UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION Washington, DC20549

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FORM10-Q

(Mark One)

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

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|   | For the quarterly period ended September 30,2005 |

or

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

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|   | For the transition period from                 to                 . |

Commission File No. 001-32342

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NALCO HOLDINGCOMPANY(Exact name of registrant as specifiedin its charter)

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| **Delaware**(State or other jurisdiction of Incorporation orOrganization) |  | **16-1701300**(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 by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was requiredto file such reports), and (2) has been subject to such filingrequirements for the past 90 days.Yes    No  

Indicate bycheck mark whether the registrant is an accelerated filer (as definedin Rule 12b-2 of the Exchange Act.)Yes    No  

As of October31, 2005, the number of shares of the registrant's common stock,par value $0.01 per share, outstanding was 141,663,369shares.

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QUARTERLYREPORT ON FORM 10-Q NALCO HOLDING COMPANY Quarter EndedSeptember 30, 2005

TABLE OFCONTENTS

|                                 |  |                                                                                                                    |        |        |        |        |        |        |        |        |  |  |  |  |
|---------------------------------|--|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--|--|--|--|
| **PartI. FinancialInformation** |  |                                                                                                               |   |   |        |   |   |   |
| Item1.                          |  | FinancialStatements (Unaudited)                                                                                    |        |   |   |   |        |   |   |   |
|                            |  | CondensedConsolidated Balance Sheets –September 30, 2005 and December31, 2004                                |        |   | 2      |   |        |   |   |   |
|                            |  | Condensed ConsolidatedStatements of Operations –Three months and nine months endedSeptember 30, 2005 and2004 |        |   | 3      |   |        |   |   |   |
|                            |  | Condensed ConsolidatedStatements of Cash Flows –Nine months ended September 30,2005 and 2004                 |        |   | 4      |   |        |   |   |   |
|                            |  | Notes to CondensedConsolidated Financial Statements –September 30,2005                                       |        |   | 5      |   |        |   |   |   |
| Item2.                          |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                                |        |   | 15     |   |        |   |   |   |
| Item3.                          |  | Quantitative and Qualitative Disclosures About MarketRisk                                                          |        |   | 27     |   |        |   |   |   |
| Item 4.                         |  | ControlsandProcedures                                                                                              |        |   | 27     |   |        |   |   |   |
| **PartII. Other Information**   |  |                                                                                                               |   |   |        |   |   |   |
| Item1.                          |  | LegalProceedings                                                                                                   |        |   | 28     |   |        |   |   |   |
| Item6.                          |  | Exhibits                                                                                                           |        |   | 28     |   |        |   |   |   |
| **Signature**                   |  |                                                                                                               | 29     |   |        |   |   |   |
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1

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PART I. FINANCIALINFORMATION Item 1. Financial Statements (Unaudited)

Nalco Holding Company and Subsidiaries CondensedConsolidated Balance Sheets(dollars inmillions)

|                                                                       |  |                             |         |                 |  |        |         |        |  |  |
|-----------------------------------------------------------------------|--|-----------------------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                                                  |  | (Unaudited)September30,2005 |         | December31,2004 |
| **Assets**                                                            |  |                        |    |            |  |   |    |   |
| Currentassets:                                                        |  |                        |    |            |  |   |    |   |
| Cash and cashequivalents                                              |  | $                           | 46.7    |            |  | $      | 33.3    |   |
| Accountsreceivable, less allowances of $20.1 in 2005 and $21.1 in2004 |  |                        | 598.7   |            |  |   | 594.2   |   |
| Inventories:                                                          |  |                        |    |            |  |   |    |   |
| Finishedproducts                                                      |  |                        | 239.0   |            |  |   | 245.4   |   |
| Materialsand work inprocess                                           |  |                        | 70.9    |            |  |   | 68.1    |   |
|                                                                  |  |                        | 309.9   |            |  |   | 313.5   |   |
| Prepaidexpenses, taxes and other currentassets                        |  |                        | 89.9    |            |  |   | 90.1    |   |
| Totalcurrentassets                                                    |  |                        | 1,045.2 |            |  |   | 1,031.1 |   |
| Property,plant, and equipment,net                                     |  |                        | 763.2   |            |  |   | 847.3   |   |
| Intangibleassets:                                                     |  |                        |    |            |  |   |    |   |
| Goodwill                                                              |  |                        | 2,220.8 |            |  |   | 2,368.3 |   |
| Otherintangibles,net                                                  |  |                        | 1,252.2 |            |  |   | 1,323.6 |   |
| Otherassets                                                           |  |                        | 346.9   |            |  |   | 363.6   |   |
| Totalassets                                                           |  | $                           | 5,628.3 |            |  | $      | 5,933.9 |   |
| **Liabilitiesand shareholders'equity**                                |  |                        |    |            |  |   |    |   |
| Currentliabilities:                                                   |  |                        |    |            |  |   |    |   |
| Accountspayable                                                       |  | $                           | 266.0   |            |  | $      | 261.9   |   |
| Shortterm debt                                                        |  |                        | 18.5    |            |  |   | 17.7    |   |
| Othercurrentliabilities                                               |  |                        | 267.6   |            |  |   | 311.7   |   |
| Totalcurrentliabilities                                               |  |                        | 552.1   |            |  |   | 591.3   |   |
| Otherliabilities:                                                     |  |                        |    |            |  |   |    |   |
| Long-termdebt                                                         |  |                        | 3,266.3 |            |  |   | 3,424.8 |   |
| Deferredincometaxes                                                   |  |                        | 392.2   |            |  |   | 484.8   |   |
| Accruedpensionbenefits                                                |  |                        | 417.4   |            |  |   | 411.7   |   |
| Otherliabilities                                                      |  |                        | 296.2   |            |  |   | 296.8   |   |
| Minorityinterest                                                      |  |                        | 12.6    |            |  |   | 14.1    |   |
| Shareholders'equity                                                   |  |                        | 691.5   |            |  |   | 710.4   |   |
| Totalliabilities and shareholders'equity                              |  | $                           | 5,628.3 |            |  | $      | 5,933.9 |   |
|                                                                       |

Seeaccompanying notes to condensed consolidated financialstatements.

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Nalco Holding Company andSubsidiaries Condensed Consolidated Statements of Operations(Unaudited)(dollars in millions, except per shareamounts)

|                                               |  |                                     |         |                                      |  |                                     |         |                                    |  |        |         |         |  |        |         |         |  |  |
|-----------------------------------------------|--|-------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                          |  | ThreeMonthsended September 30, 2005 |         | Three Monthsended September 30, 2004 |  | Nine Months endedSeptember 30, 2005 |         | Nine Monthsended September30, 2004 |
| Netsales                                      |  | $                                   | 834.9   |                                 |  | $                                   | 774.2   |                               |  | $      | 2,448.8 |    |  | $      | 2,227.9 |    |
| Operatingcosts andexpenses:                   |  |                                |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Costof productsold                            |  |                                | 457.6   |                                 |  |                                | 401.3   |                               |  |   | 1,349.9 |    |  |   | 1,147.9 |    |
| Selling,administrative, and researchexpenses  |  |                                | 252.6   |                                 |  |                                | 255.2   |                               |  |   | 774.4   |    |  |   | 770.1   |    |
| Amortizationof intangibleassets               |  |                                | 20.3    |                                 |  |                                | 23.9    |                               |  |   | 61.4    |    |  |   | 73.0    |    |
| In-processresearch anddevelopment             |  |                                | — |                                 |  |                                | — |                               |  |   | — |    |  |   | 122.3   |    |
| Businessoptimizationexpenses                  |  |                                | 3.5     |                                 |  |                                | — |                               |  |   | 21.3    |    |  |   | — |    |
| Totaloperating costs andexpenses              |  |                                | 734.0   |                                 |  |                                | 680.4   |                               |  |   | 2,207.0 |    |  |   | 2,113.3 |    |
| Operatingearnings                             |  |                                | 100.9   |                                 |  |                                | 93.8    |                               |  |   | 241.8   |    |  |   | 114.6   |    |
| Otherincome (expense),net                     |  |                                | (0.1    | )                               |  |                                | (1.2    | )                             |  |   | (3.6    | )  |  |   | (6.5    | )  |
| Interestincome                                |  |                                | 2.1     |                                 |  |                                | 2.3     |                               |  |   | 6.2     |    |  |   | 7.7     |    |
| Interestexpense                               |  |                                | (65.8   | )                               |  |                                | (64.0   | )                             |  |   | (192.7  | )  |  |   | (187.7  | )  |
| Earnings(loss) before incometaxes             |  |                                | 37.1    |                                 |  |                                | 30.9    |                               |  |   | 51.7    |    |  |   | (71.9   | )  |
| Incometaxprovision                            |  |                                | 18.1    |                                 |  |                                | 27.2    |                               |  |   | 24.7    |    |  |   | 46.8    |    |
| Minorityinterests                             |  |                                | (1.6    | )                               |  |                                | (1.7    | )                             |  |   | (4.4    | )  |  |   | (3.6    | )  |
| Netearnings(loss)                             |  | $                                   | 17.4    |                                 |  | $                                   | 2.0     |                               |  | $      | 22.6    |    |  | $      | (122.3  | )  |
| Netearnings (loss) pershare:                  |  |                                |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Basic                                         |  | $                                   | 0.12    |                                 |  | $                                   | 0.02    |                               |  | $      | 0.16    |    |  | $      | (1.35   | )  |
| Diluted                                       |  | $                                   | 0.12    |                                 |  | $                                   | 0.02    |                               |  | $      | 0.15    |    |  | $      | (1.35   | )  |
| Weighted-averageshares outstanding(millions): |  |                                |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Basic                                         |  |                                | 141.7   |                                 |  |                                | 90.6    |                               |  |   | 141.7   |    |  |   | 90.6    |    |
| Diluted                                       |  |                                | 146.6   |                                 |  |                                | 90.6    |                               |  |   | 146.6   |    |  |   | 90.6    |    |
|                                               |

Seeaccompanying notes to condensed consolidated financialstatements.

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Nalco Holding Company andSubsidiaries Condensed Consolidated Statements of Cash Flows(Unaudited)(dollars inmillions)

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|------------------------------------------------------------------------------------------|--|-----------------------------------|---------|----------------------------------|--|--------|--------|---------|--|--|
|                                                                                     |  | NineMonthsendedSeptember 30, 2005 |         | NineMonthsendedSeptember 30,2004 |
| **Operatingactivities**                                                                  |  |                              |    |                             |  |   |   |    |
| Net earnings(loss)                                                                       |  | $                                 | 22.6    |                             |  | $      | (122.3 | )  |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |                              |    |                             |  |   |   |    |
| Depreciation                                                                             |  |                              | 100.0   |                             |  |   | 80.7   |    |
| Amortization                                                                             |  |                              | 61.4    |                             |  |   | 73.0   |    |
| In-processresearch anddevelopment                                                        |  |                              | — |                             |  |   | 122.3  |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |                              | 30.1    |                             |  |   | 36.4   |    |
| Other,net                                                                                |  |                              | 13.1    |                             |  |   | 21.1   |    |
| Changes inoperating assets andliabilities                                                |  |                              | (55.1   | )                           |  |   | 44.9   |    |
| Netcash provided by operatingactivities                                                  |  |                              | 172.1   |                             |  |   | 256.1  |    |
| **Investingactivities**                                                                  |  |                              |    |                             |  |   |   |    |
| Purchase priceadjustment on acquisition of Ondeo NalcoGroup                              |  |                              | (3.2    | )                           |  |   | 25.3   |    |
| Additions toproperty, plant, and equipment,net                                           |  |                              | (45.3   | )                           |  |   | (57.7  | )  |
| Other investingactivities                                                                |  |                              | 0.9     |                             |  |   | (5.1   | )  |
| Netcash used for investingactivities                                                     |  |                              | (47.6   | )                           |  |   | (37.5  | )  |
| **Financingactivities**                                                                  |  |                              |    |                             |  |   |   |    |
| Changes inshort-term debt,net                                                            |  |                              | 1.7     |                             |  |   | (38.1  | )  |
| Proceeds fromlong-term debt                                                              |  |                              | 24.1    |                             |  |   | 542.9  |    |
| Repaymentsof long-termdebt                                                               |  |                              | (130.8  | )                           |  |   | (318.6 | )  |
| Capitalcontributions                                                                     |  |                              | — |                             |  |   | 9.3    |    |
| Capitaldistributions                                                                     |  |                              | — |                             |  |   | (446.9 | )  |
| Other                                                                                    |  |                              | (5.6    | )                           |  |   | (1.9   | )  |
| Netcash used for financingactivities                                                     |  |                              | (110.6  | )                           |  |   | (253.3 | )  |
| Effect ofexchange rate changes on cash and cashequivalents                               |  |                              | (0.5    | )                           |  |   | (2.2   | )  |
| Increase(decrease) in cash and cashequivalents                                           |  |                              | 13.4    |                             |  |   | (36.9  | )  |
| Cash andcash equivalents at beginning ofperiod                                           |  |                              | 33.3    |                             |  |   | 100.0  |    |
| Cashand cash equivalents at end ofperiod                                                 |  | $                                 | 46.7    |                             |  | $      | 63.1   |    |
|                                                                                          |

Seeaccompanying notes to condensed consolidated financialstatements.

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NalcoHolding Company and Subsidiaries Notes to Condensed ConsolidatedFinancial Statements (Unaudited)

September 30,2005

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| 1.  | Descriptionof Business and Change in Ownership |

Description ofBusiness

Nalco Holding Company and subsidiaries (the Company)is engaged 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, ourindirect subsidiary, Nalco Holdings LLC (the Buyer), a newly-formedentity controlled by affiliates of The Blackstone Group, L.P., ApolloManagement, L.P., and The Goldman Sachs Group, Inc. (collectively, theSponsors), pursuant to a Stock Purchase Agreement, as amended, withSuez S.A. (Suez or Seller) and certain of its affiliates, acquired thenet assets of Ondeo Nalco Group for $4,127.1 million, including directcosts of the acquisition of $125.6 million, excluding assumed debt of$30.2 million, and subject to certain closing and post-closingadjustments (the Acquisition).

The Buyer was capitalized byequity investments totaling $991.9 million from the Sponsors and $10.0million from Dr. William H. Joyce, the Chairman and Chief ExecutiveOfficer of the Buyer. The equity investments were made to NalcoInvestment Holdings LLC which, in turn, contributed $1,001.9 million tothe Buyer and was its parent company until January 14, 2004. Fundingfor the Acquisition included the equity investments and the issuance ofsenior notes and senior subordinated notes in a private offering, andnew revolving credit and term loan facilities by the Buyer, through its100% owned subsidiary, Nalco Company.

The Stock PurchaseAgreement provided for certain adjustments of the purchase price,including adjustments based on the closing working capital andindebtedness (as both are defined in the Stock Purchase Agreement) ofthe Ondeo Nalco Group at the date of the Acquisition. On March 25,2004, the Buyer and Suez agreed to a $25.6 million working capitaladjustment payable to the Buyer plus interest. The Buyer recorded thepurchase price adjustment in 2004 by decreasing goodwill.

TheStock Purchase Agreement also provided for adjustments of the purchaseprice for taxes paid, or tax refunds received, by the Buyer for periodsprior to the Acquisition, to the extent not already taken into accountin the closing working capital at the date of the Acquisition. Duringthe year ended December 31, 2004, such purchase price adjustmentsresulted in a net payment of $0.3 million by the Buyer, which wasrecorded as an increase to goodwill. An additional purchase priceadjustment of $3.2 million paid by the Buyer in January 2005 was alsoaccrued and reflected as an increase to goodwill in 2004.

OnJanuary 14, 2004, Nalco Investment Holdings LLC contributed its100% interest in the Buyer to a newly formed entity, NalcoFinance Holdings LLC, in exchange for a 99% interest in NalcoFinance Holdings LLC. The remaining 1% interest in Nalco FinanceHoldings LLC was held indirectly by Nalco Investment Holdings LLCthrough its wholly owned subsidiary, Nalco Finance Holdings II Inc. Asof January 14, 2004, Nalco Finance Holdings LLC became the directparent company of the Buyer. Subsequent to that date, the Sponsors andDr. Joyce engaged in a series of transactions that ultimately resultedin a newly formed entity, Nalco LLC, becoming the indirect and ultimateparent company of Nalco Investment Holdings LLC, Nalco Finance HoldingsLLC, and the Buyer. Nalco LLC's interests in Nalco InvestmentHoldings LLC were held through its holdings of 100% of theinterests of each of BCP Nalco I LLC, BCP Nalco II LLC, APV Nalco LLC,GS Nalco LLC and JAG Nalco LLC (collectively, the Sponsor entities),which collectively held 100% of the interests of NalcoInvestment Holdings LLC.

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|          |                                                                 |
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| 1.  | Descriptionof Business and Change in Ownership (continued) |

On June 1, 2004, Nalco Investment HoldingsII LLC was formed as a direct subsidiary of Nalco LLC. On June 7, 2004,Nalco Investment Holdings II LLC merged with each of the Sponsorentities and was the surviving entity of such merger. As a result ofthe merger, Nalco Investment Holdings II LLC owned 100% of theequity interests of Nalco Investment Holdings LLC. On June 17, 2004,Nalco Investment Holdings II LLC was converted into a corporation namedNalco Investment Holdings II Corp. and was subsequently renamed NalcoHolding Company. Because the ultimate ownership of the entities in theCompany's financial statements did not change, such financialstatements have been presented as if Nalco Holding Company was theparent company since the date of the Acquisition.

As part of theallocation of the purchase price for the Acquisition, the Companyrecorded a one-time charge for purchased in-process research anddevelopment (IPR&D) expenses of $122.3 million during the ninemonths ended September 30, 2004. The value of purchased IPR&D wascomprised of five ongoing development projects at the date of theAcquisition. Purchased IPR&D was derived by assigning values tothose projects identified by management as having economic value, butthat had not yet reached technological feasibility and had noalternative future use. These products had not been released to themarket as of the date of the Acquisition, but the features andfunctionality of the products had been defined.

The consolidatedstatement of operations for the nine months ended September 30, 2004includes an additional $14.5 million in cost of products sold relatedto the sale of inventory that had been revalued at selling price lesscosts to sell in the allocation of the purchase price for theAcquisition.

In conjunction with the Acquisition, the Companyformulated a plan to exit or restructure certain activities. TheCompany recorded liabilities of $35.5 million, primarily for employeeseverance and related costs, in connection with the Company'splan to exit or restructure certain activities. The Company expects tocomplete these activities by the end of 2005. As of December 31, 2004,$3.8 million remained of this accrual; $0.7 million was charged againstit during the nine months ended September 30, 2005.

|          |                      |
|----------|----------------------|
| 2.  | Basisof Presentation |

These consolidated financial statements shouldbe read in conjunction with the consolidated and combined financialstatements and notes thereto included in the Annual Report for NalcoHolding Company and subsidiaries for the fiscal year ended December 31,2004.

The accompanying unaudited consolidated financialstatements have been prepared in accordance with generally acceptedaccounting principles for interim financial information. Accordingly,they do not include all of the information and footnotes required byaccounting principles generally accepted in the United States forcomplete financial statements. Management believes these financialstatements include all normal recurring adjustments considerednecessary for a fair presentation of the financial position and resultsof operations of the Company. Operating results for the nine monthsended September 30, 2005 are not necessarily indicative of results thatmay be expected for the year ended December 31, 2005.

Certainreclassifications have been made to the prior year data to conform tothe current year presentation which had no effect on net earnings(loss) reported for any period.

|          |                                     |
|----------|-------------------------------------|
| 3.  | Goodwilland Other Intangible Assets |

The changes in goodwill for theperiod were asfollows:

|                                                                    |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|--------|---------|---------|--|--|
| **(dollarsin millions)**                                           |  |   |    |    |
| Balance as of December 31,2004                                     |  | $      | 2,368.3 |    |
| Preacquisition income taxuncertainties and deferred taxadjustments |  |   | (69.7   | )  |
| Effect of foreigncurrencytranslation                               |  |   | (77.8   | )  |
| Balanceas of September 30,2005                                     |  | $      | 2,220.8 |    |
|                                                                    |

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|          |                                                      |
|----------|------------------------------------------------------|
| 3.  | Goodwilland Other Intangible Assets (continued) |

The Company has substantially completed areview of its accumulated deferred tax balances and determined thatcertain deferred tax liabilities were overstated. These liabilitiesprimarily relate to deferred taxes on intangible assets that shouldhave been reversed as part of the allocation of the purchase price forthe Acquisition. Therefore, goodwill and deferred tax liabilities havebeen reduced by $70.0 million.

The following table reflectsintangible assets and related amortizationinformation:

|                                              |  |                         |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------|--|-------------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                         |  | Asof September 30, 2005 |         | As of December 31,2004  |
| (dollars inmillions)                         |  | GrossAmount             |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject toamortization:     |  |                    |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Customerrelationships                        |  | $                       | 491.1   |                    |  | $           | (153.5  | )                  |  | $      | 506.6   |   |  | $      | (103.5  | )  |
| Patentsand developedtechnology               |  |                    | 100.5   |                    |  |        | (19.6   | )                  |  |   | 100.5   |   |  |   | (12.2   | )  |
| Other                                        |  |                    | 3.7     |                    |  |        | — |                    |  |   | 2.2     |   |  |   | — |    |
| Intangibleassets not subject toamortization: |  |                    |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Trademarksand tradenames                     |  |                    | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                         |  | $                       | 1,425.3 |                    |  | $           | (173.1  | )                  |  | $      | 1,439.3 |   |  | $      | (115.7  | )  |
|                                              |

|          |      |
|----------|------|
| 4.  | Debt |

Debt consists of thefollowing:

|                                              |  |                  |         |                 |  |        |         |        |  |  |
|----------------------------------------------|--|------------------|---------|-----------------|--|--------|---------|--------|--|--|
| (dollarsin millions)                         |  | September30,2005 |         | December31,2004 |
| **Short-term**                               |  |             |    |            |  |   |    |   |
| Checksoutstanding and bankoverdrafts         |  | $                | 17.1    |            |  | $      | 16.9    |   |
| Notes payableto banks                        |  |             | 0.7     |            |  |   | — |   |
| Currentmaturities of long-termdebt           |  |             | 0.7     |            |  |   | 0.8     |   |
|                                         |  | $                | 18.5    |            |  | $      | 17.7    |   |
| **Long-term**                                |  |             |    |            |  |   |    |   |
| Securitizedtrade accounts receivablefacility |  | $                | 78.7    |            |  | $      | 97.3    |   |
| Term loan A,due November 2009                |  |             | 120.2   |            |  |   | 218.4   |   |
| Termloan B, due November2010                 |  |             | 1,081.0 |            |  |   | 1,081.0 |   |
| Senior notes,due November 2011               |  |             | 905.8   |            |  |   | 937.4   |   |
| Seniorsubordinated notes, due November2013   |  |             | 705.8   |            |  |   | 737.4   |   |
| Unsecured notes,due May 2008                 |  |             | 27.8    |            |  |   | 27.8    |   |
| Seniordiscount notes, due February2014       |  |             | 346.0   |            |  |   | 324.2   |   |
| Other                                        |  |             | 1.7     |            |  |   | 2.1     |   |
|                                         |  |             | 3,267.0 |            |  |   | 3,425.6 |   |
| Less:Currentportion                          |  |             | 0.7     |            |  |   | 0.8     |   |
|                                         |  | $                | 3,266.3 |            |  | $      | 3,424.8 |   |
|                                              |

OnJanuary 21, 2004, the Company, through its 100% ownedsubsidiaries, Nalco Finance Holdings LLC and Nalco Finance HoldingsInc. (together, the Issuers), issued $694.0 million aggregate principalamount at maturity of 9.0% senior discount notes due 2014. Priorto February 1, 2009, interest will accrue on the senior discount notesin the form of an increase in the accreted value of such notes.Thereafter, cash interest on the senior discount notes will accrue andbe payable semiannually in arrears on February 1 and August 1 of eachyear, commencing on August 1, 2009, at a rate of 9.0% perannum.

7

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|          |                       |
|----------|-----------------------|
| 4.  | Debt (continued) |

The accreted value of each note willincrease from the date of issuance until February 1, 2009 at a rate of9.0% per annum, reflecting the accrual of non-cash interest,such that the accreted value will equal the principal amount atmaturity on February 1, 2009.

In December 2004, the Issuersredeemed a portion of the senior discount notes with an accreted valueof $162.3 million using proceeds from the initial public offering ofcommon stock of Nalco Holding Company. After the partial redemption,the aggregate principal amount at maturity of the notes declined to$460.8 million from $694.0 million. At September 30, 2005, the seniordiscount notes had an accreted value of approximately $745.85 per$1,000 principal amount at maturity of notes, resulting in a totalaccreted value of $343.7 million. The $2.3 million difference betweenthe carrying value of the notes and the total accreted value representsa premium, which is being amortized over the term of the notes.

The Company and the Issuers do not generate any revenue, and NalcoFinance Holdings Inc. was incorporated solely to accommodate theissuance of the notes by Nalco Finance Holdings LLC. All of theCompany's consolidated assets are owned, and all of theCompany's consolidated net sales are earned, by its direct andindirect subsidiaries. As of September 30, 2005, the Company'ssubsidiaries had $1,013.4 million of restricted net assets.

Theterms of Nalco Company's senior credit agreement fully prohibitNalco Holdings LLC and its subsidiaries from paying dividends orotherwise transferring their assets to the Issuers or the Company.Further, the terms of the indentures governing the senior notes andsenior subordinated notes of Nalco Company significantly restrict NalcoCompany and the Issuers' other subsidiaries from paying dividendsor otherwise transferring assets to the Issuers or the Company. Theability of Nalco Company to make such payments is governed by a formulabased on its consolidated net income, as well as meeting certain otherconditions. Notwithstanding such restrictions, such indentures permitan aggregate of $50.0 million of such payments to be made whether ornot there is availability under the formula or the conditions to itsuse are met. The Issuers' subsidiaries will be permitted underthe terms of the senior credit facilities and other indebtedness toincur additional indebtedness that may severely restrict or prohibitthe making of distributions, the payment of dividends or the making ofloans by such subsidiaries to the Issuers or the Company.

|          |                     |
|----------|---------------------|
| 5.  | Shareholders'Equity |

Shareholders' equity consists of thefollowing:

|                                                                                                                |  |                   |         |                   |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|---------|--|--|
| (dollarsin millions, except per shareamounts)                                                                  |  | September 30,2005 |         | December 31, 2004 |
| Preferred stock,par value $0.01 per share; authorized 100,000,000 shares; noneissued                           |  | $                 | — |              |  | $      | — |    |
| Commonstock, par value $0.0l per share; authorized 500,000,000 shares;141,663,369 shares issued andoutstanding |  |              | 1.4     |              |  |   | 1.4     |    |
| Additionalpaid-incapital                                                                                       |  |              | 739.1   |              |  |   | 738.8   |    |
| Accumulateddeficit                                                                                             |  |              | (140.3  | )            |  |   | (162.9  | )  |
| Accumulatedother comprehensiveincome:                                                                          |  |              |    |              |  |   |    |    |
| Derivatives                                                                                                    |  |              | 0.1     |              |  |   | (0.2    | )  |
| Foreigncurrency translationadjustment                                                                          |  |              | 91.2    |              |  |   | 133.3   |    |
| Totalshareholders'equity                                                                                       |  | $                 | 691.5   |              |  | $      | 710.4   |    |
|                                                                                                                |

8

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|          |                                               |
|----------|-----------------------------------------------|
| 6.  | Pensionand Other Postretirement Benefit Plans |

Thecomponents of net periodic pension cost and the cost of otherpostretirement benefits for the three months and nine months endedSeptember 30, 2005 and 2004 were asfollows:

|                              |  |                                      |      |                                      |  |                                     |      |                                    |  |        |       |         |  |        |       |         |  |  |
|------------------------------|--|--------------------------------------|------|--------------------------------------|--|-------------------------------------|------|------------------------------------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|                         |  | PensionBenefits                      |
| (dollars inmillions)         |  | Three Months endedSeptember 30, 2005 |      | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |      | Nine Monthsended September 30,2004 |
| Servicecost                  |  | $                                    | 7.9  |                                 |  | $                                   | 6.6  |                               |  | $      | 21.3  |    |  | $      | 21.1  |    |
| Interestcost                 |  |                                 | 10.8 |                                 |  |                                | 9.0  |                               |  |   | 30.3  |    |  |   | 29.1  |    |
| Expectedreturn on planassets |  |                                 | (6.9 | )                               |  |                                | (6.3 | )                             |  |   | (19.1 | )  |  |   | (19.9 | )  |
| Netperiodiccost              |  | $                                    | 11.8 |                                 |  | $                                   | 9.3  |                               |  | $      | 32.5  |    |  | $      | 30.3  |    |
|                              |

|                                  |  |                                      |      |                                      |  |                                     |         |                                     |  |        |      |         |  |        |         |        |  |  |
|----------------------------------|--|--------------------------------------|------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|------|---------|--|--------|---------|--------|--|--|
|                             |  | OtherPostretirement Benefits         |
| (dollars inmillions)             |  | Three Months endedSeptember 30, 2005 |      | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| Servicecost                      |  | $                                    | 1.4  |                                 |  | $                                   | 1.2     |                                |  | $      | 4.1  |    |  | $      | 4.1     |   |
| Interestcost                     |  |                                 | 2.2  |                                 |  |                                | 1.8     |                                |  |   | 6.5  |    |  |   | 6.2     |   |
| Amortizationof prior servicecost |  |                                 | (1.0 | )                               |  |                                | — |                                |  |   | (3.0 | )  |  |   | — |   |
| Netperiodiccost                  |  | $                                    | 2.6  |                                 |  | $                                   | 3.0     |                                |  | $      | 7.6  |    |  | $      | 10.3    |   |
|                                  |

InJanuary 2005, final regulations implementing the Medicare PrescriptionDrug, Improvement, and Modernization Act of 2003 (the Act) were issuedby the Centers for Medicare & Medicaid Services (CMS) of the U.S.Department of Health and Human Services. The final regulations clarifyhow companies providing retiree prescription drug benefits shoulddetermine if those benefits are actuarially equivalent to Medicare PartD coverage. Under the Act, a federal subsidy is available, beginning inJanuary 2006, to those companies providing prescription drug benefitsthat are actuarially equivalent to Medicare Part D coverage.

Based on the proposed regulations issued by CMS in July 2004, theCompany concluded that its retiree prescription drug benefit plan wasnot actuarially equivalent to Medicare Part D coverage and that it didnot qualify for the subsidy provided by the Act. However, as a resultof the final regulations issued in January 2005, the Company hasdetermined that its plan is actuarially equivalent, and the Companywill qualify for the subsidy.

As a result of qualifying for thesubsidy, the accumulated benefit obligation for the Company'sdefined postretirement benefit plans other than pensions has beenreduced by approximately $25.4 million as of January 2005. The serviceand interest cost components of other postretirement benefits expensewas reduced by $0.4 million and $0.4 million, respectively, for thenine months ended September 30, 2005.

|          |                               |
|----------|-------------------------------|
| 7.  | BusinessOptimization Expenses |

In addition to the Company's planto exit or restructure certain activities that was formulated inconjunction with the Acquisition, the Company is continuing to redesignand optimize its business and work processes. In June 2005, the Companyalso announced a plan to de-layer its management structure and toreduce costs in lower-performing business units. The plan calls for theelimination of approximately 220 positions, primarily in Europe andNorth America.

Business process optimizationexpenses, consisting mostly of employee severance and related costs,were $3.5 million and $21.3 million for the three months and ninemonths ended September 30, 2005, respectively, and included a $14.2million accrual for the restructuring plan announced in June 2005. Asof September 30, 2005, $3.6 million had been charged against theaccrual.

9

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|          |                                  |
|----------|----------------------------------|
| 8.  | Summaryof Other Income (Expense) |

The components of other income(expense), net for the three months and nine months ended September 30,2005 and 2004, include thefollowing:

|                                                 |  |                                      |         |                                     |  |                                     |         |                                     |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|--------------------------------------|---------|-------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)                            |  | Three Months endedSeptember 30, 2005 |         | Three Months endedSeptember30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| Impairment loss on business held forsale        |  | $                                    | — |                                |  | $                                   | — |                                |  | $      | (2.4    | )  |  | $      | — |    |
| Sponsor monitoringfees                          |  |                                 | — |                                |  |                                | (2.7    | )                              |  |   | — |    |  |   | (8.4    | )  |
| Franchisetaxes                                  |  |                                 | (0.6    | )                              |  |                                | (0.8    | )                              |  |   | (1.9    | )  |  |   | (2.3    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                                 | 0.3     |                                |  |                                | 1.1     |                                |  |   | 1.1     |    |  |   | 2.4     |    |
| Foreigncurrency exchangeadjustments             |  |                                 | 1.9     |                                |  |                                | 0.2     |                                |  |   | 3.3     |    |  |   | (1.0    | )  |
| Other                                           |  |                                 | (1.7    | )                              |  |                                | 1.0     |                                |  |   | (3.7    | )  |  |   | 2.8     |    |
|                                            |  | $                                    | (0.1    | )                              |  | $                                   | (1.2    | )                              |  | $      | (3.6    | )  |  | $      | (6.5    | )  |
|                                                 |

|          |             |
|----------|-------------|
| 9.  | IncomeTaxes |

The Company's effective income tax rate was47.8% for the nine months ended September 30, 2005. The ratevaries from the U.S. statutory income tax rate of 35% primarilydue to the incremental tax on dividends received from non-U.S.subsidiaries, foreign taxes provided at less than the 35% U.S.statutory rate, U.S. state income taxes, nondeductible expenses, andother permanent differences.

The aforementioned items alsocontributed to the variation between the U.S. statutory income tax rateand the Company's effective income tax rate for the nine monthsended September 30, 2004. In addition, the effective rate was impactedby the charge for purchased IPR&D, which is not tax deductible, anda valuation allowance for the income tax benefit on the interestexpense from the senior discount notes issued by Nalco Finance HoldingsLLC and Nalco Finance Holdings, Inc. in January 2004.

Avaluation allowance for the income tax benefit on the senior discountnote interest was recorded during the first nine months of 2004,pending a determination as to whether the deduction was realizable.During the fourth quarter of 2004, the valuation allowance for this taxbenefit was reversed when it was determined that the deduction could berealized.

The effective rate of the provision for income taxesdiffers from the U.S. statutory tax rate due to the followingitems:

|                                                 |  |                                      |         |                                      |  |                                     |         |                                     |  |        |         |        |  |        |       |         |  |  |
|-------------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|---------|--------|--|--------|-------|---------|--|--|
| (dollarsin millions)                            |  | Three Months endedSeptember 30, 2005 |         | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| U.S. statutory taxrate                          |  | $                                    | 13.0    |                                 |  | $                                   | 10.8    |                                |  | $      | 18.1    |   |  | $      | (25.2 | )  |
| IPR&D                                       |  |                                 | — |                                 |  |                                | — |                                |  |   | — |   |  |   | 42.8  |    |
| Valuationallowance – senior discountnotes |  |                                 | — |                                 |  |                                | 3.6     |                                |  |   | — |   |  |   | 9.8   |    |
| Other                                           |  |                                 | 5.1     |                                 |  |                                | 12.8    |                                |  |   | 6.6     |   |  |   | 19.4  |    |
| Incometaxprovision                              |  | $                                    | 18.1    |                                 |  | $                                   | 27.2    |                                |  | $      | 24.7    |   |  | $      | 46.8  |    |
|                                                 |

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

10

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|           |                            |
|-----------|----------------------------|
| 10.  | ComprehensiveIncome (Loss) |

Total comprehensive income (loss) and itscomponents, net of related tax, for the three months and nine monthsended September 30, 2005 and 2004, are asfollows:

|                                                       |  |                                      |        |                                      |  |                                     |         |                                     |  |        |        |         |  |        |         |         |  |  |
|-------------------------------------------------------|--|--------------------------------------|--------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|--------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)                                  |  | Three Months endedSeptember 30, 2005 |        | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| Net earnings(loss)                                    |  | $                                    | 17.4   |                                 |  | $                                   | 2.0     |                                |  | $      | 22.6   |    |  | $      | (122.3  | )  |
| Othercomprehensive income (loss), net of incometaxes: |  |                                 |   |                                 |  |                                |    |                                |  |   |   |    |  |   |    |    |
| Derivatives                                           |  |                                 | (0.4   | )                               |  |                                | — |                                |  |   | 0.3    |    |  |   | — |    |
| Foreigncurrency translationadjustments                |  |                                 | 3.9    |                                 |  |                                | 44.3    |                                |  |   | (42.1  | )  |  |   | (18.3   | )  |
| Comprehensiveincome(loss)                             |  | $                                    | 20.9   |                                 |  | $                                   | 46.3    |                                |  | $      | (19.2  | )  |  | $      | (140.6  | )  |
|                                                       |

|           |                    |
|-----------|--------------------|
| 11.  | SegmentInformation |

The Company provides integrated water treatment andprocess improvement services for industrial and institutionalapplications, using technologically advanced solutions, combiningchemical products and equipment, and consistent, reliable on-siteservice and expertise. These solutions and services enable theCompany's customers to improve production yields, lowermanufacturing costs, extend asset lives and maintain environmentalstandards at costs that represent a small share of their overallproduction expense.

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

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

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

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

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

The Company evaluates the performance of itssegments based on "direct contribution",which is defined as net sales, less cost of products sold (excludingvariances to standard costs), selling and service expenses, marketingexpenses and research expenses directly attributable to each segment.There are no intersegment revenues. Prior year data have beenreclassified between segments to conform to the current yearpresentation.

Net sales by reportable segment were asfollows:

|                                      |  |                                      |       |                                      |  |                                     |       |                                    |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------|--|--------------------------------------|-------|--------------------------------------|--|-------------------------------------|-------|------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
| (dollarsin millions)                 |  | Three Months endedSeptember 30, 2005 |       | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |       | Nine Months endedSeptember 30,2004 |
| Industrial and InstitutionalServices |  | $                                    | 382.4 |                                 |  | $                                   | 354.0 |                               |  | $      | 1,106.6 |   |  | $      | 1,032.4 |   |
| EnergyServices                       |  |                                 | 222.7 |                                 |  |                                | 200.4 |                               |  |   | 653.4   |   |  |   | 593.0   |   |
| PaperServices                        |  |                                 | 174.2 |                                 |  |                                | 164.6 |                               |  |   | 520.8   |   |  |   | 489.9   |   |
| Other                                |  |                                 | 55.6  |                                 |  |                                | 55.2  |                               |  |   | 168.0   |   |  |   | 112.6   |   |
| Netsales                             |  | $                                    | 834.9 |                                 |  | $                                   | 774.2 |                               |  | $      | 2,448.8 |   |  | $      | 2,227.9 |   |
|                                      |

11

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|           |                                     |
|-----------|-------------------------------------|
| 11.  | SegmentInformation (continued) |

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

|                                     |  |                                      |         |                                      |  |                                     |         |                                    |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|------------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)                |  | Three Months endedSeptember 30, 2005 |         | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months endedSeptember 30,2004 |
| Segment directcontribution:         |  |                                 |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices |  | $                                    | 98.0    |                                 |  | $                                   | 88.2    |                               |  | $      | 267.2   |    |  | $      | 258.7   |    |
| EnergyServices                      |  |                                 | 47.3    |                                 |  |                                | 42.1    |                               |  |   | 138.7   |    |  |   | 130.4   |    |
| PaperServices                       |  |                                 | 35.1    |                                 |  |                                | 37.0    |                               |  |   | 101.6   |    |  |   | 115.5   |    |
| Other                               |  |                                 | (14.3   | )                               |  |                                | (7.9    | )                             |  |   | (48.5   | )  |  |   | (56.3   | )  |
| Totalsegment directcontribution     |  |                                 | 166.1   |                                 |  |                                | 159.4   |                               |  |   | 459.0   |    |  |   | 448.3   |    |
| Expensesnot allocated tosegments:   |  |                                 |    |                                 |  |                                |    |                               |  |   |    |    |  |   |    |    |
| Administrativeexpenses              |  |                                 | 41.4    |                                 |  |                                | 41.7    |                               |  |   | 134.5   |    |  |   | 138.4   |    |
| Amortizationof intangibleassets     |  |                                 | 20.3    |                                 |  |                                | 23.9    |                               |  |   | 61.4    |    |  |   | 73.0    |    |
| In-processresearch anddevelopment   |  |                                 | — |                                 |  |                                | — |                               |  |   | — |    |  |   | 122.3   |    |
| Businessoptimizationexpenses        |  |                                 | 3.5     |                                 |  |                                | — |                               |  |   | 21.3    |    |  |   | — |    |
| Operatingearnings                   |  |                                 | 100.9   |                                 |  |                                | 93.8    |                               |  |   | 241.8   |    |  |   | 114.6   |    |
| Otherincome (expense),net           |  |                                 | (0.1    | )                               |  |                                | (1.2    | )                             |  |   | (3.6    | )  |  |   | (6.5    | )  |
| Interestincome                      |  |                                 | 2.1     |                                 |  |                                | 2.3     |                               |  |   | 6.2     |    |  |   | 7.7     |    |
| Interestexpense                     |  |                                 | (65.8   | )                               |  |                                | (64.0   | )                             |  |   | (192.7  | )  |  |   | (187.7  | )  |
| Earnings(loss) before incometaxes   |  | $                                    | 37.1    |                                 |  | $                                   | 30.9    |                               |  | $      | 51.7    |    |  | $      | (71.9   | )  |
|                                     |

Totalsegment direct contribution for the nine months ended September 30,2005 includes inventory write-offs of $9.0 million. Of this amount,$4.0 million, $2.9 million, $1.7 million, and $0.4 million was chargedto Paper Services, Other, Energy Services, and Industrial andInstitutional Services, respectively.

|           |                          |
|-----------|--------------------------|
| 12.  | Earnings(Loss) Per Share |

Basic earnings (loss) per share is computed bydividing net earnings (loss) by the weighted average number of commonshares outstanding during the period. Diluted earnings (loss) per sharereflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into commonstock or resulted in the issuance of common stock.

Basic anddiluted earnings (loss) per share were calculated asfollows:

|                                                                                                 |  |                                      |        |                                      |  |                                     |         |                                    |  |        |        |        |  |        |         |         |  |  |
|-------------------------------------------------------------------------------------------------|--|--------------------------------------|--------|--------------------------------------|--|-------------------------------------|---------|------------------------------------|--|--------|--------|--------|--|--------|---------|---------|--|--|
| (inmillions)                                                                                    |  | Three Months endedSeptember 30, 2005 |        | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months endedSeptember 30,2004 |
| Numerator for basic and diluted earnings(loss) per share:Net earnings(loss)                     |  | $                                    | 17.4   |                                 |  | $                                   | 2.0     |                               |  | $      | 22.6   |   |  | $      | (122.3  | )  |
| Denominatorfor basic earnings (loss) per share – weighted averagecommon sharesoutstanding |  |                                 | 141.7  |                                 |  |                                | 90.6    |                               |  |   | 141.7  |   |  |   | 90.6    |    |
| Effectof dilutivesecurities:                                                                    |  |                                 |   |                                 |  |                                |    |                               |  |   |   |   |  |   |    |    |
| Stockpurchasewarrant                                                                            |  |                                 | 4.9    |                                 |  |                                | — |                               |  |   | 4.9    |   |  |   | — |    |
| Denominatorfor diluted earnings (loss) pershare                                                 |  |                                 | 146.6  |                                 |  |                                | 90.6    |                               |  |   | 146.6  |   |  |   | 90.6    |    |
|                                                                                                 |

12

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|           |                                           |
|-----------|-------------------------------------------|
| 12.  | Earnings(Loss) Per Share (continued) |

As a result of a dividend consisting of90.6 million shares of Nalco Holding Company common stock that wasissued to Nalco LLC immediately prior to the consummation of theinitial public offering of Nalco Holding Company common stock inNovember 2004, net earnings (loss) per share has been adjustedretroactively for periods subsequent to the Acquisition and prior tothe fourth quarter 2004 to reflect this stock dividend.

|           |                             |
|-----------|-----------------------------|
| 13.  | Contingenciesand Litigation |

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

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

TheCompany's undiscounted reserves for known environmental clean upcosts were $2.0 million at September 30, 2005.

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 nine months ended September 30, 2005, relating toenvironmental compliance and clean up activities, were notsignificant.

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

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

The Company has received subpoenas from theU.S. Department of Justice for documents and testimony relating to itsstorage of claimed hazardous materials, the claimed leakage ofwastewater 

13

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|           |                                              |
|-----------|----------------------------------------------|
| 13.  | Contingenciesand Litigation (continued) |

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

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

|           |            |
|-----------|------------|
| 14.  | Guarantees |

No significant guarantees were outstanding at September 30, 2005,other than subsidiary-related performance guarantees.

TheCompany had $37.0 million of letters of credit outstanding at September30, 2005.

14

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|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations |

OnNovember 4, 2003, Nalco Holdings LLC, our subsidiary and a companyformed by The Blackstone Group, Apollo Management, L.P. and GS CapitalPartners (the "Sponsors"), purchased all ofthe outstanding shares of capital stock of Ondeo Nalco Company (whichis now known as Nalco Company) and the Nalco International SASSubsidiaries, which had been operated as a single business unit, fromsubsidiaries of Suez S.A. (Suez). In the following discussion andanalysis, we refer to this acquisition as the"Acquisition," and the term"Transactions" means, collectively, theAcquisition and the related financings to fund the Acquisition.

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 financial statements of Nalco HoldingCompany included elsewhere in this report.

"SafeHarbor" Statement Under Private Securities LitigationReform Act of 1995

This Quarterly Report for the fiscal quarterended September 30, 2005 (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 substantialleverage; |

|  |              |                                                                                      |
|--|--------------|--------------------------------------------------------------------------------------|
|  | •  | limitationson flexibility in operating our business contained in our debtagreements; |

|  |              |                                                                          |
|--|--------------|--------------------------------------------------------------------------|
|  | •  | increasesin interest rates as a result of our variable rateindebtedness; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | pricingpressure from ourcustomers; |

|  |              |                                                                                                                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | changesto, or elimination of, legal or regulatory requirements imposed uponour customers which could adversely affect portions of our business,such as that which serves the synthetic-fuelindustry; |

|  |              |                                    |
|--|--------------|------------------------------------|
|  | •  | technologicalchange andinnovation; |

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

|  |              |                                        |
|--|--------------|----------------------------------------|
|  | •  | fluctuationsin currency exchangerates; |

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

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | adversechanges to environmental, health and safetyregulations; |

|  |              |                                                |
|--|--------------|------------------------------------------------|
|  | •  | operatinghazards in our production facilities; |

15

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | inabilityto achieve expected costsavings; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | difficultiesin securing the raw materials weuse; |

|  |              |                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------|
|  | •  | oursignificant pension benefit obligations and the current underfunding inour pensionplans; |

|  |              |                                                               |
|--|--------------|---------------------------------------------------------------|
|  | •  | our abilityto realize the full value of our intangibleassets; |

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

|  |              |                                                            |
|--|--------------|------------------------------------------------------------|
|  | •  | ourability to protect our intellectual property rights;and |

|  |              |                                                                            |
|--|--------------|----------------------------------------------------------------------------|
|  | •  | thepossibility that our owners' interests will conflict with ours oryours. |

There may be other factors that may cause our actualresults to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons actingon our behalf apply only as of the date of this Quarterly Report andare expressly qualified in their entirety by the cautionary statementsincluded in this Quarterly Report. We undertake no obligation to updateor revise forward-looking statements which may be made to reflectevents or circumstances that arise after the date made or to reflectthe occurrence of unanticipated events.

Executive LevelOverview

Our sales grew 7.8% for the three months endedSeptember 30, 2005 to $834.9 million, including 6.4% in organicimprovement that excludes foreign currency and divestiture impacts. Ofthis organic improvement, price represents 5.4%, orapproximately $42 million. We have consistently reminded our salesforce that our goal this year is to ensure that we capture pricing, andnot just incremental service and product volume, to offset higher costswe continue to experience. Changes in foreign currency translationrates added 1.5% to sales growth in the third quarter, whiledivestitures reduced sales by 0.1%.

Energy Servicessegment sales jumped 11.1% in the third quarter, including9.5% organic improvement. Customer operation shutdowns in theGulf of Mexico prior to and following the hurricanes limited growth inour oil field service business – including a HurricaneDennis-initiated delay of the operational start of a large new platformwe had expected to begin serving in the fourth quarter. However, wegrew at double-digit paces in our exploration service, refinery andpetrochemical units.

Industrial and Institutional Services salesincreased 8.0% in the third quarter, of which 6.5% wasorganic. Strong organic sales growth in North America, Latin Americaand the Pacific region contributed to this improvement. Areas ofweakness included the U.S. chemical sector, again impacteddisproportionately by the hurricanes, and our water treatmentoperations in Europe. In North America, water treatment sales wereparticularly strong in our Power and Institutional segments. Several ofthe global process application groups in the segment recordeddouble-digit organic growth rates.

Paper Services segment salesincreased 5.8%, of which 4.3% was organic. Strong growthin Asia, and particularly in China, led this expansion. Organic salesto Paper customers in North America and Latin America also grew atmid-single-digit rates, offsetting a sales decline in Europe. Therevenue decline in Europe was primarily caused by continued slowproduction following the conclusion of the Finnish labor strike and bythe closure of a large customer.

Organic and nominal sales grewfaster in the three months ended September 30, 2005 than for the firstnine months of 2005 for the Energy Services and Industrial andInstitutional Services segments, but slower in the Paper segment.

16

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Third quarter sales in the Other segmentwere flat, despite double-digit growth in India and good growth in analternate channels business. Year-to-date, sales in the Other segmentare up 15.2% organically, but 49.2% overall. Nominalsales growth was higher than organic sales growth primarily as a resultof the creation of the Katayama Nalco joint venture in Japan, which wasinitiated June 1, 2004.

Through the first nine months of 2005,total Company revenues grew 9.9% on a nominal basis, with6.6% of the sales growth coming from organic sales improvement.Price contributed 4.3% of the 6.6% improvement. Duringthe first nine months, price increases added approximately $95 millionto sales, while costs for raw and purchased materials and freightincreased by about $123 million.

Net earnings rose to $17.4million, or 12 cents per share, in the three months ended September 30,2005 from $2.0 million, or 2 cents per share, in the three months endedSeptember 30, 2004. Lower income tax expense drove much of theimprovement. Pre-tax earnings were reduced by an estimated $6 millionas a result of hurricane-related cost increases and lost sales incurredduring the quarter. No potential insurance recoveries related to thehurricanes are factored into our results.

Net earnings for theyear-to-date improved to $22.6 million from a year-ago loss of $122.3million. The year-ago loss included a $122.3 million, non-cash purchaseaccounting-related expense for In Process Research and Development.

Gross margin levels improved from 42.6% in the second quarterto 45.2% in the third quarter in part on the strength of priceimprovement. For the first time this year, quarterly price increases ofabout $42 million exceeded higher raw material, purchased material andfreight costs in the quarter of approximately $40 million. Versus theyear-ago quarter, however, gross margins were 300 basis points lower.About 220 points of the margin deterioration was caused by priceincreases only being modestly above year-on-year cost increases for thequarter.

In addition to increases in cost pressures, rawmaterial availability constraints are also creating operationalinefficiencies. Currently, raw materials that face supply constraintsinclude: caustic soda, some ethylene-based materials and some solventsand alcohols.

Weakness in Europe also impacted theCompany's third quarter results and its near-term performanceexpectations.

Total debt was reduced by $109.9 million and cashincreased by $7.3 million during the three months ended September 30,2005. We repaid $88 million on Term Loan A and $24 million in revolverdebt that was outstanding at June 30. Interest continues to accrete toour senior discount notes. Cash generated by operating activitiesduring the period was elevated by the benefits of our second quarterinventory reduction program.

During October, we receivedapproval from our creditors to simplify our organizational structureoverseas to more closely match the reporting structures of ourorganization. These changes will also facilitate movement of workingcapital and may improve our cash movement by reducing withholding taxlevels on dividends we repatriate to service debt.

During thethree months ended September 30, 2005, we substantially completed areview of the accumulated deferred tax balances and determined thatcertain deferred tax liabilities were overstated. These liabilitiesprimarily relate to deferred taxes on intangible assets that shouldhave been reversed as part of purchase accounting. Therefore, deferredtax liabilities and goodwill were each adjusted downward by $70million.

Our estimated effective tax rate for 2005 is now47.8%, and we have made the necessary adjustment in the thirdquarter to put the year-to-date income tax provision at this level.This rate is higher than our prior projection of 45.2%. The taxcost of repatriating certain foreign earnings is relatively unchanged,and is the primary reason our income tax provision does not decreaseproportionately with decreases in projected pre-tax earnings.

17

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Outlook

Gulf of Mexico oiland gas production, and on-shore refining and petrochemical operationsare taking longer to re-start than originally expected. We project thattotal lost sales as a result of these closures will now totalapproximately $12 million in the fourth quarter. Hurricanes Katrina,Rita and Dennis all were responsible for portions of the expected saleslosses. Some rig closures in the Gulf of Mexico now look like they willextend into 2006. We also expect pre-tax earnings to be reduced by $26million, bringing the total estimated 2005 hurricane pre-tax earningsimpact to $32 million.

On a global basis, we have seen this yearthe largest push-through of raw material costs in at least 30 years,combined with hurricanes that have had the largest impact on Nalco ofany natural events as far as we can find in the 77-year history of theCompany. Growth in the face of this year's challenges shows thestrength of our business model.

As we restore margins throughcontinued pricing moves and program upgrades and substitutions, we arealso refocusing our sales engineers on selling efforts to restorevolume growth rates. Our water and process programs by designfrequently play an important role in reducing customer energyconsumption, and this environment of extraordinarily high energy costsis conducive to promoting our fundamental value proposition.

Forexample, our 3D TRASAR® cooling water stress managementsystem provides a much higher level of contaminant control in coolingtowers, significantly reducing energy requirements in cooling toweroperations versus competitive offerings. A new SMARTSolutionsTM for Efficiency offering we recently introducedto Paper Services customers provides up to 10% to 15%energy savings on each ton of paper produced, in addition to otherefficiency benefits. Scale and fouling control programs in boilers,refinery processes and other customer operations also reduce energyconsumption, while cutting maintenance costs, extending the life ofassets, and providing other customer benefits.

Results ofOperations

Quarter Ended September 30, 2005 Compared tothe Quarter Ended September 30, 2004

Net sales for the threemonths ended September 30, 2005 and September 30, 2004 may be comparedasfollows:

|                                       |  |                   |       |                    |  |                                               |       |                     |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |     |         |  |  |
|---------------------------------------|--|-------------------|-------|--------------------|--|-----------------------------------------------|-------|---------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|-----|---------|--|--|
|                                  |  | ThreeMonths ended |       |               |  | Attributable toChangesin the FollowingFactors |
| (dollars inmillions)                  |  | September 30,2005 |       | September 30, 2004 |  | %Change                                       |       | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial& InstitutionalServices |  | $                 | 382.4 |               |  | $                                             | 354.0 |                |  |                      | 8.0  | %  |  |   | 1.5 | %  |  |   | -    | %   |  |   | 6.5 | %  |
| EnergyServices                        |  |              | 222.7 |               |  |                                          | 200.4 |                |  |                      | 11.1 | %  |  |   | 1.6 | %  |  |   | -    | %   |  |   | 9.5 | %  |
| PaperServices                         |  |              | 174.2 |               |  |                                          | 164.6 |                |  |                      | 5.8  | %  |  |   | 1.5 | %  |  |   | -    | %   |  |   | 4.3 | %  |
| Other                                 |  |              | 55.6  |               |  |                                          | 55.2  |                |  |                      | 0.9  | %  |  |   | 1.5 | %  |  |   | (1.6 | %)  |  |   | 1.0 | %  |
| Netsales                              |  | $                 | 834.9 |               |  | $                                             | 774.2 |                |  |                      | 7.8  | %  |  |   | 1.5 | %  |  |   | (0.1 | %)  |  |   | 6.4 | %  |
|                                       |

Netsales for the three months ended September 30, 2005 were $834.9million, a 7.8% increase from the $774.2 million reported forthe three months ended September 30, 2004. On an organic basis, whichexcludes the impacts of changes in foreign currency translation ratesand acquisitions and divestitures, net sales were up 6.4%. Ofthis improvement, 5.4% was attributed to price increases. Theremaining 1.0% was driven by sales growth, which was reduced byan estimated 0.5% due to hurricane-related sales losses. TheEnergy Services division posted strong organic growth in sales of9.5%, with slightly more than half of this improvement theresult of price increases. The Energy Services division was the mostaffected by the Gulf hurricanes, and organic growth would have been anestimated 1.6% higher if sales had not been lost due to thehurricanes. The Industrial and Institutional Services division reportedorganic growth of 6.5%. While this improvement was mostly

18

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

attributable to price increases, solid growthwas posted by our water treatment business in the Latin American andPacific regions and certain of our North American water treatment andglobal process service units. Lower water treatment sales in Europeoffset a portion of these gains. Organically, Paper Services divisionsales were up 4.3% compared to a year ago, as continued stronggrowth in the Pacific region and a more modest gain in North Americamore than offset a sales decline in Europe caused by continued slowproduction following the conclusion of the Finnish labor strike and theclosure of a large customer in the U.K. Price increases alsocontributed to organic growth in Paper Services sales in North Americaand Latin America. The organic increase in"other" sales was attributable to improvedalternative channel sales and our subsidiary company in India, partlyoffset by the effects of a variation in revenue recognition adjustmentsand a decision made in late 2003 to reduce certain low-margin businesswith a major customer.

Gross profit**,**defined asthe difference between net sales and cost of product sold, of $377.3million for the three months ended September 30, 2005 increased by $4.4million, or 1.2%, from the $372.9 million reported for thequarter ended September 30, 2004. On an organic basis, gross profitdecreased by $0.5 million, with unfavorable manufacturing volumevariances accounting for this change. The gross profit margin was45.2% for the three months ended September 30, 2005 compared to48.2% for the year-ago period, as increases in the sellingprices of our products were largely offset by higher costs of raw andother purchased materials.

Selling, administrative, andresearch expenses for the three months ended September 30, 2005 of$252.6 million decreased by $2.6 million, or 1.0%, from $255.2million for the three months ended September 30, 2004. On an organicbasis, selling, administrative, and research expenses decreased by $5.5million, or 2.2%, reflecting further initiatives to reduce andcontrol spending. This decrease was partly offset by the effect ofchanges in foreign currency translation rates.

Amortizationof intangible assets was $20.3 million and $23.9 million for thethree months ended September 30, 2005 and 2004, respectively. Thedecrease was attributable to lower amortization of customerrelationships, which are amortized using an accelerated method.

Business optimization expenses, representing mostlyemployee severance and related costs, were $3.5 million for the threemonths ended September 30, 2005.

Other income (expense),net was a net expense of $0.1 million and $1.2 million for thethree months ended September 30, 2005 and 2004, respectively. InNovember 2004, the Company terminated the monitoring services providedto the Company by affiliates of the Sponsors. Monitoring fees for suchservices were $2.7 million for the three months ended September 30,2004. Also contributing to the variance from the year-ago quarter werehigher foreign currency transaction gains of $1.7 million. Partlyoffsetting these favorable variations were losses from asset disposalsof $2.6 million and a $0.8 million decrease in equity in earnings ofunconsolidated subsidiaries.

Net interest expense,defined as the combination of interest income and interest expense, of$63.7 million for the three months ended September 30, 2005 increasedby $2.0 million from the $61.7 million reported for the three monthsended September 30, 2004. The impact of higher interest rates onvariable rate borrowings more than offset the impact of a lower averagedebt level compared to the year-ago period.

The effectivetax rate for the three months ended September 30, 2005 was48.8%. The rate varies from the U.S. statutory income tax rateof 35% primarily due to the incremental tax on dividendsreceived from non-U.S. subsidiaries, foreign taxes provided at lessthan the 35% U.S. statutory rate, U.S. state income taxes,nondeductible expenses, and other permanent differences.

Theseitems also contributed to the variation between the U.S. statutoryincome tax rate and the Company's effective income tax rate forthe three months ended September 30, 2004. In addition, the effectiverate was impacted by a valuation allowance for the income tax benefiton the interest 

19

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

expense from the senior discount notes issuedby Nalco Finance Holdings LLC and Nalco Finance Holdings, Inc. inJanuary 2004. A valuation allowance for the income tax benefit on thesenior discount note interest was recorded during the first nine monthsof 2004, pending a determination as to whether the deduction wasrealizable. During the fourth quarter of 2004, the valuation allowancefor this tax benefit was reversed when it was determined that thededuction could be realized.

The American Jobs Creation Act of2004 (the "Jobs Creation Act") created aone-time incentive for American companies to repatriate earnings fromtheir foreign subsidiaries. We have completed a comparison of thebenefits available under the Jobs Creation Act to those under otherstrategies for global cash and debt management, and we have comparedthe benefits of implementing the incentive to the costs required toimplement it. Based upon this analysis, we have decided not tostructure our earnings repatriation under the provisions of the JobsCreation Act.

Minority interest expense of $1.6 millionfor the three months ended September 30, 2005 was slightly lower thanthe $1.7 million for the year-ago quarter.

Nine monthsEnded September 30, 2005 Compared to the Nine Months Ended September30, 2004

Net sales for the nine months ended September 30, 2005and September 30, 2004 may be compared asfollows:

|                                       |  |                   |         |                    |  |                                               |         |                     |  |                           |      |         |  |        |     |         |  |        |      |          |  |        |      |         |  |  |
|---------------------------------------|--|-------------------|---------|--------------------|--|-----------------------------------------------|---------|---------------------|--|---------------------------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|---------|--|--|
|                                  |  | NineMonths ended  |         |               |  | Attributable toChangesin the FollowingFactors |
| (dollars inmillions)                  |  | September 30,2005 |         | September 30, 2004 |  | %Change                                       |         | CurrencyTranslation |  | Acquisitions/Divestitures |      | Organic |
| Industrial& InstitutionalServices |  | $                 | 1,106.6 |               |  | $                                             | 1,032.4 |                |  |                      | 7.2  | %  |  |   | 2.2 | %  |  |   | (0.2 | )%  |  |   | 5.2  | %  |
| EnergyServices                        |  |              | 653.4   |               |  |                                          | 593.0   |                |  |                      | 10.2 | %  |  |   | 2.1 | %  |  |   | (0.9 | )%  |  |   | 9.0  | %  |
| PaperServices                         |  |              | 520.8   |               |  |                                          | 489.9   |                |  |                      | 6.3  | %  |  |   | 2.4 | %  |  |   | (0.7 | )%  |  |   | 4.6  | %  |
| Other                                 |  |              | 168.0   |               |  |                                          | 112.6   |                |  |                      | 49.2 | %  |  |   | 3.0 | %  |  |   | 31.0 | %   |  |   | 15.2 | %  |
| Netsales                              |  | $                 | 2,448.8 |               |  | $                                             | 2,227.9 |                |  |                      | 9.9  | %  |  |   | 2.2 | %  |  |   | 1.1  | %   |  |   | 6.6  | %  |
|                                       |

Netsales for the nine months ended September 30, 2005 were $2,448.8million, a 9.9% increase from the $2,227.9 million reported forthe nine months ended September 30, 2004. On an organic basis, whichexcludes the impacts of changes in foreign currency translation ratesand acquisitions and divestitures, net sales were up 6.6%. Ofthis improvement, 4.3% was attributed to price increases, whilethe remaining 2.3% was driven by favorable sales growth broadlyspread across our customer base. The Energy Services division reporteda strong organic improvement in sales of 9.0%, more than half ofwhich represented growth. The Industrial and Institutional Servicesdivision reported organic growth of 5.2%, which was mostlyattributable to price increases. However, solid gains, exclusive ofprice increases, were posted by our water treatment business in theLatin American and Pacific regions, as well as our Pacific regionmining business. These gains were offset by sales declines, exclusiveof price increases, in North America and, more notably, Europe.Difficulties in adapting work processes following our SAP systemconversion in Europe on January 1, 2005 and the generally slowereconomy in our largest western European markets were among the causesof the sales decline in Europe. Higher sales during the three monthsended December 31, 2004 was another contributing factor, as Europeancustomers purchased in advance to avoid risking any potentialcomplications from the system conversion. Solid growth in the LatinAmerica and Pacific regions and a more modest improvement in NorthAmerica contributed to the 4.6% organic growth in Paper Servicesdivision sales. These improvements were partly offset by lower PaperServices sales in Europe, resulting from labor strikes faced by ourFinnish customers and the aforementioned factors that affectedIndustrial and Institutional Services sales in the region. Most of theorganic improvement in "other" sales wasattributable to alternate channel sales, our subsidiary company inIndia, and our Japanese joint venture, Katayama Nalco. The increase in"other" sales attributable toacquisitions/divestitures represents the incremental impact of salesfor the first five months of 2005 by Katayama Nalco, which was formedwith Katayama Chemical Inc. on June 1, 2004.

20

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Gross profit**,**defined asthe difference between net sales and cost of product sold, of $1,098.9million for the nine months ended September 30, 2005 increased by $18.9million, or 1.8%, over the $1,080.0 million reported for thenine months ended September 30, 2004. On an organic basis and excludingthe impact of a $14.5 million charge to cost of product sold during thenine months ended September 30, 2004 resulting from the sale ofinventory that had been revalued at selling price less costs to sell inpurchase accounting at the date of the Acquisition, gross profitdecreased by $29.3 million. This was primarily attributable to highercosts of raw and other purchased materials, partly offset by the impactof increases in the selling prices of our products. Gross profit marginfor the nine months ended September 30, 2005 was 44.9% comparedto 48.5% for the year-ago period. Gross profit margin for thenine months ended September 30, 2004 was reduced approximately 65 basispoints as a result of the aforementioned $14.5 million charge resultingfrom purchase accounting.

Selling, administrative, andresearch expenses for the nine months ended September 30, 2005 of$774.4 million increased by $4.3 million, or 0.6%, from $770.1million for the nine months ended September 30, 2004. On an organicbasis, selling, administrative, and research expenses decreased by$19.4 million, or 2.5%, reflecting continuing efforts to reduceand control spending. This decrease was more than offset by the effectof changes in foreign currency translation rates and the incrementalimpact of expenses of Katayama Nalco for the first five months of2005.

Amortization of intangible assets was $61.4million and $73.0 million for the nine months ended September 30, 2005and 2004, respectively. The decrease was attributable to loweramortization of customer relationships, which are amortized using anaccelerated method.

In-process research and developmentwas a one-time charge of $122.3 million recorded during the nine monthsended September 30, 2004, as a result of purchase accounting related tothe Acquisition. The value of purchased IPR&D was comprised of fiveongoing development projects at the date of the Acquisition. PurchasedIPR&D was derived by assigning values to those projects identifiedby management as having economic value, but that had not yet reachedtechnological feasibility and had no alternative future use.

Business optimization expenses, representing mostlyemployee severance and related costs, were $21.3 million for the ninemonths ended September 30, 2005, and included a $14.2 million chargerecorded in June to support a plan to de-layer our management structureand reduce costs in lower-performing business units. The plan calls forthe elimination of approximately 220 positions, primarily in Europe andNorth America.

Other income (expense), net was a netexpense of $3.6 million and $6.5 million for the nine months endedSeptember 30, 2005 and 2004, respectively. In November 2004, theCompany terminated the monitoring services provided to the Company byaffiliates of the Sponsors. Monitoring fees for such services were $8.4million for the nine months ended September 30, 2004. Also contributingto the decrease in net other expense was a favorable change in foreigncurrency transaction gains and losses of $4.3 million. A $2.4 millionimpairment charge in 2005 related to a business held for sale, anincrease in losses from asset write-offs and disposals of $5.9 million,and a $1.3 decrease in equity in earnings of unconsolidatedsubsidiaries partly offset these favorable variations.

Netinterest expense, defined as the combination of interest incomeand interest expense, of $186.5 million for the nine months endedSeptember 30, 2005 increased by $6.5 million from the $180.0 millionreported for the nine months ended September 30, 2004. The impact ofhigher interest rates on variable rate borrowings more than offset theimpact of a lower average debt level compared to the year-agoperiod.

The effective tax rate for the nine monthsended September 30, 2005 was 47.8%. The rate varies from theU.S. statutory income tax rate of 35% primarily due to theincremental tax on dividends received from non-U.S. subsidiaries,foreign taxes provided at less than the 35% U.S. statutory rate,U.S. state income taxes, nondeductible expenses, and other permanentdifferences.

21

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

These items also contributed to thevariation between the U.S. statutory income tax rate and theCompany's effective income tax rate for the nine months endedSeptember 30, 2004. In addition, the effective rate was impacted by thecharge for purchased IPR&D, which is not tax deductible, and avaluation allowance for the income tax benefit on the interest expensefrom the senior discount notes issued by Nalco Finance Holdings LLC andNalco Finance Holdings, Inc. in January 2004.

A valuationallowance for the income tax benefit on the senior discount noteinterest was recorded during the first nine months of 2004, pending adetermination as to whether the deduction was realizable. During thefourth quarter of 2004, the valuation allowance for this tax benefitwas reversed when it was determined that the deduction could berealized.

Minority interest expense was $0.8 millionhigher than the $3.6 million for the nine months ended September 30,2004, reflecting improved results for most of the Company'snon-wholly owned subsidiaries.

Liquidity and CapitalResources

Operating activities. Historically, theCompany's main source of liquidity has been its solid cash flowgenerated by operating activities. For the nine months ended September30, 2005, cash provided by operating activities was $172.1 million, adecrease of $84.0 million from the same period last year. This decreasewas mostly attributable to higher working capital requirements, mostnotably for accounts payable. Also contributing was the payment ofyear-end incentive plan and commission accruals.

Investingactivities. Cash used for investing activities was $47.6million for the nine months ended September 30, 2005, which was mostlyattributable to net property additions of $45.3 million.

Cashused for investing activities was $37.5 million for the nine monthsended September 30, 2004. This was mostly the result of net propertyadditions of $57.7 million, partly offset by $25.3 million of netpurchase price adjustments received from Suez related to theAcquisition. Approximately 40% of the capital spending wasattributable to our SAP information systems project in Europe.

Financing activities**.** Net cash used for financingactivities totaled $110.6 million during the nine months endedSeptember 30, 2005, which was mostly attributable to a net decrease inborrowings.

Net cash used for financing activities totaled$253.3 million during the nine months ended September 30, 2004. Thiswas primarily comprised of repayment of borrowings since the proceedsof the senior discount notes issued in January 2004 were used to make areturn of capital distribution to the Company's sole shareholderat the time of the distribution and to pay fees and expenses related tothat offering.

Since the Transactions, we have been highlyleveraged. Our liquidity requirements are significant, primarily due todebt service requirements as well as research and development andcapital investment. Our primary source of liquidity will continue to becash flow generated from operations, but we also have availabilityunder a $250 million revolving credit facility and a $100 millionreceivables facility, in each case subject to certain conditions. Webelieve that our financial position and financing structure willprovide flexibility in worldwide financing activities and permit us torespond to changing conditions in credit markets.

Seniorcredit facilities. On November 4, 2003, we entered into seniorcredit facilities which provided for a revolving credit facility, a$300 million six-year term loan A facility (which includes an€88.0 million tranche) which matures in November 2009 anda $1,300 million seven-year term loan B facility which matures inNovember 2010. Borrowings under the senior credit facilities bearinterest at a floating base rate plus an applicable margin. Theapplicable margin for borrowings under the revolving credit facilityand the term loan A facility is 1.50% with respect to base rateborrowings and 2.50% with respect to LIBOR or Eurocurrencyborrowings and may be reduced subject to our attaining certain leverageratios. The applicable margin for borrowings under the term loan Bfacility is 1.50% 

22

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

with respect to base rate borrowings and2.00% with respect to LIBOR or Eurocurrency borrowings. Theapplicable margin for borrowings under the term loan B facility is notsubject to adjustment.

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 will amortize each year in quarterlyamounts at a rate of 5% per annum in year one, 10% perannum in year two, 15% per annum in year three, 20% perannum in year four and 25% per annum in each of years five andsix.

The term loan B facility will amortize each year in anamount equal to 1% per annum in equal quarterly installments forthe first six years and nine months, with the remaining amount payableon November 4, 2010.

At September 30, 2005, the outstandingbalance of the term loan A and term loan B facilities was $120.2million and $1,081.0 million, respectively.

Principal amountsoutstanding under the revolving credit facility will be due and payablein full at maturity on November 4, 2009. At September 30, 2005, noborrowings were outstanding under the revolving credit facility.

The senior credit facilities contain a number of covenants that,among other things, restrict, subject to certain exceptions, ourability and the ability of our subsidiaries (including Nalco Company)to sell assets, incur additional indebtedness or issue preferred stock,repay other indebtedness, pay dividends and distributions or repurchasecertain capital stock, create liens on assets, make investments, loansor advances, make certain acquisitions, engage in mergers orconsolidations, enter into sale and leaseback transactions, engage incertain transactions with affiliates, amend certain material agreementsgoverning our indebtedness, change the business conducted by us and oursubsidiaries (including Nalco Company) and enter into hedgingagreements. In addition, the senior credit facilities require NalcoCompany to maintain the following significant financial covenants: amaximum total leverage ratio, a minimum interest coverage ratio and amaximum capital expenditures limitation. We were in compliance with allcovenants at September 30, 2005.

Senior notes, seniorsubordinated notes and senior discount notes. As part of theTransactions in November 2003, Nalco Company issued $665 millionaggregate principal amount of 73⁄4% U.S. dollar-denominatedsenior notes due 2011, €200 million aggregate principalamount of 73⁄4% euro-denominated senior notes due 2011,$465 million aggregate principal amount of8 7/8% U.S. dollar-denominated seniorsubordinated notes due 2013 and €200 million aggregateprincipal amount of 9% euro-denominated senior subordinatednotes due 2013.

On January 21, 2004, our subsidiaries, NalcoFinance Holdings LLC and Nalco Finance Holdings Inc., issued $694.0million aggregate principal amount at maturity of 9.0% seniordiscount notes due 2014. Prior to February 1, 2009, interest willaccrue on the notes in the form of an increase in the accreted value ofsuch notes. The accreted value of each note will increase from the dateof issuance until February 1, 2009 at a rate of 9.0% per annum,reflecting the accrual of non-cash interest, such that the accretedvalue will equal the principal amount at maturity on February 1, 2009.Cash interest payments on the notes will be due and payable beginningin 2009. Our primary source of liquidity for such payments will be cashflow generated from the operations of subsidiaries, including NalcoHoldings LLC and Nalco Company. However, the terms of NalcoCompany's senior credit agreement fully prohibit Nalco HoldingsLLC and our other subsidiaries from paying dividends or otherwisetransferring assets to the issuers. In addition, the terms of certainof the indentures governing the existing senior notes and seniorsubordinated notes of Nalco Company significantly restrict NalcoCompany and our other subsidiaries from paying dividends, makingdistributions and otherwise transferring assets to the issuers of thesenior discount notes. For example, the ability of Nalco 

23

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Company to make such payments is governed bya formula based on 50% of its consolidated net income (which, asdefined in such indentures, excludes impairment charges, amortizationcharges from purchase accounting and any after-tax extraordinary,unusual or nonrecurring gains and losses).

In addition, as acondition to making such payments to the issuers based on such formula,Nalco Holdings LLC must have an Adjusted EBITDA to interest expenseratio of at least 2.0 to 1 after giving effect to any such payments.Notwithstanding such restrictions, such indentures permit an aggregateof $50.0 million of such payments to be made whether or not there isavailability under the formula or the conditions to its use aremet.

In December 2004, Nalco Finance Holdings LLC and NalcoFinance Holdings Inc. redeemed a portion of the senior discount noteswith an accreted value of $162.3 million using proceeds from theNovember 2004 initial public offering of common stock of Nalco HoldingCompany. After the partial redemption, the aggregate principal amountat maturity of the notes declined to $460.8 million from $694.0million.

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

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

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

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

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

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

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

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

Subject to certainexceptions, the indentures governing the senior notes, the seniorsubordinated notes, and the senior discount notes permit the Companyand our restricted subsidiaries to incur additional indebtedness,including secured indebtedness.

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

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

24

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Adjusted EBITDA is calculated asfollows:

|                                  |  |                                      |       |                                      |  |                                     |         |                                     |  |        |       |         |  |        |         |         |  |  |
|----------------------------------|--|--------------------------------------|-------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)             |  | Three Months endedSeptember 30, 2005 |       | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| Net earnings(loss)               |  | $                                    | 17.4  |                                 |  | $                                   | 2.0     |                                |  | $      | 22.6  |    |  | $      | (122.3  | )  |
| Interest,net                     |  |                                 | 63.7  |                                 |  |                                | 61.7    |                                |  |   | 186.5 |    |  |   | 180.0   |    |
| Incometaxprovision               |  |                                 | 18.1  |                                 |  |                                | 27.2    |                                |  |   | 24.7  |    |  |   | 46.8    |    |
| Depreciation                     |  |                                 | 33.3  |                                 |  |                                | 23.8    |                                |  |   | 100.0 |    |  |   | 80.7    |    |
| Amortization                     |  |                                 | 20.3  |                                 |  |                                | 23.9    |                                |  |   | 61.4  |    |  |   | 73.0    |    |
| EBITDA                           |  | $                                    | 152.8 |                                 |  | $                                   | 138.6   |                                |  | $      | 395.2 |    |  | $      | 258.2   |    |
| Non-cashcharges(1)               |  |                                 | 5.0   |                                 |  |                                | 14.5    |                                |  |   | 20.8  |    |  |   | 167.5   |    |
| Businessoptimization expenses(2) |  |                                 | 3.5   |                                 |  |                                | — |                                |  |   | 21.3  |    |  |   | — |    |
| Unusualitems(3)                  |  |                                 | 4.3   |                                 |  |                                | 2.2     |                                |  |   | 6.8   |    |  |   | 6.7     |    |
| Otheradjustments(4)              |  |                                 | (1.1  | )                               |  |                                | 1.9     |                                |  |   | (4.1  | )  |  |   | 5.6     |    |
| AdjustedEBITDA                   |  | $                                    | 164.5 |                                 |  | $                                   | 157.2   |                                |  | $      | 440.0 |    |  | $      | 438.0   |    |
|                                  |

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

|                                                |  |                                      |         |                                      |  |                                     |         |                                     |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------|--|--------------------------------------|---------|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
| (dollarsin millions)                           |  | Three Months endedSeptember 30, 2005 |         | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| In-process research and development            |  | $                                    | — |                                 |  | $                                   | — |                                |  | $      | — |   |  | $      | 122.3   |   |
| Inventorystep-up                               |  |                                 | — |                                 |  |                                | — |                                |  |   | — |   |  |   | 14.5    |   |
| Assetwrite-offs                                |  |                                 | — |                                 |  |                                | — |                                |  |   | 4.9     |   |  |   | — |   |
| Profitsharing expense and 401(k) funded bySuez |  |                                 | 1.1     |                                 |  |                                | 8.0     |                                |  |   | 10.9    |   |  |   | 24.0    |   |
| Other                                          |  |                                 | 3.9     |                                 |  |                                | 6.5     |                                |  |   | 5.0     |   |  |   | 6.7     |   |
| Non-cashcharges                                |  | $                                    | 5.0     |                                 |  | $                                   | 14.5    |                                |  | $      | 20.8    |   |  | $      | 167.5   |   |
|                                                |

|        |                                    |
|--------|------------------------------------|
|   | In-processResearch and Development |

|        |                                                                                                                                                                                                           |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In-process research anddevelopment was a one time charge of $122.3 million recorded during thenine months ended September 30, 2004, as a result of purchaseaccounting entries related to the Acquisition. |

|        |                   |
|--------|-------------------|
|   | Inventory Step-Up |

|        |                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | As a result ofpurchase accounting for the Acquisition, we wrote up our inventory tofair value and subsequently charged the write up to cost of sales asthe inventory was sold. |

|        |                                                 |
|--------|-------------------------------------------------|
|   | Profit Sharing and 401(k)Expense Funded 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 includethe non-cash impact on earnings of our equity investments and minorityinterests. Non-cash charges also includes the non-cash portion of rentexpense under the sublease that we entered into with Suez inconjunction with the Acquisition. |

25

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

|           |                                                                                                                                                                                                                                                                   |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Businessoptimization expenses for 2005 include costs associated with thede-layering of our management structure, cost reductions inlower-performing business units, and the redesign and optimization ofwork processes. See note 7 to Item 1 for moreinformation. |

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

|                                      |  |                                      |     |                                      |  |                                     |         |                                     |  |        |     |        |  |        |         |        |  |  |
|--------------------------------------|--|--------------------------------------|-----|--------------------------------------|--|-------------------------------------|---------|-------------------------------------|--|--------|-----|--------|--|--------|---------|--------|--|--|
| (dollarsin millions)                 |  | Three Months endedSeptember 30, 2005 |     | Three Months ended September30, 2004 |  | Nine Months ended September 30,2005 |         | Nine Months ended September 30,2004 |
| Loss (gain) on sales, net ofexpenses |  | $                                    | 2.6 |                                 |  | $                                   | — |                                |  | $      | 3.7 |   |  | $      | — |   |
| Other unusual items(a)               |  |                                 | 1.7 |                                 |  |                                | 2.2     |                                |  |   | 3.1 |   |  |   | 6.7     |   |
|                                 |  | $                                    | 4.3 |                                 |  | $                                   | 2.2     |                                |  | $      | 6.8 |   |  | $      | 6.7     |   |
|                                      |

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | Other unusual items for the three months ended September 30,2005 primarily include costs associated with an offering of NalcoHolding Company common stock by our parent company, Nalco LLC. Otherunusual items for the nine months ended September 30, 2005 mostlyrepresent these costs and certain inventory write-offs. Other unusualitems for the three months and nine months ended September 30, 2004primarily include certain costs associated with theTransactions. |

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

Our covenantlevels and ratios for the four quarters ended September 30, 2005 are asfollows:

|                                                                                                           |  |                                    |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|------------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                                                                                      |  | CovenantLevel at September 30,2005 |        | Ratios |
| **Senior creditfacility**(1)                                                                              |  |                               |   |   |  |   |   |   |
| MinimumAdjusted EBITDA to cash interestratio                                                              |  |                               | 1.70x  |   |  |   | 2.85x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |                               | 6.50x  |   |  |   | 4.92x  |   |
| **Indentures**(2)                                                                                         |  |                               |   |   |  |   |   |   |
| Minimum AdjustedEBITDA to fixed charge ratio required to incur additional debt pursuantto ratioprovisions |  |                               | 2.00x  |   |  |   | 2.47x  |   |
|                                                                                                           |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (1)  | During2005, our senior credit facility requires us to maintain an AdjustedEBITDA to cash interest ratio at a minimum of 1.70x and a net debt toAdjusted EBITDA ratio at a maximum of 6.50x, in each case for the mostrecent four quarter period. Failure to satisfy these ratio requirementswould constitute a default under the senior credit agreement. If ourlenders failed to waive any such default, our repayment obligationsunder the senior credit agreement could be accelerated, which wouldalso 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 $1,950 million (including $1,201.2million that was outstanding under our term loan facilities as ofSeptember 30, 2005) and investments in similar business and otherinvestments equal to 6% of Nalco Holding Company consolidatedassets. |

Local lines of credit. Certain of our non-U.S.subsidiaries have lines of credit to support local requirements. As ofSeptember 30, 2005, the aggregate outstanding balance under these locallines of credit was approximately $18.3 million. Certain of these linesof credit are equally and ratably secured with obligations under oursenior credit facilities.

26

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|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| Item2.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations (continued) |

Receivables facility. NalcoCompany entered into a receivables facility on June 25, 2004 thatprovides up to $100 million in funding from a commercial paper conduitsponsored by JPMorgan Chase Bank, one of the lenders under NalcoCompany's senior credit facilities, based on availability ofeligible receivables and satisfaction of other customaryconditions.

Availability of funding under the receivablesfacility depends primarily upon the outstanding trade accountsreceivable balance from time to time. Aggregate availability isdetermined by using a formula that reduces the gross receivablesbalance by factors that take into account historical default anddilution rates, excessive concentrations and average days outstandingand the costs of the facility. Based on the terms of this facility andon the criteria described above, as of September 30, 2005,approximately $163.6 million of our accounts receivable balance wasconsidered eligible for financing under the program, of whichapproximately $87.0 million would have been available for funding. Asof September 30, 2005, we had $78.7 million of outstanding borrowingsunder this facility.

This facility is treated as a generalfinancing agreement resulting in the borrowings and related receivablesbeing shown as liabilities and assets, respectively, on ourconsolidated balance sheet and the costs associated with thereceivables facility being recorded as interest expense.

|               |                                                           |
|---------------|-----------------------------------------------------------|
| Item3.   | Quantitative and Qualitative Disclosures AboutMarket Risk |

There have been no material changes to theCompany's exposures to market risk since December 31, 2004.

|                |                        |
|----------------|------------------------|
| Item 4.   | Controls andProcedures |

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation of disclosure controlsand procedures. |

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The Company's chief executiveofficer and chief financial officer, after evaluating the effectivenessof the Company'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 requireddisclosures. |

|           |                                                       |
|-----------|-------------------------------------------------------|
| (b)  | Changes in internal controls overfinancial reporting. |

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

27

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PartII.    Other Information

Item 1.    Legal Proceedings

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

Item 6.    Exhibits

|           |                                    |
|-----------|------------------------------------|
| (a)  | The following are included herein: |

|  |                     |                                                                                 |
|--|---------------------|---------------------------------------------------------------------------------|
|  | Exhibit 10.1   | Material Contracts– Amendment No. 3 to the Receivables Transfer Agreement |

|  |                     |                                                               |
|--|---------------------|---------------------------------------------------------------|
|  | Exhibit 10.2   | Material Contracts– Amendment No. 3 to Credit Agreement |

|  |                     |                                                                                                   |
|--|---------------------|---------------------------------------------------------------------------------------------------|
|  | Exhibit 31.1   | Certification ofChief Executive Officer, Pursuant to Section 302 of the Sarbanes-OxleyAct of 2002 |

|  |                    |                                                                                                    |
|--|--------------------|----------------------------------------------------------------------------------------------------|
|  | Exhibit 31.2  | Certification of Chief Financial Officer, Pursuantto Section 302 of the Sarbanes-Oxley Act of 2002 |

|  |                     |                                                                                                                       |
|--|---------------------|-----------------------------------------------------------------------------------------------------------------------|
|  | Exhibit 32.1   | CertificationsPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 |

28

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SIGNATURE

The Company has dulycaused this report to be signed on its behalf by the undersignedthereunto duly authorized.

|                      |  |                                                     |  |  |  |  |
|----------------------|--|-----------------------------------------------------|--|--|--|--|
| NALCOHOLDING COMPANY |
| /s/ BRADLEY J.BELL   |
| Name:                |  | BradleyJ. Bell                                      |
| Title:               |  | Executive Vice Presidentand Chief Financial Officer |
|                      |

Dated: November10, 2005

29

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