==========================================================================

                     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, 1996

                       Commission file number 1-2918

                                ASHLAND INC.
                          (a Kentucky corporation)

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

                      Telephone Number: (606) 329-3333

              Securities Registered Pursuant to Section 12(b):

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

$3.125 Cumulative Convertible Preferred Stock           New York Stock Exchange

6 3/4% Convertible Subordinated Debentures, due 2014    New York 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 Form
10-K or any amendment to this Form 10-K. [ ]

     At October  31,  1996,  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  $2,595,905,440.  In  determining  this
amount,  Ashland Inc. has assumed that directors,  certain of its executive
officers,  and persons known to it to be the beneficial owners of more than
five percent of its common stock are affiliates.  Such assumption shall not
be deemed conclusive for any other purpose.

     At October 31,  1996,  there were  64,599,228  shares of  Registrant's
common stock outstanding.

                    Documents Incorporated by Reference

     Portions of Registrant's  Annual Report to Shareholders for the fiscal
year ended  September 30, 1996 are  incorporated  by reference into Parts I
and II.

     Portions of  Registrant's  definitive  Proxy Statement for its January
30, 1997 Annual Meeting of Shareholders  are incorporated by reference into
Part III.
===============================================================================




                             TABLE OF CONTENTS
                                                               Page

PART I
  Item 1.  Business ...........................................  1
           Recent Developments.................................  1
           Petroleum...........................................  2
           SuperAmerica........................................  5
           Valvoline...........................................  6
           Chemical............................................  7
           APAC................................................  8
           Coal................................................  9
           Exploration......................................... 11
           Other Business...................................... 15
           Miscellaneous....................................... 15
  Item 2.  Properties.......................................... 18
  Item 3.  Legal Proceedings................................... 18
  Item 4.  Submission of Matters to a
            Vote of Security Holders........................... 19
  Item X.  Executive Officers of Ashland....................... 19
PART II
  Item 5.  Market for Registrant's Common Stock and Related
            Security Holder Matters............................ 20
  Item 6.  Selected Financial Data............................. 20
  Item 7.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations................ 20
  Item 8.  Financial Statements and Supplementary Data......... 20
  Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure............. 20
PART III
  Item 10. Directors and Executive Officers of the Registrant.. 20
  Item 11. Executive Compensation...............................20
  Item 12. Security Ownership of Certain Beneficial
            Owners and Management...............................21
  Item 13. Certain Relationships and Related Transactions.......21
PART IV
  Item 14. Exhibits, Financial Statement Schedules and Reports
            on Form 8-K.........................................21






                                   PART I

ITEM 1. BUSINESS
      Ashland  Inc.  is a Kentucky  corporation,  organized  on October 22,
   1936,  with its  principal  executive  offices  located at 1000  Ashland
   Drive, Russell,  Kentucky 41169 (Mailing Address: P.O. Box 391, Ashland,
   Kentucky 41114) (Telephone: (606) 329-3333). The terms "Ashland" and the
   "Company"  as used herein  include  Ashland  Inc.  and its  consolidated
   subsidiaries, except where the context indicates otherwise.
     Ashland's   businesses  are  grouped  into  seven  industry  segments:
   Petroleum,   SuperAmerica,   Valvoline,   Chemical,   APAC,   Coal   and
   Exploration.  Financial  information  about these  segments for the five
   fiscal years ended September 30, 1996 is set forth on Pages 60 and 61 of
   Ashland's  Annual  Report to  Shareholders  for the  fiscal  year  ended
   September 30, 1996 ("Annual Report").
     Ashland Petroleum is one of the nation's largest independent petroleum
   refiners  and  a  leading   supplier  of   petroleum   products  to  the
   transportation   and  commercial  fleet  industries,   other  industrial
   customers and  independent  marketers,  and to  SuperAmerica  for retail
   distribution.  In addition,  Ashland  Petroleum  gathers and  transports
   crude oil and  petroleum  products and  distributes  petroleum  products
   under the  Ashland(R)  brand  name.  SuperAmerica  operates  combination
   gasoline and merchandise  stores under the  SuperAmerica(R)  and Rich(R)
   brand names. Valvoline is a marketer of branded,  packaged motor oil and
   automotive   chemicals,   antifreeze,   filters,  rust  preventives  and
   coolants.  In  addition,  Valvoline  is engaged in the "fast oil change"
   business  through  outlets  operating  under the  Valvoline  Instant Oil
   Change(R) and Valvoline Rapid Oil Change(R) names.
     Ashland   Chemical   distributes   industrial   chemicals,   solvents,
   thermoplastics and resins, and fiberglass materials,  and manufactures a
   wide variety of specialty  chemicals  and certain  petrochemicals.  APAC
   performs contract construction work including highway paving and repair,
   excavation and grading, and bridge and sewer construction,  and produces
   asphaltic and  ready-mix  concrete,  crushed stone and other  aggregate,
   concrete  block and certain  specialized  construction  materials in the
   southern United States.
     Ashland's coal operations are conducted by 56% owned,  publicly traded
   Ashland  Coal,  Inc.   ("Ashland   Coal"),  a  producer  of  low-sulfur,
   bituminous  coal in central  Appalachia for sale to domestic and foreign
   electric  utility and  industrial  customers.  Ashland  also holds a 50%
   interest in Arch Mineral Corporation  ("Arch"), a producer of low sulfur
   coal and steam and metallurgical coal in Illinois,  Kentucky,  Virginia,
   West Virginia and Wyoming.  Ashland Exploration  explores for, develops,
   produces  and  sells  crude  oil  and  natural  gas  principally  in the
   Appalachian  Basin and Gulf Coast  areas of the  United  States and also
   crude oil in Nigeria for export.
     At September 30, 1996,  Ashland and its consolidated  subsidiaries had
   approximately 36,100 employees (excluding contract employees).

                           RECENT DEVELOPMENTS

      In a press release  issued on December 9, 1996,  Ashland  announced a
   plan to improve profitability and shareholder returns. The following are
   some of the key elements of the plan:
      o Establish  a  Petroleum  Group,  consisting  of Ashland  Petroleum,
   SuperAmerica  and Valvoline.  J. A. (Fred) Brothers has been named Group
   Operating  Officer for the new Petroleum  Group and will be  responsible
   for these businesses.
      o Reduce capital employed in refining.  As part of this effort,  1997
   capital  expenditures for Ashland  Petroleum are being reduced from $175
   million to $150  million.  Capital  expenditures  for  refining  will be
   limited  to  $100  million,   well  below  Ashland   Petroleum's  annual
   depreciation  of $122  million.  The  remaining  $50  million in Ashland
   Petroleum's  1997  capital  budget  will be  earmarked  for  value-added
   petrochemical  and  Ashland(R)  branded  marketing  expansions.   Future
   capital  spending for refining will remain  materially less than Ashland
   Petroleum's annual depreciation.
      o  Review  options  for  strategic  alliances.   In  view  of  recent
   developments  in the  refining  and  marketing  industry,  Ashland  will
   continue to assess and  actively  explore  strategic  options  regarding
   alignments  or  partnering  with  others to  enhance  returns  from this
   business.

                                        -1-

      o  Retain  CS  First  Boston   Corporation   to  evaluate   strategic
   alternatives   including   mergers  and  spin-offs,   regarding  Ashland
   Exploration,  Inc.  The  goal  is to  complete  an  evaluation  and  any
   resulting business  transaction before the end of calendar 1997, subject
   to regulatory approvals, tax rulings and market conditions.
      o  Redirect  capital  freed as a result of  reducing  capital  in the
   refining  and  exploration  segments  to  growth  businesses,  including
   Ashland  Chemical  Company,  the APAC  highway  construction  group  and
   Valvoline.
      o  Terminate  the  shelf  registration  statement  providing  for the
   offering  from  time to time of up to $100  million  in  Ashland  common
   stock. To date,  approximately $50 million of common stock has been sold
   under this program.
      o Implement a common  stock  repurchase  program.  This  program will
   authorize  the  repurchase of up to 1 million  shares of Ashland  common
   stock annually.
      o Initiate a program to evaluate corporate general and administrative
   expenses.  Activities  directly related to business unit support will be
   allocated  to those  business  units.  Corporate  G&A costs that are not
   allocated to business units will be reassessed.
      o Continue to encourage the ongoing discussions between Ashland Coal,
   Inc. and Arch Mineral Corporation,  in which Ashland has separate equity
   ownership  positions.  The two coal companies  previously announced they
   are discussing a possible business combination.

                                 PETROLEUM

      Ashland  Petroleum,  a division of Ashland,  has  responsibility  for
   obtaining   Ashland's  crude  oil  requirements,   operating   Ashland's
   refineries,  marketing the refined  petroleum  products and transporting
   and storing crude oil and refined products.

Crude Oil Supply

      The crude oil processed in Ashland Petroleum's refineries is obtained
   from negotiated lease, contract and spot purchases or exchanges.  During
   fiscal 1996,  Ashland  Petroleum's  negotiated lease,  contract and spot
   purchases of United States crude oil for refinery input averaged 114,062
   barrels per day (1 barrel = 42 United States gallons),  including 97,206
   barrels per day acquired through Ashland's Scurlock Permian  subsidiary.
   During fiscal 1996, Ashland  Petroleum's  foreign crude oil requirements
   were met largely  through  purchases from various  foreign  national oil
   companies,  producing  companies and traders, as well as purchases of an
   average of 85,989 barrels per day during fiscal 1996 from Canada through
   Scurlock Permian's Canadian  subsidiary.  Purchases of foreign crude oil
   (including  Canada)  represented  68% of Ashland  Petroleum's  crude oil
   requirements  during  fiscal  1996 as well as in  fiscal  1995.  
      Ashland  Petroleum's  crude  oil  requirements  in  fiscal  1997  are
   expected to be met  through  lease,  contract  and spot  purchases  from
   United States  independent  producers and from various foreign  national
   oil companies, producing companies and traders as worldwide availability
   and prices dictate.  Ashland  Exploration's share of Nigerian production
   will  either be sold,  traded or used to help  satisfy  part of  Ashland
   Petroleum's  fiscal 1997 crude oil  requirements,  depending  upon world
   crude oil prices and other  economic  factors.  For further  information
   concerning   Nigerian   production,    see    "Exploration-International
   Operations."
      In  addition  to   providing   crude  oil  for  Ashland   Petroleum's
   refineries,  Scurlock  Permian and its Canadian  subsidiary are actively
   engaged in  purchasing,  selling and trading crude oil,  principally  at
   Midland, Texas, Cushing,  Oklahoma, and St. James,  Louisiana,  three of
   the major distribution points for United States crude oil, as well as in
   western Canada. 

Refining and Marketing

      Ashland  Petroleum owns and operates three refineries  located in its
   key markets with an aggregate  refining  capacity of 354,200  barrels of
   crude oil per calendar day. The  Catlettsburg,  Kentucky  refinery has a
   refining  capacity  of 219,300  barrels  per day and the St.  Paul Park,
   Minnesota and Canton, Ohio refineries have refining capacities of 69,000
   barrels and 65,900 barrels per day,  respectively.  Ashland  Petroleum's
   refineries  are  complex and include  crude oil  atmospheric  and vacuum
   distillation,    fluid   catalytic   cracking,    catalytic   reforming,
   desulfurization  and sulfur recovery  units.  Each has the capability to
   process a wide  variety  of crude oils and to  

                                    2

   produce normal refinery products,  including  reformulated  gasoline. In
   addition,   the   Catlettsburg   refinery  is  equipped  to  manufacture
   lubricating oils and a wide range of petrochemicals.
      Ashland  Petroleum's  principal  marketing area for gasoline and fuel
   oils includes the Ohio River Valley, the upper Midwest,  the upper Great
   Plains and the southeastern  United States.  In addition to gasoline and
   fuel oils,  Ashland also  manufactures and markets  liquified  petroleum
   gas, asphalt and asphaltic products,  pitch, base lube stocks, kerosene,
   petrochemicals, jet fuels and residual fuels.
      Ashland Petroleum's  production of gasoline,  kerosene and light fuel
   oils is sold in 21 states  through  wholesale  channels of  distribution
   (including  company owned and exchange  terminals and Ashland brand bulk
   plants) and at retail through Ashland(R) brand distributor locations and
   SuperAmerica.  Gasoline is sold at wholesale  primarily  to  independent
   marketers,  jobbers,  and chain  retailers  who resell  through  several
   thousand retail outlets  primarily under their own names, and also under
   the Ashland(R) brand name. Gasoline, kerosene,  distillates and aviation
   products are also sold to utilities,  railroads, river towing companies,
   commercial fleet operators, aviation and airline companies, governmental
   agencies and other end users.
      Ashland   Petroleum  also  markets   petroleum   products  under  the
   Ashland(R)  brand  name  through a network of 28 (26 owned and 2 leased)
   bulk plants located in 5 states.  These plants  maintain  inventories of
   gasoline,  distillate,  kerosene,  motor oils, greases and other related
   products.  During fiscal 1996,  Ashland Petroleum  continued the program
   announced  in  1994  to  modernize  and  upgrade  Ashland  Brand  retail
   marketing  primarily  through  an  independent  jobber  network.  As  of
   September 30, 1996, 36 jobbers with 631 retail outlets have committed to
   the new program,  and Ashland Petroleum has sold or transferred  company
   owned or leased  bulk  plants  and  stations  to some of these  jobbers.
   Retail  outlets  are  being  reimaged,  including  the  use of  the  new
   Ashland(R) brand logo to improve customer recognition. Ashland Petroleum
   currently  plans to continue  expanding  the  Ashland(R)  brand  through
   jobbers,  and company  owned or leased  bulk plants will  continue to be
   sold to jobbers in the process.  It had 485 units  reimaged by September
   30, 1996.  Ashland also  supplies 23 (21 owned and 2 leased)  Ashland(R)
   brand  lessee-dealers and 61 reseller outlets using the Ashland(R) brand
   name. 

      Ashland   Petroleum  also  produces  and  markets  asphalt   cements,
   polymerized  asphalt,  asphalt emulsions and industrial  asphalts in the
   United States.  Ashland Petroleum markets asphalt products in 19 states.
   Additionally,  Ashland Petroleum manufactures petroleum pitch, primarily
   used in the graphite electrode, clay target and refractory industries.
      Ashland Petroleum produces residual fuels at its three refineries and
   markets and sells these products in nine states, primarily to industrial
   customers as boiler fuel.
 
      The table  below shows  Ashland's  refining  operations  for the last
   three fiscal years.


                                                                             Years Ended September 30
                                                                       -------------------------------------
                                                                        1996           1995           1994
                                                                       -----          -----          -----
                                                                                              
     Refinery Input (In thousands of barrels per day)                  372.3          353.8          341.8
     ------------------------------------------------

     Refinery Production (In thousands of barrels per day)
     -----------------------------------------------------
     Gasoline                                                          183.5          176.8          168.0
     Distillates and Kerosene                                          102.1           92.5           90.6
     Asphalt                                                            30.4           31.5           29.3
     Jet and Turbine Fuel                                               11.4           11.1           10.9
     Heavy Fuel Oils                                                     7.1            6.7            7.7
     Lubricants                                                          7.7            7.7            7.6
     Other                                                              20.0           16.8           16.8


                                      3



      The  table  below  shows  the  average  daily  consolidated  sales of
   petroleum  products  and crude oil by Ashland  Petroleum,  SuperAmerica,
   Valvoline and Exploration  (excluding  intercompany  sales) for the last
   three  fiscal  years.   Sales  of  gasoline   (excluding  excise  taxes)
   represented  approximately  17%, 17% and 18% of  Ashland's  consolidated
   sales and operating  revenues  (excluding  excise taxes) in fiscal years
   1996, 1995 and 1994, respectively.


                                                                             Years Ended September 30
                                                                       -------------------------------------
                                                                        1996           1995           1994
                                                                       -----          -----          -----
                                                                                              
     Consolidated Product Sales (In thousands of barrels per day)
     ------------------------------------------------------------
     Gasoline                                                          197.6          193.7          181.9
     Crude Oil                                                         134.4          131.8          142.1
     Distillates and Kerosene                                          112.8          102.8           97.0
     Asphalt                                                            37.0           36.8           34.3
     Jet and Turbine Fuel                                                9.6            9.6           10.9
     Heavy Fuel Oils                                                     7.0            7.1            8.4
     Lubricants                                                         14.8           15.0           14.7
     Other                                                              28.0           28.3           23.3


Transportation and Storage

     Ashland owns,  leases  or has an ownership  interest in 5,790 miles of
   pipeline in 13 states.  This  network  transports  crude oil and refined
   products to and from  terminals,  refineries and other  pipelines.  This
   includes 2,287 miles of crude oil gathering lines,  2,987 miles of crude
   oil trunk  lines,  475 miles of  refined  product  lines and 41 miles of
   natural gas liquid lines.
     Ashland has an 18.6% ownership interest in LOOP LLC ("LOOP"), the only
   U.S. deep water port facility  capable of receiving  crude oil from very
   large crude  carriers and which has a capacity to off-load  1,000,000 to
   1,200,000  barrels per day. Ashland also has a 21.4% ownership  interest
   in LOCAP INC.  ("LOCAP")  which has a capacity of 1,200,000  barrels per
   day and a 21.6%  undivided  ownership  interest in the Capline  Pipeline
   System which has a nominal capacity of 1,175,000  barrels per day. LOCAP
   owns a pipeline  connecting  LOOP and the Capline System that originates
   at St. James, Louisiana. These port and pipeline systems provide Ashland
   Petroleum  with  access  to  common  carrier   transportation  from  the
   Louisiana Gulf Coast to Patoka,  Illinois. At Patoka, the Capline System
   connects with other common carrier  pipelines owned or leased by Ashland
   which  provide  transportation  to  Ashland  Petroleum's  refineries  in
   Kentucky and Ohio. For summarized  financial  statements and information
   with respect to advances and transportation  payments made by Ashland to
   LOOP and  LOCAP,  see Notes C and H of Notes to  Consolidated  Financial
   Statements in Ashland's Annual Report.

     In addition,  Ashland owns a 33% stock  interest in the Minnesota Pipe
   Line Company,  which owns a crude oil pipeline in  Minnesota.  Minnesota
   Pipe Line  Company  provides  Ashland  Petroleum  with access to 270,000
   barrels  per  day  of  crude  oil  common  carrier  transportation  from
   Clearbrook,  Minnesota  to  Cottage  Grove,  Minnesota,  which is in the
   vicinity of Ashland Petroleum's St. Paul Park, Minnesota refinery.
     Ashland Petroleum's river transportation operations include 8 towboats
   (6 owned, 2 leased) and 166 barges that transport  crude oil and refined
   products  on  the  Ohio,   Mississippi   and  Illinois   rivers,   their
   tributaries,  and the Intracoastal  Waterway.  In 1995,  Ashland entered
   into an  agreement  with  Jeffboat,  a division of  American  Commercial
   Marine Service Company,  to construct 42 new double-hulled  inland river
   tank barges.  As of September  30, 1996,  construction  on 14 of the new
   double-hulled  units has been completed and these barges have been added
   to   Ashland's   barge  fleet.   These   barges  will  replace   current
   single-hulled  barges  owned and  operated by Ashland in order to comply
   with   requirements  of  the  Oil  Pollution  Act  of  1990.   Displaced
   single-hulled units will be divested or recycled into dock floats within
   Ashland's system. See also "Miscellaneous - Governmental  Regulation and
   Action - Environmental Protection."
     Ashland   Petroleum  leases  on  a  long-term  basis  two  80,000  ton
   deadweight  tankers which are normally used for third party  delivery of
   foreign crude oil to the United States.  Additional requirements are met
   by chartering tankers for individual voyages.


                                       4


     Ashland Petroleum leases rail cars in various sizes and capacities for
   movement of petroleum  products and  chemicals.  Ashland  Petroleum also
   owns a large  number of  tractor-trailers,  additional  trailers,  and a
   large fleet of tank trucks and general service trucks.
     Ashland  Petroleum  owns or has an interest in 34 terminal  facilities
   from which it sells a wide range of petroleum products. These facilities
   are supplied by a combination of river barge, pipeline,  truck and rail.
   Ashland Petroleum also owns or operates a number of other terminals that
   are used in connection with the  transportation of petroleum products or
   crude oil.

Other Matters

     For  information on federal,  state and local statutes and regulations
   relating  to  releases  into  the   environment  or  protection  of  the
   environment,    see    "Miscellaneous-Governmental     Regulation    and
   Action-Environmental  Protection."  For information  relating to certain
   environmental   litigation,    see   "Legal    Proceedings-Environmental
   Proceedings."
     There are traditional seasonal variations in Ashland Petroleum's sales
   and  operating   results.   The  seasonality   that  Ashland   Petroleum
   experiences is due primarily to increased demand for gasoline during the
   summer driving  season,  higher demand for distillate  during the winter
   heating  season,  and increased  demand for asphalt from the road paving
   industry  during  the last six  months of  Ashland's  fiscal  year.  The
   refining  industry  experiences  a similar  seasonality.  For  Ashland's
   fiscal years 1994 to 1996,  refining margins for Ashland  Petroleum have
   averaged  $4.12 per barrel for the  six-month periods ended March 31 and
   $4.74 per barrel for the six-month periods ended September 30.


                                SUPERAMERICA

       SuperAmerica Group, a division of Ashland, conducts retail petroleum
   marketing  operations under the  SuperAmerica(R)  and Rich(R) names. See
   also "Petroleum-Refining and Marketing."
       SuperAmerica(R)  Stores -  SuperAmerica  operates 624 (484 owned and
   140 leased) combination  gasoline and merchandise stores in 10 states in
   the Ohio Valley and upper Midwest under the SuperAmerica(R)  name. These
   stores  are  designed  for  high  volume  sales.   SuperAmerica   stores
   (exclusing  excise  taxes)  offer  consumers  gasoline,  diesel  fuel at
   selected  locations  and a broad mix of other goods and services such as
   fresh-baked goods, automated teller machines, video rentals,  automotive
   accessories  and a line of  private-label  items.  SuperAmerica  is also
   adding to its one-stop  shopping  concept by  partnering  with fast food
   chains  including Taco Bell,  Subway,  TCBY,  Arby's,  Blimpies,  Baskin
   Robbins,  A&W and Pizza Hut.  During fiscal 1996, 40% of the revenues of
   the  SuperAmerica  stores were derived from the sale of merchandise  and
   60% of such  revenues  were derived from the sale of gasoline and diesel
   fuel.
       SuperAmerica operates warehouse distribution centers in Bloomington,
   Minnesota, and Ashland, Kentucky, that distribute certain merchandise to
   stores.  SuperAmerica  also operates a commissary in Russell,  Kentucky,
   that  produces  fresh  sandwiches,  salads and other food  products  for
   distribution to stores in the Ohio Valley. A wholly-owned  subsidiary of
   Ashland also  operates a large bakery and  commissary  in St. Paul Park,
   Minnesota, under the name SuperMom's(R) Inc.
       In  addition to the 624  SuperAmerica  stores,  SuperAmerica  has 26
   jobber/franchisees  who  operate  40  stores  in 2 states  in the  upper
   Midwest.  During  fiscal 1996,  44 new and rebuilt  SuperAmerica  retail
   outlets were opened.
       Rich(R)  Oil -  SuperAmerica  also  operates  118 (103  owned and 15
   leased)  retail  gasoline  outlets in Kentucky,  Ohio and West  Virginia
   under the  Rich(R)  Oil name.  These  outlets  generate  lower  gasoline
   volumes  than the  average  SuperAmerica  store,  primarily  because the
   outlets are  generally  smaller  and  located in  less-densely-populated
   areas.  During fiscal 1996, 16 new and rebuilt Rich retail  outlets were
   opened.


                                       5



                                 VALVOLINE

       The  Valvoline  Company,  a division  of  Ashland,  is a marketer of
   automotive and industrial oils, automotive chemicals, and automotive and
   environmental  services,  with  sales in more  than 140  countries.  The
   Valvoline(R)  trademark  was  federally  registered  in 1873  and is the
   oldest  trademark for a lubricating  oil in the United States.  See also
   "Petroleum-Refining   and  Marketing."  Valvoline  has  diversified  its
   operations  in recent years and is comprised of the  following  business
   units:
       Valvoline  Domestic  -  Valvoline's   largest  division,   Valvoline
   Domestic, markets automotive,  commercial, and industrial lubricants and
   automotive  chemicals to a broad  network of U.S.  customers.  Valvoline
   branded motor oil is one of the top selling  brands in the U.S.  private
   passenger car and light truck market.  Valvoline  DuraBlend(R) Motor Oil
   was the leading semi-synthetic brand of motor oil for all of 1996.
       Valvoline  Domestic also markets  Zerex(R)  antifreeze and Pyroil(R)
   automotive chemicals. Zerex(R) is the second-leading antifreeze brand in
   the U.S. During 1996,  Valvoline Domestic managed a dwindling  inventory
   of R-12, an automotive  refrigerant that was phased out of production in
   1995.   R-12  is  being   replaced  in  the  market  by   new-generation
   refrigerants.  It is  anticipated  that R-12  inventory is sufficient to
   supply customers through 1997.
       The domestic  commercial/fleet  group continued a strategic alliance
   relationship  with the Cummins Engine  Company to distribute  heavy-duty
   lubricants to the commercial market.
       Valvoline    International   -   Valvoline   International   markets
   Valvoline(R)  branded products and TECTYL(R) rust preventives  worldwide
   through  company-owned  affiliates  or divisions in  Australia,  Canada,
   Denmark, Great Britain, the Netherlands,  Sweden, Germany,  Switzerland,
   Austria,   France,  Italy,  Belgium  and  South  Africa.  Licensees  and
   distributors market products in other parts of Europe, Central and South
   America,  the Far East, the Middle East and certain  African  countries.
   Packaging  and blending  plants and  distribution  centers in Australia,
   Canada,  Denmark,  Sweden, Great Britain, the Netherlands and the United
   States supply international customers.
       Valvoline  Instant  Oil  Change(R)  ("VIOC")  -  VIOC  is one of the
   largest  competitors  in the expanding  U.S.  "fast oil change"  service
   business,  providing Valvoline with a significant share of the installed
   segment  of  the  passenger  car  and  light  truck  motor  oil  market.
   Incorporation  of the Valvoline name and trademark in VIOC's name, store
   signage and advertising  provides an ongoing  Valvoline  presence in the
   communities in which VIOC stores are located.  As of September 30, 1996,
   374 company-owned and 100 franchise service centers were operating in 12
   and 18 states, respectively.
       In 1996, the "MVP" (Maximum Vehicle  Performance)  program continued
   VIOC's  industry  leadership in  customer-service  innovation.  MVP is a
   computer-based  program that maintains  service  records on all customer
   vehicles, system-wide. MVP also contains a database on all car makes and
   models which allows  service  recommendations  based on vehicle  owner's
   manual recommendations.

       First Recovery - As of September 30, 1996,  Ecogard,  Inc.,  through
   its First Recovery division,  was collecting used motor oil at an annual
   rate of 52  million  gallons  from a network of  automotive  aftermarket
   retailers and service  businesses in 48 states.  Completing  Valvoline's
   "total fluid management"  approach to customer  service,  First Recovery
   provides  an  environmental  service  to  Valvoline  U.S.A.   customers,
   collecting used antifreeze and oil filters as well.

       Lube Refinery Sales - Valvoline's Lube Refinery Sales division sells
   excess  base  stock  production  from the  Catlettsburg,  Kentucky  lube
   refinery to other U.S. motor oil and  industrial oil marketers,  as well
   as to fuel and lube  additive  companies in the United  States.  It also
   markets slack wax, a lube byproduct,  through a network of resellers and
   to other refiners for further  processing.  The division is also engaged
   in  private  label  blending  and  packaging  for other  North  American
   refiners. See also "Petroleum-Refining and Marketing."

                                     6


                                  CHEMICAL

       Ashland Chemical Company,  a division of Ashland,  is engaged in the
   manufacture,  distribution  and sale of a wide  variety of chemical  and
   plastic products. Ashland Chemical operates 48 manufacturing facilities,
   most of which are owned, in 11 states and 15 foreign  countries and owns
   or leases approximately 100 distribution  facilities in 33 states and 11
   foreign  countries.  Ashland  Chemical  is  comprised  of the  following
   operations:

Distribution

       Industrial  Chemicals & Solvents  Division  ("IC&S") - IC&S  markets
   chemical products, ingredients and solvents to industrial chemical users
   in major  markets  through  distribution  centers in the United  States,
   Canada,  Mexico and Puerto  Rico.  It  distributes  approximately  3,500
   chemical  products  made  by  many  of  the  nation's  leading  chemical
   manufacturers,   a  growing   number  of   off-shore   producers,   plus
   petrochemicals  from Ashland's  refineries.  It specializes in supplying
   mixed truckloads and  less-than-truckload  quantities to many industries
   including  the paint and coatings,  inks,  adhesives,  polymer,  rubber,
   industrial  and  institutional  compounding,  automotive,  appliance and
   paper   industries.   In  addition,   IC&S   distributes   cosmetic  and
   pharmaceutical   specialty   chemicals  and   foodgrade   additives  and
   ingredients.   It  also  offers  customers  chemical  waste  collection,
   disposal  and  recycling  services,  working in  cooperation  with major
   chemical waste services companies.
        FRP Supply  Division - This  division  markets to  customers in the
   reinforced  plastics and cultured marble  industries mixed truckload and
   less-than-truckload quantities of polyester resins, fiberglass and other
   specialty  reinforcements,  catalysts and allied products from more than
   50 distribution locations throughout North America.
       General  Polymers  Division - This division markets a broad range of
   thermoplastic injection molding and extrusion materials to processors in
   the  plastics  industry  through  distribution  locations  in the United
   States,  Canada,  Mexico  and  Puerto  Rico.  It also  provides  plastic
   material  transfer  and  packaging   services  and   less-than-truckload
   quantities of packaged  thermoplastics.  The basic resins  business unit
   markets bulk thermoplastic resins to a variety of proprietary processors
   in North America.
       Ashland  Plastics  Division - This division markets a broad range of
   thermoplastics to processors outside North America. Ashland Plastics has
   distribution centers located in Australia,  Belgium,  France, Italy, the
   Netherlands,  Ireland, Spain, and the United Kingdom. It also exports to
   Latin  America  from  the  United  States.  It  also  has a  compounding
   manufacturing  plant  located  in  Italy.  In  September  1996,  Ashland
   Plastics and Borealis, a joint venture between Statoil and Neste, signed
   a Memorandum of Understanding,  under which Ashland Plastics will become
   the   Pan-European   distributor   for   all   small-volume   sales   of
   Borealis-produced   polyolefins.   In  October  1996,  Ashland  Plastics
   acquired Exter Plasticos,  S.A., a Spanish  thermoplastics  distribution
   business.

Specialty Chemicals

       Composite Polymers Division - This division manufactures and sells a
   broad range of  chemical-resistant,  fire-retardant and  general-purpose
   grades  of  unsaturated   polyester  and  vinyl  ester  resins  for  the
   reinforced  plastics industry.  Key markets include the  transportation,
   construction  and  marine  industries.  It has  manufacturing  plants in
   Jacksonville,  Arkansas;  Colton and Los  Angeles,  California;  Bartow,
   Florida; Ashtabula, Ohio; Philadelphia and Neville Island, Pennsylvania.
   In  March  1996,  Ashland  Chemical  acquired  the  shares  of  Sociedad
   Italo-Espanola  d  Resinas,   S.A.,  an  unsaturated   polyester  resins
   manufacturer  located  in  Spain.  It has a  manufacturing  facility  in
   Benicarlo, Spain.

       Specialty Polymers & Adhesives Division - This division manufactures
   and sells specialty  phenolic resins for paper impregnation and friction
   material  bonding;  acrylic polymers for pressure  sensitive  adhesives;
   emulsion  polymer  isocyanate  adhesives  for  structural  wood bonding;
   polyurethane  and epoxy  structural  adhesives  for  bonding  fiberglass
   reinforced   plastics,   composites,   thermoplastics   and   metals  in
   automotive, recreational, and industrial applications; induction bonding
   systems for thermoplastic  materials;  elastomeric polymer adhesives and
   butyl rubber  roofing tapes for  commercial  roofing  applications;  and
   vapor  curing,   high-performance  urethane  coatings  systems.  It  has
   manufacturing plants in Calumet City, Illinois; Norwood, New Jersey; and
   Ashland, Ohio.
       Drew Ameroid  Marine  Division - This  division  supplies  specialty
   chemicals for water and fuel  treatment and general  maintenance as well
   as refrigeration  services,  sealing  products,  welding and refrigerant
   products and fire 

                                     7


   fighting and safety services to the world's merchant marine fleet.  Drew
   Ameroid Marine currently provides  shipboard  technical service for more
   than  10,000  vessels  from more  than 30  locations  serving  700 ports
   throughout the world.
       Electronic Chemicals Division - This division manufactures and sells
   a variety of ultra high-purity chemicals for the worldwide semiconductor
   manufacturing industry through various manufacturing  locations and also
   custom  blends and  packages  high-purity  liquid  chemicals to customer
   specifications.  It has  manufacturing  plants  in  Newark,  California;
   Milan,  Italy;  Easton,   Pennsylvania;   Dallas,  Texas  and  Campbell,
   California.  In addition,  it also enters into  long-term  agreements to
   provide complete chemical  management  services,  including  purchasing,
   warehousing  and  delivering  chemicals  for  in-plant  use,  for  major
   facilities of large  consumers of high-purity  chemicals.  In July 1996,
   Ashland  Chemical  signed a letter of intent with the Pueblo,  Colorado,
   Economic  Development  Corporation to purchase  property to build a new,
   ultra-high  purity  manufacturing  and  packaging  facility  in  Pueblo,
   Colorado.
       Foundry  Products  Division - This division  manufactures  and sells
   foundry  chemicals  worldwide,  including  a  complete  line of  foundry
   binders,  core and mold coatings,  sand additives,  mold releases,  core
   pastes,   die  lubes  and  other   specialties.   It  has  two  domestic
   manufacturing   plants  located  in  Cleveland,   Ohio  and  18  foreign
   subsidiaries and affiliates  manufacturing  and/or marketing foundry and
   other chemicals. It also has a metals applications laboratory as part of
   the company's technical center, which is used for test castings and mold
   and core material testing.
       Drew  Industrial  Division  -  This  division  supplies  specialized
   chemicals  and  consulting  services for the  treatment of boiler water,
   cooling water,  steam, fuel and waste streams.  It also supplies process
   chemicals  and  technical  services  to the pulp and  paper  and  mining
   industries and also supplies  additives used in manufacturing  latex and
   paints. It conducts operations throughout North America,  Europe and the
   Far East through subsidiaries, joint venture companies and distributors.
   The division has manufacturing  plants in Kansas City,  Kansas;  Kearny,
   New Jersey; Houston, Texas; Ajax, Ontario, Canada; Singapore; Sydney and
   Perth, Australia; and Auckland, New Zealand.

Petrochemicals

       This division markets  aromatic  hydrocarbons,  principally  cumene,
   toluene,  xylene,  and aromatic  and  aliphatic  solvents and  propylene
   manufactured  at  facilities  located  at  the  Catlettsburg,   Kentucky
   refinery.  It manufactures  maleic  anhydride at Neal, West Virginia and
   Neville Island, Pennsylvania and methanol near Plaquemine, Louisiana.

Other Matters

       Melamine  Chemicals,   Inc.  ("MCI")  -  Ashland  owns  23%  of  the
   outstanding  common stock of MCI, a public  company  (NASDAQ:MTWO).  MCI
   produces melamine at its Donaldsonville, Louisiana plant and sells it to
   customers throughout the world.  Melamine is a specialty chemical having
   numerous industrial and commercial applications.
       For information relating to the Comprehensive Environmental Response
   Compensation  and Liability Act ("CERCLA")  and the Superfund  Amendment
   and  Reauthorization  Act of 1986 ("SARA")  (CERCLA and SARA hereinafter
   sometimes  referred to  collectively as  "Superfund"),  and the Resource
   Conservation and Recovery Act ("RCRA"), see  "Miscellaneous-Governmental
   Regulation and Action-Environmental Protection."

                                    APAC

       The APAC  group of  companies,  which  are  located  in 13  southern
   states, perform construction work such as paving, repair and resurfacing
   highways,  streets,  airports,  residential and commercial developments,
   sidewalks,  and  driveways;  grading and base work;  and  excavation and
   related  activities  in the  construction  of  bridges  and  structures,
   sanitary sewers,  drainage  facilities and underground  utilities.  APAC
   also  produces and sells  construction  materials  such as asphaltic and
   ready-mix  concrete,  crushed stone and other aggregate,  and in certain
   markets,  concrete block and specialized construction materials, such as
   architectural block.


                                       8


       To deliver  its  services  and  products,  APAC  utilizes  extensive
   aggregate-producing  properties and construction equipment. It currently
   has  17  permanent  operating  quarry  locations,   32  other  aggregate
   production facilities, 33 ready-mix concrete plants, 141 hot-mix asphalt
   plants,  and a fleet of over 8,900  mobile  equipment  units,  including
   heavy construction equipment and transportation-related equipment.
       Raw aggregate generally consists of sand, gravel, granite, limestone
   and sandstone.  About 28% of the raw aggregate  produced by APAC is used
   in the  performance  of APAC's own  contract  construction  work and the
   production of various processed construction materials. The remainder is
   sold to third parties. APAC also purchases substantial quantities of raw
   aggregate from other producers whose proximity to the job site render it
   economically feasible. Most other raw materials, such as liquid asphalt,
   portland cement and reinforcing  steel, are purchased from others.  APAC
   is not dependent upon any one supplier or customer.
       Approximately  60% of APAC's  revenues  are derived from highway and
   other public sector  sources.  The other 40% is derived from  industrial
   and commercial customers and other private developers and contractors.
       Climate   and   weather   significantly   affect   revenues  in  the
   construction  business.  Due to its  location,  APAC  tends  to  enjoy a
   relatively long construction  season. Most of APAC's operating income is
   generated during the construction period of May to October.
       Total backlog at September  30, 1996 was $647  million,  compared to
   $672 million at September 30, 1995.  The backlog orders at September 30,
   1996 are  considered  firm, and a major portion is expected to be filled
   during fiscal 1997.

                                    COAL

       Ashland Coal, Inc. ("Ashland Coal") - Ashland owns approximately 56%
   of Ashland  Coal, a public  company  (NYSE:ACI)  which is engaged in the
   production, transportation,  processing and marketing of bituminous coal
   produced  in  eastern  Kentucky  and  southern  West  Virginia.  Carboex
   International   Ltd.,  a  subsidiary  of  Sociedad  Espanola  De  Carbon
   Exterior,  S.A.,  a coal  supply  firm  controlled  by  entities  of the
   Government of Spain, owns  approximately a 10% interest in Ashland Coal.
   The  remaining  34% of Ashland Coal is owned by the public.  The primary
   emphasis  and  direction  of  Ashland  Coal  is on the  acquisition  and
   development  of  low-sulfur  steam coal  reserves  for sale to  electric
   utility customers in the U.S. and abroad.
       For its fiscal year ended  December 31,  1995,  Ashland Coal and its
   independent  operating  subsidiaries  sold 22.5 million tons of coal, as
   compared  to  20.2  and  16.0  million  tons  sold  in  1994  and  1993,
   respectively.  Of the  total  number of tons sold  during  fiscal  1995,
   approximately 60% was under long-term contracts,  as compared to 62% for
   1994 and 57% for 1993,  with the balance  being sold on the spot market.
   In fiscal 1995, Ashland Coal and its independent operating  subsidiaries
   sold 3.3  million  tons of coal in the export  market,  compared  to 1.7
   million  tons in 1994 and 2.1 million tons in 1993.  Approximately  62%,
   54%, and 61% of total revenues for 1995,  1994, and 1993,  respectively,
   were derived from long-term  contracts.  For the year ended December 31,
   1995,  Ashland  Coal's  independent   operating   subsidiaries  produced
   approximately  20.9 million  tons of coal,  as compared to 19.2 and 14.2
   million tons for 1994 and 1993, respectively.  In addition, Ashland Coal
   purchased for resale  approximately 1.4 million tons of coal during 1995
   and approximately 1.3 and 1.6 million tons of coal during 1994 and 1993.
       Ashland  Coal's  consolidated  results  for 1993 were  significantly
   affected  by a selective  strike by the United  Mine  Workers of America
   ("UMWA")  from  May to  December  1993  against  the  operations  of two
   subsidiaries  of Ashland  Coal's  Dal-Tex  Coal  Corporation  subsidiary
   ("Dal-Tex")  and the  operations of Ashland  Coal's Hobet  Mining,  Inc.
   subsidiary  ("Hobet").  On December 14, 1993, UMWA members  ratified the
   National Bituminous Coal Wage Agreement of 1993, and thereafter the UMWA
   miners returned to work at the Dal-Tex and Hobet  operations.  Dal-Tex's
   subsidiaries  were  merged  into  Dal-Tex,  and  Dal-Tex was merged into
   Hobet, in each case effective March 1, 1996.
       For the nine months ended  September 30, 1996,  Ashland Coal and its
   independent  operating  subsidiaries  sold 16.0 million tons of coal. Of
   the total number of tons sold during the nine months ended September 30,
   1996,  63% was under  long-term  contracts.  These sales  accounted  for
   approximately  62% of Ashland  Coal's total  

                                      9


   revenues for the nine-month period. Of the 16.0 million tons sold during
   the nine-month  period, 1.7 million tons were sold in the export market.
   For the nine months,  Ashland Coal's independent operating  subsidiaries
   produced   approximately   14.8  million  tons  of  coal  and  purchased
   approximately 1.3 million tons for resale.
       Ashland  Coal's  1996  earnings  have been  significantly  adversely
   affected  by the  expiration  at the  end of  1995  of  favorable  sales
   contracts with Cincinnati Gas & Electric  Company and by price reopeners
   under other supply contracts.  On October 27, 1995, Ashland Coal's Board
   of Directors authorized the repurchase,  from time to time, of up to one
   million shares of Ashland Coal's Common Stock. As of September 30, 1996,
   256,000 shares have been purchased.
       Recently, the National Labor Relations Board ruled that ballots cast
   in an election by  employees  at Mingo Logan Coal  Company to  determine
   whether they would be  represented  by the UMWA should be destroyed  and
   following that ruling, the UMWA withdrew its petition for an election.
       Substantially  all of Ashland Coal's coal  properties are in eastern
   Kentucky  and  southern  West  Virginia  and are  controlled  by  lease.
   Royalties  paid to lessors  are either on a fixed price per ton basis or
   on a percentage of the gross sales price basis. Most of these leases run
   until the  exhaustion of minable and  merchantable  coal.  The remaining
   leases have primary  terms ranging from one to 40 years from the date of
   their  execution,  with many  containing  options  to renew.  Those term
   leases covering  principal  reserves under Ashland Coal's current mining
   plans are not  scheduled to expire prior to expiration of those plans in
   2003 ( at Ashland Coal's Coal Mac  operations)  and 2006 (at the balance
   of  Ashland  Coal's  operations).   Mining  plans  are  not  necessarily
   indicative of the life of the mine.
       As  of  December  31,  1995,   Ashland  Coal   estimates   that  its
   subsidiaries  controlled  approximately  640 million tons of recoverable
   reserves  in the  proven and  probable  categories.  Based upon  limited
   information  obtained from  preliminary  prospecting,  drilling and coal
   seam analysis,  Ashland Coal estimates that a substantial  percentage of
   this coal has a sulfur  content of 1% or less.  Ashland  has not made an
   independent  verification  of this  information.  The  extent  to  which
   reserves  will  eventually be mined depends upon a variety of variables,
   including future economic conditions and governmental  actions affecting
   both the mining and marketability of low-sulfur steam coal.
       Arch Mineral  Corporation  ("Arch") - Ashland  currently owns 50% of
   Arch and has the right to acquire an  additional  1.25% of Arch pursuant
   to a Put and Call Agreement with an Arch shareholder. Through its wholly
   owned  subsidiaries,  Arch mines,  processes,  markets,  and  transports
   bituminous  coal in the  domestic  steam  market and owns,  controls and
   manages  mineral-bearing  properties  throughout the United States. Arch
   has mines  located in the  Appalachian,  Midwestern,  and  Western  coal
   fields with access to rail,  inland  waterway  and truck  transportation
   networks,  including  several of its own transloading  facilities.  Arch
   also  controls  undeveloped  coal  reserves in the San Juan Basin of New
   Mexico,  the Green River area in southwest  Wyoming,  southern Illinois,
   Indiana,   southeast  Kentucky,   western  Virginia  and  southern  West
   Virginia.
      For its fiscal year ended  December 31, 1995,  Arch sold 26.7 million
   tons of coal  compared to sales of 27.9  million  tons and 17.6  million
   tons in 1994 and 1993,  respectively.  In 1995, 78% of Arch's sales were
   from   the   production  of  its  wholly-owned   independent   operating
   subsidiaries,  compared  to 73% and 79% in 1994 and 1993,  respectively.
   The  remainder  of the coal  sold in each of  these  periods  came  from
   brokerage  activities  or  from  independent  contractors  operating  on
   property  controlled  by Arch.  Surface  mines  accounted for 60% of the
   production  in  1995,  as  compared  to 52% and 69% in  1994  and  1993,
   respectively.  In  each  of  these  periods,  the  remainder  of  Arch's
   production  came from its  underground  and  auger  mines.  Sales  under
   contracts  with a duration  of more than one year  accounted  for 72% of
   Arch's  sales in  1995,  compared  with  69% and 78% in 1994  and  1993,
   respectively.
     As of  September  30, 1996,  Arch had 33 coal supply  contracts of one
   year or longer  duration.  In the nine-months  ended September 30, 1996,
   Arch  sold  21.7  million  tons of  coal,  70% of which  was sold  under
   contracts with a duration of more than one year. During this period, 81%
   of Arch's  total  sales came from the  production  of its  subsidiaries,
   while  the  remaining  coal  sold  came  from  brokerage  activities  or
   independent  contractors  operating on  properties  controlled  by Arch.
   During this  nine-month  period,  67% of Arch's  production was from its
   surface  mines  and the  remainder  was from its  underground  and auger
   mines.

                                        10


     As  of  December  31,  1995,   Arch  owned  or  controlled   estimated
   recoverable  coal  reserves  in the proven and  probable  categories  of
   approximately  1.3 billion tons, based on an estimate  prepared by Arch.
   Arch  estimates  that a majority of these reserves have a sulfur content
   of less  than  1.6  pounds  of  sulfur  dioxide  per  million  Btu and a
   substantial  portion  have a sulfur  content  of less than 1.2 pounds of
   sulfur  dioxide per  million  Btu.  Ashland has not made an  independent
   verification of this information.
     During 1996,  Arch acquired  roughly  58,000 acres in the Carbon Basin
   Reserve area of Wyoming  consisting of  approximately 96 million tons of
   reserves in the proven and probable  categories  having a sulfur content
   of less than 1.2 pounds of sulfur dioxide per million Btu. Additionally,
   during 1996, the reserves  associated with the idled Pilot Butte mine in
   Sweetwater  County,  Wyoming and the assets  associated  with the Corbin
   Preparation  Plant in Knox and Whitley  Counties,  Kentucky were sold in
   unrelated  transactions for cash consideration and the assumption of the
   reclamation liabilities of these operations.
     Apogee Coal Company ("Apogee"), an independent operating subsidiary of
   Arch, is a member of the Bituminous Coal Operators  Association ("BCOA")
   and a signatory to a five year collective  bargaining agreement with the
   UMWA that  expires on August 1, 1998.  This  contract  was  ratified  on
   December 14, 1993,  after a 219-day strike against certain BCOA members,
   including   Apogee.   This  strike   significantly   affected   Apogee's
   performance  in 1993.  In August 1996,  the UMWA  exercised its right to
   reopen the contract to discuss wages and pensions. The BCOA and the UMWA
   reached an agreement on these  reopener  issues,  including an agreement
   that the UMWA would not  exercise its  reopener  rights in 1997.  In the
   nine months ended September 30, 1996,  Apogee's  production  represented
   approximately   50%  of  Arch's  total  sales.  Two  other   independent
   subsidiaries of Arch are signatories to collective bargaining agreements
   with independent employees  associations.  Employees of the remainder of
   Arch's operating subsidiaries are not represented by labor unions.
     Other  Matters - Ashland  Coal and Arch have  resumed  discussions  of
   options for combining their  businesses and operations.  However,  there
   can be no assurances that the discussions will result in progress toward
   a combination of the companies.
     Ashland  Coal and  Arch  are  subject  to  environmental  regulations,
   including the Surface  Mining Control and  Reclamation  Act of 1977, the
   Clean Water Act, RCRA and the Clean Air Act, as well as related  federal
   environmental regulations and similar state enactments. In addition, the
   Federal Mine Safety and Health Act of 1977 ("MSHA")  imposes  health and
   safety standards on all mining  operations.  Regulations  under MSHA are
   comprehensive   and  affect  numerous  aspects  of  mining   operations,
   including the training of mine personnel,  mining  procedures,  blasting
   and the equipment used in mining operations. These laws, regulations and
   requirements  are not  expected  to have a  material  adverse  impact on
   Ashland Coal's or Arch's competitive position.
     Ashland  Coal and  Arch  are  subject  to the  provisions  of the Coal
   Industry Retiree Health Benefit Act of 1992. This  legislation  provides
   for the  funding of  medical  and death  benefits  for  certain  retired
   members of the UMWA through  premiums to be paid by assigned  operators,
   transfers from an overfunded  pension trust  established for the benefit
   of retired UMWA  members,  and transfers  from the Abandoned  Mine Lands
   Fund, which is funded by a federal tax on coal production.
     The  Clean  Air  Act  contains  acid  rain  provisions  which  require
   substantial  reductions in sulfur  dioxide  emissions by power plants in
   the  United  States.   Both  Ashland  Coal  and  Arch  have  significant
   low-sulfur coal reserves.

                                EXPLORATION

       Ashland's oil and gas  exploration  and  production  activities  are
   conducted  through wholly-owned  subsidiaries  of Ashland  (collectively
   referred to as "Ashland Exploration").  Ashland Exploration is currently
   engaged in the  exploration  for and production of crude oil and natural
   gas in the United States and in the  exploration  for and  production of
   crude  oil  in  Nigeria.   Limited  exploration  activity  continues  in
   Australia.
       For information  regarding Ashland  Exploration's  estimated oil and
   gas reserves and other  financial  data,  see  Supplemental  Oil and Gas
   Information on Pages 62 and 63 in Ashland's Annual Report. Since October
   1, 1995, 

                                     11


   no  estimates  of  Ashland  Exploration's  total  proved  net oil or gas
   reserves have been filed or included in reports to any federal authority
   or agency other than the SEC.

Domestic Operations

     Ashland   Exploration  has  concentrated  its  domestic  drilling  and
   production efforts in two core areas: the Appalachian Basin and the Gulf
   Coast. In addition, minor royalty interests are located primarily in the
   Southwest and Midcontinent regions of the United States.
     In the Appalachian  Basin,  Ashland  Exploration's  activities consist
   primarily of shallow gas  development  drilling on  leaseholds  totaling
   approximately  900,000  acres in  eastern  Kentucky,  Virginia  and West
   Virginia.  In fiscal 1996,  it completed 79 net gas wells,  excluding 13
   net wells which were being drilled at year-end.
     During fiscal 1996, Ashland Exploration's domestic production averaged
   564 net  barrels  of oil per day and 108.4  million  net  cubic  feet of
   natural gas per day. The average price  received  during fiscal 1996 was
   $18.22 per barrel of oil and $2.39 per thousand cubic feet (MCF) of gas.
     Ashland Exploration's exploratory efforts are concentrated in the Gulf
   of Mexico. In fiscal 1996, Ashland Exploration  participated in drilling
   7  gross  exploratory  prospects.   Ashland  Exploration's   exploratory
   leasehold  position  in the Gulf of  Mexico  was  155,000  net  acres at
   September 30, 1996.
     Ashland  Exploration  owned a working  interest  in 4,247  gross  (3,858  
   net)  domestic  producing  wells at September 30, 1996.

International Operations

     Ashland Exploration's oil production in Nigeria during fiscal 1996 was
   17,520 barrels per day (before royalty  obligations)  from 103,000 acres
   onshore  ("OPL 118") and 74,000 acres  offshore  ("OPL 98") held under a
   production-sharing contract ("PSC") with the Nigerian National Petroleum
   Corporation  ("NNPC"),   the  Nigerian  state-owned  petroleum  company.
   Ashland Exploration holds a 100% working interest in these blocks. Three
   successful horizontal development wells were drilled on OPL 98. The Akam
   #15 and Ebughu #5 wells are currently producing a combined 2,255 barrels
   per day. The Adanga SW #1 well is currently  waiting on pipeline hook-up
   which is expected in early fiscal 1997.  The appraisal well Adanga North
   #2 was drilled in  September  1996 on OPL 98. The well was tested at 661
   barrels  per day and has  been  suspended  pending  further  evaluation.
   Ashland Exploration plans to drill one additional horizontal development
   well on OPL 98 during fiscal 1997.
     Other  exploratory  efforts  in  Nigeria  occurred  on two  additional
   offshore  blocks  ("OPL's   90/225")   comprising  a  contract  area  of
   approximately  580,000  gross  acres  under  another  production-sharing
   contract with NNPC. Ashland Exploration holds a 50% working interest and
   is operator  in these  blocks.  Two  appraisal  wells were  successfully
   drilled in fiscal 1996 as confirmation  to a 1994 discovery.  The Okwori
   South #2 encountered 297 net feet of oil pay and is currently suspended.
   The  Okwori  South  #3  encountered  378 net feet of oil pay and is also
   currently  suspended.  Ashland Exploration and its partner are currently
   evaluating the commercial potential of the Okwori field.
     In Australia,  Ashland  Exploration owns a 50% working interest in one
   exploration  permit consisting of 335,000 gross acres and a 25% interest
   in another exploration permit consisting of 590,000 gross acres, both of
   which  are  located  offshore  western  Australia.  Ashland  Exploration
   expects to fulfill its remaining seismic commitment in fiscal 1997.
     Ashland Exploration's international operations are necessarily subject
   to factors beyond its control.  Foreign  operations may also be affected
   by laws and  policies of the United  States  relating to foreign  trade,
   investment, and taxation.

                                         12


Operating Statistics
Acreage and Wells

     The following table sets forth the gross and net productive  wells and
acreage at September 30, 1996:



Productive wells - Gas                                                                      Gross          Net
                                                                                            -----          ---
                                                                                                     
      United States* ......................................                                 4,211        3,836


Productive wells - Oil
      United States........................................                                    36           22
      Nigeria .............................................                                    36           36
                                                                                               --           --
           Total*..........................................                                    72           58
                                                                                               ==           ==




                                                                      Developed                  Undeveloped
                                                                       Acreage                     Acreage

   Acreage (in thousands)                                        Gross         Net          Gross          Net
                                                                 -----         ---          -----          ---
                                                                                               
      United States........................................      1,263         936            748          410
      Nigeria .............................................        177         177            580          290
      Australia............................................                                   925          315
                                                             ---------   ---------         ------       ------
           Total...........................................      1,440       1,113          2,253        1,015
                                                                 =====       =====          =====        =====
   -----------------
   *  These wells  include 331 gross wells (317  domestic and 14  international)  and 293 net wells (279  domestic
   and 14 international) which have multiple completions.


                                     13




   The following table summarizes the exploration and production activities
for the last three fiscal years:



                                                                            Years Ended September 30
                                                                 ---------------------------------------------
                                                                    1996              1995                1994
                                                                    ----              ----                ----
                                                                                               
   Net Natural Gas Production (MMCF per day)
      United States........................................        108.4             102.9                94.3
   Net Crude Oil Production (average barrels per day)
      United States........................................          564               609                 822
      Nigeria (1) .........................................       17,520            18,791              18,707
                                                                  ------            ------              ------
           Total...........................................       18,084            19,400              19,529
                                                                  ======            ======              ======
   Average Sales Prices - Natural Gas (per MCF)
      United States........................................        $2.39            $ 1.89               $2.42
   Average Sales Prices - Crude Oil (per barrel)
      United States........................................       $18.22            $15.96              $14.29
      Nigeria .............................................        18.46             16.17               15.01

   Average Production Product Cost (per equivalent barrel) (2)
      United States........................................        $4.37             $4.09               $3.87
      Nigeria .............................................         9.70              9.17                7.69

   Net Exploratory Wells Drilled - United States
      Net Productive Wells.................................            1                 2                   2
      Net Dry Wells .......................................            1                 5                   4
                                                                     ---               ---                 ---
            Total..........................................            2                 7                   6
                                                                     ===               ===                 ===
   Net Exploratory Wells Drilled - International
      Net Productive Wells.................................            2                 1                   1
      Net Dry Wells .......................................            0                 2                   1
                                                                     ---               ---                 ---
            Total..........................................            2                 3                   2
                                                                     ===               ===                 ===
   Net Development Wells Drilled
      Net Productive Wells
      United States........................................           79                88                  59
      International .......................................            3                 0                   0
                                                                     ---               ---                 ---
           Total...........................................           82                88                  59
                                                                      ==                ==                  ==
      Net Dry Wells
      United States........................................            0                 0                   1
      International .......................................            0                 0                   0
                                                                     ---               ---                 ---
           Total...........................................            0                 0                   1
                                                                     ===               ===                 ===
   -----------------
   (1)Net production for Nigeria is before royalty.
   (2)Equivalent barrels computed on a six MCF to one barrel ratio.




                                       14


                               OTHER BUSINESS

       AECOM  Technology  Corporation  ("AECOM"),  which  is 12%  owned  by
   Ashland,  provides a wide array of design,  engineering,  architectural,
   planning,  operations and  maintenance,  construction  and  construction
   management,   development,   environmental   and  other   technical  and
   professional services to industrial,  commercial and government clients.
   AECOM is headquartered in Los Angeles, California, and performs services
   through offices located throughout the world. Under an agreement between
   AECOM and Ashland,  AECOM is obligated  to  repurchase  all of Ashland's
   equity  interest in AECOM with the repurchase  scheduled to be completed
   in stages through 1998.
       Ashland, through a special purpose subsidiary, Ashland Ethanol, Inc.
   ("AEI"),  has a 50% interest in a partnership that owns an ethanol plant
   located in South Point,  Ohio.  The  partnership is comprised of AEI and
   subsidiaries of Ohio Farm Bureau Federation,  Inc., Publicker Industries
   Inc. and UGI  Corporation.  The plant began  operation in September 1982
   but discontinued  operations due to low margins in August 1995.  Because
   of concerns about the venture's long-term  viability,  Ashland wrote off
   its  investment  in AEI in fiscal 1986.  The  partnership  is in default
   under a loan with the U.S. Department of Agriculture-Rural  Economic and
   Community  Development  Services  (formerly  known as the  Farmers  Home
   Administration)  with a balance due of approximately  $14.7 million plus
   interest and has an unpaid  balance of $24.5 million plus interest under
   a Department of Energy cooperative  agreement.  A liquidation auction of
   the plant, property and assets is scheduled for December 1996.

                               MISCELLANEOUS

Forward Looking Statements

       This Form 10-K, and the documents incorporated by reference, contain
   forward-looking  statements  within the  meaning  of Section  27A of the
   Securities  and Exchange  Act of 1933 and Section 21E of the  Securities
   Exchange Act of 1934,  including various  information within the Capital
   Resources and Outlook  sections in Management's  Discussion and Analysis
   in  Ashland's   Annual  Report.   Although  Ashland  believes  that  its
   expectations are based on reasonable assumptions,  it cannot assure that
   the  expectations   contained  in  such  statements  will  be  achieved.
   Important  factors which could cause actual results to differ materially
   from those contained in such statements are discussed immediately below,
   as well as in  other  portions  of this  Form  10-K and in Note A to the
   Consolidated  Financial  Statements  under  risks and  uncertainties  in
   Ashland's Annual Report.
       Ashland's  operations  are  affected by domestic  and  international
   political,  legislative,  regulatory and legal actions. Such actions may
   include  changes  in the  policies  of  the  Organization  of  Petroleum
   Exporting   Countries  ("OPEC")  or  other  developments   involving  or
   effecting   oil-producing   countries,   including   military  conflict,
   embargoes,   internal   instability  or  actions  or  reactions  of  the
   government  of the United  States in  anticipation  of or in response to
   such developments.
       Domestic and international economic conditions, such as recessionary
   trends,  inflation,  interest and monetary  exchange  rates,  as well as
   changes in the availability and market prices of crude oil, natural gas,
   coal and  petroleum  products,  can also  have a  significant  effect on
   Ashland's  operations.  While Ashland maintains reserves for anticipated
   liabilities  and carries  various levels of insurance,  Ashland could be
   affected  by civil,  criminal,  regulatory  or  administrative  actions,
   claims  or   proceedings.   In   addition,   climate   and  weather  can
   significantly  affect Ashland in several of its  operations  such as its
   construction, natural gas, heating oil and coal businesses. 

Governmental Regulation and Action

       Ashland's operations are affected by political developments and laws
   and  regulations,  such as restrictions  on production,  restrictions on
   imports and  exports,  the  maintenance  of  specified  reserves,  price
   controls,  tax increases and  retroactive tax claims,  expropriation  of
   property,  cancellation  of contract  rights,  environmental  protection
   controls and laws pertaining to workers' health and safety. As discussed
   in part  below,  a number of bills have been  enacted or proposed by the
   United States Congress and various state governments which have or could
   have a significant impact on Ashland.
      General - As a refiner,  Ashland is substantially affected by changes
   in world  crude oil  prices.  Many  world and  regional  events can have
   substantial   effects  on  world  crude  oil  prices  and  can  increase
   volatility  in world  markets.  Ashland  expects  to be able to  acquire
   adequate supplies of crude oil at competitive prices. However,


                                        15


   Ashland  cannot  predict  whether  foreign and United  States  petroleum
   product  price  levels  will  permit  its  refineries  to  operate  on a
   profitable  basis.  Neither can it predict the effect on its  operations
   and financial  condition from possible  changes in the  Organization  of
   Petroleum  Exporting  Countries  ("OPEC")  policies or in actions by the
   President of the United States and the  Congress,  from changes in taxes
   and federal regulation of the oil and gas business in the United States,
   or from other developments that cannot be foreseen.
       The stability of Ashland's  crude oil supply from foreign sources is
   subject to factors beyond its control, such as military conflict between
   oil-producing  countries,  the possibility of nationalization of assets,
   embargoes of the type imposed by OPEC in 1973,  internal  instability in
   one or more  oil-producing  countries,  and rapid increases in crude oil
   prices.  Although Ashland will continue,  for economic reasons,  to rely
   upon foreign  crude oil sources for a  substantial  portion of its crude
   oil supply,  the extent of operation  in the  domestic  crude oil market
   afforded by its Scurlock  Permian  subsidiary  assists in offsetting the
   adverse  effects  frequently  associated  with  market  volatility.  See
   "Petroleum-Crude   Oil  Supply"  for  Ashland's   crude  oil  processing
   requirements.
       Imported  crude oil is subject at present to payment of duty,  which
   is  10.5(cent)  per  barrel  for  crudes  over  25(degree)  API  gravity
   (2.1(cent)  per barrel for Canadian  imports) and  5.25(cent) per barrel
   for crudes  below  25(degree)  API  gravity  (1.05(cent)  per barrel for
   Canadian imports). Imported crude oil is also subject to a customs users
   fee of .17% of the value of the crude oil. For information  with respect
   to tax assessments on crude oil, see also "Environmental Protection."
       Retail marketing "divorcement"  legislation and wholesale and retail
   pricing  regulations have been adopted in some states. They are proposed
   from time to time in other  states  and at the  federal  level.  If such
   legislation  were  adopted at the federal  level or in the states  where
   SuperAmerica  sells  petroleum  products,  it could  have a  substantial
   adverse impact.
       Environmental  Protection  - Federal,  state and local  statutes and
   regulations  relating  to  the  protection  of  the  environment  have a
   significant  impact on the conduct of  Ashland's  businesses.  Ashland's
   capital  and  operating  expenditures  for air,  water and  solid  waste
   control facilities are summarized below.
                                            Years Ended September 30
                                      -------------------------------------
  (In millions)                       1996          1995              1994
- ---------------------------------     -----        -----             -----
   Capital expenditures               $ 40         $  44             $  63
   Operating expenditures              158           151               140

        At  September  30,  1996,   Ashland's  reserves  for  environmental
   assessments  and  remediation  efforts  were  $173  million,  reflecting
   Ashland's most likely estimates of the costs which will be incurred over
   an extended period to remediate identified  environmental conditions for
   which costs are reasonably estimable.
       Based  on  current  environmental  regulations,   Ashland  estimates
   capital  expenditures for air, water and solid waste control  facilities
   to be $25 million in 1997.  Expenditures for  investigatory and remedial
   efforts in future years are subject to the uncertainties associated with
   environmental  exposures,  including identification of new environmental
   sites and changes in laws and  regulations and their  application.  Such
   expenditures,  however,  are not  expected  to have a  material  adverse
   effect  on  Ashland's  consolidated  financial  position,  cash  flow or
   liquidity,  but could  have a  material  adverse  effect on  results  of
   operations  in a  particular  quarter or fiscal  year.  For  information
   regarding inspections being conducted by the United States Environmental
   Protection Agency with respect to Ashland  Petroleum's three refineries,
   see Note K of Notes to  Consolidated  Financial  Statements in Ashland's
   Annual Report.
       The United States Environmental  Protection Agency ("USEPA") and the
   states have adopted regulations and laws concerning  underground storage
   tanks  covering,  among other  things,  registration  of tanks,  release
   detection,  corrosion protection,  response to releases, closure of, and
   financial responsibility for, underground storage tank systems.
       Superfund  provided for the establishment of a fund to be used for a
   waste clean-up  program  administered  by the USEPA.  The law previously
   provided  for the  following  separate  taxes:  (i) a  petroleum  tax on
   domestic  crude oil and on imported crude oil equalized at 9.7(cent) per
   barrel plus a 5(cent) per barrel oil spill tax, as more fully  described
   below,  (ii) a chemical  feedstock tax, (iii) a tax on imported chemical
   derivatives,  (iv) an "environmental tax" based on corporate alternative
   minimum  taxable  income,  and (v) the motor fuel tax to finance the new
   Underground  Storage Tank Trust Fund. During 1996, the tax provisions of
   Superfund  expired which  resulted in Ashland  paying  approximately  $5
   million in Superfund taxes during fiscal 1996 as compared to $19 million
   in fiscal  1995.  Superfund,  which  provides  for  cleanup  of  certain
   hazardous  waste sites,  is  undergoing  consideration  


                                       16


   for  significant   amendments,   including   reauthorization  of  taxing
   provisions  as  well  as a  reevaluation  of  the  liability  allocation
   provisions  and  improved  cleanup  remedy  selection.  However,  it  is
   uncertain at this time exactly  what the  revisions  will be, or if they
   will in fact be adopted.
       The Oil  Pollution  Act of 1990 ("OPA 90")  established a $1 billion
   trust  fund to cover  cleanup-related  costs  of oil  spills  after  the
   responsible  party's  liability  limits have been reached,  or where the
   responsible  party is  otherwise  unidentifiable  or unable to pay.  The
   trust fund is financed, when depleted below specified levels, through an
   excise tax of  5(cent)  per barrel on  domestic  crude oil and  imported
   petroleum oil products (pursuant to Superfund). OPA 90 subjects spillers
   to strict  liability  for removal costs and damages  (including  natural
   resource   damages)   resulting  from  oil  spills,   and  requires  the
   preparation and  implementation  of  spill-response  plans at designated
   vessels and  facilities.  Additionally,  OPA 90  requires  that new tank
   vessels entering or operating in domestic waters be  double-hulled,  and
   that existing tank vessels that are not  double-hulled be retrofitted or
   removed from domestic service according to a phase-out schedule.
       On July 1, 1994,  the United States Coast Guard issued interim final
   regulations  dealing with financial  responsibility  for water pollution
   under OPA 90 and CERCLA.  The regulations  require  self-propelled  tank
   vessel   owners  and   operators  to  maintain   evidence  of  financial
   responsibility,  effective  December 28, 1994,  sufficient to meet their
   potential liability defined under OPA 90 and CERCLA for spills of oil or
   hazardous substances. The Director, Coast Guard National Pollution Funds
   Center has granted  permission to Ashland to  self-insure  the financial
   responsibility amount for liability purposes for Ashland's ocean tankers
   as provided in OPA 90.
       The Federal  Clean Air Act required the refining  industry to market
   cleaner-burning,  reformulated  gasoline  ("RFG")  beginning  January 1,
   1995, in nine specified  metropolitan areas across the country.  Ashland
   does not directly supply gasoline in any of the nine metropolitan areas.
   However,  several urban locations within  Ashland's  marketing area have
   opted into the RFG program  and  Ashland has been able to meet  expected
   demand for RFG in its  marketing  area.  The Clean Air Act also required
   the refining  industry to supply 39 carbon monoxide (CO)  non-attainment
   areas with gasoline containing 2.7 weight percent oxygen for four winter
   months each year.  Upon being  re-designated  CO attainment,  several of
   these  areas  are  seeking  to  opt-out  of  the   oxygenated   gasoline
   requirements.  Ashland  believes  it  will  have a  continuing  need  to
   directly  supply  this  fuel only at St.  Paul  Park,  Minnesota,  whose
   primary market is a CO non-attainment area.
       RCRA,  which  requires  "cradle to grave"  management  of  hazardous
   waste, is slated to be reauthorized by Congress, although timing of such
   reauthorization  is  uncertain.  Reauthorization  issues may  include an
   expansion of hazardous waste program coverage,  recycling, used oil, and
   solid waste management. These same issues may be addressed in additional
   USEPA  rulemakings   unrelated  to   reauthorization   efforts.   It  is
   anticipated that both the  reauthorization  and other future rulemakings
   will result in increased environmental  compliance costs, but the amount
   of such increase is uncertain at this time. 

Research

      Ashland  conducts  a program of  research  and  development  directed
   toward the invention and  improvement of products and processes and also
   toward  the  improvement  of  environmental  controls  for its  existing
   facilities.   It   maintains   its  primary   research   facilities   in
   Catlettsburg, Kentucky, and Dublin, Ohio. Research and development costs
   are expensed as incurred  ($27 million in 1996,  $24 million in 1995 and
   $23 million in 1994).

   Competition

       In all of its operations,  Ashland is subject to intense competition
   both from  companies in the  respective  industries in which it operates
   and from  products of  companies in other  industries.  In most of these
   segments,  competition is based primarily on price, with factors such as
   reliability  of supply,  service and quality being  considered.  Ashland
   Petroleum  competes  primarily  with other  domestic  refiners and, to a
   lesser  extent,  with  imported  products.  However,  Ashland  Petroleum
   typically  enjoys a  geographic  advantage  for  products in its primary
   marketing  areas.  While some  integrated  competitors  have  sources of
   controlled  crude  production,  few  competitors in Ashland  Petroleum's
   market  areas  are  significantly  crude  self-sufficient.  SuperAmerica
   competes  with  major  oil  companies,  independent  oil  companies  and
   independent marketers.  Virtually all of SuperAmerica's refined products
   are supplied by Ashland Petroleum.  SuperAmerica strives to provide high
   quality and efficient  service and enjoys gasoline and merchandise sales
   per store exceeding the convenience  store industry average based on the
   1995 National  Association  of  Convenience  Store State of the Industry
   Survey.


                                       17



       Valvoline  competes  primarily with domestic oil companies and, to a
   lesser extent,  with  international  oil companies on a worldwide basis.
   Valvoline's  brand  recognition and increasing market share in the "fast
   oil change" market are important  competitive factors.  Ashland Chemical
   competes in a number of chemical  distribution,  specialty  chemical and
   petrochemical   markets.   Its  chemicals   and  solvents   distribution
   businesses   compete  with  national,   regional  and  local   companies
   throughout North America. Its plastics  distribution  businesses compete
   worldwide.  Ashland Chemical's  specialty  chemicals  businesses compete
   globally in selected  niche markets and compete  largely on the basis of
   technology and service while holding proprietary technology in virtually
   all their specialty  chemicals  businesses.  Petrochemicals  are largely
   commodities,  with pricing and quality being the most important factors.
   The  majority  of the  business  for which APAC  competes is obtained by
   competitive   bidding.  An  important   competitive  factor  in  Ashland
   Exploration's  domestic  production  activity  is  the  ability  of  its
   exploration staff to identify  potential  natural gas prospects,  obtain
   exploration  rights and formulate and complete plans for the development
   of  properties.  Similarly,  competitive  factors that are important for
   Ashland Exploration's international production include its experience in
   identifying prospects and developing and operating properties.  The coal
   industry  is  highly  competitive,  and  Ashland  Coal and Arch  compete
   (principally in price, location and quality of coal) with a large number
   of other coal producers, some of which are substantially larger and have
   greater  financial  resources and larger reserve bases than Ashland Coal
   and Arch. 

ITEM 2. PROPERTIES
       Ashland's corporate headquarters, which is leased, and the principal
   offices of Ashland  Petroleum,  which are owned, are located in Russell,
   Kentucky.  Principal offices of other segments are located in Lexington,
   Kentucky (SuperAmerica and Valvoline); Dublin, Ohio (Chemical); Atlanta,
   Georgia (APAC);  Huntington,  West Virginia  (Ashland Coal) and Houston,
   Texas  (Exploration),  all of  which  are  leased.  Ashland's  principal
   manufacturing,   marketing  and  other  materially   important  physical
   properties are described under the appropriate segment under Item 1. See
   also the  statistical  data included under  "Exploration"  and "Coal" in
   Item 1 and  Supplemental  Oil and Gas  Information on Pages 62 and 63 in
   Ashland's  Annual  Report.  Additional  information  concerning  certain
   leases  may be  found  in  Note H of  Notes  to  Consolidated  Financial
   Statements in Ashland's Annual Report. 

ITEM 3. LEGAL PROCEEDINGS
       EnvironmentalProceedings  -(1) As of September 30, 1996, Ashland was
   subject to 77 notices received from the USEPA and similar state agencies
   identifying  Ashland as a "potentially  responsible party" ("PRP") under
   Superfund  or  similar  state  laws  for  potential  joint  and  several
   liability  for cleanup  costs in  connection  with  alleged  releases of
   hazardous  substances  from various 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 accordance  with
   procedures  established  under  regulations,  in  which  Ashland  may be
   participating as a member of various PRP groups.  Generally, the type of
   relief  sought  includes   remediation  of   contaminated   soil  and/or
   groundwater,  reimbursement  for the costs of site  cleanup or oversight
   expended, and/or long-term monitoring of environmental conditions at the
   sites.   Ashland  carefully  monitors  the  investigatory  and  remedial
   activity  at many of these  sites.  Based on its  experience  with  site
   remediation,   its  familiarity  with  current  environmental  laws  and
   regulations, its analysis of the specific hazardous substances at issue,
   the existence of other financially viable PRPs and its current estimates
   of  investigatory,  clean-up and monitoring costs at each site,  Ashland
   believes that its liability at these sites,  either  individually  or in
   the aggregate,  after taking into account established reserves, will not
   have a  material  adverse  effect on  Ashland's  consolidated  financial
   position,  cash flow or  liquidity,  but could have a  material  adverse
   effect on results of operations in a particular  quarter or fiscal year.
   Estimated  costs for these matters are  recognized  in  accordance  with
   generally accepted accounting  principles governing  probability and the
   ability to reasonably estimate future costs. For additional  information
   regarding  Superfund,  see  "Miscellaneous  Governmental  Regulation and
   Action-Environmental Protection."
       (2) On March  19,  1996,  after  consultation  with the  USEPA,  the
   Kentucky  Division for Air Quality issued a finding that Ashland had not
   demonstrated  compliance with certain air regulations regarding volatile
   organic compounds at its Catlettsburg,  Kentucky refinery,  and referred
   the matter to USEPA - Region IV for formal enforcement  action.  Ashland
   filed a petition  requesting a hearing before a Kentucky  administrative
   hearing  officer  on the  merits  of the  matter,  which  has  now  been
   rescheduled  for July  1997.  Separately,  the USEPA  issued a Notice of
   Violation  to Ashland  regarding  this  matter.  


                                     18


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, 1996.
   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 as to Senior Vice Presidents who are members of Ashland's
   core management group, other Senior Vice Presidents, Administrative Vice
   Presidents and other executive officers.)
       JOHN R. HALL (age 63) Effective October 1, 1996, Mr. Hall retired as
   Chief Executive  Officer of Ashland,  a position he has held since 1981.
   He will remain as Chairman and Director until  Ashland's  Annual Meeting
   on January  30,  1997 and has served in such  capacities  since 1981 and
   1968, respectively.
       PAUL W.  CHELLGREN (age 53) was elected as Chief  Executive  Officer
   effective  October 1, 1996 and is  President  and  Director  of Ashland,
   having  served in such  capacities  since  1992.  He is  expected  to be
   elected  Chairman  of the Board  upon Mr.  Hall's  retirement  from such
   position on January 30,  1997.  During the past five years,  he has also
   served as Chief  Operating  Officer,  Senior  Vice  President  and Chief
   Financial Officer of Ashland.
       JAMES R. BOYD (age 50) is Senior Vice President of Ashland and Group
   Operating Officer - Ashland Exploration, Inc., Arch Mineral Corporation,
   Ashland  Services  Company and APAC,  Inc. Mr. Boyd has served as Senior
   Vice President since 1989 and as Group  Operating  Officer for the above
   companies  since 1990,  with the  exception of APAC for which he assumed
   responsibility as of October 1, 1993.
       JOHN A.  BROTHERS  (age 56) is Senior Vice  President of Ashland and
   Group Operating Officer - Ashland Petroleum Company, SuperAmerica  Group
   and The Valvoline  Company and has served in such capacities  since 1984
   and  1996,  respectively.  During  the last  five  years,  he was  Group
   Operating Officer - Ashland Chemical Company, SuperAmerica Group and The
   Valvoline Company.
       THOMAS L. FEAZELL (age 59) is Senior Vice President, General Counsel
   and Secretary of Ashland and has served in such  capacities  since 1992,
   1981 and 1992,  respectively.  During  the past  five  years he has also
   served as Administrative Vice President of Ashland.
       J. MARVIN QUIN (age 49) is Senior Vice President and Chief Financial
   Officer of Ashland and has served in such capacities since 1992.  During
   the past five years, he has also served as Administrative Vice President
   and Treasurer of Ashland.
       ROBERT E. YANCEY,  JR. (age 51) is Senior Vice President of Ashland
   and  President  of  Ashland  Petroleum  Company  and has  served in such
   capacities  since 1986.  During the past five  years,  he also served as
   Group Operating Officer of APAC, Inc. and Ashland Petroleum.
      HARRY M. ZACHEM (age 52) is Senior  Vice  President - Public  Affairs
   and has served in such capacity since 1988.
       DAVID J. D'ANTONI  (age 51) is Senior Vice  President of Ashland and
   President of Ashland  Chemical Company and has served in such capacities
   since 1988.
       JOHN F.  PETTUS  (age 53) is Senior  Vice  President  of Ashland and
   President of SuperAmerica  Group and has served in such capacities since
   1989 and 1988, respectively.
       CHARLES F. POTTS (age 52) is Senior  Vice  President  of Ashland and
   President of APAC,  Inc. and has served in such  capacities  since 1992.
   During the past five years he has also served as Senior  Vice  President
   and Chief Operating Officer of APAC.
      G. THOMAS  WILKINSON (age 58) is Senior Vice President of Ashland and
   President of Ashland Exploration, Inc. and has served in such capacities
   since  1992 and 1990,  respectively.  During  the past five years he has
   also served as Vice President of Ashland.
       KENNETH L.  AULEN  (age 47) is  Administrative  Vice  President  and
   Controller of Ashland and has served in such capacity since 1992. During
   the past five years he has also served as Auditor of Ashland.
       PHILIP W. BLOCK (age 49) is  Administrative  Vice  President - Human
   Resources of Ashland and has served in such capacity since 1992.  During
   the past five years he has also  served as Vice  President  -  Corporate
   Human Resources.




                                       19


       JOHN  W.  DANSBY  (age  51) is  Administrative  Vice  President  and
   Treasurer  of Ashland  and has  served in such  capacities  since  1992.
   During  the past  five  years  he has  also  served  as  Ashland's  Vice
   President of Planning.
       WILLIAM R. SAWRAN (age 51) is Vice  President and Chief  Information
   Officer of Ashland,  and President of Ashland  Services  Company and has
   served  in such  capacities  since  1984,  with the  exception  of Chief
   Information Officer which he assumed in 1994.
       JAMES J. O'BRIEN (age 42) is Vice President of Ashland and President
   of The Valvoline Company and has served in such capacities since October
   1995. During the past five years he has also served as Vice President of
   Ashland Petroleum  Company,  Executive  Assistant to the Chief Executive
   Officer and  Regional  Manager of Ashland  Chemical's  General  Polymers
   division.
       FRED E.  LUTZEIER  (age 44) is Auditor of Ashland  and has served in
   such capacity  since  December  1992.  During the past five years he has
   also  served  as  Vice   President   and   Controller  of  Arch  Mineral
   Corporation.
       Each executive officer (other than Vice Presidents who are appointed
   by Ashland's  management) is elected by the Board of Directors to a term
   of one year,  or until the  successor  is duly  elected,  at the  annual
   meeting of the Board of Directors,  except in those  instances where the
   officer  is  elected  at other  than an annual  meeting  of the Board of
   Directors,  in which  case the  tenure  will  expire at the next  annual
   meeting of the Board of Directors unless the officer is re-elected.

                                  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 G of Notes to  Consolidated  Financial  Statements  in Ashland's
   Annual Report.
      At September 30, 1996,  there were  approximately  23,100  holders of
   record of Ashland's Common Stock.  Ashland Common Stock is listed on the
   New York and Chicago stock exchanges (ticker symbol ASH) and has trading
   privileges  on  the  Boston,  Cincinnati,   Pacific,   Philadelphia  and
   Amsterdam stock exchanges.

   ITEM 6.  SELECTED FINANCIAL DATA
       There is hereby incorporated by reference the information  appearing
   under the caption "Five Year Selected Financial  Information" on Page 64
   in Ashland's Annual Report.

  ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
       RESULTS OF OPERATIONS There is hereby  incorporated by reference the
       information appearing under the caption "Management's
   Discussion and Analysis" on Pages 36 to 42 in Ashland's Annual Report.

  ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
       There is hereby incorporated by reference the consolidated financial
   statements  appearing  on  Pages  43  through  58 and  the  supplemental
   information appearing on Pages 60 through 63 in Ashland's Annual Report.

   ITEM 9. CHANGES IN AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
   FINANCIAL DISCLOSURE
       None

                                  PART III

   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
       There is hereby  incorporated by reference the information to appear
   under the caption "Election of Directors" in Ashland's  definitive Proxy
   Statement for its January 30, 1997 Annual Meeting of Shareholders, which
   will be filed  with the SEC within 120 days  after  September  30,  1996
   ("Proxy  Statement").  See also the list of Ashland's executive officers
   and related  information under "Executive Officers of Ashland" in Item X
   herein.

  ITEM 11. Executive Compensation
       There is hereby  incorporated by reference the information to appear
   under  the  captions  "Executive   Compensation"  and  "Compensation  of
   Directors" in Ashland's Proxy Statement.


                                          20


  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      There is hereby  incorporated  by reference the information to appear
   under the caption "Election of Directors" and the information  regarding
   the ownership of securities of Ashland in Ashland's Proxy Statement.

   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
       There is hereby  incorporated by reference the information to appear
   under  the  caption  "Compensation   Committee  Interlocks  and  Insider
   Participation" in Ashland's Proxy Statement.

                                  PART IV

   ITEM 14. EXHIBITS,  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
       (a)  Documents  filed as part of this  Report (1) and (2)  Financial
       Statements and Financial Schedule
       The  consolidated  financial  statements  and financial  schedule of
   Ashland presented or incorporated by reference in this report are listed
   in the index on Page 25.
  
      (3) Exhibits
          3.1     -      Second  Restated  Articles of  Incorporation  of
                         Ashland,  as  amended  to May 16,  1996  (filed as
                         Exhibit  3.1 to  Ashland's  Form 8-K dated May 16,
                         1996, and incorporated herein by reference).

           3.2    -      Bylaws of Ashland,  as amended to September 19,
                         1996 (filed as Exhibit 3.2 to Ashland's  Form 8-K
                         dated September 20, 1996, and incorporated herein
                         by reference).

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

          4.2     -      Indenture,  dated as of  August  15,  1989,  as
                         amended  and  restated  as  of  August  15,  1990,
                         between  Ashland and  Citibank,  N.A.,  as Trustee
                         (filed as Exhibit 4(a) to  Ashland's  Form10-K for
                         the fiscal  year ended  September  30,  1991,  and
                         incorporated herein by reference).

          4.3     -      Rights  Agreement,  dated  as of May 16,  1996,
                         between  Ashland Inc. and Harris Trust and Savings
                         Bank,  together  with  Form of  Right  Certificate
                         (filed as Exhibits 4(a) and 4(c), respectively, to
                         Ashland's  Form8-A  filed  with the SEC on May 16,
                         1996, and incorporated herein by reference).

                The following  Exhibits 10.1 through 10.20 are compensatory
           plans or  arrangements  or management  contracts  required to be
           filed  as  exhibits  pursuant  to  Item   601(b)(10)(iii)(A)  of
           Regulation S-K.

          10.1    -      Amended Stock  Incentive  Plan for Key Employees
                         of Ashland Inc. and its Subsidiaries.

          10.2    -      Ashland  Inc.  Deferred  Compensation  and Stock
                         Incentive Plan for Non-Employee Directors.

          10.3    -      Ashland Inc. Director  Retirement Plan (filed as
                         Exhibit  10(c).3  to  Ashland's  Form 10-K for the
                         fiscal  year  ended   September   30,  1988,   and
                         incorporated herein by reference).

          10.4    -      Ninth   Amended  and   Restated   Ashland  Inc.
                         Supplemental Early Retirement Plan for Certain Key
                         Executive Employees.

          10.5    -      Ashland  Inc.  Amended  Performance  Unit  Plan
                         (filed as Exhibit  10(c).5 to Ashland's  Form 10-K
                         for the fiscal year ended  September 30, 1994, and
                         incorporated herein by reference).

          10.6    -      Ashland Inc. Incentive  Compensation Plan (filed
                         as Exhibit  10(c).6 to Ashland's  Form10-K for the
                         fiscal  year  ended   September   30,  1993,   and
                         incorporated herein by reference).

          10.7    -      Ashland  Inc.  Director  Death  Benefit  Program
                         (filed as Exhibit  10(c).10 to Ashland's Form 10-K
                         for the fiscal year ended  September 30, 1990, and
                         incorporated herein by reference).

          10.8    -      Ashland Inc. Salary  Continuation Plan (filed as
                         Exhibit  10(c).11 to  Ashland's  Form 10-K for the
                         fiscal  year  ended   September   30,  1988,   and
                         incorporated herein by reference).

          10.9    -      Forms  of  Ashland  Inc.  Executive  Employment
                         Contract   between   Ashland   Inc.   and  certain
                         executive  officers  of Ashland  (filed as Exhibit
                         10(c).12  to  Ashland's  Form 10-K for the  fiscal
                         year ended  September 30, 1989,  and  incorporated
                         herein by reference).




                                          21


          10.10   -      Form  of   Indemnification   Agreement  between
                         Ashland  Inc.  and  each  member  of its  Board of
                         Directors  (filed as Exhibit 10(c).13 to Ashland's
                         Form 10-K for the fiscal year ended  September 30,
                         1990, and incorporated herein by reference).

          10.11   -      Ashland Inc. Nonqualified Excess Benefit Pension
                         Plan.
 
          10.12   -      Ashland Inc. Long-Term Incentive Plan.

          10.13   -      Ashland Inc. Directors' Charitable Award Program.

          10.14   -      Ashland Inc. 1993 Stock Incentive Plan.

          10.15   -      Ashland Inc. 1995 Performance Unit Plan.

          10.16   -      Ashland Inc. Incentive Compensation Plan for Key 
                         Executives.

          10.17   -      Ashland Inc. Deferred Compensation Plan.

          11      -      Computation of Earnings Per Share  (appearing on
                         Page 28 of Ashland's Form 10-K for the fiscal year
                         ended September 30, 1996).

          12      -      Computation of Ratios of Earnings to Fixed Charges
                         and Earnings to Combined Fixed Charges and
                         Preferred Stock Dividends.

          13      -      Portions   of   Ashland's   Annual   Report  to
                         Shareholders,  incorporated  by reference  herein,
                         for the fiscal year ended September 30, 1996.

          21      -      List of Subsidiaries.


          23      -      Consent of independent auditors.

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

          27      -      Financial Data Schedule.

      Upon written or oral  request,  a copy of the above  exhibits will be
   furnished at cost. (b) Reports on Form 8-K

      A report on Form 8-K was filed on September 20, 1996 to announce that
   Paul W.  Chellgren  was  formally  elected by the Board of  Directors as
   Chief Executive  Officer.  The report also noted that Ashland's Board of
   Directors had amended  Ashland's  Bylaws at its meeting on September 19,
   1996.

      A report on Form 8-K was filed on November 14, 1996 to announce  that
   Providence  Capital,  Inc.,  a  New  York-based  financial  firm  and  a
   stockholder of record of 100 Ashland Inc.  (NYSE:ASH) common shares, had
   given  formal  notice  to  Ashland  that  it  had      nominated   three
   individuals  for  election to  Ashland's  board of directors at the 1997
   annual shareholders' meeting, to be held on January 30, 1997.

      A report on Form 8-K was filed on December 9, 1996 announcing several
   steps to improve the  Company's  profitability  and  enhance  returns to
   Ashland's shareholders.  Ashland also announced that Providence Capital,
   which had proposed  nominating  three  directors  to Ashland's  board at
   Ashland's  annual  shareholders'  meeting,  has agreed to  withdraw  its
   nominations.

                                         22




                                 SIGNATURES

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

                                      ASHLAND INC.
                                     (Registrant)

                                        By:    /s/ Kenneth L. Aulen
                                           --------------------------------
                                          (Kenneth L. Aulen, Administrative
                                           Vice President and Controller)

                                           Date:   December 10, 1996

      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 10, 1996.

          Signatures                               Capacity

          /s/ Paul W. Chellgren          Chief Executive Officer, President
      -------------------------          and Director
          Paul W. Chellgren


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


       /s/ Kenneth L. Aulen             Administrative Vice President,
      -------------------------          Controller and Principal
        Kenneth L. Aulen                 Accounting Officer


                    *                                 Director
      -------------------------
         Jack S. Blanton                      

                    *                                 Director
      -------------------------
        Thomas E. Bolger                      

                    *                                 Director
      -------------------------
        Samuel C. Butler                      

                    *                                 Director
      -------------------------
        Frank C. Carlucci                     

                    *                                 Director
      -------------------------
         James B. Farley                      

                    *                                 Director
      -------------------------
         Ralph E. Gomory                      

                    *                                 
      -------------------------         Chairman of the Board of Directors
         John R. Hall                   and Director

                                          23



                    *
      -------------------------                       Director
        Mannie L. Jackson

                    *
      -------------------------                       Director
        Patrick F. Noonan                     
                    
                    *                                 Director
      -------------------------
        Jane C. Pfeiffer                      

                    *                                 Director
      -------------------------
        James R. Rinehart                     

                    *                                 Director
      -------------------------
         Michael D. Rose                      

                    *                                 Director
      -------------------------
         William L. Rouse , Jr.                   

                    *                                 Director
      -------------------------
         Robert B. Stobaugh                     




      *  By: /s/ Thomas L. Feazell
            ------------------------
             Thomas L. Feazell
             Attorney-in-Fact

            Date:  December 10, 1996


                                          24




                INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES

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

Consolidated financial schedule:
 II - Valuation and qualifying accounts                                  27
       -----------


           *The  consolidated  financial  statements  appearing on Pages 43
   through  58 and the  supplemental  information  appearing  on  Pages  60
   through 63 in Ashland's  Annual Report are  incorporated by reference in
   this Annual Report on Form 10-K.


           Schedules other than that listed above have been omitted because
   of the  absence  of the  conditions  under  which they are  required  or
   because the information required is shown in the consolidated  financial
   statements  or the  notes  thereto.  Separate  financial  statements  of
   unconsolidated  affiliates  are omitted  because  each  company does not
   constitute a significant  subsidiary using the 20% tests when considered
   individually.  Summarized  financial  information for such affiliates is
   disclosed in Note C of Notes to  Consolidated  Financial  Statements  in
   Ashland's Annual Report.



                                        25




                       REPORT OF INDEPENDENT AUDITORS

       We have audited the consolidated  financial  statements and schedule
   of Ashland Inc. and  subsidiaries  listed in the  accompanying  index to
   financial   statements  and  financial  schedules  (Item  14(a)).  These
   financial  statements and schedule are the  responsibility  of Ashland's
   management.  Our  responsibility  is to  express  an  opinion  on  these
   financial statements and schedule based on our audits.
       We  conducted  our  audits in  accordance  with  generally  accepted
   auditing standards. Those standards require that we plan and perform the
   audit  to  obtain  reasonable  assurance  about  whether  the  financial
   statements  are  free  of  material  misstatement.   An  audit  includes
   examining,  on  a  test  basis,  evidence  supporting  the  amounts  and
   disclosures  in  the  financial  statements.   An  audit  also  includes
   assessing the accounting  principles used and significant estimates made
   by  management,  as well as evaluating the overall  financial  statement
   presentation.  We believe that our audits provide a reasonable basis for
   our opinion.
       In our opinion,  the financial statements listed in the accompanying
   index to  financial  statements  (Item  14(a))  present  fairly,  in all
   material respects,  the consolidated  financial position of Ashland Inc.
   and  subsidiaries  at September 30, 1996 and 1995, and the  consolidated
   results of their  operations  and their cash flows for each of the three
   years in the  period  ended  September  30,  1996,  in  conformity  with
   generally  accepted  accounting  principles.  Also, in our opinion,  the
   related financial statement schedule, when considered in relation to the
   basic  financial  statements  taken as a whole,  presents  fairly in all
   material respects the information set forth therein.
       As discussed in Note A to the consolidated financial statements,  in
   fiscal  1995  Ashland  changed  its  method of  accounting  relative  to
   impairments of long-lived assets.

   Louisville, Kentucky                                   ERNST & YOUNG LLP
   November 6, 1996



                                         26



- -------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------------------------------------------------------
(In millions)                                          Balance at      Provisions                                       Balance
                                                        beginning      charged to       Reserves            Other        at end
Description                                               of year        earnings       utilized          changes       of year
================================================================================================================================
                                                                                                            
YEAR ENDED SEPTEMBER 30, 1996
Reserves deducted from asset accounts
   Accounts receivable                                       $25             $10            $(8) (1)       $  -            $27
   Inventories                                                 6               6             (2)              -             10
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
Reserves deducted from asset accounts
   Accounts receivable                                       $23             $ 9            $(7) (1)       $  -            $25
   Inventories                                                 6               3             (3)              -              6
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1994
Reserves deducted from asset accounts
   Accounts receivable                                       $20             $11            $(8) (1)       $  -            $23
   Inventories                                                 5               3             (2)              -              6
================================================================================================================================

(1)  Uncollected amounts written off, net of recoveries of $2 million in 1996, $1 million in 1995 and $2 million in 1994.




                                         27



- ----------------------------------------------------------------------------------------------------------------------------------
Ashland Inc. and Subsidiaries
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Years Ended September 30
- ----------------------------------------------------------------------------------------------------------------------------------
(In millions except per share data)                                                       1996             1995              1994
===================================================================================================================================
                                                                                                                     
PRIMARY EARNINGS PER SHARE
Income available to common shares
   Net income                                                                            $ 211             $ 24             $ 197
   Dividends on convertible preferred stock                                                (19)             (19)              (19)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                         $ 192             $  5             $ 178
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
   Average common shares outstanding                                                        64               62                60
   Common shares issuable upon exercise of stock options                                     1                -                 1
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                            65               62                61
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share                                                                       $2.97             $.08             $2.94
===================================================================================================================================
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income available to common shares
   Net income                                                                            $ 211             $ 24             $ 197
   Interest on convertible debentures (net of income taxes)                                  5               -                  5
   Dividends on convertible preferred stock                                                 -               (19)               -
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                         $ 216             $  5             $ 202
- -----------------------------------------------------------------------------------------------------------------------------------
Average common shares and equivalents outstanding
   Average common shares outstanding                                                        64               62                60
   Common shares issuable upon
      Exercise of stock options                                                              1                1                 1
      Conversion of debentures                                                               3                -                 2
      Conversion of preferred stock                                                          9                -                 9
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                            77               63                72
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share                                                                       $2.82             $.08             $2.79
===================================================================================================================================




                                           28