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UNITEDSTATESSECURITIES AND EXCHANGECOMMISSION

Washington, DC20549

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FORM10-Q

(Mark One)

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

For the quarterly period endedSeptember  30,2006

or

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

For the transition periodfrom            to            .

Commission FileNo.333-119231

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NALCOFINANCE HOLDINGS LLC

(Exact name ofregistrant as specified in itscharter)

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

1601 West Diehl RoadNaperville, IL60563-1198(630) 305-1000

(Address,Including Zip Code, and Telephone Number, Including Area Code, ofRegistrant’s Principal Executive Offices)

Notapplicable

(Former name, former addressand former fiscal year, if changed since lastreport)

Indicate by check mark whether theregistrant: (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was requiredto file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes     No

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, or a non-acceleratedfiler. See definition of ‘‘accelerated filer and largeaccelerated filer’’ in Rule 12b-2 of the Exchange Act.(Check one):

Large accelerated filer                        Accelerated filer                                Non-acceleratedfiler 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12-b-2 of theExchange Act).    Yes         No

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QUARTERLYREPORT ON FORM 10-QNALCO FINANCE HOLDINGS LLC Quarter EndedSeptember  30,  2006

TABLE OFCONTENTS

|                             |  |  |                                                                                                                       |  |        |  |  |        |  |
|-----------------------------|--|--|-----------------------------------------------------------------------------------------------------------------------|--|--------|--|--|--------|--|
| PartI. FinancialInformation |  |  |                                                                                                                       |  |   |  |
| Item1.                      |  |  | FinancialStatements(Unaudited)                                                                                        |  |        |  |  |   |  |
|                        |  |  | CondensedConsolidated Balance Sheets – September  30,  2006and December  31,2005                                |  |        |  |  | 2      |  |
|                        |  |  | CondensedConsolidated Statements of Operations – Three months and ninemonths ended September  30,  2006 and2005 |  |        |  |  | 3      |  |
|                        |  |  | CondensedConsolidated Statements of Cash Flows – Nine months endedSeptember  30,  2006 and2005                  |  |        |  |  | 4      |  |
|                        |  |  | Notesto Condensed Consolidated Financial Statements – September30,2006                                          |  |        |  |  | 5      |  |
| Item2.                      |  |  | Management’s Discussion andAnalysis of Financial Condition and Results ofOperations                             |  |        |  |  | 13     |  |
| Item3.                      |  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                             |  |        |  |  | 28     |  |
| Item4.                      |  |  | Controls andProcedures                                                                                                |  |        |  |  | 28     |  |
| PartII. OtherInformation    |  |  |                                                                                                                       |  |   |  |
| Item1A.                     |  |  | RiskFactors                                                                                                           |  |        |  |  | 29     |  |
| Item6.                      |  |  | Exhibits                                                                                                              |  |        |  |  | 29     |  |
| Signature                   |  |  |                                                                                                                       |  | 30     |  |
|                             |

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Table of Contents

PARTI.    FINANCIAL INFORMATION

Item 1.        FinancialStatements

Nalco Finance Holdings LLC andSubsidiariesCondensed Consolidated Balance Sheets(dollarsinmillions)

|                                                                       |  |  |                             |   |         |                 |  |  |  |   |         |  |
|-----------------------------------------------------------------------|--|--|-----------------------------|---|---------|-----------------|--|--|--|---|---------|--|
|                                                                  |  |  | (Unaudited)September30,2006 |   |         | December31,2005 |
| Assets                                                                |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Currentassets:                                                        |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Cash and cashequivalents                                              |  |  |                             | $ | 42.9    |                 |  |  |  | $ | 30.8    |  |
| Accountsreceivable, less allowances of $20.3 in 2006 and $16.6 in2005 |  |  |                             |   | 665.3   |                 |  |  |  |   | 622.3   |  |
| Inventories:                                                          |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Finishedproducts                                                      |  |  |                             |   | 261.7   |                 |  |  |  |   | 242.6   |  |
| Materialsand work inprocess                                           |  |  |                             |   | 76.8    |                 |  |  |  |   | 70.6    |  |
|                                                                  |  |  |                             |   | 338.5   |                 |  |  |  |   | 313.2   |  |
| Prepaidexpenses, taxes and other currentassets                        |  |  |                             |   | 63.6    |                 |  |  |  |   | 83.1    |  |
| Totalcurrentassets                                                    |  |  |                             |   | 1,110.3 |                 |  |  |  |   | 1,049.4 |  |
| Property,plant, and equipment,net                                     |  |  |                             |   | 733.1   |                 |  |  |  |   | 755.3   |  |
| Intangibleassets:                                                     |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Goodwill                                                              |  |  |                             |   | 2,257.3 |                 |  |  |  |   | 2,196.7 |  |
| Otherintangibles,net                                                  |  |  |                             |   | 1,183.2 |                 |  |  |  |   | 1,227.5 |  |
| Otherassets                                                           |  |  |                             |   | 311.9   |                 |  |  |  |   | 326.0   |  |
| Totalassets                                                           |  |  |                             | $ | 5,595.8 |                 |  |  |  | $ | 5,554.9 |  |
| Liabilitiesand unitholder’sequity                               |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Currentliabilities:                                                   |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Accountspayable                                                       |  |  |                             | $ | 271.0   |                 |  |  |  | $ | 285.4   |  |
| Short-termdebt                                                        |  |  |                             |   | 141.7   |                 |  |  |  |   | 22.6    |  |
| Other currentliabilities                                              |  |  |                             |   | 280.2   |                 |  |  |  |   | 235.1   |  |
| Totalcurrentliabilities                                               |  |  |                             |   | 692.9   |                 |  |  |  |   | 543.1   |  |
| Otherliabilities:                                                     |  |  |                             |   |    |                 |  |  |  |   |    |  |
| Long-termdebt                                                         |  |  |                             |   | 3,060.0 |                 |  |  |  |   | 3,244.2 |  |
| Deferredincometaxes                                                   |  |  |                             |   | 369.5   |                 |  |  |  |   | 380.7   |  |
| Accruedpensionbenefits                                                |  |  |                             |   | 393.5   |                 |  |  |  |   | 416.4   |  |
| Otherliabilities                                                      |  |  |                             |   | 279.8   |                 |  |  |  |   | 278.9   |  |
| Minorityinterest                                                      |  |  |                             |   | 14.1    |                 |  |  |  |   | 11.2    |  |
| Unitholder’sequity                                              |  |  |                             |   | 786.0   |                 |  |  |  |   | 680.4   |  |
| Totalliabilities and unitholder’sequity                         |  |  |                             | $ | 5,595.8 |                 |  |  |  | $ | 5,554.9 |  |
|                                                                       |

Seeaccompanying notes to condensed consolidated financialstatements.

2

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

|                                                   |  |  |                                   |   |        |                                    |  |  |                                   |   |         |                                   |  |  |  |   |         |   |  |  |  |   |         |   |
|---------------------------------------------------|--|--|-----------------------------------|---|--------|------------------------------------|--|--|-----------------------------------|---|---------|-----------------------------------|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                              |  |  | ThreeMonthsendedSeptember 30,2006 |   |        | ThreeMonthsended September 30,2005 |  |  | NineMonthsended September 30,2006 |   |         | NineMonthsended September 30,2005 |
| Netsales                                          |  |  |                                   | $ | 915.4  |                                    |  |  |                                   | $ | 834.9   |                                   |  |  |  | $ | 2,655.8 |   |  |  |  | $ | 2,448.8 |   |
| Operatingcosts andexpenses:                       |  |  |                                   |   |   |                                    |  |  |                                   |   |    |                                   |  |  |  |   |    |   |  |  |  |   |    |   |
| Costof productsold                                |  |  |                                   |   | 502.3  |                                    |  |  |                                   |   | 457.9   |                                   |  |  |  |   | 1,469.0 |   |  |  |  |   | 1,351.0 |   |
| Selling,administrative, and researchexpenses      |  |  |                                   |   | 277.5  |                                    |  |  |                                   |   | 251.2   |                                   |  |  |  |   | 823.6   |   |  |  |  |   | 772.2   |   |
| Amortizationof intangibleassets                   |  |  |                                   |   | 17.6   |                                    |  |  |                                   |   | 20.3    |                                   |  |  |  |   | 52.4    |   |  |  |  |   | 61.4    |   |
| Businessoptimizationexpenses                      |  |  |                                   |   | 3.0    |                                    |  |  |                                   |   | 3.5     |                                   |  |  |  |   | 8.6     |   |  |  |  |   | 21.3    |   |
| Totaloperating costs andexpenses                  |  |  |                                   |   | 800.4  |                                    |  |  |                                   |   | 732.9   |                                   |  |  |  |   | 2,353.6 |   |  |  |  |   | 2,205.9 |   |
| Operatingearnings                                 |  |  |                                   |   | 115.0  |                                    |  |  |                                   |   | 102.0   |                                   |  |  |  |   | 302.2   |   |  |  |  |   | 242.9   |   |
| Otherincome (expense),net                         |  |  |                                   |   | 0.1    |                                    |  |  |                                   |   | — |                                   |  |  |  |   | (0.5    | ) |  |  |  |   | (2.8    | ) |
| Interestincome                                    |  |  |                                   |   | 2.4    |                                    |  |  |                                   |   | 2.1     |                                   |  |  |  |   | 6.4     |   |  |  |  |   | 6.2     |   |
| Interestexpense                                   |  |  |                                   |   | (68.9  | )                                  |  |  |                                   |   | (65.8   | )                                 |  |  |  |   | (203.2  | ) |  |  |  |   | (192.7  | ) |
| Earningsbefore income taxes and minorityinterests |  |  |                                   |   | 48.6   |                                    |  |  |                                   |   | 38.3    |                                   |  |  |  |   | 104.9   |   |  |  |  |   | 53.6    |   |
| Incometax provision                               |  |  |                                   |   | 19.4   |                                    |  |  |                                   |   | 23.0    |                                   |  |  |  |   | 45.6    |   |  |  |  |   | 31.0    |   |
| Minorityinterests                                 |  |  |                                   |   | (1.7   | )                                  |  |  |                                   |   | (1.6    | )                                 |  |  |  |   | (5.2    | ) |  |  |  |   | (4.4    | ) |
| Netearnings                                       |  |  |                                   | $ | 27.5   |                                    |  |  |                                   | $ | 13.7    |                                   |  |  |  | $ | 54.1    |   |  |  |  | $ | 18.2    |   |
|                                                   |

Seeaccompanying notes to condensed consolidated financialstatements.

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

|                                                                                  |  |  |                                  |   |         |                                 |  |  |  |   |        |   |
|----------------------------------------------------------------------------------|--|--|----------------------------------|---|---------|---------------------------------|--|--|--|---|--------|---|
|                                                                             |  |  | NineMonthsendedSeptember 30,2006 |   |         | NineMonthsendedSeptember30,2005 |
| Operatingactivities                                                              |  |  |                                  |   |    |                                 |  |  |  |   |   |   |
| Net earnings                                                                     |  |  |                                  | $ | 54.1    |                                 |  |  |  | $ | 18.2   |   |
| Adjustmentsto reconcile net earnings to net cash provided byoperatingactivities: |  |  |                                  |   |    |                                 |  |  |  |   |   |   |
| Depreciation                                                                     |  |  |                                  |   | 97.5    |                                 |  |  |  |   | 100.0  |   |
| Amortization                                                                     |  |  |                                  |   | 52.4    |                                 |  |  |  |   | 61.4   |   |
| Amortizationof deferred financing costs and accretion of senior discountnotes    |  |  |                                  |   | 32.5    |                                 |  |  |  |   | 30.1   |   |
| Other,net                                                                        |  |  |                                  |   | (13.6   | )                               |  |  |  |   | 19.4   |   |
| Changes inoperating assets andliabilities                                        |  |  |                                  |   | (19.8   | )                               |  |  |  |   | (55.1  | ) |
| Netcash provided by operatingactivities                                          |  |  |                                  |   | 203.1   |                                 |  |  |  |   | 174.0  |   |
| Investingactivities                                                              |  |  |                                  |   |    |                                 |  |  |  |   |   |   |
| Purchase priceadjustment on acquisition of Ondeo NalcoGroup                      |  |  |                                  |   | — |                                 |  |  |  |   | (3.2   | ) |
| Additions toproperty, plant, and equipment,net                                   |  |  |                                  |   | (59.6   | )                               |  |  |  |   | (45.3  | ) |
| Other, net                                                                       |  |  |                                  |   | 1.8     |                                 |  |  |  |   | (0.9   | ) |
| Netcash used for investingactivities                                             |  |  |                                  |   | (57.8   | )                               |  |  |  |   | (49.4  | ) |
| Financingactivities                                                              |  |  |                                  |   |    |                                 |  |  |  |   |   |   |
| Changes inshort-term debt,net                                                    |  |  |                                  |   | 29.3    |                                 |  |  |  |   | 1.7    |   |
| Proceeds from long-termdebt                                                      |  |  |                                  |   | — |                                 |  |  |  |   | 24.1   |   |
| Repayments oflong-termdebt                                                       |  |  |                                  |   | (159.5  | )                               |  |  |  |   | (130.8 | ) |
| Other,net                                                                        |  |  |                                  |   | (3.4    | )                               |  |  |  |   | (5.6   | ) |
| Netcash used for financingactivities                                             |  |  |                                  |   | (133.6  | )                               |  |  |  |   | (110.6 | ) |
| Effect ofexchange rate changes on cash and cashequivalents                       |  |  |                                  |   | 0.4     |                                 |  |  |  |   | (0.5   | ) |
| Increasein cash and cashequivalents                                              |  |  |                                  |   | 12.1    |                                 |  |  |  |   | 13.5   |   |
| Cash and cashequivalents at beginning ofperiod                                   |  |  |                                  |   | 30.8    |                                 |  |  |  |   | 33.2   |   |
| Cashand cash equivalents at end ofperiod                                         |  |  |                                  | $ | 42.9    |                                 |  |  |  | $ | 46.7   |   |
|                                                                                  |

Seeaccompanying notes to condensed consolidated financialstatements.

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NalcoFinance Holdings LLC and SubsidiariesNotes to CondensedConsolidated FinancialStatements(Unaudited)

September  30,2006

|          |                                                |
|----------|------------------------------------------------|
| 1.  | Description of Business and Change inOwnership |

Description of Business

NalcoFinance Holdings LLC and subsidiaries (the Company) is engaged in theworldwide manufacture and sale of highly specialized service chemicalprograms. This includes production and service related to the sale andapplication of chemicals and technology used in water treatment,pollution control, energy conservation, oil production and refining,steelmaking, papermaking, mining, and other industrialprocesses.

Change in Ownership

OnNovember  4,  2003, Nalco Holdings LLC (the Buyer), anewly-formed entity controlled by affiliates of The Blackstone Group,L.P., Apollo Management, L.P., and The Goldman Sachs Group, Inc.(collectively, the Sponsors), pursuant to a Stock Purchase Agreement,as amended, with Suez S.A. (Suez or Seller) and certain of itsaffiliates, acquired the net assets of Ondeo Nalco Group for$4,127.1  million, including direct costs of the acquisition of$125.6  million, excluding assumed debt of $30.2  million,and subject to certain closing and post-closing adjustments (theAcquisition).

|          |                       |
|----------|-----------------------|
| 2.  | Basis of Presentation |

These consolidated financial statements should be read inconjunction with the consolidated and combined financial statements andnotes thereto included in the Annual Report for Nalco Finance HoldingsLLC and subsidiaries for the fiscal year ended December31,  2005.

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 thenine months ended September  30,  2006 are not necessarilyindicative of results that may be expected for the year endedDecember  31,  2006.

Certainreclassifications have been made to the prior year data to conform tothe current year presentation which had no effect on net earningsreported for any period.

5

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|          |      |
|----------|------|
| 3.  | Debt |

Debt consistsof thefollowing:

|                                              |  |  |                  |   |         |                  |  |  |  |   |         |        |
|----------------------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------|--------|
| (dollarsin millions)                         |  |  | September30,2006 |   |         | December 31,2005 |
| Short-term                                   |  |  |                  |   |    |             |  |  |  |   |    |   |
| Checksoutstanding and bankoverdrafts         |  |  |                  | $ | 26.2    |             |  |  |  | $ | 17.9    |   |
| Notes payableto banks                        |  |  |                  |   | 0.9     |             |  |  |  |   | 0.9     |   |
| Current maturitiesof long-termdebt           |  |  |                  |   | 17.4    |             |  |  |  |   | 3.8     |   |
| Securitized tradeaccounts receivablefacility |  |  |                  |   | 97.2    |             |  |  |  |   | — |   |
|                                         |  |  |                  | $ | 141.7   |             |  |  |  | $ | 22.6    |   |
| Long-term                                    |  |  |                  |   |    |             |  |  |  |   |    |   |
| Securitizedtrade accounts receivablefacility |  |  |                  | $ | — |             |  |  |  | $ | 75.3    |   |
| Term loanA, due November2009                 |  |  |                  |   | 78.0    |             |  |  |  |   | 107.6   |   |
| Term loan B, dueNovember2010                 |  |  |                  |   | 957.0   |             |  |  |  |   | 1,081.0 |   |
| Senior notes, dueNovember2011                |  |  |                  |   | 918.2   |             |  |  |  |   | 900.7   |   |
| Senior subordinatednotes, due November2013   |  |  |                  |   | 718.2   |             |  |  |  |   | 700.7   |   |
| Unsecured notes,due May  2008                |  |  |                  |   | 27.8    |             |  |  |  |   | 27.8    |   |
| Seniordiscount notes, due February2014       |  |  |                  |   | 377.3   |             |  |  |  |   | 353.5   |   |
| Other                                        |  |  |                  |   | 0.9     |             |  |  |  |   | 1.4     |   |
|                                         |  |  |                  |   | 3,077.4 |             |  |  |  |   | 3,248.0 |   |
| Less:Currentportion                          |  |  |                  |   | 17.4    |             |  |  |  |   | 3.8     |   |
|                                         |  |  |                  | $ | 3,060.0 |             |  |  |  | $ | 3,244.2 |   |
|                                              |

|          |                          |
|----------|--------------------------|
| 4.  | Unitholder’sEquity |

Unitholder’s equity consists of thefollowing:

|                                      |  |  |                   |   |       |                   |  |  |  |   |        |         |
|--------------------------------------|--|--|-------------------|---|-------|-------------------|--|--|--|---|--------|---------|
| (dollarsin millions)                 |  |  | September 30,2006 |   |       | December 31, 2005 |
| Capitalaccount                       |  |  |                   | $ | 742.9 |              |  |  |  | $ | 741.5  |    |
| Accumulateddeficit                   |  |  |                   |   | (87.1 | )            |  |  |  |   | (141.2 | )  |
| Accumulatedother comprehensiveincome |  |  |                   |   | 130.2 |              |  |  |  |   | 80.1   |    |
| Totalunitholder’sequity        |  |  |                   | $ | 786.0 |              |  |  |  | $ | 680.4  |    |
|                                      |

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 September  30,  2006and December  31,  2005, there were 100 Units issued andoutstanding, which were owned by Nalco HoldingCompany.

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|          |                                               |
|----------|-----------------------------------------------|
| 5.  | Pension and Other PostretirementBenefit Plans |

The components of net periodic pension costand the cost of other postretirement benefits for the three months andnine months ended September  30,  2006 and 2005 were asfollows:

|                                  |  |  |                                   |   |         |                                    |  |  |                                   |   |         |                                  |  |  |  |   |       |         |  |  |  |   |         |         |
|----------------------------------|--|--|-----------------------------------|---|---------|------------------------------------|--|--|-----------------------------------|---|---------|----------------------------------|--|--|--|---|-------|---------|--|--|--|---|---------|---------|
|                             |  |  | PensionBenefits                   |
| (dollarsin millions)             |  |  | ThreeMonthsendedSeptember 30,2006 |   |         | Three MonthsendedSeptember 30,2005 |  |  | Nine MonthsendedSeptember 30,2006 |   |         | NineMonthsendedSeptember 30,2005 |
| Servicecost                      |  |  |                                   | $ | 7.7     |                               |  |  |                                   | $ | 7.9     |                             |  |  |  | $ | 22.3  |    |  |  |  | $ | 21.3    |    |
| Interestcost                     |  |  |                                   |   | 10.8    |                               |  |  |                                   |   | 10.8    |                             |  |  |  |   | 31.9  |    |  |  |  |   | 30.3    |    |
| Expectedreturn on planassets     |  |  |                                   |   | (7.5    | )                             |  |  |                                   |   | (6.9    | )                           |  |  |  |   | (22.2 | )  |  |  |  |   | (19.1   | )  |
| Amortizationof prior servicecost |  |  |                                   |   | 0.1     |                               |  |  |                                   |   | — |                             |  |  |  |   | 0.1   |    |  |  |  |   | — |    |
| Recognizednet actuarialloss      |  |  |                                   |   | 0.1     |                               |  |  |                                   |   | — |                             |  |  |  |   | 0.3   |    |  |  |  |   | — |    |
| Settlementcharge                 |  |  |                                   |   | — |                               |  |  |                                   |   | — |                             |  |  |  |   | 0.4   |    |  |  |  |   | — |    |
| Netperiodiccost                  |  |  |                                   | $ | 11.2    |                               |  |  |                                   | $ | 11.8    |                             |  |  |  | $ | 32.8  |    |  |  |  | $ | 32.5    |    |
|                                  |

|                                  |  |  |                                   |   |      |                                   |  |  |                                  |   |         |                                  |  |  |  |   |      |         |  |  |  |   |         |         |
|----------------------------------|--|--|-----------------------------------|---|------|-----------------------------------|--|--|----------------------------------|---|---------|----------------------------------|--|--|--|---|------|---------|--|--|--|---|---------|---------|
|                             |  |  | Other PostretirementBenefits      |
| (dollarsin millions)             |  |  | ThreeMonthsendedSeptember 30,2006 |   |      | ThreeMonthsendedSeptember 30,2005 |  |  | NineMonthsendedSeptember 30,2006 |   |         | NineMonthsendedSeptember 30,2005 |
| Servicecost                      |  |  |                                   | $ | 1.3  |                              |  |  |                                  | $ | 1.4     |                             |  |  |  | $ | 4.1  |    |  |  |  | $ | 4.1     |    |
| Interestcost                     |  |  |                                   |   | 2.1  |                              |  |  |                                  |   | 2.2     |                             |  |  |  |   | 6.1  |    |  |  |  |   | 6.5     |    |
| Amortizationof prior servicecost |  |  |                                   |   | (1.0 | )                            |  |  |                                  |   | (1.0    | )                           |  |  |  |   | (3.0 | )  |  |  |  |   | (3.0    | )  |
| Recognizednet actuarialloss      |  |  |                                   |   | (0.1 | )                            |  |  |                                  |   | — |                             |  |  |  |   | (0.2 | )  |  |  |  |   | — |    |
| Netperiodiccost                  |  |  |                                   | $ | 2.3  |                              |  |  |                                  | $ | 2.6     |                             |  |  |  | $ | 7.0  |    |  |  |  | $ | 7.6     |    |
|                                  |

|          |                               |
|----------|-------------------------------|
| 6.  | BusinessOptimization Expenses |

The Company has undertaken severalinitiatives to redesign and optimize its business and work processes.Business process optimization expenses, consisting mostly of employeeseverance and related costs, were $8.6  million and $21.3million for the nine months ended September  30,  2006 andSeptember  30,  2005,respectively.

|          |                                  |
|----------|----------------------------------|
| 7.  | Summary of Other Income(Expense) |

The components of other income (expense), netfor the three months and nine months ended September  30,2006 and 2005, include thefollowing:

|                                                 |  |  |                                   |   |      |                                    |  |  |                                   |   |         |                                  |  |  |  |   |      |         |  |  |  |   |      |         |
|-------------------------------------------------|--|--|-----------------------------------|---|------|------------------------------------|--|--|-----------------------------------|---|---------|----------------------------------|--|--|--|---|------|---------|--|--|--|---|------|---------|
| (dollarsin millions)                            |  |  | ThreeMonthsendedSeptember 30,2006 |   |      | ThreeMonthsended September 30,2005 |  |  | NineMonthsended September 30,2006 |   |         | NineMonthsended September30,2005 |
| Franchisetaxes                                  |  |  |                                   | $ | (0.9 | )                             |  |  |                                   | $ | (0.6    | )                           |  |  |  | $ | (2.4 | )  |  |  |  | $ | (1.9 | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |  |                                   |   | 0.5  |                               |  |  |                                   |   | 0.3     |                             |  |  |  |   | 3.1  |    |  |  |  |   | 1.1  |    |
| Foreigncurrency exchangeadjustments             |  |  |                                   |   | 0.3  |                               |  |  |                                   |   | 1.9     |                             |  |  |  |   | (2.7 | )  |  |  |  |   | 3.3  |    |
| Other                                           |  |  |                                   |   | 0.2  |                               |  |  |                                   |   | (1.6    | )                           |  |  |  |   | 1.5  |    |  |  |  |   | (5.3 | )  |
|                                            |  |  |                                   | $ | 0.1  |                               |  |  |                                   | $ | — |                             |  |  |  | $ | (0.5 | )  |  |  |  | $ | (2.8 | )  |
|                                                 |

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|          |              |
|----------|--------------|
| 8.  | Income Taxes |

TheCompany’s effective income tax rate was 43.4% for thenine months ended September  30,  2006. The rate variesfrom the U.S. federal statutory income tax rate of 35% due tothe tax treatment of the senior discount note interest expense, theincremental tax on dividends received from non-U.S. subsidiaries,foreign taxes provided at other than the 35% U.S. statutoryrate, U.S. state income taxes, nondeductible expenses, and otherpermanent differences.

The aforementioned items alsocontributed to the variation between the U.S. federal statutory incometax rate and the Company’s effective income tax rate for thenine months ended September  30,  2005.

Thefollowing is a reconciliation of the tax derived by applying the U.S.statutory tax rate to the earnings before income taxes and minorityinterest and comparing that to the recorded income taxprovision:

|                                              |  |  |                                    |   |      |                                    |  |  |                                   |   |      |                                   |  |  |  |   |      |        |  |  |  |   |      |        |
|----------------------------------------------|--|--|------------------------------------|---|------|------------------------------------|--|--|-----------------------------------|---|------|-----------------------------------|--|--|--|---|------|--------|--|--|--|---|------|--------|
| (dollarsin millions)                         |  |  | Three MonthsendedSeptember 30,2006 |   |      | Three Monthsended September30,2005 |  |  | Nine Monthsended September30,2006 |   |      | Nine Monthsended September30,2005 |
| U.S. statutory taxrate                       |  |  |                                    | $ | 17.0 |                               |  |  |                                   | $ | 13.4 |                              |  |  |  | $ | 36.7 |   |  |  |  | $ | 18.8 |   |
| Interestexpense – senior discountnotes |  |  |                                    |   | 2.9  |                               |  |  |                                   |   | 2.7  |                              |  |  |  |   | 8.4  |   |  |  |  |   | 7.7  |   |
| Other                                        |  |  |                                    |   | (0.5 | )                             |  |  |                                   |   | 6.9  |                              |  |  |  |   | 0.5  |   |  |  |  |   | 4.5  |   |
| Incometax provision                          |  |  |                                    | $ | 19.4 |                               |  |  |                                   | $ | 23.0 |                              |  |  |  | $ | 45.6 |   |  |  |  | $ | 31.0 |   |
|                                              |

TheInternal Revenue Service (the Service) is in the process of completingits examination of the consolidated federal income tax returns of theCompany's subsidiary, Nalco Company, and Nalco Company'ssubsidiaries for the years 2003 and 2004. Recently, the Serviceinformally advised the Company that it is considering the disallowanceof federal tax deductions for a series of expenses, totaling$152  million. These expenses relate to fees paid to the Sponsorsand financial institutions for debt issuance and consulting services.The Company believes that the deductions as reflected in its auditedfinancial statements are proper and will be sustained; accordingly, noreserve has been taken for these amounts. Nonetheless, should theService prevail on the disallowance of any of these expenses, anyincremental tax would offset existing net operating loss carryforwards,rather than require immediate cash payments, and a substantial portionof the disallowed tax benefits would be charged to goodwill, and not tothe tax provision.

|          |                            |
|----------|----------------------------|
| 9.  | Comprehensive Income(Loss) |

Total comprehensive income (loss) and itscomponents, net of related tax, for the three months and nine monthsended September  30,  2006 and 2005, are asfollows:

|                                                       |  |  |                                    |   |        |                                    |  |  |                                   |   |        |                                   |  |  |  |   |        |         |  |  |  |   |        |         |
|-------------------------------------------------------|--|--|------------------------------------|---|--------|------------------------------------|--|--|-----------------------------------|---|--------|-----------------------------------|--|--|--|---|--------|---------|--|--|--|---|--------|---------|
| (dollarsin millions)                                  |  |  | Three MonthsendedSeptember 30,2006 |   |        | Three Monthsended September30,2005 |  |  | Nine Monthsended September30,2006 |   |        | Nine Monthsended September30,2005 |
| Netearnings                                           |  |  |                                    | $ | 27.5   |                               |  |  |                                   | $ | 13.7   |                              |  |  |  | $ | 54.1   |    |  |  |  | $ | 18.2   |    |
| Othercomprehensive income (loss), net of incometaxes: |  |  |                                    |   |   |                               |  |  |                                   |   |   |                              |  |  |  |   |   |    |  |  |  |   |   |    |
| Derivatives                                           |  |  |                                    |   | (0.6   | )                             |  |  |                                   |   | (0.4   | )                            |  |  |  |   | (1.2   | )  |  |  |  |   | 0.3    |    |
| Foreigncurrency translationadjustments                |  |  |                                    |   | 3.1    |                               |  |  |                                   |   | 3.9    |                              |  |  |  |   | 51.3   |    |  |  |  |   | (42.1  | )  |
| Comprehensiveincome(loss)                             |  |  |                                    | $ | 30.0   |                               |  |  |                                   | $ | 17.2   |                              |  |  |  | $ | 104.2  |    |  |  |  | $ | (23.6  | )  |
|                                                       |

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|           |                    |
|-----------|--------------------|
| 10.  | SegmentInformation |

The Company provides integrated watertreatment and process improvement services for industrial andinstitutional applications, using technologically advanced solutions,combining chemical products and equipment, and consistent, reliableon-site service 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 theend markets it serves. The organization is comprised of the followingreportable segments:

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

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

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

Other   –   Thissegment serves the alternative channels to market, supply chainactivities, and certain other operating expenses not allocated to asegment. It also includes the Company’s subsidiary in India andthe Katayama Nalco joint venture.

The Company evaluatesthe performance of its segments based on ‘‘directcontribution’’, which is defined as net sales, less costof products sold (excluding variances to standard costs), selling andservice expenses, marketing expenses, research expenses and‘‘capital charges’’ directly attributableto each segment. Each segment is assessed an internal non-GAAP‘‘capital charge’’ based on trade accountsreceivable, inventories and equipment specifically identifiable to thesegment. The capital charges included in each segment’s directcontribution are eliminated to arrive at the consolidated directcontribution for the Company. There are no intersegment revenues. TheCompany’s segment reporting was changed in the first quarter of2006 to reflect the aforementioned capital charge in the reporteddirect contribution of each segment. Prior year data have beenreclassified between segments to conform to the current yearpresentation.

Net sales by reportable segment were asfollows:

|                                      |  |  |                                    |   |       |                                    |  |  |                                   |   |       |                                   |  |  |  |   |         |        |  |  |  |   |         |        |
|--------------------------------------|--|--|------------------------------------|---|-------|------------------------------------|--|--|-----------------------------------|---|-------|-----------------------------------|--|--|--|---|---------|--------|--|--|--|---|---------|--------|
| (dollarsin millions)                 |  |  | Three MonthsendedSeptember 30,2006 |   |       | Three Monthsended September30,2005 |  |  | Nine Monthsended September30,2006 |   |       | Nine Monthsended September30,2005 |
| Industrial and InstitutionalServices |  |  |                                    | $ | 406.3 |                               |  |  |                                   | $ | 379.5 |                              |  |  |  | $ | 1,174.1 |   |  |  |  | $ | 1,098.0 |   |
| EnergyServices                       |  |  |                                    |   | 267.1 |                               |  |  |                                   |   | 223.4 |                              |  |  |  |   | 772.7   |   |  |  |  |   | 655.5   |   |
| PaperServices                        |  |  |                                    |   | 181.1 |                               |  |  |                                   |   | 173.9 |                              |  |  |  |   | 535.0   |   |  |  |  |   | 520.1   |   |
| Other                                |  |  |                                    |   | 60.9  |                               |  |  |                                   |   | 58.1  |                              |  |  |  |   | 174.0   |   |  |  |  |   | 175.2   |   |
| Netsales                             |  |  |                                    | $ | 915.4 |                               |  |  |                                   | $ | 834.9 |                              |  |  |  | $ | 2,655.8 |   |  |  |  | $ | 2,448.8 |   |
|                                      |

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|           |                                             |
|-----------|---------------------------------------------|
| 10.  | SegmentInformation    (continued) |

The following table presents directcontribution by reportable segment and reconciles the total segmentdirect contribution to earnings before income taxes and minorityinterests:

|                                                   |  |  |                                    |   |        |                                    |  |  |                                   |   |         |                                   |  |  |  |   |        |         |  |  |  |   |        |         |
|---------------------------------------------------|--|--|------------------------------------|---|--------|------------------------------------|--|--|-----------------------------------|---|---------|-----------------------------------|--|--|--|---|--------|---------|--|--|--|---|--------|---------|
| (dollarsin millions)                              |  |  | Three MonthsendedSeptember 30,2006 |   |        | Three Monthsended September30,2005 |  |  | Nine Monthsended September30,2006 |   |         | Nine Monthsended September30,2005 |
| Segment directcontribution:                       |  |  |                                    |   |   |                               |  |  |                                   |   |    |                              |  |  |  |   |   |    |  |  |  |   |   |    |
| Industrialand InstitutionalServices               |  |  |                                    | $ | 98.7   |                               |  |  |                                   | $ | 87.5    |                              |  |  |  | $ | 263.6  |    |  |  |  | $ | 235.9  |    |
| EnergyServices                                    |  |  |                                    |   | 58.0   |                               |  |  |                                   |   | 42.8    |                              |  |  |  |   | 161.2  |    |  |  |  |   | 125.5  |    |
| PaperServices                                     |  |  |                                    |   | 28.6   |                               |  |  |                                   |   | 30.8    |                              |  |  |  |   | 81.2   |    |  |  |  |   | 88.3   |    |
| Other                                             |  |  |                                    |   | (15.2  | )                             |  |  |                                   |   | (14.2   | )                            |  |  |  |   | (49.5  | )  |  |  |  |   | (48.3  | )  |
| Capitalchargeelimination                          |  |  |                                    |   | 19.4   |                               |  |  |                                   |   | 19.8    |                              |  |  |  |   | 57.5   |    |  |  |  |   | 59.2   |    |
| Totalsegment directcontribution                   |  |  |                                    |   | 189.5  |                               |  |  |                                   |   | 166.7   |                              |  |  |  |   | 514.0  |    |  |  |  |   | 460.6  |    |
| Expensesnot allocated tosegments:                 |  |  |                                    |   |   |                               |  |  |                                   |   |    |                              |  |  |  |   |   |    |  |  |  |   |   |    |
| Administrativeexpenses                            |  |  |                                    |   | 53.9   |                               |  |  |                                   |   | 40.9    |                              |  |  |  |   | 150.8  |    |  |  |  |   | 135.0  |    |
| Amortizationof intangibleassets                   |  |  |                                    |   | 17.6   |                               |  |  |                                   |   | 20.3    |                              |  |  |  |   | 52.4   |    |  |  |  |   | 61.4   |    |
| Businessoptimizationexpenses                      |  |  |                                    |   | 3.0    |                               |  |  |                                   |   | 3.5     |                              |  |  |  |   | 8.6    |    |  |  |  |   | 21.3   |    |
| Operatingearnings                                 |  |  |                                    |   | 115.0  |                               |  |  |                                   |   | 102.0   |                              |  |  |  |   | 302.2  |    |  |  |  |   | 242.9  |    |
| Otherincome (expense),net                         |  |  |                                    |   | 0.1    |                               |  |  |                                   |   | — |                              |  |  |  |   | (0.5   | )  |  |  |  |   | (2.8   | )  |
| Interestincome                                    |  |  |                                    |   | 2.4    |                               |  |  |                                   |   | 2.1     |                              |  |  |  |   | 6.4    |    |  |  |  |   | 6.2    |    |
| Interestexpense                                   |  |  |                                    |   | (68.9  | )                             |  |  |                                   |   | (65.8   | )                            |  |  |  |   | (203.2 | )  |  |  |  |   | (192.7 | )  |
| Earningsbefore income taxes and minorityinterests |  |  |                                    | $ | 48.6   |                               |  |  |                                   | $ | 38.3    |                              |  |  |  | $ | 104.9  |    |  |  |  | $ | 53.6   |    |
|                                                   |

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

|           |                             |
|-----------|-----------------------------|
| 11.  | Contingenciesand Litigation |

Various claims, lawsuits andadministrative proceedings are pending or threatened against theCompany and its subsidiaries, arising from the ordinary course ofbusiness with respect to commercial, contract, intellectual property,product liability, employee, environmental and other matters.Historically, these matters have not had a material impact on theconsolidated financial position of the Company. However, the Companycannot predict the outcome of any litigation or the potential forfuture litigation.

The Company has been named as apotentially responsible party (PRP) by the Environmental ProtectionAgency or state enforcement agencies at three pending waste sites wheresome financial contribution is or may be required. These agencies havealso identified many other parties who may be responsible for clean upcosts at these waste disposal sites. The Company is also remediating asmall ground contamination it discovered at its plant in Colombia andcleaned a raw material spill at its plant near Botany, Australia. TheCompany’s financial contribution to remediate these sites is notexpected to be material. There has been no significant financial impacton the Company up to the present, nor is it anticipated that there willbe in the future, as a result of these matters. The Company has madeand will continue to make provisions for these costs if theCompany’s liability becomes probable and when costs can bereasonably estimated.

The Company’s undiscountedreserves for known environmental clean up costs were $2.0million at September  30,  2006. These environmentalreserves represent management’s current estimate of itsproportional clean-up costs (and the cost to remediate the Colombiasite) and are based upon 

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|           |                                                      |
|-----------|------------------------------------------------------|
| 11.  | Contingenciesand Litigation    (continued) |

negotiation and agreement with enforcementagencies, its previous experience with respect to clean-up activities,a detailed review by the Company of known conditions, and informationabout other PRPs. They are not reduced by any possible recoveries frominsurance companies or other PRPs not specifically identified. Althoughmanagement cannot determine whether or not a material effect on futureoperations is 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 nine months ended September30,  2006, relating to environmental compliance and clean upactivities, were not significant.

The Company has beennamed as a defendant in lawsuits based on claimed involvement in thesupply of allegedly defective or hazardous materials and the claimedpresence of hazardous substances at its plants. The plaintiffs in thesecases seek damages for alleged personal injury or potential injuryresulting from exposure to our products or other chemicals. Thesematters have had a de minimis impact on the Company’s businesshistorically and the Company does not anticipate these matters topresent any material risk to the Company’s business in thefuture. Notwithstanding, the Company cannot predict the outcome of anysuch lawsuits or the involvement the Company might have in thesematters in the future.

On November  2,  2005,the U.K. Health and Safety Executive(‘‘HSE’’) sent notice that it intends toinitiate legal proceedings against the Company’s U.K. subsidiaryunder the Health and Safety at Work Act. The place of these proceedingsis not indicated in the notice. This notice references a legionellaoutbreak from November  2003 that is claimed to have originatedat cooling towers owned by one of the subsidiary’s customers.The HSE indicates that the proceedings will relate to the cleaning ofthese cooling towers. The HSE has not initiated the legal proceedingsmentioned in the notice, and the Company has not received any specificcharges or claims for relief. The Company will defend and refute anycontention that it has violated any law.

Beginning onMay  16,  2003, the Company received subpoenas from theU.S. Department of Justice for documents and testimony relating to itsstorage of claimed hazardous materials, the claimed leakage ofwastewater and other matters at its plant in Garyville, Louisiana. Nocharges or indictments have been filed, but the outcome of thisinvestigation is unknown to the Company.

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

|           |            |
|-----------|------------|
| 12.  | Guarantees |

Nosignificant guarantees were outstanding at September  30,2006, other than subsidiary-related performanceguarantees.

The Company had $42.5  million ofletters of credit outstanding at September  30,2006.

|           |                                 |
|-----------|---------------------------------|
| 13.  | RecentAccounting Pronouncements |

In June  2006, theFinancial Accounting Standards Board (FASB) issued Interpretation No.48 (FIN 48), Accounting for Uncertainty in Income Taxes, aninterpretation of FASB Statement No. 109, Accounting for IncomeTaxes. The interpretation clarifies the accounting for uncertaintyin income taxes recognized in an enterprise’s financialstatements by prescribing a recognition threshold and 

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|           |                                                          |
|-----------|----------------------------------------------------------|
| 13.  | RecentAccounting Pronouncements    (continued) |

measurement attribute for the financialstatement recognition and measurement of a tax position taken orexpected to be taken in a tax return. FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting ininterim periods, disclosure, and transition. The effective date of FIN48 is no later than fiscal years beginning after December15,  2006. The Company is in the process of determining theeffects, if any, that adoption of FIN 48 will have on its financialstatements.

In September  2006, the FASB issuedStatement of Financial Accounting Standards (SFAS) No. 157, FairValue Measurements, which defines fair value, establishes aframework for measuring fair value, and expands disclosures about fairvalue measurements. The provisions of SFAS No. 157 are effective forthe Company as of the beginning of its fiscal year endedDecember  31,  2008. The Company is in the process ofdetermining the effects, if any, that adoption of SFAS No. 157 willhave on its financial statements.

In September2006, the FASB issued SFAS No. 158, Employers' Accounting forDefined Benefit Pension and Other Postretirement Plans — anamendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No.158 requires an employer to recognize in its statement of financialposition an asset for a plan's overfunded status or a liabilityfor a plan's underfunded status, measure a plan's assetsand its obligations that determine its funded status as of the end ofthe employer's fiscal year, and recognize changes in the fundedstatus of a defined benefit postretirement plan in the year in whichthe changes occur. Those changes will be reported in comprehensiveincome and as a separate component of shareholders’ equity. SFASNo. 158 does not change the amount of net periodic benefit costincluded in net earnings. The requirement to recognize the fundedstatus of defined benefit postretirement plans is effective for theCompany as of December  31,  2006. The requirement tomeasure plan assets and benefit obligations as of the end of the fiscalyear is effective for the Company no later than December31,  2008. Retrospective application of both the recognition andmeasurement date provisions of SFAS No. 158 is not permitted. Had theCompany applied the recognition provisions of SFAS No. 158 as ofDecember  31,  2005, accumulated other comprehensive incomewould have been reduced by an additional $2.1  million. However,this impact could change materially as of December  31,2006, due to changes in the discount rates used to measure planobligations, the actual returns on plan assets, and otherfactors.

In September  2006, the Securities andExchange Commission (SEC) issued Staff Accounting BulletinNo. 108 (SAB 108), Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements, to address diversity in practice in quantifyingfinancial statement misstatements. SAB 108 provides interpretiveguidance on the consideration of the effects of prior yearmisstatements in quantifying current year misstatements for the purposeof a materiality assessment. SAB 108 is effective for the Company inits year ended December  31,  2006, and allows a one-timetransitional cumulative effect adjustment to retained earnings as ofJanuary 1, 2006 for errors that were not previously deemedmaterial, but are material under the guidance in SAB 108. The Companyis in the process of determining the effects, if any, that SAB 108 willhave on its financial statements.

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

OnNovember  4,  2003, Nalco Holdings LLC, our subsidiary anda company formed by The Blackstone Group, Apollo Management, L.P. andGS Capital Partners (the ‘‘Sponsors’’),purchased all of the outstanding shares of capital stock of Ondeo NalcoCompany (which is now known as Nalco Company) and the NalcoInternational SAS Subsidiaries, which had been operated as a singlebusiness unit, from subsidiaries of Suez S.A. (Suez). In the followingdiscussion and analysis, we refer to this acquisition as the‘‘Acquisition,’’ and the term‘‘Transactions’’ means, collectively, theAcquisition and the related financings to fund theAcquisition.

The statements in the discussion andanalysis regarding industry outlook, our expectations regarding theperformance of our business and the other non-historical statements inthe discussion and analysis are forward-looking statements. Theseforward-looking statements are subject to numerous risks anduncertainties. Our actual results may differ materially from thosecontained in or implied by any forward-looking statements. You shouldread the following discussion together with the consolidated financialstatements of Nalco Finance Holdings LLC included elsewhere in thisreport.

‘‘Safe Harbor’’Statement Under Private Securities Litigation Reform Act of1995

This Quarterly Report for the fiscal quarter endedSeptember  30,  2006 (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,’’ orfuture 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.

There are a number of risks and uncertainties that couldcause our actual results to differ materially from the forward-lookingstatements contained in this Quarterly Report. Additionally, importantfactors could 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, amongothers:

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

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

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

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

|  |              |                                                                                                                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | changes to, or eliminationof, legal or regulatory requirements imposed upon our customers whichcould adversely affect portions of our business, such as that whichserves the synthetic-fuelindustry; |

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

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

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

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

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

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

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

|  |              |                                                             |
|--|--------------|-------------------------------------------------------------|
|  | •  | our ability to protect ourintellectual property rights; and |

|  |              |                                                                                  |
|--|--------------|----------------------------------------------------------------------------------|
|  | •  | thepossibility that our owners’ interests will conflict with oursor yours. |

There may be other factors that may cause ouractual results to differ materially from the forward-lookingstatements. For further information regarding risk factors, pleaserefer to Part I, Item 1A in the Company’s Annual Report on Form10-K for the year ended December  31,  2005, Part II, Item1A of the Quarterly Report on Form 10-Q for the quarter endedJune  30,  2006, and Part II, Item 1A of this QuarterlyReport.

All forward-looking statements attributable to usor persons acting on our behalf apply only as of the date of thisQuarterly Report and are expressly qualified in their entirety by thecautionary statements included in this Quarterly Report. We undertakeno obligation to update or revise forward-looking statements which maybe made to reflect events or circumstances that arise after the datemade or to reflect the occurrence of unanticipated events.

Useof Non-GAAP Financial Measures

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

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

We believe EBITDA is useful to the investors because it isfrequently used by securities analysts, investors and other interestedparties in the evaluation of companies in our industry. We consider theinclusion of supplementary adjustments to EBITDA applied in presentingAdjusted EBITDA appropriate to provide additional information toinvestors to demonstrate compliance with our financing covenants. Webelieve Free Cash Flow provides investors with a measure of our abilityto generate cash for the repayment of debt.

EBITDA,Adjusted EBITDA and Free Cash Flow are not recognized terms under U.S.GAAP and do not purport to be alternatives to net earnings (loss) as anindicator of operating performance or to cash flows from operatingactivities as a measure of liquidity. The most direct comparable GAAPfinancial measures of each non-GAAP financial measure, as well as thereconciliation between each non-GAAP financial measure and the GAAPfinancial measure, are presented in the discussions of the non-GAAPfinancial measures below. Because not all companies use identicalcalculations, our measures may not be comparable to other similarlytitled measures of other companies.

Executive LevelOverview

Third quarter sales increased 9.7% to$915.4  million, including 7.8% organic growth and1.9% in favorable foreign currency translation rate changes,from prior-year revenues of $834.9 milion. Organic 

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

growth excludes the impacts of changes inforeign currency translation rates and acquisitions and divestitures.In addition to obtaining 3.8% price improvement, real salesgrowth — organic growth less price that simply passes on highercosts — was 4.0% which moves Nalco closer to our generalexpectations for 5% real growth in base business sales.

Energy Services again led Nalco’s growth efforts,delivering its third straight quarter of 15% or better organicrevenue growth, with 17.4% improvement in the quarter endedSeptember  30. Strong product portfolios and substantialinvestments we made training new sales engineers and servicetechnicians ahead of growth are key contributors to expansion in theEnergy Services segment.

Our Downstream refinery andpetrochemical business continues to grow at the nearly 15%organic rate delivered year-to-date. The Adomite well-service businesswas up just over 20% in the third quarter. While price was animportant contributor to the organic sales increase, real growth wasalso ahead of the 11.3% average growth pace for rig counts inthe quarter. Our Oil Field services business grew at a 20%organic pace in the quarter ended September  30, an accelerationfrom the 15% organic growth pace achieved through the first sixmonths of 2006. This acceleration largely results from not repeatingthe closures of deepwater Gulf of Mexico platforms prior to andfollowing hurricanes Katrina and Rita last year.

Priceimprovement played a role in the 250 basis points direct contributionmargin expansion in Energy Services versus the prior year. In addition,segment results include an initial $1.5  million businessinterruption insurance recovery from last year’s hurricanes. Wecontinue to work toward additional insurance recoveries. At its currentpace, Energy Services should pass the $1  billion mark in salesbefore year-end.

Industrial and Institutional Services(I&IS) sales grew 5.1% organically. Among the higher-growthregions and/or industries were: Asia/Pacific mining, global marine,North American chemical and food and beverage, Latin America, EasternEurope, Africa and the Middle East. The chemical business in the UnitedStates benefited from Gulf Coast chemical plants being fullyoperational this year.

High oil prices in the early partof the third quarter contributed to a significant decline in synfuelsales. Those sales began to return in September as oil prices droppedunder the $70 per barrel mark. The I&IS business expanded itsdirect contribution margins in the quarter by 120 basis points comparedto the prior year.

Paper Services sales increased2.1% organically — on pace with year-to-date growth of2.2%. All of the increase comes from price. Latin America grewnicely, Asia/Pacific improved and North America is nearly stable, butEuropean paper declined both organically and in real terms. PaperServices direct contribution margin improved from first half results,but remains well below year-ago levels and even further behind what weconsider normal performance levels.

Our price achievementin the Paper market is well below necessary levels given the pace ofpurchased material and freight cost increases since mid-2004. Werecently announced additional price increases for the Paper Servicessegment.

Third quarter net earnings doubled to$27.5  million from 2005 third quarter earnings of $13.7million.

Adjusted EBITDA, which is used to determinecompliance with the Company’s debt covenants, increased11.3% to $183.1  million from $164.5  million in thethird quarter of 2005. During the third quarter, price contributedabout $31  million to improvement from the prior year, whilepurchased material and freight costs increased $18  million overthat same period. This is the first time that we have succeeded inreducing the lag between our price increases and cost increases to lessthan one quarter since mid-2004. The price-cost differential accountsfor nearly all of our Adjusted EBITDA improvement.

Wehave made strong progress this year in developing the right structuresfor our business — minimizing the impact of double-taxation towhich some of our earnings stream had been exposed in 

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

our immediate, post-LBO structure. We nowestimate our effective income tax rate for the year to be 44.0%.Our third quarter rate of 40.0% includes some one-time impacts,so our year-to-date effective tax rate stands at 43.4%.

Free Cash Flow, which we define as cash flow from operationsless net capital expenditures and minority interest charges, was$117.5  million in the third quarter. With our Free Cash Flow inthe quarter, we repaid $114.0  million of Term Loan B debt in thequarter ended September  30. In addition, we more fully utilizedour receivables securitization facility to pay off the $25million that had been outstanding on our revolver at the end of thesecond quarter. Net cash provided by operating activities is reconciledto Free Cash Flow as follows:

|                                                |  |  |                                   |   |       |                                    |  |  |  |   |       |         |
|------------------------------------------------|--|--|-----------------------------------|---|-------|------------------------------------|--|--|--|---|-------|---------|
| (dollarsin millions)                           |  |  | ThreeMonthsendedSeptember 30,2006 |   |       | ThreeMonthsendedSeptember 30, 2005 |
| Netcash provided by operatingactivities        |  |  |                                   | $ | 141.3 |                               |  |  |  | $ | 143.6 |    |
| Minorityinterests                              |  |  |                                   |   | (1.7  | )                             |  |  |  |   | (1.6  | )  |
| Additions toproperty, plant, and equipment,net |  |  |                                   |   | (22.1 | )                             |  |  |  |   | (20.3 | )  |
| Freecashflow                                   |  |  |                                   | $ | 117.5 |                               |  |  |  | $ | 121.7 |    |
|                                                |

Operatingworking capital continues to require a use of cash. While inventoriesand payables remained stable in the third quarter, we used additionalworking capital for receivables. We expect to end the year with workingcapital requiring a use of cash of somewhat more than the $40million previously estimated. However, we will drive improvement— primarily in payables and receivables —before year-end.

Year-to-date Results andOutlook

Through nine months, Nalco sales of$2.66  billion are up 8.5% from $2.45  billion inthe first three quarters of 2005, including real growth of 3.7%and 4.5% price improvement. We expect to end the year above our7% organic growth target.

Geographically, LatinAmerica continues to be our fastest growth region in nominal terms,followed by Asia/Pacific, North America and then Europe, Africa and theMiddle East. Year-to-date, currency translations boosted Latin Americansales, but were drags in Europe and several Asianmarkets.

Our focus in the fourth quarter is on deliveringa strong finish to 2006, making further progress toward targeted5% real growth in our base business while continuing to obtainprice. This outlook assumes that cost increases will moderate, and thatour most concentrated efforts to obtain additional price will be in thePaper industry. Our oil field and chemical businesses in and around theGulf of Mexico should improve in the fourth quarter, as a substantialnumber of Gulf platforms and nearby chemical plants did not reopenpost-hurricanes until late in the fourth quarter 2005 and some wellinto 2006.

At $54.1  million, Septemberyear-to-date net earnings are nearly triple September  2005year-to-date net earnings of $18.2  million.

Year-to-date adjusted EBITDA is up 10.7% to$487.1  million from $440.0  million, and remains on trackto reach our 12% growth target for the year. We expect fourthquarter results to be modestly ahead of the third quarter, providingthe 3 percent sequential improvement needed to deliver on our targeted12% growth in Adjusted EBITDA this year. This would put thefourth quarter 15% ahead of the same quarter of 2005. Inaddition to not repeating raw material cost spikes and sales lossesfrom last year’s hurricanes, we expect real growth, price andcost improvement programs to allow us to reach our Adjusted EBITDAtarget. Included in the forecast is an accrual for variablecompensation 

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

programs in the fourth quarter, an increaseof $8  million compared to the same period of 2005. In thequarter ended September  30, our variable compensation accrualwas an additional $9  million above the same period of 2005.

Since costs began escalating in the third quarter of 2004,purchased material and freight increases have totaled about $270million across the Company. Price actions since that time haverecovered about $261  million. As a Company, we expect cumulativeprice capture to catch up to purchased material and freight costincreases by year-end.

While generally pleased with theperformance of the business, we have fallen behind in achieving plannedcost savings. Year-to-date cost savings stand at $36  millioncompared to our full-year target of $75  million. We are lategenerating savings from two major projects — a new order entryprocess and a new customer service center in Europe. While late, bothof these projects are expected to hit their planned savings targets. Itis very unlikely now that we will hit our $75  million costsavings target, after delivering $88 and $89  million in the pasttwo years, respectively.

Contributing to the cost impactis a series of investments we made in sales engineers and R&D tosupport high growth in Energy Services and developing countries thathave already exceeded the $17  million investment target weestablished at the beginning of the year.

At year-end, weexpect our annual effective tax rate to be at 44.0%. Goingforward, we believe that our effective tax rate for 2006 of44.0% should represent the upper limit of our rate. We continueto work on programs to make furtherimprovements.

Year-to-date Free Cash Flow stands at$138.3  million, and we have left our target unchanged for theyear at $170  million. While we expect some cash tax benefitsfrom our reduced tax rate, these gains may be partly offset byexpectations for higher-than-planned business process optimizationexpenses in the fourth quarter. Net cash provided by operatingactivities is reconciled to Free Cash Flow asfollows:

|                                                |  |  |                                   |   |       |                                  |  |  |  |   |       |         |
|------------------------------------------------|--|--|-----------------------------------|---|-------|----------------------------------|--|--|--|---|-------|---------|
| (dollarsin millions)                           |  |  | Nine MonthsendedSeptember 30,2006 |   |       | Nine MonthsendedSeptember30,2005 |
| Net cash provided by operatingactivities       |  |  |                                   | $ | 203.1 |                             |  |  |  | $ | 174.0 |    |
| Minorityinterests                              |  |  |                                   |   | (5.2  | )                           |  |  |  |   | (4.4  | )  |
| Additions toproperty, plant, and equipment,net |  |  |                                   |   | (59.6 | )                           |  |  |  |   | (45.3 | )  |
| Freecashflow                                   |  |  |                                   | $ | 138.3 |                             |  |  |  | $ | 124.3 |    |
|                                                |

Ourcapital expenditure program, about $60  million through threequarters, would appear to be well below the $105  million spendwe projected this year. Last year, however, we spent roughly 40%of our capital in the fourth quarter. Heavy fourth quarter capitalspending is typical of Nalco. A similar spend rate this year would putus at about $100  million in capital expenditures, or very nearto our expected spend level this year.

Results of Operations— Consolidated

Quarter Ended September30,  2006 Compared to the Quarter Ended September30,  2005

Net sales for the threemonths ended September  30,  2006 were $915.4million, a 9.7% increase from the $834.9  million reportedfor the three months ended September  30,  2005. On anorganic basis, which excludes the impacts of changes in foreigncurrency translation rates and acquisitions and divestitures, net saleswere up 7.8%. Of this improvement, 3.8% was attributed toprice increase, while the remaining 4.0% was driven by realgrowth.

Gross profit, defined as thedifference between net sales and cost of product sold, of $413.1million for the three months ended September  30,  2006increased by $36.1  million, or 9.6%, over the

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

$377.0  million for the three monthsended September  30,  2005. On an organic basis, grossprofit increased by 7.7%. Contributing to the improvement wasthe impact of higher selling prices and sales volumes, partly offset bythe effect of increased costs of raw and other purchased materials. Aninitial business interruption recovery of $1.5  million relatedto last year’s hurricanes was recognized during the three monthsended September  30,  2006, which also contributed to theincrease in gross profit. Gross profit margin for the three monthsended September  30,  2006 was 45.1% compared to45.2% for the year-ago period.

Selling,administrative, and research expenses for the three months endedSeptember  30,  2006 of $277.5  million increased$26.3  million, or 10.5%, from $251.2  million forthe three months ended September  30,  2005. On an organicbasis, selling, administrative, and research expenses increased8.6%. This was mostly attributable to higher salaries, employeeincentive plan expenses, employee benefits, travel, and outsideconsulting related to our work process redesign initiatives and therationalization of our legal entitystructure.

Amortization of intangible assets was$17.6  million and $20.3  million for the three monthsended September  30,  2006 and 2005, respectively. Thedecrease was attributable to lower amortization of customerrelationships, which are amortized using an acceleratedmethod.

Business optimization expenses,representing mostly employee severance and related costs associatedwith the continuing redesign and optimization of business and workprocesses, were $3.0  million for the three months endedSeptember  30,  2006, a $0.5  million decrease fromthe $3.5  million for the three months ended September30,  2005.

Other income (expense), netfavorably changed by $0.1  million. This was largely the resultof higher earnings of our affiliated entities.

Netinterest expense, defined as the combination of interest incomeand interest expense, of $66.5  million for the three monthsended September  30,  2006 increased by $2.8  millionfrom the $63.7  million reported for the three months endedSeptember  30,  2005. 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 endedSeptember  30,  2006 was 40.0%. The rate varies fromthe U.S. federal statutory income tax rate of 35% primarily dueto the tax treatment of the senior discount note interest expense, theincremental tax on dividends received from non-U.S. subsidiaries,foreign taxes provided at other than the 35% U.S. statutoryrate, U.S. state income taxes, nondeductible expenses, and otherpermanent differences.

The aforementioned items alsocontributed to the variation between the U.S. federal statutory incometax rate and the Company’s effective income tax rate for thethree months ended September  30,2005.

During the three months ended September30,  2006, the income tax provision was favorably affected by areduction in the estimate of the annual effective tax rate. The taxprovision was also reduced by the recognition of certain discrete itemsin the quarter, which lowered the effective tax rate for the thirdquarter 2006 by 2.7 percentage-points.

Minorityinterest expense was $0.1  million higher than the$1.6  million for the three months ended September30,  2005, which was due to mixed results for theCompany’s non-wholly owned subsidiaries.

Nine MonthsEnded September  30,  2006 Compared to the Nine MonthsEnded September  30,  2005

Netsales for the nine months ended September  30,  2006were $2,655.8  million, an 8.5% increase from the$2,448.8  million reported for the nine months endedSeptember  30,  2005. On an organic basis, which excludesthe impacts of changes in foreign currency translation rates andacquisitions and divestitures, net sales were up 8.2%. Of thisimprovement, 4.5% was attributed to price increase, while theremaining 3.7% was driven by real growth.

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

Gross profit,defined as the difference between net sales and cost of productsold, of $1,186.8  million for the nine months endedSeptember  30,  2006 increased by $89.0  million, or8.1%, over the $1,097.8  million for the nine months endedSeptember  30,  2005. On an organic basis, gross profitincreased by 7.9%. Higher sales volume and the impact of higherselling prices, partly offset by the effect of increased costs of rawand other purchased materials, contributed to this change. Theimprovement was also partly attributable to an inventory write-off of$9.0  million during the nine months ended September30,  2005. Also contributing to the improvement was an initialbusiness interruption recovery of $1.5  million related to lastyear’s hurricanes that was recognized in 2006. Gross profitmargin for the nine months ended September  30,  2006 was44.7% compared to 44.8% for the year-agoperiod.

Selling, administrative, and researchexpenses for the nine months ended September  30,2006 of $823.6  million increased $51.4  million, or6.7%, from $772.2  million for the nine months endedSeptember  30,  2005. On an organic basis, selling,administrative, and research expenses increased 6.6%. This wasmainly attributable to selling expense, which was primarily due tohigher salaries, commission expenses, employee benefits, bad debts, andoutside services. Administrative expense increased from the year-agoperiod due to higher employee incentive plan expenses, employeebenefits, and outside consulting related to our work process redesigninitiatives and the rationalization of our legal entitystructure.

Amortization of intangible assets was$52.4  million and $61.4  million for the nine months endedSeptember  30,  2006 and 2005, respectively. The decreasewas attributable to lower amortization of customer relationships, whichare amortized using an accelerated method.

Businessoptimization expenses, representing mostly employee severance andrelated costs associated with the continuing redesign and optimizationof business and work processes, were $8.6  million for the ninemonths ended September  30,  2006, a $12.7  milliondecrease from the $21.3  million for the nine months endedSeptember  30,  2005. The nine months endedSeptember  30,  2005 included a $14.2  million chargeto support a plan to delayer our management structure and reduce costsin lower-performing business units.

Other income(expense), net favorably changed by $2.3  million from thenet expense of $2.8  million for the nine months endedSeptember  30,  2005. A $2.4  million impairment losson a business held for sale recognized in 2005 and a $2.0million increase in equity in earnings of unconsolidated subsidiariescontributed to the improvement. Partly offsetting these favorableyear-over-year changes was an unfavorable change in foreign exchangegains and losses due to the weakening of the U.S. dollar versus theeuro during 2006.

Net interest expense, definedas the combination of interest income and interest expense, of$196.8  million for the nine months ended September30,  2006 increased by $10.3  million from the$186.5  million reported for the nine months endedSeptember  30,  2005. 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 nine months endedSeptember  30,  2006 was 43.4%. The rate varies fromthe U.S. federal statutory income tax rate of 35% primarily dueto the tax treatment of the senior discount note interest expense, theincremental tax on dividends received from non-U.S. subsidiaries,foreign taxes provided at other than the 35% U.S. statutoryrate, U.S. state income taxes, nondeductible expenses, and otherpermanent differences.

The aforementioned items alsocontributed to the variation between the U.S. federal statutory incometax rate and the Company’s effective income tax rate for thenine months ended September  30,  2005.

Duringthe nine months ended September  30,  2006, the income taxprovision was favorably affected by a reduction in the estimate of theannual effective tax rate. The tax provision was also reduced by

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

the recognition of certain discrete items inthe period, which lowered the effective tax rate for the nine monthsended September  30,  2006 by 1.6percentage-points.

Minority interest expense was$0.8  million higher than the $4.4  million for the ninemonths ended September  30,  2005, reflecting improvedresults for the Company’s non-wholly owned subsidiaries inSpain, Saudi Arabia, and Japan.

Results of Operations —Segment Reporting

Quarter Ended September  30,2006 Compared to the Quarter Ended September  30,2005

Net sales by reportable segment forthe three months ended September  30,  2006 andSeptember  30,  2005 may be compared asfollows:

|                                       |  |  |                   |   |       |                   |  |  |                                               |   |       |                     |  |  |                           |  |      |         |  |  |  |  |      |          |  |  |  |  |         |        |  |  |  |  |      |         |
|---------------------------------------|--|--|-------------------|---|-------|-------------------|--|--|-----------------------------------------------|---|-------|---------------------|--|--|---------------------------|--|------|---------|--|--|--|--|------|----------|--|--|--|--|---------|--------|--|--|--|--|------|---------|
|                                  |  |  | Three MonthsEnded |   |       |              |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsin millions)                  |  |  | September30,2006  |   |       | September 30,2005 |  |  | %Change                                       |   |       | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic |
| Industrial& InstitutionalServices |  |  |                   | $ | 406.3 |              |  |  |                                               | $ | 379.5 |                |  |  |                           |  | 7.1  | %  |  |  |  |  | 2.0  | %   |  |  |  |  | — |   |  |  |  |  | 5.1  | %  |
| EnergyServices                        |  |  |                   |   | 267.1 |              |  |  |                                               |   | 223.4 |                |  |  |                           |  | 19.6 | %  |  |  |  |  | 2.2  | %   |  |  |  |  | — |   |  |  |  |  | 17.4 | %  |
| PaperServices                         |  |  |                   |   | 181.1 |              |  |  |                                               |   | 173.9 |                |  |  |                           |  | 4.2  | %  |  |  |  |  | 2.1  | %   |  |  |  |  | — |   |  |  |  |  | 2.1  | %  |
| Other                                 |  |  |                   |   | 60.9  |              |  |  |                                               |   | 58.1  |                |  |  |                           |  | 4.8  | %  |  |  |  |  | (0.9 | )%  |  |  |  |  | — |   |  |  |  |  | 5.7  | %  |
| Netsales                              |  |  |                   | $ | 915.4 |              |  |  |                                               | $ | 834.9 |                |  |  |                           |  | 9.7  | %  |  |  |  |  | 1.9  | %   |  |  |  |  | — |   |  |  |  |  | 7.8  | %  |
|                                       |

TheIndustrial and Institutional Services division reported sales of$406.3  million for the three months ended September30,  2006, a 7.1% increase over the $379.5  millionfor the year-ago-period. Price increases accounted for approximatelytwo-thirds of the 5.1% organic change. Double-digit real growthwas reported by our Asian mining and global marine businesses, as wellas in the emerging markets in Eastern Europe, the Middle East andAfrica.

The Energy Services division reported sales of$267.1  million for the three months ended September30,  2006, a 19.6% gain over the $223.4  million forthe three months ended September  30,  2005. Organically,sales improved by 17.4%, with about three-fourths of thisincrease attributed to real growth. All businesses within EnergyServices grew double digits in the quarter, with our Upstream oil fieldproduction and Downstream refinery and petrochemical businessesexpanding at faster-than-market growth rates.

The PaperServices division reported sales of $181.1  million for the threemonths ended September  30,  2006, a 4.2% increaseover the $173.9  million reported for the third quarter of 2005.The North American region reported positive organic growth as a resultof price increases, while solid organic improvements in Latin Americaand Asia were mostly the result of real growth. The European regioncontinues to struggle with customer closures and lost business due tothe price-increase initiatives.

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

Direct contribution isdefined as the difference between net sales and operating costs,including cost of product sold, selling and service expenses, marketingexpenses, research expenses and capital charges. Direct contribution byreportable segment for the three months ended September30,  2006 and September  30,  2005 may be compared asfollows:

|                                        |  |  |                   |   |       |                   |  |  |                                               |   |       |                     |  |  |                           |  |      |          |  |  |  |  |      |          |  |  |  |  |         |        |  |  |  |  |      |          |
|----------------------------------------|--|--|-------------------|---|-------|-------------------|--|--|-----------------------------------------------|---|-------|---------------------|--|--|---------------------------|--|------|----------|--|--|--|--|------|----------|--|--|--|--|---------|--------|--|--|--|--|------|----------|
|                                   |  |  | Three MonthsEnded |   |       |              |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsin millions)                   |  |  | September30,2006  |   |       | September 30,2005 |  |  | %Change                                       |   |       | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic  |
| Industrial & InstitutionalServices |  |  |                   | $ | 98.7  |              |  |  |                                               | $ | 87.5  |                |  |  |                           |  | 12.8 | %   |  |  |  |  | 2.1  | %   |  |  |  |  | — |   |  |  |  |  | 10.7 | %   |
| EnergyServices                         |  |  |                   |   | 58.0  |              |  |  |                                               |   | 42.8  |                |  |  |                           |  | 35.5 | %   |  |  |  |  | 2.7  | %   |  |  |  |  | — |   |  |  |  |  | 32.8 | %   |
| PaperServices                          |  |  |                   |   | 28.6  |              |  |  |                                               |   | 30.8  |                |  |  |                           |  | (6.9 | )%  |  |  |  |  | 1.9  | %   |  |  |  |  | — |   |  |  |  |  | (8.8 | )%  |
| Other                                  |  |  |                   |   | (15.2 | )            |  |  |                                               |   | (14.2 | )              |  |  |                           |  | (6.9 | )%  |  |  |  |  | (4.6 | )%  |  |  |  |  | — |   |  |  |  |  | (2.3 | )%  |
|                                        |

Directcontribution of the Industrial and Institutional Services division was$98.7  million for the three months ended September30,  2006, an increase of 12.8% over the $87.5million reported for the three months ended September  30,2005. Sales growth accounted for the 10.7% organic improvementin direct contribution.

The Energy Services divisionreported direct contribution of $58.0  million for the threemonths ended September  30,  2006, a 35.5% increaseover the $42.8  million reported for the year-ago period. On anorganic basis, direct contribution increased 32.8%. Higher salesvolume accounted for most of the increase. Gross profit marginsimproved as planned price increases took effect. An initial businessinterruption insurance recovery of $1.5  million related to lastyear’s hurricanes was recognized during the three months endedSeptember  30,  2006, which also contributed to theincrease over the year-ago period.

The Paper Servicesdivision reported direct contribution of $28.6  million for thethree months ended September  30,  2006, a 6.9%decrease from the direct contribution reported for the three monthsended September  30,  2005. Organically, directcontribution was down 8.8%, as costs of raw and other purchasedmaterials continued to exceed price increases.

The directcontribution loss of $15.2  million reported in‘‘Other’’ for the three months endedSeptember  30,  2006, represented an increase of$1.0  million from the $14.2  million direct contributionloss reported in the third quarter 2005.

Nine Months EndedSeptember  30,  2006 Compared to Nine Months EndedSeptember  30,  2005

Net salesby reportable segment for the nine months ended September30,  2006 and September  30,  2005 may be compared asfollows:

|                                       |  |  |                  |   |         |                   |  |  |                                               |   |         |                     |  |  |                           |  |      |          |  |  |  |  |      |          |  |  |  |  |         |        |  |  |  |  |      |         |
|---------------------------------------|--|--|------------------|---|---------|-------------------|--|--|-----------------------------------------------|---|---------|---------------------|--|--|---------------------------|--|------|----------|--|--|--|--|------|----------|--|--|--|--|---------|--------|--|--|--|--|------|---------|
|                                  |  |  | Nine MonthsEnded |   |         |              |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsin millions)                  |  |  | September30,2006 |   |         | September 30,2005 |  |  | %Change                                       |   |         | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic  |
| Industrial& InstitutionalServices |  |  |                  | $ | 1,174.1 |              |  |  |                                               | $ | 1,098.0 |                |  |  |                           |  | 6.9  | %   |  |  |  |  | 0.3  | %   |  |  |  |  | — |   |  |  |  |  | 6.6  | %  |
| EnergyServices                        |  |  |                  |   | 772.7   |              |  |  |                                               |   | 655.5   |                |  |  |                           |  | 17.9 | %   |  |  |  |  | 0.7  | %   |  |  |  |  | — |   |  |  |  |  | 17.2 | %  |
| PaperServices                         |  |  |                  |   | 535.0   |              |  |  |                                               |   | 520.1   |                |  |  |                           |  | 2.8  | %   |  |  |  |  | 0.6  | %   |  |  |  |  | — |   |  |  |  |  | 2.2  | %  |
| Other                                 |  |  |                  |   | 174.0   |              |  |  |                                               |   | 175.2   |                |  |  |                           |  | (0.7 | )%  |  |  |  |  | (3.0 | )%  |  |  |  |  | — |   |  |  |  |  | 2.3  | %  |
| Netsales                              |  |  |                  | $ | 2,655.8 |              |  |  |                                               | $ | 2,448.8 |                |  |  |                           |  | 8.5  | %   |  |  |  |  | 0.3  | %   |  |  |  |  | — |   |  |  |  |  | 8.2  | %  |
|                                       |

TheIndustrial and Institutional Services division posted sales of$1,174.1  million for the nine months ended September30,  2006, an increase of 6.9% over the $1,098.0million for the year-ago-period. Price increases accounted for aboutthree-fourths of the 6.6% organic increase insales.

21

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

The Energy Services divisionreported sales of $772.7  million for the nine months endedSeptember  30,  2006, a 17.9% gain over the$655.5  million for the nine months ended September30,  2005. Sales improved by 17.2% on an organic basis,with slightly more that two-thirds of this improvement attributed toreal growth.

The Paper Services division posted sales of$535.0  million for the nine months ended September30,  2006, a 2.8% increase over the $520.1  millionreported for the year-ago period. The North American region reportedpositive organic growth as a result of price increases, while organicimprovements in Latin America and Asia were primarily the result ofreal growth. These organic growth gains were partly offset by a declinein the European region.

The 2.3% organic growth insales reported by the Other segment was attributable to price increasesby our Integrated Channels business and real growth by our subsidiaryin India.

Direct contribution by reportablesegment for the nine months ended September  30,  2006 andSeptember  30,  2005 may be compared asfollows:

|                                       |  |  |                  |   |       |                   |  |  |                                               |   |       |                     |  |  |                           |  |      |          |  |  |  |  |      |          |  |  |  |  |         |        |  |  |  |  |      |          |
|---------------------------------------|--|--|------------------|---|-------|-------------------|--|--|-----------------------------------------------|---|-------|---------------------|--|--|---------------------------|--|------|----------|--|--|--|--|------|----------|--|--|--|--|---------|--------|--|--|--|--|------|----------|
|                                  |  |  | Nine MonthsEnded |   |       |              |  |  | Attributable toChangesin the FollowingFactors |
| (dollarsin millions)                  |  |  | September30,2006 |   |       | September 30,2005 |  |  | %Change                                       |   |       | CurrencyTranslation |  |  | Acquisitions/Divestitures |  |      | Organic  |
| Industrial& InstitutionalServices |  |  |                  | $ | 263.6 |              |  |  |                                               | $ | 235.9 |                |  |  |                           |  | 11.7 | %   |  |  |  |  | 0.3  | %   |  |  |  |  | — |   |  |  |  |  | 11.4 | %   |
| EnergyServices                        |  |  |                  |   | 161.2 |              |  |  |                                               |   | 125.5 |                |  |  |                           |  | 28.5 | %   |  |  |  |  | 0.9  | %   |  |  |  |  | — |   |  |  |  |  | 27.6 | %   |
| PaperServices                         |  |  |                  |   | 81.2  |              |  |  |                                               |   | 88.3  |                |  |  |                           |  | (8.0 | )%  |  |  |  |  | 0.9  | %   |  |  |  |  | — |   |  |  |  |  | (8.9 | )%  |
| Other                                 |  |  |                  |   | (49.5 | )            |  |  |                                               |   | (48.3 | )              |  |  |                           |  | (2.5 | )%  |  |  |  |  | (1.7 | )%  |  |  |  |  | — |   |  |  |  |  | (0.8 | )%  |
|                                       |

Directcontribution of the Industrial and Institutional Services division was$263.6  million for the nine months ended September30,  2006, an increase of 11.7% over the $235.9million reported for the nine months ended September  30,2005. Organically, direct contribution improved 11.4%. TheIndustrial and Institutional Services division’s success inimplementing price increases and controlling operating expensescontributed to the period-on-period performance improvement.

The Energy Services division reported direct contribution of$161.2  million for the nine months ended September30,  2006, a 28.5% increase over the $125.5  millionreported for the prior year period. On an organic basis, directcontribution increased 27.6%. Higher sales volume and the impactof price increases accounted for most of the improvement. An initialbusiness interruption insurance recovery of $1.5  million relatedto last year’s hurricanes recognized in 2006 also contributed tothe increase.

The Paper Services division reported directcontribution of $81.2  million for the nine months endedSeptember  30,  2006, an 8.0% decrease from the$88.3  million reported for the year-ago period. Organically,direct contribution was down 8.9%, as costs of raw and otherpurchased materials continued to exceed price increases. Due to tightcontrols on spending, operating expenses were flat on a year-over-yearbasis despite a significant increase in bad debts.

Thedirect contribution loss of $49.5  million reported in‘‘Other’’ for the nine months endedSeptember  30,  2006, represented an increase of$1.2  million from the $48.3  million direct contributionloss reported for the nine months ended September  30,2005. Significant contributors to the year-over-year change includesupply chain variances that benefited 2006 results and favorableadjustments in 2005 for commissions and insurance/legal claims that didnot recur in 2006.

Liquidity and CapitalResources

Operatingactivities.    Historically, the Company’s main sourceof liquidity has been its solid cash flow generated by operatingactivities. For the nine months ended September  30,  2006,cash provided by operating activities was $203.1  million, anincrease of $29.1  million from the same period last year.

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

The improvement was mainly the result of theincrease in net earnings and not making any payments in 2006 for 2005variable incentive plans. Partly offsetting these improvements werehigher contributions to the principal U.S. pension plan and higher cashrequirements for inventories and accountspayable.

Investing activities.    Cash used forinvesting activities was $57.8  million for the nine months endedSeptember  30,  2006, which was mostly attributable to netproperty additions of $59.6  million.

Cash used forinvesting activities was $49.4  million for the nine months endedSeptember  30,  2005. This was mostly the result of netproperty additions of $45.3  million.

Financingactivities.    Net cash used for financing activities totaled$133.6  million and $110.6  million during the nine monthsended September  30,  2006 and 2005, respectively, whichwas mostly attributable to a net decrease inborrowings.

Since the Transactions, we have been highlyleveraged. Our liquidity requirements are significant, primarily due todebt service requirements as well as research and development andcapital investment. Our primary source of liquidity will continue to becash flow generated from operations, but we also have availabilityunder a $250  million revolving credit facility and a $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 creditmarkets.

Senior credit facilities.    OnNovember  4,  2003, we entered into senior creditfacilities which provided for a revolving credit facility, a$300  million six-year term loan A facility (which includes an€88.0  million tranche) which matures inNovember  2009 and a $1,300  million seven-year term loan Bfacility which matures in November  2010. Borrowings under thesenior credit facilities bear interest at a floating base rate plus anapplicable margin. The applicable margin for borrowings under therevolving credit facility and the term loan A facility is 1.50%with respect to base rate borrowings and 2.50% with respect toLIBOR or Eurocurrency borrowings and may be reduced subject to ourattaining certain leverage ratios. The applicable margin for borrowingsunder the term loan B facility is 0.75% with respect to baserate borrowings and 1.75% with respect to LIBOR or Eurocurrencyborrowings. The applicable margin for borrowings under the term loan Bfacility is not subject to adjustment.

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

The term loan A facility 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.

The term loan Bfacility will amortize each year in an amount equal to 1% perannum in equal quarterly installments for the first six years and ninemonths, with the remaining amount payable on November  4,2010.

At September  30,  2006, theoutstanding balance of the term loan A and term loan B facilities was$78.0  million and $957.0  million,respectively.

Principal amounts outstanding under therevolving credit facility will be due and payable in full at maturityon November  4,  2009. At September  30,  2006,no borrowings were outstanding under the revolving credit facility.

The senior credit facilities contain a number of covenantsthat, among other things, restrict, subject to certain exceptions, ourability and the ability of our subsidiaries (including Nalco Company)to sell

23

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

assets, incur additional indebtedness orissue preferred stock, repay other indebtedness, pay dividends anddistributions or repurchase certain capital stock, create liens onassets, make investments, loans or advances, make certain acquisitions,engage in mergers or consolidations, enter into sale and leasebacktransactions, engage in certain transactions with affiliates, amendcertain material agreements governing our indebtedness, change thebusiness conducted by us and our subsidiaries (including Nalco Company)and enter into hedging agreements. In addition, the senior creditfacilities require Nalco Company to maintain the following significantfinancial covenants: a maximum total leverage ratio, a minimum interestcoverage ratio and a maximum capital expenditures limitation. We werein compliance with all covenants at September  30,2006.

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

On January  21,  2004, our subsidiaries,Nalco Finance Holdings LLC and Nalco Finance Holdings Inc., issued$694.0  million aggregate principal amount at maturity of9.0% senior discount notes due 2014. Prior to February1,  2009, interest will accrue on the notes in the form of anincrease in the accreted value of such notes. The accreted value ofeach note will increase from the date of issuance until February1,  2009 at a rate of 9.0% per annum, reflecting theaccrual of non-cash interest, such that the accreted value will equalthe principal amount at maturity on February  1,  2009.Cash interest payments on the notes will be due and payable beginningin 2009. Our primary source of liquidity for such payments will be cashflow generated from the operations of subsidiaries, including NalcoHoldings LLC and Nalco Company. However, the terms of NalcoCompany’s senior credit agreement fully prohibit Nalco HoldingsLLC and our other subsidiaries from paying dividends or otherwisetransferring assets to the issuers. In addition, the terms of certainof the indentures governing the existing senior notes and seniorsubordinated notes of Nalco Company significantly restrict NalcoCompany and our other subsidiaries from paying dividends, makingdistributions and otherwise transferring assets to the issuers of thesenior discount notes. For example, the ability of Nalco 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,Nalco Finance Holdings LLC and Nalco Finance Holdings Inc. redeemed aportion of the senior discount notes with an accreted value of$162.3  million using proceeds from the November  2004initial public offering of common stock of Nalco Holding Company. Afterthe partial redemption, the aggregate principal amount at maturity ofthe notes declined to $460.8  million from $694.0million.

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

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

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

24

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

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

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

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

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

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

Subject tocertain exceptions, the indentures governing the senior notes, thesenior subordinated notes, and the senior discount notes permit theCompany and our restricted subsidiaries to incur additionalindebtedness, including secured indebtedness.

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

Adjusted EBITDA is used to determine ourcompliance 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 financingcovenants.

Adjusted EBITDA is calculated asfollows:

|                                 |  |  |                                     |   |       |                                     |  |  |                                   |   |       |                                   |  |  |  |   |       |         |  |  |  |   |       |         |
|---------------------------------|--|--|-------------------------------------|---|-------|-------------------------------------|--|--|-----------------------------------|---|-------|-----------------------------------|--|--|--|---|-------|---------|--|--|--|---|-------|---------|
| (dollarsin millions)            |  |  | Three Months endedSeptember 30,2006 |   |       | Three Months ended September30,2005 |  |  | Nine Monthsended September30,2006 |   |       | Nine Monthsended September30,2005 |
| Net earnings                    |  |  |                                     | $ | 27.5  |                                |  |  |                                   | $ | 13.7  |                              |  |  |  | $ | 54.1  |    |  |  |  | $ | 18.2  |    |
| Interest,net                    |  |  |                                     |   | 66.5  |                                |  |  |                                   |   | 63.7  |                              |  |  |  |   | 196.8 |    |  |  |  |   | 186.5 |    |
| Incometax provision             |  |  |                                     |   | 19.4  |                                |  |  |                                   |   | 23.0  |                              |  |  |  |   | 45.6  |    |  |  |  |   | 31.0  |    |
| Depreciation                    |  |  |                                     |   | 32.8  |                                |  |  |                                   |   | 33.3  |                              |  |  |  |   | 97.5  |    |  |  |  |   | 100.0 |    |
| Amortization                    |  |  |                                     |   | 17.6  |                                |  |  |                                   |   | 20.3  |                              |  |  |  |   | 52.4  |    |  |  |  |   | 61.4  |    |
| EBITDA                          |  |  |                                     | $ | 163.8 |                                |  |  |                                   | $ | 154.0 |                              |  |  |  | $ | 446.4 |    |  |  |  | $ | 397.1 |    |
| Non-cashcharges(1)              |  |  |                                     |   | 10.7  |                                |  |  |                                   |   | 5.0   |                              |  |  |  |   | 26.7  |    |  |  |  |   | 20.8  |    |
| Businessoptimizationexpenses(2) |  |  |                                     |   | 3.0   |                                |  |  |                                   |   | 3.5   |                              |  |  |  |   | 8.6   |    |  |  |  |   | 21.3  |    |
| Unusualitems(3)                 |  |  |                                     |   | 6.8   |                                |  |  |                                   |   | 3.1   |                              |  |  |  |   | 9.4   |    |  |  |  |   | 4.9   |    |
| Otheradjustments(4)             |  |  |                                     |   | (1.2  | )                              |  |  |                                   |   | (1.1  | )                            |  |  |  |   | (4.0  | )  |  |  |  |   | (4.1  | )  |
| AdjustedEBITDA                  |  |  |                                     | $ | 183.1 |                                |  |  |                                   | $ | 164.5 |                              |  |  |  | $ | 487.1 |    |  |  |  | $ | 440.0 |    |
|                                 |

|  |
|--|
|  |  |
|  |

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

25

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

|                                                |
|------------------------------------------------|
|                                                |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| (dollarsin millions)                           |  |  | Three Months endedSeptember 30,2006 |  |  | Three Months ended September30,2005 |  |  | Nine Monthsended September30,2006 |  |  | Nine Monthsended September30,2005 |
| Assetwrite-offs                                |  |  |  | $ | 0.3 |   |  |  |  | $ | — |   |  |  |  | $ | 1.4 |   |  |  |  | $ | 4.9 |   |
| Profitsharing expense and 401(k) funded bySuez |  |  |  |  | 7.0 |   |  |  |  |  | 1.1 |   |  |  |  |  | 18.8 |   |  |  |  |  | 10.9 |   |
| Other                                          |  |  |  |  | 3.4 |   |  |  |  |  | 3.9 |   |  |  |  |  | 6.5 |   |  |  |  |  | 5.0 |   |
| Non-cashcharges                                |  |  |  | $ | 10.7 |   |  |  |  | $ | 5.0 |   |  |  |  | $ | 26.7 |   |  |  |  | $ | 20.8 |   |
|                                                |

    ProfitSharing and 401(k) Expense Funded by Suez

Inconjunction with the Acquisition, we entered into an agreement withSuez whereby Suez will reimburse us for certain profit-sharing and401(k) matching contributions made by us to the Profit-SharingTrust.

    Other

Other non-cash chargesinclude the non-cash impact on earnings of our equity investments andminority interests. Non-cash charges also includes the non-cash portionof rent expense under the sublease that we entered into with Suez inconjunction with the Acquisition.

|     |                                                                                                                                                       |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Business optimization expenses includecosts associated with the redesign and optimization of work processes.See note 6 to Item 1 for moreinformation. |

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

|                                     |
|-------------------------------------|
|                                     |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| (dollarsin millions)                |  |  | Three Months endedSeptember 30,2006 |  |  | Three Months ended September30,2005 |  |  | Nine Monthsended September30,2006 |  |  | Nine Monthsended September30,2005 |
| Pensionsettlement                   |  |  |  | $ | — |   |  |  |  | $ | — |   |  |  |  | $ | 0.4 |   |  |  |  | $ | — |   |
| Loss(gain) on sales, net ofexpenses |  |  |  |  | 1.7 |   |  |  |  |  | 2.6 |   |  |  |  |  | 2.3 |   |  |  |  |  | 3.7 |   |
| Otherunusual items                  |  |  |  |  | 5.1 |   |  |  |  |  | 0.5 |   |  |  |  |  | 6.7 |   |  |  |  |  | 1.2 |   |
|                                |  |  |  | $ | 6.8 |   |  |  |  | $ | 3.1 |   |  |  |  | $ | 9.4 |   |  |  |  | $ | 4.9 |   |
|                                     |

|     |                                                                                                    |
|-----|----------------------------------------------------------------------------------------------------|
| (4) | Weare required to make adjustments to EBITDA for franchise taxes and401(k) matching contributions. |

Our covenant levelsand ratios for the four quarters ended September  30,  2006are asfollows:

|                                                                                                           |  |  |                                  |  |        |        |  |  |  |  |        |        |
|-----------------------------------------------------------------------------------------------------------|--|--|----------------------------------|--|--------|--------|--|--|--|--|--------|--------|
|                                                                                                      |  |  | CovenantLevelatSeptember 30,2006 |  |        | Ratios |
| Seniorcreditfacility(1)                                                                                   |  |  |                                  |  |   |   |  |  |  |  |   |   |
| MinimumAdjusted EBITDA to cash interestratio                                                              |  |  |                                  |  | 1.75x  |   |  |  |  |  | 2.99x  |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                   |  |  |                                  |  | 6.00x  |   |  |  |  |  | 4.28x  |   |
| Indentures(2)                                                                                             |  |  |                                  |  |   |   |  |  |  |  |   |   |
| MinimumAdjusted EBITDA to fixed charge ratio required to incur additional debtpursuant to ratioprovisions |  |  |                                  |  | 2.00x  |   |  |  |  |  | 2.61x  |   |
|                                                                                                           |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | During2006, our senior credit facility requires us to maintain an AdjustedEBITDA to cash interest ratio at a minimum of 1.75x and a net debt toAdjusted EBITDA ratio at a maximum of |

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

|  |                                                                                                                                                                                                                                                                                                                                                                 |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 6.00x, in each case for the most recent fourquarter period. Failure to satisfy these ratio requirements wouldconstitute a default under the senior credit agreement. If our lendersfailed to waive any such default, our repayment obligations under thesenior credit agreement could be accelerated, which would alsoconstitute 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$1,035.0  million that was outstanding under our term loanfacilities as of September  30,  2006) and investments insimilar business and other investments equal to 6% of NalcoFinance Holdings LLC consolidated assets. |

Locallines of credit.    Certain of our non-U.S. subsidiaries havelines of credit to support local requirements. As of September30,  2006, the aggregate outstanding balance under these locallines of credit was approximately $25.9  million. Certain ofthese lines of credit are equally and ratably secured with obligationsunder our senior credit facilities.

Receivablesfacility.    Nalco Company entered into a receivables facilityon June  25,  2004 that provides up to $100  millionin funding from a commercial paper conduit sponsored by JPMorgan ChaseBank, one of the lenders under Nalco Company’s senior creditfacilities, based on availability of eligible receivables andsatisfaction of other customary conditions.

Availabilityof funding under the receivables facility depends primarily upon theoutstanding trade accounts receivable balance from time to time.Aggregate availability is determined by using a formula that reducesthe gross receivables balance by factors that take into accounthistorical default and dilution rates, excessive concentrations andaverage days outstanding and the costs of the facility. Based on theterms of this facility and on the criteria described above, as ofSeptember  30,  2006, approximately $183.2  millionof our accounts receivable balance was considered eligible forfinancing under the program, of which approximately $120.4million would have been available for funding. As of September30,  2006, we had $97.2  million of outstanding borrowingsunder this facility.

This facility is treated as a generalfinancing agreement resulting in the borrowings and related receivablesbeing shown as liabilities and assets, respectively, on ourconsolidated balance sheet and the costs associated with thereceivables facility being recorded as interest expense. The facilityexpires in June  2007.

Recent AccountingPronouncements

See Note 13 to the condensed consolidatedfinancial statements, included in Part I, Item 1, for information onrecent accountingpronouncements.

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

There have been no material changes to theCompany’s exposures to market risk since December31,  2005.

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

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

The Company’s chief executiveofficer and chief financial officer, after evaluating the effectivenessof the Company’s ‘‘disclosure controls andprocedures’’ (as defined in the Securities Exchange Actof 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period,have concluded that the Company’s disclosure controls andprocedures were effective as of September  30,2006.

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

There were no changes in theCompany’s internal controls over financial reporting thatoccurred during the third quarter of 2006 that have materiallyaffected, or are reasonably likely to materially affect, theCompany’s internal controls over financialreporting.

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PART II.    OTHERINFORMATION

|                |             |
|----------------|-------------|
| Item 1A.  | RiskFactors |

Changes have occurred to the following riskfactor that was included in the Company’s Annual Report on Form10-K for the year ended December  31,  2005:

Our pension plans are currently underfunded and we may have tomake significant cash payments to the plans, reducing the cashavailable for our business.

We sponsor variouspension plans worldwide that are underfunded and require significantcash payments. For example, in 2004 and 2005, we contributed$13.7  million and $30.0  million, respectively, to ourpension plans. We are required to contribute at least $58.5million to the U.S. pension plan in 2006. In early April  2006,we added $45.0  million in funding to our first quarter 2006 U.S.pension plan contribution of $13.5  million, completing our 2006U.S. pension funding requirements ahead of schedule. We may also opt tomake additional voluntary contributions to various pension plansworldwide in 2006.

As of December  31,  2005,our worldwide pension plans were underfunded by $434.2  million(based on the actuarial assumptions used for purposes of Statement ofFinancial Accounting Standards (SFAS) No. 87, Employers’Accounting for Pensions). Our U.S. pension plans are subject to theEmployee Retirement Income Security Act of 1974, or ERISA. Under ERISA,the Pension Benefit Guaranty Corporation, or PBGC, has the authority toterminate an underfunded pension plan under certain circumstances. Inthe event our U.S. pension plans are terminated for any reason whilethe plans are underfunded, we will incur a liability to the PBGC thatmay be equal to the entire amount of the underfunding. Prior to theclosing of the Acquisition, the PBGC requested and received informationfrom us regarding our business, the Transactions and our pension plans.The PBGC took no further action with respect to theirinquiry.

On August  17,  2006, the Presidentsigned into law new pension reform legislation – the PensionProtection Act of 2006 (PPA). The PPA affects defined benefit anddefined contribution plans, the employers who sponsor such plans, andplan participants. The PPA will influence the amount and timing of ourpension funding requirements, our decisions regarding pension funding,and the timing of payouts to those of our employees who are planparticipants. The changes resulting from the PPA might impact ouremployees and influence their employment decisions.

|              |          |
|--------------|----------|
| Item6.  | Exhibits |

|           |                                   |
|-----------|-----------------------------------|
| (a)  | The followingare included herein: |

|  |                   |                                                                                                   |
|--|-------------------|---------------------------------------------------------------------------------------------------|
|  | Exhibit31.1  | Certification of Chief Executive Officer,Pursuant to Section 302 of the Sarbanes-Oxley Act of2002 |

|  |                    |                                                                                                   |
|--|--------------------|---------------------------------------------------------------------------------------------------|
|  | Exhibit 31.2  | Certification ofChief Financial Officer, Pursuant to Section 302 of the Sarbanes-OxleyAct of 2002 |

|  |                   |                                                                                                                       |
|--|-------------------|-----------------------------------------------------------------------------------------------------------------------|
|  | Exhibit32.1  | Certifications Pursuant to 18 U.S.C. Section1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of2002 |

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SIGNATURE

TheCompany has duly caused this report to be signed on its behalf by theundersigned thereunto dulyauthorized.

|        |  |  |                                                                                                                                                                                            |  |  |                                                   |
|--------|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|---------------------------------------------------|
|   |  |  | NALCOFINANCE HOLDINGSLLC                                                                                                                                                                   |
|   |  |  | /s/ BRADLEY J.BELL                             |
|   |  |  | Name:                                                                                                                                                                                      |  |  | BradleyJ. Bell                                    |
|   |  |  | Title:                                                                                                                                                                                     |  |  | ExecutiveVice President andChief FinancialOfficer |
|        |

Dated: November  7,2006

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