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, 2003

                          Commission file number 1-2918

                                  ASHLAND INC.
                            (a Kentucky corporation)

                              I.R.S. No. 61-0122250

                           50 E. RiverCenter Boulevard

                                  P.O. Box 391

                         Covington, Kentucky 41012-0391

                        Telephone Number: (859) 815-3333

                Securities Registered Pursuant to Section 12(b):

                                                       Name of each exchange
          Title of each class                           on which registered
          -------------------                           -------------------

 Common Stock, par value $1.00 per share             New York Stock Exchange
                                                      and Chicago Stock Exchange
 Rights to Purchase Series A Participating           New York Stock Exchange
  Cumulative Preferred Stock                          and Chicago Stock Exchange

              SECURITIES REGISTERED PURSUANT TO SECTION 12(g): NONE

     Indicate  by check  mark  whether  the  Registrant  (1) has  filed all
reports  required  to be filed  by  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934 during the  preceding  12 months (or for such shorter
period that the Registrant was required to file such reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes [x]  No

     Indicate by check mark if disclosure of delinquent  filers pursuant to
Item  405 of  Regulation  S-K is not  contained  herein,  and  will  not be
contained,  to the best of Registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this annual
report on Form 10-K or any  amendment  to this annual  report on Form 10-K.
[x]

     Indicate by check mark whether the Registrant is an accelerated filer.
Yes [x] No

     At October  31,  2003,  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  $2,549,347,022.  In  determining  this
amount,  the  Registrant  has  assumed  that its  directors  and  executive
officers are affiliates. Such assumption shall not be deemed conclusive for
any other purpose.

     At October 31,  2003,  there were  68,603,477  shares of  Registrant's
common stock outstanding.

                    DOCUMENTS INCORPORATED BY REFERENCE

     Portions of  Registrant's  definitive  Proxy Statement for its January
29, 2004 Annual Meeting of Shareholders  are incorporated by reference into
Part III.


<PAGE>


                                TABLE OF CONTENTS
                                                                            Page
     PART I                                                                 ----

     Item 1.    Business....................................................   1
                APAC   .....................................................   1
                Ashland Distribution........................................   2
                Ashland Specialty Chemical..................................   2
                Valvoline...................................................   3
                Refining and Marketing......................................   4
                Miscellaneous...............................................   7
     Item 2.    Properties..................................................  10
     Item 3.    Legal Proceedings...........................................  10
     Item 4.    Submission of Matters to a Vote of Security Holders.........  12
     Item X.    Executive Officers of Ashland...............................  12

     PART II

     Item 5.    Market for Registrant's Common Stock and Related
                 Security Holder Matters....................................  12
     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
     Item 9A.   Controls and Procedures.....................................  13

     PART III

     Item 10.   Directors and Executive Officers of the Registrant..........  13
     Item 11.   Executive Compensation......................................  13
     Item 12.   Security Ownership of Certain Beneficial
                 Owners and Management and Related Shareholder Matters......  14
     Item 13.   Certain Relationships and Related Transactions..............  14
     Item 14.   Principal Accountant Fees and Services......................  14

     PART IV

     Item 15.   Exhibits, Financial Statement Schedules and Reports
                 on Form 8-K................................................  14



<PAGE>




                                   PART I
ITEM 1. BUSINESS

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

     Ashland's  businesses are grouped into five industry  segments:  APAC,
Ashland  Distribution,  Ashland Specialty Chemical,  Valvoline and Refining
and  Marketing.  Financial  information  about these segments for the three
fiscal years ended  September  30, 2003 is set forth on pages F-24 and F-25
of this annual report on Form 10-K.

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

     Ashland  Distribution  distributes  industrial chemicals and solvents,
plastics,  composite  materials and fine  ingredients  in North America and
plastics  in  Europe.  Ashland  Distribution  also  provides  environmental
services. Ashland Specialty Chemical is focused on two primary chemistries:
thermoset  and water.  It  manufactures  and  supplies  specialty  chemical
products and services to industries including the automotive,  building and
construction,  foundry,  marine,  paint, paper, ink, flexible packaging and
water treatment industries.

     Valvoline is a producer and marketer of premium packaged motor oil and
automotive chemicals, including appearance products,  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) name.

     Marathon Ashland Petroleum LLC ("MAP"),  a joint venture with Marathon
Oil  Company,  operates  seven  refineries  with a total crude oil refining
capacity  of 935,000  barrels per day.  Refined  products  are  distributed
through a network of independent and company-owned  outlets in the Midwest,
the upper Great Plains and the  southeastern  United  States.  Marathon Oil
Company  holds a 62% interest in MAP,  and Ashland  holds a 38% interest in
MAP. Ashland accounts for its investment in MAP using the equity method.

     At September 30, 2003,  Ashland and its consolidated  subsidiaries had
approximately 22,500 employees (excluding contract employees).

     AVAILABLE INFORMATION.  Ashland's Internet address is www.ashland.com.
There, Ashland makes available,  free of charge, its annual reports on Form
10-K,  quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports, as well as any beneficial ownership reports of
officers and directors filed  electronically  on Forms 3, 4 and 5. All such
reports will be available as soon as reasonably  practicable  after Ashland
electronically files such material with, or furnishes such material to, the
Securities  and  Exchange  Commission  ("SEC").  Information  contained  on
Ashland's website is not part of this annual report on Form 10-K and is not
incorporated by reference in this document.

                                    APAC

     The APAC  group of  companies  is the  nation's  largest  asphalt  and
concrete paving company and is a major supplier of construction  materials.
APAC performs construction work, such as paving,  repairing and resurfacing
highways,  streets,  airports,  residential  and  commercial  developments,
sidewalks  and  driveways,  and  grading  and base work.  In  addition,  it
performs a number of  construction  services such as excavation and related
activities  in  the  construction  of  bridges  and  structures,   drainage
facilities and underground utilities. APAC conducts its business through 24
market  focused  business  units  operating in 14 southern  and  midwestern
states.  These business units provide  construction  services and materials
throughout the regions in which they operate. These market focused business
units are  supported by  management  and  administrative  staff in Atlanta,
Georgia.

     To  deliver  its  services  and  products,   APAC  utilizes  extensive
aggregate-producing properties and construction equipment. It currently has
96 aggregate production facilities, including 35 permanent operating quarry
locations;  65 ready-mix concrete plants; 239 hot-mix asphalt plants; and a
fleet of over 15,000 mobile equipment units,  including heavy  construction
equipment and  transportation-related  equipment.  In certain market areas,
APAC  is  vertically  integrated  with  asphalt,  aggregate  and  ready-mix
operations, all complementing each other.

                                     1

<PAGE>

     Raw aggregate generally consists of sand, gravel,  granite,  limestone
and sandstone.  About 29% 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  renders  it  economically
attractive.  Most other raw  materials,  such as liquid  asphalt,  portland
cement and reinforcing steel, are purchased from third parties.

     Approximately   77%  of  APAC's  sales  and  operating   revenues  are
construction  revenues,  with  the  remaining  23%  coming  from  sales  of
construction  materials.  Approximately 84% of APAC's construction revenues
are derived directly from highway and other public sector sources, with the
remaining 16% coming from  industrial and commercial  customers and private
developers.

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

     Total  backlog at  September  30, 2003 was $1,745  million  (including
APAC's $79 million proportionate share of work related to an unconsolidated
equity joint  venture),  compared to $1,691  million at September 30, 2002.
APAC  includes a  construction  project in its  backlog  when a contract is
awarded or a firm letter of commitment is obtained and funding is in place.
The backlog at September 30, 2003 is considered  firm,  and a major portion
is expected to be completed during fiscal 2004.

                              ASHLAND DISTRIBUTION

     Ashland  Distribution  Company  ("Ashland  Distribution")  distributes
chemicals,  plastics,  reinforcements  and resins,  and fine ingredients in
North America and plastics in Europe. Suppliers include many of the world's
leading  chemical  manufacturers.   Ashland  Distribution   specializes  in
providing mixed truckloads and less-than-truckload  quantities to customers
in a wide range of industries. Deliveries are facilitated through a network
of owned or leased  facilities  including 120  locations in North  America.
Distribution  of  thermoplastic  resins in Europe  is  conducted  primarily
through  17  third-party  warehouses  located  in  13  countries.   Ashland
Distribution operates in the following major market segments:

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

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

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

     INGREDIENTS - Ashland Distribution  markets food-grade  ingredients to
food and beverage industry customers in North America.  It also distributes
ingredients  used by  companies  in the  personal  care and  pharmaceutical
industries.

     ENVIRONMENTAL  SERVICES - Working in  cooperation  with chemical waste
service companies, Ashland Distribution provides customers with collection,
disposal and  recycling  of  hazardous  and  non-hazardous  waste  streams.
Services  are  offered  through a North  American  network  of more than 80
distribution centers,  including 10 storage facilities that have been fully
permitted by the United States Environmental Protection Agency ("USEPA").

                           ASHLAND SPECIALTY CHEMICAL

     Ashland Specialty Chemical Company ("Ashland  Specialty  Chemical") is
focused on two primary chemistries:  thermoset and water. Ashland Specialty
Chemical manufactures and supplies specialty chemical products and services
to industries  including  automotive,  building and construction,  foundry,
marine,  paint,  paper,  ink  and  flexible  packaging.  Ashland  Specialty
Chemical owns and operates 38 manufacturing  facilities and participates in
12 manufacturing joint ventures in 20 countries.

                                     2

<PAGE>

         THERMOSET CHEMISTRY

     COMPOSITE  POLYMERS - This  business  group  manufactures  and sells a
broad  range of  chemical-resistant,  fire-retardant,  general-purpose  and
high-performance  marine  grades of  unsaturated  polyester and vinyl ester
resins and  gelcoats  for the  reinforced  plastics  industry.  Key markets
include  the  transportation,  construction  and  marine  industries.  This
business group has  manufacturing  plants in  Jacksonville  and Fort Smith,
Arkansas;  Los  Angeles,   California;   Bartow,  Florida;  Pittsburgh  and
Philadelphia,  Pennsylvania;  Johnson Creek,  Wisconsin;  Kelowna,  British
Columbia,  Canada; Kunshan,  China; Porvoo and Lahti, Finland;  Sauveterre,
France;  Miszewo,  Poland;  Benicarlo,  Spain;  and, through separate joint
ventures has manufacturing  plants in Sao Paolo,  Brazil, and Jeddah, Saudi
Arabia.  This business group also manufactures  products through an Ashland
Specialty  Chemical facility located in Mississauga,  Ontario,  Canada. The
Petrochemicals  business,  a group within the Composite  Polymers  business
group,  manufactures  maleic  anhydride  in Neal,  West  Virginia  and also
markets maleic anhydride in North America.

     CASTING  SOLUTIONS - This business group  manufactures and sells metal
casting  chemicals   worldwide,   including   sand-binding  resin  systems,
refractory  coatings,  release agents,  engineered sand additives and riser
sleeves.  This business group serves the global metal casting industry from
9 owned and operated  manufacturing  sites which includes factories located
in Campinas, Brazil; Mississauga, Ontario, Canada; Changzhou, China; Milan,
Italy; Alava, Cantabria and Las Arenas, Spain;  Kidderminster,  England and
Cleveland,  Ohio. Casting Solutions also has 9 joint venture  manufacturing
facilities located in Vienna,  Austria; Pons and Le Goulet, France; Bendorf
and Wuelfrath,  Germany; Ulsan, South Korea; Alvsjo, Sweden and St. Gallen,
Switzerland.

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

         WATER CHEMISTRY

     DREW INDUSTRIAL - This business group 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 paint.  It  conducts  operations
throughout  North  America,  Europe and the Far East and has  manufacturing
plants in Kearny,  New  Jersey;  Houston,  Texas;  Ajax,  Ontario,  Canada;
Viiala, Finland;  Somercotes,  England;  Sydney,  Australia; and Singapore;
and, through separate joint ventures,  has production  facilities in Seoul,
South Korea and Navi Mumbai, India.

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

         DISCONTINUED OPERATIONS

     ELECTRONIC  CHEMICALS - This business group was a leading manufacturer
and  marketer of a variety of  electronic  materials  and  services for the
worldwide semiconductor industry. On August 29, 2003, Ashland completed the
sale of its Electronic  Chemicals  business in a cash transaction valued at
approximately $300 million.

OTHER MATTERS

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

                                    VALVOLINE

     The  Valvoline  Company,  a division  of  Ashland,  is a  marketer  of
premium-branded  automotive  and  commercial  oils,  automotive  chemicals,
automotive appearance products and automotive services,  with sales in more
than 120 countries.  The Valvoline(R) trademark was federally registered in
1873  and is the  oldest  trademark  for a  lubricating  oil in the  United
States. Valvoline is comprised of the following business units:

                                     3

<PAGE>

     NORTH AMERICAN:  DO IT YOURSELF ("DIY") and DO IT FOR ME ("DIFM") - In
the  United  States  and  Canada,   Valvoline  markets  premium  automotive
lubricants and chemicals to the U.S. private  passenger car and light truck
market through two large  business units based on the consumer  segments of
the market,  "Do-It-Yourself" and "Do-It-For-Me."  These two business units
market  Valvoline(R) motor oil, one of the top selling brands in the United
States; synthetic SynPower(R) automotive chemicals; Eagle One(R) automotive
appearance  products;   Zerex(R)   antifreeze;   and  Pyroil(R)  automotive
chemicals.  The DIY business unit sells Valvoline products to consumers who
perform their own auto maintenance,  through retail auto parts stores, mass
merchandisers,  and  warehouse  distributors  and their  affiliated  jobber
stores such as NAPA and Carquest.  The DIFM  business unit sells  Valvoline
products to  installers  (such as car dealers  and quick  lubes)  through a
network of independent  distributors,  5 company-owned and operated "direct
market" operations and directly to large national account installers.  This
business unit also  established  a chain of quick lubes branded  "Valvoline
Express Care(R)." This chain consists of approximately 300 stores which are
independently owned and operated.


     The DIFM  business  unit also has a strategic  alliance  with  Cummins
Engine Company, Inc. ("Cummins") to distribute heavy-duty lubricants to the
commercial  market.   This  business  unit  marketed  R-12,  an  automotive
refrigerant that was phased out of production in 1995.  Valvoline  depleted
its inventory of R-12 in fiscal 2003.

     EAGLE  ONE -  Eagle  One  markets  its  brand  of  premium  automobile
appearance  chemicals for "above-the-hood"  applications.  Products include
waxes, polishes,  wheel cleaners and tire shine products. Eagle One markets
its products in North  America  through  Valvoline's  DIY and DIFM business
units and  internationally  through the  Valvoline  International  business
unit.

     VALVOLINE  INTERNATIONAL - Valvoline  International  markets Valvoline
and Eagle One  branded  products  through  wholly-owned  affiliates,  joint
ventures,  licensees,  and  independent  distributors in over 120 countries
around  the  world.   The   profitability   of  the  business  is  balanced
geographically,  with over half of the profit coming from mature markets in
Europe and Australia. There are smaller, but rapidly growing, businesses in
emerging markets of China, India, and Mexico, including joint ventures with
Cummins  in  India  and  China.  These  businesses  market  lubricants  for
servicing  heavy duty engines and  equipment.  Supply for these  businesses
comes from toll manufacturers and from  company-owned  plants in the United
States, Australia, and the Netherlands.

     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.  As of September  30,
2003, 357 company-owned  and 372 franchised  service centers were operating
in 38 states.

     VIOC  has  continued  its  customer  service  innovation  through  its
upgraded and enhanced Maximum Vehicle Performance program ("MVP"). MVP is a
computer-based  program that maintains  system-wide  service records on all
customer  vehicles.  MVP also contains a database on all car models,  which
allows employees to make service recommendations based on a vehicle owner's
manual recommendations.

                             REFINING AND MARKETING

     Refining  and  Marketing  operations  are  conducted  by MAP  and  its
subsidiaries,    including   its   wholly-owned   subsidiaries,    Speedway
SuperAmerica LLC and Marathon Ashland Pipe Line LLC. MAP also  participates
in the  travel  center  business  through  its  joint  venture  with  Pilot
Corporation  ("Pilot").  Marathon  Oil  Company  ("Marathon")  holds  a 62%
interest in MAP and Ashland holds a 38% interest in MAP.

REFINING

     MAP owns and operates  seven  refineries  with an  aggregate  refining
capacity of 935,000  barrels of crude oil per  calendar  day (1 barrel = 42
United States  gallons).  The table below sets forth the location and daily
crude  oil  throughput  capacity  (measured  in  barrels)  of each of MAP's
refineries as of September 30, 2003:

     Garyville, Louisiana...........................................232,000
     Catlettsburg, Kentucky.........................................222,000
     Robinson, Illinois.............................................192,000
     Detroit, Michigan.............................................. 74,000
     Canton, Ohio................................................... 73,000
     Texas City, Texas.............................................. 72,000
     St. Paul Park, Minnesota....................................... 70,000
                                                                    --------
         Total  ....................................................935,000
                                                                    ========
                                     4

<PAGE>


     MAP's   refineries   include   crude  oil   atmospheric   and   vacuum
distillation,    fluid    catalytic    cracking,    catalytic    reforming,
desulfurization   and  sulfur  recovery  units.  The  refineries  have  the
capability  to process a wide variety of crude oils and to produce  typical
refinery products,  including reformulated gasoline ("RFG"). In addition to
typical refinery products, the Catlettsburg refinery, an ISO-9000 certified
facility,   manufactures   base  lube  oil  stocks  and  a  wide  range  of
petrochemicals.  For the twelve  months ended  September  30, 2003,  66% of
MAP's base lube oil  production was purchased by Valvoline and 41% of MAP's
petrochemical  production  (excluding  propylene)  was purchased by Ashland
Distribution.

     MAP also produces a wide range of asphalt  products,  petroleum  pitch
aromatics, slack wax, extract and polymer grade propylene.

     The table below sets forth  MAP's  refinery  total input and  refinery
production by product  group for the three years ended  September 30, 2003.
Refinery total inputs include crude oil and other feedstocks.

<TABLE>
<CAPTION>
                                                         Years Ended September 30
                                        ---------------------------------------------------------
     <S>                                           <C>              <C>              <C>
                                                  2003             2002             2001
                                                  ----             ----             ----
     Refinery Input
     --------------
     (in thousands of barrels per day)          1,033.1          1,080.9          1,051.0
     ---------------------------------
     Refined Product Yields
     ----------------------
     (in thousands of barrels per day)
     ---------------------------------
         Gasoline.....................            553.9            594.0            560.5
         Distillates..................            278.4            292.9            278.7
         Propane......................             20.7             21.7             21.2
         Feedstocks & Special Products             87.6             83.5             69.9
         Heavy Fuel Oils..............             23.1             21.3             44.7
         Asphalt......................             70.5             73.3             74.5
                                                -------          -------        ---------
                    Total.............          1,034.2          1,086.7          1,049.5
                                                =======          =======        =========
</TABLE>


     Planned maintenance activities requiring temporary shutdown of certain
refinery operating units are periodically  performed at each refinery.  MAP
initiated  major  turnarounds  at the  Robinson,  Texas City and  Garyville
refineries in the year ended September 30, 2003.

     At its Catlettsburg, Kentucky refinery, MAP continues to make progress
on an approximately $400 million multi-year  integrated  investment program
to  upgrade  product  yield  realizations  and  reduce  fixed and  variable
manufacturing expenses. This program involves the expansion, conversion and
retirement  of certain  refinery  processing  units  which,  in addition to
improving  profitability,  will reduce the  refinery's  total gasoline pool
sulfur  below  30  parts  per  million,  thereby  eliminating  the need for
additional low sulfur gasoline compliance investments at the refinery based
on current  regulations.  The project is expected  to be  completed  in the
March quarter of 2004.

     MAP has announced  approximately  $300 million in new capital projects
for its Detroit,  Michigan  refinery.  One of the projects,  a $110 million
expansion  project,  is expected to raise the crude oil  throughput  at the
refinery by 35% to 100,000  barrels per day. Other projects are expected to
enable  the  refinery  to  produce  new  clean  fuels and  further  control
regulated air emissions.  Construction  is expected to start in early 2004,
with completion scheduled for 2005. MAP will be obtaining financing to fund
these capital projects.

MARKETING

     MAP's principal  marketing areas for gasoline and distillates  include
the Midwest,  the upper Great Plains and the  southeastern  United  States.
Gasoline  and  distillates  are  sold  in 21  states.  Gasoline  is sold at
wholesale primarily to independent  marketers,  jobbers and chain retailers
who resell these products through several thousand retail outlets. MAP also
supplies  approximately 3,850 jobber-dealer,  open-dealer and lessee-dealer
locations using the Marathon(R) and Ashland(R) brand names.

     Gasoline,   distillates  and  aviation   products  are  also  sold  to
utilities,  railroads, river towing companies,  commercial fleet operators,
airlines and governmental agencies. About one-half of MAP's propane is sold
into the home heating  markets and the balance is  purchased by  industrial
consumers.  Propylene and  petrochemicals  are marketed to customers in the
chemical  industry.  Base  lube  oils,  slack  wax  and  extract  are  sold
throughout  the  United  States.  Pitch  is  also  sold  domestically,  but
approximately  12% of pitch  products are exported into growing  markets in
Canada, Mexico, India, and South America.

                                     5

<PAGE>


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

     Retail  sales of  gasoline  and  diesel  fuel are made  through  MAP's
wholly-owned subsidiary, Speedway SuperAmerica LLC ("SSA"). As of September
30,  2003,  SSA had 1,791 retail  outlets in 9 states in the Midwest  which
sell petroleum  products and convenience store merchandise  primarily under
the brand names Speedway(R) and SuperAmerica(R).  The retail locations sell
a variety of food, merchandise,  cigarettes,  candy and beverages.  Several
locations also have on-premises brand-name restaurants.

     During  the twelve  months  ended  September  30,  2003,  62% of SSA's
revenues  (excluding  excise  taxes) were derived from the sale of gasoline
and  diesel  fuel,  and  the  remainder  were  derived  from  the  sale  of
merchandise.

     Pilot  Travel  Centers LLC  ("PTC") is the largest  operator of travel
centers in the United States with approximately 260 locations in 34 states.
The travel  centers  offer  diesel  fuel,  gasoline  and a variety of other
services associated with such locations,  including on-premises  brand-name
restaurants.  In February  2003,  PTC  purchased 60 retail  travel  centers
located in 15 states,  primarily in the Midwest,  Southeast and  Southwest.
Pilot and MAP each own a 50% interest in PTC.

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

     The table below shows the volume of MAP's consolidated refined product
sales for the three years ended September 30, 2003.

<TABLE>
<CAPTION>

                                                                           Years Ended September 30
                                                         -------------------------------------------------
                                                              2003              2002             2001
                                                              ----              ----             ----
     <S>                                                      <C>               <C>              <C>
     Refined Product Sales
     ---------------------
     (in thousands of barrels per day)
     ---------------------------------
         Gasoline..........................                   772.4             774.3             741.0
         Distillates.......................                   360.6             345.7             349.6
         Propane...........................                    20.3              22.7              21.5
         Feedstocks & Special Products ....                    94.9              80.3              68.1
         Heavy Fuel Oils...................                    23.2              22.0              46.3
         Asphalt...........................                    73.2              76.2              75.8
                                                            -------           -------           -------
                             Total.........                 1,344.6           1,321.2           1,302.3
                                                            =======           =======           =======

     Matching Buy/Sell Volumes
     included in above.....................                    68.3              69.3              43.7
</TABLE>

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

SUPPLY AND TRANSPORTATION

     The  crude  oil  processed  in  MAP's   refineries  is  obtained  from
negotiated  contract and spot  purchases or  exchanges.  For the year ended
September  30,  2003,  MAP's  negotiated  contract and spot  purchases  for
refinery input of crude oil produced in the United States averaged  403,400
barrels  per day,  including  an  average  of 33,700  net  barrels  per day
acquired  from  Marathon.  For the year ended  September  30,  2003,  MAP's
foreign crude oil  requirements  were met largely  through  purchases  from
various foreign  national oil companies,  producing  companies and traders.
Purchases  of  foreign  crude  oil  represented  55%  of  MAP's  crude  oil
requirements for the year ended September 30, 2003.

     MAP's  ownership  or  interest  in  domestic  pipeline  systems in its
refining and marketing  areas is  significant.  MAP owns,  leases or has an
ownership  interest in 6,786 miles of pipelines in 12 states.  This network
transports crude oil and refined products to and from terminals, refineries
and other  pipelines and includes  3,073 miles of crude oil trunk lines and
3,713 miles of refined product lines.

     MAP has a 46.7% ownership interest in LOOP LLC ("LOOP"),  which is the
owner and  operator of the only U.S.  deepwater  port  facility  capable of
receiving crude oil from very large crude carriers.  Ashland has retained a
4% ownership  interest in LOOP. MAP also owns a 49.9% ownership interest in
LOCAP  LLC  ("LOCAP"),  which is the  owner  and  operator  of a crude  oil
pipeline  connecting  LOOP to the Capline  system.  Ashland has retained an
8.62% ownership  interest in LOCAP. In addition,  MAP has a 37.2% ownership
interest in the Capline system. These port and pipeline systems provide MAP
with access to common carrier  transportation from the Louisiana Gulf Coast
to

                                     6

<PAGE>


Patoka,  Illinois. At Patoka, the Capline system connects with other common
carrier  pipelines  owned  by MAP  that  provide  transportation  to  MAP's
refineries in Illinois, Kentucky, Michigan, Minnesota and Ohio.

     Ohio River Pipe Line LLC ("ORPL"),  a subsidiary of MAP, is building a
pipeline from Kenova, West Virginia to Columbus, Ohio. The pipeline will be
an  interstate  common  carrier  pipeline.  The  pipeline  will be known as
Cardinal  Products  Pipeline and is expected to initially move about 36,000
barrels per day of refined  petroleum  into the central  Ohio  region.  The
majority of the construction work on the pipeline has been completed,  with
start-up of the pipeline  expected late in the quarter ending  December 31,
2003.

     In February 2003,  MAP increased its ownership in Centennial  Pipeline
LLC from 33.3% to 50%. The remaining  50% is owned by TE Products  Pipeline
Company, Limited Partnership.

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

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

     In addition,  MAP owns and operates 87 terminal  facilities from which
it sells a wide range of petroleum products.  These facilities are supplied
by a combination of barges, pipeline, truck and/or rail.

OTHER MATTERS

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

     In connection with the formation of MAP,  Ashland and Marathon entered
into  a  Put/Call,   Registration  Rights  and  Standstill  Agreement  (the
"Put/Call  Agreement").  The Put/Call  Agreement  provides that at any time
after  December 31,  2004,  Ashland will have the right to sell to Marathon
all of  Ashland's  ownership  interest in MAP, for an amount in cash and/or
Marathon  debt or equity  securities  equal to the  product  of 85% (90% if
equity  securities  are used) of the fair market value of MAP at that time,
multiplied by Ashland's  percentage  interest in MAP. Payment could be made
at closing,  or, at Marathon's option, in three equal annual  installments,
the first of which would be payable at closing.  At any time after December
31,  2004,  Marathon  will have the right to purchase  Ashland's  ownership
interest in MAP,  for an amount in cash equal to the product of 115% of the
fair market value of MAP at that time,  multiplied by Ashland's  percentage
interest in MAP.

                                  MISCELLANEOUS
ENVIRONMENTAL MATTERS

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

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

     At  September   30,  2003,   Ashland's   reserves  for   environmental
remediation amounted to $174 million, reflecting Ashland's estimates of the
most  likely  costs  that  will be  incurred  over an  extended  period  to
remediate  identified   conditions  for  which  the  costs  are  reasonably
estimable, without regard to any third-party recoveries. Engineering

                                     7


<PAGE>



studies,  probability  techniques,  historical experience and other factors
are used to  identify  and  evaluate  remediation  alternatives  and  their
related  costs in  determining  the  estimated  reserves for  environmental
remediation.  Environmental  remediation  reserves  are subject to numerous
inherent  uncertainties that affect Ashland's ability to estimate its share
of  the  costs.  Such  uncertainties  involve  the  nature  and  extent  of
contamination  at each site, the extent of required  cleanup  efforts under
existing  environmental  regulations,  widely  varying  costs of  alternate
cleanup methods, changes in environmental regulations, the potential effect
of continuing  improvements in remediation  technology,  and the number and
financial strength of other potentially  responsible  parties at multiparty
sites. Ashland regularly adjusts its reserves as environmental  remediation
continues. No individual remediation location is material to Ashland as its
largest reserve for any site is less than 10% of the  remediation  reserve.
As a result, Ashland's exposure to adverse developments with respect to any
individual  site is not  expected  to be  material,  and these sites are in
various stages of ongoing remediation.  Although environmental  remediation
could  have a  material  effect on  results  of  operations  if a series of
adverse developments occurs in a particular quarter or fiscal year, Ashland
believes that the chance of such developments occurring in the same quarter
or fiscal year is remote.

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

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

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

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

     SOLID  WASTE  -  Ashland's  businesses  are  subject  to the  Resource
Conservation and Recovery Act ("RCRA"), which establishes standards for the
management of solid and hazardous wastes. In addition to regulating current
waste disposal practices,  RCRA also addresses the environmental effects of
certain past waste  disposal  operations,  the  recycling of wastes and the
storage of regulated substances in underground tanks.

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

RESEARCH

     Ashland  conducts a program of research and  development to invent and
improve  products and processes and to improve  environmental  controls for
its existing facilities.  It maintains research facilities in Dublin, Ohio;
Lexington,  Kentucky; and Atlanta,  Georgia. Research and development costs
are  expensed as they are  incurred  and totaled $36 million in fiscal 2003
($34 million in 2002 and $33 million in 2001).

                                     8

<PAGE>


COMPETITION

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

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

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

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

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

     MAP competes with a large number of companies to acquire crude oil for
refinery  processing and in the  distribution and marketing of a full array
of  petroleum  products.  MAP  believes  it  ranks  among  the top ten U.S.
petroleum  companies  on the basis of crude  oil  refining  capacity  as of
September 30, 2003.  MAP competes in four distinct  markets for the sale of
refined products - wholesale,  spot, branded and retail  distribution.  MAP
believes it competes  with  approximately  40  companies  in the  wholesale
distribution  of petroleum  products to private  brand  marketers and large
commercial and industrial consumers; approximately 80 companies in the sale
of   petroleum   products   in   the   spot   market;    approximately   10
refiner/marketers  in the supply of branded  petroleum  products to dealers
and jobbers;  and  approximately  600  petroleum  product  retailers in the
retail sale of petroleum  products.  MAP also  competes in the  convenience
store  industry  through  SSA's  retail  outlets  and in the travel  center
industry  through its ownership in PTC. The retail outlets offer  consumers
gasoline,  diesel  fuel (at  selected  locations)  and a  variety  of food,
merchandise, cigarettes, candy and beverages.

FORWARD-LOOKING STATEMENTS

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


                                     9

<PAGE>


MARKETING CONDITIONS

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

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

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

     In addition,  changes in climate and weather can significantly  affect
the performance of several of Ashland's operations. Extreme variations from
normal climatic conditions could have a significant effect on the operating
results  of APAC's  construction  operations.  In  particular,  unfavorable
weather  conditions will delay the completion of construction  projects and
may require  the use of  additional  resources.  In  addition,  most of the
refined products sold by MAP and Valvoline are seasonal in nature, and thus
demand  for those  products  may  decline  due to  significant  changes  in
prevailing climate and weather conditions. MAP's production or distribution
operations  are also subject to  disruption by extreme  weather  conditions
such as floods, frozen rivers or hurricanes.  In addition,  adverse weather
conditions  which impair driving  conditions,  such as winter  storms,  can
result in reduced retail sales of gasoline.

ITEM 2.  PROPERTIES

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

 ITEM 3. LEGAL PROCEEDINGS

     ENVIRONMENTAL  PROCEEDINGS  -  (1)  Under  the  federal  Comprehensive
Environmental  Response  Compensation  and  Liability  Act (as amended) and
similar state laws,  Ashland may be subject to joint and several  liability
for  clean-up  costs in  connection  with  alleged  releases  of  hazardous
substances  at  sites  where  it  has  been  identified  as a  "potentially
responsible  party"  ("PRP").  As of September  30, 2003,  Ashland had been
named a PRP at 100 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 is  typically
participating as a member of a PRP group.

                                    10

<PAGE>


Generally,  the type of relief sought includes  remediation of contaminated
soil and/or groundwater,  reimbursement for past costs of site clean-up and
administrative  oversight,  and/or  long-term  monitoring of  environmental
conditions  at the  sites.  The  ultimate  costs are not  predictable  with
assurance.  For additional information regarding  environmental matters and
reserves,  see  "Management's  Discussion  and  Analysis -  Application  of
Critical  Accounting  Policies - Environmental  Remediation"  and Note M of
Notes  to  Consolidated  Financial  Statements  and  "Item  1.  Business  -
Miscellaneous - Environmental Matters" in this annual report on Form 10-K.

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

     In addition,  as part of the plea  agreement,  Ashland  entered into a
deferred prosecution agreement,  wherein prosecution of a separate count of
the indictment charging Ashland with violating Subpart QQQ was deferred for
four years.  The deferred  prosecution  agreement  provides that if Ashland
satisfies the terms and  conditions of the plea agreement and completes the
Refinery Upgrades,  the deferred  prosecution  agreement will terminate and
the United States will dismiss that count with prejudice.  If, however,  it
is  determined  by the court that  Ashland  willfully  violated any term or
condition  of the plea  agreement  during the deferral  period,  the United
States may re-initiate prosecution of the deferred count of the indictment,
using an admission  made by Ashland for purposes of the plea agreement that
Ashland  knowingly  operated  the St. Paul Park  refinery in  violation  of
certain Subpart QQQ standards.

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

     (3) Pursuant to a 1988 RCRA  Administrative  Consent  Order  ("Consent
Order"),  Ashland is remediating  soil and groundwater at a former chemical
distribution  facility  site in Lansing,  Michigan.  The USEPA is asserting
that Ashland has not complied with certain  provisions of the Consent Order
and has indicated  that it may seek to assess  penalties  against  Ashland.
Ashland disputes USEPA's assertions.  No formal penalty proceeding has been
initiated.

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

     SHAREHOLDER  DERIVATIVE  LITIGATION  - On  August  16,  2002,  Central
Laborers'   Pension  Fund,   derivatively  as  a  shareholder  of  Ashland,
instituted  an action in the Circuit  Court of  Kentucky  in Kenton  County
against Ashland's then-serving Board of Directors. On motion of Ashland and
the other  defendants,  the case was removed to the United States  District
Court,  Eastern  District of Kentucky,  Covington  Division.  Plaintiff has
moved to remand  the case to the state  court.  The  action is  purportedly
filed on behalf of  Ashland,  and asserts  the  following  causes of action
against the Directors:  breach of fiduciary duty,  abuse of control,  gross
mismanagement,  and waste of corporate assets.  The suit also names Paul W.
Chellgren,  the  then-serving  Chief Executive  Officer and Chairman of the
Board, and James R. Boyd,  former Senior Vice President and Group Operating
Officer, as individual defendants,  and it seeks to recover an unstated sum
from them individually alleging unjust enrichment from various transactions
completed  during their  tenure with  Ashland.  The suit  further  seeks an
unspecified  sum  from  Mr.  Chellgren   individually  based  upon  alleged
usurpation of corporate opportunities.  The suit also names J. Marvin Quin,
Ashland's Chief  Financial  Officer,  as well as three former  employees of
Ashland's  wholly-owned  subsidiary,  APAC,  as individual  defendants  and
alleges  that they  participated  in the  preparation  and  filing of false
financial  statements  during  fiscal  years 1999 - 2001.  The suit further
names Ernst & Young LLP  ("E&Y"),  as a  defendant,  alleging  professional
accounting  malpractice  and  negligence  in the  conduct  of its  audit of
Ashland's  1999 and 2000  financial  statements,  respectively,  as well as
alleging  that E&Y aided and abetted  the  individual  defendants  in their
alleged  breach of duties.  The  complaint  seeks to  recover,  jointly and
severally,  from  defendants an unstated sum of  compensatory  and punitive
damages.  The complaint seeks equitable and/or  injunctive  relief to avoid
continuing harm from alleged ongoing illegal acts, and seeks a disgorgement
of defendants' alleged insider-trading gains, in

                                       11


<PAGE>


addition to the  reasonable  cost and  expenses  incurred  in bringing  the
complaint, including attorneys' and experts' fees.

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

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

     No matters were submitted to a vote of security  holders,  through the
solicitation  of proxies or otherwise,  during the quarter ended  September
30, 2003.

ITEM X.  EXECUTIVE OFFICERS OF ASHLAND

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

     JAMES J.  O'BRIEN (age 49) is Chairman of the Board,  Chief  Executive
Officer and  Director of Ashland  and has served in such  capacities  since
2002.  During the past five years,  he has also served as President,  Chief
Operating  Officer,  Senior Vice President and Group  Operating  Officer of
Ashland and President of The Valvoline Company.

     GARY  A.  CAPPELINE  (age  54) is  Senior  Vice  President  and  Group
Operating  Officer of Ashland and President of Ashland  Specialty  Chemical
Company,   and  has  served  in  such  capacities   since  2003  and  2002,
respectively.  During the past five years, he has also served as a chemical
industry partner at Bear Stearns  Merchant Bank,  President of AlliedSignal
Specialty  Chemicals  and Group Vice  President,  Pigments and Additives of
Engelhard Corp.

     DAVID  J.  D'ANTONI  (age  58) is  Senior  Vice  President  and  Group
Operating  Officer of Ashland and President of APAC, Inc. and has served in
such capacities  since 1988, 1999 and 2003,  respectively.  During the past
five years, he has also served as President of Ashland Chemical Company.

     DAVID L.  HAUSRATH (age 51) is Vice  President and General  Counsel of
Ashland   and  has  served  in  such   capacities   since  1998  and  1999,
respectively.  During the past five years,  he has also served as Associate
General Counsel of Ashland.

     J. DAN LACY (age 56) is Vice President - Corporate  Affairs of Ashland
and has served in such capacity since 1986. It is anticipated that Mr. Lacy
will retire on December 31, 2003.

     J. MARVIN QUIN (age 56) is Senior Vice  President and Chief  Financial
Officer of Ashland and has served in such capacities since 1992.

     RICHARD P. THOMAS (age 57) is Vice  President and Secretary of Ashland
and has served in such capacities since 1998 and 1999, respectively. During
the past five years,  he has also served as  Associate  General  Counsel of
Ashland and  Administrative  Vice President and General  Counsel of Ashland
Petroleum  Company.  It is anticipated that Mr. Thomas will retire on March
31, 2004.

     KENNETH  L.  AULEN  (age  54) is  Administrative  Vice  President  and
Controller of Ashland and has served in such  capacities  since 1992. It is
anticipated that Mr. Aulen will retire in the March quarter of fiscal 2004.

     SAMUEL J. MITCHELL (age 42) is Vice President of Ashland and President
of The  Valvoline  Company  and has served in such  capacities  since 2002.
During the past five years,  he has also served as Vice  President - Retail
Business,  Vice  President  of  Marketing  and  Director of Marketing - The
Valvoline Company.

     FRANK L. WATERS (age 42) is Vice President of Ashland and President of
Ashland  Distribution Company and has served in such capacities since 2002.
During the past five years, he has also served as Vice President of Ashland
Plastics - Europe and  Director  of Sales for Ashland  Distribution's  Fine
Ingredients Division.

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


                                  PART II

     ITEM 5. MARKET FOR  REGISTRANT'S  COMMON  STOCK AND  RELATED  SECURITY
HOLDER MATTERS

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

                                    12

<PAGE>


     At September  30, 2003,  there were  approximately  16,800  holders of
record of Ashland's Common Stock. Ashland Common Stock is listed on the New
York and  Chicago  stock  exchanges  (ticker  symbol  ASH) and has  trading
privileges  on the  Boston,  Cincinnati,  Pacific  and  Philadelphia  stock
exchanges.

ITEM 6.  SELECTED FINANCIAL DATA

     See Five-Year Selected Financial Information on page F-26.

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

     See  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations on pages M-1 through M-12.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See  Quantitative  and  Qualitative  Disclosures  About Market Risk on
pages M-11 and M-12.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     None.

ITEM 9A.  CONTROLS AND PROCEDURES

(a)      As of September 30, 2003, Ashland,  under the supervision and with
         the  participation  of its management,  including  Ashland's Chief
         Executive Officer and its Chief Financial  Officer,  evaluated the
         effectiveness  of Ashland's  disclosure  controls  and  procedures
         pursuant to Rule  13a-15(b)  and 15d-15(b)  promulgated  under the
         Securities  Exchange  Act of 1934,  as  amended.  Based  upon that
         evaluation,  the  Chief  Executive  Officer  and  Chief  Financial
         Officer have concluded that the disclosure controls and procedures
         were effective.

(b)      There were no significant  changes in Ashland's  internal  control
         over  financial  reporting,  or in other  factors,  that  occurred
         during the  fiscal  quarter  ended  September  30,  2003 that have
         materially  affected,  or  are  reasonably  likely  to  materially
         affect, Ashland's internal control over financial reporting.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     There is hereby  incorporated  by reference the  information to appear
under the  caption  "Ashland  Inc.'s  Board of  Directors  -  Nominees  for
Election at the 2004 Annual Meeting" and the information  regarding Section
16 beneficial  ownership reporting compliance in Ashland's definitive Proxy
Statement for its January 29, 2004 Annual  Meeting of  Shareholders,  which
will be filed with the SEC within 120 days after September 30, 2003 ("Proxy
Statement").  See also the list of Ashland's executive officers and related
information  under  "Executive  Officers  of Ashland" in Part I - Item X in
this annual report on Form 10-K.

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

     Ashland has adopted a Code of Business Conduct (the "Code").  The Code
applies to Ashland's directors, all employees of Ashland and its subsidiary
companies,  including the principal executive officer,  principal financial
officer,  principal  accounting  officer  and  persons  performing  similar
functions  ("Key  Personnel").  The Code is  posted on  Ashland's  website.
Ashland will satisfy any disclosure  requirement  under Item 10 of Form 8-K
regarding an amendment  to, or waiver from,  any provision of the Code with
respect to its Key Personnel or directors by disclosing  the nature of such
amendment or waiver on its website or in a current report on Form 8-K.


ITEM 11. EXECUTIVE COMPENSATION

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


                                    13

<PAGE>

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

     There is hereby  incorporated  by reference the  information to appear
under the caption  "Ashland Common Stock Ownership of Directors and Certain
Officers  of  Ashland"  and the  information  regarding  the  ownership  of
securities of Ashland in Ashland's Proxy Statement.

     The following  table  summarizes the equity  compensation  plans under
which Ashland  Common Stock may be issued as of September 30, 2003.  Except
as disclosed  in the  narrative  to the table,  all plans were  approved by
shareholders of Ashland.
<TABLE>
<CAPTION>
                                        EQUITY COMPENSATION PLAN INFORMATION
                                                                                 Number of securities
                                                                                remaining available for
     Plan Category           Number of securities to     Weighted-average        future issuance under
     -------------           be issued upon exercise    exercise price of        equity compensation
                             of outstanding options,   outstanding options,         plans(excluding
                               warrants and rights     warrants and rights       securities  reflected in
                               -------------------     --------------------           column (a))
                                                                                      -----------
<S>                            <C>                     <C>                       <C>
                                       (a)                     (b)                        (c)
Equity compensation plans
 approved by security              6,971,774                 $37.56                   2,712,816  (2)
 holders.....................

Equity compensation plans
not approved by security             835,291                 $33.89                        0
holders (1).................       ---------                 ------                    ---------
         Total...............      7,807,065                 $37.17                    2,712,816
                                   =========                 ======                    =========
</TABLE>

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

(2)      Includes  489,074 shares available for issuance under the Deferred
         Compensation Plan for Employees,  and 364,154 shares available for
         issuance  under the Deferred  Compensation  Plan for  Non-Employee
         Directors.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Not applicable.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     There is hereby incorporated by reference the information with respect
to  principal  accountant  fees and  services to appear  under the captions
"Item  2:  Ratification  of  Auditors"  and  "Audit  Committee  Report"  in
Ashland's Proxy Statement.


                                  PART IV

ITEM 15. 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  in this  annual  report on Form 10-K are  listed in the
index on page F-1.


                                    14

<PAGE>



(3) Exhibits

3.1      Third  Restated  Articles of  Incorporation  of Ashland  (filed as
         Exhibit 3 to  Ashland's  Form 10-Q for the quarter  ended June 30,
         2002 and incorporated herein by reference).

3.2      By-laws of Ashland,  effective  as of November  15, 2002 (filed as
         Exhibit 3.2 to Ashland's annual report on Form 10-K for the fiscal
         year  ended  September  30,  2002  and   incorporated   herein  by
         reference).

4.1      Ashland  agrees  to  provide  the SEC,  upon  request,  copies  of
         instruments  defining the rights of holders of  long-term  debt of
         Ashland  and all of its  subsidiaries  for which  consolidated  or
         unconsolidated  financial statements are required to be filed with
         the SEC.

4.2      Indenture, dated as of August 15, 1989, as amended and restated as
         of August 15, 1990, between Ashland and Citibank, N.A., as Trustee
         (filed as Exhibit 4.2 to Ashland's  annual report on Form 10-K for
         the fiscal year ended September 30, 2001 and  incorporated  herein
         by reference).

4.3      Indenture, dated as of September 7, 2001, between Ashland and U.S.
         Bank  National  Association,  as Trustee  (filed as Exhibit 4.3 to
         Ashland's  annual  report on Form 10-K for the  fiscal  year ended
         September 30, 2001 and incorporated herein by reference).

4.4      Rights Agreement,  dated as of May 16, 1996,  between Ashland Inc.
         and the  Rights  Agent,  together  with Form of Right  Certificate
         (filed as Exhibit 4.4 to Ashland's  annual report on Form 10-K for
         the fiscal year ended September 30, 2001 and  incorporated  herein
         by reference).

     The following  Exhibits 10.1 through 10.12 are  compensatory  plans or
arrangements  or  management  contracts  required  to be filed as  exhibits
pursuant to Item 601(b)(10)(ii)(A) of Regulation S-K.

10.1     Amended Stock Incentive Plan for Key Employees of Ashland Inc. and
         its Subsidiaries (filed as Exhibit 10.1 to Ashland's annual report
         on Form 10-K for the fiscal  year  ended  September  30,  1999 and
         incorporated herein by reference).

10.2     Ashland Inc. Deferred Compensation Plan for Non-Employee Directors
         (filed as  Exhibit  10.2 to  Ashland's  Form 10-Q for the  quarter
         ended June 30, 2003 and incorporated herein by reference).

10.3     Ashland Inc. Deferred  Compensation Plan (filed as Exhibit 10.1 to
         Ashland's  Form  10-Q for the  quarter  ended  June  30,  2003 and
         incorporated herein by reference).

10.4     Eleventh  Amended and  Restated  Ashland Inc.  Supplemental  Early
         Retirement  Plan for Certain  Employees  (filed as Exhibit 10.3 to
         Ashland's  Form  10-Q for the  quarter  ended  June  30,  2003 and
         incorporated herein by reference).

10.5     Ashland Inc.  Salary  Continuation  Plan (filed as Exhibit 10.5 to
         Ashland's  annual  report on Form 10-K for the  fiscal  year ended
         September 30, 2002 and incorporated herein by reference).

10.6     Form of Ashland Inc. Executive Employment Contract between Ashland
         Inc. and certain  executives of Ashland  (filed as Exhibit 10.6 to
         Ashland's  annual  report on Form 10-K for the  fiscal  year ended
         September 30, 2002 and incorporated herein by reference).

10.7     Form of Indemnification Agreement between Ashland Inc. and members
         of its Board of Directors.

10.8     Ashland Inc.  Nonqualified  Excess Benefit  Pension Plan (filed as
         Exhibit 10.4 to Ashland's Form 10-Q for the quarter ended June 30,
         2003 and incorporated herein by reference).

10.9     Ashland Inc. Directors' Charitable Award Program (filed as Exhibit
         10.11 to Ashland's  annual report on Form 10-K for the fiscal year
         ended September 30, 2002 and incorporated herein by reference).

10.10    Ashland Inc. 1993 Stock  Incentive Plan (filed as Exhibit 10.11 to
         Ashland's  annual  report on Form 10-K for the  fiscal  year ended
         September 30, 2000 and incorporated herein by reference).


                                    15

<PAGE>



10.11    Ashland Inc. 1997 Stock  Incentive Plan (filed as Exhibit 10.14 to
         Ashland's  annual  report on Form 10-K for the  fiscal  year ended
         September 30, 2002 and incorporated herein by reference).

10.12    Amended and Restated Ashland Inc. Incentive Plan (filed as Exhibit
         10.15 to Ashland's  annual report on Form 10-K for the fiscal year
         ended September 30, 2002 and incorporated herein by reference).

10.13    Amended  and  Restated  Limited  Liability  Company  Agreement  of
         Marathon  Ashland  Petroleum  LLC dated as of  December  31,  1998
         (filed as Exhibit  10.17 to Ashland's  annual  report on Form 10-K
         for the fiscal  year ended  September  30,  1999 and  incorporated
         herein by reference).

10.14    Put/Call,  Registration Rights and Standstill Agreement as amended
         to December 31, 1998 among Marathon Oil Company,  USX Corporation,
         Ashland  Inc.  and Marathon  Ashland  Petroleum  (filed as Exhibit
         10.18 to Ashland's  annual report on Form 10-K for the fiscal year
         ended September 30, 1999 and incorporated herein by reference).

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

12       Computation of Ratio of Earnings to Fixed Charges.

21       List of subsidiaries.

23.1     Consent of independent auditors.

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

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

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

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

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

(B) REPORTS ON FORM 8-K

     During the quarter ended September 30, 2003, and between such date and
the filing of this annual  report on Form 10-K,  Ashland filed or furnished
the following reports on Form 8-K.

(1)      A report on Form 8-K dated July 18, 2003 reporting the filing of a
         lawsuit  by  a  third  party  seeking,  among  other  remedies,  a
         preliminary and permanent  injunction  preventing the consummation
         of the  proposed  sale of the net assets of  Ashland's  Electronic
         Chemicals business and certain related subsidiaries.

(2)      A report on Form 8-K dated July 22, 2003 reporting Ashland's third
         quarter results.

(3)      A report on Form 8-K dated July 23, 2003  containing  a Regulation
         FD disclosure.

(4)      A report on Form 8-K dated August 20, 2003  reporting that Ashland
         had signed a  definitive  agreement  to sell the net assets of its
         Electronic Chemicals business group to Air Products and Chemicals,
         Inc.

(5)      A report on Form 8-K dated August 27, 2003 containing a Regulation
         FD disclosure.

(6)      A report on Form 8-K dated August 29, 2003  reporting that Ashland
         had completed the sale of its Electronic  Chemicals business group
         to Air Products and Chemicals, Inc.

(7)      A report on Form 8-K dated October 1, 2003 containing a Regulation
         FD disclosure.

(8)      A report on Form 8-K dated  October 21, 2003  reporting  Ashland's
         fourth quarter and fiscal 2003 results.

(9)      A  report  on  Form  8-K  dated  October  23,  2003  containing  a
         Regulation FD disclosure.

(10)     A report on Form 8-K dated November 26, 2003, as amended by a Form
         8-K/A  dated  November  26,  2003,   containing  a  Regulation  FD
         disclosure.



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

                                  Date:  December 1, 2003

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, in the capacities indicated, on December 1, 2003.
<TABLE>
<CAPTION>


                  SIGNATURES                                           CAPACITY
                  ----------                                           --------

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

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

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

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

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

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

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

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

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

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

                         *                           Director
--------------------------------------------
            GEORGE A. SCHAEFER, JR.
</TABLE>

                                    17

<PAGE>


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

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


*By:  /s/ David L. Hausrath
      ---------------------
      David L. Hausrath
      Attorney-in-Fact


     Date:  December 1, 2003


                                    18

<PAGE>





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

     The following  table shows  revenues,  operating  income and operating
information  by  industry  segment  for each of the last three  years ended
September 30.
<TABLE>
<CAPTION>
(In millions)                                                                      2003         2002           2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>           <C>
SALES AND OPERATING REVENUES
APAC                                                                          $   2,400    $   2,652     $    2,624
Ashland Distribution                                                              2,804        2,535          2,849
Ashland Specialty Chemical                                                        1,170        1,094          1,055
Valvoline                                                                         1,235        1,152          1,092
Intersegment sales                                                                  (91)         (85)           (92)
                                                                              ----------   ----------    -----------
                                                                              $   7,518    $   7,348     $    7,528
                                                                              ==========   ==========    ===========
OPERATING INCOME
APAC                                                                          $     (42)   $     122     $       55
Ashland Distribution                                                                 32            1             35
Ashland Specialty Chemical                                                           31           70             38
Valvoline                                                                            87           77             81
Refining and Marketing (1)                                                          263          143            707
Corporate                                                                          (105)         (92)           (85)
                                                                              ----------   ----------    -----------
                                                                              $     266    $     321     $      831
                                                                              ==========   ==========    ===========
OPERATING INFORMATION
APAC
      Construction backlog at September 30 (millions) (2)                     $   1,745    $   1,691     $    1,629
      Hot-mix asphalt production (million tons)                                    32.5         36.7           36.7
      Aggregate production (million tons)                                          28.7         31.0           28.7
      Ready-mix concrete production (million cubic yards)                           2.0          2.1            2.3
Ashland Distribution (3)
      Sales per shipping day (millions)                                       $    11.1    $    10.1     $     11.2
      Gross profit as a percent of sales                                           15.3%        16.1%          15.9%
Ashland Specialty Chemical (3)
      Sales per shipping day (millions)                                       $     4.6    $     4.3     $      4.2
      Gross profit as a percent of sales                                           33.7%        37.0%          34.1%
Valvoline
      Lubricant sales (million gallons)                                           193.5        199.0          187.4
      Premium lubricants (percent of U.S. branded volumes)                         18.5%        16.1%          11.7%
Refining and Marketing (4)
      Refinery runs (thousand barrels per day)
        Crude oil refined                                                           900          930            912
        Other charge and blend stocks                                               133          151            139
      Refined product yields (thousand barrels per day)
        Gasoline                                                                    554          594            560
        Distillates                                                                 278          293            279
        Asphalt                                                                      71           73             75
        Other                                                                       131          127            136
                                                                              ----------   ----------    -----------
        Total                                                                     1,034        1,087          1,050
      Refined product sales (thousand barrels per day) (5)                        1,345        1,321          1,302
      Refining and wholesale marketing margin (per barrel) (6)                $    2.59    $    1.82     $     5.17
      Speedway SuperAmerica (SSA)
        Retail outlets at September 30                                            1,791        2,063          2,145
        Gasoline and distillate sales (million gallons)                           3,423        3,622          3,587
        Gross margin - gasoline and distillates (per gallon)                  $   .1191    $   .1040     $    .1218
        Merchandise sales (millions) (7)                                      $   2,281    $   2,381     $    2,186
        Merchandise margin (as a percent of sales)                                 24.5%        24.2%          23.3%
</TABLE>
--------------------------------------------------------------------------------
(1)      Includes  Ashland's equity income from Marathon Ashland  Petroleum
         LLC (MAP),  amortization related to Ashland's excess investment in
         MAP, and other activities associated with refining and marketing.
(2)      Includes   APAC's   proportionate   share   of  the   backlog   of
         unconsolidated joint ventures.
(3)      Sales are defined as sales and operating revenues. Gross profit is
         defined as sales and  operating  revenues,  less cost of sales and
         operating expenses,  and depreciation and amortization relative to
         manufacturing assets.
(4)      Amounts represent 100% of MAP's operations,  in which Ashland owns
         a 38% interest.
(5)      Total average  daily volume of all refined  product sales to MAP's
         wholesale, branded and retail (SSA) customers.
(6)      Sales revenue less cost of refinery inputs, purchased products and
         manufacturing expenses, including depreciation.
(7)      Effective January 1, 2003, SSA adopted EITF 02-16,  "Accounting by
         a  Customer  (Including  a  Reseller)  for  Certain  Consideration
         Received from a Vendor," which requires rebates from vendors to be
         recorded as  reductions  to cost of sales.  Rebates  from  vendors
         recorded in SSA merchandise  sales for periods prior to January 1,
         2003 have not been restated and included $46 million in 2003, $170
         million in 2002 and $128 million in 2001.

                                    M-1

<PAGE>



RESULTS OF OPERATIONS

     Ashland's net income  amounted to $75 million in 2003, $117 million in
2002 and $417 million in 2001.  Income from  continuing  operations  (which
excludes  discontinued  operations and the cumulative  effect of accounting
changes)  amounted  to $94 million in 2003,  $115  million in 2002 and $390
million  in 2001.  As  discussed  in Note A to the  Consolidated  Financial
Statements,   Ashland  adopted  certain  pronouncements  of  the  Financial
Accounting  Standards  Board  (FASB)  during the last three years that have
resulted in changes in Ashland's  accounting methods.  One of those changes
was expensing of employee  stock options in accordance  with FASB Statement
No. 123 (FAS  123),  "Accounting  for  Stock-Based  Compensation,"  and its
related amendments as of October 1, 2002. A second change involved goodwill
no longer being  amortized  under the  provisions of FASB Statement No. 142
(FAS 142),  "Goodwill and Other Intangible  Assets," as of October 1, 2001.
Although Ashland also adopted FASB  Interpretation  No. 46 (FIN 46) on July
1, 2003,  FIN 46 did not have any  significant  effect on Ashland's  income
from continuing operations.

     The following table compares  Ashland's reported results for the three
years  ended  September  30,  2003,  with pro forma  financial  information
assuming that these changes in  accounting  methods  occurred on October 1,
2000.  Pro forma expense under FAS 123 would have amounted to $7 million in
2002 and $5 million in 2001.  Ashland's  segments also recognized  goodwill
amortization  of $41 million in 2001 ($25 million for APAC,  $7 million for
Ashland  Distribution,  $8 million for Ashland  Specialty  Chemical  and $1
million for Valvoline). In addition, part of Ashland's excess investment in
Marathon Ashland  Petroleum LLC (MAP) was accounted for as goodwill and was
being  amortized  at a rate of $10 million a year prior to the  adoption of
FAS 142.
<TABLE>
<CAPTION>

(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C>           <C>
OPERATING INCOME
      As reported                                                                $   266       $   321       $   831
      Pro forma                                                                      266           314           877
INCOME FROM CONTINUING OPERATIONS
      As reported                                                                     94           115           390
      Pro forma                                                                       94           111           432
</TABLE>

APAC

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

     APAC generated  operating income of $122 million in 2002,  compared to
$55 million in 2001.  The  improvement  reflected the net effects of better
operating results, the change in accounting for goodwill,  costs associated
with APAC's  business  process  redesign  initiative,  and a  non-recurring
charge of $18 million in 2001 to correct  previously  reported  earnings of
the Manassas,  Virginia  division.  Results from  construction jobs and the
asphalt  plants   improved,   reflecting   better  margins.   These  margin
improvements  resulted from more efficient production and favorable weather
conditions, lower costs for liquid asphalt, fuel and power, as well as most
of the low-margin  work obtained in  acquisitions  being completed in 2001.
Goodwill  amortization  amounted  to $25  million in 2001,  but the expense
reduction from eliminating that amortization was largely offset by costs of
$17 million in 2002 associated with the process redesign initiative.

     During an internal  investigation  of financial  activities  at APAC's
Manassas  division in the March 2001 quarter,  it was  discovered  that the
division's earnings had been intentionally  overstated by $18 million. That
overstatement  was  corrected in 2001 and local  management of the division
was  replaced.  Independent  investigations  confirmed  that  the  problems
related  primarily to the improper  recognition  of revenues and failure to
recognize  certain  costs over a period of about two years.  No evidence of
any impact on, or involvement by, outside  parties,  customers or suppliers
was discovered.

                                    M-2

<PAGE>



ASHLAND DISTRIBUTION

     Operating income from Ashland Distribution  amounted to $32 million in
2003,  compared to $1 million in 2002.  Overall sales were up 11% (of which
5% came from  higher  volumes)  despite a  continuing  sluggish  industrial
production  environment,  which more than offset the effects of a reduction
in margins resulting from cost increases for petroleum-based raw materials.
Reported  results for 2003 included $6 million of gains from property sales
and  litigation  settlements,  as well as a charge of $5 million  for staff
reductions under Ashland's  Top-Quartile Cost Structure (TQCS) program.  As
discussed below,  results of Ashland  Distribution for 2002 included income
of $7 million from the settlement of the sorbate antitrust litigation.

     Ashland  Distribution's  operating  income  amounted  to $1 million in
2002,  compared  to $35  million  in  2001.  Overall  sales  were  off 11%,
reflecting  weak markets and  internal  execution  problems  related to the
implementation  of  an  enterprise   resource   planning  system.   Ashland
Distribution  is the  most  sensitive  of all of  Ashland's  businesses  to
industrial  output,  which  remained  soft in  comparison  to prior  years.
However,  sales in the September 2002 quarter  exceeded the amount for that
period in 2001, and were also up 13% from the low point  experienced in the
December 2001  quarter.  Reported  results for 2002  included  income of $7
million from the  settlement  of the sorbate class action  antitrust  suit,
compared to income of $11 million  from a similar  class  action  involving
citric acid in 2001.  Results for 2001 also included  charges of $7 million
for goodwill amortization and write-offs prior to the change in accounting.

ASHLAND SPECIALTY CHEMICAL

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

     Ashland Specialty Chemical's operating income increased to $70 million
in 2002, a significant increase from its recession-weakened  results of $38
million  in 2001.  Despite  softness  in unit  volumes,  Ashland  Specialty
Chemical achieved steady improvement throughout 2002. Results improved from
performance materials  (unsaturated polyester resins, foundry chemicals and
adhesives) and water treatment  chemicals and services.  Results of Ashland
Specialty  Chemical  for 2001  included a charge of $8 million for goodwill
amortization and write-downs prior to the change in accounting.

VALVOLINE

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

     At  September  30,  2003,  VIOC  operated  357  company-owned  service
centers,  compared to 363 centers in 2002 and 364 centers in 2001. The VIOC
franchising program continues to expand, with 372 centers open at September
30, 2003,  compared to 335 centers in 2002 and 311 centers in 2001.  VIOC's
future growth will continue to focus principally on expanding the number of
franchised rather than company-owned centers.

     Valvoline's  operating income was $77 million in 2002, compared to $81
million in 2001.  The decline was  attributable  entirely to lower sales of
R-12 automotive refrigerant that contributed essentially no gross profit to
2002 results, compared to $13 million in 2001. However, strong results from
core lubricants,  automotive chemicals and Valvoline International, as well
as a record year from VIOC in 2002,  largely  offset the  reduced  earnings
from  sales of R-12.  Lubricant  volumes  were up 6% and  sales of  premium
lubricants  continued  to grow.  Increasing  numbers of premium oil changes
also contributed to VIOC's record year. Earnings from automotive  chemicals
and Valvoline  International  both  recovered  strongly from their weakened
levels in 2001.

                                    M-3

<PAGE>



REFINING AND MARKETING

     Operating income from Refining and Marketing, which consists primarily
of equity income from Ashland's 38% ownership  interest in MAP, amounted to
$263 million in 2003,  compared to $143 million in 2002. Equity income from
MAP's  refining  and  wholesale  marketing  operations  was up $92 million,
principally  reflecting an increase of 77 cents a barrel in their  refining
and wholesale marketing margin and higher operating expenses. Equity income
from MAP's retail operations  (Speedway  SuperAmerica and a 50% interest in
the  Pilot  Travel  Centers  joint  venture)   increased  by  $20  million,
reflecting  a gain of $8 million on the sale of SSA's  southern  stores and
higher product and merchandise margins for PTC.

     Operating income from Refining and Marketing was $143 million in 2002,
down from a record $707 million in 2001.  Equity income from MAP's refining
and wholesale marketing operations was down $585 million due principally to
weak refining  margins.  The reduction of $3.35 a barrel in MAP's  refining
and wholesale  marketing margin resulted from an  industry-wide  decline in
demand for petroleum products and a narrow  differential  between sweet and
sour crude oil prices.  Sour crude oils typically  account for about 60% of
MAP's crude oil slate.  Equity income from MAP's retail operations improved
slightly,  reflecting  the net effects of higher sales  volumes of products
and merchandise,  improved  merchandise  margins and lower product margins.
Equity  income from MAP for 2001 also  included a charge of $10 million for
goodwill amortization.

CORPORATE

     Corporate  expenses were $105 million in 2003, $92 million in 2002 and
$85 million in 2001. The increase in such expenses in 2002 compared to 2001
resulted  from  additional  reserves  for  environmental,   litigation  and
severance  costs,  which more than  offset a  reduction  in  incentive  and
deferred compensation costs. The increase in 2003 compared to 2002 includes
severance and other  transition  costs of $19 million  related to Ashland's
TQCS and other cost reduction  programs,  increased  incentive and deferred
compensation  costs and $6 million  related to the  expensing  of  employee
stock  options.  Those  increases  were  partially  offset by lower ongoing
administrative  costs in 2003, as well as the additional reserves that were
included in 2002 costs.

NET INTEREST AND OTHER FINANCIAL COSTS

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

(In millions)                                                                       2003          2002         2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
NET INTEREST AND OTHER FINANCIAL COSTS
Interest expense                                                               $     123    $      135    $     162
Expenses on sales of accounts receivable                                               3             4            8
Loss on early retirement of debt                                                       -             -            5
Other financial costs                                                                  3             3            2
Interest income                                                                       (1)           (4)          (2)
                                                                               ----------   -----------   ----------
                                                                               $     128    $      138    $     175
                                                                               ==========   ===========   ==========
</TABLE>
     Ashland's long-term debt declined from $2.0 billion at October 1, 2000
to $1.6 billion at the end of fiscal 2003,  which accounted for a reduction
in interest expense of $17 million in 2002 and an additional $12 million in
2003.  Lower interest rates on short-term  borrowings also brought interest
expense  down from prior year  levels by $11  million in 2002.  Expenses on
sales of accounts  receivable also reflect  declining  interest rates since
that program was implemented.

INCOME TAXES

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

     Ashland's overall effective income tax rate amounted to 37.2% in 2002,
compared to 40.5% in 2001.  The  reduction  resulted  principally  from the
change in accounting  for goodwill,  reduced state income taxes and a lower
tax  rate  on  foreign  results.   The  accounting  change  eliminated  the
amortization   for  financial   reporting   purposes,   and  most  of  that
amortization was not deductible for income tax purposes. In addition, state
income tax rates  actually  experienced  were  lower than those  previously
assumed in the deferred tax calculations. Those reductions resulted

                                    M-4

<PAGE>



from changing  apportionment  factors related to MAP's earnings and the use
of tax  loss  carryforwards  in  various  jurisdictions  that  had not been
recognized  in  prior  years  due to  uncertainties  as to  their  ultimate
realization.

DISCONTINUED OPERATIONS AND ACCOUNTING CHANGES

     Results of Ashland's discontinued operations are summarized below. See
Note  N of  Notes  to  Consolidated  Financial  Statements  for  additional
information.
<TABLE>
<CAPTION>
(In millions)                                                                      2003         2002           2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>           <C>
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (NET OF TAX)
Reserves for asbestos-related litigation (net of insurance recoveries)        $    (109)   $       -     $      (14)
Electronic Chemicals
      Results of operations                                                          14           13             13
      Gain on sale of operations                                                     81            -              -
Gain on sale of investment in Arch Coal                                               -            -             33
                                                                              ----------   ----------    -----------
                                                                              $     (14)   $      13     $       32
                                                                              ==========   ==========    ===========
</TABLE>
     Ashland is subject to liabilities from claims alleging personal injury
caused by exposure to asbestos.  Virtually all of those liabilities  result
from indemnification  obligations undertaken in connection with the sale of
Riley  Stoker  Corporation,  a  former  subsidiary.  During  2003,  Ashland
increased its reserve for asbestos claims to cover  litigation  defense and
claim  settlement  costs  expected  to be paid  during  the next ten years.
Because  insurance  provides  reimbursements  for  most  of the  costs  and
coverage-in-place  agreements  exist  with  the  insurance  companies  that
provide  substantially  all of the coverage  currently being accessed,  the
increase in the asbestos  reserve was offset in part by probable  insurance
recoveries. A reserve associated with asbestos-related liabilities was also
recognized in 2001.

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

     Ashland  spun-off the majority of its shares of Arch Coal common stock
to Ashland's  shareholders in 2000. Ashland subsequently sold its remaining
Arch Coal shares in a public offering in February 2001.

     As  discussed  in  Note A to the  Consolidated  Financial  Statements,
Ashland  adopted certain  pronouncements  of the FASB during the last three
years.  As of July 1, 2003,  Ashland  consolidated  a lessor  entity in its
financial  statements  under FIN 46, and doing so resulted in an  after-tax
charge of $5 million to adjust the depreciation  included in the cumulative
lease payments to conform to Ashland's  depreciation methods.  Ashland also
adopted FAS 142 in 2002 and  recognized an  impairment  loss of $11 million
after income taxes to write off the  goodwill of Ashland  Distribution.  In
addition,  the cumulative  effect of the change in the method of accounting
for  derivatives  by MAP under FAS 133 resulted in an  after-tax  charge to
Ashland of $5 million in 2001.

FINANCIAL POSITION

LIQUIDITY

     Cash flows from  operations,  a major source of  Ashland's  liquidity,
amounted to $242 million in 2003,  $163 million in 2002 and $814 million in
2001. Such amounts include cash  distributions  from MAP of $197 million in
2003,  $196  million in 2002 and $658  million in 2001.  MAP  operates on a
calendar  year basis and is organized as a limited  liability  company that
has elected to be taxed as a partnership.  As a result, Ashland pays income
taxes on most of its share of the taxable  earnings  reported by MAP in the
following  year,  creating  additional  variability in Ashland's cash flows
from year to year.  Income taxes paid by Ashland  related to MAP's earnings
amounted to $4 million in 2003,  $239  million in 2002 and $157  million in
2001.  Over the last three years,  cash flows from operations have exceeded
Ashland's capital  requirements for net property additions and dividends by
about $550 million,  providing additional funds for debt reductions,  stock
purchases and acquisitions.

     Ashland's  financial position has enabled it to obtain capital for its
financing needs and to maintain investment grade ratings on its senior debt
of Baa2 from Moody's and BBB from Standard & Poor's (S&P).  In August 2003,
S&P revised its outlook on Ashland to  negative  from  stable,  and lowered
Ashland's  commercial paper rating to A-3 from A-2. This action  materially
restricts, and could at times eliminate, the availability of the commercial
paper  market to  Ashland.  Ashland  has two  revolving  credit  agreements
providing for up to $350 million in borrowings.  Although  Ashland borrowed
$175 million under these agreements to repay commercial paper shortly after
the S&P  downgrade,  the  revolving  credit  agreements  were not in use at
September 30, 2003. While the revolving credit

                                    M-5

<PAGE>



agreements  contain  covenants  limiting new borrowings  based on Ashland's
stockholders'  equity,  these agreements would have permitted an additional
$1.7 billion of borrowings at September  30, 2003.  Additional  permissible
borrowings are increased  (decreased) by 150% of any increase (decrease) in
stockholders' equity.

     At September 30, 2003,  working capital (excluding debt due within one
year) amounted to $703 million.  Although the comparable  amount at the end
of 2002 was $752 million,  that amount  included net assets of $172 million
of the discontinued Electronic Chemical operations held for sale. Ashland's
working  capital is  affected  by its use of the LIFO  method of  inventory
valuation.  That method valued inventories below their replacement costs by
$78 million at September  30, 2003,  and $61 million at September 30, 2002.
Liquid assets (cash, cash equivalents and accounts  receivable) amounted to
92% of current  liabilities  at September 30, 2003,  compared to 75% at the
end of 2002.  Most of the  improvement  resulted from the combination of an
increase of $112 million in cash equivalents and a reduction of $99 million
in debt due within one year.

CAPITAL RESOURCES

     Property  additions  amounted  to $470  million  during the last three
years and are  summarized in the  Information  by Industry  Segment on page
F-25.  For  that  period,  APAC  accounted  for  52% of  Ashland's  capital
expenditures,  while Ashland Specialty Chemical accounted for an additional
21%.  Capital used for  acquisitions  (including  assumed debt) amounted to
$113 million during the last three years, of which $46 million was invested
in APAC,  $64  million  in  Ashland  Specialty  Chemical  and $3 million in
Valvoline.  A summary  of the  capital  employed  in  Ashland's  operations
follows. The reduction in capital employed in Ashland Specialty Chemical in
2003  resulted  principally  from  the  sale  of the  Electronic  Chemicals
business.
<TABLE>
<CAPTION>
(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
CAPITAL EMPLOYED
APAC                                                                           $   1,014    $    1,039    $    1,047
Ashland Distribution                                                                 418           459           470
Ashland Specialty Chemical                                                           438           610           612
Valvoline                                                                            399           343           389
Refining and Marketing                                                             1,866         1,818         1,654

</TABLE>
     Long-term  borrowings  provided cash flows of $107 million  during the
last three years,  the proceeds from which were used in part to retire $525
million of long-term debt. Debt retirements included scheduled  maturities,
as well as prepayments or refundings to reduce interest  costs.  Cash flows
were  supplemented  as  necessary  by the  issuance  of  short-term  notes,
commercial paper and borrowings under the revolving credit agreements.

     During  2003,  Ashland  reduced its total debt by $193 million to $1.6
billion  principally  by using the proceeds from the sale of the Electronic
Chemicals  business to retire debt.  Stockholders'  equity increased by $80
million during 2003 to $2.3 billion.  Although  Ashland's net income of $75
million for 2003 was equivalent to its cash  dividends,  translation  gains
associated  with foreign  operations and a reduction in the minimum pension
liability resulted in an increase in reported stockholders' equity. Debt as
a percent of capital  employed was reduced from 45.4% at the end of 2002 to
41.7% at September 30, 2003.

     At September 30, 2003,  Ashland's  long-term debt included $69 million
of floating-rate obligations,  and the interest rates on an additional $153
million of  fixed-rate,  medium-term  notes were  effectively  converted to
floating  rates  through  interest  rate  swap  agreements.   In  addition,
Ashland's costs under its sale of receivables program and various operating
leases are based on the  floating-rate  interest  costs on $203  million of
third-party debt underlying those  transactions.  As a result,  Ashland was
exposed to short-term  interest rate  fluctuations  on $425 million of debt
obligations at September 30, 2003.

     During 2004,  Ashland  expects capital  expenditures of  approximately
$175 million,  compared to $110 million in 2003,  with most of the increase
committed to APAC and Ashland  Specialty  Chemical.  Improvements in APAC's
equipment  management process allowed for a temporary  reduction in capital
expenditures in 2003,  while Ashland  Specialty  Chemical plans  additional
investments in international  capacity and environmental  projects in 2004.
Ashland  anticipates  meeting  its  capital  requirements  during  2004 for
property additions, dividends and scheduled debt repayments of $102 million
from  internally  generated  funds.  However,  external  financing  may  be
necessary to provide funds for acquisitions or other corporate purposes.

                                    M-6

<PAGE>



OFF-BALANCE SHEET ARRANGEMENTS

     Ashland and its subsidiaries are lessees of office  buildings,  retail
outlets, transportation and off-road construction equipment, warehouses and
storage  facilities,  and other equipment,  facilities and properties under
leasing  agreements  that expire at various  dates.  At September 30, 2003,
minimum rental payments under these operating leases amount to $258 million
in the  aggregate,  including $47 million in 2004, $39 million in 2005, $33
million in 2006,  $26 million in 2007,  $22 million in 2008 and $91 million
thereafter.

     Under various  operating  leases,  Ashland has guaranteed the residual
value of the underlying  property.  If Ashland had canceled those leases at
September  30,  2003,  its maximum  obligations  under the  residual  value
guarantees would have amounted to $102 million.  Ashland does not expect to
incur any  significant  charge to  earnings  under  these  guarantees,  $46
million of which relates to real estate.  These lease  agreements  are with
unrelated third party lessors and Ashland has no additional  contractual or
other commitments to any parties to the leases.

     Ashland has also  guaranteed  38% of MAP's  payments for certain crude
oil purchases,  up to a maximum guarantee of $95 million.  At September 30,
2003,  Ashland's  contingent liability under this guarantee amounted to $60
million.  Ashland  has not made and does not  expect  to make any  payments
under this guarantee.

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

LONG-LIVED ASSETS

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

     Intangible   assets  with  indefinite  lives  are  subject  to  annual
impairment tests.  Such tests are completed  separately with respect to the
goodwill  of  each  of  Ashland's  reporting  units,  which  are  generally
synonymous with its industry segments.  However,  the individual  operating
divisions of Ashland Specialty Chemical are also considered reporting units
under FAS 142.  Since market  prices of Ashland's  reporting  units are not
readily  available,  management makes various  estimates and assumptions in
determining the estimated fair values of those units. Fair values are based
principally on EBITDA (earnings before  interest,  taxes,  depreciation and
amortizaton)  multiples of peer group companies for each of these reporting
units.  During 2003,  Ashland recognized an impairment charge of $9 million
for goodwill  associated with  non-strategic  businesses of APAC identified
for sale. The most recent annual  impairment  tests indicated that the fair
values of each of Ashland's reporting units with significant  goodwill were
in

                                      M-7


<PAGE>


excess of their  carrying  values by at least  20%.  Despite  that  excess,
however,  impairment  charges  could  still be  required  if a  divestiture
decision were made with respect to a particular business included in one of
the reporting units.

EMPLOYEE BENEFIT OBLIGATIONS

     Ashland and its  subsidiaries  sponsor  noncontributory  pension plans
that cover  substantially  all  employees,  as well as healthcare  and life
insurance  plans  for  eligible  employees  who  retire  or  are  disabled.
Ashland's retiree life insurance plans are  noncontributory,  while Ashland
shares  the  costs  of  providing  healthcare  coverage  with  its  retired
employees through premiums, deductibles and coinsurance provisions.

     The  principal  assumptions  used to determine  Ashland's  pension and
other  postretirement  benefit  costs are the  discount  rate,  the  salary
adjustment  rate and the  expected  return on plan  assets.  Nearly  all of
Ashland's  retiree  healthcare  plans  contain a cap that limits  Ashland's
contributions  to base year (1992) per capita costs,  plus annual increases
of up to 4.5% per year  (1.5% a year  effective  January  1,  2004).  Since
medical inflation is expected to continue at a rate in excess of these caps
for the immediate  future,  no explicit  assumption  was required as to the
expected rate of future medical inflation.

     The  discount  rates used to  determine  the  present  value of future
pension payments, healthcare costs and life insurance benefits are based on
the  yields on  high-quality,  fixed-income  investments  (such as  Moody's
Aa-rated corporate bonds), as adjusted for the longer duration of Ashland's
pension and other postretirement benefit obligations. The present values of
Ashland's  future  pension  and  other   postretirement   obligations  were
determined  using  discount rates of 6.25% at September 30, 2003, and 6.75%
at September  30, 2002.  Ashland's  costs under these plans are  determined
using the  discount  rate as of the  beginning  of the fiscal  year,  which
amounted  to 6.75% for 2003,  7.25% for 2002,  7.75% for 2001,  and will be
6.25% for 2004.

     The salary adjustment rate and the expected return on plan assets were
assumed to be 5% and 9% in determining Ashland's costs for each of the last
three years, and those factors will be reduced slightly to 4.5% and 8.5% in
determining  Ashland's  costs  for 2004.  The  salary  assumption  has been
indicative  of actual  results for the last few years,  but the  compounded
return of 1.1% on plan assets for the last three years has been  subject to
wide year to year  variances.  For 2003, the pension plan assets  generated
income  of  19.1%,  compared  to  losses  of 6.7% in 2002 and 7.1% in 2001.
However,  the expected  return on plan assets is designed to be a long-term
assumption that will be subject to considerable year-to-year variances from
actual returns.  Ashland has generated compounded annual investment returns
of 4.8% and 7.8% on its pension  plan assets  over the last  five-year  and
ten-year  periods.  Although  those  returns  are both below the  long-term
assumption,  they were  measured  with the  ending  point  amidst a partial
recovery from a two-year period of declining stock prices that  accompanied
depressed economic conditions.  For the five-year and ten-year periods that
ended in  September  2000 prior to this  adverse  investment  climate,  the
compounded annual investment  returns on Ashland's pension plan assets were
11.4% and 12.4%.

     Shown  below  are  the  estimated   increases  in  pension  and  other
postretirement  costs  that  would  have  resulted  from a 1% change in the
principal assumptions for each of the last three years.
<TABLE>
<CAPTION>
(In millions)                                                                         2003         2002         2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>          <C>
INCREASE IN PENSIONS COSTS FROM
Decrease in the discount rate                                                   $       20    $      21    $      15
Increase in the salary adjustment rate                                                   9           10            6
Decrease in the expected return on plan assets                                           6            5            5
INCREASE IN OTHER POSTRETIREMENT COSTS FROM
Decrease in the discount rate                                                            2            4            3
</TABLE>
ASBESTOS-RELATED LITIGATION

     Ashland is subject to liabilities from claims alleging personal injury
caused by exposure to asbestos.  Virtually all of those liabilities  result
from indemnification  obligations undertaken in 1990 in connection with the
sale of Riley Stoker Corporation  (Riley),  a former subsidiary.  Ashland's
reserve  for  asbestos  claims  covers  the  litigation  defense  and claim
settlement  costs  expected  to be paid  during  the next  ten  years on an
undiscounted basis and amounted to $610 million at September 30, 2003.

     Projecting future asbestos costs is subject to numerous variables that
are  extremely  difficult  to  predict.  In  addition  to  the  significant
uncertainties  surrounding  the number of claims  that  might be  received,
other  variables  include the type and  severity of the disease  alleged by
each claimant,  the long latency period associated with asbestos  exposure,
dismissal rates, costs of medical treatment,  the impact of bankruptcies of
other companies that are co-defendants in claims, uncertainties surrounding
the litigation  process from  jurisdiction to jurisdiction and from case

                                    M-8

<PAGE>


to case,  and the impact of potential  changes in  legislative  or judicial
standards. Furthermore, any predictions with respect to these variables are
subject to even greater uncertainty as the projection period lengthens.  In
light of these inherent  uncertainties,  Ashland believes that ten years is
the most reasonable  period for recognizing a reserve for future costs, and
that costs  that might be  incurred  after that  period are not  reasonably
estimable.

Insurance  provides  reimbursements  for most of the litigation defense and
claim settlement  costs incurred,  and  coverage-in-place  agreements exist
with the insurance companies that provide substantially all of the coverage
currently being accessed.  As a result,  increases in the asbestos  reserve
are  expected to be offset in part by probable  insurance  recoveries.  The
amounts not recoverable are generally due from insurers that are insolvent,
rather than as a result of uninsured  claims or the exhaustion of Ashland's
insurance  coverage.  At  September  30,  2003,  Ashland's  receivable  for
recoveries  of such costs from its insurers  amounted to $429  million,  of
which  $26  million  relates  to costs  previously  paid.  About 35% of the
estimated  receivables from insurance companies are expected to be due from
Equitas  Limited  (Equitas) and other London  companies.  Of the remainder,
over 90% is expected to come from  companies  or groups that are rated A or
higher by A. M. Best.

Although  coverage limits are resolved in the  coverage-in-place  agreement
with Equitas and the other London  companies,  there is a disagreement with
these  companies  over the timing of  recoveries.  The  resolution  of this
disagreement  could  have a  material  effect  on the  value  of  insurance
recoveries  from  those  companies.  In  estimating  the  value  of  future
recoveries  at  September  30,  2003,  Ashland  used  the  least  favorable
interpretation of this agreement and will continue to do so until such time
as the disagreement is resolved.

ENVIRONMENTAL REMEDIATION

     Ashland is subject to various federal,  state and local  environmental
laws and regulations that require  environmental  assessment or remediation
efforts (collectively  environmental remediation) at multiple locations. At
September 30, 2003, such locations included 100 waste treatment or disposal
sites where Ashland has been identified as a potentially  responsible party
under Superfund or similar state laws, approximately 135 current and former
operating  facilities  (including certain  facilities  conveyed to MAP) and
about  1,220   service   station   properties.   Ashland's   reserves   for
environmental  remediation  amounted to $174 million at September 30, 2003,
and reflect its  estimates  of the most likely  costs that will be incurred
over an extended  period to remediate  identified  conditions for which the
costs  are  reasonably   estimable,   without  regard  to  any  third-party
recoveries.   Engineering  studies,   probability  techniques,   historical
experience and other factors are used to identify and evaluate  remediation
alternatives and their related costs in determining the estimated  reserves
for environmental remediation.

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

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

CONSTRUCTION CONTRACTS

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

     The extent of completion  for each  production  phase is determined by
reference to material quantities,  labor hours,  subcontract costs or other
factors that are believed to be most  indicative of the progress made under
each phase of a project.  Revenues  earned are computed by reference to the
contract or detailed  analyses of revenues and expenses by production phase
that  supported the related  construction  contract or bid proposal.  These
detailed   analyses  also  serve  as  early  indicators  as  to  whether  a
construction   contract  may   ultimately  be  completed  at  a  loss.  Any
anticipated losses on such contracts are charged against operations as soon
as such losses are  determined to be probable and  estimable.  During 2003,
reserves of $14 million were  established for job losses related to a large
highway construction project in Virginia,  reflecting  weather-related cost
increases and construction delays. Losses

                                    M-9

<PAGE>



of this  magnitude  are unusual,  and this  reserve  reflects the fact that
rainfall in Virginia  during 2003 was among the highest levels on record in
the last 109 years.

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

OUTLOOK

     The major  cornerstones of Ashland's strategy for 2004 will be driving
efficiency,  managing  capital  effectively  and expanding  through organic
means in existing or adjacent  markets.  The  Top-Quartile  Cost  Structure
(TQCS)  program that is currently  underway is the initial focus in driving
efficiency.  That program is designed to reduce  Ashland's  annual selling,
general and administrative  (SG&A) costs by at least $75 million, and is in
addition  to the  actions  that were  taken in 2003 to  produce  annual G&A
savings of $25 million. Opportunities to produce additional savings through
process  changes  that cut  horizontally  across  Ashland  are  also  being
examined.

     Improving  the  efficiency  of  Ashland's  operations  will be another
focus.  During 2003, APAC consolidated its operations from 39 into 24 field
business units, implemented new employee benefit plans that will reduce its
costs and consolidated its purchasing function,  and also plans to continue
reducing  costs  through the TQCS  program and the  Project  PASS  redesign
initiative.  Costs of $20  million  were  incurred  during  2003 under this
redesign initiative, and such costs are expected to decline by about 40% in
2004 when this initiative will be completed. Ashland Distribution continues
to focus on service level  improvements,  with a goal of reducing rework in
the order to cash process.  Ashland Specialty Chemical has recently adopted
the Six Sigma  quality  process  that  focuses  on  reducing  manufacturing
expenses and  improving  quality.  Valvoline  continues to focus on process
improvements,  and recently  implemented a new system that will result in a
much more concise and streamlined invoicing process.

     Managing  capital   effectively  assures  that  Ashland's  assets  are
performing at desired or expected levels.  Assets whose performance  cannot
be improved  will be  redeployed,  with the proceeds used to reduce debt or
reinvest in more profitable growth  opportunities.  Reducing debt remains a
key objective,  with an ultimate  target of having debt no greater than 35%
of capital  employed.  MAP has been an important  source of both  operating
income and cash,  and  Ashland  will  continue  to capture  value from that
investment,  which is subject to the put/call agreement discussed in Note D
to the Consolidated Financial Statements.  MAP is also working on improving
its cost structure to strengthen profitability and competitive position.

     Ashland is also pursuing  sales and profit  growth by  developing  new
products,  expanding  into  adjacent  geographic  or product  markets,  and
improving  marketing  techniques  to  existing  customers.  In  addition to
restoring normal sales and profits through  increased  efficiency,  APAC is
pursuing   growth  by   emphasizing   large  jobs  and  extending   current
capabilities  in concrete  paving,  milling  and bridge  work across  their
markets. Ashland Distribution will continue to focus on perfecting on-time,
accurate and complete service to ultimately restore sales to their pre-2001
levels, which were in excess of $3 billion.  Ashland Specialty Chemical has
two new  processes  designed  to support  organic  sales  growth.  A growth
initiatives process will support the delivery of customer-focused solutions
that do not require extensive research and development or commercialization
support,  while a solutions  process is being  developed  to  identify  and
deliver emerging,  technology-based solutions within a 36-month time frame.
Valvoline  will pursue growth by continuing to build its premium brands and
services in both the "do-it-yourself" and "do-it-for-me" markets, including
an emphasis  on product  innovation  and growth in  selected  international
markets.

     At September 30, 2003,  APAC's  construction  backlog amounted to $1.7
billion,  up  slightly  from  the  level at the end of  2002.  However,  an
increasingly  competitive bidding process led to a decrease of about .5% in
the estimated margin on about $1.3 billion of new business awarded in 2003.
About $400  million of the backlog was bid at lower energy  prices,  and no
income will be recognized  on the  completion of the work on which job loss
reserves  were  recognized  in  2003.  Public  sector  work in the  backlog
increased  slightly during the year, and the public funding outlook remains
positive.  Private  contract work increased from $136 million at the end of
2002 to $169 million this year, reflecting the strengthening economy.

     Ashland's  sales  and  operating  revenues  are  normally  subject  to
seasonal  variations.  Although  APAC  normally  enjoys a  relatively  long
construction  season,  most of its operating income is generated during the
construction period of May to October. In addition,  MAP experiences demand
increases for gasoline  during the summer driving  season,  for propane and
distillate  during the winter  heating  season and for  asphalt  during the
construction  season.  The following  table  compares  operating  income by
quarter for the three  years ended  September  30, 2003  (amounts  for each
quarter do not necessarily total to results for the year due to rounding).

                                   M-10

<PAGE>

<TABLE>
<CAPTION>

(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
QUARTERLY OPERATING INCOME (LOSS)
December 31                                                                    $      32    $       96    $      136
March 31                                                                             (24)           (3)           79
June 30                                                                              138           132           366
September 30                                                                         119            96           251

</TABLE>
EFFECTS OF INFLATION AND CHANGING PRICES

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

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

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

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

FORWARD-LOOKING STATEMENTS

     Management's  Discussion and Analysis (MD&A) contains  forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the  Securities  Exchange  Act of 1934.  Estimates as to
operating  performance  and earnings are based on a number of  assumptions,
including  those  mentioned  in MD&A.  Such  estimates  are also based upon
internal forecasts and analyses of current and future market conditions and
trends,  management plans and strategies,  weather,  operating efficiencies
and economic conditions, such as prices, supply and demand, and cost of raw
materials.   Although  Ashland  believes  its  expectations  are  based  on
reasonable assumptions, it cannot assure the expectations reflected in MD&A
will  be  achieved.  This  forward-looking  information  may  prove  to  be
inaccurate  and  actual  results  may  differ   significantly   from  those
anticipated  if one or more of the underlying  assumptions or  expectations
proves to be inaccurate or is unrealized, or if other unexpected conditions
or events occur. Other factors and risks affecting Ashland are contained in
Risks and Uncertainties in Note A to the Consolidated  Financial Statements
and in Item 1 of this annual  report on Form 10-K.  Ashland  undertakes  no
obligation  to   subsequently   update  or  revise  these   forward-looking
statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Ashland selectively uses unleveraged  interest rate swap agreements to
obtain greater access to the lower  borrowing  costs normally  available on
floating-rate debt, while minimizing refunding risk through the issuance of
long-term,   fixed-rate   debt.   Ashland's   intent  is  to  maintain  its
floating-rate  exposure  between  25%  and  45% of  total  interest-bearing
obligations.  At September 30, 2003,  Ashland held interest rate swaps that
effectively  converted  the interest  rates on $153 million of  fixed-rate,
medium-term notes to floating rates based upon three-month LIBOR. The swaps
have been designated as fair value hedges,  and since the critical terms of
the debt  instruments  and the swaps  match,  the hedges are  assumed to be
perfectly  effective,  with the changes in fair value of the debt and swaps
offsetting.

     Ashland regularly uses commodity-based and foreign currency derivative
instruments to manage its exposure to price  fluctuations  associated  with
the purchase of natural gas,  diesel fuel and gasoline,  as well as certain
transactions  denominated  in  foreign  currencies.  In  addition,  Ashland
opportunistically enters into petroleum crackspread futures to economically
hedge or  enhance  its equity  earnings  and cash  distributions  from MAP.
Although certain of these instruments could be designated as qualifying for
hedge  accounting  treatment,  Ashland  has not  elected to do so.  Futures
contracts for natural gas are generally  accounted for as normal  purchases
and sales,  and the fair values of other  derivatives  are  recorded on the
balance sheet,  with the resulting gains or losses  recognized in earnings.
The

                                   M-11

<PAGE>



potential loss from a hypothetical  10% adverse change in commodity  prices
or foreign  currency  rates on Ashland's open  commodity-based  and foreign
currency   derivative   instruments  at  September  30,  2003,   would  not
significantly affect Ashland's consolidated financial position,  results of
operations, cash flows or liquidity.

     MAP uses commodity-based derivative instruments to manage its exposure
to  commodity  price  risk.  MAP's  management  has  authorized  the use of
futures,  forwards,  swaps  and  combinations  of  options  related  to the
purchase or sale of crude oil, refined products and natural gas. Changes in
the fair value of all  derivatives  are  recognized  immediately  in income
unless the derivative  qualifies as a hedge of future cash flows or certain
foreign  currency  exposures.  MAP has not  designated  any  derivatives as
qualifying for hedge accounting treatment.

                                   M-12

<PAGE>




ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE
                                                                            PAGE
                                                                            ----
Report of management....................................................     F-2
Report of independent auditors..........................................     F-2
Consolidated financial statements:
         Statements of consolidated income..............................     F-3
         Consolidated balance sheets....................................     F-4
         Statements of consolidated stockholders' equity................     F-5
         Statements of consolidated cash flows..........................     F-6
         Notes to consolidated financial statements.....................     F-7
Information by industry segment.........................................    F-24
Five-year selected financial information................................    F-26
Consolidated financial schedule:
         Schedule II - Valuation and qualifying accounts................    F-27

     Schedules  other than that listed above have been  omitted  because of
the absence of the conditions  under which they are required or because the
information  required is shown in the consolidated  financial statements or
the notes thereto.  Separate financial  statements for MAP required by Rule
3-09 of Regulation  S-X will be filed as an amendment to this annual report
on Form 10-K  within  90 days  after the end of MAP's  fiscal  year  ending
December 31, 2003.  Separate financial  statements of other  unconsolidated
affiliates  are  omitted   because  each  company  does  not  constitute  a
significant  subsidiary  using the 20% tests when considered  individually.
Summarized financial information for such affiliates is disclosed in Note D
of Notes to Consolidated Financial Statements.

                                    F-1

<PAGE>


REPORT OF MANAGEMENT

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

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

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

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

REPORT OF INDEPENDENT AUDITORS

     We have  audited  the  accompanying  consolidated  balance  sheets  of
Ashland Inc. and  consolidated  subsidiaries  as of September  30, 2003 and
2002,  and the related  consolidated  statements  of income,  stockholders'
equity  and cash  flows for each of the  three  years in the  period  ended
September  30,  2003.  Our audits also  included  the  financial  statement
schedule listed in the Index at Item 15(a). These financial  statements and
schedule  are  the  responsibility  of  Ashland  Inc.'s   management.   Our
responsibility  is to express an opinion on these financial  statements and
schedule based on our audits.

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

     In our opinion,  the financial statements referred to above (appearing
on pages F-3 to F-25 of this annual report on Form 10-K) present fairly, in
all material respects,  the consolidated financial position of Ashland Inc.
and  consolidated  subsidiaries  at  September  30, 2003 and 2002,  and the
consolidated  results of their  operations and their cash flows for each of
the three years in the period ended  September 30, 2003, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion,  the related  financial  statement  schedule,  when  considered in
relation  to the  basic  financial  statements  taken as a whole,  presents
fairly in all material respects the information set forth therein.

     As discussed in Note A to the  financial  statements,  in 2003 Ashland
Inc.  changed its methods of  accounting  for  employee  stock  options and
variable  interest  entities and in 2002 Ashland Inc. changed its method of
accounting  for  goodwill and other  intangible  assets.  Additionally,  as
discussed in Note A to the financial  statements,  in 2001 Ashland Inc. and
its unconsolidated affiliate, Marathon Ashland Petroleum LLC, changed their
method of accounting for derivatives.

                                                      /s/ Ernst & Young LLP
Cincinnati, Ohio
November 5, 2003

                                    F-2

<PAGE>

<TABLE>
<CAPTION>
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
Years Ended September 30

(In millions except per share data)                                                2003         2002          2001
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>           <C>
REVENUES
Sales and operating revenues                                                 $    7,518    $   7,348     $   7,528
Equity income - Note D                                                              301          181           755
Other income                                                                         46           47            53
                                                                             -----------   ----------    ----------
                                                                                  7,865        7,576         8,336
COSTS AND EXPENSES
Cost of sales and operating expenses                                              6,005        5,736         6,016
Selling, general and administrative expenses                                      1,390        1,311         1,249
Depreciation, depletion and amortization                                            204          208           240
                                                                             -----------   ----------    ----------
                                                                                  7,599        7,255         7,505
                                                                             -----------   ----------    ----------
OPERATING INCOME                                                                    266          321           831
Net interest and other financial costs - Note E                                    (128)        (138)         (175)
                                                                             -----------   ----------    ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                               138          183           656
Income taxes - Note J                                                               (44)         (68)         (266)
                                                                             -----------   ----------    ----------
INCOME FROM CONTINUING OPERATIONS                                                    94          115           390
Results from discontinued operations (net of income taxes) - Note N                 (14)          13            32
                                                                             -----------   ----------    ----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES                                80          128           422
Cumulative effect of accounting changes (net of income taxes) - Note A               (5)         (11)           (5)
                                                                             -----------   ----------    ----------
NET INCOME                                                                   $       75    $     117     $     417
                                                                             ===========   ==========    ==========

EARNINGS PER SHARE - NOTE A
Basic
      Income from continuing operations                                      $     1.37    $    1.67     $    5.60
      Results from discontinued operations                                         (.19)         .19           .46
      Cumulative effect of accounting changes                                      (.08)        (.17)         (.07)
                                                                             -----------   ----------    ----------
      Net income                                                             $     1.10    $    1.69     $    5.99
                                                                             ===========   ==========    ==========
Diluted
      Income from continuing operations                                      $     1.37    $    1.64     $    5.54
      Results from discontinued operations                                         (.19)         .19           .45
      Cumulative effect of accounting changes                                      (.08)        (.16)         (.06)
                                                                             -----------   ----------    ----------
      Net income                                                             $     1.10    $    1.67     $    5.93
                                                                             ===========   ==========    ==========
</TABLE>
See Notes to Consolidated Financial Statements.

                                    F-3

<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30

(In millions)                                                                                      2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>          <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents                                                                     $     223    $      90
Accounts receivable (less allowances for doubtful accounts of
      $35 million in 2003 and $34 million in 2002)                                                1,135        1,056
Inventories - Note A                                                                                441          456
Deferred income taxes - Note J                                                                      142          119
Assets of discontinued operations held for sale - Note N                                              -          211
Other current assets                                                                                144          139
                                                                                              ----------   ----------
                                                                                                  2,085        2,071
INVESTMENTS AND OTHER ASSETS
Investment in Marathon Ashland Petroleum LLC (MAP) - Note D                                       2,448        2,350
Goodwill - Note A                                                                                   523          510
Asbestos insurance receivable (noncurrent portion) - Note M                                         399          171
Other noncurrent assets                                                                             340          329
                                                                                              ----------   ----------
                                                                                                  3,710        3,360
PROPERTY, PLANT AND EQUIPMENT
Cost
      APAC                                                                                        1,322        1,358
      Ashland Distribution                                                                          333          360
      Ashland Specialty Chemical                                                                    722          708
      Valvoline                                                                                     424          379
      Corporate                                                                                     158          115
                                                                                              ----------   ----------
                                                                                                  2,959        2,920
Accumulated depreciation, depletion and amortization                                             (1,748)      (1,629)
                                                                                              ----------   ----------
                                                                                                  1,211        1,291
                                                                                              ----------   ----------
                                                                                              $   7,006    $   6,722
                                                                                              ==========   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Debt due within one year
      Commercial paper                                                                        $       -    $      10
      Current portion of long-term debt                                                             102          191
Trade and other payables                                                                          1,371        1,256
Liabilities of discontinued operations held for sale - Note N                                         -           39
Income taxes                                                                                         11           24
                                                                                              ----------   ----------
                                                                                                  1,484        1,520
NONCURRENT LIABILITIES
Long-term debt (less current portion) - Note E                                                    1,512        1,606
Employee benefit obligations - Note O                                                               385          509
Deferred income taxes - Note J                                                                      291          246
Reserves of captive insurance companies                                                             168          166
Asbestos litigation reserve (noncurrent portion) - Note M                                           560          152
Other long-term liabilities and deferred credits                                                    353          350
Commitments and contingencies - Notes F and M
                                                                                              ----------   ----------
                                                                                                  3,269        3,029
STOCKHOLDERS' EQUITY - Notes E, K and L
Preferred stock, no par value, 30 million shares authorized                                           -            -
Common stock, par value $1.00 per share, 300 million shares authorized
      Issued - 68 million shares in 2003 and 2002                                                    68           68
Paid-in capital                                                                                     350          338
Retained earnings                                                                                 1,961        1,961
Accumulated other comprehensive loss                                                               (126)        (194)
                                                                                              ----------   ----------
                                                                                                  2,253        2,173
                                                                                              ----------   ----------
                                                                                              $   7,006    $   6,722
                                                                                              ==========   ==========
</TABLE>
See Notes to Consolidated Financial Statements.


                                    F-4


<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Consolidated Subsidiaries
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
                                                                                            Accumulated
                                                                                                  other
                                                Common         Paid-in        Retained    comprehensive
(In millions)                                    stock         capital        earnings             loss           Total
------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>              <C>             <C>
BALANCE AT OCTOBER 1, 2000                   $      70       $     388       $   1,579        $     (72)      $   1,965
Total comprehensive income (1)                                                     417              (54)            363
Cash dividends, $1.10 per common share                                             (76)                             (76)
Issued common stock under
      stock incentive plans                          1              22                                               23
Repurchase of common stock                          (2)            (47)                                             (49)
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2001                       69             363           1,920             (126)          2,226
Total comprehensive income (1)                                                     117              (68)             49
Cash dividends, $1.10 per common share                                             (76)                             (76)
Issued common stock under
      stock incentive plans                                         16                                               16
Repurchase of common stock                          (1)            (41)                                             (42)
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2002                       68             338           1,961             (194)          2,173
Total comprehensive income (1)                                                      75               68             143
Cash dividends, $1.10 per common share                                             (75)                             (75)
Issued common stock under
      stock incentive plans                                         12                                               12
                                             ----------      ----------      ----------       ----------      ----------
BALANCE AT SEPTEMBER 30, 2003                $      68       $     350       $   1,961        $    (126)      $   2,253
                                             ==========      ==========      ==========       ==========      ==========
</TABLE>
(1)      Reconciliations  of  net  income  to  total  comprehensive  income
         follow.
<TABLE>
<CAPTION>
(In millions)                                     2003            2002            2001
---------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>
Net income                                   $      75       $     117       $     417
Minimum pension liability adjustment                24            (144)            (57)
      Related tax benefit (expense)                 (9)             56              22
Unrealized translation gains (losses)               53              19             (21)
      Related tax benefit                            -               1               2
                                             ----------      ----------      ----------
Total comprehensive income                   $     143       $      49       $     363
                                             ==========      ==========      ==========
</TABLE>
At September 30, 2003, the  accumulated  other  comprehensive  loss of $126
million (after tax) was comprised of net unrealized  translation  losses of
$10 million and a minimum pension liability of $116 million.

See Notes to Consolidated Financial Statements.

                                    F-5

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

(In millions)                                                                         2003         2002          2001
----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>           <C>
CASH FLOWS FROM OPERATIONS
Income from continuing operations                                               $       94    $     115     $     390
Expense (income) not affecting cash
      Depreciation, depletion and amortization                                         204          208           240
      Deferred income taxes                                                             49         (121)          151
      Equity income from affiliates                                                   (301)        (181)         (755)
      Distributions from equity affiliates                                             203          201           664
      Other items                                                                        1            -             5
Change in operating assets and liabilities (1)                                          (8)         (59)          119
                                                                                -----------   ----------    ----------
                                                                                       242          163           814
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt                                                 -           55            52
Proceeds from issuance of common stock                                                   2           11            15
Repayment of long-term debt                                                           (216)        (140)         (169)
Repurchase of common stock                                                               -          (42)          (49)
Increase (decrease) in short-term debt                                                 (10)          10          (245)
Dividends paid                                                                         (75)         (76)          (76)
                                                                                -----------   ----------    ----------
                                                                                      (299)        (182)         (472)
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment                                            (110)        (174)         (186)
Purchase of operations - net of cash acquired                                           (5)         (15)          (91)
Proceeds from sale of operations                                                         7            -             9
Other - net                                                                             11           27             9
                                                                                -----------   ----------    ----------
                                                                                       (97)        (162)         (259)
                                                                                -----------   ----------    ----------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS                                         (154)        (181)           83
Cash provided by discontinued operations                                               287           35            86
                                                                                -----------   ----------    ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       133         (146)          169
Cash and cash equivalents - beginning of year                                           90          236            67
                                                                                -----------   ----------    ----------
CASH AND CASH EQUIVALENTS - END OF YEAR                                         $      223    $      90     $     236
                                                                                ===========   ==========    ==========

DECREASE (INCREASE) IN OPERATING ASSETS (1)
Accounts receivable                                                             $      (79)   $     110     $      70
Inventories                                                                             15           12             5
Deferred income taxes                                                                   22           17             -
Other current assets                                                                    (5)          30            31
Investments and other assets                                                             7           36          (168)
INCREASE (DECREASE) IN OPERATING LIABILITIES (1)
Trade and other payables                                                               115         (132)           71
Income taxes                                                                           (50)         (18)            4
Noncurrent liabilities                                                                 (33)        (114)          106
                                                                                -----------   ----------    ----------
CHANGE IN OPERATING ASSETS AND LIABILITIES                                      $       (8)   $     (59)    $     119
                                                                                ===========   ==========    ==========
</TABLE>
(1)      Excludes changes resulting from operations acquired or sold.

See Notes to Consolidated Financial Statements.

                                    F-6

<PAGE>


Ashland Inc. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

RISKS AND UNCERTAINTIES

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

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

INVENTORIES
<TABLE>
<CAPTION>
(In millions)                                                                                     2003          2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>           <C>
Chemicals and plastics                                                                      $      333    $      335
Construction materials                                                                              67            68
Petroleum products                                                                                  66            58
Other products                                                                                      48            51
Supplies                                                                                             5             5
Excess of replacement costs over LIFO carrying values                                              (78)          (61)
                                                                                            -----------   -----------
                                                                                            $      441    $      456
                                                                                            ===========   ===========
</TABLE>
     Chemicals,  plastics and petroleum products with a replacement cost of
$279 million at September 30, 2003, and $294 million at September 30, 2002,
are valued  using the  last-in,  first-out  (LIFO)  method.  The  remaining
inventories are stated  generally at the lower of cost (using the first-in,
first-out [FIFO] or average cost methods) or market.

LONG-LIVED ASSETS, GOODWILL AND OTHER INTANGIBLE ASSETS

     The cost of plant and equipment is  depreciated  by the  straight-line
method  over the  estimated  useful  lives of the  assets.  Such  costs are
periodically  reviewed for  recoverability  when impairment  indicators are
present.  Such indicators include,  among other factors,  operating losses,
unused  capacity,  market value  declines and  technological  obsolescence.
Recorded  values of property,  plant and equipment that are not expected to
be recovered through undiscounted future net cash flows are written down to
current fair value, which is generally determined from estimated discounted
future net cash flows (assets held for use) or net realizable value (assets
held for sale). During

                                    F-7

<PAGE>


NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2003,  Ashland  recognized an impairment charge of $10 million for a maleic
anhydride  production  facility  that is shutdown  and not likely to reopen
based on internal analyses.

     As of October 1, 2001,  Ashland  adopted FASB  Statement  No. 142 (FAS
142),  "Goodwill and Other Intangible  Assets." Under FAS 142, goodwill and
intangible  assets with  indefinite  lives are no longer  amortized but are
subject  to annual  impairment  tests.  Prior to the  adoption  of FAS 142,
Ashland's  goodwill was amortized by the straight-line  method over periods
generally ranging from 15 to 40 years.  Goodwill  amortization  amounted to
$41 million in 2001 and  included  charges of $10  million for  write-downs
related to certain operations.  Results from those operations  consistently
had been well below the levels that were expected when they were  acquired,
necessitating the impairment review and resulting write-downs.

     When MAP was formed,  Ashland's  investment  exceeded  its  underlying
equity in the net assets of that company.  That excess investment  included
$245 million that was accounted for as part of the carrying  value of MAP's
plant and equipment,  and is being amortized on a straight-line  basis over
15 years at a rate of $16 million a year.  The  remainder was accounted for
as goodwill and was being amortized on a straight-line  basis over 20 years
at a rate of $10  million  a year  prior to the  adoption  of FAS  142.  At
September  30,  2003,  Ashland's  investment  exceeds its equity in the net
assets of MAP by $316 million,  of which $151 million  represents plant and
equipment that will continue to be amortized,  and $165 million  represents
goodwill.

     As a result of the  adoption  of FAS 142, it was  determined  that the
goodwill of Ashland Distribution was impaired.  Accordingly,  an impairment
loss of $14 million  ($11  million net of income  taxes) was  recorded as a
cumulative  effect of accounting change as of October 1, 2001. During 2003,
Ashland  recognized  an  impairment  charge  of  $9  million  for  goodwill
associated with  non-strategic  businesses of APAC identified for sale. Due
to the nonamortization of goodwill, Ashland's reported results for 2003 and
2002 are not  comparable  to 2001.  If Ashland  had  adopted  FAS 142 as of
October 1, 2000,  income  from  continuing  operations  for 2001 would have
increased to $435 million,  and basic and diluted  earnings per share would
have increased to $6.24 and $6.18, respectively.

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

     Following is a  progression  of goodwill by segment for the year ended
September 30, 2003. Not included in the $510 million of goodwill at October
1, 2002, is $11 million of goodwill of the Electronic Chemicals division of
Ashland  Specialty  Chemical that was classified as assets of  discontinued
operations held for sale (see Note N).
<TABLE>
<CAPTION>
                                                                                Ashland
                                                                              Specialty
(In millions)                                                         APAC     Chemical      Valvoline         Total
---------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>          <C>           <C>           <C>
Balance at October 1, 2002                                       $     420    $      85     $        5    $      510
Goodwill acquired                                                        -            -              1             1
Goodwill assigned to sold businesses                                    (1)           -              -            (1)
Impairment losses                                                       (9)           -              -            (9)
Adjustments related to previous acquisitions                            16            1              -            17
Currency translation adjustments                                         -            5              -             5
                                                                 ----------   ----------    -----------   -----------
Balance at September 30, 2003                                    $     426    $      91     $        6    $      523
                                                                 ==========   ==========    ===========   ===========
</TABLE>
ENVIRONMENTAL COSTS

     Accruals for  environmental  costs are recognized  when it is probable
that a liability has been incurred and the amount of that  liability can be
reasonably  estimated.  Such costs are charged to expense if they relate to
the remediation of conditions caused by past operations or are not expected
to mitigate or prevent  contamination from future operations.  Accruals are
recorded at  undiscounted  amounts  based on  experience,  assessments  and
current  technology,  without regard to any third-party  recoveries and are
regularly  adjusted as  environmental  assessments and remediation  efforts
continue.

                                    F-8

<PAGE>

EARNINGS PER SHARE

     Following is the computation of basic and diluted earnings per share
(EPS) from continuing operations.
<TABLE>
<CAPTION>
(In millions except per share data)                                                 2003         2002          2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>           <C>           <C>
NUMERATOR
Numerator for basic and diluted EPS -
      Income from continuing operations                                       $       94    $     115     $     390
                                                                              ===========   ==========    ==========

DENOMINATOR
Denominator for basic EPS - Weighted average
      common shares outstanding                                                       68           69            69
Common shares issuable upon exercise of stock options                                  1            1             1
                                                                              -----------   ----------    ----------
Denominator for diluted EPS - Adjusted weighted
      average shares and assumed conversions                                          69           70            70
                                                                              ===========   ==========    ==========
BASIC EPS FROM CONTINUING OPERATIONS                                          $     1.37    $    1.67     $    5.60
DILUTED EPS FROM CONTINUING OPERATIONS                                              1.37         1.64          5.54
</TABLE>
STOCK INCENTIVE PLANS

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

DERIVATIVE INSTRUMENTS

     In June 1998, the FASB issued Statement No. 133 (FAS 133), "Accounting
for Derivative  Instruments and Hedging Activities." FAS 133 was amended by
two other  statements  and was  required  to be adopted in years  beginning
after June 15, 2000.  Because of Ashland's minimal use of derivatives,  FAS
133 did not have a significant effect on Ashland's  consolidated  financial
position or results of  operations  when it was adopted on October 1, 2000.
MAP's  adoption  of FAS 133 on January 1, 2001,  resulted  in a $20 million
pretax loss from the cumulative effect of this accounting change. Ashland's
share of the pretax loss  amounted to $8 million  which,  net of income tax
benefits  of $3  million,  resulted  in a  loss  of  $5  million  from  the
cumulative effect of this accounting change.

     Ashland selectively uses unleveraged  interest rate swap agreements to
obtain greater access to the lower  borrowing  costs normally  available on
floating-rate debt, while minimizing refunding risk through the issuance of
long-term,   fixed-rate   debt.   Ashland's   intent  is  to  maintain  its
floating-rate  exposure  between  25%  and  45% of  total  interest-bearing
obligations.  At September 30, 2003,  Ashland held interest rate swaps that
effectively  converted  the interest  rates on $153 million of  fixed-rate,
medium-term notes to floating rates based upon three-month LIBOR. The swaps
have been designated as fair value hedges,  and since the critical terms of
the debt  instruments  and the swaps  match,  the hedges are  assumed to be
perfectly  effective,  with the changes in fair value of the debt and swaps
offsetting.  Settlements  of  terminated  swaps are  amortized  to interest
expense over the remaining term of the debt.

     Ashland regularly uses commodity-based and foreign currency derivative
instruments to manage its exposure to price  fluctuations  associated  with
the purchase of natural gas,  diesel fuel and gasoline,  as well as certain
transactions  denominated  in  foreign  currencies.  In  addition,  Ashland
opportunistically enters into petroleum crackspread futures to economically
hedge or  enhance  its equity  earnings  and cash  distributions  from MAP.
Although certain of these instruments could be designated as qualifying for
hedge  accounting  treatment,  Ashland  has not  elected to do so.  Futures
contracts for natural gas are generally  accounted for as normal  purchases
and sales,  and the fair values of other  derivatives  are  recorded on the
balance sheet, with the resulting gains or losses recognized in earnings.

     MAP uses commodity-based derivative instruments to manage its exposure
to  commodity  price  risk.  MAP's  management  has  authorized  the use of
futures,  forwards,  swaps  and  combinations  of  options  related  to the
purchase or sale of crude oil, refined products and natural gas. Changes in
the fair value of all  derivatives  are  recognized  immediately  in income
unless the derivative  qualifies as a hedge of future cash flows or certain
foreign  currency  exposures.  MAP has not  designated  any  derivatives as
qualifying for hedge accounting treatment.

                                    F-9

<PAGE>


NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

OTHER

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

     Income related to  construction  contracts is generally  recognized by
the   units-of-production   method,   which   is   a   variation   of   the
percentage-of-completion  method.  Any anticipated losses on such contracts
are charged against  operations as soon as such losses are determined to be
probable and estimable.

     Advertising  costs ($77  million in 2003,  $78 million in 2002 and $67
million in 2001) and research and  development  costs ($36 million in 2003,
$34 million in 2002 and $33 million in 2001) are expensed as incurred.

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

     Certain prior year amounts have been  reclassified in the consolidated
financial   statements   and   accompanying   notes  to   conform  to  2003
classifications.

NOTE B - INFORMATION BY INDUSTRY SEGMENT

     Ashland's  operations  are  managed  along  industry  segments,  which
include APAC, Ashland Distribution,  Ashland Specialty Chemical, Valvoline,
and Refining and  Marketing.  Information  by industry  segment is shown on
pages F-24 and F-25.

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

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

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

     Valvoline is a marketer of  premium-branded  automotive and commercial
oils,  automotive  chemicals,  appearance products and automotive services,
with sales in more than 120  countries.  Valvoline  is engaged in the "fast
oil change" business through owned and franchised service centers operating
under the Valvoline Instant Oil Change name.

     The Refining and Marketing  segment  includes  Ashland's 38% ownership
interest  in  Marathon  Ashland  Petroleum  LLC (MAP) and other  activities
associated  with refining and  marketing.  MAP was formed  January 1, 1998,
combining the major elements of the refining,  marketing and transportation
operations  of Ashland and Marathon Oil Company.  MAP has seven  refineries
with a combined crude oil refining capacity of 935,000 barrels per calendar
day, 87 light  products and asphalt  terminals in the Midwest and Southeast
United  States,  about  5,650  retail  marketing  outlets  in 17 states and
significant  pipeline holdings.  Ashland accounts for its investment in MAP
using the equity method.

     Information about Ashland's domestic and foreign  operations  follows.
Ashland has no material operations in any individual foreign country.
<TABLE>
<CAPTION>
                                                         Revenues from                           Property, plant
                                                      external customers                          and equipment
                                             --------------------------------------          ------------------------
(In millions)                                     2003          2002          2001                 2003         2002
---------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>           <C>                  <C>           <C>
United States                                $   6,740    $    6,621    $    7,380           $    1,079    $   1,168
Foreign                                          1,125           955           956                  132          123
                                             ----------   -----------   -----------          -----------   ----------
                                             $   7,865    $    7,576    $    8,336           $    1,211    $   1,291
                                             ==========   ===========   ===========          ===========   ==========
</TABLE>

                                   F-10

<PAGE>


NOTE C - RELATED PARTY TRANSACTIONS

     Ashland sells chemicals and lubricants to Marathon  Ashland  Petroleum
LLC (MAP) and purchases  petroleum products from MAP. Such transactions are
in the ordinary course of business at negotiated prices comparable to those
of transactions  with other customers and suppliers.  In addition,  Ashland
leases  certain  facilities  to  MAP,  and  provides  certain   information
technology  and  administrative   services  to  MAP.  The  following  table
indicates  the  amounts  of these  transactions  for each of the last three
years ended September 30. Ashland's  transactions with other affiliates and
related parties were not significant.
<TABLE>
<CAPTION>
(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
Ashland's sales to MAP                                                         $      23    $       24    $       22
Ashland's purchases from MAP                                                         247           217           258
Ashland's costs charged to MAP                                                         3             6             6
</TABLE>
     Ashland has entered into  revolving  credit  agreements  providing for
short-term loans, at Ashland's  discretion,  to and from MAP at competitive
rates. Under MAP's borrowing agreement, Ashland may loan up to $190 million
to MAP. Under Ashland's borrowing agreement,  MAP could invest up to 38% of
its surplus cash  balances with Ashland.  No loans were  outstanding  under
either  agreement at September 30, 2003 and 2002.  Under these  agreements,
Ashland  paid  interest  expense  to MAP of $4  million  in 2001.  Interest
expense paid to MAP in 2003 and 2002 and interest  income received from MAP
in all three years was not significant.

     Ashland has  guaranteed  38% of MAP's  payments for certain  crude oil
purchases, up to a maximum guarantee of $95 million. At September 30, 2003,
Ashland's  contingent  liability  under  this  guarantee  amounted  to  $60
million.  Although  Ashland  has not made and does not  expect  to make any
payments  under  this  guarantee,  it has  recorded  the fair value of this
guarantee obligation, which is not significant.

NOTE D - UNCONSOLIDATED AFFILIATES

     As discussed in Note B, Ashland  accounts for its investment in MAP on
the equity method.  Under the agreements related to its formation,  MAP was
organized  by Ashland  and  Marathon  Oil Company  (Marathon)  as a limited
liability  company  for an initial  term  expiring on  December  31,  2022,
subject to automatic  ten-year  extensions  unless a termination  notice is
given by either parent.  The parents also entered into a put/call agreement
that could be  exercised  by either  parent at any time after  December 31,
2004. Under that agreement,  Ashland will have the right to sell all of its
ownership  interest in MAP to Marathon  for an amount  equal to 85% (90% if
equity  securities  are used) of the fair  market  value of that  ownership
interest, payable in cash or Marathon debt or equity securities. Similarly,
Marathon  will  have  the  right to  purchase  all of  Ashland's  ownership
interest  in MAP for an amount  equal to 115% of the fair  market  value of
that ownership interest, payable in cash.

     Summarized  financial  information reported by MAP and other companies
accounted  for on the equity  method is presented in the  following  table,
along with a summary of the  amounts  recorded  in  Ashland's  consolidated
financial statements. Since MAP is organized as a limited liability company
that has elected to be taxed as a partnership,  the parents are responsible
for income taxes applicable to their share of MAP's taxable income. The net
income of MAP  reflected  below does not include any  provision  for income
taxes  that  will be  incurred  by its  parents.  At  September  30,  2003,
Ashland's retained earnings included $212 million of undistributed earnings
from unconsolidated affiliates accounted for on the equity method.


                                   F-11

<PAGE>

<TABLE>
<CAPTION>

NOTE D - UNCONSOLIDATED AFFILIATES (CONTINUED)

                                                                                                  Other
(In millions)                                                                         MAP    affiliates         Total
----------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>           <C>             <C>
SEPTEMBER 30, 2003
Financial position
      Current assets                                                           $    3,889    $      149
      Current liabilities                                                          (2,640)          (82)
                                                                               -----------   -----------
      Working capital                                                               1,249            67
      Noncurrent assets                                                             4,946            99
      Noncurrent liabilities                                                         (586)          (59)
                                                                               -----------   -----------
      Stockholders' equity                                                     $    5,609    $      107
                                                                               ===========   ===========
Results of operations
      Sales and operating revenues                                             $   32,034    $      336
      Income from operations                                                          810            41
      Net income                                                                      795            34
Amounts recorded by Ashland
      Investments and advances                                                      2,448 (1)        47     $   2,495
      Equity income                                                                   285            16           301
      Distributions received                                                          197             6           203
SEPTEMBER 30, 2002
Financial position
      Current assets                                                           $    3,425    $      151
      Current liabilities                                                          (2,200)          (71)
                                                                               -----------   -----------
      Working capital                                                               1,225            80
      Noncurrent assets                                                             4,572           105
      Noncurrent liabilities                                                         (461)         (106)
                                                                               -----------   -----------
      Stockholders' equity                                                     $    5,336    $       79
                                                                               ===========   ===========
Results of operations
      Sales and operating revenues                                             $   25,063    $      237
      Income from operations                                                          511            24
      Net income                                                                      502            16
Amounts recorded by Ashland
      Investments and advances                                                      2,350            37     $   2,387
      Equity income                                                                   176             5           181
      Distributions received                                                          196             5           201
SEPTEMBER 30, 2001
Results of operations
      Sales and operating revenues                                             $   28,865    $      204
      Income from operations                                                        2,042            22
      Net income                                                                    2,022            14
Amounts recorded by Ashland
      Equity income                                                                   749             6     $     755
      Distributions received                                                          658             6           664

</TABLE>
(1)      At September 30, 2003,  Ashland's investment exceeds its equity in
         the net  assets  of MAP by $316  million,  of which  $151  million
         represents plant and equipment that will continue to be amortized,
         and $165 million represents goodwill.  Straight-line  amortization
         of the excess  investment  that was charged  against equity income
         amounted  to $16  million in 2003 and 2002 and $26 million in 2001
         (see Note A).


                                   F-12

<PAGE>
<TABLE>
<CAPTION>

NOTE E - DEBT

(In millions)                                                                                     2003          2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>           <C>
Medium-term notes, due 2004-2025, interest at a weighted
      average rate of 8% at September 30, 2003 (6.9% to 10.4%)                              $      578    $      765
8.80% debentures, due 2012                                                                         250           250
7.83% medium-term notes, Series J, due 2005                                                        229           229
Pollution control and industrial revenue bonds, due
      2004-2022, interest at a weighted average rate of 5.5%
      at September 30, 2003 (1.0% to 7.1%)                                                         176           201
6.86% medium-term notes, Series H, due 2009                                                        150           150
6.625% senior notes, due 2008                                                                      150           150
Other                                                                                               81            52
                                                                                            -----------   -----------
Total long-term debt                                                                             1,614         1,797
Current portion of long-term debt                                                                 (102)         (191)
                                                                                            -----------   -----------
Long-term debt (less current portion)                                                       $    1,512    $    1,606
                                                                                            ===========   ===========
</TABLE>
     Aggregate  maturities of long-term debt are $102 million in 2004, $399
million in 2005, $62 million in 2006, $125 million in 2007 and $168 million
in 2008. Interest payments on all indebtedness  amounted to $125 million in
2003,  $138  million  in 2002  and $167  million  in  2001.  No  short-term
borrowings  were  outstanding at September 30, 2003.  The weighted  average
interest rate on short-term  borrowings  outstanding  was 1.9% at September
30, 2002.

     Ashland has two revolving credit  agreements  providing for up to $350
million in  borrowings,  neither of which was in use at September 30, 2003.
The agreement  providing for $250 million in borrowings  expires on June 2,
2004.  The agreement  providing  for $100 million in borrowings  expires on
June 4, 2004.  Both agreements  contain a covenant  limiting new borrowings
based on Ashland's  stockholders' equity.  However,  these agreements would
have  permitted an  additional  $1.7 billion of borrowings at September 30,
2003. Additional  permissible  borrowings are increased (decreased) by 150%
of any increase (decrease) in stockholders'  equity.

<TABLE>
<CAPTION>
NET INTEREST AND OTHER FINANCIAL COSTS

(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
Interest expense                                                               $     123    $      135    $      162
Expenses on sales of accounts receivable (see Note G)                                  3             4             8
Loss on early retirement of debt                                                       -             -             5
Other financial costs                                                                  3             3             2
Interest income                                                                       (1)           (4)           (2)
                                                                               ----------   -----------   -----------
                                                                               $     128    $      138    $      175
                                                                               ==========   ===========   ===========
</TABLE>
NOTE F - LEASES

     Ashland and its subsidiaries are lessees of office  buildings,  retail
outlets, transportation and off-road construction equipment, warehouses and
storage  facilities,  and other equipment,  facilities and properties under
leasing  agreements that expire at various dates.  Under various  operating
leases,  Ashland  has  guaranteed  the  residual  value  of the  underlying
property  that had an  unamortized  cost totaling $117 million at September
30, 2003.  If Ashland had canceled  those leases at that date,  its maximum
obligations under the residual value guarantees would have amounted to $102
million.  Ashland  does not  expect  to incur  any  significant  charge  to
earnings  under  these  guarantees,  $46  million of which  relates to real
estate.  These lease  agreements are with unrelated third party lessors and
Ashland has no additional  contractual or other  commitments to any parties
to the leases.  Capitalized  lease  obligations are not significant and are
included in long-term debt. Future minimum rental payments at September 30,
2003, and rental expense under operating leases follow.

                                   F-13

<PAGE>


<TABLE>
<CAPTION>

NOTE F - LEASES (CONTINUED)

(In millions)
Future minimum rental payments                  Rental expense                     2003          2002          2001
--------------------------------------------------------------------------------------------------------------------
<S>                       <C>                   <C>                           <C>          <C>           <C>
2004                      $      47             Minimum rentals
2005                             39               (including rentals under
2006                             33               short-term leases)          $      98    $      103    $      116
2007                             26             Contingent rentals                    3             3             5
2008                             22             Sublease rental income               (2)           (2)           (2)
Later years                      91                                           ----------   -----------   -----------
                          ----------                                          $      99    $      104    $      119
                          $     258                                           ==========   ===========   ===========
                          ==========

</TABLE>

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

NOTE G - SALE OF ACCOUNTS RECEIVABLE

     On March 15, 2000, Ashland entered into a five-year agreement to sell,
on an ongoing basis with limited  recourse,  up to a $200 million undivided
interest in a designated  pool of accounts  receivable.  Under the terms of
the agreement, new receivables are added to the pool and collections reduce
the pool. Since inception,  interests  totaling $150 million have been sold
on a continuous  basis,  except for a period between April 29 and September
7, 2003, when the full $200 million capacity was utilized.  Ashland retains
a credit  interest in these  receivables  and addresses its risk of loss on
this retained interest in its allowance for doubtful accounts.  Receivables
sold exclude defaulted accounts or concentrations  over certain limits with
any one  customer.  The  costs  of these  sales  are  based on the  buyer's
short-term borrowing rates and approximated 1.5% at September 30, 2003, and
2.2% at September 30, 2002.

NOTE H - FINANCIAL INSTRUMENTS

DERIVATIVE INSTRUMENTS

     Ashland  uses  interest  rate swaps and  commodity-based  and  foreign
currency  derivative  instruments  as described  in Note A. Open  contracts
other than interest rate swaps were not  significant  at September 30, 2003
and 2002.

FAIR VALUES

     The  carrying  amounts  and  fair  values  of  Ashland's   significant
financial  instruments at September 30, 2003 and 2002 are shown below.  The
fair values of cash and cash equivalents,  investments of captive insurance
companies and commercial paper approximate their carrying amounts. The fair
values of long-term  debt are based on quoted  market  prices or, if market
prices are not available,  the present values of the underlying  cash flows
discounted at Ashland's  incremental  borrowing  rates.  The fair values of
interest rate swaps are based on quoted market prices.

<TABLE>
<CAPTION>
                                                                          2003                            2002
                                                             ------------------------         ------------------------
                                                              Carrying          Fair           Carrying          Fair
(In millions)                                                   amount         value             amount         value
----------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>                <C>          <C>
Assets
      Cash and cash equivalents                              $     223     $     223          $      90    $       90
      Interest rate swaps                                            1             1                 11            11
      Investments of captive insurance companies (1)                13            13                  3             3
Liabilities
      Commercial paper                                               -             -                 10            10
      Long-term debt (including current portion)                 1,614         1,809              1,797         1,958

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


                                   F-14

<PAGE>



NOTE I - ACQUISITIONS AND DIVESTITURES

ACQUISITIONS

     During 2001,  Ashland  Specialty  Chemical  acquired Neste Polyester's
unsaturated  polyester  resins and gelcoats  business and assets from Dynea
Oy. In  addition,  several  smaller  acquisitions  were  completed by APAC,
Ashland  Specialty  Chemical  and  Valvoline  during the three  years ended
September 30, 2003. These  acquisitions were accounted for as purchases and
did not have a  significant  effect  on  Ashland's  consolidated  financial
statements.

DIVESTITURES

     During  2003,  APAC sold the  assets  of its  Nashville  division  and
certain  ready-mix  operations in Missouri.  During 2001, APAC sold certain
grading and utilities construction  operations.  None of these divestitures
had a significant effect on Ashland's  consolidated  financial  statements.
See  Note N for a  discussion  of the  sale  of  the  Electronic  Chemicals
division of Ashland Specialty Chemical in 2003.

NOTE J - INCOME TAXES

     A summary of the  provision  for income  taxes  related to  continuing
operations follows.
<TABLE>
<CAPTION>
(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>          <C>
Current (1)
      Federal                                                                  $     (17)   $      151    $       85
      State                                                                           (3)           22            13
      Foreign                                                                         15            16            17
                                                                               ----------   -----------   -----------
                                                                                      (5)          189           115
Deferred                                                                              49          (121)          151
                                                                               ----------   -----------   -----------
                                                                               $      44    $       68    $      266
                                                                               ==========   ===========   ===========
</TABLE>
(1)      Income tax payments  amounted to $24 million in 2003, $158 million
         in 2002 and $103 million in 2001.


     Deferred  income  taxes are  provided  for  income and  expense  items
recognized  in different  years for tax and financial  reporting  purposes.
Ashland  has  not  recorded  deferred  income  taxes  on the  undistributed
earnings of certain foreign  subsidiaries  and 50% owned foreign  corporate
joint ventures.  Management intends to indefinitely reinvest such earnings,
which  amounted  to  $105  million  at  September  30,  2003.   Because  of
significant  foreign tax credits,  it is not  practicable  to determine the
U.S. federal income tax liability,  if any, that might be incurred if those
earnings  were  distributed.   Temporary  differences  that  give  rise  to
significant deferred tax assets and liabilities follow.
<TABLE>
<CAPTION>
(In millions)                                                                                     2003          2002
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>           <C>
Employee benefit obligations                                                                $      219    $      204
Environmental, self-insurance and litigation reserves (net of receivables)                         196           134
Compensation accruals                                                                               59            53
Uncollectible accounts receivable                                                                   18            18
Other items                                                                                         61            51
                                                                                            -----------   -----------
Total deferred tax assets                                                                          553           460
                                                                                            -----------   -----------
Property, plant and equipment                                                                      189           175
Investment in unconsolidated affiliates                                                            513           412
                                                                                            -----------   -----------
Total deferred tax liabilities                                                                     702           587
                                                                                            -----------   -----------
Net deferred tax liability                                                                  $      149    $      127
                                                                                            ===========   ===========
</TABLE>
                                   F-15

<PAGE>


NOTE J - INCOME TAXES (CONTINUED)

     The U.S. and foreign  components of income from continuing  operations
before income taxes and a  reconciliation  of the statutory  federal income
tax with the provision for income taxes follow.
<TABLE>
<CAPTION>
(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
Income from continuing operations before income taxes
      United States                                                            $      60    $      114    $      594
      Foreign                                                                         78            69            62
                                                                               ----------   -----------   -----------
                                                                               $     138    $      183    $      656
                                                                               ==========   ===========   ===========

Income taxes computed at U.S. statutory rate (35%)                             $      48    $       64    $      230
Increase (decrease) in amount computed resulting from
      State income taxes                                                               3             1            21
      Net impact of foreign results                                                   (2)            3             4
      Nondeductible goodwill amortization                                              -             -            11
      Business meals and entertainment                                                 3             3             3
      Deductible dividends under employee stock ownership plan                        (2)           (3)           (3)
      Life insurance expense (income)                                                 (2)            4             5
      Other items                                                                     (4)           (4)           (5)
                                                                               ----------   -----------   -----------
Income taxes                                                                   $      44    $       68    $      266
                                                                               ==========   ===========   ===========
</TABLE>

NOTE K - CAPITAL STOCK

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

     At September 30, 2003,  500,000 shares of cumulative  preferred  stock
are reserved for potential  issuance under the Shareholder  Rights Plan and
10.5 million common shares are reserved for issuance under stock  incentive
and deferred compensation plans.

NOTE L - STOCK INCENTIVE PLANS

     Ashland  has  stock  incentive  plans  under  which key  employees  or
directors  can  purchase  shares of common  stock  under  stock  options or
nonvested  stock awards.  Stock options are granted to employees at a price
equal to the fair market value of the stock on the date of grant and become
exercisable over periods of one to four years. Unexercised options lapse 10
years after the date of grant.  Nonvested stock awards entitle employees or
directors to purchase  shares at a nominal cost, to vote such shares and to
receive  any  dividends  thereon.  However,  such  shares  are  subject  to
forfeiture upon termination of service before the vesting period ends.

     As discussed in Note A, Ashland began expensing employee stock options
in accordance  with FAS 123 in 2003. The following  table  illustrates  the
effect on net income and  earnings per share if FAS 123 had been applied in
2002 and 2001 to all  outstanding and unvested  awards.  The fair value per
share of options  granted was  determined  using the  Black-Scholes  option
pricing model with the indicated assumptions.


                                   F-16

<PAGE>
<TABLE>
<CAPTION>
(In millions except per share data)                                                2003         2002           2001
--------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>           <C>
Net income as reported                                                        $      75    $     117     $      417
Add:  Stock-based employee compensation expense included in
      reported net income, net of related tax effects                                 5            -              -
Deduct:  Total stock-based employee compensation expense
      determined under FAS 123 for all awards, net of related tax effects            (5)          (4)            (3)
                                                                              ----------   ----------    -----------
Pro forma net income                                                          $      75    $     113     $      414
                                                                              ==========   ==========    ===========
Earnings per share:
      Basic - as reported                                                     $    1.10    $    1.69     $     5.99
      Basic - pro forma                                                            1.10         1.63           5.94
      Diluted - as reported                                                        1.10         1.67           5.93
      Diluted - pro forma                                                          1.10         1.61           5.88
Weighted average fair value per share of options granted                           6.71         5.35           7.38
Assumptions (weighted average)
      Risk-free interest rate                                                       3.1%         2.9%           4.1%
      Expected dividend yield                                                       3.3%         3.8%           3.0%
      Expected volatility                                                          27.3%        26.7%          24.4%
      Expected life (in years)                                                      5.0          5.0            5.0

</TABLE>
     A progression  of activity and various other  information  relative to
stock options is presented in the following table.
<TABLE>
<CAPTION>
                                                 2003                        2002                       2001
                                      ------------------------    ------------------------   ------------------------
                                                     Weighted                    Weighted                   Weighted
                                                      average                     average                    average
(In thousands except                      Common option price        Common  option price        Common option price
 per share data)                          shares    per share        shares     per share        shares    per share
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>      <C>               <C>      <C>                <C>      <C>
Outstanding-beginning of year (1)          7,482    $   37.28         6,735    $    38.41         6,380    $   38.01
Granted                                      537        33.42         1,210         29.05         1,001        36.38
Exercised                                   (103)       27.96          (413)        31.34          (572)       30.06
Canceled                                    (109)       35.27           (50)        38.54           (74)       41.04
                                      -----------                 ----------                 -----------
Outstanding-end of year (1)                7,807        37.17         7,482         37.28         6,735        38.41
                                      ===========                 ==========                 ===========
Exercisable-end of year                    6,491        38.25         5,537         39.34         4,803        39.36
</TABLE>
(1)      Shares of common stock  available  for future grants of options or
         awards  amounted to 1,860,000 at September  30, 2003 and 2,853,000
         at  September  30,  2002.  Exercise  prices per share for  options
         outstanding at September 30, 2003 ranged from $25.00 to $34.00 for
         2,982,000 shares,  from $35.88 to $43.13 for 3,500,000 shares, and
         from $44.20 to $53.38 for 1,325,000  shares.  The weighted average
         remaining contractual life of the options was 5.6 years.


NOTE M - LITIGATION, CLAIMS AND CONTINGENCIES

ASBESTOS-RELATED LITIGATION

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

                                   F-17


<PAGE>


NOTE M - LITIGATION, CLAIMS AND CONTINGENCIES (CONTINUED)

     A summary of asbestos  claims  activity  follows.  Because  claims are
frequently  filed and  settled  in large  groups,  the amount and timing of
settlements,   as  well  as  the  number  of  open  claims,  can  fluctuate
significantly from period to period.
<TABLE>
<CAPTION>
(In thousands)                                                                      2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
Open claims - beginning of year                                                      160           167           118
New claims filed                                                                      66            45            52
Claims settled                                                                        (7)          (15)           (2)
Claims dismissed                                                                     (21)          (37)           (1)
                                                                               ----------   -----------   -----------
Open claims - end of year                                                            198           160           167
                                                                               ==========   ===========   ===========
</TABLE>
     Since October 1, 2000,  Riley has been dismissed as a defendant in 71%
of the  resolved  claims.  Amounts  spent on  litigation  defense and claim
settlements  totaled  $45  million  in 2003,  $38  million  in 2002 and $15
million in 2001.

     During the December  2002 quarter,  Ashland  increased its reserve for
asbestos  claims by $390 million to cover the litigation  defense and claim
settlement costs expected to be paid during the next ten years.  Additional
reserves were provided  during the nine months ended September 30, 2003, to
maintain the reserve at a level  adequate to cover future  payments  over a
rolling  10-year period.  Prior to December 31, 2002, the asbestos  reserve
was based on the  estimated  costs that would be  incurred  to settle  open
claims.  The  estimates of future  asbestos  claims and related  costs were
developed  with the  assistance of Hamilton,  Rabinovitz & Alschuler,  Inc.
(HR&A),  nationally  recognized  experts  in  that  field.  Reflecting  the
additional  provisions,   Ashland's  reserve  for  asbestos  claims  on  an
undiscounted basis amounted to $610 million at September 30, 2003, compared
to $202 million at September 30, 2002.

     The  methodology  used by HR&A to project  future  asbestos  costs was
based largely on Ashland's recent  experience,  including  claim-filing and
settlement  rates,  disease mix, open claims,  and  litigation  defense and
claim  settlement  costs.  Ashland's  claim  experience was compared to the
results of previously  conducted  epidemiological  studies  estimating  the
number of people likely to develop asbestos-related diseases. Those studies
were  undertaken in connection  with  national  analyses of the  population
expected to have been exposed to  asbestos.  Using that  information,  HR&A
estimated the number of future  claims that would be filed,  as well as the
related costs that would be incurred in resolving those claims.

     Projecting future asbestos costs is subject to numerous variables that
are  extremely  difficult  to  predict.  In  addition  to  the  significant
uncertainties  surrounding  the number of claims  that  might be  received,
other  variables  include the type and  severity of the disease  alleged by
each claimant,  the long latency period associated with asbestos  exposure,
dismissal rates, costs of medical treatment,  the impact of bankruptcies of
other companies that are co-defendants in claims, uncertainties surrounding
the litigation  process from  jurisdiction to jurisdiction and from case to
case,  and the impact of  potential  changes  in  legislative  or  judicial
standards. Furthermore, any predictions with respect to these variables are
subject to even greater uncertainty as the projection period lengthens.  In
light of these inherent  uncertainties,  Ashland believes that ten years is
the most reasonable  period for recognizing a reserve for future costs, and
that costs  that might be  incurred  after that  period are not  reasonably
estimable.

     Insurance  provides  reimbursements for most of the litigation defense
and claim settlement costs incurred, and coverage-in-place agreements exist
with the insurance companies that provide substantially all of the coverage
currently  being accessed.  As a result,  the current year increases in the
asbestos  reserve  were  largely  offset by probable  insurance  recoveries
valued at $257 million.  The amounts not recoverable are generally due from
insurers that are insolvent, rather than as a result of uninsured claims or
the  exhaustion  of Ashland's  insurance  coverage.  At September 30, 2003,
Ashland's  receivable  for  recoveries  of such  costs  from  its  insurers
amounted to $429 million,  of which $26 million relates to costs previously
paid.  Receivables  from  insurance  companies  amounted to $196 million at
September 30, 2002.

     Ashland retained the services of  Tillinghast-Towers  Perrin to assist
management  in  the  estimation  of  probable  insurance  recoveries.  Such
recoveries are based on assumptions and estimates surrounding the available
insurance  coverage,  including  the  continued  viability  of all  solvent
insurance carriers.  About 35% of the estimated  receivables from insurance
companies  at  September  30,  2003,  are  expected to be due from  Equitas
Limited (Equitas) and other London companies. Of the remainder, over 90% is
expected to come from  companies or groups that are rated A or higher by A.
M. Best.

     Although  coverage  limits  are  resolved  in  the   coverage-in-place
agreement with Equitas and other London companies,  there is a disagreement
with these companies over the timing of recoveries.  The resolution of this
disagreement  could  have a  material  effect  on the  value  of  insurance
recoveries from those companies. In estimating


                                   F-18

<PAGE>


the value of future  recoveries  at September  30,  2003,  Ashland used the
least favorable interpretation of this agreement and will continue to do so
until such time as the disagreement is resolved.

ENVIRONMENTAL PROCEEDINGS

     Ashland is subject to various federal,  state and local  environmental
laws and regulations that require  environmental  assessment or remediation
efforts (collectively  environmental remediation) at multiple locations. At
September 30, 2003, such locations included 100 waste treatment or disposal
sites where Ashland has been identified as a potentially  responsible party
under Superfund or similar state laws, approximately 135 current and former
operating  facilities  (including certain operating  facilities conveyed to
MAP) and about 1,220 service  station  properties.  Ashland's  reserves for
environmental  remediation  amounted to $174 million at September 30, 2003,
and $169 million at  September  30, 2002.  Such amounts  reflect  Ashland's
estimates of the most likely  costs that will be incurred  over an extended
period  to  remediate  identified   conditions  for  which  the  costs  are
reasonably  estimable,   without  regard  to  any  third-party  recoveries.
Engineering  studies,  probability  techniques,  historical  experience and
other  factors are used to identify and evaluate  remediation  alternatives
and  their  related  costs  in  determining  the  estimated   reserves  for
environmental remediation.

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

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

OTHER LEGAL PROCEEDINGS

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

NOTE N - DISCONTINUED OPERATIONS

     Ashland is subject to liabilities from claims alleging personal injury
caused by exposure to asbestos.  Virtually all of those liabilities  result
from indemnification  obligations undertaken in 1990 in connection with the
sale of Riley Stoker Corporation,  a former subsidiary.  During the quarter
ended December 31, 2002,  Ashland increased its reserve for asbestos claims
by $390  million to cover  litigation  defense and claim  settlement  costs
expected to be paid  during the next ten years.  Additional  reserves  were
provided  during the nine months ended  September 30, 2003, to maintain the
reserve at a level adequate to cover future payments over a rolling 10-year
period.  Because insurance provides  reimbursements for most of these costs
and  coverage-in-place  agreements exist with the insurance  companies that
provide  substantially all of the coverage currently being accessed,  these
increases  in the  asbestos  reserve  are  expected to be offset in part by
probable insurance recoveries.  The resulting $178 million pretax charge to
income,  net of deferred income tax benefits of $69 million,  was reflected
as an after-tax  loss from  discontinued  operations of $109 million in the
Statements of  Consolidated  Income.  See Note M for further  discussion of
Ashland's asbestos-related litigation.

     On August 29,  2003,  Ashland  sold the net  assets of its  Electronic
Chemicals business and certain related subsidiaries in a transaction valued
at approximately $300 million before tax.  Electronic  Chemicals was a part
of Ashland  Specialty  Chemical,  providing  ultra pure chemicals and other
products  and  services  to  the  worldwide  semiconductor  industry,  with
revenues of $215 million in 2003,  $217 million in 2002 and $212 million in
2001. The sale reflects Ashland's strategy to optimize its business mix and
focus greater attention on the remaining  specialty chemical businesses and
other  transportation  and  construction-related  operations  where  it can
achieve  strategic  advantage.   Ashland's  after-tax  proceeds  were  used
primarily  to  reduce  debt.  All  assets  and  liabilities  of  Electronic
Chemicals  are  classified  as current in the  September  30, 2002  balance
sheet.  Assets of $211  million  were  composed  of  current  assets of $62
million,  investments and other assets of $23 million, and property,  plant
and equipment of


                                   F-19


<PAGE>


NOTE N - DISCONTINUED OPERATIONS (CONTINUED)

$126  million.   Liabilities  of  $39  million  were  composed  of  current
liabilities of $27 million and noncurrent liabilities of $12 million.

     In 2001,  Ashland sold its remaining 4.7 million Arch Coal shares in a
public offering for $86 million and recorded reserves for  asbestos-related
litigation.  Components  of  amounts  reflected  in the  income  statements
related to discontinued operations are presented in the following table.
<TABLE>
<CAPTION>
(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
INCOME FROM DISCONTINUED OPERATIONS
Reserves for asbestos-related litigation                                       $    (178)   $        -    $      (23)
Electronic Chemicals                                                                  17            17            20
GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS
Electronic Chemicals                                                                 101             -             -
Arch Coal                                                                              -             -            49
                                                                               ----------   -----------   -----------
INCOME BEFORE INCOME TAXES                                                           (60)           17            46
INCOME TAXES
Income from discontinued operations
      Reserves for asbestos-related litigation                                        69             -             9
      Electronic Chemicals                                                            (3)           (4)           (7)
Gain on disposal of discontinued operations                                          (20)            -           (16)
                                                                               ----------   -----------   -----------
RESULTS FROM DISCONTINUED OPERATIONS                                           $     (14)   $       13    $       32
                                                                               ==========   ===========   ===========
</TABLE>
NOTE O - EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT PLANS

     Ashland and its  subsidiaries  sponsor  noncontributory  pension plans
that cover  substantially  all employees.  For certain  plans,  half of the
balances in employees'  accounts under an employee stock ownership plan are
coordinated with their pension  benefits.  Ashland's  objective is to fully
fund the accumulated  benefit  obligations of its qualified  plans, and the
level of its contributions is determined annually to achieve that objective
over time.  During 2003,  Ashland  contributed $61 million to its qualified
pension plans,  and an additional $50 million was contributed on October 1,
2003.  Ashland  funds the costs of its  nonqualified  pension  plans as the
benefits are paid.

     Prior to July 1, 2003,  benefits  under  Ashland's  pension plans were
generally based on employees' years of service and compensation  during the
years immediately preceding their retirement. Although certain changes were
implemented on that date,  the pension  benefits of employees with at least
ten years of service  were not  affected.  As of July 1, 2003,  the pension
benefits of most other  employees were converted to cash balance  accounts.
Such  employees  received an initial  account  balance equal to the present
value of their  accrued  benefits  under the  previous  plan on that  date.
Although  individual  plans have varying  provisions,  employees  with cash
balance accounts generally receive either fixed pay credits or variable pay
credits  ranging  from 3% to 16% of pay  based  on their  age  plus  vested
service.  Their  accounts  are also  credited  with  interest  based on the
one-year U. S. Treasury rate plus 1%, subject to a minimum annual crediting
rate of 4% and a maximum of 7%. Pension  benefits for these  employees will
be based on the balances in their accounts upon retirement.

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

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

                                   F-20

<PAGE>


     Employees  not  meeting the  required  qualifications  were  allocated
notional  accounts based on their age and years of service that can only be
used to pay all or part of the  premiums for retiree  healthcare  coverage.
Such premiums represent the full costs of providing that coverage,  without
any subsidy from Ashland.  The notional accounts are credited with interest
based on the  one-year U. S.  Treasury  rate plus 1%,  subject to a minimum
annual  crediting rate of 4% and a maximum of 7%. Retirees will continue to
have  access  to  Ashland  coverage  after  their  notional   accounts  are
exhausted, but they will be responsible for paying the full premiums.

     Summaries  of the changes in the benefit  obligations  and plan assets
(primarily  listed stocks and debt  securities) and of the funded status of
the plans follow.  Pension benefit obligations under the qualified plans at
September  30,  2003 were  reduced  by  approximately  $82  million,  which
represents  the  amount  expected  to be  funded  by  the  balances  in the
employees' accounts under an employee stock ownership plan.

<TABLE>
<CAPTION>

                                                              Pension benefits
                                              --------------------------------------------------
                                                        2003                       2002
                                              ------------------------   -----------------------             Other
                                                                                                         postretirement
                                                                 Non-                      Non-             benefits
                                               Qualified    qualified     Qualified   qualified       --------------------
(In millions)                                      plans        plans         plans       plans          2003        2002
--------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>           <C>          <C>           <C>         <C>
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligations at October 1              $      874   $      109    $      715   $     103     $     361   $     333
Service cost                                          42            1            42           1            11          12
Interest cost                                         58            7            52           7            22          23
Retiree contributions                                  -            -             -           -            12           8
Benefits paid                                        (33)          (4)          (30)         (4)          (33)        (33)
Plan amendments                                       (6)           -             -           -           (95)          -
Changes in assumptions                                58            5            59           7            19          19
Other-net                                              9          (19)           36          (5)           (1)         (1)
                                              -----------  -----------   -----------  ----------    ----------  ----------
Benefit obligations at September 30           $    1,002   $       99    $      874   $     109     $     296   $     361
                                              ===========  ===========   ===========  ==========    ==========  ==========
CHANGE IN PLAN ASSETS
Value of plan assets at October 1             $      551                 $      518
Actual return on plan assets                          99                        (42)
Employer contributions                                61                        103
Benefits paid                                        (33)                       (30)
Other                                                  2                          2
                                              -----------                -----------
Value of plan assets at September 30          $      680                 $      551
                                              ===========                ===========
FUNDED STATUS OF THE PLANS
Unfunded accumulated obligation               $      139   $       90    $      150   $      98     $     296   $     361
Provision for future salary increases                183            9           173          11             -           -
                                              -----------  -----------   -----------  ----------    ----------  ----------
Excess of obligations over plan assets               322           99           323         109           296         361
Unrecognized actuarial loss                         (344)         (41)         (354)        (43)          (87)        (72)
Unrecognized prior service credit (cost)               3            -            (2)          -           100          15
                                              -----------  -----------   -----------  ----------    ----------  ----------
Net liability recognized                      $      (19)  $       58    $      (33)  $      66     $     309   $     304
                                              ===========  ===========   ===========  ==========    ==========  ==========

BALANCE SHEET LIABILITIES (ASSETS)
Accrued benefit liabilities                         $     231                  $     250            $     309   $     304
Intangible assets                                          (1)                        (2)                   -           -
Accumulated other comprehensive loss                     (191)                      (215)                   -           -
                                                    ----------                 ----------           ----------  ----------
Net liability recognized                            $      39                  $      33            $     309   $     304
                                                    ==========                 ==========           ==========  ==========
ASSUMPTIONS AS OF SEPTEMBER 30
Discount rate                                            6.25%                      6.75%                6.25%       6.75%
Salary adjustment rate                                   4.50                       5.00                    -           -
</TABLE>

                                   F-21


<PAGE>


NOTE O - EMPLOYEE BENEFIT PLANS (CONTINUED)

     The  following  table  details  the  components  of pension  and other
postretirement benefit costs.
<TABLE>
<CAPTION>
                                                                                                 Other
                                                  Pension benefits                       postretirement benefits
                                        -----------------------------------       -----------------------------------
(In millions)                                2003         2002        2001             2003        2002         2001
---------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>         <C>              <C>         <C>          <C>
Service cost                            $      43    $      43   $      37        $      11   $      12    $      11
Interest cost                                  65           59          53               22          23           22
Expected return on plan assets (9%)           (51)         (47)        (48)               -           -            -
Other amortization and deferral                30           19           4               (7)         (6)          (6)
                                        ----------   ----------  ----------       ----------  ----------   ----------
                                        $      87    $      74   $      46        $      26   $      29    $      27
                                        ==========   ==========  ==========       ==========  ==========   ==========

</TABLE>

     The changes previously  discussed in the postretirement  benefit plans
reduced Ashland's accrued obligations under those plans, and the reductions
are being amortized to income.  Such  amortization  reduced Ashland's costs
for postretirement benefit costs by $10 million in 2003, $8 million in 2002
and $9 million in 2001. At September 30, 2003,  the remaining  unrecognized
prior service credit  resulting from the changes  amounted to $100 million,
and will reduce future costs by $15 million in 2004, $9 million in 2005 and
about $8 million annually thereafter through 2014.

OTHER PLANS

     Ashland sponsors a qualified savings plan to assist eligible employees
in providing for retirement or other future needs. Under that plan, Ashland
contributes  up to  5.5%  (increased  from  4.2%  at  July  1,  2003)  of a
participating  employee's earnings.  Company contributions  amounted to $19
million in 2003, $17 million in 2002 and $16 million in 2001.

     Certain union employees are covered under multiemployer  pension plans
administered  by unions.  Amounts  contributed  to the plans by Ashland and
charged to expense amounted to $5 million annually in 2003, 2002 and 2001.


                                   F-22


<PAGE>


NOTE P - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following table presents quarterly  financial  information and per
share data relative to Ashland's  common stock.  Amounts for quarters prior
to June 2003 have been  restated to reflect  the results of the  Electronic
Chemicals   division  of  Ashland  Specialty  Chemical  as  a  discontinued
operation. See Note N for further explanations.

<TABLE>
<CAPTION>
Quarters ended                          December 31            March 31              June 30            September 30
                                    -------------------  --------------------  -------------------  -------------------
(In millions except per share data)    2002       2001 (1)   2003      2002 (1)   2003       2002       2003      2002
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>       <C>        <C>       <C>         <C>       <C>        <C>        <C>
Sales and operating revenues        $ 1,738   $  1,765   $  1,644  $  1,553    $ 2,006   $  1,997   $  2,130   $ 2,033
Operating income (loss)                  32         96        (24)       (3)       138        132        119        96
Income (loss) from
      continuing operations              (1)        37        (37)      (23)        71         61         61        41
Net income (loss)                       (92)        27        (39)      (21)        70         65        137        47

Basic earnings (loss) per share
      Continuing operations         $  (.02)  $    .53   $   (.54) $   (.33)   $  1.04   $    .88   $    .89   $   .59
      Net income (loss)               (1.35)       .38       (.57)     (.31)      1.02        .94       2.00       .68

Diluted earnings (loss) per share
      Continuing operations         $  (.02)  $    .52   $   (.54) $   (.33)   $  1.03   $    .87   $    .89   $   .59
      Net income (loss)               (1.35)       .38       (.57)     (.31)      1.01        .93       1.99       .68

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

Market price per common share
      High                          $ 30.80   $  46.54   $  30.37  $  46.98    $ 33.85   $  45.61   $  34.51   $ 41.20
      Low                             23.60      37.60      25.91     43.04      28.66      37.11      30.27     26.29

</TABLE>

(1)      MAP  maintains an inventory  valuation  reserve to reduce the LIFO
         cost  of  its   inventories  to  their  net   realizable   values.
         Adjustments  in that  reserve are  recognized  quarterly  based on
         changes in petroleum product prices,  creating non-cash charges or
         credits to Ashland's earnings. A pretax charge of $29 million ($18
         million  after  tax,  or $.26 per  share)  was  recognized  in the
         December  2001 quarter and reversed in the March 2002 quarter as a
         result of these adjustments.


                                   F-23


<PAGE>

<TABLE>
<CAPTION>
Ashland Inc. and Consolidated Subsidiaries
INFORMATION BY INDUSTRY SEGMENT
Years Ended September 30

(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
REVENUES
Sales and operating revenues
      APAC                                                                     $   2,400    $    2,652    $    2,624
      Ashland Distribution                                                         2,804         2,535         2,849
      Ashland Specialty Chemical                                                   1,170         1,094         1,055
      Valvoline                                                                    1,235         1,152         1,092
      Intersegment sales (1)
        Ashland Distribution                                                         (21)          (20)          (26)
        Ashland Specialty Chemical                                                   (69)          (63)          (64)
        Valvoline                                                                     (1)           (2)           (2)
                                                                               ----------   -----------   -----------
                                                                                   7,518         7,348         7,528
Equity income
      APAC                                                                             9             -             -
      Ashland Specialty Chemical                                                       7             4             5
      Valvoline                                                                        -             1             1
      Refining and Marketing                                                         285           176           749
                                                                               ----------   -----------   -----------
                                                                                     301           181           755
Other income
      APAC                                                                             -            12            13
      Ashland Distribution                                                            19            17            15
      Ashland Specialty Chemical                                                      10             4             6
      Valvoline                                                                        5             7             6
      Refining and Marketing                                                           2             2             7
      Corporate                                                                       10             5             6
                                                                               ----------   -----------   -----------
                                                                                      46            47            53
                                                                               ----------   -----------   -----------
                                                                               $   7,865    $    7,576    $    8,336
                                                                               ==========   ===========   ===========
OPERATING INCOME
APAC                                                                           $     (42)   $      122    $       55
Ashland Distribution                                                                  32             1            35
Ashland Specialty Chemical                                                            31            70            38
Valvoline                                                                             87            77            81
Refining and Marketing (2)                                                           263           143           707
Corporate                                                                           (105)          (92)          (85)
                                                                               ----------   -----------   -----------
                                                                               $     266    $      321    $      831
                                                                               ==========   ===========   ===========
ASSETS
APAC                                                                           $   1,481    $    1,498    $    1,574
Ashland Distribution                                                                 856           884           961
Ashland Specialty Chemical                                                           749           941           941
Valvoline                                                                            667           611           642
Refining and Marketing                                                             2,484         2,409         2,452
Corporate (3)                                                                        769           379           558
                                                                               ----------   -----------   -----------
                                                                               $   7,006    $    6,722    $    7,128
                                                                               ==========   ===========   ===========
</TABLE>

                                   F-24


<PAGE>

<TABLE>
<CAPTION>

(In millions)                                                                       2003          2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>          <C>           <C>
INVESTMENT IN EQUITY AFFILIATES
APAC                                                                           $       4    $       (2)   $        -
Ashland Specialty Chemical                                                            35            30            30
Valvoline                                                                              8             9             9
Refining and Marketing                                                             2,448         2,350         2,387
                                                                               ----------   -----------   -----------
                                                                               $   2,495    $    2,387    $    2,426
                                                                               ==========   ===========   ===========
EXPENSE (INCOME) NOT AFFECTING CASH
Depreciation, depletion and amortization
      APAC                                                                     $     108    $      114    $      133
      Ashland Distribution                                                            19            21            27
      Ashland Specialty Chemical                                                      40            38            46
      Valvoline                                                                       26            24            23
      Corporate                                                                       11            11            11
                                                                               ----------   -----------   -----------
                                                                                     204           208           240
Other noncash items (4)
      APAC                                                                           (25)           24            14
      Ashland Distribution                                                             3             1            (1)
      Ashland Specialty Chemical                                                      (2)            3             3
      Valvoline                                                                        4            (2)            4
      Refining and Marketing                                                           2          (168)           21
      Corporate                                                                      (30)           41            24
                                                                               ----------   -----------   -----------
                                                                                     (48)         (101)           65
                                                                               ----------   -----------   -----------
                                                                               $     156    $      107    $      305
                                                                               ==========   ===========   ===========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
APAC                                                                           $      47    $      107    $       92
Ashland Distribution                                                                   5            12            15
Ashland Specialty Chemical                                                            34            27            38
Valvoline                                                                             16            21            29
Corporate                                                                              8             7            12
                                                                               ----------   -----------   -----------
                                                                               $     110    $      174    $      186
                                                                               ==========   ===========   ===========
</TABLE>

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


                                   F-25


<PAGE>

<TABLE>
<CAPTION>
Ashland Inc. and Consolidated Subsidiaries
FIVE-YEAR SELECTED FINANCIAL INFORMATION
Years Ended September 30

(In millions except per share data)                       2003          2002          2001         2000         1999
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>            <C>          <C>          <C>
SUMMARY OF OPERATIONS
Revenues
      Sales and operating revenues                   $   7,518    $    7,348     $   7,528    $   7,771    $   6,623
      Equity income                                        301           181           755          395          350
      Other income                                          46            47            53           63           88
Cost and expenses
      Cost of sales and operating expenses              (6,005)       (5,736)       (6,016)      (6,157)      (5,118)
      Selling, general and administrative expenses      (1,390)       (1,311)       (1,249)      (1,200)      (1,113)
      Depreciation, depletion and amortization            (204)         (208)         (240)        (227)        (219)
                                                     ----------   -----------    ----------   ----------   ----------
Operating income                                           266           321           831          645          611
Net interest and other financial costs                    (128)         (138)         (175)        (194)        (140)
                                                     ----------   -----------    ----------   ----------   ----------
Income from continuing operations
      before income taxes                                  138           183           656          451          471
Income taxes                                               (44)          (68)         (266)        (179)        (188)
                                                     ----------   -----------    ----------   ----------   ----------
Income from continuing operations                           94           115           390          272          283
Results from discontinued operations                       (14)           13            32         (202)           7
                                                     ----------   -----------    ----------   ----------   ----------
Income before cumulative effect
      of accounting changes                                 80           128           422           70          290
Cumulative effect of accounting changes                     (5)          (11)           (5)           -            -
                                                     ----------   -----------    ----------   ----------   ----------
Net income                                           $      75    $      117     $     417    $      70    $     290
                                                     ==========   ===========    ==========   ==========   ==========
BALANCE SHEET INFORMATION
Current assets                                       $   2,085    $    2,071     $   2,233    $   2,173    $   2,060
Current liabilities                                      1,484         1,520         1,530        1,711        1,398
                                                     ----------   -----------    ----------   ----------   ----------
Working capital                                      $     601    $      551     $     703    $     462    $     662
                                                     ==========   ===========    ==========   ==========   ==========

Total assets                                         $   7,006    $    6,722     $   7,128    $   6,824    $   6,475

Short-term debt                                      $       -    $       10     $       -    $     245    $     182
Long-term debt (including current portion)               1,614         1,797         1,871        1,981        1,664
Stockholders' equity                                     2,253         2,173         2,226        1,965        2,200
                                                     ----------   -----------    ----------   ----------   ----------
Capital employed                                     $   3,867    $    3,980     $   4,097    $   4,191    $   4,046
                                                     ==========   ===========    ==========   ==========   ==========
CASH FLOW INFORMATION
Cash flows from operations                           $     242    $      163     $     814    $     457    $     373
Additions to property, plant and equipment                 110           174           186          214          232
Cash dividends                                              75            76            76           78           81
COMMON STOCK INFORMATION
Diluted earnings per share
      Income from continuing operations              $    1.37    $     1.64     $    5.54    $    3.83    $    3.80
      Net income                                          1.10          1.67          5.93          .98         3.89
Cash dividends per share                                  1.10          1.10          1.10         1.10         1.10

</TABLE>

                                   F-26


<PAGE>

<TABLE>
<CAPTION>

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

                                                   Balance at    Provisions                                  Balance
                                                    beginning    charged to      Reserves        Other        at end
(In millions)                                         of year      earnings      utilized      changes       of year
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>           <C>           <C>           <C>
YEAR ENDED SEPTEMBER 30, 2003
Reserves deducted from asset accounts
      Accounts receivable                           $     34     $       18    $      (18)   $       1     $      35
      Inventories                                         12              2            (5)           -             9
---------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2002
Reserves deducted from asset accounts
      Accounts receivable                           $     33     $       23    $      (23)   $       1     $      34
      Inventories                                         12              5            (5)           -            12
---------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2001
Reserves deducted from asset accounts
      Accounts receivable                           $     25     $       33    $      (25)   $       -     $      33
      Inventories                                         10              4            (2)           -            12
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                   F-27



<PAGE>



                               Exhibit Index



Exhibit
No.                                Description
-------  ------------------------------------------------------------------

10.7     Form of Indemnification Agreement between Ashland Inc. and members
         of its Board of Directors.

12       Computation of Ratio of Earnings to Fixed Charges.

21       List of subsidiaries.

23.1     Consent of independent auditors.

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

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

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

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


<PAGE>