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                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                 FORM 10-K

            Annual Report Pursuant to Section 13 or 15(d) of the
                      Securities Exchange Act of 1934

                FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

                       Commission file number 1-2918

                                ASHLAND INC.
                          (a Kentucky corporation)

                           I.R.S. No. 61-0122250
                             1000 Ashland Drive
                          Russell, Kentucky 41169

                      Telephone Number: (606) 329-3333

              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): 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) as
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. [ ]
     At October  31,  1997,  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  $3,174,811,812.  In  determining  this
amount,  Ashland Inc. has assumed that directors,  certain of its executive
officers,  and persons known to it to be the beneficial owners of more than
five percent of its common stock are affiliates.  Such assumption shall not
be deemed conclusive for any other purpose.
     At October 31,  1997,  there were  75,019,275  shares of  Registrant's
common stock outstanding.

                    Documents Incorporated by Reference

     Portions of Registrant's  Annual Report to Shareholders for the fiscal
year ended  September 30, 1997 are  incorporated  by reference into Parts I
and II.
     Portions of  Registrant's  definitive  Proxy Statement for its January
29, 1998 Annual Meeting of Shareholders  are incorporated by reference into
Part III.

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<PAGE>
                             TABLE OF CONTENTS
                                                                  Page
PART I
         Item 1.  Business                                          1
                     Corporate Developments                         1
                     Chemical                                       2
                     Valvoline                                      3
                     APAC                                           4
                     Refining and Marketing                         5
                       Petroleum                                    5
                       SuperAmerica                                 7
                     Coal                                           7
                     Miscellaneous                                  9
         Item 2.  Properties                                       12
         Item 3.  Legal Proceedings                                12
         Item 4.  Submission of Matters to a
                    Vote of Security Holders                       13
PART II
         Item 5.  Market for Registrant's Common Stock and 
                    Related Security Holder Matters                13
         Item 6.  Selected Financial Data            13
         Item 7.  Management's Discussion and Analysis of 
                    Financial Condition and Results of Operations  13
         Item 7A. Quantitative and Qualitative Disclosures 
                    About Market Risk                              13
         Item 8.  Financial Statements and Supplementary Data      13
         Item 9.  Changes in and Disagreements with Accountants
                    on Accounting and Financial Disclosure         13
PART III
         Item 10. Directors and Executive Officers of the 
                    Registrant                                     13
         Item 11. Executive Compensation                           15
         Item 12. Security Ownership of Certain Beneficial
                    Owners and Management                          15
         Item 13. Certain Relationships and Related Transactions   15
PART IV
         Item 14. Exhibits, Financial Statement Schedules and 
                    Reports on Form 8-K                            15

<PAGE>
                                   PART I
ITEM 1. BUSINESS
     Ashland Inc. is a Kentucky corporation, organized on October 22, 1936,
with  its  principal  executive  offices  located  at 1000  Ashland  Drive,
Russell,  Kentucky 41169 (Mailing Address: P.O. Box 391, Ashland,  Kentucky
41114) (Telephone:  (606) 329-3333).  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:
Chemical,  Valvoline,  APAC,  Refining and  Marketing  and Coal.  Financial
information  about these segments for the five fiscal years ended September
30,  1997 is set  forth on Pages 62 and 63 of  Ashland's  Annual  Report to
Shareholders  for  the  fiscal  year  ended  September  30,  1997  ("Annual
Report").
     Ashland   Chemical   distributes   industrial   chemicals,   solvents,
thermoplastics and resins, and fiberglass  materials,  and manufactures and
sells a wide variety of  specialty  chemicals  and certain  petrochemicals.
Valvoline  is a marketer  of  branded,  packaged  motor oil and  automotive
chemicals, antifreeze, filters, rust preventives and coolants. In addition,
Valvoline  is engaged in the "fast oil  change"  business  through  outlets
operating under the Valvoline Instant Oil Change(R) and Valvoline Rapid Oil
Change(R) names.
     APAC performs 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,
concrete  block  and  certain  specialized  construction  materials  in the
southern and midwestern United States.
     Refining and Marketing  operations are conducted by Ashland  Petroleum
and SuperAmerica. Ashland Petroleum is an independent petroleum refiner and
a supplier of petroleum products to the transportation and commercial fleet
industries,  other industrial customers and independent  marketers,  and to
SuperAmerica  for  retail  distribution.  In  addition,  Ashland  Petroleum
gathers and  transports  crude oil and petroleum  products and  distributes
petroleum products under the Ashland(R) brand name.  SuperAmerica  operates
combination  gasoline and merchandise stores under the  SuperAmerica(R) and
Rich(R) brand names.
     Ashland's coal operations are conducted by Arch Coal,  Inc.,  which is
54% owned by Ashland and is publicly traded, and which produces and markets
bituminous  coal in Central  Appalachia,  the Illinois  Basin and the Hanna
Basin in Wyoming for sale to  domestic  and  foreign  electric  utility and
industrial customers.
     At September 30, 1997,  Ashland and its consolidated  subsidiaries had
approximately 37,200 employees (excluding contract employees).


                           CORPORATE DEVELOPMENTS


     In May 1997, USX  Corporation  and Ashland  announced the signing of a
letter  of  intent to pursue a  combination  of the major  elements  of the
petroleum  supply,  refining,  marketing and  transportation  operations of
USX's  Marathon  Group and  Ashland.  USX-Marathon  would own a 62  percent
ownership interest and Ashland would own a 38 percent ownership interest in
the joint venture to be known as Marathon Ashland  Petroleum LLC. The joint
venture is expected to be formed following regulatory reviews, execution of
definitive  agreements  and  approval  by the  Ashland  and USX  Boards  of
Directors.
     On July 1, 1997, Ashland sold the domestic  exploration and production
assets of Blazer Energy Corporation (formerly Ashland Exploration, Inc.) to
the Norwegian energy company,  Statoil,  through its U.S. energy management
subsidiary,  The Eastern Group, for $566 million.  Ashland has entered into
an agreement to sell its Nigerian  exploration  and production  operations,
which is subject  to the  approval  of the  Nigerian  government  and other
conditions.  For  further  information,  see  Note  B to  the  Consolidated
Financial Statements on Page 50 in Ashland's Annual Report.
     On July 1, 1997,  Ashland  Coal,  Inc.  and Arch  Mineral  Corporation
merged  into a new,  publicly  traded  corporation,  named Arch Coal,  Inc.
Ashland owns 54% of the new company.  The merger  created the sixth largest
coal company in the United  States by tons mined.  For further  information
relating to Arch Coal, see "Coal".

<PAGE>
                                  CHEMICAL

     Ashland  Chemical  Company,  a division of Ashland,  is engaged in the
manufacture,  distribution  and  sale of a wide  variety  of  chemical  and
plastic  products.  Ashland  Chemical  owns and  operates 34  manufacturing
facilities and participates in 12 manufacturing joint ventures in 10 states
and 14 foreign  countries.  In addition,  Ashland  Chemical  owns or leases
approximately   100  distribution   facilities  in  North  America  and  25
distribution  facilities  in 17  foreign  countries.  Ashland  Chemical  is
comprised of the following operations: 

DISTRIBUTION

     INDUSTRIAL  CHEMICALS  & SOLVENTS  DIVISION  ("IC&S")  - IC&S  markets
chemical products, ingredients and solvents to industrial chemical users in
major markets through  distribution  centers in the United States,  Canada,
Mexico  and  Puerto  Rico.  It  distributes  approximately  3,500  chemical
products made by many of the nation's leading chemical  manufacturers and a
growing  number of  off-shore  producers,  as well as  petrochemicals  from
Ashland's  refineries.  It  specializes in supplying  mixed  truckloads and
less-than-truckload quantities to many industries,  including the paint and
coatings, inks, adhesives,  polymer,  rubber,  industrial and institutional
compounding,  automotive,  appliance and paper  industries.  It also offers
customers  chemical  waste  collection,  disposal and  recycling  services,
working in cooperation with major chemical waste services companies.
      FINE INGREDIENTS  DIVISION - This division (formerly part of the IC&S
division) distributes cosmetic and pharmaceutical  specialty chemicals, and
food-grade and nutritional additives and ingredients across North America.
      FRP SUPPLY  DIVISION - This  division  markets  to  customers  in the
reinforced  plastics and cultured  marble  industries  mixed  truckload and
less-than-truckload  quantities of polyester  resins,  fiberglass and other
specialty  reinforcements,  catalysts and allied products from more than 50
distribution locations throughout North America.
     GENERAL  POLYMERS  DIVISION - This  division  markets a broad range of
thermoplastic  injection  molding and extrusion  materials to processors in
the plastics industry through distribution  locations in the United States,
Canada,  Mexico and Puerto Rico. It also provides plastic material transfer
and  packaging  services  and  less-than-truckload  quantities  of packaged
thermoplastics.  The basic resins business unit markets bulk  thermoplastic
resins to a variety of proprietary processors in North America.
     ASHLAND PLASTICS EUROPE - This division (formerly known as the Ashland
Plastics Division) markets a broad range of thermoplastics to processors in
Europe, including Finland, Norway, Sweden and Germany. Ashland Plastics has
distribution  centers located in Belgium,  France,  Italy, the Netherlands,
Ireland,  Spain,  and the United  Kingdom.  The  division  has  compounding
manufacturing facilities located in Italy and Spain. 

SPECIALTY CHEMICALS

     COMPOSITE  POLYMERS DIVISION - This division  manufactures and sells a
broad  range  of  chemical-resistant,  fire-retardant  and  general-purpose
grades of  unsaturated  polyester and vinyl ester resins for the reinforced
plastics industry. Key markets include the transportation, construction and
marine industries.  It has manufacturing plants in Jacksonville,  Arkansas;
Colton and Los  Angeles,  California;  Bartow,  Florida;  Ashtabula,  Ohio;
Philadelphia and Neville Island, Pennsylvania; and Benicarlo, Spain.
     In September  1997,  the company  reached an agreement in principle to
purchase  the  unsaturated  polyester  resins  business  of Buna Sow  Leuna
Olefinvergund  GmbH (BSL).  The  agreement is subject to the execution of a
definitive agreement and is expected to close by the first calendar quarter
of 1998. This  acquisition  will add a manufacturing  facility in Schkopau,
Germany.
     SPECIALTY POLYMERS & ADHESIVES  DIVISION - This division  manufactures
and sells  specialty  phenolic resins for paper  impregnation  and friction
material  bonding;  acrylic  polymers  for  pressure-sensitive   adhesives;
emulsion  polymer   isocyanate   adhesives  for  structural  wood  bonding;
polyurethane  and  epoxy  structural   adhesives  for  bonding   fiberglass
reinforced plastics,  composites,  thermoplastics and metals in automotive,
recreational,  and industrial  applications;  induction bonding systems for
thermoplastic  materials;  elastomeric  polymer  adhesives and butyl rubber
roofing  tapes for  commercial  roofing  applications;  and  vapor  curing,
high-performance  urethane coatings systems. It has manufacturing plants in
Calumet City, Illinois; Norwood, New Jersey; and Ashland, Ohio.
     DREW  AMEROID  MARINE  DIVISION  - This  division  supplies  specialty
chemicals for water and fuel  treatment and general  maintenance as well as
refrigeration services,  sealing products, welding and refrigerant products
and fire fighting and safety services to the world's merchant marine fleet.
Drew Ameroid Marine currently provides shipboard technical service for more
than  10,000  vessels  from  more  than  30  locations  serving  700  ports
throughout the world.


                                     2

<PAGE>
     ELECTRONIC CHEMICALS DIVISION - This division manufactures and sells a
variety of ultra-high  purity  chemicals  for the  worldwide  semiconductor
manufacturing  industry  through various  manufacturing  locations and also
custom  blends  and  packages  high-purity  liquid  chemicals  to  customer
specifications.  It has manufacturing plants in Newark, California;  Milan,
Italy; Easton,  Pennsylvania;  Dallas, Texas, and Campbell,  California. In
addition,  it also enters into  long-term  agreements  to provide  complete
chemical  management  services,   including  purchasing,   warehousing  and
delivering  chemicals  for  in-plant  use,  for major  facilities  of large
consumers of high-purity chemicals.  Ashland Chemical is currently building
a new,  ultra-high purity  manufacturing and packaging  facility in Pueblo,
Colorado, targeted for completion in spring 1998.
     FOUNDRY  PRODUCTS  DIVISION  - This  division  manufactures  and sells
foundry  chemicals   worldwide,   including   sand-binding  resin  systems,
refractory  coatings,  release agents,  engineered  sand  additives,  riser
sleeves,  and die  lubricants.  The division  purchased  the  remaining 50%
ownership  interest in its Brazilian  affiliate,  Ashland Bentonit Resinas,
Ltda., from Bentonit Uniao Nordeste,  S.A. in September 1997. This division
serves the global metal casting industry from 22 locations in 18 countries.
     DREW  INDUSTRIAL   DIVISION  -  This  division  supplies   specialized
chemicals  and  consulting  services  for the  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 paints.  It conducts
operations  throughout  North  America,  Europe  and the Far  East  through
subsidiaries,  joint venture companies and  distributors.  The division has
manufacturing plants in Kansas City, Kansas;  Kearny, New Jersey;  Houston,
Texas; Ajax, Ontario, Canada;  Singapore;  Sydney and Perth, Australia; and
Auckland, New Zealand. 

PETROCHEMICALS
     This division markets aromatic and aliphatic solvents  manufactured at
facilities  located  at  the  Catlettsburg,   Kentucky  refinery.  It  also
manufactures  maleic anhydride at Neal, West Virginia,  and Neville Island,
Pennsylvania, and methanol near Plaquemine,  Louisiana. The division formed
an Energy  Services  business unit in July 1997 to provide  industrial  and
commercial   businesses  with  expert  management  of  their  total  energy
requirements.  The  new  business  will  source  and  supply  natural  gas,
electricity and natural gas liquids.

OTHER MATTERS
     MELAMINE  CHEMICALS,  INC.  ("MCI") - In October 1997,  MCI and Borden
Chemicals Inc.  ("Borden")  announced that a definitive  agreement had been
reached providing for Borden to tender for all of the outstanding shares of
MCI for $20.50 per share.  Ashland  tendered its 1,275,000 shares under the
terms of the offer and received $26,137,500 for such shares.
     DUBLIN,  OHIO  HEADQUARTERS   TECHNICAL  CENTER  EXPANSION  -  Ashland
Chemical  is  constructing  a  115,000-square-foot  facility  to expand its
Technical Center in Dublin, Ohio. The project is targeted for completion in
late calendar year 1998.
     For information relating to the Comprehensive  Environmental Response,
Compensation, and Liability Act ("CERCLA") and the Superfund Amendments and
Reauthorization Act of 1986 ("SARA") (CERCLA and SARA hereinafter sometimes
referred to collectively as "Superfund"), and the Resource Conservation and
Recovery  Act  ("RCRA"),  see  "Miscellaneous-Governmental  Regulation  and
Action-Environmental Protection."




                                 VALVOLINE

     The  Valvoline  Company,  a division  of  Ashland,  is a  marketer  of
automotive and industrial oils,  automotive  chemicals,  and automotive and
environmental  services,  with  sales  in  more  than  140  countries.  The
Valvoline(R)  trademark was federally  registered in 1873 and is the oldest
trademark for a lubricating  oil in the United  States.  See also "Refining
and  Marketing."  Valvoline has  diversified its operations in recent years
and is comprised of the following business units:
     NORTH  AMERICAN  PRODUCTS  -  Valvoline's   largest  division,   North
American,  markets automotive,  commercial,  and industrial  lubricants and
automotive  chemicals  to a broad  network  of  North  American  customers.
Valvoline  branded  motor oil is one of the top selling  brands in the U.S.
private passenger car and light truck market.
     North American  markets Zerex(R)  antifreeze and Pyroil(R)  automotive
chemicals. Zerex(R) is the second-leading antifreeze brand in the U.S. This
division also markets R-12, an automotive  refrigerant  that was phased out
of  production  in  1995.   R-12  is  being   replaced  in  the  market  by
new-generation refrigerants.
     The domestic  commercial/fleet  group continued its strategic alliance
with the Cummins Engine Company to distribute  heavy-duty lubricants to the
commercial market.

                                     3

<PAGE>

     VALVOLINE INTERNATIONAL - Valvoline International markets Valvoline(R)
branded   products  and  TECTYL(R)  rust  preventives   worldwide   through
company-owned affiliates or divisions in Australia, Denmark, Great Britain,
the Netherlands,  Sweden,  Germany,  Switzerland,  Austria,  France, Italy,
Belgium and South Africa.  Licensees and  distributors  market  products in
other parts of Europe,  Central and South America, the Far East, the Middle
East and certain African countries. Joint ventures have been established in
Argentina,  Ecuador,  Thailand and India. Packaging and blending plants and
distribution centers in Australia,  Canada, Denmark, Sweden, Great Britain,
the Netherlands and the United States supply international customers.
     VALVOLINE INSTANT OIL CHANGE(R)  ("VIOC") - 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 installed  segment of
the  passenger car and light truck motor oil market.  Incorporation  of the
Valvoline name and trademark in VIOC's name,  store signage and advertising
provides an ongoing  Valvoline  presence in the  communities  in which VIOC
stores are located.  As of September 30, 1997,  382  company-owned  and 137
franchise service centers were operating in 15 and 27 states, respectively.
     In 1997, the "MVP" (Maximum  Vehicle  Performance)  program  continued
VIOC's  industry  leadership  in  customer-service  innovation.  MVP  is  a
computer-based  program  that  maintains  service  records on all  customer
vehicles,  system-wide.  MVP also  contains a database on all car makes and
models,  which  allows  service  recommendations  based on vehicle  owner's
manual recommendations.
     FIRST RECOVERY - As of September 30, 1997, Ecogard,  Inc., through its
First Recovery division, was collecting used motor oil at an annual rate of
64 million gallons from a network of automotive  aftermarket  retailers and
service  businesses  in 48  states.  Completing  Valvoline's  "total  fluid
management"  approach  to  customer  service,  First  Recovery  provides an
environmental  service to Valvoline customers in the U.S.,  collecting used
antifreeze and oil filters as well.


                                    APAC

     The APAC group of  companies,  which are  located in 13  southern  and
midwestern  states,  perform  construction work such as paving,  repair 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.  APAC  also
produces  and sells  construction  materials,  such as hot-mix  asphalt and
ready-mix  concrete,  crushed  stone and other  aggregate  and,  in certain
markets,  concrete block and specialized  construction  materials,  such as
architectural block.
     To  deliver  its  services  and  products,   APAC  utilizes  extensive
aggregate-producing properties and construction equipment. It currently has
18 permanent  operating  quarry  locations,  32 other aggregate  production
facilities, 34 ready-mix concrete plants, 145 hot-mix asphalt plants, and a
fleet of over 9,000 mobile  equipment units,  including heavy  construction
equipment and transportation-related equipment.
     Raw aggregate generally consists of sand, gravel,  granite,  limestone
and sandstone.  About 26% of the raw 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 render it economically  feasible.
Most  other raw  materials,  such as liquid  asphalt,  portland  cement and
reinforcing  steel,  are purchased from others.  APAC is not dependent upon
any one supplier or customer.
     Approximately 60% of APAC's revenues are derived directly from highway
and other public sector sources.  The other 40% are derived from industrial
and  commercial  customers,   and  other  private  developers,   and  other
contractors to the public sector.
     Climate and weather  significantly affect revenues 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, 1997 was $693 million, compared to $647
million at September 30, 1996. The backlog orders at September 30, 1997 are
considered firm, and a major portion is expected to be filled during fiscal
1998.


                                     4
<PAGE>

                           REFINING AND MARKETING

     Refining and Marketing  operations are conducted by Ashland  Petroleum
and  SuperAmerica.   Ashland   Petroleum,   a  division  of  Ashland,   has
responsibility  for obtaining  Ashland's crude oil requirements,  operating
Ashland's   refineries,   marketing  the  refined  petroleum  products  and
transporting  and  storing  crude oil and  refined  products.  SuperAmerica
Group,  a  division  of  Ashland,   conducts  retail  petroleum   marketing
operations  under the  SuperAmerica(R)  and Rich(R)  names.  See "Corporate
Developments"  for information  relating to the proposed joint venture with
USX-Marathon.

PETROLEUM
     CRUDE OIL  SUPPLY - The crude oil  processed  in  Ashland  Petroleum's
refineries is obtained from negotiated  lease,  contract and spot purchases
or exchanges.  During fiscal 1997,  Ashland  Petroleum's  negotiated lease,
contract and spot  purchases of United States crude oil for refinery  input
averaged  111,392 barrels per day (1 barrel = 42 U.S.  gallons),  including
93,122  barrels  per  day  acquired  through  Ashland's   Scurlock  Permian
subsidiary.  During  fiscal 1997,  Ashland  Petroleum's  foreign  crude oil
requirements  were met  largely  through  purchases  from  various  foreign
national  oil  companies,  producing  companies  and  traders,  as  well as
purchases of an average of 60,800  barrels per day during  fiscal 1997 from
Canada through Scurlock Permian's Canadian subsidiary. Purchases of foreign
crude oil (including Canada)  represented 68% of Ashland  Petroleum's crude
oil requirements during fiscal 1997 and in fiscal 1996.
     In addition to providing crude oil for Ashland Petroleum's refineries,
Scurlock  Permian  and its  Canadian  subsidiary  are  actively  engaged in
purchasing,  selling and trading crude oil, principally at Midland,  Texas,
Cushing,   Oklahoma,  and  St.  James,   Louisiana,   three  of  the  major
distribution  points for United  States crude oil, as well as major trading
and distribution hubs in western Canada.
     REFINING AND WHOLESALE MARKETING - Ashland Petroleum owns and operates
three  refineries,  located in its key  markets,  with an  aggregate  rated
refining  capacity of 360,000  barrels of crude oil per  calendar  day. The
Catlettsburg, Kentucky, refinery has a refining capacity of 220,000 barrels
per day, and the St. Paul Park,  Minnesota,  and Canton,  Ohio,  refineries
each have rated  refining  capacities  of 70,000  barrels per day.  Ashland
Petroleum's  refineries are complex and include crude oil  atmospheric  and
vacuum  distillation,   fluid  catalytic  cracking,   catalytic  reforming,
desulfurization  and sulfur  recovery  units.  Each has the  capability  to
process  a wide  variety  of crude  oils  and to  produce  normal  refinery
products,  including  reformulated  gasoline. In addition, the Catlettsburg
refinery manufactures lubricating oils and a wide range of petrochemicals.
     Ashland  Petroleum's  principal  marketing areas for gasoline and fuel
oils  include the Ohio River  Valley,  the upper  Midwest,  the upper Great
Plains and the southeastern United States.
     Ashland  Petroleum's  production of gasoline,  kerosene and light fuel
oils  is sold in 20  states  through  wholesale  channels  of  distribution
(including  company owned and exchange  terminals and 17 Ashland brand bulk
plants in 4 states)  and at retail  through  Ashland(R)  brand  distributor
locations,  SuperAmerica(R)  and  Rich(R).  Gasoline  is sold at  wholesale
primarily to independent marketers, jobbers, and chain retailers who resell
through several thousand retail outlets  principally under their own names,
and also under the  Ashland(R)  brand name.  As of September  30, 1997,  37
jobbers were  committed to Ashland's  jobber program and 601 units had been
reimaged.  Ashland also supplies 46 reseller  outlets using the  Ashland(R)
brand name. Gasoline, kerosene,  distillates and aviation products are also
sold to utilities,  railroads,  river towing  companies,  commercial  fleet
operators, airlines and governmental agencies.
     Ashland Petroleum also produces asphalt cements,  polymerized asphalt,
asphalt emulsions and industrial  asphalts and markets these products in 18
states.  Additionally,  Ashland  Petroleum  manufactures  petroleum  pitch,
primarily  used in the  graphite  electrode,  clay  target  and  refractory
industries.
     The table below shows Ashland's refining operations for the last three
fiscal years.
<TABLE>
<CAPTION>

                                                                 Years Ended September 30
                                                                -------------------------
                                                                 1997     1996     1995
                                                                -----    -----    -----
<S>                                                             <C>      <C>      <C>  
     REFINERY INPUT (IN THOUSANDS OF BARRELS PER DAY)           362.6    372.3    353.8
     ------------------------------------------------

     REFINERY PRODUCTION (IN THOUSANDS OF BARRELS PER DAY)
     -----------------------------------------------------
     Gasoline                                                   178.3    183.5    176.8
     Distillates and Kerosene                                    98.0    102.1     92.5
     Asphalt                                                     29.9     30.4     31.5
     Jet and Turbine Fuel                                        11.6     11.4     11.1
     Heavy Fuel Oils                                              7.9      7.1      6.7
     Lubricants                                                   7.1      7.7      7.7
     Other                                                       20.7     20.0     16.8

</TABLE>
                                     5

<PAGE>

     The table below shows the average daily  consolidated sales (excluding
intercompany  sales)  of  petroleum  products  and  crude  oil  by  Ashland
Petroleum,  SuperAmerica  and  Valvoline  for the last three fiscal  years.
Sales of gasoline  (excluding excise taxes) represented  approximately 17%,
18%  and  17%  of  Ashland's  consolidated  sales  and  operating  revenues
(excluding excise taxes) in fiscal years 1997, 1996 and 1995, respectively.
<TABLE>
<CAPTION>

                                                                      Years Ended September 30
                                                                     -------------------------
                                                                      1997     1996     1995
                                                                     -----    -----    -----
<S>                                                                  <C>      <C>      <C>  
     CONSOLIDATED PRODUCT SALES (IN THOUSANDS OF BARRELS PER DAY)
     Gasoline                                                        197.1    197.6    193.7
     Crude Oil                                                       108.6    116.3    112.5
     Distillates and Kerosene                                        108.5    112.8    102.8
     Asphalt                                                          37.4     37.0     36.8
     Jet and Turbine Fuel                                             12.4      9.6      9.6
     Heavy Fuel Oils                                                   7.5      7.0      7.1
     Lubricants                                                       13.8     14.8     15.0
     Other                                                            29.9     28.0     28.3
</TABLE>

     TRANSPORTATION  AND STORAGE - Ashland owns, leases or has an ownership
interest  in 5,790  miles of active  pipeline  in 13 states.  This  network
transports crude oil and refined products to and from terminals, refineries
and other  pipelines.  This  includes  2,545  miles of crude oil  gathering
lines,  2,729 miles of crude oil trunk lines,  475 miles of refined product
lines and 41 miles of natural gas liquid lines.
     Ashland has an 18.6% ownership interest in LOOP LLC ("LOOP"), the only
U.S.  deep water port  facility  capable of  receiving  crude oil from very
large crude  carriers  and which has a capacity to  off-load  1,000,000  to
1,200,000  barrels per day. Ashland also has a 21.4% ownership  interest in
LOCAP  INC.  ("LOCAP"),  a  pipeline  operation  which  has a  capacity  of
1,200,000 barrels per day, and a 21.6% undivided  ownership interest in the
Capline Pipeline System,  which has a nominal capacity of 1,175,000 barrels
per day. LOCAP owns a pipeline  connecting LOOP and the Capline System that
originates at St. James, Louisiana. These port and pipeline systems provide
Ashland  Petroleum  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 or leased by Ashland
which provide  transportation to Ashland Petroleum's refineries in Kentucky
and Ohio. For summarized  financial statements and information with respect
to advances and transportation  payments made by Ashland to LOOP and LOCAP,
see  Notes  D  and I of  Notes  to  Consolidated  Financial  Statements  in
Ashland's Annual Report.
     In addition,  Ashland owns a 33% stock interest in Minnesota Pipe Line
Company, which owns a crude oil pipeline in Minnesota.  Minnesota Pipe Line
Company provides  Ashland  Petroleum with access to 270,000 barrels per day
nominal   capacity  of  crude  oil  common  carrier   transportation   from
Clearbrook, Minnesota to Cottage Grove, Minnesota, which is in the vicinity
of Ashland Petroleum's St. Paul Park, Minnesota, refinery.
     Ashland Petroleum's river transportation operations include 8 towboats
(6 owned,  2 leased)  and 170 barges that  transport  crude oil and refined
products on the Ohio,  Mississippi and Illinois rivers,  their tributaries,
and the Intracoastal  Waterway.  In 1995, Ashland entered into an agreement
with Jeffboat, a division of American Commercial Marine Service Company, to
construct 42 new  double-hulled  inland river tank barges.  As of September
30,  1997,  construction  on 34 of the new  double-hulled  units  has  been
completed. These barges will replace current single-hulled barges owned and
operated  by  Ashland  in  order to  comply  with  requirements  of the Oil
Pollution Act of 1990.  Displaced  single-hulled  units will be divested or
recycled into dock floats within Ashland's system. See also  "Miscellaneous
- Governmental Regulation and Action - Environmental Protection."
     Ashland   Petroleum  leases  on  a  long-term  basis  two  80,000  ton
deadweight  tankers,  which are primarily  used for third party delivery of
foreign crude oil to the United States.  Ashland  Petroleum's  requirements
for tankers are met by chartering tankers for individual voyages.
     Ashland Petroleum leases rail cars in various sizes and capacities for
movement of petroleum products and chemicals. Ashland Petroleum also owns a
large number of tractor-trailers, additional trailers, and a large fleet of
tank trucks and general service trucks.


                                     6

<PAGE>

     Ashland  Petroleum  owns or has an interest in 34 terminal  facilities
from which it sells a wide range of petroleum  products.  These  facilities
are supplied by a  combination  of river barge,  pipeline,  truck and rail.
Ashland  Petroleum  also owns or operates a number of other  terminals that
are used in connection  with the  transportation  of petroleum  products or
crude oil. 
     OTHER MATTERS - There are traditional  seasonal  variations in Ashland
Petroleum's  sales and  operating  results.  The  seasonality  that Ashland
Petroleum  experiences  is due  primarily to increased  demand for gasoline
during the summer driving season,  higher demand for distillate  during the
winter  heating  season,  and  increased  demand for asphalt  from the road
paving  industry  during the last six months of Ashland's  fiscal year. The
refining industry experiences a similar  seasonality.  For Ashland's fiscal
years 1995  through  1997,  refining  margins  for Ashland  Petroleum  have
averaged  $3.69 per barrel for the  six-month  periods  ended  March 31 and
$5.19 per barrel for the six-month periods ended September 30.
     For  information on federal,  state and local statutes and regulations
relating to releases into the environment or protection of the environment,
see   "Miscellaneous-Governmental   Regulation   and   Action-Environmental
Protection." For information relating to certain environmental  litigation,
see "Legal Proceedings-Environmental Proceedings."

SUPERAMERICA
     SUPERAMERICA(R)  STORES - SuperAmerica operates 641 (497 owned and 144
leased)  combination  gasoline and  merchandise  stores in 10 states in the
Ohio Valley and upper Midwest under the SuperAmerica(R)  name. These stores
are designed for high volume  sales.  SuperAmerica  stores offer  consumers
gasoline,  diesel  fuel (at  selected  locations)  and a broad mix of other
goods and services,  such as fresh-baked goods,  automated teller machines,
video rentals,  automotive  accessories and a line of private-label  items.
SuperAmerica  has also  added  on-premise  brand-name  restaurants  at some
outlets to enhance overall profitability. At September 30, 1997, there were
81 SuperAmerica locations with branded food service.
     SuperAmerica  operates warehouse  distribution centers in Bloomington,
Minnesota,  and Ashland,  Kentucky,  that distribute certain merchandise to
its stores.  SuperAmerica also operates a commissary in Russell,  Kentucky,
that produces  sandwiches,  salads and other food products for distribution
to stores in the Ohio  Valley.  A wholly owned  subsidiary  of Ashland also
operates a large bakery and commissary in St. Paul Park,  Minnesota,  under
the name SuperMom's(R) that supplies baked goods, sandwiches and salads.
     In addition to its product and service  innovations,  SuperAmerica has
adopted a number of technological  enhancements that improve efficiency and
service.  SuperAmerica  has bar  code  scanning  and home  office  to store
satellite communication links. SuperAmerica is also one of the first in the
industry to operate a data  warehouse  to collect and analyze data from its
stores.
     In addition to the 641 company-owned and leased  SuperAmerica  stores,
SuperAmerica has 27  jobber/franchisees  who operate 43 stores in Minnesota
and Wisconsin.  During fiscal 1997, 33 new or rebuilt  SuperAmerica  retail
outlets  were  opened.  During  fiscal  1997,  38% of the  revenues  of the
SuperAmerica  stores (excluding excise taxes) were derived from the sale of
merchandise and 62% of such revenues were derived from the sale of gasoline
and diesel fuel.
     RICH OIL -  SuperAmerica  also  operates  125 (97 owned and 28 leased)
retail  gasoline  outlets in  Kentucky,  Ohio and West  Virginia  under the
Rich(R)  name.  These  outlets  are  generally  smaller,   are  located  in
less-densely-populated  areas and generate lower gasoline  volumes than the
average SuperAmerica store.

OTHER MATTERS
     For  information on federal,  state and local statutes and regulations
relating to releases into the environment or protection of the environment,
see   "Miscellaneous-Governmental   Regulation   and   Action-Environmental
Protection." For information relating to certain environmental  litigation,
see "Legal Proceedings-Environmental Proceedings."


                                    COAL

     ARCH COAL, INC. ("ARCH COAL") - Ashland owns approximately 54% of Arch
Coal, a publicly traded Delaware corporation  (NYSE:ACI) resulting from the
merger of Ashland Coal, Inc. and Arch Mineral  Corporation.  See "Corporate
Developments" for a discussion of the July 1, 1997 merger transaction.  The
unaudited pro forma combined operating data below are not representative of
the operating  results which would have occurred had the merger occurred as
of the  beginning  of the periods  presented  or dates  indicated or of the
operating results which may be achieved in the future.

                                     7
<PAGE>


     Arch Coal is engaged in the production, transportation, processing and
marketing of bituminous coal produced in Central  Appalachia,  the Illinois
Basin and the Hanna Basin in Wyoming.  Arch Coal concentrates  primarily on
acquiring  and  developing  low-sulfur  steam  coal  reserves  for  sale to
electric  utility  customers  in the United  States and  abroad.  Arch Coal
relies on third-party rail, barge and truck  transportation to deliver coal
to  its  domestic   customers.   A  substantial  portion  of  shipments  to
international  customers  are made  primarily  from the  Dominion  Terminal
Associates  terminal  facility  in  Newport  News,   Virginia.   Arch  Coal
subsidiaries  are partners in the  partnership  that owns and operates this
terminal.
     For its fiscal year ended  December 31, 1996, on a pro forma  combined
basis,  Arch  Coal and its  independent  operating  subsidiaries  sold 51.3
million  tons of coal,  as compared to 49.2 and 48.1  million  tons sold in
1995 and 1994, respectively. Of the total number of tons sold during fiscal
1996,  approximately 68% were under long term contracts, as compared to 69%
for 1995 and 67% for 1994,  with the balance being sold on the spot market.
In fiscal 1996, Arch Coal and its independent  operating  subsidiaries sold
2.4 million tons of coal in the export market, compared to 3.5 million tons
in  1995  and  2.2  million  tons  in  1994.   Sales  of  coal  represented
approximately  10%,  5% and 6% of  Ashland's  consolidated  revenues in its
fiscal years ended September 30, 1997, 1996 and 1995, respectively.
     For its fiscal year ended December 31, 1996,  Arch Coal's  independent
operating subsidiaries produced approximately 47.4 million tons of coal, as
compared to 46.5 and 46.6 million tons for 1995 and 1994, respectively.  In
addition,  Arch Coal purchased for resale approximately 3.9 million tons of
coal during 1996 and  approximately 2.6 and 2.5 million tons of coal during
1995 and 1994.
     Approximately  66%,  70% and 68% of total  revenues  for fiscal  years
1996, 1995 and 1994,  respectively,  were derived from long-term contracts.
In the nine months ended September 30, 1997, on a pro forma combined basis,
Arch Coal  sold  40.1  million  tons of coal,  69% of which was sold  under
contracts with a duration of more than one year. During this period, 94% of
Arch Coal's total sales came from the production of its subsidiaries, while
the  remaining  coal sold  came  from  brokerage  activities.  During  this
nine-month period, 58% of Arch Coal's production was from its surface mines
and the remainder was from its underground and auger mines.
     During its fiscal year ended December 31, 1996,  Arch Coal's pro forma
combined  sales to  affiliates  of The Southern  Company and  affiliates of
American  Electric  Power  accounted  for  approximately  14.6% and  13.1%,
respectively,  of pro forma  combined  revenues  from  coal  sales for such
period.  The loss of such customers would have a material adverse effect on
Arch Coal.
     As of September 30, 1997,  Arch Coal  estimates it owned or controlled
recoverable  coal  reserves  in  the  proven  and  probable  categories  of
approximately 2.1 billion tons. Arch Coal believes that a majority of these
reserves  have a sulfur  content of less than 1.6 pounds of sulfur  dioxide
per million Btu and a  substantial  portion  have a sulfur  content of less
than 1.2 pounds of sulfur dioxide per million Btu.  Ashland has not made an
independent verification of this information.
     Arch Coal's coal  properties  are owned  outright  and  controlled  by
lease. Royalties paid to lessors on leased properties are either on a fixed
price per ton basis or on a percentage of the gross sales price basis. Most
of these leases run until the exhaustion of mineable and merchantable coal.
The  remaining  leases have primary terms ranging from one to 40 years from
the date of their execution,  with many containing  options to renew. Those
term leases  covering  principal  reserves under Arch Coal's current mining
plans are not  scheduled  to expire prior to  expiration  of those plans in
2003 (at Arch Coal's Coal Mac, Inc. operations) and 2006 (at the balance of
Arch Coal's operations). Mining plans are not necessarily indicative of the
life of the mine.  The extent to which  reserves  will  eventually be mined
depends upon a variety of factors, including future economic conditions and
governmental  actions  affecting  both  the  mining  and  marketability  of
low-sulfur steam coal.
     Arch Coal's  Apogee Coal Company  ("Apogee")  and Hobet  Mining,  Inc.
("Hobet")  subsidiaries,  are  members  of the  Bituminous  Coal  Operators
Association  ("BCOA")  and each is a  signatory  to a five year  collective
bargaining  agreement  with the United Mine Workers of America that expires
on August 1, 1998. In the nine months ended  September  30, 1997,  Apogee's
and  Hobet's  combined  production  represented  approximately  55% of Arch
Coal's total  production on a pro forma combined basis. Two other Arch Coal
subsidiaries  are  signatories  to collective  bargaining  agreements  with
independent  employee  associations.  Employees  of the  remainder  of Arch
Coal's operating subsidiaries are not represented by labor unions.
     Arch Coal is subject to extensive federal and state environmental laws
and   regulations,   including  the  federal  Surface  Mining  Control  and
Reclamation  Act of 1977,  the Clean Water Act, RCRA and the Clean Air Act,
as well as related  federal  environmental  regulations  and similar  state
enactments.  In  addition,  the Federal  Mine Safety and Health Act of 1977
("MSHA")  imposes  health and safety  standards  on all mining  operations.
Regulations  under MSHA are  comprehensive  and affect numerous  aspects of
mining operations, including the

                                     8

<PAGE>
training of mine personnel,  mining procedures,  blasting and the equipment
used in mining operations. Although the cost of compliance with these laws,
regulations and  requirements is substantial,  it is not expected to have a
material  adverse impact on Arch Coal's  results of  operations,  financial
condition or competitive position.
     The  Clean  Air  Act  contains  acid  rain  provisions  which  require
substantial  reductions in sulfur dioxide  emissions by power plants in the
United States.  Typically,  power plants burn low-sulfur coal as a means of
reducing  sulfur  dioxide  emissions.  Because  Arch  Coal has  significant
low-sulfur  coal  reserves,  future sales should be positively  affected by
stringent enforcement of sulfur dioxide emission standards.

                               MISCELLANEOUS
GOVERNMENTAL REGULATION AND ACTION
     Ashland's  operations are affected by political  developments and laws
and  regulations,  such as  restrictions  on  production,  restrictions  on
imports and exports, the maintenance of specified reserves, price controls,
tax  increases  and  retroactive  tax claims,  expropriation  of  property,
cancellation of contract rights, environmental protection controls and laws
pertaining  to workers'  health and safety.  As discussed in part below,  a
number of bills have been enacted or proposed by the United States Congress
and various  state  governments  which have,  or could have, a  significant
impact on Ashland.
     GENERAL - As a refiner,  Ashland is substantially  affected by changes
in world  crude  oil  prices.  Many  world  and  regional  events  can have
substantial  effects on world crude oil prices and can increase  volatility
in world markets.  Ashland expects to be able to acquire adequate  supplies
of crude oil at competitive prices. However, Ashland cannot predict whether
foreign and United  States  petroleum  product price levels will permit its
refineries  to operate on a  profitable  basis.  Neither can it predict the
effect on its operations and financial  condition from possible  changes in
the policies of the Organization of Petroleum  Exporting Countries ("OPEC")
or in actions by the President of the United States and the Congress,  from
changes in taxes and federal  regulation of the oil and gas business in the
United States, or from other developments that cannot be foreseen.
     The  stability of Ashland's  crude oil supply from foreign  sources is
subject to factors beyond its control,  such as military conflict involving
oil-producing  countries,  the  possibility of  nationalization  of assets,
embargoes of the type imposed by OPEC in 1973, internal  instability in one
or more oil-producing  countries,  and rapid increases in crude oil prices.
Although Ashland will continue,  for economic reasons, to rely upon foreign
crude oil sources for a  substantial  portion of its crude oil supply,  the
extent of  operation  in the  domestic  crude oil  market  afforded  by its
Scurlock  Permian  subsidiary  assists in  offsetting  the adverse  effects
frequently associated with market volatility. See "Refining and Marketing -
Petroleum-Crude   Oil   Supply"   for   Ashland's   crude  oil   processing
requirements.
     Imported crude oil is subject at present to payment of duty,  which is
10.5(cent) per barrel for crudes over 25(degree) API gravity (2.1(cent) per
barrel for  Canadian  imports) and  5.25(cent)  per barrel for crudes below
25(degree)  API  gravity  (1.05(cent)  per  barrel for  Canadian  imports).
Imported  crude oil is also  subject to a customs  users fee of .17% of the
value of the crude oil. For information  with respect to tax assessments on
crude oil, see also  "Miscellaneous  Governmental  Regulation  and Action -
Environmental Protection."
     Retail  marketing  "divorcement"  legislation and wholesale and retail
pricing  regulations  have been adopted in some  states.  They are proposed
from  time  to time in  other  states  and at the  federal  level.  If such
legislation  were  adopted  at the  federal  level or in the  states  where
SuperAmerica  sells petroleum  products,  it could have a material  adverse
impact on Ashland's results of operations.
     ENVIRONMENTAL  PROTECTION  -  Federal,  state and local  statutes  and
regulations   relating  to  the  protection  of  the  environment   have  a
significant  impact  on the  conduct  of  Ashland's  businesses.  Ashland's
capital and operating  expenditures  for air, water and solid waste control
facilities for continuing operations are summarized below.
<TABLE>
<CAPTION>

                                                                       Years Ended September 30
                                                          -----------------------------------------
                        (In millions)                       1997              1996             1995
            --------------------------------------        ------            ------            -----
<S>                                                        <C>               <C>              <C>  
                    Capital expenditures                   $  26             $  38            $  42
                    Operating expenditures                   155               153              148

</TABLE>

     At  September   30,  1997,   Ashland's   reserves  for   environmental
assessments and remediation efforts were $150 million, reflecting Ashland's
estimates  of the  costs  which  are most  likely  to be  incurred  over an
extended period to remediate identified  environmental conditions for which
costs are reasonably estimable.


                                     9

<PAGE>


     Based on current environmental regulations,  Ashland estimates capital
expenditures  for air,  water and solid waste control  facilities to be $30
million in 1998.  Expenditures  for  investigatory  and remedial efforts in
future years are subject to the uncertainties associated with environmental
exposures,  including identification of new environmental sites and changes
in laws and regulations and their application. Such expenditures,  however,
are  not  expected  to  have  a  material   adverse   effect  on  Ashland's
consolidated  financial position,  cash flow or liquidity.  For information
regarding  the 1996  multimedia  inspections  which were  conducted  by the
United  States   Environmental   Protection  Agency  ("USEPA")  at  Ashland
Petroleum's three refineries, see "Legal Proceedings".
     Federal,  state and local environmental laws and regulations have had,
and will  continue  to have,  a  significant  impact on the manner in which
Ashland conducts its business, manages its refining,  storage, pipeline and
retail facilities and selects its range of refined  products.  A summary of
the effects of the most  significant  of these laws and  regulations is set
forth below.
     The USEPA and the states in which Ashland conducts petroleum marketing
operations have adopted regulations and laws concerning underground storage
tanks  covering,  among  other  things,   registration  of  tanks,  release
detection, corrosion protection,  response to releases, and closure of, and
financial responsibility for, underground storage tank systems. Under RCRA,
underground  storage  tanks  used  for  retail  distribution  of  petroleum
products must be brought into  compliance  with the variety of  engineering
specifications and leak protection  technologies by calendar year-end 1998.
In anticipation of this compliance  deadline,  Ashland's  retail  petroleum
marketing  operations  have  upgraded  the  underground  storage  tanks  at
approximately  96% of the  Company's  existing  marketing  locations,  and
Ashland  anticipates  that the  remaining  locations  will be brought  into
timely compliance.  
     As originally  enacted,  Superfund provided for the establishment of a
fund to be used for a hazardous substance clean-up program, administered by
the USEPA and funded by: (i) a petroleum  tax on domestic  crude oil and on
imported  crude oil  equalized at  9.7(cent)  per barrel plus a 5(cent) per
barrel  oil spill  tax,  as more  fully  described  below,  (ii) a chemical
feedstock  tax,  (iii)  a tax on  imported  chemical  derivatives,  (iv) an
"environmental tax" based on corporate  alternative minimum taxable income,
and (v) the motor  fuel tax to finance  the new  Underground  Storage  Tank
Trust Fund.  During 1996,  the tax  provisions of Superfund  expired.  As a
result  Ashland paid no Superfund  taxes during  fiscal 1997.  Superfund is
undergoing    consideration   for   significant    amendments,    including
reauthorization  of the taxing  provisions as well as a reevaluation of the
cleanup liability  allocation scheme and improved cleanup remedy selection.
However,  it is  uncertain  at this time what  revisions  will be  formally
considered by Congress, or if any such revisions will in fact be adopted.
     The Oil  Pollution  Act of 1990  ("OPA 90")  established  a $1 billion
trust fund to cover  cleanup-related  costs of oil spills  after  statutory
liability  limits for a responsible  party have been reached,  or where the
responsible  party is otherwise  unidentifiable or unable to pay. The trust
fund is financed,  when depleted below specified levels,  through an excise
tax of 5(cent) per barrel on domestic crude oil and imported  petroleum oil
products (pursuant to Superfund).  OPA 90 subjects  responsible  parties to
strict liability for removal costs and damages  (including natural resource
damages)  resulting  from oil spills,  and  requires  the  preparation  and
implementation   of  spill-response   plans  for  designated   vessels  and
facilities. Additionally, OPA 90 requires that new tank vessels entering or
operating  in domestic  waters be  double-hulled,  and that  existing  tank
vessels that are not  double-hulled be retrofitted or removed from domestic
service according to a phase-out schedule.
     On July 1, 1994,  the United  States Coast Guard issued  interim final
regulations dealing with financial responsibility for water pollution under
OPA 90 and  CERCLA.  The  regulations  require  self-propelled  tank vessel
owners and  operators  to maintain  evidence of  financial  responsibility,
effective December 28, 1994,  sufficient to meet their potential  liability
defined under OPA 90 and CERCLA for spills of oil or hazardous  substances.
The Director,  Coast Guard  National  Pollution  Funds Center,  has granted
permission to Ashland to self-insure  the financial  responsibility  amount
for liability purposes for Ashland's ocean tankers, as provided in OPA 90.
     The Federal  Clean Air Act required  the  refining  industry to market
cleaner-burning,  reformulated  gasoline ("RFG") beginning January 1, 1995,
for use in nine specified  metropolitan  areas across the country.  Ashland
does not directly  supply gasoline in any of the nine  metropolitan  areas.
However, several urban locations within Ashland's marketing area have opted
into the RFG program, and Ashland has been able to meet expected demand for
RFG in its  marketing  area.  The Clean Air Act also  required the refining
industry  to supply 39  carbon  monoxide  (CO)  non-attainment  areas  with
gasoline  containing  2.7 weight percent oxygen for four winter months each
year. Upon being  re-designated  CO attainment,  several of these areas are
seeking  to  opt-out  of  the  oxygenated  gasoline  requirements.  Ashland
believes it will have a continuing need to supply oxygenated  gasoline only
at St. Paul Park,  Minnesota,  whose primary market is a CO  non-attainment
area.


                                    10

<PAGE>

     RCRA, which requires management of hazardous waste, is scheduled to be
reauthorized  by  Congress,  although  timing  of such  reauthorization  is
uncertain.  Reauthorization  issues may include an  expansion  of hazardous
waste program  coverage,  recycling,  used oil, and solid waste management.
These issues may be addressed in additional USEPA rulemakings  unrelated to
the statutory  reauthorization  efforts.  It is  anticipated  that both the
reauthorization  and other  future  rulemakings  will  result in  increased
environmental   compliance  costs  which  cannot  currently  be  estimated.

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 its primary research  facilities in
Catlettsburg,  Kentucky,  and Dublin,  Ohio. Research and development costs
are expensed as incurred ($29 million in 1997,  $28 million in 1996 and $24
million in 1995). 

COMPETITION
     In all of its  operations,  Ashland is subject to intense  competition
both from companies in the  respective  industries in which it operates and
from products of companies in other industries.  In most of these segments,
competition is based  primarily on price,  with factors such as reliability
of supply, service and quality being considered.  Ashland Chemical competes
in a number of chemical distribution,  specialty chemical and petrochemical
markets.  Its chemicals and solvents  distribution  businesses compete with
national,  regional  and local  companies  throughout  North  America.  Its
plastics  distribution  businesses  compete  worldwide.  Ashland Chemical's
specialty chemicals  businesses compete globally in selected niche markets,
largely on the basis of technology and service,  while holding  proprietary
technology  in  virtually  all  their   specialty   chemicals   businesses.
Petrochemicals are largely commodities,  with pricing and quality being the
most  important  factors.  Valvoline  competes  primarily with domestic oil
companies and, to a lesser extent,  with  international  oil companies on a
worldwide basis.  Valvoline's brand recognition and increasing market share
in the "fast oil change" market are important competitive factors.
     The majority of the  business  for which APAC  competes is obtained by
competitive  bidding.  Ashland  Petroleum  competes  primarily  with  other
domestic  refiners  and,  to  a  lesser  extent,  with  imported  products.
Ashland's  refineries  are located  close to its market  areas,  giving the
Company a  geographic  advantage  in  supplying  these  areas.  While  some
integrated  competitors  have sources of controlled crude  production,  few
competitors in Ashland  Petroleum's  market areas are  significantly  crude
self-sufficient.   SuperAmerica   competes   with   major  oil   companies,
independent  oil  companies  and  independent  marketers.  Virtually all of
SuperAmerica's   refined  products  are  supplied  by  Ashland   Petroleum.
SuperAmerica  strives to provide  high  quality and  efficient  service and
enjoys gasoline and  merchandise  sales per store exceeding the convenience
store  industry  average,   based  on  the  1997  National  Association  of
Convenience Store State of the Industry Survey. The coal industry is highly
competitive,  and Arch Coal competes  (principally  in price,  location and
quality of coal) with a large number of other coal producers, some of which
are substantially  larger and have greater  financial  resources and larger
reserve bases than Arch Coal. 

FORWARD LOOKING STATEMENTS
     This Form 10-K, and the documents  incorporated by reference,  contain
forward-looking  statements  within  the  meaning  of  Section  27A  of the
Securities  and  Exchange  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934,  including  various  information  within the Capital
Resources,  Derivative  Instruments  and Outlook  sections in  Management's
Discussion  and  Analysis in  Ashland's  Annual  Report.  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  which could cause  actual  results to differ
materially   from  those   contained  in  such   statements  are  discussed
immediately  below,  as well as in other  portions of this Form 10-K and in
Note  A  to  the   Consolidated   Financial   Statements  under  risks  and
uncertainties in Ashland's Annual Report.
     Ashland's  operations  are  affected  by  domestic  and  international
political,  legislative,  regulatory  and legal  actions.  Such actions may
include changes in the policies of OPEC or other developments  involving or
affecting oil-producing countries,  including military conflict, embargoes,
internal  instability  or actions or  reactions  of the  government  of the
United States in anticipation of or in response to such developments.
     Domestic and international  economic conditions,  such as recessionary
trends, inflation, interest and monetary exchange rates, as well as changes
in the availability and market prices of crude oil and petroleum  products,
can also have a significant effect on Ashland's  operations.  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.  In addition,  climate and
weather can significantly  affect Ashland in several of its operations such
as its construction, heating oil and coal businesses. 


                                    11

<PAGE>

ITEM 2. PROPERTIES
     Ashland's corporate  headquarters,  which is leased, and the principal
location  of Ashland  Petroleum,  which is owned,  are  located in Russell,
Kentucky.  Principal  offices  of other  major  operations  are  located in
Lexington, Kentucky (SuperAmerica and Valvoline);  Dublin, Ohio (Chemical);
Atlanta,  Georgia (APAC); and St. Louis, Missouri (Arch Coal), all of which
are  leased.  Ashland's  principal   manufacturing,   marketing  and  other
materially   important   physical   properties  are  described   under  the
appropriate segment under Item 1. Additional information concerning certain
leases may be found in Note I of Notes to Consolidated Financial Statements
in Ashland's Annual Report.

ITEM 3.  LEGAL PROCEEDINGS
     ENVIRONMENTAL  PROCEEDINGS - (1) As of September 30, 1997, Ashland had
been  identified  as  a  "potentially   responsible  party"  ("PRP")  under
Superfund or similar state laws for potential  joint and several  liability
for  cleanup  costs  in  connection  with  alleged  releases  of  hazardous
substances in connection with 78 waste  treatment or disposal sites.  These
sites  are  currently   subject  to  ongoing   investigation  and  remedial
activities,  overseen by the USEPA or a state agency,  in which Ashland may
be participating as a member of various PRP groups.  Generally, the type of
relief sought includes remediation of contaminated soil and/or groundwater,
reimbursement for the costs of site cleanup or oversight  expended,  and/or
long-term  monitoring of  environmental  conditions  at the sites.  Ashland
carefully monitors the investigatory and remedial activity at many of these
sites. Based on its experience with site remediation,  its familiarity with
current  environmental  laws and regulations,  its analysis of the specific
hazardous  substances at issue, the existence of other  financially  viable
PRPs and its current  estimates of  investigatory,  clean-up and monitoring
costs at each site,  Ashland  believes  that its  liability at these sites,
either  individually  or  in  the  aggregate,  after  taking  into  account
established reserves,  will not have a material adverse effect on Ashland's
consolidated  financial position,  cash flow or liquidity.  Estimated costs
for these  matters are  recognized in accordance  with  generally  accepted
accounting  principles governing the likelihood that costs will be incurred
and Ashland's  ability to reasonably  estimate future costs. For additional
information   regarding   Superfund,   see  "Miscellaneous  -  Governmental
Regulation and Action-Environmental Protection".
     (2) On March 19, 1996, after consultation with the USEPA, the Kentucky
Division for Air Quality issued a finding that Ashland had not demonstrated
compliance  with certain air  regulations  governing  emissions of volatile
organic  compounds  ("VOC") at its  Catlettsburg,  Kentucky  refinery,  and
referred the matter to USEPA - Region IV for formal enforcement  action. On
May 27, 1997,  Kentucky and Ashland  entered into an Agreed Order resolving
the  issues in  contention.  Under the terms of the Agreed  Order,  Ashland
agreed  to  pay a  civil  penalty  and to  design,  construct  and  install
additional VOC controls. Separately, the USEPA issued a Notice of Violation
to Ashland regarding this matter.
     (3) In the fall of 1996, the USEPA conducted multimedia inspections of
Ashland's three refineries.  Over the past several months,  the  USEPA  and
Ashland have engaged in discussions to resolve the issues identified during
these inspections.  The parties have reached a tentative agreement and have
begun the process of drafting a settlement document. Resolution is expected
to involve  both a penalty  payment  and  environmental  projects.  Ashland
expects to finalize  the  settlement  agreement  before the end of calendar
year 1997 or early calendar 1998.
     (4) On October 24,  1996,  the rock  strata  overlaying  an  abandoned
underground  mine adjacent to the coal-refuse  impoundment  used by an Arch
Coal  subsidiary's  preparation  plant  failed,  resulting in an accidental
discharge  of  approximately  6.3  million  gallons  of water and fine coal
slurry into a tributary of the Powell River in Lee County,  Virginia.  As a
consequence,  the  Director  of the  State  Water  Control  Board  and  the
Department of Mines,  Minerals and Energy of the  Commonwealth  of Virginia
filed a suit in Lee County  Virginia  Circuit  Court  against the Arch Coal
subsidiary, Lone Mountain Processing, Inc., alleging violations of effluent
limitations  and  reporting   violations  under  Lone  Mountain's  National
Pollutant  Discharge  Elimination System permits under the Clean Water Act.
The  Commonwealth of Virginia agreed to vacate two notices of violation and
a  show  cause  order  in  exchange  for  Lone  Mountain's  payment  to the
Commonwealth  of a fine  of  approximately  $1.4  million.  A  final  order
effectuating  the  settlement  was  entered as a  judgment  by the court on
October 29, 1997.  At the request of the USEPA and the U.S. Fish & Wildlife
Service,  the United States  Attorney for the Western  District of Virginia
also has opened a criminal investigation of the 1996 incident. Arch Coal is
cooperating with the  investigation,  the results of which are not expected
until sometime in calendar 1998.

                                    12

<PAGE>

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, 1997.

                                  PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER 
         MATTERS
     There is hereby incorporated by reference the information appearing in
Note N of Notes to Consolidated  Financial  Statements in Ashland's  Annual
Report.
     At September  30, 1997,  there were  approximately  22,000  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,  Philadelphia and Amsterdam
stock exchanges.
ITEM 6.  SELECTED FINANCIAL DATA
     There is hereby  incorporated by reference the  information  appearing
under the caption "Five-Year Selected Financial  Information" on Page 61 in
Ashland's Annual Report.
ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION
         AND RESULTS OF OPERATIONS  
     There is hereby  incorporated by reference the  information  appearing
under the caption "Management's  Discussion and Analysis" on Pages 36 to 42
in Ashland's Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     There is hereby  incorporated by reference the  information  appearing
under the caption  "Derivative  Instruments" on Page 41 in Ashland's Annual
Report.
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     There is hereby  incorporated by reference the consolidated  financial
statements   appearing  on  Pages  43  through  59  and  the   supplemental
information appearing on Pages 62 and 63 in Ashland's Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE
     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" in Ashland's  definitive  Proxy
Statement for its January 29, 1998 Annual  Meeting of  Shareholders,  which
will be filed with the SEC within 120 days after September 30, 1997 ("Proxy
Statement").
     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  top  two  officers  as  to  other  Senior  Vice
Presidents, Administrative Vice Presidents and other executive officers.)
      PAUL W.  CHELLGREN*  (age 54) was elected as Chairman of the Board on
January 30, 1997,  and is Chief  Executive  Officer and Director of Ashland
and a Director of Arch Coal, Inc. , having served in such capacities  since
1996, 1992 and 1997  respectively.  During the past five years, he has also
served as President and Chief Operating Officer of Ashland.
      JOHN A. BROTHERS* (age 57) is Executive Vice President of Ashland and
has served in such capacity since January 1997. During the last five years,
he has also served as Senior Vice President and Group  Operating  Officer -
SuperAmerica Group, The Valvoline Company and Ashland Chemical Company.

-----------------------
     *Member of Ashland's Executive Committee

                                    13
<PAGE>

     JAMES R. BOYD* (age 51) is Senior Vice  President and Group  Operating
Officer of Ashland - Ashland Services Company, APAC, Inc. and a Director of
Arch Coal,  Inc.,  having served in such capacities  since 1989, 1990, 1993
and 1997 respectively.
     DAVID J.  D'ANTONI*  (age 52) is Senior Vice  President of Ashland and
President  of Ashland  Chemical  Company and has served in such  capacities
since 1988.
     THOMAS L. FEAZELL* (age 60) is Senior Vice President,  General Counsel
and  Secretary of Ashland and a Director of Arch Coal,  Inc. and has served
in such capacities since 1992, 1981, 1992 and 1997, respectively.
      D. DUANE  GILLIAM*  (age 53) is Senior Vice  President of Ashland and
President of Ashland  Petroleum  Company and has served in such  capacities
since  October  1997.  During  the past  five  years he has also  served as
Executive  Vice  President  of  Ashland  Petroleum  Company  and Group Vice
President for Ashland Petroleum's Scurlock Permian division.
     J. MARVIN QUIN* (age 50) is Senior Vice President and Chief  Financial
Officer of Ashland and a Director of Arch Coal, Inc. and has served in such
capacities since 1992 and 1997, respectively.
     HARRY M.  ZACHEM* (age 53) is Senior Vice  President - Public  Affairs
and has served in such capacity since 1988.
      JAMES J.  O'BRIEN  (age 43) is Senior Vice  President  of Ashland and
President of The Valvoline  Company and has served in such capacities since
January 1997 and October 1995, respectively.  During the past five years he
has also served as Vice  President  of Ashland,  Vice  President of Ashland
Petroleum Company,  Executive  Assistant to the Chief Executive Officer and
Regional Manager of Ashland Chemical's General Polymers division.
     JOHN F.  PETTUS  (age 54) is Senior  Vice  President  of  Ashland  and
President of  SuperAmerica  Group and has served in such  capacities  since
1989 and 1988, respectively.
     CHARLES F.  POTTS (age 53) is Senior  Vice  President  of Ashland  and
President of APAC, Inc. and has served in such capacities since 1992.
     KENNETH  L.  AULEN  (age  48) is  Administrative  Vice  President  and
Controller of Ashland and has served in such capacities since 1992.  During
the past five years he has also served as Auditor of Ashland.
     PHILIP W. BLOCK*  (age 50) is  Administrative  Vice  President - Human
Resources of Ashland and has served in such capacity since 1992.
     JOHN W. DANSBY (age 52) is Administrative Vice President and Treasurer
of Ashland and has served in such capacities since 1992.
     WILLIAM R. SAWRAN  (age 52) is Vice  President  and Chief  Information
Officer of  Ashland,  and  President  of Ashland  Services  Company and has
served  in  such  capacities  since  1984,  with  the  exception  of  Chief
Information Officer which he assumed in 1994.
     WILLIAM P. TIEFEL (age 48) is Vice  President of Ashland and President
of Ashland  Exploration  Holdings,  Inc. and has served in such  capacities
since February 1997.
     FRED E. LUTZEIER (age 45) is Auditor of Ashland and has served in such
capacity since December 1992. During the past five years he has also served
as Vice President and Controller of Arch Mineral Corporation.
     Each executive  officer (other than Vice  Presidents who are appointed
by Ashland's  management) is elected by the Board of Directors to a term of
one year, or until the successor is duly elected,  at the annual meeting of
the Board of  Directors,  except in those  instances  where the  officer is
elected at other than an annual meeting of the Board of Directors, in which
case the  tenure  will  expire at the next  annual  meeting of the Board of
Directors unless the officer is re-elected.

--------------------------
     *Member of Ashland's Executive Committee

                                    14

<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
     There is hereby  incorporated  by reference the  information to appear
under the captions "Executive Compensation" and "Compensation of Directors"
in Ashland's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     There is hereby  incorporated  by reference the  information to appear
under the caption "Election of Directors" and the information regarding the
ownership of securities of Ashland in Ashland's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     There is hereby  incorporated  by reference the  information to appear
under  the  caption   "Compensation   Committee   Interlocks   and  Insider
Participation" in Ashland's Proxy Statement.

                                  PART IV

ITEM 14. EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES AND REPORTS ON FORM 8-K
     (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 or incorporated by reference in this report are listed in
the index on Page 19.
     (3) Exhibits
        3.1 -  Second Restated  Articles of  Incorporation  of Ashland,  as
               amended to May 16, 1996  (filed as Exhibit 3.1 to  Ashland's
               Form 8-K  dated May 16,  1996,  and  incorporated  herein by
               reference).
        3.2  - Bylaws of Ashland,  as amended to January 30, 1997 (filed as
               Exhibit 3.2 to  Ashland's  Form 10-Q for the  quarter  ended
               December 31, 1996, 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(a)  to
               Ashland's Form 10-K for the fiscal year ended  September 30,
               1991, and incorporated herein by reference).
        4.3  - Rights Agreement,  dated as of May 16, 1996, between Ashland
               Inc. and Harris Trust and Savings  Bank,  together with Form
               of Right  Certificate  (filed  as  Exhibits  4(a) and  4(c),
               respectively,  to  Ashland's  Form 8-A filed with the SEC on
               May 16, 1996, and incorporated herein by reference).


     The following  Exhibits 10.1 through 10.18 are  compensatory  plans or
arrangements  or  management  contracts  required  to be filed as  exhibits
pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

        10.1 - Amended  Stock  Incentive  Plan for Key Employees of Ashland
               Inc.  and its  Subsidiaries  (filed as  Exhibit  10(c).1  to
               Ashland's Form 10-K for the fiscal year ended  September 30,
               1996, and incorporated herein by reference).
        10.2 - Ashland Inc. Deferred  Compensation and Stock Incentive Plan
               for Non-Employee Directors.
        10.3 - Ashland  Inc.  Director  Retirement  Plan  (filed as Exhibit
               10(c).3 to  Ashland's  Form 10-K for the  fiscal  year ended
               September 30, 1988, and incorporated herein by reference).
        10.4 - Ninth Amended and Restated Ashland Inc.  Supplemental  Early
               Retirement Plan for Certain Key Executive Employees.
        10.5 - Ashland Inc. Amended Performance Unit Plan (filed as Exhibit
               10(c).5 to  Ashland's  Form 10-K for the  fiscal  year ended
               September 30, 1994, and incorporated herein by reference).


                                    15
<PAGE>

        10.6 - Ashland Inc.  Incentive  Compensation Plan (filed as Exhibit
               10(c).6 to  Ashland's  Form 10-K for the  fiscal  year ended
               September 30, 1993, and incorporated herein by reference).
        10.7 - Ashland Inc.  Director  Death  Benefit  Program  (filed as
               Exhibit  10(c).10 to Ashland's Form 10-K for the fiscal year
               ended  September  30,  1990,  and  incorporated   herein  by
               reference).
        10.8 - Ashland  Inc.  Salary  Continuation  Plan  (filed as Exhibit
               10(c).11  to  Ashland's  Form 10-K for the fiscal year ended
               September 30, 1988, and incorporated herein by reference).
        10.9 - Forms of Ashland Inc. Executive  Employment Contract between
               Ashland  Inc.  and  certain  executive  officers  of Ashland
               (filed as Exhibit  10(c).12 to  Ashland's  Form 10-K for the
               fiscal  year ended  September  30,  1989,  and  incorporated
               herein by reference).
       10.10 - Form of  Indemnification  Agreement between Ashland Inc. and
               each  member of its  Board of  Directors  (filed as  Exhibit
               10(c).13  to  Ashland's  Form 10-K for the fiscal year ended
               September 30, 1990, and incorporated herein by reference).
       10.11 - Ashland Inc. Nonqualified Excess Benefit Pension Plan. 
       10.12 - Ashland  Inc.  Long-Term  Incentive  Plan  (filed as Exhibit
               10(c).12  to  Ashland's  Form 10-K for the fiscal year ended
               September 30, 1996, and incorporated herein by reference).
       10.13 - Ashland Inc.  Directors'  Charitable Award Program (filed as
               Exhibit  10(c).13 to Ashland's Form 10-K for the fiscal year
               ended  September  30,  1996,  and  incorporated   herein  by
               reference).
       10.14 - Ashland  Inc.  1993 Stock  Incentive  Plan (filed as Exhibit
               10(c).14  to  Ashland's  Form 10-K for the fiscal year ended
               September 30, 1996, and incorporated herein by reference).
       10.15 - Ashland Inc.  1995  Performance  Unit Plan (filed as Exhibit
               10(c).15  to  Ashland's  Form 10-K for the fiscal year ended
               September 30, 1996, and incorporated herein by reference).
       10.16 - Ashland Inc. Incentive  Compensation Plan for Key Executives
               (filed as Exhibit  10(c).16 to  Ashland's  Form 10-K for the
               fiscal  year ended  September  30,  1996,  and  incorporated
               herein by reference).
       10.17 - Ashland Inc. Deferred Compensation Plan.
       10.18 - Ashland Inc. 1997 Stock Incentive Plan.

        11   - Computation  of Earnings Per Share  (appearing on Page 22 of
               Ashland's Form 10-K for the fiscal year ended  September 30,
               1997).
        13   - Portions  of  Ashland's   Annual  Report  to   Shareholders,
               incorporated by reference herein,  for the fiscal year ended
               September 30, 1997.
        21   - List of Subsidiaries. 
        23   - Consent of independent auditors.
        24   - Power of  Attorney,  including  resolutions  of the Board of
               Directors. 
        27   - Financial Data Schedule.
     Upon written or oral  request,  a copy of the above  exhibits  will be
furnished at cost.
     (B) REPORTS ON FORM 8-K
     None


                                    16
<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/ Kenneth L. Aulen
                                        ---------------------------------
                                           (Kenneth L. Aulen, Administrative
                                           Vice President and Controller)

                                     Date:   November 25, 1997

     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 November 25, 1997.

          Signatures                            Capacity

/s/ PAUL W. CHELLGREN
--------------------          Chairman of the Board, Chief Executive Officer
  PAUL W. CHELLGREN           and Director

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


/s/ KENNETH L. AULEN          
--------------------          Administrative   Vice   President,   
  KENNETH L. AULEN            Controller  and Principal Accounting Officer

         *                    Director
--------------------
   JACK S. BLANTON

         *                    Director
--------------------
  THOMAS E. BOLGER

         *                    Director
--------------------
  SAMUEL C. BUTLER

         *                    Director
--------------------
 FRANK C. CARLUCCI

         *                    Director
--------------------
  RALPH E. GOMORY

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

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

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


                                    17


<PAGE>

          *                    Director
--------------------
  MICHAEL D. ROSE

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

          *                    Director
--------------------
  ROBERT B. STOBAUGH





*  BY: /S/ THOMAS L. FEAZELL
       ------------------------
        THOMAS L. FEAZELL
        ATTORNEY-IN-FACT


DATE:  November 25, 1997



                                    18
<PAGE>



           INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES

                                                                      Page
Consolidated financial statements and supplemental information:
Statements of consolidated income................................       *
Consolidated balance sheets......................................       *
Statements of consolidated stockholders' equity..................       *
Statements of consolidated cash flows............................       *
Notes to consolidated financial statements.......................       *
Five-year information by industry segment........................       *


Consolidated financial schedule:
II - Valuation and qualifying accounts...........................      21
-----------



     *The consolidated  financial  statements appearing on Pages 43 through
59 and the  supplemental  information  appearing  on Pages 61 through 63 in
Ashland's Annual Report are incorporated by reference in this Annual Report
on Form 10-K.


         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  of  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 in Ashland's Annual Report.

                                    19

<PAGE>


                       REPORT OF INDEPENDENT AUDITORS

     We have audited the consolidated  financial statements and schedule of
Ashland Inc. and subsidiaries listed in the accompanying index to financial
statements and financial schedules (Item 14(a)). These financial statements
and  schedule  are  the   responsibility  of  Ashland'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 generally accepted auditing
standards.  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  listed in the accompanying
index to financial  statements (Item 14(a)) present fairly, in all material
respects,   the  consolidated   financial  position  of  Ashland  Inc.  and
subsidiaries at September 30, 1997 and 1996, and the  consolidated  results
of their operations and their cash flows for each of the three years in the
period ended  September  30, 1997, in conformity  with  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 consolidated  financial  statements,  in
fiscal  1995  Ashland   changed  its  method  of  accounting   relative  to
impairments of long-lived assets.

                             ERNST & YOUNG LLP



Louisville, Kentucky
November 5, 1997


                                    20


<PAGE>

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


=================================================================================================================================
(In millions)                                           Balance at      Provisions                                       Balance
                                                         beginning      charged to       Reserves           Other         at end
Description                                                of year        earnings       utilized         changes        of year
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>           <C>              <C>             <C>
YEAR ENDED SEPTEMBER 30, 1997
Reserves deducted from asset accounts
   Accounts receivable                                        $27            $  8          $(10)(1)         $ (1)           $24
   Inventories                                                 10               2            (1)               -             11
=================================================================================================================================
YEAR ENDED SEPTEMBER 30, 1996
Reserves deducted from asset accounts
   Accounts receivable                                        $25             $10         $  (8)(1)         $  -            $27
   Inventories                                                  6               6            (2)               -             10
=================================================================================================================================
YEAR ENDED SEPTEMBER 30, 1995
Reserves deducted from asset accounts
   Accounts receivable                                        $23            $  9         $  (7)(1)         $  -            $25
   Inventories                                                  6               3            (3)               -              6
=================================================================================================================================

(1)  Uncollected amounts written off, net of recoveries of $2 million in 1997, $2 million in 1996 and $1 million in 1995.

</TABLE>

                                    21
<PAGE>


Ashland Inc. and Subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Years Ended September 30


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
(In millions except per share data)                                                        1997             1996              1995
====================================================================================================================================
<S>                                                                                       <C>              <C>                <C> 
PRIMARY EARNINGS PER SHARE
Income available to common shares
   Net income                                                                             $ 279            $ 211              $ 24
   Dividends on convertible preferred stock                                                  (9)             (19)              (19)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          $ 270            $ 192             $   5
------------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
   Average common shares outstanding                                                         70               64                62
   Common shares issuable upon exercise of stock options                                      1                1                 -
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             71               65                62
------------------------------------------------------------------------------------------------------------------------------------
Earnings per share                                                                        $3.80            $2.97             $ .08
====================================================================================================================================
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income available to common shares
   Net income                                                                             $ 279            $ 211              $ 24
   Interest on convertible debentures (net of income taxes)                                   -                5                 -
   Dividends on convertible preferred stock                                                   -                -               (19)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          $ 279            $ 216             $   5
------------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
   Average common shares outstanding                                                         70               64                62
   Common shares issuable upon
      Exercise of stock options                                                               2                1                 1
      Conversion of debentures                                                                -                3                 -
      Conversion of preferred stock                                                           4                9                 -
------------------------------------------------------------------------------------------------------------------------------------
                                                                                             76               77                63
------------------------------------------------------------------------------------------------------------------------------------
Earnings per share                                                                        $3.67            $2.82             $ .08
====================================================================================================================================
</TABLE>



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