2013 Value Investing Challenge Finalist

Long on Ashland (ASH:US)

By Daniel Lawrence, Elmrox Investment Group

CHALLENGE U BY FACTSET
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2nd Annual Value Investing Challenge Winners

Travis Cocke
Southpaw 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.

www.ValueInvestingChallenge.com
 CHALLENGE U BY FACTSET
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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

www.ValueInvestingChallenge.com
Elmrox  Investment  Group    

Ashland  Inc  
”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.  

2  
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Variant  Perception  
 

Misunderstood  asset  transformation  with  signi=icant  upside  and  catalysts.  

 

•  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  

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Investment  Merits  
 

ASH  is  a  premier  global  specialty  chemical  =irm    

well-­‐positioned  for  growth  and  margin  expansion.  
 

•  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  
 

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Why  Invest  in  Specialty  Chemicals?  
 

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.  
 

•  Long-­‐term  growth  
•  More  consistent,  predictable  performance  
•  Strong,  sustainable  margins  
•  SigniMicant  hurdles  for  new  entrants  
•  Technology  driven,  difMicult  to  displace  
   

   
Technology   Switching  Costs   Intellectual   High  Barriers  to  
 
    Property   Entry  

•  Highly  tailored   •  RequaliMication  periods   •  High  number  of   •  SigniMicant  amount  of  
products   costly  and  time   -  Patents   backward  integration  
•  Customer-­‐intimate   consuming   -  Trade  secrets   •  Stand-­‐alone  plant  
technology  model   •  Products  typically   •  Large  degree  of   capital  is  $40M+  
•  Push  for  constant   represent  small  %  of   manufacturing  know-­‐ •  Full  supply-­‐chain  
innovation   customer’s  Minal   how   replication  would  cost  
product   $  billions  

9  
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 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.  

11  
Transformation  Driving  Outperformance  
 

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  
Improved  Balance   Ef=icient  Operations   Improved    End  
Sheet  and  New   Market  Exposure,  
Investment   Higher  Revenue  
Opportunities   Growth  
Refreshed    
Asset  Portfolio  
 
Growth  and  
Margin  Improvement  
 
Transform  to  Specialty  
Chemicals  

Higher  Cash  Flow,   Improved  Cost  

Increased  Returns  on   Ef=iciency,  Asset  
Invested  Capital   Utilization,  Operating  
Margins  

12  
 Competitive  Advantages  &  Moats  
 

Sustainable  &  widening  moats  from  proprietary  and  patented  IP.  

 

   

High  Barriers  to  Entry   Leading  Economies  of  Scale   High  Switching  Costs  
 
 

and  Market  Share    

   

ü  High  capital  costs  to  replicate   ü  #1  or  #2  in  position  in  its   ü  Extensive  relationships  with  
manufacturing  capabilities   global,  core  chemistries   leading  consumer  products  
and  pharmaceutical  providers  
ü  Stand-­‐alone  plant  capital  is   ü  Broad  global  footprint  that  
over  $40+  million   sells  into  more  than  100   ü  Unique  technology  portfolio  
countries   highly  customized  to  meet  
ü  Full  supply-­‐chain  replication   demanding  customer  
would  cost  billions   ü  30  manufacturing  locations   applications  
ü  High  number  of  active  patents   ü  20  technology  centers   ü  RequaliMication  periods  costly  
and  trade  secrets   and  time  consuming    
ü  Active  program  of  
ü  Approximately  400  scientists   collaboration  with  academia   ü  Mission-­‐critical  products  that  
positioned  globally   typically  represent  a  small  %  
ü  A  full  complement  of  testing  
of  overall  cost  of  a  customer’s  
services  for  personal  care  
product  companies   Minal  product  

13  
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Well-­‐Positioned  Product  Portfolio  
 

Bene=iciary  of  long-­‐term,  global  secular  growth  trends,    

where  Ashland’s  chemicals  are  mission-­‐critical  ingredients.  
 

     
Pharmaceuticals   Personal  Care   Emerging    
Energy    
   
   
Middle  Class  
 
 

•  Aging  population   •  Global  focus  on  anti-­‐ •  Consumer  spending   •  Horizontal  and  
aging   inMluenced  by  global   deepwater  wells  
•  Global  access  to  health  
middle  class   require  2x  the  
care   •  Increased  global    
specialty  chemicals  per  
consumer  awareness   •  Improved  product  
•  Controlled  release   rig  
of  UV  protection  /   performance  
forms  (medication)  
suncare   •  Depressed  natural  gas  
•  Manufacturing  cost  
•  Rapid  growth  of   in  North  America  and  
•  Male  grooming,   efMiciency  
generics  leading  to   shift  from  dry–gas  to  
particularly  in  young  
lower  price  and   •  Environmental  /   more  liquid-­‐rich  wells  
men  
increased  availability   Regulation  
•  Unconventional  wells,  
•  Desire  for  simple,  
•  Pharmaceutical  R&D   including  shale  gas  in  
natural  /  green  
centers  located   North  America  
products  
worldwide  
•  Environmental  /  
Regulatory  
Source:    Company  data.  

17  
 Strong  Balance  Sheet  &  Liquidity  
 

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

•  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  

Source:    Company  data.  

18  
Predictable  &  Growing  Free  Cash  Flow  
 

Cash  =low  generation  temporarily  depressed  by  growth  capex,  higher  

coupon  debt,  and  higher  than  likely  corporate  tax  rate.  
 

•  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  

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

19  
Capital  Allocation  &  Cash  Management  
 

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.  

20  
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ASI  Drivers  (cont’d)  
  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  
Viscosity  
-  Improves  packaging  clarities  
•  Secular  Drivers:    
-  Increasing  customer  demands  for  more  convenience  
-  Health  and  wellness  
-  More  natural  ingredients   ClariMication   Stability  
•  Growth  Opportunities:  
-  Beverages  and  bakery  
-  Natural  products  
Shelf  Life  

25  
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Water  Turnaround  Initiative  
 

New  management  brought  in  to  =ix  business.  

 

Signi=icant  Strategic  Actions  in  2013  

 
Innovation  
 

1.  Consolidated  business  into  two  segments:     •  Rich  pipeline  of  innovation  platforms  with  a  
•  reduces  management  complexity   number  of  products  in  launch  phase:  
•  Aligns  business  by  customer  and   •  Bioguard  –  Packaging  
market  opportunity   •  OptiMilm  –  Printing  &  Writing  
•  $20mm  full-­‐year  run-­‐rate  SG&A   •  Microbial  Control  –  Water  Tech  
from  overheard  reduction   •  Monitoring  &  Diagnosis  -­‐  Industrial  
2.  Bringing  in  the  right  team:   •  Strong  R&D  Portfolio  
•  New  talent  for  marketing  and  
geographic  expansion   Improving  a  Repeatable  Process  
Realigned  sales  force  to  better  
 

• 
address  customer  needs   •  Multi  regional  marketing  
3.  Improve  Execution:   •  Selling  process  
•  At  customer  level   •  Pricing  management  
•  Accelerate  new  product  penetration   •  Contract  administration  
  •  Channel  management  
Hired  Luis  Fernandez-­‐Moreno  as  new  President  of  
Water  in  late  2012.    He  has  30  years  of  relevant   •  Corporate  customer  focus  
industry  experience  (Arch,  Dow,  Rohm  &  Haas)   •  Sales  and  operations  planning  

33  
 Potential  Upside  at  Water  
 

Potential  value  creation  from  recent  actions  taken.  

 

•  New  management  stabilized  sales  in   Sensitivity)Analyses

1H2013  and  identiMied  signiMicant   EBITDA)Margin

operational  restructuring  opportunities   Sales Gross)Margin

33% 34% 35% 36% 37%
$1,700 9% 10% 11% 12% 13%
•  Industrial  middle  management  structure   $1,750 9% 10% 11% 12% 13%
$1,800 10% 11% 12% 13% 14%
being  streamlined  or  ~$20mm  permanent   $1,850 11% 12% 13% 14% 15%
$1,900 11% 12% 13% 14% 15%
run-­‐rate  savings;  (PF  LTM  EBITDA  
$163mm)   Incremental)EBITDA
Sales Gross)Margin
33% 34% 35% 36% 37%
•  Potential  for  EBITDA  margins  to  reach  mid   $1,700 $6 $23 $40 $57 $74
teens  over  long-­‐term  from  8.4%  LTM   $1,750
$1,800
$22
$39
$40
$57
$57
$75
$75
$93
$92
$111
3/31/13  through  new  market  penetration,   $1,850 $55 $74 $92 $111 $129
$1,900 $72 $91 $110 $129 $148
increasing  sales  of  existing  customers  and    
   
operating  leverage     Value)Per)Share)(7x)EBITDA)
Sales Gross)Margin
33% 34% 35% 36% 37%
•  Peer-­‐like  gross  margins  would  create  $5  to   $1,700 $0.49 $1.97 $3.45 $4.93 $6.41
$13  per  share  of  incremental  value(1)   $1,750
$1,800
$1.93
$3.36
$3.45
$4.93
$4.97
$6.50
$6.50
$8.06
$8.02
$9.63
$1,850 $4.80 $6.41 $8.02 $9.63 $11.24
(1)  Nalco,  now  owned  by  Ecolab,  had  ~40%  gross  margin  when  it  was  an  independent  company.     $1,900 $6.23 $7.89 $9.54 $11.20 $12.85
N.B.:    Ashland  Water  LTM  3/31/13  gross  margin  was  33%.  

34  
 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  

Water&Potential&Valuation Sensitivity)Analysis
Low High Water
LTM*3/31/13*PF*EBITDA $163 $163 EBITDA EBITDA)Multiple
EBITDA*Multiple 8.0x 12.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied&Water&Gross&Value $1,304 $1,956 $143 $1,144 $1,287 $1,430 $1,573 $1,716
Ashland*Shares 79 79 $153 $1,224 $1,377 $1,530 $1,683 $1,836
Water&Gross&Value&per&Share $17 $25 $163 $1,304 $1,467 $1,630 $1,793 $1,956
%*of*current*ASH*price 20% 29% $173 $1,384 $1,557 $1,730 $1,903 $2,076
Source:    Based  off  consensus  estimates  as  of  July  16,  2013.   $183 $1,464 $1,647 $1,830 $2,013 $2,196

35  
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Performance  Chemicals  Drivers  
 

Key  long-­‐term  growth  markets  

.  

   

Packaging  and  Converting   Fuel  Gas  Desulfurization  

.    

  •  Very  large  growing  market   •  Global  energy  demands  drive  one  

Market  Appeal   •  Above  average  gross  margins   new  coal-­‐Mired  power  plant  per  week  
  •  Relatively  non-­‐cyclical   -  Increasingly  stringent  legislation  
  •  Estimated  $1.5bn  opportunity   demands  reduced  emissions  
 
.   •  Estimated  $100mm  opportunity  
 
•  More  environmentally  friendly   •  Highly  corrosive  pollution  gases  are  
Market  Needs   adhesives   not  suited  for  traditional  metals  
  -  Maintaining  same  level  of  
 
 
performance  as  solvent-­‐based  
  chemistries  
  •  Custom-­‐formulated  products   •  Leading  provider  of  corrosion  
Value  Proposition   •  New  technologies  including  water-­‐ resistant  resin  solutions  
  based  and  radiation-­‐curable   (DerakaneTM)  
  products   •  Well-­‐known,  reliable  performance  
 
.   -  20+  year  history  in  the  Mield  

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Valvoline  Organic  Opportunities  
 

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

Organic  Opportunities  

ü  Capitalize  on   ü  Leverage   ü  New  Product   ü  Expand  and   ü  Base  oil  
secular  shifts   Instant  Oil   Penetration:   strengthen   capacity  
-  Shift  from  DIY   Change   Drive   international   expansions  
to  higher   business  model   NextGen™  trial   presence  in   should  further  
margin  DIFM   to  grow   and  MaxLife™   emerging   reduce  
organically  and   growth   regions   volatility  
-  Mix  shift  to  
gain  share  
higher  margin  
premium  
products  
 

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

43  
Innovative  Brands:  NextGenTM  
 

Innovative  new  products  with  higher  margins  that  gain  share.  

 

Consumer    
Objectives   Results  to  Date   Next  Steps  
Proposition  

•  Introduced  in  Spring   •  Drive  signiMicant  DIY   •  DIY    available  in  14,500   •  Execute  recycling  
2011   share  growth  and   retail  auto  parts  stores   program  initiatives  
DIFM  consumer/ with  retailers  to  drive  
•  Better  for   •  Estimated  600,000  DIY  
installer  loyalty   trial  
environment   early  adopters;  $34  
•  Increase  base  oil   million  in  sales  for   •  Continue  advertising  
-  50%  recycled,  re-­‐
purchasing  leverage   Miscal  2011   focus  
reMined  oil  
by  driving  
•  NextGenTM  represents   •  Establish  national  bulk  
•  No  compromise  to   development  of  re-­‐
19%  of  oil  changes  at   distribution  for  VIOC,  
quality   reMined  market  
$5  premium   Installer  channels  
-  100%  Valvoline   •  Establish  NextGenTM  
•  Fleet  opportunity  for  
protection   in  VIOC  company  
both  VIOC  and  C&I  
stores  
•  Similar  price  point   businesses  

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U.S.  Competitive  Landscape  for  VIOC  
 

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

 

•  U.S.  Market  Size  (2013E):  $9.8bn   Top$US$Fast$Lube$Chains$2013

•  Stable  and  highly  fragmented   Owned Franchised Total %$Share
market  with  17,063  stores   1 Jiffy&Lube 0 1,962 1,962 11.5%
2 Valvoline$Instant$Oil$Change 260 636 896 5.3%
•  Industry  largely  consists  of   3 Pennzoil 750 0 750 4.4%
4 Kwik&Tar 393 0 393 2.3%
small  mom  and  pop  owners     5 Express&Care 336 0 336 2.0%
6 Mobil&1&Lube&Express 327 0 327 1.9%
•  Ripe  for  consolidation   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%
•  #1  player  only  has  ~11%  share   10 Grease&Monkey 8 172 180 1.1%
Total$Top$10 2,645 2,880 5,525 32.4%
•  Top  10  players  represent  only   Total$Top$50 3,736 3,039 6,775 39.7%
32%  of  market   Total$US$Fast$Lube$Industry   17,063
   

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

Source:  National  Oil  &  Lube  News  and  Company  Data    

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&fed&& !BBDU!! &fe_dc&&
!jjD@@!!
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&ecc&& !B?DU!! &Yd_Z&& &f[_e[&&
!j@@!! &Y[_b&& !j?D@@!! &eW_Wf&&
!B?D@!!
!BADU!! !j@D@@!!
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!BAD@!! !UcD@@!!
!U@@!! !B@DU!! !UjD@@!!
?@@Y! ?@A@! ?@AA! ?@A?! ?@@Y! ?@A@! ?@AA! ?@A?! ?@@Y! ?@A@! ?@AA! ?@A?!

A58@6$C&;453"1&& P36$>:/1"&;453"1&&
R.4-*1h!H.,5&':!(&2&D!

fc!
Valvoline  International    
 

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

 

•  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  

49  
International  Landscape  for  VIOC  
 

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

Top$US'Based$Chains$with$Foreign$Facilities
•  Big  opportunity  for  growth  and  
penetration  particularly  among   Total %$Share
developing  markets   1 Mobil'1'Centers 2,188 48.5%
2 Texaco'Havoline'xpress'lube 1,432 31.8%
3 Walmart'Tire'&'Lube'Express 266 5.9%
•  Branded  International  Market   4 Midas'Auto'Service'Experts 160 3.5%
consists  primarily  of  ~4,500  US-­‐ 5 Jiffy'Lube 150 3.3%
6 Precision'Tune'Auto'Care 82 1.8%
based  chains  with  foreign   7 Meineke'Care'Care'Centers 78 1.7%
facilities     8 Pennzoil 75 1.7%
9 Grease'Monkey 65 1.4%
10 AAMCO 11 0.2%
•  Growing  and  highly  fragmented   11 Citgo 1 0.0%
market  in  its  infancy   Total$US'Based$Chains$with$Foreign$Facilities 4,508

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

 

Source:  National  Oil  &  Lube  News  and  Company  Data.    

50  
Market  Ascribes  Little  Value  to  Valvoline  
 

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.  
 

Valvoline)Implied)Valuation Sensitivity)Analysis
ASH$consolidated$9/15E$EBITDA $1,400 $1,600 FYE)9/15E
$Less:$Valvoline$EBITDA ($350) ($350) EBITDA ASH)EBITDA)Multiple
ASH$EBITDA$exEValvoline $1,050 $1,250 7.0x 7.5x 8.0x 8.5x 9.0x
EBITDA$Multiple 8.0x 8.0x $1,400 $2,110 $1,585 $1,060 $535 $10
Implied$ASH$Value$exEValvoline $8,400 $10,000 $1,450 $1,760 $1,210 $660 $110 $0
Plus:$2014E$&$2015E$FCF 1,200 1,400 $1,500 $1,410 $835 $260 $0 $0
Total$Implied$Value$exEValvoline $9,600 $11,400 $1,550 $1,060 $460 $0 $0 $0
$1,600 $710 $85 $0 $0 $0
Current$ASH$Enterprise$Value $10,660 $10,660 $1,650 $360 $0 $0 $0 $0
$Less:$Value$exEValvoline ($9,600) ($11,400)
Implied)Valvoline)Value $1,060 $0
Implied$Valvoline$Value$per$Share $14 $0
Valvoline$EBITDA $350 $350
Implied$Valvoline$Multiple 3.0x 0.0x
 

At  the  current  ASH  share  price,    

a  shareholder  effectively  gets  Valvoline  for  free.  
 

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

51  
How  Much  Is  Valvoline  Worth?  
 

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)    

Valvoline)Potential)Valuation Sensitivity)Analysis:)Value)per)Share

Low High
Valvoline.Normalized.EBITDA $400 $400 EBITDA EBITDA)Multiple
EBITDA.Multiple (1) 8.0x 12.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied)Valvoline)Value $3,200 $4,800 $350 $36 $40 $45 $49 $54
Ashland.Shares 79 79 $375 $38 $43 $48 $53 $57
Valvoline)Value)per)Share $41 $61 $400 $41 $46 $51 $56 $61
Market.Implied.Value.per.Share $14 $14.00 $425 $43 $49 $54 $60 $65
%.difference 191% 337% $450 $46 $52 $57 $63 $69
 
   

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

(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.  

52  
Potential  Ways  to  Unlock  Trapped  Value  
 

Valvoline:  Spin  or  MLP  or  both?  

 

•  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  

53  
Potential  Further  Value  Creation  as  MLP  
 

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”  

54  
How  Could  Valvoline  Qualify  as  a  MLP?  
 

MLPs  already  exist  that  process,  blend,  and    

distribute  hydrocarbons  including  motor  oils.  
 

•  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)  
   

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.    

(1)  Source:  2013  CLMT  Investor  &  Analyst  Day  

(2)  Source:  Northern  Tier  2012  10-­‐K  Miling  
(3)  Source:  CVR  ReMining  2012  10-­‐K  Miling  

55  
Operations  That  Could  Qualify  for  MLP  
Valvoline  has  plants  and  distribution  capabilities  akin  to    
entities  that  already  qualify  as  MLP’s  for  tax  purposes.  
 

Lubricant  Blending  &  Manufacturing  

 
Distribution  
 

-  Santa  Fe  Springs,  California   -  College  Park,  Georgia  

-  Cincinnati,  Ohio   -  Willow  Springs,  Illinois  
-  East  Rochester,  Pennsylvania   -  Noblesville,  Indiana  
-  Deer  Park,  Texas   -  St.  Louis,  Missouri  
-  Wetherill  Park,  Australia   -  Cincinnati,  Ohio  
-  Dordrecht,  the  Netherlands   -  East  Rochester,  Pennsylvania  
-  Birkenhead,  United  Kingdom  
Bulk  Blending  
-  Sydney,  Australia  
-   Dordrecht,  the  Netherlands  
-  College  Park,  Georgia      
-  Willow  Springs,  Illinois  
-  St.  Louis,  Missouri  
-  Mississauga,  Canada  

Source:  Company  Data  

56  
Illustrative  Valvoline  MLP  Valuation  
 

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
MLP)Enterprise)Value
EBITDA'(FYE'9/14E) $350 EBITDA Yield
(4)'Maintenance'Capex (36) 4.0% 5.0% 6.0% 7.0% 8.0%
(4)'Interest 0 $325 $7,225 $5,780 $4,817 $4,129 $3,613
Distributable'CF $314 $350 $7,850 $6,280 $5,233 $4,486 $3,925
Yield 5.0% $375 $8,475 $6,780 $5,650 $4,843 $4,238
Implied'Equity'Value $6,280 $400 $9,100 $7,280 $6,067 $5,200 $4,550
(+)'Net'Debt 0 $425 $9,725 $7,780 $6,483 $5,557 $4,863
Enterprise'Value $6,280
Implied'EBITDA'Multiple 17.9x Implied(MLP(EBITDA(Multiples
   
EBITDA Yield
Valvoline  as  a  MLP  could  be   4.0%
   
5.0% 6.0% 7.0% 8.0%
worth  $4bn  to  $9bn  versus     $325 22.2x 17.8x 14.8x 12.7x 11.1x
$350 22.4x 17.9x 15.0x 12.8x 11.2x
ASH  current  equity  market   $375 22.6x 18.1x 15.1x 12.9x 11.3x
capitalization  of  $6.7bn.  
$400 22.8x 18.2x 15.2x 13.0x 11.4x
  $425 22.9x 18.3x 15.3x 13.1x 11.4x

57  
How  Much  Value  Could  an  MLP  Create?  
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$Creation
MLP$per$Share$Value$Creation
Implied(MLP((Equity(Value $6,280 EBITDA Yield
ASH(Shares(Outstanding 79 4.0% 5.0% 6.0% 7.0% 8.0%
Equity(Value(Per(Share $80.00 $325 $63.24 $44.83 $32.56 $23.80 $17.22
$350 $68.99 $48.99 $35.65 $26.13 $18.99
ASH(EBITDA(Reduction ($350) $375 $74.73 $53.14 $38.75 $28.46 $20.75
ASH(EV(Multiple 7.0x $400 $80.48 $57.30 $41.84 $30.80 $22.52
EV(Value(Reduction ($2,450) $425 $86.23 $61.45 $44.93 $33.13 $24.28
ASH(Shares(Outstanding 79
(Q)(ASH(EBITDA(Reduction ($31.01)
Net$Value$Creation $48.99
%(from(current 57.6%
 

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

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

58  
 &

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

59
We  believe  ASH  is  Undervalued  
 

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:  
 

•  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  

60  
Why  This  Opportunity  Exists  
 

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

Pharmaceuticals  
•  Many  moving  pieces  mask  true  underlying  value  
•  Long  history  of  being  deeply  cyclical  company  
with  its  “old”  portfolio   Personal  Care  

•  Misguided  concerns  over  hydrocarbon  chain  

exposure  (base  oil  II)  
Coatings  
•  Investor  fatigue  over  Water  restructurings  
Transform  
•  Lack  of  publicly  traded  comps  for  Valvoline  
Energy  
•  Scant  insider  ownership  
•  Management  is  low  proMile  
Construction  
•  ASH  stock  not  in  major  indexes  or  sector  ETFs  
•  Historically  under-­‐followed  on  the  sell  side    
Food  &  Beverage  

61  
Why  are  ASH  Shares  Cheap?  
   

The  Bear’s  Concerns   Elmrox  View  

   

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

•  Oil  exposure   •  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  

 

•  Valvoline  difMicult  to  value   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  
•  Weak  cash  Mlow   costs  annualize,  and  tax  rates  fall  towards  mid  20s;  Consensus  
overestimates  cash  pension  payments  in  FYE  2014  and  FYE  2015  

•  Underfunded  pension   •  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  will  make  poor   •  Management  has  long  history  of  being  patient  and  thoughtful  
capital  allocators  managing  the  portfolio.  
acquisition  

62  
Multiple  Ways  to  Create  Value  
 

Organic  Growth  +    
Under-­‐Appreciated  Assets  
 

   

Specialty  Ingredients   Water  

   

•  New  products   •  Operational  turnaround  

•  Developing  markets  penetration   •  Sales  of  asset    
 

Valvoline  
 

•  Store  and  franchise  growth  

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

Shareholder  Value  Creation  

 

63  
Opportunity  for  Multiple  Expansion  
 

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.  
 

FYE  2014   Specialty   Commodity   Ashland  

EV/EBITDA    9x   6x   7x  
   
P/E   16x   10x   11x  
   

Multiple  
Expansion  
 

We  believe  the  market  is  offering  

investors  a  leading  global  specialty  
chemical  business  for  relatively  low  
multiples  of  earnings  and  cash  =low.  
 

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.  

STRICTLY  CONFIDENTIAL  
64  
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Illustrative  ASH  Standalone  Valuation  
 

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  
Sensitivity)Analysis
   

Low High
ASH*EBITDA*(FYE*9/30/15E) $1,400 $1,600 EBITDA EBITDA)Multiple
EBITDA*Multiple 8.0x 8.0x 8.0x 9.0x 10.0x 11.0x 12.0x
Implied!Firm!Value $11,200 $12,800 $1,400 $107 $125 $143 $161 $178
Less:*Net*Debt (3,991) (3,991) $1,450 $112 $131 $149 $168 $186
Plus:*2014E*&*2015E*FCF 1,200 1,400 $1,500 $117 $136 $156 $175 $194
Implied*Equity*Value 8,409 10,209 $1,550 $122 $142 $162 $182 $201
Ashland*Shares 79 79 $1,600 $128 $148 $168 $189 $209
Implied!Equity!Value!per!Share $107 $130
Current*Price $85 $85
%*from*current 26% 53%
 

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)  

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.    

66  
Illustrative  Sum-­‐of-­‐Parts  Valuations  
   

(Ashland)  +  (Valvoline  Spin)  

 

Sum$of$the$Parts Sensitivity)Analysis (1)

ASH$consolidated$EBITDA $1,400 $1,600 ASH)EBITDA
$Less:$Valvoline$EBITDA ($350) ($350) Multiple Valvoline)EBITDA)Multiple
ASH$EBITDA$exCValvoline $1,050 $1,250 8.0x 9.0x 10.0x 11.0x 12.0x
EBITDA$Multiple 8.0x 8.0x 8.0x $129 $133 $137 $142 $146
Implied3ASH3Value3ex$Valvoline $8,400 $10,000 8.5x $136 $140 $145 $149 $154
9.0x $143 $148 $152 $156 $161
Valvoline$EBITDA $350 $350 9.5x $150 $155 $159 $164 $168
EBITDA$Multiple 10.0x 10.0x 10.0x $158 $162 $167 $171 $175
Implied3Valvoline3Value $3,500 $3,500

Total3Enterprise3Value $11,900 $13,500

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

(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.    

67  
Illustrative  Sum-­‐of-­‐Parts  Valuations  (cont’d)  
   

(Ashland)  +  (Valvoline  as  MLP)  

 

Sum$of$the$Parts Sensitivity)Analysis (1)

ASH$consolidated$EBITDA $1,400 $1,600 ASH)EBITDA
$Less:$Valvoline$EBITDA ($350) ($350) Multiple Valvoline)EBITDA)Multiple
ASH$EBITDA$exCValvoline $1,050 $1,250 14.0x 16.0x 18.0x 20.0x 22.0x
EBITDA$Multiple 8.0x 8.0x 8.0x $155 $164 $173 $182 $191
Implied3ASH3Value3ex$Valvoline $8,400 $10,000 8.5x $162 $171 $180 $189 $198
9.0x $170 $179 $187 $196 $205
Valvoline$EBITDA $350 $350 9.5x $177 $186 $195 $204 $212
EBITDA$Multiple 15.0x 15.0x 10.0x $184 $193 $202 $211 $220
Implied3Valvoline3Value $5,250 $5,250

Total3Enterprise3Value $13,650 $15,250

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

(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.    

68  
Attractive  Leveraged  Buyout  Candidate  
 

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

Signi=icant  
Sustainable  Margins   Competitive  
High  Free  Cash  Flow   Advantages  (Barrier   Global  Footprint  and  
Characteristics   and  Pricing  Power  
to  Entry,  Switching   Scale  
Costs,  Patents)  
 

Organic  Growth   Margin  of  Safety:  

Opportunities   Attractive  LBO   Valvoline  Valuation  
especially  in   Target   Signi=icantly  Under-­‐
Developing  Markets   Appreciated  
 

Scaling  Up  of   Potential  for   Synergy  Potential  

Valvoline  Franchises   Signi=icant  Margin   with  Existing  Private   Low  Cyclicality  of  
May  Be  Executed   Expansion  in  Core   Equity  Owned   Business  
Better  in  Private   Business   Chemical  Firms  
Market   especially  Water  
 
   
We  believe  a  =inancial  sponsor  could  contribute  up  to  30%  equity  using  total  leverage  69  
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  
 

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

 

•  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    f  or  share  repurchases.  

Thoughtful  capital  allocation  by  management  =  shareholder  value  creation    

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

71  
Management  Aligned  with  Shareholders  
 

“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)    

•  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)    
   
 

“Be  recognized  as  the  premier  specialty  ingredients  and  formulation  

business  in  the  world  with  strong  growth  and  superior  margins.”(2)  
 

(1):    Ashland  proxy  dated  December  12,  2012    

(2):  Ashland  vision  statement  from  Ashland  2012  Analyst  Day        

72  
Conclusion  
 

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  

73  
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76
 Executive  OfMicers  
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    
 
 
 
 
 
 
77  
 Executive  OfMicers  (cont’d)  
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  2    006.  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    

78  
 Executive  OfMicers  (cont’d)  
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    

79  
 Management  Compensation  
 

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

80  
 Board  of  Directors  
 

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.        
 
 

81  
 Board  of  Directors  (cont’d)  
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  
  Executive   OfMicer   of   The   Conservation   Fund,   a   non-­‐   proMit  
November   2001   until   July   2005.   Prior   to   serving   at   the   Department   of   State,   he   was   President   and   Chief  
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.        
 

82  
 Director  Compensation  
 

Board  aligned  with  shareholders.  

 

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.        

83  
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