6.   Financial Instruments

In December 2006, the company issued euro 300 million ($440 million as of September 30, 2008) aggregate principal amount of the company’s senior notes in two series: 4.355% Series A Senior Notes due 2013 in the aggregate principal amount of euro 125 million and 4.585% Series B Senior Notes due 2016 in the aggregate principal amount of euro 175 million. The company designated this debt and related accrued interest as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries. Accordingly, the transaction gains and losses on all euronotes which are designated and are effective as hedges of the company’s net investments have been included as a component of the cumulative translation account. Total transaction gains of $16.7 million, net of tax, related to the euronotes were charged to shareholders’ equity in the third quarter of 2008. Total transaction losses of $0.4 million, net of tax, related to the euronotes were charged to shareholders’ equity for the first nine months of 2008. Total transaction losses of $3.3 million, net of tax, and $7.0 million, net of tax, related to the euronotes were charged to shareholders’ equity in the third quarter and first nine months of 2007, respectively.

6.   Financial Instruments

In December 2006, the company issued euro 300 million ($467 million as of June 30, 2008) aggregate principal amount of the company’s senior notes in two series: 4.355% Series A Senior Notes due 2013 in the aggregate principal amount of euro 125 million and 4.585% Series B Senior Notes due 2016 in the aggregate principal amount of euro 175 million. The company designated this debt and related accrued interest as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries. Accordingly, the transaction gains and losses on all euronotes which are designated and are effective as hedges of the company’s net investments have been included as a component of the cumulative translation account.  Total transaction losses related to the euronotes charged to shareholders’ equity were $6.9 million, net of tax, and $17.1 million, net of tax, in the second quarter and first six months of 2008, respectively.  Total transaction losses related to the euronotes charged to shareholders’ equity were $4.1 million, net of tax, and $3.7 million, net of tax, in the second quarter and first six months of 2007, respectively.

5.       Financial Instruments

In December 2006, the company issued euro 300 million ($404 million as of June 30, 2007) aggregate principal amount of the company’s senior notes in two series: 4.355% Series A Senior Notes due 2013 in the aggregate principal amount of euro 125 million and 4.585% Series B Senior Notes due 2016 in the aggregate principal amount of euro 175 million. In February 2007, the company designated this debt as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries. The company had previously designated its euro 300 million 5.375% euronotes, which were repaid in February 2007, as a net investment hedge of existing foreign currency exposures. Accordingly, the transaction gains and losses on all euronotes which are designated and are effective as hedges of the company’s net investments have been included as a component of the cumulative translation account.  Total transaction losses related to the euronotes charged to shareholders’ equity were $4.1 million, net of tax, and $3.7 million, net of tax, in the second quarter and first six months of 2007, respectively.

4.       Financial Instruments

In February 2002, the company issued euro 300 million of 5.375 percent euronotes, due February 2007. The company has designated this euronote debt as a hedge of existing foreign currency exposures related to net investments the company has in certain European subsidiaries.  Accordingly, the transaction gains and losses on the euronotes which are designated and are effective as hedges of the company’s net investments have been included as a component of the cumulative translation account.  Total transaction gains and losses related to the euronotes charged to shareholders’ equity were losses of $0.1 million and $1.6 million for the third quarter of 2006 and 2005, respectively, and losses of $31.3 million and gains of $28.4 million for the first nine months of 2006 and 2005, respectively.

10

ECOLAB INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)