2013 Value Investing Challenge Finalist

Long on AshLAnd (Ash:Us) By Daniel Lawrence, Elmrox Investment Group

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2nd Annual Value Investing Challenge Winners

Travis CockeSouthpaw Capital

Travis Cocke has over seven years of public market investment experience including one year as a portfolio manager with complete investment discretion for a portion of the public equity portfolio of a family office. Prior to co−founding Southpaw Capital LLC, he was a Portfolio Manager at Farney Management Corp., and Analyst at Ascendant Advisors LLC. Mr. Cocke joined Ascendant in 2009 as a generalist research analyst. Mr. Cocke also interned at the Texas Teachers Retirement System, a $100 billion public pension fund, in the summer of 2008, and interned at Omega Advisors, a $6+ billion long/short fund based in NYC. Mr. Cocke received a BBA in Finance from Texas A&M University.

daniel W. Lawrence Elmrox Investment Group

Daniel W. Lawrence is Managing Partner and Founder of Elmrox Investment Group (EIG). EIG is an investment partnership focused on capital preservation and superior risk-adjusted returns that looks for highly idiosyncratic, asymmetric opportunities using a concentrated approach over a multi-year horizon. Prior to founding Elmrox Investment Group in 2013, Mr. Lawrence was a Managing Director and co-founder of Talara Capital Management. Previously, Mr. Lawrence was a Senior Analyst at Citadel Investment Group. Mr. Lawrence began his career as an investment banking analyst and equity derivatives analyst for Merrill Lynch & Co. Mr. Lawrence is also Founder and Principal Owner of Elmrox Media LLC, a global content firm targeting 18 to 34 year olds. In addition, Mr. Lawrence has served on the Board of Directors of SUS since 2009. Mr. Lawrence earned a B.S. in Commerce from the McIntire School of Commerce at the University of Virginia. He has since been a guest finance lecturer at the University and participates in UVa?s Galant Center for Entrepreneurship.

david swartz Pacific West Land, LLC

David Swartz is a financial analyst at Pacific West Land, LLC. Founded in 1981, PWL is a Seattle-based real estate investment firm with more than $100 million in assets under management. David Swartz assists PWL CEO Bruce Galloway with equity investments. David Swartz has previously worked as an equity analyst and fund manager for three hedge funds. He has a B.A. in economics from U.C. Berkeley and an M.A. in economics from Yale University.

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LONG ON ASHLAND (ASH:US)

Contributer: Daniel Lawrence

Title: Founder/Managing Partner

Firm: Elmrox Investment Group

Firm Type: Hedge Fund

Location: New York, NY

Prior Employers: Citadel, Merrill Lynch.

Ticker: ASH:US

Recommendation: Long

Expected Timeframe: 6 Months to 1 Year

Country: United States

Situation: Value

Catalysts: M&A/Buyout Target, Spinoff

Market Cap: $6,670mm

Date of Recommendation: 8/01/2013

Recommendation Price: $87.44

Target Price: $120.00

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Ashland  Inc  

Elmrox  Investment  Group    

”With  good  chemistry,  great  things  (shareholder  returns)  happen”        

July  2013    

Daniel  W.  Lawrence          

©  2013  Elmrox  Investment  Group  LLC.  All  rights  reserved  

Disclaimer  The   analyses   and   conclusions   of   Elmrox   Investment   Group   LLC   (”Elmrox”)   contained   in   this   presentation   are   based   on   publicly   available   information.   Elmrox  recognizes  that  there  may  be  conMidential  information  in  the  possession  of  the  companies  discussed  in  the  presentation  that  could  lead  these  companies  to  disagree  with  Elmrox’s  conclusions.  This  presentation  is  for  general  informational  purposes  only,  is  not  complete  and  does  not  constitute  an  agreement,  offer,  a  solicitation  of  an  offer,  or  any  advice  or  recommendation  to  enter   into  or  conclude  any  transaction  or  conMirmation  thereof  (whether  on  the  terms  shown  herein  or  otherwise).  This  presentation  should  not  be  construed  as  legal,  tax,  investment,  Minancial  or  other  advice.  It  does  not  have  regard  to  the  speciMic  investment  objective,  Minancial  situation,  suitability,  or  the  particular  need  of  any  speciMic  person  who  may  receive  this  presentation,  and  should  not  be  taken  as  advice  on  the  merits  of  any  investment  decision.  The  views  expressed  in  this  presentation  represent  the  opinions  of  Elmrox,  and  are  based  on  publicly  available  information  with  respect  to  Ashland  Inc.  (the  "Issuer")  and  the  other  companies  referred  to  herein.  Certain  Minancial  information  and  data  used  herein  have  been  derived  or  obtained  from  Milings  made  with  the  Securities  and  Exchange  Commission  ("SEC")  or  other  regulatory  authorities  and  from  other  third  party  reports.    The   analyses   provided   may   include   certain   statements,   estimates   and   projections   prepared   with   respect   to,   among   other   things,   the   historical   and   anticipated  operating  performance  of  the  companies,  access  to  capital  markets  and  the  values  of  assets  and  liabilities.  Such  statements,  estimates,  and  projections  reMlect  various  assumptions  by  Elmrox  concerning  anticipated  results  that  are  inherently  subject  to  signiMicant  economic,  competitive,  and  other  uncertainties  and  contingencies  and  have  been  included  solely  for  illustrative  purposes.  No  representations,  express  or  implied,  are  made  as  to  the  accuracy  or  completeness  of  such  statements,  estimates  or  projections  or  with  respect  to  any  other  materials  herein.  Actual  results  may  vary  materially  from  the  estimates  and  projected  results  contained  herein.  Accordingly,  no  party  should  purchase  or  sell  securities  on  the  basis  of  the  information  contained  in  this  presentation.  Elmrox  expressly  disclaims  liability  on  account  of  any  party’s  reliance  on  the  information  contained  herein  with  respect  to  any  such  purchases  or  sales.    Elmrox   has   not   sought   or   obtained   consent   from   any   third   party   to   use   any   statements   or   information   indicated   herein   as   having   been   obtained   or   derived   from  statements  made  or  published  by  third  parties.  Any  such  statements  or  information  should  not  be  viewed  as  indicating  the  support  of  such  third  party  for  the  views  expressed  herein.  Elmrox  does  not  endorse  third-­‐party  estimates  or  research  which  are  used  in  this  presentation  solely  for  illustrative  purposes.  No  warranty  is  made  that  data  or  information,  whether  derived  or  obtained  from  Milings  made  with  the  SEC  or  any  other  regulatory  agency  or  from  any  third  party,  are  accurate.    Elmrox  hereby  disclaims  any  duty  to  provide  any  updates  or  changes  to  the  analyses  contained  here.      Neither  Elmrox  nor  any  of  its  afMiliates  shall  be  responsible  or  have  any  liability  for  any  misinformation  contained  in  any  third  party,  SEC  or  other  regulatory  Miling  or  third  party  report.  There  is  no  assurance  or  guarantee  with  respect  to  the  prices  at  which  any  securities  of  the  Issuer  will  trade,  and  such  securities  may  not  trade  at  prices  that  may  be  implied  herein.  The  estimates,  projections,  pro  forma  information  and  potential  impact  of  the  opportunities  identiMied  by  Elmrox  herein  are  based  on  assumptions  that  Elmrox  believes  to  be  reasonable  as  of  the  date  of  this  presentation,  but  there  can  be  no  assurance  or  guarantee  that  actual  results  or  performance  of  the  Issuer  will  not  differ,  and  such  differences  may  be  material.  This  presentation  does  not  recommend  the  purchase  or  sale  of  any  security.    Elmrox   reserves   the   right   to   change  any  of   its  opinions  expressed  herein  at   any   time  as   it  deems  appropriate.  Elmrox  disclaims  any  obligation   to  update   the  data,  information  or  opinions  contained  in  this  presentation.  

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Variant  Perception  

4  

•  Commodity  chemicals  valuation  (5x–7x  EBITDA)  does  not  reMlect  the  Company’s  transformation  to  a  specialty  chemicals  business  (comps  8x-­‐12x  EBITDA)  -  One  of  strongest  and  most  predictable  earnings  growth  proMiles  in  materials  -  Much  stronger  pricing  power  and  more  sustainable  margins  that  market  gives  credit  for  -  Much  less  cyclical  than  market  realizes  (~20%  of  sales)  -  ~80%  of  EBITDA  comes  from  competitive  advantaged,  specialty  chemical  businesses    

•  Free  cash  Mlow  generation  potential  and  amount  of  cash  that  can  be  returned  to  shareholders  is  underappreciated  •  Consensus  does  not  assume  a  turnaround  of  Water  business  under  new  management;  if  turnaround  does  not  

materialize,  Water  will  be  monetized  with  cash  proceeds  likely  returned  to  shareholders  (2013/2014)  •  Consensus  incorrectly  believes  that  Water  business  is  exposed  to  North  American  newsprint  paper  •  Current  share  price  ascribes  little  value  to  unique  and  valuable  Valvoline  asset;  Multiple  options  for  unlocking  

signiMicant  shareholder  value  including  a  tax-­‐free  spinoff  and/or  MLP  qualiMication  (2014/2015)  •  Valvoline  Instant  Oil  Change  (“VIOC”)  store  base  is  hidden  asset  where  signiMicant  incremental  value  can  be  created  

with  little  (if  any)  capex  •  Raw  material  concerns  especially  around  guar  and  oil  are  exaggerated  and  misunderstood  •  Consensus  does  not  assume  any  recovery  in  Europe  in  FYE  2014  and  FYE  2015  despite  end  market  improvements  •  Cheap  option  on  U.S.  housing  recovery  through  Performance  Materials  segment  (2013-­‐2015)  •  Free  option  on  higher  interest  rates  through  pension  •  Private  market  valuation  creates  margin  of  safety  

     

 

Misunderstood  asset  transformation  with  signi=icant  upside  and  catalysts.    

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Investment  Merits  

7  

•  Strong  Market  Positions  with  Attractive  and  Widening  Moats  -  #1  or  #2  position  in  its  global  core  chemistries  -  Leadership  positions  in  such  high  margin,  less  cyclical  en-­‐markets  as  pharmaceuticals  and  personal  care  -  Pricing  power  and  sustainable  margins  -  Extensive  IP  knowledge  -  Special  Ingredients:  #1  cellulosic  ethers  producer  and  global  leader  in  PVP  -  Water:  #1  producer  of  specialty  papermaking  chemicals  -  Performance  Materials:  Global  leader  of  unsaturated  polyester  and  vinyl  ester  resins  -  Valvoline:  Second  largest  franchised  quick-­‐lube  chain  in  the  U.S.  and  #2  in  passenger  car  motor  oil  

•  Signi=icant  Value  Proposition  for  Customers;  Focused  Growth  through  innovation  -  Highly  tailored  customer  solutions  with  broad  new  product  pipeline  -  Performance-­‐enhancing  chemistries  across  more  than  30  different  industries  -  Technology-­‐driven  sales  process  and  approach  to  meet  each  the  needs  of  each  customer  -  Broad  application  expertise  and  deep  industry  knowledge  of  both  products  and  their  applications  

•  Signi=icant  Global  Presence  and  Footprint  -  30  manufacturing  locations  and  20  technology  centers  -  Half  of  sales  outside  the  U.S.  with  signiMicant  emerging  market  middle-­‐class  exposure  -  Nearly  half  of  sales  come  outside  the  U.S.  and  approximately  20%  of  sales  come  from  the  rapidly  growing  Asia  

PaciMic  and  Latin  America  regions    

     

 

ASH  is  a  premier  global  specialty  chemical  =irm    well-­‐positioned  for  growth  and  margin  expansion.  

 

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Why  Invest  in  Specialty  Chemicals?  

9  

•  Long-­‐term  growth  

•  More  consistent,  predictable  performance  

•  Strong,  sustainable  margins  

•  SigniMicant  hurdles  for  new  entrants  

•  Technology  driven,  difMicult  to  displace    

Technology      

 

Switching  Costs    

 

Intellectual  Property  

 

High  Barriers  to  Entry  

•  Highly  tailored  products  

•  Customer-­‐intimate  technology  model  

•  Push  for  constant  innovation  

•  RequaliMication  periods  costly  and  time  consuming  

•  Products  typically  represent  small  %  of  customer’s  Minal  product  

•  High  number  of  -  Patents  -  Trade  secrets  

•  Large  degree  of  manufacturing  know-­‐how  

•  SigniMicant  amount  of  backward  integration  

•  Stand-­‐alone  plant  capital  is  $40M+  

•  Full  supply-­‐chain  replication  would  cost  $  billions  

 

Our  favorite  chemical  assets  are  ingredients  businesses:  design  and  produce  highly  formulated  (and  usually  patented)  mission-­‐critical  

ingredients  that  are  a  small  %  of  the  overall  cost  of  customer’s  product.    

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11  

ISP  Acquisition  •  In  2011,  ASH  acquired  global  specialty  chemical  =irm,  International  Specialty  Ingredients  (“ISP”),  for  $3.2bn  

-  Management  used  the  cash  proceeds  from  selling  its  low  margin  and  cyclical  Distribution  business  and  highly  attractive  debt  Minancing  to  acquire  high  growth  and  high  margin  ISP  

-  ISP  was  acquired  from  the  estate  of  the  late  Minancier  Sam  Heyman.  Heyman  had  previously  attempted  to  combine  ISP  with  Hercules  in  2002  (ASH  purchased  Hercules  in  2008)  

•  High  Quality  Asset  That  Furthered  Transformation  to  a  Leading  Specialty  Chemical  Firm  -  Manufactured  highly  specialized  chemicals  to  meet  customers’  unique  speciMications  -  Products  represent  a  small  fraction  of  customers’  overall  costs,  and  provide  high  functionality  (mission-­‐critical)  -  Had  broad  technology  portfolio  protected  by  patents,  trade  secrets  and  manufacturing  know-­‐how  -  High  capital  costs  to  replicate  manufacturing  capabilities    (signiMicant  barriers  to  entry)  -  With  EBITDA  margins  ~24%  in  FYE  2011,  the  transaction  was  immediately  accretive  

•  Signi=icantly  Upgraded  Existing  ASH  Portfolio  -  Strengthened  positions  in  a  number  of  important  high-­‐growth,  high-­‐margin  end  markets  such  as  

pharmaceuticals  and  personal  care  (hair  care,  skin  care,  oral  care)  -  Broadened  IP  portfolio  of  water-­‐soluble  polymers  and  global  R&D  and  applications  capability  -  Had  strong  pipeline  of  new  products  to  drive  growth  of  combined  business  -  Deepened  relationships  with  existing  customers  and  enhanced  penetration  of  existing  markets  

•  Signi=icant  Long-­‐Term  Cost  and  Revenue  Synergies  -  $300mm  plus  sales  synergies  by  FYE  2015  from  complementary  product  offerings  in  familiar  ASH  segments:  

food  &  beverage,  energy,  pharma,  skin  care,  oral  care,  hair  care  -  At  least  $50mm  in  cost  reductions  

Source:  Company  data.  

Transformation  Driving  Outperformance  

12  

 

Thoughtful  capital  allocation  upgraded  ASH’s  portfolio  to  higher  quality  specialty  assets  and  should  lead  to  creation  of  long-­‐term  shareholder  value.  

 

More  R&D,  New  Products    and  

Ef=icient  Operations   Improved    End  Market  Exposure,  Higher  Revenue  

Growth  

Improved  Cost  Ef=iciency,  Asset  

Utilization,  Operating  Margins  

Improved  Balance  Sheet  and  New  Investment  Opportunities  

Higher  Cash  Flow,  Increased  Returns  on  Invested  Capital  

Refreshed    Asset  Portfolio  

 Growth  and  

Margin  Improvement    

Transform  to  Specialty  Chemicals  

Competitive  Advantages  &  Moats  

13  

 

Sustainable  &  widening  moats  from  proprietary  and  patented  IP.    

ü  #1  or  #2  in  position  in  its  global,  core  chemistries  

ü  Broad  global  footprint  that  sells  into  more  than  100  countries  

ü  30  manufacturing  locations  

ü  20  technology  centers  

ü  Active  program  of  collaboration  with  academia  

ü  A  full  complement  of  testing  services  for  personal  care  product  companies  

 

Leading  Economies  of  Scale  and  Market  Share  

 

 

High  Switching  Costs      

 

High  Barriers  to  Entry    

 

ü  Extensive  relationships  with  leading  consumer  products  and  pharmaceutical  providers  

ü  Unique  technology  portfolio  highly  customized  to  meet  demanding  customer  applications  

ü  RequaliMication  periods  costly  and  time  consuming    

ü  Mission-­‐critical  products  that  typically  represent  a  small  %  of  overall  cost  of  a  customer’s  Minal  product  

ü  High  capital  costs  to  replicate  manufacturing  capabilities  

ü  Stand-­‐alone  plant  capital  is  over  $40+  million  

ü  Full  supply-­‐chain  replication  would  cost  billions  

ü  High  number  of  active  patents  and  trade  secrets  

ü  Approximately  400  scientists  positioned  globally  

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Well-­‐Positioned  Product  Portfolio  

17  

 

Bene=iciary  of  long-­‐term,  global  secular  growth  trends,    where  Ashland’s  chemicals  are  mission-­‐critical  ingredients.  

 

 

Pharmaceuticals      

Source:    Company  data.  

 

Personal  Care      

 

Emerging    Middle  Class  

 

 

Energy      

•  Aging  population  

•  Global  access  to  health  care  

•  Controlled  release  forms  (medication)  

•  Rapid  growth  of  generics  leading  to  lower  price  and  increased  availability  

•  Pharmaceutical  R&D  centers  located  worldwide  

•  Global  focus  on  anti-­‐aging  

•  Increased  global    consumer  awareness  of  UV  protection  /  suncare  

•  Male  grooming,  particularly  in  young  men  

•  Desire  for  simple,  natural  /  green  products  

•  Consumer  spending  inMluenced  by  global  middle  class  

•  Improved  product  performance  

•  Manufacturing  cost  efMiciency  

•  Environmental  /  Regulation  

•  Horizontal  and  deepwater  wells  require  2x  the  specialty  chemicals  per  rig  

•  Depressed  natural  gas  in  North  America  and  shift  from  dry–gas  to  more  liquid-­‐rich  wells  

•  Unconventional  wells,  including  shale  gas  in  North  America  

•  Environmental  /  Regulatory  

Strong  Balance  Sheet  &  Liquidity  

18  

•  Ample  cash  &  liquidity  

•  Low  cost  of  debt  

•  Very  manageable  maturity  schedule  

•  Flexibility  to  make  opportunistic  and  accretive,  bolt-­‐on  acquisitions  

•  2.0x    gross  debt  long-­‐term  target  

     

 

Improving  cash  =low  should  lead  to  rapid  de-­‐levering  through  FYE  2015.    

Source:    Company  data.  

Predictable  &  Growing  Free  Cash  Flow  

19  

•  FYE  2013  and  FYE  2014  growth  capex  of  ~$220mm  with  80%  allocated  to  Specialty  Ingredients,  given  capacity  constraints  

•  Maintenance  capex  ~$200mm  to  $220mm  per  year  

•  Tax  rate  should  fall  to  mid  20s  by  FYE  2014  from  high  20s  over  the  last  few  years  

•  Consensus  does  not  understand  the  signiMicant  decline  in  pension  cash  commitments  in  FYE  9/30/2014  and  FYE  9/30/2014  

•  Based  on  our  diligence,  ASH  should  generate  between  ~$1.2bn  to  $1.4bn  in  cumulative  free  cash  Mlow(1)  through  FYE  9/30/2015  or  approximately  ~$15  to  $17  per  share  

     

 

Cash  =low  generation  temporarily  depressed  by  growth  capex,  higher  coupon  debt,  and  higher  than  likely  corporate  tax  rate.  

 

(1)  Free  cash  Mlow  deMined  as  :  (EBITDA  –  capex  –  cash  interest  –  cash  taxes  –  environmental  payments  –  pension/OPEB)  /  (equity  market  capitalization).  

Capital  Allocation  &  Cash  Management  

20  

 

Management  has  long  history  of  thoughtful  capital    allocation  to  create  shareholder  value.  

 

•  Allocation  of  cash  to  highest-­‐return  opportunities  •  Concentrated  growth  in  Specialty  Ingredients  -  Numerous  organic  growth  opportunities  (greenMield  &  brownMield)  -  Further  expand  short-­‐  and  long-­‐term  R&D  pipeline  -  Selective  bolt-­‐on  M&A  opportunities  

•  Continue  to  tightly  manage  and  improve  working  capital    •  Return  excess  cash  via  share  repurchases  and  dividend  increases  •  Continued  to  selective  portfolio  asset  sales  (likely  the  remaining  non-­‐specialty  or  more  

cyclical  pieces)  

“We  have  taken  a  disciplined  approach  to  managing  cash.  We  have  used  it  to    make  strategic  acquisitions,  to  invest  in  organic  growth,  and  to  return  capital  to    

our  shareholders.  We  will  continue  to  look  for  ways  to  unlock  value  and    generate  signi=icant  returns  for  Ashland  shareholders.”(1)  

(1)  CEO  Jim  O’Brien,  May  15.  2013.  

21

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ASI  Drivers  (cont’d)    

25  

1b.  Nutrition    

•  Provider  of  natural  and  synthetic  additives  -  Make  foods  more  viscous  (thickening  agent)  for  baked,  

diary  and  prepared  foods  

-  Enhances  food  texture  

-  Adds  stability  

-  Increases  product  shelf  life  -  Improves  packaging  clarities  

•  Secular  Drivers:    

-  Increasing  customer  demands  for  more  convenience  

-  Health  and  wellness  

-  More  natural  ingredients  •  Growth  Opportunities:  

-  Beverages  and  bakery  

-  Natural  products  

Viscosity  

Stability  

Shelf  Life  

ClariMication  

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Water  Turnaround  Initiative  

33  

 

New  management  brought  in  to  =ix  business.    

1.  Consolidated  business  into  two  segments:    •  reduces  management  complexity  •  Aligns  business  by  customer  and  

market  opportunity  •  $20mm  full-­‐year  run-­‐rate  SG&A  

from  overheard  reduction  2.  Bringing  in  the  right  team:  

•  New  talent  for  marketing  and  geographic  expansion  

•  Realigned  sales  force  to  better  address  customer  needs  

3.  Improve  Execution:  •  At  customer  level  •  Accelerate  new  product  penetration  

 

Innovation    

•  Rich  pipeline  of  innovation  platforms  with  a  number  of  products  in  launch  phase:  

•  Bioguard  –  Packaging  •  OptiMilm  –  Printing  &  Writing  •  Microbial  Control  –  Water  Tech  •  Monitoring  &  Diagnosis  -­‐  Industrial  

•  Strong  R&D  Portfolio  

Improving  a  Repeatable  Process    

•  Multi  regional  marketing  •  Selling  process  •  Pricing  management  •  Contract  administration  •  Channel  management  •  Corporate  customer  focus  •  Sales  and  operations  planning  

Signi=icant  Strategic  Actions  in  2013    

Hired  Luis  Fernandez-­‐Moreno  as  new  President  of  Water  in  late  2012.    He  has  30  years  of  relevant  industry  experience  (Arch,  Dow,  Rohm  &  Haas)  

Potential  Upside  at  Water  

34  

     

 

Potential  value  creation  from  recent  actions  taken.    

•  New  management  stabilized  sales  in  1H2013  and  identiMied  signiMicant  operational  restructuring  opportunities  

•  Industrial  middle  management  structure  being  streamlined  or  ~$20mm  permanent  run-­‐rate  savings;  (PF  LTM  EBITDA  $163mm)  

•  Potential  for  EBITDA  margins  to  reach  mid  teens  over  long-­‐term  from  8.4%  LTM  3/31/13  through  new  market  penetration,  increasing  sales  of  existing  customers  and  operating  leverage    

•  Peer-­‐like  gross  margins  would  create  $5  to  $13  per  share  of  incremental  value(1)  

Sensitivity)Analyses

EBITDA)Margin

Sales Gross)Margin33% 34% 35% 36% 37%

$1,700 9% 10% 11% 12% 13%$1,750 9% 10% 11% 12% 13%$1,800 10% 11% 12% 13% 14%$1,850 11% 12% 13% 14% 15%$1,900 11% 12% 13% 14% 15%

Incremental)EBITDA

Sales Gross)Margin33% 34% 35% 36% 37%

$1,700 $6 $23 $40 $57 $74$1,750 $22 $40 $57 $75 $92$1,800 $39 $57 $75 $93 $111$1,850 $55 $74 $92 $111 $129$1,900 $72 $91 $110 $129 $148

Value)Per)Share)(7x)EBITDA)

Sales Gross)Margin33% 34% 35% 36% 37%

$1,700 $0.49 $1.97 $3.45 $4.93 $6.41$1,750 $1.93 $3.45 $4.97 $6.50 $8.02$1,800 $3.36 $4.93 $6.50 $8.06 $9.63$1,850 $4.80 $6.41 $8.02 $9.63 $11.24$1,900 $6.23 $7.89 $9.54 $11.20 $12.85(1)  Nalco,  now  owned  by  Ecolab,  had  ~40%  gross  margin  when  it  was  an  independent  company.    

N.B.:    Ashland  Water  LTM  3/31/13  gross  margin  was  33%.  

If  Water  is  Not  Fixed,  a  Sale  is  Likely  

35  

If  Water  is  Not  Fixed,  a  Sale  is  Likely    

How  much  could  Water  sell  for?    

“New  leadership…by  the  summer,  we  should  be  able  to  tell  if  this  is  making  a  difference  or  not.  If  it's  not  making  a  difference  then,  obviously,  that  limits  our  alternatives  in  what  we  can  do,  and  we'll  start  to  take  a  hard  look  of  what  the  outcome  will  be.”  -­‐  CEO  Jim  O’Brien,  Q4  2012  Earnings  Call,  October  30,  2012  •  Given  Water’s  scale,  breadth  of  products,  and  IP  knowledge  there  would  likely  be  a  number  of  interested  strategic  and  

Minancial  buyers.  Water  asset  is  highly  attractive  platform  for  consolidating  a  fragmented  global  industry.  •  It  is  unlikely  that  Ashland  would  sell  Water  for  less  than  ASH’s  consolidated  multiple  of  7x  FYE  2014E  EBITDA.(1)  Given  the  

turnaround  underway,  the  signiMicant  breadth  and  scale  of  the  platform  for  industry  consolidation,  potential  synergies/cost  savings,  we  believe  Water  could  sell  for  8x  to  12x  PF  LTM  3/31/2013  EBITDA  of  $163mm  

•  Potential  Strategic  Buyers:  Permira,  BASF,  SNF,  Danaher  (GE  and  Ecolab  less  likely  given  potential  DOJ  issues  and  GE  capital  allocation  priorities  towards  other  industries)  

•  Financial  Sponsors:  Likely  strong  interest  from  private  equity  given:  (i)  the  platform  for  consolidation  it  represents;  (ii)  the  operational  turnaround  opportunities;  and  (iii)  global  secular  growth  trends  .  Given  current  strength  in  bank  loan  and  high  yield  markets,  we  think  a  private  equity  Mirm  could  purchase  Water  with  up  to  4.0x  to  6.0x  total  leverage  

Sensitivity)Analysis

WaterEBITDA EBITDA)Multiple

8.0x 9.0x 10.0x 11.0x 12.0x$143 $1,144 $1,287 $1,430 $1,573 $1,716$153 $1,224 $1,377 $1,530 $1,683 $1,836$163 $1,304 $1,467 $1,630 $1,793 $1,956$173 $1,384 $1,557 $1,730 $1,903 $2,076$183 $1,464 $1,647 $1,830 $2,013 $2,196

Water&Potential&Valuation

Low HighLTM*3/31/13*PF*EBITDA $163 $163EBITDA*Multiple 8.0x 12.0xImplied&Water&Gross&Value $1,304 $1,956Ashland*Shares 79 79Water&Gross&Value&per&Share $17 $25%*of*current*ASH*price 20% 29%

Source:    Based  off  consensus  estimates  as  of  July  16,  2013.  

36

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•  Very  large  growing  market  •  Above  average  gross  margins  •  Relatively  non-­‐cyclical  •  Estimated  $1.5bn  opportunity  

•  Global  energy  demands  drive  one  new  coal-­‐Mired  power  plant  per  week  -  Increasingly  stringent  legislation  

demands  reduced  emissions  •  Estimated  $100mm  opportunity  

•  More  environmentally  friendly  adhesives  -  Maintaining  same  level  of  

performance  as  solvent-­‐based  chemistries  

•  Highly  corrosive  pollution  gases  are  not  suited  for  traditional  metals  

•  Custom-­‐formulated  products  •  New  technologies  including  water-­‐

based  and  radiation-­‐curable  products  

•  Leading  provider  of  corrosion  resistant  resin  solutions  (DerakaneTM)  

•  Well-­‐known,  reliable  performance  -  20+  year  history  in  the  Mield  

Performance  Chemicals  Drivers  

38  

 

Key  long-­‐term  growth  markets  .  

 

Packaging  and  Converting  .  

 

Fuel  Gas  Desulfurization    

 

Market  Appeal        .  

 

Market  Needs        

 

 

Value  Proposition        .  

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Valvoline  Organic  Opportunities  

43  

ü  Base  oil  capacity  expansions  should  further  reduce  volatility  

 

“The  most  valuable  businesses  in  the  world  are  brand  royalty  businesses  that  can  grow  without  capital  investment.”  

 

ü  Leverage  Instant  Oil  Change  business  model  to  grow  organically  and  gain  share  

ü  New  Product  Penetration:  Drive  NextGen™  trial  and  MaxLife™  growth  

ü  Expand  and  strengthen  international  presence  in  emerging  regions  

Organic  Opportunities  

N.B.:  Quote  from  Pershing  Square  Capital  Management,  L.P.  presentation,  “Justice  is  Best  Served  Flame  Broiled,”  April  4,  2012.  

ü  Capitalize  on  secular  shifts  -  Shift  from  DIY  to  higher  margin  DIFM  

-  Mix  shift  to  higher  margin  premium  products  

 

 

Innovative  Brands:  NextGenTM  

44  

 

Innovative  new  products  with  higher  margins  that  gain  share.    

•  Introduced  in  Spring  2011  

•  Better  for  environment  

-  50%  recycled,  re-­‐reMined  oil  

• No  compromise  to  quality  

-  100%  Valvoline  protection  

•  Similar  price  point  

•  Drive  signiMicant  DIY  share  growth  and  DIFM  consumer/installer  loyalty  

•  Increase  base  oil  purchasing  leverage  by  driving  development  of  re-­‐reMined  market  

•  Establish  NextGenTM  in  VIOC  company  stores  

•  DIY    available  in  14,500  retail  auto  parts  stores  

•  Estimated  600,000  DIY  early  adopters;  $34  million  in  sales  for  Miscal  2011  

• NextGenTM  represents  19%  of  oil  changes  at  $5  premium  

•  Execute  recycling  program  initiatives  with  retailers  to  drive  trial  

•  Continue  advertising  focus  

•  Establish  national  bulk  distribution  for  VIOC,  Installer  channels  

•  Fleet  opportunity  for  both  VIOC  and  C&I  businesses  

Consumer    Proposition  

Objectives   Results  to  Date   Next  Steps  

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U.S.  Competitive  Landscape  for  VIOC  

47  

     

 

Signi=icant  opportunity  exists  to  consolidate  and  re-­‐brand  U.S.  market.    

•  U.S.  Market  Size  (2013E):  $9.8bn  

•  Stable  and  highly  fragmented  market  with  17,063  stores  

•  Industry  largely  consists  of  small  mom  and  pop  owners    

•  Ripe  for  consolidation  

•  #1  player  only  has  ~11%  share  

•  Top  10  players  represent  only  32%  of  market  

 

Minimal  capex  required  to  re-­‐brand  existing  privately  held  store  networks.      

Source:  National  Oil  &  Lube  News  and  Company  Data    

Top$US$Fast$Lube$Chains$2013

Owned Franchised Total %$Share1 Jiffy&Lube 0 1,962 1,962 11.5%2 Valvoline$Instant$Oil$Change 260 636 896 5.3%3 Pennzoil 750 0 750 4.4%4 Kwik&Tar 393 0 393 2.3%5 Express&Care 336 0 336 2.0%6 Mobil&1&Lube&Express 327 0 327 1.9%7 Express&Lube 300 0 300 1.8%8 Express&Oil&Change&&&Service 85 110 195 1.1%9 Philips&66 186 0 186 1.1%10 Grease&Monkey 8 172 180 1.1%Total$Top$10 2,645 2,880 5,525 32.4%Total$Top$50 3,736 3,039 6,775 39.7%Total$US$Fast$Lube$Industry 17,063

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Valvoline  International    

49  

•  Addressable  Market  

-  6.3  billion  gallons  per  year  versus  800  million  in  the  U.S.  

-  EMEA:  Middle  East,  Africa,  Russia,  and  Eastern  Europe  

-  LatAm:  particularly  Brazil  

-  India  Joint  Venture:  expanding  distributor  network;  new  blending  &  packaging  plant  

-  Asia:  leveraging  Cummins  relationship;  following  build-­‐out  model  in  India  

•  Emerging  Market  Growth  

-  Now  account  for  more  than  50%  of  global  light  vehicle  sales  

•  Consumer  &  Industrial  

-  Valvoline’s  focus  has  been  on  heavy-­‐duty  transportation  and  power  generation  

     

 

Large  and  growing  under-­‐penetrated  market  represents  large  opportunity.    

International  Landscape  for  VIOC  

50  

 

While  #2  share  position  in  US,  VIOC  has  no  internationally  branded  stores.    

•  Big  opportunity  for  growth  and  penetration  particularly  among  developing  markets  

•  Branded  International  Market  consists  primarily  of  ~4,500  US-­‐based  chains  with  foreign  facilities    

•  Growing  and  highly  fragmented  market  in  its  infancy  

 

No  capex  required  to  re-­‐brand  existing,  privately  held  store  networks.      

Source:  National  Oil  &  Lube  News  and  Company  Data.    

Top$US'Based$Chains$with$Foreign$Facilities

Total %$Share1 Mobil'1'Centers 2,188 48.5%2 Texaco'Havoline'xpress'lube 1,432 31.8%3 Walmart'Tire'&'Lube'Express 266 5.9%4 Midas'Auto'Service'Experts 160 3.5%5 Jiffy'Lube 150 3.3%6 Precision'Tune'Auto'Care 82 1.8%7 Meineke'Care'Care'Centers 78 1.7%8 Pennzoil 75 1.7%9 Grease'Monkey 65 1.4%10 AAMCO 11 0.2%11 Citgo 1 0.0%Total$US'Based$Chains$with$Foreign$Facilities 4,508

Market  Ascribes  Little  Value  to  Valvoline  

51  

 

Using  an  illustrative  specialty  chemical  EBITDA  multiple  range  of  8x-­‐10x  and  illustrative  FYE  9/30/15E  ASH  EBITDA  range  of  $1.4bn  to  $1.6bn  suggests  the  market  implied  valuation  of  Valvoline  is:  $0  to  $1.1bn.  

 

 

At  the  current  ASH  share  price,    a  shareholder  effectively  gets  Valvoline  for  free.  

 

Valvoline)Implied)Valuation

ASH$consolidated$9/15E$EBITDA $1,400 $1,600$Less:$Valvoline$EBITDA ($350) ($350)ASH$EBITDA$exEValvoline $1,050 $1,250EBITDA$Multiple 8.0x 8.0xImplied$ASH$Value$exEValvoline $8,400 $10,000Plus:$2014E$&$2015E$FCF 1,200 1,400Total$Implied$Value$exEValvoline $9,600 $11,400

Current$ASH$Enterprise$Value $10,660 $10,660$Less:$Value$exEValvoline ($9,600) ($11,400)Implied)Valvoline)Value $1,060 $0Implied$Valvoline$Value$per$Share $14 $0Valvoline$EBITDA $350 $350Implied$Valvoline$Multiple 3.0x 0.0x

Sensitivity)Analysis

FYE)9/15EEBITDA ASH)EBITDA)Multiple

7.0x 7.5x 8.0x 8.5x 9.0x$1,400 $2,110 $1,585 $1,060 $535 $10$1,450 $1,760 $1,210 $660 $110 $0$1,500 $1,410 $835 $260 $0 $0$1,550 $1,060 $460 $0 $0 $0$1,600 $710 $85 $0 $0 $0$1,650 $360 $0 $0 $0 $0

N.B.:  EBITDA  multiple  in  Valvoline  implied  valuation  table  conservatively  assumes  the  low-­‐end  of  specialty  chemical  EBITDA  multiple  range  of  8x-­‐12x.    

How  Much  Is  Valvoline  Worth?  

52  

     

 

As  part  specialty  chemical  company  and  part  leading,  branded  consumer  franchise  with  a  predictable,  high  cash  =low  /  low  capex  model,    we  believe  Valvoline  should  trade  between  8x  –  12x  EBITDA.(1)  

 

(1)  Represents  a  blended  multiple  of  specialty  chemicals  (8x-­‐12x  EBITDA)  and  leading  consumer  franchises  (10x  -­‐14x  EBITDA).  (2)  Market  Implied  Value  per  share  of  $14  from  previous  slide.  

 

Valvoline  has  low  maintenance  capex  of  ~$36mm  or  less  than  2%  of  sales.      

Sensitivity)Analysis:)Value)per)Share

EBITDA EBITDA)Multiple8.0x 9.0x 10.0x 11.0x 12.0x

$350 $36 $40 $45 $49 $54$375 $38 $43 $48 $53 $57$400 $41 $46 $51 $56 $61$425 $43 $49 $54 $60 $65$450 $46 $52 $57 $63 $69

Valvoline)Potential)Valuation

Low High

Valvoline.Normalized.EBITDA $400 $400

EBITDA.Multiple(1) 8.0x 12.0x

Implied)Valvoline)Value $3,200 $4,800Ashland.Shares 79 79

Valvoline)Value)per)Share $41 $61Market.Implied.Value.per.Share $14 $14.00

%.difference 191% 337%

Potential  Ways  to  Unlock  Trapped  Value  

53  

•  Based  on  our  diligence,  we  believe  Valvoline  has  a  low  tax  base  and  an  outright  sale  would  likely  not  be  the  most  tax  efMicient  mechanism  to  release  trapped  value  for  shareholders.  

•  Two  value  unlocking  alternatives:  

•  Tax-­‐Free  Spin  to  Shareholders  

-  Given  its  predictability,  low  capex  growth  model,  and  high  cash  Mlow  generation,  an  independently  traded  Valvoline,  would  likely  be  in  high  demand  among  income  oriented  investors  

•  Conversion  to  Master  Limited  Partnership  

-  Given  its  operational  proMile  and  high  cash  Mlow  generation,  Valvoline  could  qualify  as  an  MLP  for  tax  purposes  and  would  likely  be  in  high  demand  among  yield  oriented  investors  

     

 

Valvoline:  Spin  or  MLP  or  both?    

Potential  Further  Value  Creation  as  MLP  

54  

     

 

A  strong  case  exists  that  Valvoline  could  qualify  as    a  MLP.    

•  IRS  Private  Letter  Ruling  released  August  10,  2012  (PLR-­‐104854-­‐12)  for  MLP  quali=ication:  

-  “principally  engaged  in  the  gathering,  processing,  transportation,  storage,  and  distribution  of  reMined  petroleum  products”  

-  “income  derived…from  additization  activities  is  qualifying  income”  for  MLP  status  

-  qualifying  MLP  income  under  Section  7704(d)(1)(E)  of  the  Internal  Revenue  Code  :  “income  or  gains  derived  from….processing,  reMining,  transportation,  or  the  marketing  of  any  mineral  or  natural  resource”  

•  Ashland  10-­‐K  for  FYE  9/30/2012  describing  Valvoline’s  activities:  

-  “operates  blending  and  packaging  plants”  

-  “blending  and  distribution”  

-  “additives  and  base  oils  constitute  a  large  portion  of  the  raw  materials  required  to  manufacture  [Valvoline]  products”  

How  Could  Valvoline  Qualify  as  a  MLP?  

55  

•  Calumet  Specialty  Products  Partners  (NYSE:  CLMT)  

-  “Manufacture  petroleum-­‐based  specialty  products”(1)  including  motors  oils  

•  Northern  Tier  (NYSE:  NTI)  

-  “Produces  [and  distributes]  a  broad  slate  of  reMined  [petroleum-­‐based]  products  including  gasoline,  diesel,  jet  fuel  and  asphalt”  (2)  

•  CVR  (NYSE:  CVRR)  

-  Produces  and  distributes  petroleum-­‐based  products  including  gasoline,  natural  gas  liquids,  asphalt,  jet  fuel,  and  other  reMined  products  (3)  

     

 

MLPs  already  exist  that  process,  blend,  and    distribute  hydrocarbons  including  motor  oils.  

 

(1)  Source:  2013  CLMT  Investor  &  Analyst  Day  (2)  Source:  Northern  Tier  2012  10-­‐K  Miling  (3)  Source:  CVR  ReMining  2012  10-­‐K  Miling  

 

While  CLMT,  NTI  and  CVRR  take  hydrocarbons  to  produce  cyclical  commodity  products,  Valvoline  uses  them  to  produce  highly-­‐engineered,  

value-­‐added  (non-­‐commodity),  branded  consumer  products.    

Operations  That  Could  Qualify  for  MLP  

56  

-  Santa  Fe  Springs,  California  -  Cincinnati,  Ohio  -  East  Rochester,  Pennsylvania  -  Deer  Park,  Texas  -  Wetherill  Park,  Australia  -  Dordrecht,  the  Netherlands  

     

Valvoline  has  plants  and  distribution  capabilities  akin  to    entities  that  already  qualify  as  MLP’s  for  tax  purposes.  

 

Source:  Company  Data  

Bulk  Blending  

Lubricant  Blending  &  Manufacturing    

-  College  Park,  Georgia  -  Willow  Springs,  Illinois  -  St.  Louis,  Missouri  -  Mississauga,  Canada  

-  College  Park,  Georgia  -  Willow  Springs,  Illinois  -  Noblesville,  Indiana  -  St.  Louis,  Missouri  -  Cincinnati,  Ohio  -  East  Rochester,  Pennsylvania  -  Birkenhead,  United  Kingdom  -  Sydney,  Australia  -  Dordrecht,  the  Netherlands  

Distribution    

Illustrative  Valvoline  MLP  Valuation  

57  

     

 

Given  the  predictability  and  low  capital  needs  of  Valvoline,  a  potential  MLP  could  trade  near  comparables  that  possess  similar  high  degrees  of  visibility  

of  distribution  growth.  Such  MLPs  trade  between  4%  to  8%  yields.      

Valvoline)MLP)Valuation MLP)Enterprise)Value

EBITDA'(FYE'9/14E) $350

(4)'Maintenance'Capex (36)

(4)'Interest 0

Distributable'CF $314

Yield 5.0%

Implied'Equity'Value $6,280

(+)'Net'Debt 0

Enterprise'Value $6,280

Implied'EBITDA'Multiple 17.9x

MLP$Enterprise$Value Implied$MLP$EBITDA$Multiples

EBITDA Yield4.0% 5.0% 6.0% 7.0% 8.0%

$325 $7,225 $5,780 $4,817 $4,129 $3,613$350 $7,850 $6,280 $5,233 $4,486 $3,925$375 $8,475 $6,780 $5,650 $4,843 $4,238$400 $9,100 $7,280 $6,067 $5,200 $4,550$425 $9,725 $7,780 $6,483 $5,557 $4,863

Implied(MLP(EBITDA(Multiples

EBITDA Yield4.0% 5.0% 6.0% 7.0% 8.0%

$325 22.2x 17.8x 14.8x 12.7x 11.1x$350 22.4x 17.9x 15.0x 12.8x 11.2x$375 22.6x 18.1x 15.1x 12.9x 11.3x$400 22.8x 18.2x 15.2x 13.0x 11.4x$425 22.9x 18.3x 15.3x 13.1x 11.4x

 

Valvoline  as  a  MLP  could  be  worth  $4bn  to  $9bn  versus    ASH  current  equity  market  capitalization  of  $6.7bn.  

 

How  Much  Value  Could  an  MLP  Create?  

58  

 

Unlike  most  MLPs,  Valvoline  is  not  capital  intensive  and  thus  would  likely  not  require  leverage  to  grow.    High  recurring  cash  =low  would  be  returned.  

 

We  believe  a  Valvoline  MLP  would  garner  a  premium  valuation  relative  to  most  MLPs:  much  less  cyclical,  signi=icantly  less  capital  intensive,  and  

manufactures  highly  engineered,  branded  consumer  products.    

MLP$$Value$Creation MLP$per$Share$Value$Creation

Implied(MLP((Equity(Value $6,280ASH(Shares(Outstanding 79Equity(Value(Per(Share $80.00

ASH(EBITDA(Reduction ($350)ASH(EV(Multiple 7.0xEV(Value(Reduction ($2,450)ASH(Shares(Outstanding 79(Q)(ASH(EBITDA(Reduction ($31.01)Net$Value$Creation $48.99%(from(current 57.6%

MLP$per$Share$Value$Creation

EBITDA Yield4.0% 5.0% 6.0% 7.0% 8.0%

$325 $63.24 $44.83 $32.56 $23.80 $17.22$350 $68.99 $48.99 $35.65 $26.13 $18.99$375 $74.73 $53.14 $38.75 $28.46 $20.75$400 $80.48 $57.30 $41.84 $30.80 $22.52$425 $86.23 $61.45 $44.93 $33.13 $24.28

N.B.:  MLP  Valuation  Creation  table  conservatively  assumes  the  current  forward  EV/EBITDA  multiple  of  7x  of  Ashland  as  of  July  16,  2013..  

59

&

J6B%64/5$&'&P/$6$>/6B1&&&

We  believe  ASH  is  Undervalued  

60  

•  Revenue  synergies  from  ISP  

•  BeneMits  of  growth  capex  

•  Stand-­‐alone  margin  opportunities  

•  Turnaround  at  water  business  

•  Cyclical  upside  to  U.S.  housing  and  auto  markets  

•  Multiple  expansion  on  a  stand-­‐alone  basis  

•  Potential  monetization  of  water  

•  Own  Valvoline,  a  great  consumer  business  for  ~3x  EBITDA  or  less  (comps  8x-­‐12x)  

•  Recovery  in  European  end-­‐markets  

•  Option  on  tax-­‐free  spin  and/or  MLP  of  Valvoline  

•  Option  on  higher  long-­‐term  interest  rates  

 

We  believe  Ashland  is  signi=icantly  undervalued  with  long-­‐term    potential  upside.  At  current  prices,  a  long-­‐term  shareholder  pays  

7x    consensus  FYE  9/30/14E  EBITDA  and  gets  for  free:    

Why  This  Opportunity  Exists  

61  

•  Many  moving  pieces  mask  true  underlying  value  

•  Long  history  of  being  deeply  cyclical  company  with  its  “old”  portfolio  

•  Misguided  concerns  over  hydrocarbon  chain  exposure  (base  oil  II)  

•  Investor  fatigue  over  Water  restructurings  

•  Lack  of  publicly  traded  comps  for  Valvoline  

•  Scant  insider  ownership  

•  Management  is  low  proMile  

•  ASH  stock  not  in  major  indexes  or  sector  ETFs  

•  Historically  under-­‐followed  on  the  sell  side    

 

Market  fails  to  recognize  transformation  to  leading  specialty  chemical  =irm.    

Pharmaceuticals  

Personal  Care  

Coatings  

Energy  

Construction  

Food  &  Beverage  

Transform  

Why  are  ASH  Shares  Cheap?  

62  

•  Guar  exposure  

•  Oil  exposure  

 

 

•  Valvoline  difMicult  to  value  

•  Weak  cash  Mlow  

•  Underfunded  pension    

 

 

•  Management  will  make  poor  acquisition  

 

The  Bear’s  Concerns    

 

Elmrox  View    

•  Guar  pricing  bubble  in  the  past.  F3Q2013  is  most  difMicult  comp.  Management  considering  divesting  commodity  guar  operations  to  eliminate  potential  volatility  

•  Limited  direct  exposure.  Base  oil  Group  II  (an  oil  derivative)  is  input  for  Valvoline  –  pricing  covers  input  inMlation  with  3-­‐4  month  lag.  Group  II    overcapacity  growing  2013-­‐2015  

•  Is  misunderstood  because  no  direct  public  comps.  Is  stable,  high  recurring-­‐cash  Mlow  business  with  small  capex  requirements  with  strong  consumer  brands  and  differentiated  products.  Has  hidden  growth  asset  in  U.S.  store  branded  store  base  

•  Cash  Mlow  will  normalize  as  growth  capex  sunsets,  lower  interest  costs  annualize,  and  tax  rates  fall  towards  mid  20s;  Consensus  overestimates  cash  pension  payments  in  FYE  2014  and  FYE  2015  

•  200  bps  move  in  the  discount  rate  eliminates  underfunding,  which  generally  tracks  the  AA  corporate  bond  spread  

•  This  was  before  the  recent  move  in  interest  rates  in  2Q2013  •  Management  has  long  history  of  being  patient  and  thoughtful  

capital  allocators  managing  the  portfolio.  

Multiple  Ways  to  Create  Value  

63  

     

 

Organic  Growth  +    Under-­‐Appreciated  Assets  

 

•  New  products  •  Developing  markets  penetration  

 

Shareholder  Value  Creation    

 

Specialty  Ingredients    

 

Water    

 

Valvoline    

•  Operational  turnaround  •  Sales  of  asset    

•  Store  and  franchise  growth  •  Secular  shift  to  Do-­‐It-­‐For-­‐Me  •  Mix  shift  to  premium  products  •  Spin-­‐off  and/or  MLP  conversion  

Opportunity  for  Multiple  Expansion  

64  

 

Specialty  chemicals  trade  at  higher  multiples  than  commodity  chemicals  given  the  aforementioned  characteristics.  We  expect  ASH  shares  to    garner  a  specialty  multiple  as  the  market  arrives  at  our  variant  view.  

 

STRICTLY  CONFIDENTIAL  

Multiple  Expansion  

FYE  2014   Specialty   Commodity   Ashland  

EV/EBITDA    9x   6x    

7x    

P/E   16x   10x    

11x    

N.B.:  Specialty  chemicals  include:  ALB,  CYT,  DD,  ECL,  FMC,  GRA,  POL,  PPG,  ROC,  RPM,  SHW,  VAL.  N.B.:  Commodity  chemicals  include:  DOW,  HUN,  KRA,  LYB,  MEOH,  OLN,  OMN,  WLK.  N.B.:  Multiples  based  on  sell  side  estimates  and  share  prices  as  of  July  16,  2013.  

 

We  believe  the  market  is  offering  investors  a  leading  global  specialty  chemical  business  for  relatively  low  multiples  of  earnings  and  cash  =low.  

 

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Illustrative  ASH  Standalone  Valuation  

66  

     

 

Even  if  revenue  growth  remains  =lat  in  FYE  2014  and  FYE  2015,  ASH  should  generate  ~$15  to  ~$17  per  share  of  cumulative  free  cash  =low.(1)  

 

 

Specialty  chemical  =irms  generally  trade  for  8x  to  12x  EBITDA  in  the  public  markets  versus  commodity  chemical  assets  at  4x  to  7x  EBITDA.  

 !ASH!Potential!Standalone!Valuation

Low High

ASH*EBITDA*(FYE*9/30/15E) $1,400 $1,600

EBITDA*Multiple 8.0x 8.0x

Implied!Firm!Value $11,200 $12,800Less:*Net*Debt (3,991) (3,991)

Plus:*2014E*&*2015E*FCF 1,200 1,400

Implied*Equity*Value 8,409 10,209

Ashland*Shares 79 79

Implied!Equity!Value!per!Share $107 $130Current*Price $85 $85

%*from*current 26% 53%

Sensitivity)Analysis

EBITDA EBITDA)Multiple8.0x 9.0x 10.0x 11.0x 12.0x

$1,400 $107 $125 $143 $161 $178$1,450 $112 $131 $149 $168 $186$1,500 $117 $136 $156 $175 $194$1,550 $122 $142 $162 $182 $201$1,600 $128 $148 $168 $189 $209

N.B.:  EBITDA  multiple  in  ASH  Potential  Standalone  Valuation  table  conservatively  assumes  the  low-­‐end  of  specialty  chemical  EBITDA  multiple  range  of  8x-­‐12x.  This  analysis  conservatively  assumes  no  additional  share  repurchases  and  excludes  dividends.    

Illustrative  Sum-­‐of-­‐Parts  Valuations    

67  

 

(Ashland)  +  (Valvoline  Spin)    

(1)    Assumes  ASH  EBITDA  of  $1.5bn  N.B.:  ASH  EBITDA  multiple  in  Sum-­‐of-­‐the-­‐Parts  table  conservatively  assumes  the  low-­‐end  of  specialty  chemical  EBITDA  multiple  range  of  8x-­‐12x  and  Valvoline  EBITDA  multiple  assumes  the  mid-­‐point  valuation  range  of  8x-­‐12x  (as  referenced  on  page  52).    This  analysis  conservatively  assumes  no  additional  share  repurchases  and  excludes  dividends.    

Sum$of$the$Parts

ASH$consolidated$EBITDA $1,400 $1,600$Less:$Valvoline$EBITDA ($350) ($350)ASH$EBITDA$exCValvoline $1,050 $1,250EBITDA$Multiple 8.0x 8.0xImplied3ASH3Value3ex$Valvoline $8,400 $10,000

Valvoline$EBITDA $350 $350EBITDA$Multiple 10.0x 10.0xImplied3Valvoline3Value $3,500 $3,500

Total3Enterprise3Value $11,900 $13,500$Less:$Net$Debt (3,991) (3,991)Plus:$2014E$&$2015E$FCF 1,200 1,400Total$Equity$Value $9,109 $10,909ASH$Shares$Outstanding 79 79Per3Share3Equity3Value $115 $138%"from"current 36% 62%

Sensitivity)Analysis(1)

ASH)EBITDAMultiple Valvoline)EBITDA)Multiple

8.0x 9.0x 10.0x 11.0x 12.0x8.0x $129 $133 $137 $142 $1468.5x $136 $140 $145 $149 $1549.0x $143 $148 $152 $156 $1619.5x $150 $155 $159 $164 $16810.0x $158 $162 $167 $171 $175

Illustrative  Sum-­‐of-­‐Parts  Valuations  (cont’d)    

68  

 

(Ashland)  +  (Valvoline  as  MLP)    

Sum$of$the$Parts

ASH$consolidated$EBITDA $1,400 $1,600$Less:$Valvoline$EBITDA ($350) ($350)ASH$EBITDA$exCValvoline $1,050 $1,250EBITDA$Multiple 8.0x 8.0xImplied3ASH3Value3ex$Valvoline $8,400 $10,000

Valvoline$EBITDA $350 $350EBITDA$Multiple 15.0x 15.0xImplied3Valvoline3Value $5,250 $5,250

Total3Enterprise3Value $13,650 $15,250$Less:$Net$Debt (3,991) (3,991)Plus:$2014E$&$2015E$FCF 1,200 1,400Total$Equity$Value $10,859 $12,659ASH$Shares$Outstanding 79 79Per3Share3Equity3Value $137 $160%"from"current 62% 89%

Sensitivity)Analysis(1)

ASH)EBITDAMultiple Valvoline)EBITDA)Multiple

14.0x 16.0x 18.0x 20.0x 22.0x8.0x $155 $164 $173 $182 $1918.5x $162 $171 $180 $189 $1989.0x $170 $179 $187 $196 $2059.5x $177 $186 $195 $204 $21210.0x $184 $193 $202 $211 $220

(1)    Assumes  ASH  EBITDA  of  $1.5bn  N.B.:  ASH  EBITDA  multiple  in  Sum-­‐of-­‐the-­‐Parts  table  conservatively  assumes  the  low-­‐end  of  specialty  chemical  EBITDA  multiple  range  of  8x-­‐12x  and  Valvoline  EBITDA  multiple  conservatively  assumes  the  lower-­‐end  of  the  12x-­‐22x  MLP  valuation  range  (where  most  publicly-­‐traded  MLPS  currently  trade).    This  analysis  conservatively  assumes  no  additional  share  repurchases  and  excludes  dividends.    

Attractive  Leveraged  Buyout  Candidate  

69  

     

High  Free  Cash  Flow  Characteristics  

 

Sustainable  Margins  and  Pricing  Power  

Signi=icant  Competitive  

Advantages  (Barrier  to  Entry,  Switching  Costs,  Patents)  

Global  Footprint  and  Scale  

Organic  Growth  Opportunities  especially  in  

Developing  Markets  

Potential  for  Signi=icant  Margin  Expansion  in  Core  

Business  especially  Water  

Margin  of  Safety:  Valvoline  Valuation  Signi=icantly  Under-­‐

Appreciated  

Synergy  Potential  with  Existing  Private  

Equity  Owned  Chemical  Firms  

Scaling  Up  of  Valvoline  Franchises  May  Be  Executed  Better  in  Private  

Market  

Attractive  LBO  Target  

 

Low  Cyclicality  of  Business  

 

Strong  free  cash  =low  and  low  cyclicality  =  Attractive  private  equity  returns    

We  believe  a  =inancial  sponsor  could  contribute  up  to  30%  equity  using  total  leverage  between  4x  to  6x  and  could  pay  up  to  $121  per  share  while  meeting  typical  returns  hurdles.  

69  

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Management  Gets  It  

71  

     

•  The  accelerated  share  repurchase  plan  (“ASR”)  with  Citibank  was  part  of  a  $600mm    common  stock  buyback  plan  that  expires  December  31,  2014.  

•  At  the  current  share  price,  management  could  repurchase  ~15%  to  ~20%  of  ASH  shares  between  2014  and  2015  using  discretionary  free  cash  Mlow(1)  

•  Share  repurchases  may  accelerate  further  as  free  cash  Mlow  normalizes  through  2015  

•  The  Board  also  increased  the  quarterly  dividend  51.1%  in  May  2013  to  34    cents  per  quarter  in  recognition  of  increasing  cash  Mlows  over  the  next  few  years.    

•  Despite  the  2Q2013  move  in  U.S.  interest  rates,  the  current  environment  makes  debt  Minancing  an  additional  and  attractive  source  of  capital  for  share  repurchases.  

 

May  20,  2013:  Announced  $150mm  accelerated  share  repurchase  plan.      

 

Thoughtful  capital  allocation  by  management  =  shareholder  value  creation    

Source:  Discretionary  free  cash  Mlow  deMined  as  free  cash  Mlow  –  less  dividends.          

Management  Aligned  with  Shareholders  

72  

     

•  Long-­‐term  executive  compensation  tied  to  performance  of:  

-  Operating  income  

-  Working  capital  efMiciency  

-  Return  on  investment  

•  Majority  of  compensation  at  risk  for  senior  management  tied  to  long-­‐term  metrics:  

-  CEO:  84%  tied  to  long-­‐term  and  annual  incentives  (64%  long-­‐term  /  20%  annual)  

-  Other  executive  ofMicers:  70%  at  risk  (44%  long-­‐term  /  26%  annual)    

 

“Programs  should  create  alignment  between  the  interests  of  the  executives  and  the  shareholders  by  ensuring  that  compensation  opportunities  for  executives  are  linked  to  building  long-­‐  term  shareholder  value.”(1)  

 

(1):    Ashland  proxy  dated  December  12,  2012    (2):  Ashland  vision  statement  from  Ashland  2012  Analyst  Day        

 

“Be  recognized  as  the  premier  specialty  ingredients  and  formulation  business  in  the  world  with  strong  growth  and  superior  margins.”(2)  

 

Conclusion  

73  

 

Valuable  and  high  quality  assets  trading  at  substantial  discount  to    intrinsic  value.  Multiple  paths  to  signi=icant  shareholder  value  creation.    Private  market  value  provides  margin  of  safety  and  limits  downside  risk.  

 

Ashland  is  a  Good  Business  •  Market  leader  in  specialty  chemicals  with  signiMicant  competitive  advantages  •  Secular  growth  opportunities  •  Stable  and  predictable  free  cash  Mlow  that  will  likely  be  returned  to  shareholders  •  Strong  balance  sheet  •  Management  is  thoughtful  capital  allocators  Shares  are  Undervalued  •  Water  turnaround  not  priced  into  shares  •  Effectively  getting  Valvoline  for  free  •  VIOC  is  hidden  asset  for  signiMicant  growth  with  scant  capex  required  to  grow  Additional  Value  Creation  Opportunities  Exist  •  If  Water  is  not  Mixed,  it  will  be  sold  •  Valvoline  value  could  be  unlocked  via  tax-­‐free  spin  and/or  conversion  to  MLP  •  Aggressive  share  repurchase  program  in  place  •  Attractive  acquisition  candidate  for  strategic  and  Minancial  sponsors  •  Free  option  on  higher  interest  rates  Low  Relative  Valuation  and  Asset  Value  Creates  Margin  of  Safety  =  Asymmetric  Risk  /  Reward  

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Executive  OfMicers  

77  

     

James  J.  O'Brien,  Chairman  and  Chief  Executive  OfRicer,  Age:  58  Since  2002,  O’Brien  served  as  chairman  and  chief  executive  ofMicer.  O'Brien  leads  Ashland's  Executive  Committee,  whose  members  set  Ashland's  global  strategy,  manage  its  capital,  and  uphold  Ashland's  operating  principles.  O'Brien  joined  the  former  Ashland  Chemical  Company  in  1976  as  an  accountant,  a  year  after  starting  as  an  accounting  intern.  He  quickly  moved  into  operations,  serving  in  product  marketing  and  sales  management  positions  in  the  chemicals  and  plastics  businesses  during  the  '80s.    By  1992,  O'Brien  had  gained  the  attention  of  then-­‐Chairman   and   CEO   John   R.   Hall.   Hall   tapped   O'Brien   to   serve   as   his   executive   assistant   to   support   him   as   the   company   grew   its   nonreMining   businesses,   strengthened   its  competitive  position  and  focused  on  reducing  its  dependence  on  earnings  from  reMining.  In  1995  he  was  named  president  of  the  company's  Valvoline  division  and  became  an  executive  ofMicer  of  Ashland.  At  Valvoline,  O'Brien  and  his   team   implemented  a  master  brand  strategy,  while  driving   innovation  and  expanding   the  product   line.   In  2001,   as  group  operating  ofMicer,   O'Brien   initiated   the   successful   redesign   of   the   Ashland   Distribution   business   model   and   increased   Ashland   Specialty   Chemical's   focus   on   markets,   new   products   and  applications  and  geographic  expansion.  A  native  of  Circleville,  Ohio,  O'Brien  is  a  graduate  of  The  Ohio  State  University,   from  which  he  earned  a  bachelor's  degree   in  accounting  and  Minance  and  a  master's  degree  in  business  administration.  He  is  a  1994  graduate  of  Leadership  Kentucky.    

J.  Kevin  Willis,  Senior  Vice  President  and  Chief  Financial  OfRicer,  Age:  47  Mr.  Willis  was   elected   senior   vice   president   and   chief   Minancial   ofMicer   of   Ashland   in   2013.  He   oversees  Ashland's  worldwide   Minancial   functions   and   processes,   including   Minancial  accounting  and  reporting,   treasury  and   Minance,   insurance,  business  development,  planning  and  analysis,   investor  relations,   tax  and   internal  audit  activities.  A  member  of  Ashland's  Executive  Committee,  he  shares  overall   responsibility   for  setting  Ashland's  global  strategy,  managing  capital,  and  upholding  Ashland's  operating  principles.  Willis   joined  Ashland   in  1987  as  an  associate  auditor  in  the  internal  audit  department.  He  served  in  various  management  positions  of  increasing  responsibility,  including  leading  teams  on  major  projects  in  the  business  services,  information  technology,  accounting  and  Minance  areas.  Spending  nearly  three  years  in  The  Netherlands,  he  helped  lead  Ashland's  effort  to  standardize  processes  and  implement  accounting  shared  services  across  European  operations.   In  2004,  Willis  was  designated  general  auditor.  Later   in  2007,  he  was  appointed  vice  president  and  treasurer  of  Ashland.  Since  Ashland's  acquisition  of  International  Specialty  Products  (ISP)  in  August  2011,  Willis  served  as  Ashland's  vice  president  of  Minance,  and  controller  for  Ashland  Specialty  Ingredients,  Ashland's  largest  and  fastest-­‐growing  commercial  unit.    A  native  of  Richmond,  Ky.,  Kevin  earned  a  bachelor’s  degree  in  accounting  from  Eastern  Kentucky  University  and  an  MBA  from  the  Kellogg  School  of  Management  at  Northwestern  University.    John  E.  Panichella,  Senior  Vice  President  and  Group  Operating  OfRicer  of  Ashland;  and  President,  Ashland  Specialty  Ingredients,  Age:  53  Mr.  Panichella  was  elected  senior  vice  president  of  Ashland  in  2011  and  added  the  additional  position  of  group  operating  ofMicer  in  September  2012.  Also  in  2011,  he  became  president  of  Ashland  Specialty  Ingredients,  when  International  Specialty  Products  Inc.  was  acquired  and  merged  into  Ashland  Aqualon  Functional  Ingredients.  Panichella  joined  Ashland  in  2008  as  a  vice  president  and  president  of  Ashland  Aqualon  Functional  Ingredients,  following  Ashland's  acquisition  of  Hercules,  where  he  held  a  similar  position.  Prior  to  joining  Hercules  in  2006,  Panichella  enjoyed  a  25-­‐year  career  with  General  Electric  and  BetzDearborn,  where  he  served  in  numerous  management  positions,  including  business  development,  operations  management,   sales  and  marketing,  and  strategic  development.  His   last  position  at  General  Electric  Water  and  Process  Technologies  was  vice  president  and  general  manager  of   the  Americas  business.  Before  joining  General  Electric,  he  served  as  vice  president  of  the  Global  Hydrocarbon  Processing  unit  of  BetzDearborn.  A  native  of  Pittsburgh,  Pa.,  Panichella  holds  an  M.B.A.  from  the  University  of  Phoenix  and  a  bachelor's  degree  in  chemistry  from  the  University  of  Pittsburgh.      Luis  Fernandez-­‐Moreno,  Vice  President  and  President,  Ashland  Water  Technologies,  Age:  50  Mr.  Luis  Fernandez-­‐Moreno  joined  Ashland  in  2012  as  president,  Ashland  Water  Technologies.  He  heads  a  worldwide  commercial  unit  that  holds  a  global,  leading  market  position  as  a  specialty   chemicals   supplier  of  process,   utility   and   functional   chemistries   for   the  papermaking   industry.  He   also   serves   as   vice  president  of  Ashland  and  a  member  of   the  Ashland  Operating   Committee.   A   30-­‐year   veteran   of   the   global   chemical   industry,   Fernandez-­‐Moreno   previously   served   as   executive   vice   president   of   Arch   Chemicals,   Inc.   where   he   was  responsible  for  the  wood  protection  and  HTH  water  products  businesses.  Prior  to  that,  he  served  as  business  group  vice  president  of  Dow  Coating  Materials  which  was  formed  after  Dow  Chemical  acquired  Rohm  &  Haas  in  2009.  He  previously  spent  more  than  25  years  with  Rohm  &  Haas  in  a  series  of  leadership  roles  spanning  across  Europe,  Latin  America  and  the  United   States.   Fernandez-­‐Moreno   earned   a   Bachelor   of   Science   degree   in   chemical   engineering   from  Universidad   Iberoamericana   in  Mexico   City.   He   also   completed   the  Wharton  Management  Program  at  The  Wharton  School  at  the  University  of  Pennsylvania.                

 

Source:  Company  Website    

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Samuel  J.  Mitchell  Jr.,  Senior  Vice  President  and  President,  Ashland  Consumer  Markets,  Age:  51    Mr.  Mitchell   heads  Ashland   Consumer  Markets,   a   commercial   unit   of   Ashland   Inc.  His   responsibilities   include   leadership   of   the  worldwide  Valvoline   business   of   automotive   and  commercial  lubricants,  chemicals,  and  appearance  products,  as  well  as  growth  of  the  company's  quick-­‐lube  business  and  continued  development  of  innovative  premium  products.  He  joined  Ashland  in  1997  as  director  of  marketing  for  Valvoline's  brand  management  group.  In  August  1999,  he  was  named  vice  president  of  marketing,  and  in  2000,  vice  president  and  general  manager  of  the  Valvoline  DIY  (Do-­‐It-­‐Yourself)  retail  business.  He  became  president  of  Valvoline  and  a  vice  president  of  Ashland  in  2002.  In  2011,  Mitchell  was  promoted  to  the  role   of   senior   vice   president   of   Ashland,   while   retaining   his   responsibilities   for   Ashland   Consumer  Markets.   Prior   to   joining   Ashland,   he   held   brand   and   category  management  leadership  positions  at  The  Clorox  Company  for  eight  years.  A  Birmingham,  Mich.,  native,  Mitchell  earned  a  bachelor's  degree  from  Miami  University,  Oxford,  Ohio,  and  a  master's  degree  in  business  administration  from  the  University  of  Chicago.  He  is  a  graduate  of  the  Harvard  Business  School's  Advanced  Management  Program.    Peter  Ganz,  Senior  Vice  President,  General  Counsel  and  Secretary,  Age:  50  Mr.  Ganz  joined  Ashland  in  2011  as  senior  vice  president  and  general  counsel,  responsible  for  managing  all  legal  and  corporate  governance  matters  pertaining  to  Ashland.  In  addition,  he  oversees  the  company's  government  relations  function  and  serves  as  Ashland's  chief  compliance  ofMicer,  chairing  its  Ethics  and  Compliance  Committee.  He  also  serves  as  a  member  of  Ashland's  Executive  Committee,  sharing  overall  responsibility  for  setting  Ashland's  global  strategy,  managing  capital,  and  upholding  Ashland's  operating  principles.  Immediately  prior  to  joining  Ashland,  Ganz  was  a  partner  with  the  law  Mirm  Sedgwick  LLP  in  Newark,  N.J.  From  2005  to  2010,  he  served  as  executive  vice  president,  general  counsel  and  secretary  of  Foster  Wheeler  AG,  a  global  engineering,  construction  and  project-­‐management  contractor  and  power-­‐equipment  supplier.  Previously,  he  was  senior  vice  president,  general  counsel  and  secretary  of  G-­‐I  Holdings  Inc.  (formerly  GAF  Corp.)  and  of  its  afMiliate,  International  Specialty  Products  Inc.,  in  Wayne,  N.J.  Earlier  in  his  career,  Ganz  practiced  litigation  for  law  Mirms  McCarter  &  English  in  Newark,  N.J.,  and  Kramer,  Levin,  Nessen,  Kamin  &  Frankel  in  New  York,  N.Y.  He  began  his  legal  career  serving  a  federal  judicial  clerkship  with  the  Hon.  Anne  E.  Thompson  in  the  U.S.  District  Court  for  the  District  of  New  Jersey.  A  native  of  Charlotte,  N.C.,  Ganz  earned  his  bachelor  of  arts  degree  from  Duke  University  in  1984.  In  1987,  he  received  his  J.D.  degree  from  Harvard  Law  School.  He  is  a  member  of  the  New  York,  New  Jersey  and  Kentucky  state  bar  associations  and  the  American  Corporate  Counsel  Association.    Theodore  L.  "Ted"  Harris,  Senior  Vice  President  and  President,  Global  Supply  Chain  of  Ashland;  and  President,  Ashland  Performance  Materials,  Age:  47  Mr.  Harris  was  named  president,  Ashland  Performance  Materials,   in  2009.  n  addition,  as  president,  Global  Supply  Chain,  Harris  holds  Ashland-­‐wide  responsibility  for  the  functions  that  encompass  the  manufacture  and  delivery  of  products  to  customers.  Harris  joined  the  company  in  2004  as  vice  president  and  general  manager  of  the  Composite  Polymers  group  within  Ashland  Performance  Materials.  In  2006,  he  was  named  a  vice  president  of  Ashland  and  president  of  Ashland  Distribution.  In  2008,  he  was  named  president  of  Ashland's  Global  Supply  Chain.  In  2008  and  2009,  he  also  led  the  development  and  execution  of  the  global  integration  strategy  related  to  the  Hercules  acquisition.  In  2011,  Harris  was  named  a  senior  vice  president  of  Ashland,  while  retaining  his  responsibilities  for  Performance  Materials  and  the  Global  Supply  Chain.    Immediately  prior  to  joining  Ashland,  Harris  served  as  general  manager  of  the  Food  Ingredients  Division  within  FMC's  Food,  Pharmaceutical  and  Personal  Care  Group  in  his  career  with  FMC  Corp.,  which  began  in  1992.  A  native  of  Philadelphia,  Pa.,  Harris  earned  a  bachelor's  degree  in  chemical  engineering  from  Lehigh  University.  He  also  holds  an  M.B.A.  from  the  Harvard  Graduate  School  of  Business  Administration.    Susan  B.  Esler,  Vice  President  and  Chief  Human  Resources  and  Communications  OfRicer,  Age:  51  Ms.  Esler  assumed  leadership  of  both  the  human  resources  and  corporate  communications  functions  of  Ashland  in  2006.  She  is  responsible  for  the  global  management  of  all  aspects  of  human   resources,   including   talent   management   and   development,   compensation   and   beneMits,   and   labor   and   employee   relations.   Her   communications   responsibilities   include  corporate  and  Minancial  communications,  public  relations  and  business-­‐to-­‐business  marketing  communications.  She  joined  Ashland  in  1999  as  manager,  executive  compensation.  She  was  promoted  in  2001  to  director,  corporate  human  resources,  and  in  2002,  to  vice  president,  human  resources  programs  and  services.  In  2004,  she  became  vice  president,  human  resources,  and  in  2006,  communications  and  corporate  affairs  were  added  to  her  responsibilities.  She  was  named  to  her  current  position  of  vice  president  and  chief  human  resources  and  communications  ofMicer  in  2011.  Immediately  prior  to   joining  Ashland,  Esler  served  as  senior  director  of  compensation,  beneMits  and  HRIS  for  PepsiCo  Food  Systems.  She  held  various  HR  leadership  roles  within  the  PepsiCo  organization  starting  in1990.  Esler  has  also  been  employed  as  a  compensation  consultant  with  Mercer  and  started  her  working  career  at  Dow  Chemical  as  an  HR  specialist.  A  native  of  Pittsburgh,  Pa.,  Esler  is  a  graduate  of  Miami  University,  Oxford,  Ohio,  and  earned  her  master's  degree  in  business  administration  from  the  Weatherhead  School  of  Management  at  Case  Western  Reserve  University,  Cleveland,  Ohio.    Source:  Company  Website    

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J.  William  Heitman,  Vice  President  and  Controller,  Age:  58  Mr.  Heitman  joined  Ashland  in  2008  with  more  than  30  years  of  Minancial  experience  in  various  industries,  including  automotive  and  chemicals.  As  vice  president  and  controller,  he  is  responsible   for  Ashland's  global   Minancial  accounting  and  reporting  processes,   including  oversight  of  accounting  policies  and  practices  and  external  and   internal   Minancial  reporting.  Previously,  Heitman  served  as  controller  for  the  $9  billion  North  American  Tire  operations  of  Goodyear  Tire  &  Rubber  Co.,  responsible  for  all  accounting  and  shared  services  for  North  America.  While  there,  he  was  a  key  contributor  to  the  signiMicant  restructuring  of  operations  and  implementation  of  an  enterprise  resource  planning  (ERP)  system  and  processes  related  to  Sarbanes-­‐Oxley  compliance.  He  joined  Goodyear  in  2004  after  three  years  of  experience  in  the  chemical  industry  at  Ferro  Corp.,  where  he  served  as  vice  president  of  Minance  and  interim  chief  Minancial  ofMicer.  At  Ferro,  he  led  the  Minancial  integration  of  a  sizeable  global  acquisition  and  was  a  key  contributor  to  a  $500  million  debt-­‐reduction  effort.  Heitman  was  also  vice  president  and  controller  for  Moen  Inc.,  where  he  spent  six  years.  Earlier  in  his  career,  he  held  numerous  Minancial  positions  during  a  16-­‐year  tenure  with  TRW.  Heitman  earned  a  B.S.B.A.  degree  in  accounting  and  an  M.B.A.   in  Minance  from  Pittsburg  State  University,  Pittsburg,  Kan.  He  is  a  certiMied  public  accountant  and  a  member  of  the  Financial  Executives  Institute,  the  American  Institute  of  CertiMied  Public  Accountants  and  the  Ohio  Society  of  CPAs.    Steven  E.  Post,  Vice  President,  Operations  and  Environmental,  Health  and  Safety,  Age:  58  Steve  Post  is  responsible  for  Ashland's  global  manufacturing  operations  and  environmental,  health  and  safety  (EH&S)  activities.  Post  came  to  Ashland  in  2011  following  its  acquisition  of  International  Specialty  Products  Inc.  (ISP).  He  joined  ISP  in  1999  when  it  acquired  Monsanto's  alginates  business,  which  he  served  as  president.  Post  soon  became  ISP's  senior  vice  president  of  Operations,  managing  global  manufacturing,  which  included  18  production  facilities  and  engineering,  process  technology  and  environmental,  health,  safety  and  security  functions.   Prior   to   ISP,   Post   enjoyed   a  20-­‐year   career  with  Merck,   holding  manufacturing   roles   of   increasing   responsibility   in  both   the  U.S.   and  Europe.  While   at  Merck,   he   gained  signiMicant  experience  in  the  production  of  specialty  polymers  derived  from  natural  raw  materials  and  fermentation  in  the  company's  Kelco  division.  Following  Monsanto's  acquisition  of  the  Kelco  division,  Post  worked  for  Mive  years  in  Monsanto's  nutrition  and  consumer  group  managing  manufacturing,  procurement  and  logistics,  engineering  and  EH&S,  prior  to  being  appointed   president   of   the   alginates   business.   A   native   of   Alliance,   Ohio,   Post   grew  up   in   Tempe,   Ariz.  He   holds   a   bachelor   of   science   in   chemical   engineering   from  Arizona   State  University  and  served  on  the  board  of  governors  of  the  Society  of  Chemical  Manufacturers  &  AfMiliates  (SOCMA).    Anne  T.  Schumann,  Vice  President  and  Chief  Information  and  Administrative  Services  OfRicer,  Age:  52  Ms.  Schumann  was  named  vice  president  and  chief  information  and  administrative  services  ofMicer  in  August  2009.  In  this  role,  she  holds  responsibility  for  Ashland's  global  information  technology   functions,   security   and   facilities  management.   Schumann   joined   the   company   in   2008   as   vice   president,   acquisition   integration,   at   the   time  Ashland   acquired  Hercules  Incorporated.  Previously,  she  served  as  Hercules'  vice  president  of  information  technology  from  2006,  with  responsibility  for  human  resources  added  in  2008.  She  joined  Hercules  in  2000  as  vice  president  of  the  Hercules  Shared  Services  Center.  Before  joining  Hercules,  Schumann  served  as  director  of  Minance  and  management  operations  for  Bryn  Mawr  College  near  Philadelphia,  Pa.  She  also  spent  11  years  with  ARCO  Chemical  Company,  holding  various  management  positions  in  Minance,  human  resources  and  global  business  operations.  She  began  her   career   in   1984  with   Continental   Illinois   National   Bank,   where   she  managed   corporate   banking   portfolios.   A   native   of   Chicago,   Ill.,   Schumann   earned   a   bachelor   of   science   in  environmental  biology  from  the  University  of  Illinois  and  an  M.B.A.  in  Minance  from  Indiana  University.    Walter  H.  Solomon,  Vice  President  and  Chief  Growth  OfRicer,  Age:  52  Ashland  vice  president  and  chief  growth  ofMicer  since  August  2005,  Mr.  Solomon  is  responsible  for  the  company's  enterprise  strategy.  His  team  has  mapped  Ashland's  transformation  from  a  U.S.   regional  oil   reMiner   into  a  global   specialty  chemical  company  and   leader   in  sustainable  chemistry.  Solomon   joined  Ashland   in  2002  as  senior  vice  president  and  general  manager  of  Ashland  Consumer  Markets'  (Valvoline)  Do-­‐It-­‐Yourself  business  unit.  While  in  that  role,  his  team  grew  proMitability  and  premium  lubricant  volume  each  year.  Prior  to  joining  Ashland,  Solomon  spent  20  years  growing  both  large  and  small  companies.  His  Mirst  10  years  were  in  a  series  of  brand  management  roles  with  Procter  &  Gamble,  ultimately  directing  marketing  in  P&G's  hair  care  and  juice  drink  businesses.  During  that  time,  Pantene*  grew  from  a  small,  boutique  brand  into  a  $100+  million  business  en  route  to  becoming  one  of  P&G's  billion-­‐dollar  global  brands.  He  spent  the  next  10  years  leading  privately  funded  startup  companies  in  the  healthcare  and  software  industries,  including  an  Inc.  500*  company  and  an  internet  technology  incubator.  A  native  of  Charleston,  S.C.,  Solomon  has  served  as  president,  chairman  or  vice  chairman  of  the  board  of  trustees  of  four  not-­‐for-­‐proMit  organizations  and  as  a  board  member  for  six  others.  He  received  his  bachelor's  degree  in  commerce  from  the  University  of  Virginia.  Source:  Company  Website    

Management  Compensation  

80  

     

 

Executive  management  highly  aligned  with  long-­‐term  shareholders.    

•  Compensation  Philosophy  

-  “seeks  to  align  executive  compensation  with  shareholder  value  on  an  annual  and  long-­‐  term  basis  through  a  combination  of  the  following  types  of  compensation:  base  pay,  annual  incentive  compensation  awards  and  long-­‐  term  incentive  compensation  awards  which  are  comprised  primarily  of  stock  appreciation  rights  (“SARs”)  and  Long  Term  Incentive  Plan  Awards  ("LTIPs”)”  

•  Compensation  Heavily  Weighted  Towards    At  Risk  Long  Term    Incentive  Targets  

-  CEO:  target  of  Total  Direct  Compensation  (1)  that  is  at  risk  is  84%:    

-  64%  to  long  term  incentives  

-  20%  to  annual  incentives  

-  16%  to  base  salary  

-  Other  Executive  OfMicers  Total  Direct  Compensation  that  is  at  risk  is  an  average  of  70%:  

-  44%  to  long-­‐  term  incentives  

-  26%  to  annual  incentives  

-  30%  to  base  salary  

 Source:  Ashland  Proxy  dated  January  31,  2013.      (1)  Total  Direct  Compensation  represents  the  sum  of  base  salary  +  target  annual  incentive  +  target  long-­‐  term  incentive.  The  base  salary  is  the  only  Mixed  compensation  component.  At-­‐  risk  compensation  is  

equal  to  the  sum  of  target  annual  incentive  +  target  long-­‐  term  incentive.  

Board  of  Directors  

81  

     

 

BoD  is  currently  made  up  of  eleven  directors,  divided  into  three  classes.    

Brendan  M.  Cummins,  Age:  61    Mr.  Cummins  served  as  a  global  strategic  advisor  to,  and  on  the  senior  executive  panel  of,  The  Valence  Group,  a  specialist  mergers  and  acquisitions  Mirm  from  2010  until  May  2012.  Prior  to  that  position,  Mr.  Cummins  served  with  Ciba  Specialty  Chemicals  as  Chief  Executive  OfMicer  from  2007  to  2008  and  as  Chief  Operating  OfMicer  from  2005  to  2007.  From  1974  to  2005,  Mr.  Cummins  held  a  variety  of  international  and  senior  management  positions  with  Ciba.  Mr.  Cummins  is  an  Associate  and  Fellow  of  the   Institute  of  Company  Accountants,   is  a  Fellow  of   the  Association  of   International  Accountants  and  received  a  Diploma   in  Company  Direction   from  the   Institute  of  Directors  in  2010.  He  also  completed  a  management  development  program  at  Harvard  in  1989.      

Roger  W.  Hale,  Age:  69    Mr.  Hale   is   currently   an   independent   consultant.   He   served   as   Chairman   of   the   Board   and   Chief   Executive  OfMicer   of   LG&E  Energy   Corporation,   a   diversiMied   energy  services  company  headquartered  in  Louisville,  Kentucky,  from  August  1990  until  retiring  in  April  2001.  Prior  to  joining  LG&E  Energy,  he  was  Executive  Vice  President  of  BellSouth   Corporation,   a   communications   services   company   in   Atlanta,   Georgia.   From   1966   to   1986,   Mr.   Hale   held   several   executive   positions   with   AT&T   Co.,   a  communications  services  company,  including  Vice  President,  Southern  Region  from  1983  to  1986.      

Kathleen  Ligocki,  Age:  56    Ms.  Ligocki  is  an  Operating  Executive  at  Kleiner  Perkins  CauMield  &  Byers,  one  of  Silicon  Valley's  largest  capital  providers.  She  is  also  a  principal  in  Pine  Lake  Partners,  Inc.,  a  consulting  Mirm  focused  on  turnaround  and  start-­‐  up  companies.  She  served  as  the  Chief  Executive  OfMicer  of  Next  Autoworks,  from  2010  to  2012,  and  GS  Motors,  from  2008   to   2009,   two   privately-­‐   held   start-­‐   up   companies.   Prior   to   joining   GS   Motors,   Ms.   Ligocki   worked   at   Tower   Automotive,   the   Ford   Motor   Company,   United  Technologies   and   General   Motors   Corporation.   Ms.   Ligocki   holds   a   Bachelor   of   Arts   degree   in   liberal   studies   from   Indiana   University,   a   Masters   in   Business  Administration  from  The  Wharton  School  at  the  University  of  Pennsylvania  and  honorary  doctorates  from  Indiana  University  and  Central  Michigan  University.      

Vada  O.  Manager,  Age:  51    Mr.   Manager   is   the   Chief   Executive   OfMicer   of   Manager   Global   Consulting   Group   and   a   Senior   Director/Senior   Counselor   of   APCO  Worldwide,   a   strategic   consulting  company.  Prior  to  this  position,  he  was  an  independent  global  consultant.  Mr.  Manager  served  as  the  Senior  Director  of  Global  Issues  Management  for  Nike,  Inc.  from  2006  until  March  2009,  and  he  held  various  management  positions  at  Nike  beginning  in  1997.  Before  joining  Nike,  he  performed  a  similar  role  for  Levi  Strauss  &  Co.  and  was  also   a  Vice  President   of   the  Washington,  D.C.-­‐   based  public   affairs   Mirm,  Powell  Tate,   a   part   of  Weber   Shandwick.  Mr.  Manager  holds   a  Bachelor   of   Science  degree   in  political  science  from  Arizona  State  University  and  performed  graduate  work  at  the  London  School  of  Economics.      

James  J.  O'Brien,  Age:  58  Mr.  O'Brien  is  Ashland's  Chairman  of  the  Board  and  Chief  Executive  OfMicer.  Prior  to  this  position,  Mr.  O'Brien  was  President  and  Chief  Operating  OfMicer  of  Ashland  and  Senior  Vice  President  and  Group  Operating  OfMicer  of  Ashland.  He  also  served  as  the  President  of  Valvoline  from  1995  to  2001.  Mr.  O'Brien  holds  a  Bachelor  of  Science  degree  in  accounting  and  Minance  and  a  Masters  in  Business  Administration  from  The  Ohio  State  University.          

Source:  Ashland  Proxy  dated  January  31,  2013.        

Board  of  Directors  (cont’d)  

82  

     

Barry  W.  Perry,  Age:  66    Mr.  Perry  served  as  Chairman  and  Chief  Executive  OfMicer  of  Engelhard  Corporation  from  January  2001  to  June  2006.  Prior  to  this  position,  he  held  various  management  positions  with  Engelhard  Corporation  beginning  in  1993.  From  1991  to  1993,  Mr.  Perry  was  a  Group  Vice  President  of  Rhone-­‐  Poulenc.  Prior  to  joining  Rhone-­‐  Poulenc,  he  held   a   number   of   executive   positions   with   General   Electric   Company.   Mr.   Perry   holds   a   Bachelor   of   Science   degree   in   plastics   engineering   from   the   University   of  Massachusetts.      Mark  C.  Rohr,  Age:  61    Mr.  Rohr  is  Chairman  and  Chief  Executive  OfMicer  of  Celanese  Corporation,  a  technology  and  specialty  materials  company.  He  has  served  in  these  roles  since  April  2012.  Prior  to  this  position,  he  held  several  executive  positions  with  Albemarle  Corporation,  a  specialty  chemical  company,  including  Executive  Chairman  of  the  Board  (2011-­‐  2012),   Chairman   of   the  Board   (2008-­‐   2011),   Chief   Executive  OfMicer   (2002-­‐   2011)   and   President   (2000-­‐   2010).   Before   joining  Albemarle,   he   served  with  Occidental  Chemical  Corporation  as  Senior  Vice  President,  Specialty  Chemicals.  Mr.  Rohr  holds  Bachelor  of  Science  degrees  in  chemistry  and  chemical  engineering  from  Mississippi  State  University.      George  A.  Schaefer,  Jr.,  Age:  67  Mr.  Schaefer  served  as  Chairman  of  the  Board  of  Directors  of  Fifth  Third  Bancorp  and  Fifth  Third  Bank  headquartered  in  Cincinnati,  Ohio  until  June  2008.  Prior  to  this  position,  he  held  several  executive  positions  with  Fifth  Third  Bancorp  and  Fifth  Third  Bank,  including  Chief  Executive  OfMicer,  President  and  Chief  Operating  OfMicer.    Mr.  Schaefer  holds  a  Bachelor  of  Science  degree  from  the  U.S.  Military  Academy  at  West  Point  and  a  Masters  in  Business  Administration  from  Xavier  University.      

Janice  J.  Teal,    Age:  60    Dr.  Teal  served  as  the  Group  Vice  President  and  Chief  ScientiMic  OfMicer  for  Avon  Products  Inc.,  a  direct  seller  of  beauty  and  related  products,  from  January  1999  to  May  2010.  Prior  to  that  position,  Dr.  Teal  served  as  Vice  President  of  the  Avon  Skin  Care  Laboratories,  where  she  led  the  bioscience  research  and  skin  care  teams.  Dr.  Teal  holds  a  doctorate  degree  and  a  Master  of  Science  degree  in  Pharmacology  from  Emory  University  Medical  School,  a  Pharmacy  Degree  from  Mercer  University  and  was  a  Post-­‐  Doctoral  Fellow  at  the  New  York  University  Medical  Center  Institute  of  Environmental  Medicine.    John  F.  Turner,  Age:  70    Mr.  Turner  served  as  Assistant  Secretary  of  State  for  the  U.S.  Department  of  State's  Bureau  of  Oceans  and  International  and  ScientiMic  Affairs  in  Washington,  D.C.,   from  November   2001   until   July   2005.   Prior   to   serving   at   the   Department   of   State,   he  was   President   and   Chief   Executive   OfMicer   of   The   Conservation   Fund,   a   non-­‐   proMit  organization  dedicated  to  conserving  America's  natural  and  historic  heritage.  Mr.  Turner  also  served  in  the  Wyoming  state  legislature  for  19  years  and  is  a  past  president  of  the  Wyoming  State  Senate.  He  is  also  a  managing  partner  in  The  Triangle  X  Ranch  in  Wyoming  and  a  visiting  professor  at  the  University  of  Wyoming.  Mr.  Turner  holds  a  Bachelor  of  Arts  degree  in  biology  from  the  University  of  Notre  Dame  and  a  Master  of  Science  degree  in  wildlife  ecology  from  the  University  of  Michigan.      Michael  J.  Ward,  Age:  62    Mr.   Ward   is   Chairman   of   the   Board   and   Chief   Executive   OfMicer   of   CSX   Corporation,   a   transportation   supplier.   Prior   to   this   position,   he   was   President   of   CSX  Transportation,  the  corporation's  rail  unit.  Mr.  Ward  holds  a  Bachelor  of  Science  degree  from  the  University  of  Maryland  and  a  Masters  in  Business  Administration  from  the  Harvard  Business  School.        Source:  Ashland  Proxy  dated  January  31,  2013.        

Director  Compensation  

83  

     

Annual  Retainer  •  an  annual  retainer  of  $90,000  for  each  director  •  an  additional  annual  retainer  of  $20,000  for  the  Lead  Independent  Director  •  an  additional  annual  retainer  of  $15,000  for  the  Chair  of  the  Audit  Committee  and  $9,000  for  Audit  Committee  members  •  an  additional  annual  retainer  of  $10,000  for  other  Committee  Chairs  •  Non-­‐  employee  directors  may  elect   to   receive  part  or  all  of  each  retainer   in  cash  or   in  shares  of  Ashland  Common  Stock.  They  may  also  elect   to  have  a  portion  or  all   retainers  

deferred  and  paid  through  the  Directors'  Deferral  Plan.  The  directors  who  make  an  election  to  defer  retainers  may  have  the  deferred  amounts  held  as  common  stock  units  (share  equivalents)  in  the  hypothetical  Ashland  Common  Stock  fund  or  invested  under  the  other  available  investment  options  under  the  plan.  The  payout  of  the  deferred  retainers  occurs  upon  termination  of  service  by  a  director.  Directors  may  elect  to  have  the  payout  in  a  single  lump  sum  or  in  installments  not  to  exceed  15  years.  For  deferrals  before  January  1,  2005,  upon  a  "change  in  control"  of  Ashland  (as  deMined  in  the  Directors'  Deferral  Plan),  amounts  in  the  directors'  deferral  accounts  will  be  automatically  distributed  as  a  lump  sum  in  cash  to  the  director.  For  deferrals  on  and  after  January  1,  2005,  distributions  for  such  deferrals  will  be  made  pursuant  to  each  director's  election  and  valued  at  the  time  of  the  distribution.  

 

Restricted  Shares  /  Units  •  Upon  election  to  the  Board  of  Directors,  each  new  director    received  1,000  restricted  shares  of  Ashland  Common  Stock.  •  Each  non-­‐  employee  director  also  receives  an  annual  award  of  deferred  restricted  stock  units   in   the  Directors'  Deferral  Plan  with  a  grant  date  value  of  $100,000  (pro-­‐  rated  as  

applicable   for   less   than  a   full-­‐   year  of   service).  The   restricted   stock  units   vest  one  year   after  date  of   grant  or  upon   the  date  of   the  next   annual   shareholder  meeting,   if   earlier.  Dividends  on  restricted  stock  units  are  reinvested  in  additional  restricted  stock  units.  Upon  a  "change  in  control"  of  Ashland,  the  restricted  stock  units  immediately  vest.  A  director  may  elect  before  the  restricted  stock  units  vest  to  have  his  or  her  vested  units  paid  in  shares  of  Ashland  Common  Stock  or  in  cash  after  the  director  terminates  from  service.  

 

Stock  Ownership  Guidelines  Minimum  ownership  guidelines   for  non-­‐  employee  directors  which   require  each  director   to  own   the   lesser  of   (i)  12,500  shares  or  units  of  Ashland  Common  Stock,  or   (ii)  Ashland  Common  Stock  having  a  value  of  at   least   Mive   times  his  or  her  base  annual  cash  retainer  of  $90,000.    Each  newly  elected  director  has   Mive  years   from  the  year  elected  to  reach  this  ownership  level.    

 

“The  Board  of  Directors  considers  Ashland  Common  Stock  ownership  by  directors  to  be  of  utmost  importance.  The  Board  believes  that  such  

ownership  enhances  the  commitment  of  directors  to  Ashland's  future  and  aligns  their  interests  with  those  of  Ashland's  other  shareholders.”  

 

Source:  Ashland  Proxy  dated  January  31,  2013.        

 

Board  aligned  with  shareholders.    

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The World’s Largest Community of Buyside Professionals. Since 2008.

What Is SumZero? SumZero is the world’s largest community of investment professionals working at hedge funds, mutual funds, and private equity funds. With over 8,500 pre-screened professionals collaborating on a fully-transparent platform, SumZero fosters the sharing of many thousands of proprietary investment reports every year and offers several ancillary services in support of that effort. SumZero’s membership base is represented by analysts and PMs at nearly all of the world’s largest and most prominent investment funds.

SumZero Research ! Fast-growing research database with over 7,000 long-form research memos and 24,000

short-form pitches created by member analysts. ! Extensive search and filtering capabilities on a variety of standard metrics and

proprietary data points. ! Deep, fundamental research supplemented with Excel valuations, PDFs, and PPT decks. ! Global, cross-asset coverage.

SumZero Community

! Access to a searchable rolodex of all SumZero members. ! Search by current and past employers, firm type, AUM, research performance, site

ranking, sector/geographic/asset class expertise, job title, location, educational history, and more.

SumZero Cap Intro

! A searchable, two-sided platform designed to showcase SumZero’s top funds and managers through a qualitative, research-focused database.

! Exposure to a rapidly-growing group of over 50 large, institutional allocators. ! Participating investors are 50% family office/multi-family office, 25% fund of funds, 25%

university endowment.

SumZero Careers

! Fast-growing compensation database with hundreds of entries from member analysts, detailing specifics on salary history, incentive fees, comp structures, and firm types.

! Access to internal Job Vault with dozens of exclusive listings at buyside shops.

Learn more at sumzero.com