Good afternoon and welcome everyone in the room with us in New York as well as those of you joining us via webcast,and thank for your interest in Ashland.We are scheduled for a total about one hour today. I am Eric Boni, Director ofInvestors Relations. With me today are Jim O'Brien, Ashland's Chairman and Chief ExecutiveOfficer and Marvin Quinn, Senior Vice President and Chief Financial Officer. We have released preliminary results for our Fourth Fiscalquarter at 8.08 am EasternDay Light time this morning. Please note that results are preliminary until wefile our 2007 10-K. Copies of our presentation are available here today and arealso available on our website. During our meeting I will review Ashland’s financial results for the fiscalfourth quarter 2007. Marvin Quinn will discuss the 2007 fourth quarter resultsof Ashland’score businesses, as well as, 2008 corporate map. And Jim O'Brien will closewith an overview of Ashland'sbusinesses and our strategy. At the end of presentation, we will answerquestions from the members of our New York audience. Before we get started, we ask you to note our cautionarylanguage regarding forward-looking statements on Slide 3. Statements will bemade during the course of this presentation that constitutes forward-lookingstatements, as that term is defined in relevant securities law. Such statementswill be based on a number of assumptions, such as market conditions, operatingefficiencies, prices and supply and demand. Ashland believes its expectations regardingoperating performance are based on reasonable assumptions, but cannot assurethat these expectations will be achieved. Therefore, any forward-lookingstatements may prove to be inaccurate. Please turn to Slide 4 to review Ashland's fiscal fourth quarter results. Iwill begin by noting that our quarterly and annual results were impacted bynumerous key items in both fiscal 2007 and 2006, which affects comparisonsbetween these periods. We'll discuss these items shortly. If you go straight tothe bottom…

Thanks, Eric and good afternoon, everyone. I will introducethe results of our businesses with our own key items table in order to help youbetter understand the underlying performance of each business. So, let's move to slide 9. Here you see the impact of keyitems that Eric described as they relate to Ashland Performance Materialsoperating income. On an apple-to-apples basis, the $13.9 million of all otherincome for the fourth quarter of 2007 up was 13.9 million as compared to $24.2million in the fourth quarter of 2006, a decline of 43%. Total operating was$7.2 million from the September 2007 quarter and compares with $17.8 million inthe previous year's quarter. Now let’s look at the performance materials results in moredetail. For the September 2007 quarter, performance materialsrevenue increased to $438 million. However, these included revenues from boththe elimination of a one-month lag of foreign fund reporting, as well as, aNorthwest Coatings acquisition and now, a 100% ownership of a former Japanesejoint venture. Excluding these effects revenues for the fourth quarterincreased 4%, but volume declined 4%. Performance Materials has been able to pass through rawmaterial cost increases. Gross margin per pound actually rose slightly in thequarter, but total gross profits declined as volume declined as shown on thenext slide. As you can see here, at a negative $10.6 million, volume wasthe largest factor in Performance Materials declined in operating income. Asmaller contributing factor was a $4.2 million increase in selling, general andadministrative expenses exclusive of acquisitions and key items. A number of small items played a role in this increase,including market development efforts in new geographies such as India, as well as, new products and preparationfor our SAP implementation in Europe. Also,currency exchange rates contributed to the rise of SG&A, which is true foreach of our businesses. Now, let's move to distribution. Here you…

Thank you, Marvin, and thank you everyone for joining usthis afternoon. As you heard, although Ashlandhas experienced a challenging year in fiscal 2007, we were not a without accomplishments,as you will see on slide 26. As you heard, fiscal 2007 operating results were led by arecord performance by Valvolin and, although there was a bump in the fourthquarter, Water Technologies also delivered a record year, despite the writedown of the PathGuard asset. We ended the year with a very strong balance sheet,highlighted by cash and securities of just over $1 billion. At this time, lastyear, we had just announced our management reorganization, and this streamlinedand flexible structure is working well for us. In addition to our seniordivisional management, we have key leaders now in Europe and in China.The focus on regions of faster growth is occurring. The growth offers, which combines market strategy andR&D is leading us to a deeper understanding of commercial opportunities.And we also had a very successful SAP implementation throughout our company. During the past two years we have implemented our GlobalOneSAP platform, and all four of our businesses throughout the North America andalso on October 1st in Europe, Middle East and Africa,putting together more than 85% of our revenues on the same Enterprise PlanningSystem. Considering the number of languages, countries and complexities, thesuccess of our EMVA to go live is a significant accomplishment of which Ashland employeesworldwide can and should be very proud. We are looking to our GlobalOne in China and Singapore in late fiscal 2008.Beyond that additional countries will be added as needed by small teams. Thus,the financial update on Globalone that Marvin provided would likely be the lastone we provide on a regular basis. Now, I before I discuss our strategy, let me summarize Ashland’s annual results and give you an overview of…

Good afternoon. Iguess, first of all, on GlobalOne, could you address the timing for us to starseeing savings and how fast you will be pushing that?

The focus is past year as we are getting GlobalOne inplace. And that has frankly increased ourcost in the short-term for training, support people to pick up jobs or otherrelating to the new job. So costsincreased this year. So, as we look in the next year with continued training.so I would anticipate in the first quarter five months that cost will notchange much, but as we move into the second half of the year, my expectationwould be that we start gaining the efficiency that GlobalOne was designed toprovide. So, our focus would be after the second half in plans to represent thefirst half to start moving those efficiencies through the business. Ianticipate that will take two years to fully gain the efficiency that we wantout of this system.

Okay. And then secondly, excluding distribution, what isyour relative margin between your US businesses and internationalbusinesses?

When you look at margins in the US, we have been trying very hardto get price increases through on the performance side. We have been fairlysuccessfully and on Valvoline, very successful, distribution not successful atall. Europe has followed a similar course.Asia, the margins there are relatively less than the US and European markets. But we arefocused on there as on very large international customers, and we are trying tobring higher technology through our plans to increase those margins overtime.So, we are looking at a strong hold in the Asian markets, continue to upgradethose as the market matures and they get more into domestic production andutilization of these products versus export.

Thank you. Could you remind me what the normalize tax rateis we should think of going forward? And the second one question is on slide13, I may just have missed it. In distribution, the revenue is being $1.50billion, did you say Dow US was out of that or there was still a five months ofDow US in that?

The numbers that reflected there would have the Dow throughthe first six months through March and then after that they are out. AndMarvin, why don't you address the tax rate?

Hi. I think it's fair to say that we have not distinguishedourselves and being able to project tax rate, but it is very difficult, first,not only in the a level of operating income dropped rate, but our negotiationswith every various state, Federal or foreign government. This past year, we had22%. As we look at it historically, well, let's say, as we look at this comingquarter, first quarter of our new fiscal year, I expect to have a rate abovethat. But I would rather not project an absolute rate. I think if you look atthe underlying business, the rate will be driven by the level of operatingincome. If operating income, say, is low, we will have low tax rate. As itrises, you should expect that rate of course to rise. But I think the thingthat surprises the most is the success our tax department has had with thenegotiations, we are quite pleased by that. Thank you.

If I could just begin with the clarification of the answerto the previous question. Do you expect your tax rate to be up or down nextyear relative to this year?

We expect it to be up next year.

How much?

I don't know.

What? Okay. In your presentation, I noted that, there wasnot a long section on 2008, as far as the performances of the division. Is thatbecause the raw material volatility that's occurring these days is just forgrade that it makes it very difficult to assess the near-term performances of distributionand performance materials or is there a difference?

I think what you described is somewhat our feeling as well.We have two things that we're faced with in the near term. One is thevolatility of energy price. The pricing last year was a fairly consistent rise,which was, it wouldn't be easy to deal with, but it was more predictable andalso the stronger economy, so that pricing power is more relevant in ourbusiness. What's lacking this year is the volatility in pricing. Prices aregoing up, they are going down. The marketplace is not as strong. The transitionof what we are trying to do now with our supply base, there is a lot morenegotiations going on as far as what is the price that's relevant to themarkets that we are in, compared to the world market, where a lot of this pricehave been put into. So, there's a lot of disclarity around the pricing. A lotmore negotiation is taking place around the price that we get from our supplybase. So, when you try to bring that forward, we don't know howthe outcome of this negotiations will take place? How firm they will be and howvolatile they would be over the near term? Plus, we are also concerned aboutthe USmarketplace as far as the general economy. It seems to be somewhat growing broadly.But in the transportation construction businesses that we are in, they aredown, in some cases 8% to 10%. So, we don’t have any preview as far as how longis that going to be sustained and when will the up tick take place. And so, aswe look into '08, there is so many variables that we don’t have clarity around.It's very difficult for us to project forward what we think '08 will be. So, inthe near-term where we are putting our focus, negotiations on the materials,negotiation on with our customers on the price and trying to maintain as highervolumes as possible inside these [two contractors] trying to maintain volumesat a price and we can maintain some level of margin.

That’s helpful. If I could just try one last question. Inthe distribution business, there are all kinds of things that you felt thatcomes from a barrel of oil ultimately? And my imagination is if that there areprice pass through for some of those chemicals. And what I was wondering ifmaybe you can help us with the degree to which that your distribution operatingincome was penalized, because there was a lag in your price pass through. Nowyou may have to lag in the fourth quarter as well, but maybe if you could focuson that large component?

I think the lag had an impact. In other words, we did notget pricing efficiently to cover margin. But in the distribution business, alsowhat's relevant is what you buy that product for. But I think our biggestopportunity is how we buy the product versus how we sell the product. I thinkwhat's not been recognized is we are not doing a good enough job, communicatingto our supply base what the real market pricing is, so we can get the relevantdiscount to maintain our margin. But we have done to try to address that thisyear. We announced the reorganization of our thought management into moremarket focused orientation. I think the marketplace going in this year '08 isgoing to require our management team to focused more in specific markets likeplastics, commodity chemicals, specialty chemicals, and broadly, how weestablish our relationship with our supply base on how we have decided to ourdiscount. So, our management team has been organized around that manner becauseI think that's what the largest opportunity as to improve that business. And I said, that was announced today, and that's been in theworks now for about three months and that’s an anticipation of the type ofmarket we are going to be in. So, our expectation is we want hit that marginback into the historical 7% to 8%. And naturally, we want to head the business,but it's under a lot of uncertainty about our ability to achieve that. So,that's what we are going to take try to achieve.

John Roberts, Buckingham Research.What are you watching with respect to the IRS finalization of your taxagreement, with them, so that you can get access to cash from the Marathon transaction? Do you have any negotiations leftto go with them or is there anything that you are looking at in terms of atimetable?

Marvin?

John, we expect to have, what's called, the revenue agentmoving letter prior to the end of the year, late fall. And if there are nodisagreements with the IRS, we would see concluding shorten thereafter thesub-year of June of 2005. If there are issues that the IRS raises, then we willhave to decide if we want to spend time and energy to negotiate those. If theyare non material, we may not, if they are more material, we will enter intonegotiation and challenge on those. So, we expect to get, as we have saidpreviously, the RAR letter of late fall and we will have to see the content ofthat letter to know how quickly we would then be closing the 2005 year.

I believe you said in distribution as of October 1, you puton few cents for hydrocarbon sales product. Could you remind me what percentageof the daily volume accounts that amounts to? And then a second question givenwhat's happened with oil, has there have any further movement in base oilprices that you will have to address to?

Okay. I will answer the second question because we are sortof neutral on the first one. When we look at base oil, there's been severalannouncements of base oil expansion taking place in Asia and the Middle East. So, the base oil, I think is going to bewell supplied going into the future. And if you look at last year, what causedthe problems with Valvoline, it was more about the hurricane effect, taking twoor three plants out that really drove supply down as that increased the priceso rapidly, we could not adjust quick enough; took us almost six months to getthrough that and basically destroyed the second half of the year because of theprice moves. So, as you look at this year, we have more of a stable supplybase. So, that's going to be helpful in that. We have a supply demand going forward. Now, it’s hard to saythat crude oil stays in the 90s or it goes to 100 or wherever it’s going to go,that you are going to have some price pressure. But if you look back in ourcharts, the year before that was a year where you had pricing going up once aquarter. Now, it hurts the earnings by about 20%, 30% compared to what they putahead during that type of run up, but it didn't destroy therein. So, there wasabout a quarter lag, when it was going up by one serving quarter which yourecovered it and you moved it through. And so if we experience that type ofbehavior in the marketplace, I would anticipate it to have some effect onearnings, but doesn't destroy earnings.

Two things, I guess, it’s just a follow-up on what Jimmentioned on Valvoline. Another element to keep in consideration here is baseoil. The capacity is expected to about 16% increase into the twos in about 31%increase in this period. So, we're expecting a lot more base oil capacity toCMI and close to in the agent market. And we think, that will also have someeffect on the overall base oil pricing. Regarding the question on distributionand hydrocarbon, you can think in terms of roughly 20% to 25% of the overalldistribution business. Any other questions?

What happened in water treatments this quarter, that is someof the other water treatment chemical companies seem to be growing theiroperating profits that are relatively good clips, and even if you exclude thehigher depreciation charges, it doesn't look like it was a stellar quarter?What are some of the impediments to that business growing at a faster rate?

When you look at the water business, this year has been atremendously challenging year forum internally. We changed the focus from beinga product-focused style business to more of a market-focused style business.We've created teams where the team is going to be responsible for a certaingeography and broad markets have that geography. They are going to beincentivized based upon the profitability and growth of profitability inside ofthat town that they are going to have. So what we are trying to say is moremarket focus and driving products through the marketplace, but really lookingat the opportunities that particular geography brings forward. So, thatdisconnects from where they were to where they are going was transitional intrying to get this people focused on the new way of doing business. So, to acertain extent the reason why we didn’t enjoy as much growth is we otherwisewould have had is because of that change of focus that we have put the businessthrough, we are through that now. The teams have been oriented, it’s been set,Europe has been set, United States so everybody has their marchingorders. They understand what they are trying to accomplish. They have theirincentive plans. But I would expect going into next year is we should pick upthe top line growth, because this change will have incentives to do the rightthings inside their marketplace. We remain focused on profitable growth, we are going to lookat their pricing and how they orient that team with expenses, support and allit goes with trying to create the opportunity inside of their geographies. Somy anticipation is that expenses will go down, we’ll do a better job on pricingthe product, hitting the margins that we implied that geography and it’s a muchcloser view of what’s happening inside that marketplace. So I think that you are going to see ourWater business, probably for the first time, have the ability to react tomarket, grow market and have the orientation, to have a right cost structureinside that one. So those are the anticipations of the change and that’s whatwe hope to see going into ’08.

Secondly, you had a working capital use this year as a $156million, and it seems that perennially the working capital you use is very highfor the Company? Will that come to an end in 2008 or do you expect a materialpositive change? Jim O’Brien: There has been a couple of things impacting the workingcapital. One is the focus onGlobalOne. We had so much focus onmaking sure that the system didn’t blow up. That all the energy was kind of placed there in trying to make sure thebusiness ran versus fine tuned. As we gointo next year, it’s going to be more orientation of fine tuning, and lookingat working capital. This is something that, in particular myself, I am verydisturbed by and distressed by, because it’s -- that type of consumption ofcash is not necessary. And if you look at the orientation, we are putting thesenior executive and the sales people, and everyone touches just on inventory,on receivables. We have 40% of ourincentive now placed on improvement in that area. And we had 20% of it in place last year andit created a zero performance in that area for our management team includingmyself. So we rationed it up to 40% focuswith the intention of driving that down, as well as drive inventory down,receivables down, so we generate more cash. So cash generation is a primary focus and it’s in those two areas.Marvin, do you want to comment on that?

Let me just make one other comment. As you look at thecomponents of working capital this half quarter, receivables did not increasemuch at all. In fact, the receivables increased at half the rate of sales.Payables were pretty much the same and then inventory just increased slightly.If you look at the total year, you will see the real detriment was our payablecontracted about a $150 million. And that's the real source of cash. And that'sto reinforce Jim's point. That's much more of a internal issue than an externalissue.

Thanks, Marvin.

[Any questions] at the back?

And just a question on the distribution business and theperformance business, things came in noticeably a bit worse than even theguidance that you had put out towards the end of the quarter, I am wonderingwhere do things kind of fall apart versus your expectations, was it on thevolume side, was it on the raw side or was it just it mix of both? Jim O’Brien: When you take a look at what actually gone wrong with ourestimates, when we were looking at it three weeks ago, just about every aspectyou described came in a little bit worse. So the combination of all thosecombined, and particularly the expenses were higher than we thought. And that wasparticularly the case in distribution in Water. So as you look at those two, in particular, those were theareas that really within as a transparency and it's time that we spoke at yourconference that somewhat surprised that and we are taking a lot of time to diginto it to figure it out, so we can get it reversed as far as whatever it wasthat created that to get and taken out and get it right. So it was really allthe same, but expenses particularly the things that really were higher than weanticipated.

More of a broad based question, as you step back and youlook at the businesses excluding distribution, because I know that weighs onthe margin, where do you think these businesses should operate at in terms ofoperating income margins longer term, where do you think you can get them overthe next three to five year? How do you get them there? The focus that we've on the both the water platform and theresin platform battling we want to have that 8% Return on Sales and as the minimum.So, a lot of these who had mid 10 or maybe 7.5, but we want to have on theaverage 8%. We have Return on Investment of 10% to 12%. Those are the kind ofbasic metrics that we use. And how you get them there is you have to push on itfrom two different directions. You had to have the organic growth, piece we’vetalked about. That’s what the growth profit is about. Want to get them tobetter market, high-growth markets, taking the technologies that we have,applying them differently against different opportunities, try to grow thebusiness and to higher-margin type opportunities. I think they have some pretty decent ideas out there, whichhopefully will start bringing included over the next 12 months. That way youstart releasing some of these products into the marketplace, but that’s one wayto do it. The other is, we have to continue to get more efficient and withGlobalOne, that’s what GlobalOne was originally situated to improve. It wasimproved working capital; it was an improved operating efficiency. So, we hadbetter expenses down much far than they are today. And we continue to expandour margins if the margins we have on the gross level are not sufficient tosupport that ambition. So, we have to push it in both directions.

Do you think it’s a scale issue at all? I mean do you havethe global infrastructure in place necessary to drive and sustain these marginsat that level, marked at 8%? Jim O’Brien: You know scale is something that’s relative. I think that,when you look at how we organize our European and our Asiabusiness and [inaudible] business all of you those parts of the geography, Ithink, they have sufficient scale to perform. What we haven’t done is orient itin such a way to get the highest efficiency out of all those businesses. And inGlobalOne by having a single way to gather information, analyze the inflationwe have, and the transparency of the information will help us drive thatefficiency forward. So that’s really the focus in the near term, it's really todrive efficiency.

So what do you say then that with GlobalOne almost fullyimplemented, that as we look to 2009, 2010 we should really start to see thebenefits of it, and as such we should start to see margins improve significantly? Jim O’Brien: That was the strategy, was to put in a system such asGlobalOne that would help drive the efficiency, have a growth office that willhelp drive better margin type business. And those two efforts were justsuccessful, should deliver those types of outcomes. I think that pretty much closes out our time. Those of youwho are in the room, the reception will continue in the garden terrace on the16th floor. Thank you all for your attendance. We hope to see you upstairs.