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                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

                               -------------

                                 FORM 10-K

                     FOR ANNUAL AND TRANSITION REPORTS
                  PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

           (Mark One)
           |X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

               For the fiscal year ended September 30, 2004

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

          For the transition period from _________ to ___________


                       Commission file number 1-2918

                                ASHLAND INC.
                          (a Kentucky corporation)
                           I.R.S. No. 61-0122250

                        50 E. RiverCenter Boulevard
                                P.O. Box 391
                       Covington, Kentucky 41012-0391
                      Telephone Number (859) 815-3333

              Securities Registered Pursuant to Section 12(b):

                                                 Name of each exchange
            Title of each class                  on which registered
            -------------------                  -------------------
Common Stock, par value $1.00 per share         New York Stock Exchange
                                               and Chicago Stock Exchange
Rights to purchase Series A Participating       New York Stock Exchange
     Cumulative Preferred Stock                and Chicago Stock Exchange

      Securities Registered Pursuant to Section 12(g) of the Act: None

     Indicate  by check  mark  whether  the  registrant  (1) has  filed all
reports  required  to be filed  by  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934 during the  preceding  12 months (or for such shorter
period that the Registrant was required to file such reports),  and (2) has
been subject to such filing  requirements  for the past 90 days. Yes |X| No
|_|
     Indicate by check mark if disclosure of delinquent  filers pursuant to
Item  405 of  Regulation  S-K is not  contained  herein,  and  will  not be
contained,  to the best of Registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. |X|
     Indicate by check mark whether the Registrant is an accelerated  filer
(as defined in Rule 12b-2 of the Act). Yes |X| No |_|
     At March 31, 2004, based on the New York Stock Exchange closing price,
the aggregate  market value of voting stock held by  non-affiliates  of the
Registrant was  approximately  $3,249,782,427.  In determining this amount,
the  Registrant  has assumed that its directors and executive  officers are
affiliates.  Such assumption  shall not be deemed  conclusive for any other
purpose.
     At November 30, 2004,  there were  71,941,455  shares of  Registrant's
common stock outstanding.
                    DOCUMENTS INCORPORATED BY REFERENCE
     Portions of  Registrant's  definitive  Proxy Statement for its January
27, 2005 Annual Meeting of Shareholders  are incorporated by reference into
Part III.



<PAGE>


                             TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
<S>                    <C>          <C>                                                               <C>
         PART I
                       Item 1.      Business.......................................................     1

                                      Corporate Developments.......................................     2

                                      APAC.........................................................     2

                                      Ashland Distribution.........................................     3

                                      Ashland Specialty Chemical...................................     3

                                      Valvoline....................................................     4

                                      Refining and Marketing.......................................     5

                                      Miscellaneous................................................     8

                       Item 2.      Properties.....................................................    12

                       Item 3.      Legal Proceedings..............................................    12

                       Item 4.      Submission of Matters to a Vote of Security Holders............    14

                       Item X.      Executive Officers of Ashland .................................    14


         PART II
                       Item 5.      Market for Registrant's Common Equity, Related Stockholder
                                       Matters and Issuer Purchases of Equity Securities...........    15

                        Item 6.     Selected Financial Data........................................    15

                        Item 7.     Management's Discussion and Analysis of Financial
                                       Condition and Results of Operations.........................    15

                        Item 7A.    Quantitative and Qualitative Disclosures about Market Risk.....    15

                        Item 8.     Financial Statements and Supplementary Data....................    15

                        Item 9.     Changes in and Disagreements With Accountants
                                       on Accounting and Financial Disclosure......................    15

                        Item 9A.    Controls and Procedures........................................    16

                        Item 9B.    Other Information..............................................    16


         PART III
                        Item 10.    Directors and Executive Officers of the Registrant.............    16

                        Item 11.    Executive Compensation.........................................    16

                        Item 12.    Security Ownership of Certain Beneficial
                                       Owners and Management and Related Stockholder Matters.......    16

                        Item 13.    Certain Relationships and Related Transactions.................    17

                        Item 14.    Principal Accountant Fees and Services.........................    17


         PART IV
                        Item 15.    Exhibits and Financial Statement Schedules.....................    17

</TABLE>

<PAGE>


                                   PART I


ITEM 1. BUSINESS

     Ashland Inc. is a Kentucky corporation, organized on October 22, 1936,
with  its  principal   executive  offices  located  at  50  E.  RiverCenter
Boulevard,  Covington,  Kentucky 41011 (Mailing Address:  50 E. RiverCenter
Boulevard, P.O. Box 391, Covington,  Kentucky 41012-0391) (Telephone: (859)
815-3333).  The terms  "Ashland" and the  "Company" as used herein  include
Ashland Inc. and its  consolidated  subsidiaries,  except where the context
indicates otherwise.

     Ashland's  businesses are grouped into five industry  segments:  APAC,
Ashland  Distribution,  Ashland Specialty Chemical,  Valvoline and Refining
and  Marketing.  Financial  information  about these segments for the three
fiscal years ended  September 30, 2004, is set forth on pages F-26 and F-27
of this annual report on Form 10-K.

     APAC  performs  asphalt  and  concrete  contract   construction  work,
including  highway paving and repair,  excavation  and grading,  and bridge
construction,  and produces asphaltic and ready-mix concrete, crushed stone
and other aggregate in the southern and mid-continent United States.

     Ashland  Distribution  distributes  chemicals,  plastics and resins in
North America and plastics in Europe.  Ashland  Distribution  also provides
environmental services.

     Ashland  Specialty  Chemical  is  focused on two  primary  businesses:
thermoset  resins and water  technologies.  It is a, worldwide  supplier of
specialty chemicals serving industries including building and construction;
commercial and  institutional  water treatment;  graphic arts and printing;
industrial  water   treatment;   marine;   metal  casting;   packaging  and
converting; pulp and paper; recreational marine; and transportation.

     Valvoline is a producer and marketer of premium packaged motor oil and
automotive chemicals, including appearance products,  antifreeze,  filters,
and automotive fragrances.  In addition,  Valvoline is engaged in the "fast
oil change" business through outlets  operating under the Valvoline Instant
Oil Change(R) name.

     Marathon Ashland Petroleum LLC ("MAP"),  a joint venture with Marathon
Oil Company ("Marathon"),  operates seven refineries with a total crude oil
refining  capacity  of  948,000  barrels  per  day.  Refined  products  are
distributed  through a network of independent and company-owned  outlets in
the Midwest,  the upper Great Plains and the  southeastern  United  States.
Marathon  holds a 62% interest in MAP, and Ashland  holds a 38% interest in
MAP. Ashland accounts for its investment in MAP using the equity method.

     At September 30, 2004,  Ashland and its consolidated  subsidiaries had
approximately 21,200 employees (excluding contract employees).

     Available Information.  Ashland's Internet address is www.ashland.com.
There, Ashland makes available,  free of charge, its annual reports on Form
10-K,  quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports as well as any beneficial  ownership reports of
officers and directors filed  electronically  on Forms 3, 4 and 5. All such
reports will be available as soon as reasonably  practicable  after Ashland
electronically files such material with, or furnishes such material to, the
Securities and Exchange Commission  ("SEC").  Ashland also makes available,
free of charge on its website, its Corporate Governance  Guidelines;  Board
Committee Charters;  Director Independence Standards;  and Code of Business
Conduct for  directors,  officers and employees.  These  documents are also
available  in  print  to  any  shareholder  who  requests  it.  Information
contained  on Ashland's  website is not part of this annual  report on Form
10-K and is not incorporated by reference in this document.

     Ashland has designated a Presiding Director of the Board of Directors,
whose primary  responsibility is to preside over regular executive sessions
of the Board in which management  directors and other members of management
do not  participate.  The  Presiding  Director is an  independent  director
appointed  by the Board.  The  non-management  directors  of the Board have
designated  Mr.  Solso to serve in this  capacity  through  Ashland's  2006
Annual  Meeting.   Shareholders  and  others  interested  in  communicating
directly with the Board, the Presiding Director,  with a specific member of
the Board or a Committee of the Board, or with the non-management directors
as a group may do so by writing to the Presiding Director, Ashland Inc., 50
E. RiverCenter  Boulevard,  P.O. Box 391, Covington,  Kentucky  41012-0391,
Attn: Secretary.  Communications directed to the Presiding Director will be
reviewed by the Secretary and distributed to the Presiding Director as well
as to other individual directors, as appropriate,  depending on the subject
matter  and  facts  and  circumstances  outlined  in  such  correspondence.

<PAGE>

Communications  that are not related to the duties and  responsibilities of
the Board,  or are  otherwise  inappropriate,  will not be forwarded to the
Presiding Director,  although all communications directed to the Board will
be available to any director upon request.

                           CORPORATE DEVELOPMENTS


     On March 19, 2004, Ashland announced the signing of an agreement under
which  it  would  transfer  its 38%  interest  in MAP and two  wholly-owned
businesses to Marathon in a transaction structured to be generally tax free
and valued at  approximately  $3.0 billion.  The two other  businesses  are
Ashland's  maleic  anhydride  business and 61 Valvoline  Instant Oil Change
("VIOC")  centers.   The  transaction  is  subject  to  several  previously
disclosed conditions, including approval by Ashland's shareholders, consent
from  Ashland's  public debt  holders  and  receipt of a favorable  private
letter ruling from the Internal Revenue Service ("IRS") with respect to the
tax treatment of the transaction. Ashland has filed registration statements
and  proxy  materials  with  the  SEC and is  responding  to  comments.  In
addition,  Ashland  submitted  a request  to the IRS for a  private  letter
ruling  on  the  tax-free  status  of  the  proposed  transaction.  Ashland
continues  to discuss the complex  tax issues  related to this  transaction
with the IRS.  Ashland  has not  resolved  all  issues  with the IRS and is
exploring  alternatives  for the resolution of these issues.  At this time,
Ashland cannot predict whether the requested  rulings will be received.  If
the requested  rulings are not received,  the transaction  would have to be
modified or  terminated.  In any event,  Ashland  does not  believe  that a
transaction will close earlier than March 2005.


                                    APAC

     The Ashland Paving And Construction,  Inc. group of companies ("APAC")
is one of the nation's largest transportation  construction contractors and
is a major supplier of construction  materials.  APAC performs construction
work,  such  as  paving,  repairing  and  resurfacing  highways,   streets,
airports, residential and commercial developments, sidewalks and driveways,
and  grading  and  base  work.  In  addition,   it  performs  a  number  of
construction  services  such as  excavation  and related  activities in the
construction of bridges and structures, drainage facilities and underground
utilities.  APAC conducts its business through 24  market-focused  business
units and a Major Projects Group operating in 14 southern and mid-continent
states.  These business units provide  construction  services and materials
throughout the regions in which they operate.  The market-focused  business
units  and  Major   Projects   Group  are  supported  by   management   and
administrative staff in Atlanta, Georgia.

     To  deliver  its  services  and  products,   APAC  utilizes  extensive
aggregate-producing properties and construction equipment. It currently has
93 aggregate production facilities, including 36 permanent operating quarry
locations;  31 ready-mix concrete plants; 226 hot-mix asphalt plants; and a
fleet of over 13,000 mobile equipment units,  including heavy  construction
equipment and  transportation-related  equipment.  In certain market areas,
APAC  is  vertically  integrated  with  asphalt,  aggregate  and  ready-mix
operations, all complementing each other.

     Raw  materials  and  aggregate  generally  consists  of sand,  gravel,
granite,  limestone and sandstone.  About 29% of the aggregate  produced by
APAC is used in APAC's own contract construction work and the production of
various processed  construction  materials.  The remainder is sold to third
parties. APAC also purchases  substantial  quantities of raw aggregate from
other  producers  whose  proximity to the job site renders it  economically
attractive.  Most other materials,  such as liquid asphalt, Portland cement
and reinforcing steel, are purchased from third parties.

     Approximately   78%  of  APAC's  sales  and  operating   revenues  are
construction  revenues,  with  the  remaining  22%  coming  from  sales  of
construction  materials.  Approximately 82% of APAC's construction revenues
are derived directly from highway and other public sector sources, with the
remaining 18% coming from  industrial and commercial  customers and private
developers.

     Climate and weather  significantly  affect revenues and margins in the
construction  business.  Due  to  its  location,  APAC  tends  to  enjoy  a
relatively long  construction  season.  Most of APAC's  operating income is
generated during the construction period of May to October.

     Total backlog at September  30, 2004,  was $1,746  million  (including
APAC's $19 million proportionate share of work related to an unconsolidated
equity joint  venture),  compared to $1,745  million at September 30, 2003.
APAC  includes a  construction  project in its  backlog  when a contract is
awarded or a firm letter of commitment is obtained and funding is in place.
The backlog at September 30, 2004, is considered  firm, and a major portion
is expected to be completed during fiscal 2005.


                                     2

<PAGE>

OTHER MATTERS

     For  information  on APAC and  federal,  state and local  statutes and
regulations governing releases into, or protection of, the environment, see
"Item 3. Legal  Proceedings  -  Environmental  Proceedings"  in this annual
report on Form 10-K.

                            ASHLAND DISTRIBUTION

     Ashland  Distribution  distributes  chemicals,  plastics and resins in
North America and plastics in Europe. Suppliers include many of the world's
leading  chemical  manufacturers.   Ashland  Distribution   specializes  in
providing mixed truckloads and less-than-truckload  quantities to customers
in a wide range of industries. Deliveries are facilitated through a network
of owned or leased  facilities  including 126  locations in North  America.
Distribution of thermoplastic resins in Europe is conducted in 13 countries
primarily  through  17  third-party  warehouses  and one  owned  warehouse.
Ashland Distribution operates in the following major market segments:

     Chemicals - Ashland Distribution  distributes specialty and industrial
chemicals, additives and solvents to industrial users in the United States,
Canada,  Mexico and Puerto Rico as well as some export operations.  Markets
served  include the paint and coatings,  personal  care,  inks,  adhesives,
polymer,  rubber,  industrial and  institutional  compounding,  automotive,
appliance and paper industries.

     Plastics - Ashland  Distribution offers a broad range of thermoplastic
resins and specialties to processors in the United States,  Canada,  Mexico
and  Puerto  Rico as well as some  export  operations.  Processors  include
injection molders,  extruders, blow molders and rotational molders. Ashland
Distribution also provides plastic material transfer and packaging services
and    less-than-truckload    quantities   of   packaged    thermoplastics.
Additionally,  Ashland Distribution markets a broad range of thermoplastics
to  processors  in Europe via  distribution  centers  located  in  Belgium,
Denmark,   England,   Finland,   France,   Germany,   Ireland,  Italy,  the
Netherlands, Norway, Poland, Portugal, Spain and Sweden.

     Composites  -  Ashland  Distribution   supplies  mixed  truckload  and
less-than-truckload   quantities   of   polyester   thermosetting   resins,
fiberglass  and  other  specialty  reinforcements,   catalysts  and  allied
products to  customers  in the  reinforced  plastics  and  cultured  marble
industries  through   distribution   facilities  located  throughout  North
America.

     Environmental  Services - Working in  cooperation  with chemical waste
service companies, Ashland Distribution provides customers with collection,
disposal and  recycling  of  hazardous  and  non-hazardous  waste  streams.
Services  are  offered  through a North  American  network  of more than 30
distribution centers,  including 10 storage facilities that have been fully
permitted by the United States Environmental Protection Agency ("USEPA").

     On August 31, 2004, Ashland  Distribution entered into an agreement to
sell its  ingestibles  line of business - which  includes food and beverage
additives and  pharmaceutical  actives and excipients.  Ashland expects the
transaction to be completed by January 31, 2005.

                         ASHLAND SPECIALTY CHEMICAL

     Ashland  Specialty  Chemical  is  focused on two  primary  businesses:
thermoset  resins and water  technologies.  It is a  worldwide  supplier of
specialty chemicals serving industries including building and construction;
commercial and  institutional  water treatment;  graphic arts and printing;
industrial  water   treatment;   marine;   metal  casting;   packaging  and
converting;  power  generation;  pulp and  paper;  recreational  marine and
transportation.   Ashland   Specialty   Chemical   owns  and   operates  38
manufacturing   facilities  and  participates  in  12  manufacturing  joint
ventures in 19 countries.

THERMOSET RESINS

     Composite  Polymers - This  business  group  manufactures  and sells a
broad range of  corrosion-resistant,  fire-retardant,  general-purpose  and
high-performance  marine  grades of  unsaturated  polyester and vinyl ester
resins and gel coats for the  reinforced  plastics  industry.  Key  markets
include  the  transportation,  construction  and  marine  industries.  This
business group has  manufacturing  plants in  Jacksonville  and Fort Smith,
Arkansas;  Los  Angeles,   California;   Bartow,  Florida;  Pittsburgh  and
Philadelphia,  Pennsylvania;  Johnson Creek,  Wisconsin;  Kelowna,  British
Columbia,  Canada; Kunshan,  China; Porvoo and Lahti, Finland;  Sauveterre,
France;  Miszewo,  Poland;



                                     3




<PAGE>

Benicarlo,  Spain;  and, through separate joint ventures has  manufacturing
plants in Sao Paolo,  Brazil, and Jeddah, Saudi Arabia. This business group
also manufactures  products through an Ashland Specialty  Chemical facility
located  in  Mississauga,   Ontario,   Canada.   Composite   Polymers  also
manufactures  maleic  anhydride in Neal, West Virginia,  and markets maleic
anhydride in North America.  For  information on the transfer of the maleic
business as part of the proposed  transfer of Ashland's 38% interest in MAP
to Marathon, see "Item 1. Business - Corporate Developments" in this annual
report on Form  10-K.  In  November  2004  this  business  group  signed an
agreement to purchase the  DERAKANE(TM)  epoxy vinyl ester resins  business
(which  includes  the  DERAKANE  MOMENTUM(TM)  product  line)  from The Dow
Chemical Company in a cash transaction valued at approximately $92 million.
The closing of the transaction,  which is anticipated to take place in late
calendar  2004 or early  2005,  is  conditional  upon a number of  standard
closing conditions, including several regulatory reviews.

     Casting  Solutions - This business group  manufactures and sells metal
casting  chemicals   worldwide,   including   sand-binding  resin  systems,
refractory  coatings,  release agents,  engineered sand additives and riser
sleeves.  This group also provides  casting process  modeling,  core making
process modeling and rapid prototyping services. This business group serves
the  global   metal   casting   industry   from  nine  owned  and  operated
manufacturing  sites, which include factories located in Campinas,  Brazil;
Mississauga,  Ontario,  Canada;  Changzhou,  China;  Milan,  Italy;  Alava,
Cantabria, Spain;  Kidderminster,  England and Cleveland East and Cleveland
West, Ohio.  Casting  Solutions also has eight joint venture  manufacturing
facilities located in Vienna,  Austria; Pons and Le Goulet, France; Bendorf
and Wuelfrath,  Germany; Ulsan, South Korea; Alvsjo, Sweden and St. Gallen,
Switzerland.

     Specialty  Polymers and Adhesives - This business  group  manufactures
and  sells   adhesive   solutions  to  the   building   and   construction,
transportation,  and packaging and converting markets. Key technologies and
markets include:  emulsion polymer isocyanate adhesives for structural wood
bonding;  elastomeric  polymer adhesives and butyl rubber roofing tapes for
commercial   roofing   applications;   polyurethane  and  epoxy  structural
adhesives  for  bonding   fiberglass   reinforced   plastics,   composites,
thermoplastics  and  metals in  automotive,  recreational,  and  industrial
applications; specialty phenolic resins for paper impregnation and friction
material bonding;  induction  bonding systems for thermoplastic  materials;
acrylic polymers for pressure-sensitive  adhesives;  urethane adhesives for
flexible  packaging  applications;  and  hot  melt  adhesives  for  various
packaging  applications.  It has  manufacturing  plants  in  Calumet  City,
Illinois; Norwood and Totowa, New Jersey; Ashland and Columbus, Ohio; White
City, Oregon; and Kidderminster, England.

WATER TECHNOLOGIES

     Drew Industrial - This business group supplies  specialized  chemicals
and  consulting  services for  treatment of boiler  water,  cooling  water,
steam,  fuel and waste  streams.  It also  supplies  process  chemicals and
technical  services  to the  pulp  and  paper  and  mining  industries  and
additives  to  manufacturers  of latex and paint.  It  conducts  operations
throughout  North  America,  Europe and the Far East and has  manufacturing
plants in Kearny,  New  Jersey;  Houston,  Texas;  Ajax,  Ontario,  Canada;
Viiala,  Finland;   Somercotes,   England;  Chester  Hill,  Australia;  and
Singapore;  and, through separate joint ventures, has production facilities
in Seoul, South Korea and Navi Mumbai, India.

     Drew Marine - This  business  group  supplies  technical  products and
services for the global marine  industry.  Products and services  worldwide
include a  comprehensive  line of  marine  chemicals  and  water  treatment
testing,   sealing  products,   welding  and  refrigeration  products,  and
firefighting,  safety and rescue  products for the world's  merchant marine
fleet.

OTHER MATTERS

     For information on Ashland Distribution and Ashland Specialty Chemical
and federal,  state and local statutes and regulations  governing  releases
into,  or  protection  of,  the  environment,   see  "Item  1.  Business  -
Miscellaneous  -  Environmental  Matters" and "Item 3. Legal  Proceedings -
Environmental Proceedings" in this annual report on Form 10-K.

                                 VALVOLINE

     Valvoline is a marketer of  premium-branded  automotive and commercial
lubricants,   automotive  chemicals,  automotive  appearance  products  and
automotive   services,   with  sales  in  more  than  100  countries.   The
Valvoline(R)  trademark was federally  registered in 1873 and is the oldest
trademark for lubricating oil in the United States.


                                     4

<PAGE>

     Valvoline markets the following key brands of products and services to
the  private  passenger  car  and  light  truck  and  commercial   markets:
Valvoline(R) lubricants,  synthetic SynPower(R) automotive chemicals; Eagle
One(R)  automotive  appearance  products;  Zerex(R)  antifreeze;  Pyroil(R)
automotive  chemicals;  MaxLife(R)  automotive  products for vehicles  with
75,000 miles or more; Premium Blue(R)  commercial  lubricants and Valvoline
Instant Oil Change(R) automotive services.

     In North America,  Valvoline is comprised of the following  three core
businesses:

     Do It  Yourself  ("DIY")  - The DIY  business  group  sells  Valvoline
products to consumers who perform their own auto maintenance through retail
auto parts stores, mass merchandisers, and warehouse distributors and their
affiliated jobber stores such as NAPA and Carquest.

     Do It For  Me  ("DIFM")  - The  DIFM  business  unit  sells  Valvoline
products to  installers  (such as car dealers  and quick  lubes)  through a
network of independent  distributors  and five  company-owned  and operated
"direct  market"  operations.  This business also includes a chain of quick
lubes  branded   "Valvoline   Express   Care(R),"  which  consists  of  348
independently owned and operated stores. The DIFM business group also has a
strategic  alliance  with  Cummins  Engine  Company,  Inc.  ("Cummins")  to
distribute heavy duty lubricants to the commercial market.

     Valvoline   Instant  Oil  Change(R)  - VIOC  is  one  of  the  largest
competitors  in the  expanding  U.S.  "fast oil change"  service  business,
providing  Valvoline  with a  significant  share of the DIFM segment of the
passenger  car and light truck motor oil market.  As of September 30, 2004,
360 company-owned  and 397 franchised  service centers were operating in 39
states. (For information on the inclusion of 61 VIOC centers as part of the
proposed  transfer of Ashland's 38% interest in MAP to Marathon,  see "Item
1. Business - Corporate  Developments" in this annual report on Form 10-K.)
VIOC has continued its customer service innovation through its upgraded and
enhanced  preventive  maintenance  tracking  system for consumers and fleet
operators.  This  computer-based  system  maintains  service records on all
customer  vehicles and contains a database on all car models,  which allows
service  technicians  to make  service  recommendations  based  on  vehicle
owner's manual recommendations.

     Outside  North  America,  Valvoline is comprised of one core  business
group:

     Valvoline  International - Valvoline  International markets Valvoline-
and Eagle One- branded  products  through  wholly-owned  affiliates,  joint
ventures,   licenses,  and  independent   distributors  in  more  than  100
countries.  The profitability of the business is dispersed  geographically,
with more than half of the profit coming from mature  markets in Europe and
Australia.  There are smaller,  rapidly growing  businesses in the emerging
markets of China,  India and Mexico,  including joint ventures with Cummins
in India  and  China.  These  businesses  market  lubricants  for  consumer
vehicles  and heavy  duty  engines  and  equipment  and are  served by toll
manufacturers and company-owned plants in the United States, Australia, and
the Netherlands.

OTHER MATTERS

     For information on Valvoline and federal, state and local statutes and
regulations governing releases into, or protection of, the environment, see
"Item 3. Legal  Proceedings  -  Environmental  Proceedings"  in this annual
report on Form 10-K.

                           REFINING AND MARKETING

     Refining  and  Marketing  operations  are  conducted  by MAP  and  its
subsidiaries,    including   its   wholly-owned   subsidiaries,    Speedway
SuperAmerica LLC and Marathon Ashland Pipe Line LLC. MAP also  participates
in the  travel  center  business  through  its  joint  venture  with  Pilot
Corporation  ("Pilot").  Marathon  holds a 62% interest in MAP, and Ashland
holds a 38% interest in MAP. For  information  on the proposed  transfer of
Ashland's  38%  interest  in MAP to  Marathon,  see  "Item  1.  Business  -
Corporate Developments" in this annual report on Form 10-K.



                                     5

<PAGE>



     Refining - MAP owns and operates  seven  refineries  with an aggregate
refining  capacity  of  948,000  barrels of crude oil per  calendar  day (1
barrel = 42 United States gallons). The table below sets forth the location
and daily crude oil  throughput  capacity  (measured in barrels) of each of
MAP's refineries as of September 30, 2004:

          Garyville, Louisiana...................................   245,000
          Catlettsburg, Kentucky.................................   222,000
          Robinson, Illinois.....................................   192,000
          Detroit, Michigan......................................    74,000
          Canton, Ohio...........................................    73,000
          Texas City, Texas......................................    72,000
          St. Paul Park, Minnesota...............................    70,000
                                                                    --------
                       Total.....................................   948,000
                                                                    ========

     MAP's   refineries   include   crude  oil   atmospheric   and   vacuum
distillation,    fluid    catalytic    cracking,    catalytic    reforming,
desulfurization   and  sulfur  recovery  units.  The  refineries  have  the
capability  to process a wide variety of crude oils and to produce  typical
refinery products,  including reformulated gasoline ("RFG").  Approximately
60% of MAP's crude oil throughputs are sour crudes.  In addition to typical
refinery  products,   the  Catlettsburg  refinery,  an  ISO-9000  certified
facility,   manufactures   base  lube  oil  stocks  and  a  wide  range  of
petrochemicals.  For the twelve  months ended  September  30, 2004,  58% of
MAP's base lube oil production was purchased by Valvoline, and 39% of MAP's
petrochemical  production  (excluding  propylene)  was purchased by Ashland
Distribution.

     The table below sets forth  MAP's  refinery  total input and  refinery
production by product  group for the three years ended  September 30, 2004.
Refinery total inputs include crude oil and other feedstocks.

                                                  Years Ended September 30
                                           ----------------------------------
(in thousands of barrels per day)             2004         2003         2002
--------------------------------           -------       -------      -------
Refinery Input                             1,086.6       1,033.1      1,080.9
--------------

Refined Product Yields
----------------------
     Gasoline                                599.5         553.9        594.0
     Distillates                             291.5         278.4        292.9
     Propane                                  21.3          20.7         21.7
     Feedstocks & Special Products            90.3          87.6         83.5
     Heavy Fuel Oils                          23.2          23.1         21.3
     Asphalt                                  73.8          70.5         73.3
                                           -------       -------      -------
          Total                            1,099.6       1,034.2      1,086.7
                                           =======       =======      =======

     Planned maintenance activities requiring temporary shutdown of certain
refinery operating units are periodically performed at each refinery.

     At  its  Catlettsburg,   Kentucky,  refinery,  MAP  has  completed  an
approximately  $440 million  multi-year  integrated  investment  program to
upgrade   product  yield   realizations   and  reduce  fixed  and  variable
manufacturing expenses. This program involved the expansion, conversion and
retirement  of certain  refinery  processing  units  which,  in addition to
improving profitability,  reduced the refinery's total gasoline pool sulfur
below 30 parts per million, thereby eliminating the need for additional low
sulfur  gasoline  compliance  investments  at the refinery based on current
regulations.

     In the December 2003 quarter, MAP commenced approximately $300 million
in  new  capital  projects  for  its  Detroit,  Michigan,   refinery,  with
completion  scheduled for the December 2005 quarter. One of the projects, a
$110 million  expansion  project,  is expected to raise crude throughput at
the refinery by 35% to 100,000 barrels per day. Other projects are expected
to enable the  refinery  to produce  new clean  fuels and  further  control
regulated air emissions.  MAP is obtaining  financing from Marathon to fund
these capital projects.

     Marketing  -  MAP's   principal   marketing  areas  for  gasoline  and
distillates   include  the   Midwest,   the  upper  Great  Plains  and  the
southeastern United States. Gasoline and distillates are sold in 21 states.
Gasoline is sold at wholesale primarily to independent  marketers,  jobbers
and chain  retailers who resell these  products  through  several  thousand
retail  outlets.  MAP  also  supplies  approximately  3,970  jobber-dealer,
open-dealer   and   lessee-dealer   locations  using  the  Marathon(R)  and
Ashland(R) brand names.



                                     6

<PAGE>

     Gasoline,   distillates  and  aviation   products  are  also  sold  to
utilities,  railroads, river towing companies,  commercial fleet operators,
airlines and governmental agencies. About one-half of MAP's propane is sold
into the home heating  markets and the balance is  purchased by  industrial
consumers.  Propylene and  petrochemicals  are marketed to customers in the
chemical  industry.  Base  lube  oils,  slack  wax  and  extract  are  sold
throughout  the  United  States.  Pitch  is  also  sold  domestically,  but
approximately  16% of pitch  products are exported into growing  markets in
Canada, Mexico, India, and South America.

     MAP  markets  asphalt  through  owned  and  leased  terminals  located
throughout  the Midwest  and  Southeast.  The MAP  customer  base  includes
approximately 900 asphalt paving contractors,  government entities (states,
counties, cities and townships) and asphalt roofing shingle manufacturers.

     Retail  sales of  gasoline  and  diesel  fuel are made  through  MAP's
wholly-owned subsidiary, Speedway SuperAmerica LLC ("SSA"). As of September
30, 2004,  SSA had 1,685 retail  outlets in nine states in the Midwest that
sell petroleum  products and convenience store merchandise  primarily under
the brand names Speedway(R) and SuperAmerica(R).  The retail locations sell
a variety of food, merchandise,  cigarettes,  candy and beverages.  Several
locations also have on-premises brand-name restaurants.

     During  the twelve  months  ended  September  30,  2004,  64% of SSA's
revenues  (excluding  excise  taxes) were derived from the sale of gasoline
and  diesel  fuel,  and  the  remainder  were  derived  from  the  sale  of
merchandise.

     Pilot  Travel  Centers LLC  ("PTC") is the largest  operator of travel
centers in the United States with approximately 250 locations in 35 states.
The travel  centers  offer  diesel  fuel,  gasoline  and a variety of other
services associated with such locations,  including on-premises  brand-name
restaurants. Pilot and MAP each own a 50% interest in PTC.

     MAP's  retail   marketing   strategy  is  focused  on  SSA's   Midwest
operations, additional growth in the Marathon(R) brand and continued growth
for PTC.

     The table below shows the volume of MAP's consolidated refined product
sales for the three years ended September 30, 2004.

                                                Years Ended September 30
                                             ---------------------------------
(in thousands of barrels per day)            2004         2003         2002
--------------------------------             --------    --------    ---------
Refined Product Sales
---------------------
     Gasoline                                 801.9         772.4        774.3
     Distillates                              369.1         360.6        345.7
     Propane                                   21.9          20.3         22.7
     Feedstocks & Special Products             89.5          94.9         80.3
     Heavy Fuel Oils                           25.3          23.2         22.0
     Asphalt                                   77.0          73.2         76.2
                                            -------       -------      -------
          Total                             1,384.7       1,344.6      1,321.2
                                            =======       =======      =======

Matching Buy/Sell Volumes
included in above                              68.4          68.3         69.3

     MAP sells RFG in parts of its marketing territory,  primarily Chicago,
Illinois;   Louisville,   Kentucky;   Northern  Kentucky;   and  Milwaukee,
Wisconsin.  MAP also markets  low-vapor-pressure  gasolines in nine states.

     Supply  and   Transportation  -  The  crude  oil  processed  in  MAP's
refineries  is obtained  from  negotiated  contract  and spot  purchases or
exchanges. For the year ended September 30, 2004, MAP's negotiated contract
and spot  purchases for refinery  input of crude oil produced in the United
States averaged 424,500 barrels per day, including an average of 22,300 net
barrels per day acquired from  Marathon.  For the year ended  September 30,
2004,  MAP's  foreign  crude  oil  requirements  were met  largely  through
purchases from various foreign national oil companies,  producing companies
and traders.  Purchases of foreign crude oil represented 54% of MAP's crude
oil requirements for the year ended September 30, 2004.

     MAP's  ownership  or  interest  in  domestic  pipeline  systems in its
refining and marketing  areas is  significant.  MAP owns,  leases or has an
ownership  interest in 6,711 miles of pipelines in 13 states.  This network
transports crude oil and refined products to and from terminals, refineries
and other  pipelines and includes  2,861 miles of crude oil trunk lines and
3,850 miles of refined product lines.





                                     7

<PAGE>

     MAP has a 46.7% ownership interest in LOOP LLC ("LOOP"),  which is the
owner and  operator of the only U.S.  deepwater  port  facility  capable of
receiving crude oil from very large crude carriers.  Ashland has retained a
4% ownership  interest in LOOP. MAP also owns a 49.9% ownership interest in
LOCAP  LLC  ("LOCAP"),  which is the  owner  and  operator  of a crude  oil
pipeline  connecting  LOOP to the Capline  system.  Ashland has retained an
8.62%  ownership  interest in LOCAP.  For  information  on the  transfer of
Ashland's  interests in LOOP and LOCAP as part of the proposed  transfer of
Ashland's  38%  interest  in MAP to  Marathon,  see  "Item  1.  Business  -
Corporate  Developments"  in this annual  report on Form 10-K. In addition,
MAP has a 37.2% ownership  interest in the Capline  system.  These port and
pipeline  systems provide MAP with access to common carrier  transportation
from the Louisiana Gulf Coast to Patoka,  Illinois.  At Patoka, the Capline
system  connects  with other  common  carrier  pipelines  owned by MAP that
provide transportation to MAP's refineries in Illinois, Kentucky, Michigan,
Minnesota and Ohio.

     Ohio  River  Pipe  Line  LLC,  a  subsidiary  of  MAP,  has  completed
construction of a pipeline from Kenova, West Virginia,  to Columbus,  Ohio.
The pipeline is an  interstate  common  carrier  pipeline.  The pipeline is
known as Cardinal Products Pipeline. The pipeline,  which has a capacity of
up to 80,000  barrels  per day,  is  expected  to  provide  a stable,  cost
effective  supply of  gasoline,  diesel  and jet fuel to the  central  Ohio
market.

     MAP has a 50%  ownership in  Centennial  Pipeline LLC  ("Centennial").
Centennial,  a 797-mile refined products pipeline, is designed to transport
approximately  210,000 barrels per day of refined  petroleum  products from
the Gulf Coast to the Midwest.

     MAP has a 33.3% ownership interest Minnesota Pipe Line Company,  which
operates a crude oil  pipeline in  Minnesota.  Minnesota  Pipe Line Company
provides MAP with access to crude oil common  carrier  transportation  from
Clearbrook,  Minnesota,  to  Cottage  Grove,  Minnesota,  which  is in  the
vicinity of MAP's St. Paul Park, Minnesota refinery.

     MAP's marine  transportation  operations  include  towboats and barges
that  transport  refined  products on the Ohio,  Mississippi  and  Illinois
rivers,  their tributaries and the Intracoastal  Waterway.  MAP also leases
and owns railcars in various sizes and  capacities for movement and storage
of petroleum  products and a large  number of tractors,  tank  trailers and
general service trucks.

     In addition,  MAP owns and operates 84 terminal  facilities from which
it sells a wide range of petroleum products.  These facilities are supplied
by a combination of barges, pipeline, truck and/or rail.

OTHER MATTERS

     For  information  on MAP and  federal,  state and local  statutes  and
regulations  governing  releases into the  environment or protection of the
environment, see "Item 1. Business - Miscellaneous - Environmental Matters"
in this annual report on Form 10-K.

     In connection with the formation of MAP,  Ashland and Marathon entered
into  a  Put/Call,   Registration  Rights  and  Standstill  Agreement  (the
"Put/Call  Agreement").  The Put/Call  Agreement  provides that at any time
after  December 31, 2004,  Ashland will have the right to sell Marathon all
of  Ashland's  ownership  interest  in MAP,  for an amount  in cash  and/or
Marathon  debt or equity  securities  equal to the  product  of 85% (90% if
equity  securities  are used) of the fair market value of MAP at that time,
multiplied by Ashland's  percentage  interest in MAP. Payment could be made
at closing,  or, at Marathon's option, in three equal annual  installments,
the first of which would be payable at closing.  At any time after December
31,  2004,  Marathon  will have the right to purchase  Ashland's  ownership
interest in MAP,  for an amount in cash equal to the product of 115% of the
fair market value in MAP at that time,  multiplied by Ashland's  percentage
interest in MAP. The agreement entered into in connection with the proposed
transfer of Ashland's 38% interest in MAP to Marathon provides that Ashland
may not exercise its put right and Marathon may not exercise its call right
under  the  Put/Call  Agreement  unless  the  agreement  is  terminated  in
accordance  with its terms.  For  additional  information  on the  proposed
transfer  of  Ashland's  38%  interest  in MAP to  Marathon,  see  "Item 1.
Business - Corporate Developments" in this annual report on Form 10-K.

                               MISCELLANEOUS

ENVIRONMENTAL MATTERS

     Ashland has implemented a companywide environmental policy overseen by
the  Environmental,  Health  and Safety  Committee  of  Ashland's  Board of
Directors.  Ashland's Environmental,  Health and Safety ("EH&S")



                                     8


<PAGE>

department has the responsibility to ensure that Ashland's operating groups
maintain  environmental  compliance in accordance  with applicable laws and
regulations.  This  responsibility is carried out via training;  widespread
communication  of  EH&S  policies,   information  and  regulatory  updates;
formulation of relevant policies, procedures and work practices; design and
implementation  of  EH&S  management  systems;   internal  auditing  by  an
independent  auditing  group  within  the EH&S  department;  monitoring  of
legislative  and  regulatory   developments   that  may  affect   Ashland's
operations; assistance to the operating divisions in identifying compliance
issues and opportunities  for voluntary actions that go beyond  compliance;
and incident response planning and implementation.

     Federal,  state  and  local  laws  and  regulations  relating  to  the
protection  of the  environment  have a  significant  impact on how Ashland
conducts its  businesses.  New laws are being enacted and  regulations  are
being adopted by various regulatory agencies on a continuing basis, and the
costs of  compliance  with these new rules  cannot be  estimated  until the
manner in which they will be implemented  has been more precisely  defined.
In addition, most foreign countries in which Ashland conducts business have
laws dealing with similar matters.

     At  September   30,  2004,   Ashland's   reserves  for   environmental
remediation amounted to $152 million, reflecting Ashland's estimates of the
most  likely  costs  that  will be  incurred  over an  extended  period  to
remediate  identified   conditions  for  which  the  costs  are  reasonably
estimable,  without  regard  to  any  third-party  recoveries.  Engineering
studies,  probability  techniques,  historical experience and other factors
are used to  identify  and  evaluate  remediation  alternatives  and  their
related  costs in  determining  the  estimated  reserves for  environmental
remediation.  Environmental  remediation  reserves  are subject to numerous
inherent  uncertainties that affect Ashland's ability to estimate its share
of  the  costs.  Such  uncertainties  involve  the  nature  and  extent  of
contamination  at each site, the extent of required  cleanup  efforts under
existing  environmental  regulations,  widely  varying  costs of  alternate
cleanup methods, changes in environmental regulations, the potential effect
of continuing  improvements in remediation  technology,  and the number and
financial strength of other potentially  responsible  parties at multiparty
sites. Ashland regularly adjusts its reserves as environmental  remediation
continues.  Environmental  remediation  expense  amounted  to $2 million in
2004,  $22  million  in  2003  and  $30  million  in  2002.  No  individual
remediation  location is material to Ashland as its largest reserve for any
site is less than 10% of the remediation  reserve.  As a result,  Ashland's
exposure to adverse developments with respect to any individual site is not
expected to be material,  and these sites are in various  stages of ongoing
remediation.  Although  environmental  remediation  could  have a  material
effect on results of operations if a series of adverse  developments occurs
in a particular quarter or fiscal year, Ashland believes that the chance of
such developments occurring in the same quarter or fiscal year is remote.

     In  connection  with the  formation of MAP,  Marathon and Ashland each
retained  responsibility  for certain  environmental  costs  arising out of
their   respective   prior   ownership  and  operation  of  the  facilities
transferred to MAP. In certain  situations,  various  threshold  provisions
apply,   eliminating  or  reducing  the  financial  responsibility  of  the
contributing  party until certain levels of expenditure  have been reached.
In other  situations,  sunset  provisions  gradually  diminish the level of
financial responsibility of the contributing party over time.

     Air - The Clean Air Act (the "CAA")  imposes  stringent  limits on air
emissions,  establishes a federally mandated operating permit program,  and
allows  for  civil  and  criminal  enforcement  actions.  Additionally,  it
establishes air quality attainment deadlines and control requirements based
on the severity of air  pollution  in a given  geographical  area.  Various
state clean air acts implement,  complement and, in some instances,  add to
the  requirements  of the federal CAA. The  requirements of the CAA and its
state  counterparts  have a  significant  impact on the daily  operation of
Ashland's  businesses and, in many cases, on product  formulation and other
long-term  business  decisions.   Ashland's  businesses  maintain  numerous
permits  pursuant to these clean air laws and have  implemented  systems to
oversee ongoing compliance efforts.

     In July 1997, the USEPA promulgated  revisions to the National Ambient
Air Quality  Standards  ("NAAQS")  for ground  level ozone and  particulate
matter  that  could  have a  significant  effect on  certain  of  Ashland's
chemical manufacturing and distribution  businesses,  and on MAP. The USEPA
has begun to implement  the new ozone and  particulate  matters  standards,
which could result in areas of the country,  where  Ashland and MAP conduct
operations,  being  designated as not in compliance  with the NAAQS.  Until
these  revisions  have been more  fully  implemented,  it is not  currently
possible  to  estimate  any  potential  financial  impact  that the revised
standards may have on Ashland's or MAP's operations.

     Water - Ashland's  businesses  maintain numerous discharge permits, as
the National Pollutant Discharge  Elimination System of the Clean Water Act
and state programs require,  and have implemented  systems to oversee their
compliance efforts. In addition, several of MAP's operations, in particular
its barge and terminal  facilities,  are regulated  under the Oil Pollution
Act of 1990.



                                     9

<PAGE>

     Solid  Waste  -  Ashland's  businesses  are  subject  to the  Resource
Conservation and Recovery Act ("RCRA"), which establishes standards for the
management of solid and hazardous wastes. While many facilities are subject
to  the  RCRA  rules  governing  generators  of  hazardous  waste,  certain
facilities  also  have  hazardous  waste  storage   permits.   Ashland  has
implemented  systems to oversee  compliance with the RCRA  regulations and,
where  applicable,  permit  conditions.  In addition to regulating  current
waste disposal practices,  RCRA also addresses the environmental effects of
certain past waste  disposal  operations,  the  recycling of wastes and the
storage of regulated substances in underground tanks.

     Remediation  -  Ashland  currently  operates,  and  in  the  past  has
operated,  various facilities where,  during the normal course of business,
releases of hazardous  substances  have  occurred.  Federal and state laws,
including  but not limited to RCRA and various  remediation  laws,  require
that  contamination  caused by such releases be assessed and, if necessary,
remediated to meet applicable standards.  MAP operates, and in the past has
operated,  certain  retail  outlets  where,  during  the  normal  course of
business,  releases of petroleum  products from  underground  storage tanks
have occurred.  Federal and state laws require that contamination caused by
such releases at these sites be assessed  and, if necessary,  remediated to
meet applicable standards.

RESEARCH

     Ashland  conducts a program of research and  development to invent and
improve  products and processes and to improve  environmental  controls for
its existing facilities.  It maintains research facilities in Dublin, Ohio;
Lexington,  Kentucky;  Boonton, New Jersey; and Atlanta,  Georgia. Research
and  development  costs are  expensed as they are  incurred and totaled $43
million in fiscal 2004 ($36 million in 2003 and $34 million in 2002).

COMPETITION

     In all its operations,  Ashland is subject to intense competition both
from  companies in the industries in which it operates and from products of
companies in other industries.

     The majority of the  business  for which APAC  competes is obtained by
competitive  bidding.  There are a substantial number of competitors in the
markets in which APAC  operates  and, as a result,  all of APAC's goods and
services are marketed under highly  competitive  conditions.  Factors which
influence APAC's  competitiveness  are price,  reputation for quality,  the
availability of aggregate materials,  the geographic location of plants and
aggregate  materials,  machinery and  equipment,  knowledge of local market
conditions and estimating abilities.

     Each of Ashland Distribution's lines of business (chemicals, plastics,
ingredients,   composites,  and  environmental  services),   competes  with
national,  regional  and local  companies  throughout  North  America.  The
plastics distribution business also competes in Europe.  Competition within
each  line of  business  is based  primarily  on price and  reliability  of
supply.

     Ashland Specialty  Chemical's  businesses compete globally in selected
niche markets,  largely on the basis of technology and service.  The number
of competitors in the specialty  chemical  business  varies from product to
product,  and it is not practical to identify such  competitors  because of
the broad range of products and markets served by those products.  However,
many  of  Ashland   Specialty   Chemical's   businesses  hold   proprietary
technology, and Ashland believes it has a leading or strong market position
in most of its specialty chemical products.

     Valvoline  competes  in the  highly  competitive  lubricants  business
principally through premium products and services, distribution capability,
a focused "master" brand strategy, advertising and sales promotion. Some of
the major  brands of motor  oils and  lubricants  Valvoline  competes  with
internationally  are  Havoline(R),   Castrol(R),   Pennzoil(R)  and  Quaker
State(R).  The highly  competitive  consumer  products car care business is
primarily composed of maintenance  chemicals,  appearance products and tire
cleaners.  Valvoline  competes  primarily in this market  through  specific
product performance benefits,  distribution  capability and advertising and
sales  promotion.  In the highly  competitive  "fast oil change"  business,
Valvoline  competes  with other leading  independent  fast lube chains on a
national, regional or local basis as well as automobile dealers and service
stations.  Important  competitive  factors for  Valvoline  in the "fast oil
change" market include  Valvoline's  brand  recognition;  increasing market
presence  through  VIOC and  Valvoline  Express  Care  outlets;  as well as
quality of service, speed, location, convenience and sales promotion.

     MAP competes with a large number of companies to acquire crude oil for
refinery  processing and in the  distribution and marketing of a full array
of  petroleum  products.  MAP  believes  it  ranks  among  the top ten U.S.
petroleum  companies  on the basis of crude  oil  refining  capacity  as of
September 30, 2004.  MAP competes in four


                                    10


<PAGE>

distinct  markets  for the sale of  refined  products  -  wholesale,  spot,
branded  and  retail   distribution.   MAP   believes   it  competes   with
approximately  40  companies  in the  wholesale  distribution  of petroleum
products to private brand  marketers and large  commercial  and  industrial
consumers;  approximately 80 companies in the sale of petroleum products in
the spot  market;  approximately  10  refiner/marketers  in the  supply  of
branded  petroleum  products to dealers and jobbers;  and approximately 600
petroleum product retailers in the retail sale of petroleum  products.  MAP
also  competes in the  convenience  store  industry  through  SSA's  retail
outlets and in the travel center industry through its ownership in PTC. The
retail  outlets  offer  consumers   gasoline,   diesel  fuel  (at  selected
locations)  and a  variety  of food,  merchandise,  cigarettes,  candy  and
beverages.

FORWARD-LOOKING STATEMENTS

     This annual  report on Form 10-K contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities  Exchange Act of 1934.  Words such as  "anticipates,"
"believes," "estimates," "expects," "is likely," "predicts," and variations
of such  words and  similar  expressions  are  intended  to  identify  such
forward-looking statements. Although Ashland believes that its expectations
are based on reasonable assumptions, it cannot assure that the expectations
contained in such statements will be achieved. Important factors that could
cause  actual  results to differ  materially  from those  contained in such
statements  are  discussed  under  "Risks and  Uncertainties"  in Note A of
"Notes to Consolidated  Financial Statements" in this annual report on Form
10-K.  For a  discussion  of other  factors and risks  affecting  Ashland's
revenues and operations see "Item 1. Business -  Miscellaneous  - Marketing
Conditions" below.

MARKETING CONDITIONS

     Domestic and  international  political,  legislative,  regulatory  and
legal  changes  may  adversely  affect  Ashland's  results  of  operations.
Political  actions may include changes in the policies of the  Organization
of  Petroleum  Exporting  Countries  or  other  developments  involving  or
affecting oil-producing countries, including terrorist activities, military
conflict,  embargoes,  internal  instability or actions or reactions of the
U.S.  government  in  anticipation  of, or in response  to,  such  actions.
Profitability  of MAP  depends  largely on the margin  between  the cost of
crude oil and other  feedstocks  refined and the selling  prices of refined
products.  MAP is a purchaser of crude oil in order to satisfy its refinery
throughput requirements.  As a result, MAP's overall profitability could be
adversely  affected by  increases in crude oil and other  feedstock  prices
that are not recovered in the market place through higher prices. Reference
should be made to the Refining and  Marketing  section of the  Management's
Discussion  and Analysis  section in this annual  report on Form 10-K for a
discussion of the impact of crude oil costs on MAP's operating performance.
While Ashland  maintains  reserves for anticipated  liabilities and carries
various levels of insurance,  Ashland could be affected by civil, criminal,
regulatory or  administrative  proceedings and claims relating to asbestos,
environmental   remediation  and  other  matters.   Additional  information
concerning   Ashland's   asbestos-related   litigation  and   environmental
remediation  may be found in Note M of  "Notes  to  Consolidated  Financial
Statements" in this annual report on Form 10-K.

     Ashland's  operations are subject to various U.S. and foreign laws and
regulations  relating to  environmental  protection  and worker  health and
safety.  These laws and regulations  regulate  discharge of pollutants into
the air and water, the management and disposal of hazardous substances, and
the cleanup of contaminated  properties.  The costs of complying with these
laws and  regulations  can be  substantial  and may increase as  applicable
requirements  become  more  stringent  and new  rules are  implemented.  If
violation of these laws and regulations occur, Ashland may be forced to pay
substantial fines, to complete additional costly projects,  or to modify or
curtail its operations to limit contaminant emissions.

     The profitability of Ashland's businesses is particularly  susceptible
to downturns in the economy,  particularly downturns in the segments of the
U.S.  economy related to the purchase and sale of durable goods,  including
housing,  construction,  automotive,  and marine.  Both overall  demand for
Ashland's  products and  services  and its profit  margins may decline as a
direct result of an economic recession, inflation, changes in the prices of
hydrocarbons  and other raw  materials  (e.g.,  crude oil and petroleum and
chemical  products),  consumer  confidence,  interest rates or governmental
fiscal policies.  Ashland's  profitability may also experience  significant
changes as a result of  variations  in sales,  changes  in  product  mix or
pricing competition.

     In addition,  changes in climate and weather can significantly  affect
the performance of several of Ashland's operations. Extreme variations from
normal climatic conditions could have a significant effect on the operating
results  of APAC's  construction  operations.  In  particular,  unfavorable
weather  conditions will delay the completion


                                    11


<PAGE>

of construction  projects and may require the use of additional  resources.
Additionally,  most of the refined  products  sold by MAP and Valvoline are
seasonal in nature,  and thus demand for those  products may decline due to
significant  changes in prevailing  climate and weather  conditions such as
floods, frozen rivers or hurricanes. Adverse weather conditions that impair
driving  conditions,  such as winter  storms,  can also  result in  reduced
retail sales of gasoline.

ITEM 2. PROPERTIES

     Ashland's  corporate  headquarters,  which is  leased,  is  located in
Covington,  Kentucky.  Principal  offices  of other  major  operations  are
located in Atlanta,  Georgia (APAC); Dublin, Ohio (Ashland Distribution and
Ashland  Specialty  Chemical);   Boonton,  New  Jersey  (Ashland  Specialty
Chemical);   Lexington,   Kentucky  (Valvoline);   and  Russell,   Kentucky
(Administrative  Services). All of these offices are leased, except for the
Russell  office  and two  buildings  in  Dublin,  Ohio,  which  are  owned.
Principal manufacturing,  marketing and other materially important physical
properties  of  Ashland  and  its  subsidiaries  are  described  under  the
appropriate  segment  under  "Item 1" in this  annual  report on Form 10-K.
Additional  information concerning certain leases may be found in Note F of
"Notes to Consolidated  Financial Statements" in this annual report on Form
10-K.

ITEM 3. LEGAL PROCEEDINGS

     Asbestos-Related  Litigation - Ashland is subject to liabilities  from
claims alleging personal injury caused by exposure to asbestos. Such claims
result  primarily from  indemnification  obligations  undertaken in 1990 in
connection with the sale of Riley Stoker  Corporation  ("Riley"),  a former
subsidiary.  Although  Riley was neither a producer nor a  manufacturer  of
asbestos,   its  industrial  boilers  contained  some   asbestos-containing
components provided by other companies.

     The  majority  of  lawsuits  filed  involve  multiple  plaintiffs  and
multiple defendants,  with the number of defendants in many cases exceeding
100. The monetary  damages sought in the  asbestos-related  complaints that
have  been  filed  in  state  or  federal   courts  vary  as  a  result  of
jurisdictional  requirements  and  practices,  though the vast  majority of
these  complaints  either do not specify  monetary damages sought or merely
recite  that the  monetary  damages  sought  meet or  exceed  the  required
jurisdictional  minimum in which the complaint was filed.  Plaintiffs  have
asserted  specific  dollar  claims for damages in  approximately  6% of the
50,500  active  lawsuits  pending as of September 30, 2004. In these active
lawsuits,  less than 0.2% of the active lawsuits  involve claims between $0
and $100,000;  approximately  1.6% of the active  lawsuits  involve  claims
between  $100,000  and  $1 million;  less  than 1% of the  active  lawsuits
involve claims between  $1 million and  $5 million;  less than 0.2% of the
active  lawsuits   involve  claims  between   $5 million and  $10 million;
approximately 3% of the active lawsuits involve claims between  $10 million
and $15 million;  and less than 0.02% of the active lawsuits involve claims
between $15 million and $100 million.  The variability of requested damages,
coupled with the actual  experience  of  resolving  claims over an extended
period,  demonstrates that damages  requested in any particular  lawsuit or
complaint bear little or no relevance to the merits or disposition value of
a particular case. Rather, the amount potentially recoverable by a specific
plaintiff or group of  plaintiffs  is  determined  by other factors such as
product  identification  or lack  thereof,  the  type and  severity  of the
disease alleged, the number and culpability of other defendants, the impact
of  bankruptcies  of other  companies  that are  co-defendants  in  claims,
specific  defenses  available  to  certain   defendants,   other  potential
causative factors and the specific jurisdiction in which the claim is made.

     For  additional   information   regarding   liabilities  arising  from
asbestos-related  litigation,  see "Management's  Discussion and Analysis -
Application of Critical Accounting Policies - Asbestos-related  litigation"
and Note M of "Notes to Consolidated  Financial  Statements" in this annual
report on Form 10-K.

     U.S.  Department  of Justice  Antitrust  Division  Investigation  - In
November  2003,  Ashland  received a subpoena from the USDOJ  relating to a
foundry resins grand jury  investigation.  Ashland is providing  responsive
records to the subpoena. As is frequently the case when such investigations
are in  progress,  a number  of civil  actions  have  since  been  filed in
multiple  jurisdictions,  most of which are seeking class action status for
classes of customers of foundry resins.  These cases have been consolidated
for  pretrial  purposes  in the  United  States  District  Court,  Southern
District of Ohio. Ashland will vigorously defend the actions.

     Environmental  Proceedings  -  (1)  Under  the  federal  Comprehensive
Environmental  Response  Compensation  and  Liability  Act (as amended) and
similar state laws,  Ashland may be subject to joint and several  liability
for  clean-up  costs in  connection  with  alleged  releases  of  hazardous
substances at sites where it has been identified as a

                                    12


<PAGE>
"potentially  responsible party" ("PRP"). As of September 30, 2004, Ashland
had been named a PRP at 93 waste treatment or disposal  sites.  These sites
are currently  subject to ongoing  investigation  and remedial  activities,
overseen  by  USEPA  or a state  agency,  in  which  Ashland  is  typically
participating  as a member of a PRP  group.  Generally,  the type of relief
sought  includes  remediation  of  contaminated  soil  and/or  groundwater,
reimbursement for past costs of site clean-up and administrative oversight,
and/or long-term  monitoring of environmental  conditions at the sites. The
ultimate  costs  are  not  predictable   with  assurance.   For  additional
information  regarding  environmental  matters and reserves,  see Note M of
"Notes to Consolidated  Financial Statements" in this annual report on Form
10-K.

     (2) On May 13, 2002,  Ashland  entered into a plea  agreement with the
U.S.  Attorney's  Office  for  the  District  of  Minnesota  and  the  U.S.
Department of Justice  regarding a May 16, 1997, sewer fire at the St. Paul
Park,  Minnesota  refinery,  which is now owned by MAP. As part of the plea
agreement,  Ashland entered guilty pleas to two  misdemeanors,  paid a $3.5
million  fine  related to  violations  of the CAA,  paid  $3.55  million as
restitution  to the  employees  injured in the fire,  and paid  $200,000 as
restitution to the responding rescue units. Ashland also agreed to complete
certain upgrades to the St. Paul Park refinery's  process sewers,  junction
boxes and drains to meet  standards  established  by Subpart QQQ of the New
Source  Performance  Standards of the CAA (the  "Refinery  Upgrades").  The
Refinery  Upgrades  are  expected to be  completed  on or before the end of
calendar 2004.

     In addition,  as part of the plea  agreement,  Ashland  entered into a
deferred prosecution agreement,  wherein prosecution of a separate count of
the indictment charging Ashland with violating Subpart QQQ was deferred for
four years.  The deferred  prosecution  agreement  provides that if Ashland
satisfies the terms and  conditions of the plea agreement and completes the
Refinery Upgrades,  the deferred  prosecution  agreement will terminate and
the United States will dismiss that count with prejudice.  Ashland believes
that it has  satisfied  these terms and  conditions  and has filed a motion
with the court requesting that the deferred count be dismissed.

     As part of its  sentence,  Ashland  was placed on  probation  for five
years.  The primary  condition of probation is an obligation  not to commit
future federal,  state,  or local crimes.  If Ashland were to commit such a
crime,  it would be subject not only to prosecution for that new violation,
but the  government  could  also seek to revoke  Ashland's  probation.  The
probation  office has retained an independent  environmental  consultant to
review and  monitor  Ashland's  compliance  with  applicable  environmental
requirements  and the terms and  conditions  of  probation.  The court also
included  other  customary  terms  and  restrictions  of  probation  in its
probation order.

     (3) Pursuant to a 1988 RCRA  Administrative  Consent  Order  ("Consent
Order"),  Ashland is remediating  soil and groundwater at a former chemical
distribution  facility  site in Lansing,  Michigan.  The USEPA has asserted
that Ashland has not complied with certain  provisions of the Consent Order
relating  to  interim  remedial  measures  at the  site.  Although  Ashland
disputed  this  assertion,  Ashland  and the USEPA  agreed to  resolve  the
dispute prior to USEPA's filing of a formal enforcement action. Ashland has
paid a $650,000 penalty, and has signed a Consent Agreement and Final Order
("CAFO")  that  reflects an  agreement  between the parties as to what will
constitute future  compliance with the disputed  provisions of the original
Consent  Order.  Ashland is continuing to work with the USEPA to design and
implement a final remedy at the site. Once the final remedy is implemented,
the CAFO will expire.

     (4) In 1990,  contamination of groundwater at Ashland's former Canton,
Ohio,  refinery  (now owned and operated by MAP) was first  identified  and
reported to Ohio's  Environmental  Protection  Agency ("OEPA").  Since that
time,  Ashland has  voluntarily  conducted  investigation  and  remediation
activities  and regularly  communicated  with OEPA  regarding  this matter.
Ashland and the state of Ohio have exchanged  Consent Order drafts and have
met to negotiate the terms of such an order. The state filed a complaint in
February  2004,  but  simultaneously  expressed  an interest in  continuing
Consent  Order  settlement   discussions.   Following  the  filing  of  the
complaint,  Ashland,  OEPA and Ohio's  Office of the Attorney  General have
continued to work to finalize a Consent  Order.  The state has advised that
it will assess a penalty as part of the overall  settlement and has made an
initial request for $650,000.

     Shareholder  Derivative  Litigation  - On  August  16,  2002,  Central
Laborers'   Pension  Fund,   derivatively  as  a  shareholder  of  Ashland,
instituted  an action in the Circuit  Court of  Kentucky  in Kenton  County
against Ashland's then-serving Board of Directors. On motion of Ashland and
the other  defendants,  the case was removed to the United States  District
Court, Eastern District of Kentucky,  Covington Division. The case has been
remanded  to the state  court.  Ashland  has filed a Motion to Dismiss  the
Complaint. The action is purportedly filed on behalf of Ashland and asserts
the following  causes of action against the Directors:  breach of fiduciary
duty, abuse of control, gross mismanagement, and waste of corporate assets.
The suit also names Paul W.  Chellgren,  the  then-serving  Chief Executive
Officer and Chairman of the Board,  and James R. Boyd,  former  Senior Vice
President and Group




                                    13


<PAGE>

Operating  Officer,  as individual  defendants,  and it seeks to recover an
unstated sum from them individually alleging unjust enrichment from various
transactions  completed during their tenure with Ashland.  The suit further
seeks an unspecified sum from Mr. Chellgren individually based upon alleged
usurpation of corporate opportunities.  The suit also names J. Marvin Quin,
Ashland's Chief  Financial  Officer,  as well as three former  employees of
Ashland's  wholly-owned  subsidiary,  APAC,  as individual  defendants  and
alleges  that they  participated  in the  preparation  and  filing of false
financial  statements  during  fiscal  years 1999 - 2001.  The suit further
names Ernst & Young LLP  ("E&Y"),  as a  defendant,  alleging  professional
accounting  malpractice  and  negligence  in the  conduct  of its  audit of
Ashland's  1999 and 2000  financial  statements,  respectively,  as well as
alleging  that E&Y aided and abetted  the  individual  defendants  in their
alleged  breach of duties.  The  complaint  seeks to  recover,  jointly and
severally,  from  defendants an unstated sum of  compensatory  and punitive
damages.  The complaint seeks equitable and/or  injunctive  relief to avoid
continuing harm from alleged ongoing illegal acts, and seeks a disgorgement
of defendants' alleged insider-trading gains, in addition to the reasonable
cost and expenses incurred in bringing the complaint,  including attorneys'
and experts' fees.

     Other Legal  Proceedings - In addition to the matters described above,
there are various claims,  lawsuits and administrative  proceedings pending
or threatened against Ashland and its current and former subsidiaries. Such
actions are with respect to commercial  matters,  product liability,  toxic
tort liability,  and other  environmental  matters,  which seek remedies or
damages, some of which are for substantial amounts. While these actions are
being contested, their outcome is not predictable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security  holders,  through the
solicitation  of proxies or otherwise,  during the quarter ended  September
30, 2004.

ITEM X. EXECUTIVE OFFICERS OF ASHLAND

     The following is a list of Ashland's  executive  officers,  their ages
and  their  positions  and  offices  during  the last  five  years  (listed
alphabetically after the Chief Executive Officer as to members of Ashland's
Executive Committee and other executive officers).

     JAMES J.  O'BRIEN (age 50) is Chairman of the Board,  Chief  Executive
Officer and Director of Ashland,  and has served in such  capacities  since
2002.  During the past five years,  he has also served as President,  Chief
Operating  Officer,  Senior Vice President and Group  Operating  Officer of
Ashland, and as President of Valvoline.

     GARY A.  CAPPELINE  (age 55) is Senior Vice  President  of Ashland and
President and Chief Operating  Officer,  Chemical Sector, and has served in
such capacities since 2003.  During the past five years, he has also served
as Group  Operating  Officer of Ashland and President of Ashland  Specialty
Chemical,  as a chemical industry partner at Bear Stearns Merchant Bank, as
President of AlliedSignal  Specialty Chemicals and as Group Vice President,
Pigments and Additives of Engelhard Corp.

     DAVID J. D'ANTONI (age 59) was Senior Vice  President of Ashland,  and
served in such capacity since 1988. During the past five years, he has also
served as Group  Operating  Officer of Ashland,  and  President  of Ashland
Paving  And  Construction,  Inc.  Mr.  D'Antoni  retired  from  Ashland  on
September 30, 2004.

     DAVID L. HAUSRATH (age 52) is Senior Vice  President,  General Counsel
and Secretary of Ashland and has served in such capacities since 2004, 1999
and 2004,  respectively.  During the past five years, he has also served as
Vice President of Ashland.

     GARRY  M.  HIGDEM  (age  51) is  Senior  Vice  President  of  Ashland;
President and Chief Operating Officer,  Transportation Construction Sector;
and  President,  Ashland Paving And  Construction,  Inc., and has served in
such capacities since 2004.  During the past five years, he has also served
as Vice President for Granite Construction Incorporated, Heavy Construction
Division.

     J. MARVIN QUIN (age 57) is Senior Vice  President and Chief  Financial
Officer of Ashland and has served in such capacities since 1992.

     LAMAR M. CHAMBERS (age 49) is Vice President and Controller of Ashland
and has served in such capacities  since 2004.  During the past five years,
he has also served as Regional Vice  President  and Senior Vice  President,
Finance &  Administration  of Ashland  Paving And  Construction,  Inc., and
Auditor of Ashland.

                                    14

<PAGE>


     SUSAN B. ESLER (age 43) is Vice President  Human  Resources of Ashland
and has served in such capacity since 2004. During the past five years, she
has also  served as Vice  President  Human  Resources  Programs & Services,
Director of Corporate Human Resources and Manager of Executive Compensation
of Ashland.

     SAMUEL J. MITCHELL (age 43) is Vice President of Ashland and President
of Valvoline and has served in such capacities since 2002.  During the past
five years,  he has also served as Vice President - Retail  Business,  Vice
President of Marketing and Director of Marketing -Valvoline.

     FRANK L. WATERS (age 43) is Vice President of Ashland and President of
Ashland  Distribution and has served in such capacities since 2002.  During
the past five  years,  he has also  served  as Vice  President  of  Ashland
Plastics - Europe.


     Each executive officer is elected by the Board of Directors of Ashland
to a term of one year, or until a successor is duly elected,  at the annual
meeting  of the Board of  Directors,  except in those  instances  where the
officer  is  elected  other  than at an  annual  meeting  of the  Board  of
Directors,  in which case his or her tenure  will expire at the next annual
meeting of the Board of Directors unless the officer is re-elected.


                                  PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

     There is hereby incorporated by reference the information appearing in
Note P of "Notes  to  Consolidated  Financial  Statements"  in this  annual
report on Form 10-K.

     At September  30, 2004,  there were  approximately  15,900  holders of
record of Ashland's Common Stock. Ashland Common Stock is listed on the New
York and  Chicago  stock  exchanges  (ticker  symbol  ASH) and has  trading
privileges  on the  Boston,  Cincinnati,  Pacific  and  Philadelphia  stock
exchanges.

ITEM 6. SELECTED FINANCIAL DATA

     See Five-Year Selected Financial Information on page F-28.

ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

     See Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages M-1 through M-13.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See Quantitative and Qualitative Disclosures about Market Risk on page
M-13.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  consolidated  financial  statements  and  financial  schedule  of
Ashland  presented  in this  annual  report on Form 10-K are  listed in the
index on page F-1.

ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.



                                    15
<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

     (a)   As of September 30, 2004,  Ashland,  under the  supervision  and
           with the  participation of its management,  including  Ashland's
           Chief  Executive  Officer  and  its  Chief  Financial   Officer,
           evaluated the effectiveness of Ashland's disclosure controls and
           procedures pursuant to Rule 13a-15(b) and 15d-15(b)  promulgated
           under the  Securities  Exchange Act of 1934,  as amended.  Based
           upon that  evaluation,  the Chief  Executive  Officer  and Chief
           Financial  Officer have concluded  that the disclosure  controls
           and procedures were effective.

     (b)   There were no significant  changes in Ashland's internal control
           over financial  reporting,  or in other  factors,  that occurred
           during the fiscal  quarter ended  September 30, 2004,  that have
           materially  affected,  or are  reasonably  likely to  materially
           affect, Ashland's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

     None.
                                  PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     There is hereby  incorporated  by reference the  information to appear
under the caption  "Election of Directors"  and the  information  regarding
Section  16  beneficial   ownership   reporting   compliance  in  Ashland's
definitive  Proxy  Statement  for its January 27, 2005,  Annual  Meeting of
Shareholders,  which  will be filed  with  the SEC  within  120 days  after
September  30, 2004,  ("Proxy  Statement").  See also the list of Ashland's
executive  officers and related  information  under "Executive  Officers of
Ashland" in Part 1 - Item X in this annual report on Form 10-K.

     There is hereby  incorporated  by reference the  information to appear
under the  caption  "Audit  Committee  Report"  regarding  Ashland's  audit
committee financial experts, as defined under Item 401 of Regulation S-K of
the  Securities  Exchange  Act of 1934,  as  amended,  in  Ashland's  Proxy
Statement.

     There is hereby  incorporated  by reference the  information to appear
under the caption  "Corporpate  Governance  -  Shareholder  Nominations  of
Directors" in Ashland's Proxy Statement.

     Ashland has adopted a Code of Business Conduct (the "Code").  The Code
applies to Ashland's directors, all employees of Ashland and its subsidiary
companies,  including the principal executive officer,  principal financial
officer,  principal  accounting  officer  and  persons  performing  similar
functions  ("Key  Personnel").  The Code is  posted on  Ashland's  website.
Ashland will satisfy any disclosure requirement under Item 5.05 of Form 8-K
regarding an amendment  to, or waiver from,  any provision of the Code with
respect to its Key Personnel or directors by disclosing  the nature of such
amendment or waiver on its website or in a current report on Form 8-K.

ITEM 11. EXECUTIVE COMPENSATION

     There is hereby  incorporated  by reference the  information to appear
under the captions  "Executive  Compensation,"  "Compensation of Directors"
and "Corporate Governance - Personnel and Compensation Committee Interlocks
and Insider Participation" in Ashland's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     There is hereby  incorporated  by reference the  information to appear
under the captions "Ashland Common Stock Ownership of Directors and Certain
Officers  of  Ashland"  and  "Ashland  Common  Stock  Ownership  of Certain
Beneficial Owners" in Ashland's Proxy Statement.

     The following  table  summarizes the equity  compensation  plans under
which Ashland  Common Stock may be issued as of September 30, 2004.  Except
as disclosed  in the  narrative  to the table,  all plans were  approved by
shareholders of Ashland.



                                    16


<PAGE>


<TABLE>
<CAPTION>
                                                                                                 Number of securities
                                          Number of securities                                 remaining available for
                                            to be issued upon          Weighted-average         future issuance under
                                                exercise              exercise price of       equity compensation plans
                                         of outstanding options,     outstanding options,       (excluding securities
Plan Category                              warrants and rights       warrants and rights      reflected in column (a))
-------------                           ------------------------     ---------------------    -------------------------
                                                   (a)                       (b)                         (c)
<S>                                             <C>                         <C>                       <C>
Equity compensation plans approved by
     security holders..............             4,925,043                   40.73                     1,922,675 (2)
Equity compensation plans
     not approved by security holders
     (1)...........................               240,160                   32.94                             0
                                                ----------                 -------                   ------------
             Total.................             5,165,203                   40.37                     1,922,675
                                                ==========                 =======                   ============
</TABLE>

(1)  The Ashland Inc.  Stock Option Plan for Employees of Joint Ventures is
     the only equity compensation plan of Ashland not approved by Ashland's
     shareholders.  This plan was approved by Ashland's  Board of Directors
     on September  17, 1998,  and is  specifically  designed to grant stock
     options  to  employees  of  joint  ventures  in which  Ashland  has an
     interest.  There are currently no shares  reserved for future issuance
     under this plan. The Board of Directors authorizes the issuance of the
     shares at the time the stock options are granted.  A recipient of such
     stock options will have the right to purchase  Ashland Common Stock at
     a price  and on terms  specified  by the  Personnel  and  Compensation
     Committee of Ashland's Board of Directors. The stock options listed in
     the table above have been  granted to certain MAP  employees  and were
     registered with the SEC.
(2)  Includes  458,746  shares  available  for issuance  under the Deferred
     Compensation  Plan for  Employees,  and 365,527  shares  available for
     issuance  under  the  Deferred   Compensation  Plan  for  Non-Employee
     Directors.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     There is hereby incorporated by reference the information with respect
to  principal  accountant  fees and  services to appear  under the captions
"Ratification of Auditors" and "Audit Committee  Report" in Ashland's Proxy
Statement.

     Ashland has been made aware that,  in connection  with certain  income
tax  compliance  services,  affiliates of E&Y held  employment  tax related
funds  of a de  minimis  amount  and  made  payment  of such  funds  to the
applicable  tax authority in respect of expatriot and foreign  employees of
subsidiaries of Ashland in Taiwan and China. These actions by affiliates of
E&Y have been discontinued. Custody of the assets of an audit client is not
permitted  under the auditor  independence  rules in Regulation  S-X of the
SEC.  The Audit  Committee  and E&Y have  considered  the  impact  that the
holding and paying of these funds may have had on E&Y's  independence  with
respect to Ashland and have  concluded that there has been no impairment of
E&Y's  independence.  In making  this  determination,  the Audit  Committee
considered the de minimis amount of funds involved,  the ministerial nature
of the actions,  and that the subsidiaries  involved were immaterial to the
consolidated financial statements of Ashland.


                                  PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (A) DOCUMENTS FILED AS PART OF THIS REPORT

     (1) and (2) Financial Statements and Financial Schedule

     The  consolidated  financial  statements  and  financial  schedule  of
Ashland  presented  in this  annual  report on Form 10-K are  listed in the
index on page F-1.

                                    17

<PAGE>


     (3) Exhibits
         2.1*     -  Master  Agreement dated as of March 18, 2004,  among
                     Ashland  Inc.,  ATB  Holdings  Inc.,  EXM LLC, New EXM
                     Inc., Marathon Oil Corporation,  Marathon Oil Company,
                     Marathon  Domestic LLC and Marathon Ashland  Petroleum
                     LLC  (filed as  Exhibit  2.1 to  Ashland's  Form 8-K/A
                     dated March 18, 2004,  and filed November 5, 2004, and
                     incorporated herein by reference).
         2.2*     -  Tax Matters  Agreement  dated March 18, 2004,  among
                     Ashland  Inc.,  ATB  Holdings  Inc.,  EXM LLC, New EXM
                     Inc., Marathon Oil Corporation,  Marathon Oil Company,
                     Marathon  Domestic LLC and Marathon Ashland  Petroleum
                     LLC  (filed as  Exhibit  2.2 to  Ashland's  Form 8-K/A
                     dated March 18, 2004,  and filed November 5, 2004, and
                     incorporated herein by reference).
         2.3*     -  Assignment and Assumption  Agreement  (VIOC Centers)
                     dated as of March 18, 2004,  between  Ashland Inc. and
                     ATB Holdings  Inc.  (filed as Exhibit 2.3 to Ashland's
                     Form 8-K/A dated March 18, 2004, and filed November 5,
                     2004, and incorporated herein by reference).
         2.4*     -  Assignment   and   Assumption   Agreement   (Maleic
                     Business) dated as of March 18, 2004,  between Ashland
                     Inc.  and ATB Holdings  Inc.  (filed as Exhibit 2.4 to
                     Ashland's  Form 8-K/A dated March 18, 2004,  and filed
                     November   5,  2004,   and   incorporated   herein  by
                     reference).
         2.5*     -  Amendment  No. 2 dated as of March 18, 2004,  to the
                     Amended  and  Restated   Limited   Liability   Company
                     Agreement  dated as of December 31, 1998,  of Marathon
                     Ashland Petroleum LLC, by and between Ashland Inc. and
                     Marathon   Oil  Company   (filed  as  Exhibit  2.5  to
                     Ashland's  Form 8-K/A dated March 18, 2004,  and filed
                     November   5,  2004,   and   incorporated   herein  by
                     reference).
         3.1      -  Third Restated  Articles of Incorporation of Ashland
                     (filed  as  Exhibit 3(i) to  Ashland's  Form 10-Q for the
                     quarter ended June 30, 2002, and  incorporated  herein
                     by reference).
         3.2      -  By-laws of Ashland,  effective  as of  November  15,
                     2002 (filed as Exhibit 3.2 to Ashland's  annual report
                     on Form 10-K for the fiscal year ended  September  30,
                     2002, and incorporated herein by reference).
         4.1      -  Ashland  agrees to provide  the SEC,  upon  request,
                     copies of  instruments  defining the rights of holders
                     of   long-term   debt  of  Ashland   and  all  of  its
                     subsidiaries for which  consolidated or unconsolidated
                     financial statements are required to be filed with the
                     SEC.
         4.2      -  Indenture,  dated as of August 15, 1989,  as amended
                     and  restated as of August 15, 1990,  between  Ashland
                     and Citibank,  N.A., as Trustee  (filed as Exhibit 4.2
                     to Ashland's annual report on Form 10-K for the fiscal
                     year ended September 30, 2001, and incorporated herein
                     by reference).
         4.3      -  Indenture,  dated as of  September 7, 2001,  between
                     Ashland and U.S. Bank National Association, as Trustee
                     (filed as Exhibit 4.3 to  Ashland's  annual  report on
                     Form 10-K for the  fiscal  year  ended  September  30,
                     2001, and incorporated herein by reference).
         4.4      -  Rights Agreement,  dated as of May 16, 1996, between
                     Ashland Inc. and the Rights Agent,  together with Form
                     of  Right   Certificate   (filed  as  Exhibit  4.4  to
                     Ashland's  annual  report on Form 10-K for the  fiscal
                     year ended September 30, 2001, and incorporated herein
                     by reference).
         4.5      -  Amendment  No.  1 dated as of March  18,  2004,  to
                     Rights  Agreement  dated as of May 16,  1996,  between
                     Ashland  Inc.  and Rights Agent (filed as Exhibit 4 to
                     Ashland's  Form  10-Q for the  quarter  ended  March 31,
                     2004, and incorporated herein by reference).

     The following Exhibits 10.1 through 10.16 are compensatory plans or
arrangements or management contracts required to be filed as exhibits
pursuant to Item 601(b)(10)(ii)(A) of Regulation S-K.
         10.1     -  Amended Stock Incentive Plan for Key Employees of Ashland
                     Inc.  and its  Subsidiaries  (filed as Exhibit 10.1 to
                     Ashland's  annual  report on Form 10-K for the  fiscal
                     year ended September 30, 1999, and incorporated herein
                     by reference).


                                    18
<PAGE>


         10.2     -  Ashland Inc. Deferred Compensation Plan for Non-Employee
                     Directors  (filed as Exhibit  10.2 to  Ashland's  Form
                     10-Q  for  the  quarter  ended  June  30,  2003,   and
                     incorporated herein by reference).
         10.3     -  Ashland Inc. Deferred Compensation Plan (filed as
                     Exhibit 10.1 to Ashland's Form 10-Q for the quarter
                     ended June 30, 2003, and incorporated herein by
                     reference).
         10.4     -  Eleventh Amended and Restated Ashland Inc. Supplemental
                     Early Retirement Plan for Certain  Employees (filed as
                     Exhibit  10.3 to  Ashland's  Form 10-Q for the quarter
                     ended  June  30,  2003, and  incorporated   herein  by
                     reference).
         10.5     -  Ashland Inc. Salary Continuation Plan (filed as Exhibit
                     10.5 to Ashland's  annual  report on Form 10-K for the
                     fiscal year ended September 30, 2002, and  incorporated
                     herein by reference).
         10.6     -  Form of Ashland Inc. Executive Employment Contract between
                     Ashland Inc. and certain  executives of Ashland (filed
                     as Exhibit  10.6 to  Ashland's  annual  report on Form
                     10-K for the fiscal year ended  September 30, 2002, and
                     incorporated herein by reference).
         10.7     -  Form of employment agreement between Ashland Inc. and an
                     executive officer.
         10.8     -  Form of Indemnification Agreement between Ashland Inc.
                     and  members  of its  Board  of  Directors  (filed  as
                     Exhibit 10.7 to Ashland's  annual  report on Form 10-K
                     for the fiscal  year ended  September  30,  2003,  and
                     incorporated herein by reference).
         10.9     -  Ashland Inc. Nonqualified Excess Benefit Pension
                     Plan (filed as Exhibit 10.4 to Ashland's Form 10-Q
                     for the quarter ended June 30, 2003, and incorporated
                      herein by reference).
         10.10    -  Ashland Inc. Directors' Charitable Award Program (filed
                     as Exhibit  10.11 to Ashland's  annual  report on Form
                     10-K for the fiscal year ended September 30, 2002, and
                     incorporated herein by reference).
         10.11    -  Ashland Inc. 1993 Stock Incentive Plan (filed as Exhibit
                     10.11 to Ashland's  annual report on Form 10-K for the
                     fiscal year ended September 30, 2000, and incorporated
                     herein by reference).
         10.12    -  Ashland Inc. 1997 Stock Incentive Plan (filed as Exhibit
                     10.14 to Ashland's  annual report on Form 10-K for the
                     fiscal year ended September 30, 2002, and incorporated
                     herein by reference).
         10.13    -  Amended and Restated Ashland Inc. Incentive Plan (filed
                     as Exhibit  10.1 to Ashland's Form 10-Q for the quarter
                     ended June 30, 2004, and incorporated herein by reference).
         10.14    -  Form of Notice granting Stock Appreciation Rights Awards.
         10.15    -  Form of Notice granting Restricted Stock Awards.
         10.16    -  Form of Notice granting Nonqualified Stock Option Awards.
         10.17    -  Amended and Restated Limited Liability Company Agreement
                     dated as of  December  31,  1998, of  Marathon  Ashland
                     Petroleum LLC by and between Ashland Inc. and Marathon
                     Oil Company.
         10.18**  -  Amendment No. 1 dated as March 17, 2004, to the Amended
                     and Restated Limited  Liability  Company  Agreement dated
                     as of December 31, 1998, of Marathon Ashland  Petroleum
                     LLC (filed as Exhibit 10.2 to  Ashland's  Form 10-Q for
                     the quarter ended March 31, 2004, and incorporated  herein
                     by reference).
         10.19    -  Put/Call Registration Rights and Standstill Agreement,
                     dated as of January 1, 1998, including Amendment No. 1
                     thereto,  dated as of December 31, 1998,  among  Marathon
                     Oil Company,  USX  Corporation, Ashland Inc. and Marathon
                     Ashland Petroleum LLC.
         10.20    -  Amendment No. 2 dated as of March 17, 2004, to the
                     Put/Call  Registration Rights and Standstill Agreement
                     dated  as of  January  1,  1998,  among  Marathon  Oil
                     Company,  USX  Corporation,  Ashland Inc. and Marathon
                     Ashland  Petroleum  LLC  (filed  as  Exhibit  10.1  to
                     Ashland's Form  10-Q for the  quarter  ended  March 31,
                     2004, and incorporated herein by reference).


                                    19


<PAGE>

         10.21    -  Three-Year, $250 Million Revolving Credit Agreement dated
                     as of April 2, 2004
         10.22    -  364-Day, $100 Million Revolving Credit Agreement dated
                     as of April 2, 2004
         11       -  Computation of Earnings Per Share (appearing on page F-9
                     of this annual report on Form 10-K).
         12       -  Computation of Ratio of Earnings to Fixed Charges.
         21       -  List of Subsidiaries.
         23.1     -  Consent of Independent Registered Public Accounting Firm.
         24       -  Power of Attorney, including resolutions of the Board of
                     Directors.
         31.1     -  Certification of James J. O'Brien, Chief Executive Officer
                     of   Ashland,   pursuant   to   Section   302  of  the
                     Sarbanes-Oxley Act of 2002.
         31.2     -  Certification of J. Marvin Quin, Chief Financial Officer
                     of   Ashland,   pursuant   to   Section   302  of  the
                     Sarbanes-Oxley Act of 2002.
         32       -  Certification of James J. O'Brien, Chief Executive Officer
                     of  Ashland,  and  J.  Marvin  Quin,  Chief  Financial
                     Officer of  Ashland,  pursuant  to Section  906 of the
                     Sarbanes-Oxley Act of 2002.
         99.1     -  Consent of Tillinghast-Towers Perrin.
         99.2     -  Consent of Hamilton, Rabinovitz & Alschuler, Inc.

     *Ashland agrees to supplement this filing and furnish a copy of any
     omitted schedule to the United States Securities and Exchange
     Commission upon request.

     **Portions of this document have received confidential treatment.

     Upon written or oral request, a copy of the above exhibits will be
furnished at cost.


                                    20

<PAGE>


                                 SIGNATURES

     Pursuant to the  requirements of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  registrant  has duly  caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
                                            ASHLAND INC.
                                            (Registrant)
                                            By:

                                            /s/ J. Marvin Quin
                                            ---------------------------------
                                            J. Marvin Quin
                                            Senior Vice President and Chief
                                            Financial Officer

                                            Date:  December 14, 2004

     Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant, in the capacities indicated, on December 14, 2004.

               Signatures                                   Capacity
               ----------                                   ---------

               /S/ JAMES J. O'BRIEN                  Chairman of the Board,
--------------------------------------------         Chief Executive Officer
                 JAMES J. O'BRIEN                    and Director

                /S/ J. MARVIN QUIN                   Senior Vice President and
--------------------------------------------         Chief Financial Officer
                  J. MARVIN QUIN

               /S/ LAMAR M. CHAMBERS                 Vice President, Controller
--------------------------------------------         and Principal Accounting
                 LAMAR M. CHAMBERS                   Officer

                         *                           Director
--------------------------------------------
                  ERNEST H. DREW

                         *                           Director
--------------------------------------------
                   ROGER W. HALE

                         *                           Director
--------------------------------------------
                BERNADINE P. HEALY

                         *                           Director
--------------------------------------------
                  ERNEST H. DREW

                         *                           Director
--------------------------------------------
                 MANNIE L. JACKSON

                         *                           Director
--------------------------------------------
                 KATHLEEN LIGOCKI

                         *                           Director
--------------------------------------------
                 PATRICK F. NOONAN

                         *                           Director
--------------------------------------------
                 JANE C. PFEIFFER

                         *                           Director
--------------------------------------------
                 WILLIAM L. ROUSE, JR.

                         *                           Director
--------------------------------------------
                 GEORGE A. SCHAEFER, JR.

                        *                           Director
--------------------------------------------
                 THEODORE M. SOLSO

                         *                           Director
--------------------------------------------
                  MICHAEL J. WARD


*By:     /s/ David L. Hausrath
         David L. Hausrath
         Attorney-in-Fact
Date:    December 14, 2004



                                    21
<PAGE>
ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

     The following  table shows  revenues,  operating  income and operating
information  by  industry  segment  for each of the last three  years ended
September 30.

<TABLE>
<CAPTION>

(In millions)                                                                        2004         2003         2002
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
SALES AND OPERATING REVENUES
APAC                                                                            $   2,525    $   2,400    $   2,652
Ashland Distribution                                                                3,199        2,811        2,541
Ashland Specialty Chemical                                                          1,386        1,212        1,130
Valvoline                                                                           1,297        1,235        1,152
Intersegment sales                                                                   (106)         (92)         (85)
                                                                                ----------   ----------   ----------
                                                                                $   8,301    $   7,566    $   7,390
                                                                                ==========   ==========   ==========
OPERATING INCOME
APAC                                                                            $     111    $     (42)   $     122
Ashland Distribution                                                                   78           32            1
Ashland Specialty Chemical                                                             87           31           70
Valvoline                                                                             105           87           77
Refining and Marketing (1)                                                            383          263          143
Corporate                                                                            (102)        (105)         (92)
                                                                                ----------   ----------   ----------
                                                                                $     662    $     266    $     321
                                                                                ==========   ==========   ==========
OPERATING INFORMATION
APAC
      Construction backlog at September 30 (millions) (2)                       $   1,746    $   1,745    $   1,691
      Net construction job revenues (millions) (3)                              $   1,433    $   1,361    $   1,527
      Hot-mix asphalt production (million tons)                                      33.4         32.5         36.7
      Aggregate production (million tons)                                            29.6         28.7         31.0
      Ready-mix concrete production (million cubic yards)                             1.7          2.0          2.1
Ashland Distribution (4)
      Sales per shipping day (millions)                                         $    12.6    $    11.2    $    10.1
      Gross profit as a percent of sales                                              9.6%         9.9%         9.7%
Ashland Specialty Chemical (4)
      Sales per shipping day (millions)                                         $     5.4    $     4.8    $     4.5
      Gross profit as a percent of sales                                             27.9%        29.9%        32.9%
Valvoline
      Lubricant sales (million gallons)                                             191.6        193.5        199.0
      Premium lubricants (percent of U.S. branded volumes)                           21.5%        18.5%        16.1%
Refining and Marketing (5)
      Refinery runs (thousand barrels per day)
        Crude oil refined                                                             920          900          930
        Other charge and blend stocks                                                 167          133          151
      Refined product yields (thousand barrels per day)
        Gasoline                                                                      600          554          594
        Distillates                                                                   291          278          293
        Asphalt                                                                        74           71           73
        Other                                                                         135          131          127
                                                                                ----------   ----------   ----------
        Total                                                                       1,100        1,034        1,087
      Refined product sales (thousand barrels per day) (6)                          1,385        1,345        1,321
      Refining and wholesale marketing margin (per barrel) (7)                  $    3.11    $    2.59    $    1.82
      Speedway SuperAmerica (SSA)
        Retail outlets at September 30                                              1,685        1,791        2,063
        Gasoline and distillate sales (million gallons)                             3,165        3,423        3,622
        Gross margin - gasoline and distillates (per gallon)                    $   .1167    $   .1191    $   .1040
        Merchandise sales (millions) (8)                                        $   2,301    $   2,281    $   2,381
        Merchandise margin (as a percent of sales)                                   24.4%        24.5%        24.2%

</TABLE>

(1)  Includes  Ashland's equity income from Marathon Ashland  Petroleum LLC
     (MAP), amortization related to Ashland's excess investment in MAP, and
     other activities associated with refining and marketing.
(2)  Includes APAC's  proportionate  share of the backlog of unconsolidated
     joint ventures.
(3)  Total construction job revenues, less subcontract costs.
(4)  Sales are defined as sales and  operating  revenues.  Gross  profit is
     defined  as sales  and  operating  revenues,  less  cost of sales  and
     operating expenses.
(5)  Amounts  represent 100% of MAP's  operations,  in which Ashland owns a
     38% interest.
(6)  Total  average  daily  volume of all  refined  product  sales to MAP's
     wholesale, branded and retail (SSA) customers.
(7)  Sales  revenue less cost of refinery  inputs,  purchased  products and
     manufacturing expenses, including depreciation.
(8)  Effective  January 1, 2003,  SSA adopted EITF 02-16,  "Accounting by a
     Customer  (Including a Reseller)  for Certain  Consideration  Received
     from a Vendor," which requires  rebates from vendors to be recorded as
     reductions  to cost of sales.  Rebates  from  vendors  recorded in SSA
     merchandise  sales for periods  prior to January 1, 2003 have not been
     restated and included $46 million in 2003 and $170 million in 2002.

                                    M-1
<PAGE>


RESULTS OF OPERATIONS

     Ashland's net income  amounted to $378 million in 2004, $75 million in
2003 and $117 million in 2002.  Income from  continuing  operations  (which
excludes  discontinued  operations and the cumulative  effect of accounting
changes)  amounted  to $398  million in 2004,  $94 million in 2003 and $115
million in 2002. Ashland's results from discontinued operations, consisting
of charges  associated  with estimated  future  asbestos  liabilities  less
probable insurance recoveries,  as well as net income from the discontinued
operations of its Electronic Chemicals business,  along with the cumulative
effect of accounting  changes  adopted in 2002 and 2003,  accounted for the
difference in net income and income from continuing operations.

     Chemical Sector (consisting of Ashland Distribution, Ashland Specialty
Chemical  and  Valvoline)  operating  income  totaled $270 million in 2004,
compared  to $150  million  in 2003  and  $148  million  in  2002.  Ashland
Distribution,   Ashland   Specialty   Chemical  and  Valvoline  all  showed
significant  improvement  in 2004,  reflecting  a combined  12% increase in
sales  and  operating  revenues  and an  improved  cost  structure.  In the
Transportation  Construction Sector, Ashland Paving And Construction (APAC)
recorded  operating  income of $111 million in 2004,  compared to a loss of
$42 million in 2003 and income of $122 million in 2002. APAC's  improvement
in 2004  reflected a reduced cost structure and more normal weather for the
overall year.  Refining and Marketing  operating income was $383 million in
2004, compared to $263 million in 2003 and $143 million in 2002, reflecting
higher refining margins year-over-year and increased refinery throughput in
2004  compared  with 2003.  An  analysis  of  operating  income by industry
segment follows.

APAC

     Operating income from APAC totaled $111 million in 2004, compared with
an operating loss of $42 million in 2003.  Higher  margins on  construction
work,  driven  primarily  by  reduced  operating  costs,  was  the  primary
contributor  to the earnings  improvement.  Income also  increased from the
sale of hot-mix asphalt and  aggregates,  reflecting  improved  pricing and
margins as well as slightly  higher sales volumes in both areas.  Operating
efficiency  increased  as a  result  of  broad-based  business  improvement
programs implemented over the last three years, and somewhat better weather
conditions  for 2004  overall,  compared with the record levels of rainfall
experienced  in 2003.  APAC  reversed  into income $5 million of a job loss
reserve established in 2003 related to a large highway construction project
in Virginia.  Also  contributing to 2004 earnings,  APAC sold a significant
portion of its ready-mix concrete operations in the June quarter, realizing
proceeds  net of selling  expenses  of $38  million and a pretax gain of $9
million.  Costs related to Project PASS, APAC's process redesign initiative
completed during 2004,  amounted to $10 million in 2004,  compared with $20
million in 2003. As of September  30, 2004,  APAC's  construction  backlog,
which consists of contracts  awarded and funded but not yet performed,  was
$1.75 billion, essentially even with the year-end record set in 2003.

     During 2003, APAC reported an operating loss of $42 million,  compared
to income of $122  million  in 2002.  In many of the  states in which  APAC
operates,  rainfall  during 2003 was among the highest  levels on record in
the past 109 years as measured by the National  Climatic  Data  Center.  In
addition to  hampering  the overall  level of  construction  activity,  the
weather  conditions  resulted in  significant  levels of rework and created
significant  inefficiencies  in completing the construction  work that APAC
performed.   Earnings  from  construction  jobs  were  down  significantly,
reflecting  an  11%  decrease  in  net  construction  job  revenues  (total
construction job revenues less subcontract costs) and a related increase in
overhead   costs  not  allocated  to  individual   jobs.  As  a  result  of
weather-related  cost increases and construction  delays,  APAC established
reserves for job losses on several projects,  including $14 million related
to a large highway construction project in Virginia. Margins of the asphalt
plants  were  also  down  due  to  an  11%  decrease  in   production   and
significantly  higher costs for liquid asphalt and fuel. In addition,  APAC
recognized an impairment charge of $9 million associated with non-strategic
businesses  identified for sale. Costs associated with Project PASS, APAC's
process redesign  initiative,  amounted to $20 million in 2003, compared to
$17 million in 2002.

ASHLAND DISTRIBUTION

     Ashland Distribution  generated record operating income of $78 million
in 2004,  compared with $32 million in 2003.  Sales  increased 14% compared
with 2003,  due to a 7%  increase  in unit  volumes  and a 7%  increase  in
selling prices. Gross profit as a percent of sales declined slightly,  from
9.9% to 9.6%,  attributable primarily to lower margins within the chemicals
product category. Selling, general and administrative expenses were reduced
10%, reflecting  cost-cutting and efficiency  improvements achieved through
Ashland's  Top-Quartile  Cost Structure  (TQCS) program that began in 2003.
Income in 2004 increased from all regions, both domestically and in Europe.



                                    M-2
<PAGE>
     Operating income from Ashland Distribution  amounted to $32 million in
2003,  compared to $1 million in 2002.  Overall sales were up 11% (of which
5% came from higher  volumes),  despite a  continuing  sluggish  industrial
production  environment.  Reported  results for 2003 included $6 million of
gains from property sales and litigation  settlements,  as well as a charge
of $5  million  for staff  reductions  under the TQCS  program.  Results of
Ashland  Distribution  for 2002  included  income  of $7  million  from the
settlement of the sorbate antitrust litigation.

ASHLAND SPECIALTY CHEMICAL

     Operating  income from  Ashland  Specialty  Chemical  increased to $87
million in 2004,  compared to $31 million in 2003. Sales from the thermoset
resins  businesses  (Casting  Solutions,  Composite  Polymers and Specialty
Polymers & Adhesives)  increased  17%,  reflecting  an 11% increase in unit
sales  volumes and a 6% increase in selling  prices.  The increase in sales
was  partially  offset by a decline in gross profit  percentage  due to the
inability to fully recover  persistently  rising raw materials  costs.  The
water  technologies  businesses  (Drew Industrial and Drew Marine) achieved
higher income as a result of a 7% increase in revenues.  Ashland  Specialty
Chemical's  selling,  general and  administrative  expenses were reduced in
2004,  reflecting cost reductions  achieved through Ashland's TQCS program.
Adding to income in 2004, a parcel of land and fixed assets in  Plaquemine,
Louisiana  were sold for net proceeds of $9 million,  resulting in a pretax
gain of $6 million.  Results for 2003 included an impairment  charge of $10
million for a maleic anhydride production facility,  as well as a charge of
$5 million for staff reductions under the TQCS program.

     Ashland Specialty  Chemical's operating income amounted to $31 million
in 2003,  compared to $70 million in 2002.  Although  overall sales were up
7%, the individual businesses reported mixed results. Earnings from most of
the thermoset  resins  businesses  were down,  reflecting raw material cost
increases that were not completely  recovered in the  marketplace.  Results
from  Castings  Solutions and Drew  Industrial  were up,  reflecting  sales
increases of 11% and 8%,  combined  with more stable  margins.  In spite of
higher sales, operating income from Drew Marine was down largely due to the
effects of the weakening U.S.  dollar on margins.  Sales of Drew Marine are
principally  denominated  in U.S.  dollars,  while  most of its  costs  are
denominated  in foreign  currencies.  In addition,  the earnings of Ashland
Specialty  Chemical for 2003 included an  impairment  charge of $10 million
for a maleic  anhydride  production  facility,  as well as a  charge  of $5
million for staff reductions under the TQCS program.

VALVOLINE

     Valvoline  generated  record operating income of $105 million in 2004,
compared with $87 million in 2003.  Lubricant  sales  volumes  decreased 1%
from 2003, but unit sales of  higher-margin  premium  lubricants  (MaxLife,
Durablend and SynPower)  increased 15%. Valvoline Instant Oil Change (VIOC)
reported its third year of record  earnings due in part to a 3% increase in
non-oil  change  revenues  and  a  2%  increase  in  premium  oil  changes,
contributing  to a 6%  increase  in the average  sale per  customer  visit.
Valvoline's international operations posted record operating income, mostly
due to a 6% increase in lubricant sales volumes and  strengthening  foreign
currencies.  At September 30, 2004, VIOC operated 360 company-owned service
centers,  compared to 357 centers in 2003 and 363 centers in 2002. The VIOC
franchising program continues to expand, with 397 centers open at September
30, 2004,  compared to 372 centers in 2003 and 335 centers in 2002.  VIOC's
future growth will continue to focus principally on expanding the number of
franchised rather than company-owned centers.

     Operating  income  from  Valvoline  amounted  to $87  million in 2003,
compared to $77 million in 2002.  Branded lubricant volume was up slightly,
but the mix improved  considerably  with higher margin  premium  lubricants
accounting  for  18.5% of the  total in  2003,  compared  to 16.1% in 2002.
Significant improvements were also achieved from international  operations,
VIOC and  automotive  system  fluids.  Valvoline  International  had better
volumes and margins in Europe and Australia,  and their improved  operating
results were further enhanced by strengthening foreign currency translation
rates.  VIOC's increased earnings reflected a growing number of oil changes
using premium lubricants and increased revenues from transmission, cooling,
fuel and air quality  system  services.  Valvoline  also sold its remaining
inventory of R-12 refrigerant at a small profit.


REFINING AND MARKETING

     Operating income from Refining and Marketing, which consists primarily
of equity income from Ashland's 38% ownership  interest in MAP, amounted to
$383  million  in 2004,  compared  to $263  million in 2003.  In 2004,  MAP
achieved its second  highest  level of earnings for the twelve months ended
September.  Equity  income from MAP's  refining  and  marketing  operations
increased  $127  million,  reflecting an increase of 52 cents per barrel in
its refining and wholesale  marketing  margin.  MAP's refineries  processed
approximately 1.1 million barrels per day of crude oil and other feedstocks
during 2004,  an increase of 5% from 2003.  Equity income from MAP's retail
operations


                                    M-3

<PAGE>
     (Speedway  SuperAmerica and a 50% interest in the Pilot Travel Centers
joint venture) declined $6 million due to an $8 million gain on the sale of
Speedway SuperAmerica's southern stores in 2003.

     On March 19, 2004, Ashland announced the signing of an agreement under
which  it  would  transfer  its 38%  interest  in MAP and two  wholly-owned
businesses to Marathon in a transaction structured to be generally tax free
and valued at approximately $3.0 billion (the "MAP  Transaction").  The two
other  businesses  are  Ashland's  maleic  anhydride  business  and 61 VIOC
centers.  The  transaction  is  subject  to  several  previously  disclosed
conditions,  including  approval by  Ashland's  shareholders,  consent from
Ashland's  public debt  holders and receipt of a favorable  private  letter
ruling from the  Internal  Revenue  Service  (IRS) with  respect to the tax
treatment.  Ashland has filed  registration  statements and proxy materials
with the  Securities  and Exchange  Commission  (SEC) and is  responding to
comments. In addition, Ashland submitted a request to the IRS for a private
letter ruling on the tax-free status of the proposed  transaction.  Ashland
continues  to discuss the complex  tax issues  related to this  transaction
with the IRS.  Ashland  has not  resolved  all  issues  with the IRS and is
exploring  alternatives  for the resolution of these issues.  At this time,
Ashland cannot predict whether the requested  rulings will be received.  If
the requested  rulings are not received,  the transaction  would have to be
modified or  terminated.  In any event,  Ashland  does not  believe  that a
transaction will close earlier than March 2005.

     Operating income from Refining and Marketing was $263 million in 2003,
compared to $143  million in 2002.  Equity  income from MAP's  refining and
wholesale marketing operations was up $92 million,  principally  reflecting
an increase of 77 cents a barrel in its  refining and  wholesale  marketing
margin and higher  operating  expenses.  Equity  income  from MAP's  retail
operations increased by $20 million, reflecting a gain of $8 million on the
sale of  Speedway  SuperAmerica's  southern  stores and higher  product and
merchandise margins for Pilot Travel Centers.

CORPORATE

     Corporate expenses were $102 million in 2004, $105 million in 2003 and
$92 million in 2002. The reduction in expense  reflects an increase in 2004
of $16 million related to performance-based employee incentive plans, which
was more than offset by the  inclusion  in 2003 of $19 million in severance
and other  transition  costs  related  to  Ashland's  TQCS and  other  cost
reduction  programs.  The  increase in 2003  compared to 2002  reflects the
expense  in 2003 for  severance  and  other  transition  costs  related  to
Ashland's TQCS and other cost reduction  programs,  increased incentive and
deferred  compensation  costs and $6 million  related to the  expensing  of
employee stock  options.  Those  increases  were partially  offset by lower
ongoing  administrative  costs in 2003, as well as additional reserves that
were included in 2002 costs.

NET INTEREST AND OTHER FINANCIAL COSTS

     The  following  table  summarizes  the  components of net interest and
other financial costs.
<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
NET INTEREST AND OTHER FINANCIAL COSTS
Interest expense                                                                $      114   $      123   $      135
Expenses on sales of accounts receivable                                                 3            3            4
Other financial costs                                                                    3            3            3
Interest income                                                                         (6)          (1)          (4)
                                                                                -----------  -----------  -----------
                                                                                $      114   $      128   $      138
                                                                                ===========  ===========  ===========

</TABLE>
     Ashland's long-term debt declined from $1.9 billion at October 1, 2001
to $1.5  billion at the end of fiscal 2004,  accounting  for a reduction in
interest  expense of $12  million in 2003 and an  additional  $9 million in
2004.  Interest  income  increased  $5 million  in 2004,  with most of that
increase due to the recognition of interest  income  associated with income
tax refunds claimed for prior years.

INCOME TAXES

     Ashland's  income tax  expense  for 2004  included  $48 million in tax
benefits  related  to  prior  years.   During  the  year,  Ashland  reached
resolution  with the Internal  Revenue  Service on several open tax matters
from prior years,  resulting in a tax benefit of $33 million as a result of
the reduction of amounts previously provided as contingent tax liabilities.
In addition, Ashland recognized federal income tax benefits associated with
a claim for additional  research and  development tax credits valued at $15
million.  Excluding these two items,  Ashland's adjusted effective tax rate
was 36.0% in 2004,  compared to 31.9% in 2003.  The overall  effective rate
was lower in 2003 than in 2004



                                    M-4
<PAGE>

due to Ashland's  lower level of earnings in 2003 and the resulting  larger
relative  portion of those earnings  derived from income taxed at less than
full U.S. statutory rates.

     Ashland's  overall  effective  income tax rate  declined from 37.2% in
2002 to 31.9% in 2003.  Recurring  nontaxable income, such as equity income
from foreign operations,  had a larger effect on the effective rate in 2003
due to the reduced level of earnings.  In addition,  the changed investment
climate  resulted in nontaxable  income being realized under life insurance
policies  during  2003,  compared  to 2002 when  nondeductible  losses were
incurred.  These life  insurance  policies are the  underlying  investments
behind Ashland's deferred compensation programs.

DISCONTINUED OPERATIONS AND ACCOUNTING CHANGES

     Results of Ashland's discontinued operations are summarized below. See
Note  N of  Notes  to  Consolidated  Financial  Statements  for  additional
information.
<TABLE>
<CAPTION>

(In millions)                                                                        2004        2003         2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>          <C>
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (NET OF TAX)
Reserves for asbestos-related litigation (net of insurance recoveries)         $      (18)  $    (109)   $       -
Electronic Chemicals
      Results of operations                                                             -          14           13
      Gain on sale of operations                                                       (3)         81            -
Resolution of tax contingency issues                                                    1           -            -
                                                                               -----------  ----------   ----------
                                                                               $      (20)  $     (14)   $      13
                                                                               ===========  ==========   ==========

</TABLE>

     Ashland is subject to liabilities from claims alleging personal injury
caused  by  exposure  to  asbestos.   Such  claims  result  primarily  from
indemnification  obligations undertaken in 1990 in connection with the sale
of Riley Stoker Corporation, a former subsidiary.  During the quarter ended
December 31, 2002,  Ashland  increased  its reserve for asbestos  claims by
$390  million  to cover  litigation  defense  and  claim  settlement  costs
expected to be paid  through  December  2012.  Because  insurance  provides
reimbursements  for most of these  costs and  coverage-in-place  agreements
exist with the insurance  companies that provide  substantially  all of the
coverage being accessed, the increase in the asbestos reserve was offset in
part by probable insurance recoveries valued at $235 million. The resulting
$155 million pretax charge to income,  net of deferred  income tax benefits
of $60  million,  was  reflected  as an  after-tax  loss from  discontinued
operations of $95 million in the Statement of  Consolidated  Income for the
three  months  ended  December  31,  2002.  Additional  reserves  have been
provided  since  then to  reflect  updates  in the  estimate  of  potential
payments for litigation defense and claim settlement costs.

     During 2003,  Ashland sold the net assets of its Electronic  Chemicals
business and certain  related  subsidiaries  for $300  million.  Due to the
sale, the results of operations of those businesses, as well as the gain on
the sale, were shown in discontinued operations.

     During 2004,  Ashland  reached  resolution  with the Internal  Revenue
Service  on  several  open tax  matters  from  prior  years,  as  described
previously  in the  discussion  of income  taxes.  In  addition  to amounts
reported in income from  continuing  operations,  favorable  resolution was
also reached on matters associated with previously discontinued businesses,
resulting  in a $1 million tax benefit  from the  associated  reduction  in
contingent tax liabilities previously recorded.

     As  discussed  in  Note A to the  Consolidated  Financial  Statements,
Ashland  adopted certain  pronouncements  of the FASB during the last three
years.  As of July 1, 2003,  Ashland  consolidated  a lessor  entity in its
financial  statements  under FIN 46, and doing so resulted in an  after-tax
charge of $5 million to adjust the depreciation  included in the cumulative
lease payments to conform to Ashland's  depreciation methods.  Ashland also
adopted FAS 142 in 2002 and  recognized an  impairment  loss of $11 million
after income taxes to write off the goodwill of Ashland Distribution.

FINANCIAL POSITION

LIQUIDITY

     Cash flows from  operations,  a major source of  Ashland's  liquidity,
amounted to $209 million in 2004,  $242 million in 2003 and $168 million in
2002. Such amounts include cash  distributions  from MAP of $146 million in
2004, $197 million in 2003 and $196 million in 2002.  During 2004,  Ashland
paid income taxes of $84 million,


                                    M-5
<PAGE>

compared  with $24 million in 2003 and $158  million in 2002.  Ashland also
contributed $137 million to its qualified  pension plans in 2004,  compared
with $61  million  in 2003 and  $103  million  in  2002.  Cash  flows  from
operations  during 2004 were  supplemented by $108 million in proceeds from
the issuance of common stock resulting from stock option exercises, as well
as $48  million  from the sale of certain  APAC  operations.  Over the last
three years,  cash flows from operations  approximately  equaled  Ashland's
capital requirements for net property additions and dividends,  despite the
fact that cash  distributions  from MAP have been suspended  since December
31, 2003, pending closure of the MAP Transaction.  Ashland's share of MAP's
undistributed cash on September 30, 2004 was $203 million.

     Ashland's  financial position has enabled it to obtain capital for its
financing needs and to maintain investment grade ratings on its senior debt
of Baa2 from Moody's and BBB from Standard & Poor's (S&P).  In August 2003,
S&P revised its outlook on Ashland to  negative  from  stable,  and lowered
Ashland's commercial paper rating to A-3 from A-2. In March 2004, following
the announcement of the pending MAP Transaction, S&P affirmed its long-term
debt rating and placed  Ashland's  A-3  commercial  paper  rating on credit
watch  with  positive  implications.  Conversely,  in March  2004,  Moody's
lowered  Ashland's  commercial  paper rating to P-3 from P-2. These actions
materially restrict, and could at times eliminate,  the availability of the
commercial  paper  market to  Ashland.  Ashland  has two  revolving  credit
agreements providing for up to $350 million in borrowings. Although Ashland
borrowed $175 million  under these  agreements  to repay  commercial  paper
shortly after the S&P downgrade in 2003,  the revolving  credit  agreements
were not used during 2004.  In the June 2004 quarter,  Ashland  executed an
additional $200 million  revolving credit agreement which expires March 31,
2005.  Ashland  has  utilized  this  facility  to fund  currently  maturing
long-term debt and certain lease payments,  and had $40 million outstanding
under this  facility at September  30,  2004.  While the  revolving  credit
agreements  contain  covenants  limiting new borrowings  based on Ashland's
stockholders'  equity,  these agreements would have permitted an additional
$2.4 billion of borrowings at September  30, 2004.  Additional  permissible
borrowings are increased  (decreased) by 150% of any increase (decrease) in
stockholders' equity.

     At September 30, 2004,  working capital (excluding debt due within one
year)  amounted to $926  million,  compared  to $703  million at the end of
2003.  Ashland's  working capital is affected by its use of the LIFO method
of  inventory  valuation.   That  method  valued  inventories  below  their
replacement  costs by $95 million at September 30, 2004, and $78 million at
September  30, 2003.  Liquid assets (cash,  cash  equivalents  and accounts
receivable)  amounted to 84% of current  liabilities at September 30, 2004,
compared to 92% at the end of 2003.  Essentially  all of this  decrease was
due to a $337 million increase in debt due within one year.

CAPITAL RESOURCES

     Property  additions  amounted  to $500  million  during the last three
years and are  summarized in the  Information  by Industry  Segment on page
F-27.  Property  additions  in 2004  included  a $33  million  buyout of an
operating  lease for a portion of the buildings on Ashland's  Dublin,  Ohio
campus.  For the past three  years,  APAC  accounted  for 45% of  Ashland's
capital  expenditures,  while Ashland Specialty  Chemical  accounted for an
additional  25%.  Capital used for  acquisitions  (including  assumed debt)
amounted to $27 million  during the last three years,  of which $20 million
was  invested  in APAC,  $4 million in Ashland  Specialty  Chemical  and $3
million  in  Valvoline.  A summary of the  capital  employed  in  Ashland's
operations  follows.  The  increase in capital  employed  in  Refining  and
Marketing  in  2004  is   attributed  to  the  terms  of  the  pending  MAP
Transaction,  under which MAP suspended  quarterly  cash  distributions  to
Ashland  and  Marathon  after  December  31,  2003 until the closing of the
transaction.  The  reduction  in  capital  employed  in  Ashland  Specialty
Chemical  in 2003  resulted  principally  from the  sale of the  Electronic
Chemicals business.

<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
CAPITAL EMPLOYED
APAC                                                                            $      959   $    1,014   $    1,039
Ashland Distribution                                                                   449          418          459
Ashland Specialty Chemical                                                             490          438          610
Valvoline                                                                              388          399          343
Refining and Marketing                                                               2,053        1,866        1,818

</TABLE>

     Long-term  borrowings  provided  cash flows of $55 million  during the
last three years,  the proceeds from which were used in part to retire $456
million of long-term debt. Debt retirements included scheduled  maturities,
as well as prepayments or refundings to reduce interest  costs.  Cash flows
were  supplemented  as  necessary  by the  issuance  of  short-term  notes,
commercial paper and borrowings under the revolving credit agreements.




                                    M-6

<PAGE>

     During  2004,  Ashland  reduced  its total debt by $66 million to $1.5
billion. Stockholders' equity increased by $453 million during 2004 to $2.7
billion.  Increases resulting from $378 million of net income, $132 million
from issuance of common shares under stock  incentive and other plans,  and
$33 million of translation  gains  associated with foreign  operations were
partially  offset  by  cash  dividends  of $77  million  and a $13  million
increase in the  minimum  pension  liability.  Debt as a percent of capital
employed  was reduced  from 41.7% at the end of 2003 to 36.4% at  September
30, 2004.

     At  September  30,  2004,  Ashland's  debt  included  $69  million  of
floating-rate  obligations,  and the interest  rates on an additional  $183
million of  fixed-rate,  medium-term  notes were  effectively  converted to
floating  rates  through  interest  rate  swap  agreements.   In  addition,
Ashland's costs under its sale of receivables program and various operating
leases are based on the  floating-rate  interest  costs on $187  million of
third-party debt underlying those  transactions.  As a result,  Ashland was
exposed to short-term  interest rate  fluctuations  on $439 million of debt
obligations at September 30, 2004.

     During 2005,  Ashland  expects capital  expenditures of  approximately
$280 million,  excluding any buyouts of current leases,  compared with $210
million in 2004.  Most of the  increase is planned for APAC and  Valvoline.
Improvements in APAC's equipment  management  processes and a sizable lease
program  during  the past two years  has  allowed a  reduction  in  capital
expenditures  during that period.  Valvoline's  increase  reflects  capital
spending on various organic growth and efficiency  improvement projects. In
2004, Ashland initiated a multi-year SAP enterprise resource planning (ERP)
project  that is expected to be  implemented  world-wide  across  Ashland's
Chemical Sector to achieve increased efficiency and effectiveness in supply
chain, financial, and environmental,  health and safety processes.  Capital
costs for this  project  through 2007 are expected to total in the range of
$90 to $100 million,  of which  approximately $25 million is expected to be
spent  in  2005.  Ashland's  capital  requirements  in  2005  for  property
additions  and  dividends  will be met  from  internally  generated  funds.
Scheduled  debt  repayments  of $439  million  will be met  either  through
proceeds from the pending MAP  Transaction or, if that  transaction  should
not  close,  partially  from  short-term  investments  and  partially  from
refundings.

     The following table  aggregates  Ashland's  commitments to make future
payments under existing  contracts at September 30, 2004.  Contractual cash
obligations  for which the  ultimate  settlement  amounts are not fixed and
determinable have been excluded.

<TABLE>
<CAPTION>
                                                                                     2006-       2008-       Later
(In millions)                                             Total         2005         2007        2009        Years
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>          <C>          <C>          <C>
CONTRACTUAL OBLIGATIONS
Short-term and long-term debt (1)                     $   2,151   $      544   $      341   $     499    $     767
Operating lease obligations                                 257           47           76          51           83
Purchase obligations
      Construction subcontracts                             570          513           57           -            -
      Construction materials                                387          319           66           1            1
      Other raw materials                                   173           75           88          10            -
      Property, plant and equipment                           6            6            -           -            -
Employee benefit obligations (2)                            401          104           62          65          170
                                                      ----------  -----------  -----------  ----------   ----------
Total contractual obligations                         $   3,945   $    1,608   $      690   $     626    $   1,021
                                                      ==========  ===========  ===========  ==========   ==========
</TABLE>
(1)   Includes   principal  and  interest   payments.   Capitalized   lease
      obligations are not significant and are included in long-term debt.
(2)   Includes  estimated funding of Ashland's  qualified U.S. and non-U.S.
      pension plans for 2005, as well as projected benefit payments through
      2014   under   Ashland's   nonqualified   pension   plans  and  other
      postretirement  benefit  plans.  See Note O of Notes to  Consolidated
      Financial Statements for additional information.

OFF-BALANCE SHEET ARRANGEMENTS

     Ashland and its subsidiaries are lessees of office  buildings,  retail
outlets, transportation and off-road construction equipment, warehouses and
storage  facilities,  and other equipment,  facilities and properties under
leasing  agreements that expire at various dates.  Under various  operating
leases,  Ashland  has  guaranteed  the  residual  value  of the  underlying
property.  If Ashland had canceled  those leases at September 30, 2004, its
maximum obligations under the residual value guarantees would have amounted
to $98 million.  Ashland does not expect to incur any significant charge to
earnings  under  these  guarantees,  $24  million of which  relates to real
estate. These


                                    M-7

<PAGE>

lease  agreements are with unrelated third party lessors and Ashland has no
additional contractual or other commitments to any parties to the leases.

     Ashland has also  guaranteed  38% of MAP's  payments for certain crude
oil purchases,  up to a maximum guarantee of $95 million.  At September 30,
2004,  Ashland's  contingent liability under this guarantee amounted to the
full $95  million.  Ashland  has not made and does not  expect  to make any
payments under this guarantee.

     During 2000, Ashland entered into a five-year agreement to sell, on an
ongoing  basis  with  limited  recourse,  up to a  $200  million  undivided
interest in a designated  pool of accounts  receivable.  Under the terms of
the agreement, new receivables are added to the pool and collections reduce
the pool. Since inception,  interests  totaling $150 million have been sold
on a continuous  basis,  except for a period between April 29 and September
7, 2003, when the full $200 million capacity was utilized.  Ashland retains
a credit  interest in these  receivables  and addresses its risk of loss on
this retained interest in its allowance for doubtful accounts.  Receivables
sold exclude defaulted accounts or concentrations  over certain limits with
any one customer.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

     The  preparation  of  Ashland's   consolidated   financial  statements
requires  management  to make  estimates  and  assumptions  that affect the
reported  amounts of assets,  liabilities,  revenues and expenses,  and the
disclosures of contingent  assets and liabilities.  Significant  items that
are subject to such estimates and assumptions  include  long-lived  assets,
employee  benefit  obligations,  reserves and  associated  receivables  for
asbestos  litigation and environmental  remediation,  and income recognized
under construction  contracts.  Although  management bases its estimates on
historical experience and various other assumptions that are believed to be
reasonable   under  the   circumstances,   actual   results   could  differ
significantly  from the estimates  under other  assumptions  or conditions.
Management has reviewed the estimates  affecting these items with the Audit
Committee of Ashland's Board of Directors.

LONG-LIVED ASSETS

     The cost of plant and equipment is  depreciated  by the  straight-line
method over the  estimated  useful  lives of the assets.  Useful  lives are
based on  historical  experience  and are adjusted  when changes in planned
use,  technological  advances or other  factors show that a different  life
would  be more  appropriate.  Such  costs  are  periodically  reviewed  for
recoverability  when  impairment  indicators are present.  Such  indicators
include,  among other factors,  operating losses,  unused capacity,  market
value declines and technological obsolescence. Recorded values of property,
plant  and  equipment  that  are  not  expected  to  be  recovered  through
undiscounted  future net cash flows are written down to current fair value,
which  generally is determined  from estimated  discounted  future net cash
flows (assets held for use) or net realizable value (assets held for sale).
During 2003,  Ashland  recognized an impairment charge of $10 million for a
maleic  anhydride  production facility  that is shut down and not likely to
reopen  based on  internal  analyses.  Although  circumstances  can  change
considerably over time,  Ashland is not aware of any impairment  indicators
that would  necessitate  periodic  reviews on any significant  asset within
property, plant and equipment at September 30, 2004.

     Intangible   assets  with  indefinite  lives  are  subject  to  annual
impairment tests.  Such tests are completed  separately with respect to the
goodwill  of  each  of  Ashland's  reporting  units,  which  generally  are
synonymous with its industry segments.  However,  the individual  operating
divisions of Ashland Specialty Chemical are also considered reporting units
under FAS 142.  Since market  prices of Ashland's  reporting  units are not
readily  available,  management makes various  estimates and assumptions in
determining the estimated fair values of those units. Fair values are based
principally on EBITDA (earnings before  interest,  taxes,  depreciation and
amortization) multiples of peer group companies for each of these reporting
units.  Ashland recognized  impairment charges of $9 million in 2003 and $2
million in 2004 for goodwill  associated with  non-strategic  businesses of
APAC identified for sale. The most recent annual impairment tests indicated
that the fair values of each of Ashland's  reporting units with significant
goodwill were in excess of their carrying  values,  with the large majority
of those units  exceeding  carrying  value by more than 20%.  Despite  that
excess,   however,   impairment  charges  could  still  be  required  if  a
divestiture  decision  were  made with  respect  to a  particular  business
included in one of the reporting units.

EMPLOYEE BENEFIT OBLIGATIONS

     Ashland and its subsidiaries  sponsor contributory and noncontributory
qualified  and  non-qualified  defined  benefit  pension  plans  that cover
substantially  all  employees in the United States and in a number of other
countries.  Benefits  under these plans  generally  are based on employee's
years of service and compensation  during the years  immediately  preceding
their  retirement.   In  addition,  the  companies  also  sponsor  unfunded
postretirement benefit


                                    M-8
<PAGE>

plans,  which provide health care and life insurance  benefits for eligible
employees who retire or are disabled.  Retiree  contributions  to Ashland's
health care plans are adjusted  periodically,  and the plans  contain other
cost-sharing features, such as deductibles and coinsurance.  Life insurance
plans generally are noncontributory.

     The  principal  assumptions  used to determine  Ashland's  pension and
other  postretirement  benefit  costs are the  discount  rate,  the rate of
compensation  increase  and the expected  long-term  rate of return on plan
assets.  Because  Ashland's  retiree health care plans contain various caps
that  limit  Ashland's  contributions  and  because  medical  inflation  is
expected to  continue  at a rate in excess of these caps for the  immediate
future, no assumption is needed with respect to future inflation in medical
costs.

     The  discount  rates used to  determine  the  present  value of future
pension payments, healthcare costs and life insurance benefits are based on
the  yields on  high-quality,  fixed-income  investments  (such as  Moody's
Aa-rated corporate bonds), as adjusted for the longer duration of Ashland's
pension and other postretirement benefit obligations.  The present value of
Ashland's future  obligations  under the pension and  postretirement  plans
were  determined  using  discount  rates of 6.0% at September 30, 2004, and
6.25% at  September  30,  2003.  Ashland's  expense  under  these  plans is
determined  using the discount rate as of the beginning of the fiscal year,
which amounted to 6.25% for 2004,  6.75% for 2003, 7.25% for 2002, and will
be 6.0% for 2005.

     The rate of  compensation  increase  assumptions are 4.5% for 2004 and
5.0% for 2003 and 2002. The long-term  expected rate of return on assets is
assumed  to be 8.5% in 2004 and 9.0% in 2003 and 2002.  The  return on plan
assets is subject to wide  year-to-year  variances.  For 2004,  the pension
plan assets generated an actual return of 11.8%,  compared to 19.1% in 2003
and losses of 6.7% in 2002. However,  the expected return on plan assets is
designed to be a long-term  assumption,  and actual returns will be subject
to considerable  year-to-year  variances.  Ashland has generated compounded
annual investment  returns of 5.3% and 9.3% on its pension plan assets over
the last  five-year  and ten-year  periods.  Shown below are the  estimated
increases in pension and  postretirement  expense that would have  resulted
from a 1%  change  in each of the  assumptions  for each of the last  three
years.

<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
INCREASE IN PENSIONS COSTS FROM
Decrease in the discount rate                                                   $       21   $       20   $       21
Increase in the salary adjustment rate                                                   9            9           10
Decrease in the expected return on plan assets                                           7            6            5
INCREASE IN OTHER POSTRETIREMENT COSTS FROM
Decrease in the discount rate                                                            2            2            4
</TABLE>

ASBESTOS-RELATED LITIGATION

     Ashland is subject to liabilities from claims alleging personal injury
caused  by  exposure  to  asbestos.   Such  claims  result  primarily  from
indemnification  obligations undertaken in 1990 in connection with the sale
of Riley Stoker Corporation  (Riley),  a former subsidiary.  Although Riley
was neither a producer  nor a  manufacturer  of  asbestos,  its  industrial
boilers  contained some  asbestos-containing  components  provided by other
companies.

     During the December  2002 quarter,  Ashland  increased its reserve for
asbestos  claims by $390 million to cover the litigation  defense and claim
settlement  costs for probable and  reasonably  estimable  future  payments
related to existing  open claims,  as well as an estimate of those that may
be filed in the future.  Prior to December 31, 2002,  the asbestos  reserve
was based on the estimated  costs that would be incurred to settle existing
open claims.  A range of estimates  of future  asbestos  claims and related
costs using  various  assumptions  was  developed  with the  assistance  of
Hamilton, Rabinovitz & Alschuler, Inc. (HR&A). The methodology used by HR&A
to project  future  asbestos  costs was based  largely on Ashland's  recent
experience,  including claim-filing and settlement rates, disease mix, open
claims, and litigation defense and claim settlement costs.  Ashland's claim
experience   was   compared   to  the  results  of   previously   conducted
epidemiological  studies  estimating the number of people likely to develop
asbestos-related diseases. Those studies were undertaken in connection with
national  analyses  of the  population  expected  to have been  exposed  to
asbestos.  Using that information,  HR&A estimated a range of the number of
future  claims that may be filed,  as well as the related costs that may be
incurred in resolving those claims.

     From the range of estimates,  Ashland  recorded the amount it believed
to be the best  estimate,  which  represented  the  expected  payments  for
litigation  defense and claim  settlement  costs during the next ten years.
Subsequent  updates to this estimate have been made, with the assistance of
HR&A,  based on a combination  of a number of factors  including the actual
volume  of new  claims,  recent  settlement  costs,  changes  in the mix of
alleged disease,




                                    M-9


<PAGE>

enacted  legislative  changes and other  developments  impacting  Ashland's
estimate of future  payments.  Ashland's  reserve for asbestos claims on an
undiscounted basis amounted to $618 million at September 30, 2004.

     Projecting future asbestos costs is subject to numerous variables that
are  extremely  difficult  to  predict.  In  addition  to  the  significant
uncertainties  surrounding  the number of claims  that  might be  received,
other  variables  include the type and  severity of the disease  alleged by
each claimant,  the long latency period associated with asbestos  exposure,
dismissal rates, costs of medical treatment,  the impact of bankruptcies of
other companies that are co-defendants in claims, uncertainties surrounding
the litigation  process from  jurisdiction to jurisdiction and from case to
case,  and the impact of  potential  changes  in  legislative  or  judicial
standards. Furthermore, any predictions with respect to these variables are
subject to even greater uncertainty as the projection period lengthens.  In
light  of these  inherent  uncertainties,  Ashland  believes  its  asbestos
reserve  represents the best estimate within a range of possible  outcomes.
As a part of the process to develop Ashland's  estimates of future asbestos
costs, a range of long-term cost models is developed that assumes a run-out
of claims  through  2055.  These models are based on national  studies that
predict the number of people  likely to develop  asbestos-related  diseases
and are heavily  influenced by assumptions  regarding  long-term  inflation
rates for  indemnity  payments and legal  defense  costs,  as well as other
variables  mentioned  previously.  The total future litigation  defense and
claim settlement costs on an undiscounted basis has been estimated within a
reasonably possible range of $400 million to $2.0 billion, depending on the
number of years those costs extend and other  combinations  of  assumptions
selected.  Ashland's reserve  represents  between 10 and 29 years of future
costs,  depending on the model selected. If actual experience is worse than
projected  relative to the number of claims filed,  the severity of alleged
disease  associated  with those claims or costs  incurred to resolve  those
claims,  Ashland may need to increase  further the  estimates  of the costs
associated with asbestos  claims and these  increases could  potentially be
material over time.

     Ashland has insurance  coverage for most of the litigation defense and
claim settlement costs incurred in connection with its asbestos claims, and
coverage-in-place  agreements  exist  with  the  insurance  companies  that
provide  substantially all of the coverage  currently being accessed.  As a
result,  increases  in the asbestos  reserve  have been  largely  offset by
probable insurance  recoveries.  The amounts not recoverable  generally are
due from insurers that are insolvent,  rather than as a result of uninsured
claims or the exhaustion of Ashland's insurance coverage.

     Ashland retained the services of  Tillinghast-Towers  Perrin to assist
management in the estimation of reasonably  possible  insurance  recoveries
associated  with  Ashland's  estimate  of its  asbestos  liabilities.  Such
recoveries are based on management's  assumptions and estimates surrounding
the available or applicable insurance coverage. One such assumption is that
all solvent insurance carriers remain solvent. Although coverage limits are
resolved in the coverage-in-place  agreement with Equitas Limited (Equitas)
and other  London  companies,  which  collectively  provide  a  significant
portion of Ashland's  insurance  coverage for asbestos  claims,  there is a
disagreement  with  these  companies  over the  timing of  recoveries.  The
resolution of this  disagreement  could have a material effect on the value
of insurance  recoveries from those  companies.  In estimating the value of
future recoveries,  Ashland has used the least favorable  interpretation of
this  agreement  under which the ultimate  recoveries are extended for many
years,  resulting in a  significant  discount  being applied to value those
recoveries. Ashland will continue to apply this methodology until such time
as the disagreement is resolved.  On July 21, 2004,  Ashland filed a demand
for  arbitration to resolve the dispute  concerning the  interpretation  of
this agreement.

     At  September  30,  2004,   Ashland's  receivable  for  recoveries  of
litigation defense and claim settlement costs from its insurers amounted to
$435 million,  of which $54 million relates to costs previously paid. About
35% of the estimated  receivables from insurance companies at September 30,
2004,  are expected to be due from Equitas and other London  companies.  Of
the  remainder,  approximately  90% is expected to come from  companies  or
groups that are rated A or higher by A. M. Best.

ENVIRONMENTAL REMEDIATION

     Ashland is subject to various federal,  state and local  environmental
laws and regulations that require  environmental  assessment or remediation
efforts (collectively  environmental remediation) at multiple locations. At
September 30, 2004, such locations  included 93 waste treatment or disposal
sites where Ashland has been identified as a potentially  responsible party
under Superfund or similar state laws, approximately 130 current and former
operating  facilities  (including certain operating  facilities conveyed to
MAP) and about 1,220 service  station  properties.  Ashland's  reserves for
environmental  remediation  amounted to $152 million at September 30, 2004.
Such amounts reflect Ashland's estimates of the most likely costs that will
be incurred over an extended period to remediate identified  conditions for
which the costs are reasonably estimable, without regard to any third-party
recoveries.   Engineering  studies,   probability  techniques,   historical
experience and other factors are used to identify and evaluate  remediation
alternatives and their related costs in determining the estimated  reserves
for environmental remediation.



                                    M-10

<PAGE>

     Environmental  remediation  reserves are subject to numerous  inherent
uncertainties  that affect  Ashland's  ability to estimate its share of the
costs. Such uncertainties involve the nature and extent of contamination at
each  site,  the  extent  of  required   cleanup   efforts  under  existing
environmental  regulations,  widely  varying  costs  of  alternate  cleanup
methods,  changes in  environmental  regulations,  the potential  effect of
continuing  improvements  in  remediation  technology,  and the  number and
financial strength of other potentially  responsible  parties at multiparty
sites. Ashland regularly adjusts its reserves as environmental  remediation
continues.  Environmental  remediation  expense  amounted  to $2 million in
2004, $22 million in 2003 and $30 million in 2002.

     No  individual  remediation  location is  material to Ashland,  as its
largest reserve for any site is less than 10% of the  remediation  reserve.
As a result, Ashland's exposure to adverse developments with respect to any
individual  site is not  expected  to be  material,  and these sites are in
various stages of ongoing remediation.  Although environmental  remediation
could  have a  material  effect on  results  of  operations  if a series of
adverse developments occurs in a particular quarter or fiscal year, Ashland
believes that the chance of such developments occurring in the same quarter
or fiscal year is remote.

CONSTRUCTION CONTRACTS

     Income related to  construction  contracts  generally is recognized by
the   units-of-production   method,   which   is   a   variation   of   the
percentage-of-completion method. Construction jobs by their very nature are
subject to numerous risks that could create  variances  from  expectations.
Such risks include changes in raw material and other costs, adverse weather
conditions and the performance of subcontractors and other entities. Income
is only certain after a job is completed,  and the extent of completion can
be difficult to assess in certain circumstances.

     The extent of completion  for each  production  phase is determined by
reference to material quantities,  labor hours,  subcontract costs or other
factors that are believed to be most  indicative of the progress made under
each phase of a project.  Revenues  earned are computed by reference to the
contract or detailed  analyses of revenues and expenses by production phase
that  supported the related  construction  contract or bid proposal.  These
detailed   analyses  also  serve  as  early  indicators  as  to  whether  a
construction   contract  may   ultimately  be  completed  at  a  loss.  Any
anticipated losses on such contracts are charged against operations as soon
as such  losses are  determined  to be  probable  and  estimable.  In 2003,
reserves of $14 million were  established for job losses related to a large
highway construction project in Virginia,  reflecting  weather-related cost
increases and construction delays resulting from record levels of rainfall.
In 2004,  $5 million of that  reserve,  which was the amount  that had been
provided for potential liquidated damages, was reversed into income when it
was determined that those damages would not apply.

     Assumptions concerning the extent of completion can have a significant
effect on the income  recognized on an individual  construction  project in
any  period.  However,  the  effects of  individual  assumptions  on APAC's
reported results are mitigated to some extent by the significant  number of
jobs in various stages of completion at any point in time.

OUTLOOK

     Ashland's  focus  in  2005  will be to  support  long-term  growth  in
earnings and  shareholder  value through  increased  efficiency,  effective
capital management and expansion in existing and adjacent markets. Earnings
performance  will be driven  largely by the  strength of the U.S. and world
economies, in combination with Ashland's continuing efforts to gain greater
operational efficiency.

     The Top-Quartile  Cost Structure (TQCS) program  initiated in 2003 has
yielded selling, general and administrative (SG&A) cost reductions in every
segment,  evidenced  by a reduction in total SG&A expense of $85 million in
2004. In 2005,  this program's  focus will  transition from cost reductions
within the individual  business segments to gains in process efficiency and
effectiveness across the segments.

     Ashland is  currently  in the  design  phase of a  multi-year  SAP ERP
system that is scheduled  to be  implemented  globally  over the next three
years across  Ashland's  Chemical  Sector.  This project  focuses on supply
chain,  financial,  and environmental,  health and safety processes.  It is
expected to provide an integrated  system that streamlines and standardizes
these key processes on an end-to-end basis, with the foundational objective
being to deliver exemplary performance for Ashland's customers.

     Positively  impacting APAC,  federal highway funding for the 14 states
in which APAC  operates  increased  22% in 2004  compared to 2003.  An even
larger  appropriation  for fiscal  year 2005 is pending in  Congress.  APAC
should also benefit from  additional  savings as a result of its multi-year
Project PASS business redesign  initiative that focused on greater leverage
of purchasing  power,  improved  equipment  management  and more  efficient
administrative   support.  At  September  30,  2004,  construction  backlog
amounted to $1.7 billion, essentially the same


                                    M-11


<PAGE>

as the previous year-end record set in 2003.  Earnings are also expected to
benefit from 0.5% higher  estimated  margin on new  construction  contracts
awarded  in 2004,  compared  with that of 2003.  APAC will  pursue  organic
earnings growth through  emphasizing large  construction jobs and expanding
existing  capabilities  in the areas of  concrete  paving,  bridge work and
milling.

     Ashland  Distribution's  strong  earnings  performance  is expected to
continue in 2005, with a focus on increasing  sales volumes through greater
customer  satisfaction from the delivery of on-time,  accurate and complete
orders and overall  reductions in the level of rework in the  order-to-cash
process.  Ashland Specialty Chemical should build on its successes achieved
in  2004  in the  area  of  manufacturing  expense  reduction  and  quality
improvements  through the application of Six Sigma  principles,  as well as
drive revenue growth through various new product  initiatives.  Building on
successes in 2004,  Valvoline  expects to further increase the share of its
lubricants product mix represented by premium brands, reflecting a strategy
of product  innovation,  while also driving growth in its Valvoline Instant
Oil Change  business  through  preventative  maintenance  service.  Ashland
expects to continue  its growth  outside  the U.S.  in areas  where  market
position or the external market dynamics offer attractive opportunities for
profitable growth.

     Ashland was successful in 2004 in largely recovering raw material cost
increases through higher selling prices in most segments.  However, Ashland
Specialty  Chemical did  experience a reduction in gross margin in 2004 due
to its  inability  to fully  recover  those  higher  costs.  The ability to
recover  any cost  increases  that may be  experienced  in 2005  will be an
important determinant of Ashland's earnings.

     Ashland does not believe that the proposed MAP Transaction  will close
earlier  than  March  2005.  If certain  rulings  concerning  the  proposed
transaction are not received from the IRS, the transaction would have to be
modified or terminated.  Forward  petroleum  markets currently suggest that
2005 should be another  strong year for MAP and for Ashland's  Refining and
Marketing  segment  during the period  Ashland  holds its  interest in MAP.
Refining margins are, however, subject to considerable change as actual and
perceived supply and demand factors change.

     Ashland's  sales  and  operating  revenues  are  normally  subject  to
seasonal  variations.  Although  APAC  normally  enjoys a  relatively  long
construction  season,  most of its operating income is generated during the
construction  period of May through October.  In addition,  MAP experiences
demand increases for gasoline during the summer driving season, for propane
and distillate  during the winter heating season and for asphalt during the
construction  season.  The following  table  compares  operating  income by
quarter for the three  years ended  September  30, 2004  (amounts  for each
quarter do not necessarily total to results for the year due to rounding).
<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
QUARTERLY OPERATING INCOME (LOSS)
December 31                                                                     $       92   $       32   $       96
March 31                                                                                10          (24)          (3)
June 30                                                                                292          138          132
September 30                                                                           268          119           96

</TABLE>

EFFECTS OF INFLATION AND CHANGING PRICES

     Ashland's  financial  statements are prepared on the  historical  cost
method of  accounting  and,  as a result,  do not  reflect  changes  in the
purchasing power of the U.S.  dollar.  Although annual inflation rates have
been low in recent  years,  Ashland's  results  are still  affected  by the
cumulative inflationary trend from prior years.

     Certain  of the  industries  in  which  Ashland  and MAP  operate  are
capital-intensive,  and  replacement  costs for their  plant and  equipment
generally would exceed their historical costs.  Accordingly,  depreciation,
depletion  and  amortization  expense  would be greater if it were based on
current  replacement  costs.  However,  since replacement  facilities would
reflect technological improvements and changes in business strategies, such
facilities   would  be  expected  to  be  more   productive  than  existing
facilities, mitigating part of the increased expense.

     Ashland  uses the LIFO  method to value a  substantial  portion of its
inventories  to provide a better  matching of revenues with current  costs.
However, LIFO values such inventories below their replacement costs.

     Monetary  assets  (such  as  cash,   cash   equivalents  and  accounts
receivable) lose purchasing power as a result of inflation,  while monetary
liabilities (such as accounts payable and  indebtedness)  result in a gain,
because they can be settled with dollars of  diminished  purchasing  power.
Ashland's monetary liabilities exceed its monetary assets, which results in
net  purchasing  power  gains and  provides a hedge  against the effects of
future inflation.

                                    M-12

<PAGE>


FORWARD-LOOKING STATEMENTS

     Management's   Discussion   and  Analysis   contains   forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities  Exchange Act of 1934.  These  statements
include those that refer to Ashland's operating  performance,  earnings and
expectations  about the MAP  Transaction.  Although  Ashland  believes  its
expectations  are based on  reasonable  assumptions,  it cannot  assure the
expectations  reflected  herein  will be  achieved.  These  forward-looking
statements  are based upon  internal  forecasts and analyses of current and
future  market  conditions  and trends,  management  plans and  strategies,
weather,  operating  efficiencies and economic conditions,  such as prices,
supply and demand, cost of raw materials,  and legal proceedings and claims
(including  environmental and asbestos matters) and are subject to a number
of risks, uncertainties, and assumptions that could cause actual results to
differ materially from those described in the  forward-looking  statements.
The risks,  uncertainties,  and assumptions  include the  possibility  that
Ashland will be unable to fully realize the benefits  anticipated  from the
MAP  Transaction;  the possibility of failing to receive a favorable ruling
from the Internal  Revenue  Service;  the possibility that Ashland fails to
obtain  the  approval  of  its  shareholders;   the  possibility  that  the
transaction  may not close or that  Ashland  may be required to modify some
aspect of the transaction to obtain regulatory approvals. Other factors and
risks affecting  Ashland are contained in Risks and Uncertainties in Note A
to the  Consolidated  Financial  Statements  and in Item 1 of  this  annual
report on Form 10-K.  Ashland  undertakes  no  obligation  to  subsequently
update or revise these forward-looking statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Ashland selectively uses unleveraged  interest rate swap agreements to
obtain greater access to the lower  borrowing  costs normally  available on
floating-rate debt, while minimizing refunding risk through the issuance of
long-term,  fixed-rate  debt. At September 30, 2004,  Ashland held interest
rate swaps that effectively converted the interest rates on $183 million of
fixed-rate,  medium-term  notes to floating  rates  based upon  three-month
LIBOR.  The swaps have been designated as fair value hedges,  and since the
critical terms of the debt  instruments and the swaps match, the hedges are
assumed to be  perfectly  effective,  with the changes in fair value of the
debt and swaps offsetting.

     Ashland regularly uses commodity-based and foreign currency derivative
instruments to manage its exposure to price  fluctuations  associated  with
the purchase of natural gas,  diesel fuel and gasoline,  as well as certain
transactions  denominated  in  foreign  currencies.  In  addition,  Ashland
opportunistically enters into petroleum crackspread futures to economically
hedge its refining and marketing earnings. Changes in the fair value of all
derivatives  are  recognized  immediately  in income unless the  derivative
qualifies  as a hedge of future  cash  flows or  certain  foreign  currency
exposures. Ashland has designated a limited portion of its foreign currency
derivatives as qualifying for hedge accounting treatment,  but their impact
on the consolidated financial statements is not significant.  The potential
loss from a hypothetical  10% adverse change in commodity prices or foreign
currency  rates on  Ashland's  open  commodity-based  and foreign  currency
derivative  instruments  at  September  30, 2004,  would not  significantly
affect Ashland's  consolidated  financial position,  results of operations,
cash flows or liquidity.

     MAP uses commodity-based derivatives and financial  instrument-related
derivatives  to  manage  its  exposure  to  commodity  price  risk.   MAP's
management  has  authorized  the  use  of  futures,   forwards,  swaps  and
combinations of options,  including written or net written options, related
to the  purchase or sale of crude oil,  refined  products  and natural gas.
Changes in the fair value of all derivatives are recognized  immediately in
income.


                                    M-13
<PAGE>
ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE

                                                                                                                            Page
                                                                                                                           -------
<S>                                                                                                                          <C>
Report of management....................................................................................................     F-2
Report of independent registered public accounting firm.................................................................     F-2
Consolidated financial statements:
         Statements of consolidated income..............................................................................     F-3
         Consolidated balance sheets ...................................................................................     F-4
         Statements of consolidated stockholders' equity................................................................     F-5
         Statements of consolidated cash flows..........................................................................     F-6
         Notes to consolidated financial statements.....................................................................     F-7
Consolidated financial schedule:
         Schedule II - Valuation and qualifying accounts................................................................     F-25
Information by industry segment..........................................................................................    F-26
Five-year selected financial information.................................................................................    F-28
</TABLE>

     Schedules  other than that listed above have been  omitted  because of
the absence of the conditions  under which they are required or because the
information  required is shown in the consolidated  financial statements or
the notes thereto.  Separate financial  statements for MAP required by Rule
3-09 of Regulation  S-X will be filed as an amendment to this annual report
on Form 10-K  within  90 days  after the end of MAP's  fiscal  year  ending
December 31, 2004.  Separate financial  statements of other  unconsolidated
affiliates  are  omitted   because  each  company  does  not  constitute  a
significant  subsidiary  using the 20% tests when considered  individually.
Summarized financial information for such affiliates is disclosed in Note D
of Notes to Consolidated Financial Statements.


                                      F-1
<PAGE>



REPORT OF MANAGEMENT

     Management is responsible for the  consolidated  financial  statements
and other  financial  information  included in this  annual  report on Form
10-K.  Such  financial  statements  are  prepared in  accordance  with U.S.
generally  accepted  accounting   principles.   Accounting  principles  are
selected  and  information  is  reported  which,  using  management's  best
judgment and estimates,  present fairly  Ashland's  consolidated  financial
position,  results  of  operations  and cash  flows.  The  other  financial
information  in this  annual  report  on Form 10-K is  consistent  with the
consolidated financial statements.

     Ashland's  Code of Business  Conduct  summarizes our guiding values as
obeying  the  law,  adhering  to  high  ethical  standards  and  acting  as
responsible  members of the communities  where we operate.  Compliance with
that Code forms the foundation of our internal control  systems,  which are
designed  to  provide  reasonable   assurance  that  Ashland's  assets  are
safeguarded and its records reflect, in all material respects, transactions
in accordance with  management's  authorization.  The concept of reasonable
assurance is based on the recognition that the cost of a system of internal
control should not exceed the related  benefits.  Management  believes that
adequate  internal controls are maintained by the selection and training of
qualified  personnel,  by an appropriate  division of responsibility in all
organizational  arrangements,  by the  establishment  and  communication of
accounting and business policies, and by internal audits.

     The Board,  subject to stockholder  ratification,  selects and engages
the  independent   auditors  based  on  the  recommendation  of  the  Audit
Committee.  The Audit Committee,  composed of directors who are not members
of management,  reviews the adequacy of Ashland's policies,  procedures and
controls,  the  scope of  auditing  and  other  services  performed  by the
independent  auditors,  and the scope of the internal audit  function.  The
Committee  holds meetings with Ashland's  internal  auditor and independent
auditors,  with and without management  present, to discuss the findings of
their  audits,  the overall  quality of Ashland's  financial  reporting and
their evaluation of Ashland's internal controls.

     Ernst & Young,  independent  auditors,  are engaged to audit Ashland's
consolidated  financial  statements.  Their  audit  includes  a  review  of
Ashland's  internal  controls to the extent they consider  necessary in the
circumstances, and their report follows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We have  audited  the  accompanying  consolidated  balance  sheets  of
Ashland Inc. and  consolidated  subsidiaries  as of September  30, 2004 and
2003,  and the related  consolidated  statements  of income,  stockholders'
equity  and cash  flows for each of the  three  years in the  period  ended
September  30,  2004.  Our audits also  included  the  financial  statement
schedule listed in the Index at Item 15(a). These financial  statements and
schedule  are  the  responsibility  of  Ashland  Inc.'s   management.   Our
responsibility  is to express an opinion on these financial  statements and
schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform  the audit to obtain  reasonable  assurance  about
whether the  financial  statements  are free of material  misstatement.  An
audit includes examining,  on a test basis, evidence supporting the amounts
and  disclosures  in the  financial  statements.  An  audit  also  includes
assessing the accounting  principles used and significant estimates made by
management,   as  well  as  evaluating  the  overall  financial   statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

     In our opinion,  the financial statements referred to above (appearing
on pages F-3 to F-27 of this annual report on Form 10-K) present fairly, in
all material respects,  the consolidated financial position of Ashland Inc.
and  consolidated  subsidiaries  at  September  30, 2004 and 2003,  and the
consolidated  results of their  operations and their cash flows for each of
the three years in the period ended  September 30, 2004, in conformity with
U.S. generally accepted accounting  principles.  Also, in our opinion,  the
related financial  statement  schedule,  when considered in relation to the
basic  financial  statements  taken  as a  whole,  presents  fairly  in all
material respects the information set forth therein.

     As discussed in Note A to the  financial  statements,  in 2003 Ashland
Inc.  changed its methods of  accounting  for  employee  stock  options and
variable  interest  entities and in 2002 Ashland Inc. changed its method of
accounting for goodwill and other intangible assets.

                                                          Ernst & Young LLP

Cincinnati, Ohio
November 3, 2004
                                    F-2

<PAGE>

Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
Years Ended September 30

<TABLE>
<CAPTION>
(In millions except per share data)                                                   2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
REVENUES
Sales and operating revenues                                                    $    8,301   $    7,566   $    7,390
Equity income - Note D                                                                 432          301          181
Other income                                                                            48           45           46
                                                                                -----------  -----------  -----------
                                                                                     8,781        7,912        7,617
COSTS AND EXPENSES
Cost of sales and operating expenses                                                 6,948        6,390        6,115
Selling, general and administrative expenses                                         1,171        1,256        1,181
                                                                                -----------  -----------  -----------
                                                                                     8,119        7,646        7,296
                                                                                -----------  -----------  -----------
OPERATING INCOME                                                                       662          266          321
Net interest and other financial costs - Note E                                       (114)        (128)        (138)
                                                                                -----------  -----------  -----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                  548          138          183
Income taxes - Note J                                                                 (150)         (44)         (68)
                                                                                -----------  -----------  -----------
INCOME FROM CONTINUING OPERATIONS                                                      398           94          115
Results from discontinued operations (net of income taxes) - Note N                    (20)         (14)          13
                                                                                -----------  -----------  -----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES                                  378           80          128
Cumulative effect of accounting changes (net of income taxes) - Note A                   -           (5)         (11)
                                                                                -----------  -----------  -----------
NET INCOME                                                                      $      378   $       75   $      117
                                                                                ===========  ===========  ===========

EARNINGS PER SHARE - NOTE A
Basic
      Income from continuing operations                                         $     5.69   $     1.37   $     1.67
      Results from discontinued operations                                            (.28)        (.19)         .19
      Cumulative effect of accounting changes                                            -         (.08)        (.17)
                                                                                -----------  -----------  -----------
      Net income                                                                $     5.41   $     1.10   $     1.69
                                                                                ===========  ===========  ===========
Diluted
      Income from continuing operations                                         $     5.59   $     1.37   $     1.64
      Results from discontinued operations                                            (.28)        (.19)         .19
      Cumulative effect of accounting changes                                            -         (.08)        (.16)
                                                                                -----------  -----------  -----------
      Net income                                                                $     5.31   $     1.10   $     1.67
                                                                                ===========  ===========  ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                    F-3
<PAGE>


Ashland Inc. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30

<TABLE>
<CAPTION>
(In millions)                                                                                      2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>          <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                                     $     243    $     223
Accounts receivable (less allowances for doubtful accounts of
      $41 million in 2004 and $35 million in 2003)                                                1,290        1,135
Inventories - Note A                                                                                458          441
Deferred income taxes - Note J                                                                      103          142
Other current assets                                                                                208          144
                                                                                              ----------   ----------
                                                                                                  2,302        2,085
INVESTMENTS AND OTHER ASSETS
Investment in Marathon Ashland Petroleum LLC (MAP) - Note D                                       2,713        2,448
Goodwill - Note A                                                                                   513          523
Asbestos insurance receivable (noncurrent portion) - Note M                                         399          399
Other noncurrent assets                                                                             319          279
                                                                                              ----------   ----------
                                                                                                  3,944        3,649
PROPERTY, PLANT AND EQUIPMENT
Cost
      APAC                                                                                        1,302        1,337
      Ashland Distribution                                                                          356          357
      Ashland Specialty Chemical                                                                    780          723
      Valvoline                                                                                     466          452
      Corporate                                                                                     200          178
                                                                                              ----------   ----------
                                                                                                  3,104        3,047
Accumulated depreciation, depletion and amortization                                             (1,848)      (1,775)
                                                                                              ----------   ----------
                                                                                                  1,256        1,272
                                                                                              ----------   ----------
                                                                                              $   7,502    $   7,006
                                                                                              ==========   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
CURRENT LIABILITIES
Debt due within one year
      Revolving credit facility                                                               $      40    $       -
      Current portion of long-term debt                                                             399          102
Trade and other payables                                                                          1,362        1,371
Income taxes                                                                                         14           11
                                                                                              ----------   ----------
                                                                                                  1,815        1,484
NONCURRENT LIABILITIES
Long-term debt (less current portion) - Note E                                                    1,109        1,512
Employee benefit obligations - Note O                                                               428          385
Deferred income taxes - Note J                                                                      367          291
Reserves of captive insurance companies                                                             179          168
Asbestos litigation reserve (noncurrent portion) - Note M                                           568          560
Other long-term liabilities and deferred credits                                                    330          353
Commitments and contingencies - Notes F and M
                                                                                              ----------   ----------
                                                                                                  2,981        3,269
STOCKHOLDERS' EQUITY - Notes E, K and L
Preferred stock, no par value, 30 million shares authorized                                           -            -
Common stock, par value $1.00 per share, 300 million shares authorized
      Issued - 72 million shares in 2004 and 68 million shares in 2003                               72           68
Paid-in capital                                                                                     478          350
Retained earnings                                                                                 2,262        1,961
Accumulated other comprehensive loss                                                               (106)        (126)
                                                                                              ----------   ----------
                                                                                                  2,706        2,253
                                                                                              ----------   ----------
                                                                                              $   7,502    $   7,006
                                                                                              ==========   ==========

See Notes to Consolidated Financial Statements.
</TABLE>


                                    F-4

<PAGE>
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                                  other
                                                Common         Paid-in        Retained    comprehensive
(In millions)                                    stock         capital        earnings             loss           Total
------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>              <C>             <C>
BALANCE AT OCTOBER 1, 2001                   $      69       $     363       $   1,920        $    (126)      $   2,226
Total comprehensive income (1)                                                     117              (68)             49
Cash dividends, $1.10 per common share                                             (76)                             (76)
Issued 382,646 common shares under
      stock incentive and other plans (2)                           16                                               16
Repurchase of 1,219,600 common shares               (1)            (41)                                             (42)
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2002                       68             338           1,961             (194)          2,173
Total comprehensive income (1)                                                      75               68             143
Cash dividends, $1.10 per common share                                             (75)                             (75)
Issued 81,698 common shares under
      stock incentive and other plans (2)                           12                                               12
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2003                       68             350           1,961             (126)          2,253
Total comprehensive income (1)                                                     378               20             398
Cash dividends, $1.10 per common share                                             (77)                             (77)
Issued 3,310,204 common shares under
      stock incentive and other plans (2)            4             128                                              132
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2004 (3)            $      72       $     478       $   2,262        $    (106)      $   2,706
                                             ==========      ==========      ==========       ==========      ==========

</TABLE>
(1)   Reconciliations of net income to total comprehensive income follow.

<TABLE>
<CAPTION>
      (In millions)                               2004            2003            2002
      ---------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>
      Net income                             $     378       $      75       $     117
      Minimum pension liability adjustment         (21)             24            (144)
           Related tax benefit (expense)             8              (9)             56
      Unrealized translation gains                  32              53              19
           Related tax benefit                       1               -               1
                                             ----------      ----------      ----------
      Total comprehensive income             $     398       $     143       $      49
                                             ==========      ==========      ==========

(2)   Includes  income tax  benefits  resulting  from the exercise of stock
      options of $16 million in 2004 and $2 million in 2002.  The amount in
      2003 was not significant.
(3)   At September 30, 2004, the accumulated  other  comprehensive  loss of
      $106 million (after tax) was comprised of net unrealized  translation
      gains of $23 million and a minimum pension liability of $129 million.

See Notes to Consolidated Financial Statements.
</TABLE>

                                    F-5
<PAGE>
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended September 30
<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
CASH FLOWS FROM OPERATIONS
Income from continuing operations                                               $      398   $       94   $      115
Expense (income) not affecting cash
      Depreciation, depletion and amortization                                         193          204          208
      Deferred income taxes                                                            125           49         (121)
      Equity income from affiliates                                                   (432)        (301)        (181)
      Distributions from equity affiliates                                             169          203          201
      Other items                                                                        2            1            -
Change in operating assets and liabilities (1)                                        (246)          (8)         (54)
                                                                                -----------  -----------  -----------
                                                                                       209          242          168
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt                                                 -            -           55
Proceeds from issuance of common stock                                                 108            2           11
Repayment of long-term debt                                                           (100)        (216)        (140)
Repurchase of common stock                                                               -            -          (42)
Increase (decrease) in short-term debt                                                  40          (10)          10
Dividends paid                                                                         (77)         (75)         (76)
                                                                                -----------  -----------  -----------
                                                                                       (29)        (299)        (182)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment                                            (210)        (112)        (178)
Purchase of operations - net of cash acquired                                           (5)          (5)         (15)
Proceeds from sale of operations                                                        48            7            -
Other - net                                                                             26           13           26
                                                                                -----------  -----------  -----------
                                                                                      (141)         (97)        (167)
                                                                                -----------  -----------  -----------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS                                           39         (154)        (181)
Cash provided (used) by discontinued operations                                        (19)         287           35
                                                                                -----------  -----------  -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        20          133         (146)
Cash and cash equivalents - beginning of year                                          223           90          236
                                                                                -----------  -----------  -----------
CASH AND CASH EQUIVALENTS - END OF YEAR                                         $      243   $      223   $       90
                                                                                ===========  ===========  ===========

DECREASE (INCREASE) IN OPERATING ASSETS (1)
Accounts receivable                                                             $     (157)  $      (79)  $      110
Inventories                                                                            (14)          15           12
Deferred income taxes                                                                    2           22           17
Other current assets                                                                   (64)          (5)          30
Investments and other assets                                                           (15)           7           41
INCREASE (DECREASE) IN OPERATING LIABILITIES (1)
Trade and other payables                                                               (15)         115         (132)
Income taxes                                                                           (19)         (50)         (18)
Noncurrent liabilities                                                                  36          (33)        (114)
                                                                                -----------  -----------  -----------
CHANGE IN OPERATING ASSETS AND LIABILITIES                                      $     (246)  $       (8)  $      (54)
                                                                                ===========  ===========  ===========
</TABLE>

(1)   Excludes changes resulting from operations acquired or sold.

See Notes to Consolidated Financial Statements.

                                    F-6

<PAGE>
Ashland Inc. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

     The consolidated  financial statements include the accounts of Ashland
and its majority owned subsidiaries.  Investments in joint ventures and 20%
to 50% owned affiliates are accounted for on the equity method.  In January
2003,  the  Financial   Accounting   Standards  Board  (FASB)  issued  FASB
Interpretation  No.  46  (FIN  46),  "Consolidation  of  Variable  Interest
Entities."  Beginning  July 1, 2003,  the lessor entity in one of Ashland's
lease programs was consolidated in Ashland's financial statements under FIN
46,  resulting  in a pretax  charge of $8 million ($5 million net of income
taxes) for the cumulative effect of this accounting change. Property, plant
and equipment  increased by $27 million and long-term debt increased by $35
million  as a result of the  consolidation  of the lessor  entity.  Ashland
canceled  the lease and  purchased  the  assets  from the lessor in October
2003.


RISKS AND UNCERTAINTIES

     The  preparation  of  Ashland's   consolidated   financial  statements
requires  management  to make  estimates  and  assumptions  that affect the
reported  amounts of assets,  liabilities,  revenues and expenses,  and the
disclosures of contingent  assets and liabilities.  Significant  items that
are subject to such estimates and assumptions  include  long-lived  assets,
employee  benefit  obligations,  reserves and  associated  receivables  for
asbestos  litigation and environmental  remediation,  and income recognized
under construction  contracts.  Although  management bases its estimates on
historical experience and various other assumptions that are believed to be
reasonable   under  the   circumstances,   actual   results   could  differ
significantly from the estimates under different assumptions or conditions.

     Ashland's  results,  including those of Marathon Ashland Petroleum LLC
(MAP),  are affected by domestic  and  international  economic,  political,
legislative,  regulatory and legal actions,  as well as weather conditions.
Economic conditions,  such as recessionary trends, inflation,  interest and
monetary exchange rates, and changes in the prices of crude oil,  petroleum
products and  petrochemicals,  can have a significant effect on operations.
Political  actions may include changes in the policies of the  Organization
of  Petroleum  Exporting  Countries  or  other  developments  involving  or
affecting oil-producing countries,  including military conflict, embargoes,
internal  instability  or actions or  reactions of the U.S.  government  in
anticipation of, or in response to, such actions.  While Ashland  maintains
reserves  for  anticipated   liabilities  and  carries  various  levels  of
insurance,  Ashland  could be affected by civil,  criminal,  regulatory  or
administrative   actions,  claims  or  proceedings  relating  to  asbestos,
environmental  remediation  or other  matters.  In  addition,  climate  and
weather can  significantly  affect  Ashland's  results  from several of its
operations,  such as  APAC's  construction  activities  and  MAP's  refined
product sales.


INVENTORIES

<TABLE>
<CAPTION>
(In millions)                                                                                      2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>          <C>
Chemicals and plastics                                                                       $      370   $      333
Construction materials                                                                               71           67
Petroleum products                                                                                   61           66
Other products                                                                                       45           48
Supplies                                                                                              6            5
Excess of replacement costs over LIFO carrying values                                               (95)         (78)
                                                                                             -----------  -----------
                                                                                             $      458   $      441
                                                                                             ===========  ===========
</TABLE>


     Chemicals,  plastics and petroleum products with a replacement cost of
$286 million at September 30, 2004, and $279 million at September 30, 2003,
are valued  using the  last-in,  first-out  (LIFO)  method.  The  remaining
inventories are stated  generally at the lower of cost (using the first-in,
first-out [FIFO] or average cost methods) or market.


LONG-LIVED ASSETS, GOODWILL AND OTHER INTANGIBLE ASSETS

     The cost of plant and equipment is  depreciated  by the  straight-line
method  over the  estimated  useful  lives of the  assets.  Such  costs are
periodically  reviewed for  recoverability  when impairment  indicators are
present. Such



                                    F-7
<PAGE>



NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)


indicators include, among other factors, operating losses, unused capacity,
market value declines and  technological  obsolescence.  Recorded values of
property, plant and equipment that are not expected to be recovered through
undiscounted  future net cash flows are written down to current fair value,
which  generally is determined  from estimated  discounted  future net cash
flows (assets held for use) or net realizable value (assets held for sale).
During 2003,  Ashland  recognized an impairment charge of $10 million for a
maleic  anhydride  production  facility  that is shutdown and not likely to
reopen based on internal analyses.

     As of October 1, 2001,  Ashland  adopted FASB  Statement  No. 142 (FAS
142),  "Goodwill and Other Intangible  Assets." Under FAS 142, goodwill and
intangible  assets with  indefinite  lives are no longer  amortized but are
subject to annual impairment tests. As a result of the adoption of FAS 142,
it was  determined  the  goodwill  of Ashland  Distribution  was  impaired.
Accordingly,  an impairment  loss of $14 million ($11 million net of income
taxes) was  recorded  as a  cumulative  effect of  accounting  change as of
October 1, 2001.  Ashland  recognized  impairment  charges of $9 million in
2003 and $2  million in 2004 for  goodwill  associated  with  non-strategic
businesses of APAC identified for sale.

     All of Ashland's intangible assets are subject to amortization.  These
intangible  assets  (included in other  noncurrent  assets) and the related
amortization expense are not material to Ashland's  consolidated  financial
position or results of operations.

     Following is a progression of goodwill by segment for the year ended
September 30, 2004.


<TABLE>
<CAPTION>

                                                                                   Ashland
                                                                                 Specialty
(In millions)                                                           APAC      Chemical    Valvoline        Total
---------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>          <C>          <C>
Balance at October 1, 2003                                         $     426    $       91   $        6   $      523
Goodwill assigned to sold businesses                                     (13)            -            -          (13)
Impairment losses                                                         (2)            -            -           (2)
Currency translation adjustments                                           -             5            -            5
                                                                   ----------   -----------  -----------  -----------
Balance at September 30, 2004                                      $     411    $       96   $        6   $      513
                                                                   ==========   ===========  ===========  ===========

</TABLE>

DERIVATIVE INSTRUMENTS

     Ashland selectively uses unleveraged  interest rate swap agreements to
obtain greater access to the lower  borrowing  costs normally  available on
floating-rate debt, while minimizing refunding risk through the issuance of
long-term,  fixed-rate  debt. At September 30, 2004,  Ashland held interest
rate swaps that effectively converted the interest rates on $183 million of
fixed-rate,  medium-term  notes to floating  rates  based upon  three-month
LIBOR.  The swaps have been designated as fair value hedges,  and since the
critical terms of the debt  instruments and the swaps match, the hedges are
assumed to be  perfectly  effective,  with the changes in fair value of the
debt and swaps offsetting. Settlements of terminated swaps are amortized to
interest expense over the remaining term of the debt.

     Ashland regularly uses commodity-based and foreign currency derivative
instruments to manage its exposure to price  fluctuations  associated  with
the purchase of natural gas,  diesel fuel and gasoline,  as well as certain
transactions  denominated  in  foreign  currencies.  In  addition,  Ashland
opportunistically enters into petroleum crackspread futures to economically
hedge its refining and marketing earnings. Changes in the fair value of all
derivatives  are  recognized  immediately  in income unless the  derivative
qualifies  as a hedge of future  cash  flows or  certain  foreign  currency
exposures. Ashland has designated a limited portion of its foreign currency
derivatives as qualifying for hedge accounting treatment,  but their impact
on the consolidated financial statements is not significant.

     MAP uses commodity-based derivatives and financial  instrument-related
derivatives  to  manage  its  exposure  to  commodity  price  risk.   MAP's
management  has  authorized  the  use  of  futures,   forwards,  swaps  and
combinations of options,  including written or net written options, related
to the  purchase or sale of crude oil,  refined  products  and natural gas.
Changes in the fair value of all derivatives are recognized  immediately in
income.

ENVIRONMENTAL COSTS

     Accruals for environmental  costs are recognized when it is probable a
liability  has  been  incurred  and the  amount  of that  liability  can be
reasonably  estimated.  Such costs are charged to expense if they relate to
the remediation of

                                    F-8
<PAGE>



conditions  caused by past  operations  or are not  expected to mitigate or
prevent  contamination  from future  operations.  Accruals  are recorded at
undiscounted   amounts  based  on  experience,   assessments   and  current
technology,  without regard to any third-party recoveries and are regularly
adjusted as environmental assessments and remediation efforts continue.

STOCK INCENTIVE PLANS

     As of October 1, 2002,  Ashland began expensing employee stock options
in  accordance  with FASB  Statement  No.  123 (FAS 123),  "Accounting  for
Stock-Based Compensation," and its related amendments.  Ashland elected the
modified  prospective  method of adoption,  under which  compensation costs
recorded in the year ended  September  30, 2003 were the same as that which
would have been  recorded had the  recognition  provisions  of FAS 123 been
applied from its original  effective  date.  Results for prior periods were
not restated. Prior to October 1, 2002, Ashland accounted for stock options
under Accounting  Principles Board Opinion No. 25 (APB 25), "Accounting for
Stock Issued to Employees," and related Interpretations, and no expense was
recorded. In 2004, Ashland began granting  stock-settled stock appreciation
rights (SARs), which are expensed like stock options in accordance with FAS
123. In addition to stock options and SARs,  Ashland grants nonvested stock
awards to key  employees  and  directors,  which are  expensed  over  their
vesting period under either APB 25 or FAS 123. See Note L for the impact of
this accounting change on net income and earnings per share.

EARNINGS PER SHARE

     Following is the computation of basic and diluted earnings per share
(EPS) from continuing operations.
<TABLE>
<CAPTION>

(In millions except per share data)                                                   2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
NUMERATOR
Numerator for basic and diluted EPS -
      Income from continuing operations                                         $      398   $       94   $      115
                                                                                ===========  ===========  ===========

DENOMINATOR
Denominator for basic EPS - Weighted average
      common shares outstanding                                                         70           68           69
Common shares issuable upon exercise of stock options                                    1            1            1
                                                                                -----------  -----------  -----------
Denominator for diluted EPS - Adjusted weighted
      average shares and assumed conversions                                            71           69           70
                                                                                ===========  ===========  ===========
EPS FROM CONTINUING OPERATIONS
Basic                                                                           $     5.69   $     1.37   $     1.67
Diluted                                                                               5.59         1.37         1.64

</TABLE>
OTHER

     Cash  equivalents  include highly liquid  investments  maturing within
three months after purchase.

     Income related to  construction  contracts  generally is recognized by
the   units-of-production   method,   which   is   a   variation   of   the
percentage-of-completion  method.  Any anticipated losses on such contracts
are charged against  operations as soon as such losses are determined to be
probable and  estimable.  Other  revenues  generally  are  recognized  when
products are shipped or services  are  provided to customers  and the sales
price is fixed or determinable and  collectibility  is reasonably  assured.
Costs associated with revenues,  including shipping and handling costs, are
recorded in cost of sales and operating expenses.

     Because  Ashland's  products  generally  are sold without any extended
warranties,  liabilities for product warranties are insignificant. Costs of
product warranties generally are expensed as incurred.

     Advertising  costs ($78  million in 2004,  $77 million in 2003 and $78
million in 2002) and research and  development  costs ($43 million in 2004,
$36 million in 2003 and $34 million in 2002) are expensed as incurred.

     Certain prior year amounts have been  reclassified in the consolidated
financial   statements   and   accompanying   notes  to   conform  to  2004
classifications.

                                    F-9
<PAGE>


NOTE B - INFORMATION BY INDUSTRY SEGMENT

     Ashland's  operations  are  managed  along  industry  segments,  which
include APAC, Ashland Distribution,  Ashland Specialty Chemical, Valvoline,
and Refining and  Marketing.  Information  by industry  segment is shown on
pages F-26 and F-27.

     The APAC group of companies performs contract  construction work, such
as  paving,   repairing  and  resurfacing  highways,   streets,   airports,
residential and commercial developments,  sidewalks, and driveways; grading
and base work; and excavation and related activities in the construction of
bridges and structures, drainage facilities and underground utilities in 14
southern and midwestern  states.  APAC also produces and sells construction
materials,  such as hot-mix asphalt,  crushed stone and other aggregate and
ready-mix concrete.

     Ashland Distribution distributes chemicals,  plastics,  composites and
fine  ingredients  in North  America and  plastics in Europe,  and provides
environmental services throughout North America.

     Ashland Specialty Chemical  manufactures  composites,  adhesives,  and
casting binder  chemicals for use in the  transportation  and  construction
industries.  Ashland Specialty  Chemical also manufactures  water treatment
chemicals for use in the general industrial and merchant marine markets.

     Valvoline is a marketer of  premium-branded  automotive and commercial
oils,  automotive  chemicals,  appearance products and automotive services,
with sales in more than 100  countries.  Valvoline  is engaged in the "fast
oil change" business through owned and franchised service centers operating
under the Valvoline Instant Oil Change name.

     The Refining and Marketing  segment  includes  Ashland's 38% ownership
interest  in  Marathon  Ashland  Petroleum  LLC (MAP) and other  activities
associated  with refining and  marketing.  MAP was formed  January 1, 1998,
combining the major elements of the refining,  marketing and transportation
operations  of Ashland and Marathon Oil Company.  MAP has seven  refineries
with a combined crude oil refining capacity of 948,000 barrels per calendar
day, 84 light  products and asphalt  terminals in the Midwest and Southeast
United  States,  about  5,650  retail  marketing  outlets  in 17 states and
significant  pipeline holdings.  Ashland accounts for its investment in MAP
using the equity method.

     Information  about  Ashland's  domestic and  international  operations
follows. Ashland has no material operations in any individual international
country.

<TABLE>
<CAPTION>
                                                         Revenues from                           Property, plant
                                                       external customers                         and equipment
                                              -------------------------------------          ------------------------
(In millions)                                      2004          2003         2002                 2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>                  <C>          <C>
United States                                 $   7,406    $    6,787   $    6,662           $    1,105   $    1,140
International                                     1,375         1,125          955                  151          132
                                              ----------   -----------  -----------          -----------  -----------
                                              $   8,781    $    7,912   $    7,617           $    1,256   $    1,272
                                              ==========   ===========  ===========          ===========  ===========


</TABLE>

                                   F-10

<PAGE>


NOTE C - RELATED PARTY TRANSACTIONS

     Ashland sells chemicals and lubricants to MAP and purchases  petroleum
products from MAP. Such transactions are in the ordinary course of business
at  negotiated  prices  comparable  to those  of  transactions  with  other
customers and suppliers. In addition,  Ashland leases certain facilities to
MAP,  and  provides  certain  information   technology  and  administrative
services  to MAP.  The  following  table  indicates  the  amounts  of these
transactions for each of the last three years ended September 30. Ashland's
transactions   with  other   affiliates   and  related   parties  were  not
significant.

<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Ashland's sales to MAP                                                          $       21   $       23   $       24
Ashland's purchases from MAP                                                           274          247          217
Ashland's costs charged to MAP                                                           2            3            6

</TABLE>

     Ashland has entered into a revolving  credit  agreement  providing for
short-term  loans, at Ashland's  discretion,  to MAP at competitive  rates.
Under the  agreement,  Ashland may loan up to $190 million to MAP. No loans
were  outstanding  under the  agreement  at  September  30,  2004 and 2003.
Interest income received from MAP in all three years was not significant.

     Ashland has  guaranteed  38% of MAP's  payments for certain  crude oil
purchases, up to a maximum guarantee of $95 million. At September 30, 2004,
Ashland's  contingent  liability  under  this  guarantee  amounted  to  $95
million.  Although  Ashland  has not made and does not  expect  to make any
payments  under  this  guarantee,  it has  recorded  the fair value of this
guarantee obligation, which is not significant.

NOTE D - UNCONSOLIDATED AFFILIATES

     Ashland accounts for its investment in MAP on the equity method. Under
the agreements  related to its formation,  MAP was organized by Ashland and
Marathon  Oil  Company  (Marathon)  as a limited  liability  company for an
initial term expiring on December 31, 2022,  subject to automatic  ten-year
extensions  unless a  termination  notice  is given by either  parent.  The
parents also entered into a put/call  agreement  that could be exercised by
either parent at any time after  December 31, 2004.  Under that  agreement,
Ashland will have the right to sell all of its ownership interest in MAP to
Marathon for an amount equal to 85% (90% if equity  securities are used) of
the  fair  market  value of that  ownership  interest,  payable  in cash or
Marathon debt or equity securities. Similarly, Marathon will have the right
to purchase all of Ashland's  ownership interest in MAP for an amount equal
to 115% of the fair market  value of that  ownership  interest,  payable in
cash.  Neither  Ashland  nor  Marathon  has the  right  to  exercise  their
respective  put and call rights  unless the  agreement  described  below is
terminated.

     On March 19, 2004, Ashland announced the signing of an agreement under
which  it  would  transfer  its 38%  interest  in MAP and two  wholly-owned
businesses to Marathon in a transaction structured to be generally tax free
and valued at  approximately  $3.0 billion.  The two other  businesses  are
Ashland's  maleic  anhydride  business and 61 Valvoline  Instant Oil Change
(VIOC) centers.  The transaction is subject to several previously disclosed
conditions,  including  approval by  Ashland's  shareholders,  consent from
Ashland's  public debt  holders and receipt of a favorable  private  letter
ruling from the  Internal  Revenue  Service  (IRS) with  respect to the tax
treatment.  Ashland has filed  registration  statements and proxy materials
with the  Securities  and Exchange  Commission  (SEC) and is  responding to
comments. In addition, Ashland submitted a request to the IRS for a private
letter ruling on the tax-free status of the proposed  transaction.  Ashland
continues  to discuss the complex  tax issues  related to this  transaction
with the IRS.  Ashland  has not  resolved  all  issues  with the IRS and is
exploring  alternatives  for the resolution of these issues.  At this time,
Ashland cannot predict whether the requested  rulings will be received.  If
the requested  rulings are not received,  the transaction  would have to be
modified or  terminated.  In any event,  Ashland  does not  believe  that a
transaction will close earlier than March 2005.

     Summarized  financial  information reported by MAP and other companies
accounted  for on the equity  method is presented in the  following  table,
along with a summary of the  amounts  recorded  in  Ashland's  consolidated
financial statements. Since MAP is organized as a limited liability company
that has elected to be taxed as a partnership,  the parents are responsible
for income taxes applicable to their share of MAP's taxable income. The net
income of MAP  reflected  below does not include any  provision  for income
taxes  that  will be  incurred  by its  parents.  At  September  30,  2004,
Ashland's retained earnings included $378 million of undistributed earnings
from unconsolidated affiliates accounted for on the equity method.


                                   F-11

<PAGE>


NOTE D - UNCONSOLIDATED AFFILIATES (continued)
<TABLE>
<CAPTION>

                                                                                                   Other
(In millions)                                                                           MAP   affiliates        Total
----------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C>          <C>
September 30, 2004
Financial position
      Current assets                                                             $    5,265    $     160
      Current liabilities                                                            (3,436)         (87)
                                                                                 -----------   ----------
      Working capital                                                                 1,829           73
      Noncurrent assets                                                               5,219           78
      Noncurrent liabilities                                                           (724)         (14)
                                                                                 -----------   ----------
      Stockholders' equity                                                       $    6,324    $     137
                                                                                 ===========   ==========
Results of operations
      Sales and operating revenues                                               $   40,672    $     409
      Income from operations                                                          1,129           51
      Net income                                                                      1,118           44
Amounts recorded by Ashland
      Investments and advances                                                        2,713 (1)       54    $   2,767
      Equity income                                                                     405           27          432
      Distributions received                                                            146           23          169
September 30, 2003
Financial position
      Current assets                                                             $    3,889    $     149
      Current liabilities                                                            (2,640)         (82)
                                                                                 -----------   ----------
      Working capital                                                                 1,249           67
      Noncurrent assets                                                               4,946           99
      Noncurrent liabilities                                                           (586)         (59)
                                                                                 -----------   ----------
      Stockholders' equity                                                       $    5,609    $     107
                                                                                 ===========   ==========
Results of operations
      Sales and operating revenues                                               $   32,034    $     336
      Income from operations                                                            810           41
      Net income                                                                        795           34
Amounts recorded by Ashland
      Investments and advances                                                        2,448           47    $   2,495
      Equity income                                                                     285           16          301
      Distributions received                                                            197            6          203
September 30, 2002
Results of operations
      Sales and operating revenues                                               $   25,063    $     237
      Income from operations                                                            511           24
      Net income                                                                        502           16
Amounts recorded by Ashland
      Equity income                                                                     176            5    $     181
      Distributions received                                                            196            5          201

</TABLE>


(1)   At September 30, 2004, Ashland's investment exceeds its equity in the
      net assets of MAP by $310 million,  of which $135 million  represents
      plant and  equipment  that will  continue to be  amortized,  and $175
      million represents goodwill. Straight-line amortization of the excess
      investment  that was charged  against  equity income  amounted to $16
      million in each of the three years ended September 30, 2004.


                                   F-12

<PAGE>


NOTE E - DEBT

<TABLE>
<CAPTION>
(In millions)                                                                                      2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>          <C>
Medium-term notes, due 2005-2025, interest at a weighted
      average rate of 8% at September 30, 2004 (6.9% to 9.4%)                                $      524   $      578
8.80% debentures, due 2012                                                                          250          250
7.83% medium-term notes, Series J, due 2005                                                         229          229
Pollution control and industrial revenue bonds, due
      2005-2022, interest at a weighted average rate of 5.7%
      at September 30, 2004 (1.7% to 7.1%)                                                          168          176
6.86% medium-term notes, Series H, due 2009                                                         150          150
6.625% senior notes, due 2008                                                                       150          150
Other                                                                                                37           81
                                                                                             -----------  -----------
Total long-term debt                                                                              1,508        1,614
Current portion of long-term debt                                                                  (399)        (102)
                                                                                             -----------  -----------
Long-term debt (less current portion)                                                        $    1,109   $    1,512
                                                                                             ===========  ===========

</TABLE>


     Aggregate  maturities of long-term  debt are $399 million in 2005, $62
million  in 2006,  $125  million  in 2007,  $168  million  in 2008 and $211
million in 2009.  Interest  payments on all  indebtedness  amounted to $116
million  in  2004,  $125  million  in 2003 and $138  million  in 2002.  The
weighted  average  interest rate on short-term  borrowings  outstanding was
2.7% at September 30, 2004. No short-term  borrowings  were  outstanding at
September 30, 2003.

     Ashland has two revolving credit  agreements  providing for up to $350
million in borrowings, neither of which was used during 2004. The agreement
providing  for $250  million in  borrowings  expires on April 1, 2007.  The
agreement  providing  for $100  million in  borrowings  expires on April 1,
2005. In the June 2004 quarter, Ashland executed an additional $200 million
revolving  credit  agreement  which  expires  March 31,  2005.  Ashland has
utilized  this  facility  to fund  currently  maturing  long-term  debt and
certain lease payments, and had $40 million outstanding under this facility
at September  30,  2004.  While the  revolving  credit  agreements  contain
covenants limiting new borrowings based on Ashland's  stockholders' equity,
these  agreements  would  have  permitted  an  additional  $2.4  billion of
borrowings at September 30, 2004.  Additional  permissible  borrowings  are
increased  (decreased) by 150% of any increase  (decrease) in stockholders'
equity.

NET INTEREST AND OTHER FINANCIAL COSTS
<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Interest expense                                                                $      114   $      123   $      135
Expenses on sales of accounts receivable (see Note G)                                    3            3            4
Other financial costs                                                                    3            3            3
Interest income                                                                         (6)          (1)          (4)
                                                                                -----------  -----------  -----------
                                                                                $      114   $      128   $      138
                                                                                ===========  ===========  ===========

</TABLE>

NOTE F - LEASES

     Ashland and its subsidiaries are lessees of office  buildings,  retail
outlets, transportation and off-road construction equipment, warehouses and
storage  facilities,  and other equipment,  facilities and properties under
leasing  agreements that expire at various dates.  Under various  operating
leases,  Ashland has made  guarantees with respect to the residual value of
the underlying property.  If Ashland had canceled those leases at September
30, 2004, its maximum obligations under the residual value guarantees would
have  amounted  to $98  million.  Ashland  does not  expect  to  incur  any
significant charge to earnings under these guarantees, $24 million of which
relates to real estate.  These lease  agreements are with  unrelated  third
party  lessors  and  Ashland  has  no  additional   contractual   or  other
commitments to any party to the leases.  Capitalized  lease obligations are
not significant  and are included in long-term debt.  Future minimum rental
payments at September 30, 2004, and rental expense under  operating  leases
follow.



                                   F-13
<PAGE>


NOTE F - LEASES (continued)


<TABLE>
<CAPTION>
(In millions)
Future minimum rental payments                 Rental expense                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                       <C>                  <C>                              <C>          <C>          <C>
2005                      $      47            Minimum rentals
2006                             41               (including rentals under
2007                             35               short-term leases)            $      104   $       98   $      103
2008                             28            Contingent rentals                        3            3            3
2009                             23            Sublease rental income                   (2)          (2)          (2)
Later years                      83                                             -----------  -----------  -----------
                          ----------                                             $      105   $       99   $      104
                          $     257                                             ===========  ===========  ===========
                          ==========
</TABLE>

     FASB  Interpretation  No. 45 (FIN  45),  "Guarantor's  Accounting  and
Disclosure  Requirements for Guarantees,  Including Indirect  Guarantees of
Indebtedness  of Others," was issued in November  2002.  Upon  entering new
lease  agreements with residual value  guarantees  after December 31, 2002,
Ashland  is  required  to  record  the  fair  value at  inception  of these
guarantee  obligations in accordance with FIN 45. At September 30, 2004 and
2003, the recorded value of such obligations was not significant.

NOTE G - SALE OF ACCOUNTS RECEIVABLE

     On March 15, 2000, Ashland entered into a five-year agreement to sell,
on an ongoing basis with limited  recourse,  up to a $200 million undivided
interest in a designated  pool of accounts  receivable.  Under the terms of
the agreement, new receivables are added to the pool and collections reduce
the pool. Since inception,  interests  totaling $150 million have been sold
on a continuous  basis,  except for a period between April 29 and September
7, 2003, when the full $200 million capacity was utilized.  Ashland retains
a credit  interest in these  receivables  and addresses its risk of loss on
this retained interest in its allowance for doubtful accounts.  Receivables
sold exclude defaulted accounts or concentrations  over certain limits with
any one  customer.  The  costs  of these  sales  are  based on the  buyer's
short-term borrowing rates and approximated 2.2% at September 30, 2004, and
1.5% at September 30, 2003.

NOTE H - FINANCIAL INSTRUMENTS

DERIVATIVE INSTRUMENTS

     Ashland  uses  interest  rate swaps and  commodity-based  and  foreign
currency  derivative  instruments  as described  in Note A. Open  contracts
other than interest rate swaps were not  significant  at September 30, 2004
and 2003.

FAIR VALUES

     The  carrying  amounts  and  fair  values  of  Ashland's   significant
financial  instruments at September 30, 2004 and 2003 are shown below.  The
fair values of cash and cash equivalents,  investments of captive insurance
companies and the revolving  credit  facility  approximate  their  carrying
amounts.  The fair  values of  long-term  debt are  based on quoted  market
prices or, if market prices are not  available,  the present  values of the
underlying cash flows discounted at Ashland's  incremental borrowing rates.
The fair values of interest rate swaps are based on quoted market prices.
<TABLE>
<CAPTION>

                                                                       2004                            2003
                                                             -----------------------         ------------------------
                                                                 Carrying      Fair              Carrying       Fair
(In millions)                                                      amount     value                amount      value
---------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>                <C>          <C>
Assets
      Cash and cash equivalents                              $     243    $     243          $      223   $      223
      Interest rate swaps                                           (1)          (1)                  1            1
      Investments of captive insurance companies (1)                13           13                  13           13
Liabilities
      Revolving credit facility                                     40           40                   -            -
      Long-term debt (including current portion)                 1,508        1,675               1,614        1,809

</TABLE>
(1)   Included in other noncurrent assets in the Consolidated Balance Sheets.

                                   F-14

<PAGE>


NOTE I - ACQUISITIONS AND DIVESTITURES

ACQUISITIONS

     Several small  acquisitions were completed by APAC,  Ashland Specialty
Chemical and  Valvoline  during the three years ended  September  30, 2004.
These  acquisitions  were  accounted  for as  purchases  and did not have a
significant effect on Ashland's consolidated financial statements.

DIVESTITURES

     During  2003,  APAC sold the  assets  of its  Nashville  division  and
certain  ready-mix  operations in Missouri.  During 2004, APAC sold much of
its remaining  ready-mix  operations and certain other operations.  None of
these  divestitures  had a  significant  effect on  Ashland's  consolidated
financial  statements.  See  Note N for a  discussion  of the  sale  of the
Electronic Chemicals division of Ashland Specialty Chemical in 2003.

NOTE J - INCOME TAXES

     A summary of the  provision  for income  taxes  related to  continuing
operations follows.
<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Current (1)
      Federal                                                                   $       (6)  $      (17)  $      151
      State                                                                              6           (3)          22
      Foreign                                                                           25           15           16
                                                                                -----------  -----------  -----------
                                                                                        25           (5)         189
Deferred                                                                               125           49         (121)
                                                                                -----------  -----------  -----------
                                                                                $      150   $       44   $       68
                                                                                ===========  ===========  ===========

</TABLE>
(1)   Income tax payments  amounted to $84 million in 2004,  $24 million in
      2003 and $158 million in 2002.

     Deferred  income  taxes are  provided  for  income and  expense  items
recognized  in different  years for tax and financial  reporting  purposes.
Ashland  has  not  recorded  deferred  income  taxes  on the  undistributed
earnings  of certain  foreign  subsidiaries  and  foreign  corporate  joint
ventures.  Management intends to indefinitely reinvest such earnings, which
amounted to $160 million at  September  30,  2004.  Because of  significant
foreign tax credits,  it is  estimated  that U.S.  federal  income taxes of
approximately  $17  million  would  be  incurred  if  those  earnings  were
distributed.  Temporary  differences that give rise to significant deferred
tax assets and liabilities follow.

<TABLE>
<CAPTION>
(In millions)                                                                                      2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>          <C>
Employee benefit obligations                                                                 $      201   $      219
Environmental, self-insurance and litigation reserves (net of receivables)                          183          196
Compensation accruals                                                                                74           59
Uncollectible accounts receivable                                                                    15           18
Other items                                                                                          37           61
                                                                                             -----------  -----------
Total deferred tax assets                                                                           510          553
                                                                                             -----------  -----------
Property, plant and equipment                                                                       182          189
Investment in unconsolidated affiliates                                                             592          513
                                                                                             -----------  -----------
Total deferred tax liabilities                                                                      774          702
                                                                                             -----------  -----------
Net deferred tax liability                                                                   $      264   $      149
                                                                                             ===========  ===========
</TABLE>

     Ashland's  income tax  expense  for 2004  included  $48 million in tax
benefits  related  to  prior  years.   During  the  year,  Ashland  reached
resolution  with the Internal  Revenue  Service on several open tax matters
from prior years,  resulting in a tax benefit of $33 million as a result of
the reduction of amounts previously provided as contingent tax liabilities.
In addition, Ashland recognized federal income tax benefits associated with
a claim for additional  research and  development tax credits valued at $15
million.


                                   F-15
<PAGE>


NOTE J - INCOME TAXES (continued)

     The U.S. and foreign  components of income from continuing  operations
before income taxes and a  reconciliation  of the statutory  federal income
tax with the provision for income taxes follow.

<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Income from continuing operations before income taxes
      United States                                                             $      441   $       60   $      114
      Foreign                                                                          107           78           69
                                                                                -----------  -----------  -----------
                                                                                $      548   $      138   $      183
                                                                                ===========  ===========  ===========

Income taxes computed at U.S. statutory rate (35%)                              $      192   $       48   $       64
Increase (decrease) in amount computed resulting from
      Resolution of prior-year contingency issues                                      (33)           -            -
      Claim for prior-year research and development credits                            (15)           -            -
      State income taxes                                                                18            3            1
      Net impact of foreign results                                                      -           (2)           3
      Business meals and entertainment                                                   2            3            3
      Deductible dividends under employee stock ownership plan                          (2)          (2)          (3)
      Life insurance expense (income)                                                   (2)          (2)           4
      Other items                                                                      (10)          (4)          (4)
                                                                                -----------  -----------  -----------
Income taxes                                                                    $      150   $       44   $       68
                                                                                ===========  ===========  ===========
</TABLE>



NOTE K - CAPITAL STOCK

     Under  Ashland's   Shareholder  Rights  Plan,  each  common  share  is
accompanied  by one right to  purchase  one-thousandth  share of  preferred
stock  for $140.  Each  one-thousandth  share of  preferred  stock  will be
entitled to dividends  and to vote on an  equivalent  basis with one common
share. The rights are neither exercisable nor separately  transferable from
the common shares  unless a party  acquires or tenders for more than 15% of
Ashland's  common stock.  If any party  acquires more than 15% of Ashland's
common  stock or  acquires  Ashland in a business  combination,  each right
(other than those held by the  acquiring  party) will entitle the holder to
purchase  preferred  stock  of  Ashland  or  the  acquiring  company  at  a
substantial  discount.  The rights  expire on May 16, 2006,  and  Ashland's
Board of Directors can amend  certain  provisions of the Plan or redeem the
rights at any time prior to their becoming exercisable.

     At September 30, 2004,  500,000 shares of cumulative  preferred  stock
are reserved for potential  issuance under the Shareholder  Rights Plan and
7.1 million common shares are reserved for issuance  under stock  incentive
and deferred compensation plans.

NOTE L - STOCK INCENTIVE PLANS

     Ashland  has  stock  incentive  plans  under  which key  employees  or
directors  are granted  stock  options,  stock-settled  stock  appreciation
rights (SARs) or nonvested stock awards. Stock options and SARs are granted
to  employees at a price equal to the fair market value of the stock on the
date of grant and become  exercisable  over  periods of one to four  years.
Unexercised  options  and  SARs  lapse 10 years  after  the date of  grant.
Nonvested  stock awards  entitle  employees or directors to vote the shares
and to receive any dividends thereon.  However,  such shares are subject to
forfeiture  upon  termination  of service  before the vesting  period ends.
During 2004, Ashland granted 216,900 nonvested stock awards with a weighted
average fair value of $40.87 per share.  Nonvested stock awards in 2003 and
2002 were not significant.

     As discussed in Note A, Ashland began expensing employee stock options
and  SARs  in  accordance  with  FAS  123  in  2003.  The  following  table
illustrates  the effect on net income and earnings per share if FAS 123 had
been applied in 2002 to all outstanding and unvested awards. The fair value
per share of options or SARs granted was determined using the Black-Scholes
option pricing model with the indicated assumptions.



                                   F-16
<PAGE>


<TABLE>
<CAPTION>
(In millions except per share data)                                                 2004         2003         2002
-------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>           <C>
Net income as reported                                                        $      378   $       75    $     117
Add:  Stock-based employee compensation expense included in
      reported net income, net of related tax effects                                  4            5            -
Deduct:  Total stock-based employee compensation expense
      determined under FAS 123 for all awards, net of related tax effects             (4)          (5)          (4)
                                                                              -----------  -----------   ----------
Pro forma net income                                                          $      378   $       75    $     113
                                                                              ===========  ===========   ==========
Earnings per share:
      Basic - as reported                                                     $     5.41   $     1.10    $    1.69
      Basic - pro forma                                                             5.41         1.10         1.63
      Diluted - as reported                                                         5.31         1.10         1.67
      Diluted - pro forma                                                           5.31         1.10         1.61
Weighted average fair value per share of options or SARs granted                   12.65         6.71         5.35
Assumptions (weighted average)
      Risk-free interest rate                                                        3.4%         3.1%         2.9%
      Expected dividend yield                                                        2.0%         3.3%         3.8%
      Expected volatility                                                           25.9%        27.3%        26.7%
      Expected life (in years)                                                       5.0          5.0          5.0

</TABLE>
     A progression of activity and various other information relative to
stock options and SARs is presented in the following table.

<TABLE>
<CAPTION>
                                                2004                         2003                       2002
                                      --------------------------   -------------------------    --------------------------
                                          Number       Weighted                     Weighted                      Weighted
                                              of        average                      average                       average
(In thousands except                      common exercise price       Common  exercise price        Common  exercise price
 per share data)                          shares      per share       shares       per share        shares       per share
--------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>          <C>             <C>           <C>             <C>
Outstanding-beginning of year (1)          7,807      $   37.17         7,482      $   37.28         6,735       $    38.41
Granted                                      603          54.65           537          33.42         1,210            29.05
Exercised                                 (3,100)         35.29          (103)         27.96          (413)           31.34
Canceled                                    (145)         36.04          (109)         35.27           (50)           38.54
                                      -----------                  -----------                   ----------
Outstanding-end of year (1)                5,165          40.37         7,807          37.17         7,482            37.28
                                      ===========                  ===========                   ==========
Exercisable-end of year                    4,067          39.37         6,491          38.25         5,537            39.34
</TABLE>

(1)   Shares of common  stock  available  for  future  grants of options or
      awards  amounted to 1,098,000 at September 30, 2004, and 1,860,000 at
      September  30, 2003.  Exercise  prices per share for options and SARs
      outstanding  at  September  30, 2004 ranged from $25.00 to $34.00 for
      1,579,000  shares,  from $35.88 to $43.13 for 1,829,000  shares,  and
      from $44.20 to $54.81 for  1,757,000  shares.  The  weighted  average
      remaining contractual life of the options and SARs was 6.0 years.


NOTE M - LITIGATION, CLAIMS AND CONTINGENCIES

ASBESTOS-RELATED LITIGATION

     Ashland is subject to liabilities from claims alleging personal injury
caused  by  exposure  to  asbestos.   Such  claims  result  primarily  from
indemnification  obligations undertaken in 1990 in connection with the sale
of Riley Stoker Corporation  (Riley),  a former subsidiary.  Although Riley
was neither a producer  nor a  manufacturer  of  asbestos,  its  industrial
boilers  contained some  asbestos-containing  components  provided by other
companies.

     A summary of asbestos  claims  activity  follows.  Because  claims are
frequently  filed and  settled  in large  groups,  the amount and timing of
settlements  and number of open  claims can  fluctuate  significantly  from
period to period.

<TABLE>
<CAPTION>
(In thousands)                                                                        2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Open claims - beginning of year                                                        198          160          167
New claims filed                                                                        29           66           45
Claims settled                                                                          (7)          (7)         (15)
Claims dismissed                                                                       (24)         (21)         (37)
                                                                                -----------  -----------  -----------
Open claims - end of year                                                              196          198          160
                                                                                ===========  ===========  ===========

</TABLE>



                                   F-17
<PAGE>



NOTE M - LITIGATION, CLAIMS AND CONTINGENCIES (continued)

     Since October 1, 2001,  Riley has been dismissed as a defendant in 73%
of the  resolved  claims.  Amounts  spent on  litigation  defense and claim
settlements  averaged $1,655 per claim resolved in 2004, compared to $1,610
in 2003 and $723 in 2002. A progression of activity in the asbestos reserve
is presented in the following table.


<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Asbestos reserve - beginning of period                                          $      610   $      202   $      199
Expense incurred                                                                        59          453           41
Amounts paid                                                                           (51)         (45)         (38)
                                                                                -----------  -----------  -----------
Asbestos reserve - end of period                                                $      618   $      610   $      202
                                                                                ===========  ===========  ===========

</TABLE>

     During the December  2002 quarter,  Ashland  increased its reserve for
asbestos  claims by $390 million to cover the litigation  defense and claim
settlement  costs for probable and  reasonably  estimable  future  payments
related to existing  open claims,  as well as an estimate of those that may
be filed in the future.  Prior to December 31, 2002,  the asbestos  reserve
was based on the estimated  costs that would be incurred to settle existing
open claims.  A range of estimates  of future  asbestos  claims and related
costs using  various  assumptions  was  developed  with the  assistance  of
Hamilton, Rabinovitz & Alschuler, Inc. (HR&A). The methodology used by HR&A
to project  future  asbestos  costs was based  largely on Ashland's  recent
experience,  including claim-filing and settlement rates, disease mix, open
claims, and litigation defense and claim settlement costs.  Ashland's claim
experience   was   compared   to  the  results  of   previously   conducted
epidemiological  studies  estimating the number of people likely to develop
asbestos-related diseases. Those studies were undertaken in connection with
national  analyses  of the  population  expected  to have been  exposed  to
asbestos.  Using that information,  HR&A estimated a range of the number of
future  claims that may be filed,  as well as the related costs that may be
incurred in resolving those claims.

     From the range of estimates,  Ashland  recorded the amount it believed
to be the best  estimate,  which  represented  the  expected  payments  for
litigation  defense and claim  settlement  costs during the next ten years.
Subsequent  updates to this estimate have been made, with the assistance of
HR&A,  based on a combination  of a number of factors  including the actual
volume  of new  claims,  recent  settlement  costs,  changes  in the mix of
alleged  disease,   enacted  legislative  changes  and  other  developments
impacting  Ashland's  estimate of future  payments.  Ashland's  reserve for
asbestos  claims on an  undiscounted  basis  amounted  to $618  million  at
September 30, 2004, compared to $610 million at September 30, 2003.

     Projecting future asbestos costs is subject to numerous variables that
are  extremely  difficult  to  predict.  In  addition  to  the  significant
uncertainties  surrounding  the number of claims  that  might be  received,
other  variables  include the type and  severity of the disease  alleged by
each claimant,  the long latency period associated with asbestos  exposure,
dismissal rates, costs of medical treatment,  the impact of bankruptcies of
other companies that are co-defendants in claims, uncertainties surrounding
the litigation  process from  jurisdiction to jurisdiction and from case to
case,  and the impact of  potential  changes  in  legislative  or  judicial
standards. Furthermore, any predictions with respect to these variables are
subject to even greater uncertainty as the projection period lengthens.  In
light  of these  inherent  uncertainties,  Ashland  believes  its  asbestos
reserve  represents the best estimate within a range of possible  outcomes.
As a part of the process to develop Ashland's  estimates of future asbestos
costs, a range of long-term cost models is developed that assumes a run-out
of claims  through  2055.  These models are based on national  studies that
predict the number of people  likely to develop  asbestos-related  diseases
and are heavily  influenced by assumptions  regarding  long-term  inflation
rates for  indemnity  payments and legal  defense  costs,  as well as other
variables  mentioned  previously.  The total future litigation  defense and
claim settlement costs on an undiscounted basis has been estimated within a
reasonably possible range of $400 million to $2.0 billion, depending on the
number of years those costs extend and other  combinations  of  assumptions
selected.  Ashland's reserve  represents  between 10 and 29 years of future
costs,  depending on the model selected. If actual experience is worse than
projected  relative to the number of claims filed,  the severity of alleged
disease  associated  with those claims or costs  incurred to resolve  those
claims,  Ashland may need to increase  further the  estimates  of the costs
associated with asbestos  claims and these  increases could  potentially be
material over time.

     Ashland has insurance  coverage for most of the litigation defense and
claim settlement costs incurred in connection with its asbestos claims, and
coverage-in-place  agreements  exist  with  the  insurance  companies  that
provide  substantially all of the coverage  currently being accessed.  As a
result,  increases  in the asbestos  reserve  have been  largely  offset by
probable insurance  recoveries.  The amounts not recoverable  generally are
due from insurers that are insolvent,  rather than as a result of uninsured
claims or the exhaustion of Ashland's insurance coverage.


                                   F-18
<PAGE>



     Ashland retained the services of  Tillinghast-Towers  Perrin to assist
management in the estimation of reasonably  possible  insurance  recoveries
associated  with  Ashland's  estimate  of its  asbestos  liabilities.  Such
recoveries are based on management's  assumptions and estimates surrounding
the available or applicable insurance coverage. One such assumption is that
all solvent insurance carriers remain solvent. Although coverage limits are
resolved in the coverage-in-place  agreement with Equitas Limited (Equitas)
and other  London  companies,  which  collectively  provide  a  significant
portion of Ashland's  insurance  coverage for asbestos  claims,  there is a
disagreement  with  these  companies  over the  timing of  recoveries.  The
resolution of this  disagreement  could have a material effect on the value
of insurance  recoveries from those  companies.  In estimating the value of
future recoveries,  Ashland has used the least favorable  interpretation of
this  agreement  under which the ultimate  recoveries are extended for many
years,  resulting in a  significant  discount  being applied to value those
recoveries. Ashland will continue to apply this methodology until such time
as the disagreement is resolved.  On July 21, 2004,  Ashland filed a demand
for  arbitration to resolve the dispute  concerning the  interpretation  of
this agreement.

     At  September  30,  2004,   Ashland's  receivable  for  recoveries  of
litigation defense and claim settlement costs from its insurers amounted to
$435  million,  of which $54  million  relates  to costs  previously  paid.
Receivables from insurance  companies amounted to $429 million at September
30, 2003. About 35% of the estimated  receivables from insurance  companies
at September 30, 2004, are expected to be due from Equitas and other London
companies.  Of the  remainder,  approximately  90% is expected to come from
companies or groups that are rated A or higher by A. M. Best.

ENVIRONMENTAL PROCEEDINGS

     Ashland is subject to various federal,  state and local  environmental
laws and regulations that require  environmental  assessment or remediation
efforts (collectively  environmental remediation) at multiple locations. At
September 30, 2004, such locations  included 93 waste treatment or disposal
sites where Ashland has been identified as a potentially  responsible party
under Superfund or similar state laws, approximately 130 current and former
operating  facilities  (including certain operating  facilities conveyed to
MAP) and about 1,220 service  station  properties.  Ashland's  reserves for
environmental  remediation  amounted to $152 million at September 30, 2004,
and $174 million at  September  30, 2003.  Such amounts  reflect  Ashland's
estimates of the most likely  costs that will be incurred  over an extended
period  to  remediate  identified   conditions  for  which  the  costs  are
reasonably  estimable,   without  regard  to  any  third-party  recoveries.
Engineering  studies,  probability  techniques,  historical  experience and
other  factors are used to identify and evaluate  remediation  alternatives
and  their  related  costs  in  determining  the  estimated   reserves  for
environmental remediation.

     Environmental  remediation  reserves are subject to numerous  inherent
uncertainties  that affect  Ashland's  ability to estimate its share of the
costs. Such uncertainties involve the nature and extent of contamination at
each  site,  the  extent  of  required   cleanup   efforts  under  existing
environmental  regulations,  widely  varying  costs  of  alternate  cleanup
methods,  changes in  environmental  regulations,  the potential  effect of
continuing  improvements  in  remediation  technology,  and the  number and
financial strength of other potentially  responsible  parties at multiparty
sites. Ashland regularly adjusts its reserves as environmental  remediation
continues.  Environmental  remediation  expense  amounted  to $2 million in
2004, $22 million in 2003 and $30 million in 2002.

     No  individual  remediation  location  is  material  to Ashland as its
largest reserve for any site is less than 10% of the  remediation  reserve.
As a result, Ashland's exposure to adverse developments with respect to any
individual  site is not  expected  to be  material,  and these sites are in
various stages of ongoing remediation.  Although environmental  remediation
could  have a  material  effect on  results  of  operations  if a series of
adverse developments occurs in a particular quarter or fiscal year, Ashland
believes that the chance of such developments occurring in the same quarter
or fiscal year is remote.

OTHER LEGAL PROCEEDINGS

     In addition to the matters described above,  there are various claims,
lawsuits  and  administrative  proceedings  pending or  threatened  against
Ashland  and its  current and former  subsidiaries.  Such  actions are with
respect to commercial matters, product liability, toxic tort liability, and
other environmental  matters, which seek remedies or damages, some of which
are for substantial amounts. While these actions are being contested, their
outcome is not predictable.

                                   F-19

<PAGE>


NOTE N - DISCONTINUED OPERATIONS

     Ashland is subject to liabilities from claims alleging personal injury
caused  by  exposure  to  asbestos.   Such  claims  result  primarily  from
indemnification  obligations undertaken in 1990 in connection with the sale
of Riley Stoker Corporation, a former subsidiary.  During the quarter ended
December 31, 2002,  Ashland  increased  its reserve for asbestos  claims by
$390  million  to cover  litigation  defense  and  claim  settlement  costs
expected to be paid  through  December  2012.  Because  insurance  provides
reimbursements  for most of these  costs and  coverage-in-place  agreements
exist with the insurance  companies that provide  substantially  all of the
coverage being accessed, the increase in the asbestos reserve was offset in
part by probable insurance recoveries valued at $235 million. The resulting
$155 million pretax charge to income,  net of deferred  income tax benefits
of $60  million,  was  reflected  as an  after-tax  loss from  discontinued
operations of $95 million in the Statement of  Consolidated  Income for the
three  months  ended  December  31,  2002.  Additional  reserves  have been
provided  since  then to  reflect  updates  in the  estimate  of  potential
payments for litigation  defense and claim settlement costs. See Note M for
further discussion of Ashland's asbestos-related litigation.

     On August 29,  2003,  Ashland  sold the net  assets of its  Electronic
Chemicals business and certain related subsidiaries in a transaction valued
at approximately $300 million before tax.  Electronic  Chemicals was a part
of Ashland  Specialty  Chemical,  providing  ultra pure chemicals and other
products  and  services  to  the  worldwide  semiconductor  industry,  with
revenues  of $215  million  in 2003 and  $217  million  in  2002.  The sale
reflects  Ashland's strategy to optimize its business mix and focus greater
attention  on  the  remaining  chemical  and  transportation   construction
operations where it can achieve strategic  advantage.  Ashland's  after-tax
proceeds were used primarily to reduce debt. During 2004,  Ashland recorded
certain minor adjustments to the gain reported in 2003.

     During 2004,  Ashland  reached  resolution  with the Internal  Revenue
Service on several  open tax  matters  from prior  years.  In  addition  to
amounts reported in income from continuing operations, favorable resolution
was  also  reached  on  matters  associated  with  previously  discontinued
businesses,  resulting  in a $1 million  tax  benefit  from the  associated
reduction in contingent tax liabilities previously recorded.

     Components of amounts  reflected in the income  statements  related to
discontinued operations are presented in the following table.

<TABLE>
<CAPTION>
(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Reserves for asbestos-related litigation                                        $      (29)  $     (178)  $        -
Electronic Chemicals                                                                     -           17           17
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED OPERATIONS
Electronic Chemicals                                                                    (2)         101            -
                                                                                -----------  -----------  -----------
INCOME (LOSS) BEFORE INCOME TAXES                                                      (31)         (60)          17
INCOME TAX BENEFIT (EXPENSE)
Income (loss) from discontinued operations
      Reserves for asbestos-related litigation                                          11           69            -
      Electronic Chemicals                                                               -           (3)          (4)
Gain (loss) on disposal of discontinued operations                                      (1)         (20)           -
Resolution of tax contingency issues                                                     1            -            -
                                                                                -----------  -----------  -----------
RESULTS FROM DISCONTINUED OPERATIONS                                            $      (20)  $      (14)  $       13
                                                                                ===========  ===========  ===========

</TABLE>


                                   F-20
<PAGE>


NOTE O - EMPLOYEE BENEFIT PLANS

PENSION PLANS

     Ashland and its subsidiaries  sponsor contributory and noncontributory
qualified  and  non-qualified  defined  benefit  pension  plans  that cover
substantially  all  employees in the United States and in a number of other
countries. Included in the following pension plan disclosures for the first
time in 2004 are amounts  related to employees in the United  Kingdom,  the
Netherlands and Canada.  Amounts for prior years have not been restated, as
the impact on Ashland's  financial position and results of operations would
not be material.

     Ashland's  funding  policy is to fully  fund the  accumulated  benefit
obligations  of its qualified  U.S.  plans with the level of  contributions
being determined annually to achieve that objective over time. In addition,
Ashland has non-qualified unfunded pension plans which provide supplemental
defined  benefits to those  employees  whose  benefits  under the qualified
pension plans are limited by the Employee Retirement Income Security Act of
1974  and the  Internal  Revenue  Code.  Ashland  funds  the  costs  of the
non-qualified  plans as the  benefits  are paid.  Pension  obligations  for
employees  of  non-U.S.  consolidated  subsidiaries  are  provided  for  by
depositing funds with trustees or by book reserves in accordance with local
practices and regulations of the respective countries.

     Prior to July 1, 2003,  benefits under  Ashland's  U.S.  pension plans
generally were based on employees' years of service and compensation during
the years immediately preceding their retirement.  Although certain changes
were  implemented on that date,  the pension  benefits of employees with at
least ten years of  service  were not  affected.  As of July 1,  2003,  the
pension  benefits of affected  employees  were  converted  to cash  balance
accounts.  Such employees  received an initial account balance equal to the
present  value of their  accrued  benefits  under the previous plan on that
date.  Pension  benefits for these  employees  are based on the balances in
their accounts upon retirement.

OTHER POSTRETIREMENT BENEFIT PLANS

     Ashland and its  subsidiaries  sponsor  healthcare  and life insurance
plans for eligible employees who retire or are disabled.  Ashland's retiree
life insurance plans are noncontributory, while Ashland shares the costs of
providing  healthcare coverage with its retired employees through premiums,
deductibles  and  coinsurance  provisions.  Ashland  funds its share of the
costs of the postretirement benefit plans as the benefits are paid.

     On December 8, 2003, the Medicare  Prescription Drug,  Improvement and
Modernization  Act of 2003  (the Act) was  signed  into  law.  Among  other
things, the Act will expand Medicare to include an outpatient  prescription
drug benefit  beginning in 2006,  as well as provide a subsidy for sponsors
of  retiree  health  care  plans  that  provide a benefit  that is at least
actuarially  equivalent  to the Medicare  Act  benefits.  In May 2004,  the
Financial  Accounting  Standards Board issued Staff Position No. FAS 106-2,
"Accounting   and   Disclosure   Requirements   Related  to  the   Medicare
Prescription  Drug,  Improvement  and  Modernization  Act of 2003." Pending
final guidance on determining  actuarial  equivalency,  Ashland has not yet
been able to determine the impact of the Act on its postretirement  benefit
plans. As a result, the accumulated  postretirement  benefit obligation and
net periodic postretirement benefit costs do not reflect the effects of the
Act.

     On July 1, 2003, Ashland  implemented changes in the way it shares the
cost of  healthcare  coverage with future  retirees.  These changes did not
affect the  previous  cost-sharing  program for  retirees or for  employees
meeting certain  qualifications  at that date.  However,  Ashland did amend
that program to limit its annual per capita  costs to an amount  equivalent
to base year per capita costs, plus annual increases of up to 1.5% per year
for costs incurred after January 1, 2004. Under a previous amendment,  base
year costs were  limited  to the  amounts  incurred  in 1992,  plus  annual
increases  of  up  to  4.5%  per  year  thereafter.  Premiums  for  retiree
healthcare  coverage  are  equivalent  to the excess of the  estimated  per
capita costs over the amounts borne by Ashland.

     Employees  who were  employed on June 30,  2003,  who did not meet the
required  qualifications  were allocated notional accounts that can only be
used to pay all or part of the  premiums for retiree  healthcare  coverage.
Such premiums represent the full costs of providing that coverage,  without
any subsidy from Ashland.  Employees  must meet certain  requirements  upon
separation  in order to have access to their  notional  accounts.  Retirees
will  continue to have  access to Ashland  coverage  after  their  notional
accounts are exhausted,  but they will be  responsible  for paying the full
premiums.  New hires after June 30,  2003,  will have access to any retiree
health  coverage  that may be  provided,  but will  have no  company  funds
available to help pay for such coverage.


                                   F-21
<PAGE>



NOTE O - EMPLOYEE BENEFIT PLANS (continued)

OBLIGATIONS AND FUNDED STATUS

     Ashland  uses a  measurement  date of September 30 for its pension and
postretirement   benefit   plans.   Summaries  of  the  change  in  benefit
obligations, plan assets, funded status of the plans, amounts recognized in
the balance sheet,  and assumptions used to determine the U.S. plan benefit
obligations  for  2004  and  2003  follow.   Non-U.S.   pension  plans  use
assumptions generally consistent with those of U.S. plans.

<TABLE>
<CAPTION>
                                                                                              Other postretirement
                                                                 Pension plans                    benefit plans
                                                             -----------------------         ------------------------
(In millions)                                                     2004         2003                2004         2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>                <C>           <C>
Change in benefit obligations
Benefit obligations at October 1                             $   1,192 (1)$     983          $      296    $     361
Service cost                                                        51           43                   9           11
Interest cost                                                       73           65                  17           22
Participant contributions                                            1            -                  11           12
Benefits paid                                                      (48)         (37)                (31)         (33)
Plan amendments                                                      -           (6)                  -          (95)
Changes in assumptions                                              44           63                   7           19
Foreign currency exchange rate changes                               8            -                   -            -
Other-net                                                            9          (10)                (11)          (1)
                                                             ----------   ----------         -----------   ----------
Benefit obligations at September 30                          $   1,330    $   1,101          $      298    $     296
                                                             ==========   ==========         ===========   ==========
Change in plan assets
Value of plan assets at October 1                            $     740 (1)$     551
Actual return on plan assets                                        86           99
Employer contributions                                             137           61
Participant contributions                                            1            -
Benefits paid                                                      (43)         (33)
Foreign currency exchange rate changes                               5            -
Other                                                                6            2
                                                             ----------   ----------
Value of plan assets at September 30                         $     932    $     680
                                                             ==========   ==========
Funded status of the plans
Unfunded benefit obligation                                  $    (398)   $    (421)         $     (298)   $    (296)
Unrecognized net actuarial loss                                    422 (1)      385                  77           87
Unrecognized prior service credit                                   (2)          (3)                (85)        (100)
                                                             ----------   ----------         -----------   ----------
Net amount recognized                                        $      22    $     (39)         $     (306)   $    (309)
                                                             ==========   ==========         ===========   ==========
Amounts recognized in the balance sheet
Accrued benefit liabilities                                  $    (191)   $    (231)         $     (306)   $    (309)
Intangible assets                                                    1            1                   -            -
Accumulated other comprehensive loss                               212          191                   -            -
                                                             ----------   ----------         -----------   ----------
Net amount recognized                                        $      22    $     (39)         $     (306)   $    (309)
                                                             ==========   ==========         ===========   ==========
U.S. plan assumptions
Discount rate                                                     6.00%        6.25%               6.00%        6.25%
Rate of compensation increase                                     4.50%        4.50%                  -            -
</TABLE>

(1)  Beginning balances have been adjusted to include $91 million of
     benefit obligations, $60 million of plan assets, and $31 million of
     unrecognized net actuarial loss for certain non-U.S. pension plans.




                                   F-22
<PAGE>


     The  accumulated  benefit  obligation for all pension plans was $1,118
million at  September  30, 2004 and $909  million at  September  30,  2003.
Information  for pension plans with an  accumulated  benefit  obligation in
excess of plan assets follows.
<TABLE>
<CAPTION>

                                                          2004                                    2003
                                          ----------------------------------      -----------------------------------
                                                            Non-                                    Non-
                                          Qualified    qualified                  Qualified    qualified
(In millions)                              plans (1)       plans      Total           plans        plans       Total
---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>         <C>          <C>            <C>          <C>         <C>
Projected benefit obligation              $   1,195   $      110   $  1,305       $   1,002    $      99   $   1,101
Accumulated benefit obligation                1,000           98      1,098             819           90         909
Fair value of plan assets                       908            -        908             680            -         680

</TABLE>
(1)   Includes qualified U.S. and non-U.S. pension plans.


COMPONENTS OF NET PERIODIC BENEFIT COSTS

     The plan amendments in 2003 and 1992 previously  discussed under other
postretirement  benefit plans reduced Ashland's  accrued  obligations under
those plans,  and the reductions are being  amortized to income over future
periods. Such amortization reduced Ashland's net periodic benefit costs for
other  postretirement  benefits by $15 million in 2004, $10 million in 2003
and $8 million in 2002. At September 30, 2004,  the remaining  unrecognized
prior service credit  resulting  from the changes  amounted to $85 million,
and will reduce  future costs by $9 million in 2005, $8 million in 2006 and
approximately $8 million annually thereafter through 2014.

     The following  table  summarizes  the  components of pension and other
postretirement  benefit costs,  and the  assumptions  used to determine net
periodic  benefit  costs  for  U.S.  plans.  Non-U.S.   pension  plans  use
assumptions generally consistent with those of U.S. plans.

<TABLE>
<CAPTION>
                                                Pension benefits                   Other postretirement benefits
                                       ------------------------------------      -----------------------------------
(In millions)                                2004        2003         2002            2004         2003        2002
--------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>         <C>              <C>         <C>          <C>
Net periodic benefit costs
Service cost                           $       51   $      43   $       43       $       9   $       11   $      12
Interest cost                                  73          65           59              17           22          23
Expected return on plan assets                (66)        (51)         (47)              -            -           -
Amortization of prior service
      cost (credit)                             -           -            1             (15)         (10)         (8)
Amortization of net actuarial loss             29          30           18               5            3           2
                                       -----------  ----------  -----------      ----------  -----------  ----------
                                       $       87   $      87   $       74       $      16   $       26   $      29
                                       ===========  ==========  ===========      ==========  ===========  ==========
U.S. plan assumptions
Discount rate                                6.25%       6.75%        7.25%           6.25%        6.75%       7.25%
Rate of compensation increase                4.50%       5.00%        5.00%              -            -           -
Expected long-term rate of
      return on plan assets                  8.50%       9.00%        9.00%              -            -           -

</TABLE>

PLAN ASSETS

     The expected long-term rate of return on U. S. pension plan assets for
2004 of 8.5% was  based on an  assumed  real  rate of  return of 5.5% and a
projected  long-term  inflation rate of 3%. The basis for  determining  the
expected  long-term  rate of  return  is a  combination  of  future  return
assumptions  for various asset classes in Ashland's  investment  portfolio,
historical analysis of previous returns,  market indices,  and a projection
of inflation.

     Ashland's U. S. pension plan assets are managed by outside  investment
managers,  which are monitored monthly against investment return benchmarks
and  Ashland's  established   investment  strategy.   Ashland's  investment
strategy is designed to promote  diversification to moderate volatility and
to balance the expected  long-term  rate of return with an acceptable  risk
level.  Investment  managers  are  selected  based on an analysis of, among
other things,  their investment  process,  historical  investment  results,
frequency  of  management  turnover,  cost  structure,   and  assets  under
management. Assets are periodically reallocated between investment managers
to maintain an appropriate asset mix, diversification of investments and to
maximize returns.



                                   F-23
<PAGE>


NOTE O - EMPLOYEE BENEFIT PLANS (continued)

     Ashland's  investment  strategy and management  practices  relative to
plan assets of non-U.S.  plans generally are consistent with those for U.S.
plans,  except  in those  countries  where  investment  of plan  assets  is
dictated by applicable regulations.

     The  target   allocation   for  2004  by  asset  category  and  actual
allocations at September 30, 2004 and 2003 follow.

<TABLE>
<CAPTION>
                                                                             Target           Actual at September 30
                                                                            ---------       -------------------------
(In millions)                                                                   2004            2004            2003
---------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>             <C>
Plan assets allocation
Equity securities                                                                70%             68%             60%
Debt securities                                                                  30%             30%             36%
Other                                                                              -              2%              4%
                                                                            ---------       ---------       ---------
                                                                                100%            100%            100%
                                                                            =========       =========       =========

</TABLE>

CASH FLOWS

     In fiscal 2005, Ashland expects to contribute $70 million to its U. S.
pension plans and $7 million to its non-U.S.  pension plans.  The following
benefit payments,  which reflect future service, are expected to be paid in
each of the next five years and in aggregate for five years thereafter.

<TABLE>
<CAPTION>
                                                                                                               Other
                                                                                         Pension      postretirement
(In millions)                                                                           benefits            benefits
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                <C>
2005                                                                                     $    51            $     21
2006                                                                                          57                  21
2007                                                                                          61                  22
2008                                                                                          68                  22
2009                                                                                          70                  23
2010-2014                                                                                    451                 122

</TABLE>
OTHER PLANS

     Certain union employees are covered under multiemployer  pension plans
administered  by unions.  Amounts  contributed  to the plans by Ashland and
charged to expense amounted to $5 million annually in 2004, 2003 and 2002.

     Ashland sponsors  qualified savings plans to assist eligible employees
in  providing  for  retirement  or other  future  needs.  Under such plans,
company contributions amounted to $23 million in 2004, $19 million in 2003,
and $17 million in 2002.

                                   F-24
<PAGE>


NOTE P - QUARTERLY FINANCIAL INFORMATION (unaudited)

     The following table presents quarterly financial information and per
share data relative to Ashland's common stock.

<TABLE>
<CAPTION>
Quarters ended                         December 31            March 31              June 30            September 30
                                    -------------------  --------------------  -------------------  -------------------
(In millions except per share data)    2003       2002       2004       2003      2004       2003       2004      2003
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>       <C>        <C>        <C>        <C>       <C>        <C>        <C>
Sales and operating revenues        $ 1,936   $  1,749   $  1,825   $  1,657   $ 2,206   $  2,018   $  2,334   $ 2,142
Operating income (loss)                  92         32         10        (24)      292        138        268       119
Income (loss) from
      continuing operations              39         (1)       (11)       (37)      167         71        203        61
Net income (loss)                        34        (92)       (16)       (39)      161         70        200       137

Basic earnings (loss) per share
      Continuing operations         $   .56   $   (.02)  $   (.16)  $   (.54)  $  2.38   $   1.04   $   2.86   $   .89
      Net income (loss)                 .49      (1.35)      (.23)      (.57)     2.29       1.02       2.81      2.00

Diluted earnings (loss) per share
      Continuing operations         $   .56   $   (.02)  $   (.16)  $   (.54)  $  2.35   $   1.03   $   2.81   $   .89
      Net income (loss)                 .49      (1.35)      (.23)      (.57)     2.26       1.01       2.76      1.99

Common cash dividends per share     $  .275   $   .275   $   .275   $   .275   $  .275   $   .275   $   .275   $  .275

Market price per common share
      High                          $ 44.55   $  30.80   $  52.20   $  30.37   $ 53.35   $  33.85   $  56.71   $ 34.51
      Low                             33.19      23.60      43.73      25.91     44.25      28.66      48.40     30.27

</TABLE>


Ashland Inc. and Consolidated Subsidiaries
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>

                                                  Balance at     Provisions                                  Balance
                                                   beginning     charged to      Reserves       Other         at end
(In millions)                                        of year       earnings      utilized     changes        of year
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>           <C>           <C>           <C>
Year ended September 30, 2004
Reserves deducted from asset accounts
      Accounts receivable                           $     35     $       20    $      (16)   $       2     $      41
      Inventories                                          9              2            (1)           -            10
---------------------------------------------------------------------------------------------------------------------
Year ended September 30, 2003
Reserves deducted from asset accounts
      Accounts receivable                           $     34     $       18    $      (18)   $       1     $      35
      Inventories                                         12              2            (5)           -             9
---------------------------------------------------------------------------------------------------------------------
Year ended September 30, 2002
Reserves deducted from asset accounts
      Accounts receivable                           $     33     $       23    $      (23)   $       1     $      34
      Inventories                                         12              5            (5)           -            12
---------------------------------------------------------------------------------------------------------------------

</TABLE>


                                   F-25
<PAGE>



Ashland Inc. and Consolidated Subsidiaries
Information by Industry Segment
Years Ended September 30
<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Revenues
Sales and operating revenues
      APAC                                                                      $    2,525   $    2,400   $    2,652
      Ashland Distribution                                                           3,199        2,811        2,541
      Ashland Specialty Chemical                                                     1,386        1,212        1,130
      Valvoline                                                                      1,297        1,235        1,152
      Intersegment sales (1)
        Ashland Distribution                                                           (19)         (21)         (20)
        Ashland Specialty Chemical                                                     (86)         (69)         (63)
        Valvoline                                                                       (1)          (2)          (2)
                                                                                -----------  -----------  -----------
                                                                                     8,301        7,566        7,390
Equity income
      APAC                                                                              19            9            -
      Ashland Specialty Chemical                                                         8            7            4
      Valvoline                                                                          -            -            1
      Refining and Marketing                                                           405          285          176
                                                                                -----------  -----------  -----------
                                                                                       432          301          181
Other income
      APAC                                                                              22            -           12
      Ashland Distribution                                                               9           18           17
      Ashland Specialty Chemical                                                        16           10            4
      Valvoline                                                                          4            5            6
      Refining and Marketing                                                            (6)           2            2
      Corporate                                                                          3           10            5
                                                                                -----------  -----------  -----------
                                                                                        48           45           46
                                                                                -----------  -----------  -----------
                                                                                $    8,781   $    7,912   $    7,617
                                                                                ===========  ===========  ===========
Operating income
APAC                                                                            $      111   $      (42)  $      122
Ashland Distribution                                                                    78           32            1
Ashland Specialty Chemical                                                              87           31           70
Valvoline                                                                              105           87           77
Refining and Marketing (2)                                                             383          263          143
Corporate                                                                             (102)        (105)         (92)
                                                                                -----------  -----------  -----------
                                                                                $      662   $      266   $      321
                                                                                ===========  ===========  ===========
Assets
APAC                                                                            $    1,428   $    1,481   $    1,498
Ashland Distribution                                                                   922          856          884
Ashland Specialty Chemical                                                             842          749          941
Valvoline                                                                              658          667          611
Refining and Marketing                                                               2,742        2,484        2,409
Corporate (3)                                                                          910          769          379
                                                                                -----------  -----------  -----------
                                                                                $    7,502   $    7,006   $    6,722
                                                                                ===========  ===========  ===========
</TABLE>


                                   F-26

<PAGE>

<TABLE>
<CAPTION>

(In millions)                                                                         2004         2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>          <C>
Investment in equity affiliates
APAC                                                                            $        6   $        4   $       (2)
Ashland Specialty Chemical                                                              40           35           30
Valvoline                                                                                7            8            9
Refining and Marketing                                                               2,713        2,448        2,350
Corporate                                                                                1            -            -
                                                                                -----------  -----------  -----------
                                                                                $    2,767   $    2,495   $    2,387
                                                                                ===========  ===========  ===========
Expense (income) not affecting cash
Depreciation, depletion and amortization
      APAC                                                                      $       95   $      108   $      114
      Ashland Distribution                                                              18           19           21
      Ashland Specialty Chemical                                                        41           40           38
      Valvoline                                                                         27           26           24
      Corporate                                                                         12           11           11
                                                                                -----------  -----------  -----------
                                                                                       193          204          208
Other noncash items (4)
      APAC                                                                              20          (25)          24
      Ashland Distribution                                                               3            3            1
      Ashland Specialty Chemical                                                         8           (2)           3
      Valvoline                                                                          2            4           (2)
      Refining and Marketing                                                          (181)           2         (168)
      Corporate                                                                         12          (30)          41
                                                                                -----------  -----------  -----------
                                                                                      (136)         (48)        (101)
                                                                                -----------  -----------  -----------
                                                                                $       57   $      156   $      107
                                                                                ===========  ===========  ===========
Additions to property, plant and equipment
APAC                                                                            $       73   $       47   $      107
Ashland Distribution                                                                    10            5           15
Ashland Specialty Chemical                                                              62           34           27
Valvoline                                                                               26           18           22
Corporate                                                                               39            8            7
                                                                                -----------  -----------  -----------
                                                                                $      210   $      112   $      178
                                                                                ===========  ===========  ===========

</TABLE>
(1)  Intersegment sales are accounted for at prices that approximate market
     value.
(2)  Includes Ashland's equity income from MAP, amortization related to
     Ashland's excess investment in MAP, and other activities associated
     with refining and marketing.
(3)  Includes cash, cash equivalents and other unallocated assets.
(4)  Includes deferred income taxes, equity income from affiliates net of
     distributions, and other items not affecting cash.


                                   F-27


<PAGE>
Ashland Inc. and Consolidated Subsidiaries
Five-Year Selected Financial Information
Years Ended September 30
<TABLE>
<CAPTION>

(In millions except per share data)                        2004         2003          2002         2001         2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>          <C>          <C>          <C>
Summary of operations
Revenues
      Sales and operating revenues                    $   8,301    $   7,566    $    7,390   $    7,544   $    7,785
      Equity income                                         432          301           181          755          395
      Other income                                           48           45            46           53           63
Cost and expenses
      Cost of sales and operating expenses               (6,948)      (6,390)       (6,115)      (6,358)      (6,517)
      Selling, general and administrative expenses       (1,171)      (1,256)       (1,181)      (1,163)      (1,081)
                                                      ----------   ----------   -----------  -----------  -----------
Operating income                                            662          266           321          831          645
Net interest and other financial costs                     (114)        (128)         (138)        (175)        (194)
                                                      ----------   ----------   -----------  -----------  -----------
Income from continuing operations
      before income taxes                                   548          138           183          656          451
Income taxes                                               (150)         (44)          (68)        (266)        (179)
                                                      ----------   ----------   -----------  -----------  -----------
Income from continuing operations                           398           94           115          390          272
Results from discontinued operations                        (20)         (14)           13           32         (202)
                                                      ----------   ----------   -----------  -----------  -----------
Income before cumulative effect
      of accounting changes                                 378           80           128          422           70
Cumulative effect of accounting changes                       -           (5)          (11)          (5)           -
                                                      ----------   ----------   -----------  -----------  -----------
Net income                                            $     378    $      75    $      117   $      417   $       70
                                                      ==========   ==========   ===========  ===========  ===========
Balance sheet information
Current assets                                        $   2,302    $   2,085    $    2,071   $    2,233   $    2,173
Current liabilities                                       1,815        1,484         1,520        1,530        1,711
                                                      ----------   ----------   -----------  -----------  -----------
Working capital                                       $     487    $     601    $      551   $      703   $      462
                                                      ==========   ==========   ===========  ===========  ===========

Total assets                                          $   7,502    $   7,006    $    6,722   $    7,128   $    6,824

Short-term debt                                       $      40    $       -    $       10   $        -   $      245
Long-term debt (including current portion)                1,508        1,614         1,797        1,871        1,981
Stockholders' equity                                      2,706        2,253         2,173        2,226        1,965
                                                      ----------   ----------   -----------  -----------  -----------
Capital employed                                      $   4,254    $   3,867    $    3,980   $    4,097   $    4,191
                                                      ==========   ==========   ===========  ===========  ===========
Cash flow information
Cash flows from operations                            $     209    $     242    $      168   $      814   $      468
Additions to property, plant and equipment                  210          112           178          214          240
Cash dividends                                               77           75            76           76           78
Common stock information
Diluted earnings per share
      Income from continuing operations               $    5.59    $    1.37    $     1.64   $     5.54   $     3.83
      Net income                                           5.31         1.10          1.67         5.93          .98
Cash dividends per share                                   1.10         1.10          1.10         1.10         1.10
</TABLE>


                                   F-28
<PAGE>
                                                                EXHIBIT INDEX



10.7    -  Form of  employment  agreement  between  Ashland  Inc.  and an
           executive officer.

10.14   -  Form of Notice of Grant of Stock Appreciation Right (SAR) Award.

10.15   -  Form of Restricted Stock Award.

10.16   -  Form of Notice of Grant of Nonqualified Stock Option.

10.17   -  Amended and Restated Limited Liability Company Agreement dated as
           of December 31, 1998, of  Marathon  Ashland  Petroleum LLC by and
           between Ashland Inc. and Marathon Oil Company.

10.19   -  Put/Call Registration Rights and Standstill Agreement, dated as of
           January  1,  1998,  including  Amendment  No. 1  thereto,  dated
           December 31, 1998, among Marathon Oil Company,  USX Corporation,
           Ashland Inc. and Marathon Ashland Petroleum LLC.

10.21   -  Three-Year, $250 Million Revolving Credit Agreement dated as of
           April 2, 2004

10.22   -  364-Day, $100 Million Revolving Credit Agreement dated as of
           April 2, 2004

11      -  Computation of Earnings Per Share (appearing on page F-9 of this
           annual report on Form 10-K).

12      -  Computation of Ratio of Earnings to Fixed Charges.

21      -  List of Subsidiaries.

23.1    -  Consent of Independent Registered Public Accounting Firm.

24      -  Power of Attorney, including resolutions of the Board of Directors.

31.1    -  Certification of James J. O'Brien, Chief Executive Officer of
           Ashland,  pursuant to Section 302 of the  Sarbanes-Oxley  Act of
           2002.

31.2    -  Certification of J. Marvin Quin, Chief Financial Officer of Ashland,
           pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32      -  Certification of James J. O'Brien, Chief Executive Officer of
           Ashland, and J. Marvin Quin, Chief Financial Officer of Ashland,
           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1    -  Consent of Tillinghast-Towers Perrin.

99.2    -  Consent of Hamilton, Rabinovitz & Alschuler, Inc.