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



                       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, 2003

                          Commission file number 1-2918



                                  ASHLAND INC.
                            (a Kentucky corporation)



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



                        Telephone Number: (859) 815-3333



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

     Indicate by check mark whether the Registrant is an accelerated  filer
(as defined in Rule 12b-2 of the Act). Yes[x] No

     At July 31, 2003, there were 68,251,752 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.


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<PAGE>




                       PART I - FINANCIAL INFORMATION
                       ------------------------------
<TABLE>
<CAPTION>
ITEM 1.  FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------------------------------

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)                                                  2003         2002           2003         2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>           <C>           <C>
REVENUES
      Sales and operating revenues                                              $   2,006    $   1,997     $    5,388    $   5,315
      Equity income                                                                   104           80            169          141
      Other income                                                                     15            7             43           35
                                                                                ----------   ----------    -----------   ----------
                                                                                    2,125        2,084          5,600        5,491
COSTS AND EXPENSES
      Cost of sales and operating expenses                                          1,648        1,602          4,430        4,285
      Selling, general and administrative expenses                                    290          298            870          828
      Depreciation, depletion and amortization                                         49           52            153          153
                                                                                ----------   ----------    -----------   ----------
                                                                                    1,987        1,952          5,453        5,266
                                                                                ----------   ----------    -----------   ----------
OPERATING INCOME                                                                      138          132            147          225
      Net interest and other financial costs                                          (31)         (33)           (97)        (103)
                                                                                ----------   ----------    -----------   ----------
INCOME FROM CONTINUING OPERATIONS
      BEFORE INCOME TAXES                                                             107           99             50          122
      Income taxes                                                                    (36)         (38)           (17)         (47)
                                                                                ----------   ----------    -----------   ----------
INCOME FROM CONTINUING OPERATIONS                                                      71           61             33           75
      Results from discontinued operations (net of income taxes) - Note B              (1)           4            (94)           7
                                                                                ----------   ----------    -----------   ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
      OF ACCOUNTING CHANGE                                                             70           65            (61)          82
      Cumulative effect of accounting change (net of income taxes) - Note C             -            -              -          (12)
                                                                                ----------   ----------    -----------   ----------
NET INCOME (LOSS)                                                               $      70    $      65     $      (61)   $      70
                                                                                ==========   ==========    ===========   ==========

BASIC EARNINGS (LOSS) PER SHARE - Note A
      Income from continuing operations                                         $    1.04    $     .88     $      .48    $    1.08
      Results from discontinued operations                                           (.02)         .06          (1.38)         .10
      Cumulative effect of accounting change                                            -            -              -         (.16)
                                                                                ----------   ----------    -----------   ----------
      Net income (loss)                                                         $    1.02    $     .94     $     (.90)   $    1.02
                                                                                ==========   ==========    ===========   ==========

DILUTED EARNINGS (LOSS) PER SHARE - Note A
      Income from continuing operations                                         $    1.03    $     .87     $      .48    $    1.06
      Results from discontinued operations                                           (.02)         .06          (1.37)         .10
      Cumulative effect of accounting change                                            -            -              -         (.16)
                                                                                ----------   ----------    -----------   ----------
      Net income (loss)                                                         $    1.01    $     .93     $     (.89)   $    1.00
                                                                                ==========   ==========    ===========   ==========

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)                                                                            2003               2002              2002
------------------------------------------------------------------------------------------------------------------------------------

                                       ASSETS
                                       ------
<S>                                                                             <C>                <C>               <C>
CURRENT ASSETS
      Cash and cash equivalents                                                 $         112      $          90     $         101
      Accounts receivable                                                               1,085              1,090             1,089
      Allowance for doubtful accounts                                                     (40)               (34)              (36)
      Inventories - Note A                                                                512                456               469
      Deferred income taxes                                                                98                119               130
      Current assets of discontinued operations held for sale                             198                211                60
      Other current assets                                                                186                139               128
                                                                                --------------     --------------    --------------
                                                                                        2,151              2,071             1,941
INVESTMENTS AND OTHER ASSETS
      Investment in Marathon Ashland Petroleum LLC (MAP)                                2,401              2,350             2,406
      Goodwill                                                                            519                510               507
      Asbestos insurance receivable (noncurrent portion)                                  398                171               168
      Noncurrent assets of discontinued operations held for sale                            -                  -               146
      Other noncurrent assets                                                             345                329               380
                                                                                --------------     --------------    --------------
                                                                                        3,663              3,360             3,607
PROPERTY, PLANT AND EQUIPMENT
      Cost                                                                              2,949              2,920             2,912
      Accumulated depreciation, depletion and amortization                             (1,725)            (1,629)           (1,603)
                                                                                --------------     --------------    --------------
                                                                                        1,224              1,291             1,309
                                                                                --------------     --------------    --------------

                                                                                $       7,038      $       6,722     $       6,857
                                                                                ==============     ==============    ==============

                        LIABILITIES AND STOCKHOLDERS' EQUITY
                        ------------------------------------

CURRENT LIABILITIES
      Debt due within one year                                                  $         296      $         201     $         302
      Trade and other payables                                                          1,235              1,256             1,225
      Current liabilities of discontinued operations held for sale                         28                 39                23
      Income taxes                                                                         16                 24                53
                                                                                --------------     --------------    --------------
                                                                                        1,575              1,520             1,603
NONCURRENT LIABILITIES
      Long-term debt (less current portion)                                             1,564              1,606             1,600
      Employee benefit obligations                                                        493                509               400
      Deferred income taxes                                                               201                246               271
      Reserves of captive insurance companies                                             184                166               182
      Asbestos litigation reserve (noncurrent portion)                                    535                152               148
      Noncurrent liabilities of discontinued operations held for sale                       -                  -                13
      Other long-term liabilities and deferred credits                                    346                350               378
      Commitments and contingencies - Notes E and F
                                                                                --------------     --------------    --------------
                                                                                        3,323              3,029             2,992

COMMON STOCKHOLDERS' EQUITY                                                             2,140              2,173             2,262
                                                                                --------------     --------------    --------------
                                                                                $       7,038      $       6,722     $       6,857
                                                                                ==============     ==============    ==============

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


                                       3

<PAGE>
<TABLE>
<CAPTION>
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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, 2001                 $          69     $         363     $       1,920      $        (126)     $       2,226
      Total comprehensive income (1)                                                      70                 18                 88
      Cash dividends                                                                     (57)                                  (57)
      Issued common stock under
        stock incentive plans                                           16                                                      16
      Repurchase of common stock                                       (11)                                                    (11)
                                           --------------    --------------    --------------     --------------     --------------
BALANCE AT JUNE 30, 2002                   $          69     $         368     $       1,933      $        (108)     $       2,262
                                           ==============    ==============    ==============     ==============     ==============



BALANCE AT OCTOBER 1, 2002                 $          68     $         338     $       1,961      $        (194)     $       2,173
      Total comprehensive income (1)                                                     (61)                76                 15
      Cash dividends                                                                     (56)                                  (56)
      Issued common stock under
        stock incentive plans                                            8                                                       8
                                           --------------    --------------    --------------     --------------     --------------
BALANCE AT JUNE 30, 2003                   $          68     $         346     $       1,844      $        (118)     $       2,140
                                           ==============    ==============    ==============     ==============     ==============


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

<TABLE>
<CAPTION>
                                                                     Three months ended                     Nine months ended
                                                                           June 30                              June 30
                                                             --------------------------------     ----------------------------------
      (In millions)                                                   2003              2002               2003               2002
      ------------------------------------------------------------------------------------------------------------------------------

      <S>                                                    <C>               <C>                <C>                <C>
      Net income (loss)                                      $          70     $          65      $         (61)     $          70
      Minimum pension liability adjustment                               -                 -                 19                  -
          Related tax expense                                            -                 -                 (7)                 -
      Unrealized translation gains                                      32                26                 64                 17
          Related tax benefit (expense)                                  -                (2)                 -                  1
                                                             --------------    --------------     --------------     --------------
      Total comprehensive income                             $         102     $          89      $          15      $          88
                                                             ==============    ==============     ==============     ==============




------------------------------------------------------------------------------------------------------------------------------------
At June 30, 2003, the accumulated other  comprehensive loss of $118 million
(after tax) was comprised of net unrealized translation gains of $1 million
and a minimum pension liability of $119 million.

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



                                       4

<PAGE>

<TABLE>
<CAPTION>
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ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Nine months ended
                                                                                                                     June 30
                                                                                                          --------------------------
(In millions)                                                                                                   2003         2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>           <C>
CASH FLOWS FROM OPERATIONS
      Income from continuing operations                                                                   $       33    $      75
      Expense (income) not affecting cash
          Depreciation, depletion and amortization                                                               153          153
          Deferred income taxes                                                                                   43         (104)
          Equity income from affiliates                                                                         (169)        (141)
          Distributions from equity affiliates                                                                   114          120
          Other items                                                                                             (1)           -
      Change in operating assets and liabilities (1)                                                             (62)         (96)
                                                                                                          -----------   ----------
                                                                                                                 111            7
CASH FLOWS FROM FINANCING
      Proceeds from issuance of common stock                                                                       1           11
      Repayment of long-term debt                                                                               (191)         (58)
      Repurchase of common stock                                                                                   -          (11)
      Increase in short-term debt                                                                                243           85
      Dividends paid                                                                                             (56)         (57)
                                                                                                          -----------   ----------
                                                                                                                  (3)         (30)
CASH FLOWS FROM INVESTMENT
      Additions to property, plant and equipment                                                                 (84)        (130)
      Purchase of operations - net of cash acquired                                                               (5)         (12)
      Proceeds from sale of operations                                                                             5            -
      Other - net                                                                                                 (6)           1
                                                                                                          -----------   ----------
                                                                                                                 (90)        (141)
                                                                                                          -----------   ----------
CASH PROVIDED (USED) BY CONTINUING OPERATIONS                                                                     18         (164)
      Cash provided by discontinued operations                                                                     4           29
                                                                                                          -----------   ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                  22         (135)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                                                   90          236
                                                                                                          -----------   ----------

CASH AND CASH EQUIVALENTS - END OF PERIOD                                                                 $      112    $     101
                                                                                                          ===========   ==========

------------------------------------------------------------------------------------------------------------------------------------
(1)   Excludes changes resulting from operations acquired or sold.

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

                                       5

<PAGE>


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

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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, as
amended,  for  the  fiscal  year  ended  September  30,  2002.  Results  of
operations  for the  periods  ended  June  30,  2003,  are not  necessarily
indicative  of results to be  expected  for the year ending  September  30,
2003.

INVENTORIES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                        June 30      September 30           June 30
(In millions)                                                              2003              2002              2002
--------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>
Chemicals and plastics                                            $         364     $         335     $         334
Construction materials                                                       82                68                82
Petroleum products                                                           75                58                55
Other products                                                               60                51                53
Supplies                                                                      5                 5                 4
Excess of replacement costs over LIFO carrying values                       (74)              (61)              (59)
                                                                  --------------    --------------    --------------
                                                                  $         512     $         456     $         469
                                                                  ==============    ==============    ==============
</TABLE>


EARNINGS PER SHARE

The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share (EPS) from continuing operations.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                    Three months ended         Nine months ended
                                                                          June 30                   June 30
                                                                  ------------------------   -----------------------
(In millions except per share data)                                    2003          2002         2003         2002
--------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>           <C>          <C>
NUMERATOR
Numerator for basic and diluted EPS - Income from
   continuing operations                                          $      71    $       61    $      33    $      75
                                                                  ==========   ===========   ==========   ==========
DENOMINATOR
Denominator for basic EPS - Weighted average
      common shares outstanding                                          68            69           68           69
Common shares issuable upon exercise of stock options                     1             1            1            1
                                                                  ----------   -----------   ----------   ----------
Denominator for diluted EPS - Adjusted weighted
      average shares and assumed conversions                             69            70           69           70
                                                                  ==========   ===========   ==========   ==========

BASIC EPS                                                         $    1.04    $      .88    $     .48    $    1.08
DILUTED EPS                                                       $    1.03    $      .87    $     .48    $    1.06

</TABLE>
PRODUCT WARRANTIES

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

                                       6

<PAGE>


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

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

NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK INCENTIVE PLANS

As of October 1, 2002,  Ashland began  expensing  employee stock options in
accordance with Financial  Accounting  Standards Board (FASB) Statement No.
123 (FAS 123),  "Accounting for Stock-Based  Compensation," and its related
amendments.  Ashland elected the modified  prospective  method of adoption,
under which  compensation costs recorded in the periods ended June 30, 2003
are the same as that which  would have been  recorded  had the  recognition
provisions  of FAS 123 been  applied  from  its  original  effective  date.
Results for prior periods have not been restated. Prior to October 1, 2002,
Ashland  accounted  for stock  options under  Accounting  Principles  Board
Opinion No. 25 (APB 25),  "Accounting  for Stock Issued to Employees,"  and
related Interpretations,  and no expense was recorded. In addition to stock
options,  Ashland  grants  nonvested  stock  awards  to key  employees  and
directors, which are expensed over their vesting period under either APB 25
or FAS 123. The following  table  illustrates  the effect on net income and
earnings per share if FAS 123 had been  applied in 2002 to all  outstanding
and unvested awards.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                        Three months ended         Nine months ended
                                                                              June 30                   June 30
                                                                      ------------------------   -----------------------
(In millions except per share data)                                        2003          2002         2003         2002
------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>           <C>          <C>
Net income (loss) as reported                                         $      70    $       65    $     (61)   $      70
Add:  Stock-based employee compensation expense included
   in reported net income, net of related tax effects                         1             -            3            -
Deduct:  Total stock-based employee compensation expense
   determined under FAS 123 for all awards, net of related
   tax effects                                                               (1)           (1)          (3)          (3)
                                                                      ----------   -----------   ----------   ----------
Pro forma net income (loss)                                           $      70    $       64    $     (61)   $      67
                                                                      ==========   ===========   ==========   ==========

Earnings (loss) per share:
      Basic - as reported                                             $    1.02    $      .94    $    (.90)   $    1.02
      Basic - pro forma                                               $    1.02    $      .92    $    (.90)   $     .97

      Diluted - as reported                                           $    1.01    $      .93    $    (.89)   $    1.00
      Diluted - pro forma                                             $    1.01    $      .92    $    (.89)   $     .96

</TABLE>
NOTE B - DISCONTINUED OPERATIONS

Ashland is subject to  liabilities  from claims  alleging  personal  injury
caused by exposure to asbestos. During the quarter ended December 31, 2002,
Ashland  increased its reserve for asbestos claims by $390 million to cover
litigation  defense and claim  settlement  costs expected to be paid during
the next ten years.  The reserve was increased by an additional $30 million
during the six months  ended June 30,  2003,  to maintain  the reserve at a
level  adequate to cover future  payments  over a rolling  10-year  period.
Because  insurance  provides  reimbursements  for most of these  costs  and
coverage-in-place  agreements  exist  with  the  insurance  companies  that
provide  substantially all of the coverage currently being accessed,  these
increases  in the  asbestos  reserve  are  expected to be offset in part by
probable  insurance  recoveries valued at $250 million.  The resulting $170
million pretax charge to income (net of deferred income tax benefits of $66
million) was reflected as an after-tax loss from discontinued operations of
$104  million in the  Statements  of  Consolidated  Income.  See Note F for
further discussion of Ashland's asbestos-related litigation.

                                       7

<PAGE>


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

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

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

NOTE B - DISCONTINUED OPERATIONS (CONTINUED)

Ashland announced on June 30, 2003, it had signed a definitive agreement to
sell the net  assets  of its  Electronic  Chemicals  business  and  certain
related   subsidiaries   to  Air  Products  in  a  transaction   valued  at
approximately  $300 million before tax.  Electronic  Chemicals is a part of
Ashland  Specialty  Chemical and provides  ultra pure  chemicals  and other
products and services to the  worldwide  semiconductor  industry.  The sale
reflects  Ashland's strategy to optimize its business mix and focus greater
attention  on  the  remaining   specialty  chemical  businesses  and  other
transportation-related  and  construction  operations  where it can achieve
strategic advantage. Ashland's after-tax proceeds will be used primarily to
reduce debt.

On July 16, 2003,  Honeywell  International  filed suit in a Delaware state
court seeking to enjoin this  transaction.  Honeywell  claims,  among other
things, that the transaction would violate the strategic alliance agreement
between Air Products and GEM Microelectronic  Materials, a joint venture of
Honeywell and Texas Ultrapure Inc. On August 11, 2003,  Teamsters Local No.
773 filed  suit in a  Pennsylvania  federal  court  seeking  to enjoin  the
transaction,   claiming  it  violates  a  collective  bargaining  agreement
concerning  the  Electronic  Chemicals  manufacturing  facility  in Easton,
Pennsylvania.  Ashland  expects the  transaction to be completed,  although
these legal  proceedings may delay the projected closing date of August 29,
2003.

Components of amounts  reflected in the income and cash flow statements and
balance  sheets  related  to  the  discontinued  operations  of  Electronic
Chemicals are presented in the following  table. All assets and liabilities
of that business are classified as current  starting with the September 30,
2002 balance sheet.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                     Three months ended           Nine months ended
                                                                          June 30                      June 30
                                                                   -----------------------     -------------------------
(In millions)                                                           2003         2002            2003          2002
------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>            <C>           <C>
INCOME STATEMENT DATA
Revenues                                                           $      56    $      56      $      163    $      157
Costs and expenses                                                       (51)         (51)           (151)         (149)
                                                                   ----------   ----------     -----------   -----------
Operating income                                                           5            5              12             8
Income taxes                                                              (1)          (1)             (2)           (1)
                                                                   ----------   ----------     -----------   -----------
Results from discontinued operations                               $       4    $       4      $       10    $        7
                                                                   ==========   ==========     ===========   ===========
CASH FLOW DATA
Cash flows from operations                                                                     $       15    $       13
Cash flows from investments                                                                            (3)           (6)
                                                                                               -----------   -----------
Cash provided by discontinued operations                                                       $       12    $        7
                                                                                               ===========   ===========


                                                                                  June 30    September 30       June 30
                                                                                     2003            2002          2002
                                                                                ----------------------------------------
BALANCE SHEET DATA
Current assets of discontinued operations held for sale
      Current assets                                                            $      52      $       62    $       60
      Investments and other assets                                                     26              23             -
      Property, plant and equipment - net                                             120             126             -
Noncurrent assets of discontinued operations held for sale
      Investments and other assets                                                      -               -            23
      Property, plant and equipment - net                                               -               -           123
Current liabilities of discontinued operations held for sale
      Current liabilities                                                              15              27            23
      Noncurrent liabilities                                                           13              12             -
Noncurrent liabilities of discontinued operations held for sale                         -               -            13
</TABLE>

                                       8

<PAGE>


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

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

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

NOTE C - ACCOUNTING CHANGE - GOODWILL

As of October 1, 2001,  Ashland  adopted FASB  Statement No. 142 (FAS 142),
"Goodwill  and  Other  Intangible  Assets."  Under  FAS 142,  goodwill  and
intangible  assets with  indefinite  lives are no longer  amortized but are
subject to annual impairment tests. As a result of the adoption of FAS 142,
it was determined that the goodwill of Ashland  Distribution  was impaired.
Accordingly,  an impairment  loss of $14 million ($12 million net of income
taxes) was  recorded  as a  cumulative  effect of  accounting  change as of
October 1, 2001.

NOTE D - UNCONSOLIDATED AFFILIATES

Under  Rule  3-09  of  Regulation  S-X,  Ashland  filed  audited  financial
statements  for  Marathon  Ashland  Petroleum  LLC (MAP) for the year ended
December 31, 2002,  on a Form 10-K/A on March 20,  2003.  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 of
MAP  reflected  below 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)                                                            2003          2002          2003          2002
------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>          <C>           <C>           <C>
Sales and operating revenues                                        $   8,005    $    6,775    $   23,338    $   17,823
Income from operations                                                    281           217           457           398
Net income                                                                276           214           446           391
Ashland's equity income                                                   101            78           157           137

</TABLE>
NOTE E - LEASES AND OTHER COMMITMENTS

LEASES

Under various operating  leases,  Ashland has guaranteed the residual value
of the  underlying  property  that had an  unamortized  cost  totaling $144
million at June 30,  2003.  If Ashland had  cancelled  those leases at that
date, its maximum  obligations  under the residual value  guarantees  would
have  amounted  to $126  million.  Ashland  does not  expect  to incur  any
significant charge to earnings under these guarantees, $78 million of which
relates to real estate.  These lease  agreements are with  unrelated  third
party  lessors  and  Ashland  has  no  additional   contractual   or  other
commitments to any party relative to these leases.

FASB  Interpretation  No. 46 (FIN 46),  "Consolidation of Variable Interest
Entities,"  was issued in January 2003.  Beginning July 1, 2003, one of the
lessor  entities will be  consolidated  in Ashland's  financial  statements
under  FIN 46,  resulting  in an  after-tax  charge of $5  million  for the
cumulative effect of this accounting change.  Property, plant and equipment
will  increase  by $27  million  and  long-term  debt will  increase by $35
million as a result of the consolidation of the lessor entity.  The ongoing
impact of the consolidation will not have a significant effect on Ashland's
earnings.


                                       9

<PAGE>


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

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

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

NOTE E - LEASES AND OTHER COMMITMENTS (CONTINUED)

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

OTHER COMMITMENTS

Ashland  has  guaranteed  38% of  MAP's  payments  for  certain  crude  oil
purchases,  up to a maximum  guarantee  of $95  million.  At June 30, 2003,
Ashland's  contingent  liability  under  this  guarantee  amounted  to  $78
million.  Although  Ashland  has not made and does not  expect  to make any
payments  under  this  guarantee,  it has  recorded  the fair value of this
guarantee obligation, which is not significant.

NOTE F - LITIGATION, CLAIMS AND CONTINGENCIES

ASBESTOS-RELATED LITIGATION

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

A  summary  of  asbestos  claims  activity  follows.   Because  claims  are
frequently  filed and  settled  in large  groups,  the amount and timing of
settlements,   as  well  as  the  number  of  open  claims,  can  fluctuate
significantly from period to period.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                 Nine months ended
                                                           June 30                Years ended September 30
                                            -----------------------    ------------------------------------------------
(In thousands)                                                2003             2002              2001             2000
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                         <C>              <C>              <C>
Open claims - beginning of period                              160              167               118               93
New claims filed                                                58               45                52               37
Claims settled                                                  (5)             (15)               (2)              (9)
Claims dismissed                                               (17)             (37)               (1)              (3)
                                            -----------------------    -------------     -------------    -------------
Open claims - end of period                                    196              160               167              118
                                            =======================    =============     =============    =============

</TABLE>
Since  October 1, 1999,  Riley has been  dismissed as a defendant in 65% of
the  resolved  claims.  Amounts  spent  on  litigation  defense  and  claim
settlements  totaled $36 million for the nine months  ended June 30,  2003,
compared to annual  costs of $38  million in 2002,  $15 million in 2001 and
$11 million in 2000.


                                       10

<PAGE>

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

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

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

NOTE F - LITIGATION, CLAIMS AND CONTINGENCIES (CONTINUED)

During the  December  2002  quarter,  Ashland  increased  its  reserve  for
asbestos  claims by $390 million to cover the litigation  defense and claim
settlement costs expected to be paid during the next ten years. The reserve
was increased by an additional $30 million during the six months ended June
30,  2003,  to  maintain  the reserve at a level  adequate to cover  future
payments over a rolling  10-year  period.  Prior to December 31, 2002,  the
asbestos reserve was based on the estimated costs that would be incurred to
settle open claims.  The  estimates of future  asbestos  claims and related
costs  were  developed  with  the  assistance  of  Hamilton,  Rabinovitz  &
Alschuler,  Inc.  (HR&A),  nationally  recognized  experts  in that  field.
Reflecting the additional provisions, Ashland's reserve for asbestos claims
on an  undiscounted  basis  amounted  to $585  million  at June  30,  2003,
compared to $195 million at June 30, 2002.

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

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

Because  insurance  provides  reimbursements  for most of these  costs  and
coverage-in-place  agreements  exist  with  the  insurance  companies  that
provide  substantially  all of the coverage  currently being accessed,  the
current year increases in the asbestos reserve are expected to be offset in
part by probable insurance  recoveries valued at $250 million.  At June 30,
2003,  Ashland's  receivable for recoveries of such costs from its insurers
amounted to $423 million,  of which $33 million relates to costs previously
paid. Receivables from insurance companies amounted to $190 million at June
30, 2002.

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

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

                                       11

<PAGE>


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

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

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

NOTE F - LITIGATION, CLAIMS AND CONTINGENCIES (CONTINUED)

ENVIRONMENTAL REMEDIATION

Ashland is subject to various federal,  state and local  environmental laws
and  regulations  that  require  environmental  assessment  or  remediation
efforts (collectively  environmental remediation) at multiple locations. At
June 30, 2003,  such  locations  included  100 waste  treatment or disposal
sites where Ashland has been identified as a potentially  responsible party
under Superfund or similar state laws, approximately 130 current and former
operating  facilities  (including certain  facilities  conveyed to MAP) and
about  1,220   service   station   properties.   Ashland's   reserves   for
environmental  remediation  amounted to $167 million at June 30, 2003,  and
reflect its  estimates of the most likely costs that will be incurred  over
an extended period to remediate  identified  conditions for which the costs
are reasonably  estimable,  without regard to any  third-party  recoveries.
Engineering  studies,  probability  techniques,  historical  experience and
other  factors are used to identify and evaluate  remediation  alternatives
and  their  related  costs  in  determining  the  estimated   reserves  for
environmental remediation.

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

None of the remediation  locations is  individually  material to Ashland as
its  largest  reserve for any site is less than $10  million.  As a result,
Ashland's  exposure to adverse  developments with respect to any individual
site is not expected to be material,  and these sites are in various stages
of ongoing  remediation.  Although  environmental  remediation could have a
material   effect  on  results  of   operations  if  a  series  of  adverse
developments occur in a particular quarter or fiscal year, Ashland believes
that the  chance of such  developments  occurring  in the same  quarter  or
fiscal year is remote.

OTHER LEGAL PROCEEDINGS

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

                                       12

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT

------------------------------------------------------------------------------------------------------------------------------------
                                                                                Three months ended           Nine months ended
                                                                                      June 30                     June 30
                                                                              ------------------------    --------------------------
(In millions)                                                                      2003          2002          2003          2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>           <C>           <C>           <C>
REVENUES
    Sales and operating revenues
       APAC                                                                   $     683     $     756     $   1,615     $   1,861
       Ashland Distribution                                                         733           670         2,081         1,875
       Ashland Specialty Chemical                                                   308           290           870           809
       Valvoline                                                                    307           305           889           833
       Intersegment sales
          Ashland Distribution                                                       (6)           (6)          (16)          (15)
          Ashland Specialty Chemical                                                (19)          (18)          (50)          (47)
          Valvoline                                                                   -             -            (1)           (1)
                                                                              ----------    ----------    ----------    ----------
                                                                                  2,006         1,997         5,388         5,315
    Equity income
       APAC                                                                           2             -             6             -
       Ashland Specialty Chemical                                                     1             1             5             3
       Valvoline                                                                      -             1             1             1
       Refining and Marketing                                                       101            78           157           137
                                                                              ----------    ----------    ----------    ----------
                                                                                    104            80           169           141
    Other income
       APAC                                                                           3             2             5             8
       Ashland Distribution                                                           3             2            17            14
       Ashland Specialty Chemical                                                     3            (1)            8             2
       Valvoline                                                                      1             2             4             4
       Refining and Marketing                                                         4             -             4             2
       Corporate                                                                      1             2             5             5
                                                                              ----------    ----------    ----------    ----------
                                                                                     15             7            43            35
                                                                              ----------    ----------    ----------    ----------
                                                                              $   2,125     $   2,084     $   5,600     $   5,491
                                                                              ==========    ==========    ==========    ==========
OPERATING INCOME
    APAC                                                                      $      17     $      42     $     (39)    $      64
    Ashland Distribution                                                             11             3            27             8
    Ashland Specialty Chemical                                                        3            20            21            50
    Valvoline                                                                        24            25            56            53
    Refining and Marketing (1)                                                      100            66           145           111
    Corporate                                                                       (17)          (24)          (63)          (61)
                                                                              ----------    ----------    ----------    ----------
                                                                              $     138     $     132     $     147     $     225
                                                                              ==========    ==========    ==========    ==========


------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)      Includes Ashland's equity income from MAP, amortization related to
         Ashland's   excess   investment  in  MAP,  and  other   activities
         associated with refining and marketing.


                                       13

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

ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
OPERATING INFORMATION BY INDUSTRY SEGMENT

------------------------------------------------------------------------------------------------------------------------------------
                                                                                Three months ended           Nine months ended
                                                                                      June 30                     June 30
                                                                              ------------------------    -------------------------
                                                                                    2003         2002          2003          2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>         <C>      <C>          <C>
APAC
    Construction backlog at June 30 (millions) (1)                                                        $   1,824    $    1,797
    Hot-mix asphalt production (million tons)                                        9.8         11.4          21.0          25.3
    Aggregate production (million tons)                                              8.1          8.5          20.5          22.2
    Ready-mix concrete production (million cubic yards)                              0.6          0.6           1.5           1.5
ASHLAND DISTRIBUTION (2)
    Sales per shipping day (millions)                                         $     11.6    $    10.5     $    11.1    $     10.0
    Gross profit as a percent of sales                                              15.1%        15.6%         15.3%         16.3%
ASHLAND SPECIALTY CHEMICAL (2)
    Sales per shipping day (millions)                                         $      4.9    $     4.5     $     4.6    $      4.3
    Gross profit as a percent of sales                                              33.1%        38.0%         33.8%         37.2%
VALVOLINE
    Lubricant sales (million gallons)                                               49.2         53.7         142.2         145.5
    Premium lubricants (percent of U.S. branded volumes)                            19.8%        17.2%         18.5%         15.7%
REFINING AND MARKETING (3)
    Refinery runs (thousand barrels per day)
       Crude oil refined                                                             951          973           878           930
       Other charge and blend stocks                                                 129          134           130           156
    Refined product yields (thousand barrels per day)
       Gasoline                                                                      582          598           544           602
       Distillates                                                                   292          308           276           298
       Asphalt                                                                        76           77            69            71
       Other                                                                         138          131           123           122
                                                                               -----------   ----------    ----------   -----------
       Total                                                                       1,088        1,114         1,012         1,093
    Refined product sales (thousand barrels per day) (4)                           1,346        1,351         1,311         1,299
    Refining and wholesale marketing margin (per barrel) (5)                  $     2.94    $    2.18     $    2.21    $     1.89
    Speedway SuperAmerica (SSA)
       Retail outlets at June 30                                                                              1,802         2,081
       Gasoline and distillate sales (million gallons)                               882          911         2,608         2,679
       Gross margin - gasoline and distillates (per gallon)                   $    .1229    $   .1116     $   .1134    $    .1032
       Merchandise sales (millions) (6)                                       $      590    $     612     $   1,695    $    1,736
       Merchandise margin (as a percent of sales)                                   23.9%        25.5%         24.4%         24.5%

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)      Includes   APAC's   proportionate   share   of  the   backlog   of
         unconsolidated joint ventures.

(2)      Sales are defined as sales and operating revenues. Gross profit is
         defined as sales and  operating  revenues,  less cost of sales and
         operating expenses,  and depreciation and amortization relative to
         manufacturing assets.

(3)      Amounts represent 100% of MAP's operations,  in which Ashland owns
         a 38% interest.

(4)      Total average  daily volume of all refined  product sales to MAP's
         wholesale, branded and retail (SSA) customers.

(5)      Sales revenue less cost of refinery inputs, purchased products and
         manufacturing expenses, including depreciation.

(6)      Effective January 1, 2003, SSA adopted EITF 02-16,  "Accounting by
         a  Customer  (Including  a  Reseller)  for  Certain  Consideration
         Received from a Vendor," which requires rebates from vendors to be
         recorded as  reductions  to cost of sales.  Rebates  from  vendors
         recorded in SSA merchandise  sales for periods prior to January 1,
         2003 have not been  restated and included $38 million in the three
         months ended June 30,  2002;  $46 million in the nine months ended
         June 30, 2003;  and $129 million in the nine months ended June 30,
         2002.


                                       14

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

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

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

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

RESULTS OF OPERATIONS

Ashland  reported income from continuing  operations of $71 million for the
quarter ended June 30, 2003,  compared to $61 million for the quarter ended
June 30, 2002.  For the nine months ended June 30, 2003,  Ashland  reported
income from continuing  operations of $33 million,  compared to $75 million
for the nine months ended June 30, 2002. An analysis of operating income by
industry segment follows.

APAC

CURRENT  QUARTER - APAC  reported  operating  income of $17 million for the
June 2003 quarter,  compared to $42 million for the June 2002 quarter. APAC
continues to suffer from adverse  weather that has  significantly  hampered
construction  activity.  Twelve of the 14 states in APAC's  operating  area
experienced  much higher than normal  rainfall for the quarter,  continuing
the pattern that has persisted  throughout  the fiscal year. In addition to
hampering  the  overall  level  of  construction   activity,   the  weather
conditions   created   significant   inefficiencies   in   completing   the
construction work that APAC was still able to perform. Net construction job
revenue (total revenue less subcontract costs) decreased 11% from the prior
year period, while production of hot-mix asphalt declined 14% and aggregate
production  dropped 5%. In addition,  the cost of liquid asphalt  increased
15% compared to the June 2002 quarter.

YEAR-TO-DATE  - APAC reported an operating loss of $39 million for the nine
months ended June 30, 2003, compared to operating income of $64 million for
the nine months ended June 30, 2002. The decline  reflects the same factors
described in the current quarter  comparison.  Net construction job revenue
declined  14%,  while  production  of  hot-mix  asphalt  declined  17%  and
production  of  aggregate  dropped 8%.  Operating  expenses  included a 15%
increase in the cost of liquid  asphalt  and higher  fuel and power  costs.
Construction backlog, which consists of work awarded and funded but not yet
performed,  continues to grow and was at a record high for the June quarter
of $1.8 billion.

APAC has  completed its  strategic  reorganization,  reducing the number of
operating  units to 24 from 38 and decreasing  field  overhead  expenses by
approximately  $8 million per year. In addition,  financial shared services
were implemented for four more operating units during the quarter, bringing
to 11 the total number sharing financial  services.  This centralization of
resources,  resulting  from the  Project  PASS  business  redesign  effort,
advances APAC's competitive position as a low-cost, operationally efficient
organization.

ASHLAND DISTRIBUTION

CURRENT QUARTER - Ashland  Distribution  reported  operating  income of $11
million for the June 2003 quarter  compared to $3 million for the June 2002
quarter.  Ashland Distribution  continues to revitalize its business and to
improve   service  to  customers  by  aggressively   implementing   quality
initiatives.  Sales per shipping day  increased  10%  reflecting  increased
prices, while the gross profit percentage declined 3% reflecting higher raw
material costs.

YEAR-TO-DATE  -  Ashland  Distribution  reported  operating  income  of $27
million for the nine months ended June 30, 2003, compared to $8 million for
the same period of 2002.  Sales per shipping day increased 11% reflecting a
6% increase  in the  average  price per pound and a 5% increase in volumes.
The gross  profit  percentage  declined 6%  reflecting  higher raw material
costs. A significant portion of the profits for both periods ($6 million in
2003 and $7 million in 2002) came from litigation  settlements and gains on
asset sales.

                                       15

<PAGE>


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

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

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

ASHLAND SPECIALTY CHEMICAL

CURRENT QUARTER - Operating  income for Ashland  Specialty  Chemical was $3
million in the June 2003 quarter and included an  impairment  charge of $10
million for a maleic anhydride  production  facility in Neville Island, Pa.
These results  compared to operating income of $20 million in the June 2002
quarter.  Sales per shipping day  increased 9%  reflecting  higher  product
prices.  Although demand for durable goods dipped by a combined 2.7 percent
in April and May,  adversely  affecting sales volumes,  volumes improved in
June.  Ashland Specialty  Chemical's gross profit  percentage  declined 13%
reflecting higher raw material costs.  Composite  polymers was hardest hit,
due  to  higher  styrene  costs.  However,  margins  improved  in  June  as
previously announced price increases took effect.

YEAR-TO-DATE - Ashland Specialty  Chemical reported operating income of $21
million for the nine months  ended June 30,  2003,  compared to $50 million
for the same  period  of  2002.  The  decline  reflects  the  same  factors
described  in the  current  quarter  comparison.  Sales  per  shipping  day
increased  7%  reflecting  increased  prices.  However,  the  gross  profit
percentage declined 9% reflecting higher raw material costs, especially for
composite polymers.

VALVOLINE

CURRENT QUARTER - Valvoline  reported  operating  income of $24 million for
the June 2003  quarter  compared to $25 million for the June 2002  quarter.
Although  overall sales volumes  declined,  Valvoline  increased its market
share in a very soft market.  Premium  product  sales  volumes  increased 7
percent. Lower margins in the core lubricants business reflected higher raw
material  costs.  Valvoline  Instant  Oil Change  (VIOC) had a record  June
quarter, due in part to a 20% increase in non-oil change revenues and a 12%
increase  in premium oil  changes.  In  addition,  results  from  Valvoline
International   improved   due  to  better   volumes  in  key  markets  and
strengthening foreign currencies.

YEAR-TO-DATE - Valvoline  reported  operating income of $56 million for the
nine  months  ended June 30,  2003,  compared  to $53  million for the same
period  of 2002.  Results  from  Valvoline  International  improved  on the
strength  of  higher  earnings  in  Europe,  Asia and  Australia.  Improved
earnings from VIOC reflected an 18% increase in non-oil change revenues and
a 14%  increase in premium  oil  changes.  Results for the core  lubricants
business declined reflecting  decreased lubricant volumes and lower margins
due to higher raw material costs.

REFINING AND MARKETING

CURRENT  QUARTER - Operating  income from  Refining  and  Marketing,  which
consists  primarily of equity income from Ashland's 38% ownership  interest
in MAP,  amounted  to $100  million for the  quarter  ended June 30,  2003,
compared to $66 million for the June 2002 quarter. Equity income from MAP's
refining and wholesale marketing operations  increased $12 million.  Demand
for petroleum products was soft in the quarter due to high crude oil prices
and a weak industrial economy.  However,  MAP refineries operated well, and
MAP's refining and wholesale  marketing margin improved 76 cents per barrel
over the June 2002 quarter. This improvement was partially offset by higher
operating  and  administrative  expenses.  Equity  income from MAP's retail
operations  (Speedway  SuperAmerica  and a 50% interest in the Pilot Travel
Centers joint venture) increased $10 million, reflecting an $8 million gain
on the sale of 190  Speedway  SuperAmerica  stores  and  increased  product
margins.  The net  costs  of  Ashland's  retained  refining  and  marketing
activities declined $12 million. The June 2003 quarter included gains of $4
million on petroleum  crack-spread  futures contracts,  while the June 2002
quarter included $7 million in fines and settlement costs related to a 1997
fire at the St. Paul Park, Minnesota refinery.


                                       16

<PAGE>


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

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

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

REFINING AND MARKETING (CONTINUED)

YEAR-TO-DATE  - Operating  income from Refining and  Marketing  amounted to
$145  million for the nine  months  ended June 30,  2003,  compared to $111
million for the comparable  2002 period.  Equity income from MAP's refining
and wholesale marketing  operations  increased $7 million,  reflecting a 32
cents per barrel increase in MAP's refining and wholesale marketing margin,
partially offset by higher operating and  administrative  expenses.  Equity
income from MAP's retail  operations  increased $15 million,  while the net
costs of Ashland's retained refining and marketing  activities declined $14
million,  reflecting  the same  factors  described  in the current  quarter
comparison.

CORPORATE

Corporate  expenses  amounted to $17 million in the quarter  ended June 30,
2003,  compared  to $24  million  in the June  2002  quarter.  The  decline
reflects  the impact of  Ashland's  program  initiated  last fall to reduce
general and administrative  (G&A) costs by $25 million per year.  Corporate
expenses  on a  year-to-date  basis  amounted  to $63  million  in the 2003
period,  compared to $61 million in the 2002 period.  The increase reflects
the net effect of an $8 million  charge in the  December  2002  quarter for
severance and other transition costs related to the cost-reduction program,
the expensing of employee  stock  options which began October 1, 2002,  and
the cost savings from the G&A cost reduction program.

NET INTEREST AND OTHER FINANCIAL COSTS

For the quarter ended June 30, 2003, net interest and other financial costs
totaled $31 million, compared to $33 million for the June 2002 quarter. For
the  year-to-date,  net interest and other  financial costs amounted to $97
million in the 2003  period,  compared to $103  million in the 2002 period.
The decline  reflects the repayment of currently  maturing  long-term  debt
with lower rate short-term debt, and reduced interest rates.

DISCONTINUED OPERATIONS AND ACCOUNTING CHANGE

As  described  in  Notes B and F to the  Condensed  Consolidated  Financial
Statements,  Ashland's results from discontinued operations include charges
associated  with  estimated  future  asbestos   liabilities  less  probable
insurance  recoveries,   as  well  as  net  income  from  the  discontinued
operations  of  its  Electronic   Chemicals  business.   Such  amounts  are
summarized below.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                     Three months ended           Nine months ended
                                                                          June 30                      June 30
                                                                   -----------------------     -------------------------
(In millions)                                                           2003         2002            2003          2002
------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>            <C>           <C>
Asbestos-related charges (net of deferred income tax benefits)     $      (5)   $       -      $     (104)   $        -
Net income of Electronic Chemicals business                                4            4              10             7
                                                                   ----------   ----------     -----------   -----------
Results from discontinued operations (net of income taxes)         $      (1)   $       4      $      (94)   $        7
                                                                   ==========   ==========     ===========   ===========

</TABLE>
As described in Note C to the Condensed  Consolidated Financial Statements,
Ashland  recognized  an  impairment  loss of $12 million after income taxes
related  to the  goodwill  of  Ashland  Distribution,  as a  result  of the
adoption of FAS 142 as of October 1, 2001.

                                       17

<PAGE>


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

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

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

FINANCIAL POSITION

LIQUIDITY

Cash flows from operations, a major source of Ashland's liquidity, amounted
to $111  million for the nine months  ended June 30,  2003,  compared to $7
million for the nine months ended June 30, 2002.  Cash flows from Ashland's
wholly owned  operations  were down primarily as a result of lower earnings
from APAC. Cash distributions from MAP were also somewhat lower,  amounting
to $108  million in the 2003  period and $119  million in the 2002  period.
However,  income taxes paid by Ashland  related to MAP's earnings were $142
million  lower in the 2003 period  than in the 2002  period.  Ashland  pays
income taxes on most of its share of the taxable  earnings  reported by MAP
in the following year,  creating timing issues in Ashland's cash flows from
year to year. Ashland's capital requirements for net property additions and
dividends  exceeded cash flows from  operations by $23 million for the nine
months ended June 30, 2003.

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 $350 million in borrowings.
Under a shelf  registration,  Ashland  can also  issue an  additional  $545
million in debt and equity securities should future  opportunities or needs
arise.  While the revolving credit  agreements  contain a covenant limiting
new borrowings based on Ashland's  stockholders'  equity,  these agreements
would have  permitted an additional  $1.3 billion of borrowings at June 30,
2003. Additional  permissible  borrowings are increased (decreased) by 150%
of any increase (decrease) in stockholders' equity.

On August 7, 2003,  S&P revised  its  outlook on Ashland to  negative  from
stable, and lowered Ashland's commercial paper rating to A-3 from A-2. This
action  will  materially  restrict,  and  could  at  times  eliminate,  the
availability  of the commercial  paper market to Ashland.  S&P affirmed its
investment-grade  long-term  ratings for Ashland at BBB. On August 8, 2003,
Ashland  borrowed $100 million under its 364-day  revolving credit facility
that matures in June 2004, to repay maturing commercial paper. Ashland will
likely  utilize a portion of its $250 million  revolving  credit  facility,
which also matures in June 2004, to repay  additional  maturing  commercial
paper.  S&P's action does not trigger any  obligations or other  provisions
under Ashland's financing agreements or other contractual relationships.

At June 30,  2003,  working  capital  (excluding  debt due within one year)
amounted to $872  million,  compared to $752 million at September 30, 2002,
and $640  million at June 30,  2002.  This  comparison  is  affected by the
classification of all of the assets and liabilities of Electronic Chemicals
as current at June 30, 2003,  and  September  30, 2002.  Ashland's  working
capital is affected by its use of the LIFO method of  inventory  valuation.
That method valued inventories below their replacement costs by $74 million
at June 30,  2003,  $61 million at September  30, 2002,  and $59 million at
June  30,  2002.   Liquid  assets  (cash,  cash  equivalents  and  accounts
receivable)  amounted  to 73% of  current  liabilities  at June  30,  2003,
compared to 75% at September 30, 2002, and 72% at June 30, 2002.

CAPITAL RESOURCES

For the nine months ended June 30, 2003, property additions amounted to $84
million,  compared to $130  million for the same period last year.  Ashland
anticipates  meeting its remaining 2003 capital  requirements  for property
additions and dividends from internally generated funds.

                                    18

<PAGE>



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

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

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

CAPITAL RESOURCES (CONTINUED)

Ashland's debt level amounted to $1.9 billion at June 30, 2003, compared to
$1.8 billion at September 30, 2002, and $1.9 billion at June 30, 2002. Debt
as a  percent  of  capital  employed  amounted  to 46.5% at June 30,  2003,
compared to 45.4% at  September  30, 2002,  and 45.7% at June 30, 2002.  At
June 30,  2003,  Ashland's  debt  included  $292  million of  floating-rate
obligations,  including $253 million of short-term commercial paper and $39
million of long-term  debt,  and the interest  rates on an additional  $153
million of  fixed-rate,  medium-term  notes were  effectively  converted to
floating  rates  through  interest  rate  swap  agreements.   In  addition,
Ashland's costs under its sale of receivables program and various operating
leases are based on the  floating-rate  interest  costs on $289  million of
third-party debt underlying those  transactions.  As a result,  Ashland was
exposed to  fluctuations  in short-term  interest  rates on $734 million of
debt obligations at June 30, 2003.

ASBESTOS-RELATED LITIGATION AND ENVIRONMENTAL REMEDIATION

For a discussion of Ashland's asbestos-related litigation and environmental
remediation  matters,  see Note F to the Condensed  Consolidated  Financial
Statements.

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,
Asbestos-Related  Litigation and Environmental Remediation sections of this
MD&A. Estimates as to operating performance, earnings, and scope and effect
of  asbestos  and  environmental  liabilities  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,
cost of raw materials, and legal proceedings and claims (including asbestos
and environmental matters).  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  2002 Annual Report and in
Ashland's  Form 10-K for the  fiscal  year ended  September  30,  2002,  as
amended.  Ashland undertakes no obligation to subsequently update or revise
these forward-looking statements.

                                       19

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ashland's  market risk  exposure at June 30, 2003 is  generally  consistent
with the types and amounts of market risk exposures  presented in Ashland's
Form 10-K for the fiscal year ended September 30, 2002.

ITEM 4.  CONTROLS AND PROCEDURES

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

(b)      There were no significant  changes in Ashland's  internal  control
         over  financial  reporting,  or in other  factors,  that  occurred
         during  the  period  covered by this  quarterly  report  that have
         materially  affected,  or  are  reasonably  likely  to  materially
         affect, Ashland's internal control over financial reporting.

                                       20

<PAGE>






                           PART II - OTHER INFORMATION
--------------------------------------------------------------------------------

     ITEM 1. LEGAL PROCEEDINGS

     ENVIRONMENTAL  PROCEEDINGS  - As of June 30,  2003,  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 100 waste  treatment  or disposal  sites.  These sites are
currently  subject  to  ongoing   investigation  and  remedial  activities,
overseen by the United States  Environmental  Protection  Agency 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.  The  ultimate  costs  are  not
predictable   with   assurance.   For  additional   information   regarding
environmental   matters  and   reserves,   see  Note  F  to  the  Condensed
Consolidated Financial Statements.

     ASBESTOS-RELATED  LITIGATION - Ashland is subject to liabilities  from
claims  alleging  personal  injury  caused by  exposure  to  asbestos.  For
additional  information regarding liabilities arising from asbestos-related
litigation, see Note F to the Condensed Consolidated Financial Statements.

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

ITEM 5. OTHER INFORMATION

     On June 30,  2003,  Ashland  filed a Form 8-K  disclosing  that it had
signed a  definitive  agreement  to sell the net  assets of its  Electronic
Chemicals  business and certain related  subsidiaries  to Air Products.  On
August 11, 2003,  Teamsters Local Union No. 773 in Allentown,  Pennsylvania
("Union")  filed suit against  Ashland in the United States  District Court
for the Eastern District of Pennsylvania  based upon an alleged breach of a
collective   bargaining  agreement  between  Ashland  and  the  Union.  The
collective

                                    21

<PAGE>


bargaining  agreement  at issue  concerns  Ashland's  Electronic  Chemicals
manufacturing  facility in Easton,  Pennsylvania.  The lawsuit seeks, among
other  remedies,  a preliminary  and  permanent  injuction  preventing  the
consumation  of Air  Products'  proposed  purchase  of the  net  assets  of
Ashland's Electronic  Chemicals business and certain related  subsidiaries.
Honeywell  International  has also  filed suit in a  Delaware  state  court
seeking to enjoin this proposed transaction,  as was described in Ashland's
Form  8-K  filed  July  18,  2003.   Ashland  still  expects  the  proposed
transaction  to be completed,  although the current legal  proceedings  may
delay the projected closing date of August 29, 2003.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
         --------

10.1     Ashland Inc. Deferred Compensation Plan

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

10.3     Eleventh  Amended and  Restated  Ashland Inc.  Supplemental  Early
         Retirement Plan for Certain Employees

10.4     Ashland  Inc.  Nonqualified  Excess  Pension  Benefit  Plan - 2003
         Restatement

12       Computation of Ratio of Earnings to Fixed Charges.

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

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

32       Certificate  of James  J.  O'Brien,  Chief  Executive  Officer  of
         Ashland,  and J. Marvin Quin, Chief Financial  Officer of Ashland,
         pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, U.S.C.
         Section 1350.

(b)      Reports on Form 8-K
         -------------------

During the  quarter  ended June 30,  2003,  and  between  such date and the
filing of this Form 10-Q,  Ashland filed or furnished the following reports
on Form 8-K:

(1)      Form 8-K dated April 22, 2003 reporting  Ashland's  second quarter
         results.

(2)      Form 8-K dated May 2, 2003 containing a Regulation FD disclosure.

(3)      Form 8-K dated May 23, 2003 containing a Regulation FD disclosure.

(4)      Form  8-K  dated  June  27,  2003   containing  a  Regulation   FD
         disclosure.

(5)      Form 8-K  dated  June  30,  2003  reporting  the  execution  of an
         agreement to sell the net assets of Ashland's Electronic Chemicals
         business and certain related subsidiaries.

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

(7)      Form 8-K dated July 22, 2003  reporting  Ashland's  third  quarter
         results.

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

                                    22

<PAGE>


                                 SIGNATURE

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 13, 2003                   /s/ J. Marvin Quin
                                      ------------------------------------------
                                      J. Marvin Quin
                                      Senior Vice President and Chief Financial
                                      Officer (on behalf of the Registrant and
                                      as principal financial officer)




                               EXHIBIT INDEX



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

10.1     Ashland Inc. Deferred Compensation Plan

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

10.3     Eleventh  Amended and  Restated  Ashland Inc.  Supplemental  Early
         Retirement Plan for Certain Employees

10.4     Ashland  Inc.  Nonqualified  Excess  Pension  Benefit  Plan - 2003
         Restatement

12       Computation of Ratio of Earnings to Fixed Charges.

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

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

32       Certificate  of James  J.  O'Brien,  Chief  Executive  Officer  of
         Ashland,  and J. Marvin Quin, Chief Financial  Officer of Ashland,
         pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, U.S.C.
         Section 1350.


                                    23

<PAGE>



