The transactionfee and expense reimbursement were capitalized and included as part ofthe purchase price.

The Predecessor provided certainmanufacturing and selling services to other subsidiaries of Suez.Amounts earned by the Predecessor for the period from January 1, 2003through November 3, 2003 and the year ended December 31, 2002 were $0.3million and $1.4 million, respectively. In addition, the Predecessorpaid Suez management fees of $2.9 million and $3.1 million for theperiod from January 1, 2003 through November 3, 2003 and the year endedDecember 31, 2002, respectively.

The Predecessor lent funds tovarious other subsidiaries of Suez. Interest earned from relatedcompanies was $1.0 million and $2.4 million for the period from January1, 2003 through November 3, 2003 and the year ended December 31, 2002,respectively.

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

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

23.    Segment Information

The Company providesintegrated water treatment and process improvement services forindustrial and institutional applications, using technologicallyadvanced solutions, combining chemical products and equipment, andconsistent, reliable on-site service and expertise. These solutions and

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

services enable the Company'scustomers to improve production yields, lower manufacturing costs,extend asset lives and maintain environmental standards at costs thatrepresent a small share of their overall production expense.

TheCompany is organized based on the end markets it serves. Theorganization is comprised of the following reportable segments:

Industrial and Institutional Services – This segmentserves the global water treatment and process chemical needs of theindustrial, institutional, and municipal markets.

EnergyServices – This segment serves the process chemicals andwater treatment needs of the global petroleum and petrochemicalindustries in both upstream and downstream applications.

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

Other – This segment serves thealternative channels to market, supply chain activities, and certainother operating expenses not allocated to a segment. It also includesthe Company's subsidiary in India and the Katayama Nalco jointventure.

During 2004, the Company began reporting Pacific regionresults related to the Industrial and Institutional Services segmentand the Paper Services segment with those segments. These results hadpreviously been reported in the Other segment. Amounts for priorperiods have been restated to conform with this change in thecomposition of the Company's reportable segments.

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

Net salesby reportable segment were asfollows:

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

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

|                                     |  |                             |         |                                           |  |                                         |         |                            |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                |  | Successor                   |         | Predecessor                               |
|                                |  | Yearended December 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year endedDecember31, 2002 |
| Segment directcontribution:         |  |                        |    |                                      |  |                                    |    |                       |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices |  | $                           | 351.7   |                                      |  | $                                       | 47.5    |                       |  | $      | 271.2   |    |  | $      | 286.5   |    |
| EnergyServices                      |  |                        | 167.2   |                                      |  |                                    | 23.8    |                       |  |   | 131.1   |    |  |   | 159.8   |    |
| PaperServices                       |  |                        | 151.3   |                                      |  |                                    | 23.4    |                       |  |   | 120.2   |    |  |   | 146.0   |    |
| Other                               |  |                        | (64.1   | )                                    |  |                                    | (22.9   | )                     |  |   | (49.6   | )  |  |   | (35.3   | )  |
| Totalsegment directcontribution     |  |                        | 606.1   |                                      |  |                                    | 71.8    |                       |  |   | 472.9   |    |  |   | 557.0   |    |
| Expensesnot allocated tosegments:   |  |                        |    |                                      |  |                                    |    |                       |  |   |    |    |  |   |    |    |
| Administrativeexpenses              |  |                        | 190.4   |                                      |  |                                    | 36.3    |                       |  |   | 181.7   |    |  |   | 170.8   |    |
| Impairmentofgoodwill                |  |                        | — |                                      |  |                                    | — |                       |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets     |  |                        | 96.3    |                                      |  |                                    | 15.4    |                       |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment   |  |                        | 122.3   |                                      |  |                                    | — |                       |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses        |  |                        | 1.7     |                                      |  |                                    | 0.8     |                       |  |   | 20.3    |    |  |   | 32.8    |    |
| Operatingearnings(loss)             |  |                        | 195.4   |                                      |  |                                    | 19.3    |                       |  |   | (42.4   | )  |  |   | 264.2   |    |
| Otherincome (expense),net           |  |                        | (57.0   | )                                    |  |                                    | (2.8    | )                     |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                      |  |                        | 10.1    |                                      |  |                                    | 0.6     |                       |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                     |  |                        | (251.1  | )                                    |  |                                    | (49.6   | )                     |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes   |  | $                           | (102.6  | )                                    |  | $                                       | (32.5   | )                     |  | $      | (85.3   | )  |  | $      | 236.9   |    |
|                                     |

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

Net sales by geographic region were asfollows:

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

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

Long-lived assets by geographic regionwere asfollows:

|                |  |                 |         |                  |  |        |         |        |  |  |
|----------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--|
|           |  | December31,2004 |         | December 31,2003 |
| UnitedStates   |  | $               | 2,903.7 |             |  | $      | 3,185.2 |   |
| Othercountries |  |            | 1,999.8 |             |  |   | 2,003.0 |   |
|           |  | $               | 4,903.5 |             |  | $      | 5,188.2 |   |
|                |

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

24. Contingencies andLitigation

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

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

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

The Company has been named as a defendant inlawsuits based on claimed involvement in the supply of allegedlydefective or hazardous materials. The plaintiffs in these cases seekdamages for alleged personal injury or potential injury resulting fromexposure to our products or other chemicals. These matters have had ade minimis impact on the Company's business historically and theCompany does not anticipate these matters to present any material riskto the Company's business in the future. Notwithstanding, theCompany cannot predict the outcome of any such lawsuits or theinvolvement the Company might have in these matters in the future.

The Company has received subpoenas from the U.S. Department ofJustice for documents and testimony relating to its storage of claimedhazardous materials, the claimed leakage of wastewater 

96

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

and other matters at its plant in Garyville,Louisiana. No charges or indictments have been filed, but the outcomeof this investigation is unknown to the Company.

In the ordinarycourse of its business, the Company is also a party to a number oflawsuits and is subject to various claims relating to trademarks,employee matters, contracts, transactions, chemicals and other matters,the outcome of which, in the opinion of management, should not have amaterial effect on the consolidated financial position of the Company.However, we cannot predict the outcome of any litigation or thepotential for future litigation. Were an unfavorable ruling to occur,there exists the possibility of a material adverse impact on theresults of operations for the period in which the ruling occurs. TheCompany maintains accruals where the outcome of the matter is probableand can be reasonably estimated.

25.    Quarterly Results ofOperations(Unaudited)

|                                   |  |                 |         |                  |  |               |         |                  |  |        |         |        |  |        |        |         |  |  |
|-----------------------------------|--|-----------------|---------|------------------|--|---------------|---------|------------------|--|--------|---------|--------|--|--------|--------|---------|--|--|
|                              |  | Successor       |
|                              |  | FirstQuarter(1) |         | SecondQuarter(2) |  | Third Quarter |         | FourthQuarter(3) |
| **2004**                          |  |            |    |             |  |          |    |             |  |   |    |   |  |   |   |    |
| Netsales                          |  | $               | 713.3   |             |  | $             | 740.4   |             |  | $      | 774.2   |   |  | $      | 805.4  |    |
| Costof productsold                |  |            | 368.2   |             |  |          | 365.5   |             |  |   | 394.7   |   |  |   | 423.8  |    |
| Businessoptimizationexpenses      |  |            | — |             |  |          | — |             |  |   | — |   |  |   | 1.7    |    |
| Earnings(loss) before incometaxes |  |            | (122.7  | )           |  |          | 19.9    |             |  |   | 30.9    |   |  |   | (30.7  | )  |
| Netearnings(loss)                 |  |            | (126.7  | )           |  |          | 2.4     |             |  |   | 2.0     |   |  |   | (33.6  | )  |
|                                   |

|                                   |  |              |        |                   |  |                 |        |                                |  |                                  |        |        |  |        |        |         |  |        |        |         |  |  |
|-----------------------------------|--|--------------|--------|-------------------|--|-----------------|--------|--------------------------------|--|----------------------------------|--------|--------|--|--------|--------|---------|--|--------|--------|---------|--|--|
|                              |  | Predecessor  |        | Successor         |
|                              |  | FirstQuarter |        | Second Quarter(4) |  | ThirdQuarter(5) |        | October 1 through November3(6) |  | November 4 through December31(7) |
| **2003**                          |  |         |   |              |  |            |   |                           |  |                             |   |   |  |   |   |    |  |   |   |    |
| Netsales                          |  | $            | 658.2  |              |  | $               | 694.5  |                           |  | $                                | 711.4  |   |  | $      | 242.4  |    |  | $      | 460.1  |    |
| Costof productsold                |  |         | 323.7  |              |  |            | 331.2  |                           |  |                             | 337.9  |   |  |   | 121.8  |    |  |   | 248.2  |    |
| Businessoptimizationexpenses      |  |         | 2.5    |              |  |            | 7.2    |                           |  |                             | 5.5    |   |  |   | 5.1    |    |  |   | 0.8    |    |
| Earnings(loss) before incometaxes |  |         | 42.4   |              |  |            | (186.5 | )                         |  |                             | 64.6   |   |  |   | (5.8   | )  |  |   | (32.5  | )  |
| Netearnings(loss)                 |  |         | 24.4   |              |  |            | (212.1 | )                         |  |                             | 33.7   |   |  |   | (4.2   | )  |  |   | (24.1  | )  |
|                                   |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                      |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Earnings(loss) before income taxes includes a $122.3 million charge ($122.3million after tax) for purchased in-process research and developmentand a $14.1 million charge ($9.8 million after tax) related to the saleof inventory that had been revalued at selling price less costs to sellin purchase accounting. |

|     |                                                                                                                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Earnings (loss)before income taxes includes a $0.4 million charge ($0.3 million aftertax) related to the sale of inventory that had been revalued at sellingprice less costs to sell in purchaseaccounting. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Earnings (loss) before incometaxes includes a $35.0 million charge ($21.8 million after tax) for thetermination of the Monitoring Fee Agreement with affiliates of theSponsors, a $13.7 million charge ($13.7 million after tax) for theearly repayment of senior discount notes, and a $0.1 million charge($0.1 million after tax) related to the sale of inventory that had beenrevalued at selling price less costs to sell in purchaseaccounting. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (4) | Earnings (loss) before incometaxes includes a $244.4 million charge ($244.4 million after tax) forgoodwill impairment. |

97

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NalcoFinance Holdings LLC and Subsidiaries Notes to Consolidated andCombined Financial Statements (Continued)(dollars in millions,except per share amounts) December 31,2004

|     |                                                                                                                                                                          |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Earnings (loss) beforeincome taxes includes a $10.9 million charge ($6.8 million after tax)to provide for the estimated loss on the termination of an interestrate swap. |

|     |                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Earnings (loss) before incometaxes includes a $0.5 million credit ($0.3 million after tax) to adjustthe provision for termination of an interest rate swap to actualsettlement cost. |

|     |                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Earnings (loss) beforeincome taxes includes a $21.2 million charge ($14.8 million after tax)related to the sale of inventory that had been revalued at sellingprice less costs to sell in purchaseaccounting. |

98

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

None.

ITEM9A.    CONTROLS ANDPROCEDURES

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation of disclosurecontrols and procedures. |

The Company's chiefexecutive officer and chief financial officer, after evaluating theeffectiveness of the Company's "disclosure controlsand procedures" (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 the Company's disclosure controls andprocedures were adequate and designed to ensure that materialinformation relating to the Company and its consolidated subsidiarieswould be made known to them by others within those entities asappropriate to allow timely decisions regarding requireddisclosures.

|           |                                                       |
|-----------|-------------------------------------------------------|
| (b)  | Changes in internalcontrols over financial reporting. |

There were no changesin the Company's internal controls over financial reporting thatoccurred during the fourth quarter of 2004 that have materiallyaffected, or are reasonably likely to materially affect, theCompany's internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION

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

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT

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

ITEM 11.    EXECUTIVE COMPENSATION

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

|                |                                                               |
|----------------|---------------------------------------------------------------|
| ITEM 12.  | SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT |

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

ITEM 13.    CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The followingtable presents fees for professional services rendered by Ernst &Young LLP for the audit of the Company's annual financialstatements for 2004 and 2003, and fees billed for audit-relatedservices, tax services and all other services rendered by Ernst &Young LLP for 2004 and 2003.

99

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|                             |  |        |         |        |  |        |         |        |  |  |
|-----------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
| **(dollarsinmillions)**     |  | 2004   |         | 2003   |
| Auditfees (1)               |  | $      | 6.1     |   |  | $      | 3.1     |   |
| Audit-relatedfees(2)        |  |   | — |   |  |   | 1.6     |   |
| Auditand audit-related fees |  |   | 6.1     |   |  |   | 4.7     |   |
| Taxfees (3)                 |  |   | 0.1     |   |  |   | 0.1     |   |
| All otherfees               |  |   | — |   |  |   | — |   |
| Totalfees(4)                |  | $      | 6.2     |   |  | $      | 4.8     |   |
|                             |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Auditfees for 2004 and 2003 include fees for the audit of the annualconsolidated financial statements, reviews of the condensedconsolidated financial statements included in the Company'squarterly reports, and statutory audits. Additionally, audit fees for2004 include fees for the re-audit of the 2001 financial statements,reviews of registration statements and issuances of related letters tounderwriters andconsents. |

|     |                                                                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Audit-related fees for2003 consisted principally of fees for services provided in connectionwith the acquisition of the Company in November 2003. |

|     |                                                                                   |
|-----|-----------------------------------------------------------------------------------|
| (3) | Tax fees for 2004 and 2003 consistedprincipally of fees for tax advisoryservices. |

|     |                                                                                                                        |
|-----|------------------------------------------------------------------------------------------------------------------------|
| (4) | Ernst & Young LLPfull time, permanent employees performed all of the professionalservices described in this chart. |

The Company's AuditCommittee of the Board of Directors has adopted a Pre-Approval Policythat can be found at www.nalco.com.

To safeguard the continuedindependence of the independent auditors, the Audit Committee hasadopted a policy that prevents our independent auditors from providingservices to us that are prohibited under Section  10A(g) of theSecurities Exchange Act of 1934, as amended. This policy also providesthat independent auditors are only permitted to provide services to usthat have been pre-approved by the Audit Committee. Pursuant to thepolicy, all audit services require advance approval by the AuditCommittee. All other services by the independent auditors that fallwithin certain designated dollar thresholds, both per engagement aswell as annual aggregate, have been pre-approved under the policy.Different dollar thresholds apply to the three categories ofpre-approved services specified in the policy (audit-related services,tax services and other services). All services that exceed the dollarthresholds must be approved in advance by the Audit Committee. Pursuantto applicable 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.

100

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PART IV

ITEM 15. EXHIBITS,FINANCIAL STATEMENT SCHEDULES

|              |                      |
|--------------|----------------------|
| (a)(1)  | Financial Statements |

Thefollowing consolidated and combined financial statements of NalcoFinance Holdings LLC and subsidiaries are filed as part of this reportunder Item 8–Financial Statements and Supplementary Data:

Consolidated Balance Sheets–December 31, 2004 and2003

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

Consolidated andCombined Statement of Unitholders' and Shareholders'Equity–Year ended December 31, 2004 (Successor), Period fromNovember 4, 2003 through December 31, 2003 (Successor), Period fromJanuary 1, 2003 through November 3, 2003 (Predecessor), and Year endedDecember 31, 2002 (Predecessor)

Consolidated andCombined Statements of Cash Flows–Year ended December 31, 2004(Successor), Period from November 4, 2003 through December 31, 2003(Successor), Period from January 1, 2003 through November 3, 2003(Predecessor), and Year ended December 31, 2002 (Predecessor)

Notes to Consolidated and Combined Financial Statements

|               |                                |
|---------------|--------------------------------|
| (a) (2)  | Financial statement schedules: |

Schedule I – Condensed Financial InformationSchedule II – Valuation and Qualifying Accounts

All other financial statement schedules are not requiredunder the relevant instructions or are inapplicable and therefore havebeen omitted.

101

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ScheduleI – Condensed Financial Information

Nalco FinanceHoldings LLC (Parent Company Only)

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

|                                             |  |                  |         |                  |  |        |         |        |  |  |
|---------------------------------------------|--|------------------|---------|------------------|--|--------|---------|--------|--|--|
|                                        |  | December31, 2004 |         | December 31,2003 |
| Investment insubsidiaries                   |  | $                | 1,017.7 |             |  | $      | 1,069.0 |   |
| Debtissuecost                               |  |             | 0.8     |             |  |   | — |   |
| **TotalAssets**                             |  | $                | 1,018.5 |             |  | $      | 1,069.0 |   |
| Long-termdebt                               |  | $                | 324.2   |             |  | $      | — |   |
| Totalunitholders'equity                     |  |             | 694.3   |             |  |   | 1,069.0 |   |
| **TotalLiabilities and Unitholders'Equity** |  | $                | 1,018.5 |             |  | $      | 1,069.0 |   |
|                                             |

Seeaccompanying note to condensed financial statements.

102

----

ScheduleI – Condensed Financial Information    –   Continued

Nalco FinanceHoldings LLC (Parent Company Only)

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

|                                              |  |                             |         |                                                      |  |        |         |         |  |  |
|----------------------------------------------|--|-----------------------------|---------|------------------------------------------------------|--|--------|---------|---------|--|--|
|                                         |  | Yearended December 31, 2004 |         | Period from November4, 2003 through December 31,2003 |
| **Net Sales**                                |  | $                           | — |                                                 |  | $      | — |    |
| Operating costs andexpenses:                 |  |                        |    |                                                 |  |   |    |    |
| Selling,administrative, and researchexpenses |  |                        | (0.1    | )                                               |  |   | — |    |
| Totaloperating costs andexpenses             |  |                        | (0.1    | )                                               |  |   | — |    |
| Operatingearnings(loss)                      |  |                        | (0.1    | )                                               |  |   | — |    |
| Equityin losses ofsubsidiaries               |  |                        | (104.2  | )                                               |  |   | (24.0   | )  |
| Loss onearly repayment ofdebt                |  |                        | (13.7   | )                                               |  |   | — |    |
| Interestexpense                              |  |                        | (37.9   | )                                               |  |   | — |    |
| Earnings(loss) before incometaxes            |  |                        | (155.9  | )                                               |  |   | (24.0   | )  |
| Income taxprovision(benefit)                 |  |                        | — |                                                 |  |   | — |    |
| **Netloss**                                  |  | $                           | (155.9  | )                                               |  | $      | (24.0   | )  |
|                                              |

Seeaccompanying note to condensed financial statements.

103

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ScheduleI – Condensed Financial Information    –   Continued

Nalco FinanceHoldings LLC (Parent Company Only)

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

|                                          |  |                             |         |                                                      |  |        |          |         |  |  |
|------------------------------------------|--|-----------------------------|---------|------------------------------------------------------|--|--------|----------|---------|--|--|
|                                     |  | Yearended December 31, 2004 |         | Period from November 4,2003 through December 31,2003 |
| **Operatingactivities**                  |  |                        |    |                                                 |  |   |     |    |
| Netloss                                  |  | $                           | (155.9  | )                                               |  | $      | (24.0    | )  |
| Non-cashadjustments                      |  |                        | 155.8   |                                                 |  |   | 23.6     |    |
| Netcash used for operatingactivities     |  |                        | (0.1    | )                                               |  |   | (0.4     | )  |
| **Investingactivities**                  |  |                        |    |                                                 |  |   |     |    |
| Acquisition ofOndeo NalcoGroup           |  |                        | — |                                                 |  |   | (1,001.5 | )  |
| Investmentinsubsidiaries                 |  |                        | (11.0   | )                                               |  |   | —  |    |
| Netcash used for investingactivities     |  |                        | (11.0   | )                                               |  |   | (1,001.5 | )  |
| **Financingactivities**                  |  |                        |    |                                                 |  |   |     |    |
| Capitalcontributions (distributions),net |  |                        | (260.7  | )                                               |  |   | 1,001.9  |    |
| Proceeds fromlong-termdebt               |  |                        | 449.9   |                                                 |  |   | —  |    |
| Payments oflong-termdebt                 |  |                        | (162.3  | )                                               |  |   | —  |    |
| Other                                    |  |                        | (15.8   | )                                               |  |   | —  |    |
| Netcash provided by financingactivities  |  |                        | 11.1    |                                                 |  |   | 1,001.9  |    |
| Increasein cash                          |  |                        | — |                                                 |  |   | —  |    |
| Cash atbeginning ofperiod                |  |                        | — |                                                 |  |   | —  |    |
| Cashat the end of period                 |  | $                           | — |                                                 |  | $      | —  |    |
|                                          |

See accompanying note tocondensed financialstatements.

104

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Schedule I– Condensed Financial Information - Continued

NalcoFinance Holdings LLC (Parent Company Only)

Note to CondensedFinancial Statements December 31, 2004

1.    Basis ofPresentation

Under the terms of agreements governingindebtedness of certain subsidiaries of Nalco Finance Holdings LLC (the"Company"), such subsidiaries are restrictedfrom making dividend payments, loans or advances to the Company.Although the Company was not formed until January 2004, if the Companyhad been in existence as of December 31, 2003, these restrictions wouldhave resulted in the restricted net assets (as defined in Rule4-03(e)(3) of Regulation S-X) of the Company's subsidiariesexceeding 25% of the consolidated net assets of the Company andits subsidiaries. Schedule I presents the condensed financialinformation of the Company as if it had been in existence as ofDecember 31, 2003. Schedule I is derived from the financial statementsof Nalco Holdings LLC, which was the previous parent company as ofDecember 31, 2003, which Nalco Finance Holdings LLC owns 100%subsequent to January 14, 2004.

The unaudited financialstatements for Nalco Finance Holdings LLC (Parent Company Only)summarize the results of operations for the year ended December 31,2004 and for the period November 4, 2003 through December 31, 2003 andas of December 31, 2004 and 2003. In these statements, Nalco FinanceHoldings LLC's investment in subsidiaries is stated at cost plusequity in undistributed earnings of subsidiaries since the date ofacquisition, November 4, 2003. Nalco Finance Holdings LLC's shareof net income of its unconsolidated subsidiaries is included inconsolidated income using the equity method. The Nalco Finance HoldingsLLC statements should be read in conjunction with the Company'sfinancial statements.

105

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

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

|  |
|--|
|  |  |
|  |

|     |                                          |
|-----|------------------------------------------|
| (1) | Foreigncurrency translation adjustments. |

|     |                                      |
|-----|--------------------------------------|
| (2) | Accountwrite-offs net of recoveries. |

|     |                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------|
| (3) | Foreigncurrency translation adjustments of $4.6 and reclassification of $3.7from deferred tax assets. |

|     |                                                                        |
|-----|------------------------------------------------------------------------|
| (4) | Additionalallowance resulting from the Acquisition charged togoodwill. |

106

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(a) (3) Exhibits required to befiled by Item 601 of RegulationS-K:

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.1           |  | StockPurchase Agreement among Nalco Holdings LLC (formerly known asBlackstone/Neptune Acquisition Company L.L.C.), Leo Holding Company andNalco International SAS, dated as of August 31, 2003, which isincorporated herein by reference from Exhibit 2.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.1           |  | Certificate of Formation ofNalco Finance Holdings LLC, which is incorporated herein by referencefrom Exhibit 3.1 on Form S-4 of Nalco Finance Holdings LLC and NalcoFinance Holdings, Inc. filed on September 23, 2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.2           |  | Limited Liability Agreementof Nalco Finance Holdings LLC, which is incorporated herein byreference from Exhibit 3.2 on Form S-4 of Nalco Finance Holdings LLCand Nalco Finance Holdings, Inc. filed on September 23, 2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3           |  | Certificate ofIncorporation 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 September 23,2004 (File No. 333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.4           |  | By-laws ofNalco Finance Holdings, Inc., which is incorporated herein by referencefrom Exhibit 3.4 on Form S-4 of Nalco Finance Holdings LLC and NalcoFinance Holdings, Inc. filed on September 23, 2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1           |  | Senior Discount NotesIndenture, dated as of January 21, 2004 among Nalco Finance HoldingsLLC, Nalco Finance Holdings Inc. and The Bank of New York, as Trustee,which is incorporated herein by reference from Exhibit 4.1 on Form S-4of Nalco Finance Holdings LLC and Nalco Finance Holdings, Inc. filed onSeptember 23, 2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2           |  | Senior Discount NotesRegistration Rights Agreement, dated as of January 21, 2004, amongNalco Finance Holdings LLC, Nalco Finance Holdings Inc. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit4.2 on Form S-4 of Nalco Finance Holdings LLC and Nalco FinanceHoldings, Inc. filed on September 23, 2004 (File No.333-119231).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1          |  | Credit Agreement, dated asof November 4, 2003, among Nalco Holdings LLC, Nalco Company, as U.S.Borrower, the Foreign Subsidiary Borrowers from time to time partythereto, the Lenders party thereto, Citigroup Global Markets Inc. andBanc of America Securities LLC, as Global Coordinators, Citicorp NorthAmerica, Inc., as Administrative Agent, Bank of America, N.A., asDocumentation Agent, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Co-Syndication Agents, Citigroup Global Markets Inc., Banc ofAmerica Securities LLC, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Joint Lead Arrangers and Joint Book Managers, which isincorporated herein by reference from Exhibit 10.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560). |
| 10.2          |  | U.S. Guarantee andCollateral Agreement, dated as of November 4, 2003, among NalcoHoldings LLC, Nalco Company, each domestic subsidiary of Nalco HoldingsLLC named therein and Citicorp North America, Inc., as CollateralAgent, which is incorporated herein by reference from Exhibit 10.2 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No. 333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|               |

107

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| 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-Competition Agreement,dated as of November 4, 2003 between Suez and Blackstone/NeptuneAcquisition Company L.L.C., which is incorporated herein by referencefrom Exhibit 10.4 of the Registration Statement on Form S-4 of NalcoCompany filed on May 17, 2004 (File No.333-115560).                                                                                                           |
| 10.5          |  | Reimbursement Agreement,dated as of November 4, 2003 between Suez and Nalco Company, which isincorporated herein by reference from Exhibit 10.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                            |
| 10.6          |  | Sublease Agreement, datedas of November 4, 2003 between Leo Holding Company, as sublandlord andOndeo Nalco Company, as subtenant, which is incorporated herein byreference from Exhibit 10.6 of the Registration Statement on Form S-4of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                               |
| 10.7          |  | Transaction Fee Agreement,dated as of November 4, 2003, among Nalco Company, Goldman, Sachs &Co., Apollo Management V, L.P., and Blackstone Management Partners IVL.L.C., which is incorporated herein by reference from Exhibit 10.7 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                   |
| 10.8          |  | Monitoring Fee Agreement,dated as of November 4, 2003, between Nalco Company, BlackstoneManagement Partners IV L.L.C., Apollo Management V, L.P. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit10.8 of the Registration Statement on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560).                                                   |
| 10.9          |  | Amendment No. 1, dated asof November 4, 2003 to the Monitoring Fee Agreement, dated as ofNovember 4, 2003, among Nalco Company, Blackstone Management PartnersIV L.L.C., Apollo Management V, L.P. and Goldman, Sachs & Co. whichis incorporated herein by reference from Exhibit 10.9 of theRegistration Statement on Form S-4 of Nalco Company filed on May 17,2004 (File No. 333-115560). |
| 10.10         |  | SponsorServices Agreement, dated as of November 16, 2004, amending andrestating the Monitoring Fee Agreement, among Nalco Company, BlackstoneManagement Partners IV L.L.C., Apollo Management V, L.P. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit10.2 on Form 8-K of Nalco Holding Company filed on November 18, 2004(File No.  001-32342).              |
| 10.11         |  | SeveranceAgreement, effective as of January 1, 2004, between Nalco Company andWilliam J. Roe, which is incorporated herein by reference from Exhibit10.10 of Amendment No. 2 to the Registration Statement on Form S-4 ofNalco Company filed on August 11, 2004 (File No.333-115560).                                                                                                            |
| 10.12         |  | Employment Agreement,effective as of November 1, 2003, between Nalco Company and Bradley J.Bell, which is incorporated herein by reference from Exhibit 10.11 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                               |
| 10.13         |  | Severance Agreement,effective as of January 1, 2004, between Nalco Company and Daniel M.Harker.                                                                                                                                                                                                                                                                                                  |
|               |

108

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|---------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.14         |  | SeveranceAgreement, effective as of January 1, 2004, between Nalco Company andLou L. Loosbrock, which is incorporated herein by reference fromExhibit 10.13 of Amendment No. 2 to the Registration Statement on FormS-4 of Nalco Company filed on August 11, 2004 (File No.333-115560).                                                                                                        |
| 10.15         |  | Receivables PurchaseAgreement, dated as of June 25, 2004, among Nalco Company, Nalco EnergyServices, L.P. and Nalco Receivables LLC, which is incorporated hereinby reference from Exhibit 10.16 of Amendment No. 2 to the RegistrationStatement on Form S-4 of Nalco Company filed on August 11, 2004 (FileNo. 333-115560).                                                                   |
| 10.16         |  | Receivables TransferAgreement, dated as of June 25, 2004, among Nalco Receivables LLC,Nalco Company, JPMorgan Chase Bank and the several transferees andfunding agents party hereto from time to time, which is incorporatedherein by reference from Exhibit 10.17 of Amendment No. 2 to theRegistration Statement on Form S-4 of Nalco Company filed on August 11,2004 (File No. 333-115560). |
| 10.17         |  | EmploymentAgreement, dated as of August 3, 2004, between Nalco LLC and William H.Joyce, which is incorporated herein by reference from Exhibit 10.18 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August 11, 2004 (File No.333-115560).                                                                                                                |
| 10.18         |  | Nalco LLC 2004 Unit Plan,which is incorporated herein by reference from Exhibit 10.24 of theRegistration Statement on Form  S-1 of Nalco Holding Companyfiled on August 26, 2004 (File No.333-118583).                                                                                                                                                                                         |
| 10.19         |  | Nalco LLC LimitedLiability Company Operating Agreement, dated May 17, 2004, which isincorporated herein by reference from Exhibit 10.25 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).                                                                                                                                       |
| 10.20         |  | Warrant Agreement, whichis incorporated herein by reference from Exhibit 10.4 on Form 8-K ofthe Nalco Holding Company filed on November 18, 2004 (File No.001-32342).                                                                                                                                                                                                                          |
| 10.21         |  | Registration RightsAgreement, dated as of November 16, 2004, among Nalco Holding Company,Nalco LLC and the other parties named therein, which is incorporatedherein by reference from Exhibit 10.1 on Form 8-K of the Nalco HoldingCompany filed on November 18, 2004 (File No.001-32342).                                                                                                     |
| 10.22         |  | Stockholders Agreement,dated as of November 16, 2004, between Nalco Holding Company and NalcoLLC, which is incorporated herein by reference from Exhibit 10.3 onForm 8-K of the Nalco Holding Company filed on November 18, 2004 (FileNo.  001-32342).                                                                                                                                         |
| 10.23         |  | Nalco HoldingCompany 2004 Stock Incentive Plan, which is incorporated herein byreference from Exhibit 10.5 on Form 8-K of Nalco Holding Company filedon November 18, 2004 (File No.001-32342).                                                                                                                                                                                                 |
| 10.24         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand William H. Joyce, which is incorporated herein by reference fromExhibit 10.30 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                                                                                                   |
| 10.25         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Bradley J. Bell, which is incorporated herein by reference fromExhibit 10.31 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                                                                                                    |
|               |

109

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|               |  |                                                                                                                                                                                                                                                                                                                    |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                               |
| 10.26         |  | ManagementMembers Agreement (class A units), dated as of June 11, 2004, betweenNalco LLC and William J. Roe, which is incorporated herein by referencefrom Exhibit 10.32 of the Registration Statement on Form  S-1 ofNalco Holding Company filed on August 26, 2004 (File No.333-118583).                         |
| 10.27         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Lou L. Loosbrock, which is incorporated herein by reference fromExhibit 10.34 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                       |
| 10.28         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William H. Joyce, which is incorporatedherein by reference from Exhibit 10.35 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583). |
| 10.29         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Bradley J. Bell, which isincorporated herein by reference from Exhibit 10.36 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).    |
| 10.30         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William J. Roe, which is incorporatedherein by reference from Exhibit 10.37 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583).   |
| 10.31         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Lou L. Loosbrock, which isincorporated herein by reference from Exhibit 10.39 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).   |
| 10.32         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Daniel M. Harker.                                                                                                                                                                                                     |
| 10.33         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Daniel M. Harker.                                                                                                                                                                                |
| 10.34         |  | Form of Nalco Holding Company 2004 StockIncentive Plan Restricted Stock Unit Agreement, which is incorporatedherein by reference from Exhibit 99.2 on Form S-8 of Nalco HoldingCompany filed on February 7, 2005 (File No.333-122582).                                                                             |
| 10.35         |  | Management Incentive Planof Nalco Company, which is incorporated herein by reference fromExhibit 99.1 on Form 8-K of Nalco Holding Company filed on March 1,2005 (File No.  001-32342).                                                                                                                            |
| 10.36         |  | LongTerm Cash Incentive Plan of Nalco Company, which is incorporated hereinby reference from Exhibit 99.2 on Form 8-K of Nalco Holding Companyfiled on March 1, 2005 (File No.001-32342).                                                                                                                          |
| 10.37         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Daniel S.Sanders.                                                                                                                                                    |
| 10.38         |  | NalcoHolding Company 2004 Stock Incentive Plan Restricted Stock UnitAgreement, effective February 18, 2005, between Nalco Holding Companyand Douglas A. Pertz.                                                                                                                                                     |
| 10.39         |  | Nalco HoldingCompany 2004 Stock Incentive Plan Restricted Stock Unit Agreement,effective February 18, 2005, between Nalco Holding Company and Leon D.Black.                                                                                                                                                        |
|               |

110

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|               |  |                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                  |
| 10.40         |  | Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Paul H.O'Neill.                                                                                                                                                                         |
| 10.41         |  | Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and ChinhChu.                                                                                                                                                                               |
| 10.42         |  | Nalco Holding Company 2004 StockIncentive Plan Restricted Stock Unit Agreement, effective February 18,2005, between Nalco Holding Company and Joshua Harris.                                                                                                                                                                          |
| 10.43         |  | Indenture, dated as of May 1, 1998, betweenNalco Chemical Company and The Chase Manhattan Bank, which isincorporated herein by reference from Exhibit 4.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                       |
| 10.44         |  | First SupplementalIndenture, dated as of December 3, 1999, by and between Nalco ChemicalCompany and The Chase Manhattan Bank, which is incorporated herein byreference from Exhibit 4.2 of the Registration Statement on Form S-4 ofNalco Company filed on May 17, 2004 (File No.333-115560).                                         |
| 10.45         |  | Senior Notes Indenture,dated as of November 4, 2003, among Nalco Company, the Guarantors namedtherein and The Bank of New York, as Trustee, which is incorporatedherein by reference from Exhibit 4.3 of the Registration Statement onForm S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                           |
| 10.46         |  | Senior Notes SupplementalIndenture, dated as of November 12, 2003, among Nalco Company, theguarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.4 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).             |
| 10.47         |  | Senior Subordinated NotesIndenture, dated as of November 4, 2003, among Nalco Company, theGuarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).              |
| 10.48         |  | Senior Subordinated NotesSupplemental Indenture, dated as of November 12, 2003, among NalcoCompany, the guarantors named therein and The Bank of New York, asTrustee, which is incorporated herein by reference from Exhibit 4.6 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560). |
| 31.1          |  | Certification of theChairman and Chief Executive Officer pursuant to Rule 13a-14(a) ofSecurities Exchange Act of 1934, as adopted pursuant to Section 302 ofthe 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          |  | Certification of William H.Joyce, our Chairman and Chief Executive Officer, and Bradley J. Bell,our Executive Vice President and Chief Financial Officer, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of2002.                                                                      |
|               |

111

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SIGNATURES

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

|        |  |                          |  |                                                     |  |  |  |  |  |  |
|--------|--|--------------------------|--|-----------------------------------------------------|--|--|--|--|--|--|
|   |  | NALCOFINANCE HOLDINGSLLC |
|   |  | (Registrant)             |
|   |  | By:                      |  | /s/BRADLEY J. BELL                                  |
|   |  |                     |  | Bradley J.Bell                                      |
|   |  |                     |  | Executive Vice President andChief Financial Officer |
|   |  |                     |  | (PrincipalFinancial Officer)                        |
|        |

Date: March 24, 2005

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

|                        |  |                                                               |
|------------------------|--|---------------------------------------------------------------|
| Signature              |  | Title                                                         |
|                        |
| /s/WILLIAM H. JOYCE    |  | Chairman of the Boardand Chief Executive Officer              |
|                        |
| William H.Joyce        |
|                        |
| /s/ BRADLEY J.BELL     |  | Executive VicePresident, Chief Financial Officer andTreasurer |
|                        |
| Bradley J. Bell        |
|                        |
| /s/ BRUNOLAVANDIER     |  | Controller                                                    |
|                        |
| BrunoLavandier         |
|                        |
| /s/ LEOND. BLACK       |  | Director                                                      |
|                        |
| Leon D.Black           |
|                        |
| /s/ CHINH E.CHU        |  | Director                                                      |
|                        |
| Chinh E.Chu            |
|                        |
| /s/ RICHARD A.FRIEDMAN |  | Director                                                      |
|                        |
| Richard A.Friedman     |
|                        |
| /s/ JOSHUA J.HARRIS    |  | Director                                                      |
|                        |
| Joshua J.Harris        |
|                        |
| /s/ SANJEEV K.MEHRA    |  | Director                                                      |
|                        |
| Sanjeev K.Mehra        |
|                        |
| /s/ PAUL H.O'NEILL     |  | Director                                                      |
|                        |
| Paul H.O'Neill         |
|                        |
| /s/DOUGLAS A. PERTZ    |  | Director                                                      |
|                        |
| Douglas A.Pertz        |
|                        |
| /s/ DANIEL S.SANDERS   |  | Director                                                      |
|                        |
| Daniel S.Sanders       |
|                        |

112

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