

<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS

Years Ended September 30
<S>                                                               <C>                 <C>              <C>

(In millions)                                                        1995                 1994             1993
===========================================================================================================================

SALES AND OPERATING REVENUES
Petroleum                                                         $ 5,050             $  4,666         $  4,752
SuperAmerica                                                        1,788                1,706            1,785
Valvoline                                                           1,113                1,000              938
Chemical                                                            3,551                2,885            2,586
APAC                                                                1,123                1,101            1,116
Coal(1)                                                               610                    -                -
Exploration                                                           198                  199              247
Intersegment sales                                                 (1,266)              (1,223)          (1,225)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                  $12,167             $ 10,334         $ 10,199
- ---------------------------------------------------------------------------------------------------------------------------

OPERATING INCOME
Petroleum                                                         $   (54)            $    113         $     56
SuperAmerica                                                           53                   59               65
Valvoline                                                              (4)                  52               56
- ---------------------------------------------------------------------------------------------------------------------------
   Total Refining and Marketing Group                                  (5)                 224              177
Chemical                                                              159                  125              108
APAC                                                                   75                   70               53
Coal(1)                                                                66                    -                -
Exploration                                                            (6)                  28               36
General corporate expenses                                            (91)                 (80)             (77)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                  $   198             $    367         $    297
- ---------------------------------------------------------------------------------------------------------------------------

EQUITY INCOME
Ashland Coal, Inc.(1)                                             $     -             $      6         $     27
Arch Mineral Corporation                                               (4)                   7              (10)
Other                                                                  11                    9                9
- ---------------------------------------------------------------------------------------------------------------------------
                                                                  $     7             $     22         $     26
- ---------------------------------------------------------------------------------------------------------------------------

OPERATING INFORMATION
Petroleum
   Product sales (thousand barrels per day)(2)                      377.2                357.7            350.3
   Refining inputs (thousand barrels per day)(3)                    349.5                338.4            335.9
   Value of products manufactured per barrel                      $ 22.41             $  21.49         $  23.00
   Input cost per barrel                                            18.55                16.76            19.06
- ---------------------------------------------------------------------------------------------------------------------------
   Refining margin per barrel                                     $  3.86             $   4.73         $   3.94
SuperAmerica
   Product sales (thousand barrels per day)                          71.5                 70.2             73.8
   Merchandise sales (millions)                                   $   547             $    519         $    549
Valvoline lubricant sales (thousand barrels per day)(2)              19.1                 17.9             16.3
APAC construction backlog at September 30 (millions)              $   672             $    554         $    495
Ashland Coal, Inc.(4)
   Tons sold (millions)                                              22.0                 18.2             18.0
   Sales price per ton                                            $ 27.80             $  29.85         $  29.77
Arch Mineral Corporation(4)
   Tons sold (millions)                                              27.2                 24.3             19.2
   Sales price per ton                                            $ 26.23             $  26.35         $  25.26
Exploration
   Net daily production
     Natural gas (million cubic feet)(2)                            102.9                 94.3             99.3
     Nigerian crude oil (thousand barrels)                           18.8                 18.7             21.7
   Sales price
     Natural gas (per thousand cubic feet)                        $  1.89             $   2.42         $   2.45
     Nigerian crude oil (per barrel)                              $ 16.17             $  15.01         $  17.77
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
(1)   Ashland Coal was  consolidated  in 1995 and accounted for on the equity method in 1994 and 1993 (see Note B to 
      the financial statements).
(2)   Includes intersegment sales.
(3)   Includes crude oil and other purchased feedstocks.
(4)   Ashland's ownership interest is 54% in Ashland Coal (39% prior to 1995) and 50% in Arch Mineral.

</TABLE>


                                       34
<PAGE>
RESULTS OF OPERATIONS

Ashland's net income  amounted to $24 million in 1995, $197 million in 1994
and $142  million  in 1993.  However,  comparisons  of  these  results  are
affected by various unusual items. The following table shows the effects of
unusual  items on  operating  and net  income  for the  three  years  ended
September 30, 1995.

<TABLE>
<CAPTION>

                                                            Operating income                          Net income
                                                ----------------------------       -----------------------------
(In millions)                                   1995        1994        1993       1995        1994         1993
=================================================================================================================
<S>                                             <C>         <C>         <C>        <C>         <C>          <C>

Income before unusual items                     $318        $356        $282       $103        $190         $115
   Asset impairment write-downs                  (83)          -           -        (54)          -            -
   Early retirement and restructuring programs   (37)          -           -        (25)          -            -
   Litigation matters                              -          11           -          -           7            -
   Ashland Coal unusual items                      -           -           -          -           -           18
   Gain on sale of Petroleum operation             -           -          15          -           -            9
- -----------------------------------------------------------------------------------------------------------------
Income as reported                              $198        $367        $297       $ 24        $197         $142
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

Effective   September  30,  1995,  Ashland  adopted  Financial   Accounting
Standards Board Statement No. 121 (FAS 121), "Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of." As a
result,  Ashland  recorded  charges of $83  million  to write down  certain
assets to their fair values,  including an idle unit at Ashland Petroleum's
Catlettsburg,   Kentucky  refinery,  certain  unused  crude  oil  gathering
pipelines  of  Scurlock   Permian,   various  petroleum  product  marketing
properties to be sold or shutdown,  and various  other assets.  Fair values
were based upon appraisals or estimates of discounted future cash flows, as
appropriate.   In  addition,  charges  of  $37  million  related  to  early
retirement and restructuring programs were incurred,  reflecting efforts by
Ashland  Petroleum  and several  other  divisions to reduce their costs and
improve their competitive positions.

Excluding  unusual  items,  net income  amounted  to $103  million in 1995,
compared to $190  million in 1994.  Results were mixed,  as record  results
from  Ashland  Chemical,  APAC and  Ashland  Coal were more than  offset by
reduced earnings from Ashland Petroleum, Valvoline and Ashland Exploration,
as well as higher interest costs.  Net income before unusual items amounted
to $190 million in 1994, compared to $115 million in 1993. Operating income
from Ashland  Petroleum was significantly  higher,  and record results were
achieved by Ashland Chemical and APAC. In addition, equity income from Arch
Mineral improved considerably after the prolonged strike by the United Mine
Workers (UMW) was settled in December 1993.

The following  table  compares  operating  income  before  unusual items by
segment for the three years ended  September  30,  1995.  Due to  Ashland's
purchase of an  additional  15% interest in Ashland  Coal during 1995,  the
results of Ashland  Coal are  consolidated  and shown as a new  segment for
1995.
<TABLE>
<CAPTION>
(In millions)                                              1995              1994              1993
- --------------------------------------------------------------------------------------------------------
<S>                                                       <C>                <C>               <C>
Operating income (loss)
   Petroleum                                              $  48              $113              $ 41
   SuperAmerica                                              53                59                65
   Valvoline                                                  1                52                56
   Chemical                                                 164               125               108
   APAC                                                      75                70                53
   Coal                                                      66                 -                 -
   Exploration                                               (2)               28                36
   General corporate expenses                               (87)              (91)              (77)
- --------------------------------------------------------------------------------------------------------------
                                                           $318              $356              $282
- --------------------------------------------------------------------------------------------------------------
</TABLE>

PETROLEUM

Operating income of Ashland Petroleum declined from $113 million in 1994 to
$48 million in 1995 before  unusual  items.  Refining  margins in 1995 were
adversely affected by the market confusion  surrounding the introduction of
reformulated  gasoline and by excess industry production of gasoline in the
March quarter when refiners switched production from distillate to gasoline
in response to one of the warmest  winters of this century.  While refining
margins recovered and averaged $4.66 a barrel during the last half of 1995,
overall  refining margins for the year declined from $4.73 a barrel in 1994
to $3.86 a barrel in 1995.  Refining  expenses  per  barrel  also  declined
somewhat  from 1994 as the  refineries  operated  at near  capacity  levels
during  the last half of 1995 and cost  savings  from  Ashland  Petroleum's
restructuring  programs  began to be realized.  Earnings from pipelines and
Scurlock  Permian were up $19 million,  reflecting a combination  of tariff
increases, higher throughput and reduced expenses.

Operating  income of Ashland  Petroleum  amounted to $113  million in 1994,
compared to 1993 when operating income amounted to $41 million, excluding a
gain  of $15  million  on  the  sale  of its  TPT  inland  waterways  barge
operation. Ashland Petroleum's strong performance was due to higher margins
in its Midwest  markets,  as well as actions to improve crude oil selection
and other profit enhancement efforts. Margins were very strong in the first
half of 1994,  reflecting  favorable  distillate prices concurrent with the
implementation  of low-sulfur  diesel  requirements in 

                                       35


<PAGE>
Ashland Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS

the December quarter and reduced crude oil costs in the March quarter.  The
last half of 1994 was  adversely  affected by  increasing  crude oil costs,
with wholesale product prices not keeping pace. Crude oil throughput was up
slightly in 1994 despite major  turnarounds  at two of Ashland  Petroleum's
refineries.  Although  refining margins were volatile for most of the year,
such margins did increase  from $3.94 a barrel in 1993 to $4.73 a barrel in
1994. This improvement was partially offset,  however, by higher turnaround
and   depreciation   costs.   Earnings  from  Scurlock   Permian   improved
considerably,  as crude oil gathering and handling  margins  increased from
their depressed levels in 1993.

SUPERAMERICA

Earnings from SuperAmerica declined from $59 million in 1994 to $53 million
in 1995.  Gasoline  volumes were up slightly  reflecting a higher number of
stores and merchandise sales volumes were up on a per store basis. However,
the  effects  were more than  offset by higher  labor and  training  costs,
reflecting  the increased  number of stores,  the tight labor  market,  and
costs associated with the continuing rollout of the co-branding partnership
program  with  popular   fast-food  chains.  At  September  30,  1995,  609
SuperAmerica stores were operating,  compared to 598 stores in 1994 and 588
stores in 1993. Of these stores,  66 included  fast-food  operations at the
end of 1995, compared to only 10 at the end of 1994.

Operating income of $59 million for SuperAmerica in 1994 was second only to
its  record  earnings  of  $65  million  achieved  in  1993.  Gasoline  and
merchandise  margins  were up  considerably  and largely  offset the volume
reductions associated with the sale of 80 SuperAmerica stores in 1993. Such
stores  were  located  in Florida  and other  non-strategic  areas  outside
markets directly supplied by Ashland Petroleum.  While the number of stores
was up at the end of 1994 compared to 1993, the average number of stores in
operation in 1994 was actually down 4%, and operations of the  newly-opened
stores had not yet fully matured.

VALVOLINE

Valvoline had an extremely  difficult  year in 1995,  operating  just above
break-even  levels before unusual items,  compared to 1994 when earnings of
$52  million  were   achieved.   Domestic  motor  oil  earnings  were  down
considerably,   reflecting   reductions  in  branded  sales  volumes,  cost
increases for additives and packaging  materials,  higher  advertising  and
promotional  expenses,  and a continuing  shift from  packaged  products to
lower margin bulk sales.  Due to  competitive  pressures,  the higher costs
could not be fully passed through in higher sales prices, particularly with
respect to private label sales.  Results from car care products  (including
Zerex   antifreeze)   were  adversely   affected  by  illegal   imports  of
refrigerants,   escalating  costs  for  ethylene  glycol  and  weak  demand
reflecting  the  unusually  warm  winter  weather.  Operating  income  from
international  operations was also down due to higher  distribution  costs,
and aggressive  advertising and promotional expenses to expand the European
distributorships  acquired in 1994.  Although average car counts and ticket
prices  continued  to improve,  results from  Valvoline  Instant Oil Change
(VIOC) were down due to increased  labor and material  costs.  At September
30, 1995, VIOC operated 365 company-owned outlets,  compared to 347 in 1994
and 341 in 1993. In addition,  the VIOC  franchising  program  continued to
expand with 90 outlets open in 1995, compared to 75 in 1994 and 66 in 1993.

Valvoline had its second best year ever in 1994,  with operating  income of
$52 million,  compared to a record $56 million in 1993. The major factor in
the decline was reduced margins on automotive  refrigerants  resulting from
built-up customer inventories.  Earnings from Valvoline's branded motor oil
business were relatively  unchanged as the effects of volume increases were
largely offset by reduced margins  associated with a continuing  shift from
packaged products to lower margin bulk sales, and by significant  increases
in  raw  material  costs  during  the  last  half  of  1994.  International
operations  were up  considerably,  spurred in part by the  acquisition  of
Valvoline distributorships in six European countries during 1994. Valvoline
Instant Oil Change (VIOC)  achieved higher earnings for the second straight
year with continued improvements in average car counts and ticket prices.

CHEMICAL

For the fourth  consecutive year, Ashland Chemical was the leading earnings
contributor to Ashland's  results.  Operating income of $164 million before
unusual  items  was up over 30%  from  1994  results  of $125  million  and
represented a third  straight  record year for Ashland  Chemical.  A strong
performance  from the  petrochemical  businesses  was a key  factor  in the
improvement. Exceptionally strong prices for methanol during the first half
of the  year,  and  higher  sales  volumes  and  margins  for  cumene  were
responsible for most of the  petrochemical  improvement.  Operating  income
from methanol  returned to more normal levels during the last half of 1995,
declining $22 million from the earnings  achieved  during the first half of
the fiscal year.  Results from the  distribution  businesses were up nearly
25%,  reflecting higher sales volumes.  However,  operating income from the
specialty  chemicals  businesses  was down 10% due to reduced  margins  for
water treatment chemicals and foundry products.

Operating income from Ashland Chemical  increased from $108 million in 1993
to  $125  million  in  1994,  despite  incurring  increased   environmental
remediation costs.  Earnings from the distribution  businesses were up 22%,
principally  due to higher  sales  volumes  for  thermoplastics.  Operating
income from the  specialty  chemicals  group  increased  25%,  with foundry
products  and  water  treatment  chemicals  leading  an  across  the  board
improvement.  

                                       36

<PAGE>

Results from  petrochemicals  were up 15%,  with  improvements  in methanol
margins more than offsetting the effects of production and  weather-related
problems on cumene results early in 1994.

APAC

Despite  the sale of its  Arizona  operations  in 1994,  APAC  construction
companies  achieved  their second  straight year of record results in 1995.
Operating  income amounted to $75 million in 1995,  compared to $70 million
in 1994,  which  included  income  of $9  million  related  to the  Arizona
operations.  A strong  backlog  which  enhanced  revenues  and margins from
construction  jobs,  and close  attention  to costs and safety were primary
factors in APAC's improvement.

APAC achieved  earnings of $70 million in 1994,  compared to $53 million in
1993. Each of its continuing operating regions achieved improvements on the
strength  of a higher  quality  backlog,  better  margins  on  construction
materials  and more  favorable  weather  conditions.  In  addition,  APAC's
Arizona  operations  contributed  operating income (including a gain on the
sale of those  operations)  of $9 million,  which was up from $6 million in
1993.

COAL

As a result of Ashland's acquisition of an additional 15% interest, Ashland
Coal was  consolidated in 1995.  Prior to 1995,  Ashland  accounted for its
investment  in  Ashland  Coal on the  equity  method  of  accounting.  On a
comparable  basis,  operating  income from Ashland Coal  increased from $35
million in 1994 to $66 million in 1995. The improvement  reflects increased
productivity and cost reductions in 1995, combined with the adverse effects
of the UMW strike  (including  the related  aftereffects)  on 1994 results.
Such  improvements  more than offset the  reduction in average sales prices
resulting  from the  expiration  of a sales  contract in the December  1994
quarter and other contract changes.

EXPLORATION

Ashland Exploration incurred an operating loss of $2 million in 1995 before
unusual items, compared to operating income of $28 million in 1994. Results
from  domestic  operations  were  down $14  million,  reflecting  depressed
natural  gas prices.  The effect of reduced  prices was  partially  offset,
however, by a 9% increase in natural gas production, in part reflecting the
operations of Appalachian  producing  properties  acquired in 1995. Foreign
earnings  were  down $16  million,  reflecting  a  combination  of  reduced
profitability from the Nigerian operations, and increased exploration costs
associated  with Nigerian  offshore blocks acquired under a 1992 production
sharing agreement.

Ashland Exploration's operating income declined from $36 million in 1993 to
$28 million in 1994. Operating income from domestic operations was down $19
million,  resulting from reduced production and prices for both natural gas
and crude oil, increased exploration expenses,  and the favorable effect of
a contract  settlement  that was  included in results  for 1993.  Operating
income from foreign  operations  improved by $11 million,  reflecting lower
exploration  costs and improved results from crude oil trading  activities.
Such  factors  more than offset the effects of normal  declines in Nigerian
crude oil production as developed reserves continue to be depleted.

During 1995, Ashland Exploration  entered into a settlement  agreement with
Columbia Gas  Transmission  to resolve claims  involving  natural gas sales
contracts  which were  abrogated  by  Columbia  in 1991.  Columbia  and its
parent,  Columbia Gas Systems,  have filed  reorganization  plans including
this agreement with the U.S.  Bankruptcy  Court in Delaware.  The Court has
approved  the  fairness  of the  settlement  agreement  and the  disclosure
statements  allowing the reorganization  plans to be voted on by creditors.
Subject to the outcome of the voting  process and various other  approvals,
the settlement agreement would provide for a $78 million payment to Ashland
Exploration,  of  which  5% would be  withheld  by  Columbia  to be used to
potentially satisfy the claims of non-settling producers.

GENERAL CORPORATE EXPENSES

Excluding  unusual items,  general  corporate  expenses were $87 million in
1995,  $91  million  in 1994 and $77  million  in 1993.  Expenses  for 1994
included  consulting  fees and other expenses  related to a  corporate-wide
cost   control   program   and  higher   accruals   for   performance-based
compensation.  In addition, expenses for both 1994 and 1993 were reduced by
income  from  the  resolution  of  matters  related  to  Ashland's   former
engineering subsidiaries.

OTHER INCOME (EXPENSE)

Interest expense (net of interest income) amounted to $171 million in 1995,
$117 million in 1994 and $123 million in 1993.  Adjusting  for  capitalized
interest  on  refinery  projects  of $9  million  in 1993,  interest  costs
incurred  amounted to $132 million that year. The changes in interest costs
incurred during the last three years resulted principally from fluctuations
in debt levels and, to a lesser extent, higher interest rates in 1995.

Results of Arch Mineral produced equity income of $2 million in 1995 before
unusual  items,  compared  to $7 million in 1994 and an equity  loss of $10
million in 1993.  The major factor in the  fluctuations  was the  prolonged
strike by the UMW which  extended  from April into  December 1993 and had a
significant effect on the comparability of results for both fiscal 1993 and
1994. Results for 1995 were negatively affected by weak demand for Illinois
high-sulfur  coal  and by high  mining  costs  resulting  from  unfavorable
overburden ratios and adverse geological  conditions at certain Appalachian
operations.

As indicated  previously,  Ashland Coal was  consolidated  in 1995.  Equity
income  from  Ashland  Coal for  1993  included  a net gain of $20  million
resulting from a favorable  adjustment to income tax expense due to tax law
changes,  partially offset by a charge to increase the valuation  allowance
for certain prepaid  royalties.  Excluding this 

                                       37


<PAGE>
Ashland Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS

unusual  gain,  equity  income from Ashland Coal  amounted to $6 million in
1994, compared to $7 million in 1993. The UMW strike reduced Ashland Coal's
earnings in both years.

FINANCIAL POSITION
LIQUIDITY

Ashland's  financial  position  has  enabled it to obtain  capital  for its
financing needs and maintain investment grade ratings on its senior debt of
Baa1 from  Moody's and BBB from  Standard & Poor's.  Ashland has  revolving
credit agreements  providing for up to $370 million in borrowings,  none of
which were in use at  September  30, 1995.  In  addition,  Ashland Coal has
revolving credit agreements providing for up to $500 million in borrowings,
of which $40  million  was in use at  September  30,  1995.  At that  date,
Ashland could issue an additional $154 million in medium-term notes under a
shelf registration should future  opportunities or needs arise. Ashland and
Ashland  Coal also have access to various  uncommitted  lines of credit and
commercial paper markets,  and had short-term notes and commercial paper of
$160  million  outstanding  at  September  30,  1995.  While  certain  debt
agreements  contain  covenants  restricting the amount by which Ashland can
increase its indebtedness,  such indebtedness  could have been increased by
up to $1.07 billion at September 30, 1995.

Cash and cash equivalents at September 30, 1995, were $52 million, compared
to $40  million for 1994.  Cash flows from  operations,  a major  source of
Ashland's  liquidity,  amounted  to $500  million in 1995  (including  $130
million from Ashland Coal),  $454 million in 1994 and $250 million in 1993.
Most of the unusual  items  which  reduced  earnings in 1995 were  non-cash
charges and therefore did not adversely  affect cash flow.  Cash flows from
operations provided 85% of Ashland's capital  requirements for net property
additions and dividends  during the last three years.  The remainder of its
capital requirements during this period, plus funds for acquisitions,  have
come from borrowings, the issuance of stock, and sales of operations.

Property  additions  amounted to $1.25 billion  during the last three years
and are  summarized  in the  Information  by  Industry  Segment on page 59.
Expenditures  by Ashland  Petroleum  amounted  to over 50% of the total for
1993, as the refineries were upgraded to produce  cleaner-burning fuels and
to   meet   tougher   environmental   regulations.   Accordingly,   capital
expenditures  by  Ashland's  related  energy and chemical  businesses  were
curtailed  during  that year to meet the capital  needs of the  refineries.
With the completion of various  refinery units in 1993,  investments in the
energy and chemical businesses were accelerated,  accounting for nearly 60%
of Ashland's capital expenditures in 1994 and nearly 70% in 1995.

Long-term  borrowings  provided funds of $748 million during the last three
years, including the issuance of $439 million of medium-term notes and $250
million of 8.80% senior debentures. The proceeds from long-term borrowings,
as well as $293 million from the issuance of convertible preferred stock in
1993,  were  used to retire  $536  million  of  long-term  debt  (scheduled
maturities as well as refundings to reduce interest costs) and to partially
fund capital expenditures and acquisitions. Cash flows were supplemented as
necessary by the issuance of short-term notes and commercial paper.

Acquisitions  (including  operations  acquired  through the issuance of $41
million of Ashland  common  stock)  amounted  to $432  million  since 1992,
including  $156  million  for  certain   operations  of  Aristech  Chemical
Corporation  and various  other  chemical  companies,  $110  million for an
additional  15%  interest  in  Ashland  Coal,  $69  million  for  Zerex and
Valvoline's European distributorships,  $68 million for Appalachian natural
gas  producing  properties,   and  $24  million  for  various  construction
companies.  Proceeds  from the sale of  operations  generated  $176 million
during the last  three  years,  including  divestitures  of APAC's  Arizona
operations,  80  SuperAmerica  stores,  various assets acquired in the 1991
acquisition of The Permian Corporation,  and Ashland Petroleum's TPT inland
waterways barge operation.

Investment purchases, sales and maturities relate primarily to the turnover
in the debt securities held by Ashland's captive insurance  companies.  The
net cash  outflow  related to these  transactions  in the last three  years
principally  reflects the increase in the  investment  portfolios  of these
companies.

Working  capital at September 30, 1995,  was $481 million and liquid assets
(cash, cash equivalents and accounts receivable) amounted to 78% of current
liabilities  at that  date.  Ashland's  working  capital  is  significantly
affected by its use of the LIFO method of inventory valuation, which valued
such inventories at $400 million below their replacement costs at September
30, 1995.

CAPITAL RESOURCES

Ashland's capital employed at September 30, 1995,  consisted of debt (53%),
deferred income taxes (1%), minority interest (5%),  convertible  preferred
stock  (7%) and common  stockholders'  equity  (34%).  Debt as a percent of
capital employed increased from 48% at the end of 1994, reflecting the high
level of acquisitions  during 1995, as well as the consolidation of Ashland
Coal's year-end debt of $228 million.  Long-term debt for 1995 included $68
million of floating-rate  debt and the interest rates on an additional $405
million  of  fixed-rate  debt were  converted  to  floating  


                                       38
<PAGE>

rates through interest rate swap agreements. As a result, interest costs in
1996 will fluctuate  based on short-term  interest rates on $473 million of
Ashland's  consolidated  long-term debt, as well as on any short-term notes
and commercial paper.

During  fiscal  1996,   Ashland   anticipates   capital   expenditures   of
approximately $535 million.  Ashland Petroleum's  capital  expenditures are
expected  to amount  to about  $180  million,  with the  remaining  capital
directed to growth  opportunities in Ashland's  related energy and chemical
businesses.  Ashland anticipates meeting its 1996 capital  requirements for
property additions and dividends from internally generated funds. Debt as a
percent of Ashland's  capital employed is expected to decline to around 50%
during 1996.

At September 30, 1995,  Ashland could issue up to an additional $49 million
in common stock under a shelf registration. During 1995, 1.4 million shares
were issued under this registration,  generating net proceeds to Ashland of
$51 million.

ENVIRONMENTAL MATTERS

Federal, state and local laws and regulations relating to the protection of
the  environment  have  resulted  in higher  operating  costs  and  capital
investments  by the  industries in which Ashland  operates.  Because of the
continuing  trends toward  greater  environmental  awareness and increasing
regulations,   Ashland  believes  that   expenditures   for   environmental
compliance will continue to have a significant effect on the conduct of its
businesses.  Although it cannot accurately  predict how these  developments
will affect future operations and earnings, Ashland believes the nature and
significance of its costs will be comparable to those of its competitors in
the petroleum, chemical and extractive industries.

Capital  expenditures  for air,  water and solid waste  control  facilities
amounted  to $44 million in 1995,  $63 million in 1994 and $137  million in
1993. Based on current environmental regulations,  Ashland anticipates such
capital  expenditures  will amount to about $50 million in 1996.  Ashland's
environmental  remediation and compliance costs amounted to $151 million in
1995, $140 million in 1994 and $148 million in 1993, and are expected to be
in the range of $140 million in 1996. Such compliance  costs do not include
expenditures for additives,  such as MTBE and ethanol, required to meet the
reformulated gasoline and oxygenated fuel requirements.

Environmental  reserves  are subject to  considerable  uncertainties  which
affect  Ashland's  ability to estimate its share of the  ultimate  costs of
required  remediation  efforts.  Such uncertainties  involve the nature and
extent of  contamination  at each  site,  the  extent of  required  cleanup
efforts under existing environmental  regulations,  widely varying costs of
alternate  cleanup  methods,  changes  in  environmental  regulations,  the
potential effect of continuing improvements in remediation technology,  and
the number and financial strength of other potentially  responsible parties
at  multiparty  sites.  As a result,  charges to income  for  environmental
liabilities  could have a material  effect on  results of  operations  in a
particular  quarter or fiscal year as assessments and  remediation  efforts
proceed or as new remediation sites are identified.  However,  such charges
are  not  expected  to  have  a  material   adverse   effect  on  Ashland's
consolidated financial position, cash flow or liquidity.

OUTLOOK

Although  refining  margins are expected to remain  volatile,  key external
factors look promising for the refining industry. The industry is currently
operating  at a  high  rate  of  capacity,  with  gasoline  and  distillate
inventories  down from last  year's  levels at this  time.  The  economy is
reasonably  strong,  inflation  appears to be under  control  and  economic
growth  continues at a modest  pace.  In  addition,  gasoline  demand is up
nearly  3% for the year and is  expected  to  continue  increasing  over 1%
annually  for  the  rest  of the  decade,  reflecting  a  leveling  of fuel
efficiency in the passenger car fleet,  increasing sales of light-truck and
sport-utility  vehicles which average fewer miles per gallon than passenger
cars, and an increasing number of vehicle miles traveled.  And finally, the
regulatory  environment  appears more relaxed with reforms remaining on the
Congressional  agenda  which  would  require  new  regulations  to  include
cost-benefit analyses.

During 1995,  Ashland  Petroleum was  reorganized  into four business units
around its three refineries and Scurlock Permian. Results from its steps to
improve profitability, including the reorganization to push decision-making
closer to the marketplace,  the elimination of 321 jobs, increased refining
capacity resulting from prior investments and other efficiency measures are
beginning to be realized.  In addition,  an aggressive program was begun in
1995 to revitalize marketing efforts under the Ashland brand name, focusing
on jobber  distribution.  This program should result in a larger percentage
of Ashland Petroleum's  gasoline being sold under company brands and reduce
its dependence on wholesale markets.

Since Ashland Petroleum's  regulatory  compliance  expenditures have peaked
for now, Ashland's discretionary cash flow position has improved,  allowing
it to accelerate its investment in related energy and chemical  businesses.
SuperAmerica  has renewed its expansion  efforts,  expecting to build about
270 new stores over the next five years and expand its partnership  program
with fast-food chains. The new stores should increase  SuperAmerica's share
in  strategic  markets  where  it  is  already  a  leader,  enabling  it to
distribute a growing percentage of Ashland Petroleum's gasoline production.

Ashland Chemical and APAC will continue to pursue growth through  selective
acquisitions.  Ashland  Chemical  will  continue  to  emphasize  integrated
marketing  efforts  targeting  its North  American  customers and a growing


                                       39

<PAGE>
Ashland Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS

international  sales base.  Ashland Chemical is expecting another good year
in  1996,   despite  methanol  margins  declining   considerably  from  the
exceptionally  high  levels  experienced  during  the  first  half of 1995.
Increased  infrastructure spending and an expanding economy should continue
to benefit APAC's efforts to build market position in existing  markets and
reduce  costs.  APAC's  construction  backlog is a record  $672  million at
September  30,  1995,  reflecting  increases in both the public and private
sectors, and is expected to contain margins comparable to those included in
last year's backlog.

After several years of aggressive  growth,  Valvoline is shifting its focus
to reassessing its growth initiatives, reducing costs and rebuilding return
on investment.  Valvoline moved  aggressively  in the September  quarter to
reduce raw material and packaging costs and limit  discretionary  spending.
Ashland Exploration's  earnings will continue to be depressed until natural
gas prices recover and its Nigerian reserves are replaced.  In an effort to
optimize cash flow, Ashland  Exploration's natural gas drilling program was
reduced  during 1995.  Exploratory  work  continues on two Nigerian  blocks
acquired in 1992 with drilling of two wells  planned in 1996.  During 1996,
Ashland  Exploration expects to resolve its claims against the Columbia Gas
companies, with most of the settlement proceeds recognized as income.

Ashland Coal's results in 1996 will be adversely affected by the expiration
of several high priced,  high volume sales contracts and by price reopeners
under  other  contracts.  Numerous  steps  have been  taken at its mines to
control  the effects of these price  changes  and  increase  profitability.
While such steps will have favorable  effects on earnings in 1996 and 1997,
unfavorable  market conditions are hindering  Ashland Coal's efforts.  As a
result,   earnings   from   Ashland  Coal  in  1996  will  likely  be  down
significantly from 1995.  However,  improved results are expected from Arch
Mineral, which undertook a restructuring of operations in 1995 (including a
staff  reduction  of  about  120   positions),   sold  a  group  of  small,
non-strategic  mines and idled an Illinois  mine due to reduced  demand for
its high-sulfur  coal. Arch will continue to have difficulty  marketing its
high-sulfur  Illinois coal, but is working to increase its low-sulfur  coal
production and improve its market position.

EFFECTS OF INFLATION AND CHANGING PRICES

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

In the capital-intensive industries in which Ashland operates,  replacement
costs for its properties  would generally  exceed their  historical  costs.
Accordingly,  depreciation,  depletion  and  amortization  expense would be
greater if it were  based on  current  replacement  costs.  However,  since
replacement facilities would reflect technological improvements and changes
in  business  strategies,  such  facilities  would be  expected  to be more
productive  than  existing  facilities,  mitigating  somewhat the increased
depreciation expense.

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

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

QUARTERLY FINANCIAL INFORMATION

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

Quarters ended                                December 31          March 31          June 30             September 30
- ---------------------------------------------------------   ---------------   --------------       ------------------
(In millions except per share data)         1994     1993     1995     1994     1995    1994         1995        1994
===========================================================================================================================
<S>                                       <C>      <C>      <C>      <C>      <C>     <C>          <C>         <C>

Sales and operating revenues              $2,924   $2,572   $2,735   $2,207   $3,256  $2,703       $3,252      $2,853
Operating income (loss)                       91      120        4       68      109      72           (7)(1)     107(2)
Net income (loss)                             35       58      (29)      33       48      44          (30)(1)      61(2)
Primary earnings (loss) per share            .50      .90     (.55)     .47      .69     .65         (.55)        .93
Common dividends per share                  .275      .25     .275      .25     .275     .25         .275         .25
Market price per common share 
    High                                  39-7/8   35-5/8   35-5/8   44-1/2   38-3/8  42-3/4       35-3/8      37-7/8
    Low                                   31-1/4       31   31-5/8       34   33-1/2  33-1/2           32      33-1/4
===========================================================================================================================
<FN>

(1)  Charges  for  asset  impairment  write-downs  under  FAS 121 and early retirement and restructuring programs 
     reduced operating income by $120 million and net income by $79 million in the quarter ended September 30, 1995.
(2)  A net gain related to litigation matters increased  operating income by $11 million and net income by $7 million 
     in the quarter ended September 30, 1994.

</TABLE>


                                       40

<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaires
STATEMENTS OF CONSOLIDATED INCOME

Years Ended September 30
(In millions except per share data)                                          1995                 1994                1993
===========================================================================================================================
<S>                                                                       <C>                  <C>                 <C>
REVENUES
Sales and operating revenues (including excise taxes)                     $12,167              $10,334             $10,199
Other                                                                          72                   48                  57
- ---------------------------------------------------------------------------------------------------------------------------
                                                                           12,239               10,382              10,256
COSTS AND EXPENSES
Cost of sales and operating expenses                                        9,286                7,742               7,951
Excise taxes on products and merchandise                                      988                  877                 645
Selling, general and administrative expenses                                1,205                1,021                 993
Depreciation, depletion and amortization                                      471                  295                 293
General corporate expenses                                                     91                   80                  77
- ---------------------------------------------------------------------------------------------------------------------------
                                                                           12,041               10,015               9,959
- ---------------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                              198                  367                 297

OTHER INCOME (EXPENSE)
Interest expense (net of interest income) - Notes A and F                    (171)                (117)               (123)
Equity income - Note D                                                          7                   22                  26
- --------------------------------------------------------------------------------------------------------------------------- 

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST                               34                  272                 200
Income taxes - Note H                                                          13                  (75)                (58)
Minority interest in earnings of subsidiaries                                 (23)                   -                   -
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                     24                  197                 142
Dividends on convertible preferred stock                                      (19)                 (19)                 (6)
Other deductions - net                                                          -                    -                  (2)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME AVAILABLE TO COMMON SHARES                                          $    5             $    178            $    134
===========================================================================================================================
EARNINGS PER SHARE - NOTE A
Primary                                                                    $  .08             $   2.94            $   2.26
Assuming full dilution                                                     $  .08             $   2.79            $   2.20
AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING
Primary                                                                        62                   61                  59
Assuming full dilution                                                         63                   72                  66
===========================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.



                                       41
<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

September 30
(In millions)                                                                                   1995                 1994
===========================================================================================================================
<S>                                                                                         <C>                  <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents - Note A                                                          $     52             $     40
Accounts receivable (less allowances for doubtful accounts of
    $25 million in 1995 and $23 million in 1994)                                               1,575                1,323
Construction completed and in progress - at contract prices                                       42                   55
Inventories - Note A                                                                             726                  601
Deferred income taxes - Note H                                                                    90                   71
Other current assets                                                                              90                   81
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                               2,575                2,171


INVESTMENTS AND OTHER ASSETS
Investments in and advances to unconsolidated affiliates - Note D                                145                  291
Investments of captive insurance companies - Note A                                              192                  181
Cost in excess of net assets of companies acquired (less accumulated
   amortization of $35 million in 1995 and $32 million in 1994)                                  107                   80
Other noncurrent assets                                                                          403                  276
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                 847                  828


PROPERTY, PLANT AND EQUIPMENT
Cost
   Petroleum                                                                                   2,860                2,911
   SuperAmerica                                                                                  488                  459
   Valvoline                                                                                     294                  273
   Chemical                                                                                      737                  633
   APAC                                                                                          566                  528
   Coal                                                                                          972                    -
   Exploration (successful efforts method)                                                     1,011                  943
   Corporate                                                                                     150                  151
- --------------------------------------------------------------------------------------------------------------------------
                                                                                               7,078                5,898
Accumulated depreciation, depletion and amortization                                          (3,508)              (3,082)
- --------------------------------------------------------------------------------------------------------------------------
                                                                                               3,570                2,816
- --------------------------------------------------------------------------------------------------------------------------
                                                                                              $6,992               $5,815
==========================================================================================================================

</TABLE>


See Notes to Consolidated Financial Statements.


                                       42
<PAGE>
<TABLE>
<CAPTION>

(In millions)                                                                                1995                1994
===========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                                       <C>                <C>
CURRENT LIABILITIES
Debt due within one year
   Notes payable to banks                                                                 $   185            $     57
   Commercial paper                                                                            15                  15
   Current portion of long-term debt                                                           72                  61
Trade and other payables                                                                    1,778               1,520
Income taxes                                                                                   44                  35
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                            2,094               1,688

NONCURRENT LIABILITIES
Long-term debt (less current portion) - Notes E and F                                       1,828               1,391
Employee benefit obligations - Note K                                                         613                 531
Reserves of captive insurance companies                                                       169                 173
Deferred income taxes - Note H                                                                 49                  30
Other long-term liabilities and deferred credits                                              405                 407
Commitments and contingencies - Notes F, G and L
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                            3,064               2,532

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                                179                   -

STOCKHOLDERS'  EQUITY - Notes E, I and J 
Preferred  stock, no par value, 30 million shares authorized
   Convertible preferred stock, 6 million shares issued, $300 million liquidation value       293                 293

Common stockholders' equity
   Common stock, par value $1.00 per share
      Authorized - 150 million shares
      Issued - 64 million shares in 1995 and 61 million shares in 1994                         64                  61
   Paid-in capital                                                                            256                 159
   Retained earnings                                                                        1,063               1,126
   Loan to leveraged employee stock ownership plan (LESOP)                                    (11)                (33)
   Other                                                                                      (10)                (11)
- ---------------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity                                                           1,362               1,302
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                            1,655               1,595
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                           $6,992              $5,815
===========================================================================================================================
</TABLE>


                                       43

<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY



                                                                                              Prepaid
                                     Common      Paid-in      Retained        Loan to    contribution
(In millions)                         stock      capital      earnings          LESOP        to LESOP    Other       Total
===========================================================================================================================
<S>                                     <C>         <C>        <C>              <C>              <C>     <C>        <C>
BALANCE AT OCTOBER 1, 1992              $60         $146       $   931          $(34)            $(24)   $   7      $1,086
Net income                                                         142                                                 142
Dividends
    Preferred stock                                                 (6)                                                 (6)
    Common stock, $1.00 a share                                    (59)                            (1)                 (60)
Decrease in equity due to
    change in Ashland Coal
    capital structure                                 (6)                                                               (6)
Issued common stock under
    stock incentive plans                              2                                                                 2
Allocation of LESOP shares
    to participants                                                                                19                   19
Other changes                                          1                           1                        (17)       (15)
- ---------------------------------------------------------------------------------------------------------------------------

BALANCE AT SEPTEMBER 30, 1993            60          143         1,008           (33)              (6)      (10)     1,162
Net income                                                         197                                                 197
Dividends
    Preferred stock                                                (19)                                                (19)
    Common stock, $1.00 a share                                    (60)                                                (60)
Issued common stock under
    stock incentive plans                 1           16                                                                17
Allocation of LESOP shares
    to participants                                                                                6                     6
Other changes                                                                                                (1)        (1)
- ---------------------------------------------------------------------------------------------------------------------------

BALANCE AT SEPTEMBER 30, 1994            61          159         1,126           (33)              -        (11)     1,302
Net income                                                          24                                                  24
Dividends
    Preferred stock                                                (19)                                                (19)
    Common stock, $1.10 a share                                    (68)                                                (68)
Issued common stock under
    Share offering program                2           49                                                                51
    Acquisition of operations
         of other companies               1           40                                                                41
    Stock incentive plans                              7                                                                 7
LESOP loan repayments                                                             22                                    22
Other changes                                          1                                                      1          2
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995           $64         $256        $1,063          $(11)          $   -       $(10)    $1,362
===========================================================================================================================

</TABLE>

See Notes to Consolidated Financial Statements.


                                       44

<PAGE>
<TABLE>
<CAPTION>
Ashland Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS

Years Ended September 30

(In millions)                                                               1995                 1994                1993
===========================================================================================================================
<S>                                                                       <C>                   <C>                 <C>
CASH FLOWS FROM OPERATIONS
Net income                                                                $   24                $ 197               $ 142
Expense (income) not affecting cash
   Depreciation, depletion and amortization(1)                               487                  308                 305
   Deferred income taxes                                                     (73)                   2                  14
   Other noncash items                                                        33                   22                 (27)
Change in operating assets and liabilities(2)                                 29                  (75)               (184)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                             500                  454                 250
CASH FLOWS FROM FINANCING
Proceeds from issuance of long-term debt                                     330                   77                 341
Proceeds from issuance of capital stock                                       55(3)                17                 295
Loan repayment from leveraged employee stock ownership plan                   22                    -                   -
Repayment of long-term debt                                                  (60)                (109)               (367)
Increase (decrease) in short-term debt                                        38                   (5)               (159)
Dividends paid                                                               (92)                 (79)                (66)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                             293                  (99)                 44
CASH FLOWS FROM INVESTMENT
Additions to property, plant and equipment                                  (444)                (376)               (432)
Purchase of operations - net of cash acquired                               (327)(3)              (62)                 (2)
Proceeds from sale of operations                                              10                   59                 107
Investment purchases(4)                                                     (725)                (335)               (451)
Investment sales and maturities(4)                                           704                  335                 440
Other - net                                                                    1                   23                  32
- ---------------------------------------------------------------------------------------------------------------------------
                                                                            (781)                (356)               (306)
- ---------------------------------------------------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              12                   (1)                (12)
Cash and cash equivalents - beginning of year                                 40                   41                  53
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR                                  $    52               $   40               $  41
===========================================================================================================================

DECREASE (INCREASE) IN OPERATING ASSETS(2) 
Accounts receivable                                                      $  (112)              $ (153)              $  26
Construction completed and in progress                                        13                   (3)                (13)
Inventories                                                                  (63)                 (45)                 67
Deferred income taxes                                                         (7)                   -                  15
Other current assets                                                          12                   (7)                 (8)
Investments and other assets                                                  31                   15                   2
INCREASE (DECREASE) IN OPERATING LIABILITIES(2) 
Trade and other payables                                                     169                   95                (245)
Income taxes                                                                   4                  (10)                (20)
Noncurrent liabilities                                                       (18)                  33                  (8)
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN OPERATING ASSETS AND LIABILITIES                                $   29               $  (75)             $ (184)
===========================================================================================================================
<FN>
(1) Includes amounts charged to general corporate expenses.
(2) Excludes changes resulting from operations acquired or sold.
(3) Excludes $41 million of common stock issued in acquisitions.
(4) Represents primarily investment transactions of captive insurance companies.

</TABLE>

See Notes to Consolidated Financial Statements.



                                       45

<PAGE>
Ashland Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SIGNIFICANT ACCOUNTING POLICIES
GENERAL

The consolidated  financial  statements include the accounts of Ashland and
its majority-owned  subsidiaries.  Investments in joint ventures and 20% to
50% owned affiliates are accounted for on the equity method.  Since Ashland
Coal, Inc. was  consolidated in 1995 and accounted for on the equity method
in 1994 and 1993  (see  Note  B),  the  comparability  of  various  amounts
included  in   Ashland's   consolidated   financial   statements   and  the
accompanying notes are affected.

The  preparation  of  Ashland's   consolidated   financial   statements  in
conformity with generally accepted accounting principles requires Ashland's
management  to make  estimates  and  assumptions  that  affect the  amounts
reported in these  financial  statements  and  accompanying  notes.  Actual
results could differ from those estimates.
<TABLE>
<CAPTION>

INVENTORIES
(In millions)                                                   1995                  1994
===========================================================================================================================
<S>                                                             <C>                   <C>

Crude oil                                                       $285                  $243
Petroleum products                                               284                   286
Chemicals and other products                                     491                   421
Materials and supplies                                            66                    46
Excess of replacement costs over LIFO carrying values           (400)                 (395)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                $726                  $601
===========================================================================================================================
</TABLE>

Crude oil,  petroleum  products and chemicals  with a  replacement  cost of
approximately  $741  million at  September  30,  1995,  and $705 million at
September 30, 1994, are valued using the last-in,  first-out (LIFO) method.
The remaining  inventories are stated generally at the lower of cost (using
the first-in, first-out (FIFO) or average cost method) or market.

PROPERTY, PLANT AND EQUIPMENT

The cost of plant and equipment (other than capitalized lease  acquisition,
exploration  and  development  costs) is depreciated  by the  straight-line
method over the  estimated  useful  lives of the assets.  Oil and gas lease
acquisition,  exploration and development costs are accounted for using the
successful  efforts method.  Coal lease  acquisition and development  costs
which are recoverable are capitalized.  Coal exploration costs are expensed
as  incurred.  Capitalized  costs are  depleted by the  units-of-production
method over the estimated recoverable reserves.

Estimated  costs of major  refinery  turnarounds  are accrued,  while other
maintenance  and repair  costs are expensed as  incurred.  Maintenance  and
repair expense  amounted to $355 million in 1995,  $279 million in 1994 and
$248 million in 1993.

ENVIRONMENTAL COSTS

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

EARNINGS PER SHARE

Primary earnings per share is based on net income less preferred  dividends
divided by the average number of common shares and equivalents  outstanding
during the  respective  years.  Shares of common stock issuable under stock
options are treated as common stock equivalents when dilutive.

Earnings per share assuming full dilution begins with the primary  earnings
per share  computation.  Shares  issuable upon  conversion of the preferred
stock and 6.75% subordinated  debentures are added to average common shares
and  equivalents  when  dilutive.  In such  cases,  net  income is  further
adjusted by adding back  preferred  dividends and interest  expense (net of
tax) on these debentures.

DERIVATIVE INSTRUMENTS

Ashland uses commodity  futures and option contracts to reduce its exposure
to  fluctuations  in prices for crude oil,  petroleum  products and natural
gas. Gains and losses on these  contracts are deferred and accounted for as
part of the transactions or activities being hedged.


                                       46

<PAGE>

Ashland uses interest rate swap  agreements to obtain greater access to the
lower  borrowing  costs normally  available on  floating-rate  debt,  while
minimizing  refunding  risk through the issuance of  long-term,  fixed-rate
debt.  Periodic  settlements  under the swap  agreements  are recognized as
adjustments of interest expense for the related periods.

ACCOUNTING CHANGES

Effective   September  30,  1995,  Ashland  adopted  Financial   Accounting
Standards Board Statement No. 121 (FAS 121), "Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of." As a
result,  Ashland recorded charges of $83 million (included in depreciation,
depletion  and  amortization)  to write down  certain  assets to their fair
value.   These  assets  included  an  idle  unit  at  Ashland   Petroleum's
Catlettsburg,   Kentucky  refinery,  certain  unused  crude  oil  gathering
pipelines  of  Scurlock   Permian,   various  petroleum  product  marketing
properties to be sold or shutdown, and various other assets. Fair value was
based upon  appraisals  or estimates of  discounted  future cash flows,  as
appropriate. Operating income was reduced for each of the affected segments
as follows: Petroleum ($68 million),  Valvoline ($3 million),  Chemical ($4
million),  Exploration  ($4  million)  and general  corporate  expenses ($4
million).  In addition,  Arch Mineral adopted FAS 121 and recorded a charge
to write down certain idle facilities,  decreasing  Ashland's equity income
by $3 million.  The adoption of FAS 121 reduced Ashland's net income by $54
million or $.86 per share.

OTHER

Cash equivalents  include highly liquid  investments  maturing within three
months after  purchase.  Investments  of captive  insurance  companies  are
primarily foreign corporate and government debt obligations and are carried
at market value plus accrued  interest,  with  foreign  currency  exposures
hedged through forward contracts.

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

Costs in excess of net assets of companies  acquired  are  amortized by the
straight-line  method over periods  generally  ranging from 10 to 40 years,
with an average remaining life of 15 years.

Research and  development  costs are  expensed as incurred  ($24 million in
1995, $23 million in 1994 and $21 million in 1993).

Interest is capitalized on projects  where  construction  of an asset takes
considerable  time  and  entails  substantial   expenditures.   Capitalized
interest amounted to $9 million in 1993 and was not significant in 1995 and
1994.

Certain  prior year  amounts  have been  reclassified  in the  consolidated
financial statements to conform with 1995 classifications.

NOTE B - ACQUISITIONS AND DIVESTITURES
ACQUISITIONS

In February 1995,  Ashland  purchased from  Saarbergwerke AG all of Ashland
Coal's Class B Preferred  Stock for $110  million.  The purchase  increased
Ashland's  ownership  of Ashland  Coal from 39 percent to 54 percent.  As a
result  of this  transaction,  Ashland  Coal  has  been  consolidated  into
Ashland's financial  statements  retroactive to October 1, 1994.  Ashland's
investment in Ashland Coal  previously had been accounted for on the equity
method.

Also during  1995,  Ashland  acquired  the  unsaturated  polyester  resins,
polyester distribution and maleic anhydride businesses of Aristech Chemical
Corporation,  the Zerex(R)  antifreeze  product  line,  the  northern  West
Virginia  assets of two natural gas  producers,  and various other chemical
and  construction  businesses.   These  acquisitions  and  several  smaller
acquisitions completed in various segments during the last three years were
generally  accounted for as purchases and did not have a significant effect
on Ashland's consolidated financial statements.

DIVESTITURES

In 1994,  Ashland sold APAC's  Arizona  operations.  In 1993,  Ashland sold
various operations, including its TPT inland waterways barge operation, the
Thunderbird  crude  oil  common  carrier  pipeline  system in  Montana  and
Wyoming,  and 80  SuperAmerica  stores in Florida  and other  non-strategic
areas  outside  markets  served  by  Ashland  Petroleum's  refineries.   In
addition,  several other smaller operations engaged in petroleum,  chemical
and  construction  activities  were sold.  Except for a pretax  gain of $15
million on the sale of TPT in 1993, the  divestitures  discussed  above and
several smaller divestitures  completed in various segments during the last
three years did not have a  significant  effect on  Ashland's  consolidated
financial statements.


                                       47

<PAGE>

NOTE C - INFORMATION BY INDUSTRY SEGMENT

Ashland's  operations are conducted  primarily in the United States and are
managed along industry  segments,  which include  Petroleum,  SuperAmerica,
Valvoline,  Chemical,  APAC, Coal and Exploration.  Information by industry
segment is shown on pages 58 and 59.

Petroleum  operations  are  conducted  by  Ashland  Petroleum,  one  of the
nation's largest independent  petroleum refiners.  In addition to supplying
petroleum products to SuperAmerica,  Valvoline,  Ashland Chemical and APAC,
Ashland  Petroleum  is a leading  supplier  of  petroleum  products  to the
transportation and commercial fleet industries,  other industrial customers
and independent marketers (including dealers operating under the Ashland(R)
brand name). Principal products include gasoline, distillates and kerosene,
asphalt,  jet and turbine fuel,  lubricants,  and heavy fuel oils.  Ashland
Petroleum also gathers and transports  crude oil and petroleum  products in
connection with its refining and wholesale marketing operations and markets
crude oil through Scurlock Permian.

SuperAmerica  includes Ashland's retail gasoline and merchandise  marketing
operations,  including  the  SuperAmerica(R)  chain of  high-volume  retail
stores.  Gasoline and  merchandise  are also sold from outlets  operated by
SuperAmerica  under  the  Rich(R)  brand  name.  Operations  are  conducted
primarily in the Ohio Valley and Upper Midwest.

Valvoline  is a marketer of  automotive  and  industrial  oils,  automotive
chemicals, antifreeze, filters, rust preventives and coolants with sales in
more than 140 countries. 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,   and  provides
environmental  services  for the  collection  of used oil,  antifreeze  and
filters.

Chemical  businesses  are managed by Ashland  Chemical,  which  distributes
industrial chemicals,  solvents,  thermoplastics and resins, and fiberglass
materials.  Ashland Chemical also  manufactures a wide variety of specialty
chemicals and certain  petrochemicals.  Major specialty  chemicals  include
foundry products,  water treatment and marine service chemicals,  specialty
polymers and  adhesives,  unsaturated  polyester  resins,  and  high-purity
electronic  and  laboratory  chemicals.  Principal  petrochemicals  include
cumene, toluene, xylene, aromatic and aliphatic solvents, propylene, maleic
anhydride and methanol.

APAC performs  contract  construction  work  including  highway  paving and
repair,  excavation and grading,  and bridge and sewer  construction.  APAC
also produces  asphaltic and  ready-mix  concrete,  crushed stone and other
aggregate, concrete block and certain specialized construction materials in
thirteen southern states.

Coal  operations are conducted by 54% owned,  publicly traded Ashland Coal,
Inc., which produces  low-sulfur  bituminous coal in central Appalachia for
sale to domestic  and foreign  electric  utility  and  industrial  markets.
Ashland also holds a 50% equity interest in Arch Mineral  Corporation  (see
Note D). Arch Mineral  produces  metallurgical  and steam coal from surface
and deep mines in Illinois, Kentucky, West Virginia and Wyoming for sale to
utility and steel companies. Both Ashland Coal and Arch Mineral market coal
mined by independent producers.

Exploration  operations  are  conducted  by Ashland  Exploration,  which is
engaged in crude oil and  natural  gas  production  in the eastern and Gulf
Coast areas of the United States and crude oil production in Nigeria.

Certain information with respect to foreign operations follows.
<TABLE>
<CAPTION>

                                                     Total assets                     Income before income taxes
                                              -------------------            ----------------------------------------------
(In millions)                                 1995           1994             1995           1994           1993
===========================================================================================================================
<S>                                           <C>           <C>                <C>            <C>            <C>

Foreign operations
     Petroleum                                $ 30          $  -               $ 4            $ 1            $ 2
     Valvoline                                 124           106                 3             10              6
     Chemical                                  302           220                42             28             27
     Exploration                                36            46                 9             22             14
- ---------------------------------------------------------------------------------------------------------------------------
                                              $492          $372               $58            $61            $49
===========================================================================================================================
</TABLE>



                                       48

<PAGE>
NOTE D - UNCONSOLIDATED AFFILIATES

Affiliated  companies  accounted  for on the equity  method  include:  Arch
Mineral  Corporation (a 50% owned coal  company);  LOOP INC. and LOCAP INC.
(18.6% and 21.4%  owned  corporate  joint  ventures  operating  a deepwater
offshore port and related pipeline  facilities in the Gulf of Mexico);  and
various other  companies.  Prior to 1995,  Ashland Coal, Inc. was less than
50% owned and accounted  for on the equity method (see Note B).  Summarized
financial  information  reported by these  affiliates  and a summary of the
amounts recorded in Ashland's consolidated financial statements follow.

<TABLE>
<CAPTION>

                                    Ashland           Arch Mineral         LOOP INC. and
(In millions)                    Coal, Inc.            Corporation            LOCAP INC.           Other          Total
===========================================================================================================================
<S>                                                          <C>                  <C>              <C>           <C>

SEPTEMBER 30, 1995
Financial position
   Current assets                                            $ 148                $   27           $ 238
   Current liabilities                                        (134)                  (91)           (130)
                                                         ------------------------------------------------------------------
   Working capital                                              14                   (64)            108
   Noncurrent assets                                           790                   633             202
   Noncurrent liabilities                                     (693)                 (506)           (101)
                                                         ------------------------------------------------------------------
   Stockholders' equity                                      $ 111                $   63           $ 209
                                                         ==================================================================
Results of operations
   Sales and operating revenues                              $ 714                 $ 119           $ 775
   Gross profit                                                 50                    36             193
   Net income (loss)                                            (8)(1)                 4              29
Amounts recorded by Ashland
   Investments and advances                                     63                    12              70          $ 145
   Equity income (loss)                                         (4)                    1              10              7
   Dividends received                                            3                     1               8             12
===========================================================================================================================

SEPTEMBER 30, 1994
Financial position
   Current assets                     $ 119                  $ 173                $   36           $ 204
   Current liabilities                 (110)                  (132)                  (86)           (123)
                                   ----------------------------------------------------------------------------------------
   Working capital                        9                     41                   (50)             81
   Noncurrent assets                    721                    797                   638             203
   Noncurrent liabilities              (373)                  (713)                 (525)            (96)
                                   ----------------------------------------------------------------------------------------
   Stockholders' equity               $ 357                  $ 125                $   63           $ 188
                                   ========================================================================================
Results of operations
   Sales and operating revenues       $ 561                  $ 641                $  149           $ 701
   Gross profit                          71                     60                    54             172
   Net income                            17                     14                    15              14
Amounts recorded by Ashland
   Investments and advances             138                     70                    12              71          $ 291
   Equity income                          6                      7                     3               6             22
   Dividends received                     3                      -                     -               5              8
===========================================================================================================================

SEPTEMBER 30, 1993
Results of operations
   Sales and operating revenues       $ 550                  $ 485                 $ 143           $ 654
   Gross profit (loss)                   58                    (13)                   49             154
   Net income (loss)                     41(2)                 (20)                    9              17
Amounts recorded by Ashland 
   Equity income (loss)                  27                    (10)                    2               7         $   26
   Dividends received                     3                      4                     1               6             14
===========================================================================================================================
<FN>
(1)  Includes  a charge of $12  million  resulting  from  asset  impairment write-downs under FAS 121 and provisions for 
     early retirement and restructuring programs.
(2)  Includes  a net  gain  of  $44  million  resulting  from  a  favorable adjustment to income tax expense due to tax law 
     changes,  partially  offset by a  charge to increase the valuation allowance for certain prepaid royalties. Also 
     includes a net charge of $19 million for the cumulative effect of the adoption of FAS 106 and FAS 109, which was 
     recorded by Ashland in 1992.
</TABLE>

Ashland's  retained earnings include $92 million of undistributed  earnings
from unconsolidated affiliates accounted for on the equity method.


                                       49

<PAGE>
<TABLE>
<CAPTION>
NOTE E - LONG-TERM DEBT
(In millions)                                                                       1995                   1994
===========================================================================================================================
<S>                                                                              <C>                    <C>
Senior debt of Ashland
   Medium-term notes, due 1996-2025, interest at an average rate
      of 8.5% at September 30, 1995 (5.8% to 10.4%)                              $   895                $   661
   8.80% debentures, due 2012                                                        250                    250
   11.125% sinking fund debentures, due 2017                                         200                    200
   Pollution control and industrial revenue bonds, due
      1996 to 2022, interest at an average rate of 6.6%
      at September 30, 1995 (4.2% to 8.1%)                                           217                    162
   Note payable to bank for financing of leveraged employee
      stock ownership plan, due 1996, interest at a combination
      of an adjusted certificate of deposit rate and 76% of
      the prime rate (5.7% at September 30, 1995)                                     11                     33
   Other                                                                              23                     22
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                   1,596                  1,328
6.75% convertible subordinated debentures, due 2014,
   convertible into common stock at $51.34 per share                                 124                    124
Debt of Ashland Coal, Inc. not guaranteed by Ashland
   9.78% senior notes, due 1997-2000                                                 101                      -
   9.66% senior notes, due 2001-2006                                                  54                      -
   8.92% senior notes, due 1996                                                       22                      -
   Other                                                                               3                      -
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                   1,900                  1,452
Current portion of long-term debt                                                    (72)                   (61)
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                  $1,828                 $1,391
===========================================================================================================================
</TABLE>

Aggregate  maturities  of  long-term  debt are $72  million  in 1996,  $104
million in 1997,  $74 million in 1998,  $73 million in 1999 and $66 million
in 2000.  Excluded  from such  maturities  are $38 million of floating rate
pollution control and industrial  revenue bonds, due between 2003 and 2009.
These bonds are subject to early  redemptions at the  bondholders'  option,
but generally not before 1997.

Ashland has various revolving credit agreements totaling $370 million under
which no borrowings  were  outstanding at September 30, 1995. The agreement
providing for $320 million in borrowings expires on February 9, 2000, while
the agreements  providing for $50 million in borrowings  expire on February
23, 1996. In addition,  Ashland Coal has revolving credit  agreements which
expire  on  November  15,  1999,  providing  for  up  to  $500  million  in
borrowings, of which $40 million was in use at September 30, 1995.

Certain debt agreements  contain  covenants  restricting  dividends,  share
repurchases  and other  distributions  with  respect to  Ashland's  capital
stock, as well as covenants limiting new borrowings. At September 30, 1995,
distributions  with respect to Ashland's  capital stock were  restricted to
$634 million and additional debt was limited to $1.07 billion.

Interest  payments on all  indebtedness  amounted to $163  million in 1995,
$119  million  in 1994  and $131  million  in 1993.  The  weighted  average
interest rate on short-term  borrowings  outstanding  was 6.0% at September
30, 1995, and 5.1% at September 30, 1994.

NOTE F - FINANCIAL INSTRUMENTS

Ashland uses interest rate swap  agreements to obtain greater access to the
lower  borrowing  costs normally  available on  floating-rate  debt,  while
minimizing  refunding  risk through the issuance of  long-term,  fixed-rate
debt. At September 30, 1995, Ashland had unleveraged swap agreements with a
notional  principal amount of $405 million which were used to convert fixed
rates  on  certain  debt,   including  the  8.80%  debentures  and  various
medium-term  notes,  to variable  rates.  The variable  rates are generally
adjusted  quarterly or semiannually based on London Interbank Offered Rates
(LIBOR),  but may be fixed for longer terms using forward rate  agreements.
At  September  30, 1995,  Ashland was  receiving a  weighted-average  fixed
interest rate of 5.4% and paying a weighted-average  variable interest rate
of  6.0%,  calculated  on the  notional  amount.  Notional  amounts  do not
quantify risk or represent  assets or liabilities of Ashland,  but are used
in the  determination of cash settlements  under the agreements.  The terms
remaining  on  Ashland's  swaps  range  from  13  to  60  months,   with  a
weighted-average remaining life of 33 months.

Interest expense was reduced by an insignificant amount in 1995, $9 million
in 1994 and $8 million  in 1993  resulting  from  settlements  under  these
agreements.   Ashland  is  exposed  to  credit  losses  from   counterparty
nonperformance, but does not anticipate any losses from its agreements, all
of which are with major financial institutions. The estimated fair value of
Ashland's  swaps amounted to a net liability of $5 million at September 30,
1995,  compared to a net  liability of $15 million at  September  30, 1994.
This decline in the  liability  was more than offset by the increase in the
fair value of the related fixed-rate  indebtedness.  Under its current swap
agreements,  Ashland's annual interest expense in 1996 will change by about
$4 million for each 1% change in LIBOR.



                                       50

<PAGE>

The  carrying  amounts and fair values of Ashland's  significant  financial
instruments at September 30, 1995 and 1994 are shown below. The fair values
of cash and cash  equivalents,  notes payable to banks and commercial paper
approximate  their  carrying  amounts.  The fair values of  investments  of
captive insurance  companies are based on quoted market prices plus accrued
interest.  The fair  values of  long-term  debt are based on quoted  market
prices or, if market prices are not  available,  the present  values of the
underlying cash flows discounted at Ashland's  incremental borrowing rates.
The fair values of interest rate swaps are based on quoted  market  prices,
which reflect the present values of the difference between estimated future
variable-rate payments and future fixed-rate receipts.

<TABLE>
<CAPTION>
                                                                                      1995                          1994
                                                                  ------------------------             --------------------
                                                                  Carrying            Fair             Carrying     Fair
(In millions)                                                       amount           value               amount    value
===========================================================================================================================
<S>                                                               <C>             <C>                 <C>         <C>

Assets
   Cash and cash equivalents                                      $     52        $     52            $     40    $   40
   Investments of captive insurance companies                          192             192                 181       181
Liabilities
   Notes payable to banks and commercial paper                         200             200                  72        72
   Long-term debt (including current portion)                        1,900           2,090               1,452     1,517
   Interest rate swaps                                                   -               5                   -        15
===========================================================================================================================

</TABLE>

NOTE G - LEASES AND OTHER COMMITMENTS
LEASES

Ashland  and  its  subsidiaries   are  lessees  in  noncancelable   leasing
agreements for office buildings, warehouses, pipelines,  transportation and
marine  equipment,  storage  facilities,   retail  outlets,   manufacturing
facilities  and other  equipment  and  properties  which  expire at various
dates.  Capitalized  lease obligations are not significant and are included
in long-term  debt.  Future minimum rental  payments at September 30, 1995,
and rental expense under operating leases follow.
<TABLE>
<CAPTION>

(In millions)
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>        <C>                          <C>         <C>         <C>
Future minimum rental payments                        Rental expense               1995        1994        1993
================================================      =====================================================================
1996                                       $  82
1997                                          76      Minimum rentals
1998                                          66       (including rentals under
1999                                          49       short-term leases)          $142        $113        $111
2000                                          46      Contingent rentals             10          12          11
Later years                                  222      Sublease rental income        (18)        (12)        (17)
- ------------------------------------------------      ---------------------------------------------------------------------
                                            $541                                   $134        $113        $105
===========================================================================================================================
</TABLE>

In addition,  Ashland Coal has entered into various  noncancelable  royalty
lease agreements under which future minimum payments are  approximately $23
million annually through 2000 and $212 million in the aggregate thereafter.

OTHER COMMITMENTS

Under  agreements  with LOOP and LOCAP (see Note D),  Ashland is obligated,
based  upon its  equity  ownership,  to provide a portion of the total debt
service  and  defined  operating  and  administrative  costs of these joint
ventures.  This annual obligation is reduced by transportation charges paid
by Ashland  and by a pro rata  portion of  transportation  charges  paid by
third  parties who are not equity  participants.  If, after each  obligor's
requirements  have been  satisfied,  the joint  ventures are unable to meet
cash  requirements,  Ashland is  obligated to advance its pro rata share of
the  deficiency.  All funds  provided to these joint  ventures  are used as
advances against future transportation  charges. At September 30, 1995, all
advances  made to LOOP  and  LOCAP by  Ashland  had  been  applied  against
transportation  charges.  Transportation  charges incurred  amounted to $21
million in 1995,  $24 million in 1994 and $21 million in 1993. At September
30, 1995,  Ashland's contingent liability for its share of the indebtedness
of LOOP and LOCAP secured by throughput and deficiency  agreements amounted
to approximately $94 million.

Ashland  Coal owns 17.5% of a joint  venture  operating a coal  loading and
storage facility at Newport News,  Virginia.  Venture partners are required
to pay their share of the  venture's  costs in relation to their  ownership
(for  fixed  operating  costs and debt  service)  or  facility  usage  (for
variable  operating costs).  Ashland Coal's share of such payments amounted
to $3 million  annually in 1995,  1994 and 1993.  Future payments for fixed
operating  costs and debt service are estimated to  approximate  $3 million
annually  through  2015 and $26 million in 2016.  Additionally,  Ashland is
contingently  liable  for a  guarantee  relating  to  the  office  building
currently  occupied by Ashland Coal. At September 30, 1995, such obligation
has a present value of approximately $7 million.

Ashland is contingently  liable for up to $16 million of borrowings under a
revolving   credit   agreement   of  AECOM   Technology   Corporation,   an
unconsolidated  affiliate.  Ashland's  guaranteed  portion  of  outstanding
borrowings  under this  agreement  amounted to $8 million at September  30,
1995.


                                       51

<PAGE>
NOTE H - INCOME TAXES

A summary of the provision for income taxes follows. The 1993 provision was
not  significantly  affected by tax legislation  that,  among other things,
increased the federal income tax rate 1%, effective January 1, 1993.
<TABLE>
<CAPTION>
(In millions)                                                           1995             1994              1993
===========================================================================================================================
<S>                                                                     <C>             <C>               <C>

Current(1)
   Federal                                                              $ 38            $  56             $  24
   State                                                                  11                8                13
   Foreign                                                                11                9                 7
- ---------------------------------------------------------------------------------------------------------------------------
                                                                          60               73                44

Deferred                                                                 (73)               2                14
- ---------------------------------------------------------------------------------------------------------------------------
                                                                        $(13)           $  75             $  58
===========================================================================================================================
<FN>
(1) Income tax  payments  amounted to $54  million in 1995,  $71 million in 1994 and $42 million in 1993.
</TABLE>

Deferred income taxes are provided for significant income and expense items
recognized  in different  years for tax and financial  reporting  purposes.
Temporary  differences  which give rise to significant  deferred tax assets
(liabilities) follow.

<TABLE>
<CAPTION>

(In millions)                                                                            1995              1994
===========================================================================================================================

<S>                                                                                      <C>               <C> 
Employee benefit obligations                                                             $250              $205
Environmental, insurance and litigation reserves                                          126               116
Alternative minimum tax credit carryforwards                                               75                23
Uncollectible accounts receivable                                                          18                17
Compensated absences                                                                       15                10
Other items                                                                                47                65
- ---------------------------------------------------------------------------------------------------------------------------

Total deferred tax assets                                                                 531               436
- ---------------------------------------------------------------------------------------------------------------------------

Property, plant and equipment                                                            (445)             (372)
Undistributed equity income                                                               (17)              (16)
Prepaid royalties                                                                         (17)                -
Coal supply agreements                                                                    (11)                -
Other items                                                                                 -                (7)
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities                                                           (490)             (395)
- ---------------------------------------------------------------------------------------------------------------------------

Net deferred tax asset                                                                  $  41             $  41
===========================================================================================================================
</TABLE>
The U.S.  and  foreign  components  of  income  before  income  taxes and a
reconciliation  of  the  normal  statutory  federal  income  tax  with  the
provision for income taxes follow.
<TABLE>
<CAPTION>
(In millions)                                                           1995              1994             1993
===========================================================================================================================
<S>                                                                    <C>               <C>              <C> 

Income before income taxes and minority interest
   United States                                                       $(24)             $211             $151
   Foreign                                                               58                61               49
- ---------------------------------------------------------------------------------------------------------------------------
                                                                       $ 34              $272             $200
===========================================================================================================================

Income taxes computed at U.S. statutory rates                          $ 12             $  95            $  70
Increase (decrease) in amount computed resulting from
   Equity income                                                         (2)               (7)              (6)
   State income taxes                                                     5                 6                9
   Net impact of foreign results                                         (5)               (7)              (7)
   Non-conventional fuel credit                                         (10)              (10)              (9)
   Percentage depletion allowance                                       (12)                -                -
   Other items                                                           (1)               (2)               1
- ---------------------------------------------------------------------------------------------------------------------------
Income taxes                                                           $(13)            $  75            $  58
===========================================================================================================================
</TABLE>

The Internal Revenue Service (IRS) has examined Ashland's consolidated U.S.
income tax returns through 1991. As a result of its  examinations,  the IRS
has proposed adjustments,  certain of which are being contested by Ashland.
Ashland  believes  it has  adequately  provided  for any  income  taxes and
related interest which may ultimately be paid on contested issues.


                                       52

<PAGE>

NOTE I - CAPITAL STOCK

In May 1993,  Ashland  sold six million  shares of  cumulative  convertible
preferred  stock  priced at $50 per  share.  Net  proceeds,  after fees and
expenses,  totaled $293  million and were used to reduce  debt.  The shares
have no voting  rights and are entitled to cumulative  annual  dividends of
$3.125 per share. They have liquidation  preferences equal to $50 per share
plus accrued and unpaid  dividends,  and are convertible at any time at the
option of the  holders  into 1.546  shares of  Ashland  common  stock.  The
preferred  shares  are  redeemable  at the  option of Ashland at $51.88 per
share beginning March 25, 1997, and declining gradually to $50 per share by
March 15, 2003, plus accrued and unpaid dividends to the redemption date.

Under Ashland's  Shareholder  Rights Plan, each common share is accompanied
by one-half of a Right to purchase  one-tenth  share of preferred stock for
$120 (the "Exercise  Price").  Each one-tenth share of preferred stock will
be entitled to dividends and to vote on an equivalent basis with two common
shares. The Rights are not exercisable or detachable from the common shares
until 10 days after any party  acquires 15% or more (or  announces a tender
offer for 20% or more) of Ashland's common stock. If any party acquires 20%
or more of  Ashland's  common  stock  or  acquires  Ashland  in a  business
combination, each Right (other than those held by the acquiring party) will
entitle the holder to purchase  stock of Ashland or the  acquiring  company
having a market value of two times the Exercise Price. The Rights expire on
May  15,  1996,  and  can  be  redeemed  at  any  time  prior  to  becoming
exercisable.

At September 30, 1995, 10 million shares of cumulative  preferred stock are
reserved for  potential  issuance  under the  Shareholder  Rights Plan.  At
September 30, 1995, 17 million common shares are reserved for conversion of
debentures  and preferred  stock and for issuance under  outstanding  stock
options.

NOTE J - STOCK OWNERSHIP PLANS
LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN

During 1986, Ashland  established a leveraged employee stock ownership plan
(LESOP) to cover the majority of its salaried employees. LESOP purchases of
Ashland  common stock that year were  generally  funded through a loan from
Ashland,  of which the remaining  principal at September 30, 1986, amounted
to $246 million.  In 1987, Ashland contributed excess assets recovered from
certain  company pension plans to the LESOP and prepaid $212 million of the
remaining principal. Because one-half of employees' LESOP accounts serve to
fund future benefits paid by certain  pension plans,  one-half of the funds
used to prepay  the LESOP  debt was  accounted  for by Ashland as a prepaid
LESOP contribution.

Ashland  common  shares held by the LESOP  related to the  contribution  of
excess  pension  assets  were  allocated  to  employees'  accounts  over an
eight-year period ending September 30, 1994. The remaining shares are being
allocated as the loan to the LESOP is repaid.  The  projected  costs of the
LESOP  (including  the prepaid  contribution,  projected  dividends  on the
related  unallocated  shares and projected future  contributions) are being
expensed  on a pro rata  basis as the  original  shares  are  allocated  to
employees.  This  expense  totaled  $14  million  in 1995  and $18  million
annually in 1994 and 1993.  Additional  contributions from Ashland were not
required through September 30, 1994, since dividends on unallocated  shares
exceeded interest and administrative  costs, with the excess used to prepay
portions of the remaining principal on the loan. Contributions from Ashland
in 1995 amounted to $22 million.

STOCK INCENTIVE PLANS

Ashland has stock  incentive  plans under which key  employees or directors
can purchase shares of common stock under stock options or restricted stock
awards. Stock options are granted to employees at a price equal to the fair
market value of the stock on the date of grant and become  exercisable over
periods of one to three years. Unexercised options lapse 10 years after the
date of grant.  Restricted  stock awards entitle  employees or directors to
purchase  shares at a nominal  cost, to vote such shares and to receive any
dividends  thereon.  However,  such shares are subject to  forfeiture  upon
termination of service before the restriction period ends.
<TABLE>
<CAPTION>
                                                           1995                           1994                        1993
                                       ------------------------        -----------------------     -----------------------
                                       Common       Price range        Common      Price range     Common      Price range
(In thousands except per share data)   shares         per share        shares        per share     shares        per share
===========================================================================================================================
<S>                                     <C>     <C>                     <C>    <C>                  <C>    <C>
Options outstanding -
     beginning of year(1)               4,697      $14-1/4 - 41         4,504     $13-3/8 - 41      3,918     $13-3/8 - 41
Options granted                           839       33 - 33-7/8           860  35-7/8 - 37-1/2        934  24-5/8 - 33-1/8
Options exercised                        (164)  14-1/4 - 35-5/8          (639)     13-3/8 - 41        (81) 13-3/8 - 33-3/8
Options canceled                         (150)      23-7/8 - 41           (28)     23-7/8 - 41       (267)     23-7/8 - 41
- ---------------------------------------------------------------------------------------------------------------------------
Options outstanding -
     end of year(1)                     5,222      $23-7/8 - 41         4,697     $14-1/4 - 41      4,504     $13-3/8 - 41
===========================================================================================================================
Options exercisable -
     end of year                        3,777      $23-7/8 - 41         3,242     $14-1/4 - 41      3,080     $13-3/8 - 41
===========================================================================================================================
<FN>
(1) Shares of common stock  available for issuance  under options or awards amounted to 4,236,000 at September 30, 1995, and 
    2,295,000 at October 1, 1994.
</TABLE>


                                       53

<PAGE>
NOTE K - EMPLOYEE BENEFIT PLANS
PENSION PLANS

Ashland  sponsors  pension plans which cover  substantially  all employees,
other than union  employees  covered by  multiemployer  pension plans under
collective bargaining agreements.  Benefits under Ashland's plans generally
are based on the employee's  years of service and  compensation  during the
years immediately preceding retirement.For certain plans, such benefits are
expected to come in part from  one-half of  employees'  leveraged  employee
stock  ownership  (LESOP)  accounts.   Ashland   determines  the  level  of
contributions to its pension plans annually and contributes  amounts within
allowable  limitations  imposed by Internal  Revenue  Service  regulations.
Ashland contributed the maximum tax-deductible contributions to its pension
plans in 1995, 1994 and 1993. The following tables detail the funded status
of the plans and the components of pension expense. A discount rate of 7.5%
and an assumed rate of salary  increases of 5% were used in determining the
actuarial present value of projected  benefit  obligations at September 30,
1995 (8% and 5% at September 30, 1994).
<TABLE>
<CAPTION>

                                                                                  1995                               1994
                                                      --------------------------------   ----------------------------------
                                                           Plans with       Plans with         Plans with      Plans with
                                                     assets in excess    ABO in excess   assets in excess   ABO in excess
(In millions)                                                  of ABO        of assets             of ABO       of assets
===========================================================================================================================

<S>                                                              <C>              <C>                <C>            <C> 
Plan assets at fair value (primarily listed stocks and bonds)    $ 14             $290               $ 36           $185
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations (ABO)
   Vested                                                          13              289                 30            188
   Nonvested                                                        1               69                  5             44
- ---------------------------------------------------------------------------------------------------------------------------
                                                                   14              358                 35            232
- ---------------------------------------------------------------------------------------------------------------------------

Plan assets less than (in excess of) ABO                            -               68(1)              (1)            47
Provision for future salary increases                               1              162                 12            131
Deferred pension costs                                             (3)             (63)                (8)           (40)
- ---------------------------------------------------------------------------------------------------------------------------
Net (prepaid) accrued pension costs(2)                           $ (2)            $167               $  3           $138
- ---------------------------------------------------------------------------------------------------------------------------

Components of deferred pension costs
   Unrecognized transition gain                                  $  -             $  9               $  3           $ 10
   Unrecognized net loss                                           (2)             (93)               (10)           (63)
   Unrecognized prior service costs                                (1)              (9)                (1)            (9)
   Recognition of minimum liability                                 -               30                  -             22
- ---------------------------------------------------------------------------------------------------------------------------
                                                                 $ (3)            $(63)              $ (8)          $(40)
===========================================================================================================================

(In millions)                                                                     1995               1994           1993
===========================================================================================================================

Components of pension expense
   Service cost                                                                   $ 23               $ 24           $ 26
   Interest cost                                                                    34                 29             28
   Actual investment (gain) loss on plan assets                                    (51)                 7            (24)
   Deferred investment gain (loss)(3)                                               30                (27)            10
   Other amortization and deferral                                                   1                  4              5
   Enhanced retirement program pension cost                                         15                  -              -
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                  $ 52               $ 37           $ 45
===========================================================================================================================

<FN>
(1)  Includes  unfunded ABO of $62 million for  non-qualified  supplemental pension  plans.  
(2)  Amounts are  recorded in various  asset and  liability accounts on Ashland's consolidated balance sheets.
(3)  The expected long-term rate of return on plan assets was 9%.
</TABLE>


OTHER POSTRETIREMENT BENEFIT PLANS

Ashland  sponsors  several unfunded benefit plans which provide health care
and life insurance  benefits for eligible  employees who retire from active
service or are  disabled.  The health  care  plans are  contributory,  with
retiree contributions adjusted periodically, and contain other cost-sharing
features such as deductibles and coinsurance.  The life insurance plans are
generally  noncontributory.  Ashland  funds the  costs of these  plans on a
pay-as-you-go basis.

During 1993, Ashland amended nearly all of its retiree health care plans to
place a cap on the  company's  contributions  and to  adopt a  cost-sharing
method  based  upon a  retiree's  years  of  service.  The cap  limits  the
company's  contribution to average retiree per capita health care costs for
1992 (net of direct retiree contributions),  increasing thereafter by up to
4.5% per year. If per capita  health care costs  increase by more than 4.5%
per year,  the  additional  costs will be paid by retirees  through  higher
contributions.   As  a  result,  the  accumulated   postretirement  benefit
obligation (APBO) for retiree health care plans was reduced by $197 million
as of October 1, 1992.

The following  tables detail the status of the plans and the  components of
postretirement  benefit  expense.  The APBO was determined using a discount
rate of 7.5% at September 30, 1995, and 8% at September 30, 1994. Under the
amended plan, the assumed annual rate of increase in the per capita cost is
4.5%.


                                       54

<PAGE>
<TABLE>
<CAPTION>
                                                                        1995                1994                  1993
                                                           -----------------    ----------------     -----------------
                                                           Health       Life    Health      Life     Health       Life
(In millions)                                                care  insurance      care  insurance      care   insurance
===========================================================================================================================
<S>                                                          <C>         <C>      <C>        <C>      <C>          <C>

Accumulated postretirement benefit obligations (APBO)
   Retired or disabled employees                             $146        $26      $ 93       $19
   Fully eligible active plan participants                     33          4        38         5
   Other active plan participants                             123          5        86         5
- -------------------------------------------------------------------------------------------------
                                                              302         35       217        29
Unrecognized net loss                                          (2)        (4)      (17)        -
Unrecognized plan amendment credit                            129          6       158         8
- -------------------------------------------------------------------------------------------------
Accrued other postretirement benefit costs                   $429        $37      $358       $37
===========================================================================================================================

Components of other postretirement benefit expense
   Service cost                                              $ 12        $ 1      $  7       $ 1      $  6         $ 1
   Interest cost                                               20          2        16         2        16           2
   Amortization and deferral
     (principally plan amendment credit)                      (15)        (1)      (15)       (1)      (17)         (1)
- ---------------------------------------------------------------------------------------------------------------------------
                                                             $ 17        $ 2      $  8       $ 2      $  5         $ 2
==========================================================================================================================
</TABLE>

OTHER PLANS

Certain union  employees are covered under  multiemployer  defined  benefit
pension plans  administered  by unions.  Amounts charged to pension expense
and  contributed  to the  plans  were $2  million  in 1995  and $1  million
annually in 1994 and 1993.

Ashland  sponsors  various  savings plans to assist  eligible  employees in
providing for retirement or other future needs.  Ashland  matches  employee
contributions  up to 6% of their  qualified  earnings at a rate of 70% (20%
for LESOP participants).  Ashland's contributions amounted to $9 million in
1995 and $7 million annually in 1994 and 1993.

NOTE L - LITIGATION, CLAIMS AND CONTINGENCIES

Ashland is subject to various federal,  state and local  environmental laws
and regulations which require  remediation  efforts at multiple  locations,
including operating  facilities,  previously owned or operated  facilities,
and Superfund or other waste sites.  Consistent with its accounting  policy
for environmental costs,  Ashland's reserves for environmental  assessments
and remediation efforts amounted to $174 million at September 30, 1995, and
$167 million at September 30, 1994.  Such amounts  reflect  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.

Environmental  reserves  are subject to  considerable  uncertainties  which
affect  Ashland's  ability to estimate its share of the  ultimate  costs of
required  remediation  efforts.  Such uncertainties  involve the nature and
extent of  contamination  at each  site,  the  extent of  required  cleanup
efforts under existing environmental  regulations,  widely varying costs of
alternate  cleanup  methods,  changes  in  environmental  regulations,  the
potential effect of continuing improvements in remediation technology,  and
the number and financial strength of other potentially  responsible parties
at  multiparty  sites.  As a result,  charges to income  for  environmental
liabilities  could have a material  effect on  results of  operations  in a
particular  quarter or fiscal year as assessments and  remediation  efforts
proceed or as new remediation sites are identified.  However,  such charges
are  not  expected  to  have  a  material   adverse   effect  on  Ashland's
consolidated financial position.

Ashland has numerous  insurance  policies that provide  coverage at various
levels  for  environmental   costs.   Ashland  is  currently   involved  in
negotiations  concerning the amount of insurance coverage for environmental
costs  under  some  of  these  policies.  In  addition,  various  costs  of
remediation  efforts related to underground  storage tanks are eligible for
reimbursement from state administered funds. Probable recoveries related to
certain  costs  incurred or  expected  to be  incurred in future  years are
included in other noncurrent assets.

In addition,  Ashland and its  subsidiaries  are parties to numerous claims
and  lawsuits  (some of which are for  substantial  amounts).  While  these
actions  are being  contested,  the  outcome of  individual  matters is not
predictable   with  assurance.   Although  any  actual   liability  is  not
determinable as of September 30, 1995,  Ashland believes that any liability
resulting from these  matters,  after taking into  consideration  Ashland's
insurance  coverages and amounts  provided for,  should not have a material
adverse effect on Ashland's consolidated financial position.

During 1995, Ashland Exploration  entered into a settlement  agreement with
Columbia Gas  Transmission  to resolve claims  involving  natural gas sales
contracts  which were  abrogated  by  Columbia  in 1991.  Columbia  and its
parent,  Columbia Gas Systems,  have filed  reorganization  plans including
this agreement with the U.S.  Bankruptcy  Court in Delaware.  The Court has
approved  the  fairness  of the  settlement  agreement  and the  disclosure
statements  allowing the reorganization  plans to be voted on by creditors.
Subject to the outcome of the voting  process and various other  approvals,
the settlement agreement would provide for a $78 million payment to Ashland
Exploration,  of  which  5% would be  withheld  by  Columbia  to be used to
potentially  satisfy  the  claims of  non-settling  producers.  Payment  is
expected  to be  received  in 1996,  with most of the  settlement  proceeds
recognized as income.



                                       55

<PAGE>
Ashland Inc. and Subsidiaries
FIVE YEAR SELECTED FINANCIAL INFORMATION

Years Ended September 30
<TABLE>
<CAPTION>
(In millions except per share data)                                   1995         1994         1993         1992         1991
================================================================================================================================
<S>                                                                <C>          <C>          <C>          <C>           <C>   
SUMMARY OF OPERATIONS
Revenues
   Sales and operating revenues (including excise taxes)           $12,167      $10,334      $10,199      $10,211       $9,867
   Other                                                                72           48           57           40           56
Costs and expenses
   Cost of sales and operating expenses                             (9,286)      (7,742)      (7,951)      (8,210)      (7,725)
   Excise taxes on products and merchandise                           (988)        (877)        (645)        (659)        (620)
   Selling, general and administrative expenses                     (1,205)      (1,021)        (993)      (1,023)        (926)
   Depreciation, depletion and amortization                           (471)        (295)        (293)        (290)        (265)
   General corporate expenses                                          (91)         (80)         (77)        (132)         (93)
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                198          367          297          (63)         294
Other income (expense)
   Interest expense (net of interest income)                          (171)        (117)        (123)        (128)        (115)
   Equity income                                                         7           22           26           33           14
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, minority interest and
   the cumulative effect of accounting changes                          34          272          200         (158)         193
Income taxes                                                            13          (75)         (58)          90          (48)
Minority interest in earnings of subsidiaries                          (23)           -            -            -            -
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before the cumulative effect
   of accounting changes                                                24          197          142          (68)         145
Cumulative effect of accounting changes                                  -            -            -         (268)           -
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                  $    24      $   197      $   142      $  (336)     $   145
===============================================================================================================================

BALANCE SHEET INFORMATION
Working capital
   Current assets                                                  $ 2,575      $ 2,171      $ 1,973      $ 2,110      $ 2,119
   Current liabilities                                               2,094        1,688        1,619        2,046        1,823
- -------------------------------------------------------------------------------------------------------------------------------
                                                                   $   481      $   483      $   354      $    64      $   296
- -------------------------------------------------------------------------------------------------------------------------------
Total assets                                                       $ 6,992      $ 5,815      $ 5,552      $ 5,668      $ 5,449
- -------------------------------------------------------------------------------------------------------------------------------
Capital employed
   Debt due within one year                                        $   272      $   133      $   159      $   306      $   195
   Long-term debt (less current portion)                             1,828        1,391        1,399        1,444        1,337
   Deferred income taxes                                                49           30           44           59          312
   Minority interest in consolidated subsidiaries                      179            -            -            -            -
   Convertible preferred stock                                         293          293          293            -            -
   Common stockholders' equity                                       1,362        1,302        1,162        1,086        1,444
- -------------------------------------------------------------------------------------------------------------------------------
                                                                   $ 3,983      $ 3,149      $ 3,057      $ 2,895      $ 3,288
===============================================================================================================================

CASH FLOW INFORMATION
Cash flows from operations                                         $   500      $   454      $   250      $   398      $   473
Additions to property, plant and equipment                             444          376          432          504          445
Dividends                                                               92           79           66           60           58
===============================================================================================================================

COMMON STOCK INFORMATION
Primary earnings (loss) per share                                  $   .08      $  2.94      $  2.26      $ (1.18)(1)  $  2.56
Dividends per share                                                   1.10         1.00         1.00         1.00         1.00
==============================================================================================================================
<FN>
(1) Excludes the cumulative effect of accounting changes of $(4.57) per share.
</TABLE>

                                       57

<PAGE>
Ashland Inc. and Subsidiaries
FIVE YEAR INFORMATION BY INDUSTRY SEGMENT

Years Ended September 30
<TABLE>
<CAPTION>
(In millions)                                             1995             1994            1993            1992          1991
==============================================================================================================================
<S>                                                    <C>              <C>             <C>             <C>           <C>    
SALES AND OPERATING REVENUES
Petroleum                                              $ 5,050          $ 4,666         $ 4,752         $ 4,848       $ 4,877
SuperAmerica                                             1,788            1,706           1,785           1,888         1,948
Valvoline                                                1,113            1,000             938             900           793
Chemical                                                 3,551            2,885           2,586           2,488         2,285
APAC                                                     1,123            1,101           1,116           1,043         1,019
Coal(1)                                                    610                -               -               -             -
Exploration                                                198              199             247             262           323
Intersegment sales(2)
   Petroleum                                            (1,228)          (1,193)         (1,195)         (1,182)       (1,335)
   Other                                                   (38)             (30)            (30)            (36)          (43)
- ------------------------------------------------------------------------------------------------------------------------------
                                                       $12,167          $10,334         $10,199         $10,211       $ 9,867
==============================================================================================================================
OPERATING INCOME (LOSS)
Petroleum                                              $   (54)         $   113         $    56(3)      $  (125)      $   138
SuperAmerica                                                53               59              65               1            30
Valvoline                                                   (4)              52              56              50            39
                                                       -----------------------------------------------------------------------
    Total Refining and Marketing Group                      (5)             224             177             (74)          207
Chemical                                                   159              125             108              81            98
APAC                                                        75               70              53              45            41
Coal(1)                                                     66                -               -               -             -
Exploration                                                 (6)              28              36              17            41
General corporate expenses                                 (91)             (80)(4)         (77)           (132)          (93)
- ------------------------------------------------------------------------------------------------------------------------------
                                                       $   198(5)       $   367         $   297         $   (63)(6)   $   294
==============================================================================================================================
IDENTIFIABLE ASSETS
Petroleum                                              $ 2,258          $ 2,259         $ 2,240         $ 2,296       $ 2,274
SuperAmerica                                               401              398             364             446           437
Valvoline                                                  603              532             430             402           377
Chemical                                                 1,372            1,122             958             999           834
APAC                                                       433              404             440             437           434
Coal(1)                                                    928                -               -               -             -
Exploration                                                424              374             375             361           337
Corporate(7)                                               573              726             745             727           756
- ------------------------------------------------------------------------------------------------------------------------------
                                                       $ 6,992          $ 5,815         $ 5,552         $ 5,668       $ 5,449
==============================================================================================================================
</TABLE>

                                       58

<PAGE>
<TABLE>
<CAPTION>
(In millions)                                                  1995          1994           1993           1992           1991
===============================================================================================================================
<S>                                                            <C>           <C>            <C>            <C>            <C> 

ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Petroleum                                                      $136          $155           $230           $273           $249
SuperAmerica                                                     47            39             25             37             37
Valvoline                                                        25            25             21             19             14
Chemical                                                         76            61             51             47             41
APAC                                                             47            45             43             42             36
Coal(1)                                                          58             -              -              -              -
Exploration                                                      45            41             42             67             60
Corporate                                                        10            10             20             19              8
- -------------------------------------------------------------------------------------------------------------------------------
                                                               $444          $376           $432           $504           $445
===============================================================================================================================

DEPRECIATION, DEPLETION AND AMORTIZATION
Petroleum                                                      $204          $134           $127           $125           $103
SuperAmerica                                                     29            27             28             31             31
Valvoline                                                        24            19             18             17             16
Chemical                                                         58            43             42             43             41
APAC                                                             42            40             44             45             48
Coal(1)                                                          72             -              -              -              -
Exploration                                                      41            33             34             28             26
Corporate                                                        17            12             12             13             14
- -------------------------------------------------------------------------------------------------------------------------------
                                                               $487(8)       $308           $305           $302           $279
===============================================================================================================================

<FN>
(1)  Amounts relate to Ashland Coal which was consolidated in 1995.
(2)  Intersegment sales are accounted for at prices which approximate market value.
(3)  Includes a gain of $15 million on the sale of TPT, an inland waterways barge operation.
(4)  Includes a net gain of $11 million related to litigation matters.
(5)  Includes charges for unusual items totaling $120 million, consisting of asset impairment write-downs of $83 million under FAS
     121 and provisions of $37 million for early retirement and restructuring programs. The combined effect of these items reduced
     operating  income for each of the  segments as follows:  Petroleum  ($102  million),  Valvoline  ($5  million),  Chemical ($5
     million), Exploration ($4 million) and general corporate expenses ($4 million).
(6)  Includes charges for unusual items totaling $208 million consisting of provisions for a voluntary enhanced retirement program
     ($31 million);  various asset  write-downs  including  properties  held for sale and assets of  discontinued  operations ($64
     million); future environmental cleanup costs ($41 million);  reserves for future costs associated with certain custom boilers
     built by a former  engineering  subsidiary and other matters ($38 million);  and the current year effect of the adoption of a
     new  accounting  standard for  postretirement  benefits  ($34  million).  The combined  effect of all of these items  reduced
     operating  income for each of the segments as follows:  Petroleum ($89 million),  SuperAmerica  ($28 million),  Valvoline ($2
     million), Chemical ($15 million), APAC ($9 million), Exploration ($16 million) and general corporate expenses ($49 million).
(7)  Includes  principally  cash, cash equivalents,  investments in and advances to  unconsolidated  affiliates and investments of
     captive insurance companies.
(8)  Includes charges of $83 million for asset impairment write-downs which increased depreciation, depletion and amortization for
     each of the segments as follows:  Petroleum ($68 million),  Valvoline ($3 million),  Chemical ($4 million),  Exploration  ($4
     million) and Corporate ($4 million).
</TABLE>


                                       59

<PAGE>
Ashland Inc. and Subsidiaries
SUPPLEMENTAL OIL AND GAS INFORMATION

OIL AND GAS RESERVES, REVENUES AND COSTS

The  following  tables  summarize  Ashland's  (1) crude oil and natural gas
reserves,  (2)  results  of  operations  from  oil  and gas  producing  and
marketing activities, (3) costs incurred, both capitalized and expensed, in
oil and gas producing activities, and (4) capitalized costs for oil and gas
producing  activities,  along with the  related  accumulated  depreciation,
depletion  and  amortization.  U.S.  crude oil and natural gas reserves are
reported net of royalties and interests owned by others.  Foreign crude oil
reserves  relate to reserves  available to Ashland,  as  producer,  under a
long-term  contract  with  the  Nigerian  National  Petroleum  Corporation.
Reserves  reported  in the table are  estimated  and are  subject to future
revisions.
<TABLE>
<CAPTION>
                                                                     1995                           1994                      1993
                                                   ----------------------        -----------------------     ---------------------
                                                   U. S.  Foreign   Total        U. S.  Foreign    Total     U. S.  Foreign  Total
===================================================================================================================================
<S>                                                <C>      <C>     <C>          <C>     <C>       <C>       <C>      <C>   <C> 
CRUDE OIL RESERVES (millions of barrels)
Proved developed and undeveloped reserves
   Beginning of year                                  .9      7.6     8.5          1.4     7.7       9.1       1.6     13.3   14.9
   Revisions of previous estimates                    .2     12.3    12.5          (.1)    6.7       6.6        .2      2.3    2.5
   Extensions and discoveries                          -      1.4     1.4            -       -         -         -        -      -
   Purchases (net of sales) of reserves in place      .4        -      .4          (.1)      -       (.1)        -        -      -
   Production                                        (.2)    (6.9)   (7.1)         (.3)   (6.8)     (7.1)      (.4)    (7.9)  (8.3)
- -----------------------------------------------------------------------------------------------------------------------------------
   End of year                                       1.3     14.4    15.7           .9     7.6       8.5       1.4      7.7    9.1
- -----------------------------------------------------------------------------------------------------------------------------------
Proved developed reserves
   Beginning of year                                  .9      7.6     8.5          1.3     7.7       9.0       1.5     13.3   14.8
   End of year                                       1.3     14.4    15.7           .9     7.6       8.5       1.3      7.7    9.0
===================================================================================================================================

NATURAL GAS RESERVES (billions of cubic feet)
Proved developed and undeveloped reserves
   Beginning of year                               349.2                         455.5                       463.9
   Revisions of previous estimates                  90.7                         (98.2)                        4.9
   Extensions and discoveries                       21.2                          25.9                        19.4
   Purchases (net of sales) of reserves in place    83.8                            .4                         3.5
   Production                                      (37.5)                        (34.4)                      (36.2)
- -----------------------------------------------------------------------------------------------------------------------------------
   End of year                                     507.4                         349.2                       455.5
- -----------------------------------------------------------------------------------------------------------------------------------
Proved developed reserves
   Beginning of year                               320.5                         352.0                       346.5
   End of year                                     427.3                         320.5                       352.0
===================================================================================================================================

RESULTS OF OPERATIONS (in millions)
Revenues
   Sales to third parties                          $  86     $110    $196        $  96    $ 99      $195      $106     $135   $241
   Intersegment sales(1)                               2        -       2            4       -         4         6        -      6
- -----------------------------------------------------------------------------------------------------------------------------------
                                                      88      110     198          100      99       199       112      135    247
Costs and expenses
   Production (lifting) costs(2)                     (27)     (49)    (76)         (24)    (90)     (114)      (25)     (60)   (85)
   Exploration expenses                              (11)     (27)    (38)         (13)     (1)      (14)       (8)     (10)   (18)
   Depreciation, depletion, amortization
      and valuation provisions                       (41)      (1)    (42)         (34)     (1)      (35)      (33)      (3)   (36)
   Other costs(3)                                    (24)      (1)    (25)         (25)     (2)      (27)      (23)      (5)   (28)
   Income and foreign exploration taxes               16      (23)     (7)           7      19        26         -      (44)   (44)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                    $  1     $  9    $ 10        $  11    $ 24      $ 35      $ 23     $ 13   $ 36
===================================================================================================================================

COSTS INCURRED (in millions)
Property acquisition costs
   Proved properties                                $ 69     $  -    $ 69        $   1    $  -      $  1      $  3     $  -   $  3
   Unproved properties                                 2        -       2            2       -         2         2        -      2
Exploration costs                                     17       31      48           19       1        20        10       10     20
Development costs                                     30       10      40           32       2        34        35        2     37
===================================================================================================================================

CAPITALIZED COSTS (in millions)
Proved properties                                   $584     $400    $984         $494    $392      $886
Unproved properties                                   11        1      12           45       1        46
- -----------------------------------------------------------------------------------------------------------------------------------
                                                     595      401     996          539     393       932
Accumulated depreciation,
   depletion and amortization                       (226)    (392)   (618)        (231)   (392)     (623)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                    $369     $  9    $378         $308    $  1      $309
===================================================================================================================================
</TABLE>

                                       60

<PAGE>

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO OIL AND 
GAS RESERVES

The following tables summarize discounted future net cash flows and changes
in such flows in  accordance  with  Financial  Accounting  Standards  Board
Statement  No.  69 (FAS  69),  "Disclosures  about  Oil  and Gas  Producing
Activities."  Under the guidelines of FAS 69,  estimated  future cash flows
are  determined  based on  current  prices for crude oil and  natural  gas,
estimated  production  of  proved  crude  oil  and  natural  gas  reserves,
estimated future  production and development  costs of those reserves based
on current costs and economic  conditions,  and estimated future income and
foreign  exploration  taxes  based on  taxing  arrangements  in  effect  at
year-end.  Such cash flows are then  discounted  using the  prescribed  10%
rate.

Many other  assumptions  could have been made  which may have  resulted  in
significantly  different  estimates.  Ashland  does  not  rely  upon  these
estimates  in  making  investment  and  operating  decisions.  Furthermore,
Ashland  does not  represent  that such  estimates  are  indicative  of its
expected future cash flows or the current value of its reserves.  Since gas
prices  utilized in deriving these  estimates are based on conditions  that
existed at September 30 and are usually different than prices that exist at
calendar  year-end due to seasonal  fluctuations in the natural gas market,
the  estimates  may not be  comparable  to those of  other  companies  with
different fiscal year-ends.  Prices can also vary significantly at the same
point in time from year to year due to a variety of  factors.  The  average
gas price  used in the  discounted  future net cash flow  calculations  was
based on $1.64 per million BTU at Henry Hub for 1995 and $1.48 for 1994.

<TABLE>
<CAPTION>

Discounted future net cash flows (in millions)                                         U. S.           Foreign              Total
===================================================================================================================================
<S>                                                                                   <C>                  <C>             <C>   
SEPTEMBER 30, 1995
Future cash inflows                                                                   $1,060               228             $1,288
Future production (lifting) costs                                                       (505)               59)              (664)
Future development costs                                                                 (58)               16)               (74)
Future income and foreign exploration taxes                                              (33)               33)               (66)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                         464                20                484
Annual 10% discount                                                                     (212)               (3)              (215)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                      $  252             $  17             $  269
===================================================================================================================================

SEPTEMBER 30, 1994
Future cash inflows                                                                   $  691             $ 124             $  815
Future production (lifting) costs                                                       (315)              (80)              (395)
Future development costs                                                                 (22)               (9)               (31)
Future income and foreign exploration taxes                                              (17)              (24)               (41)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                         337                11                348
Annual 10% discount                                                                     (140)               (1)              (141)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                      $  197             $  10             $  207
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                                     1995                        1994                        1993
Changes in discounted future                     ------------------------    ------------------------    --------------------------
       net cash flows (in millions)              U. S.   Foreign    Total    U. S.   Foreign    Total    U. S.   Foreign    Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>       <C>      <C>      <C>      <C>       <C>     <C>       <C>      <C>   

Net change due to extensions and
      discoveries                                $  25     $   6    $  31    $  21    $    -    $  21   $   20    $    -   $   20
Sales of oil and gas produced - net of
      production (lifting) costs                   (61)      (61)    (122)     (76)       (9)     (85)     (87)      (75)    (162)
Changes in prices                                   24        24       48     (186)       (3)    (189)     (35)      (25)     (60)
Previously estimated development
      costs incurred                                 7        35       42       24         2       26       38         2       40
Net change due to revisions of
      previous estimates of reserves                 7        46       53      (17)       34       17        3         7       10
Purchases (net of sales) of reserves in place       40         -       40        -         -        -        3         -        3
Accretion of 10% discount                           20         1       21       31         1       32       33         2       35
Other - net(4)                                      (9)      (40)     (49)      33       (11)      22      (16)        1      (15)
Net change in income and foreign
      exploration taxes                              2        (4)      (2)      59       (13)      46       14        71       85
- -----------------------------------------------------------------------------------------------------------------------------------
                                                    55         7       62     (111)        1     (110)     (27)      (17)     (44)
Discounted future net cash flows
      Beginning of year                            197        10      207      308         9      317      335        26      361
- -----------------------------------------------------------------------------------------------------------------------------------
      End of year                                 $252      $ 17     $269     $197    $   10     $207    $ 308     $   9   $  317
===================================================================================================================================

<FN>
(1) Intersegment sales are accounted for at prices which approximate market value.  
(2) Includes  only costs  incurred to operate and  maintain  wells, related equipment and facilities.
(3) Includes results of crude oil trading.
(4) Includes changes in future production and development costs and changes in the timing of future production.

</TABLE>



                                       61

