




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



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 10-Q



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




                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                          Commission file number 1-2918



                                  ASHLAND INC.
                            (a Kentucky corporation)



                              I.R.S. No. 61-0122250
                           50 E. RiverCenter Boulevard
                                  P. O. Box 391
                         Covington, Kentucky 41012-0391



                        Telephone Number: (859) 815-3333



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

     At July 31, 2001,  there were  69,524,589  shares of  Registrant's   Common
Stock outstanding.  One Right to purchase  one-thousandth of a share of Series A
Participating  Cumulative  Preferred Stock accompanies each outstanding share of
Registrant's Common Stock.

================================================================================
<PAGE>


                                             PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>


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

 ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
 STATEMENTS OF CONSOLIDATED INCOME

 ---------------------------------------------------------------------------------------------------------------------------------
                                                                                Three months ended           Nine months ended
                                                                                      June 30                     June 30
                                                                               -----------------------     -----------------------
 (In millions except per share data)                                              2001         2000           2001          2000
 ---------------------------------------------------------------------------------------------------------------------------------
 <S>                                                                           <C>          <C>            <C>           <C>
REVENUES
     Sales and operating revenues                                              $ 2,053      $ 2,103        $ 5,590       $ 5,821
     Equity income                                                                 314          197            537           285
     Other income                                                                   20           17             51            53
                                                                               ----------   ----------     ----------    ---------
                                                                                 2,387        2,317          6,178         6,159
 COSTS AND EXPENSES
     Cost of sales and operating expenses                                        1,675        1,716          4,586         4,712
     Selling, general and administrative expenses                                  283          274            814           804
     Depreciation, depletion and amortization                                       60           59            178           175
                                                                               ----------   ----------     ---------     ---------
                                                                                 2,018        2,049          5,578         5,691
                                                                               ----------   ----------     ---------     ---------
 OPERATING INCOME                                                                  369          268            600           468
     Net interest and other financial costs                                        (42)         (50)          (132)         (138)
                                                                               ----------   ----------     ----------    ---------
 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                             327          218            468           330
     Income taxes                                                                 (130)         (89)          (187)         (135)
                                                                               ----------   ----------     ----------    ---------
 INCOME FROM CONTINUING OPERATIONS                                                 197          129            281           195
     Loss from discontinued operations (net of income taxes)                         -            -             (8)         (215)
     Gain (loss) on disposal of discontinued operations (net of
       income taxes)                                                                 -            -             33            (3)
                                                                               ----------   ----------     ----------    ---------
 INCOME (LOSS) BEFORE EXTRAORDINARY LOSS AND
     CUMULATIVE EFFECT OF ACCOUNTING CHANGE                                        197          129            306           (23)
     Extraordinary loss on early retirement of debt (net of income taxes)            -            -              -            (3)
     Cumulative effect of accounting change (net of income taxes)                    -            -             (4)            -
                                                                               ----------   ----------     ----------    ---------
 NET INCOME (LOSS)                                                             $   197      $   129        $   302       $   (26)
                                                                               ==========   ==========     ==========    =========

 BASIC EARNINGS (LOSS) PER SHARE - Note A
     Income from continuing operations                                         $  2.82      $  1.83        $  4.04       $  2.74
     Loss from discontinued operations                                               -            -           (.11)        (3.02)
     Gain (loss) on disposal of discontinued operations                              -            -            .47          (.04)
     Extraordinary loss on early retirement of debt                                  -            -              -          (.04)
     Cumulative effect of accounting change                                          -            -           (.07)            -
                                                                               ----------   ----------     ----------    ---------
     Net income (loss)                                                         $  2.82      $  1.83        $  4.33       $  (.36)
                                                                               ==========   ==========     ==========    =========
 DILUTED EARNINGS (LOSS) PER SHARE - Note A
     Income from continuing operations                                         $  2.79      $  1.83        $  3.99       $  2.73
     Loss from discontinued operations                                               -            -           (.11)        (3.01)
     Gain (loss) on disposal of discontinued operations                              -            -            .46          (.04)
     Extraordinary loss on early retirement of debt                                  -            -              -          (.04)
     Cumulative effect of accounting change                                          -            -           (.06)            -
                                                                               ----------   ----------     ----------    ---------
     Net income (loss)                                                         $  2.79      $  1.83        $  4.28       $  (.36)
                                                                               ==========   ==========     ==========    =========

 DIVIDENDS PAID PER COMMON SHARE                                               $  .275      $  .275        $  .825       $  .825
</TABLE>


 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                   2

<PAGE>



<TABLE>
<CAPTION>

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                June 30         September 30             June 30
(In millions)                                                                      2001                 2000                2000
-----------------------------------------------------------------------------------------------------------------------------------

                               ASSETS
                               ------
<S>                                                                           <C>                  <C>                  <C>
CURRENT ASSETS
    Cash and cash equivalents                                                 $      70            $      67            $     29
    Accounts receivable                                                           1,190                1,268               1,239
    Allowance for doubtful accounts                                                 (29)                 (25)                (28)
    Inventories - Note A                                                            507                  488                 549
    Deferred income taxes                                                           124                  135                 113
    Other current assets                                                            176                  198                 205
                                                                              -----------          -----------          ----------
                                                                                  2,038                2,131               2,107
INVESTMENTS AND OTHER ASSETS
    Investment in Marathon Ashland Petroleum LLC (MAP)                            2,377                2,295               2,321
    Cost in excess of net assets of companies acquired                              547                  537                 500
    Investment in Arch Coal - discontinued operations                                 -                   35                  35
    Other noncurrent assets                                                         406                  351                 353
                                                                              -----------          -----------          ----------
                                                                                  3,330                3,218               3,209
PROPERTY, PLANT AND EQUIPMENT
    Cost                                                                          2,984                2,879               2,910
    Accumulated depreciation, depletion and amortization                         (1,559)              (1,457)             (1,445)
                                                                              -----------          -----------          ----------
                                                                                  1,425                1,422               1,465
                                                                              -----------          -----------          ----------

                                                                              $   6,793            $   6,771            $  6,781
                                                                              ===========          ===========          ==========

                LIABILITIES AND STOCKHOLDERS' EQUITY
                ------------------------------------
CURRENT LIABILITIES
    Debt due within one year                                                  $     115            $     327            $    527
    Trade and other payables                                                      1,282                1,330               1,267
    Income taxes                                                                     18                   42                  51
                                                                              -----------          -----------          ----------
                                                                                  1,415                1,699               1,845
NONCURRENT LIABILITIES
    Long-term debt (less current portion)                                         1,881                1,899               1,898
    Employee benefit obligations                                                    346                  383                 400
    Deferred income taxes                                                           377                  288                 196
    Reserves of captive insurance companies                                         184                  179                 190
    Other long-term liabilities and deferred credits                                404                  358                 344
    Commitments and contingencies - Note F
                                                                              -----------          -----------          ----------
                                                                                  3,192                3,107               3,028

COMMON STOCKHOLDERS' EQUITY                                                       2,186                1,965               1,908
                                                                              -----------          -----------          ----------

                                                                              $   6,793            $   6,771            $  6,781
                                                                              ===========          ===========          ==========
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                     3

<PAGE>


<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------------------------------------

 ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
 STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY

 -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Accumulated
                                                                                                                other
                                                          Common        Paid-in       Retained          comprehensive
(In millions)                                              stock        capital       earnings                   loss         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>            <C>           <C>             <C>                    <C>
BALANCE AT OCTOBER 1, 1999                              $     72       $    464      $   1,710       $           (46)       $ 2,200
   Total comprehensive income (loss) (1)                                                   (26)                  (16)           (42)
   Dividends
     Cash                                                                                  (58)                                 (58)
     Spin-off of Arch Coal shares                                                         (123)                                (123)
   Issued common stock under
     Stock incentive plans                                                    1                                                   1
     Acquisitions of other companies                                          1                                                   1
   Repurchase of common stock                                 (2)            69)                                                (71)
                                                        ---------      ---------    ----------       -----------------      --------
BALANCE AT JUNE 30, 2000                                $     70       $    397     $    1,503       $           (62)        $1,908
                                                        =========      =========    ==========       =================      ========



BALANCE AT OCTOBER 1, 2000                              $     70       $    388      $   1,579       $           (72)       $ 1,965
   Total comprehensive income (1)                                                          302                   (23)           279
   Cash dividends                                                                          (57)                                 (57)
   Issued common stock under
     stock incentive plans                                                   17                                                  17
   Repurchase of common stock                                 (1)           (17)                                                (18)
                                                        ----------     ---------     ----------      ----------------       --------
BALANCE AT JUNE 30, 2001                                $     69       $    388      $   1,824       $           (95)       $ 2,186
                                                        ==========     =========     ==========      ================       ========



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

<TABLE>
<CAPTION>
                                                                          Three months ended              Nine months ended
                                                                                June 30                        June 30
                                                                       ---------------------------    ---------------------------
          (In millions)                                                      2001           2000            2001           2000
          -----------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>            <C>             <C>
          Net income (loss)                                            $      197      $     129      $      302      $     (26)
          Unrealized translation adjustments                                   (7)            (9)            (26)           (23)
            Related tax benefit                                                 -              1               3              7
                                                                       -----------     -----------    -----------     -----------
          Total comprehensive income (loss)                            $      190      $     121      $      279      $     (42)
                                                                       ===========     ===========    ===========     ===========

          -----------------------------------------------------------------------------------------------------------------------
       At June 30, 2001, the accumulated  other  comprehensive  loss was comprised of net unrealized  translation  losses of
       $86 million and a minimum pension liability of $9 million.


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
                                     4

<PAGE>


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS

----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Nine months ended
                                                                                                              June 30
                                                                                              ------------------------------------
(In millions)                                                                                         2001                 2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>                  <C>
CASH FLOWS FROM CONTINUING OPERATIONS
    Income from continuing operations                                                             $    281             $    195
    Expense (income) not affecting cash
      Depreciation, depletion and amortization                                                         178                  175
      Deferred income taxes                                                                            106                   65
      Equity income from affiliates                                                                   (537)                (285)
      Distributions from equity affiliates                                                             454                  142
    Change in operating assets and liabilities (1)                                                     (50)                 (97)
                                                                                                  -----------          -----------
                                                                                                       432                  195

CASH FLOWS FROM FINANCING
    Proceeds from issuance of long-term debt                                                            52                  737
    Proceeds from issuance of common stock                                                              11                    1
    Repayment of long-term debt                                                                        (90)                (407)
    Repurchase of common stock                                                                         (18)                 (71)
    Increase (decrease) in short-term debt                                                            (190)                 244
    Dividends paid (2)                                                                                 (57)                 (58)
                                                                                                  -----------          -----------
                                                                                                      (292)                 446

CASH FLOWS FROM INVESTMENT
    Additions to property, plant and equipment                                                        (144)                (161)
    Purchase of operations - net of cash acquired (3)                                                  (82)                (579)
    Proceeds from sale of operations                                                                     9                    -
    Other - net                                                                                         (6)                  19
                                                                                                  -----------          -----------
                                                                                                      (223)                (721)
                                                                                                  -----------          -----------
 CASH USED BY CONTINUING OPERATIONS                                                                    (83)                 (80)
    Cash provided (used) by discontinued operations                                                     86                   (1)
                                                                                                  -----------          -----------
 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                        3                  (81)

 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                                        67                  110
                                                                                                  -----------          -----------

 CASH AND CASH EQUIVALENTS - END OF PERIOD                                                         $    70             $     29
                                                                                                  ===========          ===========

----------------------------------------------------------------------------------------------------------------------------------
(1)      Excludes changes resulting from operations acquired or sold.
(2)      The 2000 amount excludes the dividend of Arch Coal shares to Ashland shareholders which resulted in a $123 million charge
         to retained earnings.
(3)      Amounts exclude acquisitions through the issuance of common stock of $1 million in 2000.

</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       5

<PAGE>




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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

         INTERIM FINANCIAL REPORTING

         The  accompanying   unaudited  condensed   consolidated  financial
         statements   have  been  prepared  in  accordance  with  generally
         accepted accounting principles for interim financial reporting and
         Securities  and Exchange  Commission  regulations.  Although  such
         statements are subject to any year-end audit adjustments which may
         be  necessary,  in the  opinion  of  management,  all  adjustments
         (consisting of normal recurring accruals) considered necessary for
         a fair presentation have been included. These financial statements
         should be read in conjunction with Ashland's Annual Report on Form
         10-K for the fiscal  year ended  September  30,  2000.  Results of
         operations   for  the  periods  ended  June  30,  2001,   are  not
         necessarily  indicative  of  results to be  expected  for the year
         ending September 30, 2001.

         INVENTORIES
<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------------------------------
                                                                              June 30        September 30             June 30
           (In millions)                                                         2001                2000                2000
         --------------------------------------------------------------------------------------------------------------------
           <S>                                                                <C>                  <C>                 <C>
           Chemicals and plastics                                             $   369              $  375              $  407
           Construction materials                                                  81                  80                  86
           Petroleum products                                                      60                  52                  65
           Other products                                                          64                  45                  55
           Supplies                                                                 6                   7                   6
           Excess of replacement costs over LIFO carrying values                  (73)                (71)                (70)
                                                                              --------             -------             -------
                                                                              $   507              $  488              $  549
                                                                              ========             =======             =======

</TABLE>
<TABLE>
<CAPTION>
         EARNINGS PER SHARE

         The  following  table sets forth the  computation  of basic and diluted  earnings  per share (EPS) from  continuing
         operations.

         ----------------------------------------------------------------------------------------------------------------------
                                                                             Three months ended             Nine months ended
                                                                                   June 30                       June 30
                                                                          ---------------------------   -----------------------
            (In millions except per share data)                               2001         2000              2001         2000
         ----------------------------------------------------------------------------------------------------------------------
            <S>                                                          <C>           <C>              <C>           <C>
            NUMERATOR
            Numerator for basic and diluted EPS - Income from
               continuing operations                                      $    197     $    129         $     281     $    195
                                                                          ==========   ==========       ==========    =========
            DENOMINATOR
            Denominator for basic EPS - Weighted average
               common shares outstanding                                        70           71                70           71
            Common shares issuable upon exercise of stock options                1            -                 -            -
                                                                          ----------   ----------       -----------   ---------
            Denominator for diluted EPS - Adjusted weighted
               average shares and assumed conversions                           71           71                70           71
                                                                          ==========   ==========       ===========   =========

            BASIC EPS FROM CONTINUING OPERATIONS                          $   2.82     $   1.83         $    4.04     $   2.74
            DILUTED EPS FROM CONTINUING OPERATIONS                        $   2.79     $   1.83         $    3.99     $   2.73

</TABLE>
                                       6


<PAGE>



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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)

         ACCOUNTING CHANGE

         In June 1998,  the  Financial  Accounting  Standards  Board issued
         Statement   No.  133  (FAS  133),   "Accounting   for   Derivative
         Instruments  and  Hedging  Activities."  FAS 133 was  subsequently
         amended by two other  statements  and is required to be adopted in
         years beginning after June 15, 2000.  Because of Ashland's minimal
         use of derivatives,  FAS 133 did not have a significant  effect on
         Ashland's  financial position or results of operations when it was
         adopted on October 1, 2000.  MAP's  adoption of FAS 133 on January
         1, 2001, resulted in a $20 million pretax loss from the cumulative
         effect of this  accounting  change.  Ashland's share of the pretax
         loss amounted to $7 million  which,  net of income tax benefits of
         $3 million,  resulted in a loss of $4 million from the  cumulative
         effect of this accounting change.

         NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001,  the  Financial  Accounting  Standards  Board issued
         Statements  No.  141,  "Business  Combinations,"  and No. 142 (FAS
         142),  "Goodwill  and  Other  Intangible  Assets."  Under FAS 142,
         goodwill  and  intangible  assets  with  indefinite  lives will no
         longer be  amortized  but will be  subject  to  annual  impairment
         tests.  Other intangible assets will continue to be amortized over
         their  useful  lives.  FAS  142  is  effective  for  fiscal  years
         beginning  after  December 15, 2001.  As  permitted,  Ashland will
         early-adopt  the statement as of October 1, 2001, the beginning of
         its fiscal year. Application of the nonamortization  provisions of
         FAS  142  is  expected  to  increase   Ashland's   net  income  by
         approximately $35 million ($.50 per share) each year. During 2002,
         Ashland will perform the first of the required impairment tests of
         goodwill and indefinite lived  intangible  assets as of October 1,
         2001.  Until  those  tests are  performed  and other  transitional
         issues are finalized,  Ashland cannot  estimate what the effect of
         the initial  adoption of the statements will be on its earnings and
         financial position.

NOTE B - DISCONTINUED OPERATIONS

         In March 2000, Ashland distributed 17.4 million shares of its Arch
         Coal Common  Stock to  Ashland's  shareholders.  Ashland  sold its
         remaining  4.7 million  Arch Coal shares in February  2001 for $86
         million (after underwriting commissions).  Such sale resulted in a
         pretax gain on disposal of discontinued  operations of $49 million
         ($33  million  after  income  taxes).  In the March 2000  quarter,
         Ashland accrued $5 million of costs related to the spin-off and an
         offsetting tax benefit of $2 million.

         Results   from  Arch  Coal   through   March  2000  are  shown  as
         discontinued operations.  Components of the loss from discontinued
         operations are presented in the following  table.  Results for the
         nine months ended June 30, 2001,  reflect  accruals of $13 million
         for estimated costs  associated with other  operations  previously
         discontinued.  Results  for the nine months  ended June 30,  2000,
         included a net loss of $203  million  related to asset  impairment
         and restructuring  costs,  largely due to the write-down of assets
         at Arch's Dal-Tex and Hobet 21 mining  operations and certain coal
         reserves in central Appalachia.
<TABLE>
<CAPTION>
          --------------------------------------------------------------------------------------------------------------------------
                                                                                                           Nine months ended
                                                                                                                June 30
                                                                                                     -------------------------------
           (In millions)                                                                                    2001          2000
          --------------------------------------------------------------------------------------------------------------------------
           <S>                                                                                       <C>            <C>
           Revenues - Equity loss                                                                    $         -     $    (246)
           Costs and expenses - SG&A expenses                                                                (13)           (1)
                                                                                                     ------------   -----------
           Operating loss                                                                                    (13)         (247)
           Income tax benefit                                                                                  5            32
                                                                                                     ------------   -----------
           Loss from discontinued operations                                                         $        (8)    $    (215)
                                                                                                     ============   ===========

</TABLE>
                                     7


<PAGE>

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE C - EXTRAORDINARY LOSS

         During the nine months ended June 30, 2000,  Ashland  refunded $36
         million  of  pollution  control  revenue  bonds and  prepaid  $332
         million of the $600  million  floating-rate  debt used to fund the
         acquisition of the U.S.  construction  operations of Superfos a/s.
         The write-off of unamortized deferred debt issuance expenses and a
         redemption  premium  on  the  bonds  resulted  in  pretax  charges
         totaling  $4  million  which,  net of income  tax  benefits  of $1
         million,  resulted in an extraordinary loss on early retirement of
         debt of $3 million.

NOTE D - UNCONSOLIDATED AFFILIATES

         Ashland  is  required  by  Rule  3-09  of  Regulation  S-X to file
         separate financial  statements for its significant  unconsolidated
         affiliate,   Marathon  Ashland  Petroleum  LLC  (MAP).   Ashland's
         ownership  position  in Arch  Coal,  Inc.  met those  same  filing
         requirements  prior to the spin-off and sale  described in Note B.
         Financial  statements  for MAP and Arch  Coal  for the year  ended
         December 31, 2000,  were filed on a Form 10-K/A on March 30, 2001.
         Unaudited income statement information for MAP is shown below.

         MAP is organized as a limited  liability  company that has elected
         to  be  taxed  as  a  partnership.   Therefore,  the  parents  are
         responsible  for income taxes  applicable  to their share of MAP's
         taxable  income.  The net income  reflected below for MAP does not
         include any  provision  for income  taxes that will be incurred by
         its parents.
<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------------------------
                                                                        Three months ended             Nine months ended
                                                                             June 30                       June 30
                                                                    ----------------------------   -------------------------
           (In millions)                                                 2001          2000            2001            2000
         -------------------------------------------------------------------------------------------------------------------
           <S>                                                       <C>            <C>            <C>            <C>
           Sales and operating revenues                              $  7,542       $ 7,440        $ 21,653       $  19,812
           Income from operations                                         846           533           1,457             786
           Income before cumulative effect of accounting change           843           532           1,456             789
           Net income                                                     843           532           1,436             789
           Ashland's equity income                                        313           196             533             280
</TABLE>

NOTE E - DERIVATIVE INSTRUMENTS

         In  accordance  with  FAS  133,  Ashland  recognizes  all  of  its
         derivative  instruments  as either  assets or  liabilities  on the
         balance  sheet at fair value.  The  accounting  for changes in the
         fair value  (i.e.,  gains or losses)  of a  derivative  instrument
         depends on whether it has been designated and qualifies as part of
         a  hedging  relationship  and  further,  on the  type  of  hedging
         relationship.  For derivative  instruments that are designated and
         qualify as a fair value  hedge  (i.e.,  hedging  the  exposure  to
         changes  in the  fair  value  of an  asset  or  liability  that is
         attributable  to a  particular  risk),  the  gain  or  loss on the
         derivative  instrument,  as well as the offsetting loss or gain on
         the hedged item  attributable to the hedged risk are recognized in
         current  earnings  during the period of the change in fair values.
         For derivative  instruments not designated as hedging instruments,
         the  gain or loss  on the  derivative  is  recognized  in  current
         earnings during the period of change.

         Ashland selectively uses unleveraged interest rate swap agreements
         to obtain  greater  access to the lower  borrowing  costs normally
         available on floating-rate  debt, while minimizing  refunding risk
         through the  issuance of  long-term,  fixed-rate  debt.  Ashland's
         intent is to maintain its  floating-rate  exposure between 25% and
         45%  of  total  interest-bearing  obligations.  In the  June  2001
         quarter,  Ashland  re-entered  the  interest  rate swap  market by
         executing  two interest  rate swaps that  effectively  convert $60
         million of fixed-rate,


                                     8


<PAGE>

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE E - DERIVATIVE INSTRUMENTS (continued)

         medium-term notes to floating rates based upon three-month  LIBOR.
         The swaps have been designated as fair value hedges, and since the
         critical terms of the debt  instruments  and the swaps match,  the
         hedges are assumed to be perfectly effective,  with the changes in
         fair value of the debt and swaps offsetting. The fair value of the
         swaps  and  the  offsetting  change  in  fair  value  of the  debt
         instruments at June 30, 2001 was not significant.

         During the June 2001  quarter,  Ashland  entered  the  crackspread
         futures  market  to  take  advantage  of  perceived  anomalies  in
         refining  margins  versus  historical  trends.  The  contracts are
         intended to serve as economic hedges of Ashland's  equity earnings
         and resulting cash distributions from MAP. However,  the contracts
         do not meet the criteria for hedge  accounting  under FAS 133. The
         fair value of these  contracts  is recorded on the balance  sheet,
         with the offsetting  gain or loss  recognized in current  earnings
         during the period of change.  Net gains  recorded  during the June
         quarter and the fair value of the  contracts at June 30, 2001 were
         not significant.

NOTE F- LITIGATION, CLAIMS AND CONTINGENCIES

         Ashland  is  subject   to   various   federal,   state  and  local
         environmental  laws  and  regulations  that  require   remediation
         efforts at multiple  locations.  At June 30, 2001,  such locations
         included 95 waste  treatment or disposal  sites where  Ashland has
         been identified as a potentially responsible party under Superfund
         or  similar  state  laws,  approximately  100  current  and former
         operating  facilities   (including  certain  operating  facilities
         conveyed  to  MAP)  and  numerous   service  station   properties.
         Consistent  with its accounting  policy for  environmental  costs,
         Ashland's  reserves for environmental  assessments and remediation
         efforts  amounted to $185  million at June 30,  2001.  None of the
         remediation sites is individually  material as the largest reserve
         for any identified site is under $10 million. Such amounts reflect
         Ashland's  estimates  of the  most  likely  costs  which  will  be
         incurred   over  an  extended   period  to  remediate   identified
         environmental  conditions  for  which  the  costs  are  reasonably
         estimable, without regard to any third-party recoveries.

         Environmental   reserves   are   subject  to   numerous   inherent
         uncertainties  that 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. Reserves are
         regularly  adjusted as  environmental  assessments and remediation
         efforts proceed.

         Ashland and its  subsidiaries  are  parties to  numerous  actions,
         including  claims,  lawsuits and  environmental  matters,  some of
         which are for substantial  amounts.  While these actions are being
         contested,  their outcome is not  predictable  with  assurance and
         could be  material.  However,  Ashland  does not believe  that any
         liability  resulting  from the above  actions,  after  taking into
         consideration  its  insurance  coverage,  contributions  by  other
         responsible  parties and amounts already provided for, will have a
         material  adverse effect on its consolidated  financial  position,
         cash   flows  or   liquidity.   Ashland's   exposure   to  adverse
         developments with respect to any individual matter is not expected
         to be  material,  and these  matters are in various  stages of the
         ongoing  assessment  process.  Although  such actions could have a
         material  effect on results of  operations  if a series of adverse
         developments  occurs  in a  particular  quarter  or  fiscal  year,
         Ashland believes that the chance of such developments occurring in
         the same quarter or fiscal year is remote.


                                     9


<PAGE>




<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT

------------------------------------------------------------------------------------------------------------------------------------
                                                                          Three months ended                   Nine months ended
                                                                                June 30                             June 30
                                                                    ---------------------------------   ----------------------------
(In millions)                                                             2001             2000               2001             2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>              <C>                <C>              <C>
REVENUES
   Sales and operating revenues
     APAC                                                           $      745       $      701         $    1,750       $    1,738
     Ashland Distribution                                                  737              841              2,194            2,421
     Ashland Specialty Chemical                                            318              327                933              963
     Valvoline                                                             276              264                784              788
     Intersegment sales
       Ashland Distribution                                                 (7)              (9)               (21)             (28)
       Ashland Specialty Chemical                                          (16)             (21)               (49)             (60)
       Valvoline                                                             -                -                 (1)              (1)
                                                                    ------------     ------------       ------------     -----------
                                                                         2,053            2,103              5,590            5,821
   Equity income
     Ashland Specialty Chemical                                              1                1                  3                4
     Valvoline                                                               -                -                  1                1
     Refining and Marketing                                                313              196                533              280
                                                                    ------------     ------------       ------------    ------------
                                                                           314              197                537              285
   Other income
     APAC                                                                    7                5                 12               11
     Ashland Distribution                                                    1                1                  5                6
     Ashland Specialty Chemical                                              5                8                 20               21
     Valvoline                                                               1                2                  4                6
     Refining and Marketing                                                  5                -                  5                5
     Corporate                                                               1                1                  5                4
                                                                    ------------     ------------       ------------    ------------
                                                                            20               17                 51               53
                                                                    ------------     ------------       ------------     -----------
                                                                    $    2,387       $    2,317         $    6,178       $    6,159
                                                                    ============     ============       ============     ===========
OPERATING INCOME
   APAC                                                             $       37       $       41         $       12       $       79
   Ashland Distribution                                                     13               20                 37               47
   Ashland Specialty Chemical                                               19               23                 55               76
   Valvoline                                                                22               20                 51               54
   Refining and Marketing (1)                                              302              184                506              262
   Corporate                                                               (24)             (20)               (61)             (50)
                                                                    ------------     ------------       ------------     -----------
                                                                    $      369       $      268         $      600       $      468
                                                                    ============     ============       ============     ===========

-----------------------------------------------------------------------------------------------------------------------------------
(1)      Includes Ashland's equity income from MAP, amortization of Ashland's excess investment in MAP, and certain retained
         refining and marketing activities.

</TABLE>

                                    10


<PAGE>






<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT

------------------------------------------------------------------------------------------------------------------------------------
                                                                              Three months ended                Nine months ended
                                                                                   June 30                           June 30
                                                                        --------------------------------  --------------------------
                                                                            2001            2000             2001            2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>        <C>              <C>
OPERATING INFORMATION
   APAC
     Construction backlog at June 30 (millions)                                                         $   1,746        $  1,410
     Hot mix asphalt production (million tons)                              11.1             9.7             23.7            23.7
     Aggregate production (million tons)                                     8.1             7.9             19.5            19.8
     Ready-mix concrete production (thousand cubic yards)                    607             673            1,590           1,899
   Ashland Distribution (1)
     Sales per shipping day (millions)                                  $   11.0        $   13.4        $    11.4        $   12.8
     Gross profit as a percent of sales                                     15.5%           15.5%            15.9%           15.6%
   Ashland Specialty Chemical (1)
     Sales per shipping day (millions)                                  $    5.1        $    5.2        $     5.0        $    5.1
     Gross profit as a percent of sales                                     34.0%           34.0%            34.0%           34.8%
   Valvoline lubricant sales (thousand barrels per day)                     11.9            12.2             11.3            12.2
   Refining and Marketing (2)
     Crude oil refined (thousand barrels per day)                          958.2           965.0            895.0           880.1
     Consolidated refined products sold (thousand barrels per day) (3)   1,303.1         1,344.7          1,288.3         1,294.6
     Refining and wholesale marketing margin (per barrel) (4)           $   7.72        $   4.71        $    5.05        $   2.57
     Speedway SuperAmerica (SSA) retail outlets at June 30                                                  2,272           2,416
     SSA gasoline and distillate sales (millions of gallons)               1,102           1,145            3,289           3,393
     SSA gross margin - gasoline and distillates (per gallon)           $ 0.1168        $ 0.1239        $  0.1071        $ 0.1162
     SSA merchandise sales (millions)                                   $    620        $    600        $   1,706        $  1,663
     SSA merchandise margin (as a percent of sales)                         24.8%           25.4%            24.7%           25.9%
------------------------------------------------------------------------------------------------------------------------------------

(1)      Sales are defined as sales and operating revenues.  Gross profit is defined as sales and operating revenues, less cost of
         sales and operating expenses, less depreciation and amortization relative to manufacturing assets.
(2)      Amounts represent 100 percent of MAP's operations, in which Ashland owns a 38 percent interest.
(3)      Total average daily volume of all refined product sales to MAP's wholesale, branded and retail (SSA) customers.
(4)      Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation.

</TABLE>
                                    11


<PAGE>







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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

RESULTS OF OPERATIONS

         Current Quarter - Ashland's income from continuing  operations was
         $197 million for the quarter ended June 30, 2001, compared to $129
         million  for the quarter  ended June 30,  2000.  Record  operating
         income  of $369  million  for the 2001  period  reflects  improved
         refining margins for Marathon  Ashland  Petroleum (MAP) and strong
         results from Valvoline, partially offset by a decline in operating
         income from Ashland's other wholly owned businesses.

         Year-to-Date  - For the nine months ended June 30,  2001,  Ashland
         recorded  income  from  continuing  operations  of  $281  million,
         compared to $195  million for the nine months ended June 30, 2000.
         Record  operating  income  of $600  million  for the  2001  period
         reflects improved refining margins for MAP,  partially offset by a
         decline in operating  income from each of  Ashland's  wholly owned
         businesses.

         APAC

         Current  Quarter  -  APAC's   construction   operations   recorded
         operating  income  of $37  million  for  the  June  2001  quarter,
         compared to $41 million for the June 2000 quarter.  Aside from the
         increased  charge of $3  million  for  Manassas  discussed  below,
         profits  were nearly even with last year in spite of the impact of
         a softer economy and Tropical  Storm  Allison,  which moved across
         much of  APAC's  operating  area in early  June.  Hot mix  asphalt
         production  increased  14% and APAC  completed  the quarter with a
         strong  backlog of $1.7 billion,  up 24% from the prior year.  The
         growth  in  backlog  reflects  a 31%  increase  in  public  sector
         projects,  partially  offset by a 20%  decrease  in  private  work
         resulting from the economic slowdown.

         Previously  announced  audit  reviews of  accounting  practices at
         APAC's Manassas,  Virginia division have been completed. During an
         internal  investigation  of financial  activities  at the Manassas
         division during the March 2001 quarter, it was discovered that its
         earnings had been intentionally  overstated,  and local management
         of the division was  replaced.  Deloitte & Touche has completed an
         independent  review of these  irregularities,  while Ernst & Young
         reaffirmed   the  prior   audits  of  other  APAC   units.   These
         investigations  confirmed that the problems  related  primarily to
         the recognition of revenues and failure to recognize certain costs
         over  a  period  of  about   two   years.   No  other   accounting
         irregularities  or  evidence  of any  impact on  outside  parties,
         customers  or suppliers  was  discovered.  Ashland had  previously
         reported  an  estimated  charge of $15  million  in the March 2001
         quarter  related  to this  issue.  Based on  results  of the audit
         review,  an  additional  charge of $3  million  for  Manassas  was
         recorded in the June 2001 quarter,  resulting in a final charge of
         $18  million for the year.  APAC is  evaluating  and  implementing
         various   recommendations  for  improvement  in  overall  business
         processes,  accounting  controls and procedures  stemming from the
         reviews.

         Year-to-Date  - For the nine  months  ended  June 30,  2001,  APAC
         reported operating income of $12 million,  compared to $79 million
         for the same period of 2000.  The  decrease  reflects  the adverse
         impact of unusually severe winter weather in most of its operating
         regions,  as well as the $18 million charge for Manassas.  Despite
         several  acquisitions  and  significant  growth  in  APAC's  other
         operations,   net  construction   revenues   declined  15%,  while
         production of hot mix asphalt and aggregate were  generally  flat,
         and  ready-mix  concrete  production  declined  16%  from the 2000
         period.  While  certain  of  these  production  declines  were not
         significant,   the  conditions  under  which  the  materials  were
         produced  (extreme  cold and  precipitation)  made the  production
         process highly inefficient.  Earnings from the asphalt plants were
         also adversely affected by increased costs for liquid asphalt that
         were not fully  recovered  in APAC's hot mix  asphalt  prices.  In
         addition,  competition  in the private  sector has  increased as a
         result of the  economic  slowdown,  resulting in a loss of some of
         that  higher-margin  work  for  APAC.  This  has  reduced  overall
         margins, since proportionally more revenue is being generated from
         the lower-margin public sector jobs.


                                    12


<PAGE>

--------------------------------------------------------------------------------
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

         ASHLAND DISTRIBUTION

         Current Quarter - Ashland  Distribution  reported operating income
         of $13 million for the June 2001 quarter,  a 35% decline  compared
         to $20 million for the June 2000 quarter.  Weaker markets resulted
         in  lower   sales   volumes,   particularly   in  North   American
         thermoplastics.  However, profit improvement from fine ingredients
         and European  thermoplastics,  and a consistent  performance  from
         industrial chemicals distribution partially offset the decline.

         Year-to-Date  - For the nine months ended June 30,  2001,  Ashland
         Distribution reported operating income of $37 million, compared to
         $47  million for the same period of 2000.  Reduced  earnings  from
         North  American  thermoplastics  and  fiber-reinforced   plastics,
         reflecting  reduced volumes and margins,  were partially offset by
         improvements  in  industrial  chemicals   distribution,   European
         thermoplastics and fine ingredients.

         ASHLAND SPECIALTY CHEMICAL

         Current  Quarter - For the quarter  ended June 30,  2001,  Ashland
         Specialty  Chemical  reported  operating  income  of $19  million,
         compared  to $23  million  reported  for the  June  2000  quarter.
         Results  were mixed as economic  weakness  continued  to adversely
         affect  demand and margins in certain  specialty  chemical  units,
         including foundry,  electronic chemicals,  specialty adhesives and
         maleic  anhydride.   Profits  from  marine  and  industrial  water
         treatment  chemicals   improved.   Results  from  the  unsaturated
         polyester  resins  business  were up due in part to the April 2001
         acquisition of Neste Polyester.

         Year-to-Date  - For the nine months ended June 30,  2001,  Ashland
         Specialty  Chemical  reported  operating  income  of $55  million,
         compared to $76 million for the first nine months of 2000.  On the
         positive side,  electronic  chemicals sales volumes were up 6% and
         its margins were up 9%,  reflecting  strong  markets  early in the
         fiscal year. In addition,  marine and industrial  water  treatment
         chemicals  improved  reflecting higher sales volumes.  Margins for
         the marine  business were also aided by the strong U.S. dollar and
         internal cost cutting efforts. On the negative side, foundry sales
         were down 10%, while  unsaturated  polyester  resins and specialty
         adhesives  included the effects of higher costs for raw materials.
         The higher  costs,  combined with  resistance to price  increases,
         caused  reductions in their margins of 9% and 11%.  Reduced maleic
         anhydride  margins resulted from  significant  increases in butane
         costs.

         VALVOLINE

         Current  Quarter - For the quarter ended June 30, 2001,  Valvoline
         reported operating income of $22 million,  compared to $20 million
         for the  June  2000  quarter.  The  increase  primarily  reflected
         improved results from the core North American lubricants business,
         higher R-12 automotive refrigerant sales and improved profits from
         Eagle One.  Partially  offsetting these improvements were declines
         in international  operations,  Valvoline Instant Oil Change (VIOC)
         and the antifreeze business.

         Year-to-Date - For the nine months ended June 30, 2001,  Valvoline
         reported operating income of $51 million,  compared to $54 million
         for the same  period  of 2000.  The  decline  reflected  continued
         margin  compression in the antifreeze  business and lower sales of
         R-12  automotive  refrigerant.  R-12  sales  decreased  because of
         cooler weather conditions earlier in the year, but earnings are on
         schedule to achieve the  previously  projected $14 million  target
         for the year.  International operations reflected reduced earnings
         from European, Asian and Australian affiliates. Earnings from VIOC
         were down reflecting  reduced car counts,  as well as gains on the
         sale of certain service  centers  reported in last year's results.
         These declines were partially  offset by  improvements in the core
         North American lubricants business and Eagle One.


                                    13


<PAGE>

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

         REFINING AND MARKETING

         Current  Quarter - Operating  income from  Refining and  Marketing
         amounted to a record $302  million for the quarter  ended June 30,
         2001,  compared to $184  million  for the  quarter  ended June 30,
         2000. Such results include  Ashland's 38% share of MAP's earnings,
         amortization of Ashland's excess investment in MAP, and results of
         certain  retained  refining  and  marketing  activities.  Refining
         margins  began  to  increase  in  April,  reflecting  low  product
         inventories,  the changeover to summer product  specifications and
         seasonal increases in demand. As refining margins rose, eventually
         peaking  at  very  robust  levels  in  May,   refiners   increased
         production  to meet  demand and benefit  from the strong  margins.
         Simultaneously,  demand  moderated in response to higher  consumer
         prices  and  inventories  increased.  By the  end of the  quarter,
         refining  margins  had fallen back to more  normal  levels.  MAP's
         overall  refining and wholesale  marketing  margin for the quarter
         increased  $3.01  per  barrel,   accounting  for  a  $126  million
         improvement in Ashland's operating income.  However,  gasoline and
         distillate  gross margins for MAP's  Speedway  SuperAmerica  (SSA)
         retail  marketing  group declined 0.71 cents per gallon,  reducing
         Ashland's operating income by $5 million.

         Year-to-Date  -  Operating  income  from  Refining  and  Marketing
         amounted to a record $506  million for the nine months  ended June
         30, 2001,  compared to $262 million for the nine months ended June
         30, 2000. The increase reflects strong refining margins, partially
         offset by  compressed  retail  margins  and higher  operating  and
         administrative expenses, including costs related to MAP's variable
         pay plan. MAP's refining and wholesale  marketing margin increased
         $2.48  per  barrel,  accounting  for a $323  million  increase  in
         Ashland's  operating  income.  SSA's gasoline and distillate gross
         margin  declined  0.91  cents  per  gallon,   reducing   Ashland's
         operating  income  by  $16  million,  while  a  decline  in  SSA's
         merchandise  margins accounted for a $3 million  reduction.  These
         reductions were partially  offset by a gain on the sale of 134 SSA
         non-core  stores,  which added $7 million to  Ashland's  operating
         income.

         CORPORATE

         Corporate  expenses  amounted to $24 million for the quarter ended
         June 30, 2001,  compared to $20 million for the quarter ended June
         30, 2000.  Corporate  expenses on a year-to-date basis amounted to
         $61  million in the 2001  period,  compared  to $50 million in the
         2000  period.  The higher  level of  expenses  reflects  increased
         deferred   and   incentive   compensation   costs,   as   well  as
         environmental  insurance  recoveries  included  in the prior  year
         periods.

         NET INTEREST AND OTHER FINANCIAL COSTS

         For the  quarter  ended  June 30,  2001,  net  interest  and other
         financial  costs totaled $42 million,  compared to $50 million for
         the June 2000 quarter.  For the year-to-date  period, net interest
         and other  financial  costs amounted to $132 million,  compared to
         $138  million  for the 2000  period.  Interest  costs were down $7
         million  for the  quarter  and $19  million  for the nine  months,
         reflecting  reduced  debt  levels  and  lower  interest  rates  on
         floating-rate obligations. Interest income was down $8 million for
         the nine months,  reflecting interest income in the 2000 period on
         the note receivable from Industri Kapital that was received in the
         series of transactions associated with the acquisition of the U.S.
         construction  operations of Superfos a/s.  Other  financial  costs
         were down $1 million  for the  quarter  and up $5 million  for the
         nine months,  reflecting  costs  associated  with the sale of $150
         million of receivables under a program initiated in March 2000.


                                    14


<PAGE>




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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

         DISCONTINUED OPERATIONS

         As described  in Note B to the  Condensed  Consolidated  Financial
         Statements,  Ashland distributed to Ashland shareholders the major
         portion  of its  common  shares  of Arch Coal in March  2000.  The
         spin-off of the shares  resulted  in no gain or loss,  but Ashland
         incurred $3 million in after-tax costs related to the transaction.
         In February 2001,  Ashland sold its remaining  shares in Arch Coal
         resulting  in an after-tax  gain of $33 million.  Results for Arch
         Coal through March 2000 are shown as discontinued operations.

         Year-to-Date  - Results for the nine months  ended June 30,  2001,
         included  after-tax  accruals  of $8 million for  estimated  costs
         associated with other operations previously discontinued.  For the
         nine months  ended June 30, 2000,  Ashland  recorded a net loss of
         $215 million from its investment in Arch Coal. The loss included a
         $203  million net charge in the December  1999 quarter  related to
         asset impairment and  restructuring  costs. The charge was largely
         due to the  write-down  of assets at Arch's  Dal-Tex  and Hobet 21
         mining operations and certain coal reserves in central Appalachia.

         EXTRAORDINARY LOSS

         During the nine months ended June 30, 2000,  Ashland  refunded $36
         million  of  pollution  control  revenue  bonds and  prepaid  $332
         million of the $600  million  floating-rate  debt used to fund the
         acquisition of the U.S.  construction  operations of Superfos a/s.
         The write-off of unamortized deferred debt issuance expenses and a
         redemption  premium  on  the  bonds  resulted  in  pretax  charges
         totaling  $4  million  which,  net of income  tax  benefits  of $1
         million,  resulted in an extraordinary loss on early retirement of
         debt of $3 million.

         CUMULATIVE EFFECT OF ACCOUNTING CHANGE

         As described  in Note A to the  Condensed  Consolidated  Financial
         Statements,  in the  March  2001  quarter  Ashland  recognized  an
         after-tax loss of $4 million from MAP's adoption of FAS 133.

FINANCIAL POSITION

         LIQUIDITY

         Ashland's  financial position has enabled it to obtain capital for
         its financing  needs and to maintain  investment  grade ratings on
         its  senior  debt of Baa2 from  Moody's  and BBB from  Standard  &
         Poor's.  Ashland has two revolving credit agreements providing for
         up to $425 million in borrowings,  neither of which has been used.
         Under a shelf  registration,  Ashland can also issue an additional
         $300  million  in  debt  and  equity   securities   should  future
         opportunities  or needs arise.  Ashland  intends to increase  this
         capacity to $600  million  under a new shelf  registration  in the
         September 2001 quarter. Furthermore, Ashland has access to various
         uncommitted  lines of credit and commercial  paper markets,  under
         which $55 million of short-term  borrowings  were  outstanding  at
         June 30, 2001.  While the revolving  credit  agreements  contain a
         covenant limiting new borrowings, Ashland could have increased its
         borrowings (including any borrowings under these agreements) by up
         to  $1.3  billion  at  June  30,  2001.   Additional   permissible
         borrowings  are  increased  (decreased)  by 150% of any  increases
         (decreases) in Ashland's stockholders' equity.


                                    15


<PAGE>




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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

         LIQUIDITY (continued)

         Cash flows from continuing operations, a major source of Ashland's
         liquidity, amounted to $432 million for the nine months ended June
         30, 2001,  compared to $195 million for the nine months ended June
         30,  2000.  The  increase   primarily   reflects   increased  cash
         distributions  from MAP ($451  million in 2001,  compared  to $141
         million in 2000).  Ashland's cash flows from continuing operations
         exceeded its capital  requirements for net property  additions and
         dividends by $226 million for the nine months ended June 30, 2001.


         Operating  working capital  (accounts  receivable and inventories,
         less trade and other payables) at June 30, 2001, was $386 million,
         compared to $401 million at September  30, 2000,  and $493 million
         at June 30,  2000.  Liquid  assets  (cash,  cash  equivalents  and
         accounts  receivable)  amounted to 87% of current  liabilities  at
         June 30, 2001,  compared to 77% at September 30, 2000,  and 67% at
         June 30, 2000. Ashland's working capital is affected by its use of
         the LIFO method of inventory  valuation,  which valued inventories
         $73 million below their replacement costs at June 30, 2001.

         CAPITAL RESOURCES

         For the nine  months  ended  June  30,  2001,  property  additions
         amounted to $144  million,  compared to $161  million for the same
         period last year.  Property  additions and cash  dividends for the
         remainder  of fiscal  2001 are  estimated  at $60  million and $19
         million.  At June 30,  2001,  Ashland had  remaining  authority to
         purchase  2.1  million  shares  of its  common  stock  in the open
         market.  The number of shares ultimately  purchased and the prices
         Ashland  will pay for its stock are subject to periodic  review by
         management. Ashland anticipates meeting its remaining 2001 capital
         requirements for property additions,  dividends and scheduled debt
         repayments of $3 million from internally generated funds. However,
         external  financing  may be  necessary  to  provide  funds  for or
         purchases of common stock.

         At June 30,  2001,  Ashland's  debt level  amounted to $2 billion,
         compared to $2.2 billion at September 30, 2000.  Debt as a percent
         of capital  employed was 48% at June 30, 2001,  compared to 53% at
         the end of fiscal 2000. At June 30, 2001,  Ashland's debt included
         $194 million of floating-rate  obligations,  including $55 million
         of short-term  borrowings and $139 million of long-term  debt. The
         interest rates on $60 million of fixed-rate debt were converted to
         floating rates through interest rate swap agreements. In addition,
         Ashland's costs under its sale of receivables  program and various
         operating leases are based on the floating-rate  interest costs on
         $255 million of third-party debt underlying those transactions. As
         a result,  Ashland  was  exposed  to  fluctuations  in  short-term
         interest rates on $509 million of interest-bearing  obligations at
         June 30, 2001.

OUTLOOK

         Looking forward,  Ashland expects to report strong results for the
         fiscal year ending September 30, 2001. Refining and marketing will
         be the major  contributor to operating  profit for the year,  more
         than  offsetting  the adverse  impact of the  sluggish  economy on
         Ashland's  wholly owned  businesses whose combined results will be
         below  last  year.   As  for  the   expected   September   quarter
         performance,  refining  margins have declined  significantly  from
         their peak in May.  However,  supply and demand  fundamentals  for
         Midwest  petroleum  markets remain healthy and retail margins have
         improved , partially offsetting the weakness in wholesale margins.
         Valvoline remains on target and earnings from APAC are expected to
         be roughly equal to the comparable  period last year. The economic
         slowdown continues to impede the performance of Ashland's chemical
         operations, and fourth-quarter results from specialty chemical and
         distribution  operations are expected to fall significantly  below
         the September 2000 quarter.


                                    16


<PAGE>

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

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 ever increasing  regulations,  Ashland
         believes  that  expenditures  for  environmental  compliance  will
         continue to have a significant effect on its businesses.  Although
         it cannot  accurately  predict how such trends will affect  future
         operations   and  earnings,   Ashland   believes  the  nature  and
         significance of its ongoing compliance costs will be comparable to
         those of its  competitors.  For  information  on certain  specific
         environmental  proceedings  and  investigations,  see  the  "Legal
         Proceedings" section of this Form 10-Q. For information  regarding
         environmental  reserves,  see Note F to the Condensed Consolidated
         Financial Statements.

         Environmental   reserves   are   subject  to   numerous   inherent
         uncertainties  that 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. Reserves are
         regularly  adjusted as  environmental  assessments and remediation
         efforts proceed.

         While the ultimate  costs are not  predictable  with assurance and
         could be material,  Ashland  does not believe  that any  liability
         resulting   from   environmental   matters,   after   taking  into
         consideration  its  insurance  coverage,  contributions  by  other
         responsible  parties and amounts already provided for, will have a
         material  adverse effect on its consolidated  financial  position,
         cash   flows  or   liquidity.   Ashland's   exposure   to  adverse
         developments with respect to any individual matter is not expected
         to be  material,  and these  matters are in various  stages of the
         ongoing  assessment  process.  Although  such matters could have a
         material  effect on results of  operations  if a series of adverse
         developments  occurs  in a  particular  quarter  or  fiscal  year,
         Ashland believes that the chance of such developments occurring in
         the same quarter or fiscal year is remote.

CONVERSION TO THE EURO

         On January 1,  1999,  certain  member  countries  of the  European
         Economic and Monetary  Union (EMU)  established  fixed  conversion
         rates  between  their  existing  currencies  and the EMU's  common
         currency,  the Euro.  Entities in the participating  countries can
         conduct  their  business   operations  in  either  their  existing
         currencies or the Euro until  December 31, 2001.  After that date,
         all  non-cash   transactions   will  be  conducted  in  Euros  and
         circulation  of Euro  notes and coins for cash  transactions  will
         commence. National notes and coins will be withdrawn no later than
         June 30, 2002.

         Ashland conducts business in most of the  participating  countries
         and is addressing  the issues  associated  with the Euro. The more
         important issues include converting information technology systems
         and processing  accounting and tax records.  Based on the progress
         to date, Ashland believes that the use of the Euro will not have a
         significant  impact on the  manner in which it does  business  and
         processes its accounting records. Accordingly, the use of the Euro
         is  not   expected  to  have  a  material   effect  on   Ashland's
         consolidated financial position, results of operations, cash flows
         or liquidity.


                                    17


<PAGE>




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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

FORWARD LOOKING STATEMENTS

         Management's    Discussion    and   Analysis    (MD&A)    contains
         forward-looking  statements,  within the meaning of Section 27A of
         the  Securities  Act of 1933  and  Section  21E of the  Securities
         Exchange Act of 1934,  with respect to various  information in the
         Results of Operations,  Capital Resources,  Outlook and Conversion
         to the Euro  sections  of this  MD&A.  Estimates  as to  operating
         performance  and earnings are based upon a number of  assumptions,
         including  those  mentioned in MD&A. Such estimates are also based
         upon internal  forecasts and analyses of current and future market
         conditions and trends,  management plans and strategies,  weather,
         operating  efficiencies and economic  conditions,  such as prices,
         supply  and  demand and cost of raw  materials.  Although  Ashland
         believes its expectations are based on reasonable assumptions,  it
         cannot assure the expectations reflected in MD&A will be achieved.
         This  forward-looking  information  may prove to be inaccurate and
         actual results may differ  significantly from those anticipated if
         one or more of the underlying  assumptions or expectations  proves
         to  be  inaccurate  or  is  unrealized  or  if  other   unexpected
         conditions  or events  occur.  Other  factors and risks  affecting
         Ashland are contained in Risks and  Uncertainties in Note A to the
         Consolidated  Financial Statements in Ashland's 2000 Annual Report
         and in Ashland's Form 10-K for the fiscal year ended September 30,
         2000.

                                    18


<PAGE>

                          PART II - OTHER INFORMATION

     ITEM 1.  LEGAL PROCEEDINGS

         Environmental  Proceedings - (1) As of June 30, 2001,  Ashland has
         been identified as a "potentially responsible party" ("PRP") under
         Superfund or similar  state laws for  potential  joint and several
         liability for clean-up costs in connection  with alleged  releases
         of  hazardous  substances  associated  with 95 waste  treatment or
         disposal  sites.  These  sites are  currently  subject  to ongoing
         investigation  and remedial  activities,  overseen by the EPA or a
         state  agency,  in which Ashland is typically  participating  as a
         member  of a PRP  group.  Generally,  the  type of  relief  sought
         includes  remediation  of  contaminated  soil and/or  groundwater,
         reimbursement  for past costs of site clean-up and  administrative
         oversight, and/or long-term monitoring of environmental conditions
         at the sites.  While the ultimate costs are not  predictable  with
         assurance and could be material, based on its experience with site
         remediation,  its analysis of the specific hazardous substances at
         issue,  the  existence  of other  financially  viable PRPs and its
         current estimates of investigatory,  clean-up and monitoring costs
         at each site, Ashland does not believe that any liability at these
         sites,  either  individually  or in  the  aggregate,  will  have a
         material  adverse  effect  on  Ashland's   consolidated  financial
         position,  cash  flow or  liquidity.  For  additional  information
         regarding  environmental  matters and reserves,  see  Management's
         Discussion and Analysis - Environmental  Matters and Note F to the
         Condensed Consolidated Financial Statements.

         (2) As a result of a United States Environmental Protection Agency
         ("EPA")  enforcement  initiative  wherein  information,  including
         financial data, permit status and operational results, relating to
         construction  projects  conducted within refineries since 1980 are
         reviewed for compliance with specific  provisions of the Clean Air
         Act,  Marathon Ashland  Petroleum LLC ("MAP"),  as well as several
         other refiners, entered into negotiations with EPA and the Justice
         Department.  On May 11, 2001, MAP executed a settlement  agreement
         with  the  EPA   which   includes   MAP's   commitment   to  spend
         approximately $270 million in environmental  capital  expenditures
         and  improvements to MAP's  refineries to install specific control
         technologies over a period of eight years that are consistent with
         MAP's  current  capital   spending   plans.  In  addition,   MAP's
         settlement  provides for payment of a civil  penalty in the amount
         of $3.8 million and the  performance of $8 million in supplemental
         environmental  projects for which  Ashland has agreed to reimburse
         MAP a total of $1 million.  Approval of the consent  decree by the
         court is expected in the third quarter of calendar 2001.

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         3.2      By-Laws of Ashland, as amended to June 21, 2001.

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

(b)      Reports on Form 8-K

         A report on Form 8-K was filed on April 25, 2001 to report
         Ashland's 2001 second quarter results.

                                    19

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of the  Securities  Exchange Act of
         1934,  the  Registrant has duly caused this report to be signed on
         its behalf by the undersigned thereunto duly authorized.


                                                 Ashland Inc.
                                      ----------------------------------
                                                (Registrant)



         Date:  August 10, 2001            /s/ Kenneth L. Aulen
                                      ----------------------------------
                                      Kenneth L. Aulen
                                      Administrative Vice President and
                                      Controller
                                      (Chief Accounting Officer)


        Date:  August 10,  2001           /s/ David L. Hausrath
                                      ----------------------------------
                                      David L. Hausrath
                                      Vice President and General Counsel


                                    20


<PAGE>
                                 EXHIBIT INDEX


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

          3.2              By-Laws of Ashland, as amended to June 21, 2001.

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


