UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION Washington, DC20549

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

FORM10-Q

(Mark One)

|        |                                                                                       |
|--------|---------------------------------------------------------------------------------------|
|   | QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

|        |                                             |
|--------|---------------------------------------------|
|   | For the quarterly period endedJune 30, 2004 |

or

|        |                                                                                        |
|--------|----------------------------------------------------------------------------------------|
|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

|        |                                                                                                                                     |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|
|   | For the transition period from         to         . |

Commission File No.333-115560-15

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

NALCOHOLDINGS LLC

(Exact name of registrantas specified in its charter)

|                                                               |  |                                        |  |  |  |  |
|---------------------------------------------------------------|--|----------------------------------------|--|--|--|--|
| Delaware                                                      |  | 73-1683500                             |
| (State orother jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer IdentificationNumber) |
|                                                               |

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

(Address, Including Zip Code, and TelephoneNumber, Including Area Code, of Registrant's Principal ExecutiveOffices)

Indicate by check mark whether theregistrant: (1)  has filed all reports required to be filed bySection  13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12  months (or for such shorter period thatthe registrant was required to file such reports), and (2)  hasbeen subject to such filing requirements for the past 90  days.Yes     No 

Indicate by checkmark whether the registrant is an accelerated filer (as defined inRule  12b-2 of the Exchange Act).     No 

----

QUARTERLY REPORT ON FORM10-Q NALCO HOLDINGS LLC Quarter Ended June 30, 2004

TABLE OF CONTENTS

|                                                         |  |         |  |                                                                                                                                                     |  |        |    |        |  |  |  |  |  |  |
|---------------------------------------------------------|--|---------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|----|--------|--|--|--|--|--|--|
| **PartI.    Financial Information** |  |
|                                                    |  | Item1.  |  | FinancialStatements (Unaudited)                                                                                                                     |  |
|                                                    |  |    |  | CondensedConsolidated Balance Sheets –     June 30, 2004 andDecember 31, 2003                                             |  |   | 2  |   |
|                                                    |  |    |  | Condensed Consolidated and CombinedStatements of Operations –     Three months and six monthsended June 30, 2004 and 2003 |  |   | 3  |   |
|                                                    |  |    |  | Condensed Consolidated and CombinedStatements of Cash Flows –     Three months and six monthsended June 30, 2004 and 2003 |  |   | 4  |   |
|                                                    |  |    |  | Notes to Condensed Consolidated and CombinedFinancial Statements –     June 30,2004                                       |  |   | 5  |   |
|                                                    |  | Item2.  |  | Management's Discussion and Analysis of FinancialCondition and     Results of Operations                                        |  |   | 26 |   |
|                                                    |  | Item 3. |  | Quantitative and QualitativeDisclosures About Market Risk                                                                                           |  |   | 37 |   |
|                                                    |  | Item 4. |  | Controls andProcedures                                                                                                                              |  |   | 37 |   |
| **Part II.    OtherInformation**    |  |
|                                                    |  | Item 1. |  | LegalProceedings                                                                                                                                    |  |   | 38 |   |
|                                                    |  | Item6.  |  | Exhibits and Reports on Form8-K                                                                                                                     |  |   | 38 |   |
|                                                         |

1

----

PART I.    FINANCIALINFORMATION

Item 1.    Financial Statements (Unaudited)

Nalco Holdings LLC and Subsidiaries Condensed ConsolidatedBalance Sheets(Dollars inMillions)

|                                                                        |  |                        |         |                 |  |        |         |        |  |  |
|------------------------------------------------------------------------|--|------------------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                                                   |  | (Unaudited)June30,2004 |         | December31,2003 |
| **Assets**                                                             |  |
| Currentassets:                                                         |  |                   |    |            |  |   |    |   |
| Cash and cashequivalents                                               |  | $                      | 97.2    |            |  | $      | 100.0   |   |
| Accountsreceivable, less allowances of $21.9 in 2004 and $21.0 in 2003 |  |                   | 498.3   |            |  |   | 482.9   |   |
| Inventories:                                                           |  |                   |    |            |  |   |    |   |
| Finishedproducts                                                       |  |                   | 222.7   |            |  |   | 233.6   |   |
| Materialsand work inprocess                                            |  |                   | 55.4    |            |  |   | 61.5    |   |
|                                                                   |  |                   | 278.1   |            |  |   | 295.1   |   |
| Prepaidexpenses, taxes and other currentassets                         |  |                   | 93.2    |            |  |   | 97.6    |   |
| Totalcurrent assets                                                    |  |                   | 966.8   |            |  |   | 975.6   |   |
| Property,plant, and equipment,net                                      |  |                   | 831.5   |            |  |   | 865.6   |   |
| Intangibleassets:                                                      |  |                   |    |            |  |   |    |   |
| Goodwill                                                               |  |                   | 2,305.5 |            |  |   | 2,500.1 |   |
| Otherintangibles,net                                                   |  |                   | 1,353.5 |            |  |   | 1,408.9 |   |
| Otherassets                                                            |  |                   | 394.5   |            |  |   | 413.6   |   |
| Totalassets                                                            |  | $                      | 5,851.8 |            |  | $      | 6,163.8 |   |
|                                                                   |  |                   |    |            |  |   |    |   |
| **Liabilitiesand unitholder'sequity**                                  |  |                   |    |            |  |   |    |   |
| Currentliabilities:                                                    |  |                   |    |            |  |   |    |   |
| Accountspayable                                                        |  | $                      | 187.7   |            |  | $      | 155.9   |   |
| Short-termdebt                                                         |  |                   | 17.5    |            |  |   | 51.9    |   |
| Other currentliabilities                                               |  |                   | 292.7   |            |  |   | 321.0   |   |
| Totalcurrentliabilities                                                |  |                   | 497.9   |            |  |   | 528.8   |   |
| Otherliabilities:                                                      |  |                   |    |            |  |   |    |   |
| Long-termdebt                                                          |  |                   | 3,148.9 |            |  |   | 3,262.8 |   |
| Deferredincometaxes                                                    |  |                   | 588.2   |            |  |   | 624.0   |   |
| Accruedpensionbenefits                                                 |  |                   | 391.6   |            |  |   | 374.1   |   |
| Otherliabilities                                                       |  |                   | 303.3   |            |  |   | 293.5   |   |
| Minorityinterest                                                       |  |                   | 12.3    |            |  |   | 11.6    |   |
| Unitholder'sequity                                                     |  |                   | 909.6   |            |  |   | 1,069.0 |   |
| Totalliabilities and unitholder'sequity                                |  | $                      | 5,851.8 |            |  | $      | 6,163.8 |   |
|                                                                        |

Seeaccompanying notes to condensed consolidated and combined financialstatements.

2

----

Nalco Holdings LLC and SubsidiariesCondensed Consolidated and Combined Statements of Operations(Unaudited)(Dollars inMillions)

|                                              |  |                                 |         |                                 |  |                               |         |                               |  |        |          |         |  |        |          |         |  |  |
|----------------------------------------------|--|---------------------------------|---------|---------------------------------|--|-------------------------------|---------|-------------------------------|--|--------|----------|---------|--|--------|----------|---------|--|--|
|                                         |  | Successor                       |         | Predecessor                     |  | Successor                     |         | Predecessor                   |
|                                         |  | ThreeMonths ended June 30, 2004 |         | Three Monthsended June 30, 2003 |  | Six Months ended June 30,2004 |         | Six Months ended June 30,2003 |
|                                         |  |                            |    |                            |  |                          |    |                          |  |   |     |    |  |   |     |    |
| Netsales                                     |  | $                               | 740.4   |                            |  | $                             | 694.5   |                          |  | $      | 1,453.7  |    |  | $      | 1,352.7  |    |
| Operatingcosts andexpenses:                  |  |                            |    |                            |  |                          |    |                          |  |   |     |    |  |   |     |    |
| Costof productsold                           |  |                            | (365.5  | )                          |  |                          | (331.2  | )                        |  |   | (733.7   | )  |  |   | (654.9   | )  |
| Selling,administrative, and researchexpenses |  |                            | (268.3  | )                          |  |                          | (269.5  | )                        |  |   | (527.8   | )  |  |   | (531.1   | )  |
| Impairmentofgoodwill                         |  |                            | — |                            |  |                          | (244.4  | )                        |  |   | —  |    |  |   | (244.4   | )  |
| Amortizationof intangibleassets              |  |                            | (24.9   | )                          |  |                          | (21.0   | )                        |  |   | (49.1    | )  |  |   | (41.3    | )  |
| In-processresearch anddevelopment            |  |                            | — |                            |  |                          | — |                          |  |   | (122.3   | )  |  |   | —  |    |
| Businessoptimizationexpenses                 |  |                            | — |                            |  |                          | (7.2    | )                        |  |   | —  |    |  |   | (9.7     | )  |
|                                         |  |                            | (658.7  | )                          |  |                          | (873.3  | )                        |  |   | (1,432.9 | )  |  |   | (1,481.4 | )  |
| Operatingearnings(loss)                      |  |                            | 81.7    |                            |  |                          | (178.8  | )                        |  |   | 20.8     |    |  |   | (128.7   | )  |
| Otherincome (expense),net                    |  |                            | (1.8    | )                          |  |                          | 0.3     |                          |  |   | (5.3     | )  |  |   | (0.2     | )  |
| Interestincome                               |  |                            | 2.7     |                            |  |                          | 1.2     |                          |  |   | 5.4      |    |  |   | 4.3      |    |
| Interestexpense                              |  |                            | (52.7   | )                          |  |                          | (9.2    | )                        |  |   | (106.0   | )  |  |   | (19.5    | )  |
| Earnings(loss) before incometaxes            |  |                            | 29.9    |                            |  |                          | (186.5  | )                        |  |   | (85.1    | )  |  |   | (144.1   | )  |
| Incometaxprovision                           |  |                            | (16.6   | )                          |  |                          | (24.0   | )                        |  |   | (19.6    | )  |  |   | (40.6    | )  |
| Minorityinterests                            |  |                            | (0.9    | )                          |  |                          | (1.6    | )                        |  |   | (1.9     | )  |  |   | (3.0     | )  |
| Netincome(loss)                              |  | $                               | 12.4    |                            |  | $                             | (212.1  | )                        |  | $      | (106.6   | )  |  | $      | (187.7   | )  |
|                                              |

Seeaccompanying notes to condensed consolidated and combined financialstatements.

3

----

Nalco Holdings LLC and SubsidiariesCondensed Consolidated and Combined Statements of Cash Flows(Unaudited)(Dollars in Millions)

|                                                                               |  |                             |         |                            |  |        |         |         |  |  |
|-------------------------------------------------------------------------------|--|-----------------------------|---------|----------------------------|--|--------|---------|---------|--|--|
|                                                                          |  | Successor                   |         | Predecessor                |
|                                                                          |  | SixMonthsendedJune 30, 2004 |         | SixMonthsendedJune 30,2003 |
| **Operatingactivities**                                                       |  |                        |    |                       |  |   |    |    |
| Netloss                                                                       |  | $                           | (106.6  | )                     |  | $      | (187.7  | )  |
| Adjustmentsto reconcile net loss to net cash provided by operatingactivities: |  |                        |    |                       |  |   |    |    |
| Depreciation                                                                  |  |                        | 56.9    |                       |  |   | 60.7    |    |
| Amortization                                                                  |  |                        | 49.1    |                       |  |   | 41.3    |    |
| Impairmentofgoodwill                                                          |  |                        | — |                       |  |   | 244.4   |    |
| In-processresearch anddevelopment                                             |  |                        | 122.3   |                       |  |   | — |    |
| Amortizationof deferred financingcosts                                        |  |                        | 5.6     |                       |  |   | — |    |
| Other,net                                                                     |  |                        | 0.4     |                       |  |   | 9.2     |    |
| Changes inoperating assets andliabilities                                     |  |                        | (2.3    | )                     |  |   | (38.3   | )  |
| Netcash provided by operatingactivities                                       |  |                        | 125.4   |                       |  |   | 129.6   |    |
|                                                                          |  |                        |    |                       |  |   |    |    |
| **Investingactivities**                                                       |  |                        |    |                       |  |   |    |    |
| Purchase priceadjustment on acquisition of Ondeo NalcoGroup                   |  |                        | 25.6    |                       |  |   | — |    |
| Additions toproperty, plant, and equipment,net                                |  |                        | (34.9   | )                     |  |   | (40.4   | )  |
| Businesspurchases/sales,net                                                   |  |                        | — |                       |  |   | (15.0   | )  |
| Other investingactivities                                                     |  |                        | (0.4    | )                     |  |   | (24.5   | )  |
| Netcash used for investingactivities                                          |  |                        | (9.7    | )                     |  |   | (79.9   | )  |
|                                                                          |  |                        |    |                       |  |   |    |    |
| **Financingactivities**                                                       |  |                        |    |                       |  |   |    |    |
| Changes inshort-term debt,net                                                 |  |                        | (33.5   | )                     |  |   | (48.8   | )  |
| Proceeds fromlong-term debt                                                   |  |                        | 93.0    |                       |  |   | 0.9     |    |
| Repaymentsof long-termdebt                                                    |  |                        | (184.0  | )                     |  |   | (1.7    | )  |
| Capitalcontributions                                                          |  |                        | 9.8     |                       |  |   | 31.4    |    |
| Other                                                                         |  |                        | (0.7    | )                     |  |   | — |    |
| Netcash used for financingactivities                                          |  |                        | (115.4  | )                     |  |   | (18.2   | )  |
| Effect ofexchange rate changes on cash and cashequivalents                    |  |                        | (3.1    | )                     |  |   | 7.7     |    |
| Increase(decrease) in cash and cashequivalents                                |  |                        | (2.8    | )                     |  |   | 39.2    |    |
| Cash and cashequivalents at beginning ofperiod                                |  |                        | 100.0   |                       |  |   | 120.5   |    |
| Cashand cash equivalents at end ofperiod                                      |  | $                           | 97.2    |                       |  | $      | 159.7   |    |
|                                                                               |

Seeaccompanying notes to condensed consolidated and combined financialstatements

4

----

NalcoHoldings LLC and Subsidiaries

Notes to Condensed Consolidatedand Combined Financial Statements (Unaudited)(Dollars inMillions)

June 30,2004

1.    Description of Business and Change inOwnership

Description of Business

The Company 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 Company or Successor), a newly-formed entitycontrolled by affiliates of The Blackstone Group, L.P., ApolloManagement, L.P., and The Goldman Sachs Group, Inc. (collectively, theSponsors), entered into a Stock Purchase Agreement, as amended, withSuez S.A. (Suez or Seller) and certain of its affiliates, whereby NalcoHoldings LLC acquired the net assets of Ondeo Nalco Group (thePredecessor and as defined in Note 2 below) for $4,127.1 millionincluding direct costs of the acquisition of $125.6 million, excludingassumed debt of $30.2 million, and subject to certain closing andpost-closing adjustments (the Acquisition).

The Company wascapitalized by equity investments totaling $991.9 million from theSponsors and $10.0 million from Dr. William H. Joyce, the Chairman andChief Executive Officer of Nalco Holdings LLC. The equity investmentswere made to Nalco Investment Holdings LLC which, in turn, contributed$1,001.9 million to Nalco Holdings LLC and was its parent company as ofDecember 31, 2003. On January 14, 2004, Nalco Investment Holdings LLCcontributed its 100% interest in Nalco Holdings LLC in exchangefor a 100% interest in a newly formed entity, Nalco FinanceHoldings LLC. As of that date, Nalco Finance Holdings LLC became theparent company of Nalco Holdings LLC. Subsequent to that date, theSponsors and Dr. Joyce engaged in a series of transactions thatultimately resulted in a newly formed entity, Nalco LLC, becoming thedirect parent company of another newly formed entity, Nalco InvestmentHoldings II Corp., which, in turn, became the direct parent company ofNalco Investment Holdings LLC.

Funding for the Acquisitionincluded the equity investments and the issuance of senior notes andsenior subordinated notes (the Notes) in a private offering, and newrevolving credit and term loan facilities by the Company, through its100% owned subsidiary, Nalco Company.

The Stock PurchaseAgreement provides for certain adjustments of the purchase price,including adjustments based on the closing working capital andindebtedness (as both are defined in the Stock Purchase Agreement) ofthe Predecessor at the date of the Acquisition. On March 25, 2004, theCompany and Suez agreed to a $25.6 million working capital adjustmentpayable to the Company plus interest. This adjustment was not reflectedin the consolidated financial statements as of December 31, 2003. TheCompany recorded the purchase price adjustment in 2004 by decreasinggoodwill.

2.    Basis of Presentation

These consolidated and combined financial statements should be readin conjunction with the consolidated financial statements of theSuccessor as of December 31, 2003 and for the period from November 4,2003 to December 31, 2003, the combined financial statements of thePredecessor as of December 31, 2002 and 2001 and for each of the twoyears in the period ended December 31, 2002 and the combined financialstatements of the Predecessor for the period from January 1, 2003 toNovember 3, 2003.

5

----

2.    Basis of Presentation  (Continued)

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

Successor — The accompanying consolidatedfinancial statements include the accounts of Nalco Holdings LLC andsubsidiaries (collectively, the Company) subsequent to theAcquisition.

The accompanying unaudited consolidated financialstatements of the Successor and unaudited combined financial statementsof the Predecessor have been prepared in accordance with generallyaccepted accounting principles for interim financial information.Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the UnitedStates for complete financial statements. Management believes thesefinancial statements include all normal recurring adjustmentsconsidered necessary for a fair presentation of the financial positionand results of operations of the Company. Operating results for thethree months and six months ended June 30, 2004 are not necessarilyindicative of results that may be expected for the year ended December31, 2004.

Certain reclassifications have been made to the prioryear data to conform to the current year presentation which had noeffect on net income reported for any period.

The consolidatedfinancial statements of the Successor as of and for the three monthsand six months ended June 30, 2004 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 three months and six months ended June 30, 2003 as if theAcquisition had occurred as of the beginning of that period.

Proforma adjustments include adjustments for (1) purchase accounting,including, (i) the elimination of inventory write-up recorded as aresult of the Acquisition, (ii) adjustments to depreciation andamortization to reflect the fair value of property, plant and equipmentand identified intangible assets (with finite lives), (iii) eliminationof the pension and other postretirement benefit amortization ofunrecognized actuarial losses, prior service costs and transitionobligations and assets losses, and (2) adjustments for items directlyrelated to the transaction, including (i) rent expense that we wouldhave incurred had the sublease of our Naperville, Illinois headquartersand research facility been in place, (ii) elimination of managementfees that Suez and its affiliates charged to the Company for generalcorporate overhead and of charges to Suez and its affiliates for taxplanning and compliance and treasury administration provided by theCompany in North America, (iii) adjustments to interest expense toreflect the Company's new capital structure, and (iv)corresponding adjustments to income tax expense.

These pro formaamounts are not necessarily indicative of the results that would havebeen attained if the Acquisition had occurred at the beginning of eachperiod presented or that may be attained in thefuture.

6

----

2.    Basis of Presentation  (Continued)

|               |  |                                |        |                             |  |        |         |         |  |  |
|---------------|--|--------------------------------|--------|-----------------------------|--|--------|---------|---------|--|--|
|          |  | Predecessor(unaudited)         |
|          |  | ThreeMonths endedJune 30, 2003 |        | SixMonthsendedJune 30, 2003 |
| Netsales      |  | $                              | 694.5  |                        |  | $      | 1,352.7 |    |
| Operatingloss |  |                           | (179.0 | )                      |  |   | (131.5  | )  |
| Netloss       |  |                           | (236.6 | )                      |  |   | (236.7  | )  |
|               |

The Companyhas not finalized the allocation of the purchase price as of June 30,2004. The Company has preliminarily allocated the purchase price on thebasis of its current estimate of the fair value of the underlyingassets acquired and liabilities assumed asfollows:

|                                                  |  |                      |         |        |  |  |
|--------------------------------------------------|--|----------------------|---------|--------|--|--|
|                                             |  | Asof November 4,2003 |
| Currentassets:                                   |  |                 |    |   |
| Cash and cashequivalents                         |  | $                    | 24.3    |   |
| Trade accountsreceivable                         |  |                 | 476.5   |   |
| Inventories                                      |  |                 | 316.5   |   |
| Othercurrentassets                               |  |                 | 98.0    |   |
| Goodwill                                         |  |                 | 2,273.1 |   |
| Intangibleassets                                 |  |                 | 1,410.0 |   |
| Purchased in-process researchand development     |  |                 | 122.3   |   |
| Other noncurrentassets                           |  |                 | 366.3   |   |
| Property, plant andequipment                     |  |                 | 852.7   |   |
| Totalassetsacquired                              |  |                 | 5,939.7 |   |
|                                             |  |                 |    |   |
| Currentliabilities:                              |  |                 |    |   |
| Accountspayable                                  |  |                 | 138.7   |   |
| Accruedexpenses                                  |  |                 | 252.4   |   |
| Other currentliabilities                         |  |                 | 74.9    |   |
| Long-termdebt                                    |  |                 | 30.2    |   |
| Deferred incometaxes                             |  |                 | 657.9   |   |
| Accrued pension and otherpostretirement benefits |  |                 | 539.9   |   |
| Othernoncurrentliabilities                       |  |                 | 144.2   |   |
| Totalliabilitiesassumed                          |  |                 | 1,838.2 |   |
| Netassetsacquired                                |  | $                    | 4,101.5 |   |
|                                                  |

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 and long-term debt outstandingas of the effective date of the Acquisition have been recorded based onmanagement's judgments and estimates. The Company'sprojected pension and other postretirement benefit obligations andassets have been reflected in the allocation of purchase price at theprojected benefit obligation less plan assets at fair market value,based on management's computations which included valuationsperformed by independent actuaries engaged by the Company. Deferredincome taxes have been provided in the consolidated balance sheet basedon the Company's preliminary estimates of the tax versus bookbasis of the assets acquired and liabilities assumed, as adjusted toestimated fair values. Valuation allowances were established fordeferred tax assets related to all of the net operating losscarryforwards for which utilization is uncertain.

7

----

2.    Basis of Presentation  (Continued)

The Company engaged independent appraisersto assist in determining the fair values of property, plant andequipment and intangible assets acquired, including purchasedin-process research and development (IPR&D), trade names,trademarks, developed technology and customer relationships. TheCompany has received preliminary values from the appraisers, which havebeen included in the above table, however, the final appraisals are notyet complete. Thus, the Company has not yet completed its allocation ofpurchase price and may make further adjustments to the preliminaryallocations in subsequent periods. The Company expects to receive finalvaluations from the independent appraisers in the second half of 2004and complete its purchase accounting by the fourth quarter of 2004.

The Company recorded a one-time charge for purchased IPR&Dexpenses of $122.3 million during the six months ended June 30, 2004.The value of purchased IPR&D was comprised of five ongoingdevelopment projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative future use. Theseproducts had not been released to the market as of the date of theAcquisition, but the features and functionality of the products hadbeen defined.

During the six months ended June 30, 2004, theCompany reduced by $0.2 million the estimated fair value of property,plant and equipment to reflect the most recent updated valuationprovided by its independent appraisers.

Trademarks and tradenames have been preliminarily valued based on the relief of royaltyapproach. This method allocates value based on what the Company wouldbe willing to pay as a royalty to a third-party owner of the trademarkor trade name in order to exploit the economic benefits. Trademarks andtrade names that have been valued under this approach have apreliminary value of $830.0 million with an estimated indefinitelife.

Patents and developed technology have been preliminarilyvalued based on the relief of royalty approach. This method allocatesvalue based on what the Company would be willing to pay as a royalty toa third-party owner of the patent or technology in order to exploit theeconomic benefits. The technologies that have been valued under thisapproach have a preliminary value of $100.0  million with anestimated weighted average useful life of 10 years.

Customerrelationships have been preliminarily valued using an income approachafter considering a fair return on fixed assets, working capital,patents, trade names, trademarks, technology, and assembled workforce.A preliminary value of $480.0  million has been assigned tocustomer relationships. As of December 31, 2003, an estimated usefullife of 10 years had been used based on preliminary informationobtained from our independent appraisers. In the six months ended June30, 2004, we obtained updated information from our independentappraisers and revised the estimated useful life of customerrelationships to 16 years.

Based on the preliminary estimates,approximately $3.4 billion of goodwill and other intangible assets willnot be deductible for income tax purposes. The primary reasons for theAcquisition and the primary factors that contributed to a purchaseprice that resulted in recognition of goodwillinclude:

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

|              |                                                                                                                                                                                                                                                                                                                                             |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company being one of onlya small number of companies that can provide turnkey water managementsolutions on a global basis (130 countries across six continents)offers a competitive advantage in meeting the global needs ofmultinational 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. |

8

----

2.    Basis of Presentation  (Continued)

Other considerations affecting the value ofgoodwill include:

|              |                                                                                                                                                                                                                                                                                                              |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The potentialfor improved earnings and cash flow gained from operating as astand-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; |

|              |                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------|
| •  | Thehistorical heavy investment in recruiting and continuously trainingmore than 5,000 sales professionals andengineers; |

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

|              |                                                                                                                                                                                                                                |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The application ofpurchase accounting, particularly for such items as pension and otherpost-retirement benefits for which significant reserve balances wererecorded with no corresponding significant short-term cashoutflows. |

In conjunction with the Acquisition, theCompany is in the process of formulating a plan to exit or restructurecertain activities. The Company has not completed this analysis, buthas recorded initial liabilities of $31.6 million, primarily foremployee severance and related costs in connection with theCompany's preliminary plan to exit or restructure certainactivities. As of June 30, 2004, $23.1 million has been charged againstthis accrual. The Company expects that these initial activities will becompleted by the end of 2004. The Company also expects to finalize anyfurther plans to exit or restructure activities by the end of the thirdquarter 2004, at which time it may record additional liabilitiesrelated to additional exit and restructuring activities.

Theconsolidated statement of operations for the six months ended June 30,2004 includes $14.5 million in cost of products sold representing thewrite-off of the inventory adjustment recorded in purchase accountingrelating to the write-up of inventory on hand as of the Acquisitiondate that was sold during thisperiod.

3.    Trade AccountsReceivable Securitization

In June 2004, the Companyentered into a three-year accounts receivable securitization facilitywith a commercial paper conduit sponsored by one of the lenders underthe Company's senior credit facilities. The facility provides upto $100 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 forcash.

The financing fee charged by the Transferees under thefacility is based on the amount funded and the conduit's cost offunds for issuing commercial paper plus a margin that varies based onthe leverage ratio as calculated under the Company's seniorcredit facilities. A commitment fee that varies based on the same ratioand the 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 money isrendered against the Transferor, cross-defaults to the Company'sother debt, or breach of specified financial covenants. The Company iscurrently in compliance with these covenants.

9

----

3.    Trade AccountsReceivable Securitization  (Continued)

The facility is accounted for as a securedborrowing, resulting in the funding and related Receivables being shownas liabilities and assets, respectively, on the Company'sconsolidated balance sheet and the costs associated with the facilitybeing recorded as interest expense. At June 30, 2004, the Company hadoutstanding borrowings of $92.0 million under the facility, which theCompany had used to repay term loans under the senior creditfacilities.

4.    Goodwill and OtherIntangible Assets

The changes in goodwill for theperiod were asfollows:

|                                                              |  |        |         |         |  |  |
|--------------------------------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December 31, 2003                               |  | $      | 2,500.1 |    |
| Adjustmentto record purchased IPR&Dexpense               |  |   | (122.3  | )  |
| Adjustment of Ondeo NalcoGroup purchase price                |  |   | (25.6   | )  |
| Revised fairvalue of property, plant and equipment, aftertax |  |   | (0.7    | )  |
| Adjustment to fair value of otherlong term assets, after tax |  |   | 1.3     |    |
| Adjustmentto accrued liabilities, after tax                  |  |   | 6.5     |    |
| Effectof foreign currencytranslation                         |  |   | (53.8   | )  |
| Balanceas of June 30,2004                                    |  | $      | 2,305.5 |    |
|                                                              |

Thefollowing table reflects intangible assets and related amortizationinformation:

|                                              |  |                    |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------|--|--------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                         |  | Asof June 30, 2004 |         | As of December 31,2003  |
|                                         |  | GrossAmount        |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject toamortization:     |  |               |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Customerrelationships                        |  | $                  | 487.4   |                    |  | $           | (57.4   | )                  |  | $      | 494.4   |   |  | $      | (13.9   | )  |
| Patentsand developedtechnology               |  |               | 100.4   |                    |  |        | (6.9    | )                  |  |   | 100.1   |   |  |   | (1.7    | )  |
| Intangibleassets not subject toamortization: |  |               |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Trademarksand tradenames                     |  |               | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                         |  | $                  | 1,417.8 |                    |  | $           | (64.3   | )                  |  | $      | 1,424.5 |   |  | $      | (15.6   | )  |
|                                              |

10

----

5.    Debt

Debt consists of thefollowing:

|                                              |  |             |         |                 |  |        |         |        |  |  |
|----------------------------------------------|--|-------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                         |  | June30,2004 |         | December31,2003 |
| **Short-term**                               |  |        |    |            |  |   |    |   |
| Checksoutstanding and bankoverdrafts         |  | $           | 15.9    |            |  | $      | 19.5    |   |
| Notes payableto banks                        |  |        | 1.0     |            |  |   | 1.5     |   |
| Current maturitiesof long-term debt          |  |        | 0.6     |            |  |   | 29.2    |   |
| Notespayable to affiliatedcompanies          |  |        | — |            |  |   | 1.7     |   |
|                                         |  | $           | 17.5    |            |  | $      | 51.9    |   |
| **Long-term**                                |  |        |    |            |  |   |    |   |
| Revolvingcredit facility                     |  | $           | — |            |  | $      | 15.0    |   |
| Securitized trade accountsreceivablefacility |  |        | 92.0    |            |  |   | — |   |
| Term loan A,due November 2009                |  |        | 224.0   |            |  |   | 311.2   |   |
| Termloan B, due November2010                 |  |        | 1,186.0 |            |  |   | 1,300.0 |   |
| Senior notes,due November 2011               |  |        | 908.2   |            |  |   | 917.7   |   |
| Seniorsubordinated notes, due November2013   |  |        | 708.2   |            |  |   | 717.7   |   |
| Unsecured notes,due May2008                  |  |        | 27.8    |            |  |   | 27.8    |   |
| Other                                        |  |        | 3.3     |            |  |   | 2.6     |   |
|                                         |  |        | 3,149.5 |            |  |   | 3,292.0 |   |
| Less:Currentportion                          |  |        | 0.6     |            |  |   | 29.2    |   |
|                                         |  | $           | 3,148.9 |            |  | $      | 3,262.8 |   |
|                                              |

6.    Unitholder'sEquity

Unitholder's equity consists of thefollowing:

|                                        |  |              |         |                  |  |        |         |         |  |  |
|----------------------------------------|--|--------------|---------|------------------|--|--------|---------|---------|--|--|
|                                   |  | June30, 2004 |         | December 31,2003 |
|                                   |  |         |    |             |  |   |    |    |
| Capitalaccount                         |  | $            | 1,011.7 |             |  | $      | 1,001.9 |    |
| Accumulateddeficit                     |  |         | (130.7  | )           |  |   | (24.1   | )  |
| Accumulatedother comprehensiveincome:  |  |         |    |             |  |   |    |    |
| Foreign currencytranslationadjustments |  |         | 28.6    |             |  |   | 91.2    |    |
| Totalunitholder'sequity                |  | $            | 909.6   |             |  | $      | 1,069.0 |    |
|                                        |

Duringthe six months ended June 30, 2004, the Company received additionalcapital contributions of $9.8 million from its direct parent company,Nalco Finance Holdings LLC. This resulted from capital contributionsreceived by the Company's ultimate parent company, Nalco LLC,comprised of an additional equity investment of $1.2 million by Dr.William H. Joyce and $8.6 million in proceeds from the sale of equityinterests to certain officers and key employees under the Nalco LLC2004 Unit Plan.

11

----

7.    Pension and Other PostretirementBenefit Plans

The components of net periodic pension cost andthe cost of other postretirement benefits for the three months and sixmonths ended June 30, 2004 and 2003 were asfollows:

|                                  |  |                                |         |                                |  |                              |         |                              |  |        |         |         |  |        |       |         |  |  |
|----------------------------------|--|--------------------------------|---------|--------------------------------|--|------------------------------|---------|------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--|
|                             |  | PensionBenefits                |
|                             |  | Successor                      |         | Predecessor                    |  | Successor                    |         | Predecessor                  |
|                             |  | ThreeMonthsended June 30, 2004 |         | Three MonthsendedJune 30, 2003 |  | Six Monthsended June 30,2004 |         | Six Monthsended June 30,2003 |
| Servicecost                      |  | $                              | 8.0     |                           |  | $                            | 6.3     |                         |  | $      | 14.5    |    |  | $      | 12.6  |    |
| Interestcost                     |  |                           | 11.1    |                           |  |                         | 9.9     |                         |  |   | 20.1    |    |  |   | 20.0  |    |
| Expectedreturn on planassets     |  |                           | (7.7    | )                         |  |                         | (8.5    | )                       |  |   | (13.6   | )  |  |   | (17.8 | )  |
| Amortizationof prior servicecost |  |                           | — |                           |  |                         | (0.7    | )                       |  |   | — |    |  |   | (1.4  | )  |
| Recognizednet actuarialloss      |  |                           | — |                           |  |                         | 4.1     |                         |  |   | — |    |  |   | 8.1   |    |
| Specialterminationbenefits       |  |                           | — |                           |  |                         | — |                         |  |   | — |    |  |   | 0.6   |    |
| Settlementcharge                 |  |                           | — |                           |  |                         | — |                         |  |   | — |    |  |   | 0.7   |    |
| Curtailment                      |  |                           | — |                           |  |                         | — |                         |  |   | — |    |  |   | 0.9   |    |
| Netperiodiccost                  |  | $                              | 11.4    |                           |  | $                            | 11.1    |                         |  | $      | 21.0    |    |  | $      | 23.7  |    |
|                                  |

|                                  |  |                               |         |                                |  |                              |      |                              |  |        |         |        |  |        |      |         |  |  |
|----------------------------------|--|-------------------------------|---------|--------------------------------|--|------------------------------|------|------------------------------|--|--------|---------|--------|--|--------|------|---------|--|--|
|                             |  | OtherPostretirementBenefits   |
|                             |  | Successor                     |         | Predecessor                    |  | Successor                    |      | Predecessor                  |
|                             |  | ThreeMonthsendedJune 30, 2004 |         | Three MonthsendedJune 30, 2003 |  | Six Monthsended June 30,2004 |      | Six Monthsended June 30,2003 |
| Servicecost                      |  | $                             | 1.2     |                           |  | $                            | 1.2  |                         |  | $      | 2.9     |   |  | $      | 2.6  |    |
| Interestcost                     |  |                          | 1.8     |                           |  |                         | 2.2  |                         |  |   | 4.4     |   |  |   | 4.7  |    |
| Amortizationof prior servicecost |  |                          | — |                           |  |                         | (2.4 | )                       |  |   | — |   |  |   | (5.1 | )  |
| Recognizednet actuarialloss      |  |                          | — |                           |  |                         | 1.8  |                         |  |   | — |   |  |   | 3.7  |    |
| Netperiodiccost                  |  | $                             | 3.0     |                           |  | $                            | 2.8  |                         |  | $      | 7.3     |   |  | $      | 5.9  |    |
|                                  |

OnDecember 8, 2003, the Medicare Prescription Drug, Improvement andModernization Act of 2003 (the Act) was signed into law. The Actexpands Medicare, primarily adding a prescription drug benefit forMedicare-eligible retirees starting in 2006. Although the Companyanticipates the benefits it pays will eventually be lower as a resultof the new Medicare provisions, the reported accumulated benefitobligation and expense for other postretirement benefits included inthese financial statements do not reflect the effects of the Act.Deferring the recognition of the impact of the Act's new Medicareprovisions was permitted by FASB Staff Position 106-1 (FSP FAS 106-1)due to open questions about some of the new Medicare provisions and thefact that specific authoritative accounting guidance was pending. TheCompany is in the process of completing its evaluation of the impact ofthe recently issued FASB Staff Position 106-2 (FSP FAS 106-2), whichsupersedes FSP FAS 106-1, and will make the appropriate adjustments insubsequent periods. FSP FAS 106-2 is effective July 1, 2004 for theCompany.

The Company expects to contribute approximately $4.1million to its principal domestic pension plan during the third quarter2004.

8.    Equity Compensation Plan

Nalco LLC, the Company's ultimate parent company, establishedthe Nalco LLC 2004 Unit Plan (the "Plan") forpurposes of (i) attracting and retaining exceptional officers and otherkey employees, non-employee directors and consultants of Nalco LLC andthe Company and (ii) enabling such individuals to acquire an equityinterest in Nalco LLC and to participate in the long-term growth andfinancial success of Nalco LLC and the Company.

During thesecond quarter 2004, Nalco LLC granted certain officers and keyemployees of the Company rights to purchase a designated number of oneor more classes of equity interests ("Units")

12

----

8.    Equity Compensation Plan  (Continued)

in Nalco LLC. Those officers and keyemployees who elected to purchase such Units did so at their fairvalue, as determined by an independent valuation advisor.

TheUnits subject to the Plan include Class A, Class B, Class C, and ClassD Units. The Class A Units are fully vested at the time of purchase byan employee and have economic characteristics that are similar to thoseof shares of common stock in a private corporation. The Class B, ClassC, 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 certainperformance targets. The Units also become fully vested 18 months aftera change in control of the Company, subject to certain otherconditions.

Though the Plan was established by theCompany's ultimate parent company, the Company will account forthe Plan since its economic substance is substantially the same for theCompany and its employees. As permitted by SFAS No. 123, Accountingfor Stock-Based Compensation, the Company accounts for employeestock-based compensation in accordance with Accounting Principles BoardOpinion No. 25, Accounting for Stock Issued to Employees. Sincethe price of the Units offered was their fair value, no earned orunearned compensation expense was recognized on the grant date. Thegrant date represents the measurement date for the Class A, Class B,and Class C Units, and these Units will be subject to"fixed" plan accounting. However, due to thevesting provisions of the Class D Units, the measurement date is notyet determined, and the Class D Units will be subject to"variable" plan accounting.

As aresult of the purchase of Units under the Plan by key officers andemployees, the Company received an additional contribution of capitalof $8.6 million.

9.    BusinessOptimization Expenses

During 2002, the Predecessor began aprogram to realign its support for the petroleum, petrochemical, pulp,and paper industries to provide one-stop process improvement and watertreatment sales and service to these key customers. As a result, thePredecessor incurred expenses of $6.7 million and $8.1 million duringthe three months and six months ended June 30, 2003, respectively,which consisted primarily of severance, outplacement, and employeerelocations. This program was completed in 2003.

As a result ofacquiring Exxon's interest in the Nalco/Exxon Energy Chemicals,L.P. (Nalco/Exxon) joint venture in 2001, the Predecessor incurredcosts related to integrating the operations of the joint venture withthose of the Predecessor. Certain costs which were related to theintegration, including severance, relocations, and asset impairments,were accrued as a liability on the date of acquisition. The Predecessoralso incurred consulting and other expenses that were charged tobusiness optimization expenses during 2003 and 2002, including $0.5million and $1.6 million during the three months and six months endedJune 30, 2003, respectively.

13

----

10.    Summary of Other Income(Expense)

The components of other income (expense), net for thethree months and six months ended June  30, 2004 and 2003,include thefollowing:

|                                                 |  |                               |         |                               |  |                             |         |                             |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|-------------------------------|---------|-------------------------------|--|-----------------------------|---------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | Successor                     |         | Predecessor                   |  | Successor                   |         | Predecessor                 |
|                                            |  | ThreeMonthsendedJune 30, 2004 |         | ThreeMonthsendedJune 30, 2003 |  | SixMonthsendedJune 30, 2004 |         | SixMonthsendedJune 30, 2003 |
| Gain (loss) onsale of business                  |  | $                             | — |                          |  | $                           | 0.1     |                        |  | $      | — |    |  | $      | 0.7     |    |
| Sponsor monitoringfees                          |  |                          | (3.2    | )                        |  |                        | — |                        |  |   | (5.7    | )  |  |   | — |    |
| Suezmanagementfees                              |  |                          | — |                          |  |                        | (0.7    | )                      |  |   | — |    |  |   | (1.5    | )  |
| Franchisetaxes                                  |  |                          | (0.7    | )                        |  |                        | (1.3    | )                      |  |   | (1.5    | )  |  |   | (2.8    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                          | 0.6     |                          |  |                        | 0.6     |                        |  |   | 1.3     |    |  |   | 1.3     |    |
| Foreigncurrency exchangeadjustments             |  |                          | (0.3    | )                        |  |                        | 2.0     |                        |  |   | (1.2    | )  |  |   | 3.2     |    |
| Other                                           |  |                          | 1.8     |                          |  |                        | (0.4    | )                      |  |   | 1.8     |    |  |   | (1.1    | )  |
|                                            |  | $                             | (1.8    | )                        |  | $                           | 0.3     |                        |  | $      | (5.3    | )  |  | $      | (0.2    | )  |
|                                                 |

11.    IncomeTaxes

The difference between the Predecessor's effectivetax rate and the U.S. federal tax rate of 35% for the threemonths ended June 30, 2003 is primarily attributable to the $244.4million nondeductible goodwill impairment charge recorded during theperiod.

The difference between the Company's and thePredecessor's effective tax rate and the U.S. federal tax rate of35% for the six months ended June 30, 2004 and June 30, 2003 isprimarily attributable to the nondeductible $122.3 million charge forpurchased IPR&D and the $244.4 million of nondeductible goodwillimpairment, respectively.

Other factors contributing to thedifference in all periods presented include incremental tax costs ofrepatriating non-U.S. earnings, non-U.S. taxes, state taxes and otherpermanent differences.

12.    Comprehensive Income

Total comprehensive income and its components, net of related tax,for the three months and six months ended June 30, 2004 and 2003, areasfollows:

|                                                |  |                                |         |                                |  |                              |        |                              |  |        |         |         |  |        |        |         |  |  |
|------------------------------------------------|--|--------------------------------|---------|--------------------------------|--|------------------------------|--------|------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                           |  | Successor                      |         | Predecessor                    |  | Successor                    |        | Predecessor                  |
|                                           |  | ThreeMonthsended June 30, 2004 |         | Three MonthsendedJune 30, 2003 |  | Six Monthsended June 30,2004 |        | Six Monthsended June 30,2003 |
| Net income(loss)                               |  | $                              | 12.4    |                           |  | $                            | (212.1 | )                       |  | $      | (106.6  | )  |  | $      | (187.7 | )  |
| Othercomprehensive income, net of incometaxes: |  |                           |    |                           |  |                         |   |                         |  |   |    |    |  |   |   |    |
| Gain(loss) on derivativeinvestments            |  |                           | — |                           |  |                         | 0.5    |                         |  |   | — |    |  |   | 0.5    |    |
| Foreigncurrency translationadjustments         |  |                           | (72.1   | )                         |  |                         | 27.5   |                         |  |   | (62.6   | )  |  |   | 37.7   |    |
| Comprehensiveloss                              |  | $                              | (59.7   | )                         |  | $                            | (184.1 | )                       |  | $      | (169.2  | )  |  | $      | (149.5 | )  |
|                                                |

13.    SegmentInformation

The Company provides integrated water treatment andprocess improvement services for industrial and institutionalapplications, using technologically advanced solutions, combiningchemical products and equipment, and consistent, reliable on-siteservice and expertise. These solutions and 

14

----

13.    SegmentInformation  (continued)

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 or thegeographic location of the customer. The organization is comprised ofthe following reportable segments:

Industrial andInstitutional Services — This segment serves the watertreatment and process chemical needs of the industrial, institutional,and municipal markets in all regions of the world other thanAsia/Pacific, although the mining industry is served globally.

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

Paper Services — This segmentserves the process chemicals and water treatment needs of the pulp andpaper industry in all regions of the world other thanAsia/Pacific.

Other — This segment serves thewater treatment and process chemical needs of all industries in theAsia/Pacific region, other than mining, petroleum and petrochemicals.It also includes alternative channels to market, supply chainactivities, and certain other operating expenses not allocated to asegment.

The Company evaluates the performance of its segmentsbased on "direct contribution", which isdefined as net sales, less cost of products sold (excluding variancesto standard costs), selling and service expenses, marketing expensesand research expenses directly attributable to each segment. There areno intersegment revenues. Prior year data have been reclassifiedbetween segments to conform to the current year presentation.

Net sales by reportable segment were asfollows:

|                                      |  |                                |       |                                |  |                              |       |                             |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------|--|--------------------------------|-------|--------------------------------|--|------------------------------|-------|-----------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                 |  | Successor                      |       | Predecessor                    |  | Successor                    |       | Predecessor                 |
|                                 |  | ThreeMonthsended June 30, 2004 |       | ThreeMonthsended June 30, 2003 |  | Six MonthsendedJune 30, 2004 |       | Six MonthsendedJune 30,2003 |
| Industrial and InstitutionalServices |  | $                              | 329.3 |                           |  | $                            | 301.1 |                        |  | $      | 637.3   |   |  | $      | 580.4   |   |
| EnergyServices                       |  |                           | 198.2 |                           |  |                         | 177.7 |                        |  |   | 392.1   |   |  |   | 350.3   |   |
| PaperServices                        |  |                           | 147.4 |                           |  |                         | 140.9 |                        |  |   | 295.8   |   |  |   | 277.0   |   |
| Other                                |  |                           | 65.5  |                           |  |                         | 74.8  |                        |  |   | 128.5   |   |  |   | 145.0   |   |
| Netsales                             |  | $                              | 740.4 |                           |  | $                            | 694.5 |                        |  | $      | 1,453.7 |   |  | $      | 1,352.7 |   |
|                                      |

15

----

13.    SegmentInformation  (continued)

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

|                                            |  |                                |         |                                |  |                              |         |                             |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------|--|--------------------------------|---------|--------------------------------|--|------------------------------|---------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                       |  | Successor                      |         | Predecessor                    |  | Successor                    |         | Predecessor                 |
|                                       |  | ThreeMonthsended June 30, 2004 |         | Three MonthsendedJune 30, 2003 |  | Six Monthsended June 30,2004 |         | Six MonthsendedJune 30,2003 |
| Segment directcontribution:                |  |                           |    |                           |  |                         |    |                        |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices        |  | $                              | 85.4    |                           |  | $                            | 74.9    |                        |  | $      | 160.0   |    |  | $      | 138.0   |    |
| EnergyServices                             |  |                           | 42.0    |                           |  |                         | 41.4    |                        |  |   | 84.8    |    |  |   | 80.9    |    |
| PaperServices                              |  |                           | 31.6    |                           |  |                         | 32.2    |                        |  |   | 68.8    |    |  |   | 63.1    |    |
| Other                                      |  |                           | (1.1    | )                         |  |                         | (0.8    | )                      |  |   | (24.0   | )  |  |   | (8.4    | )  |
| Totalsegment directcontribution            |  |                           | 157.9   |                           |  |                         | 147.7   |                        |  |   | 289.6   |    |  |   | 273.6   |    |
|                                       |  |                           |    |                           |  |                         |    |                        |  |   |    |    |  |   |    |    |
| Income(expenses) not allocated tosegments: |  |                           |    |                           |  |                         |    |                        |  |   |    |    |  |   |    |    |
| Administrativeexpenses                     |  |                           | (51.3   | )                         |  |                         | (53.9   | )                      |  |   | (97.4   | )  |  |   | (106.9  | )  |
| Amortizationof intangibleassets            |  |                           | (24.9   | )                         |  |                         | (21.0   | )                      |  |   | (49.1   | )  |  |   | (41.3   | )  |
| Impairmentofgoodwill                       |  |                           | — |                           |  |                         | (244.4  | )                      |  |   | — |    |  |   | (244.4  | )  |
| In-processresearch anddevelopment          |  |                           | — |                           |  |                         | — |                        |  |   | (122.3  | )  |  |   | — |    |
| Businessoptimizationexpenses               |  |                           | — |                           |  |                         | (7.2    | )                      |  |   | — |    |  |   | (9.7    | )  |
| Operatingearnings(loss)                    |  |                           | 81.7    |                           |  |                         | (178.8  | )                      |  |   | 20.8    |    |  |   | (128.7  | )  |
| Otherincome (expense),net                  |  |                           | (1.8    | )                         |  |                         | 0.3     |                        |  |   | (5.3    | )  |  |   | (0.2    | )  |
| Interestincome                             |  |                           | 2.7     |                           |  |                         | 1.2     |                        |  |   | 5.4     |    |  |   | 4.3     |    |
| Interestexpense                            |  |                           | (52.7   | )                         |  |                         | (9.2    | )                      |  |   | (106.0  | )  |  |   | (19.5   | )  |
| Earnings(loss) before incometaxes          |  | $                              | 29.9    |                           |  | $                            | (186.5  | )                      |  | $      | (85.1   | )  |  | $      | (144.1  | )  |
|                                            |

14.    Contingenciesand Litigation

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

The Company has been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three waste sites where somefinancial contribution is or may be required.

These agencieshave also identified many other parties who may be responsible forclean up costs at the 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 $2.1 million at June 30, 2004.

These environmentalreserves represent management's current estimate of itsproportional 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 

16

----

14.    Contingenciesand Litigation  (continued)

companies or other PRPs not specificallyidentified. Although management cannot determine whether or not amaterial effect on future operations is reasonably likely to occur,given the evolving nature of environmental regulations, it believesthat the recorded reserve levels are appropriate estimates of thepotential liability. Although settlement will require future cashoutlays, it is not expected that such outlays will materially impactthe Company's liquidity position. Expenditures for the threemonths and six months ended June 30, 2004, relating to environmentalcompliance and clean up activities were not significant.

We havebeen named as a defendant in a series of multi-party lawsuits based onclaimed involvement in the supply of allegedly hazardous materials. Theplaintiffs in these cases seek damages for alleged personal injuryresulting from exposure to various chemicals. These matters have had ade minimis impact on our business historically and we do notanticipate these matters to present any material risk to our businessin the future.

Notwithstanding, we cannot predict the outcome ofany such toxic tort claims or the involvement we might have in thesematters in the future.

The Company has received subpoenas fromthe U.S. Department of Justice for documents and testimony relating toits storage of claimed hazardous materials 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, and chemical related expenses, the outcome of which,in the opinion of management, should not have a material effect on theconsolidated financial position of the Company. However, we cannotpredict the outcome of any litigation or the potential for futurelitigation. The Company maintains accruals and/or has insurance inthose instances where there is reason to believe that significant costsmight be incurred.

15.    Guarantees

No significantguarantees were outstanding at June 30, 2004, other thansubsidiary-related performance guarantees.

The Company had $34.7million of letters of credit outstanding at June 30,2004.

16.    Supplemental Guarantor Condensed FinancialStatements

In connection with the Acquisition, Nalco HoldingsLLC (presented as Parent in the following tables), through itswholly-owned subsidiary, Nalco Company (presented as Issuer in thefollowing tables), issued Senior Notes and Senior Subordinated Notes asfurther described in Note 5. The Senior Notes are fully,unconditionally and jointly and severally guaranteed on an unsecuredsenior basis and the Senior Subordinated Notes are fully,unconditionally and jointly and severally guaranteed on an unsecuredsenior subordinated basis, in each case, by Nalco Holdings LLC and bysubstantially all existing and future wholly owned restricted domesticsubsidiaries of Nalco Company (collectively, the"Guarantors"). All other subsidiaries ofNalco Holdings LLC, whether direct or indirect, do not guarantee theSenior Notes and Senior Subordinated Notes("Non-Guarantors"). The Guarantors alsounconditionally guarantee the Company's borrowings under theSenior Secured Credit Facilities on a senior secured basis.

Thefollowing unaudited condensed combining financial statements presentthe results of operations, financial position and cash flows of (1) theParent, (2) the Issuer, (3) the Guarantors, (4) the Non-Guarantors and(5) eliminations to arrive at the information for Nalco Holdings LLC ona combined basis. Separate financial statements and other disclosuresconcerning the Guarantors are not presented because management does notbelieve that such information is material toinvestors.

Therefore, each of the Guarantors is combined in thepresentation below. Further, separate financial statements of theIssuer are not presented because management does not believe that suchinformation is material to investors.

17

----

Nalco HoldingsLLC and Subsidiaries Condensed Consolidating Balance SheetJune 30, 2004 (Unaudited)(Dollars inMillions)

|                                                       |  |        |         |        |  |                       |         |                           |  |              |         |              |  |        |         |        |  |        |          |         |  |        |         |        |  |  |
|-------------------------------------------------------|--|--------|---------|--------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|--------|--|--------|----------|---------|--|--------|---------|--------|--|--|
|                                                  |  | Parent |         | Issuer |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| Cash& cash equivalents                            |  | $      | — |   |  | $                     | 19.6    |                      |  | $            | 4.7     |         |  | $      | 72.9    |   |  | $      | —  |    |  | $      | 97.2    |   |
| Trade accountsreceivable                              |  |   | — |   |  |                  | (14.6   | )                    |  |         | 3.4     |         |  |   | 509.5   |   |  |   | —  |    |  |   | 498.3   |   |
| Inventories– finishedproducts                   |  |   | — |   |  |                  | 67.1    |                      |  |         | 44.0    |         |  |   | 111.6   |   |  |   | —  |    |  |   | 222.7   |   |
| Inventories– materials & work inprocess     |  |   | — |   |  |                  | 12.5    |                      |  |         | 11.2    |         |  |   | 31.7    |   |  |   | —  |    |  |   | 55.4    |   |
| Intercompanyaccountsreceivable                        |  |   | — |   |  |                  | 27.7    |                      |  |         | 381.6   |         |  |   | 34.7    |   |  |   | (444.0   | )  |  |   | — |   |
| Prepaidexpenses, taxes, and other currentassets       |  |   | — |   |  |                  | 43.3    |                      |  |         | 2.3     |         |  |   | 47.6    |   |  |   | —  |    |  |   | 93.2    |   |
| TotalCurrentAssets                                    |  |   | — |   |  |                  | 155.6   |                      |  |         | 447.2   |         |  |   | 808.0   |   |  |   | (444.0   | )  |  |   | 966.8   |   |
| Property,plant, and equipment,net                     |  |   | — |   |  |                  | 286.1   |                      |  |         | 155.6   |         |  |   | 389.8   |   |  |   | —  |    |  |   | 831.5   |   |
| Investmentin relatedparties                           |  |   | 921.9   |   |  |                  | 2,135.0 |                      |  |         | 367.4   |         |  |   | — |   |  |   | (3,424.3 | )  |  |   | — |   |
| Goodwill                                              |  |   | — |   |  |                  | 415.0   |                      |  |         | 618.3   |         |  |   | 1,272.2 |   |  |   | —  |    |  |   | 2,305.5 |   |
| Intangibles                                           |  |   | — |   |  |                  | 1,064.6 |                      |  |         | 65.2    |         |  |   | 223.7   |   |  |   | —  |    |  |   | 1,353.5 |   |
| Otherassets                                           |  |   | — |   |  |                  | 328.9   |                      |  |         | 22.9    |         |  |   | 42.7    |   |  |   | —  |    |  |   | 394.5   |   |
| TotalAssets                                           |  | $      | 921.9   |   |  | $                     | 4,385.2 |                      |  | $            | 1,676.6 |         |  | $      | 2,736.4 |   |  | $      | (3,868.3 | )  |  | $      | 5,851.8 |   |
| Accountspayable                                       |  |   | — |   |  |                  | 60.0    |                      |  |         | 29.0    |         |  |   | 98.7    |   |  |   | —  |    |  |   | 187.7   |   |
| Short-termdebt                                        |  |   | — |   |  |                  | 0.9     |                      |  |         | 0.5     |         |  |   | 16.1    |   |  |   | —  |    |  |   | 17.5    |   |
| Othercurrentliabilities                               |  |   | — |   |  |                  | 46.7    |                      |  |         | 53.4    |         |  |   | 192.6   |   |  |   | —  |    |  |   | 292.7   |   |
| Intercompanyaccountspayable                           |  |   | — |   |  |                  | 346.1   |                      |  |         | 20.0    |         |  |   | 77.9    |   |  |   | (444.0   | )  |  |   | — |   |
| TotalCurrentLiabilities                               |  |   | — |   |  |                  | 453.7   |                      |  |         | 102.9   |         |  |   | 385.3   |   |  |   | (444.0   | )  |  |   | 497.9   |   |
| Long-termdebt                                         |  |   | — |   |  |                  | 3,054.4 |                      |  |         | — |         |  |   | 94.5    |   |  |   | —  |    |  |   | 3,148.9 |   |
| Deferredincometaxes                                   |  |   | — |   |  |                  | 496.0   |                      |  |         | 14.7    |         |  |   | 77.5    |   |  |   | —  |    |  |   | 588.2   |   |
| Accruedpensionbenefits                                |  |   | — |   |  |                  | 221.4   |                      |  |         | 34.9    |         |  |   | 135.3   |   |  |   | —  |    |  |   | 391.6   |   |
| Otherliabilities                                      |  |   | — |   |  |                  | 250.7   |                      |  |         | 27.4    |         |  |   | 25.2    |   |  |   | —  |    |  |   | 303.3   |   |
| TotalOtherLiabilities                                 |  |   | — |   |  |                  | 4,022.5 |                      |  |         | 77.0    |         |  |   | 332.5   |   |  |   | —  |    |  |   | 4,432.0 |   |
| TotalMinorityInterest                                 |  |   | 12.3    |   |  |                  | — |                      |  |         | — |         |  |   | 12.3    |   |  |   | (12.3    | )  |  |   | 12.3    |   |
| TotalUnitholder's/Shareholders'Equity                 |  |   | 909.6   |   |  |                  | (91.0   | )                    |  |         | 1,496.7 |         |  |   | 2,006.3 |   |  |   | (3,412.0 | )  |  |   | 909.6   |   |
| TotalLiabilities and Unitholder's/Shareholders'Equity |  | $      | 921.9   |   |  | $                     | 4,385.2 |                      |  | $            | 1,676.6 |         |  | $      | 2,736.4 |   |  | $      | (3,868.3 | )  |  | $      | 5,851.8 |   |
|                                                       |

18

----

Nalco Holdings LLC and SubsidiariesCondensed Consolidating Balance Sheet December 31, 2003(Successor) (Unaudited)(Dollars inMillions)

|                                                       |  |        |         |        |  |                       |         |                           |  |              |         |              |  |        |         |        |  |        |          |         |  |        |         |        |  |  |
|-------------------------------------------------------|--|--------|---------|--------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|--------|--|--------|----------|---------|--|--------|---------|--------|--|--|
|                                                  |  | Parent |         | Issuer |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| Cash& cashequivalents                             |  | $      | 4.0     |   |  | $                     | 22.5    |                      |  | $            | 1.8     |         |  | $      | 71.7    |   |  | $      | —  |    |  | $      | 100.0   |   |
| Trade accountsreceivable                              |  |   | — |   |  |                  | 96.3    |                      |  |         | 62.1    |         |  |   | 324.5   |   |  |   | —  |    |  |   | 482.9   |   |
| Inventories– finishedproducts                   |  |   | — |   |  |                  | 68.7    |                      |  |         | 46.9    |         |  |   | 118.0   |   |  |   | —  |    |  |   | 233.6   |   |
| Inventories– materials & work inprocess     |  |   | — |   |  |                  | 13.1    |                      |  |         | 11.2    |         |  |   | 37.2    |   |  |   | —  |    |  |   | 61.5    |   |
| Notesreceivable from relatedparties                   |  |   | — |   |  |                  | 52.0    |                      |  |         | 45.8    |         |  |   | 17.1    |   |  |   | (114.9   | )  |  |   | — |   |
| Otherreceivables from relatedparties                  |  |   | — |   |  |                  | 97.3    |                      |  |         | 266.3   |         |  |   | 1.7     |   |  |   | (365.3   | )  |  |   | — |   |
| Prepaidexpenses, taxes, and other currentassets       |  |   | 0.1     |   |  |                  | 51.7    |                      |  |         | 2.0     |         |  |   | 45.3    |   |  |   | (1.5     | )  |  |   | 97.6    |   |
| TotalCurrentAssets                                    |  |   | 4.1     |   |  |                  | 401.6   |                      |  |         | 436.1   |         |  |   | 615.5   |   |  |   | (481.7   | )  |  |   | 975.6   |   |
| Property,plant, and equipment,net                     |  |   | — |   |  |                  | 303.4   |                      |  |         | 160.7   |         |  |   | 401.5   |   |  |   | —  |    |  |   | 865.6   |   |
| Investmentin relatedparties                           |  |   | 1,080.5 |   |  |                  | 2,082.5 |                      |  |         | 372.2   |         |  |   | — |   |  |   | (3,535.2 | )  |  |   | — |   |
| Goodwill                                              |  |   | — |   |  |                  | 550.4   |                      |  |         | 631.6   |         |  |   | 1,318.1 |   |  |   | —  |    |  |   | 2,500.1 |   |
| Intangibles                                           |  |   | — |   |  |                  | 1,084.5 |                      |  |         | 71.6    |         |  |   | 252.8   |   |  |   | —  |    |  |   | 1,408.9 |   |
| Otherassets                                           |  |   | — |   |  |                  | 342.5   |                      |  |         | 24.2    |         |  |   | 46.9    |   |  |   | —  |    |  |   | 413.6   |   |
| TotalAssets                                           |  | $      | 1,084.6 |   |  | $                     | 4,764.9 |                      |  | $            | 1,696.4 |         |  | $      | 2,634.8 |   |  | $      | (4,016.9 | )  |  | $      | 6,163.8 |   |
| Accountspayable                                       |  | $      | — |   |  | $                     | 49.4    |                      |  | $            | 24.1    |         |  | $      | 82.4    |   |  | $      | —  |    |  | $      | 155.9   |   |
| Short-termdebt                                        |  |   | — |   |  |                  | 36.7    |                      |  |         | 2.9     |         |  |   | 12.3    |   |  |   | —  |    |  |   | 51.9    |   |
| Othercurrentliabilities                               |  |   | 4.0     |   |  |                  | 75.9    |                      |  |         | 53.4    |         |  |   | 189.2   |   |  |   | (1.5     | )  |  |   | 321.0   |   |
| Intercompanyaccountspayable                           |  |   | — |   |  |                  | 315.1   |                      |  |         | 79.2    |         |  |   | 85.9    |   |  |   | (480.2   | )  |  |   | — |   |
| TotalCurrentLiabilities                               |  |   | 4.0     |   |  |                  | 477.1   |                      |  |         | 159.6   |         |  |   | 369.8   |   |  |   | (481.7   | )  |  |   | 528.8   |   |
| Long-termdebt                                         |  |   | — |   |  |                  | 3,260.9 |                      |  |         | — |         |  |   | 1.9     |   |  |   | —  |    |  |   | 3,262.8 |   |
| Deferredincometaxes                                   |  |   | — |   |  |                  | 508.7   |                      |  |         | 14.4    |         |  |   | 100.9   |   |  |   | —  |    |  |   | 624.0   |   |
| Accruedpensionbenefits                                |  |   | — |   |  |                  | 211.6   |                      |  |         | 32.2    |         |  |   | 130.3   |   |  |   | —  |    |  |   | 374.1   |   |
| Otherliabilities                                      |  |   | — |   |  |                  | 242.5   |                      |  |         | 26.0    |         |  |   | 25.0    |   |  |   | —  |    |  |   | 293.5   |   |
| TotalOtherLiabilities                                 |  |   | — |   |  |                  | 4,223.7 |                      |  |         | 72.6    |         |  |   | 258.1   |   |  |   | —  |    |  |   | 4,554.4 |   |
| MinorityInterest                                      |  |   | 11.6    |   |  |                  | — |                      |  |         | — |         |  |   | 11.6    |   |  |   | (11.6    | )  |  |   | 11.6    |   |
| TotalUnitholder's/Shareholders'Equity                 |  |   | 1,069.0 |   |  |                  | 64.1    |                      |  |         | 1,464.2 |         |  |   | 1,995.3 |   |  |   | (3,523.6 | )  |  |   | 1,069.0 |   |
| TotalLiabilities and Unitholder's/Shareholders'Equity |  | $      | 1,084.6 |   |  | $                     | 4,764.9 |                      |  | $            | 1,696.4 |         |  | $      | 2,634.8 |   |  | $      | (4,016.9 | )  |  | $      | 6,163.8 |   |
|                                                       |

19

----

Nalco HoldingsLLC and SubsidiariesCondensed Consolidating Statement ofOperationsThree Months ended June 30, 2004(Unaudited)(Dollars inMillions)

|                                               |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |        |         |  |        |         |         |  |        |        |         |  |  |
|-----------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|--------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                          |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| Netsales                                      |  | $      | — |    |  | $                     | 272.7   |                      |  | $            | 136.9   |         |  | $      | 399.6  |    |  | $      | (68.8   | )  |  | $      | 740.4  |    |
| Operatingcosts andexpenses:                   |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Costof product sold                           |  |   | — |    |  |                  | (154.8  | )                    |  |         | (84.4   | )       |  |   | (195.1 | )  |  |   | 68.8    |    |  |   | (365.5 | )  |
| Selling,administrative, and research expenses |  |   | — |    |  |                  | (116.2  | )                    |  |         | (27.5   | )       |  |   | (124.6 | )  |  |   | — |    |  |   | (268.3 | )  |
| Amortizationof intangible assets              |  |   | — |    |  |                  | (9.7    | )                    |  |         | (3.5    | )       |  |   | (11.7  | )  |  |   | — |    |  |   | (24.9  | )  |
| Totaloperating costs and expenses             |  |   | — |    |  |                  | (280.7  | )                    |  |         | (115.4  | )       |  |   | (331.4 | )  |  |   | 68.8    |    |  |   | (658.7 | )  |
| Operatingearnings (loss)                      |  |   | — |    |  |                  | (8.0    | )                    |  |         | 21.5    |         |  |   | 68.2   |    |  |   | — |    |  |   | 81.7   |    |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Otherincome (expense), net                    |  |   | 13.4    |    |  |                  | 22.8    |                      |  |         | 3.6     |         |  |   | (20.1  | )  |  |   | (21.5   | )  |  |   | (1.8   | )  |
| Interestincome                                |  |   | — |    |  |                  | 2.1     |                      |  |         | 1.1     |         |  |   | 1.1    |    |  |   | (1.6    | )  |  |   | 2.7    |    |
| Interestexpense                               |  |   | — |    |  |                  | (52.7   | )                    |  |         | (0.3    | )       |  |   | (1.3   | )  |  |   | 1.6     |    |  |   | (52.7  | )  |
| Earnings(loss) before income taxes            |  |   | 13.4    |    |  |                  | (35.8   | )                    |  |         | 25.9    |         |  |   | 47.9   |    |  |   | (21.5   | )  |  |   | 29.9   |    |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Incometax benefit (provision)                 |  |   | (0.1    | )  |  |                  | 7.3     |                      |  |         | 0.2     |         |  |   | (24.0  | )  |  |   | — |    |  |   | (16.6  | )  |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Minorityinterests                             |  |   | (0.9    | )  |  |                  | — |                      |  |         | — |         |  |   | (0.9   | )  |  |   | 0.9     |    |  |   | (0.9   | )  |
| Netincome (loss)                              |  | $      | 12.4    |    |  | $                     | (28.5   | )                    |  | $            | 26.1    |         |  | $      | 23.0   |    |  | $      | (20.6   | )  |  | $      | 12.4   |    |
|                                               |

20

----

Nalco Holdings LLC andSubsidiariesCondensed Combining Statement of Operations ThreeMonths ended June 30, 2003(Unaudited)(Dollars inMillions)

|                                               |  |        |         |                       |  |                           |         |              |  |          |         |         |  |        |         |         |  |        |        |         |  |  |
|-----------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                          |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| Netsales                                      |  | $      | 258.8   |                  |  | $                         | 128.6   |         |  | $        | 360.1   |    |  | $      | (53.0   | )  |  | $      | 694.5  |    |
| Operatingcosts andexpenses:                   |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Costof product sold                           |  |   | (130.9  | )                |  |                      | (72.6   | )       |  |     | (180.7  | )  |  |   | 53.0    |    |  |   | (331.2 | )  |
| Selling,administrative, and research expenses |  |   | (115.4  | )                |  |                      | (39.3   | )       |  |     | (114.8  | )  |  |   | — |    |  |   | (269.5 | )  |
| Impairmentof goodwill                         |  |   | (244.4  | )                |  |                      | — |         |  |     | — |    |  |   | — |    |  |   | (244.4 | )  |
| Amortizationof intangible assets              |  |   | (18.9   | )                |  |                      | (0.9    | )       |  |     | (1.2    | )  |  |   | — |    |  |   | (21.0  | )  |
| Businessoptimization expenses                 |  |   | (6.0    | )                |  |                      | (1.9    | )       |  |     | 0.7     |    |  |   | — |    |  |   | (7.2   | )  |
| Totaloperating costs and expenses             |  |   | (515.6  | )                |  |                      | (114.7  | )       |  |     | (296.0  | )  |  |   | 53.0    |    |  |   | (873.3 | )  |
| Operatingearnings(loss)                       |  |   | (256.8  | )                |  |                      | 13.9    |         |  |     | 64.1    |    |  |   | — |    |  |   | (178.8 | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Otherincome (expense), net                    |  |   | (3.1    | )                |  |                      | (0.2    | )       |  |     | (1.0    | )  |  |   | 4.6     |    |  |   | 0.3    |    |
| Interestincome                                |  |   | 0.2     |                  |  |                      | 1.0     |         |  |     | 1.2     |    |  |   | (1.2    | )  |  |   | 1.2    |    |
| Interestexpense                               |  |   | (7.5    | )                |  |                      | (0.4    | )       |  |     | (2.5    | )  |  |   | 1.2     |    |  |   | (9.2   | )  |
| Earnings(loss) before income taxes            |  |   | (267.2  | )                |  |                      | 14.3    |         |  |     | 61.8    |    |  |   | 4.6     |    |  |   | (186.5 | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Incometax benefit (provision)                 |  |   | (3.4    | )                |  |                      | 5.2     |         |  |     | (25.8   | )  |  |   | — |    |  |   | (24.0  | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Minorityinterests                             |  |   | — |                  |  |                      | — |         |  |     | (1.6    | )  |  |   | — |    |  |   | (1.6   | )  |
| Netincome (loss)                              |  | $      | (270.6  | )                |  | $                         | 19.5    |         |  | $        | 34.4    |    |  | $      | 4.6     |    |  | $      | (212.1 | )  |
|                                               |

21

----

Nalco Holdings LLC andSubsidiariesCondensed Consolidating Statement ofOperationsSix Months ended June 30, 2004(Unaudited)(Dollars inMillions)

|                                               |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |         |         |  |        |         |         |  |        |          |         |  |  |
|-----------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|----------|---------|--|--|
|                                          |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| Netsales                                      |  | $      | — |    |  | $                     | 532.1   |                      |  | $            | 262.9   |         |  | $      | 788.0   |    |  | $      | (129.3  | )  |  | $      | 1,453.7  |    |
| Operatingcosts andexpenses:                   |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Costof product sold                           |  |   | — |    |  |                  | (300.2  | )                    |  |         | (159.3  | )       |  |   | (403.5  | )  |  |   | 129.3   |    |  |   | (733.7   | )  |
| Selling,administrative, and research expenses |  |   | — |    |  |                  | (226.6  | )                    |  |         | (56.7   | )       |  |   | (244.5  | )  |  |   | — |    |  |   | (527.8   | )  |
| Amortizationof intangible assets              |  |   | — |    |  |                  | (19.9   | )                    |  |         | (6.5    | )       |  |   | (22.7   | )  |  |   | — |    |  |   | (49.1    | )  |
| Purchasedin-process research and development  |  |   | — |    |  |                  | (108.6  | )                    |  |         | (13.7   | )       |  |   | — |    |  |   | — |    |  |   | (122.3   | )  |
| Totaloperating costs and expenses             |  |   | — |    |  |                  | (655.3  | )                    |  |         | (236.2  | )       |  |   | (670.7  | )  |  |   | 129.3   |    |  |   | (1,432.9 | )  |
| Operatingearnings (loss)                      |  |   | — |    |  |                  | (123.2  | )                    |  |         | 26.7    |         |  |   | 117.3   |    |  |   | — |    |  |   | 20.8     |    |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Otherincome (expense), net                    |  |   | (104.7  | )  |  |                  | 31.0    |                      |  |         | 10.0    |         |  |   | (38.1   | )  |  |   | 96.5    |    |  |   | (5.3     | )  |
| Interestincome                                |  |   | — |    |  |                  | 4.9     |                      |  |         | 2.1     |         |  |   | 1.5     |    |  |   | (3.1    | )  |  |   | 5.4      |    |
| Interestexpense                               |  |   | — |    |  |                  | (106.2  | )                    |  |         | (0.5    | )       |  |   | (2.4    | )  |  |   | 3.1     |    |  |   | (106.0   | )  |
| Earnings(loss) before income taxes            |  |   | (104.7  | )  |  |                  | (193.5  | )                    |  |         | 38.3    |         |  |   | 78.3    |    |  |   | 96.5    |    |  |   | (85.1    | )  |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Incometax benefit (provision)                 |  |   | — |    |  |                  | 17.0    |                      |  |         | (1.5    | )       |  |   | (35.1   | )  |  |   | — |    |  |   | (19.6    | )  |
|                                          |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Minorityinterests                             |  |   | (1.9    | )  |  |                  | — |                      |  |         | — |         |  |   | (1.9    | )  |  |   | 1.9     |    |  |   | (1.9     | )  |
| Netincome (loss)                              |  | $      | (106.6  | )  |  | $                     | (176.5  | )                    |  | $            | 36.8    |         |  | $      | 41.3    |    |  | $      | 98.4    |    |  | $      | (106.6   | )  |
|                                               |

22

----

Nalco Holdings LLC andSubsidiariesCondensed Combining Statement of Operations SixMonths ended June 30, 2003(Unaudited)(Dollars inMillions)

|                                               |  |        |         |                       |  |                           |         |              |  |          |         |         |  |        |         |         |  |        |          |         |  |  |
|-----------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|---------|---------|--|--------|---------|---------|--|--------|----------|---------|--|--|
|                                          |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| Netsales                                      |  | $      | 510.1   |                  |  | $                         | 252.7   |         |  | $        | 697.4   |    |  | $      | (107.5  | )  |  | $      | 1,352.7  |    |
| Operatingcosts andexpenses:                   |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |     |    |
| Costof product sold                           |  |   | (270.6  | )                |  |                      | (146.8  | )       |  |     | (345.0  | )  |  |   | 107.5   |    |  |   | (654.9   | )  |
| Selling,administrative, and research expenses |  |   | (237.9  | )                |  |                      | (70.1   | )       |  |     | (223.1  | )  |  |   | — |    |  |   | (531.1   | )  |
| Impairmentof goodwill                         |  |   | (244.4  | )                |  |                      | — |         |  |     | — |    |  |   | — |    |  |   | (244.4   | )  |
| Amortizationof intangible assets              |  |   | (37.5   | )                |  |                      | (2.0    | )       |  |     | (1.8    | )  |  |   | — |    |  |   | (41.3    | )  |
| Businessoptimization expenses                 |  |   | (9.0    | )                |  |                      | (0.3    | )       |  |     | (0.4    | )  |  |   | — |    |  |   | (9.7     | )  |
| Totaloperating costs and expenses             |  |   | (799.4  | )                |  |                      | (219.2  | )       |  |     | (570.3  | )  |  |   | 107.5   |    |  |   | (1,481.4 | )  |
| Operatingearnings (loss)                      |  |   | (289.3  | )                |  |                      | 33.5    |         |  |     | 127.1   |    |  |   | — |    |  |   | (128.7   | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |     |    |
| Otherincome (expense), net                    |  |   | 41.2    |                  |  |                      | 5.8     |         |  |     | (17.6   | )  |  |   | (29.6   | )  |  |   | (0.2     | )  |
| Interestincome                                |  |   | 2.5     |                  |  |                      | 2.8     |         |  |     | 1.7     |    |  |   | (2.7    | )  |  |   | 4.3      |    |
| Interestexpense                               |  |   | (16.1   | )                |  |                      | (0.9    | )       |  |     | (5.2    | )  |  |   | 2.7     |    |  |   | (19.5    | )  |
| Earnings(loss) before income taxes            |  |   | (261.7  | )                |  |                      | 41.2    |         |  |     | 106.0   |    |  |   | (29.6   | )  |  |   | (144.1   | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |     |    |
| Incometax benefit (provision)                 |  |   | 1.1     |                  |  |                      | (2.4    | )       |  |     | (39.3   | )  |  |   | — |    |  |   | (40.6    | )  |
|                                          |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |     |    |
| Minorityinterests                             |  |   | — |                  |  |                      | — |         |  |     | (3.0    | )  |  |   | — |    |  |   | (3.0     | )  |
| Netincome (loss)                              |  | $      | (260.6  | )                |  | $                         | 38.8    |         |  | $        | 63.7    |    |  | $      | (29.6   | )  |  | $      | (187.7   | )  |
|                                               |

23

----

Nalco HoldingsLLC and Subsidiaries Condensed Consolidating Statement of CashFlows Six Months ended June 30, 2004 (Unaudited)(Dollars inMillions)

|                                                             |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                        |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| **Operatingactivities**                                     |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Netincome(loss)                                             |  | $      | (106.6  | )  |  | $                     | (176.5  | )                    |  | $            | 36.8    |         |  | $      | 41.3    |    |  | $      | 98.4    |    |  | $      | (106.6  | )  |
| Noncashadjustments                                          |  |   | 106.6   |    |  |                  | 170.2   |                      |  |         | 33.0    |         |  |   | 31.1    |    |  |   | (106.6  | )  |  |   | 234.3   |    |
| Changesin operating assets andliabilities                   |  |   | (4.0    | )  |  |                  | 80.3    |                      |  |         | 2.4     |         |  |   | (81.0   | )  |  |   | — |    |  |   | (2.3    | )  |
| Netcash provided by operatingactivities                     |  |   | (4.0    | )  |  |                  | 74.0    |                      |  |         | 72.2    |         |  |   | (8.6    | )  |  |   | (8.2    | )  |  |   | 125.4   |    |
| **Investingactivities**                                     |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Purchaseprice adjustment on acquisition of Ondeo NalcoGroup |  |   | — |    |  |                  | 25.6    |                      |  |         | — |         |  |   | — |    |  |   | — |    |  |   | 25.6    |    |
| Additionsto property, plant, and equipment,net              |  |   | — |    |  |                  | (7.0    | )                    |  |         | (1.4    | )       |  |   | (26.5   | )  |  |   | — |    |  |   | (34.9   | )  |
| Businesspurchases/sales,net                                 |  |   | (9.8    | )  |  |                  | (2.5    | )                    |  |         | — |         |  |   | — |    |  |   | 12.3    |    |  |   | — |    |
| Otherinvestingactivities                                    |  |   | — |    |  |                  | 84.6    |                      |  |         | (12.2   | )       |  |   | (14.9   | )  |  |   | (57.9   | )  |  |   | (0.4    | )  |
| Netcash provided by investingactivities                     |  |   | (9.8    | )  |  |                  | 100.7   |                      |  |         | (13.6   | )       |  |   | (41.4   | )  |  |   | (45.6   | )  |  |   | (9.7    | )  |
| **Financingactivities**                                     |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Cashdividends                                               |  |   | — |    |  |                  | — |                      |  |         | (1.2    | )       |  |   | (7.0    | )  |  |   | 8.2     |    |  |   | — |    |
| Changesindebt                                               |  |   | — |    |  |                  | (187.4  | )                    |  |         | (55.0   | )       |  |   | 60.0    |    |  |   | 57.9    |    |  |   | (124.5  | )  |
| Capitalcontribution                                         |  |   | 9.8     |    |  |                  | 9.8     |                      |  |         | 0.5     |         |  |   | 2.0     |    |  |   | (12.3   | )  |  |   | 9.8     |    |
| Otherfinancingactivities                                    |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | (0.7    | )  |  |   | — |    |  |   | (0.7    | )  |
| Netcash (used for) financingactivities                      |  |   | 9.8     |    |  |                  | (177.6  | )                    |  |         | (55.7   | )       |  |   | 54.3    |    |  |   | 53.8    |    |  |   | (115.4  | )  |
| Effectof exchange rate changes oncash                       |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | (3.1    | )  |  |   | — |    |  |   | (3.1    | )  |
| Increase(decrease) incash                                   |  |   | (4.0    | )  |  |                  | (2.9    | )                    |  |         | 2.9     |         |  |   | 1.2     |    |  |   | — |    |  |   | (2.8    | )  |
| Cashat beginning ofperiod                                   |  |   | 4.0     |    |  |                  | 22.5    |                      |  |         | 1.8     |         |  |   | 71.7    |    |  |   | — |    |  |   | 100.0   |    |
| Cashat end of period                                        |  | $      | — |    |  | $                     | 19.6    |                      |  | $            | 4.7     |         |  | $      | 72.9    |    |  | $      | — |    |  | $      | 97.2    |    |
|                                                             |

24

----

Nalco Holdings LLC and SubsidiariesCondensed Combining Statement of Cash Flows Six Months ended June30, 2003 (Unaudited)(Dollars inMillions)

|                                                |  |        |         |                       |  |                           |         |              |  |          |        |         |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|--------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                           |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| **Operatingactivities**                        |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |    |    |
| Netincome(loss)                                |  | $      | (260.6  | )                |  | $                         | 38.8    |         |  | $        | 63.7   |    |  | $      | (29.6   | )  |  | $      | (187.7  | )  |
| Noncashadjustments                             |  |   | 291.9   |                  |  |                      | 12.0    |         |  |     | 27.0   |    |  |   | 24.7    |    |  |   | 355.6   |    |
| Changesin operating assets andliabilities      |  |   | (45.3   | )                |  |                      | (16.2   | )       |  |     | 23.2   |    |  |   | — |    |  |   | (38.3   | )  |
| Netcash provided by operatingactivities        |  |   | (14.0   | )                |  |                      | 34.6    |         |  |     | 113.9  |    |  |   | (4.9    | )  |  |   | 129.6   |    |
| **Investingactivities**                        |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |    |    |
| Additionsto property, plant, and equipment,net |  |   | (12.9   | )                |  |                      | (5.7    | )       |  |     | (21.8  | )  |  |   | — |    |  |   | (40.4   | )  |
| Businesspurchases/sales,net                    |  |   | 25.5    |                  |  |                      | (1.0    | )       |  |     | (43.9  | )  |  |   | 4.4     |    |  |   | (15.0   | )  |
| Otherinvestingactivities                       |  |   | 16.8    |                  |  |                      | (7.9    | )       |  |     | (17.6  | )  |  |   | (15.8   | )  |  |   | (24.5   | )  |
| Netcash (used for) investingactivities         |  |   | 29.4    |                  |  |                      | (14.6   | )       |  |     | (83.3  | )  |  |   | (11.4   | )  |  |   | (79.9   | )  |
| **Financingactivities**                        |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |    |    |
| Cashdividends                                  |  |   | — |                  |  |                      | (4.0    | )       |  |     | (0.9   | )  |  |   | 4.9     |    |  |   | — |    |
| Changesindebt                                  |  |   | (14.4   | )                |  |                      | (22.4   | )       |  |     | (28.6  | )  |  |   | 15.8    |    |  |   | (49.6   | )  |
| Capitalcontribution                            |  |   | — |                  |  |                      | 4.4     |         |  |     | 31.4   |    |  |   | (4.4    | )  |  |   | 31.4    |    |
| Otherfinancingactivities                       |  |   | 0.4     |                  |  |                      | — |         |  |     | (0.4   | )  |  |   | — |    |  |   | — |    |
| Netcash (provided by) financingactivities      |  |   | (14.0   | )                |  |                      | (22.0   | )       |  |     | 1.5    |    |  |   | 16.3    |    |  |   | (18.2   | )  |
| Effectof exchange rate changes oncash          |  |   | — |                  |  |                      | — |         |  |     | 7.7    |    |  |   | — |    |  |   | 7.7     |    |
| Increase(decrease) incash                      |  |   | 1.4     |                  |  |                      | (2.0    | )       |  |     | 39.8   |    |  |   | — |    |  |   | 39.2    |    |
| Cashat beginning ofperiod                      |  |   | 1.0     |                  |  |                      | 4.4     |         |  |     | 115.1  |    |  |   | — |    |  |   | 120.5   |    |
| Cashat end ofperiod                            |  | $      | 2.4     |                  |  | $                         | 2.4     |         |  | $        | 154.9  |    |  | $      | — |    |  | $      | 159.7   |    |
|                                                |

25

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations

The following discussionand analysis of our financial condition and results of operationscovers periods prior to the Transactions, defined as the acquisition ofOndeo Nalco Group, comprised of Nalco Company and Nalco InternationalSAS Subsidiaries, by Nalco Holdings and the related financings inconnection with such acquisition. Accordingly, the discussion andanalysis of historical periods prior to the Transactions do not reflectthe 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. Our actualresults may differ materially from those contained in or implied by anyforward-looking statements. You should read the following discussiontogether with the consolidated and combined financial statements ofNalco Holdings LLC included elsewhere in this report.

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

This Quarterly Reportfor the fiscal quarter ended June 30, 2004 (the "QuarterlyReport") 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 thisQuarterly 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 Quarterly Report. Additionally, important factorscould cause our actual results to differ materially from theforward-looking statements we make in this Quarterly Report. As statedelsewhere in this Quarterly Report, such risks, uncertainties and otherimportant factors include, among others:

|              |                           |
|--------------|---------------------------|
| •  | our substantial leverage; |

|              |                                                                                       |
|--------------|---------------------------------------------------------------------------------------|
| •  | limitations on flexibility in operating ourbusiness contained in our debt agreements; |

|              |                              |
|--------------|------------------------------|
| •  | increases in interest rates; |

|              |                                      |
|--------------|--------------------------------------|
| •  | pricing pressure from our customers; |

|              |                                      |
|--------------|--------------------------------------|
| •  | technological change and innovation; |

|              |                                               |
|--------------|-----------------------------------------------|
| •  | risks associated with our non-U.S.operations; |

|              |                                         |
|--------------|-----------------------------------------|
| •  | fluctuations in currencyexchange rates; |

|              |                                                     |
|--------------|-----------------------------------------------------|
| •  | many competitors in themarkets in which we operate; |

|              |                                                         |
|--------------|---------------------------------------------------------|
| •  | changes toenvironmental, health and safety regulations; |

|              |                                                |
|--------------|------------------------------------------------|
| •  | operating hazards in our productionfacilities; |

|              |                                             |
|--------------|---------------------------------------------|
| •  | our significant pensionbenefit obligations; |

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

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

26

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

There may be other factors that may causeour actual results to differ materially from the forward-lookingstatements. All forward-looking statements attributable to us orpersons acting on our behalf apply only as of the date of thisQuarterly Report and are expressly qualified in their entirety by thecautionary statements included in this Quarterly Report. We undertakeno obligation to update or revise forward-looking statements which maybe made to reflect events or circumstances that arise after the datemade or to reflect the occurrence of unanticipated events.

Executive Overview

During the second quarter 2004, theCompany generated gains in sales and net income. The Company alsocontinued to make discretionary debt reduction payments on target withthe plans it has previously announced.

Net sales for the quarterended June 30, 2004 increased 6.6% to $740.4 million from $694.5million. Through June  30, 2004, sales are up 7.5% from$1.35 billion to $1.45 billion. On an organic basis, which excludes theimpacts of changes in foreign currency translation rates andacquisitions and divestitures, the Company's sales growthimproved from the first quarter of 2004. Organic sales grew 4.3%in the second quarter, up from the rate of 3.1% in the firstquarter.

Net income increased to $12.4 million from ayear-earlier net loss of $212.1 million that included a $244.4 millionafter-tax goodwill impairment charge. On a year-to-date basis, theCompany reported a net loss of $106.6 million in 2004 versus a net lossof $187.7 million in 2003.

In the second quarter theCompany's sales growth was broadly spread across its customerbase. The Company's Energy Services Division delivered theCompany's strongest growth in the second quarter, with a nearlydouble-digit organic increase led by strong oil and gas productionservice sales. The Pacific and Industrial and Institutional Servicesdivisions also delivered better than 5% organic sales growthover the second quarter 2003. Lingering impacts from 2003 price andcontract concessions in North America kept the Paper Services Divisionfrom contributing to the Company's overall sales growth, althoughPaper Services sales gained momentum during the quarter. In otherwords, looking at the net impact of actions in the first half of 2004,the Company believes the business is growing. However, the flow-throughof 2003 impacts holds back this growth.

The second quarterconfirmed the progress the Company has made since the Acquisition latelast fall. The Company's sales engineers are clearly focused ondelivering results for its customers, which creates good returns forthe Company as well.

Two innovations formally introduced in thequarter delivered strong results. Early sales results were strong forthe Company's patent-protected 3D TRASAR® coolingwater stress management system. In addition, an innovativeCOIL-FLO® HVAC coil cleaning service aimed at improvingenergy efficiency and air quality in hotels, light manufacturing andseveral other markets proved successful in trial markets and is nowbeing expanded to the rest of North America.

During the quarter,the Company joined with partner Katayama Chemical Inc. to create ajoint venture in Japan known as Katayama Nalco. Results of this jointventure are consolidated with Nalco's results from June  1,2004 forward. The Company expects the joint venture to generateannualized incremental sales of more than $50 million and to beaccretive to earnings in its first full year.

This joint venturefits perfectly as part of the Company's strategy to improve andexpand its core business. Japan is the second largest economy in theworld, and the Company believes Katayama Nalco will accelerate theCompany's growth there by combining Katayama, a strong Japanesebrand name and its strong service culture and high customersatisfaction, with the Company's leading technologies and strongcustomer-focused and innovative culture. The Company expects KatayamaNalco to become the second largest water treatment provider inJapan.

27

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Mix impacts contributed to a year-on-year170 basis point gross margin decline. A few of the Company'sbusiness groups that have grown disproportionately more than its othergroups produce lower gross margins. However, these groups typicallyalso maintain lower selling and service expenses. In addition to mixissues, we faced increasing raw material and freight costs since thebeginning of the year. In groups where a significant percentage oftheir business is covered by contracts, price increases generallyfollow behind these cost increases. The Company has increased prices tooffset these costs going forward and additional price increase programsare underway in many business groups. In order to fill the short-termearnings gap created by higher raw material costs the Companyaccelerated performance of cost savings programs.

Although thecost increases affect the Company, it believes it can manage themthrough a combination of pricing and cost control programs. The Companymay lag several months behind cost increases in obtaining pricingchanges; however, because of the service nature of its business, theCompany believes the impacts are certainly not as substantial as thosefaced by many chemical companies.

Both year-to-date periods wereimpacted by significant non-recurring events, with the goodwillimpairment charge in 2003 and the $122.3 million non-cash expense forin-process research and development in the first quarter 2004, a chargeresulting from purchase accounting.

The Company'sbusinesses are gaining momentum. The Company is obtaining and holdingprice increases, but has more to do in this area. The Company expectsto exceed its commitment to reduce the cost of back-office activitiesby $75 million in 2004, while expanding its investment in salesengineers and targeted research programs. As mentioned above, theaccelerated achievement of cost savings has filled any earnings gapthat could have resulted from raw material cost increases.

TheCompany expects to continue to make discretionary debt payments, and itis focusing its free cash flow to debt reduction. In addition to thediscretionary debt payment of $45.0 million made this quarter, theCompany repaid $100 million of its term loan debt using $92.0 millionof proceeds from a trade accounts receivables securitization that theCompany entered into near the end of the quarter and $8.0 million ofcash on hand.

Net capital expenditures of $18.5 million in thesecond quarter 2004 were up slightly from the $16.4 million in thefirst quarter, but were in line with 2003 and with our expectation thatcapital expenditures for the year will be below $100 million. Our SAPinformation systems project again accounted for the largest portion ofour capital expenditures. Outside of that project, the Company hastraditionally done more of its project planning and development in thefirst half of the year, with capital spending on these projectsincreasing somewhat in the second half of the year. So while theCompany continues to expect capital spending to be below $100 millionfor the year, capital spending is likely to be higher in the secondhalf of the year than it was in the first half.

Cash provided byoperating activities was $125.4 million for the six months ended June30, 2004. In the first six months of the year, the Company madediscretionary debt repayments of $90 million on its term loans and paidoff the full $15 million borrowed earlier under its revolving creditfacility. Net debt (defined as short-term debt and long-term debt, lesscash and cash equivalents) has been reduced by $145.5 million since theend of last year.

To summarize, the Company is on target todeliver its previously projected sales growth at greater than thetrend-line of GDP. Cost savings are somewhat ahead of plan, offsettingsome time lags in balancing raw material cost increases with priceincreases. At the same time, the Company is committed to continuing tomake regular debt reduction payments.

28

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Results of Operations

QuarterEnded June 30, 2004 Compared to the Quarter Ended June 30, 2003

Net sales for the quarters ended June 30, 2004 and June 30, 2003 maybe compared asfollows:

|                                       |  |                   |       |               |  |         |       |                                               |  |                           |       |          |  |        |     |         |  |        |         |          |  |        |      |          |  |  |
|---------------------------------------|--|-------------------|-------|---------------|--|---------|-------|-----------------------------------------------|--|---------------------------|-------|----------|--|--------|-----|---------|--|--------|---------|----------|--|--------|------|----------|--|--|
|                                  |  | Successor         |       | Predecessor   |  |    |       | Attributableto Changesin the FollowingFactors |
|                                  |  | ThreeMonths Ended |       |
| (dollars inmillions)                  |  | June 30,2004      |       | June 30, 2003 |  | %Change |       | CurrencyTranslation                           |  | Acquisitions/Divestitures |       | Organic  |
| Industrial& InstitutionalServices |  | $                 | 329.3 |          |  | $       | 301.1 |                                          |  |                      | 9.4   | %   |  |   | 3.0 | %  |  |   | — |     |  |   | 6.4  | %   |
| EnergyServices                        |  |              | 198.2 |          |  |    | 177.7 |                                          |  |                      | 11.5  | %   |  |   | 2.7 | %  |  |   | (0.7    | )%  |  |   | 9.5  | %   |
| PaperServices                         |  |              | 147.4 |          |  |    | 140.9 |                                          |  |                      | 4.6   | %   |  |   | 2.1 | %  |  |   | 3.3     | %   |  |   | (0.8 | )%  |
| Other                                 |  |              | 65.5  |          |  |    | 74.8  |                                          |  |                      | (12.4 | )%  |  |   | 2.6 | %  |  |   | (8.5    | )%  |  |   | (6.5 | )%  |
| Netsales                              |  | $                 | 740.4 |          |  | $       | 694.5 |                                          |  |                      | 6.6   | %   |  |   | 2.7 | %  |  |   | (0.4    | )%  |  |   | 4.3  | %   |
|                                       |

Netsales for the quarter ended June 30, 2004 were $740.4 million, a6.6% increase over the $694.5 million reported for the quarterended June 30, 2003. After adjusting for the favorable effects ofchanges in foreign currency translation rates and the impact ofacquisitions and divestitures, net sales were up 4.3%. Thisimprovement was driven by favorable sales growth broadly spread acrossour customer base. The most significant growth was posted by the EnergyServices Division, led by strong oil and gas production service sales.The Industrial and Institutional Services Division reported broad-basedgrowth across most of the markets and geographic regions it serves, ledby its global mining business. Solid gains in our water treatmentbusiness in Eastern Europe, the Commonwealth of Independent States, theMiddle East, North Africa, and Latin America, as well as significantimprovements by the Colloidal Technologies and Environmental HygieneServices groups, also contributed to the 6.4% organic growthreported by the Industrial and Institutional Services Division.Organically, Paper Services Division sales were relatively flatcompared to a year ago, reflecting the lingering effect of 2003 priceand contract concessions in North America. New business gained andstrong growth in Europe helped offset some of that effect. Slightlymore than three-fourths of the 6.5% organic decline in"other" sales from a year ago wasattributable to the decision made last year to reduce business withvery low profitability with a major customer. This factor also reducedthe organic growth of total net sales by 0.5%; however, this isthe last quarter that the sales comparison will be affected by thisdecision. Higher revenue recognition adjustments compared to last year,partly offset by strong growth in the Asia/Pacific region, accountedfor the remainder of the organic decrease in"other" sales. Second quarter 2004"other" sales include the initial sales of anew Japanese joint venture, Katayama Nalco, which was formed withKatayama Chemical Inc. to accelerate the Company's development inthis important industrialized market. Results of this joint venturewere consolidated with the Company's results beginning June 1,2004, and it is expected that the joint venture will generateannualized incremental sales of more than $50 million and will beaccretive to earnings in its first full year. The 8.5% decreasein "other" sales attributable toacquisitions/divestitures includes the incremental impact of KatayamaNalco, which was more than offset by the effect of 2003 divestitures,most notably the Predecessor's South African subsidiary.

Gross profit**,**defined as the difference between netsales and costs of products sold, of $374.9 million for the quarterended June 30, 2004 increased by $11.6 million, or 3.2%, overthe $363.3 million reported for the quarter ended June 30, 2003.Adjusted for the favorable effects of changes in foreign currencytranslation rates and the impact of acquisitions and divestitures,gross profit increased by $3.2 million, or 0.9%. Theaforementioned increase in sales volumes favorably impacted grossprofit by approximately $17.3 million, but was partly offset by marginerosion due to product mix and increased raw material and freightcosts. Gross profit margin for the quarter ended June 30, 2004 declinedto 50.6% from 52.3% for the same period last year, mostlyas a result of the aforementioned factors.

29

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Selling, administrative, and researchexpenses for the quarter ended June 30, 2004 of $268.3 milliondecreased by $1.2 million, or 0.4%, from $269.5 million for thequarter ended June 30, 2003. Adjusted for the unfavorable effects ofchanges in foreign currency translation rates, selling, administrative,and research expenses decreased by $7.0 million, or 2.6%,primarily due to spending reductions launched in the fourth quarter2003 and tightened spending controls in 2004. The favorable impact fromspending reductions was partially offset by the net effect ofacquisitions and divestitures.

Impairment of goodwillof $244.4 million for the quarter ended June 30, 2003 resulted from thePredecessor's evaluation of its goodwill, based on the purchaseprice for the Predecessor.

Amortization of intangibleassets was $24.9 million and $21.0 million for the quarter endedJune 30, 2004 and 2003, respectively. The increase resulted from higheramortization of intangible assets as a result of the Acquisition.

Business optimization expenses of $7.2 million for thequarter ended June 30, 2003 primarily represented expenses associatedwith the Predecessor's sales and marketing business realignmentlaunched in 2002.

Other income (expense), net was anexpense of $1.8 million for the quarter ended June 30, 2004 and incomeof $0.3 million for the quarter ended June 30, 2003. Suez managementfees incurred by the Predecessor for the quarter ended June 30, 2003were $0.7 million, whereas Sponsor monitoring fees for the quarterended June 30, 2004 were $3.2 million.

Net interestexpense, defined as the combination of interest income andinterest expense, of $50.0 million for the quarter ended June 30, 2004increased by $42.0 million from the $8.0 million reported for thequarter ended June 30, 2003. The increase is due primarily to theinterest charges incurred on the new debt used to finance theAcquisition.

The effective tax rate was 55.5%for the quarter ended June 30, 2004 compared to an effective tax rateof 41.4% for the quarter ended June 30, 2003, after adjustingfor the nondeductible goodwill impairment charge. The effective taxrate in 2004 is higher than 2003 mostly because of incremental U.S.taxes on the repatriation of non-U.S. earnings.

Minorityinterest expense was $0.7 million lower than the $1.6 million forthe quarter ended June  30, 2003, due to the sale of thePredecessor's South African subsidiary in 2003.

SixMonths Ended June 30, 2004 Compared to the Six Months Ended June 30,2003

Net sales for the six months ended June 30, 2004 and June30, 2003 may be compared asfollows:

|                                       |  |                 |         |               |  |         |         |                                               |  |                           |       |          |  |        |     |         |  |        |         |          |  |        |      |          |  |  |
|---------------------------------------|--|-----------------|---------|---------------|--|---------|---------|-----------------------------------------------|--|---------------------------|-------|----------|--|--------|-----|---------|--|--------|---------|----------|--|--------|------|----------|--|--|
|                                  |  | Successor       |         | Predecessor   |  |    |         | Attributableto Changesin the FollowingFactors |
|                                  |  | Six MonthsEnded |         |
| (dollars inmillions)                  |  | June 30,2004    |         | June 30, 2003 |  | %Change |         | CurrencyTranslation                           |  | Acquisitions/Divestitures |       | Organic  |
| Industrial& InstitutionalServices |  | $               | 637.3   |          |  | $       | 580.4   |                                          |  |                      | 9.8   | %   |  |   | 4.7 | %  |  |   | — |     |  |   | 5.1  | %   |
| EnergyServices                        |  |            | 392.1   |          |  |    | 350.3   |                                          |  |                      | 11.9  | %   |  |   | 4.2 | %  |  |   | (0.4    | )%  |  |   | 8.1  | %   |
| PaperServices                         |  |            | 295.8   |          |  |    | 277.0   |                                          |  |                      | 6.8   | %   |  |   | 4.0 | %  |  |   | 3.2     | %   |  |   | (0.4 | )%  |
| Other                                 |  |            | 128.5   |          |  |    | 145.0   |                                          |  |                      | (11.4 | )%  |  |   | 5.2 | %  |  |   | (12.6   | )%  |  |   | (4.0 | )%  |
| Netsales                              |  | $               | 1,453.7 |          |  | $       | 1,352.7 |                                          |  |                      | 7.5   | %   |  |   | 4.5 | %  |  |   | (0.8    | )%  |  |   | 3.8  | %   |
|                                       |

Netsales for the six months ended June 30, 2004 were $1,453.7million, a 7.5% increase over the $1,352.7 million reported forthe six months ended June 30, 2003. After adjusting for the favorableeffects of changes in foreign currency translation rates and the netimpact of acquisitions and divestitures, net sales were up 3.8%.The Energy Services Division reported organic growth in sales of8.1% 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 a5.1% 

30

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

organic increase in sales. Paper ServicesDivision sales were flat on an organic basis compared to a year ago, asthe lingering effect of price and contract concessions in North Americain 2003 were offset by new business gained and good growth in Europe.The decision made last year to reduce certain low-margin business witha major customer was the primary cause of the 4.0% organicdecline in "other" sales from a year ago. Theeffect of this decision also reduced the organic growth of total netsales by 0.7%. Nearly double-digit organic growth in theAsia/Pacific region, partly offset by the effect of higher revenuerecognition adjustments, accounted for most of the remaining organicchange in "other" sales.

Grossprofit**,**defined as the difference between net sales andcosts of products sold, of $720.0 million for the six months ended June30, 2004 increased by $22.2 million, or 3.2%, over the $697.8million reported for the six months ended June 30, 2003. Adjusted forthe favorable effect of changes in foreign currency translation ratesand the net unfavorable impact of acquisitions and divestitures, grossprofit decreased by $2.4 million, or 0.3%. Expensing a portionof the adjustment made to increase inventories to fair value at thedate of the Acquisition during the first quarter unfavorably impactedgross profit by $14.5 million. However, the aforementioned increase insales volumes favorably impacted gross profit by approximately $27.9million, which was partly offset by margin erosion due to product mix,raw material costs and freight. Gross profit margin for the six monthsended June 30, 2004 declined to 49.5% from 51.6% for thesame period last year. The impact of the expensing of a portion of theadjustment made to increase inventories to fair value at the date ofAcquisition accounted for nearly half of this decline.

Selling, administrative, and research expenses for the sixmonths ended June 30, 2004 of $527.8 million decreased by $3.3 million,or 0.6%, from the same period last year. Adjusted for theunfavorable effects of changes in foreign currency translation rates,selling, administrative, and research expenses decreased by $23.1million, or 4.3%, primarily due to spending reductions launchedin the fourth quarter 2003 and tightened spending controls in 2004. Thenet favorable impact from acquisitions and divestitures alsocontributed $3.4 million to the change.

Impairment ofgoodwill of $244.4 million for the six months ended June 30, 2003resulted from the Predecessor's evaluation of its goodwill, basedon the purchase price for the Predecessor.

Amortization ofintangible assets was $49.1 million and $41.3 million for the sixmonths ended June 30, 2004 and 2003, respectively. The increaseresulted from higher amortization of intangible assets as a result ofthe Acquisition.

In-process research and developmentwas a one-time charge of $122.3 million recorded during the six monthsended June 30, 2004, as a result of preliminary purchase accountingentries related to the Acquisition. The value of purchased IPR&Dwas comprised of five ongoing development projects at the date of theAcquisition. Purchased IPR&D was derived by assigning values tothose projects identified by management as having economic value, butthat had not yet reached technological feasibility and had noalternative future use.

Business optimization expensesof $9.7 million for the six months ended June 30, 2003 were mostlyattributable to the Predecessor's sales and marketing businessrealignment launched in 2002.

Other income (expense),net was an expense of $5.3 million and $0.2 million for the sixmonths ended June 30, 2004 and 2003, respectively. Unfavorable changesin foreign currency exchange adjustments of $4.4 million contributed tothe deterioration between the two periods. In addition, Suez managementfees expensed by the Predecessor for the six months ended June 30, 2003were $1.5 million, whereas Sponsor monitoring fees for the six monthsended June 30, 2004 were $5.7 million. Lower franchise taxes partlyoffset these unfavorable changes.

31

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Net interest expense, defined asthe combination of interest income and interest expense, of $100.6million for the six months ended June 30, 2004 increased by $85.4million from the $15.2 million reported for the six months ended June30, 2003. The increase is due primarily to the interest chargesincurred on the new debt used to finance the Acquisition.

The effective tax rate**,**excluding the impact of theaforementioned charge for purchased IPR&D, was 52.7 % forthe six months ended June 30, 2004 compared to an effective tax rate of40.5% for the six months ended June 30, 2003, excluding theimpact of the goodwill impairment charge. The effective tax rate in2004 is higher than 2003 mostly because of incremental U.S. taxes onthe repatriation of non-U.S. earnings.

Minority interestexpense was $1.1 million lower than the $3.0 million for the sixmonths ended June 30, 2003, due to the sale of the Predecessor'sSouth African subsidiary in 2003.

Liquidity and CapitalResources

Operating activities.    Historically, theCompany's main source of liquidity has been its solid cash flowgenerated by operating activities. For the six months ended June 30,2004, cash provided by operating activities was $125.4 million, a $4.2million decrease from the same period last year. This decreaseprimarily resulted from higher interest payments in 2004, due to higherdebt from the Acquisition, partly offset by lower working capitalrequirements, reflecting efforts to more effectively manage workingcapital.

Investing activities.    Cash used forinvesting activities was $9.7 million for the six months ended June 30,2004. Net property additions of $34.9 million were partly offset by a$25.6 million purchase price adjustment related to the Acquisition.Approximately half of the capital spending was attributable to theCompany's information systems project.

Net propertyadditions of $40.4 million accounted for slightly more than half of the$79.9 million of cash used for investing activities by the Predecessorduring the six months ended June 30, 2003. The purchase of theremaining 60% of the common shares of Oekophil AG accounted forthe $15.0 million net use of cash for business purchases/sales. Otherinvesting activities of $24.5 million were mainly comprised ofadditional advances to a former related party and an investment in aformer affiliated company.

Financingactivities**.**    Net cash used for financing activitiestotaled $115.4 million during the six months ended June 30, 2004. InJune 2004, the Company entered into a three-year accounts receivablesecuritization facility with a commercial paper conduit sponsored byone of the lenders under the Company's senior credit facilities.The facility provides up to $100 million in funding. The Company used$92.0 million of proceeds from borrowings under the facility and $8.0million of cash on hand to repay $100.0 million of term loans. TheCompany also made discretionary payments of $90.0 million against itsterm loan B facility and repaid the $15.0 million it had borrowed fromits revolving credit facility as of the end of 2003. The Companyreceived $9.8 million of additional capital during the six months endedJune 30, 2004. This was the direct result of additional equity receivedby the Company's ultimate parent company, Nalco LLC, and wascomprised of an equity investment of $1.2 million from Dr. William H.Joyce, the Company's Chairman and Chief Executive Officer, and$8.6 million in proceeds from the sale of equity interests to certainofficers and key employees under the Nalco LLC 2004 Unit Plan, anequity compensation plan.

During the six months ended June 30,2003, net cash used for financing activities by the Predecessor totaled$18.2 million, reflecting net repayments of debt of $49.6 million andcapital contributions of $31.4 million from Nalco International SAS, aformer related party owned by Suez.

Prior to the Transactions,the Predecessor obtained short-term financing from Suez Finance LP, afinance company operated by Suez to provide funding to its NorthAmerican subsidiaries, rather than from external sources.

32

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

As a result of the Transactions, theCompany is highly leveraged. Its liquidity requirements aresignificant, primarily due to debt service requirements as well asresearch and development and capital investment. Its primary source ofliquidity will continue to be cash flow generated from operations, butthe Company also has availability under a $250 million revolving creditfacility, subject to certain conditions. This revolving credit facilityis part of the Company's senior credit facilities. The revolvingcredit is available for general corporate purposes, subject to certainconditions, and matures in November 2009. The Company's seniorcredit facilities also include a $300 million six-year term loan Afacility (which includes an €88.0 million tranche) whichmatures in November 2009 and a $1,300 million seven-year term loan Bfacility which matures in November 2010. Borrowings under the seniorcredit facilities bear interest at a floating base rate plus anapplicable margin. The initial applicable margin for borrowings underthe revolving credit facility and the term loan A facility is LIBORplus 2.50% and for borrowings under the term loan B facility isLIBOR plus 2.50%.

In addition to paying interest onoutstanding principal under the senior credit facilities, we arerequired to pay a commitment fee to the lenders under the revolvingcredit facility in respect of the unutilized commitments at a rateequal to 0.50%. We also pay customary letter of credit fees.

The term loan A facility amortizes each year in quarterly amounts ata rate of 5% per annum in year one, 10% per annum in yeartwo, 15% per annum in year three, 20% per annum in yearfour and 25% per annum in each of years five and six. Inaddition to the scheduled payments due for the first six months of2004, the Company repaid an additional $75.1 million mostly usingproceeds from the accounts receivable securitization facility.

The term loan B facility amortizes each year in an amount equal to1% per annum in equal quarterly installments for the first sixyears and nine months, with the remaining amount payable on the datethat is seven years from the date of the closing of the senior creditfacilities. In addition to the scheduled payments due for the first sixmonths of 2004, the Company made discretionary payments of $90.0million using cash generated from operations and repaid an additional$17.5 million mostly using proceeds from the accounts receivablesecuritization facility.

Principal amounts outstanding under therevolving credit facility will be due and payable in full at maturity,six years from the date of the closing of the senior creditfacilities.

The senior credit facilities contain a number ofcovenants that, among other things, restrict, subject to certainexceptions, our ability and our subsidiaries' ability, includingNalco Company, to sell assets, incur additional indebtedness or issuepreferred stock, repay other indebtedness (including the notes), paydividends and distributions or repurchase our 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, includingthe notes, change the business conducted by us and our subsidiaries(including Nalco Company) and enter into hedging agreements. Inaddition, the senior credit facilities require Nalco Company tomaintain the following financial covenants: a maximum total leverageratio, a minimum interest coverage ratio and a maximum capitalexpenditures limitation. The Company was in compliance with allcovenants at June 30, 2004.

The indentures governing the seniornotes and senior subordinated notes limit our ability and the abilityof our restricted subsidiaries to:

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

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

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

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

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

33

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

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

|              |                                                           |
|--------------|-----------------------------------------------------------|
| •  | sell certain assets or merge with or intoother companies. |

Subject to certain exceptions, the indenturesgoverning the senior notes and senior subordinated notes permit theCompany and its restricted subsidiaries to incur additionalindebtedness, including secured indebtedness.

Certain of ournon-U.S. subsidiaries have lines of credit to support localrequirements. As of June  30, 2004, the outstanding balance underthese local lines of credit was approximately $18.7 million. Certain ofthese lines of credit are equally and ratably secured with obligationsunder our senior credit facilities.

We believe that fundsgenerated from operations and our borrowing capacity will be adequateto fund these requirements. Our ability to fund these items and toreduce debt may be affected by general economic, financial,competitive, legislative and regulatory factors, and the cost oflitigation claims, among other things.

We believe that ourfinancial position and financing structure will provide flexibility inworldwide financing activities and permit it to respond to changingconditions in credit markets.

Adjusted EBITDA

Our new senior credit facility and our indentures contain a numberof significant covenants as described above. Adjusted EBITDA is used todetermine our compliance with many of these covenants.

AdjustedEBITDA is defined as EBITDA adjusted to exclude unusual items and otheradjustments permitted in calculating covenant compliance under theindentures governing the notes 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.

Any breach of covenants in our new seniorcredit agreement that are tied to ratios based on Adjusted EBITDA couldresult in a default under that agreement and the lenders could elect todeclare all amounts borrowed due and payable. Any such accelerationwould also result in a default under our indentures. Additionally,under our debt agreements, our ability to engage in activities such asincurring additional indebtedness, making investments and payingdividends is also tied to ratios based on Adjusted EBITDA.

34

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Adjusted EBITDA is calculated asfollows:

|                                  |  |                            |         |                                    |  |                               |        |                                       |  |                                       |         |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------|--|----------------------------|---------|------------------------------------|--|-------------------------------|--------|---------------------------------------|--|---------------------------------------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                             |  | Successor                  |         | Predecessor                        |  | Successor                     |        | Predecessor                           |  | ProformaFourQuartersEnded June30,2004 |
|                             |  | QuarterEnded June 30, 2004 |         | ProformaQuarter Ended June30, 2003 |  | Six Months Ended June 30,2004 |        | ProformaSix Months Ended June 30,2003 |  |
| Net income(loss)                 |  | $                          | 12.4    |                               |  | $                             | (212.1 | )                                |  | $                                     | (106.6  | )  |  | $      | (187.7  | )  |  | $      | (101.2 | )  |
| Interest,net                     |  |                       | 50.0    |                               |  |                          | 8.0    |                                  |  |                                  | 100.6   |    |  |   | 15.2    |    |  |   | 160.0  |    |
| Incometaxprovision               |  |                       | 16.6    |                               |  |                          | 24.0   |                                  |  |                                  | 19.6    |    |  |   | 40.6    |    |  |   | 39.4   |    |
| Depreciation                     |  |                       | 28.2    |                               |  |                          | 31.1   |                                  |  |                                  | 56.9    |    |  |   | 60.7    |    |  |   | 120.5  |    |
| Amortization                     |  |                       | 24.9    |                               |  |                          | 21.0   |                                  |  |                                  | 49.1    |    |  |   | 41.3    |    |  |   | 92.1   |    |
| EBITDA                           |  | $                          | 132.1   |                               |  | $                             | (128.0 | )                                |  | $                                     | 119.6   |    |  | $      | (29.9   | )  |  | $      | 310.8  |    |
| Non-cashcharges(1)               |  |                       | 7.6     |                               |  |                          | 251.4  |                                  |  |                                  | 153.0   |    |  |   | 261.1   |    |  |   | 187.0  |    |
| Businessoptimization expenses(2) |  |                       | — |                               |  |                          | 7.2    |                                  |  |                                  | — |    |  |   | 9.7     |    |  |   | 11.4   |    |
| Unusualitems(3)                  |  |                       | 3.4     |                               |  |                          | 2.3    |                                  |  |                                  | 4.5     |    |  |   | 7.2     |    |  |   | 37.9   |    |
| Otheradjustments(4)              |  |                       | 2.4     |                               |  |                          | 0.6    |                                  |  |                                  | 3.7     |    |  |   | — |    |  |   | 13.5   |    |
| Costsavings(5)                   |  |                       | — |                               |  |                          | 7.5    |                                  |  |                                  | — |    |  |   | 15.0    |    |  |   | 15.0   |    |
| AdjustedEBITDA                   |  | $                          | 145.5   |                               |  | $                             | 141.0  |                                  |  | $                                     | 280.8   |    |  | $      | 263.1   |    |  | $      | 575.6  |    |
|                                  |

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

|                                                |  |                            |         |                                     |  |                               |         |                                       |  |                                       |         |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------|--|----------------------------|---------|-------------------------------------|--|-------------------------------|---------|---------------------------------------|--|---------------------------------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                           |  | Successor                  |         | Predecessor                         |  | Successor                     |         | Predecessor                           |  | ProformaFourQuartersEnded June30,2004 |
|                                           |  | QuarterEnded June 30, 2004 |         | Proforma Quarter Ended June30, 2003 |  | Six Months Ended June 30,2004 |         | ProformaSix Months Ended June 30,2003 |  |
| Impairment ofgoodwill                          |  | $                          | — |                                |  | $                             | 244.4   |                                  |  | $                                     | — |   |  | $      | 244.4   |   |  | $      | — |   |
| In-processresearch anddevelopment              |  |                       | — |                                |  |                          | — |                                  |  |                                  | 122.3   |   |  |   | — |   |  |   | 122.3   |   |
| Inventorystep-up                               |  |                       | 0.4     |                                |  |                          | — |                                  |  |                                  | 14.5    |   |  |   | — |   |  |   | 35.7    |   |
| Profitsharing expense and 401(k) funded bySuez |  |                       | 9.9     |                                |  |                          | 5.7     |                                  |  |                                  | 16.0    |   |  |   | 11.7    |   |  |   | 28.3    |   |
| Other                                          |  |                       | (2.7    | )                              |  |                          | 1.3     |                                  |  |                                  | 0.2     |   |  |   | 5.0     |   |  |   | 0.7     |   |
| Non-cashcharges                                |  | $                          | 7.6     |                                |  | $                             | 251.4   |                                  |  | $                                     | 153.0   |   |  | $      | 261.1   |   |  | $      | 187.0   |   |
|                                                |

Impairmentof goodwill

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

In-process Research and Development

In-process research and development was a one time chargeof $122.3 million recorded during the six months ended June 30, 2004,as a result of preliminary purchase accounting entries related to theAcquisition.

Inventory Step-Up

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

35

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

Profit Sharing and 401(k) ExpenseFunded by Suez

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

Other

Other non-cash charges includes thenon-cash portion of rent expense under the sublease that we enteredinto with Suez in conjunction with the Acquisition and the non-cashimpact on earnings of our equity investments and minorityinterests.

|     |                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Businessoptimization expenses for 2003 includes cost associated with theintegration of the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon)joint venture and the implementation of global cost reduction programsin the sales, marketing, manufacturing and support services operations.See notes 2 and 9 to Item 1 for moreinformation. |

|     |                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Unusualitems in 2003 includes certain unusual or nonrecurring costs relatingprimarily to executive severance and relocation and consulting servicesperformed on behalf of Suez. Unusual items in 2004 include certaincosts associated with the sale of Ondeo Nalco Group. |

|     |                                                                                                                                                                                                                                                                                                                                  |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | We are required to makeadjustments to EBITDA for monitoring fees paid to the Sponsors,franchise taxes, 401(k) matching contributions and other pro formaadjustments. These pro forma adjustments include purchase accountingadjustments for pensions and the incremental rent expense we will incurunder our sublease with Suez. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Our financing agreements alsopermit us to adjust EBITDA on a pro forma basis for certain costsavings that we expect to achieve. We have initiated a comprehensivecost reduction plan that was expected to yield annual savings of atleast $30  million on a proforma basis in 2003. We implementedthis plan immediately upon consummation of the Acquisition. Theremainder of our cost reduction plan is expected to realize incrementalefficiencies through work process redesign and other targeted costimprovement programs, which address inefficiencies in ouradministrative and overhead functions, as well as other supportfunctions around the world. |

Our covenant levels and ratiosfor the four quarters ended June 30, 2004 are asfollows:

|                                                                                                           |  |                               |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|-------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                                                                                      |  | CovenantLevel at June 30,2004 |        | Ratios |
| **Senior credit facility(1)**                                                                             |  |
| Minimum Adjusted EBITDA to cashinterestratio                                                              |  |                          | 1.65x  |   |  |   | 3.04x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |                          | 6.75x  |   |  |   | 5.33x  |   |
| **Indentures(2)**                                                                                         |  |                          |   |   |  |   |   |   |
| Minimum AdjustedEBITDA to fixed charge ratio required to incur additional debt pursuantto ratioprovisions |  |                          | 2.00x  |   |  |   | 3.04x  |   |
|                                                                                                           |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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) | Ourability to incur additional debt and make certain restricted paymentsunder our indentures, subject to specified exceptions, is tied to anAdjusted EBITDA to fixed charge ratio of at least 2.0 to 1, except thatwe may incur certain debt and make certain restricted payments andcertain permitted investments without regard to the ratio, such as upto an aggregate principal amount of |

36

----

Item2.    Management's Discussion and Analysis of FinancialCondition and Results of Operations          (Continued)

|  |                                                                                                                                                                                                                               |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | $1,950 million (including $1,410.0 millionthat was outstanding under our term loan facilities as of June 30,2004) and investments in similar business and other investments equalto 6% of Nalco Holdings consolidated assets. |

NalcoCompany entered into a receivables facility on June  25, 2004that provides up to $100  million in funding from a commercialpaper conduit sponsored by JPMorgan Chase Bank, one of the lendersunder Nalco Company's senior credit facilities, based onavailability of eligible receivables and satisfaction of othercustomary conditions.

This facility is treated as a generalfinancing agreement resulting in the funding and related receivablesbeing shown as liabilities and assets, on our consolidated balancesheet and the costs associated with the receivables facility beingrecorded as interest expense.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company's exposuresto market risk since December  31, 2003.

Item 4. Controls andProcedures

(a)    Evaluation of disclosure controls andprocedures.

The Company's chief executive officer andchief financial officer, after evaluating the effectiveness of theCompany's "disclosure controls andprocedures" (as defined in the Securities Exchange Act of1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period, haveconcluded that the Company's disclosure controls and procedureswere adequate and designed to ensure that material information relatingto the Company and its consolidated subsidiaries would be made known tothem by others within those entities as appropriate to allow timelydecisions regarding required disclosures.

(b)    Changesin internal controls over financial reporting.

There were nochanges in the Company's internal controls over financialreporting that occurred during the most recent fiscal quarter that havematerially affected, or are reasonably likely to affect, theCompany's internal controls over financialreporting.

37

----

PARTII.    OTHER INFORMATION

Item 1.    LegalProceedings

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, we cannot predict the outcome of any litigation or thepotential for future litigation.

The Company has been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three waste sites where somefinancial contribution is or may be required.

Theseagencies have also identified many other parties who may be responsiblefor clean up costs at the 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 $2.1 million at June 30, 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 three months and six months ended June 30, 2004,relating to environmental compliance and clean up activities were notsignificant.

We have been named as a defendant in aseries of multi-party lawsuits based on claimed involvement in thesupply of allegedly hazardous materials. The plaintiffs in these casesseek damages for alleged personal injury resulting from exposure tovarious chemicals. These matters have had a de minimis impact onour business historically and we do not anticipate these matters topresent any material risk to our business in the future.Notwithstanding, we cannot predict the outcome of any such toxic tortclaims or the involvement we might have in these matters in thefuture.

The Company has received subpoenas from the U.S.Department of Justice for documents and testimony relating to itsstorage of claimed hazardous materials 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, and chemical related expenses, the outcome of which,in the opinion of management, should not have a material effect on theconsolidated financial position of the Company. However, we cannotpredict the outcome of any litigation or the potential for futurelitigation. The Company maintains accruals and/or has insurance inthose instances where there is reason to believe that significant costsmight be incurred.

Item 6.    Exhibits and Reports onForm 8-K

|           |                                   |
|-----------|-----------------------------------|
| (a)  | The following are includedherein: |

|        |                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------|
|   | Exhibit 31.1 Certificationof Chief Executive Officer, Pursuant to Section 302 of theSarbanes-Oxley Act of 2002 |

|        |                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------|
|   | Exhibit 31.2Certification of Chief Financial Officer, Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002 |

38

----

|        |                                                                                                                                   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   | Exhibit 32.1Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuantto Section 906 of the Sarbanes-Oxley Act of2002 |

|           |                                                                                                                |
|-----------|----------------------------------------------------------------------------------------------------------------|
| (b)  | The following are incorporatedby reference to the S-4 Registration Statement for Nalco Company,August 12, 2004 |

|              |  |                                                          |  |  |  |  |
|--------------|--|----------------------------------------------------------|--|--|--|--|
| Exhibit10.1  |  | Receivables Purchase Agreement, dated as of June 25,2004 |
| Exhibit 10.2 |  | Receivables TransferAgreement, dated as of June 25, 2004 |
| Exhibit10.3  |  | Severance Agreement with William J.Roe                   |
| Exhibit 10.4 |  | Severence Agreement withMark L. Bosanko                  |
| Exhibit 10.5 |  | SeveranceAgreement with Lou L. Loosbrock                 |
| Exhibit10.6  |  | Employment Agreement with William H.Joyce                |
|              |

|           |                                                                  |
|-----------|------------------------------------------------------------------|
| (c)  | Reports on Form8-K for the quarterly period ended June 30, 2004. |

|        |       |
|--------|-------|
|   | None. |

39

----

SIGNATURE

The Company has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

|                          |  |                    |  |                                                     |  |  |  |  |  |  |
|--------------------------|--|--------------------|--|-----------------------------------------------------|--|--|--|--|--|--|
|      |  | NALCOHOLDINGS LLC  |
|                     |  |
|                     |  | /s/ BRADLEY J.BELL |
|                     |  | Name:              |  | Bradley J.Bell                                      |
|                     |  | Title:             |  | Executive VicePresident and Chief Financial Officer |
|                          |

Dated:August 16, 2004

41

----