UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION Washington, DC20549

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FORM 10-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 June 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 FileNo.333-119231

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NALCOFINANCE HOLDINGS LLC

(Exact nameof registrant as specified in its charter)

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| **Delaware**(Stateor other jurisdiction ofIncorporation or Organization) |  | **61-1464558**(I.R.S.EmployerIdentificationNumber) |
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1601 West DiehlRoadNaperville, IL 60563-1198(630) 305-1000

(Address, Including Zip Code, and TelephoneNumber, Including Area Code, of Registrant's PrincipalExecutive Offices)

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

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the ExchangeAct.)    Yes       No   

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QUARTERLYREPORT ON FORM 10-Q NALCO FINANCE HOLDINGS LLC Quarter EndedJune 30, 2005

TABLE OF CONTENTS

PartI.    Financial Information

|                               |  |                                                                                                                |    |        |        |        |  |  |  |  |
|-------------------------------|--|----------------------------------------------------------------------------------------------------------------|----|--------|--------|--------|--|--|--|--|
| Item1.                        |  | FinancialStatements (Unaudited)                                                                                |    |   |   |   |
|                          |  | CondensedConsolidated Balance Sheets – June 30, 2005 and December 31,2004                                |    |   | 2      |   |
|                          |  | Condensed ConsolidatedStatements of Operations – Three months and six months endedJune 30, 2005 and 2004 |    |   | 3      |   |
|                          |  | CondensedConsolidated Statements of Cash Flows – Six months endedJune 30, 2005 and 2004                  |    |   | 4      |   |
|                          |  | Notes toCondensed Consolidated Financial Statements – June 30,2005                                       |    |   | 5      |   |
| Item 2.                       |  | Management'sDiscussion and Analysis of Financial Condition and Results ofOperations                            |    |   | 14     |   |
| Item 3.                       |  | Quantitativeand Qualitative Disclosures About Market Risk                                                      |    |   | 25     |   |
| Item 4.                       |  | Controls and Procedures                                                                                        |    |   | 25     |   |
| **Part II. OtherInformation** |
| Item6.                        |  | Exhibits                                                                                                       |    |   | 26     |   |
| **Signature**                 |  |                                                                                                           | 27 |   |
|                               |

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PART I. FINANCIALINFORMATION

Item 1. Financial Statements (Unaudited)

Nalco Finance Holdings LLC and Subsidiaries CondensedConsolidated Balance Sheets(dollars inmillions)

|                                                                       |  |                        |         |                 |  |        |         |        |  |  |
|-----------------------------------------------------------------------|--|------------------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                                                  |  | (Unaudited)June30,2005 |         | December31,2004 |
| **Assets**                                                            |  |                   |    |            |  |   |    |   |
| Currentassets:                                                        |  |                   |    |            |  |   |    |   |
| Cash and cashequivalents                                              |  | $                      | 39.4    |            |  | $      | 33.2    |   |
| Accountsreceivable, less allowances of $19.7 in 2005 and $21.1 in2004 |  |                   | 604.7   |            |  |   | 594.2   |   |
| Inventories:                                                          |  |                   |    |            |  |   |    |   |
| Finishedproducts                                                      |  |                   | 227.6   |            |  |   | 245.4   |   |
| Materialsand work inprocess                                           |  |                   | 73.3    |            |  |   | 68.1    |   |
|                                                                  |  |                   | 300.9   |            |  |   | 313.5   |   |
| Prepaidexpenses, taxes and other currentassets                        |  |                   | 75.1    |            |  |   | 90.1    |   |
| Totalcurrentassets                                                    |  |                   | 1,020.1 |            |  |   | 1,031.0 |   |
| Property,plant, and equipment,net                                     |  |                   | 779.4   |            |  |   | 847.3   |   |
| Intangibleassets:                                                     |  |                   |    |            |  |   |    |   |
| Goodwill                                                              |  |                   | 2,287.2 |            |  |   | 2,368.3 |   |
| Otherintangibles,net                                                  |  |                   | 1,270.4 |            |  |   | 1,323.6 |   |
| Otherassets                                                           |  |                   | 353.7   |            |  |   | 364.3   |   |
| Totalassets                                                           |  | $                      | 5,710.8 |            |  | $      | 5,934.5 |   |
| **Liabilitiesand unitholder'sequity**                                 |  |                   |    |            |  |   |    |   |
| Currentliabilities:                                                   |  |                   |    |            |  |   |    |   |
| Accountspayable                                                       |  | $                      | 231.5   |            |  | $      | 261.9   |   |
| Shortterm debt                                                        |  |                   | 21.2    |            |  |   | 17.7    |   |
| Othercurrentliabilities                                               |  |                   | 232.0   |            |  |   | 311.7   |   |
| Totalcurrentliabilities                                               |  |                   | 484.7   |            |  |   | 591.3   |   |
| Otherliabilities:                                                     |  |                   |    |            |  |   |    |   |
| Long-termdebt                                                         |  |                   | 3,373.5 |            |  |   | 3,424.8 |   |
| Deferredincometaxes                                                   |  |                   | 473.3   |            |  |   | 501.5   |   |
| Accruedpensionbenefits                                                |  |                   | 415.6   |            |  |   | 411.7   |   |
| Otherliabilities                                                      |  |                   | 297.4   |            |  |   | 296.8   |   |
| Minorityinterest                                                      |  |                   | 12.6    |            |  |   | 14.1    |   |
| Unitholder'sequity                                                    |  |                   | 653.7   |            |  |   | 694.3   |   |
| Totalliabilities and unitholder'sequity                               |  | $                      | 5,710.8 |            |  | $      | 5,934.5 |   |
|                                                                       |

Seeaccompanying notes to condensed consolidated financialstatements.

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Nalco Finance Holdings LLC andSubsidiaries Condensed Consolidated Statements of Operations(Unaudited)(dollars inmillions)

|                                              |  |                                 |         |                                 |  |                               |         |                               |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|---------------------------------|---------|---------------------------------|--|-------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | ThreeMonths ended June 30, 2005 |         | Three Monthsended June 30, 2004 |  | Six Months ended June 30,2005 |         | Six Months ended June 30,2004 |
|                                         |  |                            |    |                            |  |                          |    |                          |  |   |    |    |  |   |    |    |
| Netsales                                     |  | $                               | 836.3   |                            |  | $                             | 740.4   |                          |  | $      | 1,613.9 |    |  | $      | 1,453.7 |    |
| Operatingcosts andexpenses:                  |  |                            |    |                            |  |                          |    |                          |  |   |    |    |  |   |    |    |
| Costof productsold                           |  |                            | 479.9   |                            |  |                          | 372.2   |                          |  |   | 892.3   |    |  |   | 746.6   |    |
| Selling,administrative, and researchexpenses |  |                            | 263.3   |                            |  |                          | 261.6   |                          |  |   | 521.8   |    |  |   | 514.9   |    |
| Amortizationof intangibleassets              |  |                            | 20.5    |                            |  |                          | 24.9    |                          |  |   | 41.1    |    |  |   | 49.1    |    |
| In-processresearch anddevelopment            |  |                            | — |                            |  |                          | — |                          |  |   | — |    |  |   | 122.3   |    |
| Businessoptimizationexpenses                 |  |                            | 17.0    |                            |  |                          | — |                          |  |   | 17.8    |    |  |   | — |    |
| Totaloperating costs andexpenses             |  |                            | 780.7   |                            |  |                          | 658.7   |                          |  |   | 1,473.0 |    |  |   | 1,432.9 |    |
| Operatingearnings                            |  |                            | 55.6    |                            |  |                          | 81.7    |                          |  |   | 140.9   |    |  |   | 20.8    |    |
| Otherincome (expense),net                    |  |                            | (0.6    | )                          |  |                          | (1.8    | )                        |  |   | (2.8    | )  |  |   | (5.3    | )  |
| Interestincome                               |  |                            | 2.0     |                            |  |                          | 2.7     |                          |  |   | 4.1     |    |  |   | 5.4     |    |
| Interestexpense                              |  |                            | (64.8   | )                          |  |                          | (62.7   | )                        |  |   | (126.9  | )  |  |   | (123.7  | )  |
| Earnings(loss) before incometaxes            |  |                            | (7.8    | )                          |  |                          | 19.9    |                          |  |   | 15.3    |    |  |   | (102.8  | )  |
| Incometax provision(benefit)                 |  |                            | (3.9    | )                          |  |                          | 16.6    |                          |  |   | 8.0     |    |  |   | 19.6    |    |
| Minorityinterests                            |  |                            | (1.6    | )                          |  |                          | (0.9    | )                        |  |   | (2.8    | )  |  |   | (1.9    | )  |
| Netearnings(loss)                            |  | $                               | (5.5    | )                          |  | $                             | 2.4     |                          |  | $      | 4.5     |    |  | $      | (124.3  | )  |
|                                              |

Seeaccompanying notes to condensed consolidated financialstatements.

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Nalco Finance Holdings LLC andSubsidiaries Condensed Consolidated Statements of Cash Flows(Unaudited)(dollars inmillions)

|                                                                                          |  |                             |         |                             |  |        |        |         |  |  |
|------------------------------------------------------------------------------------------|--|-----------------------------|---------|-----------------------------|--|--------|--------|---------|--|--|
|                                                                                     |  | SixMonthsendedJune 30, 2005 |         | SixMonthsendedJune 30, 2004 |
| **Operatingactivities**                                                                  |  |                        |    |                        |  |   |   |    |
| Net earnings(loss)                                                                       |  | $                           | 4.5     |                        |  | $      | (124.3 | )  |
| Adjustments toreconcile net earnings (loss) to net cash provided by operatingactivities: |  |                        |    |                        |  |   |   |    |
| Depreciation                                                                             |  |                        | 66.7    |                        |  |   | 56.9   |    |
| Amortization                                                                             |  |                        | 41.1    |                        |  |   | 49.1   |    |
| In-processresearch anddevelopment                                                        |  |                        | — |                        |  |   | 122.3  |    |
| Amortizationof deferred financing costs and accretion of senior discountnotes            |  |                        | 19.9    |                        |  |   | 23.3   |    |
| Other,net                                                                                |  |                        | 4.1     |                        |  |   | 0.4    |    |
| Changes inoperating assets andliabilities                                                |  |                        | (105.9  | )                      |  |   | (2.3   | )  |
| Netcash provided by operatingactivities                                                  |  |                        | 30.4    |                        |  |   | 125.4  |    |
| **Investingactivities**                                                                  |  |                        |    |                        |  |   |   |    |
| Purchase priceadjustment on acquisition of Ondeo NalcoGroup                              |  |                        | (3.2    | )                      |  |   | 25.6   |    |
| Additions toproperty, plant, and equipment,net                                           |  |                        | (25.0   | )                      |  |   | (34.9  | )  |
| Other investingactivities                                                                |  |                        | (0.6    | )                      |  |   | (0.4   | )  |
| Netcash used for investingactivities                                                     |  |                        | (28.8   | )                      |  |   | (9.7   | )  |
| **Financingactivities**                                                                  |  |                        |    |                        |  |   |   |    |
| Changes inshort-term debt,net                                                            |  |                        | 4.4     |                        |  |   | (33.5  | )  |
| Proceeds fromlong-term debt                                                              |  |                        | 24.1    |                        |  |   | 542.9  |    |
| Repaymentsof long-termdebt                                                               |  |                        | (18.2   | )                      |  |   | (184.0 | )  |
| Capitalcontributions                                                                     |  |                        | — |                        |  |   | 9.8    |    |
| Capitaldistributions                                                                     |  |                        | — |                        |  |   | (446.9 | )  |
| Other                                                                                    |  |                        | (4.4    | )                      |  |   | (2.0   | )  |
| Netcash provided by (used for) financingactivities                                       |  |                        | 5.9     |                        |  |   | (113.7 | )  |
| Effect ofexchange rate changes on cash and cashequivalents                               |  |                        | (1.3    | )                      |  |   | (3.1   | )  |
| Increase(decrease) in cash and cashequivalents                                           |  |                        | 6.2     |                        |  |   | (1.1   | )  |
| Cash and cashequivalents at beginning ofperiod                                           |  |                        | 33.2    |                        |  |   | 100.0  |    |
| Cashand cash equivalents at end ofperiod                                                 |  | $                           | 39.4    |                        |  | $      | 98.9   |    |
|                                                                                          |

Seeaccompanying notes to condensed consolidated financialstatements.

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NalcoFinance Holdings LLC and Subsidiaries Notes to CondensedConsolidated Financial Statements (Unaudited)

June 30, 2005

1.    Descriptionof Business and Change in Ownership

Description ofBusiness

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

Change in Ownership

OnNovember 4, 2003, Nalco Holdings LLC (the Buyer), a newly-formed entitycontrolled 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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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. As entities under common control, the contribution ofNalco Holdings LLC to Nalco Finance Holdings LLC was accounted for in amanner similar to a pooling of interests. Therefore, the results forthe period prior to January 14, 2004 (date of inception) include theconsolidated results of Nalco Holdings LLC and subsidiaries.

Aspart of the allocation of the purchase price for the Acquisition, theCompany recorded a one-time charge for purchased in-process researchand development (IPR&D) expenses of $122.3 million during the sixmonths ended June 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 six months ended June 30, 2004 includesan additional $14.5 million in cost of products sold related to thesale of inventory that had been revalued at selling price less costs tosell in the allocation of the purchase price for the Acquisition.

In conjunction with the Acquisition, the Company formulated a planto exit or restructure certain activities. The Company recordedliabilities of $35.5 million, primarily for employee severance andrelated costs, in connection with the Company's plan to exit orrestructure certain activities. The Company expects to complete theseactivities by the end of 2005. As of December 31, 2004, $3.8 millionremained of this accrual; $0.3 million was charged against it duringthe six months ended June  30, 2005.

2.    Basis ofPresentation

These consolidated financial statements should beread in conjunction with the consolidated and combined financialstatements and notes thereto included in the Annual Report for NalcoFinance Holdings LLC and subsidiaries for the fiscal year endedDecember 31, 2004.

The accompanying unaudited consolidatedfinancial statements have been prepared in accordance with generallyaccepted accounting principles for interim financial information.Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the UnitedStates for complete financial statements. Management believes thesefinancial statements include all normal recurring adjustmentsconsidered necessary for a fair presentation of the financial positionand results of operations of the Company. Operating results for the sixmonths ended June  30, 2005 are not necessarily indicative ofresults that may be expected for the year ended December 31, 2005.

Certain reclassifications have been made to the prior year data toconform to the current year presentation which had no effect on netearnings (loss) reported for any period.

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3.    Goodwill and Other IntangibleAssets

The changes in goodwill for the period were asfollows:

|                                        |  |        |         |         |  |  |
|----------------------------------------|--|--------|---------|---------|--|--|
| (dollarsin millions)                   |  |   |
| Balance as of December 31,2004         |  | $      | 2,368.3 |    |
| Preacquisition income taxuncertainties |  |   | 0.4     |    |
| Effect of foreign currencytranslation  |  |   | (81.5   | )  |
| Balance as ofJune 30, 2005             |  | $      | 2,287.2 |    |
|                                        |

Thefollowing table reflects intangible assets and related amortizationinformation:

|                                              |  |                    |         |                         |  |             |         |                         |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------|--|--------------------|---------|-------------------------|--|-------------|---------|-------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                         |  | Asof June 30, 2005 |         | As of December 31,2004  |
| (dollars inmillions)                         |  | GrossAmount        |         | AccumulatedAmortization |  | GrossAmount |         | AccumulatedAmortization |
| Intangibleassets subject toamortization:     |  |               |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Customerrelationships                        |  | $                  | 490.4   |                    |  | $           | (135.6  | )                  |  | $      | 506.6   |   |  | $      | (103.5  | )  |
| Patentsand developedtechnology               |  |               | 100.5   |                    |  |        | (17.2   | )                  |  |   | 100.5   |   |  |   | (12.2   | )  |
| Other                                        |  |               | 2.3     |                    |  |        | — |                    |  |   | 2.2     |   |  |   | — |    |
| Intangibleassets not subject toamortization: |  |               |    |                    |  |        |    |                    |  |   |    |   |  |   |    |    |
| Trademarksand tradenames                     |  |               | 830.0   |                    |  |        | — |                    |  |   | 830.0   |   |  |   | — |    |
|                                         |  | $                  | 1,423.2 |                    |  | $           | (152.8  | )                  |  | $      | 1,439.3 |   |  | $      | (115.7  | )  |
|                                              |

4.    Debt

Debt consists of thefollowing:

|                                              |  |             |         |                 |  |        |         |        |  |  |
|----------------------------------------------|--|-------------|---------|-----------------|--|--------|---------|--------|--|--|
| (dollarsin millions)                         |  | June30,2005 |         | December31,2004 |
| **Short-term**                               |  |        |    |            |  |   |    |   |
| Checksoutstanding and bankoverdrafts         |  | $           | 19.9    |            |  | $      | 16.9    |   |
| Currentmaturities of long-termdebt           |  |        | 1.3     |            |  |   | 0.8     |   |
|                                         |  | $           | 21.2    |            |  | $      | 17.7    |   |
| **Long-term**                                |  |        |    |            |  |   |    |   |
| Securitizedtrade accounts receivablefacility |  | $           | 79.4    |            |  | $      | 97.3    |   |
| Revolvingcredit facility                     |  |        | 24.0    |            |  |   | — |   |
| Termloan A, due November2009                 |  |        | 208.5   |            |  |   | 218.4   |   |
| Term loan B, dueNovember 2010                |  |        | 1,081.0 |            |  |   | 1,081.0 |   |
| Seniornotes, due November2011                |  |        | 906.6   |            |  |   | 937.4   |   |
| Senior subordinatednotes, due November2013   |  |        | 706.6   |            |  |   | 737.4   |   |
| Unsecured notes,due May 2008                 |  |        | 27.8    |            |  |   | 27.8    |   |
| Seniordiscount notes, due February2014       |  |        | 338.5   |            |  |   | 324.2   |   |
| Other                                        |  |        | 2.4     |            |  |   | 2.1     |   |
|                                         |  |        | 3,374.8 |            |  |   | 3,425.6 |   |
| Less:Currentportion                          |  |        | 1.3     |            |  |   | 0.8     |   |
|                                         |  | $           | 3,373.5 |            |  | $      | 3,424.8 |   |
|                                              |

OnJanuary 21, 2004, Nalco Finance Holdings LLC and its 100% ownedsubsidiary, Nalco Finance Holdings Inc. (together, the Issuers), issued$694.0 million aggregate principal amount at maturity of 9.0%senior discount notes due 2014. Prior to February 1, 2009, interestwill accrue on the senior discount notes in the form of an increase inthe accreted value of such notes. Thereafter, cash interest on thesenior discount notes will accrue and be payable semiannually inarrears on February 1 and August 1 of each year, commencing on August1, 2009, at a rate of 9.0% per annum. The accreted 

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4.    Debt (continued)

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.

In December 2004, the Issuers redeemed a portion of thesenior discount notes with an accreted value of $162.3 million usingproceeds from the initial public offering of common stock of NalcoHolding Company. After the partial redemption, the aggregate principalamount at maturity of the notes declined to $460.8 million from $694.0million. At June 30, 2005, the senior discount notes had an accretedvalue of approximately $729.55 per $1,000 principal amount at maturityof notes, resulting in a total accreted value of $336.2 million. The$2.3 million difference between the carrying value of the notes and thetotal accreted value represents a premium, which is being amortizedover the term of the notes.

The Issuers do not generate anyrevenue, and Nalco Finance Holdings Inc. was incorporated solely toaccommodate the issuance of the notes by Nalco Finance Holdings LLC.All of the Issuers' consolidated assets are owned, and all of theIssuers' consolidated net sales are earned, by its direct andindirect subsidiaries. As of June 30, 2005, the Issuers'subsidiaries had $986.6 million of restricted net assets.

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

5.    Unitholder'sEquity

Unitholder's equity consists of thefollowing:

|                                       |  |              |        |                   |  |        |        |         |  |  |
|---------------------------------------|--|--------------|--------|-------------------|--|--------|--------|---------|--|--|
| (dollarsin millions)                  |  | June 30,2005 |        | December 31, 2004 |
| Capitalaccount                        |  | $            | 741.4  |              |  | $      | 741.2  |    |
| Accumulateddeficit                    |  |         | (175.5 | )            |  |   | (180.0 | )  |
| Accumulatedother comprehensiveincome: |  |         |   |              |  |   |   |    |
| Derivatives                           |  |         | 0.5    |              |  |   | (0.2   | )  |
| Foreigncurrency translationadjustment |  |         | 87.3   |              |  |   | 133.3  |    |
| Totalunitholder'sequity               |  | $            | 653.7  |              |  | $      | 694.3  |    |
|                                       |

Thecapital structure of the Company consists of one class of limitedliability company interests represented by Units, which are identicalwith each other in every respect. At December 31, 2004, there were 100Units issued and outstanding, of which 99 were owned by NalcoInvestment Holdings LLC and 1 was owned by Nalco Finance Holdings II,Inc. In January 2005, these two companies were merged with their parentcompany, Nalco Holding Company, which became the direct parent companyand unitholder of Nalco Finance Holdings LLC at that date.

8

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6.    Pension and Other PostretirementBenefit Plans

The components of net periodic pension cost andthe cost of other postretirement benefits for the three months and sixmonths ended June 30, 2005 and 2004 were asfollows:

|                              |  |                                 |      |                                 |  |                                |      |                               |  |        |       |         |  |        |       |         |  |  |
|------------------------------|--|---------------------------------|------|---------------------------------|--|--------------------------------|------|-------------------------------|--|--------|-------|---------|--|--------|-------|---------|--|--|
|                         |  | PensionBenefits                 |
| (dollars inmillions)         |  | Three Months endedJune 30, 2005 |      | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |      | SixMonths ended June 30, 2004 |
| Servicecost                  |  | $                               | 6.3  |                            |  | $                              | 8.0  |                          |  | $      | 13.4  |    |  | $      | 14.5  |    |
| Interestcost                 |  |                            | 9.3  |                            |  |                           | 11.1 |                          |  |   | 19.5  |    |  |   | 20.1  |    |
| Expectedreturn on planassets |  |                            | (5.7 | )                          |  |                           | (7.7 | )                        |  |   | (12.2 | )  |  |   | (13.6 | )  |
| Netperiodiccost              |  | $                               | 9.9  |                            |  | $                              | 11.4 |                          |  | $      | 20.7  |    |  | $      | 21.0  |    |
|                              |

|                                  |  |                                 |      |                                 |  |                                |         |                               |  |        |      |         |  |        |         |        |  |  |
|----------------------------------|--|---------------------------------|------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|------|---------|--|--------|---------|--------|--|--|
|                             |  | OtherPostretirement Benefits    |
| (dollars inmillions)             |  | Three Months endedJune 30, 2005 |      | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| Servicecost                      |  | $                               | 1.4  |                            |  | $                              | 1.2     |                          |  | $      | 2.7  |    |  | $      | 2.9     |   |
| Interestcost                     |  |                            | 2.2  |                            |  |                           | 1.8     |                          |  |   | 4.3  |    |  |   | 4.4     |   |
| Amortizationof prior servicecost |  |                            | (1.1 | )                          |  |                           | — |                          |  |   | (2.0 | )  |  |   | — |   |
| Netperiodiccost                  |  | $                               | 2.5  |                            |  | $                              | 3.0     |                          |  | $      | 5.0  |    |  | $      | 7.3     |   |
|                                  |

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 $0.3 million and $0.3 million, respectively, for the sixmonths ended June 30, 2005.

7.    Business OptimizationExpenses

In addition to the Company's plan to exit orrestructure certain activities that was formulated in conjunction withthe Acquisition, the Company is continuing to redesign and optimize itsbusiness and work processes. In June 2005, the Company also announced aplan to de-layer its management structure and to reduce costs inlower-performing business units. The plan calls for the elimination ofapproximately 220 positions, primarily in Europe and North America.

Business process optimization expenses, consisting mostly ofemployee severance and related costs, were $17.0 million and $17.8million for the three months and six months ended June 30, 2005,respectively, and included a $14.0 million accrual for therestructuring plan announced in June 2005. No payments have beencharged against the accrual as of June 30, 2005.

9

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4.    Debt (continued)

8.    Summary of Other Income(Expense)

The components of other income (expense), net for thethree months and six months ended June  30, 2005 and 2004,include thefollowing:

|                                                 |  |                                 |         |                                 |  |                                |         |                               |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|---------------------------------|---------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)                            |  | Three Months endedJune 30, 2005 |         | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| Impairment losson business held for sale        |  | $                               | — |                            |  | $                              | — |                          |  | $      | (2.4    | )  |  | $      | — |    |
| Sponsormonitoringfees                           |  |                            | — |                            |  |                           | (3.2    | )                        |  |   | — |    |  |   | (5.7    | )  |
| Franchisetaxes                                  |  |                            | (0.6    | )                          |  |                           | (0.7    | )                        |  |   | (1.3    | )  |  |   | (1.5    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                            | — |                            |  |                           | 0.6     |                          |  |   | 0.8     |    |  |   | 1.3     |    |
| Foreigncurrency exchangeadjustments             |  |                            | 2.1     |                            |  |                           | (0.3    | )                        |  |   | 1.4     |    |  |   | (1.2    | )  |
| Other                                           |  |                            | (2.1    | )                          |  |                           | 1.8     |                          |  |   | (1.3    | )  |  |   | 1.8     |    |
|                                            |  | $                               | (0.6    | )                          |  | $                              | (1.8    | )                        |  | $      | (2.8    | )  |  | $      | (5.3    | )  |
|                                                 |

9.    IncomeTaxes

The Company's effective income tax rate was52.3% for the six months ended June 30, 2005. The rate variesfrom the U.S. statutory income tax rate of 35% due to the taxtreatment of the senior discount note interest expense, the incrementaltax on dividends received from non-U.S. subsidiaries, foreign taxesprovided at less than the 35% U.S. statutory rate, U.S. stateincome taxes, nondeductible expenses, and other permanentdifferences.

The aforementioned items also contributed to thevariation between the U.S. statutory income tax rate and theCompany's effective income tax rate for the six months ended June30, 2004. In addition, the effective rate was impacted by the chargefor purchased IPR&D, which is not tax deductible.

Thetaxable income and expenses of Nalco Finance Holdings LLC flow directlyto the owners for U.S. tax purposes. As a result, the Company'sowners recognize the tax benefit on the senior discount note interestexpense.

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

|                                              |  |                                 |         |                                 |  |                                |         |                               |  |        |         |         |  |        |       |         |  |  |
|----------------------------------------------|--|---------------------------------|---------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|---------|---------|--|--------|-------|---------|--|--|
| (dollarsin millions)                         |  | Three Months endedJune 30, 2005 |         | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| U.S. statutorytaxrate                        |  | $                               | (2.7    | )                          |  | $                              | 6.9     |                          |  | $      | 5.4     |    |  | $      | (36.0 | )  |
| IPR&D                                    |  |                            | — |                            |  |                           | — |                          |  |   | — |    |  |   | 42.8  |    |
| Interestexpense – senior discountnotes |  |                            | 2.5     |                            |  |                           | 3.5     |                          |  |   | 5.0     |    |  |   | 6.2   |    |
| Other                                        |  |                            | (3.7    | )                          |  |                           | 6.2     |                          |  |   | (2.4    | )  |  |   | 6.6   |    |
| Incometax provision(benefit)                 |  | $                               | (3.9    | )                          |  | $                              | 16.6    |                          |  | $      | 8.0     |    |  | $      | 19.6  |    |
|                                              |

10.    ComprehensiveIncome (Loss)

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

|                                                       |  |                                 |       |                                 |  |                                |         |                               |  |        |       |         |  |        |         |         |  |  |
|-------------------------------------------------------|--|---------------------------------|-------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)                                  |  | Three Months endedJune 30, 2005 |       | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| Net earnings(loss)                                    |  | $                               | (5.5  | )                          |  | $                              | 2.4     |                          |  | $      | 4.5   |    |  | $      | (124.3  | )  |
| Othercomprehensive income (loss), net of incometaxes: |  |
| Derivatives                                           |  |                            | 0.2   |                            |  |                           | — |                          |  |   | 0.7   |    |  |   | — |    |
| Foreigncurrency translationadjustments                |  |                            | (24.9 | )                          |  |                           | (72.1   | )                        |  |   | (46.0 | )  |  |   | (62.6   | )  |
| Comprehensiveloss                                     |  | $                               | (30.2 | )                          |  | $                              | (69.7   | )                        |  | $      | (40.8 | )  |  | $      | (186.9  | )  |
|                                                       |

10

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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 endedJune 30, 2005 |       | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |       | SixMonths endedJune 30, 2004 |
| Industrial andInstitutionalServices |  | $                               | 380.5 |                            |  | $                              | 349.1 |                         |  | $      | 724.2   |   |  | $      | 678.4   |   |
| EnergyServices                      |  |                            | 220.8 |                            |  |                           | 198.4 |                         |  |   | 430.7   |   |  |   | 392.6   |   |
| PaperServices                       |  |                            | 176.3 |                            |  |                           | 161.2 |                         |  |   | 346.6   |   |  |   | 325.3   |   |
| Other                               |  |                            | 58.7  |                            |  |                           | 31.7  |                         |  |   | 112.4   |   |  |   | 57.4    |   |
| Netsales                            |  | $                               | 836.3 |                            |  | $                              | 740.4 |                         |  | $      | 1,613.9 |   |  | $      | 1,453.7 |   |
|                                     |

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 endedJune 30, 2005 |         | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths endedJune 30, 2004 |
| Segment directcontribution:          |  |
| Industrial and InstitutionalServices |  | $                               | 93.3    |                            |  | $                              | 90.6    |                         |  | $      | 169.2   |    |  | $      | 170.5   |    |
| EnergyServices                       |  |                            | 43.9    |                            |  |                           | 44.0    |                         |  |   | 91.4    |    |  |   | 88.3    |    |
| PaperServices                        |  |                            | 31.8    |                            |  |                           | 36.4    |                         |  |   | 66.5    |    |  |   | 78.5    |    |
| Other                                |  |                            | (28.8   | )                          |  |                           | (13.5   | )                       |  |   | (34.2   | )  |  |   | (48.4   | )  |
| Totalsegment directcontribution      |  |                            | 140.2   |                            |  |                           | 157.5   |                         |  |   | 292.9   |    |  |   | 288.9   |    |
| Expensesnot allocated to segments:   |  |
| Administrativeexpenses               |  |                            | 47.1    |                            |  |                           | 50.9    |                         |  |   | 93.1    |    |  |   | 96.7    |    |
| Amortizationof intangibleassets      |  |                            | 20.5    |                            |  |                           | 24.9    |                         |  |   | 41.1    |    |  |   | 49.1    |    |
| In-processresearch anddevelopment    |  |                            | — |                            |  |                           | — |                         |  |   | — |    |  |   | 122.3   |    |
| Businessoptimizationexpenses         |  |                            | 17.0    |                            |  |                           | — |                         |  |   | 17.8    |    |  |   | — |    |
| Operatingearnings(loss)              |  |                            | 55.6    |                            |  |                           | 81.7    |                         |  |   | 140.9   |    |  |   | 20.8    |    |
| Otherincome (expense),net            |  |                            | (0.6    | )                          |  |                           | (1.8    | )                       |  |   | (2.8    | )  |  |   | (5.3    | )  |
| Interestincome                       |  |                            | 2.0     |                            |  |                           | 2.7     |                         |  |   | 4.1     |    |  |   | 5.4     |    |
| Interestexpense                      |  |                            | (64.8   | )                          |  |                           | (62.7   | )                       |  |   | (126.9  | )  |  |   | (123.7  | )  |
| Earnings(loss) before incometaxes    |  | $                               | (7.8    | )                          |  | $                              | 19.9    |                         |  | $      | 15.3    |    |  | $      | (102.8  | )  |
|                                      |

Totalsegment direct contribution for the three months ended June 30, 2005includes inventory write-offs of $10.7 million. Of this amount, $4.0million, $3.1 million, $2.4 million, and $1.2 million was charged toPaper Services, Other, Energy Services, and Industrial andInstitutional Services, respectively.

12.    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 June 30, 2005.

These environmentalreserves represent management's current estimate of itsproportional clean-up costs and are based upon negotiation andagreement with enforcement agencies, its previous experience withrespect to clean-up activities, a detailed review by the Company ofknown conditions, and information about other PRPs. They are notreduced by any possible recoveries from insurance companies or otherPRPs not specifically identified. Although management cannot determinewhether 

12

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12.    Contingenciesand Litigation (continued)

or not a material effect on future operationsis reasonably likely to occur, given the evolving nature ofenvironmental regulations, it believes that the recorded reserve levelsare appropriate estimates of the potential liability. Althoughsettlement will require future cash outlays, it is not expected thatsuch outlays will materially impact the Company's liquidityposition. Expenditures for the six months ended June 30, 2005, relatingto environmental compliance and clean up activities, were notsignificant.

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

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

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

13.    Guarantees

Nosignificant guarantees were outstanding at June 30, 2005, other thansubsidiary-related performance guarantees.

The Company had $36.0million of letters of credit outstanding at June 30,2005.

13

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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 FinanceHoldings LLC included elsewhere in this report.

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

This Quarterly Reportfor the fiscal quarter ended June 30, 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; |

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

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

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

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

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

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

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

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

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

|              |                                            |
|--------------|--------------------------------------------|
| •  | inability toachieve expected cost savings; |

14

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

|              |                                                   |
|--------------|---------------------------------------------------|
| •  | difficulties insecuring the raw materials we use; |

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

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | our ability torealize the full value of our intangibleassets; |

|              |                                                                                                                                   |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------|
| •  | our ability to attract andretain skilled employees, particularly research scientists, technicalsales professionals and engineers; |

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

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

Theremay be other factors that may cause our actual results to differmaterially from the forward-looking statements.

Allforward-looking statements attributable to us or persons acting on ourbehalf apply only as of the date of this Quarterly Report and areexpressly 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

For the three months ended June 30, 2005, we increasednominal sales 13.0% to $836.3 million, with organic sales up8.6% compared to the three months ended June 30, 2004. Organicsales growth included 4.8% in price increases, or $36 million.This doubles the result of price increases from the $18 millionachieved in the three months ended March 31, 2005. The remainder of our13% nominal sales growth came from foreign currency increases of2.9% and a 1.5% increase from Katayama Nalco sales. June1, 2005 marked the one-year anniversary of the Katayama Nalco jointventure's formation.

Business process optimization chargesof $17.0 million, including a previously announced $14.0 millionrestructuring charge, drove otherwise positive earnings to a net lossof $5.5 million versus a $2.4 million profit in the three months endedJune 30, 2004.

All four segments generated strong nominal salesgrowth in the three months ended June 30, 2005. Energy Services grew11.3%, followed by Paper Services, up 9.4%, andIndustrial and Institutional Services, up 9.0%. Other segmentsales nearly doubled through the impact of strong organic growth andour Katayama Nalco joint venture. Sales were also strong on an organicbasis across the segments. Energy Services grew 9.9% for thethree months ended June 30, 2005, followed by Paper Services at7.1% and Industrial and Institutional Services at 6.2%.Other segment sales grew 33.5% organically. Each segmentimproved organic sales performance from the three months ended March31, 2005.

Costs continued to increase during the first sixmonths of 2005 compared to 2004 levels. Raw and other purchasedmaterial costs have stabilized, but were still ahead of priceimprovement in the three months ended June 30, 2005. For the first sixmonths of 2005, raw and other purchased material costs grew by $80million, roughly divided evenly between the three months ended March31, 2005 and the three months ended June 30, 2005. Our previouslyannounced inventory reduction plans also increased costs in the threemonths ended June 30, 2005. Reduced production volumes causedapproximately $7 million in higher-than-normal in-period recognition ofsupply chain costs. In addition, as we worked to properly valueremotely held inventories, we took a write off of $10.7 million in thethree months ended June 30, 2005. This was part of the $51.6 million inreported inventory reduction during the three months ended June 30,2005.

While the inventory reduction had a temporarily negativeearnings impact, inventory levels at June 30, 2005 totaled $300.9million, down $51.6 million from our March 31, 2005 level and down

15

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

$12.6 million from the December 31, 2004total, which was lower than we had initially targeted. Cash benefitsfrom the non-write-off inventory reductions were not immediatelyrealized, however, as these reductions initially resulted in highercash requirements for working capital, most notably for accountspayable.

During June 2005, we sold our 1,000th 3DTRASAR® cooling water stress management unit to a largemicroelectronics manufacturer. The sale comes approximately one yearafter the conclusion of sales training in North America and as initialrollout activities are being completed in other regions. We haveexperienced substantial demand for 3D TRASAR and intend to increaseproduction levels.

During the six months ended June 30, 2005,sales grew 11.0% to $1,613.9 million compared to revenues of$1,453.7 million for the six months ended June 30, 2004. Net earningsfor the six months ended June 30, 2005 increased to $4.5 millioncompared to a loss of $124.3 million for the six months ended June 30,2004. The loss in 2004 was driven largely by a one-time, non-cashexpense related to purchase accounting of $122.3 million for in-processresearch and development.

Outlook

We expect that price increases agreed upon withcustomers will be approximately $150 million, or about 5% ofrevenues, for 2005, with $96 million expected to be realized in thesecond half of 2005. We expect raw materials and other purchasedmaterial costs to be up $145 million for 2005. In the markets andproduct lines where pricing does not reflect increased raw materialcosts, we will also press for selective price increases through theremainder of 2005.

We believe that these price increases,coupled with cost reduction activities and stable raw material andother purchased materials costs, should drive better results in thesecond half of 2005. We expect that cost reduction activities willgenerate $83 million in 2005 savings with run-rate benefits of $97million. These savings actions are targeted to more than offset highercompensation, inflationary and research and sales engineer investmentcosts. We expect to begin realizing the cash benefits of our inventoryreduction efforts in the three months ended September 30, 2005, as theinitial impact of reducing inventory was to reduce payables.

Results of Operations

Quarter Ended June 30, 2005 Comparedto the Quarter Ended June 30, 2004

Net sales for the threemonths ended June 30, 2005 and June 30, 2004 may be compared asfollows:

|                                       |  |                   |       |         |  |                                               |       |                           |  |         |      |         |  |        |     |         |  |        |      |          |  |        |      |         |  |  |
|---------------------------------------|--|-------------------|-------|---------|--|-----------------------------------------------|-------|---------------------------|--|---------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|---------|--|--|
| (dollarsin millions)                  |  | Three Monthsended |       |    |  | Attributable toChangesin the FollowingFactors |
| June 30,2005                          |  | June 30, 2004     |       | %Change |  | CurrencyTranslation                           |       | Acquisitions/Divestitures |  | Organic |      |
| Industrial& InstitutionalServices |  | $                 | 380.5 |    |  | $                                             | 349.1 |                      |  |    | 9.0  | %  |  |   | 3.0 | %  |  |   | (0.2 | )%  |  |   | 6.2  | %  |
| EnergyServices                        |  |              | 220.8 |    |  |                                          | 198.4 |                      |  |    | 11.3 | %  |  |   | 2.5 | %  |  |   | (1.1 | )%  |  |   | 9.9  | %  |
| PaperServices                         |  |              | 176.3 |    |  |                                          | 161.2 |                      |  |    | 9.4  | %  |  |   | 3.1 | %  |  |   | (0.8 | )%  |  |   | 7.1  | %  |
| Other                                 |  |              | 58.7  |    |  |                                          | 31.7  |                      |  |    | 85.2 | %  |  |   | 4.7 | %  |  |   | 47.0 | %   |  |   | 33.5 | %  |
| Netsales                              |  | $                 | 836.3 |    |  | $                                             | 740.4 |                      |  |    | 13.0 | %  |  |   | 2.9 | %  |  |   | 1.5  | %   |  |   | 8.6  | %  |
|                                       |

Net salesfor the three months ended June 30, 2005 were $836.3 million, a13.0% increase from the $740.4 million reported for the threemonths ended June 30, 2004. On an organic basis, which excludes theimpacts of changes in foreign currency translation rates andacquisitions and divestitures, net sales were up 8.6%. Of thisimprovement, 4.8% was attributed to price increases, while theremaining 3.8% was driven by favorable sales growth broadlyspread across our customer base. The 

16

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

Energy Services division posted significantorganic growth in sales of 9.9% over the same period last year.Organically, Paper Services division sales were up 7.1% comparedto a year ago, reflecting continued strong growth in the Latin Americaand Pacific regions and a more modest gain in North America. PaperServices sales in Europe continue to suffer, resulting in part frommanagement vs. labor challenges faced by our Finnish customers. TheIndustrial and Institutional Services division reported organic growthof 6.2%. While most of the improvement was due to priceincreases, solid gains continue to be posted by our global miningbusiness and our water treatment business in the Latin American andPacific regions. Most of the organic improvement in"other" sales was attributable to oursubsidiary company in India and our Japanese joint venture, KatayamaNalco, which reported improved sales in the month of June over lastyear. The increase in "other" salesattributable to acquisitions/divestitures represents the incrementalimpact of April and May 2005 sales of Katayama Nalco, which was formedwith Katayama Chemical Inc. on June 1, 2004.

Grossprofit, defined as the difference between net sales and cost ofproduct sold, of $356.4 million for the three months ended June 30,2005 decreased by $11.8 million, or 3.2%, from the $368.2million reported for the quarter ended June 30, 2004. On an organicbasis, gross profit decreased by $26.3 million. Unfavorablemanufacturing volume variances attributable to our plan to reduceinventory levels during the quarter and an inventory write-offaccounted for most of this change. These two factors were primarilyresponsible for the change in the gross profit margin, which was42.6% for the three months ended June 30, 2005 compared to49.7% for the year-ago period. Higher costs of raw and otherpurchased materials were largely offset by increases in the sellingprices of our products.

Selling, administrative, andresearch expenses for the three months ended June 30, 2005 of$263.3 million increased by $1.7 million, or 0.6%, from $261.6million for the three months ended June 30, 2004. On an organic basis,selling, administrative, and research expenses decreased by $8.5million, or 3.2%, reflecting further initiatives to reduce andcontrol spending.

Amortization of intangibleassets was $20.5 million and $24.9 million for the three monthsended June 30, 2005 and 2004, respectively. The decrease wasattributable to lower amortization of customer relationships, which areamortized using an accelerated method.

Businessoptimization expenses, representing mostly employee severance andrelated costs, were $17.0 million for the three months ended June 30,2005, and included a $14.0 million charge to support a plan to de-layerour management structure and reduce costs in lower-performing businessunits. The plan calls for the elimination of approximately 220positions, primarily in Europe and North America.

Other income (expense), net was a net expense of$0.6 million and $1.8 million for the three months ended June 30, 2005and 2004, respectively. In November 2004, the Company terminated themonitoring services provided to the Company by affiliates of theSponsors. Monitoring fees for such services were $3.2 million for thethree months ended June 30, 2004.

Net interestexpense, defined as the combination of interest income andinterest expense, of $62.8 million for the three months ended June 30,2005 increased by $2.8 million from the $60.0 million reported for thethree months ended June 30, 2004. The impact of higher interest rateson variable rate borrowings more than offset the impact of a loweraverage debt level compared to the year-ago period.

The effective tax rate for the three months endedJune 30, 2005 was 50.0%. The rate varies from the U.S. statutoryincome tax rate of 35% primarily due to the tax treatment of thesenior discount note interest expense, 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.

The aforementioned items contributed to the variationbetween the U.S. statutory income tax rate and the Company'seffective income tax rate for the six months ended June 30, 2004.

17

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

The taxable income and expenses ofNalco Finance Holdings LLC flow directly to the owners for U.S. taxpurposes. As a result, the Company's owners recognize the taxbenefit on the senior discount note interest expense.

The year-to-date effective tax rate changed from51.5% for the three months ended March 31, 2005 to 52.3%for the six months ended June 30, 2005. Because the three months endedJune 30, 2005 is a pre-tax loss, this change results in a reduced taxbenefit for the quarter.

Minority interestexpense was $0.7 million higher than the $0.9 million for thethree months ended June 30, 2004, reflecting improved results for mostof the Company's non-wholly owned subsidiaries.

SixMonths Ended June 30, 2005 Compared to the Six Months Ended June 30,2004

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

|                                       |  |                 |         |         |  |                                                |         |                           |  |         |      |         |  |        |     |         |  |        |      |          |  |        |      |         |  |  |
|---------------------------------------|--|-----------------|---------|---------|--|------------------------------------------------|---------|---------------------------|--|---------|------|---------|--|--------|-----|---------|--|--------|------|----------|--|--------|------|---------|--|--|
| (dollarsin millions)                  |  | Six Monthsended |         |    |  | Attributable to Changesinthe Following Factors |
| June30, 2005                          |  | June 30, 2004   |         | %Change |  | CurrencyTranslation                            |         | Acquisitions/Divestitures |  | Organic |      |
| Industrial& InstitutionalServices |  | $               | 724.2   |    |  | $                                              | 678.4   |                      |  |    | 6.8  | %  |  |   | 2.5 | %  |  |   | (0.2 | )%  |  |   | 4.5  | %  |
| EnergyServices                        |  |            | 430.7   |    |  |                                           | 392.6   |                      |  |    | 9.7  | %  |  |   | 2.3 | %  |  |   | (1.4 | )%  |  |   | 8.8  | %  |
| PaperServices                         |  |            | 346.6   |    |  |                                           | 325.3   |                      |  |    | 6.5  | %  |  |   | 2.9 | %  |  |   | (1.2 | )%  |  |   | 4.8  | %  |
| Other                                 |  |            | 112.4   |    |  |                                           | 57.4    |                      |  |    | 95.8 | %  |  |   | 4.5 | %  |  |   | 62.6 | %   |  |   | 28.7 | %  |
| Netsales                              |  | $               | 1,613.9 |    |  | $                                              | 1,453.7 |                      |  |    | 11.0 | %  |  |   | 2.6 | %  |  |   | 1.7  | %   |  |   | 6.7  | %  |
|                                       |

Netsales for the six months ended June 30, 2005 were $1,613.9million, a 11.0% increase from the $1,453.7 million reported forthe six months ended June 30, 2004. On an organic basis, which excludesthe impacts of changes in foreign currency translation rates andacquisitions and divestitures, net sales were up 6.7%. Of thisimprovement, 3.7% was attributed to price increases, while theremaining 3.0% was driven by favorable sales growth broadlyspread across our customer base. The Energy Services division reportedstrong organic growth in sales of 8.8% over the same period lastyear. Solid double-digit growth in the Latin America and Pacificregions and a more modest improvement in North America contributed tothe 4.8% organic growth in Paper Services division salescompared to a year ago. These improvements were partly offset by lowerPaper Services sales in Europe, due to management vs. labor challengesfaced by our Finnish customers and advance purchases made by customersduring the three months ended December 31, 2004. Customers purchased inadvance to avoid risking any potential complications from ourinformation systems conversion in Europe on January 1, 2005. TheIndustrial and Institutional Services division reported organic growthof 4.5%, which was mostly attributable to price increases.However, solid gains, exclusive of price increases, were posted by ourglobal mining business and our water treatment business in the LatinAmerican and Pacific regions. These gains were partly offset by lowersales reported in Europe, which was partly the result of higher salesduring the three months ended December 31, 2004, due to advancepurchases made by customers in that region. The generally slowereconomy in our largest western European markets was also a contributingfactor. Most of the organic improvement in"other" sales was attributable to alternatechannel sales, our subsidiary company in India, and our Japanese jointventure, Katayama Nalco, which reported improved sales in the month ofJune over last year. The increase in "other"sales attributable to acquisitions/divestitures represents theincremental impact of sales for the first five months of 2005 byKatayama Nalco, which was formed with Katayama Chemical Inc. on June 1,2004.

Gross profit, defined as the differencebetween net sales and cost of product sold, of $721.6 million for thesix months ended June 30, 2005 increased by $14.5 million, or2.0%, over the $707.1 million reported for the six months endedJune 30, 2004. On an organic basis and excluding the impact of a $14.5million charge to cost of product sold during the six months ended June30, 2004 

18

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

resulting from the sale of inventory that hadbeen revalued at selling price less costs to sell in purchaseaccounting at the date of the Acquisition, gross profit decreased by$28.8 million. This was mostly attributable to higher costs of raw andother purchased materials, partly offset by the impact of increases inthe selling prices of our products. Gross profit margin for the sixmonths ended June 30, 2005 was 44.7% compared to 48.6%for the year-ago period. Gross profit margin for the six months endedJune 30, 2004 was reduced approximately 100 basis points as a result ofthe aforementioned $14.5 million charge resulting from purchaseaccounting.

Selling, administrative, and researchexpenses for the six months ended June 30, 2005 of $521.8 millionincreased by $6.9 million, or 1.3%, from $514.9 million for thesix months ended June 30, 2004. This increase was attributable tochanges in foreign currency translation rates and the incrementalexpenses of Katayama Nalco for the first five months of 2005. On anorganic basis, selling, administrative, and research expenses decreasedby $13.9 million, or 2.7%, reflecting continuing efforts toreduce and control spending.

Amortization ofintangible assets was $41.1 million and $49.1 million for the sixmonths ended June 30, 2005 and 2004, respectively. The decrease wasattributable to lower amortization of customer relationships, which areamortized using an accelerated method.

In-processresearch and development was a one-time charge of $122.3 millionrecorded during the six months ended June 30, 2004, as a result ofpurchase accounting related to the Acquisition. The value of purchasedIPR&D was comprised of five ongoing development projects at thedate of the Acquisition. Purchased IPR&D was derived by assigningvalues to those projects identified by management as having economicvalue, but that had not yet reached technological feasibility and hadno alternative future use.

Business optimizationexpenses, representing mostly employee severance and relatedcosts, were $17.8 million for the six months ended June 30, 2005, andincluded a $14.0 million charge recorded at the end of the period tosupport a plan to de-layer our management structure and reduce costs inlower-performing business units. The plan calls for the elimination ofapproximately 220 positions, primarily in Europe and North America.

Other income (expense), net was a net expense of$2.8 million and $5.3 million for the six months ended June 30, 2005and 2004, respectively. In November 2004, the Company terminated themonitoring services provided to the Company by affiliates of theSponsors. Monitoring fees for such services were $5.7 million for thesix months ended June 30, 2004. The resulting favorable variance wasoffset by a $2.4 million impairment charge recorded during the sixmonths ended June 30, 2005 related to a business held for sale.

Net interest expense, defined as the combination ofinterest income and interest expense, of $122.8 million for the sixmonths ended June 30, 2005 increased by $4.5 million from the $118.3million reported for the six months ended June 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 sixmonths ended June 30, 2005 was 52.3%. The rate varies from theU.S. statutory income tax rate of 35% due to the tax treatmentof the senior discount notes interest expense, the incremental tax ondividends received from non-U.S. subsidiaries, foreign taxes providedat less than the 35% U.S. statutory rate, U.S. state incometaxes, nondeductible expenses, and other permanent differences.

The aforementioned items contributed to the variationbetween the U.S. statutory income tax rate and the Company'seffective income tax rate for the six months ended June 30, 2004. Inaddition, the effective rate was impacted by the charge for purchasedIPR&D, which is not tax deductible.

The taxableincome and expenses of Nalco Finance Holdings LLC flow directly to theowners for U.S. tax purposes. As a result, the Company's ownersrecognize the tax benefit on the senior discount notes interestexpense.

19

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

Minority interest expensewas $0.9 million higher than the $1.9 million for the six months endedJune 30, 2004, reflecting improved results for most of theCompany's non-wholly owned subsidiaries.

Liquidity andCapital Resources

Operatingactivities.    Historically, the Company's main source ofliquidity has been its solid cash flow generated by operatingactivities. For the six months ended June 30, 2005, cash provided byoperating activities was $30.4 million, a $95.0 million decrease fromthe same period last year. This decrease was mostly attributable tohigher working capital requirements, most notably for accounts payable,which directly resulted from our efforts to significantly reduceinventory levels during the second quarter of 2005. Also contributingwas the payment of year-end incentive plan and commission accruals.

Investing activities.    Cash used for investingactivities was $28.8 million for the six months ended June 30, 2005,which was mostly attributable to net property additions of $25.0million.

Cash used for investing activities was $9.7million for the six months ended June 30, 2004. This was mostly theresult of net property additions of $34.9 million, partly offset by a$25.6 million purchase price adjustment received from Suez related tothe Acquisition. Approximately half of the capital spending wasattributable to our information systems project in Europe.

Financing activities.    Net cash provided byfinancing activities totaled $5.9 million during the six months endedJune 30, 2005, which was mostly attributable to a net increase inborrowings.

Net cash used for financing activitiestotaled $113.7 million during the six months ended June 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 unitholderat the time of the distribution and to pay fees and expenses related tothat offering.

Since the Transactions, we have beenhighly leveraged. Our liquidity requirements are significant, primarilydue to debt service requirements as well as research and developmentand capital investment. Our primary source of liquidity will continueto be cash flow generated from operations, but we also haveavailability under a $250 million revolving credit facility and a $100million receivables facility, in each case subject to certainconditions. We believe that our financial position and financingstructure will provide flexibility in worldwide financing activitiesand permit us to respond to changing conditions in credit markets.

Senior credit facilities.    On November 4, 2003,we entered into senior credit facilities which provided for a revolvingcredit facility, a $300 million six-year term loan A facility (whichincludes an €88.0 million tranche) which matures inNovember 2009 and a $1,300 million seven-year term loan B facilitywhich matures in November 2010. Borrowings under the senior creditfacilities bear interest at a floating base rate plus an applicablemargin. The applicable margin for borrowings under the revolving creditfacility and the term loan A facility is 1.50% with respect tobase rate borrowings and 2.50% with respect to LIBOR orEurocurrency borrowings and may be reduced subject to our attainingcertain leverage ratios. The applicable margin for borrowings under theterm loan B facility is 1.50% with respect to base rateborrowings and 2.00% with respect to LIBOR or Eurocurrencyborrowings. The applicable margin for borrowings under the term loan Bfacility is not subject to adjustment.

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

The term loan A facility willamortize each year in quarterly amounts at a rate of 5% perannum in year one, 10% per annum in year two, 15% perannum in year three, 20% per annum in year four and 25%per annum in each of years five and six.

20

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

The term loan B facility willamortize each year in an amount equal to 1% per annum in equalquarterly installments for the first six years and nine months, withthe remaining amount payable on November 4, 2010.

AtJune 30, 2005, the outstanding balance of the term loan A and term loanB facilities was $208.5 million and $1,081.0 million, respectively.

Principal amounts outstanding under the revolving creditfacility will be due and payable in full at maturity on November 4,2009. At June 30, 2005, our outstanding borrowing under the revolvingcredit facility was $24.0 million.

The senior creditfacilities contain a number of covenants that, among other things,restrict, subject to certain exceptions, our ability and the ability ofour subsidiaries (including Nalco Company) to sell assets, incuradditional indebtedness or issue preferred stock, repay otherindebtedness, pay dividends and distributions or repurchase certaincapital stock, create liens on assets, make investments, loans oradvances, 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 June 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, Nalco FinanceHoldings LLC and Nalco Finance Holdings Inc. issued $694.0 millionaggregate principal amount at maturity of 9.0% senior discountnotes due 2014. Prior to February 1, 2009, interest will accrue on thenotes in the form of an increase in the accreted value of such notes.The accreted value of each note will increase from the date of issuanceuntil February 1, 2009 at a rate of 9.0% per annum, reflectingthe accrual of non-cash interest, such that the accreted value willequal the principal amount at maturity on February 1, 2009. Cashinterest payments on the notes will be due and payable beginning in2009. Our primary source of liquidity for such payments will be cashflow generated from the operations of subsidiaries, including NalcoHoldings 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 Company tomake such payments is governed by a formula based on 50% of itsconsolidated net income (which, as defined in such indentures, excludesimpairment charges, amortization charges from purchase accounting andany after-tax extraordinary, unusual or nonrecurring gains and losses).In addition, as a condition to making such payments to the issuersbased on such formula, Nalco Holdings LLC must have an Adjusted EBITDAto interest expense ratio of at least 2.0 to 1 after giving effect toany such payments. Notwithstanding such restrictions, such indenturespermit an aggregate of $50.0 million of such payments to be madewhether or not there is availability under the formula or theconditions to its use are met.

In December 2004, NalcoFinance Holdings LLC and Nalco Finance Holdings Inc. redeemed a portionof the senior discount notes with an accreted value of $162.3 millionusing proceeds from the 

21

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

November 2004 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.

The indenturesgoverning the senior notes, the senior subordinated notes and seniordiscount notes limit our ability and the ability of our restrictedsubsidiaries to:

|              |                               |
|--------------|-------------------------------|
| •  | incuradditional indebtedness; |

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

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

|              |                                                          |
|--------------|----------------------------------------------------------|
| •  | enter into certaintypes of transactions 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 tocertain exceptions, the indentures governing the senior notes, thesenior subordinated notes, and the senior discount notes permit theCompany and our restricted subsidiaries to incur additionalindebtedness, including secured indebtedness.

Covenant compliance.    The breach of covenants inour senior credit agreement that are tied to ratios based on AdjustedEBITDA could result in a default under that agreement and the lenderscould elect to declare all amounts borrowed due and payable. Any suchacceleration would also result in a default under our indentures.Additionally, under our debt agreements, our ability to engage inactivities such as incurring additional indebtedness, makinginvestments and paying dividends is also tied to ratios based onAdjusted EBITDA.

Adjusted EBITDA is used to determineour compliance with many of the covenants contained in the indenturesgoverning the notes and in our senior credit agreement. Adjusted EBITDAis defined as EBITDA further adjusted to exclude unusual items andother adjustments permitted in calculating covenant compliance underthe indentures and our senior credit facility. We believe that theinclusion of supplementary adjustments to EBITDA applied in presentingAdjusted EBITDA are appropriate to provide additional information toinvestors to demonstrate compliance with our financing covenants.

Adjusted EBITDA is calculated asfollows:

|                                  |  |                                 |       |                                 |  |                                |         |                               |  |        |       |         |  |        |         |         |  |  |
|----------------------------------|--|---------------------------------|-------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
| (dollarsin millions)             |  | Three Months endedJune 30, 2005 |       | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| Net earnings(loss)               |  | $                               | (5.5  | )                          |  | $                              | 2.4     |                          |  | $      | 4.5   |    |  | $      | (124.3  | )  |
| Interest,net                     |  |                            | 62.8  |                            |  |                           | 60.0    |                          |  |   | 122.8 |    |  |   | 118.3   |    |
| Incometax provision(benefit)     |  |                            | (3.9  | )                          |  |                           | 16.6    |                          |  |   | 8.0   |    |  |   | 19.6    |    |
| Depreciation                     |  |                            | 33.5  |                            |  |                           | 28.2    |                          |  |   | 66.7  |    |  |   | 56.9    |    |
| Amortization                     |  |                            | 20.5  |                            |  |                           | 24.9    |                          |  |   | 41.1  |    |  |   | 49.1    |    |
| EBITDA                           |  | $                               | 107.4 |                            |  | $                              | 132.1   |                          |  | $      | 243.1 |    |  | $      | 119.6   |    |
| Non-cashcharges(1)               |  |                            | 5.7   |                            |  |                           | 7.6     |                          |  |   | 15.8  |    |  |   | 153.0   |    |
| Businessoptimization expenses(2) |  |                            | 17.0  |                            |  |                           | — |                          |  |   | 17.8  |    |  |   | — |    |
| Unusualitems(3)                  |  |                            | 1.1   |                            |  |                           | 3.4     |                          |  |   | 1.8   |    |  |   | 4.5     |    |
| Otheradjustments(4)              |  |                            | (1.2  | )                          |  |                           | 2.4     |                          |  |   | (3.0  | )  |  |   | 3.7     |    |
| AdjustedEBITDA                   |  | $                               | 130.0 |                            |  | $                              | 145.5   |                          |  | $      | 275.5 |    |  | $      | 280.8   |    |
|                                  |

22

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

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

|                                                |  |                                 |         |                                 |  |                                |         |                               |  |        |         |        |  |        |         |        |  |  |
|------------------------------------------------|--|---------------------------------|---------|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
| (dollarsin millions)                           |  | Three Months endedJune 30, 2005 |         | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| In-processresearch and development             |  | $                               | — |                            |  | $                              | — |                          |  | $      | — |   |  | $      | 122.3   |   |
| Inventorystep-up                               |  |                            | — |                            |  |                           | 0.4     |                          |  |   | — |   |  |   | 14.5    |   |
| Assetwrite-offs                                |  |                            | 2.5     |                            |  |                           | — |                          |  |   | 4.9     |   |  |   | — |   |
| Profitsharing expense and 401(k) funded bySuez |  |                            | 4.2     |                            |  |                           | 9.9     |                          |  |   | 9.8     |   |  |   | 16.0    |   |
| Other                                          |  |                            | (1.0    | )                          |  |                           | (2.7    | )                        |  |   | 1.1     |   |  |   | 0.2     |   |
| Non-cashcharges                                |  | $                               | 5.7     |                            |  | $                              | 7.6     |                          |  | $      | 15.8    |   |  | $      | 153.0   |   |
|                                                |

In-processResearch and Development

In-process research anddevelopment was a one time charge of $122.3 million recorded during thesix months ended June 30, 2004, as a result of purchase accountingentries related to the Acquisition.

InventoryStep-Up

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

Profit Sharing and 401(k) Expense Funded by Suez

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

Other

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

|           |                                                                                                                                                                                                                                                                    |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Business optimization expenses for2005 include costs associated with the de-layering of our managementstructure, cost reductions in lower-performing business units, and theredesign and optimization of work processes. See note 7 to Item 1 formore information. |

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

|                                     |  |                                 |     |                                 |  |                                |         |                               |  |        |     |        |  |        |         |        |  |  |
|-------------------------------------|--|---------------------------------|-----|---------------------------------|--|--------------------------------|---------|-------------------------------|--|--------|-----|--------|--|--------|---------|--------|--|--|
| (dollarsin millions)                |  | Three Months endedJune 30, 2005 |     | Three Months ended June 30,2004 |  | Six Months ended June 30, 2005 |         | SixMonths ended June 30, 2004 |
| Loss (gain) onsales, net ofexpenses |  | $                               | 0.6 |                            |  | $                              | — |                          |  | $      | 1.1 |   |  | $      | — |   |
| Otherunusual items(a)               |  |                            | 0.5 |                            |  |                           | 3.4     |                          |  |   | 0.7 |   |  |   | 4.5     |   |
|                                |  | $                               | 1.1 |                            |  | $                              | 3.4     |                          |  | $      | 1.8 |   |  | $      | 4.5     |   |
|                                     |

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

|  |     |                                                                                                                                                                                                                                                                     |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | Otherunusual items for the three months and six months ended June 30, 2005mostly represent certain inventory write-offs. Other unusual items forthe three months and six months ended June 30, 2004 primarily includecertain 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. |

23

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

Our covenant levels and ratiosfor the four quarters ended June 30, 2005 are asfollows:

|                                                                                                           |  |                                |        |        |  |        |        |        |  |  |
|-----------------------------------------------------------------------------------------------------------|--|--------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                                                                                                      |  | CovenantLevel at June 30, 2005 |        | Ratios |
| **Seniorcredit facility**(1)                                                                              |  |                           |   |   |  |   |   |   |
| Minimum AdjustedEBITDA to cash interestratio                                                              |  |                           | 1.70x  |   |  |   | 2.87x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |                           | 6.50x  |   |  |   | 5.20x  |   |
| **Indentures**(2)                                                                                         |  |                           |   |   |  |   |   |   |
| Minimum AdjustedEBITDA to fixed charge ratio required to incur additional debt pursuantto ratioprovisions |  |                           | 2.00x  |   |  |   | 2.45x  |   |
|                                                                                                           |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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) | Our ability to incuradditional debt and make certain restricted payments under ourindentures, subject to specified exceptions, is tied to an AdjustedEBITDA to fixed charge ratio of at least 2.0 to 1, except that we mayincur certain debt and make certain restricted payments and certainpermitted investments without regard to the ratio, such as up to anaggregate principal amount of $1,950 million (including $1,289.5million that was outstanding under our term loan facilities as of June30, 2005) and investments in similar business and other investmentsequal to 6% of Nalco Finance Holdings LLC consolidatedassets. |

Local lines of credit.    Certainof our non-U.S. subsidiaries have lines of credit to support localrequirements. As of June 30, 2005, the aggregate outstanding balanceunder these local lines of credit was approximately $20.5 million.Certain of these lines of credit are equally and ratably secured withobligations under our senior credit facilities.

Receivables facility.    Nalco Company entered intoa receivables facility on June 25, 2004 that provides up to $100million in funding from a commercial paper conduit sponsored byJPMorgan Chase Bank, one of the lenders under Nalco Company'ssenior credit facilities, based on availability of eligible receivablesand satisfaction of other customary conditions.

Availability of funding under the receivables facilitydepends primarily upon the outstanding trade accounts receivablebalance from time to time. Aggregate availability is determined byusing a formula that reduces the gross receivables balance by factorsthat take into account historical default and dilution rates, excessiveconcentrations and average days outstanding and the costs of thefacility. Based on the terms of this facility and on the criteriadescribed above, as of June 30, 2005, approximately $163.2 million ofour accounts receivable balance was considered eligible for financingunder the program, of which approximately $83.2 million would have beenavailable for funding. As of June 30, 2005, we had $79.4 million ofoutstanding borrowings under this facility.

Thisfacility is treated as a general financing agreement resulting in theborrowings and related receivables being shown as liabilities andassets, respectively, on our consolidated balance sheet and the costsassociated with the receivables facility being recorded as interestexpense.

24

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Item3.    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company's exposuresto market risk since December  31, 2004.

Item4.    Controls andProcedures

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

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The Company'schief executive officer and chief financial officer, after evaluatingthe effectiveness of the Company's "disclosurecontrols and procedures" (as defined in the SecuritiesExchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end ofthe period, have concluded that the Company's disclosure controlsand procedures were adequate and designed to ensure that materialinformation relating to the Company and its consolidated subsidiarieswould be made known to them by others within those entities asappropriate to allow timely decisions regarding requireddisclosures. |

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

|        |                                                                                                                                                                                                                                                                       |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There wereno changes in the Company's internal controls over financialreporting that occurred during the second quarter of 2005 that havematerially affected, or are reasonably likely to materially affect, theCompany's internal controls over financial reporting. |

25

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PART II. OTHER INFORMATION

Item6. Exhibits

|           |                                   |
|-----------|-----------------------------------|
| (a)  | The following areincluded herein: |

|        |                                                                                             |
|--------|---------------------------------------------------------------------------------------------|
|   | Exhibit 10.1 MaterialContracts – Amendment No. 2 to the Receivables TransferAgreement |

|        |                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------|
|   | Exhibit 31.1 Certification of ChiefExecutive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of2002 |

|        |                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------|
|   | Exhibit 31.2 Certification of ChiefFinancial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of2002 |

|        |                                                                                                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   | Exhibit 32.1 Certifications Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002 |

26

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SIGNATURE

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

|        |  |                          |  |                                                    |  |  |  |  |  |  |
|--------|--|--------------------------|--|----------------------------------------------------|--|--|--|--|--|--|
|   |  | NALCOFINANCE HOLDINGSLLC |
|   |  | /s/BRADLEY J. BELL       |
|   |  | Name:                    |  | Bradley J.Bell                                     |
|   |  | Title:                   |  | ExecutiveVice President and Chief FinancialOfficer |
|        |

Dated: August 12,2005

27

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