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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-K

(Mark One)

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

For the fiscal year ended December 31,2004

or

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|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF  1934 |

For the transition period from                 to                 .

Commission File No. 333-115560-15

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NALCO HOLDINGS LLC

(Exact name of registrant as specifiedin its charter)

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| **Delaware**(State or other jurisdiction of Incorporation or Organization) |  | **73-1683500** (I.R.S. Employer IdentificationNumber) |
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1601 West Diehl Road Naperville, IL60563-1198 (630) 305-1000

(Address, Including Zip Code, andTelephone Number, Including Area Code, of Registrant's PrincipalExecutive Offices)

Securities registeredpursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) ofthe Act:

None

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes     No 

Indicate by check mark if disclosure of delinquent filers pursuantto Item 405 of Regulation S-K (§ 229.405 of this chapter) is notcontained herein, and will not be contained, to the best ofregistrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act.) Yes     No 

Noneof the Company's limited liability company units is held bynon-affiliates. As of March 24, 2005, there were 100 unitsoutstanding.

DOCUMENTS INCORPORATED BYREFERENCE

None

The registrantmeets the condition set forth in General Instruction I(1)(a) and (b) ofForm 10-K and is therefore filing this Form with the reduced disclosureformat.

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FORM 10-KNALCO HOLDINGS LLC TABLE OF CONTENTS

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| **PartI**   |
| Item1.      |  | Business                                                                                                    |     |   | 2   |   |
| Item 2.     |  | Properties                                                                                                  |     |   | 17  |   |
| Item3.      |  | Legal Proceedings                                                                                           |     |   | 17  |   |
| Item4.      |  | Submission of Matters to a Vote of Security Holders*                                                        |     |   | 17  |   |
| **PartII**  |
| Item 5.     |  | Market for Registrant's Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities |     |   | 18  |   |
| Item 6.     |  | Selected Financial Data                                                                                     |     |   | 18  |   |
| Item 7.     |  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations                        |     |   | 24  |   |
| Item 7A.    |  | Quantitative and Qualitative DisclosuresAbout Market Risk                                                   |     |   | 50  |   |
| Item8.      |  | Financial Statements and SupplementaryData                                                                  |     |   | 52  |   |
| Item 9.     |  | Changes in andDisagreements with Accountants on Accounting and FinancialDisclosure                          |     |   | 108 |   |
| Item 9A.    |  | Controlsand Procedures                                                                                      |     |   | 108 |   |
| Item 9B.    |  | OtherInformation                                                                                            |     |   | 108 |   |
| **PartIII** |
| Item10.     |  | Directors and Executive Officers of the Registrant*                                                         |     |   | 109 |   |
| Item 11.    |  | ExecutiveCompensation *                                                                                     |     |   | 109 |   |
| Item12.     |  | Security Ownership of Certain Beneficial Owners andManagement *                                             |     |   | 109 |   |
| Item 13.    |  | CertainRelationships and Related Transactions *                                                             |     |   | 109 |   |
| Item 14.    |  | Principal Accountant Fees andServices                                                                       |     |   | 109 |   |
| **PartIV**  |
| Item15.     |  | Exhibits, Financial StatementSchedules                                                                      |     |   | 111 |   |
| Signatures  |  |                                                                                                        | 118 |   |
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| * | Item is omitted pursuant to the reduced disclosure format, asset forth on the cover page of this filing, since all equity securitiesof the registrant are owned indirectly by Nalco HoldingCompany. |

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PART I

ITEM 1.    BUSINESS

Overview

On August 31, 2003,Nalco Holdings LLC, an indirect wholly owned subsidiary of NalcoHolding Company and a company formed by The Blackstone Group, ApolloManagement, L.P. and GS Capital Partners (the"Sponsors"), entered into a stock purchaseagreement pursuant to which it agreed to purchase all of theoutstanding shares of capital stock of Ondeo Nalco Company (which isnow known as Nalco Company) and the Nalco International SASSubsidiaries, which had been operated as a single business unit, fromsubsidiaries of Suez S.A. (Suez or Seller). The aggregate purchaseprice was $4,105.4 million in cash, after giving effect to direct costsof the Acquisition, closing date working capital and indebtednesspurchase price adjustments, a post-closing working capital andindebtedness purchase price adjustment, and certain other post-closingadjustments. The Transactions closed on November 4, 2003. In thisreport, we refer to this acquisition as the"Acquisition," and the term"Transactions" means, collectively, theAcquisition and the related financings to fund the Acquisition.

All references in this report to "Nalco,"the "Company,""we," "our," and"us" mean, unless the context indicatesotherwise, (1) Nalco Holdings LLC and its subsidiaries and affiliateson a consolidated basis, (2) the Predecessor, and (3) the Successor. Inaddition, when the context so requires, we use the term"Predecessor" to refer to the historicaloperations of the Predecessor prior to the Acquisition and"Successor" to refer to our historicaloperations following the Acquisition.

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

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

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

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

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Our Competitive Strengths

Ourcompany has benefited from the following competitive strengths:

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

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

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

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

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

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

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

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

Business Strategy

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

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

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

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

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

Continue to Reduce Costs.    Wehave initiated a comprehensive cost reduction plan that yielded savingsin 2004 of $88 million compared to 2003, with a year-end run rate tothose savings of $110 

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million. In 2005, we intend to generateadditional savings versus 2004 of $75 million, which include therun-rate benefit of 2004 projects. We expect our cost reduction plan toachieve incremental efficiencies through work process redesign andother targeted cost improvements, which address inefficiencies in ouradministrative and overhead functions, as well as other support andservice functions around the world.

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

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

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

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

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

Industrial and Institutional Services

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

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

WaterTreatment Applications

Our water treatment capabilities areshared across our three core divisions. In our Industrial andInstitutional Services division, water treatment programs accounted for76% of our net sales in 2004. These water applications alsoaccounted for 11% of our Energy Services net sales and15% of our Paper Services net sales in 2004. The followingdescriptions include water treatment applications in the Industrial andInstitutional Services division, but these boiler water, cooling water,raw water and wastewater applications are also used in the otherdivisions.

Boiler Water Applications.    We havespecialized in boiler water applications for 75 years. Corrosion, scalebuildup and microbial fouling are the most common problems addressed byour boiler water programs. We have helped our customers overcomevarious boiler challenges by providing integrated chemical solutions,process optimizations and mechanical component modifications. OurTRASAR technology is recognized as an innovative water treatmentprogram that prevents operational problems. TRASAR technology continuesto evolve and today is used in a number of boiler water treatmentprograms such as NexGuard. NexGuard combines the most advanced boilerinternal treatment chemistry with TRASAR technology andstate-of-the-art diagnostic, monitoring, feed and control equipment.Other applications of TRASAR include TRASAR Recovery Boiler LeakIndication, which is designed to determine when a loss of concentratedboiler water occurs in operating boilers. We also develop condensatetreatment programs designed to prevent corrosion, overheating andrupture of boilers. Two examples of these programs are Nalco ACT andTri-ACT. In 2000, we were awarded a Research and Development 100 Awardfor Nalco ACT, our revolutionary food-grade boiler treatment. Tri-ACT,a series of corrosion inhibitors, includes neutralizers, filmers andoxygen scavengers to provide uniform protection of the condensatesystem.

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

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

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

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

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

Mining and Mineral Processing Applications

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

Colloidal TechnologiesApplications

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

FinishingTechnologies Applications

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

Membrane Technologies Applications

Membrane systems have been widely adopted in industrialized anddeveloping countries as an efficient and cost-effective technology forthe purification of municipal and industrial grade water and

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

Odor Control Applications

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

Energy Services

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

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

OilfieldApplications

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

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

Downstream Refining Applications

We provide processapplications specific to the petroleum refining and fuels industry,enabling our customers to profitably refine and upgrade hydrocarbons.Our heavy oil upgrading programs minimize operation costs and mitigatefouling, corrosion, foaming and the effects of heavy metals whenrefining lower-quality crude oils.

The SCORPION II programcombats napthenic acid corrosion problems, allowing refiners to takeadvantage of discounted high acid crudes through combined chemistry,novel monitoring and simulation technologies. Our proprietary NEOSTARcrude oil database and our new patented chemistries are coupled withover 20 years of experience in the treatment of high temperaturecorrosion. Crude unit fouling can increase energy and maintenancecosts, while reducing crude output. The THERMOGAIN program includesunique chemistries and patented crude stability tests to prevent crudeunit fouling. The refining industry is also addressing clean fuelsregulations that require drastic reduction in the level of sulfurallowed in fuels. Our H2S Scavengers, such as theSULFA-CHECK system, helps our customers to meet regulatorystandards.

Hydro-processing to meet low-sulfur fuelspecifications can increase the corrosiveness of fuels. We offer anentire line of fuel additives, including corrosion inhibitors, toprotect engine fuel systems and pre-market underground storage tanksand piping. In addition, we offer fuel stabilizers, pour pointdepressants, cetane improvers, detergents and antioxidants for homeheating oil and premium diesel and gasoline packages. The PROSPEC TreatService combines our knowledge of fuel specifications, testrequirements, product selection, application technology and on-sitecoordination to solve expensive finished product problems in refinerytank farms, third party terminals and ports.

DownstreamChemical Processing Applications

We provide on-site technicalservice and innovative chemical processing technologies at more than250 chemical plants in 45 countries worldwide. We guide chemical plantsthrough obstacles that arise during operation and help maximize returnon investment through products and services tailored to eachcustomer's requirements, climate and logistics. We supportolefins producers worldwide with proprietary treatment programs forethylene and butadiene plant performance maximization.

TheACTRENE fouling control program represents a significant advancement inthe olefins chemical process industry, dramatically increasingoperations run-lengths. This technology reliably mitigates and controlsfouling in fractional distillation units. COKELESS coking controltechnology protects radiant and transfer line exchanger sections ofethylene plant furnaces without adverse effects to metallurgy ordownstream processes. AQUAMAX corrosion control providescost-effective, sodium-free corrosion control in dilution steamsystems. We also provide a comprehensive line of antifoams,antifoulants and corrosion inhibitors for butadiene operations.

Adomite Well Service Applications

We support theDrilling/Exploration service industry by designing and supplyingchemicals for drilling activities. Our Adomite business supplieschemicals for the cementing, completion, drilling, fracturing andacidizing phases of oil and gas exploration, as well as conductingindependent research and jointly developing products with major wellservice companies.

Water Applications

We providetotal water management solutions specific to refining and chemicalprocessing needs. See "—Industrial and InstitutionalServices—Water Treatment Applications."

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Paper Services

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

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

Pulp Applications

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

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

PaperApplications

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

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

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

Specific to each grade segment, our programs deliver value in theform of improved brightness, lower basis weight, improved bulk andsoftness, improved printability and many other key business driverswhich our customers determine are critical to the success of theirbusiness.

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

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Water Applications

Wateris one of the primary components of the papermaking system. For eachton of paper produced, thousands of gallons of water are used. Carefulmanagement of the water throughout the process not only significantlyimpacts the water, fiber and energy costs of an operation, but alsosignificantly influences the final properties of the sheet. Ourintegrated resource approach combines our extensive papermaking andwater expertise with advanced computer modeling to optimize the waterbalance, flow and chemistry across the entire papermaking systemincluding the pulp mill, paper mill and utility operations. See"—Industrial and Institutional Services—WaterTreatment Applications."

Our Services

Ourbusiness is focused on providing integrated solutions to complex issuesfor our customers. Differences in customer equipment and processesdrive substantial variation in the individual programs we create. Inaddition, fluctuations within an operation, such as changes in waterquality or petroleum characteristics, require us to continually adaptour solutions to meet our customers' needs. These solutions areoften adapted on-site by our technical sales professionals. Our salesteams are supported by analytical services, consulting services,technical field services and environmental hygiene services.

Analytical Services

Our highly trained analyticalresearchers combine in-field work and laboratory analysis to developrecommendations. Our ISO 9002-certified laboratories usestate-of-the-art equipment, including mass and nuclear magneticresonance spectrometers and multiple testing stations, to conductsample testing and process failure analysis for water treatment, paperprocess and energy process applications. We have provided analyticalservices for more than 50 years and most of our more than 100analytical researchers have an average of more than ten years ofexperience with our Company. In addition, approximately 45% ofour chemists have advanced degrees.

ConsultingServices

Our on-site experts, industry technical consultantsand researchers develop appropriate solutions for a broad range ofcustomer requirements, such as single process optimization, system-wideprogram implementation, troubleshooting or increasing efficiencies. Weprovide numerous plant, process and application audits and surveys inwater, energy or paper processing. We offer consulting for all wateruse and discharge areas and make recommendations for improvements, costreductions or efficiency improvements through our Advanced RecycleTechnology programs. Our technically trained sales professionals canalso rely on guidance from a global knowledge management system thatallows access to our specialized experts anywhere in the world. We takea multi-disciplinary approach to developing solutions by evaluating themechanical, operational and chemical aspects of each process. Bymonitoring interactions between these three system components, ourfield engineers are able to anticipate and solve problems and preventdamage to customer processes. We utilize advanced database and computeranalytical programs to support these efforts, including our Vantagedatabase, which captures analytical data, prepares diagnostic imagesand reports on a real-time basis.

Technical and FieldServices

We provide expert technical assistance for chemicalfeed and control equipment installation, start-up, calibration,preventative maintenance and repair throughout the world. In additionto the components we maintain regionally, we provide on-site services,including on-site testing, on-site system troubleshooting, inventorymanagement, chemical usage determination, chemical dosage audits andcleaning services.

Environmental Hygiene Services

We offer a complete line of specialized services designed to assess,control and reduce risk from water-borne pathogens such as Legionella.Trained hygiene service specialists perform risk assessments

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

Customer Training

In order to educate our customersand promote more efficient and effective systems and processes in theiroperations, we have developed various training programs and interactiveonline training that teach operators and engineers how to work moreeffectively and efficiently. We conduct water treatment seminars toformally train our customers how to use our equipment and chemicals andhow to implement best practices. For example, we provide watertreatment workshops in a classroom setting where attendees discusstechnical and industry-related issues among their peers and are able toreview tailored answers to their operation-specific questions.Facilitators guide the attendees through various topics such astrending, energy management, cost implications, and best practices.These peer group discussions help the attendees troubleshoot and createsupport network groups. The latest addition to our training curriculumis our interactive, web-based program, Nalco University, which providesan economical and convenient alternative to our seminars.

Equipment

We offer complete equipment systems as part ofour integrated offering, ranging from reusable shipping containers andfeed and process control equipment to integrated wireless, web-based,data collection services. In addition, we offer a range of field testkits, process-monitoring equipment, and complete chemical feed andstorage systems proven and tested for industrial environments.

We recognize the importance of accurate, reliable chemical feed tothe success of manufacturing process and water treatment programs.Pre-packaged chemical feed systems ensure easy installation, start-upand reliable chemical feed, including our ValueLine Polymer Feeders anda line of modular pump and control systems. These chemical feed systemsare used to pump chemicals into a customer's manufacturing and/orwater treatment process. Some feed systems also have mixingtechnologies that produce high-quality solutions without usingmechanical agitators. Additionally, we have set the standard forreturnable chemical delivery systems and"hands-off" chemical handling. Our PORTA-FEEDcontainer units are returnable shipping containers set up at acustomer's plant to feed our chemicals into the customer'ssystem. When the chemical level is low, a refill unit is delivered tothe plant and we take the empty PORTA-FEED unit back for cleaning andre-use. Since the introduction of the PORTA-FEED program in 1985, wehave eliminated the disposal of over three million chemical drums.

We also understand that it is crucial to all businesses to have thepower to monitor and control their chemical treatment programs on anon-going basis in an efficient and easy-to-use manner. Our web-basedmonitoring service is a powerful multi-functional microprocessor withan embedded web server available in two series. Our Boiler Controlleris designed to provide reliable automation for corrosion and scalingcontrol programs in boilers. Our Cooling Tower Controller providesreliable automation of corrosion, scaling and microbiological growthcontrol programs in cooling water applications. Both series include arevolutionary digital communications package which allows the customerto change set points, manually activate or deactivate pumps and valves,upgrade software, and receive reports or alarms, from any personalcomputer that has Internet access.

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

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

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

Joint Ventures

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

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

Competition

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

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

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

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

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Research and Development

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

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

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

Intellectual Property

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

RawMaterials

We do not depend on any one supplier for a materialamount of our raw materials, but certain important raw materials areobtained from a sole source or a few major suppliers. Majorrequirements for key raw materials are typically purchased pursuant tomulti-year contracts. On a consolidated basis, we purchased rawmaterials totaling approximately $745 million in 2004, with no singleraw material accounting for more than 3.5% of our totalpurchases.

Working Capital

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

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

Employees

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

EnvironmentalMatters

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

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

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

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

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ExecutiveOfficers

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

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

**William J. Roe**is our Executive Vice President, ChiefOperating Officer and President, Industrial and Institutional Servicesdivision. Mr. Roe has served as Chief Operating Officer since 2001 andas Executive Vice President, Industrial and Institutional Servicesdivision, since November 2003. Prior to that, in 1999, Mr. Roe waselected Group Vice President and President of the Pacific and Processdivisions. In 1998, Mr. Roe served as Vice President and President ofthe Process division. He was named District Manager for the Mining andMineral Processing Chemicals Group in 1989, Marketing Manager in 1991and promoted to General Manager in 1994. Mr. Roe joined our Company in1978 as an Assistant Chemist in Research. Mr. Roe was promoted toChemist in 1979, Senior Chemist and Group Leader in 1981 and toTechnical Director in 1985.

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

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

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

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

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**Louis L. Loosbrock**is our GroupVice President and President of our Pacific division. Mr. Loosbrock hasbeen President of the Pacific division since April 2003. Prior to that,Mr. Loosbrock served as Group Vice President and President of our Pulpand Paper division from April 2002 to April 2003. Mr. Loosbrock servedas General Manager, Global Mining from 1998 to 2002; Sales Manager from1986 to 1989 and 1991 to 1998; and Marketing Manager from 1989 to 1991.He began his career with our Company in 1977 as a Sales Representativein the Mining Group and in 1981 was named District Manager.

WebSite

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

ITEM2.    PROPERTIES

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

ITEM3.    LEGAL PROCEEDINGS

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

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

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

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PART II

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

The Company is an indirect wholly owned subsidiaryof Nalco Holding Company and, accordingly, there is no market for theCompany's limited liability company interests represented byunits.

ITEM 6.    SELECTED FINANCIAL DATA

TheSuccessor financial statements include the consolidated auditedfinancial statements of Nalco Holdings LLC and its subsidiaries. ThePredecessor financial statements include the combined financialstatements of Ondeo Nalco Group, which include the consolidatedfinancial statements of Ondeo Nalco Company and the combined financialstatements of the Nalco International SAS Subsidiaries.

Thefollowing selected financial data has been derived from the auditedconsolidated and combined financial statements of Nalco Holdings LLCand its subsidiaries as of December 31, 2004, 2003 and 2002, and forthe periods from January 1, 2004 to December 31, 2004, November 4, 2003to December 31, 2003, January 1, 2003 to November 3, 2003, January 1,2002 to December 31, 2002, and January 1, 2001 to December 31, 2001.The selected financial data as of December 31, 2001 and as of and forthe years ended December 31, 2000 and December 31, 1999 has beenderived from the Company's unaudited internal financial reportingto Suez.

You should read the following data in conjunction with"Management's Discussion and Analysis of FinancialCondition and Results of Operations" and the consolidatedand combined financial statements included elsewhere in this AnnualReport.

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|                                              |  |                            |         |                                           |  |                                   |          |                        |  |        |         |             |  |             |         |         |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------|----------|------------------------|--|--------|---------|-------------|--|-------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                         |  | Successor                  |         | Predecessor                               |
| (dollarsin millions)                         |  | YearendedDecember 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1through November 3, 2003 |          | Year ended December31, |
| 2002                                         |  | 2001                       |         | 2000(1)                                   |  | 1999(1)                           |          |
|                                         |  |                       |         |                                      |  |                              |          |                   |  |   |         | (unaudited) |  | (unaudited) |
| **Statementof Operations Data:**             |  |
| Netsales                                     |  | $                          | 3,033.3 |                                      |  | $                                 | 460.1    |                   |  | $      | 2,306.5 |        |  | $           | 2,644.3 |    |  | $      | 2,619.7 |    |  | $      | 2,147.1 |    |  | $      | 601.2  |    |
| Operatingcosts andexpenses:                  |  |                       |    |                                      |  |                              |     |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Costsof productsold                          |  |                       | 1,552.2 |                                      |  |                              | 248.2    |                   |  |   | 1,114.6 |        |  |        | 1,266.1 |    |  |   | 1,268.1 |    |  |   |    |    |  |   |   |    |
| Selling,administrative, and researchexpenses |  |                       | 1,065.3 |                                      |  |                              | 176.4    |                   |  |   | 900.7   |        |  |        | 992.0   |    |  |   | 1,041.1 |    |  |   |    |    |  |   |   |    |
| Impairmentof goodwill(2)                     |  |                       | — |                                      |  |                              | —  |                   |  |   | 244.4   |        |  |        | — |    |  |   | — |    |  |   |    |    |  |   |   |    |
| Amortizationof intangible assets(2)          |  |                       | 96.3    |                                      |  |                              | 15.4     |                   |  |   | 68.9    |        |  |        | 89.2    |    |  |   | 171.3   |    |  |   |    |    |  |   |   |    |
| In-processresearch anddevelopment            |  |                       | 122.3   |                                      |  |                              | —  |                   |  |   | — |        |  |        | — |    |  |   | 1.3     |    |  |   |    |    |  |   |   |    |
| Businessoptimization expenses(3)             |  |                       | 1.7     |                                      |  |                              | 0.8      |                   |  |   | 20.3    |        |  |        | 32.8    |    |  |   | 172.3   |    |  |   |    |    |  |   |   |    |
| Operatingcosts andexpenses                   |  |                       | 2,837.8 |                                      |  |                              | 440.8    |                   |  |   | 2,348.9 |        |  |        | 2,380.1 |    |  |   | 2,654.1 |    |  |   | 2,156.5 |    |  |   | 868.4  |    |
| Operatingearnings(loss)                      |  |                       | 195.5   |                                      |  |                              | 19.3     |                   |  |   | (42.4   | )      |  |        | 264.2   |    |  |   | (34.4   | )  |  |   | (9.4    | )  |  |   | (267.2 | )  |
| Otherincome (expense), net(4)                |  |                       | (43.3   | )                                    |  |                              | (2.8     | )                 |  |   | (17.3   | )      |  |        | 3.4     |    |  |   | (12.4   | )  |  |   |    |    |  |   |   |    |
| Interestincome                               |  |                       | 10.1    |                                      |  |                              | 0.6      |                   |  |   | 7.1     |        |  |        | 7.8     |    |  |   | 8.8     |    |  |   |    |    |  |   |   |    |
| Interestexpense                              |  |                       | (213.2  | )                                    |  |                              | (49.6    | )                 |  |   | (32.7   | )      |  |        | (38.5   | )  |  |   | (44.4   | )  |  |   |    |    |  |   |   |    |
| Earnings(loss) before incometaxes            |  |                       | (50.9   | )                                    |  |                              | (32.5    | )                 |  |   | (85.3   | )      |  |        | 236.9   |    |  |   | (82.4   | )  |  |   |    |    |  |   |   |    |
| Incometax provision(benefit)                 |  |                       | 47.5    |                                      |  |                              | (8.3     | )                 |  |   | 68.7    |        |  |        | 105.2   |    |  |   | (1.8    | )  |  |   |    |    |  |   |   |    |
| Minorityinterests                            |  |                       | (5.8    | )                                    |  |                              | 0.1      |                   |  |   | (4.2    | )      |  |        | (3.3    | )  |  |   | (3.4    | )  |  |   |    |    |  |   |   |    |
| Netearnings(loss)                            |  | $                          | (104.2  | )                                    |  | $                                 | (24.1    | )                 |  | $      | (158.2  | )      |  | $           | 128.4   |    |  | $      | (84.0   | )  |  | $      | (58.4   | )  |  | $      | (213.6 | )  |
| **NetEarnings (Loss) Per Share Data(5)**     |  |                       |    |                                      |  |                              |     |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| **Statementof Cash FlowsData:**              |  |                       |    |                                      |  |                              |     |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netcash provided by (usedfor):               |  |                       |    |                                      |  |                              |     |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Operatingactivities                          |  | $                          | 237.2   |                                      |  | $                                 | 88.7     |                   |  | $      | 144.4   |        |  | $           | 323.1   |    |  | $      | 414.3   |    |  |   |    |    |  |   |   |    |
| Investingactivities                          |  |                       | (72.9   | )                                    |  |                              | (4,145.1 | )                 |  |   | (12.3   | )      |  |        | (126.1  | )  |  |   | (463.5  | )  |  |   |    |    |  |   |   |    |
| Financingactivities                          |  |                       | (231.9  | )                                    |  |                              | 4,130.3  |                   |  |   | (234.2  | )      |  |        | (232.7  | )  |  |   | 133.9   |    |  |   |    |    |  |   |   |    |
| **OtherFinancial Data(unaudited):**          |  |                       |    |                                      |  |                              |     |                   |  |   |    |        |  |        |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| EBITDA(6)                                    |  | $                          | 357.0   |                                      |  | $                                 | 54.5     |                   |  | $      | 106.8   |        |  | $           | 488.2   |    |  | $      | 245.7   |    |  |   |    |    |  |   |   |    |
| Non-cashcharges included in EBITDA(7)        |  |                       | 174.4   |                                      |  |                              | 23.9     |                   |  |   | 268.7   |        |  |        | 31.2    |    |  |   | 31.1    |    |  |   |    |    |  |   |   |    |
| Unusualitems included in EBITDA(8)           |  |                       | 45.9    |                                      |  |                              | 6.3      |                   |  |   | 48.5    |        |  |        | (33.3   | )  |  |   | 9.9     |    |  |   |    |    |  |   |   |    |
| Capitalexpenditures, net(9)                  |  |                       | 91.8    |                                      |  |                              | 15.6     |                   |  |   | 85.6    |        |  |        | 108.3   |    |  |   | 114.8   |    |  |   |    |    |  |   |   |    |
| Depreciation                                 |  |                       | 114.3   |                                      |  |                              | 22.5     |                   |  |   | 101.8   |        |  |        | 134.7   |    |  |   | 124.6   |    |  |   |    |    |  |   |   |    |
| Amortization                                 |  |                       | 96.3    |                                      |  |                              | 15.4     |                   |  |   | 68.9    |        |  |        | 89.2    |    |  |   | 171.3   |    |  |   |    |    |  |   |   |    |
|                                              |

19

----

|                                                                                      |  |                   |         |                   |  |        |         |        |  |             |         |             |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------|--|-------------------|---------|-------------------|--|--------|---------|--------|--|-------------|---------|-------------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                                                                 |  | Successor         |         | Predecessor       |
|                                                                                 |  | Asof December 31, |         | As of December31, |
| (dollars inmillions)                                                                 |  | 2004              |         | 2003              |  | 2002   |         | 2001   |  | 2000(1)     |         | 1999(1)     |
| **BalanceSheetData:**                                                                |  |              |         |              |  |   |         |   |  | (unaudited) |         | (unaudited) |
| Cashand cashequivalents                                                              |  | $                 | 33.2    |              |  | $      | 100.0   |   |  | $           | 120.5   |        |  | $      | 146.0   |   |  | $      | 71.6    |   |  | $      | 80.0    |   |
| Workingcapital(10)                                                                   |  |              | 424.2   |              |  |   | 398.7   |   |  |        | 240.8   |        |  |   | 208.0   |   |  |   | 193.8   |   |  |   | 298.6   |   |
| Property,plant and equipment, net(11)                                                |  |              | 847.3   |              |  |   | 865.6   |   |  |        | 823.2   |        |  |   | 856.2   |   |  |   | 821.6   |   |  |   | 573.0   |   |
| Totalassets                                                                          |  |              | 5,933.7 |              |  |   | 6,163.8 |   |  |        | 6,486.4 |        |  |   | 6,512.2 |   |  |   | 6,406.6 |   |  |   | 5,529.3 |   |
| Totaldebt (including lease obligation and current portion of long-term debt)(11)(12) |  |              | 3,118.3 |              |  |   | 3,314.7 |   |  |        | 776.2   |        |  |   | 859.2   |   |  |   | 526.1   |   |  |   | 500.0   |   |
| Totalstockholders'investment                                                         |  |              | 1,017.7 |              |  |   | 1,069.0 |   |  |        | 3,589.2 |        |  |   | 3,734.4 |   |  |   | 4,011.8 |   |  |   | 4,264.0 |   |
| Offbalance sheet receivables facility(12)                                            |  |              | — |              |  |   | — |   |  |        | 87.0    |        |  |   | 101.0   |   |  |   | — |   |  |   | — |   |
|                                                                                      |

|  |
|--|
|  |  |
|  |

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

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | ThePredecessor adopted Statement of Financial Accounting Standards (SFAS)No. 142, Goodwill and Other Intangible Assets, as ofJanuary 1, 2002. Under SFAS No. 142, goodwill and intangible assetsdeemed to have indefinite lives are no longer amortized but are subjectto annual impairment tests. In the period from January 1, 2003 throughNovember 3, 2003, the Predecessor took a goodwill impairment charge of$244.4 million based on the price paid in the Acquisition. |

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | The Successor incurred businessoptimization expenses in connection with its programs to redesign andoptimize its business and work processes. The Predecessor incurredsignificant business optimization expenses as a result of the globalintegration of the Nalco/Exxon Energy Chemicals, L.P. (Nalco/Exxon)joint venture and the implementation of global cost reduction programsin the sales, marketing, manufacturing and support services operations.The costs incurred include severance, asset write-offs, facilityclosing costs and other items. See "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations—Business OptimizationExpenses." |

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

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

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)  | EBITDA, a measure used by management to measureoperating performance, is defined as net earnings plus interest, taxes,depreciation and amortization. EBITDA is reconciled to net earnings(loss) in the following table. Our management believes EBITDA is usefulto the investors because it is frequently used by securities analysts,investors and other interested parties in the evaluation of companiesin our industry. EBITDA is not a recognized term under |

20

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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | U.S. GAAP and does not purport to be analternative to net earnings (loss) as an indicator of operatingperformance or to cash flows from operating activities as a measure ofliquidity. Because not all companies use identical calculations, thispresentation of EBITDA may not be comparable to other similarly titledmeasures of other companies. Additionally, EBITDA is not intended to bea measure of free cash flow for management's discretionary use,as it does not consider certain cash requirements such as interestpayments, tax payments and debt service requirements. The amounts shownfor EBITDA as presented herein differ from the amounts calculated underthe definition of EBITDA used in our debt instruments. The definitionof EBITDA used in our debt instruments is further adjusted for certaincash and non-cash charges and is used to determine compliance withfinancial covenants and our ability to engage in certain activitiessuch as incurring additional debt and making certain payments. Thefollowing is a reconciliation of net earnings (loss) toEBITDA: |

|                                 |  |                            |        |                                           |  |                                         |       |                       |  |        |        |         |  |        |       |        |  |        |       |         |  |  |
|---------------------------------|--|----------------------------|--------|-------------------------------------------|--|-----------------------------------------|-------|-----------------------|--|--------|--------|---------|--|--------|-------|--------|--|--------|-------|---------|--|--|
|                            |  | Successor                  |        | Predecessor                               |
| (dollarsin millions)            |  | YearendedDecember 31, 2004 |        | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |       | Year endedDecember31, |
| 2002                            |  | 2001                       |        |
| Netearnings(loss)               |  | $                          | (104.2 | )                                    |  | $                                       | (24.1 | )                |  | $      | (158.2 | )  |  | $      | 128.4 |   |  | $      | (84.0 | )  |
| Interestexpense,net             |  |                       | 203.1  |                                      |  |                                    | 49.0  |                  |  |   | 25.6   |    |  |   | 30.7  |   |  |   | 35.6  |    |
| Incometax provision(benefit)    |  |                       | 47.5   |                                      |  |                                    | (8.3  | )                |  |   | 68.7   |    |  |   | 105.2 |   |  |   | (1.8  | )  |
| Depreciation                    |  |                       | 114.3  |                                      |  |                                    | 22.5  |                  |  |   | 101.8  |    |  |   | 134.7 |   |  |   | 124.6 |    |
| Amortizationof intangibleassets |  |                       | 96.3   |                                      |  |                                    | 15.4  |                  |  |   | 68.9   |    |  |   | 89.2  |   |  |   | 171.3 |    |
| EBITDA                          |  | $                          | 357.0  |                                      |  | $                                       | 54.5  |                  |  | $      | 106.8  |    |  | $      | 488.2 |   |  | $      | 245.7 |    |
|                                 |

|           |                                                                                                                 |
|-----------|-----------------------------------------------------------------------------------------------------------------|
| (7)  | EBITDA,as defined above, was reduced by the following non-cash charges, eachof which is further discussedbelow: |

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

Impairmentof Goodwill

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

In-process Research and Development

In-process research and development was a one-timecharge of $122.3 million recorded during the year ended December 31,2004, as a result of purchase accounting entries related to

21

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the Acquisition. In 2001, the Predecessorrecorded $1.3 million of purchased in-process research and development,resulting from the redemption of Exxon's 40% interest inthe Nalco/Exxon joint venture.

Inventory Step Up

As a result of purchase accounting for theAcquisition, the Successor wrote up its inventory to fair value andsubsequently charged the write up to cost of sales as the inventory wassold. The Successor statements of operations reflect the inventorystep-up in cost of product sold.

Asset Write-Offs

In conjunction with our integration and processimprovement initiatives, the Predecessor wrote off assets consistingprimarily of a $5.0 million investment in start up ventures in 2003,$9.6 million of assets related to obsolete software systems in 2002 and$17.8 million of PORTA-FEED stainless steel containers in 2001 as aresult of a physical inventory.

Profit Sharing and401(k) Expense Funded by Suez

In conjunctionwith the Acquisition, the Successor entered into an agreement with Suezwhereby Suez will reimburse the Company for certain profit sharing and401(k) matching contributions made by the Company to the Profit-SharingTrust.

Other

Other non-cashcharges include the non-cash impact on earnings of our equityinvestments and minority interests. Successor non-cash charges includesthe non-cash portion of rent expense under the sublease that theSuccessor entered into with Suez in conjunction with theAcquisition.

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

|                                            |  |                            |         |                                           |  |                                         |         |                        |  |        |      |        |  |        |       |         |  |        |     |        |  |  |
|--------------------------------------------|--|----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|------------------------|--|--------|------|--------|--|--------|-------|---------|--|--------|-----|--------|--|--|
|                                       |  | Successor                  |         | Predecessor                               |
| (dollarsin millions)                       |  | YearEndedDecember 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year Ended December31, |
| 2002                                       |  | 2001                       |         |
| Pensionand OPEB settlement and curtailment |  | $                          | — |                                      |  | $                                       | (0.1    | )                 |  | $      | 7.9  |   |  | $      | (47.6 | )  |  | $      | 0.4 |   |
| Loss(gain) on sales, net ofexpenses        |  |                       | 0.2     |                                      |  |                                    | 1.1     |                   |  |   | 12.4 |   |  |   | (7.8  | )  |  |   | 0.9 |   |
| Otherunusualitems                          |  |                       | 45.7    |                                      |  |                                    | 5.3     |                   |  |   | 25.7 |   |  |   | 19.4  |    |  |   | 6.6 |   |
| Suezmanagement fees,net                    |  |                       | — |                                      |  |                                    | — |                   |  |   | 2.5  |   |  |   | 2.7   |    |  |   | 2.0 |   |
|                                       |  | $                          | 45.9    |                                      |  | $                                       | 6.3     |                   |  | $      | 48.5 |   |  | $      | (33.3 | )  |  | $      | 9.9 |   |
|                                            |

Pensionand Other Postretirement Benefits (OPEB) Settlement andCurtailment

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

Loss (Gain) on Sales, Net of Expenses

In 2003, the Predecessor recorded a loss of $5.3million on the sale of its South African operations as well as $8.1million of one-time costs associated with the Acquisition. In 2002, the

22

----

Predecessor sold its performance additivesbusiness, resulting in a gain of $12.4 million, and incurred $1.5million of disposal costs and losses associated with its divestiture ofHydrosan. In 2001, the Predecessor incurred a $9.0 million loss on thesale of Calgon's former headquarters facility that was partiallyoffset by a $7.0 million gain on the sale of the Predecessor'scorporate aircraft.

Other Unusual Items

The Successor's results for the year endedDecember 31, 2004 were impacted by the effects of certain unusualitems, including a $35.0 million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors, $1.4 millionof expenses associated with changing the name of the Company'soperating company from Ondeo Nalco Company to Nalco Company, $1.8million in connection with the re-audit of the Predecessor's 2001financial statements, $1.9 million of expenses related to theregistration of publicly tradable senior notes and senior subordinatednotes that were exchanged for privately placed notes issued inconnection with the Acquisition, and other expenses resulting from theAcquisition.

During the period from November 4,2003 through December 31, 2003, the Successor's results wereimpacted by the effects of certain other unusual items, most notably$3.3 million of legal and environmental costs related to events thatoccurred prior to Suez' 1999 acquisition of Nalco ChemicalCompany and litigation costs not covered by the Company's excessliability insurance policy.

The most significantother unusual item affecting the Predecessor's results during theperiod from January 1, 2003 through November 3, 2003 was a $10.4million charge for the settlement of an interest rate swap. Otherunusual items for the year ended December 31, 2002 included legal andenvironmental expenses of $6.5 million, consultancy costs for processreengineering studies associated with our cost reduction programs andother consultancy services performed on behalf of Suez of $7.1 million,and one-time pension and benefit expenses primarily related to theredesign of our Australian benefit plan and the application ofregulatory changes in Germany of $4.7 million. Executive severance andrelocation expense of $5.8 million accounted for most of the otherunusual items during the year ended December 31, 2001.

Suez Management Fees, Net

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

|           |                                                                 |
|-----------|-----------------------------------------------------------------|
| (9)  | Capital expendituresare net of proceeds from disposal ofassets. |

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

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

|            |                                                                                                                                                                                         |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Asa result of the Acquisition, the Successor engaged independentappraisers to assist in determining the fair value of property, plantand equipment in connection with our allocation of |

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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | purchase price. Preliminary and finalvaluations from the appraisers are included in the balances at December31, 2003 and 2004, respectively. In December 2002, Ondeo Nalco Companyentered into a sale-leaseback of its Naperville, Illinois headquartersand research facility that was treated as a financing lease foraccounting purposes. Concurrent with the Acquisition, on November 4,2003, the lease was assigned to another Suez subsidiary that subleasedthe property back to the Successor. The Successor accounts for thesublease as an operating lease and has excluded the headquarters andresearch facility from property, plant andequipment. |

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

|               |                                                                                     |
|---------------|-------------------------------------------------------------------------------------|
| ITEM 7.  | MANAGEMENT'SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS |

The following discussion and analysis of ourfinancial condition and results of operations includes periods prior tothe formation of Nalco Holdings LLC. It also discusses periods prior tothe Transactions, defined as the acquisition of Ondeo Nalco Group,comprised of Nalco Company and Nalco International SAS Subsidiaries, byNalco Holdings and the related financings in connection with suchacquisition (the "Acquisition"). Accordingly,the discussion and analysis of historical periods prior to theTransactions do not reflect the significant impact that theTransactions have had on us. In addition, the statements in thediscussion and analysis regarding industry outlook, our expectationsregarding the performance of our business and the other non-historicalstatements in the discussion and analysis are forward-lookingstatements. These forward-looking statements are subject to numerousrisks and uncertainties, including, but not limited to, the risks anduncertainties described in "Risk Factors."Our actual results may differ materially from those contained in orimplied by any forward-looking statements. You should read thefollowing discussion together with the consolidated and combinedfinancial statements of Nalco Holdings LLC included elsewhere in thisreport.

"Safe Harbor" Statement UnderPrivate Securities Litigation Reform Act of 1995

This AnnualReport for the fiscal year ended December 31, 2004 (the"Annual Report") includes"forward-looking statements" within themeaning of Section 27A of the Securities Act of 1933 and Section 21E ofthe Securities Exchange Act of 1934. These forward-looking statementsinclude statements concerning our plans, objectives, goals, strategies,future events, future revenue or performance, capital expenditures,financing needs, plans or intentions relating to acquisitions, businesstrends and other information that is not historical information. Whenused in this Annual Report, the words"estimates,""expects,""anticipates,""projects,""plans," "intends,""believes,""forecasts," or future or conditional verbs,such as "will,""should," "could"or "may," and variations of such words orsimilar expressions are intended to identify forward-lookingstatements. All forward-looking statements, including, withoutlimitation, management's examination of historical operatingtrends and data are based upon our current expectations and variousassumptions. Our 

24

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expectations, beliefs and projections areexpressed in good faith and we believe there is a reasonable basis forthem. However, there can be no assurance that management'sexpectations, beliefs and projections will be achieved.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk Factors

If we are unable to respond to the changing needs of aparticular industry and to anticipate, respond to or utilize changingtechnologies and develop new offerings, it could become more difficultfor us to respond to our customers' needs and cause us to be lesscompetitive.

We have historically been able to maintain ourmarket positions and margins through continuous innovation of productsand development of new offerings to create value for our customers.Recent innovations and development that we have relied on include our3D TRASAR system for controlling and monitoring chemical feed and ourrecent relationship with USFilter, which permits us to sell equipmentsolutions as part of a bundled offering to our water treatmentcustomers. We may not be successful in continuing to make similarinnovations in the future. Our future operating results will

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depend to a significant extent on our abilityto continue to introduce new products and applications and to developnew offerings that offer distinct value for our customers. Many of ourproducts may be affected by rapid technological change and new productintroductions and enhancements. We expect to continue to enhance ourexisting products and identify, develop and manufacture new productswith improved capabilities and make improvements in our productivity inorder to maintain our competitive position. We intend to devotesizeable resources to the development of new technologically advancedproducts and systems and to continue to devote a substantial amount ofexpenditures to the research and development functions of our business.However, we cannot assure you that:

|              |                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------|
| •  | wewill be successful in developing new products or systems or bringingthem to market in a timely manner; |

|              |                                                                                                        |
|--------------|--------------------------------------------------------------------------------------------------------|
| •  | products or technologies developed byothers will not render our offerings obsolete or non-competitive; |

|              |                                        |
|--------------|----------------------------------------|
| •  | the market will accept ourinnovations; |

|              |                                                                                            |
|--------------|--------------------------------------------------------------------------------------------|
| •  | our competitors will notbe able to produce our core non-patented products at a lower cost; |

|              |                                                                                                         |
|--------------|---------------------------------------------------------------------------------------------------------|
| •  | we will have sufficient resources toresearch and develop all promising new technologies and products;or |

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

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

Our substantial leverage could harm our business by limitingour available cash and our access to additional capital.

We arehighly leveraged. As of December 31, 2004, our total consolidatedindebtedness was $3,118.3 million and we had $250.0 million ofborrowing capacity available under our revolving credit facility(excluding $35.3 million of outstanding letters of credit).

Ourhigh degree of leverage could have important consequences for you,including the following:

|              |                                                                                                                                                                                                                                                         |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | It may limitour and our subsidiaries' ability to obtain additional financingfor working capital, capital expenditures, product development, debtservice requirements, acquisitions and general corporate or otherpurposes on favorable terms or at all; |

|              |                                                                                                                                                                                                                                                                                             |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | A substantial portion of oursubsidiaries' cash flows from operations must be dedicated to thepayment of principal and interest on their and our indebtedness andthus will not be available for other purposes, including operations,capital expenditures and future business opportunities; |

|              |                                                                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | It may limit our ability to adjust tochanging market conditions and place us at a competitive disadvantagecompared to those of our competitors that are lesshighly-leveraged; |

|              |                                                                                                              |
|--------------|--------------------------------------------------------------------------------------------------------------|
| •  | It may restrict ourability to make strategic acquisitions or cause us to makenon-strategic divestitures; and |

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|              |                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may be morevulnerable than a less leveraged company to a downturn in generaleconomic conditions or in our business, or we may be unable to carryout capital spending that is important to our growth. |

AtDecember 31, 2004, we had $1,408.9 million of variable rate debt. A1% increase in the average interest rate would increase futureinterest expense by approximately $14.1 million per year.

Despite our current leverage, we may still be able to incursubstantially more debt. This could further exacerbate the risks thatwe and our subsidiaries face.

We and our subsidiaries may beable to incur substantial additional indebtedness in the future. Theterms of the indentures governing our subsidiaries' notes do notfully prohibit us or our subsidiaries from doing so. NalcoCompany's revolving credit facility provides commitments of up to$250.0 million, all of which would have been available for futureborrowings as of December 31, 2004. If new debt is added to our currentdebt levels, the related risks that we and our subsidiaries now facecould intensify.

Our subsidiaries' debt agreementscontain restrictions that limit our flexibility in operating ourbusiness.

Nalco Company's senior credit agreement and theindentures governing our subsidiaries' existing notes contain anumber of significant covenants that, among other things, restrict ouror our subsidiaries' ability to:

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

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

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

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

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

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

In addition, under the senior credit agreement,Nalco Holdings LLC is required to satisfy and maintain specifiedfinancial ratios and tests. Events beyond our control may affect itsability to comply with those provisions and Nalco Holdings LLC may notbe able to meet those ratios and tests. The breach of any of thesecovenants would result in a default under the senior credit agreementand the lenders could elect to declare all amounts borrowed under thesenior credit agreement, together with accrued interest, to be due andpayable and could proceed against the collateral securing thatindebtedness.

Our significant non-U.S. operations exposeus to global economic and political changes that could impact ourprofitability.

We have significant operations outside the UnitedStates, including joint ventures and other alliances. We conductbusiness in approximately 130 countries and, in 2004, approximately55% of our net sales originated outside the United States. Thereare inherent risks in our international operations, including:

|              |                                             |
|--------------|---------------------------------------------|
| •  | exchange controls and currencyrestrictions; |

|              |                                                                                         |
|--------------|-----------------------------------------------------------------------------------------|
| •  | currency fluctuationsand devaluations, such as the recent currency crisis in Argentina; |

|              |                             |
|--------------|-----------------------------|
| •  | tariffs and trade barriers; |

|              |                           |
|--------------|---------------------------|
| •  | export duties and quotas; |

|              |                                                                                 |
|--------------|---------------------------------------------------------------------------------|
| •  | changes in local economic conditions, suchas the economic decline in Venezuela; |

|              |                                  |
|--------------|----------------------------------|
| •  | changes in laws and regulations; |

|              |                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------|
| •  | difficulties in managing internationaloperations and the burden of complying with foreign laws; |

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|              |                                                                |
|--------------|----------------------------------------------------------------|
| •  | exposure topossible expropriation or other government actions; |

|              |                                                                               |
|--------------|-------------------------------------------------------------------------------|
| •  | restrictions on our ability to repatriatedividends from our subsidiaries; and |

|              |                                                                                          |
|--------------|------------------------------------------------------------------------------------------|
| •  | unsettled political conditions andpossible terrorist attacks against American interests. |

Ourinternational operations also expose us to different local politicaland business risks and challenges. For example, in certain countries weare faced with periodic political issues that could result in currencyrisks or the risk that we are required to include local ownership ormanagement in our businesses. We are also periodically faced with therisk of economic uncertainty, such as recent strikes and currencyexchange controls in Venezuela, which has impacted our business inthese countries. Other risks in international business also includedifficulties in staffing and managing local operations, including ourobligations to design local solutions to manage credit risk to localcustomers and distributors.

Our overall success as a globalbusiness depends, in part, upon our ability to succeed in differingeconomic, social and political conditions. We may not continue tosucceed in developing and implementing policies and strategies that areeffective in each location where we do business, which could negativelyaffect our profitability.

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

We are subject tothe requirements of environmental and occupational safety and healthlaws and regulations in the United States and other countries. Theseinclude obligations to investigate and clean up environmentalcontamination on or from properties or at off-site locations where weare identified as a responsible party. For example, we are currentlyidentified as a potentially responsible party at certain wastemanagement sites. Additionally, the U.S. Environmental ProtectionAgency is conducting a civil and criminal investigation ofenvironmental practices at our Louisiana manufacturing facility. Noclaims or charges have been issued and we are unable to predict theresults of such investigation. We have also been named as a defendantin a series of multi-party and individual lawsuits based on claims ofexposure to hazardous materials. We cannot predict with certainty theoutcome of any such tort claims or the involvement we might have insuch matters in the future and there can be no assurance that thediscovery of previously unknown conditions will not require significantexpenditures. In each of these chemical exposure cases, our insurancecarriers have accepted the claims on our behalf and our financialexposure is limited to the amount of our deductible; however, we cannotpredict the number of claims that we may have to defend in the futureand we may not be able to continue to maintain such insurance.

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

The activities at our production facilities are subject to a varietyof federal, state, local and foreign laws and regulations("Production Regulations"). Similarly, thesolid, air and liquid waste streams produced from our productionfacilities are subject to a variety of regulations ("WasteRegulations") and many of our products and the handling ofour products are governmentally regulated or registered("Product Regulations"). Each of theProduction, Waste and Product Regulations is subject to expansion orenhancement. Any new or tightened regulations could lead to increasesin the direct and indirect costs we incur in manufacturing anddelivering products to our customers. For example, the EuropeanCommission is currently considering imposing new chemical registrationrequirements on the manufacturers and users of all chemicals, not justthose which are 

28

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considered to be harmful or hazardous.Should such regulations, referred to as REACH, be imposed, all chemicalcompanies will be faced with additional costs to conduct theirbusinesses in European Commission countries. Similarly, certain of ourproducts are used to assist in the generation of tax credits for ourcustomers and the termination or expiration of such tax credits couldimpact the sale of these products. In addition to an increase in costsin manufacturing and delivering products, a change in Production, Wasteor Product Regulations could result in interruptions to our businessand potentially cause economic or consequential losses should we beunable to meet the demands of our customers for products.

We may not be able to achieve all of our expected costsavings.

Although we successfully surpassed our 2004 costsavings target, a variety of risks could cause us not to achieve thebenefits of the expected 2005 cost savings, including, among others,the following:

|              |                                                                  |
|--------------|------------------------------------------------------------------|
| •  | higher than expectedseverance costs related to staff reductions; |

|              |                                                                          |
|--------------|--------------------------------------------------------------------------|
| •  | higher than expected retention costs foremployees that will be retained; |

|              |                                                                                                                                                                           |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | delays in the anticipated timing ofactivities related to our cost-saving plan, including the reduction ofinefficiencies in our administrative and overhead functions; and |

|              |                                                               |
|--------------|---------------------------------------------------------------|
| •  | other unexpected costs associated withoperating the business. |

We have experienced, and maycontinue to experience, difficulties in securing the supply of certainraw materials we and our competitors need to manufacture some of ourproducts.

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

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

We sponsor variouspension plans worldwide that are underfunded and require significantcash payments. For example, in 2004, we contributed $13.7 million toour pension plans and in 2003, we contributed $31.2 million to ourpension plans. We are required to contribute at least $21.0 million tothe U.S. pension plan in 2005. We may also opt to make additionalvoluntary contributions to various pension plans worldwide in 2005.

Additionally, if the performance of the assets in our pension plansdoes not meet our expectations, or if other actuarial assumptions aremodified, our contributions for those years could be even higher thanwe expect.

As of December 31, 2004, our worldwide pension planswere underfunded by $421.7 million (based on the actuarial assumptionsused for purposes of Statement of Financial Accounting Standards (SFAS)No. 87, Employers' Accounting for Pensions). Our U.S.pension plans are subject to the Employee Retirement Income SecurityAct of 1974, or ERISA. Under ERISA, the Pension Benefit GuarantyCorporation, or PBGC, has the authority to terminate an underfundedpension plan under certain circumstances. In the event our U.S. pensionplans are terminated for any reason while the plans are underfunded, wewill incur a liability to the PBGC that may be equal to the entireamount of the underfunding. Prior to the closing of the Acquisition,the PBGC requested and received information from us regarding ourbusiness, the Transactions and our pension plans. The PBGC took nofurther action with respect to their inquiry.

29

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We have recorded a significantamount of goodwill and other identifiable intangible assets, and we maynever realize the full value of our intangible assets.

We haverecorded a significant amount of goodwill and other identifiableintangible assets, including customer relationships, trademarks anddeveloped technologies. Goodwill and other net identifiable intangibleassets were approximately $3.7 billion as of December 31, 2004, or62% of our total assets. Goodwill, which represents the excessof cost over the fair value of the net assets of the businessesacquired, was approximately $2.4 billion as of December 31, 2004, or40% of our total assets. Goodwill and net identifiableintangible assets are recorded at fair value on the date of acquisitionand, in accordance with SFAS No. 142, Goodwill and Other IntangibleAssets, will be reviewed at least annually for impairment.Impairment may result from, among other things, deterioration in ourperformance, adverse market conditions, adverse changes in applicablelaws or regulations, including changes that restrict the activities ofor affect the products and services sold by our business, and a varietyof other factors. The amount of any quantified impairment must beexpensed immediately as a charge to results of operations. Depending onfuture circumstances, it is possible that we may never realize the fullvalue of our intangible assets. Any future determination of impairmentof a significant portion of goodwill or other identifiable intangibleassets would have an adverse effect on our financial condition andresults of operations.

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

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

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

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

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

30

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Impact of the Acquisition and RelatedFinancing Transactions

On November 4, 2003, pursuant to a StockPurchase Agreement between Nalco Holdings LLC, a Delaware limitedliability company, and Suez ("Suez") andcertain of its affiliates, Nalco Holdings LLC (the"Successor") acquired the net assets of OndeoNalco Group (the "Predecessor"). Theaggregate purchase price was $4,105.4 million in cash, after givingeffect to direct costs of the Acquisition, closing date working capitaland indebtedness purchase price adjustments, a post-closing workingcapital and indebtedness purchase price adjustment which was agreed toby us and Suez on March 25, 2004, and additional purchase priceadjustments related to taxes paid or tax refunds received by us forperiods prior to the Acquisition. The purchase price was financed byequity investments totaling $991.9 million from a consortium of privateequity funds controlled by the Blackstone Group, Apollo Management,L.P., and investment partnerships affiliated with The Goldman SachsGroup, Inc.; an equity investment of $10.0 million from Dr. William H.Joyce, our Chairman and Chief Executive Officer; term loans ofapproximately $1,600 million; and the issuance of $665 millionaggregate principal amount of 73⁄4% senior notes due 2011,€200 million aggregate principal amount of73⁄4% senior notes due 2011, $465 million aggregateprincipal amount of 8 7/8% senior subordinatednotes due 2013 and €200 million aggregate principal amountof 9% senior subordinated notes due 2013. As a result, ourinterest expense currently is, and will continue to be, higher than itwas prior to the Acquisition.

The Stock Purchase Agreementprovided for certain adjustments of the purchase price, includingadjustments based on the closing working capital and indebtedness (asboth are defined in the Stock Purchase Agreement) of Ondeo Nalco Groupat the date of the Acquisition. On March 25, 2004, the Company and Suezagreed to a $25.6 million working capital adjustment payable to theCompany plus interest. This adjustment was not reflected in theconsolidated financial statements as of December 31, 2003. We recordedthe purchase price adjustment in 2004 by decreasing goodwill.

Weaccounted for the Acquisition using the purchase method of accountingand, accordingly, the Acquisition resulted in a new basis of accountingfor us. We allocated the purchase price on the basis of our estimate ofthe fair value of the underlying assets acquired and liabilitiesassumed. We retained third party professionals to assist in thedetermination of a fair value of our pension and post retirementobligations. We also engaged independent appraisers to assist indetermining the fair values of property, plant and equipment andintangible assets acquired, including purchased in-process research anddevelopment, trade names, trademarks, developed technology and customerrelationships. We received final values from the appraisers in 2004,and we have completed our allocation of purchase price. The excess ofthe total purchase price over the estimated fair value of the netassets acquired at closing has been allocated to goodwill, and thisindefinite lived asset is subject to annual impairment review. Goodwillin the transaction, based on the final allocation of the purchaseprice, totaled $2,224.2 million. An allocation has been made for thefair value of research and development activities that, as of the dateof the Acquisition, had commenced, but had not yet been completed, andhave no alternative future use (in-process research and development).In conjunction with the independent appraisers, we estimated the fairvalue of in-process research and development and recorded a one-timecharge of $122.3 million during the year ended December 31, 2004 as aresult of the final purchase accounting entries related to theAcquisition.

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

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Business Optimization Expenses

We incurred significant, nonrecurring business optimization expensesas a result of the implementation of the redesign and optimization ofbusiness and work processes, global cost reduction programs in sales,marketing, manufacturing and support service functions, and the globalintegration of our businesses, asfollows:

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

BusinessProcess Optimization

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

Sales and Marketing Integration

During2002, we realigned our support for the petroleum, petrochemical, pulpand paper industries to provide integrated process improvement andwater treatment sales and service to key customers, primarily in NorthAmerica. As a result, we incurred expenses for severance, outplacement,and employee relocations for about 100 personnel.

2001Headcount Reduction

We also implemented a plan during thesecond half of 2001 to reduce costs and improve efficiency throughoutour organization and eliminated approximately 200 positions at OndeoNalco Company. Charges incurred included severance and outsideconsulting costs.

Nalco/Exxon Integration

As aresult of acquiring Exxon's interest in the Nalco/Exxon jointventure in 2001, we incurred costs related to integrating theoperations of the joint venture with our other operations, includingseverance, legal and tax fees.

Nalco Chemical Company,Aquazur and Calgon Integration

In November 1999, Suez acquiredNalco Chemical Company and combined Nalco Chemical Company with Aquazurand Calgon, two other subsidiaries of Suez and historical competitorsof Nalco Chemical Company. In June 1999, Degremont, a Suez subsidiary,acquired Calgon Corporation for $425.0 million. Aquazur was developedover a ten-year period through organic growth and acquisitions inEurope. At the time of Nalco Chemical Company's acquisition bySuez, Nalco Chemical Company had annual sales of $1,606.0 million.

Beginning in 2000, we implemented a strategic plan to integrate theglobal operations of Nalco Chemical Company, Calgon and Aquazurresulting in significant nonrecurring business optimization

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

Critical Accounting Policies and Estimates

Revenue Recognition

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

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

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

Impairment of Long-Lived AssetsOther Than Intangibles

We conduct periodic reviews for idleequipment and review business plans for possible impairmentimplications. PORTA-FEED stainless steel containers, utilized to shipchemicals, represent approximately 7.4% of our property, plantand equipment and are managed globally to optimize the delivery ofchemicals to customer and company sites around the world. Due to theirhigh mobility, there is a risk that

PORTA-FEEDs could be damagedor lost in transit. We perform continuous cycle counts of ourPORTA-FEEDs and when such counts are inconsistent with our trackingsystem, we investigate the discrepancy in order to locate thecontainer. If the PORTA-FEED is not found, we write off the assetimmediately.

We capitalize qualifying costs incurred in theacquisition and development of software for internal use, including thecosts of the software, materials, consultants, interest, and payrolland payroll-related costs for employees dedicated to the development.We must use our judgment in determining whether the direct costs ofmaterials and services consumed in developing or obtaining internal-usecomputer software and an employee's time and travel expensesdirectly associated with developing software are recoverable and shouldbe capitalized. We base our determination on the nature and the extentof the activity that the employee is performing. A significant portionof our capitalized software costs relates to our SAP implementation andis subject to our expectation that the acquired and developed softwarewill be completed and placed in service as anticipated.

Goodwill and Other Intangible Assets

Carrying valuesof goodwill, customer relationships, trademarks, trade names, patents,developed technology and other intangible assets are reviewedperiodically for possible impairment using a discounted cash flowapproach. The estimates and assumptions we use are consistent with thebusiness plans and estimates we use to manage operations and to makeacquisition and divestiture decisions. The use of different assumptionswould increase or decrease the estimated value of future cash flows andwould have increased or decreased any impairment charge taken. Futureoutcomes may also differ. If we fail to achieve estimated volume andpricing targets, experience unfavorable market conditions or achieveresults that differ from our estimates, then revenue and cost forecastsmay not be achieved, and we may be required to recognize additionalimpairment charges.

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We capitalize qualifying costs incurredin the acquisition and development of software for internal use,including the costs of the software, materials, consultants, interest,and payroll and payroll-related costs for employees dedicated to thedevelopment. We must use our judgment in determining whether the directcosts of materials and services consumed in developing or obtaininginternal-use computer software and an employee's time and travelexpenses directly associated with developing software are recoverableand should be capitalized. We base our determination on the nature andthe extent of the activity that the employee is performing. Asignificant portion of our capitalized software costs relates to ourSAP implementation and is subject to our expectation that the acquiredand developed software will be completed and placed in service asanticipated.

Pensions

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

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

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

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

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

Other Postretirement Benefits

Accounting for otherpostretirement benefits requires the selection of a discount rate andhealth care cost trend rates used to value benefit obligations. Inestimating the discount rate, we look to rates of return on highquality, fixed-income investments that receive one of the two highestratings given by a recognized ratings agency and we review theassumption with our actuary. We develop our estimate of the health carecost trend rates through review of our recent health care cost trendexperience and discussions with our actuary regarding the experience ofsimilar companies.

Environmental

Our businessand operations are subject to extensive environmental laws andregulations governing, among other things, air emissions, wastewaterdischarges, the use and handling of 

34

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

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

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

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

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Results of Operations for 2003

The following discussion and analysis of financial conditionand results of operations covers periods for the fiscal year endedDecember 31. For ease of comparison purposes, financial data for theperiod from November 4, 2003 through December 31, 2003 has been addedto the financial data for the period from January 1, 2003 throughNovember 3, 2003, to arrive at a twelve-month combined period endedDecember 31, 2003. This combined data may be referred to as"the year ended December 31, 2003" or"2003".

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

ExecutiveLevel Overview

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

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

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

Our net loss was $104.2 million for the year endedDecember 31, 2004 versus a loss of $182.3 million for 2003. Results inboth years were impacted by significant special items. Net income wasreduced in 2004 by a purchase accounting expense of $122.3 million forin-process research and development and by another $46.8 million forexpenses related to the Acquisition, the initial public offering ofcommon stock by Nalco Holding Company, and business optimizationexpenses. In 2003, a $244.4 million goodwill impairment charge reducednet income, as did another $37.9 million for other Acquisition-relatedcharges and business optimization expenses. Net interest expense in2004 was $128.5 million higher than in 2003 as a result of leverageestablished during our November 2003 Acquisition by our principalshareholders.

Nominal sales grew across Nalco's businesssegments during the year. Strong organic sales growth was alsosupported by foreign currency exchange benefits – particularlythe increase in value of the 

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euro compared to the U.S. dollar. EnergyServices led sales growth with an 11.8% increase (9.3%organic), followed by Industrial and Institutional Services at9.4% growth (5.2% organic), and Paper Services at6.5% (2.1% organic). Other segment sales grew15.0%, primarily as a result of sales brought to our KatayamaNalco joint venture in Japan by partner Katayama Chemical Inc. Organicsales in this segment declined 1.0%, mainly as a result of adecision made in late 2003 to reduce sales to a large, low-profitcustomer.

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

Whether looking from a quarterly or annualperspective, our growth was geographically widespread during 2004. On anominal sales dollar basis, sales in North America grew just over4%. In  every other region, nominal sales grewdouble-digits. Europe was up 16% with currency impacts playing akey role in growth. Pacific region sales increased 15%, led bystrong growth in China, India and in Japan, where our new KatayamaNalco joint venture is off to a good start. In Latin America, salesgrew 12% nominally.

North America sales now represent48.4% of Company sales, followed by Europe at 32.6%, thePacific at 11.7% and Latin America at 7.2%. We continueto expand our global business and see developments in China, India,Russia, Eastern Europe and parts of Latin America as key components ofour growth plans. We expect growth in these markets to outpace growthin the United States and Canada on an ongoing basis.

Our strongsales growth results from several factors.

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | First, the general economy continues toimprove. While we are not a cyclical business, it is always better forus to operate in an environment where our customers are doing well.This improvement includes stabilization in the North American papermarket, which had been a drag on growth during the past several years.However, customer performance improvement appeared widespread, acrossmultiple industries and all geographies. |

|              |                                                                                                                                                                                                                                                                                                     |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Second, we reinvested in the business byadding and training new sales engineers and service technicians. Manyof these new employees are supporting high growth rates in the emergingmarkets and in faster growing industry segments such as oilfieldproduction, and food and beverage applications. |

|              |                                                                                                                                                                                                                                                                                                                       |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Third, the reorganization of our sales andmarketing organization along the lines of the global industry segmentswe serve has provided sharper focus and improved growth strategies.This reorganization, which began in 2003, was initially distracting.However, it really began to positively impact results in 2004. |

|              |                                                                                                                                                                                                                                                                                                                                       |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Fourth, we were able to develop solutionsthat did not require the raw materials that were in short supply wheresome of our competitors are lacking this research and developmentcapability. For example, we were able to displace nearly 40% ofour acrylic acid requirements as this raw material became in shortsupply in late 2004. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Finally, weintroduced a number of proprietary technologies that brought trueinnovation to the applications or industry segments where they areused. New products and technologies are an important factor in ouroverall growth strategy, helping to support Nalco's image as aninnovative problem solver and solutions provider. These innovationsoften help carry and extend related products that are further down thelife-cycle curve. |

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Sales of 3D TRASAR cooling water stressmanagement systems continue to run ahead of plan after being launchedin North America in the second quarter. Training of sales engineers forthis best-in-class cooling water technology is now underway in otherregions. Development and deployment of FREEFLOW Low Dose HydrateInhibitors (LDHI) helped Nalco expand its flow assurance and assetintegrity leadership at Deepwater oil and gas exploration andproduction sites. A new line of grade-based SMART Solutionstechnologies is being launched in the paper industry to improvecustomer operating efficiencies and finished product quality.

While sales were good during 2004, we also faced numerous challengeswe need to continue to address. We clearly noticed the impact of rawmaterial cost pressures, significantly elevated freight costs and mixissues. Pricing improvement only partially offset these issues. We madeprogress on obtaining price increases during 2004, but clearly notenough progress to keep up with the pace of cost increases. A number ofprice increases accepted in the fourth quarter 2004 took effect onJanuary  1 and February 1, 2005. In late February 2005, weannounced an additional round of price increases in our Industrial andInstitutional Services division. We anticipate continued cost increasesso our prices will also need to continue to rise – and with morediscipline and speed than we showed at times in 2004.

Ourperformance, combined with some one-time events, allowed us to pay morethan $240 million toward our debt.

Debt repayments during 2004were primarily achieved through cash provided by operating activitiesof $237.2 million, of which nearly 40% was used to fund netcapital expenditures of $91.8 million. In addition, a reduction in cashon hand of $66.8 million, a purchase price adjustment for theAcquisition of $25.3 million and a capital injection from management of$9.3 million contributed to debt reduction. Cash generated by operatingactivities for 2004 was reduced by a $35.0 million payment to settle amonitoring fee arrangement with our principal shareholders.

2005 Expectations

Even with a good year and good fourthquarter, our expectations remain the same: 5% base businessorganic sales growth supported by additional growth as we beginstrategic development of alternate channels. We expect alternatechannels to be adding to our growth rate at a 2% annual run-rateby year-end 2006. We also intend to continue delivering double-digitEBITDA growth and to pay down well over $200 million in debt during theyear. We have set an improved growth path for Nalco and intend tocontinue moving in this direction.

The third quarter of 2004, at4.9% organic growth, was just shy of our 5% target. Whilethe fourth quarter surpassed our target with 8.5% organicgrowth, we believe a significant part of this above-target performancewas likely drawn from the first quarter of 2005. We believe customersbought in advance of our information systems conversion in Europe, andmay have also bought ahead in the face of raw material shortages andimpending price increases. Therefore, we believe that a 5%growth target for our base business is still correct.

Nalcosuccessfully completed conversion of the information system in Europeto SAP in early January. This will substantially lower informationtechnology capital demands in 2005. The decline in informationtechnology capital spending will be offset by increased investment inour supply chain and particularly in providing reactor capacity forsome fast-growing product lines. In total, our capital spending isexpected to continue in the range of $100 million.

Raw materialsupply shortages and capacity constraints on a few polymer linescontinue to challenge Nalco's supply chain, drivinghigher-than-normal costs. Rapid growth in demand in the third andfourth quarters of 2004 contributed to capacity constraints for someproduct lines, although we were able to meet this rapid demand growththrough substantial productivity improvements.

We intend todevelop our growth by focusing on select geographies, market segmentsand technologies that enable faster-than-market growth rates.

Cost control actions will also continue to move forward. We expectto use work process redesign to drive an added cost savings benefit of$75 million in 2005. These savings will more than offset 

38

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increased salaries and benefits, one-timeand inflationary cost increases, and investments in sales engineers,service technicians and research programs. In addition, we expect abottom-line benefit from continuing sales growth and marginrecapture.

Our effective tax rate should be around 50%for 2005. This high effective tax rate results from the normalrepatriation of earnings from our non-U.S. subsidiaries to pay down ourAcquisition debt in the United States.

As for debt repaymentexpectations for 2005, we intend to use our Free Cash Flow to continueto reduce our outstanding debt. We intend to focus these payments firston Term Loan A, on which we are paying 250 basis points over LIBOR,before proceeding to pay down Term Loan B at 200 basis points overLIBOR. We are not able to begin reducing some of our higher rate debtuntil we have extinguished these term loans. Our current weightedaverage cost of debt is 6.4% with $1.4 billion in variable ratedebt and $1.7 billion in fixed rate obligations.

Results ofOperations

Year Ended December 31, 2004 Compared to theYear Ended December 31, 2003

Net sales for the years endedDecember 31, 2004 and December 31, 2003 may be compared asfollows:

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

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

|              |                                        |
|--------------|----------------------------------------|
| •  | The improvement in the generaleconomy. |

|              |                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The addition of new salesengineers and service technicians, many of whom are supporting highgrowth rates in the emerging markets and in faster growing industrysegments such as oilfield production and food and beverageapplications. |

|              |                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The reorganization ofthe Company's sales and marketing organization along the lines ofthe global industry segments served, which was initiated in 2003 andbegan to positively impact results in 2004. |

|              |                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's ability to developsolutions that did not require raw materials that were in short supply,while some of the Company's competitors lacked this research anddevelopment capability. |

|              |                                                                                                                                              |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Theintroduction of several proprietary technologies that brought trueinnovation to the applications or industry segments where they areused. |

The Energy Services division reported organic growth insales of 9.3% over last year, with double-digit improvementsposted by both of its upstream business groups. Led by its globalmining business, the Industrial and Institutional Services divisionreported a 5.2% organic increase in sales. Paper Servicesdivision sales were up 2.1% on an organic basis compared to ayear ago, mainly due to 

39

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new business gained and good growth in thePacific region, Europe and Latin America, offset by the lingeringeffect of price and contract concessions in North America in 2003. Theunfavorable organic growth in "other" ismainly due to the decision made last year to reduce certain low-marginbusiness with a major customer, slightly offset by organic growth inIndia. The effect of this decision also reduced the organic growth oftotal net sales by 0.3%.

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

Selling, administrative, and research expenses for the yearended December 31, 2004 of $1,065.3 million decreased by $11.8 million,or 1.1%, from the $1,077.1 million for the year endedDecember  31, 2003. Adjusted for the unfavorable effects ofchanges in foreign currency translation rates and the impact ofacquisitions and divestitures, selling, administrative, and researchexpenses decreased by $53.0 million, or 4.9%, primarily due tospending reductions initiatives launched in the fourth quarter 2003 andtightened spending controls in 2004.

Impairment ofgoodwill of $244.4 million was recorded by the Predecessor duringthe period from January 1, 2003 through November 3, 2003, and resultedfrom the Predecessor's evaluation of its goodwill, based on thepurchase price for the Acquisition and the fair value of its assets andliabilities.

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

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

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

Otherincome (expense), net was an expense of $43.3 million and $20.1million for the year ended December 31, 2004 and 2003, respectively.This $23.2 million increase is primarily attributable to the payment ofa $35.0 million fee in 2004 for the termination of monitoring servicesprovided by affiliates of the Sponsors under a Monitoring Fee Agreemententered into on the date of the Acquisition. In addition, Sponsormonitoring fees were $11.2 million for the year ended December 31,2004, whereas Suez management fees paid by the Predecessor and Sponsormonitoring fees paid by the Successor were a combined $4.7 million forthe year ended December 31, 2003. These unfavorable variations fromlast year were partly offset by a $10.4 million charge incurred by thePredecessor in 2003 resulting from the discontinuance of hedgeaccounting for an interest rate swap and a $5.3 million loss on thesale of the Predecessor's South African subsidiary.

Net interest expense, defined as the combination ofinterest income and interest expense, of $203.1 million for the yearended December 31, 2004 increased by $128.5 million from the $74.6million reported for the year ended December 31, 2003. The increase isdue primarily to the interest charges incurred on the new debt used tofinance the Acquisition.

40

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The effective tax rate,excluding the impact of the aforementioned charge for purchasedIPR&D, was 66.5% for the year ended December 31, 2004compared to an effective tax rate in 2003 of 47.7%, excludingthe impact of the goodwill impairment. The increase in the effectivetax rate is primarily caused by onetime tax costs of restructuring tomore efficiently repatriate certain foreign earnings.

|                                               |  |                  |         |                   |  |        |         |         |  |  |
|-----------------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                          |  | Yearended        |
| (dollars inmillions)                          |  | December 31,2004 |         | December 31, 2003 |
| Earnings (loss)before income taxes asreported |  | $                | (50.9   | )            |  | $      | (117.8  | )  |
| Addback:                                      |  |
| In-processR&D                             |  |             | 122.3   |              |  |   | — |    |
| Goodwillimpairment                            |  |             | — |              |  |   | 244.4   |    |
| Adjustedearnings (loss) before incometaxes    |  | $                | 71.4    |              |  | $      | 126.6   |    |
| Incometax provision (benefit) asreported      |  | $                | 47.5    |              |  | $      | 60.4    |    |
| Effectiveincome taxrate                       |  |             | 66.5    | %            |  |   | 47.7    | %  |
|                                               |

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

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

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

Net sales for theyears ended December 31, 2003 and December 31, 2002 may be compared asfollows:

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

Netsales for the year ended December 31, 2003 were $2,766.6 million,a $122.3 million, or 4.6%, increase over the $2,644.3 millionreported for the year ended December 31, 2002. After adjusting for thefavorable effects of changes in foreign currency translation rates, netsales were down $18.3 million, or 0.7%, as a result of a $14.7million net decrease attributable to divestitures and acquisitions, aswell as a slight operational decrease of $3.6 million. In addition tothe unspecified volume and price reductions that resulted from thedistractions to our sales force and customers caused by the salesreorganizations in North America and the Pacific region and the sale ofthe Company, specific factors impacting the operational decreaseincluded a $16.2 million sales decrease in Venezuela caused by a

41

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national strike due to political turmoil anda $15.0 million decrease in sales due to paper mill shutdowns in NorthAmerica caused by customer bankruptcies and lower demand. Theseshortfalls were offset by positive growth in the upstream business ofEnergy Services, the Global Mining Business and the Emerging Marketsregions of Industrial and Institutional Services.

Grossprofit**,**defined as the difference between net sales andcosts of products sold, of $1,403.8 million for the year ended December31, 2003 increased by $25.6 million, or 1.9%, over the $1,378.2million reported for the year ended December 31, 2002. Adjusted for thefavorable effects of changes in foreign currency translation rates,gross profit decreased by $46.5 million, or 3.4%. Nearly half ofthis decline was attributable to expensing a portion of the adjustmentmade to increase inventories to fair value at the date of theAcquisition. Other specific factors that contributed to the decline ingross profit included the net effect of divestitures and acquisitions($6.4 million), the effect of pricing concessions made to PaperServices customers in North America ($2.5 million), unfavorable mixresulting from increased sales of low margin commodity polymers byPaper Services in North America ($1.9 million), and unfavorable mixbetween upstream and downstream sales by Energy Services ($3.1million). Gross profit was also negatively impacted by inventorydisposals and PORTA-FEED write-offs of $1.8 million and $1.0 million,respectively. Lower sales volumes accounted for $1.9 million of thedecrease in gross profit. Other factors contributing to the grossprofit decline included unfavorable mix caused by an increase inlegislated Synfuel sales in mining markets served by Industrial andInstitutional Services, as well as general price pressure in mostmarkets. Gross profit margin for the year ended December 31, 2003declined to 50.7% from 52.1% for the same period lastyear, largely as a result of the aforementioned factors. The expensingof a portion of the adjustment made to increase inventories to fairvalue at the date of the Acquisition accounted for more than half ofthe change in gross profit margin.

Selling, administrative,and research expenses for the year ended December 31, 2003 of$1,077.1 million increased by $85.1 million, or 8.6%, from$992.0 million for the year ended December 31, 2002. Adjusted for theunfavorable effects of changes in foreign currency translation rates,selling, administrative, and research expenses increased by $38.6million, or 3.9%, primarily due to the non-recurring costsassociated with the sale of the Company and a non-cash write-off of anasset by the Predecessor.

Business optimizationexpenses for the year ended December 31, 2003 and 2002 were $21.1million and $32.8 million, respectively. The decrease is due to thecompletion of various integration processes in 2002, partially offsetby costs associated with the sales and marketing business realignmentlaunched in 2002.

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

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

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

Net interestexpense, defined as the combination of interest income andinterest expense, of $74.6 million for the year ended December 31, 2003increased by $43.9 million from the $30.7 million reported for the yearended December 31, 2002. The increase is due primarily to the interestcharges incurred on the new debt used to finance the acquisition of theCompany.

42

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The effective tax rate**,**excluding the impact of the aforementioned goodwill impairmentcharge, was 47.7 % for the year ended December 31, 2003 comparedto an effective tax rate of 44.4% for the year ended December31, 2002. The effective tax rate increased primarily due to the sale ofthe Predecessor's South African subsidiary, which created taxexpense, despite a pretax loss under U.S.GAAP.

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

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

Liquidity and Capital Resources

Operatingactivities.    Historically, the Company's main source ofliquidity has been its solid cash flow generated by operatingactivities. For the year ended December 31, 2004, cash provided byoperating activities was $237.2 million, a $4.1 million increase fromthe same period last year, despite significantly higher interestpayments in 2004 as a result of the Acquisition and higher workingcapital requirements.

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

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

For the year ended December 31, 2003, cashused in investing activities was $4,157.4 million (comprised of$4,145.1 million for the period from November 4, 2003 through December31, 2003 and $12.3 million for the Predecessor during the period fromJanuary 1, 2003 through November 3, 2003), of which $4,127.1 millionwas related to the Acquisition. Net property additions were $101.2million in 2003, slightly lower than the $108.3 million for the yearended December 31, 2002. Business acquisitions, net of divestitures,was $10.1 million for the year ended December 31, 2003. Businessacquisitions in 2003 included $12.5 million to acquire the remaininginterest in the Predecessor's 40%-owned Swiss affiliateand $10.9 million for the purchase of a company in the U.K. from arelated Suez company. Net proceeds from divestitures totaled $13.3million during the year ended December  31, 2003, which wasmostly attributable to the sale of the Predecessor's SouthAfrican subsidiary. Net cash received by the Predecessor from notesreceivable from related parties was $98.3 million during 2003.

For the year ended December 31, 2002, cash used in investingactivities was $126.1 million. During the year, the Predecessorreceived net proceeds of $12.8 million from the sale of a business,

43

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and it purchased two businesses for $10.1million, net of cash acquired. The Predecessor made net cash advancesof $36.2 million to related parties in 2002.

Financingactivities.    Net cash used for financing activities totaled$231.9 million during the year ended December 31, 2004, which wasmostly comprised of net debt repayments of $242.0 million andadditional capital contributions of $11.0 million.

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

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

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

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

Senior credit facilities.    Our revolvingcredit facility is part of our senior credit facilities that wereentered into on November 4, 2003. Our senior credit facilities alsoinclude a $300 million term loan A facility (which includes an€88.0 million tranche) maturing on November 4, 2009 and a$1,300 million term loan B facility maturing on November 4, 2010.Borrowings under the senior credit facilities bear interest at afloating base rate plus an applicable margin. The applicable margin forborrowings under the revolving credit facility and the term loan Afacility is 1.50% with respect to base rate borrowings and2.50% with respect to LIBOR or Eurocurrency borrowings and maybe reduced subject to our attaining certain leverage ratios. Theapplicable margin for borrowings under the term loan B facility is1.50% with respect to base rate borrowings and 2.00% withrespect to LIBOR or Eurocurrency borrowings. The applicable margin forborrowings under the term loan B facility is not subject toadjustment.

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

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

The term loan B facility will amortizeeach year in an amount equal to 1% per annum in equal quarterlyinstallments for the first six years and nine months, with theremaining amount payable on 

44

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November 4, 2010. In addition to the $13.0million of scheduled payments due for the year ended December 31, 2004,we repaid an additional $206.0 million using cash generated fromoperations and proceeds from the accounts receivable securitizationfacility.

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

The senior credit facilitiescontain a number of covenants that, among other things, restrict,subject to certain exceptions, our ability and our subsidiaries'ability, including Nalco Company, to sell assets, incur additionalindebtedness or issue preferred stock, repay other indebtedness, paydividends and distributions or repurchase certain capital stock, createliens on assets, make investments, loans or advances, make certainacquisitions, engage in mergers or consolidations, enter into sale andleaseback transactions, engage in certain transactions with affiliates,amend certain material agreements governing our indebtedness, changethe business conducted by us and our subsidiaries (including NalcoCompany) and enter into hedging agreements. In addition, the seniorcredit facilities require Nalco Company to maintain the followingfinancial covenants: a maximum total leverage ratio, a minimum interestcoverage ratio and a maximum capital expenditures limitation. We werein compliance with all covenants at December 31, 2004.

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

The indentures governing the senior notes andsenior subordinated notes limit our ability and the ability of ourrestricted subsidiaries to:

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

|              |                                                                                  |
|--------------|----------------------------------------------------------------------------------|
| •  | pay dividendson or make other distributions or repurchase certain capital stock; |

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

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

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

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

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

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

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

Adjusted EBITDA is used to 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 financing covenants.

45

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Adjusted EBITDA is calculated asfollows:

|                                  |  |                             |         |                                           |  |                                         |       |                             |  |        |        |         |  |        |       |         |  |  |
|----------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|-------|-----------------------------|--|--------|--------|---------|--|--------|-------|---------|--|--|
|                             |  | Successor                   |         | Successor                                 |  | Predecessor                             |       | Predecessor                 |
| (dollarsin millions)             |  | Year ended December31, 2004 |         | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November3, 2003 |       | Year ended December 31,2002 |
| Net income(loss)                 |  | $                           | (104.2  | )                                    |  | $                                       | (24.1 | )                      |  | $      | (158.2 | )  |  | $      | 128.4 |    |
| Interest,net                     |  |                        | 203.1   |                                      |  |                                    | 49.0  |                        |  |   | 25.6   |    |  |   | 30.7  |    |
| Incometax provision(benefit)     |  |                        | 47.5    |                                      |  |                                    | (8.3  | )                      |  |   | 68.7   |    |  |   | 105.2 |    |
| Depreciation                     |  |                        | 114.3   |                                      |  |                                    | 22.5  |                        |  |   | 101.8  |    |  |   | 134.7 |    |
| Amortization                     |  |                        | 96.3    |                                      |  |                                    | 15.4  |                        |  |   | 68.9   |    |  |   | 89.2  |    |
| EBITDA                           |  |                        | 357.0   |                                      |  |                                    | 54.5  |                        |  |   | 106.8  |    |  |   | 488.2 |    |
| Non-cashcharges(1)               |  |                        | 174.4   |                                      |  |                                    | 23.9  |                        |  |   | 268.7  |    |  |   | 31.2  |    |
| Businessoptimization expenses(2) |  |                        | 1.7     |                                      |  |                                    | 0.8   |                        |  |   | 20.3   |    |  |   | 32.8  |    |
| Unusualitems(3)                  |  |                        | 45.9    |                                      |  |                                    | 6.3   |                        |  |   | 48.5   |    |  |   | (33.3 | )  |
| Otheradjustments(4)              |  |                        | 6.3     |                                      |  |                                    | 1.5   |                        |  |   | (3.4   | )  |  |   | (2.1  | )  |
| Costsavings(5)                   |  |                        | — |                                      |  |                                    | 5.0   |                        |  |   | 25.0   |    |  |   | 30.0  |    |
| AdjustedEBITDA                   |  | $                           | 585.3   |                                      |  | $                                       | 92.0  |                        |  | $      | 465.9  |    |  | $      | 546.8 |    |
|                                  |

|  |
|--|
|  |  |
|  |

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

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

Impairmentof goodwill

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

In-process Research and Development

In-process research and development was a one timecharge of $122.3 million recorded during the year ended December 31,2004, as a result of purchase accounting entries related to theAcquisition.

Inventory Step-Up

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

46

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Profit Sharing and 401(k)Expense Funded by Suez

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

Other

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

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

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

|                                            |  |                             |         |                                           |  |                                         |         |                             |  |        |      |        |  |        |       |         |  |  |
|--------------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|------|--------|--|--------|-------|---------|--|--|
|                                       |  | Successor                   |         | Successor                                 |  | Predecessor                             |         | Predecessor                 |
| (dollarsin millions)                       |  | Year ended December31, 2004 |         | November 4, 2003 through December31, 2003 |  | January 1, 2003 through November3, 2003 |         | Year ended December 31,2002 |
| Pension and OPEB settlement andcurtailment |  | $                           | — |                                      |  | $                                       | (0.1    | )                      |  | $      | 7.9  |   |  | $      | (47.6 | )  |
| Loss(gain) on sales, net ofexpenses        |  |                        | 0.2     |                                      |  |                                    | 1.1     |                        |  |   | 12.4 |   |  |   | (7.8  | )  |
| Otherunusual items(a)                      |  |                        | 45.7    |                                      |  |                                    | 5.3     |                        |  |   | 25.7 |   |  |   | 19.4  |    |
| Suezmanagement fees,net                    |  |                        | — |                                      |  |                                    | — |                        |  |   | 2.5  |   |  |   | 2.7   |    |
|                                       |  | $                           | 45.9    |                                      |  | $                                       | 6.3     |                        |  | $      | 48.5 |   |  | $      | (33.3 | )  |
|                                            |

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

|  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (a) | Ourresults for 2004 were impacted by the effects of certain other unusualitems, including a $35.0 million charge for the termination of theMonitoring Fee Agreement with affiliates of the Sponsors; expensesassociated with the registration of publicly tradable senior notes andsenior subordinated notes that were exchanged for the privately placednotes issued in connection with the Transactions; costs related tochanging the name of our operating company from Ondeo Nalco Company toNalco Company; and other Transaction-related expenses. In 2003, ourresults were impacted by the effects of certain other unusual itemsincluding a termination charge for the settlement of an interest rateswap; executive severance and relocation expenses; legal andenvironmental expenses that mainly related to events that occurredprior to Suez's 1999 acquisition of Nalco Chemical Company andlitigation costs not covered by our excess liability insurance policy;and consultancy expenses incurred on behalf of Suez. Our results in2002 were impacted by consultancy costs for process reengineeringstudies associated with our cost reduction programs and otherconsultancy services performed on behalf of Suez; one-time pension andbenefit expenses primarily related to the redesign of our Australianbenefit plan and the application of regulatory changes in Germany; andlegal and environmental expenses that mainly related to events thatoccurred prior to Suez's 1999 acquisition of Nalco ChemicalCompany and litigation costs not covered by our excess liabilityinsurance policy. |

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

|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Our financing agreements also permitus to adjust EBITDA on a pro forma basis for certain cost savings thatwe expect to achieve. We initiated a comprehensive cost reduction planthat was expected to yield annual savings of at least $30 million on aproforma basis in 2003. We implemented this plan immediately uponconsummation of the Acquisition. The remainder of our cost reductionplan is expected to realize incremental efficiencies through workprocess redesign and other targeted cost improvement programs, whichaddress inefficiencies in our administrative and overhead functions, aswell as other support functions around the world. |

47

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

|                                                                                                            |  |                                   |       |        |  |        |       |        |  |  |
|------------------------------------------------------------------------------------------------------------|--|-----------------------------------|-------|--------|--|--------|-------|--------|--|--|
|                                                                                                       |  | CovenantLevel at December 31,2004 |       | Ratios |
| **Senior creditfacility (1)**                                                                              |  |
| Minimum Adjusted EBITDA tocash interestratio                                                               |  |                              | 1.65x |   |  |   | 3.01x |   |
| Maximum netdebt to Adjusted EBITDAratio                                                                    |  |                              | 6.75x |   |  |   | 5.27x |   |
| **Indentures(2)**                                                                                          |  |
| Minimum Adjusted EBITDA to fixed chargeratio required to incur additional debt pursuant to ratioprovisions |  |                              | 2.00x |   |  |   | 3.01x |   |
|                                                                                                            |

|  |
|--|
|  |  |
|  |

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

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Our ability 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 $1,299.4million that was outstanding under our term loan facilities as ofDecember 31, 2004) and investments in similar business and otherinvestments equal to 6% of Nalco Holdings LLC consolidatedassets. |

Local lines of credit.    Certain of ournon-U.S. subsidiaries have lines of credit to support localrequirements. As of December 31, 2004, the aggregate outstandingbalance under these local lines of credit was approximately $14.3million. Certain of these lines of credit are equally and ratablysecured with obligations under our senior credit facilities.

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

In connection with thereceivables facility we established a wholly owned consolidatedbankruptcy-remote special purpose subsidiary, Nalco Receivables LLC(the "transferor"), to which Nalco Companyand one of its domestic subsidiaries (the"sellers") sell trade accounts receivable(the "receivables") pursuant to a receivablespurchase agreement. Pursuant to a receivables transfer agreement, thetransferor then transfers an undivided interest in the purchasedreceivables to the commercial paper conduit or the related bank sponsor(the "transferees") in exchange for cash. Thetransferor's purchase of receivables from the sellers is financedthrough the simultaneous transfer of this undivided interest in thepurchased receivables, together with cash contributed to it by NalcoCompany and the advances made by the sellers under an intercompanynote.

Nalco Company, as the receivables collection agent,services, administers and collects the receivables under thereceivables transfer agreement for which it receives a monthlyservicing fee at a rate of 1% per annum of the average dailyoutstanding balance of receivables. Borrowings under the receivablesfacility bear interest at a floating base rate plus a usage fee. Theusage fee varies based upon our leverage ratio as calculated under thesenior credit facilities and is currently 1.10% of the amountfunded. In addition, the transferor is required to pay a fee on theunused portion of the receivables facility that varies based upon thesame ratio and is currently 0.35% of the unused portion of thecommitments. These rates are per annum and payments of these fees aremade to the lenders on the monthly settlement date.

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. 

48

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Based on the terms of this facility and onthe criteria described above, as of December 31, 2004, approximately$143.8 million of our accounts receivable balance was consideredeligible for financing under the program, of which approximately $99.5million would have been available for funding. As of December 31, 2004,we had $97.3 million of outstanding borrowings under this facility.

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

Contractual Obligations and Commitments

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

|                                 |  |                       |         |        |  |            |         |            |  |               |         |        |  |        |         |        |  |        |         |        |  |  |
|---------------------------------|--|-----------------------|---------|--------|--|------------|---------|------------|--|---------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                            |  | PaymentsDue By Period |
| (dollars inmillions)            |  | Total                 |         | 2005   |  | 2006to2007 |         | 2008to2009 |  | 2010andbeyond |
| ContractualObligations:         |  |
| Debtobligations:                |  |
| Principal                       |  | $                     | 3,101.4 |   |  | $          | 0.8     |       |  | $             | 157.0   |   |  | $      | 187.8   |   |  | $      | 2,755.8 |   |
| Interest                        |  |                  | 1,424.4 |   |  |       | 197.3   |       |  |          | 395.1   |   |  |   | 381.4   |   |  |   | 450.6   |   |
| Totaldebtobligations            |  | $                     | 4,525.8 |   |  | $          | 198.1   |       |  | $             | 552.1   |   |  | $      | 569.2   |   |  | $      | 3,206.4 |   |
| Operatingleaseobligations(1)    |  |                  | 284.5   |   |  |       | 17.9    |       |  |          | 27.5    |   |  |   | 20.9    |   |  |   | 218.2   |   |
| Purchaseobligations(2)          |  |                  | — |   |  |       | — |       |  |          | — |   |  |   | — |   |  |   | — |   |
| Otherlong-termliabilities(3)(4) |  |                  | 347.6   |   |  |       | 21.0    |       |  |          | 114.6   |   |  |   | 75.2    |   |  |   | 136.8   |   |
| Total                           |  | $                     | 5,157.9 |   |  | $          | 237.0   |       |  | $             | 694.2   |   |  | $      | 665.3   |   |  | $      | 3,561.4 |   |
|                                 |

|  |
|--|
|  |  |
|  |

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

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

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

|     |                                                                                                                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The amounts in long-termliabilities represent our expected minimum pension funding requirementsfor the principal domestic defined benefit pension plan through 2014.Amounts beyond 2014 are not reasonably estimable. |

Ourcontractual obligations and commitments over the next several years aresignificant. Our primary  source of liquidity will continue to becash flow generated from operations. In the period January 1, 2002through December 31, 2004 our cumulative cash flow from operations was$793.4 million. We have  availability under a $250 millionrevolving credit facility to assist us, if required, in meeting ourworking  capital needs and other contractual obligations. Thismulti-year revolving credit facility matures in  November 2009.If our cash flow from operations is insufficient to fund our debtservice and other  obligations, we may be forced to reduce ordelay capital expenditures, seek additional capital or seek torestructure or refinance our indebtedness. At December 31, 2004, therewere  no outstanding borrowings under the $250 million revolvingcredit facility, excluding $35.3 million of outstanding letters ofcredit.

We believe that cash flow generated from operations andour borrowing capacity will be adequate to  meet our obligationsand business requirements. Our ability to fund these items and toreduce debt may  be affected by general economic, financial,competitive, legislative and regulatory factors, and the cost oflitigation claims, among other things.

49

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The following table summarizes ourexpected cash outflows resulting from commercial commitments as ofDecember 31, 2004. Commercial commitments include lines of credit,guarantees and other potential cash outflows resulting from acontingent event that requires our performance pursuant to a fundingcommitment.

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

|  |
|--|
|  |  |
|  |

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

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

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

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

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

We are subject to inherent risks attributed to operatingin a global economy. We may utilize derivative financial instruments asnecessary to manage foreign currency exchange rate risks. We manageforeign currency exchange risk arising from financial activitiespursuant to our corporate guidelines. Forward contracts and,occasionally, swaps and options are utilized to protect these cashflows from adverse movements in exchange rates, and we account forthese instruments by marking them to market at each balance sheet date.In addition, we use certain foreign currency debt as a hedge of theforeign currency exposure of a portion of our net investment in foreignoperations.

Upon issuance, we designated the €200.0million aggregate principal amount of 73⁄4% senior notesdue 2011, the €200.0 million aggregate principal amount of9% senior subordinated notes due 2013, and the€88.0 million term loan as a hedge of our net investmentin subsidiary companies whose assets, liabilities, and operations aremeasured using the euro as their functional currency. Because of thehigh degree of effectiveness between the hedging instruments and theexposure being hedged, 

50

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fluctuations in the value of theeuro-denominated debt due to exchange rate changes are offset bychanges in the net investment. Accordingly, changes in the value of theeuro-denominated debt are recognized in foreign currency translationadjustment, a component of accumulated other comprehensive income, tooffset changes in the value of our net investment in subsidiarycompanies whose financial statements are measured using the euro astheir functional currency.

We formally assess, on a quarterlybasis, whether the euro-denominated debt is effective at offsettingchanges in the value of the underlying exposure. For the year endedDecember 31, 2004, we recorded a $44.7 million non-cash pretax loss inthe accumulated foreign currency translation adjustment account relatedto this hedge. No hedge ineffectiveness was recorded in income.

We also manage operational (transactional) foreign currency risk,particularly in emerging markets, by closely managing both pricing andraw material sourcing. Risks associated with foreign exchangetranslation exposures are not hedged.

We have exposure tofluctuations in foreign currency exchange rates. Based on ourderivative foreign currency instruments outstanding at December 31,2004 and 2003, a 10% strengthening or weakening in the value ofthe U.S. dollar relative to the currencies in which those derivativeforeign currency instruments are denominated would result in a gain orloss in fair values of less than $5.1 million and $2.0 million,respectively.

At December 31, 2004, we had $1,408.9 million ofvariable rate debt. A 1% increase in the average interest ratewould increase future interest expense by approximately $14.1 millionper year.

Our sensitivity analysis of the effects of the changesin interest rates and foreign currency exchange rates do not reflectthe effect of such changes on the related hedged transactions or onother operating transactions. The analysis also does not factor in apotential change in the level of variable rate borrowings or derivativeinstruments outstanding that could take place if these hypotheticalconditions prevailed.

We are exposed to credit loss in the eventof nonperformance by the other party to the derivative financialinstruments. We limit this exposure by entering into agreementsdirectly with a number of major financial institutions that meet ourcredit standards and that are expected to satisfy fully theirobligations under the contracts. We view derivative financialinstruments as a risk management tool and do not use them forspeculative or trading purposes.

51

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ITEM8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Nalco Holdings LLCand Subsidiaries Consolidated and Combined FinancialStatements

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

|                                                                             |  |        |        |        |  |  |
|-----------------------------------------------------------------------------|--|--------|--------|--------|--|--|
| Reportof Independent Registered Public Accounting Firm                      |  |   | 53     |   |
| Consolidated and Combined FinancialStatements                               |  |   |   |   |
| ConsolidatedBalance Sheets                                                  |  |   | 54     |   |
| Consolidated and CombinedStatements of Operations                           |  |   | 55     |   |
| Consolidatedand Combined Statements of Unitholder's and Shareholders'Equity |  |   | 56     |   |
| Consolidated and CombinedStatements of Cash Flows                           |  |   | 58     |   |
| Notes toConsolidated and Combined FinancialStatements                       |  |   | 60     |   |
|                                                                             |

52

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Report of Independent Registered PublicAccounting Firm

The Board of Directors and Unitholder ofNalco Holdings LLC

We have audited the accompanying consolidatedbalance sheets of Nalco Holdings LLC and subsidiaries as of December31, 2004 and 2003, and the related consolidated statements ofoperations, unitholder's equity, and cash flows for the yearended December 31, 2004 and for the period from November 4, 2003 toDecember 31, 2003 (Successor), and the combined statements ofoperations, shareholders' equity, and cash flows of Ondeo NalcoGroup (companies listed in Note 2) for the period from January 1, 2003to November 3, 2003 and for the year ended December 31, 2002(Predecessor). Our audits also included the financial statementschedule listed in the Index at Item 15(a)(2). These financialstatements and schedule are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements and schedule based on our audits.

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

Inour opinion, the financial statements referred to above present fairly,in all material respects, the consolidated financial position of NalcoHoldings LLC and subsidiaries as of December 31, 2004 and 2003, and theconsolidated results of their operations and their cash flows for theyear ended December 31, 2004 and for the period from November 4, 2003to December 31, 2003 (Successor), and the combined results of OndeoNalco Group's operations and its cash flows for the period fromJanuary 1, 2003 to November 3, 2003 and for the year ended December 31,2002 (Predecessor), in conformity with U.S. generally acceptedaccounting principles. Also, in our opinion, the related financialstatement schedule, when considered in relation to the basic financialstatements taken as a whole, presents fairly in all material respectsthe information set forth therein.

/s/ ERNST & YOUNGLLP Chicago, Illinois February 4, 2005

53

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Nalco Holdings LLC and SubsidiariesConsolidated Balance Sheets(dollars inmillions)

|                                                                                            |  |                  |         |                  |  |        |         |        |  |  |
|--------------------------------------------------------------------------------------------|--|------------------|---------|------------------|--|--------|---------|--------|--|--|
|                                                                                       |  | December31, 2004 |         | December 31,2003 |
| **Assets**                                                                                 |  |             |    |             |  |   |    |   |
| Currentassets:                                                                             |  |             |    |             |  |   |    |   |
| Cash and cashequivalents                                                                   |  | $                | 33.2    |             |  | $      | 100.0   |   |
| Trade accounts receivable, less allowancesof $21.1 and $21.0 in 2004 and 2003,respectively |  |             | 594.2   |             |  |   | 482.9   |   |
| Inventories                                                                                |  |             | 313.5   |             |  |   | 295.1   |   |
| Deferredincometaxes                                                                        |  |             | 44.2    |             |  |   | 54.6    |   |
| Prepaidexpenses and other currentassets                                                    |  |             | 45.9    |             |  |   | 43.0    |   |
| Totalcurrentassets                                                                         |  |             | 1,031.0 |             |  |   | 975.6   |   |
| Property,plant, and equipment,net                                                          |  |             | 847.3   |             |  |   | 865.6   |   |
| Goodwill                                                                                   |  |             | 2,368.3 |             |  |   | 2,500.1 |   |
| Otherintangible assets,net                                                                 |  |             | 1,323.6 |             |  |   | 1,408.9 |   |
| Deferredfinancing costs                                                                    |  |             | 63.8    |             |  |   | 75.0    |   |
| Receivablefrom formershareholder                                                           |  |             | 87.2    |             |  |   | 117.3   |   |
| Othernoncurrentassets                                                                      |  |             | 212.5   |             |  |   | 221.3   |   |
| Totalassets                                                                                |  | $                | 5,933.7 |             |  | $      | 6,163.8 |   |
| **Liabilitiesand unitholder's equity**                                                     |  |
| Currentliabilities:                                                                        |  |             |    |             |  |   |    |   |
| Accountspayable                                                                            |  | $                | 261.9   |             |  | $      | 155.9   |   |
| Accruedexpenses                                                                            |  |             | 168.7   |             |  |   | 193.9   |   |
| Accruedcompensation                                                                        |  |             | 105.8   |             |  |   | 77.1    |   |
| Short-termdebt                                                                             |  |             | 17.7    |             |  |   | 51.9    |   |
| Incometaxes                                                                                |  |             | 37.2    |             |  |   | 50.0    |   |
| Totalcurrentliabilities                                                                    |  |             | 591.3   |             |  |   | 528.8   |   |
| Long-termdebt                                                                              |  |             | 3,100.6 |             |  |   | 3,262.8 |   |
| Deferred incometaxes                                                                       |  |             | 501.5   |             |  |   | 624.0   |   |
| Accrued pensionbenefits                                                                    |  |             | 411.7   |             |  |   | 374.1   |   |
| Otherliabilities                                                                           |  |             | 296.8   |             |  |   | 293.5   |   |
| Minorityinterest                                                                           |  |             | 14.1    |             |  |   | 11.6    |   |
| Commitments andcontingencies                                                               |  |             | — |             |  |   | — |   |
| Unitholder'sequity                                                                         |  |             | 1,017.7 |             |  |   | 1,069.0 |   |
| Totalliabilities and unitholder'sequity                                                    |  | $                | 5,933.7 |             |  | $      | 6,163.8 |   |
|                                                                                            |

Seenotes to consolidated and combined financial statements.

54

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Nalco Holdings LLC and SubsidiariesConsolidated and Combined Statements of Operations(dollars inmillions)

|                                              |  |                            |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|----------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Successor                  |         | Predecessor                            |
|                                         |  | YearendedDecember 31, 2004 |         | November 4,2003throughDecember 31,2003 |  | January 1,2003throughNovember 3,2003 |         | YearendedDecember31,2002 |
| Netsales                                     |  | $                          | 3,033.3 |                                   |  | $                                    | 460.1   |                     |  | $      | 2,306.5 |    |  | $      | 2,644.3 |    |
| Operatingcosts and expenses:                 |  |
| Cost of productsold                          |  |                       | 1,552.2 |                                   |  |                                 | 248.2   |                     |  |   | 1,114.6 |    |  |   | 1,266.1 |    |
| Selling,administrative, and researchexpenses |  |                       | 1,065.3 |                                   |  |                                 | 176.4   |                     |  |   | 900.7   |    |  |   | 992.0   |    |
| Impairmentofgoodwill                         |  |                       | — |                                   |  |                                 | — |                     |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets              |  |                       | 96.3    |                                   |  |                                 | 15.4    |                     |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment            |  |                       | 122.3   |                                   |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses                 |  |                       | 1.7     |                                   |  |                                 | 0.8     |                     |  |   | 20.3    |    |  |   | 32.8    |    |
| Totaloperating costs andexpenses             |  |                       | 2,837.8 |                                   |  |                                 | 440.8   |                     |  |   | 2,348.9 |    |  |   | 2,380.1 |    |
| Operatingearnings(loss)                      |  |                       | 195.5   |                                   |  |                                 | 19.3    |                     |  |   | (42.4   | )  |  |   | 264.2   |    |
| Otherincome (expense),net                    |  |                       | (43.3   | )                                 |  |                                 | (2.8    | )                   |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                               |  |                       | 10.1    |                                   |  |                                 | 0.6     |                     |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                              |  |                       | (213.2  | )                                 |  |                                 | (49.6   | )                   |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes            |  |                       | (50.9   | )                                 |  |                                 | (32.5   | )                   |  |   | (85.3   | )  |  |   | 236.9   |    |
| Incometax provision(benefit)                 |  |                       | 47.5    |                                   |  |                                 | (8.3    | )                   |  |   | 68.7    |    |  |   | 105.2   |    |
| Minorityinterests                            |  |                       | (5.8    | )                                 |  |                                 | 0.1     |                     |  |   | (4.2    | )  |  |   | (3.3    | )  |
| Netearnings(loss)                            |  | $                          | (104.2  | )                                 |  | $                                    | (24.1   | )                   |  | $      | (158.2  | )  |  | $      | 128.4   |    |
|                                              |

See notes toconsolidated and combined financialstatements.

55

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Nalco Holdings LLC and SubsidiariesConsolidated and Combined Statement of Unitholder's andShareholders' Equity(dollars in millions, except pershareamounts)

|                                                                        |  |                 |         |                    |  |                                            |         |             |  |                                       |         |                           |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|------------------------------------------------------------------------|--|-----------------|---------|--------------------|--|--------------------------------------------|---------|-------------|--|---------------------------------------|---------|---------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                   |  |            |         |               |  | AccumulatedOtherComprehensive Income(Loss) |         |        |
|                                                                   |  | CapitalAccounts |         | AccumulatedDeficit |  | MinimumPensionLiability Adjustment         |         | Derivatives |  | ForeignCurrencyTranslation Adjustment |         | ComprehensiveIncome(Loss) |
| **PredecessorCompany**                                                 |  |
| **Balance at January 1,2002**                                          |  | $               | 4,126.1 |               |  | $                                          | (290.2  | )      |  | $                                     | (17.6   | )                    |  | $      | (0.8    | )  |  | $      | (83.1   | )  |  |
| Issuanceof common stock, 1,997,500 shares at $20par                    |  |            | 40.0    |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| Mergerwithaffiliate                                                    |  |            | (9.2    | )             |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| Netearnings                                                            |  |            | — |               |  |                                       | 128.4   |        |  |                                  | — |                      |  |   | — |    |  |   | — |    |  | $      | 128.4  |    |
| Othercomprehensive income:                                             |  |
| Minimum pensionliability adjustment – net of tax benefit of$35.8 |  |            | — |               |  |                                       | — |        |  |                                  | (55.9   | )                    |  |   | — |    |  |   | — |    |  |   | (55.9  | )  |
| Losson derivatives – net of tax benefit of$5.0                   |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | (7.7    | )  |  |   | — |    |  |   | (7.7   | )  |
| Currencytranslationadjustments                                         |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | (18.5   | )  |  |   | (18.5  | )  |
| Comprehensiveincome                                                    |  |            |    |               |  |                                       |    |        |  |                                  |    |                      |  |   |    |    |  |   |    |    |  | $      | 46.3   |    |
| Distributionstoshareholder                                             |  |            | — |               |  |                                       | (122.3  | )      |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| **Balanceat December 31,2002**                                         |  |            | 4,156.9 |               |  |                                       | (284.1  | )      |  |                                  | (73.5   | )                    |  |   | (8.5    | )  |  |   | (101.6  | )  |  |
| Netloss                                                                |  |            |    |               |  |                                       | (158.2  | )      |  |                                  |    |                      |  |   |    |    |  |   |    |    |  | $      | (158.2 | )  |
| Capitalcontribution                                                    |  |            | 77.7    |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| Acquisitionof AquazurLimited                                           |  |            | (2.8    | )             |  |                                       | (8.1    | )      |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| Othercomprehensive income (loss):                                      |  |
| Gain onderivatives – net of tax of$5.4                           |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | 8.5     |    |  |   | — |    |  |   | 8.5    |    |
| Currencytranslationadjustments                                         |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | 54.1    |    |  |   | 54.1   |    |
| Comprehensiveloss                                                      |  |            |    |               |  |                                       |    |        |  |                                  |    |                      |  |   |    |    |  |   |    |    |  | $      | (95.6  | )  |
| Distributionstoshareholder                                             |  |            | — |               |  |                                       | (29.0   | )      |  |                                  | — |                      |  |   | — |    |  |   | — |    |  |
| **Balanceat November 3,2003**                                          |  | $               | 4,231.8 |               |  | $                                          | (479.4  | )      |  | $                                     | (73.5   | )                    |  | $      | — |    |  | $      | (47.5   | )  |  |
|                                                                        |

56

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Nalco Holdings LLC and SubsidiariesConsolidated and Combined Statement of Unitholder's andShareholders' Equity (continued)(dollars in millions,except per shareamounts)

|                                                                    |  |                 |         |                    |  |                                            |         |             |  |                                       |         |                           |  |        |         |         |  |        |         |        |  |        |        |         |  |  |
|--------------------------------------------------------------------|--|-----------------|---------|--------------------|--|--------------------------------------------|---------|-------------|--|---------------------------------------|---------|---------------------------|--|--------|---------|---------|--|--------|---------|--------|--|--------|--------|---------|--|--|
|                                                               |  |            |         |               |  | AccumulatedOtherComprehensive Income(Loss) |         |        |
|                                                               |  | CapitalAccounts |         | AccumulatedDeficit |  | MinimumPensionLiability Adjustment         |         | Derivatives |  | ForeignCurrencyTranslation Adjustment |         | ComprehensiveIncome(Loss) |
| **SuccessorCompany**                                               |  |
| Capitalcontribution                                                |  | $               | 1,001.9 |               |  | $                                          | — |        |  | $                                     | — |                      |  | $      | — |    |  | $      | — |   |  |
| Netloss                                                            |  |            | — |               |  |                                       | (24.1   | )      |  |                                  | — |                      |  |   | — |    |  |   | — |   |  | $      | (24.1  | )  |
| Othercomprehensive income:                                         |  |
| Currency translationadjustments – net of tax benefit of$18.0 |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | 91.2    |   |  |   | 91.2   |    |
| Comprehensiveincome                                                |  |            |    |               |  |                                       |    |        |  |                                  |    |                      |  |   |    |    |  |   |    |   |  | $      | 67.1   |    |
| **Balanceat December 31,2003**                                     |  |            | 1,001.9 |               |  |                                       | (24.1   | )      |  |                                  | — |                      |  |   | — |    |  |   | 91.2    |   |  |
| Capitalcontributions                                               |  |            | 11.0    |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | — |   |  |
| Netloss                                                            |  |            | — |               |  |                                       | (104.2  | )      |  |                                  | — |                      |  |   | — |    |  |   | — |   |  | $      | (104.2 | )  |
| Othercomprehensive income (loss):                                  |  |
| Loss onderivatives – net of tax benefit of$0.2               |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | (0.2    | )  |  |   | — |   |  |   | (0.2   | )  |
| Currencytranslation adjustments – net of tax of$7.5          |  |            | — |               |  |                                       | — |        |  |                                  | — |                      |  |   | — |    |  |   | 42.1    |   |  |   | 42.1   |    |
| Comprehensiveloss                                                  |  |            |    |               |  |                                       |    |        |  |                                  |    |                      |  |   |    |    |  |   |    |   |  | $      | (62.3  | )  |
| **Balanceat December 31,2004**                                     |  | $               | 1,012.9 |               |  | $                                          | (128.3  | )      |  | $                                     | — |                      |  | $      | (0.2    | )  |  | $      | 133.3   |   |  |
|                                                                    |

Seenotes to consolidated and combined financialstatements.

57

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Nalco Holdings LLC and SubsidiariesConsolidated and Combined Statements of Cash Flows(dollars inmillions)

|                                                                                          |  |                           |         |                                           |  |                                         |          |                             |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------|--|---------------------------|---------|-------------------------------------------|--|-----------------------------------------|----------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                                     |  | Successor                 |         | Predecessor                               |
|                                                                                     |  | YearendedDecember 31,2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |          | Year endedDecember 31, 2002 |
| **Operatingactivities**                                                                  |  |
| Net earnings(loss)                                                                       |  | $                         | (104.2  | )                                    |  | $                                       | (24.1    | )                      |  | $      | (158.2  | )  |  | $      | 128.4   |    |
| Adjustmentsto reconcile net earnings (loss) to net cash provided by operatingactivities: |  |
| Depreciation                                                                             |  |                      | 114.3   |                                      |  |                                    | 22.5     |                        |  |   | 101.8   |    |  |   | 134.7   |    |
| Amortization                                                                             |  |                      | 96.3    |                                      |  |                                    | 15.4     |                        |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment                                                        |  |                      | 122.3   |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Impairmentofgoodwill                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 244.4   |    |  |   | — |    |
| Amortizationof deferred financingcosts                                                   |  |                      | 11.2    |                                      |  |                                    | 17.4     |                        |  |   | — |    |  |   | — |    |
| Equityin earnings of unconsolidated subsidiaries, net ofdistributions                    |  |                      | 2.8     |                                      |  |                                    | (0.4     | )                      |  |   | (1.8    | )  |  |   | 0.3     |    |
| Deferredincometaxes                                                                      |  |                      | (49.2   | )                                    |  |                                    | (18.4    | )                      |  |   | (17.1   | )  |  |   | (30.2   | )  |
| Securitizedaccounts receivable,net                                                       |  |                      | — |                                      |  |                                    | —  |                        |  |   | (87.0   | )  |  |   | (14.0   | )  |
| Amortizationof unearned employee compensation and accretion ofobligation                 |  |                      | 27.8    |                                      |  |                                    | 4.0      |                        |  |   | 20.0    |    |  |   | 12.1    |    |
| Definedbenefit pension planexpense                                                       |  |                      | 39.8    |                                      |  |                                    | 6.6      |                        |  |   | 43.2    |    |  |   | 27.5    |    |
| Prepaidpensionpayment                                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (90.0   | )  |
| Postretirementbenefit plancurtailment                                                    |  |                      | — |                                      |  |                                    | —  |                        |  |   | — |    |  |   | (41.6   | )  |
| Other,net                                                                                |  |                      | 2.9     |                                      |  |                                    | (2.7     | )                      |  |   | (22.2   | )  |  |   | (33.8   | )  |
| Changesin current assets and liabilities:                                                |  |
| Tradeaccountsreceivable                                                                  |  |                      | (86.4   | )                                    |  |                                    | 11.3     |                        |  |   | 3.7     |    |  |   | 7.3     |    |
| Inventories                                                                              |  |                      | (10.9   | )                                    |  |                                    | 28.7     |                        |  |   | (0.4    | )  |  |   | (11.0   | )  |
| Accountspayable                                                                          |  |                      | 96.3    |                                      |  |                                    | 4.0      |                        |  |   | (44.3   | )  |  |   | 28.6    |    |
| Payabletoshareholder                                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | 6.2     |    |  |   | 112.2   |    |
| Contributionto profit-sharingtrust                                                       |  |                      | — |                                      |  |                                    | —  |                        |  |   | (24.0   | )  |  |   | (11.8   | )  |
| Otherreceivables from relatedparties                                                     |  |                      | — |                                      |  |                                    | —  |                        |  |   | (1.9    | )  |  |   | 5.5     |    |
| Other                                                                                    |  |                      | (25.8   | )                                    |  |                                    | 24.4     |                        |  |   | 13.1    |    |  |   | 9.7     |    |
| Netcash provided by operatingactivities                                                  |  |                      | 237.2   |                                      |  |                                    | 88.7     |                        |  |   | 144.4   |    |  |   | 323.1   |    |
| **Investingactivities**                                                                  |  |
| Acquisition of Ondeo NalcoGroup                                                          |  |                      | — |                                      |  |                                    | (4,127.1 | )                      |  |   | — |    |  |   | — |    |
| Purchaseprice adjustment on acquisition of Ondeo NalcoGroup                              |  |                      | 25.3    |                                      |  |                                    | —  |                        |  |   | — |    |  |   | — |    |
| Businesspurchases/sales,net                                                              |  |                      | (2.3    | )                                    |  |                                    | —  |                        |  |   | (10.1   | )  |  |   | 2.7     |    |
| Additionsto property, plant, and equipment,net                                           |  |                      | (91.8   | )                                    |  |                                    | (15.6    | )                      |  |   | (85.6   | )  |  |   | (108.3  | )  |
| Notesreceivable from relatedparties                                                      |  |                      | — |                                      |  |                                    | —  |                        |  |   | 98.3    |    |  |   | (36.2   | )  |
| Investmentsin affiliatedcompanies                                                        |  |                      | — |                                      |  |                                    | —  |                        |  |   | (6.0    | )  |  |   | — |    |
| Otherinvestingactivities                                                                 |  |                      | (4.1    | )                                    |  |                                    | (2.4     | )                      |  |   | (8.9    | )  |  |   | 15.7    |    |
| Netcash used for investingactivities                                                     |  |                      | (72.9   | )                                    |  |                                    | (4,145.1 | )                      |  |   | (12.3   | )  |  |   | (126.1  | )  |
|                                                                                          |

58

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Nalco Holdings LLC and SubsidiariesConsolidated and Combined Statements of Cash Flows (continued)(dollars inmillions)

|                                                                    |  |                          |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|--------------------------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                               |  | Successor                |         | Predecessor                            |
|                                                               |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| **Financingactivities**                                            |  |
| Cash dividends                                                     |  | $                        | — |                                   |  | $                                    | — |                     |  | $      | (29.0   | )  |  | $      | (122.3  | )  |
| Proceedsfrom long-termdebt                                         |  |                     | 269.8   |                                   |  |                                 | 3,214.2 |                     |  |   | 0.6     |    |  |   | 3.1     |    |
| Paymentsof long-termdebt                                           |  |                     | (477.0  | )                                 |  |                                 | (0.8    | )                   |  |   | (8.3    | )  |  |   | (3.5    | )  |
| Short-termdebt,net                                                 |  |                     | (34.8   | )                                 |  |                                 | 8.3     |                     |  |   | (272.7  | )  |  |   | (255.0  | )  |
| Proceedsfrom corporate facility sale andleaseback                  |  |                     | — |                                   |  |                                 | — |                     |  |   | — |    |  |   | 144.8   |    |
| Deferredfinancingcosts                                             |  |                     | — |                                   |  |                                 | (92.4   | )                   |  |   | — |    |  |   | — |    |
| Capitalcontributions                                               |  |                     | 11.0    |                                   |  |                                 | 1,001.9 |                     |  |   | 77.7    |    |  |   | — |    |
| Otherfinancingactivities                                           |  |                     | (0.9    | )                                 |  |                                 | (0.9    | )                   |  |   | (2.5    | )  |  |   | 0.2     |    |
| Netcash provided by (used for) financingactivities                 |  |                     | (231.9  | )                                 |  |                                 | 4,130.3 |                     |  |   | (234.2  | )  |  |   | (232.7  | )  |
| Effectof foreign exchange rate changes on cash and cashequivalents |  |                     | 0.8     |                                   |  |                                 | 1.7     |                     |  |   | 6.0     |    |  |   | 10.2    |    |
| Increase(decrease) in cash and cashequivalents                     |  |                     | (66.8   | )                                 |  |                                 | 75.6    |                     |  |   | (96.1   | )  |  |   | (25.5   | )  |
| Cashand cash equivalents at beginning of theperiod                 |  |                     | 100.0   |                                   |  |                                 | 24.4    |                     |  |   | 120.5   |    |  |   | 146.0   |    |
| Cashand cash equivalents at end of theperiod                       |  | $                        | 33.2    |                                   |  | $                                    | 100.0   |                     |  | $      | 24.4    |    |  | $      | 120.5   |    |
| **Supplemental cash flowsinformation**                             |  |
| Cash paid during theperiodfor:                                     |  |
| Interest                                                           |  | $                        | 206.7   |                                   |  | $                                    | 6.4     |                     |  | $      | 32.4    |    |  | $      | 40.6    |    |
| Incometaxes                                                        |  |                     | 92.3    |                                   |  |                                 | 14.2    |                     |  |   | 43.0    |    |  |   | 40.0    |    |
|                                                                    |

Seenotes to consolidated and combined financialstatements.

59

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                |
|----------|------------------------------------------------|
| 1.  | Descriptionof Business and Change in Ownership |

Description of Business

Nalco Holdings LLC and subsidiaries(the Company or Successor) is engaged in the worldwide manufacture andsale of highly specialized service chemical programs. This includesproduction and service related to the sale and application of chemicalsand technology used in water treatment, pollution control, energyconservation, oil production and refining, steelmaking, papermaking,mining, and other industrial processes.

Change inOwnership

On November 4, 2003, Nalco Holdings LLC (the Buyer),a newly 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, the Stock Purchase Agreement) with Suez S.A. (Suez orSeller) and certain of its affiliates, acquired the net assets of OndeoNalco Group (as defined in Note 2 below) for $4,127.1 million includingdirect costs of the acquisition of $125.6 million, excluding assumeddebt of $30.2 million, and subject to certain closing and post-closingadjustments (the Acquisition).

The Buyer was capitalized byequity investments totaling $991.9 million from the Sponsors and $10.0million from Dr. William H. Joyce, the Chairman and Chief ExecutiveOfficer of the Buyer. The equity investments were made to NalcoInvestment Holdings LLC which, in turn, contributed $1,001.9 million tothe Buyer and was its parent company until January 14, 2004. Fundingfor the Acquisition included the equity investments and the issuance ofsenior notes and senior subordinated notes (the Notes) in a privateoffering, and new revolving credit and term loan facilities by theBuyer, through its 100% owned subsidiary, Nalco Company.

The Stock Purchase Agreement provided for certain adjustments of thepurchase price, including adjustments based on the closing workingcapital and indebtedness (as both are defined in the Stock PurchaseAgreement) of the Ondeo Nalco Group at the date of the Acquisition. OnMarch 25, 2004, the Buyer and Suez agreed to a $25.6 million workingcapital adjustment payable to the Buyer plus interest. This adjustmentwas not reflected in the consolidated financial statements as ofDecember 31, 2003. The Buyer recorded the purchase price adjustment in2004 by decreasing goodwill.

The Stock Purchase Agreement alsoprovided for adjustments of the purchase price for taxes paid, or taxrefunds received, by the Buyer for periods prior to the Acquisition, tothe extent not already taken into account in the closing workingcapital at the date of the Acquisition. During the year ended December31, 2004, such purchase price adjustments resulted in a net payment of$0.3  million by the Buyer, which was recorded as an increase togoodwill. An additional purchase price adjustment of $3.6 million paidby the Buyer in January 2005 has also been accrued and reflected as anincrease to goodwill.

On January 14, 2004, Nalco InvestmentHoldings LLC contributed its 100% interest in the Buyer to anewly formed entity, Nalco Finance Holdings LLC. As of that date, NalcoFinance Holdings LLC became the direct parent company of the Buyer.Subsequent to that date, the Sponsors and Dr. Joyce engaged in a seriesof transactions that ultimately resulted in a newly formed entity,Nalco LLC, becoming the direct parent company of another newly formedentity, Nalco Investment Holdings II Corp., which, in turn, became thedirect parent company of Nalco Investment Holdings LLC. NalcoInvestment Holdings II Corp. has since been renamed Nalco HoldingCompany.

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

All intercompany balances and transactions areeliminated. Investments in companies or partnerships in which theCompany/Predecessor does not have control, but has the ability toexercise significant influence over operating and financial policies,are reported on the equity method.

60

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                       |
|----------|---------------------------------------|
| 2.  | Basisof Presentation (continued) |

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

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

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

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

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

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

These pro forma amounts are not necessarily indicativeof the results that would have been attained if the Acquisition hadoccurred at the beginning of each period presented or that may beattained in thefuture.

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

61

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                       |
|----------|---------------------------------------|
| 2.  | Basisof Presentation (continued) |

The Company has allocated the purchaseprice on the basis of the fair value of the underlying assets acquiredand liabilities assumed asfollows:

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

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

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

Deferred incometaxes have been provided in the consolidated balance sheet based on thetax versus book basis of the assets acquired and liabilities assumed,as adjusted to estimated fair values. Valuation allowances wereestablished for deferred tax assets related to all of the net operatingloss carryforwards for which utilization is uncertain.

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

The Company engaged independent appraisers to assist indetermining the fair values of property, plant and equipment andintangible assets acquired, including purchased in-process research and

62

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                       |
|----------|---------------------------------------|
| 2.  | Basisof Presentation (continued) |

development (IPR&D), trade names,trademarks, developed technology and customer relationships. TheCompany has received final values from the appraisers, which have beenincluded in the above table.

The Company recorded a one-timecharge for purchased IPR&D expenses of $122.3 million during theyear ended December 31, 2004. The value of purchased IPR&D wascomprised of five ongoing development projects at the date of theAcquisition. Purchased IPR&D was derived by assigning values tothose projects identified by management as having economic value, butthat had not yet reached technological feasibility and had noalternative future use. These products had not been released to themarket as of the date of the Acquisition, but the features andfunctionality of the products had been defined.

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

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

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

Customer relationships have been valued using an income approachafter considering a fair return on fixed assets, working capital,patents, trade names, trademarks, technology, and assembled workforce.A value of $480.0  million has been assigned to customerrelationships. As of December 31, 2003, an estimated useful life of 10years had been used based on preliminary information obtained from ourindependent appraisers. During the year ended December 31, 2004, weobtained updated information from our independent appraisers andrevised the estimated useful life of customer relationships to 16years.

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

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

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

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

63

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                       |
|----------|---------------------------------------|
| 2.  | Basisof Presentation (continued) |

Other considerations affecting the valueof goodwill include:

|              |                                                                                                                                                                                                                                                                                                              |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The potential forimproved earnings and cash flow gained from operating as a stand-alonecompany with focused management effort and more efficient resourcemanagement and from the ability of the assembled work force to drivesignificant annual cost reductions in the administrative and overheadfunctions; |

|              |                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------|
| •  | The historical heavyinvestment in recruiting and continuously training more than 5,500sales engineers and servicetechnicians; |

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

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

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

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

|          |                                           |
|----------|-------------------------------------------|
| 3.  | Summaryof Significant Accounting Policies |

Use of Estimates

The preparation of financial statements in conformity withaccounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been madeto the consolidated statement of operations for the period fromNovember 4, 2003 through December 31, 2003 and the combined statementsof operations for the period from January 1, 2003 through November 3,2003 and for the year ended December 31, 2002 to conform to the currentyear presentation. These reclassifications had no effect on net incomereported for any period.

Foreign Currency Translation

Local currencies are the functional currencies for most foreignoperations. Their financial statements are translated at current andaverage exchange rates, with any resulting translation adjustmentsincluded in the currency translation adjustment account inunitholder's equity. The 

64

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                            |
|----------|------------------------------------------------------------|
| 3.  | Summaryof Significant Accounting Policies (continued) |

financial statements of any foreignsubsidiaries that operate in highly inflationary environments aretranslated using a combination of current, average, and historicalexchange rates, with the resulting translation impact included inresults of operations. Transactions executed in different currenciesresulting in exchange adjustments are included in results ofoperations.

Concentration of Credit Risk

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

Cash and Cash Equivalents

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

Accounts Receivable

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

Foreign Exchange Contracts and Derivatives

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

Cash and Cash Equivalents

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

InventoryValuation

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

Goodwill

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

Intangibles

The Company amortizes customer relationshipsusing an accelerated method to reflect the pattern in which theeconomic benefits of that asset are realized. The straight-line methodis used for all other 

65

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                            |
|----------|------------------------------------------------------------|
| 3.  | Summaryof Significant Accounting Policies (continued) |

assets subject to amortization. Customerrelationships and patents and developed technology are being amortizedover estimated useful lives of 16 years and 10 years, respectively.

Deferred Financing Costs

Deferred financing costs areincurred to obtain long-term financing and are amortized using theeffective interest method over the term of the related debt. Theamortization of deferred financing costs, which is classified ininterest expense in the statement of operations, was $11.2 million forthe year ended December 31, 2004 and $17.4 million for the period fromNovember 4, 2003 through December 31, 2003, which included theimmediate write-off of $15.8 million for bridge financing commitmentfees incurred in connection with the Acquisition.

IncomeTaxes

Income taxes are recognized during the period in whichtransactions enter into the determination of financial statementincome, with deferred income taxes being provided for the tax effect oftemporary differences between the carrying amount of assets andliabilities and their tax bases.

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

Derivative Instruments

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

RetirementPlans

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

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

Revenue Recognition

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

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

66

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                            |
|----------|------------------------------------------------------------|
| 3.  | Summaryof Significant Accounting Policies (continued) |

Research and Development

Researchand development costs, excluding costs to acquire in-process researchand development, totaled $56.5 million, $9.7 million, $50.3 million,and $57.9 million for the year ended December 31, 2004, the period fromNovember 4, 2003 through December 31, 2003, the period from January 1,2003 through November 3, 2003, and the year ended December 31, 2002,respectively. Research and development costs are charged to expense asincurred. Purchased in-process research and development costs were$122.3 million for the year ended December 31, 2004.

|          |                              |
|----------|------------------------------|
| 4.  | Acquisitionsand Divestitures |

The Company acquired two businesses andcertain patents during 2004 for a combined purchase price of $2.5million, net of cash acquired. Each of these acquisitions was treatedas a purchase, and their results of operations have been included inthe consolidated financial statements since their respective dates ofacquisition. On a preliminary basis, the purchase price exceeded thefair value of tangible net assets by $2.5 million, which was allocatedto other intangible assets and patents and developed technology.

In June 2004, the Company and Katayama Chemical Inc. formed a jointventure in Japan, Katayama Nalco Inc., to provide water treatment andprocess improvement services, chemicals, and equipment to Japaneseindustrial and institutional customers. The results of Katayama NalcoInc. are included in the Company's consolidated financialstatements since it exercises control over this joint venture.

The Company sold a business during 2004 for approximately $0.2million. No gain or loss was recorded on the sale.

During theperiod from January 1, 2003 through November 3, 2003, the Predecessoracquired Aquazur Ltd. from NIS and increased its investment in OekophilAG from 40% to 100%. Each of the acquisitions wasaccounted for as a purchase; however, as disclosed in Note 2, thecombined financial statements of the Predecessor include the results ofAquazur Ltd. prior to its acquisition from NIS. The combined purchaseprice of these acquisitions, net of cash acquired, was $23.4 million.The purchase price exceeded the fair value of the net tangible assetsacquired by $12.9 million, which was allocated to goodwill.

ThePredecessor received net proceeds of $13.3 million and recognized apretax loss of $5.2  million on the sale of its South Africansubsidiary and two small businesses during the period from January 1,2003 through November 3, 2003.

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

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

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

|          |                                      |
|----------|--------------------------------------|
| 5.  | Securitizationof Accounts Receivable |

In June 2004, the Company entered into athree-year accounts receivable securitization facility with acommercial paper conduit sponsored by one of the lenders under theCompany's senior credit 

67

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                       |
|----------|-------------------------------------------------------|
| 5.  | Securitizationof Accounts Receivable (continued) |

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

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

The financing fee charged by the Transferees under the facility isbased on the amount funded and the conduit's cost of funds forissuing commercial paper plus a margin that varies based on theleverage ratio as calculated under the Company's senior creditfacilities. A commitment fee that varies based on the same ratio andthe unused portion of the facility is also charged by the conduit.Under the facility, Nalco Company services, administers and collectsthe Receivables, for which it receives a monthly servicing fee of1% per annum of the average daily outstanding balance ofReceivables.

Availability of funding under the facility dependsprimarily upon the outstanding Receivables balance from time to time.The facility may be terminated for, among other reasons, materialbreaches of representations and warranties, bankruptcies of the Sellersor the Transferor, a judgment or order for the payment of moneyrendered against the Transferor, cross-defaults to the Company'sother debt, or breach of specified financial covenants. The Company iscurrently in compliance with these covenants.

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

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

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

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

The Predecessor accounted for the transfer ofundivided percentage ownership interest in the receivables to theConduit as sales under SFAS No.  140, Accounting for Transfersand Servicing of Financial Assets and Extinguishments ofLiabilities. The Predecessor's loss on the sale of theundivided 

68

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                       |
|----------|-------------------------------------------------------|
| 5.  | Securitizationof Accounts Receivable (continued) |

interests in the receivables was $1.5million and $1.8 million for the period from January 1, 2003 throughNovember 3, 2003 and the year ended December 31, 2002, respectively,and was included in interest expense.

Cash flows from the saleof undivided interests in the receivables to the Conduit, net ofreceivables repurchased to facilitate termination of the agreement,were reported by the Predecessor as an operating activity in thestatement of cash flows.

|          |             |
|----------|-------------|
| 6.  | Inventories |

Inventories consist of thefollowing:

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

|          |          |
|----------|----------|
| 7.  | Goodwill |

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

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

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

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

69

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                           |
|----------|---------------------------|
| 7.  | Goodwill (continued) |

The Company initially recorded goodwillof $2,413.9 million as a result of the Acquisition. Changes in theCompany's carrying value of goodwill from November 4, 2003 toDecember 31, 2003 are summarizedbelow:

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

Changesin the carrying value of goodwill from December 31, 2003 to December31, 2004 are summarizedbelow:

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

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

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

70

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                        |
|----------|------------------------|
| 8.  | OtherIntangible Assets |

The Company's intangible assets aresummarized asfollows:

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

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

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

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

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

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

71

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|          |                                                                                                       |
|----------|-------------------------------------------------------------------------------------------------------|
| 9.  | ContributionAgreement With Profit-Sharing Trust and Reimbursement Agreement withSuez (continued) |

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

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

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

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

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

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

|           |                               |
|-----------|-------------------------------|
| 10.  | Property,Plant, and Equipment |

Property, plant, and equipment (includingmajor improvements) are recorded at cost. Depreciation of buildings andequipment is calculated over their estimated useful lives generallyusing the straight-line method.

72

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                |
|-----------|------------------------------------------------|
| 10.  | Property,Plant, and Equipment (continued) |

The estimated useful lives of the majorclasses of depreciable assets acquired since the date of theAcquisition are as follows: buildings – 33 to 40 years; software– 5 years; equipment – 3 to 15 years.

The Companyengaged independent appraisers to assist in determining the fair valuesof property, plant and equipment as of the date of the Acquisition.Preliminary values and final values from the appraisers are reflectedin the amounts at December 31, 2003 and December 31, 2004,respectively, in the table below. The Company is depreciating theacquired assets based on the final fair values and the remaining usefullives.

Interest capitalized in connection with the developmentof a new management information system in Europe was $1.6 million, $0.1million, and $0.1 million for the year ended December 31, 2004, theperiod from November 4, 2003 through December 31, 2003, and the periodfrom January 1, 2003 through November 3, 2003, respectively.

Property, plant, and equipment consist of thefollowing:

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

|           |           |
|-----------|-----------|
| 11.  | IncomeTax |

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

|                                   |  |                             |        |                                           |  |                                         |       |                             |  |        |        |         |  |        |       |        |  |  |
|-----------------------------------|--|-----------------------------|--------|-------------------------------------------|--|-----------------------------------------|-------|-----------------------------|--|--------|--------|---------|--|--------|-------|--------|--|--|
|                              |  | Successor                   |        | Predecessor                               |
|                              |  | Yearended December 31, 2004 |        | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |       | Year ended December31, 2002 |
| UnitedStates                      |  | $                           | (216.4 | )                                    |  | $                                       | (33.0 | )                      |  | $      | (233.1 | )  |  | $      | 100.3 |   |
| Foreign                           |  |                        | 165.5  |                                      |  |                                    | 0.5   |                        |  |   | 147.8  |    |  |   | 136.6 |   |
| Earnings(loss) before incometaxes |  | $                           | (50.9  | )                                    |  | $                                       | (32.5 | )                      |  | $      | (85.3  | )  |  | $      | 236.9 |   |
|                                   |

73

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                            |
|-----------|----------------------------|
| 11.  | IncomeTax (continued) |

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

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

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

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

74

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                            |
|-----------|----------------------------|
| 11.  | IncomeTax (continued) |

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

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

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

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

|                                           |  |                             |         |                                           |  |                                         |         |                             |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------|--|-----------------------------|---------|-------------------------------------------|--|-----------------------------------------|---------|-----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                      |  | Successor                   |         | Predecessor                               |
|                                      |  | Yearended December 31, 2004 |         | November 4, 2003through December 31, 2003 |  | January 1, 2003through November 3, 2003 |         | Year ended December31, 2002 |
| United States statutory taxrate           |  | $                           | (17.8   | )                                    |  | $                                       | (11.4   | )                      |  | $      | (29.9   | )  |  | $      | 82.9    |    |
| Stateincome taxes, net of federalbenefits |  |                        | (2.4    | )                                    |  |                                    | 0.4     |                        |  |   | 3.9     |    |  |   | 1.2     |    |
| Foreigntax ratedifferential               |  |                        | (3.4    | )                                    |  |                                    | 1.5     |                        |  |   | (4.3    | )  |  |   | (2.8    | )  |
| Nondeductible goodwillimpairment          |  |                        | — |                                      |  |                                    | — |                        |  |   | 85.5    |    |  |   | — |    |
| Withholdingtaxes                          |  |                        | 8.7     |                                      |  |                                    | 0.1     |                        |  |   | 3.6     |    |  |   | 1.8     |    |
| In-processresearch anddevelopment         |  |                        | 42.8    |                                      |  |                                    | — |                        |  |   | — |    |  |   | — |    |
| Reorganizationof wholly ownedsubsidiary   |  |                        | — |                                      |  |                                    | — |                        |  |   | — |    |  |   | 6.2     |    |
| Taxon foreignearnings                     |  |                        | 18.7    |                                      |  |                                    | — |                        |  |   | 5.9     |    |  |   | — |    |
| U.S.tax on subsidiaryintegration          |  |                        | — |                                      |  |                                    | — |                        |  |   | — |    |  |   | 8.1     |    |
| U.S.tax on subsidiarydisposition          |  |                        | 1.8     |                                      |  |                                    | — |                        |  |   | 5.2     |    |  |   | — |    |
| Creditsandincentives                      |  |                        | (2.4    | )                                    |  |                                    | (0.2    | )                      |  |   | (0.8    | )  |  |   | (1.1    | )  |
| Prioryearadjustments                      |  |                        | — |                                      |  |                                    | (0.1    | )                      |  |   | 1.3     |    |  |   | 5.9     |    |
| Fixedassetrevaluation                     |  |                        | (2.7    | )                                    |  |                                    | — |                        |  |   | — |    |  |   | — |    |
| Valuationallowance                        |  |                        | 0.2     |                                      |  |                                    | 0.5     |                        |  |   | (3.0    | )  |  |   | 1.2     |    |
| Nondeductibleitems                        |  |                        | 4.4     |                                      |  |                                    | 0.7     |                        |  |   | 2.2     |    |  |   | 9.5     |    |
| Other                                     |  |                        | (0.4    | )                                    |  |                                    | 0.2     |                        |  |   | (0.9    | )  |  |   | (7.7    | )  |
| Incometax provision(benefit)              |  | $                           | 47.5    |                                      |  | $                                       | (8.3    | )                      |  | $      | 68.7    |    |  | $      | 105.2   |    |
|                                           |

Noprovision has been made for United States or foreign income taxesrelated to approximately $509.1 million of undistributed earnings offoreign subsidiaries at December 31, 2004, as the Company considersthese earnings to be permanently reinvested. It was not practicable toestimate the additional income taxes and applicable withholding taxesthat would be payable on the remittance of such undistributedearnings.

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

75

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                            |
|-----------|----------------------------|
| 11.  | IncomeTax (continued) |

Through November 3, 2003, a portion ofthe Predecessor's United States operations were conducted as partof a United States consolidated federal tax group that generated taxlosses. Without the losses generated by other members of the group, thePredecessor would have made additional income tax payments ofapproximately $51.2 million and $84.0 million during the period fromJanuary  1, 2003 through November 3, 2003 and the year endedDecember 31, 2002, respectively.

The Company has approximately$106.0 million ($31.8 million tax effect) of U.K. capital losses thatdo not expire. The capital losses can only be used to offset futureU.K. capital gains. A full valuation allowance has been establishedpending the recognition of taxable U.K. capital gains.

TheCompany has approximately $7.9 million ($2.7 tax effect) of netoperating loss carryforward in Venezuela expiring between 2006 and2008, for which a full valuation allowance has been recorded.

The Company has U.S. federal net operating losses of approximately$96.7 million ($33.9 million tax effect) expiring between 2019 and2023. A valuation allowance has been established on $21.5 million ($7.5million tax effected) of certain separate return limitation yearamounts, that if released would be credited to goodwill.

TheCompany has U.S. foreign tax credits and state loss carryforwards,which could reduce future taxes by $4.8 million. A valuation allowanceof $2.1 million has been established for the portion which realizationis uncertain.

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

|           |      |
|-----------|------|
| 12.  | Debt |

Debt consists of thefollowing:

|                                      |  |                 |         |                 |  |        |        |        |  |  |
|--------------------------------------|--|-----------------|---------|-----------------|--|--------|--------|--------|--|--|
|                                 |  | December31,2004 |         | December31,2003 |
| **Short-term**                       |  |            |    |            |  |   |   |   |
| Checksoutstanding and bankoverdrafts |  | $               | 16.9    |            |  | $      | 19.5   |   |
| Currentmaturities of long-termdebt   |  |            | 0.8     |            |  |   | 30.7   |   |
| Notes payable toaffiliatedcompanies  |  |            | — |            |  |   | 1.7    |   |
|                                 |  | $               | 17.7    |            |  | $      | 51.9   |   |
|                                      |

76

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                       |
|-----------|-----------------------|
| 12.  | Debt (continued) |

|                                               |  |                 |         |                 |  |        |         |        |  |  |
|-----------------------------------------------|--|-----------------|---------|-----------------|--|--------|---------|--------|--|--|
|                                          |  | December31,2004 |         | December31,2003 |
| **Long-term**                                 |  |            |    |            |  |   |    |   |
| Securitizedtrade accounts receivable facility |  | $               | 97.3    |            |  | $      | — |   |
| Revolving creditfacility                      |  |            | — |            |  |   | 15.0    |   |
| Term loan A,due November 2009                 |  |            | 218.4   |            |  |   | 311.2   |   |
| Termloan B, due November2010                  |  |            | 1,081.0 |            |  |   | 1,300.0 |   |
| Senior notes,due November 2011                |  |            | 937.4   |            |  |   | 917.7   |   |
| Seniorsubordinated notes, due November2013    |  |            | 737.4   |            |  |   | 717.7   |   |
| Unsecured notes,due May2008                   |  |            | 27.8    |            |  |   | 27.8    |   |
| Other                                         |  |            | 2.1     |            |  |   | 4.1     |   |
|                                          |  |            | 3,101.4 |            |  |   | 3,293.5 |   |
| Less:Currentportion                           |  |            | 0.8     |            |  |   | 30.7    |   |
|                                          |  | $               | 3,100.6 |            |  | $      | 3,262.8 |   |
|                                               |

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

In connection with the Acquisition, Nalco Company(Nalco), a wholly owned indirect subsidiary of Nalco Holdings LLC,issued senior notes and senior subordinated notes in a private offeringand entered into senior secured credit facilities.

On November4, 2003, Nalco issued senior notes and senior subordinated notes(Notes). The senior notes were issued in the principal amount of $665.0million and €200.0 million and bear interest at7.75%. The senior subordinated notes were issued in theprincipal amount of $465.0 million and €200.0 million andbear interest at 8.875% and 9.0%, respectively. Interestis payable semi-annually on May 15 and November 15. The Notes do nothave required principal payments prior to maturity. Nalco HoldingCompany's and Nalco's direct and indirect domesticsubsidiaries that guarantee its obligations under the senior creditfacilities guarantee the Notes.

At its option, Nalco may redeemsome or all of the senior notes and senior subordinated notes,beginning November 15, 2007 and November 15, 2008, respectively, at theredemption prices set forth below (expressed as percentages ofprincipal amount), plus accrued interest, if any, if redeemed duringthe twelve-month period commencing on November 15 of the years setforth below:

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

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

77

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                       |
|-----------|-----------------------|
| 12.  | Debt (continued) |

On November 4, 2003, the Company enteredinto senior secured credit facilities which provided for a revolvingcredit facility and three term loans: a $200.0 million term loan A, a€88.0 million term loan A, and a $1,300.0 million termloan B. The senior secured credit facilities are unconditionallyguaranteed by Nalco Holdings LLC, Nalco, and certain domesticsubsidiaries of Nalco Holdings LLC (collectively, the Guarantors). Therepayment of these facilities is secured by substantially all theassets of the Guarantors, including, but not limited to, a pledge oftheir capital stock and 65% of the capital stock of eachnon-U.S. subsidiary owned by the Guarantors. The revolving creditfacility, which expires in November 2009, provides for borrowings up to$250 million, a portion of which may be made available to theCompany's non-U.S. subsidiary borrowers in euros. The revolvingcredit facility also includes borrowing capacity available for lettersof credit. The facility bears interest at a rate equal to an applicablemargin plus, at the Company's option, either (a) a base ratedetermined by reference to the greater of (1) the prime rate, (2) thethree-month certificate of deposit rate plus 0.5%, and (3) thefederal funds rate plus 0.5% or (b) LIBOR or EURIBOR plus anapplicable margin ranging from 1.0% to 2.5%, depending onthe type of borrowing and the leverage ratio of the Company, as definedin the credit agreement. Interest is generally due quarterly inarrears, and is also due upon expiration of any particular loan. Inaddition, there is an annual loan commitment fee of 0.5% on theunused portion of the revolving credit facility. The Company is alsorequired to pay a participation fee in respect of the undrawn portionof the letters of credit, at a rate per annum equal to LIBOR or EURIBORplus an applicable margin, a fronting fee at a rate of 0.25% perannum of the daily average amount, as well as customary letter ofcredit fees. As of December 31, 2004, the Company had $35.3 million inoutstanding letters of credit, none of which had been drawnagainst.

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

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

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

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

78

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                       |
|-----------|-----------------------|
| 12.  | Debt (continued) |

The senior secured credit facilities,senior notes, and senior subordinated notes contain a number ofcovenants that, among other things, restrict, subject to certainexceptions, the ability of the Company to sell assets; incur additionalindebtedness or issue preferred stock; repay other indebtedness; paydividends or repurchase stock; create liens on assets; makeinvestments, loans or advances; make acquisitions, mergers orconsolidations; enter into sale and leaseback transactions; engage incertain transactions with affiliates; amend certain material agreementsgoverning our indebtedness; change the business of the Company; andenter into hedging contracts. In addition, the Company must maintainfinancial covenants including a maximum total leverage ratio, minimuminterest coverage ratio, and maximum capital expenditure limitation. Asof December 31, 2004, the Company was in compliance with all of thesecovenants.

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

|            |  |        |         |        |  |  |  |  |  |  |
|------------|--|--------|---------|--------|--|--|--|--|--|--|
| 2005       |  | $      | 0.8     |   |  |
| 2006       |  |   | 4.4     |   |  |
| 2007       |  |   | 152.6   |   |  |
| 2008       |  |   | 107.8   |   |  |
| 2009       |  |   | 80.0    |   |  |
| Thereafter |  |   | 2,755.8 |   |  |
|       |  | $      | 3,101.4 |   |  |
|            |

|           |        |
|-----------|--------|
| 13.  | Leases |

The Company leases administrative, research, manufacturing, andwarehouse facilities and data processing and other equipment undernon-cancelable leases that expire at various dates through 2027. Rentexpense totaled $44.6 million, $9.2 million, $23.8 million, and $25.1million for the year ended December 31, 2004, the period from November4, 2003 through December 31, 2003, the period from January 1, 2003through November 3, 2003, and the year ended December 31, 2002,respectively.

Future minimum rental payments for operatingleases related to facilities, with initial or remaining terms greaterthan one year, are asfollows:

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

|           |                           |
|-----------|---------------------------|
| 14.  | Sale-LeasebackTransaction |

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

79

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                            |
|-----------|--------------------------------------------|
| 14.  | Sale-LeasebackTransaction (continued) |

$264.2  million over the initial leaseterm. The lease agreement provided for two fixed rate renewal periodsof 5 years each and two fair value renewal periods of 5 years each.

The Predecessor's payment obligations, along with certainother items under the lease agreement, were fully guaranteed by Suez.Because of the guarantee, the Predecessor was precluded from accountingfor this transaction as a sale and leaseback of the property andinstead accounted for it as a financing, with an effective interestrate of 5.5%. The Predecessor provided a cross guarantee to Suezof any payments made by Suez under its guarantee.

Under theterms of an agreement executed November 4, 2003 between the Company andLeo Holding Company (Leo), a subsidiary of Suez, the Company assignedits rights and obligations under the lease agreement to Leo.Simultaneously, Suez was released from its guarantee, and the Companyand Leo entered into an agreement whereby the Company subleases itscorporate headquarters and research facility from Leo. The terms of thesublease agreement are generally identical to those of the leaseagreement that was assigned to Leo. As a result of these transactions,the leased property, the remaining obligation under the lease assignedto Leo, and the related deferred income taxes were removed from theCompany's balance sheet as part of the allocation of theAcquisition purchase price. The Company accounts for the sublease as anoperating lease.

On November 4, 2003, the Company entered into aReimbursement Agreement with Suez whereby Suez shall reimburse theCompany for all contributions the Company makes to the Profit Sharing,Investment and Pay Deferral Plan Trust (see Note 9). Under the terms ofthe sublease agreement, if Suez fails to pay any of the paymentsrequired to be made under the Reimbursement Agreement, the Companyshall have the right to set off such overdue amounts against the rentdue under the sublease agreement.

|           |                                               |
|-----------|-----------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans |

The Company has severalnoncontributory, defined benefit pension plans covering most employeesin the U.S. and those with certain foreign subsidiaries. The principaldomestic plan represents approximately 59% of the benefitobligation and 54% of the total fair value of plan assets atDecember 31, 2004. The Company also provides a supplementary,nonqualified, unfunded plan for U.S. employees whose pension benefitsexceed ERISA limitations. In addition, the Company has defined benefitpostretirement plans that provide medical, dental, and life insurancebenefits for substantially all U.S. retirees and eligible dependents.In conjunction with the Acquisition, the Company assumed these plansfrom the Predecessor without amendment. The Company retains the rightto change or terminate these benefits, and several amendments were madein 2002 to the principal domestic pension plan and the defined benefitpostretirement medical and dental plans.

At the end of 2002, thedomestic pension plan was amended such that beginning January 2003,pension benefits no longer accrue for those participants in the pensionplan hired or rehired after October 1999 and for those participantshired before November 1999, but with less than five years of vestingservice at the end of 2002. However, these participants will continueto earn vesting service. These plan amendments resulted in acurtailment credit of $7.8 million in 2002. For those participantshired before November 1999 and with more than five years of vestingservice, the pension plan was amended to reduce future benefit accrualsand to increase the reduction factors for early retirement.

Alsoduring 2002, eligibility for participation in the defined benefitpostretirement medical and dental plans was changed from age 55 with atleast ten years of service to age 55 with at least ten years of serviceafter age 45, resulting in a curtailment credit of approximately $29.4million. Also, employees with less than five years of service at theend of 2003 will only be provided access to 

80

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

coverage at retirement; the Company will notcontribute to the cost of the coverage. This amendment resulted in anadditional curtailment credit of $12.2 million. The plans were alsoamended such that retirees and their dependents will be required to pay50% of plan costs in 2005 and beyond.

A December 31measurement date is used for the defined benefit plans for pension andother postretirement benefits.

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

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

81

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

|                                                 |  |                                     |         |                                                   |  |                                                  |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|-------------------------------------|---------|---------------------------------------------------|--|--------------------------------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | OtherPostretirementBenefits         |
|                                            |  | SuccessorYearendedDecember 31, 2004 |         | SuccessorNovember 4, 2003throughDecember 31, 2003 |  | PredecessorJanuary 1,2003 throughNovember 3,2003 |
|                                            |  |                                |    |                                              |  |                                             |    |    |  |
| **Changein benefitobligation**                  |  |                                |    |                                              |  |                                             |    |    |  |   |    |    |
| Benefitobligation at beginning ofperiod         |  | $                                   | 166.6   |                                              |  | $                                                | 165.9   |    |  | $      | 150.2   |    |
| Servicecost                                     |  |                                | 6.2     |                                              |  |                                             | 1.0     |    |  |   | 4.3     |    |
| Interestcost                                    |  |                                | 9.3     |                                              |  |                                             | 1.6     |    |  |   | 7.6     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                             | 0.3     |    |  |   | 2.2     |    |
| Planamendments                                  |  |                                | (18.5   | )                                            |  |                                             | — |    |  |   | — |    |
| Actuarialloss                                   |  |                                | 8.8     |                                              |  |                                             | — |    |  |   | 11.5    |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                             | (2.2    | )  |  |   | (9.9    | )  |
| Benefitobligation at end ofperiod               |  | $                                   | 165.6   |                                              |  | $                                                | 166.6   |    |  | $      | 165.9   |    |
|                                            |  |                                |    |                                              |  |
| **Changein plan assets**                        |  |                                |    |                                              |  |                                             |    |    |  |
| Fair value ofplan assets at beginning of period |  | $                                   | — |                                              |  | $                                                | — |    |  | $      | — |    |
| Employercontributions                           |  |                                | 6.8     |                                              |  |                                             | 1.9     |    |  |   | 7.7     |    |
| Participantcontributions                        |  |                                | 4.5     |                                              |  |                                             | 0.3     |    |  |   | 2.2     |    |
| Benefitspaid                                    |  |                                | (11.3   | )                                            |  |                                             | (2.2    | )  |  |   | (9.9    | )  |
| Fairvalue of plan assets at end of period       |  | $                                   | — |                                              |  | $                                                | — |    |  | $      | — |    |
|                                            |  |                                |    |                                              |  |                                             |    |    |  |
| Fundedstatus                                    |  | $                                   | (165.6  | )                                            |  | $                                                | (166.6  | )  |  |
| Unrecognizednet actuarialloss                   |  |                                | 8.8     |                                              |  |                                             | — |    |  |
| Unrecognized priorservicecosts                  |  |                                | (16.7   | )                                            |  |                                             | — |    |  |
| Netamountrecognized                             |  | $                                   | (173.5  | )                                            |  | $                                                | (166.6  | )  |  |
|                                                 |

Amountsrecognized in the balance sheets consistof:

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

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

82

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

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

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

The projectedbenefit obligation, accumulated benefit obligation, and fair value ofplan assets for all defined benefit pension plans with accumulatedbenefit obligations in excess of plan assets as of the end of 2004 and2003 were asfollows:

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

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

|                                    |  |                                    |         |                                                     |  |                                                  |         |                                      |  |        |       |         |  |        |         |         |  |  |
|------------------------------------|--|------------------------------------|---------|-----------------------------------------------------|--|--------------------------------------------------|---------|--------------------------------------|--|--------|-------|---------|--|--------|---------|---------|--|--|
|                               |  | PensionBenefits                    |
|                               |  | SuccessorYearendedDecember 31,2004 |         | Successor November 4,2003 through December 31, 2003 |  | PredecessorJanuary1, 2003throughNovember 3, 2003 |         | PredecessorYearendedDecember 31,2002 |
| Servicecost                        |  | $                                  | 27.2    |                                                |  | $                                                | 4.6     |                                 |  | $      | 19.9  |    |  | $      | 31.2    |    |
| Interestcost                       |  |                               | 39.4    |                                                |  |                                             | 6.6     |                                 |  |   | 31.1  |    |  |   | 35.5    |    |
| Expectedreturn on planassets       |  |                               | (26.9   | )                                              |  |                                             | (4.5    | )                               |  |   | (27.1 | )  |  |   | (37.3   | )  |
| Amortizationof prior servicecost   |  |                               | — |                                                |  |                                             | — |                                 |  |   | (2.0  | )  |  |   | (3.2    | )  |
| Amortizationof net transitionasset |  |                               | — |                                                |  |                                             | — |                                 |  |   | (0.1  | )  |  |   | (0.1    | )  |
| Recognizednet actuarialloss        |  |                               | — |                                                |  |                                             | — |                                 |  |   | 12.4  |    |  |   | 7.4     |    |
| Specialterminationbenefits         |  |                               | — |                                                |  |                                             | — |                                 |  |   | 1.1   |    |  |   | — |    |
| Settlementcharge                   |  |                               | 0.1     |                                                |  |                                             | 0.1     |                                 |  |   | 5.9   |    |  |   | 1.8     |    |
| Curtailment                        |  |                               | — |                                                |  |                                             | (0.2    | )                               |  |   | 2.0   |    |  |   | (7.8    | )  |
| Netbenefitexpense                  |  | $                                  | 39.8    |                                                |  | $                                                | 6.6     |                                 |  | $      | 43.2  |    |  | $      | 27.5    |    |
|                                    |

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

83

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

The weighted-average assumptions used forthe U.S. defined benefit plans as of the end of the last two years wereasfollows:

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

Theweighted-average assumptions used for the foreign defined benefitpension plans as of the end of the last two years were asfollows:

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

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

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

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

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

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

The assets in the principal domestic pension plan are diversifiedacross equity and fixed income investments. The investment portfoliohas target allocations of approximately 64% equity and36% fixed income. Other assets such as real estate, hedge fundsand private equity may be used judiciously 

84

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

to enhance portfolio returns anddiversification. For the fiscal years ended December 31, 2004 andDecember 31, 2003, the plan had an immaterial amount of assets investedin these alternative investment classes. The foreign pension plans havecomparable asset allocations to the principal domestic plan, with somevariances for local practices.

The expected long-term rate ofreturn is established using historical market data for each asset classas well as the target allocation. Historical markets are analyzed andlong-term historical relationships between equity and fixed incomeinvestments are preserved consistent with the widely accepted capitalmarket principle that assets with higher volatility will generate agreater return over the long run. Active management is employed in mostasset classes, which also contributes to the return assumption. Thetotal weighted-average return on each asset class supports theCompany's long-term expected rate of return assumption.

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

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

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

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

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

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

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

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

85

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                                |
|-----------|----------------------------------------------------------------|
| 15.  | Pensionand Other Postretirement Benefit Plans (continued) |

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

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

|           |                         |
|-----------|-------------------------|
| 16.  | EquityCompensation Plan |

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

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

The Unitssubject to the Plan include class A, class B, class C, and class DUnits. The class A Units are fully vested at the time of purchase by anemployee and have economic characteristics that are similar to those ofshares of common stock in a private corporation. The class B, class C,and class  D Units are subject to vesting provisions, meaningthat in order for such Units to be entitled to distributions or otherbenefits, an employee will have to continue to provide services for acertain period of time. However, with respect to the class C and classD Units, such vesting will be accelerated if the Company achievescertain EBITDA performance targets. The Units also become fully vested18 months after a change in control of the Company, subject to certainother conditions.

The methods employed to value the class AUnits were the guideline public company method, using multiples ofEBITDA and sales, and the income approach, using the discounted freecash flow method. The class B, class C, and class D Units areessentially structured as options and were valued using theBlack-Scholes option pricing model. The expected option life, risk-freeinterest rate, expected annual volatility, and dividend yield used tocalculate the fair value of the Units was 6.0 years, 3.15%,19.6%, and 0.0%, respectively. The expected annualvolatility was estimated using a group of guideline public companies asa proxy, since the Units are not publicly traded. A minority interestdiscount and various marketability discounts also affected the fairvalue of the class B, class C, and class D Units.

Though NalcoLLC established the Plan, the Company will account for the Plan sinceits economic substance is substantially the same for the Company andits employees.

In December 2004, the FASB issued SFAS No.123(R), Share-Based Payment, which revises SFAS No. 123,Accounting for Stock-Based Compensation, and supersedesAccounting Principles Board Opinion (APB) No. 25, Accounting forStock Issued to Employees. SFAS No. 123(R) requires all share-basedpayments to employees, including grants of employee stock options, tobe recognized in the financial statements based on their fairvalues.

86

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                          |
|-----------|------------------------------------------|
| 16.  | EquityCompensation Plan (continued) |

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

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

|           |                    |
|-----------|--------------------|
| 17.  | Unitholder'sEquity |

Unitholder's equity consists of thefollowing:

|                                      |  |                  |         |                   |  |        |         |         |  |  |
|--------------------------------------|--|------------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                 |  | December31, 2004 |         | December 31, 2003 |
| Capitalaccount                       |  | $                | 1,012.9 |              |  | $      | 1,001.9 |    |
| Accumulateddeficit                   |  |             | (128.3  | )            |  |   | (24.1   | )  |
| Accumulatedother comprehensiveincome |  |             | 133.1   |              |  |   | 91.2    |    |
|                                 |  |             | 1,017.7 |              |  | $      | 1,069.0 |    |
|                                      |

Thecapital structure of the Company consists of one class of limitedliability company interests represented by Units, which are identicalwith each other in every respect. There were 100 Units issued andoutstanding at December 31, 2004 and 2003.

At December 31, 2003,Nalco Investment Holdings LLC was the sole member of the Company andowned all outstanding Units as a result of its $1,001.9 million capitalcontribution to the Company on November 4, 2003. On January 14, 2004,Nalco Investment Holdings LLC contributed its 100% interest inNalco Holdings LLC in exchange for a 100% interest in a newlyformed company, Nalco Finance Holdings LLC. As of that date, NalcoFinance Holdings LLC became the direct parent company of Nalco HoldingsLLC.

During the year ended December 31, 2004, the Companyreceived additional capital contributions of $11.0 million from itsdirect parent company, Nalco Finance Holdings LLC. This primarilyresulted from $9.3 million of capital contributions received by theCompany's ultimate parent company, Nalco LLC, comprised of anadditional equity investment of $1.2 million by Dr. William H. Joyceand $8.1 million in proceeds from the sale of equity interests tocertain officers and key employees under the Nalco LLC 2004 Unit Plan.The remaining $1.7 million represented a portion of the proceeds fromsenior discount notes issued by Nalco Finance Holdings LLC in January2004.

|           |                                          |
|-----------|------------------------------------------|
| 18.  | FinancialInstruments and Risk Management |

The Company and its Predecessorhave used derivatives to fix the cost of issuing debt and to managewell-defined interest rate and foreign exchange exposures. Forderivative instruments not designated as hedging instruments, theunrealized gain or loss is recognized in other income (expense) incurrent earnings during the period of change.

Notional Amountand Credit Exposures of Derivatives

The notional amounts ofderivatives discussed below do not represent amounts exchanged by theparties and, thus, are not a measure of the exposure of the Companythrough its use of derivatives. 

87

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                           |
|-----------|-----------------------------------------------------------|
| 18.  | FinancialInstruments and Risk Management (continued) |

The amounts exchanged are calculated on thebasis of the notional amounts and the other terms of the derivatives,which relate primarily to interest rates and foreign exchangerates.

The Company is exposed to credit-related losses in theevent of nonperformance by counterparties to financial instruments, butit does not expect any counterparties to fail to meet their obligationsgiven their high credit ratings.

Interest Rate RiskManagement

Interest rate swap agreements were used by thePredecessor to reduce the potential impact of increases in interestrates on floating rate debt. During 2001, the Predecessor entered intoan interest rate swap agreement with a former related party. Thisinterest rate swap was designated as a hedge of future cash flowsrelated to certain variable interest rate borrowings. Changes in fairvalue of the interest rate swap were recognized in other comprehensiveincome and subsequently reclassified into interest expense as paymentsbecame due and the swap approached maturity.

During the thirdquarter of 2003, it became probable that the future interest paymentshedged by the swap would not be made because it was expected that therelated debt would be repaid immediately before the sale of thePredecessor during the fourth quarter of 2003. As a result, thePredecessor discontinued accounting for the swap as a hedge, and a$10.9 million pretax loss reported in accumulated other comprehensiveincome was reclassified to earnings during the third quarter 2003. Theswap was terminated in October 2003, ultimately resulting in a pretaxloss of $10.4 million that was reported in other income (expense) forthe period January 1, 2003 through November 3, 2003.

ForeignExchange Risk Management

The Company and its Predecessor haveused various types of foreign exchange contracts, including currencyswaps and forward exchange contracts, to manage foreign exchange risk.In addition, the Company uses certain foreign currency debt as a hedgeof the foreign currency exposure of a portion of its net investment inforeign operations.

Upon issuance, the Company designated the€200.0 million senior notes, the €200.0million senior subordinated notes, and the €88.0 millionterm loan as a hedge of its net investment in subsidiary companieswhose assets, liabilities, and operations are measured using the euroas their functional currency. Because of the high degree ofeffectiveness between the hedging instruments and the exposure beinghedged, fluctuations in the value of the euro-denominated debt due toexchange rate changes are offset by changes in the net investment.Accordingly, changes in the value of the euro-denominated debt arerecognized in foreign currency translation adjustment, a component ofaccumulated other comprehensive income, to offset changes in the valueof the Company's net investment in subsidiary companies whosefinancial statements are measured using the euro as their functionalcurrency.

The Company formally assesses, on a quarterly basis,whether the euro-denominated debt is effective at offsetting changes inthe value of the underlying exposure. Losses of $28.2 million (net ofincome taxes of $16.5 million) and $29.4 million (net of income taxesof $18.0 million) were reported as a component of other comprehensiveloss within the accumulated foreign currency translation adjustmentaccount for the year ended December 31, 2004 and the period fromNovember 4, 2003 through December 31, 2003, respectively. No hedgeineffectiveness was recorded in income.

The Company'sforward exchange contracts at December 31, 2004 were designated as cashflow hedges of the variability of the cash flows from certainintercompany foreign currency loans and 

88

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                           |
|-----------|-----------------------------------------------------------|
| 18.  | FinancialInstruments and Risk Management (continued) |

forecasted 2005 royalty payments due tochanges in foreign exchange rates. The fair value of these contractswas a liability of $1.3 million and $0.5 million at December 31, 2004and December 31, 2003, respectively. There was a $0.4 million pretaxloss attributable to foreign exchange contracts in accumulated othercomprehensive income at December 31, 2004. Of that amount, the Companyexpects $0.3 million to be reclassified to earnings during the nexttwelve months.

In October 2003, the Predecessor terminated threecurrency swap agreements when the intercompany foreign currency loansthey were hedging were settled. The gain on the termination of theswaps was not material.

|           |                                    |
|-----------|------------------------------------|
| 19.  | FairValue of Financial Instruments |

The following methods andassumptions were used to estimate the fair values of financialinstruments:

Cash and cash equivalents and short-term debt

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

Long-term debt

The fair value of the Company's senior notes and seniorsubordinated notes at December 31, 2004 was estimated based on theirquoted market prices. The carrying value of the Company's seniornotes and senior subordinated notes outstanding at December 31, 2003was considered to approximate fair value due to the proximity of theirdate of issuance to December 31, 2003. The carrying value of amountsoutstanding under the Company's senior secured credit facilitiesis considered to approximate fair value because interest accrues atrates which fluctuate with interest rate trends. The carrying value ofother long-term debt outstanding, other than the 6.25% fixedrate unsecured notes, also approximates fair value due to the variablenature of their interest rates.

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

Derivatives

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

89

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NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                     |
|-----------|-----------------------------------------------------|
| 19.  | FairValue of Financial Instruments (continued) |

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

|                          |  |                |         |           |  |                |         |           |  |        |         |        |  |        |         |        |  |  |
|--------------------------|--|----------------|---------|-----------|--|----------------|---------|-----------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                     |  | 2004           |         | 2003      |
|                     |  | CarryingAmount |         | FairValue |  | CarryingAmount |         | FairValue |
| **Assets**               |  |           |    |      |  |           |    |      |  |   |    |   |  |
| Cashand cashequivalents  |  | $              | 33.2    |      |  | $              | 33.2    |      |  | $      | 100.0   |   |  | $      | 100.0   |   |
|                     |  |           |    |      |  |           |    |      |  |
| **Liabilities**          |  |           |    |      |  |           |    |      |  |
| Short-termdebt           |  | $              | 17.7    |      |  | $              | 17.7    |      |  | $      | 51.9    |   |  | $      | 51.9    |   |
| Long-termdebt            |  |           | 3,100.6 |      |  |           | 3,268.4 |      |  |   | 3,262.8 |   |  |   | 3,265.6 |   |
| Forwardexchangecontracts |  |           | 1.3     |      |  |           | 1.3     |      |  |   | 0.5     |   |  |   | 0.5     |   |
|                          |

|           |                               |
|-----------|-------------------------------|
| 20.  | BusinessOptimization Expenses |

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

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

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

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

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

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

90

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                |
|-----------|------------------------------------------------|
| 20.  | BusinessOptimization Expenses (continued) |

Business optimization expenses werecomprised of thefollowing:

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

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

|           |                                  |
|-----------|----------------------------------|
| 21.  | Summaryof Other Income (Expense) |

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

|                                                 |  |                          |         |                                        |  |                                      |         |                          |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                            |  | Successor                |         | Predecessor                            |
|                                            |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |         | YearendedDecember31,2002 |
| Gain (loss) on sale ofbusiness                  |  | $                        | — |                                   |  | $                                    | — |                     |  | $      | (5.2    | )  |  | $      | 12.4    |    |
| Suez managementfees                             |  |                     | — |                                   |  |                                 | — |                     |  |   | (2.9    | )  |  |   | (3.1    | )  |
| Sponsormonitoringfees                           |  |                     | (11.2   | )                                 |  |                                 | (1.8    | )                   |  |   | — |    |  |   | — |    |
| Sponsormonitoring agreement terminationfee      |  |                     | (35.0   | )                                 |  |                                 | — |                     |  |   | — |    |  |   | — |    |
| Franchisetaxes                                  |  |                     | (2.2    | )                                 |  |                                 | (0.5    | )                   |  |   | (0.3    | )  |  |   | (4.4    | )  |
| Equityin earnings of unconsolidatedsubsidiaries |  |                     | 3.2     |                                   |  |                                 | 0.4     |                     |  |   | 2.0     |    |  |   | 3.6     |    |
| Foreigncurrency exchangeadjustments             |  |                     | (1.5    | )                                 |  |                                 | (0.9    | )                   |  |   | 3.0     |    |  |   | 0.8     |    |
| Swapsettlement                                  |  |                     | — |                                   |  |                                 | — |                     |  |   | (10.4   | )  |  |   | — |    |
| Otherincome (expense),net                       |  |                     | 3.4     |                                   |  |                                 | — |                     |  |   | (3.5    | )  |  |   | (5.9    | )  |
|                                            |  | $                        | (43.3   | )                                 |  | $                                    | (2.8    | )                   |  | $      | (17.3   | )  |  | $      | 3.4     |    |
|                                                 |

|           |                           |
|-----------|---------------------------|
| 22.  | RelatedParty Transactions |

On November 4, 2003, the Company enteredinto a Monitoring Fee Agreement with affiliates of the Sponsors formonitoring, advisory and consulting services in relation to the affairsof the Company, including debt and equity offerings, relationships withbankers and lenders, corporate strategy, acquisitions and dispositions,and other matters as may be requested. The Company agreed to pay anannual monitoring fee of at least $10.0 million for these services. Thefee could be increased depending on the Company's earnings.During the year ended December 31, 2004 and the period from November 4,2003 through December 31, 2003, the Company paid $11.2 million and $1.8million, respectively, for these services.

91

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                            |
|-----------|--------------------------------------------|
| 22.  | RelatedParty Transactions (continued) |

In connection with the public offering ofcommon stock by the Company's indirect parent company, NalcoHolding Company, in November 2004, the Company amended and restated theMonitoring Fee Agreement, pursuant to which the Company terminated themonitoring services provided to the Company by the Sponsors'affiliates. A termination fee of $35.0 million was paid to theSponsors' affiliates, which was charged to other income(expense). The amended and restated agreement will provide theSponsors' affiliates with a right of first refusal to provide uswith financial advisory services in exchange for mutually agreeablecompensation. This right of first refusal will terminate when theSponsors directly or indirectly hold less than 5% of NalcoHolding Company's outstanding common stock.

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

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

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

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

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

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

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

|           |                    |
|-----------|--------------------|
| 23.  | SegmentInformation |

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

92

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                     |
|-----------|-------------------------------------|
| 23.  | SegmentInformation (continued) |

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

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

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

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

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

During 2004, the Company began reporting Pacificregion results related to the Industrial and Institutional Servicessegment and the Paper Services segment with those segments. Theseresults had previously been reported in the Other segment. Amounts forprior periods have been restated to conform with this change in thecomposition of the Company's reportable segments.

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

Net salesby reportable segment were asfollows:

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

93

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                     |
|-----------|-------------------------------------|
| 23.  | SegmentInformation (continued) |

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

|                                     |  |                            |         |                                         |  |                                       |         |                          |  |        |         |         |  |        |         |         |  |  |
|-------------------------------------|--|----------------------------|---------|-----------------------------------------|--|---------------------------------------|---------|--------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                |  | Successor                  |         | Predecessor                             |
|                                |  | Yearended December 31,2004 |         | November 4,2003through December 31,2003 |  | January 1,2003through November 3,2003 |         | YearendedDecember31,2002 |
| Segment directcontribution:         |  |                       |    |                                    |  |                                  |    |                     |  |   |    |    |  |   |    |    |
| Industrialand InstitutionalServices |  | $                          | 351.7   |                                    |  | $                                     | 47.5    |                     |  | $      | 271.2   |    |  | $      | 286.5   |    |
| EnergyServices                      |  |                       | 167.2   |                                    |  |                                  | 23.8    |                     |  |   | 131.1   |    |  |   | 159.8   |    |
| PaperServices                       |  |                       | 151.3   |                                    |  |                                  | 23.4    |                     |  |   | 120.2   |    |  |   | 146.0   |    |
| Other                               |  |                       | (64.1   | )                                  |  |                                  | (22.9   | )                   |  |   | (49.6   | )  |  |   | (35.3   | )  |
| Totalsegment directcontribution     |  |                       | 606.1   |                                    |  |                                  | 71.8    |                     |  |   | 472.9   |    |  |   | 557.0   |    |
|                                |  |                       |    |                                    |  |                                  |    |                     |  |   |    |    |  |   |    |    |
| Expensesnot allocated tosegments:   |  |                       |    |                                    |  |                                  |    |                     |  |   |    |    |  |   |    |    |
| Administrativeexpenses              |  |                       | 190.3   |                                    |  |                                  | 36.3    |                     |  |   | 181.7   |    |  |   | 170.8   |    |
| Impairmentofgoodwill                |  |                       | — |                                    |  |                                  | — |                     |  |   | 244.4   |    |  |   | — |    |
| Amortizationof intangibleassets     |  |                       | 96.3    |                                    |  |                                  | 15.4    |                     |  |   | 68.9    |    |  |   | 89.2    |    |
| In-processresearch anddevelopment   |  |                       | 122.3   |                                    |  |                                  | — |                     |  |   | — |    |  |   | — |    |
| Businessoptimizationexpenses        |  |                       | 1.7     |                                    |  |                                  | 0.8     |                     |  |   | 20.3    |    |  |   | 32.8    |    |
| Operatingearnings(loss)             |  |                       | 195.5   |                                    |  |                                  | 19.3    |                     |  |   | (42.4   | )  |  |   | 264.2   |    |
| Otherincome (expense),net           |  |                       | (43.3   | )                                  |  |                                  | (2.8    | )                   |  |   | (17.3   | )  |  |   | 3.4     |    |
| Interestincome                      |  |                       | 10.1    |                                    |  |                                  | 0.6     |                     |  |   | 7.1     |    |  |   | 7.8     |    |
| Interestexpense                     |  |                       | (213.2  | )                                  |  |                                  | (49.6   | )                   |  |   | (32.7   | )  |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes   |  | $                          | (50.9   | )                                  |  | $                                     | (32.5   | )                   |  | $      | (85.3   | )  |  | $      | 236.9   |    |
|                                     |

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

Net sales by geographic region were asfollows:

|                |  |                          |         |                                        |  |                                      |       |                          |  |        |         |        |  |        |         |        |  |  |
|----------------|--|--------------------------|---------|----------------------------------------|--|--------------------------------------|-------|--------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|           |  | Successor                |         | Predecessor                            |
|           |  | YearendedDecember31,2004 |         | November 4,2003 throughDecember31,2003 |  | January 1,2003 throughNovember3,2003 |       | YearendedDecember31,2002 |
| UnitedStates   |  | $                        | 1,375.8 |                                   |  | $                                    | 212.0 |                     |  | $      | 1,110.6 |   |  | $      | 1,369.2 |   |
| Othercountries |  |                     | 1,657.5 |                                   |  |                                 | 248.1 |                     |  |   | 1,195.9 |   |  |   | 1,275.1 |   |
|           |  | $                        | 3,033.3 |                                   |  | $                                    | 460.1 |                     |  | $      | 2,306.5 |   |  | $      | 2,644.3 |   |
|                |

94

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                     |
|-----------|-------------------------------------|
| 23.  | SegmentInformation (continued) |

Long-lived assets by geographic regionwere asfollows:

|                |  |                 |         |                  |  |        |         |        |  |  |
|----------------|--|-----------------|---------|------------------|--|--------|---------|--------|--|--|
|           |  | December31,2004 |         | December 31,2003 |
| UnitedStates   |  | $               | 2,902.9 |             |  | $      | 3,185.2 |   |
| Othercountries |  |            | 1,999.8 |             |  |   | 2,003.0 |   |
|           |  | $               | 4,902.7 |             |  | $      | 5,188.2 |   |
|                |

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

|           |                              |
|-----------|------------------------------|
| 24.  | Contingencies and Litigation |

Variousclaims, lawsuits and administrative proceedings are pending orthreatened against the Company and its subsidiaries, arising from theordinary course of business with respect to commercial, intellectualproperty, product liability, employee and environmental 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 a potentiallyresponsible party (PRP) by the Environmental Protection Agency or stateenforcement agencies at three waste sites where some financialcontribution is or may be required. These agencies have also identifiedmany other parties who may be responsible for clean up costs at thesewaste disposal sites. The Company's financial contribution toremediate these sites is expected to be minor. There has been nosignificant financial impact on the Company up to the present, nor isit anticipated that there will be in the future, as a result of thesematters.

The Company has made and will continue to makeprovisions for these costs if the Company's liability becomesprobable and when costs can be reasonably estimated. TheCompany's undiscounted reserves for known environmental clean upcosts were $2.0 million at December 31, 2004.

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

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

95

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                               |
|-----------|-----------------------------------------------|
| 24.  | Contingencies and Litigation (continued) |

The Company has received subpoenas fromthe U.S. Department of Justice for documents and testimony relating toits storage 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 ordinary courseof its business, the Company is also a party to a number of lawsuitsand is subject to various claims relating to trademarks, employeematters, contracts, transactions, chemicals and other matters, theoutcome of which, in the opinion of management, should not have amaterial effect on the consolidated financial position of the Company.However, we cannot predict the outcome of any litigation or thepotential for future litigation. Were an unfavorable ruling to occur,there exists the possibility of a material adverse impact on theresults of operations for the period in which the ruling occurs. TheCompany maintains accruals where the outcome of the matter is probableand can be reasonably estimated.

|           |                                           |
|-----------|-------------------------------------------|
| 25.  | QuarterlyResults of Operations(Unaudited) |

|                                   |
|-----------------------------------|
|                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                              |  | Successor |
|                              |  | FirstQuarter(1) |  | SecondQuarter(2) |  | ThirdQuarter |  | FourthQuarter(3) |
| **2004**                          |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |
| Netsales                          |  | $ | 713.3 |   |  | $ | 740.4 |   |  | $ | 774.2 |   |  | $ | 805.4 |   |
| Costof productsold                |  |   | 368.2 |   |  |   | 365.5 |   |  |   | 394.7 |   |  |   | 423.8 |   |
| Businessoptimizationexpenses      |  |   | — |   |  |   | — |   |  |   | — |   |  |   | 1.7 |   |
| Earnings(loss) before incometaxes |  |   | (115.0 | )  |  |   | 29.9 |   |  |   | 41.3 |   |  |   | (7.1 | )  |
| Netearnings(loss)                 |  |   | (119.0 | )  |  |   | 12.4 |   |  |   | 12.4 |   |  |   | (10.0 | )  |
|                                   |

|                                   |
|-----------------------------------|
|                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                              |  | Predecessor |  | Successor |
|                              |  | FirstQuarter |  | SecondQuarter(4) |  | ThirdQuarter(5) |  | October1throughNovember 3(6) |  | November4throughDecember31(7) |
| **2003**                          |  |   |   |   |  |   |   |   |  |   |   |   |  |   |   |   |  |
| Netsales                          |  | $ | 658.2 |   |  | $ | 694.5 |   |  | $ | 711.4 |   |  | $ | 242.4 |   |  | $ | 460.1 |   |
| Costof productsold                |  |   | 323.7 |   |  |   | 331.2 |   |  |   | 337.9 |   |  |   | 121.8 |   |  |   | 248.2 |   |
| Businessoptimizationexpenses      |  |   | 2.5 |   |  |   | 7.2 |   |  |   | 5.5 |   |  |   | 5.1 |   |  |   | 0.8 |   |
| Earnings(loss) before incometaxes |  |   | 42.4 |   |  |   | (186.5 | )  |  |   | 64.6 |   |  |   | (5.8 | )  |  |   | (32.5 | )  |
| Netearnings(loss)                 |  |   | 24.4 |   |  |   | (212.1 | )  |  |   | 33.7 |   |  |   | (4.2 | )  |  |   | (24.1 | )  |
|                                   |

|  |
|--|
|  |  |
|  |

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

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

|     |                                                                                                                                                                                                                                                                                                                                                     |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Earnings (loss)before income taxes includes a $35.0 million charge ($21.8 millionafter tax) for the termination of the Monitoring Fee Agreement withaffiliates of the Sponsors and a $0.1  million charge ($0.1million after tax) related to the sale of inventory that had beenrevalued at selling price less costs to sell in purchaseaccounting. |

96

----

NalcoHoldings LLC and Subsidiaries Notes to Consolidated and CombinedFinancial Statements (Continued)(dollars in millions, except pershare amounts) December 31, 2004

|           |                                                            |
|-----------|------------------------------------------------------------|
| 25.  | QuarterlyResults of Operations(Unaudited) (continued) |

|     |                                                                                                                       |
|-----|-----------------------------------------------------------------------------------------------------------------------|
| (4) | Earnings(loss) before income taxes includes a $244.4 million charge ($244.4million after tax) for goodwillimpairment. |

|     |                                                                                                                                                                          |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Earnings (loss)before income taxes includes a $10.9 million charge ($6.8 million aftertax) to provide for the estimated loss on the termination of aninterest rate swap. |

|     |                                                                                                                                                                                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Earnings(loss) before income taxes includes a $0.5 million credit ($0.3 millionafter tax) to adjust the provision for termination of an interest rateswap to actual settlementcost. |

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

|           |                                                       |
|-----------|-------------------------------------------------------|
| 26.  | SupplementalGuarantor Condensed Financial Information |

In connection withthe Acquisition, Nalco Holdings LLC (presented as Parent in thefollowing tables), through its wholly-owned subsidiary, Nalco Company(presented as Issuer in the following tables), issued senior notes andsenior subordinated notes as further described in Note 12. The seniornotes are fully, unconditionally and jointly and severally guaranteedon an unsecured senior basis and the senior subordinated notes arefully, unconditionally and jointly and severally guaranteed on anunsecured senior subordinated basis, in each case, by Nalco HoldingsLLC and substantially all existing and future wholly owned restricteddomestic subsidiaries of Nalco Company (collectively, the"Guarantors"). All other subsidiaries ofNalco Holdings LLC, whether direct or indirect, do not guarantee thesenior notes and senior subordinated notes("Non-Guarantors"). The Guarantors alsounconditionally guarantee the Company's borrowings under thesenior secured credit facilities on a senior secured basis.

Thefollowing unaudited condensed combining financial statements presentthe results of operations, financial position and cash flows of (1) theParent, (2) the Issuer, (3) the Guarantors, (4)  theNon-Guarantors and (5) eliminations to arrive at the information forNalco Holdings LLC on a combined basis. Separate financial statementsand other disclosures concerning the Guarantors are not presentedbecause management does not believe that such information is materialto investors.

Therefore, each of the Guarantors is combined inthe presentation below. Further, separate financial statements of theIssuer are not presented because management does not believe that suchinformation is material toinvestors.

97

----

Nalco HoldingsLLC and Subsidiaries Condensed Consolidating Balance SheetDecember 31, 2004

|                                                           |  |        |         |        |  |                       |         |                           |  |              |         |              |  |        |         |        |  |        |          |         |  |        |         |        |  |  |
|-----------------------------------------------------------|--|--------|---------|--------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|--------|--|--------|----------|---------|--|--------|---------|--------|--|--|
|                                                      |  | Parent |         | Issuer |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| Cash& cash equivalents                                |  | $      | — |   |  | $                     | 1.3     |                      |  | $            | 0.8     |         |  | $      | 31.1    |   |  | $      | —  |    |  | $      | 33.2    |   |
| Trade accounts receivable                                 |  |   | — |   |  |                  | (16.4   | )                    |  |         | 4.4     |         |  |   | 606.2   |   |  |   | —  |    |  |   | 594.2   |   |
| Inventories– finishedproducts                       |  |   | — |   |  |                  | 70.6    |                      |  |         | 47.8    |         |  |   | 127.0   |   |  |   | —  |    |  |   | 245.4   |   |
| Inventories– materials & work inprocess         |  |   | — |   |  |                  | 13.9    |                      |  |         | 15.6    |         |  |   | 38.6    |   |  |   | —  |    |  |   | 68.1    |   |
| Notesreceivable from related parties                      |  |   | — |   |  |                  | 17.4    |                      |  |         | 133.7   |         |  |   | 24.3    |   |  |   | (175.4   | )  |  |   | — |   |
| Otherreceivables from related parties                     |  |   | — |   |  |                  | 1.2     |                      |  |         | 296.4   |         |  |   | 95.4    |   |  |   | (393.0   | )  |  |   | — |   |
| Prepaidexpenses, taxes, and other currentassets           |  |   | — |   |  |                  | 36.4    |                      |  |         | 6.9     |         |  |   | 46.8    |   |  |   | —  |    |  |   | 90.1    |   |
| **TotalCurrentAssets**                                    |  |   | — |   |  |                  | 124.4   |                      |  |         | 505.6   |         |  |   | 969.4   |   |  |   | (568.4   | )  |  |   | 1,031.0 |   |
| Property,plant, and equipment,net                         |  |   | — |   |  |                  | 270.4   |                      |  |         | 152.3   |         |  |   | 424.6   |   |  |   | —  |    |  |   | 847.3   |   |
| Investmentin subsidiaries                                 |  |   | 1,031.8 |   |  |                  | 2,437.6 |                      |  |         | 368.9   |         |  |   | — |   |  |   | (3,838.3 | )  |  |   | — |   |
| Goodwill                                                  |  |   | — |   |  |                  | 719.3   |                      |  |         | 318.2   |         |  |   | 1,330.8 |   |  |   | —  |    |  |   | 2,368.3 |   |
| Intangibles                                               |  |   | — |   |  |                  | 1,047.6 |                      |  |         | 58.6    |         |  |   | 217.4   |   |  |   | —  |    |  |   | 1,323.6 |   |
| Otherassets                                               |  |   |    |   |  |                  | 300.1   |                      |  |         | 19.9    |         |  |   | 43.5    |   |  |   | —  |    |  |   | 363.5   |   |
| **TotalAssets**                                           |  | $      | 1,031.8 |   |  | $                     | 4,899.4 |                      |  | $            | 1,423.5 |         |  | $      | 2,985.7 |   |  | $      | (4,406.7 | )  |  | $      | 5,933.7 |   |
| Accountspayable                                           |  | $      | — |   |  | $                     | 77.4    |                      |  | $            | 39.9    |         |  | $      | 144.6   |   |  | $      | —  |    |  | $      | 261.9   |   |
| Short-termdebt                                            |  |   | — |   |  |                  | 4.2     |                      |  |         | 0.4     |         |  |   | 13.1    |   |  |   | —  |    |  |   | 17.7    |   |
| Othercurrentliabilities                                   |  |   | — |   |  |                  | 50.5    |                      |  |         | 62.6    |         |  |   | 198.6   |   |  |   | —  |    |  |   | 311.7   |   |
| Intercompanyaccountspayable                               |  |   | — |   |  |                  | 53.7    |                      |  |         | 35.9    |         |  |   | 85.8    |   |  |   | (175.4   | )  |  |   | — |   |
| **TotalCurrentLiabilities**                               |  |   | — |   |  |                  | 185.8   |                      |  |         | 138.8   |         |  |   | 442.1   |   |  |   | (175.4   | )  |  |   | 591.3   |   |
| Long-termdebt                                             |  |   | — |   |  |                  | 3,002.1 |                      |  |         | — |         |  |   | 98.5    |   |  |   | —  |    |  |   | 3,100.6 |   |
| Deferredincometaxes                                       |  |   | — |   |  |                  | 401.0   |                      |  |         | (2.6    | )       |  |   | 103.1   |   |  |   | —  |    |  |   | 501.5   |   |
| Accruedpensionbenefits                                    |  |   | — |   |  |                  | 226.4   |                      |  |         | 37.2    |         |  |   | 148.1   |   |  |   | —  |    |  |   | 411.7   |   |
| Intercompanynotes payable-longterm                        |  |   | — |   |  |                  | 391.6   |                      |  |         | — |         |  |   | 1.4     |   |  |   | (393.0   | )  |  |   | — |   |
| Otherliabilities                                          |  |   | — |   |  |                  | 241.9   |                      |  |         | 27.3    |         |  |   | 27.6    |   |  |   | —  |    |  |   | 296.8   |   |
| **TotalOtherLiabilities**                                 |  |   | — |   |  |                  | 4,263.0 |                      |  |         | 61.9    |         |  |   | 378.7   |   |  |   | (393.0   | )  |  |   | 4,310.6 |   |
| **MinorityInterest**                                      |  |   | 14.1    |   |  |                  | — |                      |  |         | — |         |  |   | 14.1    |   |  |   | (14.1    | )  |  |   | 14.1    |   |
| **Unitholder's/Shareholders'Equity**                      |  |   | 1,017.7 |   |  |                  | 450.6   |                      |  |         | 1,222.8 |         |  |   | 2,150.8 |   |  |   | (3,824.2 | )  |  |   | 1,017.7 |   |
| **TotalLiabilities and Unitholder's/Shareholders'Equity** |  | $      | 1,031.8 |   |  | $                     | 4,899.4 |                      |  | $            | 1,423.5 |         |  | $      | 2,985.7 |   |  | $      | (4,406.7 | )  |  | $      | 5,933.7 |   |
|                                                           |

98

----

Nalco Holdings LLC andSubsidiariesCondensed Consolidating Balance SheetDecember 31,2003

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

99

----

Nalco Holdings LLC andSubsidiariesCondensed Consolidating Statement ofOperationsYear ended December 31, 2004(Successor)

|                                              |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| **Netsales**                                 |  | $      | — |    |  | $                     | 1,082.7 |                      |  | $            | 545.8   |         |  | $      | 1,679.0 |    |  | $      | (274.2  | )  |  | $      | 3,033.3 |    |
| Operatingcosts andexpenses:                  |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Costof productsold                           |  |   | — |    |  |                  | 631.6   |                      |  |         | 337.3   |         |  |   | 857.5   |    |  |   | (274.2  | )  |  |   | 1,552.2 |    |
| Selling,administrative, and researchexpenses |  |   | — |    |  |                  | 438.3   |                      |  |         | 117.0   |         |  |   | 510.0   |    |  |   | — |    |  |   | 1,065.3 |    |
| Amortizationof intangibleassets              |  |   | — |    |  |                  | 38.2    |                      |  |         | 13.0    |         |  |   | 45.1    |    |  |   | — |    |  |   | 96.3    |    |
| In-processresearch anddevelopment            |  |   | — |    |  |                  | 108.6   |                      |  |         | 13.7    |         |  |   | — |    |  |   | — |    |  |   | 122.3   |    |
| Businessoptimizationexpenses                 |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | 1.7     |    |  |   | — |    |  |   | 1.7     |    |
| Totaloperating costs andexpenses             |  |   | — |    |  |                  | 1,216.7 |                      |  |         | 481.0   |         |  |   | 1,414.3 |    |  |   | (274.2  | )  |  |   | 2,837.8 |    |
| **Operatingearnings(loss)**                  |  |   | — |    |  |                  | (134.0  | )                    |  |         | 64.8    |         |  |   | 264.7   |    |  |   | — |    |  |   | 195.5   |    |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Otherincome (expense),net                    |  |   | (98.4   | )  |  |                  | 45.4    |                      |  |         | 34.2    |         |  |   | (75.5   | )  |  |   | 51.0    |    |  |   | (43.3   | )  |
| Interestincome                               |  |   | — |    |  |                  | 8.6     |                      |  |         | 5.3     |         |  |   | 15.6    |    |  |   | (19.4   | )  |  |   | 10.1    |    |
| Interestexpense                              |  |   | — |    |  |                  | (222.1  | )                    |  |         | (4.9    | )       |  |   | (5.6    | )  |  |   | 19.4    |    |  |   | (213.2  | )  |
| Earnings(loss) before incometaxes            |  |   | (98.4   | )  |  |                  | (302.1  | )                    |  |         | 99.4    |         |  |   | 199.2   |    |  |   | 51.0    |    |  |   | (50.9   | )  |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Incometax provision(benefit)                 |  |   | — |    |  |                  | (37.2   | )                    |  |         | 10.1    |         |  |   | 74.4    |    |  |   | 0.2     |    |  |   | 47.5    |    |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Minorityinterests                            |  |   | (5.8    | )  |  |                  | — |                      |  |         | — |         |  |   | (5.8    | )  |  |   | 5.8     |    |  |   | (5.8    | )  |
| **Netearnings(loss)**                        |  | $      | (104.2  | )  |  | $                     | (264.9  | )                    |  | $            | 89.3    |         |  | $      | 119.0   |    |  | $      | 56.6    |    |  | $      | (104.2  | )  |
|                                              |

100

----

Nalco Holdings LLC andSubsidiariesCondensed Consolidating Statement of OperationsFor the Period from November 4, 2003 through December 31, 2003(Successor)

|                                              |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |        |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|--------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                         |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| **Netsales**                                 |  | $      | — |    |  | $                     | 159.5   |                      |  | $            | 84.7    |         |  | $      | 252.9  |    |  | $      | (37.0   | )  |  | $      | 460.1  |    |
| Operatingcosts andexpenses:                  |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Costof productsold                           |  |   | — |    |  |                  | 87.0    |                      |  |         | 53.1    |         |  |   | 145.1  |    |  |   | (37.0   | )  |  |   | 248.2  |    |
| Selling,administrative, and researchexpenses |  |   | 0.4     |    |  |                  | 67.9    |                      |  |         | 24.4    |         |  |   | 83.7   |    |  |   | — |    |  |   | 176.4  |    |
| Amortizationof intangibleassets              |  |   | — |    |  |                  | 6.2     |                      |  |         | 2.1     |         |  |   | 7.1    |    |  |   | — |    |  |   | 15.4   |    |
| Businessoptimizationexpenses                 |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | 0.8    |    |  |   | — |    |  |   | 0.8    |    |
| Totaloperating costs andexpenses             |  |   | 0.4     |    |  |                  | 161.1   |                      |  |         | 79.6    |         |  |   | 236.7  |    |  |   | (37.0   | )  |  |   | 440.8  |    |
| **Operatingearnings(loss)**                  |  |   | (0.4    | )  |  |                  | (1.6    | )                    |  |         | 5.1     |         |  |   | 16.2   |    |  |   | — |    |  |   | 19.3   |    |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Otherincome (expense),net                    |  |   | (23.9   | )  |  |                  | 5.9     |                      |  |         | 5.2     |         |  |   | (94.4  | )  |  |   | 104.4   |    |  |   | (2.8   | )  |
| Interestincome                               |  |   | — |    |  |                  | 0.5     |                      |  |         | 0.6     |         |  |   | 0.4    |    |  |   | (0.9    | )  |  |   | 0.6    |    |
| Interestexpense                              |  |   | — |    |  |                  | (49.6   | )                    |  |         | (0.2    | )       |  |   | (0.7   | )  |  |   | 0.9     |    |  |   | (49.6  | )  |
| Earnings(loss) before incometaxes            |  |   | (24.3   | )  |  |                  | (44.8   | )                    |  |         | 10.7    |         |  |   | (78.5  | )  |  |   | 104.4   |    |  |   | (32.5  | )  |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Incometax provision(benefit)                 |  |   | (0.2    | )  |  |                  | (8.9    | )                    |  |         | 1.7     |         |  |   | (0.9   | )  |  |   | — |    |  |   | (8.3   | )  |
|                                         |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |   |    |  |   |    |    |  |   |   |    |
| Minorityinterests                            |  |   | 0.1     |    |  |                  | — |                      |  |         | — |         |  |   | 0.1    |    |  |   | (0.1    | )  |  |   | 0.1    |    |
| **Netearnings(loss)**                        |  | $      | (24.0   | )  |  | $                     | (35.9   | )                    |  | $            | 9.0     |         |  | $      | (77.5  | )  |  | $      | 104.3   |    |  | $      | (24.1  | )  |
|                                              |

101

----

Nalco Holdings LLC andSubsidiariesCondensed Combining Statement of Operations Forthe Period from January 1, 2003 through November 3, 2003(Predecessor)

|                                              |  |        |         |                       |  |                           |         |              |  |          |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| **Netsales**                                 |  | $      | 858.2   |                  |  | $                         | 421.4   |         |  | $        | 1,208.5 |    |  | $      | (181.6  | )  |  | $      | 2,306.5 |    |
| Operatingcosts andexpenses:                  |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Costof productsold                           |  |   | 459.8   |                  |  |                      | 246.9   |         |  |     | 589.5   |    |  |   | (181.6  | )  |  |   | 1,114.6 |    |
| Selling,administrative, and researchexpenses |  |   | 392.2   |                  |  |                      | 123.7   |         |  |     | 384.8   |    |  |   | — |    |  |   | 900.7   |    |
| Impairmentofgoodwill                         |  |   | 244.4   |                  |  |                      | — |         |  |     | — |    |  |   | — |    |  |   | 244.4   |    |
| Amortizationof intangibleassets              |  |   | 62.5    |                  |  |                      | 6.4     |         |  |     | — |    |  |   | — |    |  |   | 68.9    |    |
| Businessoptimizationexpenses                 |  |   | 14.6    |                  |  |                      | 0.5     |         |  |     | 5.2     |    |  |   | — |    |  |   | 20.3    |    |
| Totaloperating costs andexpenses             |  |   | 1,173.5 |                  |  |                      | 377.5   |         |  |     | 979.5   |    |  |   | (181.6  | )  |  |   | 2,348.9 |    |
| **Operatingearnings(loss)**                  |  |   | (315.3  | )                |  |                      | 43.9    |         |  |     | 229.0   |    |  |   | — |    |  |   | (42.4   | )  |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Otherincome (expense),net                    |  |   | 68.6    |                  |  |                      | 42.1    |         |  |     | (72.9   | )  |  |   | (55.1   | )  |  |   | (17.3   | )  |
| Interestincome                               |  |   | 4.4     |                  |  |                      | 4.5     |         |  |     | 1.7     |    |  |   | (3.5    | )  |  |   | 7.1     |    |
| Interestexpense                              |  |   | (26.5   | )                |  |                      | (1.3    | )       |  |     | (8.4    | )  |  |   | 3.5     |    |  |   | (32.7   | )  |
| Earnings(loss) before incometaxes            |  |   | (268.8  | )                |  |                      | 89.2    |         |  |     | 149.4   |    |  |   | (55.1   | )  |  |   | (85.3   | )  |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Incometaxprovision                           |  |   | 0.7     |                  |  |                      | 15.3    |         |  |     | 52.7    |    |  |   | — |    |  |   | 68.7    |    |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Minorityinterests                            |  |   | — |                  |  |                      | — |         |  |     | (4.2    | )  |  |   | — |    |  |   | (4.2    | )  |
| **Netearnings(loss)**                        |  | $      | (269.5  | )                |  | $                         | 73.9    |         |  | $        | 92.5    |    |  | $      | (55.1   | )  |  | $      | (158.2  | )  |
|                                              |

102

----

Nalco Holdings LLC andSubsidiariesCondensed Combining Statement of Operations Yearended December 31, 2002(Predecessor)

|                                              |  |        |         |                       |  |                           |         |              |  |          |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                         |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| **Netsales**                                 |  | $      | 1,134.2 |                  |  | $                         | 414.1   |         |  | $        | 1,291.5 |    |  | $      | (195.5  | )  |  | $      | 2,644.3 |    |
| Operatingcosts andexpenses:                  |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Costof productsold                           |  |   | 579.6   |                  |  |                      | 255.9   |         |  |     | 626.1   |    |  |   | (195.5  | )  |  |   | 1,266.1 |    |
| Selling,administrative, and researchexpenses |  |   | 434.6   |                  |  |                      | 130.1   |         |  |     | 427.3   |    |  |   | — |    |  |   | 992.0   |    |
| Amortizationof intangibleassets              |  |   | 74.6    |                  |  |                      | 9.8     |         |  |     | 4.8     |    |  |   | — |    |  |   | 89.2    |    |
| Businessoptimizationexpenses                 |  |   | 16.4    |                  |  |                      | — |         |  |     | 16.4    |    |  |   | — |    |  |   | 32.8    |    |
| Totaloperating costs andexpenses             |  |   | 1,105.2 |                  |  |                      | 395.8   |         |  |     | 1,074.6 |    |  |   | (195.5  | )  |  |   | 2,380.1 |    |
| **Operatingearnings(loss)**                  |  |   | 29.0    |                  |  |                      | 18.3    |         |  |     | 216.9   |    |  |   | — |    |  |   | 264.2   |    |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Otherincome (expense),net                    |  |   | 47.3    |                  |  |                      | 32.0    |         |  |     | (72.2   | )  |  |   | (3.7    | )  |  |   | 3.4     |    |
| Interestincome                               |  |   | 5.2     |                  |  |                      | 7.3     |         |  |     | 3.3     |    |  |   | (8.0    | )  |  |   | 7.8     |    |
| Interestexpense                              |  |   | (30.9   | )                |  |                      | (3.1    | )       |  |     | (12.5   | )  |  |   | 8.0     |    |  |   | (38.5   | )  |
| Earnings(loss) before incometaxes            |  |   | 50.6    |                  |  |                      | 54.5    |         |  |     | 135.5   |    |  |   | (3.7    | )  |  |   | 236.9   |    |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Incometaxprovision                           |  |   | 44.1    |                  |  |                      | 15.0    |         |  |     | 46.1    |    |  |   | — |    |  |   | 105.2   |    |
|                                         |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |    |    |
| Minorityinterests                            |  |   | — |                  |  |                      | — |         |  |     | (3.3    | )  |  |   | — |    |  |   | (3.3    | )  |
| **Netearnings(loss)**                        |  | $      | 6.5     |                  |  | $                         | 39.5    |         |  | $        | 86.1    |    |  | $      | (3.7    | )  |  | $      | 128.4   |    |
|                                              |

103

----

Nalco Holdings LLC andSubsidiariesCondensed Consolidating Statement of Cash FlowsYear ended December 31, 2004(Successor)

|                                                    |  |        |         |         |  |                       |         |                           |  |              |         |              |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------|--|--------|---------|---------|--|-----------------------|---------|---------------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                               |  | Parent |         | Issuer  |  | GuarantorSubsidiaries |         | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| **Operatingactivities**                            |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Netearnings(loss)                                  |  | $      | (104.2  | )  |  | $                     | (264.9  | )                    |  | $            | 89.3    |         |  | $      | 119.0   |    |  | $      | 56.6    |    |  | $      | (104.2  | )  |
| Non-cashadjustments                                |  |   | 104.5   |    |  |                  | 216.0   |                      |  |         | 59.5    |         |  |   | 86.6    |    |  |   | (98.4   | )  |  |   | 368.2   |    |
| Changesin operating assets andliabilities          |  |   | (4.0    | )  |  |                  | 114.8   |                      |  |         | 4.0     |         |  |   | (141.6  | )  |  |   | — |    |  |   | (26.8   | )  |
| Netcash provided by (used for) operatingactivities |  |   | (3.7    | )  |  |                  | 65.9    |                      |  |         | 152.8   |         |  |   | 64.0    |    |  |   | (41.8   | )  |  |   | 237.2   |    |
| **Investingactivities**                            |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Acquisitionof Ondeo NalcoGroup                     |  |   | (0.3    | )  |  |                  | 25.6    |                      |  |         | — |         |  |   | — |    |  |   | — |    |  |   | 25.3    |    |
| Businesspurchases/sales,net                        |  |   | (11.0   | )  |  |                  | (6.2    | )                    |  |         | (0.3    | )       |  |   | (0.1    | )  |  |   | 15.3    |    |  |   | (2.3    | )  |
| Additionsto property, plant, and equipment,net     |  |   | — |    |  |                  | (23.9   | )                    |  |         | (6.0    | )       |  |   | (61.9   | )  |  |   | — |    |  |   | (91.8   | )  |
| Otherinvestingactivities                           |  |   | — |    |  |                  | 118.9   |                      |  |         | (29.7   | )       |  |   | (96.1   | )  |  |   | 2.8     |    |  |   | (4.1    | )  |
| Netcash provided by (used for) investingactivities |  |   | (11.3   | )  |  |                  | 114.4   |                      |  |         | (36.0   | )       |  |   | (158.1  | )  |  |   | 18.1    |    |  |   | (72.9   | )  |
|                                               |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| **Financingactivities**                            |  |   |    |    |  |                  |    |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |    |    |
| Cashdividends                                      |  |   | — |    |  |                  | — |                      |  |         | (31.4   | )       |  |   | (10.4   | )  |  |   | 41.8    |    |  |   | — |    |
| Netborrowings (repayments) ofdebt                  |  |   | — |    |  |                  | (212.5  | )                    |  |         | (86.9   | )       |  |   | 60.2    |    |  |   | (2.8    | )  |  |   | (242.0  | )  |
| Capitalcontributions                               |  |   | 11.0    |    |  |                  | 11.0    |                      |  |         | 0.5     |         |  |   | 3.8     |    |  |   | (15.3   | )  |  |   | 11.0    |    |
| Otherfinancingactivities                           |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | (0.9    | )  |  |   | — |    |  |   | (0.9    | )  |
| Netcash provided by (used for) financingactivities |  |   | 11.0    |    |  |                  | (201.5  | )                    |  |         | (117.8  | )       |  |   | 52.7    |    |  |   | 23.7    |    |  |   | (231.9  | )  |
| Effectof exchange rate changes oncash              |  |   | — |    |  |                  | — |                      |  |         | — |         |  |   | 0.8     |    |  |   | — |    |  |   | 0.8     |    |
| Decreaseincash                                     |  |   | (4.0    | )  |  |                  | (21.2   | )                    |  |         | (1.0    | )       |  |   | (40.6   | )  |  |   | — |    |  |   | (66.8   | )  |
| Cashat beginning ofperiod                          |  |   | 4.0     |    |  |                  | 22.5    |                      |  |         | 1.8     |         |  |   | 71.7    |    |  |   | — |    |  |   | 100.0   |    |
| Cashat end of period                               |  | $      | — |    |  | $                     | 1.3     |                      |  | $            | 0.8     |         |  | $      | 31.1    |    |  | $      | — |    |  | $      | 33.2    |    |
|                                                    |

104

----

Nalco Holdings LLC andSubsidiaries Condensed Consolidating Statement of Cash FlowsFor the Period from November 4, 2003 through December 31, 2003(Successor)

|                                                    |  |        |          |         |  |                       |          |                           |  |              |         |              |  |        |         |         |  |        |         |         |  |        |          |         |  |  |
|----------------------------------------------------|--|--------|----------|---------|--|-----------------------|----------|---------------------------|--|--------------|---------|--------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|----------|---------|--|--|
|                                               |  | Parent |          | Issuer  |  | GuarantorSubsidiaries |          | Non-GuarantorSubsidiaries |  | Eliminations |         | Consolidated |
| **Operatingactivities**                            |  |   |     |    |  |                  |     |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Netearnings(loss)                                  |  | $      | (24.1    | )  |  | $                     | (35.9    | )                    |  | $            | 9.0     |         |  | $      | (77.5   | )  |  | $      | 104.4   |    |  | $      | (24.1    | )  |
| Non-cashadjustments                                |  |   | 23.7     |    |  |                  | 24.4     |                      |  |         | 8.9     |         |  |   | 89.1    |    |  |   | (105.5  | )  |  |   | 40.6     |    |
| Changesin operating assets andliabilities          |  |   | 4.0      |    |  |                  | 21.3     |                      |  |         | 3.2     |         |  |   | 43.7    |    |  |   | — |    |  |   | 72.2     |    |
| Netcash provided by operatingactivities            |  |   | 3.6      |    |  |                  | 9.8      |                      |  |         | 21.1    |         |  |   | 55.3    |    |  |   | (1.1    | )  |  |   | 88.7     |    |
|                                               |  |   |     |    |  |                  |     |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| **Investingactivities**                            |  |   |     |    |  |                  |     |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Acquisitionof Ondeo NalcoGroup                     |  |   | (1,001.5 | )  |  |                  | (3,095.6 | )                    |  |         | — |         |  |   | (481.8  | )  |  |   | 451.8   |    |  |   | (4,127.1 | )  |
| Additionsto property, plant, and equipment,net     |  |   | —  |    |  |                  | (2.9     | )                    |  |         | (1.0    | )       |  |   | (11.7   | )  |  |   | — |    |  |   | (15.6    | )  |
| Otherinvestingactivities                           |  |   | —  |    |  |                  | (12.8    | )                    |  |         | (2.4    | )       |  |   | (1.9    | )  |  |   | 14.7    |    |  |   | (2.4     | )  |
| Netcash used for investingactivities               |  |   | (1,001.5 | )  |  |                  | (3,111.3 | )                    |  |         | (3.4    | )       |  |   | (495.4  | )  |  |   | 466.5   |    |  |   | (4,145.1 | )  |
|                                               |  |   |     |    |  |                  |     |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| **Financingactivities**                            |  |   |     |    |  |                  |     |                      |  |         |    |         |  |   |    |    |  |   |    |    |  |   |     |    |
| Cashdividends                                      |  |   | —  |    |  |                  | —  |                      |  |         | — |         |  |   | (1.1    | )  |  |   | 1.1     |    |  |   | —  |    |
| Netborrowings (repayments) of long-termdebt        |  |   | —  |    |  |                  | 3,214.0  |                      |  |         | — |         |  |   | (0.6    | )  |  |   | — |    |  |   | 3,213.4  |    |
| Deferredfinancingcosts                             |  |   | —  |    |  |                  | (92.4    | )                    |  |         | — |         |  |   | — |    |  |   | — |    |  |   | (92.4    | )  |
| Capitalcontribution                                |  |   | 1,001.9  |    |  |                  | —  |                      |  |         | — |         |  |   | 451.8   |    |  |   | (451.8  | )  |  |   | 1,001.9  |    |
| Otherfinancingactivities                           |  |   | —  |    |  |                  | 2.4      |                      |  |         | (16.2   | )       |  |   | 35.9    |    |  |   | (14.7   | )  |  |   | 7.4      |    |
| Netcash provided by (used for) financingactivities |  |   | 1,001.9  |    |  |                  | 3,124.0  |                      |  |         | (16.2   | )       |  |   | 486.0   |    |  |   | (465.4  | )  |  |   | 4,130.3  |    |
| Effectof exchange rate changes oncash              |  |   | —  |    |  |                  | —  |                      |  |         | — |         |  |   | 1.7     |    |  |   | — |    |  |   | 1.7      |    |
| Increaseincash                                     |  |   | 4.0      |    |  |                  | 22.5     |                      |  |         | 1.5     |         |  |   | 47.6    |    |  |   | — |    |  |   | 75.6     |    |
| Cashat beginning ofperiod                          |  |   | —  |    |  |                  | —  |                      |  |         | 0.3     |         |  |   | 24.1    |    |  |   | — |    |  |   | 24.4     |    |
| Cashat end ofperiod                                |  | $      | 4.0      |    |  | $                     | 22.5     |                      |  | $            | 1.8     |         |  | $      | 71.7    |    |  | $      | — |    |  | $      | 100.0    |    |
|                                                    |

105

----

Nalco Holdings LLC and SubsidiariesCondensed Combining Statement of Cash Flows For the Period fromJanuary 1, 2003 through November 3, 2003 (Predecessor)

|                                                    |  |        |         |                       |  |                           |         |              |  |          |        |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|--------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                               |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| **Operatingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |   |    |
| Netearnings(loss)                                  |  | $      | (269.5  | )                |  | $                         | 73.9    |         |  | $        | 92.5   |    |  | $      | (55.1   | )  |  | $      | (158.2 | )  |
| Non-cashadjustments                                |  |   | 335.4   |                  |  |                      | 37.8    |         |  |     | 40.2   |    |  |   | 24.7    |    |  |   | 438.1  |    |
| Changesin operating assets andliabilities          |  |   | (92.9   | )                |  |                      | (40.4   | )       |  |     | (2.2   | )  |  |   | — |    |  |   | (135.5 | )  |
| Netcash provided by (used for) operatingactivities |  |   | (27.0   | )                |  |                      | 71.3    |         |  |     | 130.5  |    |  |   | (30.4   | )  |  |   | 144.4  |    |
|                                               |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |   |    |
| **Investingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |   |    |
| Businesspurchases/sales,net                        |  |   | 42.9    |                  |  |                      | (0.8    | )       |  |     | (56.6  | )  |  |   | 4.4     |    |  |   | (10.1  | )  |
| Additionsto property, plant, and equipment,net     |  |   | (30.4   | )                |  |                      | (9.2    | )       |  |     | (46.0  | )  |  |   | — |    |  |   | (85.6  | )  |
| Otherinvestingactivities                           |  |   | 4.9     |                  |  |                      | (46.6   | )       |  |     | 0.2    |    |  |   | 124.9   |    |  |   | 83.4   |    |
| Netcash provided by (used for) investingactivities |  |   | 17.4    |                  |  |                      | (56.6   | )       |  |     | (102.4 | )  |  |   | 129.3   |    |  |   | (12.3  | )  |
|                                               |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |   |    |
| **Financingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |   |    |  |   |    |    |  |   |   |    |
| Cashdividends                                      |  |   | — |                  |  |                      | (6.3    | )       |  |     | (53.1  | )  |  |   | 30.4    |    |  |   | (29.0  | )  |
| Netborrowings (repayments) of long-termdebt        |  |   | — |                  |  |                      | 0.2     |         |  |     | (7.9   | )  |  |   | — |    |  |   | (7.7   | )  |
| Capitalcontribution                                |  |   | — |                  |  |                      | 4.4     |         |  |     | 77.7   |    |  |   | (4.4    | )  |  |   | 77.7   |    |
| Otherfinancingactivities                           |  |   | 8.6     |                  |  |                      | (17.1   | )       |  |     | (141.8 | )  |  |   | (124.9  | )  |  |   | (275.2 | )  |
| Netcash provided by (used for) financingactivities |  |   | 8.6     |                  |  |                      | (18.8   | )       |  |     | (125.1 | )  |  |   | (98.9   | )  |  |   | (234.2 | )  |
| Effectof exchange rate changes oncash              |  |   | — |                  |  |                      | — |         |  |     | 6.0    |    |  |   | — |    |  |   | 6.0    |    |
| Decreaseincash                                     |  |   | (1.0    | )                |  |                      | (4.1    | )       |  |     | (91.0  | )  |  |   | — |    |  |   | (96.1  | )  |
| Cashat beginning ofperiod                          |  |   | 1.0     |                  |  |                      | 4.4     |         |  |     | 115.1  |    |  |   | — |    |  |   | 120.5  |    |
| Cashat end of period                               |  | $      | — |                  |  | $                         | 0.3     |         |  | $        | 24.1   |    |  | $      | — |    |  | $      | 24.4   |    |
|                                                    |

106

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Nalco Holdings LLC andSubsidiaries Condensed Combining Statement of Cash Flows Yearended December 31, 2002(Predecessor)

|                                                    |  |        |         |                       |  |                           |         |              |  |          |         |         |  |        |         |         |  |        |        |         |  |  |
|----------------------------------------------------|--|--------|---------|-----------------------|--|---------------------------|---------|--------------|--|----------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                               |  | Issuer |         | GuarantorSubsidiaries |  | Non-GuarantorSubsidiaries |         | Eliminations |  | Combined |
| **Operatingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Netearnings(loss)                                  |  | $      | 6.5     |                  |  | $                         | 39.5    |         |  | $        | 86.1    |    |  | $      | (3.7    | )  |  | $      | 128.4  |    |
| Non-cashadjustments                                |  |   | 72.5    |                  |  |                      | 51.1    |         |  |     | 34.6    |    |  |   | — |    |  |   | 158.2  |    |
| Changesin operating assets andliabilities          |  |   | (5.4    | )                |  |                      | 60.2    |         |  |     | (8.6    | )  |  |   | (9.7    | )  |  |   | 36.5   |    |
| Netcash provided by operatingactivities            |  |   | 73.6    |                  |  |                      | 150.8   |         |  |     | 112.1   |    |  |   | (13.4   | )  |  |   | 323.1  |    |
|                                               |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| **Investingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Businesspurchases/sales,net                        |  |   | 17.1    |                  |  |                      | (0.3    | )       |  |     | (14.1   | )  |  |   | — |    |  |   | 2.7    |    |
| Additionsto property, plant, and equipment,net     |  |   | (49.0   | )                |  |                      | (1.8    | )       |  |     | (57.5   | )  |  |   | — |    |  |   | (108.3 | )  |
| Otherinvestingactivities                           |  |   | 96.5    |                  |  |                      | (53.6   | )       |  |     | 47.5    |    |  |   | (110.9  | )  |  |   | (20.5  | )  |
| Netcash provided by (used for) investingactivities |  |   | 64.6    |                  |  |                      | (55.7   | )       |  |     | (24.1   | )  |  |   | (110.9  | )  |  |   | (126.1 | )  |
| **Financingactivities**                            |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Cashdividends                                      |  |   |    |                  |  |                      |    |         |  |     |    |    |  |   |    |    |  |   |   |    |
| Proceedsfrom corporate facility sale andleaseback  |  |   | (122.3  | )                |  |                      | (4.4    | )       |  |     | (9.0    | )  |  |   | 13.4    |    |  |   | (122.3 | )  |
| Netborrowings (repayments) of long-termdebt        |  |   | 144.8   |                  |  |                      | — |         |  |     | — |    |  |   | — |    |  |   | 144.8  |    |
| Otherfinancingactivities                           |  |   | (174.4  | )                |  |                      | (93.1   | )       |  |     | (98.6   | )  |  |   | 110.9   |    |  |   | (255.2 | )  |
| Netcash used for financingactivities               |  |   | (151.9  | )                |  |                      | (97.5   | )       |  |     | (107.6  | )  |  |   | 124.3   |    |  |   | (232.7 | )  |
| Effectof exchange rate changes oncash              |  |   | — |                  |  |                      | — |         |  |     | 8.9     |    |  |   | 1.3     |    |  |   | 10.2   |    |
| Decreaseincash                                     |  |   | (13.7   | )                |  |                      | (2.4    | )       |  |     | (10.7   | )  |  |   | 1.3     |    |  |   | (25.5  | )  |
| Cashat beginning ofperiod                          |  |   | 14.7    |                  |  |                      | 6.8     |         |  |     | 125.8   |    |  |   | (1.3    | )  |  |   | 146.0  |    |
| Cashat end ofperiod                                |  | $      | 1.0     |                  |  | $                         | 4.4     |         |  | $        | 115.1   |    |  | $      | — |    |  | $      | 120.5  |    |
|                                                    |

107

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|               |                                                                                    |
|---------------|------------------------------------------------------------------------------------|
| ITEM 9.  | CHANGES INAND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE |

None.

|                |                        |
|----------------|------------------------|
| ITEM 9A.  | CONTROLSAND PROCEDURES |

|           |                                                  |
|-----------|--------------------------------------------------|
| (a)  | Evaluation ofdisclosure controls and procedures. |

TheCompany's chief executive officer and chief financial officer,after evaluating the effectiveness of the Company's"disclosure controls and procedures" (asdefined in the Securities Exchange Act of 1934 Rules 13a-15(e) and15d-15(e)) as of the end of the period, have concluded that theCompany's disclosure controls and procedures were adequate anddesigned to ensure that material information relating to the Companyand its consolidated subsidiaries would be made known to them by otherswithin those entities as appropriate to allow timely decisionsregarding requireddisclosures.

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

There were nochanges in the Company's internal controls over financialreporting that occurred during the fourth quarter of 2004 that havematerially affected, or are reasonably likely to materially affect, theCompany's internal controls over financial reporting.

|                |                   |
|----------------|-------------------|
| ITEM 9B.  | OTHER INFORMATION |

There wasno information required to be disclosed in a report on Form 8-K duringthe fourth quarter of 2004 that was not previously reported.

108

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT

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

ITEM 11.    EXECUTIVE COMPENSATION

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

|               |                                                               |
|---------------|---------------------------------------------------------------|
| ITEM12.  | SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT |

Omitted pursuant to General InstructionI(2)(c) to Form 10-K.

ITEM 13.    CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS

Omitted pursuant to General InstructionI(2)(c) to Form 10-K.

ITEM 14.    PRINCIPAL ACCOUNTANT FEESAND SERVICES

The following table presents fees for professionalservices rendered by Ernst & Young LLP for the audit of theCompany's annual financial statements for 2004 and 2003, and feesbilled for audit-related services, tax services and all other servicesrendered by Ernst & Young LLP for 2004 and 2003.

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

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

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

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

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

109

----

The Company's Audit Committee ofthe Board of Directors has adopted a Pre-Approval Policy that can befound at www.nalco.com.

To safeguard the continued independenceof the independent auditors, the Audit Committee has adopted a policythat prevents our independent auditors from providing services to usthat are prohibited under Section  10A(g) of the SecuritiesExchange Act of 1934, as amended. This policy also provides thatindependent auditors are only permitted to provide services to us thathave been pre-approved by the Audit Committee. Pursuant to the policy,all audit services require advance approval by the Audit Committee. Allother services by the independent auditors that fall within certaindesignated dollar thresholds, both per engagement as well as annualaggregate, have been pre-approved under the policy. Different dollarthresholds apply to the three categories of pre-approved servicesspecified in the policy (audit-related services, tax services and otherservices). All services that exceed the dollar thresholds must beapproved in advance by the Audit Committee. Pursuant to applicableprovisions of the Securities Exchange Act of 1934, as amended, theAudit Committee has delegated approval authority to the Chairman of theAudit Committee, who is an independent director. The Chairman haspresented all approval decisions to the full Audit Committee.

110

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PART IV

ITEM 15.    EXHIBITS,FINANCIAL STATEMENT SCHEDULES

(a) (1)    FinancialStatements

The following consolidated and combinedfinancial statements of Nalco Holdings LLC and subsidiaries are filedas part of this report under Item 8–Financial Statements andSupplementary Data:

Consolidated BalanceSheets–December 31, 2004 and 2003

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

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

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

Notes to Consolidated and Combined FinancialStatements

(a) (2)    Financial statementschedules:

Schedule II – Valuation and QualifyingAccounts

All other financial statement schedules arenot required under the relevant instructions or are inapplicable andtherefore have been omitted.

111

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

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

|  |
|--|
|  |  |
|  |

|     |                                         |
|-----|-----------------------------------------|
| (1) | Foreigncurrency translationadjustments. |

|     |                                      |
|-----|--------------------------------------|
| (2) | Account write-offsnet of recoveries. |

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

|     |                                                                         |
|-----|-------------------------------------------------------------------------|
| (4) | Additional allowanceresulting from the Acquisition charged to goodwill. |

112

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(a) (3)    Exhibits required tobe filed by Item 601 of RegulationS-K:

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 2.1           |  | StockPurchase Agreement among Nalco Holdings LLC (formerly known asBlackstone/Neptune Acquisition Company L.L.C.), Leo Holding Company andNalco International SAS, dated as of August 31, 2003, which isincorporated herein by reference from Exhibit 2.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                   |
| 3.1           |  | Certificate of Formation ofNalco Holdings LLC, as amended, which is incorporated herein byreference from Exhibit 3.29 on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                     |
| 3.2           |  | Amended and RestatedLimited Liability Company Agreement of Nalco Holdings LLC, which isincorporated herein by reference from Exhibit 3.30 on Form S-4 of NalcoCompany filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                 |
| 4.1           |  | Senior Subordinated NotesRegistration Rights Agreement, dated as of November 4, 2003 among NalcoHoldings LLC, Nalco Company, the Guarantors named therein, CitigroupGlobal Markets Inc., as dollar representatives of the dollar initialpurchasers and Citigroup Global Markets Limited, as eurorepresentatives of the euro initial purchasers, which is incorporatedherein by reference from Exhibit 4.9 on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560). |
| 4.2           |  | Indenture, dated as of May1, 1998, between Nalco Chemical Company and The Chase Manhattan Bank,which is incorporated herein by reference from Exhibit 4.1 of theRegistration Statement on Form S-4 of Nalco Company filed on May 17,2004 (File No. 333-115560).                                                                                                                                                                                                                   |
| 4.3           |  | FirstSupplemental Indenture, dated as of December 3, 1999, by and betweenNalco Chemical Company and The Chase Manhattan Bank, which isincorporated herein by reference from Exhibit 4.2 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                     |
| 4.4           |  | Senior Notes Indenture,dated as of November 4, 2003, among Nalco Company, the Guarantors namedtherein and The Bank of New York, as Trustee, which is incorporatedherein by reference from Exhibit 4.3 of the Registration Statement onForm S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                       |
| 4.5           |  | Senior Notes SupplementalIndenture, dated as of November 12, 2003, among Nalco Company, theguarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.4 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                         |
| 4.6           |  | Senior Subordinated NotesIndenture, dated as of November 4, 2003, among Nalco Company, theGuarantors named therein and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                          |
| 4.7           |  | Senior Subordinated NotesSupplemental Indenture, dated as of November 12, 2003, among NalcoCompany, the guarantors named therein and The Bank of New York, asTrustee, which is incorporated herein by reference from Exhibit 4.6 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                             |
| 4.8           |  | Indenture, dated as ofJanuary 21, 2004 among Nalco Finance Holdings LLC, Nalco FinanceHoldings Inc. and The Bank of New York, as Trustee, which isincorporated herein by reference from Exhibit 4.7 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                         |
|               |

113

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.9           |  | Senior NotesRegistration Rights Agreement, dated as of November 4, 2003 among NalcoHoldings LLC, Nalco Company, the Guarantors named therein, CitigroupGlobal Markets Inc., as dollar representatives of the dollar initialpurchasers and Citigroup Global Markets Limited, as eurorepresentatives of the euro initial purchasers, which is incorporatedherein by reference from Exhibit 4.8 on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.1          |  | Credit Agreement, dated asof November 4, 2003, among Nalco Holdings LLC, Nalco Company, as U.S.Borrower, the Foreign Subsidiary Borrowers from time to time partythereto, the Lenders party thereto, Citigroup Global Markets Inc. andBanc of America Securities LLC, as Global Coordinators, Citicorp NorthAmerica, Inc., as Administrative Agent, Bank of America, N.A., asDocumentation Agent, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Co-Syndication Agents, Citigroup Global Markets Inc., Banc ofAmerica Securities LLC, Deutsche Bank Securities Inc., J.P. MorganSecurities Inc., Goldman Sachs Credit Partners L.P. and UBS SecuritiesLLC, as Joint Lead Arrangers and Joint Book Managers, which isincorporated herein by reference from Exhibit 10.1 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560). |
| 10.2          |  | U.S. Guarantee andCollateral Agreement, dated as of November 4, 2003, among NalcoHoldings LLC, Nalco Company, each domestic subsidiary of Nalco HoldingsLLC named therein and Citicorp North America, Inc., as CollateralAgent, which is incorporated herein by reference from Exhibit 10.2 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.3          |  | Guarantee Agreement, datedas of August 31, 2003, between Suez and Blackstone/Neptune AcquisitionCompany L.L.C., which is incorporated herein by reference from Exhibit10.3 of the Registration Statement on Form S-4 of Nalco Company filedon May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.4          |  | Non-Competition Agreement,dated as of November 4, 2003 between Suez and Blackstone/NeptuneAcquisition Company L.L.C., which is incorporated herein by referencefrom Exhibit 10.4 of the Registration Statement on Form S-4 of NalcoCompany filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.5          |  | Reimbursement Agreement,dated as of November 4, 2003 between Suez and Nalco Company, which isincorporated herein by reference from Exhibit 10.5 of the RegistrationStatement on Form S-4 of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.6          |  | Sublease Agreement, datedas of November 4, 2003 between Leo Holding Company, as sublandlord andOndeo Nalco Company, as subtenant, which is incorporated herein byreference from Exhibit 10.6 of the Registration Statement on Form S-4of Nalco Company filed on May 17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.7          |  | Transaction Fee Agreement,dated as of November 4, 2003, among Nalco Company, Goldman, Sachs &Co., Apollo Management V, L.P., and Blackstone Management Partners IVL.L.C., which is incorporated herein by reference from Exhibit 10.7 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.8          |  | Monitoring Fee Agreement,dated as of November 4, 2003, between Nalco Company, BlackstoneManagement Partners IV L.L.C., Apollo Management V, L.P. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit10.8 of the Registration Statement on Form S-4 of Nalco Company filedon May 17, 2004 (File No. 333-115560).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|               |

114

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.9          |  | Amendment No. 1, datedas of November 4, 2003 to the Monitoring Fee Agreement, dated as ofNovember 4, 2003, among Nalco Company, Blackstone Management PartnersIV L.L.C., Apollo Management V, L.P. and Goldman, Sachs & Co. whichis incorporated herein by reference from Exhibit 10.9 of theRegistration Statement on Form S-4 of Nalco Company filed on May 17,2004 (File No. 333-115560). |
| 10.10         |  | SponsorServices Agreement, dated as of November 16, 2004, amending andrestating the Monitoring Fee Agreement, among Nalco Company, BlackstoneManagement Partners IV L.L.C., Apollo Management V, L.P. and Goldman,Sachs & Co., which is incorporated herein by reference from Exhibit10.2 on Form 8-K of Nalco Holding Company filed on November 18, 2004(File No.001-32342).                |
| 10.11         |  | SeveranceAgreement, effective as of January 1, 2004, between Nalco Company andWilliam J. Roe, which is incorporated herein by reference from Exhibit10.10 of Amendment No. 2 to the Registration Statement on Form S-4 ofNalco Company filed on August 11, 2004 (File No.333-115560).                                                                                                            |
| 10.12         |  | Employment Agreement,effective as of November 1, 2003, between Nalco Company and Bradley J.Bell, which is incorporated herein by reference from Exhibit 10.11 ofthe Registration Statement on Form S-4 of Nalco Company filed on May17, 2004 (File No.333-115560).                                                                                                                               |
| 10.13         |  | Severance Agreement,effective as of January 1, 2004, between Nalco Company and Daniel M.Harker.                                                                                                                                                                                                                                                                                                  |
| 10.14         |  | Severance Agreement, effectiveas of January 1, 2004, between Nalco Company and Lou L. Loosbrock,which is incorporated herein by reference from Exhibit 10.13 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August 11, 2004 (File No.333-115560).                                                                                                          |
| 10.15         |  | Receivables PurchaseAgreement, dated as of June 25, 2004, among Nalco Company, Nalco EnergyServices, L.P. and Nalco Receivables LLC, which is incorporated hereinby reference from Exhibit 10.16 of Amendment No. 2 to the RegistrationStatement on Form S-4 of Nalco Company filed on August 11, 2004 (FileNo. 333-115560).                                                                     |
| 10.16         |  | Receivables TransferAgreement, dated as of June 25, 2004, among Nalco Receivables LLC,Nalco Company, JPMorgan Chase Bank and the several transferees andfunding agents party hereto from time to time, which is incorporatedherein by reference from Exhibit 10.17 of Amendment No. 2 to theRegistration Statement on Form S-4 of Nalco Company filed on August 11,2004 (File No. 333-115560).   |
| 10.17         |  | EmploymentAgreement, dated as of August 3, 2004, between Nalco LLC and William H.Joyce, which is incorporated herein by reference from Exhibit 10.18 ofAmendment No. 2 to the Registration Statement on Form S-4 of NalcoCompany filed on August 11, 2004 (File No.333-115560).                                                                                                                  |
| 10.18         |  | Nalco LLC 2004 Unit Plan,which is incorporated herein by reference from Exhibit 10.24 of theRegistration Statement on Form  S-1 of Nalco Holding Companyfiled on August 26, 2004 (File No.333-118583).                                                                                                                                                                                           |
| 10.19         |  | Nalco LLC LimitedLiability Company Operating Agreement, dated May 17, 2004, which isincorporated herein by reference from Exhibit 10.25 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).                                                                                                                                         |
| 10.20         |  | Warrant Agreement, whichis incorporated herein by reference from Exhibit 10.4 on Form 8-K ofthe Nalco Holding Company filed on November 18, 2004 (File No.001-32342).                                                                                                                                                                                                                            |
|               |

115

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|               |  |                                                                                                                                                                                                                                                                                                                    |  |  |  |  |
|---------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                                                                               |
| 10.21         |  | Registration RightsAgreement, dated as of November 16, 2004, among Nalco Holding Company,Nalco LLC and the other parties named therein, which is incorporatedherein by reference from Exhibit 10.1 on Form 8-K of the Nalco HoldingCompany filed on November 18, 2004 (File No.001-32342).                         |
| 10.22         |  | Stockholders Agreement,dated as of November 16, 2004, between Nalco Holding Company and NalcoLLC, which is incorporated herein by reference from Exhibit 10.3 onForm 8-K of the Nalco Holding Company filed on November 18, 2004 (FileNo.  001-32342).                                                             |
| 10.23         |  | Nalco HoldingCompany 2004 Stock Incentive Plan, which is incorporated herein byreference from Exhibit 10.5 on Form 8-K of Nalco Holding Company filedon November 18, 2004 (File No.001-32342).                                                                                                                     |
| 10.24         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand William H. Joyce, which is incorporated herein by reference fromExhibit 10.30 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                       |
| 10.25         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Bradley J. Bell, which is incorporated herein by reference fromExhibit 10.31 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                        |
| 10.26         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand William J. Roe, which is incorporated herein by reference fromExhibit 10.32 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                         |
| 10.27         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Lou L. Loosbrock, which is incorporated herein by reference fromExhibit 10.34 of the Registration Statement on Form  S-1 of NalcoHolding Company filed on August 26, 2004 (File No.333-118583).                       |
| 10.28         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William H. Joyce, which is incorporatedherein by reference from Exhibit 10.35 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583). |
| 10.29         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Bradley J. Bell, which isincorporated herein by reference from Exhibit 10.36 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).    |
| 10.30         |  | Management MembersAgreement (class B, class C and class D Units), dated as of June 11,2004, between Nalco LLC and William J. Roe, which is incorporatedherein by reference from Exhibit 10.37 of the Registration Statement onForm  S-1 of Nalco Holding Company filed on August 26, 2004 (FileNo.  333-118583).   |
| 10.31         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Lou L. Loosbrock, which isincorporated herein by reference from Exhibit 10.39 of the RegistrationStatement on Form  S-1 of Nalco Holding Company filed on August26, 2004 (File No.333-118583).   |
| 10.32         |  | Management MembersAgreement (class A units), dated as of June 11, 2004, between Nalco LLCand Daniel M. Harker.                                                                                                                                                                                                     |
| 10.33         |  | ManagementMembers Agreement (class B, class C and class D Units), dated as ofJune 11, 2004, between Nalco LLC and Daniel M.Harker.                                                                                                                                                                                 |
|               |

116

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|               |  |                                                                                                                                                                                                                                                                   |  |  |  |  |
|---------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNumber |  |                                                                                                                                                                                                                                                              |
| 10.34         |  | Form of Nalco HoldingCompany 2004 Stock Incentive Plan Restricted Stock Unit Agreement,which is incorporated herein by reference from Exhibit 99.2 on Form S-8of Nalco Holding Company filed on February 7, 2005 (File No.333-122582).                            |
| 10.35         |  | Management Incentive Planof Nalco Company, which is incorporated herein by reference fromExhibit 99.1 on Form 8-K of Nalco Holding Company filed on March 1,2005 (File No.  001-32342).                                                                           |
| 10.36         |  | LongTerm Cash Incentive Plan of Nalco Company, which is incorporated hereinby reference from Exhibit 99.2 on Form 8-K of Nalco Holding Companyfiled on March 1, 2005 (File No.001-32342).                                                                         |
| 10.37         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Daniel S.Sanders.                                                                                                   |
| 10.38         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Douglas A.Pertz.                                                                                                    |
| 10.39         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Leon D.Black.                                                                                                       |
| 10.40         |  | Nalco Holding Company 2004Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and Paul H.O'Neill.                                                                                                     |
| 10.41         |  | Nalco Holding Company2004 Stock Incentive Plan Restricted Stock Unit Agreement, effectiveFebruary 18, 2005, between Nalco Holding Company and ChinhChu.                                                                                                           |
| 10.42         |  | Nalco Holding Company 2004 StockIncentive Plan Restricted Stock Unit Agreement, effective February 18,2005, between Nalco Holding Company and JoshuaHarris.                                                                                                       |
| 31.1          |  | Certification of the Chairmanand Chief Executive Officer pursuant to Rule 13a-14(a) of SecuritiesExchange Act of 1934, as adopted pursuant to Section 302 of theSarbanes-Oxley Act of2002.                                                                        |
| 31.2          |  | Certification of the ExecutiveVice President and Chief Financial Officer pursuant to Rule 13a-14(a)of Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of2002.                                                        |
| 32.1          |  | Certification of William H.Joyce, our Chairman and Chief Executive Officer, and Bradley J. Bell,our Executive Vice President and Chief Financial Officer, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002. |
|               |

117

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SIGNATURES

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

|  | NALCO HOLDINGS LLC (Registrant) |
|--|---------------------------------|

|  | By:    /s/ BRADLEY J.BELL |
|--|-----------------------------------------------|

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

|  | BradleyJ. BellExecutive Vice President and Chief FinancialOfficer(Principal Financial Officer) |
|--|------------------------------------------------------------------------------------------------|

Date:    March 24, 2005

Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signedbelow by the following persons on behalf of the registrant and in thecapacities indicated on March  24,2005.

|                         |  |                                                                 |
|-------------------------|--|-----------------------------------------------------------------|
| Signature               |  | Title                                                           |
|                         |
| /s/ WILLIAM H. JOYCE    |  | Chairman of the Board and Chief ExecutiveOfficer                |
|                         |
| William H.Joyce         |
|                         |
| /s/ BRADLEY J.BELL      |  | Executive VicePresident, Chief Financial Officer and  Treasurer |
|                         |
| Bradley J. Bell         |
|                         |
| /s/ BRUNO LAVANDIER     |  | Controller                                                      |
|                         |
| Bruno Lavandier         |
|                         |
| /s/ LEON D.BLACK        |  | Director                                                        |
|                         |
| Leon D.Black            |
|                         |
| /s/ CHINH E.CHU         |  | Director                                                        |
|                         |
| Chinh E. Chu            |
|                         |
| /s/ RICHARD A. FRIEDMAN |  | Director                                                        |
|                         |
| Richard A.Friedman      |
|                         |
| /s/ JOSHUAJ. HARRIS     |  | Director                                                        |
|                         |
| Joshua J.Harris         |
|                         |
| /s/ SANJEEV K.MEHRA     |  | Director                                                        |
|                         |
| Sanjeev K.Mehra         |
|                         |
| /s/ PAUL H.O'NEILL      |  | Director                                                        |
|                         |
| Paul H.O'Neill          |
|                         |
| /s/DOUGLAS A. PERTZ     |  | Director                                                        |
|                         |
| Douglas A.Pertz         |
|                         |
| /s/ DANIEL S.SANDERS    |  | Director                                                        |
|                         |
| Daniel S. Sanders       |
|                         |

118

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