AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2003
-------------------------------------------------------------------------------


                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ________________________

                                   FORM 20--F
                            ________________________

___
___          REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR
___
 X                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
___                     THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2002

                                       OR
___
___           TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

                       For the transition period from to
                         Commission File Number 1-14398

                         SGL CARBON AKTIENGESELLSCHAFT
             (Exact name of Registrant as specified in its charter)
<TABLE>
<S>                                                                                               <C>
SGL CARBON CORPORATION                                                    FEDERAL REPUBLIC OF GERMANY
(Translation of Registrant's name into English)        (Jurisdiction of incorporation or organization)

</TABLE>
                            ________________________

                              RHEINGAUSTRASSE 182
                               D-65203 WIESBADEN
                                    GERMANY
                    (Address of principal executive offices)
                            ________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act.

<TABLE>
<S>                                                                                             <C>
TITLE OF EACH CLASS                                       NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------                                       -----------------------------------------
American Depositary Shares,                                                 New York Stock Exchange
 each representing one-third of one Ordinary
 Bearer Share, no par value
Ordinary Bearer Shares, no par value                                       New York Stock Exchange*

</TABLE>
________________________

*Not for trading,  but only in  connection  with the  registration  of American
 Depositary Shares,  pursuant to the requirements of the Securities and Exchange
 Commission.

Securities to be registered pursuant to Section 12(g) of the Act: NONE

Securities for which there is a reporting  obligation pursuant to Section 15(d)
of the Act: NONE

Indicate the number of  outstanding  shares of each of the issuer's  classes of
capital  or common  stock as of the close of the  period  covered by the annual
report:

<TABLE>
<S>                                                                     <C>
    ORDINARY BEARER SHARES, NO PAR VALUE.......................  22,184,958

</TABLE>

Indicate  by check  mark  whether  the  registrant  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange Act of
1934  during the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No -- --  Indicate  by check  mark  which  financial  statement  item the
registrant has elected to follow

                               Item 17    Item 18 X
                                      --          --
_______________________________________________________________________________

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>         <C>                                                             <C>
CERTAIN TERMS............................................................     1
FORWARD-LOOKING STATEMENTS...............................................     1
PART I...................................................................     2
    ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS........     2
    ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE......................     2
    ITEM 3. KEY INFORMATION..............................................     2
            Selected Financial Data......................................     2
            Capitalization and Indebtedness..............................     5
            Reasons for the Offer and Use of Proceeds....................     5
            Risk Factors.................................................     5
    ITEM 4. INFORMATION ON THE COMPANY...................................    10
            INTRODUCTION.................................................    10
            History......................................................    10
            BUSINESS.....................................................    13
            Industry and Market Overview.................................    13
            Organizational Structure.....................................    24
            Property, Plants and Equipment...............................    24
    ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.................    27
            Operating Results............................................    32
            Liquidity and Capital Resources..............................    40
            Research and Development.....................................    47
            Trend Information............................................    48
            Significant Differences Between IFRS and U.S. GAAP...........    49
    ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...................    52
            Directors and Senior Management..............................    52
            Compensation.................................................    55
            Board Practices..............................................    60
            Employees....................................................    60
            Share Ownership..............................................    61
    ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............    62
            Major Shareholders...........................................    62
            Related Party Transactions...................................    62
            Interest of Experts and Counsel..............................    63
    ITEM 8. FINANCIAL INFORMATION........................................    64
            Consolidated Statements and Other Financial Information......    64
            Significant Changes..........................................    67
    ITEM 9. THE OFFER AND LISTING........................................    68
            Offer and Listing Details....................................    68
            Plan of Distribution.........................................    70
            Selling Shareholders.........................................    70
            Dilution.....................................................    70
            Expenses of the Issue........................................    70
    ITEM 10. ADDITIONAL INFORMATION......................................    71
            Share Capital................................................    71
            Memorandum and Articles of Association.......................    71
            Material Contracts...........................................    74
            Exchange Controls............................................    78
            Taxation.....................................................    79
            Dividends and Paying Agents..................................    83
            Statements by Experts........................................    84
            Documents on Display.........................................    84
            Subsidiary Information.......................................    84
    ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
             RISK........................................................    85

                                       -i-

<PAGE>

                                                                           Page
                                                                           ----
    ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
             SECURITIES..................................................    89
PART II..................................................................    90
    ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............    90
    ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
             HOLDERS AND USE OF PROCEEDS.................................    90
    ITEM 15. CONTROLS AND PROCEDURES.....................................    90
    ITEM 16. [RESERVED]..................................................    90
PART III.................................................................    90
    ITEM 17. FINANCIAL STATEMENTS........................................    90
    ITEM 18. FINANCIAL STATEMENTS........................................    91
    ITEM 19. EXHIBITS....................................................    91
SIGNATURES...............................................................    92
CERTIFICATION............................................................    93
CERTIFICATION............................................................    94

</TABLE>
























                                      -ii-

<PAGE>

                                  CERTAIN TERMS

    SGL CARBON Aktiengesellschaft is organized as a stock corporation under the
laws of the Federal Republic of Germany. In this annual report on Form 20-F, we
refer  to SGL  CARBON  Aktiengesellschaft  and  (unless  the  context  requires
otherwise)  its  consolidated  subsidiaries  as the "SGL Group" or the "Group".
References  to  "SGL"  are  to  SGL  CARBON   Aktiengesellschaft   without  its
consolidated  subsidiaries.  We refer to the  ordinary  bearer  shares,  no par
value, of SGL as the "Shares".

    The following abbreviated references to the Business Areas of the SGL Group
will also be used in this  annual  report:  CG for the  "Carbon  and  Graphite"
Business  Area, GS for the  "Graphite  Specialties"  Business  Area, CP for the
"Corrosion Protection" Business Area, and SGL T or T for the "SGL Technologies"
Business  Area.  We use  the  term  "Business  Area"  for  financial  reporting
purposes,  whereas  the  term  "Business  Unit"  is  used  in  business-related
discussions in this annual report.  Both terms refer to the reporting  units of
the SGL Group described above.



                           FORWARD-LOOKING STATEMENTS

    This annual report  contains  forward-looking  statements  and  information
relating to the SGL Group. Words such as "anticipate",  "believe",  "estimate",
"expect", "intend", "plan", "project" and similar expressions identify forward-
looking  statements.  These  statements  reflect  the  current  belief  of  our
management as well as assumptions made by, and information  currently available
to, the SGL Group.

    Forward-looking statements are subject to risks and uncertainties. If these
risks and uncertainties materialize, or if our assumptions prove incorrect, our
actual results,  performance or achievements  could differ  materially from any
future  results,  performance  or  achievements  expressed  or  implied  by our
forward-looking  statements.  Factors  that  could  cause  our  forward-looking
statements to prove incorrect  include changes in general economic and business
conditions, changes in currency exchange rates and interest rates, introduction
of competing products by other companies, lack of acceptance of new products or
services by the SGL Group's targeted  customers,  changes in business  strategy
and various other factors. See Item 3, "Key  Information---Risk  Factors" for a
discussion of risks that we believe  particularly  significant to the Group and
our business.  We do not intend,  and do not assume any  obligation,  to update
these forward-looking statements.





                                       -1-

<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

    Not applicable.


ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

    Not applicable.


ITEM 3. KEY INFORMATION

SELECTED FINANCIAL DATA

    We  prepare  our  consolidated  financial  statements  in  accordance  with
International  Financial  Reporting  Standards (IFRS).  Since 2002, IFRS is the
term for the entire body of accounting  standards  issued by the  International
Accounting  Standards  Board,  replacing  the  earlier  IAS,  or  International
Accounting  Standards.  Individual  accounting  standards  that the IASB issued
prior to this change in terminology  continue to use the prefix "IAS".  We have
prepared our  consolidated  financial  statements in accordance with IFRS since
our 1999 fiscal year. In 2001, we discontinued preparing consolidated financial
statements in accordance with the accounting  standards set forth in the German
Commercial Code (Handelsgesetzbuch), generally referred to as German GAAP.

    We derived the following  selected  financial data for each of the years in
the four-year  period ended December 31, 2002 from our  consolidated  financial
statements.  We prepared this  information  in  accordance  with IFRS or, where
indicated,  in accordance with U.S. generally accepted  accounting  principles.
IFRS  differs in  certain  significant  respects  from U.S.  GAAP.  See Item 5,
"Operating and Financial Review and  Prospects-Significant  Differences Between
IFRS and U.S.  GAAP" as well as Notes 34 and 35 to the  consolidated  financial
statements  contained elsewhere in this annual report for a discussion of these
differences.

    As indicated in their reports that appear  elsewhere in this annual report,
BDO Deutsche Warentreuhand Aktiengesellschaft, Wirtschaftsprufungsgesellschaft,
independent  auditors,  have audited our consolidated  financial statements for
the year ended  December  31,  2002,  and KPMG  Deutsche  Treuhand-Gesellschaft
Aktiengesellschaft, Wirtschaftsprufungsgesellschaft, independent auditors, have
audited our consolidated  financial statements for the years ended December 31,
2001 and 2000.

















                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                                        AS OF AND FOR THE YEAR ENDED DECEMBER 31,
                               ----------------------------------------------------------
                                  2002(1)     2002(2)     2001(2)     2000(2)     1999(2)
                               ----------  ----------  ----------  ----------  ----------
                                        $         [E]         [E]         [E]         [E]
                                 (IN MILLIONS; EXCEPT PER SHARE AND CERTAIN OTHER DATA)


<S>                                   <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
IFRS
Sales revenue................     1,158.5     1,112.3     1,233.3     1,262.5       980.1
Cost of sales(3).............      (923.3)    (886.5)      (941.8)     (950.8)     (691.4)
Gross profit.................       235.2       225.8       291.5       311.7       288.7
Selling, research and
  development,
  administration and other
  operating
  income (net)(3)............      (205.4)     (197.2)     (232.8)     (232.5)     (197.5)
Costs relating to anti-trust
  proceedings
  and restructuring(3).......       (31.6)      (30.3)      (76.0)        0.0      (130.2)
Profit/(loss) from operations        (1.8)       (1.7)      (17.3)       79.2       (39.0)
Result of investments .......        (1.9)       (1.8)        3.2         0.6        (0.4)
Interest expense (net)(4)....       (33.5)      (32.2)      (38.5)      (42.6)       (1.6)
Other financial result.......         8.9         8.5       (13.2)      (17.2)      (16.0)



Income tax benefit (expense).         3.7         3.6       (29.2)      (55.7)       13.7
Net loss (including minority
  interests)(5)..............       (24.6)      (23.6)      (95.0)      (35.7)      (43.3)
Net loss attributable to
  shareholders...............       (24.6)      (23.6)      (95.2)      (36.0)      (43.5)
Loss per Share(6)............       (1.12)      (1.08)      (4.42)      (1.68)      (2.05)
Loss per ADS(6)..............       (0.37)      (0.36)      (1.47)      (0.56)      (0.68)

U.S. GAAP
Net loss (11)................       (23.0)      (22.0)     (148.0)       (3.3)      (54.1)
Basic loss per Share(6)......       (1.05)      (1.01)      (6.87)      (0.15)      (2.55)
Basic loss per ADS (6).......       (0.35)      (0.34)      (2.29)      (0.05)      (0.85)
Diluted loss per Share(6)....       (1.05)      (1.01)      (6.87)      (0.15)      (2.55)
Diluted loss per ADS(6)......       (0.35)      (0.34)      (2.29)      (0.05)      (0.85)

BALANCE SHEET DATA:
IFRS
Working capital(7)...........       402.0       386.0       548.7       565.3       487.5
Total assets.................     1,339.8     1,286.4     1,495.0     1,547.0     1,406.0
Financial debt...............       467.1       448.5       538.9       502.4       391.8
Shareholders' equity.........       204.4       196.3       255.2       337.0       350.8
Number of Shares
  outstanding(14)............  21,813,930  21,813,930  21,530,563  21,376,753  21,210,200

U.S. GAAP
Total assets.................     1,388.6     1,333.3     1,531.8     1,629.9     1,480.5
Shareholders' equity.........       218.3       209.7       264.1       402.9       380.1

OTHER DATA:
IFRS
Gross profit margin (%) (3)..        20.3        20.3        23.6        24.7        29.5
Operating margin (%) (3).....        (0.2)       (0.2)       (1.4)        6.3        (4.0)
Depreciation and amortization        84.6        81.2        95.8        83.0        73.4
Capital expenditures.........        43.2        41.5        90.6        67.2        78.4
Ratio of debt to
  shareholders' equity
  (%)(8).....................       217.5       217.5       206.4       146.2       103.3
Return on capital employed
  (%)(9).....................        (0.2)%      (0.2)%      (1.4)%      6.6%        (3.7)%
Research and development
  expenses...................        26.5        25.4        31.1        29.2        24.3
Quantity of graphite
  electrodes sold
  (thousands of metric tons..         173         173         175         188         171
Number of employees worldwide
  (end of year)..............       7,360       7,360       8,197       8,082       6,656

                                       -3-

<PAGE>

                                        AS OF AND FOR THE YEAR ENDED DECEMBER 31,
                               ----------------------------------------------------------
                                  2002(1)     2002(2)     2001(2)     2000(2)     1999(2)
                               ----------  ----------  ----------  ----------  ----------
                                        $         [E]         [E]         [E]         [E]
                                 (IN MILLIONS; EXCEPT PER SHARE AND CERTAIN OTHER DATA)

BUSINESS AREA DATA:
Sales Revenue(10)
 Carbon and Graphite ........       573.5       550.7       619.8       619.5       539.7
 Graphite Specialties(12) ...       203.9       195.9       230.7       242.0       227.8
 Corrosion Protection (12) ..       221.1       212.4       235.8       247.3        82.8
 SGL Technologies(12) .......       156.5       150.4       135.1       151.8       127.8
Operating profit (loss) (13)
 Carbon and Graphite ........        54.0        51.9        78.9       108.0       103.1
 Graphite Specialties(12) ...         1.9         1.9        22.3        16.9         5.9
 Corrosion Protection(12) ...         4.9         4.8        12.6        (1.4)        4.8
 SGL Technologies(12)               (12.3)      (11.7)      (33.7)      (17.3)       (6.5)


</TABLE>

(1)   Amounts in this column have been translated solely for the convenience of
      the reader at an exchange rate of [E]1.00 = $ 1.0415,  the middle rate of
      exchange on December 31, 2002 as published by Deutsche Bank.

(2)   Beginning  January 1, 2002, we have  consolidated SGL Brakes GmbH and SGL
      Information-Systems  LLC,  whose net assets were  previously  included in
      other  consolidated  companies.   Beginning  January  1,  2001,  we  have
      consolidated SGL Information-Services  GmbH, SGL Technologies GmbH and RK
      Technologies  International Ltd., which were previously  non-consolidated
      subsidiaries. As of January 1, 2001, we acquired all shares in SGL ACOTEC
      Ltda (formerly KCH-ANCOBRAS Ltda.), which we have consolidated as of this
      date.  Effective  December 31, 2000, we began to  consolidate  ZEW in our
      year  end  balance  sheet,  although  we  did  not  recognize  ZEW in our
      consolidated  statement  of  operations  for that year.  As of January 1,
      2000, the SGL Group began consolidating  Keramchemie GmbH (now SGL Acotec
      GmbH).  Beginning January 1, 1999, we have consolidated HAW Linings GmbH,
      Germany (now part of SGL Acotec GmbH).

(3)   Costs relating to anti-trust proceedings and major restructuring expenses
      for the years under review are  presented  separately in the statement of
      operations.

(4)   For 2002,  2001 and 2000,  we have  included  the  interest  component of
      additions to the pension  provision of [E] 10.4 million,  [E]9.9  million
      and [E] 9.2 million,  respectively, as an expense in the financial result
      in accordance  with IFRS.  Under U.S.  GAAP,  this interest  component is
      included in operating profit.

(5)   Net loss (before minority  interests) and  shareholders'  equity/minority
      interests includes amounts  attributable to minority interests.  Net loss
      attributable   to  minority   interests   and   minority   interests   in
      shareholders'  equity  for the  years  2002,  2001 and 2000  were [E] 0.0
      million,  [E]0.2  million and [E] 0.3 million,  respectively,  and [E]1.4
      million, [E]1.6 million and [E] 2.1 million, respectively.

(6)   We have  calculated  loss per Share for each  period  based upon net loss
      less amounts  attributable to minority  interests divided by the weighted
      average number of Shares outstanding.  We have calculated loss per ADS as
      loss per Share divided by three. Because of the net loss for the year and
      the resulting lack of any dilutive effect, the diluted loss per Share for
      2002, 2001 and 2000 was identical to the loss per Share.

(7)   Total  net  inventories  plus  total net trade  receivables,  less  trade
      payables. Under U.S. GAAP, working capital at December 31, 2001, 2000 and
      1999  would  have  been [E] 41.3  million,  [E]5.5  million  and  [E]83.6
      million, respectively.

(8)   Total  financial  debt  less  cash  and  cash  equivalents,   divided  by
      shareholders' equity at year-end.

(9)   Operating  results  divided by the  amount of  goodwill,  tangible  fixed
      assets,  inventories and trade accounts receivables,  less trade accounts
      payables at the end of the year.

(10)  Business area data for sales revenue do not include  certain  amounts for
      sales not allocable to a business area. For the years 2002, 2001 and 2000
      these amounts were [E] 2.9 million,  [E]11.9  million and [E]1.9  million
      respectively.

(11)  Net loss  under  U.S.  GAAP is  presented  before  cumulative  changes in
      accounting principles.

(12)  As of January 1, 2001, we reorganized  our operations  into four business
      areas:  Carbon and Graphite,  Graphite  Specialties  (formerly  Specialty
      Graphite), Corrosion Protection and SGL Technologies (formerly Fibers and
      Composites). As of January 1, 2002, we reclassified our expanded graphite
      business in Europe from Graphite Specialties to SGL Technologies. We have
      adjusted the corresponding figures from the previous years to reflect our
      current segment reporting structure.

(13)  Operating  profit (loss) before costs relating to anti-trust  proceedings
      and  restructuring  for the  years  2002,  2001 and  2000 do not  include
      unallocated corporate costs and consolidation adjustments. See Note 28 to
      the consolidated financial statements.

(14)  Weighted average number of shares.

EXCHANGE RATES

    The following table shows the high, low, average and period-end euro-dollar
exchange  rates for the five years ended December 31, 2002 and the high and low
euro-dollar  exchange  rates for the six months  ended  March 31,  2003 and for
April 8, 2003.  In each case,  these rates are based on the noon  buying  rates
published by Deutsche Bank. For 1998, the table reflects exchange rates between
the dollar and Deutsche Mark  translated  into euros at the  irrevocably  fixed
Deutsche Mark-euro rate of

                                       -4-

<PAGE>

DM 1.95583 = [E]1.00.  You should  not assume  that these  translated  exchange
rates  would be the same as the  dollar-euro  exchange  rates  that  would have
prevailed during 1998 had the euro existed at that time.

<TABLE>
<CAPTION>
                                                    PERIOD  PERIOD
PERIOD                               HIGH     LOW   AVERAGE    END
---------------------------------  ------  ------  -------  ------
                                        (IN DOLLARS PER EURO)


<S>                                   <C>     <C>      <C>     <C>
1998.............................  1.1961  1.0548   1.1144  1.1733
1999.............................  1.1802  1.0020   1.0658  1.0027
2000.............................  1.0395  0.8286   0.9213  0.9305
2001.............................  0.9548  0.8388   0.8957  0.8820
2002.............................  1.0477  0.8600   0.9448  1.0415

October 2002.....................  0.9894  0.9725
November 2002....................  1.0156  0.9903
December 2002....................  1.0415  0.9887
January 2003.....................  1.0881  1.0371
February 2003....................  1.0924  1.0691
March 2003.......................  1.1055  1.0564
April 8, 2003....................  1.0887  1.0581

</TABLE>

    Fluctuations  in the  euro-dollar  exchange  rate will  affect  the  dollar
equivalent of the Share price in euros on the Frankfurt  Stock Exchange and, as
a result,  are  likely to affect the market  price of the  American  Depositary
Shares on the New York Stock  Exchange  as well as the amount of any  dividends
received by holders of American Depositary Receipts.

DIVIDENDS

    In 1999, SGL declared and paid a dividend of [E]1.20  ($1.31) per Share for
the 1998 fiscal year. SGL did not declare  dividends for the fiscal years 1999-
2002.

    Except  as  described  herein,  holders  of ADRs are  entitled  to  receive
dividends on the Shares  represented  by the ADSs  evidenced by such ADRs.  SGL
will pay any cash dividends  payable to such holders to JPMorgan Chase Bank, as
depositary, in euro; subject to certain exceptions, the depositary will convert
these  payments into dollars.  Dividends  paid on Shares and dividends  paid to
holders  and  beneficial  owners of ADRs are  subject  to  deduction  of German
withholding tax. See Item 10, "Additional Information --- Taxation".

CAPITALIZATION AND INDEBTEDNESS

    Not applicable.

REASONS FOR THE OFFER AND USE OF PROCEEDS

    Not applicable.

RISK FACTORS

    WE FACE PRICE AND OTHER FORMS OF COMPETITION FROM OUR COMPETITORS.

    The industries in which we operate are highly  competitive.  Competition is
based  primarily  on  price,  product  quality  and  customer  service.   Price
competition  is  strong  due to the  capital  intensive  nature  of most of our
production  processes,  which results in high fixed costs.  In addition,  price
decreases  can be  aggravated  by  temporary  imbalances  in supply and demand.
Graphite electrodes, in particular, are subject to strong price competition ---
the average  price of our graphite  electrodes  declined by  approximately  16%
during  2002.  Our market  share could be  adversely  affected if we  increased
prices,  or a competitor  reduced  prices,  or if we decided to maintain profit
margins  rather  than market  share or pursued  other  competitive  strategies.
Continuing  competition  could  prevent us from  raising  prices or force price
reductions, could reduce our sales volumes, require us to spend more for sales,
marketing,  and research and development.  Any of these developments could harm
our financial condition and results of operations.

                                       -5-

<PAGE>

    DECLINES IN DEMAND FOR GRAPHITE ELECTRODES COULD ADVERSELY AFFECT OUR
BUSINESS.

    In 2002, we derived approximately 36% of our sales revenue from the sale of
graphite  electrodes,  our  core  business.  We sell  our  graphite  electrodes
primarily to the electric arc furnace (or EAF) steel industry. The EAF industry
is global and  customers  are located in every major  geographic  market.  As a
result,  our customers are affected by changes in global and regional  economic
conditions.  The  recent  economic  slowdown  in  the  steel  industry,  and in
particular, the present structural crisis in the U.S. steel industry, led to an
overall drop in the demand for graphite  electrodes  during early 2002.  At the
end of 2002, almost one-third of steel producers in the United States had filed
for bankruptcy protection under Chapter 11.

    In addition,  demand for our products sold to the EAF steel  industries may
be adversely  affected by technological  improvements in those products as well
as in the manufacturing  operations of our customers,  which reduce the rate of
consumption  or use of our  products  for a given  level of  production  by our
customers.  Since the early 1980s there has been a steady  gradual  decrease in
"specific  consumption"  -- the  quantity of graphite  electrodes  consumed per
metric ton of steel produced -- due to improved  efficiency in EAF steel-making
processes  and  equipment  design.  Since the  mid-1990s,  increased  EAF steel
production has offset the decrease in specific consumption, resulting in steady
to slightly increasing demand for graphite  electrodes over the cycle.  Despite
the  overall   long-term  trend,   the   year-to-year  and   quarter-to-quarter
fluctuations in the demand for graphite  electrodes have been  significant.  We
cannot assure you, however, that future improvements in steel-making  processes
and  technology or a decline in EAF steel  production  will not result in a net
decrease in demand for graphite  electrodes.  A significant  drop in demand for
our graphite  electrodes  could have a material adverse effect on our financial
condition and results of operations.


    WE FACE VARIOUS LEGAL PROCEEDINGS THAT ARE OR COULD BE MATERIAL.

    In the  past  several  years,  we have  faced  various  court  actions  and
investigations in connection with anti-trust violations, and have been assessed
substantial  fines by the United States  Department of Justice and the European
Commission  for price fixing in the graphite  electrode and specialty  graphite
industries. We have also settled a large number of civil actions, however there
are a small number of civil actions  remaining.  We have appealed the two fines
by the  European  Commission,  however  there can be no  assurance  that  these
appeals will be  successful  in reducing the amount of the fines that have been
assessed.  In addition,  other  lawsuits and  investigations,  and appeals from
penalties,  are currently pending. See Item 8, "Financial Information --- Legal
Proceedings".

    Although  we cannot  predict  the  ultimate  outcome of these  proceedings,
lawsuits  and  investigations,  if a court were to order us to pay  substantial
damages, or we were assessed further substantial fines in relation to future or
pending proceedings or investigations,  this could harm our business, financial
condition and results of operations.


    WE  OPERATE  GLOBALLY  AND  FACE   UNPREDICTABLE   INTERNATIONAL   ECONOMIC
CONDITIONS,  GOVERNMENT  POLICIES,  REGULATORY  CONTROLS  AND CHANGES IN PUBLIC
POLICY THAT COULD ADVERSELY AFFECT OUR BUSINESS.

    We operate 40 manufacturing  facilities in 13 countries on three continents
and sell our products in approximately 100 countries. In 2002, sales revenue of
our products outside Germany accounted for approximately 81% of our total sales
revenue.  As a result,  we are subject to risks  associated  with  operating in
foreign countries,  including fluctuations in currency exchange rates, declines
in regional or global economic activity, limitations, if any, on the conversion
of foreign currencies into euro, and the possible  imposition of investment and
other  restrictions  by  governments.  In addition,  our business is subject to
changes in the public  policies of  individual  countries or states,  including
potential increases in taxes and tax rates.

    We must comply with a broad range of  regulatory  controls on the  testing,
manufacture  and marketing of our products.  In some  countries,  including the
United States and member states of the European Union, regulatory controls have
become  increasingly  demanding.  We expect  that this trend will  continue.  A
proposed new  European  Union  chemicals  policy  could  mandate a  significant
increase  in the  testing  and  assessment  of  basic  chemicals  and  chemical
intermediates,  leading to increased  costs and reduced  operating  margins for
these products.

                                       -6-

<PAGE>

    Although  many  regulations  and policies  increase  our costs,  changes in
public policy and  regulations  have not had a material  adverse  effect on the
Group during the past  decade.  However,  we cannot  assure you that changes in
policies  or  regulations  will not harm our  operating  results  or  financial
condition in the future.


    OUR FINANCIAL  CONDITION DEPENDS TO A SIGNIFICANT  EXTENT ON OUR ABILITY TO
GENERATE FUNDS AND MAINTAIN SUFFICIENT FINANCING.

    We require  significant  funds for the SGL  Group's  operations,  financing
costs,  and the payment of  antitrust  liabilities  and other  obligations.  In
recent  years,   we  have  raised  capital  through  public  and  private  debt
financings,  and have generated  positive cash flow from  operating  activities
since  1993.  We cannot  assure you that we will be able to  generate or obtain
sufficient  funds  needed  for  our  future   operations  and  our  other  cash
requirements,  or that we will meet all loan covenants and other obligations in
connection  with our present  financing  arrangements.  In addition,  we cannot
assure you that we will be able to refinance our financial  liabilities as they
mature or that we will be able to negotiate  the same or better terms in future
loan agreements.  If our ability to raise or generate funds were impaired, this
could have a material  adverse  effect on our  business  operations,  financial
condition and results of operations.

    If we breach the covenants of a credit agreement and are unable to cure the
breach (to the extent the breach is capable of being  cured) or obtain a waiver
from the lender (to the extent the  covenant  is capable of being  waived),  we
could be in default  under the terms of that  agreement.  A default  could have
significant harmful consequences, including acceleration, which would cause all
debt under the  agreement to become due.  Moreover,  a default under one credit
agreement could cause lenders under other credit  agreements to terminate those
agreements,  in which case amounts under those  agreements  would become due as
well.  In  addition,  in an event of default,  the  lenders  under our lines of
credit could terminate their commitments to extend credit up to the full amount
of the facility.  This would have an immediate  material  adverse effect on our
liquidity.

    As of December 31, 2002, we were not in default under any credit agreement.
Our latest  forecast of operating  results and cash flows indicates that we are
in compliance  with all covenant  tests for the current  fiscal year.  Seasonal
effects may have an impact on the course of our business  over the year.  These
effects could have an impact on our ability to meet quarterly  ratios  required
under our covenants. We will perform the compliance tests for the first quarter
of 2003 in the  second  half of April  2003,  after  completing  the  financial
closing  process  for the first  quarter.  Although  we expect  those  tests to
indicate that we remain in compliance with our covenants,  we cannot assure you
that we will in  future  be in  compliance  with  the  provisions  of our  debt
agreements,  nor that the lending banks, in the event of a default, would agree
to a waiver.  See Item 5,  "Operating  and  Financial  Review and  Prospects --
Liquidity  and Capital  Resources  -- Overview of Bank Debt and Cash Flows" and
"--Consolidated Cash Flows -- Financing Cash Flows".


    WE  MAY  ENCOUNTER  SUPPLY  SHORTAGES  AND  INCREASES  IN THE  COST  OF RAW
MATERIALS AND ENERGY.

    We are exposed to commodity  price risks through our  dependence on various
raw  materials,  such as  petroleum  coke,  coal tar  pitch,  petroleum  pitch,
anthracite  coal and  natural  graphite  flake as well as energy  supplies.  We
purchase  raw  materials  and energy from a variety of sources and do not enter
into  long-term  purchase  contracts.  The principal raw material we use in the
manufacture  of our products is petroleum  coke,  an  engineered  by-product of
petroleum refining.  Although we believe that the raw materials we require will
remain  available in adequate  quantities,  the  availability  and price of raw
materials   and  energy  may  be  affected  by  new   regulations,   suppliers'
allocations,  interruptions  in production by suppliers and market  conditions.
High energy prices continue to significantly influence our costs of production.
Although  we have  reduced  the  impact of price  increases  for energy and raw
materials through increased  efficiency and cost savings,  we cannot assure you
that we will be able to mitigate any future price  increases in the same way. A
substantial  increase  in  raw  material  or  energy  prices,  or  a  continued
interruption in energy supplies, could harm our business operations,  financial
condition and results of operations.

                                       -7-

<PAGE>

    WE MAY NOT  REALIZE  EXPECTED  BENEFITS  FROM  OUR  RESTRUCTURING  AND COST
SAVINGS PROGRAMS.

    During 2002 we  reorganized  our  operating  structure  and  implemented  a
restructuring  program to manage and integrate all our  operations  within four
global Business Units. The restructuring program announced in December 2001 and
subsequent  initiatives have included  reductions in our work force,  idling or
closure of selected  production sites,  rationalization  and  specialization of
remaining  sites  and  other  cost  reduction  initiatives.   In  addition,  we
continually strive to reduce costs and increase  efficiencies  (through our SGL
Excellence  program,  SGL One information  systems and other  initiatives).  We
cannot  assure  you,  however,  that we will be able to  realize  the  expected
benefits from our restructuring and cost savings programs.


    WE ARE EXPOSED TO CURRENCY EXCHANGE RATE RISKS AND INTEREST RATE RISKS.

    We conduct a significant  portion of our operations  outside the euro zone.
Fluctuations in the rate of exchange between the euro and non-euro  currencies,
especially the U.S.  dollar,  can  materially  affect our revenue and operating
results which are reported in euros. For example,  changes in currency exchange
rates may  affect  the  relative  prices at which we and our  competitors  sell
products in the same market,  and the cost of raw  materials and other items we
require for our operations.

    These fluctuations can benefit or harm our financial results.  The weighted
average value of the U.S.  dollar  relative to the euro during 2002 declined by
approximately  5% compared to 2001. This decreased our reported revenue in 2002
by  approximately  [E]24  million.  From  time to  time,  we may use  financial
instruments  to hedge our  exposure  to  foreign  currency  and  interest  rate
fluctuations. However, we cannot assure you that our hedging activities will be
successful.


    ENVIRONMENTAL MATTERS COULD RESULT IN SIGNIFICANT INCREASES IN COSTS.

    Our operations are subject to normal risks  associated with  manufacturing,
including the related storage and transportation of raw materials, products and
wastes.  We are  also  subject  to  numerous  domestic  and  foreign  laws  and
regulations relating to the storage, handling, generation, treatment, emission,
release, discharge and disposal of potentially hazardous substances and wastes.
We  cannot  assure  you,   however,   that  a  previously   unknown  or  future
contamination  event or new more  stringent  regulations  will not increase our
environmental  costs in the future.  A  significant  increase in  environmental
liabilities or costs could harm our business  operations,  financial  condition
and results of operations.


    PROLONGED WORK STOPPAGES DUE TO LABOR DISPUTES COULD  ADVERSELY  AFFECT OUR
BUSINESS.

    Most of our  workforce  is covered  by  collective  bargaining  agreements.
Although we believe that we have satisfactory relations with our works councils
and unions,  we cannot  assure you that we will reach new  agreements  with our
workforce on satisfactory terms when existing collective  bargaining agreements
expire.  Nor can we assure you that we would reach such new agreements  without
work stoppages,  strikes or similar industrial  actions.  If industrial actions
substantially  obstructed our manufacturing  operations for an extended period,
our business, financial condition and results of operations could suffer.


    THE SEASONALITY OF OUR BUSINESS COULD ADVERSELY AFFECT OUR REPORTED RESULTS
OF OPERATIONS.

    Our sales revenue fluctuates from quarter to quarter due to such factors as
scheduled  plant  shutdowns  by  customers,   vacations,  changes  in  customer
production  schedules in response to seasonal changes in energy costs,  weather
conditions,  strikes  and work  stoppages  at customer  plants,  and changes in
customer order  patterns in response to the  announcement  of price  increases.
Generally,  these factors tend to adversely  affect our results of  operations.
During the period following the effective date of a price increase for graphite
electrodes,  customers tend to reduce their inventories  before placing further
orders. This tends to reduce our sales revenue during such periods.

                                       -8-

<PAGE>

    WE MAY NOT BE ABLE TO PROTECT THE  INTELLECTUAL  PROPERTY  CRITICAL FOR THE
DEVELOPMENT OF SGL TECHNOLOGIES' BUSINESS.

    We  generally  have  a  number  of new  patent  applications  or  trademark
registration  applications  pending  at any  given  time  relating  to  product
enhancements and new product  developments.  We do not believe that the success
of our  established  businesses  is  materially  dependent  on  trade  secrets,
knowledge,  patents,  trademarks or other proprietary information.  However, in
the  future  competitors  may  obtain  patents  for  technologies  which  could
adversely affect our business and financial condition.

    The new  product  lines  that  we are  developing  in our SGL  Technologies
business,   however,  do  currently  rely  to  a  significant  extent  on  such
proprietary  rights and  information.  We cannot assure you that any patents or
trademarks  that we obtain will  adequately  protect the covered  products  and
technologies.  Nor can we assure  you that our  confidentiality  covenants  and
agreements  will  adequately  protect  our trade  secrets,  knowledge  or other
proprietary  information  not covered by patents or trademarks,  or that others
will not obtain this information through independent development or other legal
means. Furthermore,  we cannot assure you that our activities will not infringe
on the proprietary rights of others or that we will be able to obtain licenses,
on reasonable terms or otherwise,  to technology that we need. In addition,  we
cannot assure you that our proprietary  rights and information  will not become
obsolete as a result of the development of new technologies by our competitors,
or that we will be able to  develop  and grow  the  demand  for our  fuel  cell
components, brake discs and other products of our SGL Technologies business. If
we fail to protect our  proprietary  information,  or if we  infringe  upon the
proprietary rights of others, the business,  financial  condition or results of
operations of our SGL Technologies business could suffer significant harm.


    EXISTING INSURANCE COVERAGE MAY TURN OUT TO BE INADEQUATE.

    We aim to cover  foreseeable  material  risks by  insurance.  Our insurance
coverage,  however,  may prove inadequate to fully cover the risks to which the
Group is exposed.  For certain risks,  adequate  insurance  coverage may not be
available on the market or at reasonable conditions.


                                       -9-

<PAGE>

ITEM 4. INFORMATION ON THE COMPANY

INTRODUCTION

    SGL Carbon  Aktiengesellschaft  is incorporated as a stock  corporation for
unlimited  duration  under the laws of the Federal  Republic of Germany.  SGL's
registered  office  is at  Rheingaustrasse  182,  D-65203  Wiesbaden,  Germany,
telephone number +49-611-60-29-100. Our English-language home page on the World
Wide  Web is at  www.sglcarbon.com/index.html;  this  annual  report  does  not
incorporate information found on our web site. SGL's agent in the United States
for U.S.  federal security law purposes is SGL Carbon LLC, located at our North
American  headquarters,  8600 Bill Ficklen  Drive,  Charlotte,  North  Carolina
28269.

HISTORY

    Our corporate  origins lie in the second half of the 19th  century.  Two of
the earliest  industrial  manufacturers of carbon products,  Gebruder Siemens &
Co.  (founded 1872) and the Plania Werke (founded 1896) merged in 1928 into the
Siemens  Plania Werke AG fur  Kohlefabrikate.  This company and its  successors
underwent a series of international  mergers and  acquisitions,  becoming Sigri
Great Lakes Carbon GmbH, SGL's immediate  predecessor company, in 1992. At that
time, Hoechst AG was the majority shareholder of Sigri Great Lakes.

    On December  21,  1994,  Sigri  Great Lakes  became SGL through a change in
corporate  form  (Umwandlung).  In April 1995, SGL completed its initial public
offering  and listed its Shares on the  Frankfurt  Stock  Exchange.  SGL became
fully independent of Hoechst in June 1996, when Hoechst divested  substantially
all of its ownership in SGL in a global placement of approximately 10.5 million
Shares. Approximately 40% of that issue was placed in North America in the form
of American  Depositary  Shares listed on the New York Stock Exchange under the
symbol "SGG".

    We have recently completed several acquisitions and divestitures as part of
our strategy to enhance our position as the world's largest  producer of carbon
and  graphite  products and to  concentrate  our business on areas where we see
growth  opportunities.   The  following  are  the  principal  acquisitions  and
divestitures that we have made since the beginning of 2000:

    *    With effect from  January 1, 2000,  SGL  acquired  100% of  Keramchemie
         GmbH,  or KCH.  On that  date,  we merged  KCH and our  subsidiary  HAW
         LININGS GmbH into SGL TECHNIK GmbH (now SGL Acotec GmbH).

    *   During 2000 we increased our interest in ZEW Zaklady Elektrod Weglowych
        S.A., a Polish  subsidiary,  from 19.6% to 97.2%. We fully consolidated
        ZEW with effect from  December 31, 2000,  although we did not recognize
        it in the income statement for fiscal year 2000.

    *    As of  January  1,  2001,  we  acquired  all  shares  in our  Brazilian
         subsidiary,  SGL Acotec Ltda. (formerly KCH-ANCOBRAS Ltda.). SGL Acotec
         Ltda. is now fully consolidated.

    *    As of January 1, 2001, we increased our interest in SGL Acotec  (Wuhan)
         Co. Ltd., a Chinese joint venture,  from 70% to 90%. SGL Acotec (Wuhan)
         is fully consolidated.

    *    In April 2002,  SGL and Tokai Carbon Co. Ltd of Japan formed SGL Carbon
         Tokai Shanghai, a joint venture for the production, marketing and sales
         of UHP  graphite  electrodes  for  the  Chinese  market.  We hold a 51%
         interest in this joint venture.

    *    In January  2003,  we sold all shares in SGL PanTrac  Gesellschaft  fur
         elektrische Kontakte mbH, a German subsidiary.  PanTrac was still fully
         consolidated in the consolidated  financial  statements for fiscal year
         2002.

    *    As of April 8, 2003 we sold all shares in Risomesa S.p.A., Italy to the
         Schunk Group,  Germany. This transaction was effective as of January 1,
         2003.  Risomesa  was  still  fully  consolidated  in  the  consolidated
         financial statements for fiscal year 2002.

STRATEGY

    The carbon and graphite markets have changed  considerably in recent years.
Key  driving  forces  have  been the  Asian  economic  crises in 1998 and 1999;
economic  recession in 2001,  which had a particularly  negative  effect on the
steel industry, especially in the United States; the market downturn

                                      -10-

<PAGE>

following  the events of  September  11,  2001;  and the  continuing  worldwide
recessionary  trend in 2002. In addition,  the increasing  globalization of our
customers and competitors has had a significant effect on our changing markets.


    We have  responded to these  challenges  by reviewing  and  realigning  our
overall  strategy.  We have  condensed  this  strategy  into  our  "Five  Point
Program":

    1.   Increase returns

    2.   Continuously increase efficiency

    3.   Improve capital structures

    4.   Optimize portfolio

    5.   Enhance corporate governance

    The relative  priority of these five points can vary according to our needs
at any  given  time.  SGL's  Executive  Committee  sets  annual  priorities  in
consultation with the Supervisory Board. In 2001, we emphasized the first point
of our program -- increase  returns.  Beginning in 2002,  we have set the third
point -- improve  capital  structures -- as our  priority.  Our goal under this
strategic point is to improve cash flow and reduce net debt.

    This  section  describes  our long term  objectives  under  the Five  Point
Program,  focusing  on actions  we have  taken  during  2002 to  implement  the
program.


    INCREASE RETURNS:

    Our goal is to steadily increase the returns from our business to achieve a
profitability  level above  industry  average.  To this end,  we  significantly
reduced our costs during 2002 compared with 2001. The restructuring program for
our Carbon and Graphite and Graphite Specialties businesses,  initiated in late
2001,  contributed  nearly half these savings.  Savings  achieved  through this
program during 2002 significantly  exceed our original target.  Additional cost
cutting and  restructuring  measures in all four Business Units contributed the
remainder of these savings.  These measures focused on a further  concentration
in our Graphite  Specialties  feederstock  production and specialization in our
electrode  plants.  By year-end 2002 we had reduced  headcount by approximately
840,  more  than  10% of the  entire  workforce  in the SGL  Group.  We plan to
continue  implementing  the  restructuring  program for Carbon and Graphite and
Graphite Specialties during 2003 and 2004.


    CONTINUOUSLY INCREASE EFFICIENCY:

    In early 2002, we initiated the Group-wide "SGL  Excellence"  initiative to
continuously improve core processes throughout all our businesses. In employing
methods like Six Sigma,  this initiative  substantially  expands our historical
Total Quality  Management  program.  The main  objective of the SGL  Excellence
initiative is to continuously  achieve sustained  improvements in productivity,
competitiveness and customer satisfaction.

    The components of SGL Excellence fall under three headings:

    *    Operational  Excellence,  focusing on production flow, productivity and
         costs;

    *    Commercial Excellence, concentrating on customer requirements, customer
         satisfaction, marketing and sales; and

    *    People   Excellence,    emphasizing   the   selection,   training   and
         incentivization of a high-quality workforce.

    We believe that the SGL Excellence  initiative  will be a key factor in our
efforts to increase the value of our business and forge a revitalized corporate
culture.


    IMPROVE CAPITAL STRUCTURES:

    We aim to reduce the net financial debt of the SGL Group, lower its working
capital and improve key financial  ratios such as net debt to EBITDA,  sales to
net working capital and return on capital employed.

                                      -11-

<PAGE>

    This  objective was our top priority  during 2002. We succeeded in reducing
net financial debt by nearly four times our original  target.  We  accomplished
this primarily by reducing working capital and curtailing capital expenditures.
Because of the impact of these  measures on our  operating  results,  we do not
expect to achieve the same level of reductions  during 2003.  Nevertheless,  we
intend to continue  reducing  working capital and net debt levels over the next
several  years  in  a  manner  that  balances  our  objective  of  continuously
increasing returns.

    In late 2002, we also  finalized a refinancing  project by signing a [E]495
million  syndicated loan  agreement.  See Item 10,  "Additional  Information --
Material Contracts" for a description of the refinancing. We believe that these
measures have substantially  provided for the financial requirements of the SGL
Group over the near and medium term.


    OPTIMIZE PORTFOLIO:

    To improve the Group's portfolio,  we concentrate on further  strengthening
our market and technology  position in our  established  businesses  Carbon and
Graphite,  Graphite  Specialties  and  Corrosion  Protection,   reducing  their
cyclical  sensitivity and improving cash flow. For our SGL Technologies  growth
businesses,  we intend to focus on high yield  growth  areas and on  becoming a
leader in selected markets.

    We base portfolio  decisions on  considerations  of Group companies' fit in
the core competencies of the SGL Group -- high-temperature technology, advanced
materials and  engineering -- as well as on our vision and mission  statements.
We seek to streamline  our portfolio by finding joint venture  partners for, or
by divesting, businesses that do not meet our criteria.

    Recently,  we streamlined our portfolio by divesting our German and Italian
machined electrical carbon businesses. We believe that divesting these non-core
businesses  will enable us to further  concentrate  on  high-tech  applications
within the Graphite Specialties business area.


    ENHANCE CORPORATE GOVERNANCE:

    We seek to continuously promote transparency and stakeholder confidence. We
support  national and  international  initiatives to further enhance  corporate
governance.

    In late 2002,  the members of SGL's  Executive  Committee  and  Supervisory
Board signed a revised version of our Corporate Governance  Principles to bring
these Principles in line with the new German Corporate Governance Code. We also
intend to continue implementing the requirements of rules promulgated under the
U.S.  Sarbanes-Oxley  Act  of  2002  as  they  become  applicable  to  us.  SGL
established an official Disclosure Committee in February 2003.


                                      -12-

<PAGE>

BUSINESS

    The SGL Group is the largest  manufacturer of carbon and graphite  products
in  the  world,  based  on  2002  sales  revenue.  In  2002,  we had  sales  in
approximately 100 countries;  sales outside Germany accounted for approximately
81% of our sales revenue. We currently operate  manufacturing  facilities in 13
countries. Our customers are located throughout the industrialized world.

    We organize our business  operations  into business  areas that reflect the
products that we produce and market.  As of January 1, 2001, we reorganized our
operations into four business areas: Carbon and Graphite, Graphite Specialties,
Corrosion  Protection  and SGL  Technologies.  We renamed our former  Specialty
Graphite  segment  "Graphite  Specialties" and the former Fibers and Composites
segment "SGL Technologies".  As of January 1, 2002, we transferred parts of our
Graphite Specialties activities to SGL Technologies.

    *    Carbon and Graphite  manufactures and markets  graphite  electrodes and
         certain carbon and graphite products (carbon  electrodes,  cathodes and
         furnace linings).

    *    Graphite  Specialties  manufactures  and markets  products  with a wide
         variety of applications  and for a large number of industrial  sectors,
         including high-technology,  tool manufacturing, ferrous and non-ferrous
         metallurgy,  high-temperature processes,  chemicals,  automotive, glass
         and ceramics.

    *    Corrosion  Protection  produces heat exchangers,  columns and synthesis
         units  for  the  treatment  of  aggressive  or  corrosive   media.   It
         manufactures  and  applies  rubber  linings  and  other  anti-corrosive
         materials, such as acid-proof bricks and coatings, engineered plastics,
         flakes and pumps.  Corrosion Protection also offers complete engineered
         systems to  customers  in the  chemical  and  environmental  protection
         industries.

    *    SGL Technologies  manufactures carbon fibers,  aerospace and industrial
         composites,  expanded  graphite  (including yarns and fabrics),  carbon
         ceramic brake discs and fuel cell components.  SGL Technologies  covers
         the entire value chain from fibers  through to  composites.  We believe
         that we are the only major  competitor  in this  market  that can cover
         this broad range.

INDUSTRY AND MARKET OVERVIEW

    The SGL  Group is  active  in a broad  range of  markets  for  carbon-based
industrial products.  Historically, a significant portion of our sales has been
to the metallurgical industries, especially steelmaking. The chief factors that
drive our business are  conditions in our main  customer  industries as well as
general  economic  conditions in the  industrialized  and newly  industrialized
countries.

    Many of the  industries  served by our  established  Carbon  and  Graphite,
Graphite Specialties and Corrosion Protection  businesses---in  particular, the
steel,  aluminum and chemicals  industries---are  mature global industries that
tend to grow at  approximately  the same rate as the economy as a whole and may
be marked by cyclicality. Demand for products used in these industries tends to
fluctuate with global and regional business cycles as well as specific industry
developments.  Our SGL  Technologies  business  area,  by contrast,  focuses on
emerging technologies that we believe have significant potential for growth.

    In the late 1990s and  through  the first part of 2000,  the world  economy
generally expanded, as industrialized  Western nations recovered from the Asian
economic  crisis of 1997.  Our businesses  benefited from this positive  trend,
particularly  from  growth  in the  semiconductor  markets  and  in  the  steel
industry.  Since  mid-2000,  however,  there  has been a  significant  economic
downturn in the developed  industrial  nations of the OECD.  The effects of the
terrorist  attacks on the United States on September 11, 2001  exacerbated this
slowdown.  These negative  developments  have  adversely  affected our customer
industries.

    In the discussion  that follows,  we describe the primary  markets in which
our four business areas are active.

                                      -13-

<PAGE>

CARBON AND GRAPHITE

    Our Carbon and Graphite business area serves the metallurgical  industries.
Our graphite  electrodes are a necessary  component of electric arc furnace, or
EAF,  steelmaking,  while our carbon  electrodes  and  cathode  blocks  play an
important role in the production of aluminum and other  non-ferrous  metals. We
also produce  carbon-based  furnace  linings that help  furnaces  withstand the
extreme temperatures needed in metals production. In 2002, the worldwide market
for  products  made by our Carbon & Graphite  business  area was  approximately
[E]2.8 billion.

    The manufacture of high-quality graphite and carbon electrodes is a mature,
capital intensive  business that requires  extensive process know-how developed
over years of  experience  working  with the  various raw  materials  and their
suppliers,  furnace  manufacturers  and steelmakers  (including  working on the
specific applications for finished  electrodes).  It also requires high-quality
raw material sources and a developed energy supply  infrastructure.  There have
been no significant  new entrants in the  manufacture  of electrodes  since the
1940s.  Accordingly,  we  believe  that  it is  unlikely  that  there  will  be
significant  new entrants in the  manufacture of graphite  electrodes  over the
next several years.

Graphite electrodes

    Graphite  electrode  production is our single  largest  business.  Graphite
electrodes  are  a  necessary  component  of  EAF  steelmaking,  the  principal
technology used in "mini-mills".  To a lesser extent,  they may also be used in
traditional blast furnace/basic  oxygen furnace,  or BF/BOF,  steel production.
EAF steelmaking consumes graphite electrodes,  for which there are currently no
substitute products.

    Demand for graphite electrodes,  therefore, varies directly with demand for
finished  steel and, in  particular,  with  production of EAF steel.  The steel
industry   generally  is  cyclical  in  nature  and   experiences   significant
fluctuations  based on numerous  factors.  In general,  the EAF steel industry,
however,  has been less  cyclical  than the crude steel  industry and has grown
fairly steadily since the early 1970s. See below, "---EAF steelmaking".  Volume
and percentage of EAF steel to total steel production  increased  through 2001.
Despite  a  significant  increase  in  volume,  the  percentage  of  EAF  steel
production to total steel production  declined slightly during 2002,  primarily
as a result of a significant  increase of steel production in China,  where EAF
steelmaking  currently  represents a smaller portion of total steel production.
We believe that long-term  growth  prospects for the EAF steel industry  remain
favorable.  See Item 5, "Operating and Financial Review and Prospects-Operating
Results" and "---Trend Information".

    Beginning  in  the  1970s,  technological  improvements  reduced  "specific
consumption",  or the total mass of graphite electrodes consumed per metric ton
of steel produced.  During the same period,  graphite  electrode  manufacturing
capacity began to expand.  As a result,  by the mid-1980s there was significant
excess  manufacturing  capacity in this  industry.  In the late 1980s and early
1990s,   graphite   electrode   producers   began  to   consolidate,   reducing
manufacturing  capacity.  As a result,  supply and  demand  were  generally  in
balance during the 1990s. In the late 1990s, however, external factors began to
affect the graphite electrode  industry,  causing oversupply and price erosion.
These factors included the Asian financial crises of 1998-1999,  the structural
crisis  in the  U.S.  and  Japanese  steel  industries  in 2001  and  worldwide
recessionary  trends in 2002. In the wake of these  developments,  two graphite
electrode  producers in Germany and the United States have become  insolvent or
filed for  protection  under  Chapter 11 of the U.S.  Bankruptcy  Code.  In the
second half of 2002, the steel industry  appeared to be recovering,  causing an
upturn in demand for graphite electrodes.

    Technological  improvements in equipment design and production process, use
of higher quality scrap metals and other raw materials and  improvements in the
size,  strength  and quality of  graphite  electrodes  (including  improvements
developed by the SGL Group) have  increased the efficiency and reduced the cost
of  EAF  steel   production.   According  to  our  estimates,   these  improved
efficiencies have reduced worldwide specific consumption from approximately 6.5
kilograms of graphite  electrodes  per ton of steel produced in the early 1980s
to approximately  2.3 kilograms per ton in 2002. We expect that, as the cost of
further marginal  improvements in the efficiency of EAF steelmaking  increases,
the rate of decline in specific  consumption will grow slower.  We believe that
the long-term growth  potential of EAF steel will tend to offset  reductions in
specific  consumption,  resulting  in steady to slightly  increased  demand for
graphite electrodes over the long term.

                                      -14-

<PAGE>

    According to our estimates,  our share of the worldwide market for graphite
electrodes  was  approximately  19%. We believe that our regular  customers for
graphite electrodes include most of the world's major EAF steel producers.

    EAF steelmaking.  Electric arc furnace  production and blast  furnace/basic
oxygen furnace  production are the two primary  steelmaking  technologies.  EAF
steelmaking  operations  are commonly  referred to as mini-mills  because their
production  capacity  is  generally  smaller  than that of  BF/BOF  facilities.
Electric arc furnaces range in size from those producing  approximately 25 tons
of steel per production cycle, or "heat", to those producing  approximately 150
tons per heat.  Graphite  electrodes  act as conductors of  electricity  in the
furnace,  generating sufficient heat to melt scrap metal or other material used
to produce steel or other materials.  EAF steelmaking is generally  regarded as
more  efficient  and  cost-effective  than  BF/BOF  steelmaking.  Although  EAF
production is unlikely to replace BF/BOF  altogether,  a number of factors have
favored its growth at the expense of the older technology.  These include lower
required   investments,   lower  energy  consumption,   greater   environmental
sustainability,  technological  advances and, in many cases,  producers  with a
lean and innovative corporate culture.

    Since its development in the 1960s, mini-mill technology has produced a
steadily increasing portion of total steel production. Due primarily to the
cost effectiveness of EAF steelmaking, EAF steel production worldwide has grown
steadily from 100 million tons in 1972 (approximately 16% of total steel
production) to about 304 million tons in 2002 (approximately 34% of total steel
production), according to industry and SGL Group estimates. The following table
shows worldwide crude and EAF steel production in 1972, in 1980 and from 1990
through 2002.


                           WORLDWIDE STEEL PRODUCTION*

<TABLE>
<CAPTION>
                                                               EAF PROPORTION OF
YEAR                                    CRUDE1            EAF   CRUDE PRODUCTION
-------------------------------  -------------  -------------  -----------------
                                    (IN THOUSANDS OF TONS)                   (%)
<S>                                        <C>            <C>                <C>

1972...........................        632,009         99,749                 16
1980...........................        716,493        160,511                 22

1990...........................        770,694        215,124                 28
1991...........................        733,974        209,873                 29
1992...........................        719,398        210,508                 29
1993...........................        726,247        222,511                 31
1994...........................        723,958        229,063                 32
1995...........................        750,309        245,330                 33
1996...........................        750,611        249,741                 33
1997...........................        797,135        270,051                 34
1998...........................        778,032        266,144                 34
1999...........................        789,900        269,150                 34
2000...........................        849,200        293,600                 35
2001...........................        846,000        295,000                 35
2002...........................        893,000        304,000                 34

</TABLE>

* Source: International Iron and Steel Institute, 2002.

(1) "Crude"  steel production, a term  used in the  steelmaking industry, refers
    to total steel production by all methods.

Other Carbon and Graphite products

    Carbon  electrodes  serve as  conductors  of  electricity  in a furnace  to
generate sufficient heat to reduce silicon dioxide in a continuous process. The
production of silicon metal in furnaces that use carbon  electrodes  involves a
process   similar  to  that  used  for  graphite   electrodes,   but  at  lower
temperatures. Demand for carbon electrodes is directly related to the volume of
silicon and phosphorus production. Silicon and phosphorus production, and hence
demand for  carbon  electrodes,  have been  relatively  stable  since the early
1990s. In 2001, demand declined by approximately  20%, primarily as a result of
the energy crisis in Brazil. Demand for carbon electrodes returned to stability

                                      -15-

<PAGE>

in 2002;  assuming that silicon and phosphorus  production  remain  stable,  we
expect this trend to continue. Our primary markets for carbon electrodes are in
the United States, France,  Norway,  Australia and Brazil. We estimate that our
share of the worldwide market for carbon  electrodes was  approximately  31% in
2002.

    Cathode blocks and other products are used to equip  electrolysis cells for
the  production  of primary  aluminum.  Cathode  blocks for the  production  of
primary  aluminum  are  produced  according to  customers'  specifications  and
design. Hence we expect demand for cathodes to grow by 1%-2% annually, compared
to an annual  increase in aluminum  production  of 2%-3%.  We sell  cathodes to
major aluminum smelters in the United States,  Canada,  Brazil, Norway, France,
South Africa and other countries.  According to our estimates, our share of the
worldwide market for cathodes in 2002 was approximately 17%.

    Carbon  blocks  for  furnace  linings  are also  produced  in a variety  of
dimensions and grades, depending on the furnace size, the position of the block
within the blast  furnace  and the  function  the block is required to perform.
They are used for bottom lining,  wall  protection  and heat  conduction in the
hotter areas of blast furnaces. A modern furnace design allows for more than 10
years of  furnace  operation  before the  replacement  of the  linings  becomes
necessary.  Our main markets for furnace  linings are Europe and North America.
Furnace  linings  typically  account for a modest  portion of our business (for
example, approximately 1% of our sales revenue in 2002).

GRAPHITE SPECIALTIES

    The worldwide  market for graphite  specialties  was  approximately  [E]1.8
billion in 2002 (excluding  China and the  Commonwealth of Independent  States,
for which no data are available).  We estimate that, in 2002, our share of this
market was approximately  12%. Many of our customer  industries,  including the
chemicals industry and most areas of the electronics industry, are mature, with
growth  rates at or below the  overall  rate of  growth  in the  industrialized
world. The semiconductor  industry and the portion of the electronics  industry
serving  automotive  and household  applications,  however,  are more volatile.
After a deep recession during 1998 and most of 1999, the semiconductor business
recovered in 2000, but has experienced  another downturn since the beginning of
2001.

    We estimate that the worldwide market for technical carbon (excluding China
and the CIS) was  approximately  [E]0.6  billion in 2002, and that our share of
this  market was  approximately  18%.  We have a leading  position  in graphite
products for the semiconductor  industry in both Europe and North America, with
an estimated  20% share of the worldwide  market.  The growth rate of the other
major  industrial  applications for technical  products has  historically  been
closely  linked to the general  industrial  growth  rate in the United  States,
Japan and Europe. The market growth rate for mechanical carbons during the last
ten years has also been in the range of his general industrial growth rate.

CORROSION PROTECTION

    The Corrosion  Protection  business area combines the Process Equipment and
Rubber  Linings  business  lines of our former  Technik  business area with the
business  activities of Keramchemie,  which we acquired and  consolidated as of
January  1, 2000.  Historically,  our  Process  Equipment  and  Rubber  Linings
business lines primarily  served the chemicals  industry.  In recent years, the
chemicals industry has experienced decline. After integrating KCH, however, our
current  Corrosion  Protection  business area has  significantly  broadened its
customer base, reducing its dependence on a single industry. In addition to the
chemicals industry,  Corrosion  Protection now serves the engineering,  energy,
environmental,  metals, transportation,  electronics,  pharmaceuticals and food
industries.   We  estimate  the  worldwide  market  for  industrial   corrosion
protection  solutions to be  approximately  [E]2.8 billion,  of which we have a
share of approximately 10%.

SGL TECHNOLOGIES

    SGL  Technologies,  our newest  business area,  aims for growth in specific
niche markets,  where we expect  cyclicality to be generally  lower than in the
customer  industries of our established  businesses.  SGL Technologies serves a
number of diverse  specialty  markets with carbon  fiber and carbon  composite-
based  solutions.  The  worldwide  market for carbon  fibers is estimated to be
approximately  [E]1.0  billon.  We hold  established  market  positions  in the
segments  for  oxidized  fiber and chopped  carbon  fiber.  In the more diverse
market segments, such as those for continuous carbon fiber, aircraft

                                      -16-

<PAGE>

structural  components and carbon fiber reinforced plastics,  our market shares
are relatively  small. We also have strong market shares in certain markets for
composite  materials and components,  such as in rocket motor nozzles,  carbon-
carbon for wet friction applications and high purity carbon felts.

    We expect these  markets to grow as new  applications  are  developed.  For
example, the market for  high-performance  carbon-ceramic brake discs is in the
initial  stages of  development.  We believe  that the market for our fuel cell
components, which are currently in the research and development phase, also has
significant potential for growth. Development of this business, and of the fuel
cell  industry in general,  is  dependent  on the  achievement  of  significant
reductions in fuel cell production and operating costs by both SGL Technologies
and fuel cell stack  manufacturers.  Our increasingly  important  aerospace and
defense  business  grew by 15% last  year;  our U.S.  subsidiary  HITCO  Carbon
Composites  Inc has  entered  into a Special  Security  Agreement  for  defense
contracts with the U.S.  government.  This  agreement  makes HITCO eligible for
defense projects that are only open to U.S. companies.


PRINCIPAL PRODUCTS BY BUSINESS AREA

CARBON AND GRAPHITE

    The Carbon and Graphite  business area  manufactures  and markets  graphite
electrodes and specialized carbon products such as carbon electrodes,  cathodes
and furnace linings. Carbon and graphite are based on petroleum coke, coal tar,
petroleum  pitch and  anthracite  coal,  which are our primary  raw  materials.
Carbon and  graphite  have many  exceptional  properties  that we optimize  for
various applications through our manufacturing processes. See "---Manufacturing
Process and Operations".  Our carbon and graphite  products  exhibit  stability
under high temperatures, are non-corrosive and conduct heat and electricity. As
a result, these products are used in a wide range of applications.

    The Carbon and Graphite business area's key products include:

    *    Graphite electrodes, our principal product, used primarily in electric
         arc furnace or EAF steel production,  the steelmaking  technology used
         by virtually all  "mini-mills",  as well as in some ladle furnaces and
         foundries.   Steel  production   requires   temperatures  as  high  as
         2,760[degree]  Celsius  to melt  scrap  metal,  iron ore or other  raw
         materials for processing.  Electricity  passing through our electrodes
         creates an electric arc that generates these extreme temperatures. The
         electrodes,  which vary in size depending on the individual  furnace's
         requirements,  are consumed  regularly in the production  process.  We
         believe we provide the full range of sizes in graphite  electrodes and
         that their quality is equal to, or in specific segments,  better than,
         that of any other  manufacturer.  We  further  believe  that there are
         currently no commercially  viable substitutes for graphite  electrodes
         in EAF steel making.

    *    Carbon  electrodes,  used  primarily  to produce  silicon  metal.  This
         process is similar to the melting process in EAF steelmaking, though it
         uses  lower  temperatures.  Electrodes  vary in size but are  typically
         larger than the graphite electrodes used in EAF steelmaking and require
         a different manufacturing process. A typical silicon metal furnace uses
         18 electrodes, consuming three of them every five days.

    *    Cathode blocks and related products,  used to equip  electrolysis cells
         for the  production  of  primary  aluminum.  Cathode  blocks  require a
         significant degree of custom fitting; we produce them to our customers'
         specifications and design.  Newly constructed aluminum smelters tend to
         require larger  electrolysis  cells than older  facilities;  we believe
         that we are equipped to meet this trend in demand.

    *    Furnace  linings,  used for wall  protection and heat conduction in the
         hotter  areas of blast  furnaces  used to produce  liquid pig iron,  an
         intermediary  material  in the  production  of  steel  from  iron  ore.
         Although  modern  furnace  design  allows 10 or more years of operation
         before lining  replacement  becomes  necessary,  a typical furnace will
         have its lining  replaced a number of times  over its useful  life.  We
         produce the carbon blocks used in furnace  linings in conjunction  with
         our production of cathode blocks.

                                      -17-

<PAGE>

GRAPHITE SPECIALTIES

    Our Graphite  Specialties  products have a wide variety of  applications in
such sectors as high technology,  tool  manufacturing,  ferrous and non-ferrous
metallurgy,   high-temperature  processes,  chemicals,  automotive,  glass  and
ceramics.

    Our Graphite Specialties products consist of:

    *    technical carbons for use in high technology,  including  semiconductor
         materials;

    *    mechanical carbons, machined or pressed components and graphite- filled
         high-performance plastic parts; and

    *    electrical  carbons,  including machined products (such as brushes used
         in electrical motors and generators) and feederstock.

    Technical  applications  are  used in  laboratory  and  medical  analytical
technology,  ferrous and  non-ferrous  metallurgy,  electrochemistry  and high-
temperature technology.  Semiconductor materials made from high purity graphite
and carbon-reinforced carbon are used for semiconductor fabrication. Mechanical
carbon comprises carbon and graphite components that are machined or pressed to
specified sizes and shapes and graphite-filled  high-performance plastic parts.
Such  mechanical  carbons are mainly  used in the  automotive  industry  and in
mechanical engineering applications such as seal rings, bearings and components
for pumps.  Electrical carbons are used as pantograph carbons for railways, and
brushes made of carbon,  graphite  and  metal-graphite  are used in  electrical
motors and generators.  Because we no longer regard machined  electrical carbon
products as part of our core businesses,  we have divested substantially all of
these operations.

CORROSION PROTECTION

    Corrosion  Protection  concentrates on producing  process equipment for the
treatment of aggressive or corrosive media as well as on producing and applying
rubber linings and other anti-corrosive materials such as acid-proof bricks and
coatings,   engineered   plastics,   flakes,   coatings  and  pumps.   We  have
strategically bundled the individual product areas into Corrosion  Protection's
Surface  Protection  and Process  Technology  business  lines to offer complete
systems and solutions for specific applications from a single source.

    The  Corrosion  Protection  business  area offers  engineered  and packaged
solutions for industrial corrosion protection, has enhanced engineering support
to meet its customers'  specific  requirements,  and is characterized by a high
level of investment in research and development relative to sales. The products
of the Corrosion  Protection business area include rubber linings for corrosion
protection in flue gas desulphurization plants (as protection for metals or in-
depth surface  protection),  graphite-based  heat  exchangers,  graphite pumps,
exotic  metals,  polymer  coatings and  floorings,  tiles and bricks to protect
against corrosion.  Our broad product range and our engineering and application
know-how enable us to offer comprehensive solutions in the corrosion protection
market.

SGL TECHNOLOGIES

    SGL  Technologies  consists of six businesses  lines  manufacturing  carbon
fibers,   aerospace/defense  and  industrial   composites,   expanded  graphite
(including  yarns  and  fabrics),  carbon  ceramic  brake  discs  and fuel cell
components.

    Carbon fibers serve as base materials in the manufacture of products that
must be both stiff and lightweight, particularly in the aviation and aerospace
industries. We produce carbon fibers in two forms. Oxidized fibers are used in
high performance carbon-carbon aircraft brakes and racing car brakes as well as
for specialty insulation applications. Carbonized fibers are used primarily in
chopped form as reinforcement in conductive plastics, such as mobile telephone
and computer housings.

    Carbon  composites  include carbon fiber  reinforced  carbon,  or CFRC, and
carbon fiber  reinforced  plastics,  or CFRP. CFRC is processed into mechanical
parts that are used in  mechanical  engineering,  semiconductor  and other high
temperature  applications and in packaging in the chemicals industry.  CFRP are
used in optical  equipment,  medical technology and the textile and wire making
industries.  The  composite  materials  and  components  we produce  range from
relatively standard carbon or

                                      -18-

<PAGE>

fiberglass  reinforced  plastics,  used for x-ray tables and secondary aircraft
structures, to high performance, high temperature composites, used for fixtures
in vacuum  heat-treated  furnaces for semiconductor  monocrystal  production as
well as for rocket motor nozzles.

    Expanded  graphite consists  primarily of manufactured  graphite foils that
can withstand extremely high temperatures and are used in sealing  applications
instead of asbestos.  In addition,  milled exfoliated  graphite can be used for
the growing market of fillers in high-performance batteries.

    We have  developed  new  materials  and  components  for  developing  high-
technology   applications,   such  as  carbon  ceramics  for  high  performance
automotive brakes and components for fuel cells. SGL Technologies  began serial
production of carbon ceramic brake discs in a newly  constructed plant to serve
expected increasing demand from Porsche and other car manufacturers.


SEASONALITY

    Our sales  revenue  from  graphite  electrodes  fluctuates  from quarter to
quarter due to such factors as customer  inventory levels,  scheduled  customer
plant  shutdowns,  vacations  and changes in customer  production  schedules in
response to seasonal changes in energy costs,  weather conditions,  strikes and
work  stoppages.  In addition,  customers  may change  their order  patterns in
response to price  changes.  During the period prior to the effective date of a
price  increase,  customers  tend  to buy  additional  quantities  of  graphite
electrodes at the then lower price, which adds to our sales revenue during that
period.  During the period  following the effective  date of a price  increase,
customers  tend to use  those  additional  quantities  before  placing  further
orders,  which  reduces  our  sales  revenue  during  that  period.  Similarly,
customers tend to use up their inventories and delay purchases when they expect
price reductions.  Sales of the Corrosion Protection business area are normally
lowest in the first quarter and highest in the fourth quarter.


RAW MATERIALS AND SUPPLIERS

    The primary raw materials for graphite electrodes and graphite specialties
products are petroleum coke (needle coke for electrodes and regular grades for
specialty products), coal tar pitch and petroleum pitch. The primary raw
materials for carbon electrodes are anthracite coal and coal tar pitch and, in
some instances, a petroleum coke-based material. The primary raw material for
flexible graphite is natural graphite flake, which is obtained primarily from
China and Canada.

    We purchase all of our raw materials from a variety of sources. We maintain
contacts with the ten most important petroleum coke suppliers and purchase from
most  vendors on an ongoing  basis to  satisfy  our needs in our four  business
areas.  We buy the most  strategically  important  grades  of  needle  coke for
graphite  electrodes  from four major  producers and purchase a majority of our
needle coke  requirements  from  multiple  plants of a single  major  petroleum
company.  Binder  pitch and  impregnation  pitch are bought  locally from eight
different binder pitch and six different  impregnation  pitch vendors.  We have
established  strong ties to these suppliers and have been cooperating with them
on the  implementation  of joint  quality  improvement  and quality  monitoring
programs for many years.  We believe that,  under current  conditions,  our raw
materials are available in adequate quantities at current market prices.

    We purchase electric power and natural gas used in our manufacturing
processes from supra-regional linked supply systems or from local suppliers
under short-term contracts. The availability and price of raw materials and
energy may be affected by limitations imposed under new legislation or
governmental regulations, suppliers' allocations to meet the demand of other
purchasers during periods of shortage (or, in the case of energy suppliers,
extended cold weather), interruptions in production by suppliers, and market
and other events and conditions. In recent years, prices for petroleum coke
have gone through cycles of increase, decrease and stability. During this time,
we mitigated the effect of price increases by improving operating efficiency,
by implementing cost-cutting measures, and by passing price increases on to
customers.

                                      -19-

<PAGE>

MARKETING CHANNELS AND CUSTOMER SERVICE

    We sell our  products  in our local  markets  primarily  through our direct
Sales force,  which operates from the Group's sales offices and is supported by
our own  customer  service  personnel.  Export  customers  are  serviced by the
Group's  local sales  organizations,  or local sales  representatives  with the
assistance of our direct sales force. Most of these sales  representatives have
worked with the SGL Group for many years.

    In the Graphite  Specialties,  Corrosion  Protection  and SGL  Technologies
business area, we make the majority of our sales through our specialized  sales
organizations  specifically  dedicated  to each  such  business.  We  also  use
exclusive  sales agents in certain  locations.  From time to time, the CG sales
organization  also  assists in sales of GS  products,  particularly  outside of
Europe and North America.

    Since we are globally  oriented with a diverse  customer base, we regularly
hold  regional  conferences  to present and discuss  our  business  strategies,
targets and philosophy with our  representatives  in Germany and throughout the
world. Sales to customers outside Germany accounted for 81% of our net sales in
2002. No single  customer or group of affiliated  customers  accounted for more
than 5% of the SGL Group's net sales in 2002.

    For many years,  we have been strongly  committed to  supporting  our sales
activity by providing a high level of customer service. Together with our sales
and  distribution  organizations,  each of our  customer  service  personnel is
specifically  dedicated  to one of our four  business  areas.  In  addition  to
providing basic support services,  we assist our customers with their technical
problems, focusing on the design and operation of production equipment (such as
EAF  technology),  as well  as on  specifications  for  and use of the  Group's
products.  Since 1992 we have established  long-term  cooperative  arrangements
with  several  key  customers  to focus on  technical  challenges  and  product
development.

    The  customers in the CG Business  generally  place  orders for  electrodes
three to six months prior to the specified  delivery  date, as well as pursuant
to annual  framework  agreements with a forecasted full year demand. A customer
may cancel any such order, and we accordingly manufacture electrodes and manage
electrode  inventory  levels on the basis of  rolling  sales  forecasts.  Other
products,  particularly  in  the  GS,  CP and  SGL T  Business,  are  generally
manufactured  to  order.   Finished   products  are  generally  stored  at  our
manufacturing  facilities. We ship our finished products to customers primarily
overland and by sea, using "just in time" techniques where practicable.

    Proximity  of   manufacturing   facilities   to  customers  can  provide  a
competitive  advantage  in terms of cost of  delivery  of certain  products  to
customers.  The  significance  of these costs is affected  by  fluctuations  in
exchange   rates,   methods  of  shipment,   import   duties  and  whether  the
manufacturing facilities are located in the same economic trading region as the
customer.


DEPENDENCE  ON  PATENTS  OR  LICENSES,  INDUSTRIAL,   COMMERCIAL  OR  FINANCIAL
CONTRACTS

    We own over 280  patents  registered  in the United  States,  Europe and in
other major world markets,  and have over 300 patent  applications  pending for
new  technologies  and  processes.  In addition,  we have obtained  licenses to
various domestic and foreign patents.  These patents,  patent  applications and
licenses are, in the aggregate,  important to our competitive position, and the
loss of a great  number of patents  worldwide  could  have a  material  adverse
effect on our business. However, we believe that we are not currently dependent
on any individual patent or license or group of patents or licenses.

    We enter into industrial,  commercial and financial contracts with a number
of parties  throughout  the world and  consider  our  relationships  with these
counterparties  to be sound and productive.  However,  we also have a policy of
locating  alternative  sources  for  all  of  our  industrial,  commercial  and
financial  needs, and thus we believe that we are not dependent on our existing
industrial, commercial or financial contracts.


MANUFACTURING PROCESSES AND OPERATIONS

    The manufacture of graphite electrodes takes, on average, approximately two
months.  Graphite  electrodes  range in size from three  inches to 32 inches in
diameter  and two feet to nine feet in length  and weigh  between 20 pounds and
4,800 pounds (2.2 metric tons). Carbon electrodes, cathodes and

                                      -20-

<PAGE>

furnace linings are  manufactured in a process  comparable to that for graphite
electrodes,  except  that  impregnation  and  graphitization  are used only for
particular  grades of cathodes and furnace linings.  For these products we also
manufacture "green" material with vibro moulding techniques.

    The manufacture of graphite  electrodes  involves the following six primary
processes.

    FORMING -- Calcined petroleum coke is crushed,  screened,  sized and blended
    in a  heated  vessel  with  coal  tar  pitch,  applying  highly  specialized
    techniques.  The resulting  plastic mass is extruded through a forming press
    and cut into cylindrical  lengths (called "green" electrodes) before cooling
    in a water bath.

    BAKING -- The "green"  electrodes  are baked at  approximately  900[degree]
    Celsius in  specially  designed  furnaces to further  carbonize  the pitch.
    After cooling, the electrodes are cleaned, inspected and sample-tested.

    IMPREGNATION -- Baked  electrodes are impregnated  with a special pitch when
    higher  density,  mechanical  strength and  capability  to withstand  higher
    electric currents are required.

    REBAKING -- The impregnated  electrodes are rebaked to "coke out" the pitch,
    thereby adding strength to the electrodes.

    GRAPHITIZING -- The rebaked  electrodes are heated in longitudinal  electric
    resistance  furnaces at  approximately  3,000o  Celsius to  restructure  the
    carbon to its  characteristically  crystalline  form,  graphite.  After this
    process,  the  electrodes  are  gradually  cooled,  cleaned,  inspected  and
    sample-tested.

    MACHINING -- After graphitizing,  the electrodes are machined to comply with
    international  specifications  governing outside diameters,  overall lengths
    and joint details.  Tapered sockets are  machine-threaded at each end of the
    electrode  to permit  the  joining  of  electrodes  in  columns  by means of
    correspondingly double-tapered machine-threaded graphite connecting pins.

    The  production  of the variety of graphite  specialties  grades  generally
follows the process  described  above, but uses additional  forming  techniques
(such as isostatic and die molding),  additional  treatments like  purification
and  more  intricate  machining.  Specialty  graphite  products  use  different
mixtures  of raw  materials  due  to  fine  grain  formulations  and  different
processing time periods.

    Expanded graphite is made from mined natural graphite flake, which is acid-
treated, heat-treated and rolled into sheets of desired thickness and width and
produced in highly specialized production lines. Fibers and composites that use
polymer raw materials also require highly  sophisticated and highly specialized
facilities  in  addition  our main  production  lines for carbon  and  graphite
products.  The  manufacture of graphite  fibers and composites also relies upon
our high temperature technology expertise.

    We use statistical process controls in all manufacturing processes and have
implemented a teamwork and quality management program that involves  continuous
in-house training. We generally warrant to our customers that our products will
meet the SGL Group's and the customers'  specifications.  With the exception of
1997,  in which we conducted a recall of graphite  electrodes  in North America
due to a defect  in a new  piece  of  production  equipment  at one of our U.S.
production sites, electrode returns and replacements have historically amounted
to approximately 1% of sales revenue


COMPETITIVE POSITION OF THE SGL GROUP

    The  carbon  and  graphite   products   industry  is  highly   competitive.
Competition is based primarily on price,  product quality and customer service.
There are  approximately  10 to 15 major  manufacturers  of carbon and graphite
products worldwide.  Of these manufacturers,  the SGL Group is the largest, and
GrafTech  International Ltd.  (formerly UCAR International  Inc.) is the second
largest, based on 2002 net sales.

Carbon and Graphite

    For graphite electrodes,  our principal product, there are approximately 10
to 15 major manufacturers worldwide. GrafTech and the SGL Group are the largest
of these  manufacturers  on basis of  metric  tons  produced.  Other  producers
include The Carbide/Graphite Group in the United

                                      -21-

<PAGE>

States,  four Japanese  manufacturers  and several  manufacturers  in India and
China.  We  estimate  that  GrafTech's  share of  global  market  for  graphite
electrodes  was  approximately  20% in 2002,  followed  by the SGL Group with a
market share of 19%, The  Carbide/Graphite  Group with 4% and the four Japanese
manufacturers with an aggregate of 18%.

    We  believe  that we are the  largest  manufacturer  of  carbon  electrodes
worldwide, with GrafTech second largest.  According to our estimates in 2002 we
supplied approximately 31% of the worldwide market for carbon electrodes, while
GrafTech supplied 25%.

    Some ten  manufacturers  compete in the global  market for cathodes for the
aluminum  industry.  We believe  GrafTech  supplied  approximately  18% of this
market in 2002, while we supplied  approximately 17%. Other major manufacturers
include Erft Carbon GmbH,  Nippon  Denkyoku K.K.  (NDK),  SEC  Corporation  and
VESUVIUS.  We believe that none of these other  manufacturers  reached a market
share of more than 10% in 2002.

Graphite Specialties

    The  graphite  specialties  market  is  served  by  many  competitors  with
different   product   ranges  and   value-added   segments.   We  believe  that
globally-oriented  international  companies  including the SGL Group as well as
Morgan Crucible Company plc, Le Carbone Lorraine S.A., Schunk Gruppe,  GrafTech
and Toyo Tanso  Company,  account for only about two thirds of the total market
volume  worldwide  (excluding  China and the CIS,  for which  limited  data are
available).  A significant part of the market is served by small, local machine
shops,  which machine and finish goods  supplied to them by the major  graphite
producers in a semi-finished  state. We believe that we have leading  positions
in the supply of graphite and CFC products to the  semiconductor  and technical
carbon industry in Europe and North America.

Corrosion Protection

    We estimate that the worldwide market for industrial  corrosion  protection
is approximately  [E]2.5 billion,  of which we have an approximately 10% share.
This market is highly fragmented with many locally-oriented, often family-owned
smaller companies.  The key competitors in the market for carbon-based  process
equipment  applications  are Le Carbone  Lorraine and Carbon Everflow  (India).
Companies  such as Tip Top  and  Ohji  are  competitors  in the  rubber-linings
market,  while  Steuler  and  Stebbins  are key  competitors  in the market for
ceramic  bricks and tiles.  We believe,  however,  that we are the only company
that  supplies all heavy  corrosion  protection  market  segments with complete
systems.

SGL Technologies

    The  competitors  of our SGL  Technologies  business  area are carbon based
advanced  material and composites  companies.  Our main  competitors  for fiber
products are Zoltek,  Fortafil and several  Japanese  producers.  In the market
segments for carbon  composites the key competitors  include  Thiokol,  Hexcel,
ATPX and Cytec.  Key  competitors  in expanded  graphite  are  GrafTech  and Le
Carbone Lorraine.


GOVERNMENT REGULATION

    Our domestic and international  manufacturing facilities and operations are
subject  to   numerous   environmental   laws  and   regulations   as  well  as
administrative   orders  relating  to  alleged  prior  violations  of  laws  or
regulations.   These  legislation  and  orders  could  require  us  to  install
additional controls for certain emission sources or to change our manufacturing
processes in future years. We believe we possess all material permits necessary
for the current  operation of our  facilities.  Although we believe that we are
currently in material compliance with applicable laws, regulations and permits,
our operations,  like those of our competitors,  involve certain  environmental
risks.

    We seek to minimize  environmental  risk by  developing,  implementing  and
improving  material  resources,  production  and  abatement  techniques.  Using
advanced  techniques,  we aim to  improve  working  conditions  and  reduce the
environmental  impact  of our  own  operations  and  those  of  our  customers'
businesses.  Our  goal  is to  comply  with  the  European  Union's  Integrated
Pollution  Prevention  and  Control  (IPPC)  directive  while at the same  time
creating  economically  and technically  viable  conditions to assure long-term
competitiveness. We augment the efforts of our internal auditors,

                                      -22-

<PAGE>

research and development team and operations supervisors with periodic,  active
cooperation with national and international  state agencies and  organizations.
We are currently adjusting the organization of our environmental team to create
an integrated  Environmental,  Health & Safety Audit (EHSA)  management  system
tailored  to the  demands of our  industry.  Our goal,  which we believe we are
approaching,  is to achieve certification under ISO 14000, generally recognized
as the highest  standard in this field.  We use our system of  continuous  EHSA
risk assessment in our efforts to achieve permanent,  sustainable  improvements
in performance.

    International regulations govern the transportation of hazardous goods. Air
pollution,  wastewater,  solid  waste and  occupational  health  and safety are
generally  regulated by national laws. In the European  Union,  these areas are
generally covered by EU directives and guidelines. In particular, the EU's IPPC
directive  requires  certain  industries,  including  the carbon  and  graphite
industry, to implement advanced techniques.  The IPPC directive does not itself
create binding  regulation.  Rather, it serves as a framework for regulators in
the EU member states in establishing national  regulations.  Although national-
level  implementation  of the  IPPC  directive  may  lead to  more  restrictive
national  environmental  regulations,  based on our  experience  in  Germany we
believe that national  regulations  based on the IPPC directive will tend to be
more lenient than those  proposed in the directive  itself.  We believe that we
are  in  compliance,  or in the  process  of  achieving  compliance,  with  the
heightened requirements of IPPC directive-based regulation.

    In Germany we are subject to environmental  laws and regulations  including
the Federal Pollution  Control Act, the Water Resources  Management Act and the
Waste Act. Under these  statutes and their related  bodies of  regulation,  the
authorities may inspect our production  sites every one to three years. We must
also  comply  with  the  Plant  Security  Act,  the  Employment  Security  Act,
Regulations  for the Prevention of Accidents and the Toxic  Substances  Control
Act (which  includes  technical  regulations on hazardous  substances)  and the
Dangerous Chemicals Ordinance.

    Similar  laws are already in force in Austria,  Italy and a number of other
EU  countries;  France  and Spain are in the  process of  adopting  new laws to
comply  with  EU   requirements.   We  expect  that  most   European   national
environmental  laws  and  regulations  will  be  replaced  over  the  near-  to
medium-term by common EU requirements (or by national  regulations  based on EU
directives).  National  governments  will  remain  free to  adopt  requirements
stricter than those required by the EU.

    In the United States we are subject to environmental requirements including
those  imposed  by the  Clean  Air Act,  the  Clean  Water  Act,  the  Resource
Conservation and Recovery Act, the Safe Drinking Water Act and similar federal,
state and local laws regulating air emissions,  water  discharges and solid and
hazardous  waste  generation,   storage,   transportation  and  disposal.   The
Comprehensive  Environmental  Response,  Compensation and Liability Act of 1980
(Superfund)  and similar state laws can impose joint and several  liability for
releases of hazardous substances into the environment,  without regard to fault
or  the  lawfulness  of  the  original  activity.   Categories  of  potentially
responsible  parties can include  current or former  owners and  operators of a
contaminated  site and companies  that  generated or sent waste to a site.  The
Toxic  Substances  Control Act and related laws are designed to assess the risk
to health and the environment of new products at early developmental stages. In
addition,  laws  adopted or  proposed in various  states  impose  reporting  or
remediation requirements if historical contamination is discovered,  operations
cease or property is  transferred  or sold. We believe that we are currently in
material compliance with applicable U.S. laws and regulations.

    From time to time we have received claims seeking  environmental cleanup or
similar  costs  with  respect  to  properties  that we or others  currently  or
previously owned or operated.  We believe that the extent of contamination  and
our  liability,  if any,  arising  from such  claims  will not have a  material
adverse effect on our financial condition or results of operations.

    We have  established and continue to establish  accruals for  environmental
liabilities  where it is probable  that a liability  has been  incurred and the
amount of the liability can be reasonably  estimated.  We adjust  accruals on a
periodic basis as we make new  remediation  commitments or receive  information
indicating that previous  estimates should be changed.  We believe that, taking
into account our environmental accruals, our current environmental  liabilities
will not have a material  adverse effect on our financial  condition or results
of operations.

                                      -23-

<PAGE>

    Estimates  of future  costs of  environmental  protection  are  necessarily
imprecise.  Uncertainties  affecting these estimates  include the impact of new
laws and  regulations,  the  availability  and  application  of new and diverse
technologies  and the extent of insurance  coverage.  Subject to this  inherent
imprecision,  on the basis of our experience in managing  environmental matters
we  believe  that  costs and  capital  expenditures  related  to  environmental
protection  over the next several years will not have a  significant  impact on
our financial condition or results of operation.

ORGANIZATIONAL STRUCTURE

    As a management  holding company,  SGL is legally separate from its various
operating  subsidiaries in the SGL Group. SGL's Executive  Committee,  however,
provides overall strategic  direction and monitors the operations of the Group.
Individual members of the Executive  Committee also have direct  responsibility
for specific  operational areas on a business area, function or regional basis.
See Item 6, "Directors,  Senior Management and Employees---Directors and Senior
Management---Executive Committee".

    Our operational  business is managed by business areas. At the beginning of
2002, we combined the former regional business units of Carbon and Graphite and
Graphite  Specialties  into global  business  areas to improve  efficiency  and
respond to the increasing globalization of our key customers. With this change,
all four of our business  areas---Carbon  and Graphite,  Graphite  Specialties,
Corrosion  Protection  and SGL  Technologies---are  now  organized  on a global
basis.  Our  organizational  structure  is  thus  identical  with  our  segment
reporting by business areas.

    Our  production  sites and Group  companies  are  managed  by the  relevant
business area (or, in the case of  multi-business  area sites,  by a management
committee).  The  boards  of  directors  of  individual  Group  companies  have
responsibility  for those companies' legal and financial  affairs.  Centralized
corporate functions support the Executive Committee and provide services to all
business areas and to individual legal entities within the Group.


PRINCIPAL SUBSIDIARIES

    The following table lists the principal direct and indirect subsidiaries of
the SGL Group as of December 31, 2002:

<TABLE>
<CAPTION>
                                                                              OWNERSHIP
COMPANY NAME                                         LOCATION  BUSINESS AREA  INTEREST %
--------------------------------------  ---------------------  -------------  ----------
<S>                                                       <C>            <C>         <C>
SGL Carbon LLC........................          Charlotte, NC  CG, GS, SGL T       100.0
HITCO Carbon Composites Inc...........            Gardena, CA      GS, SGL T        94.0
SGL Technic Inc.......................           Valencia, CA      GS, SGL T       100.0
SGL Carbon GmbH.......................     Meitingen, Germany         CG, GS       100.0
SGL Technic SA........................       Grenoble, France         GS, CP       100.0
SGL Canada Inc........................        Lachute, Canada             CG       100.0
SGL Carbon SpA........................           Milan, Italy             CG        99.7
SGL Carbon SA.........................       La Corupa, Spain             CG        99.9
SGL Carbon SA.........................      Nowy Sacz, Poland             CG       100.0
SGL Carbon GmbH & Co..................         Steeg, Austria             CG       100.0
ZEW Zaklady Electrod Weglowych SA.....        Ratibor, Poland             CG        97.2
SGL Carbon SA.........................         Chedde, France             GS       100.0
SGL Acotec GmbH.......................     Siershahn, Germany             CP       100.0
SGL Technologies GmbH.................     Meitingen, Germany          SGL T       100.0
SGL Technic Ltd.......................  Muir of Ord, Scotland          SGL T       100.0
SGL Carbon Beteiligung GmbH*..........     Wiesbaden, Germany      Corporate       100.0

</TABLE>

* SGL Carbon Beteiligung GmbH is a 100% subsidiary of SGL Carbon AG that serves
  as a holding company for various other subsidiaries in the SGL Carbon Group.

PROPERTY, PLANTS AND EQUIPMENT

    As of December  31,  2002,  we operated 40 major  manufacturing  facilities
worldwide of which 36 are located in Europe and North  America.  As part of the
restructuring  program  announced  in December  2001,  we closed or idled three
plants during 2002. Effective January 2003, we sold our

                                      -24-

<PAGE>

Berlin,  Germany  manufacturing  facility and, in March 2003, sold our land and
building  in Milan,  Italy.  We also have other  properties,  including  office
buildings,  research laboratories and warehouses,  primarily in Germany and the
United  States.  We  own  most  of  our  manufacturing   facilities  and  other
properties.

    We are  harmonizing  our  manufacturing  processes  throughout the Group to
permit global sourcing from all locations with  consistent and  interchangeable
quality levels. We produce  electrodes in the United States,  Canada,  Germany,
Italy, Spain,  Austria and Poland.  Carbon electrode production is concentrated
in Italy and  cathodes  and  furnace  linings are  manufactured  in Germany and
Poland.  Our feeder stock for specialty  graphite  products is  manufactured in
Germany,  France and the United States.  In Europe,  we have further  optimized
production by  concentrating  extruded,  molded and isostatic  pressed graphite
product  grades in the  facilities  best  suited for this  work.  We have taken
similar restructuring measures in North America,  discontinuing  manufacture of
molded and  isostatic  products in the United  States.  We produce  most of our
corrosion   protection  materials  in  Germany,   with  additional   production
facilities in France,  the United  States,  Brazil,  Singapore,  Italy,  United
Kingdom  and  China.  About  four-fifths  of  our  fibers  and  composites  are
manufactured outside of Germany,  primarily in the United States and the United
Kingdom.

    We conduct major  maintenance  of our  facilities on an ongoing  basis.  We
currently  have capacity to  manufacture  approximately  280,000 metric tons of
heavy carbon and graphite products annually (excluding  graphite  specialties).
This  capacity   includes   approximately   215,000  metric  tons  of  graphite
electrodes.  In 2002,  we sold  approximately  173,000  metric tons of graphite
electrodes  compared  with  175,000  metric  tons in 2001.  We also sold 22,000
metric tons of carbon  electrodes  in 2002,  an increase from the 17,000 metric
tons we sold in 2001.

    As of December 31, 2002 we operated the following major facilities

<TABLE>
<CAPTION>
                                                 PRIMARY USE
                           -------------------------------------------------------  OWNED/
LOCATION                   MANUFACTURING  SALES  ADMINISTRATION      BUSINESS AREA  LEASED
-------------------------  -------------  -----  --------------  -----------------  ------
<S>                                  <C>    <C>             <C>                <C>     <C>
EUROPE
Wiesbaden, Germany(1)....                                     x          Corporate  Leased
Meitingen, Germany.......              x      x               x  CG, GS, CP, SGL T   Owned
Berlin, Germany(3).......              x                                        GS  Leased
Griesheim, Germany(4)....              x                                        CG   Owned
Bonn, Germany............              x                      x                 GS   Owned
Siershahn, Germany.......              x                      x                 CP   Owned
Bornum, Germany..........              x                      x                 CP  Leased
Leuna, Germany...........                     x               x                 CP   Owned
Augsburg, Germany........                                     x          Corporate  Leased
Steeg, Austria...........              x                      x                 CG   Owned
Milan, Italy(2)..........                     x               x                 CG  Leased
Milan, Italy.............              x      x               x                 GS   Owned
Pero, Italy..............              x      x               x                 CP   Owned
Narni, Italy.............              x                                        CG   Owned
Ascoli Piceno, Italy.....              x                                        CG   Owned
Chedde, France...........              x                      x                 GS   Owned
Houdain, France..........              x                      x                 CP   Owned
Grenoble, France.........              x                      x                 CP   Owned
La Coruna, Spain.........              x      x               x                 CG   Owned
Ratibor, Poland..........              x                      x                 CG   Owned
Nowy Sacz, Poland........              x                      x                 CG   Owned(4)
Nowy Sacz, Poland........              x      x                                 GS   Owned
Inverness, Scotland......              x                      x              SGL T   Owned
Alcester, England........              x                      x                 GS  Leased

                                      -25-

<PAGE>

                                                 PRIMARY USE
                           -------------------------------------------------------  OWNED/
LOCATION                   MANUFACTURING  SALES  ADMINISTRATION      BUSINESS AREA  LEASED
-------------------------  -------------  -----  --------------  -----------------  ------

Sandbach, England........              x                      x                 CP   Owned
NORTH AMERICA
Charlotte, North
  Carolina(5)............              x               x             CG, GS   Owned
Morganton, North
  Carolina...............              x                                        CG   Owned
Hickman, Kentucky........              x                                        CG   Owned
Ozark, Arkansas..........              x                                        CG   Owned
Niagara Falls, New York(6)             x                                        GS   Owned
Valencia, California.....              x      x               x          SGL T, GS   Owned
Lachute, Quebec, Canada..              x      x               x                 CG   Owned
Kitchener, Ontario,
  Canada.................              x      x                                 GS  Leased
St. Marys, Pennsylvania..              x      x                          GS, SGL T   Owned
Strongsville, Ohio.......              x      x                                 CP   Owned
Houston, Texas...........              x                                        CP   Owned
Arkadelphia, Arkansas....              x                                     SGL T  Leased
Robesonia, Pennsylvania..              x                                        GS  Leased
Womelsdorf, Pennsylvania.              x                                        GS  Leased
Gardena, California......              x      x               x          SGL T, GS   Owned
Cheshire, Connecticut....              x                                        GS  Leased
Brecksville, Ohio........                     x               x                 CP  Leased

REST OF WORLD
Mexico City, Mexico......              x                      x                 CP  Leased
Wuhan, China.............              x                      x                 CP  Leased
Singapore, Singapore.....              x                      x                 CP  Leased
Guarnlhos, Brazil........              x                      x                 CP   Owned

</TABLE>
__________

(1) Corporate Headquarters

(2) Head Office, Italy

(3) Sold effective January 2003

(4) Hereditary  building right (Erbbaurecht)  under German law, comparable  to a
    long-term ground lease

(5) Head Office, North America

(6) Idled

    As of December 31, 2002 we had not created any material encumbrances on our
property other than customary  security  interests  created in connection  with
their purchase.  In connection with our recent refinancing we have encumbered a
number of our  properties;  see Item 10,  "Additional  Information  -- Material
Contracts". We believe that our facilities, which are of varying ages and types
of  construction,  are in good  condition,  are suitable for our operations and
generally  provide  sufficient  capacity  to  meet  our  requirements  for  the
foreseeable future.







                                      -26-

<PAGE>

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

    You should read this discussion  together with our  consolidated  financial
statements,  including  the  Notes  thereto,  as  well as the  other  financial
information  contained  elsewhere in this annual  report.  We have prepared our
consolidated   financial   statements  in  accordance  with  IFRS.   There  are
significant  differences between IFRS and U.S. GAAP. These differences could be
material to the financial  information in this annual report.  For a discussion
of the significant differences between IFRS and U.S. GAAP as they relate to the
SGL Group, see "--Significant  Differences  between IFRS and U.S. GAAP" as well
as Notes 34 and 35 to our consolidated financial statements.

    This discussion includes  forward-looking  statements within the meaning of
the  U.S.  Private  Securities  Reform  Act  of  1995.  These   forward-looking
statements  are subject to risks,  uncertainties  and other  factors that could
cause our actual results to differ  materially  from those expressed or implied
by our forward-looking statements. See "Forward-Looking Statements".


OVERVIEW

    The SGL Group  manufactures  carbon and graphite  products.  We manufacture
graphite  and carbon  electrodes  and  cathodes,  used  primarily  in EAF steel
production and aluminum  smelting.  We also  manufacture  natural and synthetic
graphite  products for, and provide  services in connection  with, a variety of
industrial applications world-wide. Our customers are located in industrialized
countries  throughout in the world. In 2001, we sold products in  approximately
100 countries,  with sales outside Germany  accounting for approximately 81% of
our sales revenue. We operate manufacturing facilities in 13 countries.

BUSINESS REALIGNMENT

    We manage our  operations in business  areas that reflect the products that
we produce and market.  During 2001 we restructured our  organization  into the
four  current  business  areas--Carbon  and  Graphite,   Graphite  Specialties,
Corrosion  Protection,  and  SGL  Technologies.   As  of  January  1,  2002  we
reclassified  our European  foils  business  from Graphite  Specialties  to SGL
Technologies.  The  discussion  for 2001 and 2000 that  follows  reflects  this
reorganization.

COST REDUCTION PROGRAM

    In 2001 we  announced a major cost  reduction  and  restructuring  program,
which  includes  significant  cost  containment  measures  and  other  steps to
increase our financial results and cash flows from operations.  As part of this
restructuring  program,  we reduced our total number of employees by 837,  from
8,197 at the end of 2001 to 7,360 at the end of 2002.  In addition,  we plan to
achieve  further cost savings  through our SGL Excellence  initiative,  through
which  we  train  our  managers  in  Six  Sigma   methods  to  identify   other
cost-reduction  measures.  In 2002, we incurred costs of  approximately  [E]2.3
million  relating to SGL Excellence.  In that year, we achieved savings of more
than [E]4.0 million that we attribute to this initiative, and expect to achieve
further  sustained  savings of approximately  [E]3.0 million in each subsequent
year as a result.  The total  non-recurring  charges that we expect to incur in
connection with our various restructuring and cost reduction initiatives amount
to  [E]41.0   million  on  a  pretax  basis  in  2001,  of  which  we  incurred
approximately  [E]15.0  million  as cash  expense  in  2002.  In  addition,  we
identified a number of additional  plant and overhead cost  reduction  projects
during 2002, which generated an expense of [E]8.3 million in 2002.

CURRENCY EXCHANGE EXPOSURE

    We invoice our sales  primarily in U.S.  dollars and in euro. The remainder
of our sales is denominated  principally in other western  European  currencies
(primarily  sterling  and the Polish  zloty).  Purchases of our  principal  raw
material--petroleum  coke, which on average comprise  approximately  25% of the
total  production  costs  of  our  Carbon  and  Graphite   business   area--are
denominated in U.S. dollars.  Our other principal  production costs,  labor and
energy,  are  denominated  in the currency of the country in which the relevant
production  facilities are located. We currently operate our main manufacturing
facilities in Europe and North America.

    Fluctuations in currency rates, especially between the dollar and the euro,
can  influence  our financial  results.  Through  early 2001,  the value of the
dollar generally  increased  relative to the euro. The relative strength of the
dollar positively impacted our operating results. In early 2002, the value

                                      -27-

<PAGE>

of the dollar began to decline relative to the euro. If this decline continues,
we expect that it would have several effects on our financial results,  some of
which could  offset  others.  In  addition to the dollar- and  euro-denominated
revenue  and  expense  items  discussed  above,  we also have major  assets and
liabilities in the United States or denominated in dollars, including antitrust
liabilities  and  dollar-denominated  debt.  Fluctuations  in  the  euro-dollar
exchange  rate can cause  translation  effects in the SGL Group's  consolidated
balance  sheet.  A continued  increase in the value of the euro relative to the
dollar would tend to reduce our antitrust-related  expenses as well as expenses
related to  dollar-denominated  debt.  On the other hand, it would also tend to
reduce the contribution of our U.S.  businesses to our consolidated  results of
operations. A stronger dollar will tend to increase our non-current and current
assets as well as equity and  liabilities,  whereas a weaker  dollar  rate will
tend to  decrease  assets,  equity  and  liabilities.  The  ultimate  impact of
currency  exchange  rate  fluctuations  on our net  income  will  depend on the
circumstances at any given time.

SALES REVENUE

    We generate  revenue  primarily  through the manufacture and sale of carbon
and  graphite  products  to  customers  from  several   industries,   including
steel-making,  aluminum smelting, chemicals, manufacturing and electronics. Our
revenue from trading and other sources is not significant.

    Our consolidated  sales revenue reflects net sales,  that is, sales revenue
after  elimination of intersegment  sales.  The following table shows our sales
revenue and its year-on-year  change for the SGL Group on a consolidated  basis
as well as by business area and geographical region from 2000 to 2002.

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                              -------------------------------------------------------------------------
                                         2002                         2001                         2000
                              --------------------------  ---------------------------  ----------------
                              ([E]IN MILLIONS) (% CHANGE) ([E] IN MILLIONS) (% CHANGE) ([E] IN MILLIONS)
<S>                                       <C>        <C>               <C>        <C>               <C>

SGL Group consolidated total          1,112.3       (9.8)          1,233.3       (2.3)          1,262.5
By business area:
 Carbon and Graphite .......            550.7      (11.1)            619.8        0.0             619.5
 Graphite Specialties * ....            195.9      (15.1)            230.7       (4.7)            242.0
 Corrosion Protection ......            212.4       (9.9)            235.8       (4.7)            247.3
 SGL Technologies * ........            150.3       11.3             135.1      (11.0)            151.8
Other.......................              3.0      (74.8)             11.9      526.3               1.9

By geographical region:
 Germany ...................            216.6      (12.0)            246.0        2.1             241.0
 Rest of Europe ............            373.8       (8.7)            409.2       13.8             359.6
 North America .............            281.6      (10.8)            315.8      (19.2)            390.6
 Rest of World .............            240.3       (8.4)            262.3       (3.3)            271.3

</TABLE>
__________

*   As of January 1, 2002, we reclassified the European graphite foils business
    from Graphite Specialties to SGL Technologies. Sales for 2000 and 2001 have
    been adjusted to reflect this reclassification.

    We  recognize  sales  revenue  at the  time  of  transfer  of  risk  to the
purchaser,  generally  after  delivery of the products or the  rendering of the
services  and net of any  discounts  and  rebates.  We record most of our sales
revenue  through  invoices  under  purchase  contracts  with  major  industrial
customers,  with the timing of revenue  recognition  dependant  on the specific
terms of these contracts.  If product sales are subject to customer acceptance,
we do not recognize  revenue until the customer accepts the product.  We do not
account for any sales under the  "percentage  of  completion"  method.  See "--
Critical U.S. GAAP accounting policies -- Revenue Recognition".

    Our  sales  revenue  from  graphite  electrodes  fluctuates  as a result of
changes in customer  purchasing  patterns due to shifts in inventory levels and
production  schedules,  plant shutdowns and vacations as well as in response to
energy  cost  fluctuations,   adverse  weather  conditions,  strikes  and  work
stoppages.  Due to  the  long  production  cycles  for  graphite  products  and
fluctuations in order patterns and inventory levels within customer industries,
there is often a considerable  time lag between  changes in demand for customer
products and any impact on our businesses. In addition, our

                                      -28-

<PAGE>

customers  frequently  alter  their  ordering  patterns  as a result  of, or in
anticipation   of,  price  changes  for  our   products.   Just  prior  to  the
effectiveness  of an announced  price  increase,  customers tend to build their
inventories of graphite  electrodes,  which boost our sales revenue during that
period.  Immediately after a price increase,  customers typically deplete these
stocks,  which reduces orders and sales revenue during that period.  Similarly,
when customers  anticipate  price  reductions,  they will tend to deplete their
stock and delay orders. Sales of the Corrosion Protection business area tend to
be seasonal,  with the highest sales in the fourth quarter and the lowest sales
in the first quarter each year.

    Over the last decade,  we have  significantly  broadened  the  geographical
distribution of our sales revenue.  In particular,  a decline in North American
steel  production  has  reduced  our  sales  revenue  in  that  market,   while
consolidation of our Polish subsidiary ZEW in 2001 has increased the percentage
of our sales revenue generated in Europe. We have also significantly  increased
our sales  revenue in Asia,  a trend that we expect to continue in the next few
years with the  continuing  industrialization  of eastern and southern Asia. We
believe that our broad product  portfolio across many industries and the global
distribution  of our business  reduces our exposure to economic  cyclicality in
any one region or customer  industry.  In particular,  and although results may
vary in any  given  period,.  Graphite  Specialties'  large  number  of  target
industries enables it to diversify, thereby reducing exposure to economic slow-
down  in any  one  key  industry.  Following  the  integration  of KCH  and the
organization of Corrosion  Protection in its current form, we believe that this
business area is also better  diversified than in its earlier form, in which it
was significantly dependent on the chemicals industry.

COST OF SALES

    Major components of cost of sales include personnel  expenses,  the cost of
raw  materials  and  energy  and  other  variable  and fixed  costs.  Personnel
expenses,  including wages, salaries,  social security and pension expense, are
the most  significant  items in our cost of  sales.  Raw  material  cost in the
Carbon and Graphite business area consists primarily of purchases of petroleum-
based needle coke and coal tar binder and impregnation pitch. Historically,  we
have not had difficulty  obtaining these raw materials.  In addition,  we incur
substantial  energy costs,  primarily for  electricity,  in connection with the
production of our graphite electrode and other carbon products.  The production
of these  products is energy  intensive  and energy costs over the last several
years have been highly volatile.  Graphite Specialties  production uses similar
raw  materials  as  well  as  additional  forming  techniques,  treatments  and
combinations of other raw materials.  Our cost of sales includes  straight-line
depreciation of property,  plant and equipment  having  estimated  useful lives
ranging from four to 41 years. In the periods discussed below, raw material and
energy  prices have  generally  increased,  reducing  our gross  profit  margin
(calculated as sales revenue less cost of sales, divided by sales revenue).

SELLING EXPENSES

    Our selling expenses consist primarily of the sales  organization  expenses
as well as distribution expenses, such as packaging materials,  freight charges
and sales commission expenses.  We include in sales organization expenses wages
and salaries,  social security,  pension expense, office space and expenses, in
each case related to our sales force. Selling expenses typically comprise about
13% of sales revenue.  We expect this percentage to remain relatively stable or
to decrease slightly as a percentage of sales revenue.

RESEARCH COSTS

    We incur research costs in connection with the development of new materials
and compounds for high  technology  applications,  such as carbon  ceramics for
high  performance  automotive  brakes and components for fuel cells.  In recent
years, this expense has increased as a percentage of our sales revenue. We have
invested  considerable  amounts in carbon  ceramics  technology  and  commenced
production of carbon -ceramic brake discs at our plant in Meitingen, Germany in
July 2002.  Another principal area of research expense has been the development
of a fuel cell components  business,  which is currently in the research phase.
We expect our research costs to remain stable or to decrease as a percentage of
sales revenue in the next few years.

                                      -29-

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES

    Our  general   and   administrative   expenses   comprise   personnel   and
non-personnel  costs  attributable  to  headquarters  and other  administrative
centers,  including  accounting,  legal and  regulatory  expenses  and  pension
expense related to administrative  personnel. In recent years, the main factors
contributing  to these  expenses have  included  overhead  attributable  to our
consolidated  subsidiaries  and strategic  technology  projects  related to the
development of a common management  information system platform,  conversion of
our information systems to the euro and external consulting expenses related to
acquisitions and other corporate projects.  While we expect the significance of
these and  similar  expenses  to vary from  period to period,  we would  expect
aggregate general and  administrative  expenses to remain stable or to decrease
as a percentage of sales revenue in the future.

OTHER OPERATING INCOME (NET)

    The major  components of other operating  income (net) are  amortization of
goodwill from acquisitions,  insurance  payments  received,  exchange gains and
losses from  operating  activities,  gains and losses  from sales of  property,
plant and equipment, bank charges and income and/or loss from the adjustment of
accruals and provisions.

COSTS RELATING TO ANTITRUST PROCEEDINGS

    We record costs relating to antitrust proceedings as a separate item in our
statement of  operations.  On May 3, 1999 we pleaded guilty to charges of price
fixing raised at the initiative of the U.S. Department of Justice. As a result,
we are obligated to pay $135 million in fines and have  guaranteed  the payment
of an additional  $10 million in fines payable by the Chairman of our Executive
Committee  over the next six years.  We have  subsequently  settled most of the
claims arising from related civil lawsuits alleging damages from the activities
upon which the DOJ's antitrust  action was based. We believe that we will reach
economically  reasonable  settlements in the remaining civil lawsuits. In April
2002, SGL reached an agreement  with the DOJ revising the payment  schedule for
the antitrust  penalties  assessed in 1999. This agreement extended the payment
period for this liability  until 2007,  delaying  payment of $50 million of the
remaining $65 million  liability from 2002 and 2003, as contemplated  under the
original payment plan, to 2004 through 2007 under the revised payment plan.

    In mid-July 2001, the European Commission imposed a fine of [E]80.2 million
for alleged  anti-competitive  practices in the graphite  electrodes market. We
believe that the amount of this fine is unjustified.  In particular, we believe
that the  European  Commission  is  assessing  fines twice for certain  alleged
violations. We have filed an appeal against the Commission's decision.  Payment
of the fine has been suspended pending final judgment in the appeal. Appeals of
this type may take two years or longer to be decided. Appellants must typically
provide security for the amount of the contested fine when filing an appeal. We
have used funds drawn under the Term B Facility  of our new  syndicated  credit
facility to provide this security.

    See "--- Liquidity and Capital Resources --- Overview of Bank Debt and Cash
Flows".

RESTRUCTURING EXPENSES

    We present  major  restructuring  expenses  separately  in our statement of
operations.  These expenses include plant closure costs, expenses for workforce
reduction and write-downs on plant, equipment and inventory.

NET FINANCING COSTS

    The components of our net financing costs include net interest  expense and
other net financing costs,  including the non-cash currency impact of antitrust
liabilities and other non-cash  financing costs. Net interest expense includes,
among other  things,  interest  expense on loans,  the  interest  component  of
appropriations  to pension  provisions and accrued interest on liabilities from
antitrust  proceedings.  Other recurring  non-cash  related net financing costs
include the interest component of appropriations to pension provisions.

                                      -30-

<PAGE>

    When the DOJ imposed a fine on SGL Carbon in  connection  with an antitrust
investigation,  we discounted  the resulting  antitrust fine to its net present
value and  recorded  this amount as a  liability  on our  balance  sheet.  This
antitrust  liability  resulted in a positive,  non-cash  reduction in financing
costs in 1999. In each succeeding  reporting  period,  we have recalculated the
net present value of this  liability,  which has resulted in a regular  imputed
interest expense for each such period.  In the first half of 2002, we agreed to
an amended fine payment  schedule with the DOJ. This amended  payment  schedule
resulted in a one-time  reduction in our net financing costs due to a reduction
in the net present value of the outstanding antitrust liability.

    Because the antitrust  liability is denominated in dollars,  changes in the
euro/dollar  exchange  rate from period to period may give rise to  transaction
and translation  effects on our balance sheet. To reduce the resulting exposure
to currency  exchange  rates,  we hedge the antitrust  liability using currency
options.  However, we retain exposure to non-cash  adjustments in the amount of
the antitrust liability, which we record at the end of each reporting period in
other net financing  costs.  As a result of the financing of  antitrust-related
payments,  the funding of our brake disc and fuel cell component businesses and
the   acquisition   of  KCH  and  ZEW,  our  interest   expense  has  increased
significantly in recent years. We expect that, as a percentage of sales revenue
in future periods, net interest expense will increase due to our new syndicated
credit facility, which we expect to have a higher stated interest rate than the
credit facilities it refinanced. See Item 10, "Additional Information--Material
Contracts".  This increase should be offset,  in part, by a decrease in accrued
interest  on  liabilities  from  antitrust  proceedings  as we  pay  off  those
liabilities as well as by further reductions in our net financial debt.

INCOME TAX BENEFIT (EXPENSE)

    Tax expenses  include current and deferred income tax expenses.  Our income
tax expense  reflects income tax liability in respect of pre-tax  earnings from
our  consolidated  group companies that cannot be set off against existing loss
carryforwards or other tax credits. Deferred tax income and expense result from
the  capitalization  or  write-down of tax loss  carryforwards  to deferred tax
assets and also arise as a result of temporary differences between the carrying
amounts of assets and liabilities in financial  statements  prepared under IFRS
as compared to tax accounts  prepared using the liability  method. We recognize
on a consistent  basis deferred tax assets on tax loss  carryforwards  based on
internal  projections.   These  projections  reflect  uncertainties  concerning
assumptions and other general conditions.

    When we first  prepared  IFRS (then IAS) annual  financial  statements,  we
retrospectively  adjusted  our  recognition  of deferred tax assets on tax loss
carryforwards  previously booked in the United States for the reporting periods
covered.  These adjustments  resulted in changes in the amounts of deferred tax
assets  reported  in 2000 as  compared  with  amounts  previously  reported  in
published quarterly reports. In 2001, we wrote down the full amount of deferred
tax assets on tax loss  carryforwards  as a consequence of the recession in the
United States and the weak economic  situation of the U.S. steel industry,  our
principal  customer for graphite  electrodes.  To ensure a comparable basis for
earnings  projections prepared at the end of 2000 with respect to the uncertain
U.S. economy and the U.S. steel industry, in particular, we shortened the time-
frame  used as a basis for  recognizing  U.S.  deferred  taxes as of the end of
2000.  This  resulted in a non-cash  adjustment  in the value of  deferred  tax
assets as of the end of 2000 and 2001 and an increase in our income tax expense
in each of those years.

    Until  fiscal  year  2000,  the  German  Corporation  Tax  Act  used a full
imputation  system with split tax rates for the taxation of corporate income of
German  companies.  Under this  system,  once a dividend was  distributed,  the
corporation  tax  payable  by the  distributing  company  with  respect to such
dividend  was reduced  (the "split tax  rate").  German-domiciled  shareholders
entitled  to  offset  corporation  tax were  able to claim a tax  credit in the
amount of the corporation tax originally paid by the distributing  company (the
so-called "corporation tax imputation procedure"). The German Tax Reduction Act
came into effect in January  2001.  Under this  statute,  net profits of German
companies  became  subject to a standard 25% rate of  corporation  tax,  plus a
solidarity  surcharge of 5.5% on the corporation tax rate. The aggregate German
corporation  tax rate for 2001 was 26.4%,  and the trade tax rate was 12%. As a
result of the German Tax Reduction Act, all deferred tax items not realized

                                      -31-

<PAGE>

until after  January 1, 2001 are  measured at an average tax rate of 38.4%.  We
recognized  the  effect of this  change in the  effective  German tax rate as a
deferred tax  liability in the taxable  income of 2000 in  accordance  with IAS
12.60.


OPERATING RESULTS

<TABLE>
<CAPTION>
                                                       ------------------------------
                                                            2002       2001      2000
                                                       ---------  ---------  --------
                                                              ([E] IN MILLIONS)
<S>                                                          <C>        <C>      <C>

Sales revenue........................................    1,112.3    1,233.3   1,262.5
Cost of sales........................................     (886.5)    (941.8)   (950.8)
                                                       ---------  ---------  --------
Gross profit.........................................      225.8      291.5     311.7
Selling expenses.....................................     (139.4)    (154.5)   (156.6)
Research costs.......................................      (25.4)     (31.1)    (29.2)
General and administrative expenses..................      (47.5)     (57.8)    (43.2)
Other operating income (expense) (net................       15.1       10.6      (3.5)
Profit from operations before costs relating to
  antitrust proceedings and restructuring, net ......       28.6       58.7      79.2
Costs relating to antitrust proceedings..............      (22.0)     (35.0)      ---
Restructuring expenses...............................       (8.3)     (41.0)      ---
                                                       ---------  ---------  --------
Profit (loss) from operations........................       (1.7)     (17.3)     79.2
Net financing costs..................................      (25.5)     (48.5)    (59.2)
                                                       ---------  ---------  --------
Profit (loss) before tax.............................      (27.2)     (65.8)     20.0
Income tax benefit (expense..........................        3.6      (29.2)    (55.7)
                                                       ---------  ---------  --------
Net loss before minority interests...................      (23.6)     (95.0)    (35.7)
Minority interests...................................        ---       (0.2)     (0.3)
                                                       ---------  ---------  --------
Net loss.............................................      (23.6)     (95.2)    (36.0)
                                                       =========  =========  ========
</TABLE>

    The following table shows selected consolidated statement of operations data
for expressed as a percentage of total sales revenue:

<TABLE>
<CAPTION>
                                                       ------------------------------
                                                            2002       2001      2000
                                                       ---------  ---------  --------
                                                             (%)        (%)       (%)
<S>                                                          <C>        <C>       <C>
Sales revenue........................................      100.0      100.0     100.0
Cost of sales........................................      (79.7)     (76.4)    (75.3)
                                                       ---------  ---------  --------
Gross profit.........................................       20.3       23.6      24.7
Selling, research and development, general
  administration and other operating expenses, net...      (17.7)     (18.9)    (18.4)
Costs relating to antitrust proceedings and
  restructuring expenses.............................       (2.8)      (6.1)      0.0
                                                       ---------  ---------  --------
Profit (loss) from operations........................       (0.2)      (1.4)      6.3
Result of investments and other financial result.....        0.7       (0.9)     (1.3)
Net financing costs..................................       (2.9)      (3.0)     (3.4)
Income taxes.........................................        0.3       (2.4)     (4.4)
                                                       ---------  ---------  --------
Net loss (includes minority interests)...............       (2.1)      (7.7)     (2.8)
                                                       =========  =========  ========
Net loss attributable to shareholders.................      (2.1)      (7.7)     (2.8)
                                                       =========  =========  ========
</TABLE>
                                      -32-

<PAGE>


2002 COMPARED TO 2001

Sales revenue

    Sales  revenue  decreased  by  10%  from  [E]1,233.3  million  in  2001  to
[E]1,112.3  million  in  2002.  The  positive  business   developments  at  SGL
Technologies  were  unable to offset  the  reduction  in the price of  graphite
electrodes  and the downturn in key  customer  industries  for our  established
businesses. The global economy did not recover in 2002.

    The  unfavorable  operating  environment  affected  most  of  our  customer
industries  leading to reduced  investment  activity in key sectors such as the
chemical industry and mechanical and plant  engineering.  Demand also continued
to decline in the electronics  industry and in the  semiconductor  market.  The
steel industry almost matched the previous year's  production  levels , despite
the difficult economic environment and bankruptcies among U.S. steel producers.
The protective tariffs that the United States has imposed against steel imports
in the  United  States  since  March 2002 led to a  reduction  in supply in the
United  States.  The resulting  price  increases in that market had a follow-on
effect in Europe and Asia. In the first quarter in particular,  the downturn in
the steel  industry in Japan and North America and the  inventory  reduction in
Europe had a negative impact on sales. The steel industry recovered slowly over
the rest of the year,  but could not fully  compensate  for the downturn at the
beginning of the year.

    Changes in regional sales revenue  breakdowns  were minimal in 2002, with a
slight decline in the share of sales revenue  attributable  to Germany,  at 19%
(previous year: 20%), and North America,  at 25% (previous year: 26%). Sales in
the rest of Europe to 34% (previous  year: 33%) and in the remaining world rose
to 22% (previous year: 21%).

    The  CARBON  AND  GRAPHITE  business  area  accounted  for 50% of our sales
revenue in 2002(previous year: 51%). Sales of graphite electrodes accounted for
36% of the Group`s  total sales  revenue  (previous  year:  40%) while sales of
other carbon and graphite  products  accounted  for 14% (previous  year:  11%).
Sales volumes of graphite electrodes  decreased by 1% from 175,000 tons in 2001
to 173,000 tons in 2002.  Reduced  demand along with the existing  overcapacity
resulted in  continuous  price  pressure in all  markets.  This price  pressure
combined  with the weaker  U.S.  dollar,  caused a 16%  decrease in the average
price for graphite  electrodes compared to the previous year. Due to continuing
strong demand from the aluminum  industry,  cathodes sales  increased by 21% to
[E]91.1  million.  While Furnace lining sales revenue remained almost unchanged
at [E]13.8 million, we increased sales revenue of carbon electrodes for silicon
metal production by 11% to [E]41.5 million.

    The GRAPHITE  SPECIALTIES  business area accounted for approximately 18% of
our sales revenue in 2002. As a consequence of ongoing economic weakness in our
customer  industries   (semiconductor,   tool  manufacturing,   metals,   high-
temperature  processes,  chemicals,  automotive)  sales revenue declined by 15%
from [E]230.7  million in 2001 to [E] 195.9 million in 2002.  All product areas
were affected,  with the exception of mechanical  carbons.  In addition to weak
sales,  the  planned   reduction  in  inventory  levels  affected  earnings  by
approximately [E]12 million,  due to the high level of internal value added and
associated high fixed cost portions.

    Sales revenue in the CORROSION  PROTECTION  business area  decreased by 10%
from [E]235.8  million in 2001 to [E] 212.4 million in 2002. This was primarily
due to lower levels of investment in our key customer industries and an overall
drop  in  customer  maintenance  and  repair  expenditures,  as  well as to the
postponement   of  orders  by  our  customers  in  the  chemical,   energy  and
environmental industries.  These developments affected all Corrosion Protection
product areas.

    SGL TECHNOLOGIES' sales revenue increased by 11.3% from [E]135.1 million in
2001 to  [E]150.4  million in 2002.  The  defense-related  business of our U.S.
subsidiary HITCO developed  encouragingly with sales revenue increasing by 15%.
We were also able to increase sales volumes of oxidized fibers for the aircraft
industry

Cost of sales and gross profit

    Consolidated  costs of sales decreased by 6% from [E]941.8  million in 2001
to [E]886.5 million in 2002. Raw material costs,  primarily  petroleum coke and
energy decreased by 18.5% from [E]297.1 million in 2001 to [E] 242.2 million in
2002,  while total material  expenses  decreased by 19.1% to [E]303.5  million.
Personnel  expenses decreased by 8.6% during 2002 to [E]368.2 million primarily
due to our
                                      -33-

<PAGE>

reduction in headcount.Gross  profit amounted to [E]225.8 million,  22.5% below
the previous  year,  and the gross profit  margin on sales,  which we define as
sales  revenue less cost of sales  divided by sales  revenue fell from 23.6% to
20.3%. This development  reflects the drop in the price of graphite electrodes,
the reduction of inventory  levels (which partly  affected  earnings),  and the
economic  downturn in the customer  industries of our Graphite  Specialties and
Corrosion Protection businesses. We were able to prevent a further reduction in
the gross  profit  margin  through  our  restructuring  program  in Carbon  and
Graphite  and  Graphite  Specialties.  These  cost-cutting  measures  delivered
savings in excess of our original  expectations,  contributing to the reduction
in cost of sales compared with the previous year.

Selling expense,  research costs,  general and administrative  expenses,  other
operating income (net)

    Our selling  expenses  decreased by 9.8% from  [E]154.5  million in 2001 to
[E]139.4  million in 2002.  This  decrease  is in line with the  reduced  sales
revenue during 2002. We significantly reduced research and development costs by
18.3% from [E]31.1 million in 2001 to [E] 25.4 million in 2002,  primarily as a
result of the finalization of our carbon ceramic brake discs  development and a
further  organizational  streamlining.   General  and  administrative  expenses
decreased by 17.8% from [E]57.8 million in 2001 to [E] 47.5 million in 2002. We
achieved these savings through our  restructuring  program in North America and
Europe, as well as by reducing variable incentive compensation. Other operating
income  (net)  increased  by 42.5%  from  [E]10.6  million  in 2001 to [E] 15.1
million  in  2002.  This  increase  was due to  increased  gains on the sale of
noncurrent assets and reduced net goodwill amortization.

Costs relating to antitrust proceedings and restructuring expenses

    Our costs relating to antitrust  proceedings  decreased 37.1%, from [E]35.0
million  in 2001 to [E]22.0  million  in 2002.  In 2002,  these  costs  related
primarily  to an increase in the  provision  for a fine imposed by the European
Commission in December 2002.  Restructuring  expenses decreased  significantly,
from  [E]41.0  million in 2001 to [E] 8.3  million in 2002.  Our  restructuring
expenses in 2002 related to Graphite Specialties and Corrosion  Protection.  In
2002, we  accelerated  restructuring  measures in these  business areas that we
originally planned for 2003.

Profit (loss) from operations

    In 2002 we  substantially  reduced our  consolidated  loss from operations,
from [E](17.3)  million in 2001 to [E]( 1,7) million in 2002. This  improvement
was  primarily  the result of the lower  operating  costs we  achieved  in 2002
through our  cost-cutting  measures,  as well as of the reduced  level of costs
relating to antitrust  proceedings and restructuring  expenses in 2002 compared
with the previous year. Our operating margin,  which we define as profit (loss)
from  operations  divided by sales  revenue,  improved  from  (1.4)% in 2001 to
(0.2)% in 2002.

    Profit from  operations in the Carbon and Graphite  Business area decreased
to [E]51.9 million in 2002 (previous year: [E] 78.9 million).  The cost savings
that we  achieved  could only  partly  offset  the  effect of lower  prices for
graphite  electrodes in Europe and North America.  The reduced production costs
from our restructuring  program had a one-time negative non-cash effect of [E]6
million  related  to the  valuation  of  inventory  at the end of the year.  In
addition, the reduction in inventory levels to improve cash flow led to a lower
coverage of our fixed costs and reduced profit from operations by [E]6 million.

    Before restructuring expenses, Graphite Specialties' profit from operations
decreased  significantly,  from  [E]22.3  million in 2001 to [E] 1.9 million in
2002.  Besides  weak sales,  the  reduction in  inventory  levels  affected our
earnings  by  approximately  [E]12.0  million as a result of  lowered  capacity
utilization and related uncovered fixed costs. After restructuring expenses, we
reduced our loss from operations in Graphite  Specialties from [E](7.2) million
in 2001 to [E](2.8)  million in 2002. This improvement  primarily  reflects the
significantly lower level of restructuring expenses in 2002 compared with 2001.
In 2002, we  accelerated  restructuring  measures for Graphite  Specialties  in
Europe originally planned for 2003, including an additional headcount reduction
of 91 employees.  Costs associated with this  restructuring  were approximately
[E]4.7 million.

    Corrosion Protection's profit from operations before restructuring expenses
decreased from [E]12.6  million in 2001 to [E] 4.8 million in 2002. The primary
cause of this  decrease was a decline in capacity  utilization,  which was only
partly offset by savings through ongoing rationalization measures. This

                                      -34-

<PAGE>

development led us to accelerate  additional structural  adjustments,  which we
had originally  planned for the coming years,  to fiscal 2002. In the course of
these restructuring  measures, we reduced headcount by a total of 196 employees
at our two German sites in Siershahn and Bornum,  as well as in Houston,  Texas
and at various  other  sites.  The costs  involved  were  approximately  [E]3.6
million in 2002. As a result,  Corrosion  Protection's  profit from  operations
after  restructuring  expenses was [E]1.2 million in 2002  (previous  year: [E]
12.6 million).

    In 2002 we reduced SGL  Technologies'  loss from  operations  to  [E](11.7)
million from [E](33.7) million in 2001. This improvement  exceeded our original
target of a 50% reduction.  The primary  factors  contributing to the 2002 loss
were start-up costs for the  commencement  of full-scale  carbon-ceramic  brake
disc production, underutilization of our fiber facilities and expenses relating
to the further  development of both fuel cell  components  and  defense-related
business.

Net financing costs

    Our net financing costs decreased 47.4%,  from [E](48.5) million in 2001 to
[E](25.5) million in 2002. The primary factors contributing to this improvement
were non-cash  currency  adjustments of our antitrust  liabilities,  a positive
impact of the recalculated net present value of these antitrust liabilities due
to the revised payment schedule and the reversal of the fair value of an option
issued to a third party. Major elements of financing costs in 2002 were [E]27.4
million in net interest  expenses and a [E]10.4 million  interest  component in
pension provisions.

2001 COMPARED TO 2000

Sales revenue

    Sales  revenue  decreased  by  2%,  from  [E]1,262.5  million  in  2000  to
[E]1,233.3 million in 2001.  Currency effects and the first-time  consolidation
of our Polish  subsidiary ZEW, with sales revenue of [E]48.5  million,  largely
offset the drop in sales volumes of graphite electrodes.  For the first time in
decades,  there  was a  simultaneous  economic  downturn  in all the  key  OECD
economic regions.  After years of a strong growth in the United States, falling
industry growth rates pushed the United States into recession -- a process that
was further  accelerated  by the events of September 11.  Growth  forecasts for
Europe and Japan were also downgraded considerably for 2002.

    These  negative  developments  also affected our customer  industries.  The
global economic slowdown led to a further reduction in capacity  utilization in
the international steel industry.  The effects of the North American recession,
particularly in the United States steel sector, also worsened.  Approximately a
third of U.S.  steel  producers  filed for  Chapter  11  protection  from their
creditors.  In  Europe,  major  steel  manufacturers  merged  to  increase  the
efficiency of their steelworks and to reduce market capacity. Outside the steel
sector,  demand declined in the electronics  industry as well. This decline was
compounded by a significant drop in the price of memory chips. In addition, the
chemicals industry downgraded its economic forecasts substantially.

    The breakdown of our business by  geographic  region  changed in 2001.  The
proportion  of sales  generated  in  Europe  rose to 53% due to the  first-time
consolidation  of ZEW,  while  sales  in  Germany  rose  slightly  to 20%.  The
proportion of business  accounted for by North America fell from 31% to 26% due
to the weaker  business in North America,  while sales in the rest of the world
decreased from 22% to 21%.

    In the CARBON AND GRAPHITE  business area,  which  accounted for 51% of our
consolidated  sales revenue in 2001 and 49% in 2000, sales rose slightly,  from
[E]619.5  million in 2000 to [E]61 9.8 million in 2001.  This  increase was the
result of our  first-time  consolidation  of ZEW,  without  which sales revenue
would have declined 8% from the previous year.  Demand for graphite  electrodes
dropped,  with sales volume decreasing by 7%, from 188,000 tons to 175,000 tons
(including  9,000 tons from ZEW).  One  consequence  of this falling demand was
increased  price pressure in the United  States,  which also began to appear in
Europe by the end of 2001. As a result of exchange rate effects,  however,  our
average price for graphite  electrodes in euros  increased 2% from the previous
year.

                                      -35-

<PAGE>

    Sales  revenue in GRAPHITE  SPECIALTIES  decreased  by 4.7%,  from  [E]242.0
million in 2000 to [E]230.7 million in 2001. Sales in the industrial application
business  line,  which  accounted  for more than half the business  area's sales
revenue,  remained  almost flat.  Demand for  semiconductor  industry  materials
business  dropped by around one fifth due to the sharp  downturn in this market.
The electrical contacts and mechanical carbons business lines also lost ground.

    In the CORROSION  PROTECTION  business area, sales revenue decreased by 5%,
from [E]247.3  million in 2000 to [E] 235.8 million in 2001.  This drop was the
result the  disposal of  non-core  businesses  in the  previous  year.  Revenue
generated by the surface  protection  business  line,  dropped  slightly by 1%,
while revenue for process technology rose by 9%.

    SGL  TECHNOLOGIES'  sales revenue decreased 11.0%, from [E]151.8 million in
2000 to [E]135.1 million in 2001. Our fibers business was directly  affected by
the events of September  11, 2001,  after which orders for oxidized  fibers for
aircraft brakes and nozzles were postponed or cancelled. Sales of carbon fibers
used in the  manufacture of PC casings also decreased  considerably.  In total,
sales  revenue in the  fibers  and  composites  businesses  fell by 32%.  Sales
revenue generated by SGL Technologies' newer business lines, although amounting
only to approximately  10% of the business area's total,  increased by 39.0% in
2001 compared with the previous year.

Cost of sales and gross profit

    Our consolidated  cost of sales decreased by 0.9%, from [E]950.8 million in
2000 to [E]941.8 million in 2001. Raw material costs,  primarily petroleum coke
and  energy,  increased  by 2.3%,  from  [E]290.4  million in 2000 to [E] 297.1
million in 2001,  while total material  expenses  decreased by 2.2% to [E]375.3
million.  Personnel expenses decreased by 3.1% during 2001 to [E]403.2 million.
Our gross profit declined by 6.5%,  from [E]311.7  million in 2000 to [E] 291.5
million in 2001.  Gross profit  margin  declined from 24.7% in 2000 to 23.6% in
2001.  The  decline  in gross  profit  was due to the fact  that  cost of sales
declined at a lower rate than sales revenue, reflecting increased raw materials
and energy costs as well as start-up and expansion costs for our new business.

Selling expense,  research costs,  general and administrative  expenses,  other
operating income (expense) (net)

    Selling expense  decreased  slightly by 1.3%, from [E]156.6 million in 2000
to [E]154.5 million in 2001. Over the same period,  research costs increased --
primarily  driven by the product  development in SGL  Technologies  -- by 6.5%,
from  [E]29.2   million  in  2000  to  [E]  31.1   million  in  2001.   General
administrative  costs  increased by 33.8%,  from [E]43.2 million in 2000 to [E]
57.8 million in 2001. In addition to the  first-time  consolidation  of ZEW and
SGL ACOTEC (Brazil), the increase in general and administrative expenses during
2001 was due to the costs of strategic IT projects and euro  conversion as well
external consulting expenses relating to acquisition projects.  Other operating
income (net) amounted to [E]10.6 million in 2001, compared to operating expense
(net) of [E](3.5)  million in 2000. This improvement  related  predominantly to
operational currency gains and insurance refunds received in 2001.

Costs relating to antitrust proceedings and restructuring expenses

    Costs  relating to  antitrust  proceedings  amounted to [E]35.0  million in
2001.  These costs  related  primarily  to an  increased  provision  for a fine
imposed by the European  Commission  during that year.  Restructuring  expenses
amounted to [E]41.0 million in 2001,  including  closure costs for three plants
in the United States,  expenses for reducing the workforce and for  write-downs
on plant and equipment and inventory in the United States, as well as workforce
resizing  costs  in  Europe.  We did not  incur  costs  relating  to  antitrust
proceedings or restructuring expenses during 2000.

Profit (loss) from operations

    Our loss from  operations in 2001 was [E](17.3)  million in 2001,  compared
with a  profit  from  operations  of  [E]79.2  million  in 2000.  This  decline
primarily  reflects costs relating to antitrust  proceedings and  restructuring
expenses  during  2001;  these  were  absent in 2000.  Before  these  costs and
expenses,  our profit from operations had decreased 25.9%, from [E]79.2 million
in 2000 to [E]58.7  million in 2001. The primary  factors  contributing to this
decrease were related to higher raw material and energy costs,  reduced volumes
of graphite  electrodes sold and the development and start-up costs for our new
products in the SGL  Technologies  business area. Our operating margin (defined
as operating  profit divided by sales  revenue)  decreased from 6.3% in 2000 to
(1.4)% in 2001.

                                      -36-

<PAGE>

Net financing costs

    Our net financing costs decreased 18.1%,  from [E](59.2) million in 2000 to
[E](48.5) million in 2001. In 2001, the amount included [E] 27.4 million in net
interest  expenses,  primarily  in  connection  with  recent  acquisitions  and
antitrust obligation financing,  a [E]9.9 million interest component in pension
provisions  and a [E]5.0 million charge for the fair value of an option granted
to a  related  party.  See  Item  7,  "Major  Shareholders  and  Related  Party
Transactions -- Related Party Transactions".


INFLATION

    During the past three years,  the effects of inflation on our operations in
Germany and other countries have generally been immaterial.


CRITICAL U.S. GAAP ACCOUNTING POLICIES

    The Securities and Exchange  Commission recently issued disclosure guidance
for  "critical  accounting  policies."  The SEC  defines  "critical  accounting
policies"  as  those  that  are the  most  important  to the  portrayal  of our
financial  position and results and that require  application  of  management's
most difficult,  subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain and
may change in subsequent periods.

    The preparation of our financial statements requires our management to make
estimates   and  judgments   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues,  and  expenses,  and related  disclosure  of contingent
assets and  liabilities.  On an  on-going  basis,  we evaluate  our  estimates,
including those related to customer programs and incentives, doubtful accounts,
inventory valuation, impaired assets, restructuring of operations, investments,
environmental costs, pensions and other post-employment benefits,  goodwill and
intangible assets,  and litigation and contingencies.  We base our estimates on
historical  experience and on various other assumptions that are believed to be
reasonable  under the  circumstances,  the  results of which form the basis for
making  judgments about the carrying values of assets and liabilities  that are
not readily  apparent from other sources.  Actual results may differ from these
estimates under different assumptions or conditions.

    We believe the following  critical U.S.  GAAP  accounting  policies are the
most  important to the  portrayal of our  financial  condition  and results and
require   management's   more  significant   judgments  and  estimates  in  the
preparation of our consolidated financial statements.

ACCOUNTING FOR BUSINESS COMBINATIONS

    During the past three years, we have completed several significant business
combination  transactions.  In the future, we may continue to grow our business
through business combinations.  Prior to the issuance of SFAS No. 141, Business
Combinations,   in  2001,  we  applied  the  guidance  provided  by  Accounting
Principles  Board  Opinion  (APB) No. 16, and its  interpretations,  as well as
various other authoritative  literature and interpretations that address issues
encountered in accounting for business combinations.  We accounted for our past
combinations using the purchase method.  Accounting for business  combinations,
by the purchase  method,  is  complicated  and involves the use of  significant
judgment.

    Under  the  purchase  method  of  accounting,  a  business  combination  is
accounted  for  at  a  purchase   price  based  upon  the  fair  value  of  the
consideration  given,  whether it is in the form of cash, assets,  stock or the
assumption of liabilities.  The assets and liabilities acquired are measured at
their  fair  values,  and the  purchase  price is  allocated  to the assets and
liabilities based upon these fair values.  Fair values are recognized,  and any
remaining  excess of cost of acquisition over net assets acquired is recognized
as goodwill.  Since January 1, 2002,  goodwill arising from  acquisitions is no
longer  amortized  under US GAAP.  Instead,  SFAS 142 requires that goodwill be
tested  for  impairment  at least  annually  using a two-step  approach  at the
reporting  unit level.  In the first step, the fair value of the reporting unit
is compared to the book value  including  goodwill.  In order to determine  the
fair value of the reporting unit,  significant  management judgement is applied
in order to estimate the underlying  discounted  future free cash flows. In the
case,  that the fair value of the reporting unit is less than its book value, a
second  step  needs  to be  performed  which  compares  the  fair  value of the
reporting unit's goodwill to the book value of the goodwill.  The fair value of
goodwill is determined


                                      -37-

<PAGE>

based upon the difference  between the fair value of the reporting unit and the
net of the fair  values  of the  identifiable  assets  and  liabilities  of the
reporting  unit. If the fair value is less than the book value,  the difference
is recorded as an  impairment.  In 2002, no goodwill was impaired  based on the
present value of estimated  future cash flows. The actual cash flows may differ
significantly, thereby requiring an impairment in later periods.

    Determining the fair values of the assets and liabilities acquired involves
the use of judgment,  since the majority of the assets and liabilities acquired
do not have fair values that are readily determinable. Different techniques may
be used to determine fair values,  including  market prices,  where  available,
appraisals,  comparisons to transactions for similar assets and liabilities and
present  value of  estimated  future  cash  flows,  among  others.  Since these
estimates  involve  the use of  significant  judgment,  they can  change as new
information becomes available.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

    Each quarter we classify doubtful receivable balances and determine the bad
debt reserve as follows:

    *    Customers  balances  are  reserved  based on the  historical  write-off
         percentages.

    *    Risk accounts are individually reviewed and the reserve is based on the
         probability of potential default.

    If  circumstances  change for example,  if the rate of default is higher or
lower than  expected  or if a major  customer's  ability to meet its  financial
obligations to us changes  unexpectedly  and  materially,  our estimates of the
recoverability of amounts due to us could be reduced or increased by a material
amount.

INVENTORY OBSOLESCENCE

    Inventories are valued under U.S. GAAP at the lower of cost or market.  The
cost of all  inventories is determined by the weighted  average cost method and
last in  first  out  (lifo).  We  write  down  our  inventories  for  estimated
obsolescence or unmarketable inventory equal to the difference between the cost
of inventory and the estimated market value based upon assumptions about future
demand and market  conditions.  If actual market  conditions are less favorable
than those  projected by management,  additional  inventory  write-downs may be
required.

    At December  31, 2002,  we reported  inventory  of [E]288.4  million.  Each
quarter we review the inventory and make an assessment of the realizable value.
There are many factors that management  considers in determining whether or not
a reserve should be established. These factors include the following:

    *    return or rotation privileges with vendors,

    *    expected usage during the next twenty-four months,

    *    whether or not a customer is  obligated  by  contract  to purchase  the
         inventory,

    *    current market pricing, and

    *    risk of obsolescence.

    If  circumstances  change for example,  if there are  unexpected  shifts in
market demand or there could be a material  impact on the net realizable  value
of our inventory.

IMPAIRED ASSETS

    We  review  the  carrying  values  of  long-lived  assets  and  amortizable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
for an asset to be held and used is recognized when the fair value of the asset
is less than the carrying value of the asset.  For assets to be disposed of, an
impairment loss is recognized  when the fair value of the asset,  less costs to
dispose,  is less than the carrying  value of the asset.  The fair value of the
assets is  generally  based on  discounted  estimated  cash flows using  annual
discount rates of 5% to 7%. The estimates reflect our assumptions about selling
prices,  production and sales volume levels,  costs, and market conditions over
the estimated  remaining  operating period which can range from three months to
over fifteen years. If our assumptions related

                                      -38-

<PAGE>

to assets to be held and used are  inaccurate,  additional  write-downs  may be
required  in the  future.  If  estimates  of fair  value less costs to sell are
revised,  the carrying  amount of the related assets is adjusted,  resulting in
recognition of a credit or debit to earnings.

RESTRUCTURING OF OPERATIONS

    We record  restructuring  charges incurred in connection with consolidation
or relocation of operations,  exited  business  lines, or shutdowns of specific
sites. These restructuring charges, which reflect management's  commitment to a
termination  or exit plan that will begin within  twelve  months,  are based on
estimates  of the  expected  costs  associated  with  site  closure,  legal and
environmental  matters,  demolition,  contract  terminations,  or  other  costs
directly related to the restructuring.  If the actual cost incurred exceeds the
estimated  cost,  an additional  charge to earnings will result.  If the actual
cost is less than the estimated cost, a credit to earnings will be recognized.

    In December  2001 we  recorded a [E]41.0  million  restructuring  and asset
impairment charge in connection with our 2001 repositioning  efforts,  of which
[E]16.2 million represented  restructuring  charges.  The repositioning  effort
affected two of our business areas and will take approximately twelve months to
complete  from date of  commencement.  The  [E]16.2  million  of  restructuring
charges  included  [E]11.8  million of severance  termination  benefits for 430
employees affected by plant closings or capacity reductions, as well as various
personnel in corporate, administrative and shared service functions.

    In the latter part of 2002 we identified further cost-cutting potential and
took  immediate  action.  Restructuring  measures  in  our  European  Corrosion
Protection and Graphite Specialties business areas that were implemented led to
287 additional positions being eliminated. These actions resulted in a one-time
charge on profit from operations of approximately [E]8.3 million.

    Severance  termination  benefits  were based on various  factors  including
length of service,  contract provisions and salary levels. Management estimated
the  restructuring  charge based on these  factors as well as  projected  final
service  dates.  Given the  complexity of estimates and broad scope of the 2002
repositioning effort, actual expenses could differ from management's estimates.
If actual  results  are  different  from  original  estimates,  we will  record
additional  restructuring  expenses  or  reverse  previously  recorded  expense
through the  statement  of  operations.  Management  will make  adjustments  if
necessary as actions under the plan are carried out.

DEFERRED TAX ASSETS

    Deferred  income taxes are  recognized for the tax  consequences  in future
years of the  differences  between the tax basis of assets and  liabilities and
their financial  reporting amounts at each period end based on enacted tax laws
and statutory tax rates  applicable to the periods in which the differences are
expected to affect taxable earnings.  Valuation allowances are established when
necessary  to reduce  deferred tax assets to the amount more likely than not to
be realized.

TAX CONTINGENCIES

    We  believe  we  have a  reasonable  basis  in  applicable  tax law for the
positions we take on the various tax returns we file.  However, we maintain tax
reserves  in  recognition  of the fact that  various tax  authorities  may take
opposing  views on some  issues,  that the costs and hazards of  litigation  in
maintaining  the  positions  that we have  taken on  various  returns  might be
significant  and that the tax  authorities  may  prevail in their  attempts  to
overturn these positions.  The amounts of these reserves,  the potential issues
they are intended to cover and their  adequacy to do so, are topics of frequent
review  internally  and  with  outside  tax  professionals.   Where  necessary,
adjustments  are  periodically  made to such reserves to reflect the lapsing of
statutes of limitations,  closings of ongoing  examinations or the commencement
of new examinations.

LITIGATION AND CONTINGENT LIABILITIES

Antitrust and competition matters

    We have accrued  amounts for  estimated  settlements  of antitrust  actions
pending against us as of December 31, 2002. Computing our liability for pending
antitrust  actions  requires us to make judgments as to the most likely outcome
of litigation, future settlements and judgments to be paid for

                                      -39-

<PAGE>

open  claims.  We estimate the cost of final  judgments  by reviewing  with our
legal counsel the probable  outcome of pending  appeals.  If the actual cost of
settlements  and final judgments  differs from our estimates,  our reserves for
open claims may not be sufficient.  If so, any deficiency  would be a loss that
we would be required to recognize at the time it becomes reasonably estimable.

Litigation

    We are currently  involved in other legal  proceedings  resulting  from the
antitrust  investigations  and  settlements.  As  discussed  in  Note 21 of our
consolidated financial statements,  as of December 31, 2002, we have accrued an
estimate of the probable costs for the resolution of these claims. Attorneys in
our legal department  specializing in litigation  claims monitor and manage all
claims filed against us. Our  management  develops  estimates of probable costs
related to these  claims in  consultation  with outside  legal  counsel who are
defending  us in  these  actions.  We base  our  estimates  on an  analysis  of
potential  results,   assuming  a  combination  of  litigation  and  settlement
strategies.  We attempt to resolve  claims  through  mediation and  arbitration
where  possible.  If the actual  settlement  costs and final  judgments,  after
appeals,  differ  from our  estimates,  our  future  financial  results  may be
adversely affected.


LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW OF BANK DEBT AND CASH FLOWS

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                           --------------------
                                                                2001       2002
                                                           ---------  ---------
                                                            (MILLIONS OF EUROS)
<S>                                                               <C>       <C>

Short term debt and current maturities...................      300.7      193.1
Long term debt...........................................      238.2      255.4
                                                           ---------  ---------
Total debt...............................................      538.9      448.5
Cash and cash equivalents................................      (12.1)     (21.5)
                                                           ---------  ---------
Net bank debt............................................      526.8      427.5
                                                           =========  =========

</TABLE>

    Our  financing  arrangements  at December 31, 2002  consisted  primarily of
short-term bank debt with a number of financial  institutions ([E]243 million),
a convertible bond ([E]134 million), and a syndicated revolving credit facility
([E]72  million).  The  following  table  summarizes  our debt and  significant
obligations as of December 31, 2002:

<TABLE>
<CAPTION>
                                                             MATURING IN:
                                -----------------------------------------------------------------
                                           LESS THAN                                        AFTER
OBLIGATION                          TOTAL   ONE YEAR       2004       2005       2006        2006
------------------------------  ---------  ---------  ---------  ---------  ---------  ----------
                                (MILLIONS  (MILLIONS  (MILLIONS  (MILLIONS  (MILLIONS   (MILLIONS
                                  OF EURO)   OF EURO)   OF EURO)   OF EURO)   OF EURO)    OF EURO)
<S>                                   <C>        <C>        <C>        <C>        <C>         <C>
Convertible Bond..............      133.6        0.0        0.0      133.6        0.0         0.0
Other financial Debt..........      314.9      193.1        5.3       79.4        7.7        29.4
                                ---------  ---------  ---------  ---------  ---------  ----------
Financial Debt................      448.5      193.1        5.3      213.0        7.7        29.4
Operating and Capital leases..       12.2        3.5        2.1        0.9        0.8         4.9
Purchase obligations..........       21.1       21.1        0.0        0.0        0.0         0.0
DOJ and Canadian settlements
  and payments................       80.9        8.0       17.1       24.6       23.9         7.3
Other short-term obligations..       69.2       69.2        0.0        0.0        0.0         0.0
                                ---------  ---------  ---------  ---------  ---------  ----------
Total.........................      631.9      294.9       24.5      238.5       32.4        41.6
                                =========  =========  =========  =========  =========  ==========

</TABLE>


                                      -40-

<PAGE>

    Our net bank debt  (which we define as long term debt plus short term debt,
less cash and cash equivalents) increased [E]129.6 million in 2000 and [E] 34.5
million in 2001, but decreased in 2002 by [E]99.3 million to [E] 427.5 million.
An important factor in 2001 contributing to the increase were payments relating
to antitrust proceedings in North America. They consisted primarily of payments
of antitrust  penalties imposed by the U.S. Department of Justice (DOJ) as well
as settlements in civil actions  relating to the DOJ action. A small portion of
the total  payments  related to similar  actions in Canada.  Together  with the
ongoing capital expenditure programs and acquisitions,  these antitrust-related
payments significantly increased the financing requirements of the Company.

    In line with the strategy for 2002 to improve  capital  structures  the SGL
Group focused on the reduction of working  capital and on  improvement  of cash
flow. The key element was the reduction of  inventories of [E]82.7  million net
of currency effects. In addition, at the end of December 2001 and at the end of
December  2002, we sold accounts  receivable in the amounts of [E]11.4  million
and 41.2 million, respectively, to financial service companies.

    On December 20, 2002 we entered into a syndicated  credit  facility  with a
number of banks. See Item 10, "Additional  Information-Material  Contracts". On
January 7, 2003 we used this new facility to refinance then existing bank debt.
The following  table  summarizes  our debt and  significant  obligations  as of
January 7, 2003:

<TABLE>
<CAPTION>
                                                             MATURING IN:
                                -----------------------------------------------------------------
                                           LESS THAN                                        AFTER
CREDIT FACILITIES                   TOTAL   ONE YEAR       2004       2005       2006        2006
------------------------------  ---------  ---------  ---------  ---------  ---------  ----------
                                (MILLIONS  (MILLIONS  (MILLIONS  (MILLIONS  (MILLIONS   (MILLIONS
                                  OF EURO)   OF EURO)   OF EURO)   OF EURO)   OF EURO)    OF EURO)
<S>                                   <C>        <C>        <C>        <C>        <C>         <C>

Convertible Bond..............      133.6        0.0        0.0      133.6        0.0         0.0
Term Facility A...............      335.0       25.0       50.0      260.0        0.0         0.0
Term Facility C...............       20.0        0.0        2.3        4.7        4.7         8.3
Revolving Credit Facility.....       55.0        0.0        0.0       55.0        0.0         0.0
BNP Paribas Poland*...........       15.0        0.0        0.0       15.0        0.0         0.0
                                ---------  ---------  ---------  ---------  ---------  ----------
Subtotal......................      558.6       25.0       52.3      468.3        4.7         8.3
                                ---------  ---------  ---------  ---------  ---------  ----------
Term Facility B...............       85.0        0.0        0.0       85.0        0.0         0.0
Letter of Credit Facilities...       99.0       99.0        0.0        0.0        0.0         0.0
                                ---------  ---------  ---------  ---------  ---------  ----------
Total.........................      742.6      124.0       52.3      553.3        4.7         8.3
                                =========  =========  =========  =========  =========  ==========

</TABLE>

*   In  addition  our  Polish  subsidiaries  entered  into  a  credit  facility
    agreement with BNP Paribas Bank Polska S.A. in the amount of [E]15 million.
    This facility is governed by Polish Law.

    On May 3, 1999 we pleaded  guilty to charges of price fixing  raised at the
initiative  of the DOJ. As a result,  SGL is  obligated to pay $ 135 million in
fines and has  guaranteed the payment of an additional $ 10 million in fines to
be paid by the Chairman of the Executive  Committee over the next six years. We
have settled most of the claims  arising from related civil  lawsuits  alleging
damages from the activities upon which the DOJ's antitrust action was based. We
believe  economically  reasonable  settlements will be reached in the remaining
lawsuits. In April 2002 the Company reached an agreement with the DOJ resulting
in a revision to the payment plan for the antitrust penalties assessed in 1999.
This  agreement  extended  the payment  period for this  liability  until 2007,
delaying payment from 2002-2003 under the original payment plan to 2004 -- 2007
under the revised payment plan as shown in the maturity table in this section.

    In mid-July 2001, the European Commission imposed a fine of [E]80.2 million
for alleged  anti-competitive  practices in the graphite  electrodes market. We
believe that the amount of this fine is unjustified.  In particular, we believe
that the  European  Commission  is  assessing  fines twice for certain  alleged
violations. We have filed an appeal against the Commission's decision.  Payment
of the fine has been suspended pending final judgment in the appeal. Appeals of
this type may take two years or

                                      -41-

<PAGE>

longer to be decided. Appellants must typically provide security for the amount
of the contested fine when filing an appeal. We have used funds drawn under the
Term Facility B of our new syndicated credit facility to provide this security.

    As part of its investigation of the graphite industry for  anti-competitive
behavior between 1992 and 1998, which has been ongoing since 1997, the European
Commission  imposed a fine of  [E]27.8  million  on SGL in  December  2002 with
regard to its Graphite Specialties  activities.  We do not believe this fine to
be justified and filed an appeal  against the decision with the European  Court
in March  2003.  The  potential  amount to be paid is already  included  in the
refinancing agreement.

CONSOLIDATED CASH FLOWS

    The  following  table  shows our  consolidated  cash  flows  (adjusted  for
currency fluctuations) for the three years ending December 31, 2002:

<TABLE>
<CAPTION>
                                                      2002       2001       2000
                                                 ---------  ---------  ---------
                                                        ([E] IN MILLIONS)
<S>                                                    <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) before taxes ................      (27.2)     (65.8)      20.0
Gain (loss) on sale of property, plant and
  equipment....................................       (2.8)       1.0        0.8
Gain (loss) on sale of equity investments......       (1.0)       ---        4.8
Depreciation and amortization expense..........       81.4       86.8       83.2
Write-downs on noncurrent assets ..............        ---        9.8        ---
Taxes paid ....................................      (22.3)     (13.6)      (2.9)
Changes in provisions, net ....................       (2.8)      16.3      (26.9)
Change in working capital, net of changes in
  basis of consolidation:
  Inventories .................................       82.7      (26.8)       0.6
  Write-downs on inventories ..................        ---       15.0        ---
  Trade receivables ...........................       44.7       33.8       10.5
  Trade payables ..............................        6.8        6.2        2.6
  Other operating assets/liabilities...........      (10.4)      30.0      (47.1)
                                                 ---------  ---------  ---------
Cash provided by operating activities before
  payment of antitrust fines...................      149.1       92.7       45.6
                                                 ---------  ---------  ---------
Payments relating to antitrust proceedings.....      (10.1)     (36.9)     (89.0)
                                                 ---------  ---------  ---------
Cash provided by (used in) operating activities      139.0       55.8      (43.4)
                                                 ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment
  and intangible assets, excluding goodwill....      (53.6)     (96.1)     (69.8)
Proceeds from sale of property, plant and
  equipment and intangible assets..............        7.8        3.8        2.0
Cost of acquisitions...........................       (0.7)      (5.7)     (23.3)
Proceeds from sale of equity investments.......        5.6        5.5        2.1
                                                 ---------  ---------  ---------
Cash used in investing activities..............      (40.9)     (92.5)     (89.0)
                                                 ---------  ---------  ---------


                                      -42-

<PAGE>

                                                      2002       2001       2000
                                                 ---------  ---------  ---------
                                                        ([E] IN MILLIONS)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in financial liabilities............      (87.6)      36.5       97.8
Dividends paid.................................       (0.2)      (0.1)      (0.4)
Net proceeds from capital increase.............        0.8        2.2        5.5
                                                 ---------  ---------  ---------
Cash provided by financing activities..........      (87.0)      38.6      102.9
                                                 ---------  ---------  ---------
Cash received from first-time consolidation....        ---        ---        8.6
Effect of foreign exchange rate changes........       (1.7)       0.4        2.1
Net increase (decrease) in cash and cash
  equivalents..................................        9.4        2.3      (18.8)
                                                 ---------  ---------  ---------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.       12.1        9.8       28.6
                                                 ---------  ---------  ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......       21.5       12.1        9.8
                                                 =========  =========  =========

</TABLE>

Operating cash flows

    Our cash  provided  (used) by operating  activities  (adjusted for currency
effects)  totaled  [E]139.0  million in 2002,  compared to [E] 55.8  million in
2001, a net improvement of [E]83.2million.  Key drivers of the increase in cash
provided from  operations  were a decrease in working capital and the reduction
in payments  relating to antitrust  proceedings.  Inventories  increased during
2000 and 2001, but decreased  substantially  in 2002 by [E]82.7  million net of
currency impacts.  The primary cause of the decrease of inventories in 2002 was
the  realization  of one point of our strategy  program with focus on improving
capital  structure  through  increased  cash flow and reduced  debt level.  The
planned  reduction of inventories led to a lower  utilization of capacities and
therefore to unabsorbed fixed costs of approximately [E]18.0 million which were
charged to the statement of operations. Working capital (which we define as net
book  value of  inventories  and trade  receivables  less  trade  payables  and
advanced  payments)  was [E]386.0  million at December  31,  2002,  compared to
[E]548.7  million at December 31, 2001.  Besides the  reduction of  inventories
receivables  declined to [E]208.1  million with a reduction of [E] 44.7 million
net of currency  effects.  This  decrease  in  receivables  reflected  sales of
accounts receivable in the total amount of [E]41.2 million in December 2002 and
[E]11.4 million in December 2001.

    Non-cash expense for  depreciation  and amortization of non-current  assets
decreased from [E]86.8 million in 2001 to [E] 81.4 million in 2002. In 2002 and
2001 there was a negative  impact on the operating cash flow due to the payment
of  accrued  liabilities  for  antitrust  proceedings  by an amount of  [E]10.1
million and [E]36.9 million, respectively.

    In 2001 we announced a major cost reduction and restructuring  program. The
total  non-recurring  charges of the restructuring plan amount to [E]41 million
on a pretax basis.  This plan had a cash effect of approximately  [E]15 million
in 2002. In addition,  we took further  restructuring charges of [E]8.3 million
in 2002,  primarily for the  acceleration of headcount  reductions in Corrosion
Protection and Graphite Specialties originally planned for 2003.

    Expenditures  for  research  and  development  declined by 18.3% to [E]25.4
million in 2002,  representing 2.3% (2001: 2.5%) of our consolidated net sales,
as a result  of a  restructuring  and  efficiency  enhancement  program.  As in
previous periods, the main emphasis of our research and development  activities
was in high  technology  fields  within the SGL T Business Area for the further
development of applications  for carbon fibers and  composites,  as well as for
the  optimization  of fuel cell  technology  components.  We also  invested  in
research related to high performance  carbon-ceramic disc brakes used in sports
cars as well as by the aerospace  industry.  In the CG Business Area,  emphasis
was placed on the further  development of large diameter  graphite  electrodes.
Research and development expenditures in the GS Business Area were concentrated
on  developing  ultra  graphite  powder for  lithium  batteries  used in laptop
computers, cell phones and other mobile communication devices.

                                      -43-

<PAGE>

Investing cash flows

    Cash used for investing activities was [E]40.9 million in 2002, compared to
[E]92.5  million in 2001 and [E]89 .0 million in 2000.  The high levels in 2001
and  2000  were  due  to the  construction  of our  carbon-ceramic  brake  disc
production plant in Meitingen and the acquisition activity.

    Capital  expenditures for property,  plant and equipment decreased by 41.8%
from [E]71.3  million in 2001 to [E] 41.5 million in 2002.  In 2001, we reduced
investments in  established  businesses in order to channel more funds into new
growth projects in the SGL Technologies  business area. Capital expenditures in
property, plant and equipment in 2002 were primarily for replacements.  Capital
expenditure  in  intangible  assets  increased  by [E]6.6  million  to [E] 12.1
million primarily due to the implementation of our new standardized  Group-wide
SAP system.  We spent [E]0.7 million for additions to financial  assets in 2002
compared to [E]5.7 million in 2001.

    In past years,  our capital  expenditures  focused on defending  the global
position of Carbon and Graphite,  our core business area, and on developing new
businesses  in SGL  Technologies  to  reduce  our  long-run  dependence  on EAF
steelmaking. Our capital expenditures peaked in 2001, when (in contrast to 2000
and 2002) they significantly exceeded  depreciation.  Almost 80% of our capital
expenditures in 2001 were in Carbon and Graphite and SGL Technologies. The most
important  capital  expenditures  for Carbon and  Graphite  in 2001 were [E]4.3
million for new  milling  and  batching  equipment  in our  Frankfurt-Griesheim
facility.  Our  investments  in  SGL  Technologies  related  primarily  to  the
Meitingen  production  facility.  This investment is now largely completed;  we
believe this facility now has sufficient capacity for the next several years.

    In 2002, we began to reduce capital  expenditures  as part of our strategic
priority to increase cash flow and reduce net debt. We intend to reduce capital
expenditures in 2003 to a level  significantly  below  depreciation.  We expect
these expenditures to be limited primarily to replacement and maintenance.

Financing cash flows

    Our liabilities  decreased by [E]133.6 to [E]710.2 million in 2002 compared
to the increase by [E]12.6  million to [E] 843.8 million in 2001.  The decrease
in  financial  liabilities  in 2002  resulted  from  positive  cash  flows from
operating   activities   before  antitrust   payments  and  reduced   investing
activities.  Antitrust payments decreased by [E]26.8 million,  amounting to [E]
10.1 million in 2002.

    Our corporate debt decreased to [E]448.5  million at December 31, 2002 from
[E]538.9  million at December 31, 2001.  Our corporate  debt carried an average
interest rate of 4.4% during 2002, compared to an average rate of 4.8% in 2001.
On September 18, 2000, we issued 133,650 convertible bonds at an issue price of
100% of the nominal value of [E]1,000 per bond. The bonds bear annual  interest
of 3.5% on their nominal  value.  Each bond may be converted into 11.2233 fully
paid-in  Shares at any time  between  October 18, 2000 and  September  4, 2005,
subject to adjustment of the conversion  price. The bonds will become repayable
on September 18, 2005 at their nominal value,  provided that they have not been
repaid or converted at an earlier  date.  We used the proceeds from the sale of
these bonds primarily for the long-term financing of the SGL Group,  especially
for the development and growth of our Corrosion Protection and SGL Technologies
business areas.

    We also received approximately [E]0.8 million in 2002 and [E]2.2 million in
2001 in connection with the issuance of Shares to current and former  employees
and managers who elected to exercise stock options during those years.

    We believe that cash flows from  operations,  combined  with the  available
borrowing  capacity  described  above  will be  sufficient  to meet our  future
capital  requirements  for the current  fiscal year,  including  scheduled debt
principal  amortization  payments, if we maintain compliance with the financial
covenants and other requirements of our credit facilities.  Our ability to meet
these  covenants in 2003 will depend upon a number of operational  and economic
factors.  In the event  that we are unable to meet  these  covenants,  we would
consider  several  options to meet our cash flow  needs.  These  options  could
include  further  renegotiations  with  our  credit  lenders,  additional  cost
reduction, or restructuring  initiatives,  sales of assets or capital stock, or
other alternatives to enhance our financial and operating position.

                                      -44-

<PAGE>

    Due to  losses  incurred  in 1999  through  2002,  SGL has not  distributed
dividends for those years. The payment of future dividends will be dependent on
our  earnings,  the terms of our  syndicated  credit  facility  agreement,  our
financial condition, and cash requirements,  general business conditions in the
markets in which we operate,  legal,  tax, and  regulatory  considerations  and
other factors. See Item 10, "Additional Information -- Material Contracts"


U.S. GAAP RECONCILIATION

    We prepare our consolidated  financial  statements in accordance with IFRS,
which differ in certain significant respects from U.S. GAAP. See "--Significant
Differences  Between  IFRS  and  U.S.  GAAP"  as well as Notes 34 and 35 to our
consolidated financial statements for a discussion of these differences.

<TABLE>
<CAPTION>
                                                      2002       2001       2000
                                                 ---------  ---------  ---------
                                                        ([E] IN MILLIONS)
<S>                                                    <C>        <C>        <C>

Net loss per IAS...............................      (23.6)     (95.2)     (36.0)
                                                 ---------  ---------  ---------
Goodwill amortization..........................        5.1       (2.7)      (1.6)
Intangible/tangible fixed assets...............       (3.0)      (0.9)       2.2
Inventory......................................        5.8        3.9        2.1
Pension provisions.............................       (2.1)      (1.1)      (1.1)
Incentive plans................................       (2.2)      (4.9)      (9.3)
Restructuring..................................       (7.1)       7.9        0.0
First time implementation of IAS...............        ---      (41.9)      37.6
Deferred tax on U.S. GAAP adjustments..........        5.1      (13.1)       2.8
                                                 ---------  ---------  ---------
Net loss per U.S. GAAP.........................      (22.0)    (148.0)      (3.3)
                                                 ---------  ---------  ---------
Cumulative Change in Accounting Principles.....        9.4        0.0        0.0
                                                 ---------  ---------  ---------
Net loss per U.S. GAAP after Cumulative Change
  in Accounting Principles.....................      (12.6)    (148.0)      (3.3)
                                                 =========  =========  =========

</TABLE>

    Under U.S.  GAAP our  operating  profit  (loss)  before  cost  relating  to
antitrust  proceedings and restructuring  expenses for the years ended December
31, 2002,  2001 and 2000 was [E](5.1)  million,  [E] (36.6) million and [E]59.7
million,  respectively,  compared to an operating  profit (loss) under IFRS for
the same periods of [E](1.7)  million,  [E] (17.3) million and [E]79.2 million,
respectively.  Our U.S. GAAP operating  profit in 2002,  2001 and 2000 differed
from our IFRS operating profit for the same years, primarily due to differences
in goodwill amortization,  deferred taxes, provisions,  reserves and valuation,
as well as differing provisions for pensions.  Furthermore, we reclassified the
interest  component  associated  with our annual  pension  provision of [E]10.4
million in 2002  (2001:  [E]9.9  million;  2000:  [E] 9.2  million) as interest
expense under IFRS. See Note 34 to our consolidated  financial statements for a
description of the differences  between our IFRS accounting  policies and those
that would be required under U.S. GAAP.

    Basic loss per Share in accordance  with U.S.  GAAP in 2002 was  [E](1.01),
compared  to  [E](6.87)  in 2001 and [E] (0.15) in 2000.  Basic loss per ADS in
accordance with U.S. GAAP in 2002 was [E](0.34), compared to [E] (2.29) in 2001
and [E](0.05) in 2000.  Due to the net loss in each year,  the diluted loss per
Share was the same as the basic loss.


RECENT ACCOUNTING PRONOUNCEMENTS

    In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase  method of accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141 also  specifies
criteria  that  intangible  assets  acquired  in  a  purchase  method  business
combination must meet to be recognized and

                                      -45-

<PAGE>

reported  apart from goodwill,  noting that any purchase price  allocable to an
assembled workforce may not be accounted for separately. Statement 142 requires
that goodwill and intangible  assets with indefinite  useful lives no longer be
amortized,  but instead  tested for  impairment at least annually in accordance
with  the  provisions  of  Statement  142.  Statement  142 also  requires  that
intangible   assets  with  estimable  useful  lives  be  amortized  over  their
respective  estimated  useful lives to their  estimated  residual  values,  and
reviewed for  impairment in accordance  with FAS Statement No. 121,  Accounting
for the  Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to be
Disposed of.

    We adopted the  provisions of SFAS 141 and SFAS 142 as of July 1, 2001, and
January 1, 2002, respectively.  These Statements require that goodwill acquired
in a business  combination  completed  after June 30, 2001,  and any intangible
asset  determined  to have an indefinite  useful life  acquired  after June 30,
2001,  should not be  amortized.  Goodwill  acquired in  business  combinations
completed before July 1, 2001, and any intangible assets with indefinite useful
lives acquired before July 1, 2001, were amortized until December 31, 2001.

    SFAS 142 required the Group to evaluate its existing  intangible assets and
goodwill and to make any necessary  reclassifications  in order to conform with
the new separation  requirements at the date of adoption.  The Group reassessed
the estimated  useful lives and residual values of all intangible  assets other
than goodwill and determined that no adjustments regarding amortization periods
were necessary.

    In  connection  with  the  transitional  impairment  evaluation,  SFAS  142
required SGL to perform an assessment  of whether  there is an indication  that
goodwill  is  impaired  as of January  1, 2002.  To  accomplish  this,  SGL (1)
identified  its reporting  units,  (2)  determined  the carrying  value of each
reporting unit by assigning the assets and liabilities,  including the existing
goodwill and intangible  assets,  to those reporting  units, and (3) determined
the fair value of each  reporting  unit.  SGL completed  this first step of the
transitional  assessment  for all of the  Group's  reporting  units by June 30,
2002, and determined there was no indication that goodwill had been impaired as
of January 1, 2002. Accordingly, no transitional goodwill impairment charge was
necessary.  Finally,  any unamortized  negative  goodwill  existing at the date
Statement 142 was adopted was written off as the cumulative  effect of a change
in accounting principle.

    In June 2001 the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" which is effective for fiscal years beginning after June 15, 2002.
SFAS No. 143 addresses  financial  accounting and reporting for obligations and
costs associated with the retirement of tangible long-lived assets.

    In  October  2001  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets"  "SFAS No. 144"  supersedes  FASB
Statement No. 121,  "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived  Assets  to Be  Disposed  Of,"  and  the  accounting  and  reporting
provisions  of APB  Opinion  No. 30,  "Reporting  the  Results  of  Operations-
Reporting   the  Effects  of   Disposal  of  a  Segment  of  a  Business,   and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the  disposal of a segment of a business.  SFAS No. 144 also amends  Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the
exception to  consolidation  for a subsidiary for which control is likely to be
temporary and also broadens the existing definition of discontinued  operations
to include a  component  of an entity  (rather  than a segment of a  business).
Under SFAS No. 144 all  long-lived  assets to be disposed  of and  discontinued
operations shall be measured at the lower of carrying amount or fair value less
cost to sell. Goodwill is excluded from the scope of SFAS No. 144 and is tested
separately  for  impairment  under SFAS No. 142. We adopted SFAS 144  effective
January 1, 2002. The adoption of SFAS 144 did not to have a material  impact on
our financial statements.

    In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement 13 and Technical  Corrections."  SFAS
145 requires  gains and losses on  extinguishments  of debt to be classified as
gains or losses from continuing  operations rather than as extraordinary  items
as  previously  required  under SFAS 4,  unless  the gains and losses  meet the
criteria to be  classified as  extraordinary  pursuant to APB 30. SFAS 145 also
amends SFAS 13, "Accounting for Leases," to eliminate an inconsistency  between
the required  accounting  for  sale-lease  back  transactions  and the required
accounting for certain lease  modifications that have economic effects that are
similar to sale-lease back transactions.  The rescission of SFAS 4 is effective
for fiscal

                                      -46-

<PAGE>

years  beginning after May 15, 2002. The provisions of SFAS 145 related to SFAS
13 are effective for transactions occurring after May 15, 2002. The adoption of
these  provisions  had  no  impact  on  the  Group's   consolidated   financial
statements.

    In July 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." The Statement requires that a liability for
costs  associated with exit or disposal  activities be recognized in the period
in which the costs are incurred if a  reasonable  estimate of fair value can be
made.  Under current  accounting  guidance,  a liability can be recognized when
management has committed to an exit plan. The  requirements  under SFAS 146 are
effective  prospectively  for  exit  or  disposal  activities  initiated  after
December 31, 2002. Restatement of previously issued financial statements is not
permitted.  The adoption of this Statement  will affect the Group's  accounting
for exit and disposal activities initiated after December 31, 2002.

    December 31, 2002 the Financial  Accounting Standards Board issued SFAS No.
148  "Accounting for  Stock-Based  Compensation -- Transition and  Disclosure",
which  amends the  disclosure  requirements  relating to  stock-based  employee
compensation  previously  contained in SFAS No. 123. The amendments in SFAS No.
148 relevant to the SGL Group are  effective  for all fiscal years ending after
December  15,  2002.  The  disclosure  requirements  have been  included in the
additional  information provided on U.S. GAAP, see Note 35d to our consolidated
financial statements.

    In  November  2002,  FASB  Interpretation  No.  45 (FIN  45),  "Guarantor's
Accounting and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others" was issued.  FIN 45  elaborates on the
disclosures  to be made by a  guarantor  in its  interim  and annual  financial
statements about its obligations  under certain  guarantees that it has issued.
It also clarifies  that a guarantor is required to recognize,  at the inception
of a guarantee,  a liability for the fair value of the obligation undertaken in
issuing  the  guarantee.   The  initial  recognition  and  initial  measurement
provisions of this  Interpretation  are  applicable  on a prospective  basis to
guarantees issued or modified after December 31, 2002. The required disclosures
and a roll-forward of product warranty  liabilities are effective for financial
statements of interim or annual periods ending after December 15, 2002. At this
time,  we do not believe that the adoption of this  interpretation  will have a
material effect on our financial statements.

    In  January  2003,  the FASB  issued  Interpretation  No.  46  ("FIN  46"),
Consolidation of Variable Interest  Entities,  an interpretation of ARB 51. The
primary  objectives of FIN 46 are to provide guidance on the  identification of
entities for which control is achieved  through means other than through voting
rights ("variable  interest  entities" or "VIEs") and how to determine when and
which   business   enterprise   should   consolidate   the  VIE  (the  "primary
beneficiary").  This new model for consolidation  applies to an entity in which
either (1) the equity  investors (if any) do not have a  controlling  financial
interest or (2) the equity  investment at risk is  insufficient to finance that
entity's activities without receiving additional subordinated financial support
from  other  parties.  In  addition,  FIN 46  requires  that  both the  primary
beneficiary and all other enterprises with a significant variable interest in a
VIE make additional disclosures.  We are currently evaluating the impact of FIN
46 on our  financial  statements,  but do not  expect  that  there  will be any
material impact.

    We are  required to and will adopt SFAS Nos.  143,  145, and 146 as well as
FIN 45 and FIN 46 and are  currently  reviewing  these  statements to determine
their impact on our U.S. GAAP results of operations and shareholders' equity.

    We did not  consider  recent  IAS  pronouncements  that are  scheduled  for
adoption  after  December 31, 2002 to be  applicable  to the  activities of SGL
covered by this annual report.


RESEARCH AND DEVELOPMENT

    We conduct research and development  activities,  both independently and in
conjunction with suppliers,  customers and others,  to develop new products and
to improve product quality and manufacturing  processes.  We carry out research
and development  activities primarily at our German sites in Bonn and Meitingen
and at the U.S. sites located in Gardena and Valencia, California. Our research
and development activities are decentralized and closely linked to the business
units. At the
                                      -47-

<PAGE>

same time, our research and development staff is actively sharing knowledge and
experience  across  business  units thus  making  effective  use of the overall
research and development resources within the Group.

    Supported  by  a  well  educated   technical  staff  in  the  manufacturing
facilities,  research activities are a fully integrated part of the SGL Group`s
organization.  As a result,  we are able to adapt our  products  quickly to the
changing  requirements of the markets in which we compete and also successfully
enter into new product  segments.  We have recently  developed  large  diameter
graphite  electrodes  for  use  in  ultra  high  power  (UHP)  furnaces,  which
contribute to a more efficient and more cost  effective EAF steel  process.  In
early 2001,  we became the first  supplier in the world to  introduce a 32-inch
(800mm) diameter electrode at a customer's  facility.  In the past two years we
have also established a leading position as supplier of ceramic brake disks for
automotive applications based on novel material developments.  In addition, the
effort to cooperate  closely and continuously with our key customers during the
improvement  process  ensures a high level of product and service  quality.  We
sponsor  educational and informal programs for our customers and create problem
solving teams to improve customers' operations.

    Our  activities  in  new  product  development   concentrate  on  high-tech
innovations with substantial  growth potential.  Our primary focus is currently
on ceramic  brake  disks for cars,  new energy  applications  such as  graphite
powders  for  lithium  batteries  and carbon  components  for fuel  cells,  and
composite  structures  for  aerospace  and  defense  applications.  We are also
increasing  efforts  to  develop  non-sealing  applications  for  our  expanded
graphite materials. Primarily as a result of our recent growth efforts in those
high-tech  areas,  our research  and  development  expenses  increased to [E]29
million in 2000 and [E]31  million in 2001. In 2002,  research and  development
expenses were [E]25 million.  This decrease is mostly related to re-structuring
efforts in our established  business units.  The efficiency of our research and
development processes has been increased by using more centralized research and
development resources and applying targeted innovation techniques.


TREND INFORMATION

    We do not expect the global  economy to recover  significantly  in 2003. We
cannot  currently  predict the  economic  impact on our  business of the war in
Iraq. The ultimate impact could, however, be serious,  especially if it affects
business with our customers in the Middle East.  Because we can neither predict
not quantify the possible effects of the war, the following discussion of trend
information does not take these possible effects into account.

    We expect that increased demand from the steel and aluminum industries will
lead to higher  sales  volumes of  graphite  electrodes  and  cathodes  in 2003
compared  to 2002.  As of the date of this  annual  report,  our order book has
already  reached  approximately  90%  of our  budgeted  shipments  of  graphite
electrodes  and 80% of our budgeted  shipments  of cathodes for 2003.  Thus our
capacities  are almost  fully  booked  until the  fourth  quarter of this year.
Demand and  orders  for our  carbon  electrodes  and for  furnace  linings  are
currently in the normal range for this time of the year.

    We do not  anticipate a significant  economic  recovery in the key customer
industries  of our Graphite  Specialty  business area --  semiconductors,  tool
manufacturing,  metals,  chemicals,  automotive--during  2003.  We expect sales
revenue in this business area to remain  substantially  unchanged compared with
2002 or, if the  economy  recovers  during  the  second  half of the  year,  to
increase slightly.

    Similarly,  we expect no significant  economic  recovery during the current
year in the key  customer  industries  of our  Corrosion  Protection  business.
Participants in these industries,  particular  chemicals and plant engineering,
are currently  reluctant to spend money on maintenance  and  investment.  Order
entries during 2003 are low for this time of the year. We do,  however,  expect
that large orders relating to an Australian  magnesium plant project may have a
positive effect on Corrosion Protection's sales revenue during 2003 and 2004.

    Our SGL  Technologies  business is developing in accordance with our plans.
We expect a further  increase  in sales  revenue  from our  carbon  fibers  and
carbon-  ceramic brake discs as well as from the aerospace and  defense-related
business of our U.S. subsidiary HITCO.

                                      -48-

<PAGE>

    Overall, we aim to achieve a slight increase in consolidated sales revenue,
driven  primarily by higher sales volumes for graphite  electrodes and cathodes
as well as  further  growth  in SGL  Technologies.  We also aim to  achieve  an
improvement in  consolidated  operating  results  compared with 2002. We expect
that this improvement  would primarily be the result of the positive effects of
past and current cost reduction programs as well as higher capacity utilization
in the Carbon and Graphite and SGL Technologies business areas.


SIGNIFICANT DIFFERENCES BETWEEN IFRS AND U.S. GAAP

    This section  describes the significant  differences  between IFRS and U.S.
GAAP  as  they  relate  to the  SGL  Group.  See  also  Notes  34 and 35 to our
consolidated financial statements.

BUSINESS COMBINATIONS

    Prior to the  adoption  of IAS 22  (revised  1993) on January  1, 1995,  we
wrote- off all goodwill  directly to equity in accordance  with IAS existing at
that time.  The adoption of IAS 22 "Business  Combinations"  (revised 1993) did
not require  prior -period  restatement.  Accordingly,  a U.S. GAAP  difference
exists with  respect to the  recognition  of goodwill and  amortization  before
January 1, 1995 and for the amortization of goodwill after January 1, 2002. For
U.S. GAAP  reconciliation  purposes,  the pre-1995  goodwill is being amortized
through the  statement of operations  over the  estimated  useful lives between
five and 20 years. Since January 1, 2002, as stated in SFAS 142 goodwill should
no longer be amortized  over its estimated  useful life but evaluated  annually
using an impairment test approach as described in SFAS 142. Under IFRS goodwill
was still  amortized  in 2002 and,  accordingly,  a  reconciliation  difference
exists.

    In  accordance  with IFRS,  any negative  goodwill  resulting in a business
combination  as an excess of the  acquirer's  interest in the fair value of the
indentifiable assets and liabilities over the cost of the acquisition for which
the  acquisition  was before July 1, 2001 was presented as a deduction from the
assets of the reporting enterprise, in the same balance sheet classification as
goodwill,  and recognized in the income statement over its remaining  estimated
useful live. Accordingly, under U.S. GAAP an excess of the acquirer interest in
the fair value of the identifiable  assets and liabilities over the cost of the
acquisition was allocated to reduce proportionately the values assigned to non-
current  assets.  The  remainder of the excess over costs was  classified  as a
deferred  credit.  As of January 1, 2002 these  amounts  were  written  off and
recognized  as the effect of a change in  accounting  principle.  Subsequent to
January 1, 2002 any negative  goodwill  arising from a business  combination is
recognized as income immediately.

INTANGIBLE AND TANGIBLE FIXED ASSETS

    Statement of Position (SOP) 98-1 provides guidance on accounting under U.S.
GAAP for the costs of computer software developed or obtained for internal use.
Once the  capitalization  criteria  of the SOP have been met,  external  direct
costs of materials and services  consumed in developing  internal-use  computer
software;  payroll and  payroll-related  costs for  employees  who are directly
associated  with and who  devote  time to the  internal-use  computer  software
project should be  capitalized.  Under U.S. GAAP,  overhead costs should not be
capitalized  as  costs of  internal-use  software  while  under  IFRS  directly
allocated overhead costs are included.

    For U.S. GAAP  purposes,  we capitalize  interest on borrowings  during the
active construction period of major capital projects.  Capitalized  interest is
added to the cost of the  underlying  assets and is  depreciated as part of the
assets  cost over the  useful  life of the  asset.  In  accordance  with IAS 23
"Borrowing Costs", benchmark treatment interest cost should be recognized as an
expense in the period in which they occur.

INVENTORY

    IAS 2  "Inventories"  identifies two  alternatives  as benchmark  valuation
methods,  the FIFO (first in, first out) method and the  weighted-average  cost
method. The LIFO (last in, first out) method is permitted as an alternative. In
valuing inventories for IFRS reporting,  we have elected to apply the benchmark
method using the weighted average cost method. For certain  inventories held in
the United  States,  under U.S.  GAAP we have  elected  to  continue  recording
inventories on the LIFO method,

                                      -49-

<PAGE>

consistent with historical accounting practices.  This is due, in part, to U.S.
income tax laws,  regulations  and rulings,  which require that an entity using
LIFO for income tax purposes must use LIFO in its financial statements.

PENSION PROVISIONS

    Under IFRS,  pension  costs and similar  obligations  are  accounted for in
accordance with IAS 19, "Employee Benefits". For purposes of U.S. GAAP, pension
costs for defined  benefit plans are accounted for in accordance  with SFAS No.
87  "Employers'  Accounting  for Pensions"  and the  disclosure is presented in
accordance with SFAS No. 132 "Employers'  Disclosures  about Pensions and Other
Post-retirement  Benefits". IAS 19, as we apply it, is substantially similar to
the  methodology  required under SFAS No. 87. The  adjustment  between IFRS and
U.S. GAAP comprises amortization of the unrecognized transition obligation over
the remaining  average  service lives of employees  and the  recognition  of an
additional minimum liability under SFAS No. 87, which is not required under IAS
19. Under IFRS,  changes in the market value of plan assets are  recognized  in
the calculation immediately; under U.S. GAAP they are deferred over five years.
The interest  component of additions to the pension provision has been shown as
an expense in the financial result under IFRS, which is below operating profit,
while under U.S. GAAP it is included in operating profit.

INCENTIVE PLANS

    IFRS provides that, in the absence of a specific  International  Accounting
Standard or an Interpretation of the Standing Interpretations  Committee of the
IASB,  management  should use its judgment in developing  an accounting  policy
that  provides  the  most  useful  information  to  users  of the  enterprise's
financial  statements.  In making this judgment,  management  should  consider,
among others,  pronouncements  of other  standard  setting  bodies and accepted
industry  practices.  We have  elected,  for  purposes  of IFRS  reporting,  to
continue the  accounting  treatment for the incentive  plans,  consistent  with
prior practices under German GAAP.

RESTRUCTURING

    The only significant  difference  between the restructuring  guidance under
both IAS 37,  "Commitments  and  Contingencies"  and Emerging Issues Task Force
(EITF)  Issue 94-3  "Liability  Recognition  for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (including Certain Costs Incurred
in a Restructuring)" is found in the criteria for the initial  recognition of a
restructuring  provision. For employee termination benefits, EITF 94-3 requires
that prior to the date of the financial statements,  the benefit arrangement be
communicated to employees,  including  sufficient detail to enable employees to
determine  the type and  amount of  benefits  they will  receive  when they are
terminated.  IAS 37 does not require that the  communication to employees be in
such detail but rather that the communication  simply include the main features
of the  plan.  As a  result,  there may be  situations  in which an  enterprise
following IAS 37 could recognize a restructuring  provision  before it would be
permitted to do so if it were following EITF 94-3.

FIRST TIME ADOPTION OF IFRS

    A deferred tax asset for tax loss  carryforwards has been recognized in the
IFRS  consolidated  financial  statements  on the basis of five-year  projected
earnings before taxes of the individual companies consolidated. The projections
reflect  uncertainties  about certain assumptions and other general conditions,
and, in exceptional  cases, a deferred tax asset for tax loss carryforwards has
not been recognized.

    When we first prepared annual financial  statements in accordance with IFRS
(then  IAS),  we  adjusted  recognition  of  deferred  tax  asset  for tax loss
carryforwards in the United States  retrospectively  for the reporting periods.
These  adjustments  under U.S. GAAP also resulted in restatement of the amounts
reported in the published 2001 quarterly  reports  prepared in accordance  with
IFRS.  The deferred tax asset for tax loss  carryforwards  in the United States
was written down in full in the 2001  consolidated  financial  statements  as a
consequence  of the recession and the economic  situation of the steel industry
in the United States. To ensure a comparable basis for the projection  prepared
at end-2000 as regards uncertainties  surrounding the U.S. economy and the U.S.
steel
                                      -50-

<PAGE>

industry,  the analysis horizon used as the basis for recognizing U.S. deferred
taxes at the end of fiscal year 2000 was  truncated  to three years under IFRS,
while the U.S. GAAP deferred tax assets as of December 31, 2000 remained.

DEFERRED TAXES

    The items discussed above create differences between the U.S. GAAP book and
tax basis of assets and  liabilities,  requiring the  recognition of associated
deferred tax assets and liabilities. With some exceptions,  deferred tax assets
and  liabilities  are recognized for all  differences  between the book and tax
basis of the  assets and  liabilities  using  future  statutory  tax rates.  In
addition,  a valuation allowance is established when it is more likely than not
that deferred tax assets will not be realized.

                                      -51-

<PAGE>

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

    In accordance with the German Stock Corporation Act (Aktiengesetz), SGL has
two  distinct  boards  of  directors.  These  are the  Vorstand,  or  board  of
management,  which we refer to as our Executive Committee, and the Aufsichtsrat
or  Supervisory  Board.  The two boards are separate;  no  individual  may be a
member of both boards.

    The Executive  Committee is responsible for managing the business of SGL in
accordance with  applicable  laws and the Articles of Association  (Satzung) of
SGL.

    The  principal  function  of the  Supervisory  Board  is to  supervise  the
Executive  Committee.It  is also  responsible  for  appointing and removing the
members of the Executive. Certain transactions,  such as purchases and sales of
real estate,  commencement or discontinuance of business lines, the granting of
guarantees, or buying and selling equity interests require the prior consent of
the Supervisory  Board if the transaction  goes beyond SGL's ordinary course of
business.  To ensure  that  these  functions  are  carried  out  properly,  the
Executive  Committee  must,  among  other  things,   regularly  report  to  the
Supervisory  Board  with  regard to  current  business  operations  and  future
business  planning.  The Supervisory  Board is also entitled to request special
reports at any time. The  Supervisory  Board oversees our management but is not
permitted to make management decisions.

    Both  the  members  of the  Executive  Committee  and  the  members  of the
Supervisory   Board  are   responsible   for  and  manage   their  own  affairs
(Kompetenztrennung). In carrying out their duties, the individual board members
must  exercise the standard of care of a diligent and prudent  businessman.  In
complying with this standard of care, the boards must take into account a broad
range of  considerations  including the interests of SGL and its  shareholders,
employees and creditors.

    As a general rule under German law, a  shareholder  has no direct  recourse
against the members of the Executive  Committee or the Supervisory Board in the
event  that  they are  believed  to have  breached  a duty to SGL.  Apart  from
insolvency  or other  special  circumstances,  only SGL has the  right to claim
damages from members of either board. We may only waive these damages or settle
these  claims if at least  three  years  have  passed  and if the  shareholders
approve the waiver or  settlement  at the  shareholders'  meeting with a simple
majority of the votes cast, provided that opposing shareholders do not hold, in
the  aggregate,  one tenth or more of our share  capital  and do not have their
opposition formally noted in the minutes maintained by a German notary.

EXECUTIVE COMMITTEE

    The  Executive  Committee  of SGL  currently  consists of five members (the
total number is determined by the  Supervisory  Board) who are appointed by the
Supervisory Board in accordance with the German Stock Corporation Act.

    Pursuant to the  Articles  of  Association  of SGL,  any two members of the
Executive  Committee or one member of the Executive Committee together with the
holder of a general  power of attorney  (Prokura)  recorded  in the  commercial
register (Handelsregister) may bind SGL.

    The Executive  Committee must report regularly to the Supervisory Board, in
particular, on proposed business policy and strategy,  profitability and on the
current  business of SGL Group as well as on any  exceptional  matters that may
arise from time to time.

    The members of the Executive  Committee  are  appointed by the  Supervisory
Board for a maximum term of five years.  They may be  reappointed or have their
term extended for one or more terms of five years. Under certain circumstances,
such as a serious  breach of duty or a bona fide vote of no  confidence  by the
shareholders'  meeting,  a member of the Executive  Committee may be removed by
the  Supervisory  Board prior to the expiration of his or her term. A member of
the  Executive  Committee may not deal with,  or vote on,  matters  relating to
proposals, arrangements or contracts between himself and SGL.

    According to the Articles of Association  of SGL, board  decisions are made
by a  simple  majority  of the  votes,  if the law does  not  require  a larger
majority.  In the event of a tie,  the vote of the  Chairman  of the  Executive
Committee is decisive. In practice, SGL reaches its decisions by consensus.

                                      -52-

<PAGE>

    The current members of the Executive Committee of SGL and the year in which
they were appointed to their positions are as follows:

<TABLE>
<CAPTION>
                           YEAR
NAME                  APPOINTED    END OF TERM  TITLE
--------------------  ---------  -------------  -----------------------------------
<S>                         <C>            <C>  <C>
Robert J. Koehler...       1994  December 2006  Chairman of the Executive Committee
Theodore H. Breyer..       1999      June 2005  Member of the Executive Committee
Dr. Hariolf Kottmann       2001     March 2007  Member of the Executive Committee
Dr. Bruno Toniolo...       1996  December 2004  Member of the Executive Committee
Dr. Klaus Warning...       1997      June 2006  Member of the Executive Committee

</TABLE>

    Mr. Koehler has served as Chairman of the Executive  Committee  since SGL's
transformation  into a stock corporation in 1994. From 1992 until that time, he
served as Chairman of the Board of Managing Directors of SGL CARBON GmbH. Prior
to joining the SGL Group,  he held various  positions  with the Hoechst  Group.
From 1989 to 1991,  Mr.  Koehler was Head of Corporate  Planning of Hoechst AG,
and from 1987 until 1989,  he served as  President of Hoechst  Colombiana  S.A.
From 1985 to 1987, he was  responsible  for the Industrial  Division of Hoechst
U.K.  Limited  and was a  member  of the  Management  Committee.  Prior  to his
position as Director of Chemical  Division of Hoechst U.K. Limited from 1975 to
1985,  he was Product  Manager of Organic  Chemicals at Hoechst AG from 1971 to
1975.

    Mr. Breyer was appointed as a member of the Executive Committee in 1999. In
addition to this appointment,  he took over the  responsibility  for the global
Carbon and Graphite  business  area  effective  January 1, 2002.  In 1970,  Mr.
Breyer joined the Caltex  Petroleum  Corporation.  Between 1974 and joining SGL
Group in 1995,  Mr.  Breyer held various  positions in Hoechst  Celanese,  most
recently  as Vice  President  and  General  Manager  for  Bulk  Pharmaceuticals
Products of the Specialty Chemicals Group. From 1997 to 1999, Mr. Breyer served
as Chairman of our the Carbon and Graphite North America business unit.

    Mr. Kottmann was appointed as a member of the Executive  Committee in 2001.
In addition to this appointment, he took over the responsibility for the global
Graphite  Specialties business area effective January 1, 2002. Prior to joining
the SGL Group,  Mr. Kottmann acted as Executive Vice President of Celanese Ltd.
(Dallas,  Texas).  Mr. Kottmann has also held several  management  positions as
divisional head of research and development,  divisional head of production and
head of divisions with Hoechst AG or affiliated companies.

    Mr.  Toniolo was appointed as a member of the Executive  Committee in 1996.
Between 1992 and 1995, he served as Chairman of the Carbon and Graphite  Europe
business unit and was Managing Director of SGL CARBON S.p.A.,  Italy.  Prior to
joining the SGL Group in 1983, he held positions as Controller and Treasurer at
Singer S.p.A. and Kodak S.p.A. in Italy.

    Mr.  Warning was appointed as a member of the Executive  Committee in 1997.
Prior to joining the SGL Group, he acted as a member of the Board of Management
and Senior Vice President of Hoechst  Celanese Corp. in the United States.  Mr.
Warning  has also  held  several  management  positions,  mainly in the area of
research and development, with Hoechst AG.

                                      -53-

<PAGE>

OTHER SENIOR MANAGEMENT

    The table below sets forth the SGL Group's senior executive  officers,  the
year they were appointed and their positions within the SGL Group:
<TABLE>
<CAPTION>
                              YEAR
NAME                     APPOINTED  MANAGEMENT POSITION
-----------------------  ---------  -----------------------------------------------


<S>                            <C>  <C>
Reinhard Damerow.......       1992  Group Coordination -- Treasury
Wilhelm Hauf...........       2001  Group Coordination -- Accounting
Dr. Joachim Heins-Bunde       1992  Group Coordination -- Corporate Planning
Gernot Hochegger.......       2002  Managing Director -- SGL Technologies
Dr. Thomas Kosack......       2000  Corrosion Protection business area
Helmut Muhlbradt.......       1989  Group Coordination -- Human Resources and Legal
Dr. Jan Verdenhalven...       2001  Managing Director -- SGL Technologies
Thomas Werner..........       2000  Group Coordination -- Information Services

</TABLE>

    Mr.  Damerow  joined SGL as Head of Finance and Accounting in 1992. In 2001
he took over the newly  formed  position  as Head of Group  Treasury.  Prior to
joining  the  SGL  Group,  he held  the  position  of  Head  of the  Securities
Department of Hoechst AG.

    Mr. Hauf was appointed  Head of Group  Accounting in 2001.  From 1994 until
2001, he was  Controller of the Carbon and Graphite  Europe  business  unit. He
joined SGL Group in 1992 as a member of the Corporate Planning and Coordination
Department.  Prior to  joining  the SGL  Group,  Mr.  Hauf  was in the  Central
Auditing Department of Hoechst AG.

    Mr.  Heins-Bunde has served as Head of Corporate  Planning and Coordination
since 1992. He joined SGL Group in 1982,  holding  various  positions in sales,
business unit management and central coordination.

    Mr.  Hochegger was appointed  Chairman of the Graphite  Specialties  Europe
business  unit in 1997.  From 1995 until 1997, he was Chairman of the Specialty
Graphite  business area,  and prior to that position,  he served as Chairman of
the Specialty  Graphite North America  business unit. Mr.  Hochegger joined the
SGL Group in 1965 and has served in various  research,  marketing  and  general
management  positions.  Effective  January 1, 2002, Mr. Hochegger was appointed
Managing Director of SGL Technologies.

    Mr. Kosack was appointed Chairman of the Corrosion Protection business area
at the  beginning  of  2000.  He  joined  the SGL  Group  in 1997 as  Strategic
Controller of the former Process  Equipment and Linings business unit. Prior to
joining the SGL Group, Mr. Kosack was responsible for the European polyethylene
business of Hoechst AG.

    Mr.  Muhlbradt  joined  SGL as Head of  Human  Resources  and of the  Legal
Department in 1989.  Prior to joining the SGL Group, he held similar  positions
with other companies of the Hoechst Group.

    Mr. Verdenhalven was appointed Managing Director of SGL Technologies in May
2001.  He joined the SGL Group in March 2000 as Head of  Corporate  Controlling
and  Development.  Prior to joining the SGL Group,  he held several  management
positions with Hoechst AG and a consulting company.

    Mr. Werner joined the SGL Group as Chief Information Officer in 2000. Prior
to joining  the SGL  Group,  he held  similar  positions  including  operations
research with other international companies.

SUPERVISORY BOARD

    The current  Supervisory  Board of SGL consists of twelve  members,  six of
whom were elected by the shareholders in the general meeting in accordance with
the provisions of the Stock Corporation Act and six of whom were elected by the
employees in accordance with the Co-Determination Act (Mitbestimmungsgesetz).

                                      -54-

<PAGE>

    A member  of the  Supervisory  Board  elected  by the  shareholders  may be
removed by a majority of at least three-quarters of the votes cast at a general
meeting  of  shareholders.  A member of the  Supervisory  Board  elected by the
employees may be removed by a majority of at least  three-quarters of the votes
cast by the relevant  class of  employees.  The  Supervisory  Board  appoints a
chairman  and a deputy  chairman  from among its  members.  The Chairman of the
Supervisory Board must be elected by a majority of two-thirds of the members of
the  Supervisory  Board. If this majority is not reached in the first vote, the
chairman will be elected in a second vote solely by the  representatives of the
shareholders.  At least  half the  members  of the  Supervisory  Board  must be
present to  constitute a quorum.  Unless  otherwise  provided for by law or the
Articles of  Association,  resolutions  are passed by a simple  majority of the
Supervisory  Board.  In the  event  of a tie,  another  vote is  held,  and the
chairman then has a tie-breaking vote.

    The members of the  Supervisory  Board are each elected for a term of about
five years (the term expires at the end of the general  meeting of shareholders
in which the shareholders discharge the Supervisory Board member for the fourth
fiscal  year  following  the  year in  which  such  member  was  elected).  The
remuneration  of the  members of the  Supervisory  Board is  determined  by the
Articles of Association of SGL.

    The current  members of the  Supervisory  Board of SGL,  the years in which
they were first  elected  to the  Supervisory  Board of SGL or its  predecessor
companies, respectively, and their principal occupations are as follows:

<TABLE>
<CAPTION>
                                                  YEAR   END OF
NAME                                     FIRST ELECTED  TERM(1)  PRINCIPAL OCCUPATION
---------------------------------------  -------------  -------  ----------------------------------------------------------


<S>                                                <C>      <C>  <C>
Prof. Dr. rer. nat. Utz-Hellmuth Felcht
  (Chairman)...........................           1992     2003  Chairman of the Board of Management of Degussa AG
Franz Schaffer(2)
  (Vice Chairman)......................           1978     2003  Metal worker, SGL CARBON AG, Meitingen
Hans-Georg Bartel(2)(3)................           1999     2002  Electrician, SGL CARBON GmbH, Bonn
Peter Fischer(2).......................           1993     2003  Legal Counsel of SGL CARBON AG, Wiesbaden
Dr-Ing. Claus Hendricks................           1996     2003  Member of the Board of Management of Thyssen Stahl AG
Hansgeorg B. Hofmann...................           1996     2003  Banker
                                                                 Authorized Representative of IG Metall, Verwaltungsstelle
Juergen Kerner(2)......................           2002(4)  2003  Augsburg
Dr.-Ing. Hubert H. Lienhard............           1996     2003  Enterpreneur
Jacques Loppion........................           1993     2003  Chairman of Giat Industries S.A.
                                                                 Authorized Representative of IG Metall, Verwaltungsstelle,
Lutz Muhring(2)........................           1998     2003  Bonn-Rhein-Sieg
                                                                 Authorized Representative of IG Metall, Verwaltungsstelle,
Karl-Heinz Schneider(2)(5).............           1985     2003  Augsburg
Heinz Schroth(2).......................           1988     2003  Administrative clerk, SGL ACOTEC GmbH
Andrew H. Simon........................           1998     2003  Consultant and Member of the Board of various companies
                                                                 Technician Mechanical Engineering, SGL CARBON
Hans-Werner Zorn(2)....................           2003(6)  2003  GmbH, Bonn

</TABLE>

(1) Terms end upon the adjournment of the annual shareholders'  meeting held in
    the year indicated.

(2) Employee representatives.

(3) Mr.  Bartel died on November  11, 2002 before the  scheduled  expiry of his
    term.

(4) Appointed by court as replacement on September 13, 2002.

(5) Mr. Schneider  resigned on June 11, 2002 before the scheduled expiry of his
    term.

(6) Appointed by court as replacement on February 27, 2003.

COMPENSATION

    In 2002 SGL paid aggregate  compensation of [E]3.1 million (including a 54%
variable  component from the management  incentive plans) to the members of its
Executive  Committee  who held office in 2002,  and aggregate  compensation  of
[E]2.2 million to its executive  officers  (excluding the Executive  Committee,
including a 44%  variable  component)  who held office in 2002.  The  aggregate
amount of
                                      -55-

<PAGE>

compensation  paid  by SGL to the  members  of its  Supervisory  Board  in 2002
amounted to [E]0.3  million.  In addition,  SGL paid [E] 0.1 million to retired
members of the Executive  Committee  and their  surviving  dependents.  Pension
reserves for these persons were [E]1.1 million as of December 31, 2002.

    In accordance  with the  provisions of the Articles of  Association of SGL,
the  remuneration  paid to the  Supervisory  Board contained fixed and variable
components  until  fiscal year 1999.  Effective  from fiscal year 2000,  only a
fixed  remuneration  in  the  amount  of  [E]20,000  was  to be  paid  to  each
Supervisory  Board member.  The chairperson  received twice this amount and the
deputy  chairperson  received one and one-half times this amount.  In addition,
members of Supervisory  Board committees  received  [E]2,000 for each committee
meeting attended.

    Approximately 500 key managers are eligible for participation in our annual
bonus program.  This program  provides for annual bonus payments subject to (i)
SGL's income before tax, (ii) the operating results of the respective  business
unit and (iii) the personal performance of the participating manager. Depending
on the  seniority  and the position held by the  participating  manager,  these
bonus payments can equal between 25% and 70% of base salary.

    Since  1998,  a  similar  bonus  plan  was  introduced  for all  non-exempt
employees in Germany,  replacing the previous  profit-sharing  plan.  The bonus
payment  under this plan can amount to up to 20% of an  employee's  yearly base
salary and is distributed in the form of Shares.

MANAGEMENT INCENTIVE PLANS

    Effective  January 1, 1996, the SGL Group  implemented an incentive program
that grants to the  members of the  Executive  Committee  and  selected  senior
managers  participation in a Stock  Appreciation  Rights Plan  (SAR-Plan).  The
Long-Term Cash Incentive  Plan  (LTCI-Plan)  1999-2001 has been followed by the
LTCI-Plan  2002-2004.  A share  ownership  plan  open to all  employees  became
effective in March 1996. A Share Plan and a new Stock Option Plan were approved
by the  annual  meeting of  shareholders  of SGL on April 27,  2000.  The Stock
Option Plan was implemented in June 2000, and the share plan was implemented in
March 2001.

SAR-Plan

    Under the  SAR-Plan,  certain  managers of the SGL Group have been  granted
stock  appreciation  rights  (SARs).  Each SAR represents (i) with respect to a
participant who is a member of the Executive Committee, the right to receive an
amount equal to the difference  between the exercise  price,  which ranges from
[E]33.03  to  [E]102.26,  and the Sh are  price  as  officially  quoted  on the
Frankfurt Stock Exchange on March 16 of each year until termination of the SAR-
Plan,  and (ii) with  respect to a  participant  who is an  employee of the SGL
Group, the right to purchase one Share at the exercise price.

    One SAR is equivalent to one Share.  The total number of Shares  associated
with the SAR-Plan is 840,500,  which represents  approximately 4% of all Shares
outstanding. SARs representing a total of 797,300 Shares have been allocated to
the members of the Executive  Committee  and 74 senior  managers as of December
31, 2002. Of these SARs, 637,350 had been exercised as of December 31, 2002.

    Under the  SAR-Plan,  a  specific  number  of SARs,  as  determined  by the
Executive  Committee,  or by the  Supervisory  Board if the  participant  was a
member of the  Executive  Committee,  were  allocated to a  participant  at the
beginning of the SAR performance  cycle (January 1, 1996 -- December 31, 2000).
The options  allocated to each  participant vest on January 1 of each year from
1997 through 2001, in annual installments of 20% during the vesting period (the
12 month period immediately preceding the vesting date). Each vested option can
be  exercised  between  March 1 and March 15 of each  year,  but not later than
March 15, 2006, or upon termination of service as described below.

    From the net proceeds  derived from the exercise of SARs by a member of the
Executive Committee, an equivalent of 15% of the gross proceeds must be applied
by the  participant  for the purchase of Shares in the stock  market.  For this
purpose,  SGL will instruct a financial  institution  to acquire the Shares for
the account and in the name of the member of the  Executive  Committee.  SGL or
the relevant subsidiary will provide the financial means to effect the purchase
directly to the financial institution from the participants' funds derived from
the exercise of the SARs. The financial

                                      -56-

<PAGE>

institution  will retain these Shares on behalf of the member of the  Executive
Committee  for the next twelve  months,  after which  period the Shares will be
delivered to the  participant.  The  remaining net proceeds will be paid to the
member of the Executive Committee.

    All of the Shares  purchased by a participant who is an employee of the SGL
Group upon exercise of a SAR must immediately be resold by such employee except
for a number of Shares equivalent to the number of Shares that can be purchased
with 15% of the gross  proceeds from the sale of all the Shares.  Such retained
Shares may not be sold and are restricted for a period of twelve months.

    If a  participant's  employment  with  the  SGL  Group  terminates  due  to
disability,  death or termination  without cause within one year of a change of
control, any vested or non-vested part of a SAR will be deemed exercised or, in
the case of employees, will be exercisable during the exercise period following
the  termination  of  employment.  In the case of  termination  for cause,  the
participant's  right to  exercise  any  vested and  non-vested  part of the SAR
terminates  and the SAR  lapses.  In  this  event,  the  Supervisory  Board  is
authorized to grant the  participant  the right to exercise  immediately or, in
the case of employees,  to exercise  during the exercise  period  following the
termination of employment any vested part of the option to the extent such part
of the option is  exercisable at the date of such  termination.  In the case of
retirement,   termination   without  dispute,   or  voluntary   termination  of
employment,  the participant's right to exercise any non-vested part of the SAR
terminates  and such  option  lapses.  Any vested  part of the option is deemed
exercised or, in the case of employees, will be exercisable during the exercise
period  following  the  termination  of  service  to the  extent  such part was
exercisable at the date of  termination  of employment.  If the employment of a
participant who is a member of the Executive Committee  terminates  voluntarily
without  dispute  within one year of a change in  control,  any vested and non-
vested  part of the SARs of such  members of the  Executive  Committee  will be
deemed exercised.

LTCI Plan 2002-2004

    Under the LTCI-Plan,  the members of the Executive  Committee and 36 senior
managers were granted cash awards by SGL subject to the  achievement of certain
performance  targets over a three-year  period. The current plan period is 2002
through 2004. The maximum aggregate award is [E]7.8 million.

    The  performance  target  that  the SGL  Group  must  reach  in  order  for
participating senior managers and directors to be entitled to the maximum award
under the LTCI-Plan was set at a 2.3 ratio of net debt to EBITDA.

    Of the net proceeds  from the LTCI  premium,  an amount equal to 15% of the
gross proceeds must be used by the participants to buy Shares of SGL Carbon AG.
The shares must be locked up for 12 months.

    If a  participant's  employment  with  the  SGL  Group  or  its  affiliates
terminates due to retirement,  disability, death, transfer to another affiliate
or termination  without cause,  the participant will have the right to obtain a
prorated award proportional to such participant's tenure in the LTCI-Plan until
the date of  termination  of service.  If a participant  who is a member of the
Executive Committee terminates employment with the SGL Group due to a voluntary
termination  for  good  cause  within  one year of a change  of  control,  such
participant will have the right to obtain a prorated award  proportional to the
participant's tenure in the LTCI-Plan until the date of termination of service.
In the case of  termination  for  cause or  voluntary  termination  that is not
caused by a change of control, the participant's right to obtain any LTCI award
terminates and such award lapses.

Share Ownership Plan

    Under the Share  Ownership  Plan,  each German and  Austrian  employee  was
offered 25, 50 or 60 Shares at a price of [E]4.42 per share for the first 25 or
50 Shares (basic offer) and at a price of [E]5.50 for the  additional 10 Shares
(additional offer). In total, 1,631 employees  participated in this program and
purchased an aggregate number of 88,775 Shares. These Shares were issued on the
basis of the capital  increase from  authorized  capital in 2002. The Shares of
the basic  offer are  subject  to a  two-year  internal  lock-up  period  until
November  30, 2004,  and those of the  additional  offer to a one-year  lock-up
period until November 31, 2003.

                                      -57-

<PAGE>

    For  accounting  purposes,  under  German  GAAP and  IFRS , the  difference
between  the Share  purchase  price  paid by the SGL Group and that paid by the
employees  will  represent  compensation  expense that is recognized  through a
charge in the statement of operations at the date of each transaction.

    For additional  information related to the incentive programs,  see Note 31
to our consolidated financial statements for the year ended December 31, 2002.

Share Plan

    The Share Plan of SGL was adopted by the  Shareholders of SGL at the annual
meeting of  shareholders  held on April 27, 2000.  The maximum number of Shares
that may be reserved for the issuance of Shares under the Plan shall not exceed
250,000 new Shares.  The Share Plan was implemented,  effective March 31, 2001.
No Shares were issued under the Share Plan as of December 31, 2002.  At the end
of March  2003,  for the first  time  20,508 new shares  were  issued  from the
authorized  capital increase to the senior managers and officers  participating
in the Share Plan 2001; 6,490 already outstanding shares, acquired in the stock
market, are granted to the members of the Executive Committee.

    The  Supervisory  Board  will  administer  the Plan for the  members of the
Executive  Committee Under the Share Plan, the Supervisory  Board is authorized
to grant Shares in SGL to members of the  Executive  Committee.  The  Executive
Committee will  administer the Share Plan for the senior  managers and officers
of SGL and those  companies  in which  SGL,  directly  or  indirectly,  holds a
majority  interest.  For the "purposes of the Share Plan, the Stock Option Plan
and the  Change in Control  Agreement  described  below,  these  companies  are
referred to as Affiliates").  Under the Share Plan, the Executive  Committee is
authorized  to grant  Shares to those  senior  managers  of the SGL Group as it
selects,  and to members of the management  and senior  managers of Affiliates.
The  Shares  will  be  issued  as  a  result  of  a  capital  increase  against
contributions in kind in form of bonus claims.  Such bonuses will be granted to
the participants under the Share Plan.

    Level 1, 2 and 3 senior managers of SGL and its Affiliates  selected by the
Executive  Committee  and members of the  Executive  Committee  selected by the
Supervisory Board may participate in the Plan on a voluntary basis.

    In order to participate in the Plan, the selected  employees and members of
the Executive  Committee  must acquire  Shares in the stock market in an amount
not  exceeding  50% of their  bonuses  under  SGL's  annual  bonus  plan at the
relevant current price of the Shares in the Xetra securities  trading system on
the  Frankfurt  Stock  Exchange  prior to the  start of the  Plan.  The  Shares
acquired in the stock market are held for the participants in a blocked custody
account for a two year lock-up period.  The participants may not dispose of the
Shares during the lock-up  period in order to retain their  entitlements  to be
granted matching Shares (at the end of the Plan as described below).

    After the lock-up period,  SGL will grant each  participant a number of new
matching Shares from the authorized  capital increase in an amount equal to the
number  of Shares  held for the  benefit  of each  participant  in the  blocked
custody  account.  The  contribution in kind by the participants is a claim for
the bonus payment  payable at the end of the lock-up  period.  After the end of
the  lock-up  period,  the  participants  receive the  released  Shares and the
matching Shares.

    The 76 senior managers who  participated in the Share Plan as of March 2003
have purchased  38,381 Shares in the stock market in connection  with the Share
Plan.

Stock Option Plan

    SGL`s  shareholders  adopted the Stock Option Plan at their annual  meeting
held on April 27, 2000.  The maximum  number of Shares that may be reserved for
issuance  under the Plan may not exceed  1,600,000.  The options may be granted
until the end of the year  2004.  The Stock  Option  Plan has been  implemented
effective June 2000.

    The  Supervisory  Board  will  administer  the Plan for the  members of the
Executive  Committee.  Under the Plan, the  Supervisory  Board is authorized to
grant  options on Shares to members of the Executive  Committee.  The Executive
Committee will  administer the Plan for  approximately  150 senior managers and
officers of SGL and its Affiliates.  Under the Plan, the Executive Committee is
authorized to grant options to those senior  managers of SGL as it  determines,
and to members of the
                                      -58-

<PAGE>

management and senior managers of its Affiliates. In each case, the Supervisory
Board or the  Executive  Committee,  will offer and  transfer  new Shares  upon
exercise  of the  options  out of the  conditional  capital  created  for  that
purpose.

    The options available under the Plan will be distributed as follows:

        *   Executive Committee, up to 30%;

        *   senior managers of SGL, up to 20%;

        *   members of management of Affiliates, up to 20%; and

        *   remaining senior managers of Affiliates, up to 30%.

    If any of the groups  mentioned  above is not granted its maximum number of
options,  the  remaining  options  may  be  cumulatively   distributed  to  the
participants  in the next or previous  group, in addition to the maximum number
of options  that are  distributed  to that group,  to the extent that the total
volume of subscription rights are exhausted. The Executive Committee or, to the
extent that members of the Executive  Committee are affected,  the  Supervisory
Board, will decide on the allocation of any remaining options. However, no more
than  30%  of the  available  options  may be  distributed  to  members  of the
Executive Committee.

    The options have a term of 10 years  starting on the date of grant and will
expire,  without  compensation,  if they are not  exercised  before this period
elapses.

    The options may not be  exercised  until a two-year  qualifying  period has
elapsed,  which period begins on the day following the date of grant, resulting
in an exercise period of eight years.  During the exercise period,  exercise of
the options is possible only on trading days during  defined  trading  windows.
For each  tranche of options,  there will be two trading  windows of 10 days in
which options may be exercised  following SGL's public reporting  dates.  These
periods will be determined by the Supervisory Board if members of the Executive
Committee  are granted  options,  and by the  Executive  Committee  for options
granted to the remaining participants.

    Options  may be  exercised  only if the SGL Group  has met its  performance
target at the time the options are  exercised.  The  performance  target is the
increase in the total shareholder  return of the Shares. The plan defines total
shareholder return as the Share price plus reinvested  dividends plus the value
of the options.  Total shareholder return must increase by at least 15% against
the exercise price for options to be exercised.

    The  exercise  price to be paid by  participants  under  the  Plan  will be
calculated  based  upon the  average  closing  price of the Shares on the Xetra
securities  trading  system of the  Frankfurt  Stock  Exchange  for the last 20
trading  days before the  relevant  options are  granted,  without  taking into
account  incidental  purchase costs.  The minimum amount to be paid will be the
proportional interest in SGL's share capital per Share.

    The options are subject to certain terms and  conditions  of sale,  namely,
participants  must retain a minimum  number of Shares equal to 15% of the gross
proceeds for an additional twelve months.

    The number of options granted, and their respective exercise prices, are as
follows:

        *   as of July 3, 2000,  234,500 options were granted to the members of
            the  Executive  Committee  and 151 senior  managers  at an exercise
            price of [E]72.45;

        *   as of January 16, 2001, 257,000 options were granted to the members
            of the Executive  Committee and 155 senior  managers at an exercise
            price of [E]57.82;

        *   as of January 16, 2002, 261,000 options were granted to the members
            of the Executive  Committee and 170 senior  managers at an exercise
            price of [E]25.00;

        *   as of August 12, 2002,  247,000 options were granted to the members
            of the Executive  Committee and 154 senior  managers at an exercise
            price of [E]17.65; and

        *   as of January 16, 2003, 258,500 options were granted to the members
            of the Executive  Committee and 168 senior  managers at an exercise
            price of [E]8.35.

    A total of 1,258,000  options have been granted to  participants  under the
Plan.

                                      -59-

<PAGE>

CHANGE IN CONTROL

    In  March  2002  the  Personnel   Committee   (Personalausschuss)   of  the
Supervisory  Board resolved to enter into a "Change in Control"  Agreement with
the members of the Executive Committee, and the Executive Committee resolved to
enter this agreement with senior management.

    For the purposes of this agreement, a change in control will occur if

        *   an investor or a group of investors directly or indirectly acquires
            more than 30% of the voting rights in the general  meeting of SGL's
            shareholders;

        *   the general  meeting of  shareholders  consents to a combination by
            merger with another entity, a takeover by another entity or the new
            formation of another entity, or

        *   the Affiliate in which the senior  managers are employed leaves the
            SGL Group.

    If, following a change in control, SGL or an Affiliate intends to terminate
without cause the  employment of a manger who is party to the change in control
agreement,  or if the manager intends to end the employment  relationship  with
good  reasons,  the manager  will offered a  separation  agreement  terminating
employment  with a notice  period of 3 months from the end of the then  current
month.  This offer will lapse if the manager is offered a position  appropriate
to his qualifications in another Group company.

    The settlement under the separation agreement will include payment of three
times annual salary for the Chairman of the  Executive  Committee and two times
annual salary for other members of the Executive Committee and senior managers.
Annual  salary  will  consist of the most  recent  annual  base salary plus the
annual target bonus.

    Managers  may assert a claims for a  separation  agreement  only  within 18
months following the change in control.

BOARD PRACTICES

    We have  entered into service  agreements  with all current  members of our
Executive  Committee.  These agreements  generally  provide for base salary, an
annual bonus plan, a pension plan and fringe benefits.  For a discussion of the
stock  option  and  similar  plans in which  the  management  of the SGL  Group
participate,  see  "--Management  Incentive Plans". We believe that the service
agreements  between  SGL and the members its  Executive  Committee  provide for
ordinary  payments and benefits upon termination of employment that are in line
with customary market practices.

    All compensation  paid to the members of SGL's Executive  Committee must be
approved by the Personnel  Committee of the  Supervisory  Board.  The Personnel
Committee consists of three members who meet four times annually,  or on an as-
needed basis. The chairman and the deputy chairman of the Supervisory Board sit
on the Committee as permanent members,  and the third member is a member of the
Supervisory  Board  who  represents  the  shareholders  and is  elected  to the
Committee by the other members of the Supervisory Board. The current members of
SGL's Personnel  Committee are Prof. Dr.  Utz-Hellmuth  Felcht,  Mr. Hans-Georg
Hofmann and Mr. Franz Schaffer.

    For a  discussion  of the  terms of office of the  current  members  of the
Supervisory  Board and the  Executive  Committee of SGL, see  "--Directors  and
Senior Management".


EMPLOYEES

    At the end of 2002,  we  employed a global  workforce  of 7,360  people,  a
decrease of 837, or 10% from the end of the previous year. The number of people
employed in our  established  Carbon and  Graphite,  Graphite  Specialties  and
Corrosion  Protection  business  areas declined by 884 to 6,551 at December 31,
2002. As a result of the transfer of the graphite  foils business from Graphite
Specialties to SGL Technologies,  our growth businesses area,  headcount at SGL
Technologies rose by 52 to 757 at the end of 2002.

    As a result of these  changes,  the  percentages  of the  global  workforce
employed in individual  business areas and regions  differed  compared with the
previous year. Employees in Germany accounted for 43% of the total workforce at
the end 2002,  compared to 41% at the end of 2001.  The proportion of employees
in the Carbon and Graphite business area dropped to 42% (2001: 43%),

                                      -60-

<PAGE>

while  the  employees  in  the  Corrosion  Protection  business  area  slightly
increased  from 27% in 2001 to 28% in 2002.  The percentage of employees in the
Graphite  Specialties  business  area  dropped  to  20%  (2001:  21%)  and  the
percentage of employees in SGL Technologies was 10% (2001: 9% ) of the total.

    Approximately 90% of our employees are covered by collective  bargaining or
similar  agreements  that expire at various times over the next several  years.
Except for non-material  strikes at our Italian plants and one plant in France,
we have not  experienced  any work  stoppages  or  strikes as a result of labor
contract  negotiations in the past decade at our current locations.  We believe
that we have  satisfactory  relations with our workers councils and unions and,
therefore,  anticipate  reaching new  agreements on  satisfactory  terms as the
existing agreements expire.


SHARE OWNERSHIP

    Neither the members of the  Supervisory  Board and Executive  Committee nor
any other officers serving in the management of the SGL Group  beneficially own
1.0%  or  more of the  outstanding  Shares  or of the  shares  of any of  SGL`s
subsidiaries.

                                      -61-

<PAGE>

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

    As of March 13, 2003, SGL had 22,184,958 Shares outstanding.

    The Shares are  issued  only in bearer  form.  We are  therefore  unable to
determine  how many  shares  any  given  shareholder  owns.  To the best of our
knowledge,  SGL  is  not  controlled,   directly  or  indirectly,   by  another
corporation or by any  government,  and there are no  arrangements  known to us
that may at a subsequent date result in a change in control of SGL.

    As of March 2003, there were 408 registered holders of American  Depositary
Receipts  under our sponsored  program with JPMorgan  Chase Bank.  Our ADRs are
listed  on the New York  Stock  Exchange.  Each ADR  represents  one third of a
share.

    Under    Section    21   of   the    German    Securities    Trading    Act
(Wertpapierhandelsgesetz),  holders of voting  securities  of a German  company
(including  SGL) admitted to official  trading on a stock  exchange  within the
European  Union or the  European  Economic  Area are obliged to notify both the
company and the German  Federal  Supervisory  Authority for Financial  Services
(Bundesanstalt  fur  Finanzdienstleistungsaufsicht)  promptly and in writing of
the level of their holdings whenever such holdings reach,  exceed or fall below
certain thresholds.  These thresholds are set at 5%, 10%, 25%, 50% and 75% of a
company's  outstanding  voting  rights.  If a  shareholder  fails to notify the
company as required,  the shareholder will be disqualified  from exercising the
voting rights  attached to its shares,  for so long as such failure  continues.
The German Securities Trading Act contains various rules designed to ensure the
attribution of shares to the person who has effective control over the shares.

    SGL has  been  informed,  that  as of  January  20,  2003,  the  Abu  Dhabi
Investment  Authority had reduced its beneficial  ownership to 762,794  Shares,
corresponding to 3.49% of voting rights. On January 28, 2003, SGL also received
notification   that  The  Capital  Group   Companies  held  1,108,200   Shares,
corresponding  to 5.068% of voting  rights.  On February 8, 2003,  SGL received
notification  that Oppenheimer  Funds held 1,134,432  Shares,  corresponding to
5.19% of voting  rights.  On February  22,  2003,  SGL was also  informed  that
Allianz AG held 1,304,786 Shares, or 6% of voting rights.


RELATED PARTY TRANSACTIONS

    During  the  course  of its  business  activities,  the SGL  Group  renders
services to related companies and persons. In turn, these persons and companies
deliver  goods or render  services  to the SGL Group as part of their  business
purpose.  These  transactions  are on an arm's length basis.  Receivables  from
unconsolidated  subsidiaries and associates amount to [E]12.9 million,  and the
corresponding  liabilities  amount to [E]6.4 million.  Details are presented in
the notes to the  relevant  balance  sheet and  income  statement  items in our
consolidated financial statements.

    In August 2001, Paul W. Pendorf was appointed  Chief  Executive  Officer of
HITCO. Mr. Pendorf has acquired a 6% minority interest in this company. The SGL
Group has granted a loan to Mr. Pendorf,  secured by the proceeds from the sale
of his HITCO shares, to finance the purchase price. The shareholders  agreement
also  provides  for options  that can be  exercised by both sides at a variable
price after no later than four years.

    Mr. Pendorf is also a shareholder  (AMT II, a company that has entered into
two service  and option  agreements  with HITCO.  Under the terms of the option
agreement,  AMT II has an option to buy up to 43% of the shares of HITCO on the
basis of a defined calculation formula. This option expires no later than three
years after signing in August 2001 or after  exercise of the put or call option
from the shareholders' agreement. SGL can extend this option by a further year.

    In order to assist in our  endeavors to ensure solid  long-term  financing,
the Executive  Committee signed a temporary  consulting contract with Hansgeorg
Hofmann on June 24, 2002,  which was  approved by the  Supervisory  Board.  The
consultant expense in 2002 amounted to [E]75,000.

    At December 31, 2002 and 2001, there were also call-in  obligations of $3.6
million  and $36.2  million,  respectively,  for  shares  in an  unconsolidated
subsidiary.  The  contribution of the company to a joint venture in fiscal year
2002 and the resulting  reduction of the commitment has  significantly  reduced
this amount in 2002.  SGL believes that its dealings  with Group  companies and
companies
                                      -62-

<PAGE>

with which members of its  Supervisory  Board are  affiliated  take place on an
arm's length basis, and that all terms and conditions of sale are comparable to
those currently contracted with unrelated, third party suppliers, manufacturers
or service providers.


INTEREST OF EXPERTS AND COUNSEL

    Not applicable.

                                      -63-

<PAGE>

ITEM 8. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

    See Item 19 for a list of financial statements filed under Item 18


EXPORT SALES

    In 2002  approximately  64% of all  products  produced  by the SGL Group in
Germany, having an estimated total value of [E]369.3 million, and approximately
9% of all products  produced by the SGL Group in the United  States,  having an
estimated total value of [E]21.7 million, were exported to other countries.


LEGAL PROCEEDINGS

    SGL was subject to an  investigation  by the United  States  Department  of
Justice  in  connection  with  allegations  of  price  fixing  in the  graphite
electrodes  industry.  This  investigation  culminated  in  a  negotiated  plea
agreement,  pursuant to which SGL  pleaded  guilty on June 16, 1999 in the U.S.
District Court for the Eastern  District of  Pennsylvania to a violation of the
Sherman Act. SGL was fined a total of $145 million,  consisting of $135 million
to be paid by SGL and $10 million to be paid by the  Chairman of the  Executive
Committee of SGL, Mr. Robert J. Koehler.  Mr.  Koehler's fine has now been paid
in its entirety.  SGL has made payments of its fine in the aggregate  amount of
$50.75  million.  The payment terms for SGL's fine have been  restructured  and
extended  twice;  the  remainder  of the  fine is now  scheduled  to be paid in
additional  installments through March 2007. The DOJ took no action against any
of SGL's other employees and has concluded its investigation  into the business
activities of SGL and its subsidiaries.  In connection with an investigation by
Canadian  antitrust  authorities,  on July 18, 2000, SGL entered a plea and was
fined  C$12.5  million.  We have also been  subject  to  investigations  by the
competition directorate of the European Commission.  Like the DOJ investigation
in the United States,  these investigations refer to acts alleged to have taken
place through the late 1990s. Unlike the DOJ investigation,  which concluded in
a single plea agreement covering all carbon and graphite products, the European
Commission  is  investigating  each  group  of  carbon  and  graphite  products
separately. On July 18, 2001, two years after the pleas agreement with the DOJ,
the  European  Commission  fined SGL [E]80.2  million  with respect to graphite
electrodes. We are currently appealing the total amount of this fine before the
European  Court in  Luxembourg.  Our  appeal  contends  that the fine  includes
amounts penalizing the same actions more than once and that the total amount of
the fine is  disproportionate.  The  Commission  has also  conducted a separate
investigation  of  similar  allegations  with  respect to  specialty  graphites
(isostatic  graphite and  extruded  graphite)  for the period  between 1992 and
1998.  SGL  cooperated  fully with the  Commission  and was  assessed a fine of
[E]27.75  million on December 17, 2002. We are also  appealing the total amount
of this second  fine,  on  substantially  the same  grounds as in the  graphite
electrodes  case. In  connection  with the  proceedings  described  above,  the
Commission has continued its investigation into other carbon/graphite  products
during the period through the late 1990s.

    On March 20,  2002,  the Korean Fair Trade  Commission  decided to impose a
fine of US$731,000  against SGL for alleged  cartel  activities in violation of
Korean  antitrust laws. SGL filed an appeal to the KFTC in May 2002.  After the
KFTC  confirmed  its original  ruling,  SGL appealed this decision to the Seoul
High Court in September 2003.

    In July 1997, four separate  putative class action suits were filed against
The Carbide/Graphite Group, Inc., UCAR International,  Inc., SGL and SGL Carbon
Corp.  in the U.S.  District  Court for the Eastern  District of  Pennsylvania.
Those  suits,  which  were later  consolidated  into a single  action,  alleged
violations  of Section 1 of the Sherman Act and sought  unspecified  damages on
behalf of all persons who  purchased  graphite  electrodes in the United States
from the  defendants  during the  period  from 1992  through  the filing of the
litigation.  The District Court certified a class  consisting of all purchasers
of graphite electrodes in the United States during the period from July 1, 1992
through and including June 30, 1997.  Seven  additional  suits against SGL, SGL
Carbon Corp. and other defendants, which contained allegations similar to those
asserted in the consolidated action, were either filed in or transferred to the
District Court. An eighth suit,  initially filed in 1998 by Chaparral Steel Co.
and two  affiliates  against SGL, SGL Carbon Corp.  and other  defendants  in a
Texas state court alleged  violations of Section 15.05(a) of the Texas Business
and Commerce Code, asserted other
                                      -64-

<PAGE>

claims and sought unspecified  damages.  We have reached  settlements in all of
these cases.  In addition,  in 1999 we settled a civil lawsuit filed in Ontario
court in Canada by fourteen Canadian purchasers of graphite electrodes.

    On April 19, 2000,  Bethlehem  Steel Corp. sued SGL and SGL Carbon Corp. in
the U.S.  District Court for the Middle District of  Pennsylvania.  This action
was transferred to the District Court for the Eastern  District of Pennsylvania
for pretrial  proceedings.  On December 30, 2002, that District Court issued an
order  dismissing  the action  without  prejudice  and  tolled  the  statute of
limitations.  The order  provided  that the  action  was to remain  active  and
discovery  was to continue.  Four  additional  suits were filed in the District
Court against SGL and a number of other  graphite  electrode  manufacturers  or
their  affiliates  by  predominantly  non-U.S.  based  purchasers  of  graphite
electrodes.  One such action,  filed on February 10, 1999,  was  instituted  on
behalf of Ferromin  International Trade Corp. and a group of graphite electrode
purchasers  from six  countries  in Europe and Asia.  A second  suit,  filed on
September 24, 1999, was brought on behalf of Broken Hill Proprietary Co., Ltd.,
an  Australian  company,  and three of its  subsidiaries.  In a single  opinion
covering both cases,  on June 14, 2001,  the District Court granted in part and
denied in part the defendants'  motions to dismiss the  plaintiffs'  claims for
lack of standing and lack of subject  matter  jurisdiction.  The District Court
dismissed with  prejudice the claims of twenty  plaintiffs  whose  purchases of
graphite  electrodes  had no  connection  to the United  States  (which  claims
accounted  for the  majority  of the  damages  sought by the  plaintiffs),  but
allowed the claims of thirteen  other  plaintiffs  to proceed.  The  plaintiffs
appealed the portion of the order dismissing their  complaints;  the defendants
appealed the portion of the order denying their motion to dismiss. The Ferromin
and Broken Hill appeals were argued on March 11, 2003,  but the District  Court
has not yet issued an opinion.  In  addition,  an action  filed in the District
Court  by  Saudi  Iron and  Steel  Company  named  SGL and SGL  Carbon,  LLC as
defendants.  The District Court dismissed this action without prejudice in July
2001  pending the outcome of the Ferromin  and Broken Hill  appeals.  The order
dismissing the case provided that the case would be "still  considered  active"
in the interim,  although no further  proceedings have occurred since the order
was issued. Arbed, S.A. and four additional graphite electrode purchasers filed
another action on February 19, 2002, against  defendants  including SGL and SGL
Carbon  Corp.  This action has been stayed  pending the outcome of the Ferromin
and Broken Hill appeals.  All of these suits make allegations  similar to those
in the  consolidated  action before the District Court for the Eastern District
of Pennsylvania and seek similar relief

    In addition, in December 1999, Globe Metallurgical,  Inc. filed a complaint
in the District Court for the Eastern District of Pennsylvania  against SGL and
others,  seeking damages for alleged violations of Section 1 of the Sherman Act
in connection with the sale of carbon electrodes. We have settled this case. In
July 2000, Elkem Metals Company,  Inc. and Elkem Metals Company Alloy L.P. sued
defendants  including SGL Carbon Corp.  in the District  Court for the Southern
District of West Virginia,  also alleging violation of Section 1 of the Sherman
Act in connection with the sale of carbon electrodes. That case was transferred
to the District  Court for the Eastern  District of  Pennsylvania  for pretrial
proceedings and subsequently settled.

    On April 10, 2000, a purchaser of isostatic  graphite,  Industrial Graphite
Products,  Inc,  filed a putative  class action in the  District  Court for the
Eastern  District of  Pennsylvania  against  defendants  including  SGL and SGL
Carbon Corp. That complaint  seeks damages for alleged  violations of Section 1
of the Sherman Act on behalf of all those who purchased  non-machined and semi-
machined isostatic graphite in the United States from the defendants during the
period from July 1, 1993  through  March 13,  2000.  Four other  purchasers  of
isostatic  graphite,   Ceradyne,  Inc.,  Schutte  &  Koerting,  Inc.,  Graphite
Machining  Inc.,  and Graphite  Sales & Machine,  Inc.,  filed  putative  class
actions against both SGL and SGL Carbon Corp. based on substantially  identical
claims on July 3,  2000,  July 27,  2000,  August 4, 2000 and  October 2, 2000,
respectively.  SGL Carbon Corp. has filed answers in all of the  aforementioned
cases involving isostatic graphite.

    On March 27,  2002,  two  purchasers  of carbon  cathode  block,  Northwest
Aluminum Company and Goldendale Aluminum Company, filed a complaint in the U.S.
District Court for the District of Oregon  against,  among others,  SGL and SGL
Carbon Corp. This suit seeks damages for alleged violations of Section 1 of the
Sherman Act in connection with the sale of carbon cathode block. SGL

                                      -65-

<PAGE>

has filed a motion to dismiss this suit for lack of personal jurisdiction;  SGL
Carbon Corp.  has filed a motion to dismiss for improper venue based on a forum
selection  clause in a contract  between the  parties.  Both  motions have been
fully briefed and await decision.

    On December 27, 2002,  Ceradyne filed another  putative class action in the
U.S.  District  Court  for  the  District  of New  Jersey,  against  defendants
including  SGL and SGL Carbon Corp.  That  complaint  seeks damages for alleged
violations of Section 1 of the Sherman Act on behalf of all those who purchased
bulk  (extruded)  graphite  products in the United  States from the  defendants
during the period  from July 1, 1992 to the  present.  Since  then,  four other
companies  have  filed  separate  complaints,  in the  District  Courts for the
District of New Jersey and for the Eastern District of  Pennsylvania,  based on
substantially  identical  claims.  The various  plaintiffs have indicated their
intention to file a consolidated complaint.

    We are  currently  awaiting  the  decision  of the  Higher  Regional  Court
(Oberlandesgericht)  in  Koblenz,  Germany  in the  appeal of a  decision  in a
lawsuit between  Keramchemie  and American  Insurance.  In 1987 a U.S.  federal
court in Portland, Oregon rendered a judgment in favor of American Insurance in
the amount of $1.3 million.  Arguing that this judgment was invalid because the
Portland  court  lacked  jurisdiction  to hear the case,  KCH  refused  to pay.
American Insurance then commenced litigation in the courts at Koblenz to obtain
enforcement  of the judgment.  After the trial court ruled in favor of American
Insurance,  KCH  appealed to the Higher  Regional  Court.  This appeal is still
pending.

    After a decision  of its  Special  Committee  on June 4, 1998,  the Italian
National  Social  Security  Agency  informed SGL CARBON S.p.A.,  a wholly owned
subsidiary of SGL, that SGL CARBON S.p.A.  was not entitled to certain payments
it received from the Italian government from 1991 to 1993 under a law providing
for  reimbursements  to  corporations  that used reduced  operating time. It is
possible that the National  Social Security Agency could impose civil sanctions
against  SGL  CARBON  S.p.A.  To  cover  these  potential  sanctions,  we  have
established a reserve in the amount of [GBP]1.2 million.

    We cannot predict the ultimate  outcome of the proceedings  discussed above
in which a final decision is still pending.  However, in light of the nature of
the  allegations,  the  unspecified  amounts  of the  damages  sought  and  the
potential for treble damages in the antitrust suits,  liabilities  arising from
the  proceedings  could be material to our business,  results of operations and
financial condition. See Item 3, "Key Information -- Risk Factors."

    In addition,  from time to time SGL and its  subsidiaries are parties to or
targets of lawsuits,  claims,  investigations  and  proceedings in the ordinary
course of business.  We do not expect any liabilities that may arise from these
proceedings  to have a material  effect on our business,  results of operations
and financial condition.


DIVIDEND DISTRIBUTIONS

    Dividends  are  jointly  proposed  by  the  Executive   Committee  and  the
Supervisory  Board.  They are  approved  for payment  with respect to the prior
financial  year  by the  shareholders  at the  annual  general  meeting  in the
following year. Dividends approved at the annual general meeting are payable on
or after the business  day  following  the annual  general  meeting.  Since all
Shares are in bearer form, dividends are either remitted to the depositary bank
(Depotbank)  on behalf  of the  shareholder,  or,  in the case of  shareholders
holding physical certificates,  are paid through the paying agents appointed by
SGL against presentation of the relevant dividend coupon. Details of the paying
agents are published in the German Federal Gazette (Bundesanzeiger).

    Except  as  described  herein,  holders  of ADRs are  entitled  to  receive
dividends on the Shares  represented  by the ADSs  evidenced by such ADRs.  Any
cash  dividends  payable to such holders are paid to JPMorgan Chase Bank of New
York as Depositary in Euros and, subject to certain exceptions,  converted into
U.S.  dollars.  The  amount of  dividends  received  by holders of ADRs will be
affected by  fluctuations in exchange  rates.  See Item 3. "Key  Information --
Selected Financial Data -- Exchange Rates".

    Dividends  paid on Shares  and  dividends  paid to holders  and  beneficial
owners of ADRs are subject to deduction of German withholding tax. See Item 10,
"Additional Information -- Taxation".

                                      -66-

<PAGE>

    The payment of future  dividends will be dependent on SGL's  earnings,  the
terms of our syndicated credit facility agreement,  its financial condition and
cash  requirements,  general  business  conditions  in the  markets in which it
operates,  legal, tax and regulatory considerations and other factors. Although
SGL generally  expects to pay annual  dividends on its Shares,  there can be no
assurance as to  particular  amounts that would be paid from year to year.  See
Item 10, "Additional Information -- Material Contracts".


SIGNIFICANT CHANGES

    See Note 36 to our consolidated financial statements.



                                      -67-

<PAGE>

ITEM 9. THE OFFER AND LISTING

OFFER AND LISTING DETAILS

NATURE OF TRADING MARKET AND STOCK PRICE HISTORY

    The table below shows the high and low sales prices of the SGL`s American
Depositary Receipts on the New York Stock Exchange for the periods indicated.

<TABLE>
<CAPTION>
                                           AVERAGE
                                            DAILY
                                $ PER      TRADING
                              ADR(1)(2)     VOLUME(3)
                             ------------  --------
YEAR ENDED                   HIGH    LOW
---------------------------  -----  -----


<S>                            <C>    <C>      <C>
December 31, 1998..........  44.13  19.25    3,200
December 31, 1999..........  28.75  13.25    2,800
December 31, 2000..........  37.25  16.25      700
December 31, 2001..........  22.00   4.60    1,200
December 31, 2002..........   8.45   1.60    1,600

</TABLE>
<TABLE>

<CAPTION>
                                           AVERAGE
                                            DAILY
                                $ PER      TRADING
                              ADR(1)(2)     VOLUME(3)
                             ------------  --------
QUARTER ENDED                HIGH    LOW
---------------------------  -----  -----

<S>                            <C>    <C>        <C>
March 31, 2001 ............  22.00  10.70      2,300
June 30, 2001 .............  14.45   9.60      1,100
September 30, 2001.........  11.60   4.60      1,300
December 31, 2001..........   8.25   6.00      1,400
March 31, 2002.............   8.45   6.20      1,300
June 30, 2002..............   7.85   6.00      1,200
September 30, 2002.........   6.96   1.95      1,900
December 31, 2002..........   3.25   1.60      2,800
March 31, 2003.............   5.30   2.78      7,300

</TABLE>

(1) Source: JP Morgan/Bloomberg.

(2) Each ADS represents one third of one share.

(3) Rounded to the nearest 100.

<TABLE>
<CAPTION>
                                           AVERAGE
                                            DAILY
                                $ PER      TRADING
                              ADR(1)(2)     VOLUME(3)
                             ------------  --------
MONTH ENDED                  HIGH   LOW
---------------------------  ----  ----

<S>                           <C>   <C>        <C>
October 31, 2002...........  3.25  1.60      3,300
November 30, 2002..........  2.80  2.15      3,900
December 31, 2002..........  3.07  2.60      1,100
January 31, 2003...........  4.60  2.78      2,700
February 28, 2003..........  4.30  3.57      2,600
March 31, 2003.............  5.30  4.10     16,000

</TABLE>

(1) Source: JP Morgan/Bloomberg.

(2) Each ADS represents one third of one share.

(3) Rounded to the nearest 100.

                                      -68-

<PAGE>

The table below shows the high and low sales  prices in Euro of SGL's shares on
the Frankfurt Stock Exchange for the periods indicated.

<TABLE>
<CAPTION>
                                             AVERAGE
                                              DAILY
                                [E] PER      TRADING
                                SHARE(1)    VOLUME(2)
                             -------------  ---------
YEAR ENDED                   HIGH    LOW
---------------------------  ------  -----
<S>                             <C>    <C>        <C>
December 31, 1998..........  127.30  49.10    106,900
December 31, 1999..........   78.80  36.20     71,400
December 31, 2000..........  115.00  55.00     85,400
December 31, 2001..........   72.00  15.10     98,700
December 31, 2002..........   28.90   5.10    110,800

</TABLE>
<TABLE>

<CAPTION>
                                           AVERAGE
                                            DAILY
                               EURO PER    TRADING
                               SHARE(1)   VOLUME(2)
                              ----------  ---------
QUARTER ENDED                 HIGH   LOW
----------------------------  ----  ----
<S>                            <C>   <C>        <C>
March 31, 2001..............  72.0  34.7     63,400
June 30, 2001...............  51.2  31.6    100,300
September, 2001.............  41.5  15.1     65,700
December 31, 2001...........  28.9  17.9    110,800
March 31, 2002..............  28.9  18.8     95,600
June 30, 2002...............  25.8  18.1     73,100
September 30, 2002..........  20.4   5.5     93,900
December 31, 2002...........   9.6   5.1    192,000
March 31, 2003..............  13.8   7.8    173,000

</TABLE>

(1) Source: JP Morgan/Bloomberg.

(2) Rounded to the nearest 100.

    Share prices before  January 1999 reported in Deutsche Mark were  converted
into Euro at the official fixed conversion rate of DM 1.95583 per [E]1.00.

<TABLE>
<CAPTION>
                                            AVERAGE
                                             DAILY
                               EURO PER     TRADING
                               SHARE(1)    VOLUME(2)
                             ------------  ---------
MONTH ENDED                  HIGH    LOW
---------------------------  -----  -----
<S>                            <C>    <C>        <C>
October 31, 2002...........   9.67   5.10    175,200
November 30, 2002..........   8.26   6.30    229,500
December 31, 2002..........    9.5    7.5    171,300
January 31, 2003...........  12.25   7.75    216,000
February 28, 2003..........  11.46   9.50    129,900
March 31, 2003.............  13.77  11.35    159,400

</TABLE>

(1) Source: JP Morgan/Bloomberg.

(2) Rounded to the nearest 100.

    The entire share  capital of SGL consists of the Shares.  All Shares are in
bearer  form and freely  transferable.  On March 13,  2003,  we had  22,184,958
Shares outstanding. The Shares are listed on the Frankfurt Stock Exchange under
the trading symbol "SGL". The Shares are also listed in Germany

                                      -69-

<PAGE>

on the Berlin, Bremen, Dusseldorf, Hamburg, Hanover, Munich and Stuttgart stock
exchanges.  Since March 18,  1996,  the Shares  have been  included in the MDAX
Index.  On March 24, 2003, the new index model of the Frankfurt  Stock Exchange
came into  effect.  SGL will remain in the MDAX,  which now consists of only 50
companies.

    The ADRs, each representing one third of one Share, are listed on the NYSE
under the trading symbol "SGG" and have traded on the NYSE since June 5, 1996.
On January 14, 2003, we had 278,970 outstanding ADRs. The ADRs are issued under
the terms of a Deposit Agreement, dated June 4, 1996, as amended as of February
22, 2000, among SGL, JPMorgan Chase Bank (formerly the Morgan Guaranty Trust
Company of New York), as depositary, and the holders and beneficial owners from
time to time of the ADRs issued thereunder.


PLAN OF DISTRIBUTION

    Not applicable.


SELLING SHAREHOLDERS

    Not applicable.


DILUTION

    Not applicable.


EXPENSES OF THE ISSUE

    Not applicable.

                                      -70-

<PAGE>

ITEM 10. ADDITIONAL INFORMATION

SHARE CAPITAL

    Not applicable.


MEMORANDUM AND ARTICLES OF ASSOCIATION

REGISTRATION AND CORPORATE PURPOSE

    SGL is registered in the commercial register (Handelsregister) of the local
court  (Amtsgericht)  in Wiesbaden,  Germany  under the number HRB 9448.  SGL's
Articles  of  Association  provide  that the  purpose of SGL is to operate as a
holding company for a group of firms,  particularly  those that manufacture and
market:

    *    any kind of carbon products,  especially industrial products of natural
         and artificial carbon and graphite,

    *    materials  and  products  on the base of  carbon or  graphite,  such as
         fibers,  composite  materials,  foils and process  equipment  including
         industrial facilities,

    *    other ceramic materials and products,

    *    corrosion resistant materials, and

    *    other  substances  and  products  that can be produced or  extracted in
         connection with these fields of activities.

    SGL may also  itself  engage  in  activities  described  above and may make
resources  and funds  available to companies in which it holds an interest.  In
addition,  SGL may establish,  acquire,  take holdings in or consolidate  other
companies, and is authorized to take shares in any kind of company,  especially
for the purpose of investing Group funds.

CORPORATE GOVERNANCE

    In contrast to corporations  organized under the laws of the United States,
German stock  corporations  are governed by three separate  bodies:  the annual
general  meeting  of  shareholders,  the  Supervisory  Board and the  Executive
Committee.  Their  roles are  defined  by German  law and by the  corporation's
Articles of Association, and may be described generally as follows:

    The annual  general  meeting of  Shareholders  ratifies  the actions of the
corporation's  Supervisory  Board and  Executive  Committee.  It decides on the
amount of the annual dividend,  the appointment of an independent  auditor, and
certain  significant  corporate  transactions.  The law requires that an annual
general meeting of  shareholders  must be held within the first eight months of
each fiscal year.

    The  Supervisory  Board  appoints and removes the members of the  Executive
Committee  and oversees  the  management  of the  corporation.  Although  prior
approval of the  Supervisory  Board may be required in connection  with certain
significant  matters, the law does not ordinarily entitle the Supervisory Board
to make management decisions.

    The Executive  Committee manages the corporation's  business and represents
it in dealings with third  parties.  The Executive  Committee  submits  regular
reports  to the  Supervisory  Board  about  the  corporation's  operations  and
business  strategies,  and prepares special reports upon request. No person may
serve concurrently on the Executive  Committee and the Supervisory Board of the
same corporation.

MATTERS REGARDING THE POWERS OF DIRECTORS

    Under German law, the members of the Supervisory Board and of the Executive
Committee of a stock corporation,  such as SGL, have a duty of loyalty and care
toward the company  itself.  They must act in the best interest of the company,
its employees and, to a certain extent,  the general public,  and must exercise
the standard of care expected from a prudent and diligent  businessman in their
actions.  If an action of a member of the  Supervisory  Board or the  Executive
Committee is  challenged,  such member  bears the burden of proving  compliance
with the  applicable  standard of care.  Board members who violate their duties
may be held jointly and severally liable for any damages,  unless their actions
were approved by the shareholders' meeting.

                                      -71-

<PAGE>

    A member of either the Supervisory Board or the Executive Committee may not
participate  in the adoption of any  resolution  that involves a transaction or
settlement  of a dispute  between the  company and the member,  nor may a board
member who is also a  shareholder  vote his or her  Shares on any  matter  that
concerns  ratification  of his or her  own  acts or the  release  of his or her
obligations.  The  compensation  of  the  Executive  Committee  is  set  by the
Personnel  Committee  of the  Supervisory  Board  and the  compensation  of the
Supervisory  Board is set in SGL's Articles of Association as determined by the
shareholders. Therefore, no member of any board may participate in the adoption
of a  resolution  affecting  his  or  her  own  compensation.  Pursuant  to our
corporate governance  guidelines we have not granted and do not intend to grant
loans to any member of the Supervisory Board or the Executive Committee.

    Pursuant to Article 10 of the Articles of Association of SGL, the Executive
Committee  must have the  approval of the  Supervisory  Board in order to enter
into the  following  transactions  if they  exceed  SGL's  ordinary  course  of
business:

    *    acquisition,  disposal or encumbrance of real estate, rights equivalent
         to real property and rights to real estate;

    *    commencement of new or  discontinuance  of existing lines of production
         or business;

    *    issuing of debt and long-term borrowing;

    *    acceptance of guarantees, sureties and similar liabilities;

    *    granting loans and other credits;

    *    opening and closing branch offices; or

    *    purchasing or disposing of interests in other companies.

    The Articles of  Association  of SGL do not specify age limits at which the
members of the  Supervisory  Board or  Executive  Committee  of SGL must resign
their office.  However,  it is customary for the service  contracts between SGL
and the members of its Executive Committee to provide for retirement at age 65.
Neither  the  members  of the  Supervisory  Board  nor  those of the  Executive
Committee  are  required  to own  Shares in order to hold  their  offices.  For
further discussion of the Supervisory Board and Executive Committee of SGL, see
Item 6, "Directors, Senior Management and Employees".

MATTERS REGARDING THE RIGHTS ATTACHING TO SHARES

    The capital stock of SGL consists of the Shares,  which are ordinary bearer
shares without par value  (Stuckaktien).  The Shares grant each  shareholder an
equal right to receive dividends and participate in any surplus in the event of
liquidation  in  proportion  to  his  or  her  shareholding.  With  respect  to
dividends,  Article 3 of SGL's Articles of Association  allows dividend rights,
in the event of a capital  increase,  to be  limited or even  excluded  for new
issues of Shares.  No such  limitation or exclusion has been  implemented as of
the date  hereof.  Pursuant  to German law,  dividends  may only be paid out of
distributable  profits  as  they  are  shown  in the  German  statutory  annual
financial  statements  of SGL, and the decision to pay dividends is made by the
annual  shareholders'  meeting.  If a valid resolution to pay out dividends has
been made,  a  shareholder's  right to make a claim to receive  such  dividends
would  generally be time barred after  expiration of the  applicable  period of
limitation.  Each  Share  carries  one  vote,  and gives its owner the right to
attend,  pose questions and speak at the shareholders'  meeting,  as well as to
file a judicial challenge to any resolution  adopted.  Cumulative voting is not
permitted.  Although staggered terms are not explicitly  provided for in German
law and are not foreseen by SGL's Articles of Association, it would be possible
to create such terms.

    The Shares grant each  shareholder  a  preemptive  right to  subscribe,  in
proportion to his or her  shareholding,  to any new issues of Shares.  However,
pursuant to German law, such  preemptive  rights may be excluded for individual
issues of shares  (including  in connection  with  conditional  and  authorized
capital) by a vote of 75% of the share capital in attendance at a shareholders'
meeting.  SGL has excluded preemptive rights on certain new issues of Shares in
connection  with  its  stock  option  plans.  See  "Item  6  Directors,  Senior
Management and Employees -Management Incentive Plans".

                                      -72-

<PAGE>

    German stock corporations may, in certain  circumstances,  repurchase their
own shares. The German Stock Corporation Act generally limits share repurchases
to 10% of our share capital. The Articles of Association of SGL do not prohibit
such repurchases. The annual general meeting decided in April 2002 to allow SGL
to  repurchase up to 10% of the stock  available at that time.  The shares of a
German stock  corporation  are generally  non-assessable,  and no provision has
been made in the  Articles of  Association  of SGL for further  capital  calls.
Neither  German law nor SGL's  Articles of  Association  contain any  provision
discriminating against any existing or prospective holder of Shares as a result
of such shareholder owning a substantial number of Shares.

CHANGES TO THE RIGHTS OF SHAREHOLDERS

    In  principle,  all  changes  to the  rights  of  shareholders  require  an
amendment of the Articles of Association by a resolution of the majority of the
share capital in attendance at the relevant shareholders' meeting. In addition,
changes to most rights  attaching to shares require the explicit consent of all
those  shareholders who are negatively  affected by the change.  There are also
certain  shareholder  rights,  such as the  right  to  attend  a  shareholders'
meeting,  that may not be changed under German law, even with the shareholder's
consent.  SGL's Articles of Association do not provide for any conditions  that
extend beyond the requirements of law.

CONVENING AND PARTICIPATING IN SHAREHOLDERS' MEETINGS

    Pursuant to German law, the Supervisory  Board and the Executive  Committee
may call a shareholders' meeting. In addition, shareholders who together own at
least 5% of the outstanding Shares may request the Executive  Committee to call
a  shareholders'  meeting.  The call to meeting must be published in a business
newspaper at least one month before the meeting,  and must contain the items of
the  agenda  to be  addressed  at  the  meeting.  There  is no  minimum  quorum
requirement for shareholder meetings.

    According to the Articles of  Association  of SGL,  shareholders  must,  in
order to attend and vote at a shareholders' meeting,  deposit their Shares at a
designated  location at least seven days before the  shareholders'  meeting and
keep them  deposited  until  after the close of the  meeting.  Deposit  is also
deemed to be made if Shares are  blocked in a  securities  account in favor and
with the  approval of a  designated  depository  for the same time  frame.  The
Articles of Association of SGL also provide that if share  certificates are not
issued, the Executive  Committee may require  shareholders to register with SGL
at least three days prior to the meeting.

LIMITATIONS ON RIGHTS TO OWN SHARES

    No limitations, in particular no limitations on ownership by non-residents,
exist on the rights to own or to vote the Shares of SGL.

LIQUIDATION RIGHTS

    In accordance with the German Stock Corporation Act, if we were liquidated,
any liquidation proceeds remaining after all our liabilities have been paid off
would be  distributed  among our  shareholders  in  proportion to the number of
Shares they hold.

CHANGE OF CONTROL

    The Articles of  Association of SGL contain no provision that would have an
effect of delaying,  deferring or  preventing a change in control of SGL in the
context of a merger, acquisition or corporate restructuring.

DISCLOSURE OF SHAREHOLDINGS

    The Articles of Association  of SGL do not contain any provision  requiring
the disclosure of share ownership in SGL. However,  under the German Securities
Trading Act, holders of voting securities of a German  corporation  listed on a
stock exchange  within the European Union must notify SGL of the level of their
holding  whenever  such  holding  reaches,   exceeds  or  falls  below  certain
thresholds, which are currently set at 5%, 10%, 25%, 50% and 75% of a company's
outstanding  voting rights.  See Item 7, "Major  Shareholders and Related Party
Transaction -- Major Shareholders" If a

                                      -73-

<PAGE>

shareholder  fails to notify the company or the Federal  Supervisory  Authority
for  Securities  Trading  as  required,  he or she cannot  exercise  any rights
associated with the Shares for as long as the default continues.

    The German  Securities  Trading Act also contains  rules designed to ensure
the  attribution  of shares to the person who has  effective  control  over the
exercise of the voting rights attached to those shares.

    In addition,  on November 30, 2001, the German legislature enacted into law
certain  amendments to the German Securities  Trading Act, effective January 1,
2002,  that  extend  these  reporting  requirements  to  holders  of the voting
securities of German  corporations  admitted to trading in an organized  market
(Organisierter  Markt) of a stock  exchange  within the  European  Union or the
European  Economic Area. The amendments also require the holders of 30% or more
of the outstanding  voting rights of a covered security to report such holdings
immediately upon, or at the latest within seven days of, acquiring such rights.


MATERIAL CONTRACTS

SYNDICATED CREDIT FACILITIES AGREEMENT

    On December 20, 2002, we entered into a credit facilities  agreement with a
syndicate of lenders led by Deutsche Bank AG and Dresdner Bank AG in the amount
of [E]495 million*.  Deutsche Bank Luxembourg S.A. serves as facility agent for
the syndicate as well as security agent. We have attached the syndicated credit
facilities  agreement as an exhibit to this annual report. The facilities under
the credit  facilities  agreement are Term Facility A, Term Facility B and Term
Facility  C, each a term loan,  and a  revolving  credit  facility.  The credit
facilities agreement is governed by German law.

    The  following  table  summarizes  the four  facilities  under  the  credit
facilities agreement as of April 7, 2003:

<TABLE>
<CAPTION>
                                                                                MAXIMUM    PRINCIPAL
                                                                              PRINCIPAL       AMOUNT
FACILITY            BORROWER                             FINAL MATURITY          AMOUNT  OUTSTANDING
------------------  -----------------------------------  --------------  --------------  -----------
                                                                         ([E] MILLIONS)


<S>                 <C>                                             <C>             <C>          <C>
Term Facility A...  SGL Carbon AG; various subsidiaries    May 31, 2005             335          335
Term Facility B...  SGL Carbon AG                          May 31, 2005              85(1)        85
Term Facility C...  SGL Carbon AG                        Sept. 30, 2007              20           20
Revolving Facility  SGL Carbon AG; various subsidiaries    May 31, 2005              55           --
                                                                         --------------  -----------
Term Total:.......                                                                  495          440
                                                                         ==============  ===========

</TABLE>

(1) As  of October  24, 2002;  includes [E]4.8  million in  capitalized interest
    accruing at an annual rate of 6.04% from October 24, 2001.

Term Facility A

    The Term  Facility A loan serves to refinance  existing debt to the lenders
under the facility and other lenders as well as to repay intercompany debt owed
by certain Group subsidiaries to the parent company or other  subsidiaries.  In
most cases, SGL Group companies  receiving amounts borrowed under Term Facility
A in  repayment  of  intercompany  loans are,  in turn,  required  to use those
amounts to repay  existing bank debt.  The following  table shows the SGL Group
borrowers,  the amount of their  borrowings  under the facility and the loan or
loans the borrower is refinancing through its drawings under Term Facility A:



*   In  addition  our  Polish  subsidiaries  entered  into  a  credit  facility
    agreement with BNP Paribas Bank Polska S.A. in the amount of [E]15 million.
    This facility is governed by Polish Law.

                                      -74-

<PAGE>

<TABLE>
<CAPTION>
                                                                                    MAXIMUM
                                                                                  PRINCIPAL
                       JURISDICTION OF                                            AMOUNT OF
BORROWER               INCORPORATION    LOAN REPAID                               BORROWING
---------------------  ---------------  -----------------------------------  --------------
                                                                             ([E] MILLIONS)


<S>                    <C>              <C>                                             <C>
SGL Carbon AG........  Germany          Bank debt                                       160
SGL Beteiligung GmbH.  Germany          Loan from SGL Carbon AG1                         20
SGL ACOTEC GmbH......  Germany          Loan from SGL Carbon AG1                         15
SGL Technologies GmbH  Germany          Bank debt/ Loan from SGL Carbon AG1              25
SGL Brakes GmbH......  Germany          Loan from SGL Carbon AG1                         20
SGL Carbon S.p.A.....  Italy            Bank debt                                        20
SGL Carbon S.A.......  Spain            Bank debt                                         5
SGL Carbon LLC.......  USA              Loan from SGL Carbon AG1                         70
                                                                             --------------
Total:...............                                                                   335
                                                                             ==============
</TABLE>


(1) SGL Carbon has used funds received in repayment of these intercompany loans
    to repay bank debt.

    Under Term Facility A, we are required to repay a total of [E]25 million on
each of December 30, 2003,  June 30, 2004, and December 30, 2004,  with a final
payment of the remaining outstanding amount on May 31, 2005.

    Term Facility A permits SGL Carbon LLC to draw upon Term Facility A in U.S.
dollars in an amount up to the  dollar  equivalent  of [E]70  million as of the
date of the drawing.  SGL Carbon LLC drew its portion of Term  Facility A again
on April 7, 2003 entirely in dollars, in a total amount of $75.8 million.

Term Facility B

    Under Term Facility B, the lending banks agreed to issue a letter of credit
in favor of the European Union.  This letter of credit replaced earlier letters
of credit  issued in  connection  with our appeal  against  fines imposed by EU
competition  authorities.  The  letter of credit is in a total  amount of [E]85
million,  of which [E]4.8 million represents interest under the earlier letters
of credit  capitalized at an annual rate of 6.04% from October 24, 2001 through
October 24, 2002.

    This  letter of credit is to be  returned  to the  lending  banks if the EU
waives its requirement  that we provide the letter of credit in connection with
the appeal process and, in any event, on May 31, 2005, the facility termination
date.  If the EU reduces the amount that we are required to provide in the form
of a letter of  credit,  the  existing  letter of credit  will be  replaced  by
another in the reduced amount.

Term Facility C

    The Term Facility C loan amounts to [E]20 million.  This loan  refinances a
loan granted by Kreditanstalt fur Wiederaufbau (KfW). We will apply all amounts
borrowed  under Term  Facility C towards  discharging  our payment  obligations
under the KfW loan  agreement.  Under Term Facility C, we are required to repay
[E]2,333,335  on September  30, 2004,  [E] 2,333,333 on each of March 31, 2005,
September 30, 2005, March 31, 2006,  September 30, 2006 and March 31, 2007, and
[E]6,000,000 on September 30, 2007. After May 31, 2005,  repayment  obligations
under Term Facility C are governed by the terms of the KfW loan agreement.

Revolving Credit Facility

    The  revolving  line of credit  facility may be drawn at any time up to one
month before the facility  termination  date of May 31, 2005.  We may use funds
drawn under the Revolving Credit Facility for general  corporate  purposes.  We
may not, however,  use these funds to make or declare any dividend,  any return
on capital,  or repay capital  contributions or any other payment in respect of
share capital,  or to refinance the convertible bond due 2005 or to repay other
financial indebtedness incurred after December 20, 2002.

                                      -75-

<PAGE>

    The maximum  principal  amount under the Revolving Credit Facility is [E]55
million.  We may draw down loans  under this  facility  in a minimum  principal
amount of [E]5  million.  No more than 12 loans  may be  outstanding  under the
Revolving  Credit  Facility  at any one time.  Each loan is to be repaid on the
last date of its interest period.

    Drawings under the Revolving Credit Facility may be denominated in euros or
in  dollars.  As of April 7,  2003,  no  amounts  were  outstanding  under  the
Revolving Credit Facility.

Interest rate and interest periods

    Amounts drawn under the credit facilities agreement bear interest at a rate
composed of a variable  margin  over  Euribor (or Libor if drawn in US dollars)
plus  mandatory  costs to compensate  lenders for the costs of compliance  with
regulatory requirements, if applicable.  Mandatory costs do not, and we believe
that they will not,  represent a material  component of the interest rate under
these facilities.

    The  applicable  Euribor  or Libor rate is that  provided  by  Reuters.  If
Reuters is not  available,  the Euribor or Libor rate will be determined on the
basis of rates  provided by Deutsche Bank  Luxembourg  S.A.,  Dresdner Bank and
Commerzbank  AG,  designated  as  reference  banks  for the  credit  facilities
agreement.

    The  initial  margin  over  Euribor or Libor is 2.75%  annually.  Every six
months thereafter the margin is reset on the basis of our consolidated net debt
to  EBITDA  ratio as  determined  on the  basis of  quarterly  reports  for the
previous  four  quarters.  The  following  table shows the  various  applicable
margins:

<TABLE>
<CAPTION>
                                                                          ANNUAL
                                                                          MARGIN
NET DEBT TO EBITDA RATIO                                                RATE (%)
--------------------------------------------------------------------  ----------

<S>                                                                          <C>
           > 4.0....................................................        2.75
<= 4.0 and > 3.5....................................................        2.50
<= 3.5 and > 3.0....................................................        2.25
<= 3.0 and > 2.5....................................................        1.75
<= 2.5 and > 2.0....................................................        1.50
<= 2.0 and < 1.0....................................................        1.00
          <= 1.0....................................................        0.75

</TABLE>

    If the principal  amount  outstanding  under Term Facility A exceeds [E]200
million on or after December 31, 2003, the applicable margin is increased by an
annual  0.50%.  The  applicable  margin will be further  increased by an annual
1.00% if the principal amount  outstanding under Term Facility A exceeds [E]175
million on or after June 30, 2004. In addition, in the event of a default under
the credit facilities agreement, the margin is reset to an annual rate of 4.00%
until the default is remedied or waived.

Voluntary and mandatory prepayment

    We may  prepay  part or all of the Term  Facility  A,  without  premium  or
penalty,  on the last date of the availability period relating to that loan. We
may  provide  cash  collateral  to reduce the issuing  bank's  letter of credit
proportion under the letters of credit issued under the Term Facility B. We may
not prepay  (without  consent of the Term  Facility C loan lender) the whole or
any part of the Term  Facility C loan.  Except with respect to Term Facility C,
we may also cancel all remaining  commitments and prepay any amounts owed under
an available  commitment in a minimum amount of [E]500,000.  We may also cancel
any amount owing to any single lender, fronting bank or issuing bank that makes
a claim for certain  additional  payments  such as those  relating to increased
bank regulatory capital costs or tax gross-ups.

    The credit facilities  agreement requires partial or complete prepayment of
loans under certain circumstances. These include the following:

                                      -76-

<PAGE>

        *   Prepayment  out of  excess  cash  flow.  Within  30 days  after the
            availability  of  consolidated  financial  statements  for a  given
            fiscal  year,  we must apply 50% of our  excess  cash flow for that
            year  towards  payment  of  amounts  outstanding  under the  credit
            facilities  agreement.  For the purposes of the  syndicated  credit
            facilities,  "excess  cash flow" means our  consolidated  cash flow
            minus  capital  expenditures,  antitrust or  competition  fines and
            scheduled repayments under Term Facility A.

        *   Prepayments  out of proceeds  from  securities  issuances.  We must
            apply  100% of the net  proceeds  from the  issuance  by SGL or any
            subsidiary of debt securities, and 75% of the net proceeds from any
            issuance  of  equity   securities,   towards   payment  of  amounts
            outstanding under the credit facilities agreement.

        *   Prepayments out of proceeds from asset  disposals or insurance.  We
            must generally apply towards payment of amounts  outstanding  under
            the credit facilities  agreement any proceeds from a sale of assets
            or any insurance claim payments  relating to insured assets (unless
            we  use  these  payments  to  replace  the  insured  assets  or  to
            compensate  insured  costs within 180 days of receipt) in excess of
            [E]250,000,  up to an annual maximum of [E]5 million.  However,  we
            are  not  required  to  use  the  proceeds  from  the  sale  of our
            electrical  carbons  business  unit to prepay debt under the credit
            facilities agreement.

        *   Change of  control  prepayment.  Any  lender  may,  at its  option,
            require us to cancel its  portion of unused  commitments  under the
            credit  facilities  agreement  and to prepay any amounts drawn from
            that lender under the facilities upon not less than 30 days' notice
            if any  person  (or group of persons  acting in  concert)  acquires
            control of SGL.

Security

    In order to secure claims under the credit  facilities  agreement,  SGL and
various  subsidiaries  have  granted a number  of  security  interests  for the
benefit of the lenders and the other secured parties. These include:

        *   Pledges of shares held by SGL in SGL  Beteiligung  GmbH, SGL Acotec
            GmbH, SGL Carbon GmbH, SGL Technologies GmbH, by SGL Acotec GmbH in
            KCH Beteiligungs  GmbH and by SGL  Technologies  GmbH in SGL Brakes
            GmbH;

        *   Pledges  of bank  accounts  held  by  SGL,  SGL  Carbon  GmbH,  SGL
            Beteiligung  GmbH,  SGL Acotec GmbH,  SGL  Technologies  GmbH,  SGL
            Brakes GmbH and KCH Beteiligungs GmbH;

        *   Security  assignments  of accounts  receivable  by SGL,  SGL Carbon
            GmbH, SGL Beteiligung GmbH, SGL Acotec GmbH, SGL Technologies GmbH,
            SGL Brakes GmbH and KCH Beteiligungs GmbH;

        *   Security  transfers of movable fixed assets and  inventory  held by
            SGL Carbon GmbH,  SGL Acotec GmbH,  SGL  Technologies  GmbH and SGL
            Brakes GmbH;

        *   Security  assignments of  intellectual  property rights by SGL, SGL
            Carbon  GmbH,   SGL   Beteiligung   GmbH,   SGL  Acotec  GmbH,  SGL
            Technologies GmbH, SGL Brakes GmbH and KCH Beteiligungs GmbH; and

        *   A mortgage over real property by SGL.

    The credit  facilities  agreement  originally  provided for other  security
interests  to be  granted  by and over the  Group's  material  subsidiaries  in
various  jurisdictions,  including Austria,  Canada,  England,  France,  Italy,
Poland,  Scotland,  Spain and the United States by March 20, 2003.  This period
has been extended to May 6, 2003.

Restrictive Covenants

    The credit facilities agreement includes a number of restrictive  covenants
typical for credit facilities of this nature, including:

        *   Restrictions on disposals of assets;

        *   Restrictions on changes of the financial year;

                                      -77-

<PAGE>

        *   No changes  to the  constitutional  documents  of any member of the
            group without the prior written consent of the facility agent;

        *   Maintenance and protection of intellectual property rights;

        *   Restrictions on treasury  transactions  and other foreign  exchange
            transactions  other than as permitted  under the credit  facilities
            agreement or in the ordinary course of business; and

        *   No  acquisitions  and joint  ventures,  unless  permitted under the
            credit facilities agreement.

    The above  restrictions do not directly apply to SGL or to its subsidiaries
incorporated in Germany. These companies must notify the facility agent if they
intend to take any of the actions above.  The lenders will  determine  within a
pre-determined  time limit  whether such actions  would  constitute an event of
default if implemented.  In addition, the credit facilities agreement restricts
the ability of SGL's  Executive  Committee to propose  that the annual  general
meeting of shareholders declare a dividend. The agreement does not restrict the
ability of the  Supervisory  Board to propose a dividend,  nor does it restrict
the ability of the  shareholders  to declare a dividend at their annual general
meeting.

Financial Covenants

    The  credit  facilities  agreement  provides  for  a  number  of  financial
covenants typical for credit  facilities of this nature,  pursuant to which SGL
has to meet certain net worth,  interest cover and leverage ratios at all times
during the term of the credit facilities agreement.

Events of Default

    The credit  facilities  agreement  contains  provisions  typical for credit
facilities of this nature  specifying  that certain  actions or omissions by us
will or can  constitute a default  under the  agreement.  These events  include
breaches of  covenants  or failure to pay  interest or principal on loans under
the credit facilities as they become due. In the event of a default that is not
cured or waived,  the agreement provides the lenders with certain remedies that
may be exercised at the election of lenders representing a majority of the then
outstanding  principal  amount under the  facilities.  These  remedies  include
acceleration  of  all  outstanding  amounts,   cancellation  of  all  remaining
commitments and exercise of security interests that we have granted.

    In addition, we will be in default if any new competition law related civil
proceeding  is  instituted  against  any  member  of the  SGL  Group  or if any
competition  law-related  fines in an aggregate amount exceeding [E]2.5 million
are assessed against any member of the SGL Group by administrative authorities,
or if any of the fines assessed in connection with the existing competition law
proceedings of [E]80.2  million and [E] 27.8 million are increased by an amount
exceeding [E]2.5 million.  Should this default occur,  however, the lenders may
not immediately  accelerate the loans.  Rather, the credit facilities agreement
requires them, before  accelerating,  to negotiate with us in good faith for up
to 30 days with a view to continuing the credit facilities agreement.


EXCHANGE CONTROLS


At the present time, Germany does not restrict the export or import of capital,
except for  certain  direct  investments  in areas  covered  by United  Nations
embargoes and certain other countries and  individuals  subject to embargoes in
accordance  with German law.  However,  for  statistical  purposes with certain
exceptions,  every corporation or individual residing in Germany must report to
the German  Central Bank any payment  received from or made to a  non-resident,
corporation or individual if the payment  exceeds  [E]12,500 (or the equivalent
in a foreign currency). Additionally,  corporations and individuals residing in
Germany  must  report to the  German  Central  Bank any  claims  of a  resident
corporation or individual  against,  or liabilities  payable to, a non-resident
corporation  or  individual  exceeding  an  aggregate  [E]1.5  million  (or the
equivalent in a foreign  currency) at the end of any calendar month.  There are
no limitations on the right of  non-resident  or foreign owners to hold or vote
the Shares or the ADSs imposed by German law or the Articles of  Association of
SGL.

                                      -78-

<PAGE>

TAXATION

GERMAN TAXATION

    The  following   discussion  is  a  summary  of  the  material  German  tax
consequences for beneficial owners of Shares or American  Depositary Shares who
are (i) not German  residents  for German  income tax purposes  (i.e.,  persons
whose  residence,   habitual  abode,  statutory  seat  or  place  of  effective
management  and control is not located in Germany) and (ii) whose Shares do not
form part of the business  property of a permanent  establishment or fixed base
in Germany.  Throughout  this section we refer to these  owners as  "non-German
Holders".

    This  summary is based on German tax laws and typical tax treaties to which
Germany is a party, as they are in effect on the date hereof, and is subject to
changes in German tax laws or such treaties.  The following discussion does not
purport to be a comprehensive  discussion of all German tax  consequences  that
may be relevant for  non-German  Holders.  You should  consult your tax advisor
regarding the German federal, state and local tax consequences of the purchase,
ownership and  disposition  of Shares or ADSs and the  procedures to follow for
the refund of German taxes withheld from dividends.

Taxation in Germany

    For the fiscal year 2003 the corporate  income tax rate was increased  from
25% to 26.5% plus 5.5% solidarity  surcharge  thereon,  amounting to a total of
27.9575%.  From 2004 on, the former rate of 25% plus 5.5% solidarity  surcharge
will be  applicable  again.  According to the  transition  rules  applicable in
connection with the German Tax Reform and the change from the corporate  income
tax credit  system to the new system,  a corporate  income tax reduction in the
amount of 1/6 of the  distributions  of earnings  that were taxed under the old
credit system  applies.  This results from the fact that  distributed  earnings
were  taxed  under the  credit  system  only at a rate of 30%,  while  retained
earnings were taxed at a rate of 40%. German  corporations  are also subject to
profit-related  trade tax on income,  the exact amount of which  depends on the
municipality in which the corporation maintains its business  establishment(s).
Trade tax on income is a deductible  item in computing  the  corporation's  tax
base for corporate income tax purposes.

Dividends

    To avoid multiple levels of taxation in a corporate chain, German corporate
income tax law provides for an exemption comparable to a full dividend-received
deduction  for  inter-corporate   dividends  received  by  a  German  corporate
shareholder,  irrespective of ownership percentage.  This exemption applies for
trade tax purposes only if the corporate shareholder holds at least 10% in SGL.
German  resident  individuals  must recognize 50% of the dividends  received as
taxable income.

Withholding Tax

    The withholding  tax rate on dividends is 20%. In addition,  the solidarity
surcharge of 5.5% on the withholding tax will be retained, resulting in a total
withholding  from dividends of 21.1%.  The  withholding tax rate may be reduced
for non-German  Holders by an applicable  double tax treaty.  Under most double
tax  treaties  the  withholding  tax rate is  reduced  to 15%.  To  reduce  the
withholding to the applicable treaty rate of 15%, a non-German Holder may apply
for a refund of  withholding  taxes  paid.  The  refund  amounts to 6.1% of the
declared dividend for dividend distributions withheld at the rate of 21.1%. The
application  for  refund  must be filed  with the  German  Federal  Tax  Office
(Bundesamt  fur  Finanzen,  Friedhofstrasse  1,  D-53221  Bonn,  Germany).  The
relevant  forms can be  obtained  from the  German  Federal  Tax Office or from
German embassies and consulates.

Special Tax Rules for U.S. Holders

    Under the United  States-German Income Tax Treaty, the withholding tax rate
is reduced to 15% of the gross amount of the dividends for shareholders holding
less than 10% in SGL.  Otherwise,  the  withholding  tax rate is reduced to 5%.
Therefore,  in most cases  eligible U.S.  holders will be entitled to receive a
repayment  from  the  German  tax  authorities  equal  to 6.1% of the  declared
dividend.  Accordingly, for a declared dividend of 100, an eligible U.S. holder
initially will receive 78.9 (100 minus the 21.1% withholding tax). The eligible
U.S. holder is then entitled to a refund from the

                                      -79-

<PAGE>

German tax  authorities  of 6.1 and will,  as a result,  effectively  receive a
total of 85 (i.e.,  85% of the declared  dividend).  Thus,  the  eligible  U.S.
holder  will be deemed to have  received a dividend  of 100,  subject to German
withholding tax of 15.

    Under the Treaty, a U.S. holder will generally not be liable for German tax
on capital gains realized or accrued on the sale or other disposition of Shares
or ADSs. However, under certain circumstances,  the Treaty does allow Germany a
limited right to tax former German resident  holders of a substantial  interest
(at least 25%) in SGL on such capital gains.

Dividend Refund Procedure for U.S. Holders

    For Shares and ADSs kept in custody with The  Depositary  Trust  Company in
New York or one of its  participating  banks,  the German tax authorities  have
introduced a collective  procedure for the refund of German withholding tax and
the solidarity  surcharge thereon, on a trial basis. Under this procedure,  DTC
may  submit  claims  for  refunds  payable  to U.S.  holders  under the  Treaty
collectively  to the German tax  authorities  on behalf of these  eligible U.S.
holders.  The  German  Federal  Tax  Office  will pay the  refund  amounts on a
preliminary basis to DTC, which will redistribute these amounts to the eligible
United States holders according to the regulations governing the procedure. The
Federal Tax Office may review  whether the refund was made in  accordance  with
the law within  four years  after  making the  payment to DTC.  Details of this
collective procedure are available from DTC.

    Alternatively,  a new  simplified  collective  refund  procedure  has  been
introduced,  the so-called  Datentragerverfahren.  Financial institutions which
deal  with  dividend  distributions  of SGL (for  example,  custodian  banks or
clearing  offices) or SGL itself may apply to  participate in this procedure at
the  German  Federal  Tax  Office.   Upon   acceptance,   the  participant  may
electronically  file  collective  refund  claims  with the German  Federal  Tax
Office.

    Individual  claims for refund may be made on a special  German form,  which
must be filed with the German  Federal  Tax  Office,  Friedhofstrasse  1, 53221
Bonn,  Germany.  Copies of the  required  form may be obtained  from the German
Federal  Tax  Office at the same  address or from the  Embassy  of the  Federal
Republic of Germany,  4645 Reservoir Road,  N.W.,  Washington D.C.  20007-1998.
Alternatively, the form can be downloaded from the following website:

www.bff-online.de/Steuer_Vordrucke/KSt_KapSt/
               ClaimRefundWithholdingTaxesDividends_Interests.pdf

    Claims must be filed within a four-year period from the end of the calendar
year in which the dividend was  received.  Holders who are entitled to a refund
in excess of [E]153.39 for the calendar year  generally  must file their refund
claims on an individual basis. However, the custodian bank may be in a position
to make refund claims on behalf of such holders.

    As part of the individual  refund claim,  an eligible  United States holder
must  submit to the  German tax  authorities  the  original  bank  voucher  (or
certified  copy  thereof)  issued  by the  paying  entity  documenting  the tax
withheld,  and an  official  certification  on IRS form 6166 of its last United
States  federal  income tax  return.  IRS Form 6166 may be obtained by filing a
request with the Internal Revenue Service Center in Philadelphia, Pennsylvania,
Foreign  Certification  Request, P.O. Box 16347,  Philadelphia,  PA 19114-0447.
Requests for  certifications  must include the eligible  United States holder's
name, Social Security Number or Employer Identification Number, tax return form
number,  and tax period for which the certification is requested.  Requests for
certification can include a request to the Internal Revenue Service to send the
certification  directly to the German tax  authorities.  If no such  request is
made, the Internal  Revenue Service will send a certification  on IRS Form 6166
to the eligible  United States holder,  who then must submit this document with
its claim for refund.

Capital Gains

    Under German domestic tax law as currently in effect, capital gains derived
by an individual non-German Holder from the sale or other disposition of Shares
or ADSs are subject to tax in Germany only if such non-German  Holder has held,
directly  or  indirectly,  Shares  or  ADSs  representing  1% or  more  of  the
registered  share  capital  of  SGL  at  any  time  during  the  5-year  period
immediately preceding the disposition.

    Corporate  non-German  Holders  will be fully  exempt  from  German  tax on
capital  gains  derived  on or after  January  1,  2002  from the sale or other
disposition of Shares or ADSs.

                                      -80-

<PAGE>

    Under most double tax treaties,  a non-German Holder will not be liable for
German  income tax on capital  gains  realized  or accrued on the sale or other
disposition of Shares or ADSs. This applies also under the United States-German
Income Tax Treaty.

    Individuals  owning  at least 1% of the  Shares  who gave up  residence  in
Germany and have become residents of the United States can be liable for German
tax on capital gains under the Treaty if certain prerequisites are met.

Inheritance and Gift Tax

    Under German law,  German gift or inheritance tax will generally be imposed
on  transfers  of  Shares  or ADSs by a gift or on the  death in the  following
situations:

        *   The donor or transferor,  or the heir, donee or other  beneficiary,
            was  domiciled  in Germany  at the time of the  transfer  or,  with
            respect to German  citizens who are not  domiciled in Germany,  the
            donor,  transferor or beneficiary has not been continuously outside
            of Germany for a period of more than 5 years; or

        *   The  shares  or  ADSs  subject  to  such  transfer  form  part of a
            portfolio  that  represents  10% or  more of the  registered  share
            capital of SGL and that has been held directly or indirectly by the
            donor or transferor himself or together with a related party.

    The few German estate tax treaties currently in force, including the treaty
with the United States, usually provide that German gift or inheritance tax may
only be imposed in situations falling under the first condition above.

Other Taxes

    No German  transfer,  stamp or other  similar  taxes apply to the purchase,
sale or other disposition of Shares or ADSs by non-German  Holders. As a result
of  a  judicial  decision,  the  German  net  worth  tax  (Vermogensteuer)  was
abolished.

Tax Reform

    On February 21, 2003,  the German  Parliament  (Bundestag)  adopted the Tax
Privilege  Reduction Act, which was rejected by the Federal Council (Bundesrat)
on March 14, 2003. Therefore,  the Tax Privilege Reduction Act was submitted to
the mediation committee (Vermittlungsausschuss). It is not clear whether any of
the  intended  amendments  will  finally  come into force as the  parliamentary
opposition,  which has the majority in the Federal Council,  has stated that it
is not  willing  to accept  most of the  suggested  amendments.  The  following
proposed provisions, if enacted, could become relevant:

        *   As described  before,  "old"  profits  which were derived under the
            German  corporate income tax credit system entitle the distributing
            corporation  to a corporate  income tax credit in the amount of 1/6
            of the  distributions  with no further  restrictions;  that is, all
            "old" profits can be  distributed at once. It is intended to reduce
            the permitted tax credit to a certain  amount per year or to have a
            moratorium  with  respect  to the tax  credits  for a certain  time
            period.

        *   It is discussed whether corporate  shareholders shall become liable
            to a capital gains tax upon the sale or other disposition of Shares
            or  ADSs at a flat  rate of 15%.  However,  this  will  not  become
            relevant for non-German Holders as under most double tax treaties a
            non-German  shareholder will not be liable for German income tax on
            those  capital gains as long as the shares are not held by a German
            permanent  establishment.  This applies also under the  U.S.-German
            Income Tax Treaty.

UNITED STATES TAXATION

    This  section  describes  the material  United  States  federal  income tax
consequences  of owning and disposing of Shares or ADSs. It applies to you only
if you are a U.S.  holder  (as  defined  below) and holds the Shares or ADSs as
capital assets for tax purposes. This section does not address all material tax
consequences  of  owning  and  disposing  Shares or ADSs.  It does not  address
special  classes  of  holders,  some of whom may be  subject  to  other  rules,
including:

        *   tax-exempt entities,

        *   certain insurance companies,

                                      -81-

<PAGE>

        *   broker-dealers,

        *   traders  in  securities  that  elect to mark to  market  method  of
            accounting for securities holdings,

        *   investors liable for alternative minimum tax,

        *   investors  that actually or  constructively  own 10% or more of our
            voting stock,

        *   investors  that  hold  shares  or ADSs as part of a  straddle  or a
            hedging or conversion transaction, or

        *   investors whose functional currency is not the U.S. dollar.

    This section is based on the tax laws of the United  States,  including the
Internal Revenue Code of 1986, as amended,  its legislative  history,  existing
and  proposed  regulations,  and  published  rulings  and court  decisions,  as
currently  in  effect,  as well as on the  Treaty.  These  laws are  subject to
change, possibly on a retroactive basis.

    In  addition,  this  section is based in part upon the  representations  of
JPMorgan  Chase  Bank,  the  depositary  for our  American  Depositary  Receipt
program. Assuming that each obligation in the deposit agreement and any related
agreement  will be performed  in  accordance  with its terms for United  States
federal  income  tax  purposes,  if you hold  ADRs  evidencing  ADSs,  you will
generally  be  treated as the owner of the Shares  represented  by those  ADSs.
Exchanges  of  Shares  for ADSs,  and ADSs for  Shares,  generally  will not be
subject to United States federal income tax.

    You are a "U.S. holder" if you are a beneficial owner of Shares or ADSs and
you are:

        *   an individual citizen or resident of the United States,

        *   a corporation  organized under the laws of the United States or any
            state thereof or the District of Columbia, or

        *   an estate whose income is subject to United States  federal  income
            tax regardless of its source, or

        *   a trust if a United States court can exercise  primary  supervision
            over  the  trust's  administration  and one or more  United  States
            persons are authorized to control all substantial  decisions of the
            trust.

    This discussion addresses only United States federal income taxation.  U.S.
holders should consult their tax advisor  regarding the United States  federal,
state,  local and other tax  consequences of owning and disposing of Shares and
ADSs in their particular circumstances. In particular, they should confirm that
they are eligible for the benefits  under the Treaty with respect to income and
gain from the Shares or ADSs.

Taxation of Dividends

    Under the United States federal income tax laws, if you are a U.S.  holder,
you must include in your gross income the gross amount of any dividend  paid by
us out of our current or accumulated earnings and profits, as these amounts are
determined for United States federal income tax purposes.  You must include any
German tax withheld from the dividend  payment in this gross amount even though
you do not in fact receive it. See the paragraph  under  "--German  Taxation --
Special Tax Rules for U.S.  Holders"  for examples of how to compute the amount
of dividends received. The dividend is ordinary income that you must include in
income when you, in the case of Shares,  or JPMorgan Chase Bank, in the case of
ADSs, receive the dividend,  actually or constructively.  The dividend will not
be eligible for the  dividends-received  deduction  generally allowed to United
States  corporations in respect of dividends  received from other United States
corporations.  The amount of the dividend distribution that you must include in
your  income  as a U.S.  holder  will be the U.S.  dollar  value  of the  gross
distribution  (including  German taxes withheld),  determined at the spot euro/
U.S.  dollar rate on the date the dividend  distribution  is includable in your
income,  regardless  of  whether  the  payment is in fact  converted  into U.S.
dollars.   Generally,  any  gain  or  loss  resulting  from  currency  exchange
fluctuations  during the period from the date you include the dividend  payment
in


                                     -82-

<PAGE>

income to the date you convert the payment into U.S. dollars will be treated as
ordinary income or loss. The gain or loss generally will be income or loss from
sources within the United States for foreign tax credit limitation purposes.

    Distributions in excess of current and accumulated earnings and profits, as
determined for United States federal income tax purposes,  will be treated as a
nontaxable  return of capital to the extent of your basis in the Shares or ADSs
and thereafter as a capital gain.

    Subject to certain limitations,  the German tax withheld in accordance with
German law and the Treaty and paid over to Germany  may be claimed as a foreign
tax credit  against your United States  federal  income tax  liability.  To the
extent a refund of the tax  withheld is  available  to you under  German law or
under the Treaty,  the amount of tax withheld  that is  refundable  will not be
eligible for credit  against your United States  federal  income tax liability.
See "--German Taxation -- Dividend Refund Procedure for U.S. Holders" above for
the procedures for obtaining a tax refund.

    Dividends  distributed by us will generally  constitute income from sources
outside the United States and will generally be categorized as "passive income"
or "financial services income", each of which are treated separately from other
types of income for purposes of computing  the foreign tax credit  allowable to
you.

    The United States Treasury has expressed concerns that parties to whom ADSs
are released may be taking actions that are  inconsistent  with the claiming of
foreign tax credits.  Accordingly,  the creditability of German withholding tax
on  dividends  could be  affected  by future  actions  that may be taken by the
United States Treasury.

Taxation of Capital Gains

    Upon a sale or other  disposition  of  Shares or ADSs,  you will  recognize
capital gain or loss for U.S. federal income tax purposes in an amount equal to
the difference  between the amount  realized and your adjusted tax basis in the
Shares or ADSs.  This gain or loss generally will be U.S.  source gain or loss,
and will be treated as long-term capital gain or loss if your holding period in
the Shares or ADSs exceeds one year.  The  deductibility  of capital  losses is
subject to significant  limitations.  If you are an individual  U.S.  holder of
Shares  or  ADSs,  any  capital  gain  generally  will  be  subject  to  tax at
preferential rates, provided certain holding periods are met.

Passive Foreign Investment Company

    We believe  that SGL is not  currently a PFIC for U.S.  federal  income tax
purposes.  However,  an actual  determination  of PFIC status is  fundamentally
factual in nature and must be made annually as of the close of each fiscal year
and is  therefore  is subject to  change.  We urge you to consult  your own tax
advisers regarding possible application of the PFIC rules to your ownership and
disposition of Shares or ADSs.

U.S. Information Reporting and Backup Withholding

    Dividend payments on the ADSs or Shares and proceeds from the sale or other
disposition  of ADSs or Shares may be subject to  information  reporting to the
IRS and possible  U.S.  backup  withholding  at a current  rate of 30%.  Backup
withholding will not apply to you,  however,  if you furnish a correct taxpayer
identification  number or certificate of foreign status or if you are otherwise
exempt from backup  withholding.  U.S.  holders who are  required to  establish
their exempt status  generally must provide such  certification on IRS Form W-9
(Request  for  Taxpayer  Identification  Number  and  Certification).  Non-U.S.
holders generally will not be subject to U.S.  information  reporting or backup
withholding.  However, such holders may be required to provide certification of
non-U.S.  status in connection  with payments  received in the United States or
through certain U.S. related financial intermediaries.

    Backup withholding is not an additional tax. Any amounts withheld as backup
withholding may be credited against your U.S. federal income tax liability, and
you may  obtain a refund  of any  excess  amounts  withheld  under  the  backup
withholding  rules by filing the appropriate  claim for refund with the IRS and
furnishing any required information.

                                      -83-

<PAGE>

DIVIDENDS AND PAYING AGENTS

    Not applicable.


STATEMENTS BY EXPERTS

    Not applicable.


DOCUMENTS ON DISPLAY

    We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements, we file reports
and other information with the Securities and Exchange  Commission.  Members of
the general  public may read and copy these  materials,  including  this annual
report and the  exhibits  thereto,  at the SEC's Public  Reference  Room at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices at
500 West Madison Street,  Suite 1400,  Chicago,  Illinois  60661-2511,  and 233
Broadway, New York, New York 10274, and may also obtain copies of the materials
by mail from the Public  Reference  Room of the SEC at 450 Fifth Street,  N.W.,
Washington,  D.C. 20549, at prescribed rates. The public may obtain information
on the operation of the SEC's Public  Reference  Room by calling the SEC in the
United  States  at  1-800-SEC-0330.   The  SEC  also  maintains  a  website  at
www.sec.gov  that contains  reports,  proxy  statements  and other  information
regarding registrants that file electronically with the SEC. You may access our
annual  report  2002 and some of the  other  information  we  submit to the SEC
through  this  website.  In addition,  you may inspect  material we file at the
offices of the New York Stock  Exchange at 20 Broad Street,  New York, New York
10005.


SUBSIDIARY INFORMATION

    Not applicable.

                                      -84-

<PAGE>

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The global nature of our business exposes our operations, financial results
and cash flows to a number of risks, including those listed below.

        *   Interest rate  fluctuations.  We are exposed to changes in interest
            rates.  Our primary  interest rate exposure is to  fluctuations  in
            short-term European and U.S. interest rates.

        *   Currency exchange rate fluctuations. We are exposed to fluctuations
            between the Euro and other major world currencies.  The majority of
            our  currency  fluctuation  risk is  between  the Euro and the U.S.
            dollar.  In addition,  we are exposed to  fluctuations  between the
            euro and the  U.K.  pound  sterling  and  between  the euro and the
            Polish zloty.

        *   Commodity price fluctuations.  We are exposed to possible increases
            in raw  material  prices.  We may  not be able  to  pass  any  such
            increases on to our customers.

        *   Credit  risk.  We are  exposed to credit  risk with  respect to the
            counterparties in our transactions.

    Any  of  these  risks  could  harm  our  operating  results  and  financial
condition. These risks are similar to the risks to which we were exposed in the
prior year.

    The  tables  below  present  certain  information   regarding  our  use  of
derivative financial  instruments.  You should read these tables in conjunction
with Item 3, "Key Information -- Selected Financial Data -- Exchange Rates" and
the notes to our consolidated  financial statements.  All financial instruments
in the tables below are used to manage market risks to which we are exposed. We
do not purchase or sell derivative financial instruments for trading purposes.


INTEREST RATE RISK MANAGEMENT

    We are exposed to interest  rate risks  through  our debt  instruments.  We
manage this risk  exposure  through the use of interest rate swaps and interest
rate caps.

    The following  tables provide  information  about our derivative  financial
instruments  and other financial  instruments  that are sensitive to changes in
interest  rates as of December 31, 2002.  For our fixed rate and variable  rate
debt,  the table presents  principal  amounts at the December 31, 2002 exchange
rate and the related weighted average interest rates by expected maturity date.
Weighted  average  variable rates are based on implied zero coupon rates in the
yield curve.  For interest  rate swaps and caps,  the table  presents  notional
amounts  and  weighted  average  interest  rates or  strike  rates by  expected
maturity date. Weighted average variable rates are based on the implied forward
rates  as  of  December  31,  2002.  The   information  is  presented  in  euro
equivalents, which is our reporting currency.


INTEREST RATE RISK MANAGEMENT
                PRINCIPAL (NOTIONAL) AMOUNT BY EXPECTED MATURITY
                              AVERAGE INTEREST RATE

<TABLE>
<CAPTION>
                                                                                         FAIR VALUE
                                                                                       DECEMBER 31,
                                  2003   2004   2005   2006   2007  AFTER 2007  TOTAL          2002
                                 -----  -----  -----  -----  -----  ----------  -----  ------------
                                                    ([E] EQUIVALENT IN MILLIONS)
<S>                                <C>    <C>    <C>    <C>    <C>         <C>    <C>           <C>
DEBT, INCLUDING CURRENT PORTION
Fixed rate ([E])...............    6.1    5.3  141.4    7.7   21.4         8.0  189.9         170.6
Average interest rate..........  4.47%  5.44%  3.61%  5.52%  5.77%
Variable rate ([E])............  152.7          71.6                            224.3         225.7
Average interest rate..........  5.22%         4.07%

Variable rate (U.S. $).........    6.8                                            6.8           6.8
Average interest rate..........  2.80%

Variable rate (GBP.............    7.3                                            7.3           7.3
Average interest rate..........  4.32%

Variable rate (PLN.............   19.8                                           19.8          19.8
Average interest rate..........  8.13%
Other currencies...............    0.4                                            0.4           0.4

</TABLE>

    Other  currencies in which we have issued debt are the Canadian  dollar and
the Chinese yuan.

                                      -85-

<PAGE>

INTEREST RATE RISK MANAGEMENT
                PRINCIPAL (NOTIONAL) AMOUNT BY EXPECTED MATURITY
                AVERAGE INTEREST (SWAP) RATE/OPTION STRIKE PRICE

<TABLE>
<CAPTION>
                                                                                                  FAIR VALUE
                                                                                  AFTER         DECEMBER 31,
                                                2003   2004   2005   2006   2007   2007  TOTAL          2002
                                               -----  -----  -----  -----  -----  -----  -----  ------------
                                                                ([E] EQUIVALENT IN MILLIONS)
<S>                                              <C>    <C>    <C>    <C>    <C>    <C>    <C>           <C>
INTEREST RATE SWAPS
EURO
Capped Swap..................................                 50.0                        50.0          (0.1)
Average receive rate (variable)..............                3.06%
Average pay rate (variable, capped by 5.185%)                3.06%

EURO
Capped Swap..................................                 50.0                        50.0          (0.8)
Average receive rate (variable)..............                3.06%
Average pay rate (variable, capped by 4.67%).                3.16%

EURO
Receiver Swap (fixed to variable)............   0.64   0.64   0.64   0.64   0.64           3.2           0.2
Average receive rate (fixed).................  4.75%  4.75%  4.75%  4.75%  4.75%           ---           ---
Average pay rate (variable...................  2.36%  2.32%  2.89%  3.44%  3.97%

INTEREST RATE OPTIONS
EURO
Caps purchased...............................   15.3                                      15.3           0.0
Average strike rate..........................  6.50%
</TABLE>

FOREIGN EXCHANGE RISK MANAGEMENT

    We are exposed to foreign  currency  exchange  rate risks through sales and
purchasing  transactions,  intercompany loans and the DOJ liability denominated
in currencies other than our functional  currency,  the euro.  Although the net
impact of foreign currency  exposures is partially offset in the aggregate,  we
hedge certain  significant  unmatched foreign currency exposure through the use
of forward currency contracts and currency options.

    The tables  below  provide  information  about our  significant  derivative
financial  instruments  that are  sensitive  to  changes  in  foreign  currency
exchange rates as of December 31, 2002. For forward foreign  currency  exchange
agreements,  which relate to  intercompany  financing,  the table  presents the
notional amounts and the weighted average contractual foreign currency exchange
rates.  The forward foreign  currency  contracts  entered into by the SGL Group
have a term of less than six months.  For foreign currency  options,  the table
presents the contract  amounts and the average  foreign  currency option strike
prices.  The foreign currency options entered into by the SGL Group have a term
of less than five years.

<TABLE>
<CAPTION>
                                                                    AVERAGE
                                                    CONTRACT    CONTRACTUAL    FAIR VALUE
                                                      AMOUNT        FORWARD  DECEMBER 31,
                                                  BUY (SELL)  EXCHANGE RATE          2002
                                                  ----------  -------------  ------------
                                                  ([E] EQUIVALENT IN MILLIONS, EXCEPT FOR
                                                                  AVERAGE
                                                        CONTRACTUAL EXCHANGE RATE)
<S>                                                      <C>            <C>           <C>
FORWARD FOREIGN CURRENCY CONTRACTS
Euro
U.S. Dollar ....................................      (170.3)        1.0089         5.834
U.S. Dollar ....................................         3.9         1.0160        (0.134)
British Pound Sterling .........................       (52.0)        0.6400         0.857
British Pound Sterling .........................         0.6         0,6415        (0.010)
Singapore Dollar ...............................        (1.1)        1.7890         0.019
Polish Zloty ...................................         6.3         4.0049        (0.063)

                                      -86-

<PAGE>

                                                                    AVERAGE
                                                    CONTRACT    CONTRACTUAL    FAIR VALUE
                                                      AMOUNT        FORWARD  DECEMBER 31,
                                                  BUY (SELL)  EXCHANGE RATE          2002
                                                  ----------  -------------  ------------
                                                  ([E] EQUIVALENT IN MILLIONS, EXCEPT FOR
                                                                  AVERAGE
                                                        CONTRACTUAL EXCHANGE RATE)
FORWARD FOREIGN CURRENCY CONTRACTS WITH CHANCE
Euro
British Pound Sterling .........................        (0.8)        0.6462         0.007

</TABLE>
<TABLE>
<CAPTION>
                                      CONTRACT       AVERAGE    FAIR VALUE
                                        AMOUNT        OPTION  DECEMBER 31,
                                     BUY (SELL)  STRIKE PRICE          2002
                                     ----------  ------------  ------------
                                      ([E] EQUIVALENT IN MILLIONS, EXCEPT
                                        FOR AVERAGE OPTION STRIKE PRICE)
<S>                                         <C>           <C>           <C>
CURRENT PAIRS
FOREIGN CURRENCY OPTIONS
U.S Dollar put/euro call*..........       (93.6)        0.900       (11.346)
U.S Dollar call/euro put...........        99.1        0.8504         1.141

</TABLE>

*   Thefollowing  features  distinguish  these options from  standard  currency
    options.  The  option  may only be  exercised  if a  "knock-in  event"  has
    occurred,  based on the following  terms:  principal  amount $84.3 million;
    knock-in level between [E]0.96 = $1.00 and [E]1. 1115 = $1.00;  strike rate
    (exchange  rate at which  dollars must be purchased if the euro rises above
    the knock-in level [E]0.90 = $1.00.


COMMODITY PRICE RISKS

    We are exposed to commodity  price risks through our  dependence on various
raw materials (petroleum coke, coal tar pitch, petroleum pitch, anthracite coal
and natural graphite flake) and energy. We seek to minimize these risks through
our  sourcing  policies  and  efficient  operating  procedures.  Some of  these
products are derived from petroleum  therefore their prices are affected by the
market price of petroleum.  Possible increases in the market price of petroleum
in 2003  could  adversely  affect  the gross  margins  of some of our  business
segments.

    In order to secure (hedge) the supply of some of our raw materials, in 2001
we were party to  commodity  forward  contracts  (futures)  in the  natural gas
market, which were settled during 2002.

    As of December  31, 2001 we had a long  forward  position of natural gas in
the  United  States  with a negative  market  value for the SGL Group of [E]0.7
million.  These forward  contracts  were to hedge the natural gas supply in the
United  States for the first six months of 2002. In 2002 these  contracts  were
changed so that they no longer  represent  commodity  future  contracts.  These
contracts now fall under the definition of normal  purchases and serve SGL only
in the normal course of business.

    There were no forward contracts as of December 31, 2002.


CREDIT RISK

    Credit  risk is the  possibility  that the value of our  assets  may become
impaired  if  counterparties  cannot  meet their  obligations  in  transactions
involving financial instruments.  The total of the amounts recognized in assets
represents our maximum exposure to credit risk.


RISK MANAGEMENT SYSTEM

    We identify and manage risks through our Group wide Risk Management System.
Certain  risks which are beyond our control,  for example,  the war in Iraq and
its ultimate effects, are not covered by the Risk Management System.

    The Risk Management  System  comprises a series of distinct but interlinked
planning,  monitoring  and  information  systems.  These cover all areas of the
Group and are continuously  adapted to reflect changes in conditions.  The Risk
Management System is based on an integrated  planning  process,  value-oriented
key figure systems and control reports. Our operating units and central service

                                      -87-

<PAGE>

departments  are  responsible  for identifying the respective key risks for the
entire medium-term  planning period, for determining their financial impact and
initial probability of occurrence,  and for suggesting measures to be taken. As
part of the  target-setting  meetings  between the Executive  Committee and the
operating  units and central  service  departments,  key risks are examined and
countermeasures  are  agreed  and  introduced.  A  rolling  evaluation  of  the
likelihood of key risks  occurring  takes place on a quarterly  basis;  any new
risks which may have arisen are identified and  countermeasures are examined by
the responsible operating units and service departments.

    Individual  risks are  aggregated by Corporate  Financial  Controlling on a
quarterly  basis  or ad hoc as  required,  and  discussed  at  meetings  of the
Executive  Committee.  For  its  part,  the  Executive  Committee  informs  the
Supervisory  Board  about  risk  development  and risk  management  at  regular
intervals.  In addition,  the Internal Audit department examines all components
of the risk  management  system at appropriate  intervals in its role as a unit
independent of these processes. The areas of responsibility for risk management
are set out in Group guidelines.

                                      -88-

<PAGE>

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

DEBT SECURITIES

    As of  December  31,  2002,  one major debt  security,  issued by SGL,  was
outstanding:  133,650  bonds with warrants of [E]1,000 each were issued as part
of a convertible  bond on September  18, 2000 at 100% of the principal  amount.
They bear annual  interest at 3.5% on their  principal  amount.  The bonds with
warrants can be converted at any time into fully  paid-in  Shares in the period
from  October  18, 2000 to  September  4, 2005.  Each bond with  warrant in the
principal  amount of [E]1,000 can be converted  into 11.2233  Shares subject to
adjustment of the conversion  price.  The bonds with warrants will be repaid on
September 18, 2005 at their principal amount,  provided that they have not been
repaid or converted at an earlier date.

Commercial Paper

    Of the [E]200 million  commercial  paper program that SGL launched in 1996,
as of December  31, 2002 and 2001 [E]0.0  million and [E] 37.0 million had been
drawn down respectively.


                                      -89-

<PAGE>

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

    Not applicable.


ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

    Not applicable.


ITEM 15. CONTROLS AND PROCEDURES

    The Chief  Executive  Officer  and the Chief  Financial  Officer,  with the
assistance  of other  members of  management,  performed an  evaluation  of our
disclosure  controls  and  procedures,   pursuant  to  Rule  13a-15  under  the
Securities  Exchange Act of 1934, as amended,  within 90 days prior to the date
of this  annual  report.  Based on that  evaluation,  they  concluded  that our
disclosure  controls and  procedures  are effective to ensure that  information
required  to be  disclosed  in  this  annual  report  is  recorded,  processed,
summarized  and  reported  within the time  periods  specified in the rules and
forms of the Securities and Exchange Commission.

    There were no  significant  changes in our  internal  controls  or in other
factors that could  significantly  affect internal  controls  subsequent to the
date of the evaluation.  No significant  deficiencies  and material  weaknesses
were identified that required corrective actions.


ITEM 16. [RESERVED]

    [Reserved]


                                      -90-

<PAGE>

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

    We have responded to Item 18 in lieu of responding to this Item.


ITEM 18. FINANCIAL STATEMENTS

    The  following  financial  statements,  together  with the  Reports  of BDO
Deutsche Warentreuhand Aktiengesellschaft Wirtschaftprufunsgesellschaft for the
year  ended   December  31,  2002  and  KPMG   Deutsche   Treuhand-Gesellschaft
Aktiengesellschaft, Wirtschaftprufunsgesellschaft, for the years ended December
31, 2001 and 2000 are filed as part of this annual report.
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                       -------

<S>                                                                                        <C>
Independent Auditors' Reports........................................................  F-2/F-3
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and
  2000...............................................................................      F-4
Consolidated Balance Sheets at December 31, 2002 and 2001............................      F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and
  2000...............................................................................      F-6
Consolidated Statements of Changes in Shareholders' Equity for the years ended
  December 31, 2002, 2001 and 2000...................................................      F-7
Notes to the Consolidated Financial Statements.......................................      F-8

</TABLE>
ITEM 19. EXHIBITS

EXHIBIT NUMBER

1.  Articles of Incorporation  (Satzung) of SGL CARBON  Aktiengesellschaft,  as
    amended  (incorporated  by reference  to Exhibit 1 to the annual  report on
    Form 20-F of SGL CARBON Aktiengesellschaft filed on July 1, 2002).

2.  Term  facilities  and Revolving  Credit  Agreement  dated December 20, 2002
    between SGL CARBON Aktiengesellschaft and the banks parties thereto.

3.  A list  showing  the number  and a brief  identification  of each  material
    foreign  patent  for an  invention  not  covered by a U.S.  patent  will be
    provided upon the Commission`s request.

4.  An  explanation  of how earnings per share  information  was  calculated is
    provided in Notes 10 and 33 to our consolidated  financial statements filed
    in Item 18, "Financial Statements".

5.  A list of our principal subsidiaries is provided in Item 4, "Information on
    the Company -- Organizational Structure".


                                      -91-

<PAGE>

                                   SIGNATURES

    Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the registrant  certifies that it meets all requirements for filing on
Form 20-F and has duly caused this annual  report to be signed on its behalf by
the undersigned, thereunto duly authorized.



                              SGL CARBON Aktiengesellschaft

                              By: /s/ Robert J. Koehler
                                  ---------------------
                                  Robert J. Koehler
                                  Chief Executive Officer
                                  Chairman of the Executive Committee

                              By: /s/ Dr. Bruno Toniolo
                                  ---------------------
                                  Dr. Bruno Toniolo
                                  Chief Financial Officer
                                  Member of the Executive Committee

Date: April 14, 2003

                                      -92-

<PAGE>

                                  CERTIFICATION

I, Robert Koehler, certify that:

1.  I have reviewed this annual report on Form 20-F of SGL Carbon AG;

2. Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances  under which such statements
were made,  not  misleading  with respect to the period  covered by this annual
report;

3.  Based on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and I are  responsible  for
establishing and maintaining  disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.  designed such  disclosure  controls and  procedures to ensure that material
    information   relating  to  the  registrant,   including  its  consolidated
    subsidiaries,  is  made  known  to  us by  others  within  those  entities,
    particularly  during  the  period  in which  this  annual  report  is being
    prepared;

b.  evaluated the  effectiveness  of the registrant's  disclosure  controls and
    procedures  as of a date  within 90 days prior to the  filing  date of this
    annual report (the "Evaluation Date"); and

c.  presented in this annual report our conclusions  about the effectiveness of
    the disclosure  controls and  procedures  based on our evaluation as of the
    Evaluation Date;

5. The registrant's  other certifying  officers and I have disclosed,  based on
our  most  recent  evaluation,  to the  registrant's  auditors  and  the  audit
committee  of  registrant's  board of  directors  (or  persons  performing  the
equivalent function):

a.  all  significant  deficiencies  in the  design  or  operation  of  internal
    controls which could adversely affect the  registrant's  ability to record,
    process,  summarize and report  financial data and have  identified for the
    registrant's auditors any material weaknesses in internal controls; and

b.  any fraud,  whether or not  material,  that  involves  management  or other
    employees  who  have  a  significant  role  in  the  registrant's  internal
    controls; and

6. The  registrant's  other  certifying  officers and I have  indicated in this
annual  report  whether  or not there  were  significant  changes  in  internal
controls or in other factors that could significantly  affect internal controls
subsequent to the date of our most recent evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date: April 14, 2003

                                                              /s/ Robert Koehler
                                                              ------------------
                                                                  Robert Koehler
                                                         Chief Executive Officer
                                             Chairman of the Executive Committee

                                      -93-

<PAGE>

                                  CERTIFICATION

I, Dr. Bruno Toniolo, certify that:

1.  I have reviewed this annual report on Form 20-F of SGL Carbon AG;

2. Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances  under which such statements
were made,  not  misleading  with respect to the period  covered by this annual
report;

3.  Based on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and I are  responsible  for
establishing and maintaining  disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

d.  designed such  disclosure  controls and  procedures to ensure that material
    information   relating  to  the  registrant,   including  its  consolidated
    subsidiaries,  is  made  known  to  us by  others  within  those  entities,
    particularly  during  the  period  in which  this  annual  report  is being
    prepared;

e.  evaluated the  effectiveness  of the registrant's  disclosure  controls and
    procedures  as of a date  within 90 days prior to the  filing  date of this
    annual report (the "Evaluation Date"); and

f.  presented in this annual report our conclusions  about the effectiveness of
    the disclosure  controls and  procedures  based on our evaluation as of the
    Evaluation Date;

5. The registrant's  other certifying  officers and I have disclosed,  based on
our  most  recent  evaluation,  to the  registrant's  auditors  and  the  audit
committee  of  registrant's  board of  directors  (or  persons  performing  the
equivalent function):

c.  all  significant  deficiencies  in the  design  or  operation  of  internal
    controls which could adversely affect the  registrant's  ability to record,
    process,  summarize and report  financial data and have  identified for the
    registrant's auditors any material weaknesses in internal controls; and

d.  any fraud,  whether or not  material,  that  involves  management  or other
    employees  who  have  a  significant  role  in  the  registrant's  internal
    controls; and

6. The  registrant's  other  certifying  officers and I have  indicated in this
annual  report  whether  or not there  were  significant  changes  in  internal
controls or in other factors that could significantly  affect internal controls
subsequent to the date of our most recent evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date: April 14, 2003

                                                           /s/ Dr. Bruno Toniolo
                                                           ---------------------
                                                               Dr. Bruno Toniolo
                                                         Chief Financial Officer
                                               Member of the Executive Committee

                                      -94-

<PAGE>

     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Form 20-F annual report of SGL Carbon AG (the "Company")
for the  period  ending  December  31,  2002 as filed with the  Securities  and
Exchange  Commission  on the date hereof  (the  "annual  report"),  each of the
undersigned officers of the Company certify pursuant to 18 U.S.C. Section 1350,
as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, to the
best of such officer's knowledge and belief, that:

1. the annual report fully complies with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2. the  information  contained in the annual  report  fairly  presents,  in all
material  respects,  the  financial  condition and results of operations of the
Company.

                                                           /s/ Robert J. Koehler
                                                           ---------------------
                                                               Robert J. Koehler
                                                         Chief Executive Officer
                                             Chairman of the Executive Committee

                                                           /s/ Dr. Bruno Toniolo
                                                           ---------------------
                                                               Dr. Bruno Toniolo
                                                         Chief Financial Officer
                                               Member of the Executive Committee

Date: April 14, 2003




                                      -95-

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
 <CAPTION>
EXHIBIT NO.                                                                         SEQUENTIALLY
                                            EXHIBIT                                NUMBERED PAGE
-----------  --------------------------------------------------------------------  -------------
    <S>      <C>                                                                             <C>

        1   Articles of Incorporation  (Satzung) of the Registrant,  as amended
            (incorporated  by  reference  to Exhibit 1 to the annual  report on
            Form  20-F  of SGL  CARBON  Aktiengesellschaft  filed  on  July  1,
            2002)........ 2 Term Facility and Revolving Credit Agreement, dated
            20 December,  2002, between SGL CARBON  Aktiengesellschaft  and the
            banks  parties  thereto............................................


</TABLE>


                                      -96-

<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT

                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                             <C>

Independent Auditors' Reports.............................................................  F-2/F-3
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000      F-4

Consolidated Balance Sheets at December 31, 2002 and 2001.................................      F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000      F-6

Consolidated Statements of Changes in Shareholders' Equity for the years ended                  F-7
  December 31, 2002, 2001 and 2000........................................................
Notes to the Consolidated Financial Statements............................................      F-8



</TABLE>

                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
SGL CARBON AKTIENGESELLSCHAFT


    We  have   audited   the   consolidated   balance   sheet   of  SGL  CARBON
Aktiengesellschaft  and subsidiaries (,,SGL Group") as of December 31, 2002 and
the related  consolidated  statements of  operation,  cash flows and changes in
shareholders'  equity for the year ended December 31, 2002. These  consolidated
financial  statements  are the  responsibility  of SGL  Group  management.  Our
responsibility is to express an opinion on these consolidated  statements based
on our audit.

    We  conducted  our audit in  accordance  with  International  Standards  on
Auditing  and auditing  standards  generally  accepted in the United  States of
America.  Those standards  require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are  free of
material misstatements.  An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements.  An audit
also  includes  assessing  the  accounting   principles  used  and  significant
estimates  made by  management,  as well as  evaluating  the overall  financial
statement  presentation.  We believe that our audit provides a reasonable basis
for our opinion.

    In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of the SGL
Group as of December 31, 2002 and the result of their operations and their cash
flows for the year ended  December 31, 2002, in conformity  with  International
Accounting Standards.

     International  Accounting  Standards vary in certain  significant  respects
from generally accepted accounting principles in the United States.  Application
of generally  accepted  accounting  principles  in the United  States would have
affected  the result of  operations  for the year ended  December  31,  2002 and
shareholders'  equity as of December 31, 2002 to the extent  summarized in notes
34 and 35 to the consolidated financial statements.

Munich,  Germany
February  27, 2003 except for notes 34, 35 and 36 as to which the date is April
14, 2003.



BDO Deutsche Warentreuhand

Aktiengesellschaft

Wirtschaftsprufungsgesellschaft

                                       F-2

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND SHAREHOLDERS SGL CARBON AKTIENGESELLSCHAFT



    We  have   audited   the   consolidated   balance   sheets  of  SGL  CARBON
Aktiengesellschaft  and subsidiaries (,,SGL Group") as of December 31, 2001 and
the related  consolidated  statements of operations,  cash flows and changes in
shareholders'  equity  for  each of the  years  in the  two-year  period  ended
December  31,  2001.   These   consolidated   financial   statements   are  the
responsibility  of SGL Group  management.  Our  responsibility is to express an
opinion on these consolidated statements based on our audits.

    We  conducted  our audits in  accordance  with  International  Standards on
Auditing  and auditing  standards  generally  accepted in the United  States of
America.  Those standards  require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are  free of
material misstatements.  An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements.  An audit
also  includes  assessing  the  accounting   principles  used  and  significant
estimates  made by  management,  as well as  evaluating  the overall  financial
statement  presentation.  We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of the SGL
Group as of December  31, 2001 and the  results of their  operations  and their
cash flows for each of the years in the  two-year  period  ended  December  31,
2001, in conformity with International Accounting Standards.

    International  Accounting  standards vary in certain  significant  respects
from generally accepted accounting principles in the United States. Application
of generally  accepted  accounting  principles  in the United States would have
affected  the  results of  operations  for each of the years in the  three-year
period ended December 31, 2001 and shareholders' equity as of December 31, 2001
to the extent summarized in note 34 to the consolidated financial statements.

Munich, Germany
February 28, 2002.



KPMG Deutsche Treuhand-Gesellschaft

Aktiengesellschaft Wirtschaftsprufungsgesellschaft

                                       F-3

<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in millions, except per share data)

<TABLE>
<CAPTION>
                                                   NOTES     2002     2002     2001     2000
                                                          -------  -------  -------  -------

                                                              US$(1)  EURO     EURO     EURO
<S>                                                  <C>      <C>      <C>      <C>      <C>

Sales revenue....................................     28  1,158.5  1,112.3  1,233.3  1,262.5
Cost of sales....................................          (923.3)  (886.5)  (941.8)  (950.8)
                                                          -------  -------  -------  -------

GROSS PROFIT.....................................           235.2    225.8    291.5    311.7
Selling expenses.................................          (145.2)  (139.4)  (154.5)  (156.6)
Research costs...................................           (26.5)   (25.4)   (31.1)   (29.2)
General and administrative expenses..............      4    (49.5)   (47.5)   (57.8)   (43.2)
Other operating income (net).....................      5     15.8     15.1     10.6     (3.5)
                                                          -------  -------  -------  -------

PROFIT FROM OPERATIONS BEFORE COSTS
  RELATING TO ANTITRUST PROCEEDINGS
  AND RESTRUCTURING, NET.........................            29.8     28.6     58.7     79.2
Costs relating to antitrust proceedings..........      6    (22.9)   (22.0)   (35.0)     0.0
Restructuring expenses...........................      6     (8.7)    (8.3)   (41.0)     0.0
                                                          -------  -------  -------  -------

PROFIT (LOSS) FROM OPERATIONS....................            (1.8)    (1.7)   (17.3)    79.2
Net financing costs..............................      7    (26.5)   (25.5)   (48.5)   (59.2)
                                                          -------  -------  -------  -------

PROFIT (LOSS) BEFORE TAX.........................           (28.3)   (27.2)   (65.8)    20.0
Income tax benefit/(expense)                           9      3.7      3.6    (29.2)   (55.7)
                                                          -------  -------  -------  -------

NET LOSS FOR THE PERIOD BEFORE MINORITY INTERESTS           (24.6)   (23.6)   (95.0)   (35.7)
Minority interests...............................             0.0      0.0     (0.2)    (0.3)
                                                          -------  -------  -------  -------

NET LOSS FOR THE PERIOD..........................           (24.6)   (23.6)   (95.2)   (36.0)
                                                          =======  =======  =======  =======

Basic earnings per share (EPS) in................     10    (1.12)    (1.08)   (4.42)   (1.68)
Diluted earnings per share (EPS) in .............     10    (1.12)    (1.08)   (4.42)   (1.68)

</TABLE>




(1) The 2002 financial  figures have been translated for the convenience of the
    reader at an exchange  rate of $ 1.0415 to [E] 1.00,  the  average  rate on
    December 31, 2002.



The accompanying notes are an integral part of these Consolidated Financial
                                   Statements.

                                       F-4

<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT

                           CONSOLIDATED BALANCE SHEETS

                                  (in millions)

<TABLE>
<CAPTION>
ASSETS                                              NOTE  31.12.02  31.12.02  31.12.01
                                                          --------  --------  --------

                                                               US$(1)   EURO      EURO
<S>                                                  <C>       <C>       <C>       <C>
NONCURRENT ASSETS
Intangible assets.................................    11     108.1     103.8     111.2
Property, plant and equipment.....................    12     497.1     477.3     553.5
Long-term investments.............................    13      34.6      33.2      34.0
                                                          --------  --------  --------

                                                             639.8     614.3     698.7
CURRENT ASSETS
Inventories.......................................    14     300.4     288.4     394.2
Trade receivables.................................    15     216.7     208.1     262.2
Other receivables and other current assets........    16      63.2      60.7      47.4
                                                          --------  --------  --------

Receivables and other current assets..............           279.9     268.8     309.6
Cash and cash equivalents.........................    17      22.4      21.5      12.1
                                                          --------  --------  --------

                                                             602.7     578.7     715.9
DEFERRED TAX ASSETS...............................    18      97.3      93.4      80.4
                                                          --------  --------  --------

                                                           1,339.8   1,286.4   1,495.0
                                                          ========  ========  ========

EQUITY AND LIABILITIES
EQUITY/MINORITY INTERESTS
Issued Capital....................................            58.3      56.0      55.2
Share premium.....................................           115.9     111.3     111.3
Retained earnings.................................            54.8      52.6     183.9
Net loss for the period...........................           (24.6)    (23.6)    (95.2)
Equity............................................    19     204.4     196.3     255.2
Minority interests................................             1.5       1.4       1.6
                                                          --------  --------  --------

                                                             205.9     197.7     256.8
PROVISIONS
Provision for pensions and other employee benefits    20     198.5     190.6     193.1
Other provisions..................................    21     155.4     149.2     164.6
                                                          --------  --------  --------

                                                             353.9     339.8     357.7
LIABILITIES.......................................    22
Financial liabilities.............................           467.1     448.5     538.9
Trade payables....................................           115.1     110.5     107.7
Other liabilities.................................           157.5     151.2     197.2
                                                          --------  --------  --------

                                                             739.7     710.2     843.8
DEFERRED TAX LIABILITIES                              23      40.3      38.7      36.7
                                                          --------  --------  --------

                                                           1,339.8   1,286.4   1,495.0
                                                          ========  ========  ========



</TABLE>



(1) The 2002 financial  figures have been translated for the convenience of the
    reader at an exchange  rate of $ 1.0415 to [E] 1.00,  the  average  rate on
    December 31, 2002.



The accompanying notes are an integral part of these Consolidated Financial
                                   Statements



                                       F-5

<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (in millions)

<TABLE>
<CAPTION>
                                                          2002   2002   2001   2000
                                                         -----  -----  -----  -----

                                                           US$(1)EURO   EURO   EURO
<S>                                                        <C>    <C>    <C>    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss) before taxes.........................  (28.3) (27.2) (65.8)  20.0
Adjustments to reconcile net profit or loss to net cash
  provided by operating activities
Loss on sale of property, plant and equipment..........   (2.9)  (2.8)   1.0    0.8
Gain/loss on sale of equity investments................   (1.0)  (1.0)   0.0    4.8
Depreciation and amortization expense..................   84.8   81.4   86.8   83.2
Write-downs on noncurrent assets.......................    0.0    0.0    9.8    0.0
Taxes paid.............................................  (23.3) (22.3) (13.6)  (2.9)
Change in provisions, net..............................   (2.9)  (2.8)  16.3  (26.9)
Change in Working capital, net of changes in basis of
  consolidation:
Inventories............................................   86.1   82.7  (26.8)   0.6
Write-downs on inventories.............................    0.0    0.0   15.0    0.0
Trade receivables......................................   46.6   44.7   33.8   10.5
Trade payables.........................................    7.1    6.8    6.2    2.6
Other operating assets/liabilities.....................  (10.9) (10.4)  30.0  (47.1)
                                                         -----  -----  -----  -----

Cash provided by operating activities before payment of
  antitrust fines......................................  155.3  149.1   92.7   45.6
                                                         -----  -----  -----  -----

Payments relating to antitrust proceedings.............  (10.5) (10.1) (36.9) (89.0)
                                                         -----  -----  -----  -----

Cash provided /used by operating activities............  144.8  139.0   55.8  (43.4)
                                                         -----  -----  -----  -----

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment, and
  intangible assets (excl. Goodwill)...................  (55.8) (53.6) (96.1) (69.8)
Proceeds from sale of property, plant and equipment,
  and intangible assets................................    8.1    7.8    3.8    2.0
Cost of aquisitions....................................   (0.7)  (0.7)  (5.7) (23.3)
Proceeds from sale of equity investments...............    5.8    5.6    5.5    2.1
                                                         -----  -----  -----  -----

Cash used in investing activities......................  (42.6) (40.9) (92.5) (89.0)
                                                         -----  -----  -----  -----

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in financial liabilities....................  (91.2) (87.6)  36.5   97.8
Dividends paid.........................................   (0.2)  (0.2)  (0.1)  (0.4)
Net proceeds from capital increase.....................    0.8    0.8    2.2    5.5
                                                         -----  -----  -----  -----

Cash provided by financing activities..................  (90.6) (87.0)  38.6  102.9
                                                         -----  -----  -----  -----

Cash received from first-time consolidation............                         8.6
                                                         -----  -----  -----  -----

Effect of foreign exchange rate changes................    0.1   (1.7)   0.4    2.1
                                                         -----  -----  -----  -----

Net increase/decrease in cash and cash equivalents.....   11.7    9.4    2.3  (18.8)
Cash and cash equivalents at beginning of year.........   10.7   12.1    9.8   28.6
                                                         -----  -----  -----  -----

CASH AND CASH EQUIVALENTS AT END OF YEAR...............   22.4   21.5   12.1    9.8
                                                         =====  =====  =====  =====



</TABLE>



(1) The 2002 financial  figures have been translated for the convenience of the
    reader at an exchange  rate of $ 1.0415 to [E] 1.00,  the  average  rate on
    December 31, 2002.

    Cash flow was  adjusted for currency  impacts,  see Note 24 for  additional
cash flow information.

The accompanying notes are an integral part of these Consolidated Financial
                                   Statements

                                       F-6

<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                               (in Euro millions)

<TABLE>
<CAPTION>
                                                                         UNAPPROPRIATE
                                                           THEREOF FROM       SURPLUS/
                                ISSUED    SHARE  RETAINED      CURRENCY    ACCUMULATED           MINORITY
                               CAPITAL  PREMIUM  EARNINGS   TRANSLATION        DEFIZIT  EQUITY  INTERESTS  TOTAL
<S>                                <C>      <C>       <C>           <C>            <C>     <C>        <C>    <C>
Balance at Jan. 1, 2000......     54.3    104.4     175.3                         15.9   349.9        0.9  350.8
Appropriation of net loss for
  2000.......................                        15.9                        (51.9)  (36.0)       0.3  (35.7)
Other recognized gains and
  losses.....................                         2.0                                  2.0        0.9    2.9
Capital increase.............      0.5      5.1                                            5.6               5.6
Exchange differences.........                        15.5          15.5                   15.5              15.5
                               -------  -------  --------  ------------  -------------  ------  ---------  -----

Balance at Dec. 31, 2000.....     54.8    109.5     208.7          15.5          (36.0)  337.0        2.1  339.1
                               =======  =======  ========  ============  =============  ======  =========  =====

Balance at Jan. 1, 2001......     54.8    109.5     208.7          15.5          (36.0)  337.0        2.1  339.1
Appropriation of net loss for
  2001.......................                       (36.0)                       (59.2)  (95.2)       0.2  (95.0)
Other recognized gains and
  losses.....................                        (0.6)                                (0.6)      (0.7)  (1.3)
Capital increase.............      0.4      1.8                                            2.2               2.2
Exchange differences.........                        11.8          11.8                   11.8              11.8
                               -------  -------  --------  ------------  -------------  ------  ---------  -----

Balance at Dec. 31, 2001.....     55.2    111.3     183.9          27.3          (95.2)  255.2        1.6  256.8
                               =======  =======  ========  ============  =============  ======  =========  =====

Balance at Jan. 1, 2002......     55.2    111.3     183.9          27.3          (95.2)  255.2        1.6  256.8
Appropriation of net loss for
  2002.......................                       (95.2)                        71.6   (23.6)       0.0  (23.6)
Other recognized gains and
  losses.....................                                                              0.0       (0.2)  (0.2)
Capital increase.............      0.8                                                     0.8               0.8
Exchange differences.........             (36.1)    (36.1)                               (36.1)            (36.1)
                               -------  -------  --------  ------------  -------------  ------  ---------  -----

Balance at Dec. 31, 2002.....     56.0    111.3      52.6          (8.8)         (23.6)  196.3        1.4  197.7
                               =======  =======  ========  ============  =============  ======  =========  =====



</TABLE>


The accompanying notes are an integral part of these Consolidated Financial
                                   Statements

                                       F-7
<PAGE>

                          SGL CARBON AKTIENGESELLSCHAFT
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                 (in millions)


1.  SUMMARY OF ACCOUNTING POLICIES

    DESCRIPTION OF BUSINESS

    SGL Carbon  Aktiengesellschaft  (SGL Carbon) together with its subsidiaries
(the "SGL  Carbon  Group")  is a global  manufacturer  of carbon  and  graphite
products. See note 28 for further information on business activities.


    BASIS OF PRESENTATION

    The  consolidated  financial  statements  of the SGL Carbon Group have been
prepared in accordance with the  International  Financial  Reporting  Standards
(IFRSs) -- formerly known as the International  Accounting  Standards (IASs) --
issued by the International  Accounting  Standards Board (IASB),  incorporating
the   interpretations   issued  by  the   International   Financial   Reporting
Interpretations  Committee (IFRIC). All standards to be applied for fiscal year
2002 have been complied with. References to IFRSs/IASs relate to the IFRSs/IASs
in force,  as amended.  Application  of the  IFRSs/IASs  was  possible  because
consolidated  financial  statements prepared in accordance with internationally
accepted  accounting  standards  such as the  IFRSs/IASs  qualify as  exempting
consolidated financial statements as defined by section 292a of the HGB (German
Commercial Code) introduced in 1998.

    As in the previous year, the 2002  consolidated  financial  statements were
prepared in euros ([E]) and are presented in millions of euros ([E]m),  rounded
to the nearest 0.1 million. Conversion from Deutsche Mark to euros was based on
the official DM:[E] conversion rate of 1.95583 fixed on January 1, 1999.


    CONSOLIDATION METHODS

    The annual financial statements of the companies consolidated were prepared
in accordance with uniform accounting  policies.  Interim financial  statements
are used for subsidiaries  with differing  balance sheet dates.  Except for two
subholding companies and three smaller companies, all financial statements have
been audited and certified by independent auditors.

    Companies are consolidated  using the purchase method of accounting,  under
which the acquisition  cost of the interests in the  subsidiaries is eliminated
against the equity of the  subsidiaries  attributable  to the parent company at
the date of acquisition.  Fair values are recognized,  and any remaining excess
of cost of acquisition  over net assets acquired is recognized as goodwill from
capital  consolidation  and  reduced  by  straight-line  amortization  over its
expected  useful life.  In  accordance  with IAS 22, any  negative  goodwill is
deducted  from  goodwill on the face of the  balance  sheet and  recognized  in
income under other operating income over the useful life of the asset. Goodwill
arising prior to 1994 has been charged directly to reserves.

    Companies or joint ventures representing an interest of between 20% and 50%
and additionally the parent company has a significant influence are measured at
equity.

    Intercompany receivables and liabilities,  intercompany profits and losses,
as well as intragroup  sales revenue,  expenses and income are  eliminated.  In
accordance  with IAS 12, deferred tax assets and liabilities are recognized for
temporary differences arising from consolidation.


    FOREIGN CURRENCY TRANSLATION

    Foreign currency receivables and liabilities in the single-entity financial
statements are translated at the middle rates at the balance sheet date. Hedged
items and related  derivatives are measured  separately at their fair values at
the balance sheet date in accordance with IAS 39.103.

                                       F-8

<PAGE>

    The annual  financial  statements of companies  domiciled  outside the euro
zone are  translated  into euros in accordance  with IAS 21. For all SGL Carbon
Group companies, translation is effected on the basis of the local currency, as
the  companies  are  economically  independent.  Balance  sheet items of annual
financial  statements  that are not  prepared  in euros are  translated  at the
middle rates  prevailing at the balance sheet date;  income statement items are
translated at average rates for the year.

    Exchange  differences  resulting from the application of different exchange
rates in the income  statements and the balance sheets,  as well as differences
from the translation of net assets at rates differing from those applied in the
prior-year period, are taken directly to retained earnings.

    Changes  in the  exchange  rates of  currencies  that are  material  to the
consolidated financial statements are presented below:


FOREIGN CURRENCY

<TABLE>
<CAPTION>
                             [E] MIDDLE RATES AT THE    AVERAGE RATE
                               BALANCE SHEET DATE            [E]
                           --------------------------  --------------
                 ISO CODE  DEC 31. 2002  DEC 31. 2001    2002    2001
                 --------  ------------  ------------  ------  ------


<S>                   <C>           <C>           <C>     <C>     <C>
US dollar......       USD        1.0415        0.8820  0.9448  0.8957
Sterling.......       GBP        0.6502        0.6088  0.6288  0.6219
Canadian dollar       CAD        1.6385        1.4102  1.4826  1.3866
Polish zloty...       PLN        4.0202        3.5068  3.8894  3.6815

</TABLE>
    FINANCIAL INSTRUMENTS

    The SGL  Carbon  Group  uses all  standard  financial  instruments  such as
interest  rate swaps,  interest  rate  options,  currency  forwards and options
purely for hedging purposes and to reduce risk.

    Derivatives are measured at cost when the transaction is executed. They are
subsequently  remeasured  at their  fair  values  at the  balance  sheet  date.
Presentation in the income statement is based on the underlying transaction.


    INTANGIBLE ASSETS

    Purchased  intangible  assets  are  carried at cost and  amortized  over an
expected  useful  life  of  three  years.   Purchased   goodwill  is  generally
capitalized and amortized over its expected useful life of 20 years. Internally
generated  intangible  assets are  capitalized at cost and amortized over their
expected useful life where future economic benefits are expected to flow to the
Company.  Research and development costs are not capitalized,  but are expensed
directly when incurred.


    PROPERTY, PLANT AND EQUIPMENT

    Property,  plant  and  equipment  is  capitalized  at cost and  reduced  by
straight-line depreciation.  Borrowing costs are not capitalized.  Repair costs
are expensed  directly when  incurred.  Contracts in which the lessee bears all
significant opportunities and risks from the use of the leased asset, and which
are hence classified as finance leases, are carried at their fair valuesor,  if
lower, at the net present value of the minimum lease payments. All other leases
are  treated as  operating  leases  and, as a result,  the lease  payments  are
expensed when incurred.  The range of the standard useful lives are as follows:
buildings  10 to 41 years,  technical  equipment  and  machinery 4 to 25 years,
other equipment, operating and office equipment 3 to 15 years.

    Additions to items of movable  plant and equipment in the first half of the
year are depreciated at the full-year rate; additions in the second half of the
year are depreciated at half the full-year rate.  Low-value  assets are written
off in full  in the  year of  acquisition  and  reported  as  disposals  in the
statement of changes in noncurrent assets. The resulting effects on net assets,
financial position and results of operations are insignificant.

                                       F-9

<PAGE>

    NONCURRENT FINANCIAL ASSETS

    Noncurrent  financial  assets are carried at cost,  net of any  write-downs
incurred.  Interest-free and low-interest  long-term receivables are discounted
at a standard market rate for risk-free instruments.


    INVENTORIES

    Inventories are carried at cost using the weighted  average cost method are
written down to the lower net realizable  value where required.  Net realizable
value is the estimated selling price less the estimated costs of completion and
the estimated costs necessary to make the sale.  Specific valuation  allowances
are also  charged for  inventory  risks.  In addition to directly  attributable
costs,  production  costs also  include  appropriate  shares of  materials  and
production  overheads,  as  well  as  depreciation  and  write-downs.  Directly
attributable costs include labor costs,  including  pensions,  amortization and
directly  attributable  material costs.  Borrowing  costs are not  capitalized.
Construction contracts whose outcome can be reliably estimated and which have a
material effect are valued using the percentage of completion method.


    CUSTOMER-RELATED EXPENSES

    Advertising and sales promotion expenses as well as other  customer-related
expenses are expensed directly when incurred. Provisions are recognized for the
estimated cost of warranties after the date of sale of the product concerned.


    RECEIVABLES AND OTHER CURRENT ASSETS

    Trade and other receivables are carried at their principal  amount,  net of
any bad debt allowances  calculated on the basis of the probable  default risk.
Bills  receivable and other  long-term  receivables  are discounted at standard
market rates.

    The  carrying  amounts of assets are reviewed  where there are  indications
that the  carrying  amount of an asset  exceeds its value in use or net selling
price  (impairment  test).  The carrying amount is written down if it is higher
than the recoverable amount.


    PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS

    For the SGL Carbon defined benefit plans, provisions for pensions and other
employee  benefits  from  defined  benefit  plans are  measured by  independent
actuaries  using the projected unit credit method and reflect future salary and
pension  increases in  accordance  with IAS 19. The  interest  component of the
addition to pension  provisions is carried under net financing costs.  Payments
under  defined  contribution  plans are  recognized  as expenses at the time of
payment.


    OTHER PROVISIONS

    Other  provisions are recognized in accordance  with IAS 37 for obligations
to third  parties that will  probably be required to be settled,  and where the
amount of the obligation can be reliably estimated.  Long-term other provisions
are  only  discounted  in  individual  cases.   Restructuring   provisions  are
recognized  where a formal  restructuring  plan has been  adopted and  publicly
announced in sufficient  detail.  The accounting for our stock option plans and
recognition of the appropriate provisions are described in note 31.


    PROVISIONS FOR ENVIRONMENTAL PROTECTION OBLIGATIONS

    The SGL Carbon Group  recognizes  provisions for  environmental  protection
obligations  where it is probable that such an obligation exists and its amount
can be reasonably estimated.  Any possible insurance  compensation payments are
not deducted when estimating such liabilities.


    LIABILITIES

    Liabilities  are  carried  at  their  notional  amount  or  at  the  higher
redemption  amount at the balance  sheet  date.  Interestfree  or  low-interest
liabilities  due after more than one year are  discounted  to the balance sheet
date.  One-time fees for long-term loan  agreements are amortized over the term
of the loan agreement.

                                      F-10

<PAGE>

    DEFERRED INCOME

    Government  grants are recognized only if the grants have been received and
it is likely that the Company  will comply  with the  conditions  attaching  to
them.  The amounts are carried in deferred  income and  recognized as income as
the associated expenses are incurred.

    INCOME AND EXPENSES

    Income and  expenses of the fiscal year are  recognized  upon  realization.
Sales revenue is recognized  at the time of transfer of risk,  generally  after
delivery of the products or rendering of the services, net of any discounts and
rebates granted.  The percentage of completion method in accordance with IAS 11
is applied to significant construction contracts.

    Operating  expenses are  recognized  when the service is utilized or at the
time  when  they are  incurred.  Interest  income  and  expenses  are  accrued.
Dividends are generally recognized at the time of distribution.  To enhance the
quality  of  presentation  of  earnings  power,  costs  relating  to  antitrust
proceedings and restructuring are presented separately on the income statement.

    DEFERRED TAX ASSETS AND LIABILITIES

    Income  taxes are  calculated  using the balance  sheet  liability  method.
Deferred tax assets and  liabilities  are  presented  separately on the balance
sheet to reflect  the future tax effect of  temporary  differences  between the
carrying amounts of assets and liabilities in the financial accounts and in the
tax accounts.  Deferred tax assets and  liabilities are calculated on the basis
of the tax rates expected to be enacted when the items reverse.  The effects of
changes in tax rates are  recognized at the time new tax rules come into force.
Deferred tax assets are only recognized for tax loss carryforwards where future
utilization is probable.

    ESTIMATES AND ASSUMPTIONS

    Preparation of financial statements requires management in certain cases to
make  estimates  and   assumptions   regarding  the  amounts  of   receivables,
liabilities  and  provisions,  the  disclosure  of contingent  liabilities  and
reported  amounts of income and expenses.  Actual amounts may differ from those
estimates.

2.  EXPLANATION OF SIGNIFICANT DIFFERENCES BETWEEN GERMAN ACCOUNTING PRINCIPLES
    AND THE INTERNATIONAL ACCOUNTING STANDARDS IN THE SGL CARBON GROUP

    The  significant   differences   between  the  IFRSs/IASs  and  the  German
Commercial Code (HGB) that are relevant to the SGL Carbon Group are as follows:

        *   Under the HGB,  goodwill  may be  capitalized  and  amortized  over
            generally 15 years or eliminated  directly against the reserves (as
            was the case in the SGL Carbon  Group until 1994).  The  IFRSs/IASs
            require  goodwill to be capitalized and amortized over a maximum of
            20 years.  The cost of  integrating  the company  acquired is not a
            component of the cost of acquisition in accordance  with the IFRSs/
            IASs. The resulting goodwill and goodwill  amortization charges are
            correspondingly lower.

        *   Under the IFRSs/IASs,  internally  generated  intangible assets are
            capitalized if future economic benefits are expected to flow to the
            enterprise.

        *   Depreciation   of  movable   items  of  plant  and   equipment  was
            retrospectively changed from the declining balance to the straight-
            line method of depreciation.

        *   Leased items of property, plant and equipment that are attributable
            to the SGL Carbon Group as the beneficial  owner in accordance with
            the criteria set out in IAS 17 must be capitalized and depreciated.
            The associated  liabilities  are reduced as lease payments are made
            and  apportioned  between  interest  expense and  reduction  of the
            capitalized lease obligations.

        *   The  IFRSs/IASs  do not  permit  general  valuation  allowances  on
            inventories and receivables.

                                      F-11

<PAGE>

        *   Foreign currency translation under the HGB is based on the imparity
            principle:  foreign currency  receivables must be translated at the
            rate prevailing at the transaction date or at the lower rate at the
            balance sheet date. Foreign currency liabilities must be translated
            at the rate  prevailing  at the  transaction  date or at the higher
            rate at the balance sheet date. The IFRSs/IASs  require all foreign
            currency receivables and liabilities to be translated at the middle
            rate at the balance sheet date. Any resulting  gains and losses are
            recognized in income.

        *   Deferred  taxes are recognized and measured using the balance sheet
            liability method in accordance with IAS 12, in contrast to the HGB.
            Under IAS,  assets and  liabilities  from amounts of future  income
            taxes  recoverable  or payable must be recognized  using the future
            enacted tax rates.  This also includes the  recognition of deferred
            tax  assets  from tax loss  carryforwards  if it is  probable  that
            taxable  profits will be available  against  which the deferred tax
            asset can be utilized.

        *   Under the IFRSs/IASs,  pension provisions are calculated to reflect
            future salary and pension increases (projected unit credit method).
            Under German law, the provision is calculated using the net present
            value  method in  accordance  with  section 6a of the EStG  (German
            Income Tax Act).  IFRS/IAS pension  provisions are generally higher
            than HGB pension provisions.

        *   55  Recognition of provisions  under the  IFRSs/IASs  requires that
            future  utilization  of the  provision is probable.  Under the HGB,
            provisions may also be recognized for possible obligations.

        *   Under the IFRSs/IASs,  long-term provisions and liabilities must be
            discounted, producing a lower carrying amount. The accrued interest
            on  the  liability   relating  to  the  North  American   antitrust
            proceedings calculated each quarter reduces net profit or increases
            net loss before tax compared with the HGB result.

3.  ACQUISITIONS AND BASIS OF CONSOLIDATION

    The  19.6%  interest  in  ZEW  Zaklady  Elektrod  Weglowych  S.A.,  Ratibor
(Poland), acquired by SGL Carbon in 1999 was increased in several steps in 2000
to 97.2%. The total acquisition cost amounted to [E]25.9 million.  This company
was  fully  consolidated  effective  December  31,  2000,  although  it was not
recognized in the income statement for fiscal year 2000.

    As of January 1, 2001, all shares in SGL Acotec Ltda.,  Sao Paulo (Brazil),
-- formerly  KCH-ANCOBRAS  Ltda.  -- were  acquired  in  exchange  for of a 38%
interest in Larrondo Inversiones S.L. at a purchase price of [E]1.8 million. In
addition,  the interest in SGL Acotec  (Wuhan) Co.  Ltd.,  Wuhan  (China),  was
increased from 70% to 90%.  [E]0.9 million was paid for the  acquisition of the
20% interest to the partner continuing to hold the 10% interest. Both companies
are fully consolidated.

    Tokai Carbon Co. Ltd., Tokyo (Japan), a third-party enterprise,  acquired a
49% interest in the joint venture which has been  operating  under the name SGL
Tokai  Carbon  Ltd.,  Shanghai  (China),  since  July  2002.  The 51%  interest
remaining  in  the  hands  of  SGL  Carbon  is  carried  at  cost  and  is  not
consolidated, because it is not material.

    All shares in SGL PanTrac Gesellschaft fur elektrische Kontakte mbH, Berlin
(PanTrac), were sold to E-Carbon S.A., Brussels, a third-party enterprise,  and
were transferred in January 2003.  PanTrac was still fully  consolidated in the
consolidated financial statements for fiscal year 2002.

    BASIS OF CONSOLIDATION

    All significant subsidiaries under the legal or constructive control of SGL
Carbon have been consolidated. At December 31, 2002, eight (2001: seven) German
and forty three (2001:43) foreign subsidiaries were consolidated in addition to
SGL Carbon AG.  Compared with 2001, one German and one foreign  subsidiary were
consolidated  for  the  first  time,  and one  foreign  company  was no  longer
consolidated  because  it was  deemed to be  insignificant.  The two  companies
consolidated   for  the  first  time  are   companies   that  were   previously
unconsolidated. 25 companies were not consolidated

                                      F-12

<PAGE>

because  they are  insignificant  overall for the  presentation  of net assets,
financial position and results of operations.  One joint venture was carried at
equity. The significant consolidated companies are listed on page 82.


    CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED BALANCE SHEET DISCLOSURES

    Note 28 presents a breakdown of sales revenue by Business Area.


4.  GENERAL AND ADMINISTRATIVE EXPENSES

    During the year under  review,  general and  administrative  expenses  were
reduced  significantly  compared  with the  previous  year.  These  savings are
primarily due, in particular, to the restructuring program implemented in North
America, as well as to a reduction in variable compensation.


5.  OTHER OPERATING INCOME/EXPENSES, NET

    Other operating income is primarily composed of income from the reversal of
provisions ([E]10.4 million), in particular staff cost and warranty provisions,
insurance compensation ([E]4.9 million), income from the disposal of noncurrent
assets  ([E]4.5  million),  income  from  changes  in bad  debt  allowances  on
receivables  ([E]2.8  million),  the amortization of negative  goodwill ([E]2.3
million) and exchange rate gains ([E]1.8 million).

    The major items of other  operating  expenses are  amortization of goodwill
([E]7.4  million),  additions  to  provisions,  exchange  rate  losses  ([E]1.6
million) and losses on the disposal of noncurrent assets ([E]0.6 million).


6.  COSTS RELATING TO ANTITRUST PROCEEDINGS AND RESTRUCTURING EXPENSES

<TABLE>
<CAPTION>
                                                                2002  2001  2000
                                                                ----  ----  ----
                                                                [E]M  [E]M  [E]M

<S>                                                              <C>   <C>   <C>
Cost relating to antitrust proceedings........................  22.0  35.0   0.0
Restructuring expenses........................................   8.3  41.0   0.0
                                                                ----  ----  ----
                                                                30.3  76.0   0.0
                                                                ====  ====  ====

</TABLE>

    The costs relating to antitrust proceedings relate primarily to an increase
in the provisions for fines imposed by the European  Commission in fiscal years
2001 and 2002. The restructuring  expenses in fiscal year 2002 relate to the GS
and CP  businesses  and are  linked to the  acceleration  of the  restructuring
program and to the fact that measures  originally planned for 2003 were brought
forward  to  2002,  resulting  in a  significant  increase  in  job  cuts.  The
restructuring  expenses for the previous  year contain  closure costs for three
plants in the US, the  resulting  expenses for reducing the  workforce  and for
impairment  losses  of  noncurrent  and  current  assets  in the US, as well as
workforce resizing costs in Europe (see also notes 21 and 25).


7.  NET FINANCING COSTS

<TABLE>
<CAPTION>
                                                                                 2002   2001   2000
                                                            -------------------------  -----  -----
                                                                                 [E]M   [E]M   [E]M

<S>                                                                               <C>    <C>    <C>
Net investment income/(loss)..............................                       (1.8)   3.2    0.6
                                                            -------------------------  -----  -----

Interest on other securities and long-term loans..........                        0.1    0.5    0.1
Other interest and similar income.........................                        2.1    2.0    2.3
(thereof from subsidiaries)...............................                                     (0.0)
Interest on borrowings and other interest.................                      (27.4) (28.4) (31.5)
Accrued interest on liabilities from antitrust proceedings                        3.4   (2.7)  (4.3)
Interest component of appropriation to pension provisions.                      (10.4)  (9.9)  (9.2)
                                                            -------------------------  -----  -----
Interest expense, net.....................................                      (32.2) (38.5) (42.6)
                                                            =========================  =====  =====

                                      F-13

<PAGE>

                                                                                 2002   2001   2000
                                                            -------------------------  -----  -----
                                                                                 [E]M   [E]M   [E]M

Other net financing costs                                                         8.5  (13.2) (17.2)
                                                            -------------------------  -----  -----
                                                                                (25.5) (48.5) (59.2)
                                                            =========================  =====  =====

</TABLE>

    Net financing costs include non-cash expenses  amounting to [E]3.9 million.
Other net  financial  income/net  financing  costs relate to net exchange  rate
gains and  losses on  financial  transactions  and to  write-downs  of  current
financial  instruments.  The fair value of options issued to a third party (see
note 26)  recognized in the previous year was reversed in fiscal year 2002. The
result is reported under other net financing  costs. We have  reclassified  the
interest  component of foreign currency hedging costs of [E]1.0 million in 2001
from interest on borrowings and other  interest  expense to other net financial
income/net financing costs.


8.  OTHER DISCLOSURES

COSTS OF MATERIAL

<TABLE>
<CAPTION>
                                                                       2002   2001   2000
                                                                      -----  -----  -----
                                                                       [E]M   [E]M   [E]M

<S>                                                                     <C>    <C>    <C>
Cost of raw materials and consumables used and of good purchased
  and held for resale...............................................  242.1  297.1  290.4
Cost of purchased services..........................................   61.3   78.2   93.4
                                                                      -----  -----  -----
                                                                      303.5  375.3  383.8
                                                                      =====  =====  =====


</TABLE>
STAFF COSTS

<TABLE>
<CAPTION>
                                                                       2002   2001   2000
                                                                      -----  -----  -----
                                                                       [E]M   [E]M   [E]M

<S>                                                                     <C>    <C>    <C>
Wages and salaries..................................................  298.1  326.0  341.6
Social security contributions, retirement and other benefit costs      70.1   77.2   74.3
(thereof for pensions)..............................................  (18.7) (17.3) (17.7)
                                                                      -----  -----  -----
                                                                      368.2  403.2  415.9
                                                                      =====  =====  =====



</TABLE>
    OTHER TAXES

    Other taxes are reported in the appropriate  functional expense.  The total
expense was [E]9.8 million in 2002 and [E]9.7 million in 2001.


BREAKDOWN OF EMPLOYEES

<TABLE>
<CAPTION>
Annual average number of employees                                     2002   2001   2000
--------------------------------------------------------------------  -----  -----  -----

<S>                                                                     <C>    <C>    <C>
Production and auxiliary plants.....................................  5,465  6,103  5,837
Sales and marketing.................................................    638    655    717
Research............................................................    307    487    475
Administration, other functions.....................................  1,294  1,246  1,264
                                                                      -----  -----  -----
                                                                      7,704  8,491  8,293
                                                                      =====  =====  =====
</TABLE>

                                      F-14

<PAGE>

    The  reduction  in the  average  number  of  employees  is a result  of the
headcount reduction implemented under the previous year's restructuring program
and the fact that measures planned for 2003 were brought forward.

9.  INCOME TAX BENEFIT/EXPENSE

    The tax expense is composed as follows:
<TABLE>
<CAPTION>
                                                                2002   2001  2000
                                                                ----  -----  ----
                                                                [E]M   [E]M  [E]M

<S>                                                              <C>    <C>   <C>
CURRENT INCOME TAX EXPENSE
Germany.......................................................  (2.1)  (5.6)  0.9
Rest of World.................................................  (5.7) (16.8) 28.0

DEFERRED TAXES
Germany.......................................................  11.1   (1.6) (1.3)
Rest of World.................................................   0.3   (5.2) 28.1
                                                                ----  -----  ----
Income tax expense (income)...................................   3.6  (29.2) 55.7
                                                                ====  =====  ====

</TABLE>

    Deferred tax assets from tax loss carryforwards are generally recognized in
the  IFRS/IAS  consolidated  financial  statements  on the  basis of  five-year
projected earnings before taxes of the individual consolidated  companies.  The
projections  reflect  uncertainties about certain assumptions and other general
conditions  and,  in  exceptional  cases,  deferred  tax  assets  from tax loss
carryforwards have not been recognized.

    Deferred tax assets from tax loss  carryforwards were not recognized in the
US and the UK in the period  under  review.  Deferred  tax assets from tax loss
carryforwards  in the US were  written  down in full in the  2001  consolidated
financial statements as a consequence of the economic situation in the US steel
industry.

    Since the Tax  Reduction  Act became  effective  in January  2001,  the net
profit  of  German  companies  has  been  subject  to a  standard  25%  rate of
corporation  tax. In September  2002,  the rate of German  corporation  tax for
fiscal 2003 was increased to 26.5%.  The impact of this tax increase,  which is
limited to one year, is not of material  importance  and has therefore not been
included in the calculation of deferred  taxes. A solidarity  surcharge of 5.5%
is added to the corporation tax rate resulting in an aggregate  corporation tax
rate for 2001 and 2002 of 26.4%. Together with the trade tax burden of 12%, the
German income tax rate amounts to a total of 38.4%.

RECONCILIATION

<TABLE>
<CAPTION>
                                                               2002   2001   2000
                                                              -----  -----  -----
                                                               [E]M   [E]M   [E]M

<S>                                                             <C>    <C>    <C>
Net profit (loss) before tax................................  (27.2) (65.8)  20.0
                                                              -----  -----  -----
Expected tax income/expense at 38.4%........................   10.4   25.3   (7.7)
                                                              -----  -----  -----
Change in expected tax expense due to:
-- non-deductable expenses
   (incl. goodwill amortization) and tax-exempt income:.....   (7.6) (16.4)  (2.9)
-- Taxation differences at foreign companies................    3.3   (0.5)   4.6
-- Prior-period taxes.......................................    4.0   (5.2)   0.0
-- Effects of change in tax rate............................    0.0   (0.7)  (5.9)
-- Change in valuation allowance against deferred tax assets  (11.4) (31.6) (46.0)
-- Other....................................................    4.9   (0.1)   2.2
                                                              -----  -----  -----
= Effective tax benefit (+)/expense(-)......................    3.6  (29.2) (55.7)
                                                              =====  =====  =====

</TABLE>

                                      F-15

<PAGE>

    Since the income tax burden differs from country to country, these taxation
differences are disclosed  separately in the above  reconciliation.  The prior-
period  taxes are the  result  of  refunds  for  taxes  paid in the past due to
successful appeals to the tax authorities.  The valuation  allowance charged on
deferred tax assets relates  primarily to the  non-recognition  of deferred tax
assets in the US and the UK.


10. EARNINGS PER SHARE (EPS)

    Basic  earnings per share are calculated by dividing the net profit or loss
attributable to SGL Carbon shareholders (2002: [E]-23.6 million; 2001: [E]-95.2
million)  by  the  weighted  average  number  of  shares   outstanding   (2002:
21,813,930;   2001:   21,530,563).   The  weighted  average  number  of  shares
outstanding  is calculated  from the number of shares  outstanding at January 1
plus the new shares issued in February 2002 (see note 17).

    Because of the net loss for the year and the resulting lack of any dilutive
effect,  the diluted  earnings per share in accordance  with IAS 33.40 for both
fiscal years were identical to the basic earnings per share.


11. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                            DEC. 31,  DEC. 31,  DEC. 31,  DEC. 31,    DEC. 31,  DEC. 31,  DEC. 31,  DEC. 31,
                                2002      2002      2002      2002        2001      2001      2001      2001
                          ----------  --------  --------  --------  ----------  --------  --------  --------
                          INDUSTRIAL                                INDUSTRIAL
                             RIGHTS,                                   RIGHTS,
                            SOFTWARE                                  SOFTWARE
                                 AND                                       AND
                             SIMILAR            NEGATIVE               SIMILAR            NEGATIVE
                              RIGHTS  GOODWILL  GOODWILL     TOTAL      RIGHTS  GOODWILL  GOODWILL     TOTAL
                          ----------  --------  --------  --------  ----------  --------  --------  --------
                                [E]M      [E]M      [E]M      [E]M        [E]M      [E]M      [E]M      [E]M

<S>                              <C>       <C>       <C>       <C>         <C>       <C>       <C>       <C>
HISTORICAL COST:
Balance at Jan. 1.......        24.0     140.6      (8.3)    156.3        24.3     138.2      (8.3)    154.2
Change in basis of
  consolidation.........         0.0       0.0       0.0       0.0         0.0       0.0       0.0       0.0
Currency translation....        (1.0)     (8.5)     (3.1)    (12.8)        0.9       3.8       0.0       4.7
Additions...............        12.0       0.1       0.0      12.1         1.1       4.4       0.0       5.5
Disposals...............        (0.6)      0.0       0.0      (0.6)       (2.3)     (5.8)      0.0      (8.1)
                          ----------  --------  --------  --------  ----------  --------  --------  --------
Balance at Dec. 31......        34.4     132.2     (11.4)    155.2        24.0     140.6      (8.3)    156.3
                          ----------  --------  --------  --------  ----------  --------  --------  --------
CUMULATIVE AMORTIZATION:
Balance at Jan. 1.......        18.5      31.3      (4.7)     45.1        15.7      22.7      (0.7)     37.7
Change in basis of
  consolidation.........         0.0       0.0       0.0       0.0         0.0       0.0       0.0       0.0
Currency translation....        (1.2)     (1.8)      0.0      (3.0)        1.0       0.3       0.0       1.3
Additions...............         4.8       7.4      (2.3)      9.9         3.5       8.4      (4.0)      7.9
Disposals...............        (0.6)      0.0       0.0      (0.6)       (1.7)     (0.1)      0.0      (1.8)
                          ----------  --------  --------  --------  ----------  --------  --------  --------
Balance at Dec. 31......        21.5      36.9      (7.0)     51.4        18.5      31.3      (4.7)     45.1
                          ----------  --------  --------  --------  ----------  --------  --------  --------
CARRYING AMOUNTS AT
  DEC. 31...............        12.9      95.3      (4.4)    103.8         5.5     109.3      (3.6)    111.2
                          ==========  ========  ========  ========  ==========  ========  ========  ========

</TABLE>

    Industrial  rights,  software and similar rights mainly comprise  purchased
and internally  developed  software.  Additions in the year under review relate
mainly to the first phase in the  creation  of a  standardized  Group-wide  SAP
system  (SGL ONE).  The aim of the SAP  project is to  replace a  multitude  of
legacy systems with a single,  fully  integrated  global SAP system. A total of
[E]4.9 million has been  capitalized to date for the SGL ONE project.  Negative
goodwill is reversed to the income  statement  across the remaining useful life
of the asset.  Goodwill  amortization is contained in other operating expenses.
There was no requirement for write-downs from impairment testing.

                                      F-16

<PAGE>

12. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                         OTHER      ADVANCE
                                         TECHNICAL  EQUIPMENT,     PAYMENTS
                             LAND, LAND  EQUIPMENT   OPERATING   AND ASSETS
                             RIGHTS AND        AND  AND OFFICE        UNDER
[E]M                          BUILDINGS  MACHINERY   EQUIPMENT  DEVELOPMENT    TOTAL
                             ----------  ---------  ----------  -----------  -------

<S>                                 <C>        <C>         <C>          <C>      <C>
Historical cost:
Balance at Jan. 1, 2002....       395.8    1.106.6       142.5         52.9  1,697.0
Change in basis of
  consolidation............       (10.9)     (36.4)       (8.5)         0.0    (55.8)
Currency translation.......       (19.3)     (61.4)       (3.2)        (2.2)   (86.1)
Reclassifications..........        10.1        0.0         0.0        (10.1)     0.0
Additions..................         2.6       43.7         6.1        (10.9)*   41.5
Disposals..................        (6.3)     (28.6)       (5.5)       (0.1)    (40.5)
                             ----------  ---------  ----------  -----------  -------
Balance at Dec. 31, 2002...       372.0    1.023.9       131.4         29.6  1,556.9
                             ----------  ---------  ----------  -----------  -------
CUMULATIVE DEPRECIATION
Balance at Jan. 1, 2002....       214.5      811.3       118.3          0.2  1,144.3
Change in basis of
  consolidation............       (10.0)     (34.3)       (8.5)         0.0    (52.8)
Currency translation.......        (7.1)     (38.1)       (2.2)         0.0    (47.4)
Reclassifications..........         0.0        0.0         0.0          0.0      0.0
Additions..................        10.3       52.4         8.6          0.0     71.3
Disposals..................        (4.0)     (26.5)       (5.3)         0.0    (35.8)
                             ----------  ---------  ----------  -----------  -------
Balance at Dec. 31, 2002...       203.7      764.8       110.9          0.2  1,079.6
                             ----------  ---------  ----------  -----------  -------
Carrying amount at Dec. 31,
  2002.....................       168.3      259.1        20.5         29.4    477.3
                             ==========  =========  ==========  ===========  =======
HISTORICAL COST:
Balance at Jan. 1, 2001....       377.3    1.049.8       145.2         35.4  1,607.7
Change is basis of
  consolidation............         2.4        0.6         0.5          0.0      3.5
Currency translation.......         6.7       19.1         0.4         (1.1)    25.1
Reclassifications..........         1.6        2.7         0.0         (4.3)     0.0
Additions..................         8.7       49.3         9.7         22.9     90.6
Disposals..................        (0.9)     (14.9)      (13.3)         0.0    (29.1)
                             ----------  ---------  ----------  -----------  -------
Balance at Dec. 31, 2001          395.8    1,106.6       142.5         52.9  1,697.8
                             ----------  ---------  ----------  -----------  -------
CUMULATIVE DEPRECIATION
Balance at Jan. 1, 2001....       202.1      751.7       119.5          0.0  1,073.3
Change in basis of
  consolidation............         0.7        0.4         0.4          0.0      1.5
Currency translation.......        (1.8)       8.2         0.0          0.0      6.4
Reclassifications..........         0.0        0.1        (0.1)         0.0      0.0
Additions..................        14.3       62.6        10.8          0.2     87.9
Disposals..................        (0.8)     (11.7)      (12.3)         0.0    (24.8)
                             ----------  ---------  ----------  -----------  -------
Balance at Dec. 2001.......       214.5      811.3       118.3          0.2  1,144.3
                             ----------  ---------  ----------  -----------  -------
CARRYING AMOUNT AT DEC. 31,
  2001.....................       181.3      295.3        24.2         52.7    553.5
                             ==========  =========  ==========  ===========  =======

</TABLE>

* Balance of additions of [E]28.9 million and reclassifications to operational
equipment of [E]39.8 million

                                      F-17

<PAGE>

    Additions in property,  plant and equipment fell by [E]49.1  million in the
year under  review,  from [E]90.6  million to [E]41.5  million.  In fiscal year
2002,  [E]5.5  million  was  invested  in the  new  carbon-ceramic  brake  disc
production plant,  which was completed in 2002. Other material additions relate
primarily to the  replacement of capital assets for our plants in Germany,  the
US and Italy.  Capitalized  leased  assets  relate to land and buildings and to
technical equipment, and amount to [E]1.4 million at December 31, 2002.


13. NONCURRENT FINANCIAL ASSETS

<TABLE>
<CAPTION>
                                   INVESTMENTS                    OTHER
                                        IN NOT   NONCURRENT  NONCURRENT
                                  CONSOLIDATED    FINANCIAL   FINANCIAL
                                  SUBSIDIARIES  INSTRUMENTS      ASSETS  TOTAL
                                          [E]M         [E]M        [E]M   [E]M
                                  ------------  -----------  ----------  -----

<S>                                        <C>          <C>         <C>    <C>
HISTORICAL COST:
Balance at Jan.1, 2002..........          27.3          2.7         5.2   35.2
Change in basis of consolidation          11.0          0.0         0.0   11.0
Currency translation............          (1.7)         0.0         0.1   (1.6)
Reclassifications...............           0.0         (0.3)        0.3    0.0
Additions.......................           0.6          0.1         0.0    0.7
Disposals.......................          (4.4)         0.0        (0.2)  (4.6)
                                  ------------  -----------  ----------  -----
Balance at Dec.31, 2002.........          32.8          2.5         5.4   40.7
                                  ------------  -----------  ----------  -----
CUMULATIVE WRITE-DOWNS:
Balance at Jan.1, 2002..........           1.2          0.0         0.0    1.2
Change in basis of consolidation           6.0          0.0         0.0    6.0
Currency translation............           0.0          0.0         0.1    0.1
Additions.......................           0.0          0.0         0.2    0.2
Disposals.......................           0.0          0.0         0.0    0.0
                                  ------------  -----------  ----------  -----
Balance at Dec.31, 2002.........           7.2          0.0         0.3    7.5
                                  ------------  -----------  ----------  -----
CARRYING AMOUNT AT DEC.31, 2002.          25.6          2.5         5.1   33.2
                                  ============  ===========  ==========  =====
HISTORICAL COST:
Balance at Jan.1, 2001..........          30.1          2.5         4.2   36.8
Change in basis of consolidation           0.0          0.0         0.1    0.1
Currency translation............           0.7          0.0         0.1    0.8
Reclassifications...............          (1.0)         0.5         0.5    0.0
Additions.......................           2.2          0.5         0.9    3.6
Disposals.......................          (4.7)        (0.8)       (0.6)  (6.1)
                                  ------------  -----------  ----------  -----
Balance at Dec.31, 2001.........          27.3          2.7         5.2   35.2
                                  ------------  -----------  ----------  -----
CUMULATIVE WRITE-DOWNS:
Balance at Jan.1, 2001..........           0.9          0.0         0.0    0.9
Change in basis of consolidation           0.0          0.0         0.0    0.0
Currency translation............           0.0          0.0         0.0    0.0
Additions.......................           0.8          0.0         0.0    0.8
Disposals.......................          (0.5)         0.0         0.0   (0.5)
Balance at Dec.31, 2001.........           1.2          0.0         0.0    1.2
                                  ------------  -----------  ----------  -----
CARRYING AMOUNT AT DEC.31, 2001.          26.1          2.7         5.2   34.0
                                  ============  ===========  ==========  =====

</TABLE>

                                      F-18

<PAGE>

    Other  noncurrent  financial  assets  relate  primarily to the  capitalized
surrender  value  of  reinsurance   policies.   The  change  in  the  basis  of
consolidation  in the year under  review  relates to the  carrying  amount of a
company  which is no longer  consolidated  due to  immateriality.  There are no
longer any advance payments on noncurrent financial assets.


14. INVENTORIES

<TABLE>
<CAPTION>
                                                        DEC. 31,  DEC. 31,
                                                            2002      2001
                                                        --------  --------
                                                            [E]M      [E]M
<S>                                                          <C>       <C>
Raw materials and supplies............................      83.1     109.1
Work in progress......................................     147.9     200.9
Finished goods and goods purchased and held for resale      54.5      71.0
Cost in excess of billings............................       9.3      12.6
Advance payments/minus payments received..............      (6.4)      0.6
                                                        --------  --------
                                                           288.4     394.2
                                                        ========  ========

</TABLE>

    Cost  in  excess  of  billings  relates  to  customer-specific   production
contracts  measured at cost.  The total  amount of  inventories  carried at net
realizable  value amounts to [E]5.8  million.  Advances  received  amounting to
[E]7.5  million  were netted  against  inventories  for the first time in 2002.
Write-downs were only reversed to a limited extent.


15. TRADE RECEIVABLES

<TABLE>
<CAPTION>
                                                        DEC. 31,  DEC. 31,
                                                            2002      2001
                                                        --------  --------
                                                            [E]M      [E]M
<S>                                                          <C>       <C>
Customers ............................................     198.1     256.0
thereof with more than one year to maturity
  (2002: [E]0.3 million, 2001: [E]0.4 million)
Subsidiaries .........................................      10.0       6.2
                                                        --------  --------
                                                           208.1     262.2
                                                        ========  ========

</TABLE>

    Trade  receivables  are  reported net of specific  allowances  for doubtful
accounts  amounting  to [E]9.6  million as of  December  31,  2002 and  [E]15.0
million  as  of  December  31,  2001.  No  general  valuation  allowances  were
recognized in 2002.  There were no trade  receivables  from  associates.  As of
December 31, 2002 and 2001, sales of receivables,  as reported during the year,
amounted to [E]41.2 million and [E]11.4 million, respectively.


16. OTHER RECEIVABLES AND OTHER CURRENT ASSETS

<TABLE>
<CAPTION>
                                                        DEC. 31,  DEC. 31,
                                                            2002      2001
                                                        --------  --------
                                                            [E]M      [E]M
<S>                                                          <C>       <C>
Other receivables from subsidiaries ..................       2.9       0.2
Other current assets .................................      57.8      47.2
  thereof with more than one year to maturity
  (2002: [E]0.0 million, 2001: [E]0.0 million)
                                                        --------  --------
                                                            60.7      47.4
                                                        ========  ========

</TABLE>

                                      F-19

<PAGE>

    Other current  assets relate  primarily to recoverable  taxes  amounting to
[E]19.8 million,  positive fair values of financial derivatives totaling [E]8.7
million,  prepaid  expenses of [E]7.0  million,  insurance  claims,  short-term
loans, purchase price receivables for noncurrent assets sold, and miscellaneous
receivables.


17. CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                                        DEC. 31,  DEC. 31,
                                                            2002      2001
                                                        --------  --------
                                                            [E]M      [E]M
<S>                                                          <C>       <C>
Cash and bank balances................................      21.4      11.6
Financial instruments.................................       0.1       0.5
                                                        --------  --------
                                                            21.5      12.1
                                                        ========  ========

</TABLE>

    The  increase in bank  balances as compared to the prior year is mainly due
to reporting date effects at subsidiary in Poland.

    On February 28, 2002 the Company  purchased  300,000 own shares at [E] 2.56
each. These shares resulted from the capital  increase  approved on January 23,
2002 and were for use by  employees.  In March 2002, a total of 276,707  shares
(notional [E] 708,370 = 1.3% of the share  capital) were issued to employees of
SGL Carbon AG and its  affiliates  as part of the bonus  program.  In  November
2002,  the  Company  purchased a total of 63,455 own shares at [E] 7.17 each (a
total of [E]  455,251).  Using the initial  portfolio of 2,027  shares,  88,775
shares  (notional  [E]  227,264 = 0.4% of the  share  capital)  were  issued as
employee  shares to employees of SGL Carbon AG and its  affiliates  in November
2002.  79,825 shares were purchased by the  participants at a price of [E] 4.42
each and 8,950  shares at a price of [E] 5.50  each.  As a result,  no  further
shares were held at the balance sheet date.

    The financial  instruments are classified as "available for sale". The fair
values of the financial instruments correspond to their carrying amounts. There
was no requirement to charge impairment losses.


18. DEFERRED TAX ASSETS

    Tax loss carryforwards are recorded primarily in the US and in Germany.  As
the law currently stands, the tax loss carryforwards in Germany can be utilized
without  limitation  of  time.  In the US,  the tax loss  carryforwards  expire
between  2018 and  2021.  These  tax loss  carryforwards  are  measured  at the
expected  enacted  future tax rates.  Valuation  allowances  are charged on the
gross  amounts  calculated  in this way to  obtain  the  amounts  likely  to be
utilized in the future.

    Deferred tax assets from loss  carryforwards  in the US and the UK were not
recognized   during   preparation  of  the  IFRS/IAS   consolidated   financial
statements.

    Deferred tax assets were also  recognized for timing  differences in profit
and  loss  resulting  from   consolidation   adjustments,   and  for  temporary
differences  in  carrying  amounts  at  the  Group  companies   resulting  from
provisions  for onerous  contracts not allowable for tax purposes and for other
measurement differences under the IFRSs/IASs.  In the event of doubts about the
tax-deductibility  of expenses,  an equivalent  valuation  allowance is charged
against the calculated  deferred tax assets. Most deferred tax assets have more
than one year to maturity.


19. EQUITY

    The  classification  of items of equity is  presented  in the  consolidated
statement of changes in shareholders equity on page F-7.

    The share  capital  of SGL  Carbon as of  December  31,  2002  amounted  to
[E]55,972,992 and is composed of 21,864,450 no-par value bearer shares.

                                      F-20

<PAGE>

    The share  capital of SGL Carbon may be increased  against cash or non-cash
contributions by a resolution  adopted by an Annual General Meeting by a simple
majority, or if the subscription rights of the shareholders are to be excluded,
by a majority  of at least  three-quarters  of the share  capital  present  (in
person or by proxy) at the  adoption  of the  resolution.  Any  decrease in the
share capital of SGL Carbon requires a resolution  adopted by a  three-quarters
majority.

    The  Annual  General  Meeting  of a  German  corporation  may  empower  the
Executive Committee to issue,  subject to the consent of the Supervisory Board,
shares up to a certain  aggregate  notional  amount  not  exceeding  50% of the
issued  share  capital at the time of the adoption of the  resolution  during a
period not exceeding five years.

    For  reasons of  transparency,  various  amounts of  authorized  capital in
existence at the time of different Annual General Meetings were aggregated in a
single  provision of the Articles of  Association  by  resolution of the Annual
General  Meeting on April 30, 2002. To do this,  the  following  authorizations
were revoked:  (i) the  authorization of the Executive  Committee in accordance
with Article 3 (6) of the Articles of Association to increase the share capital
by a total of up to [E]376,192  on one or more  occasions up to April 15, 2004,
with the consent of the Supervisory  Board, by issuing 146,950 new no-par value
shares for cash  contributions,  and (ii) the  authorization  of the  Executive
Committee in accordance  with Article 3 (8) of the Articles of  Association  to
increase  the share  capital  by a total of up to  [E]5,400,000  on one or more
occasions up to April 26, 2005, with the consent of the  Supervisory  Board, by
issuing new no-par value  shares for cash and/or  non-cash  contributions.  The
Annual  General  Meeting  resolved  to create new  authorized  capital I and to
revise Article 3 (6) of the Articles of Association. As a result, the Executive
Committee is authorized  to increase the Company's  share capital by a total of
up to  [E]6,928,192.00  on one or more occasions up to April 29, 2007, with the
consent of the  Supervisory  Board,  by issuing new shares  against cash and/or
non-cash  contributions  (authorized  capital I).  Shareholders must be granted
subscription  rights.  With the consent of the Supervisory Board, the Executive
Committee  is  authorized   to  exclude   fractions   from  the   shareholders'
subscription   rights.   Furthermore,   the  Executive  Committee  may  exclude
shareholders' subscription rights with the consent of the Supervisory Board,

        *   insofar as it is necessary to grant a right to subscribe for shares
            to the holders of warrants or the  creditors of  convertible  bonds
            issued by SGL Carbon  Aktiengesellschaft or its wholly owned direct
            or indirect  subsidiaries  to the extent that they are  entitled to
            this right after exercising  their options or conversion  rights or
            after fulfilling their conversion obligations,

        *   if  the  new  shares  are  issued  to   employees   of  SGL  Carbon
            Aktiengesellschaft   or  companies   affiliated   with  SGL  Carbon
            Aktiengesellschaft  as  defined  by  sections  15 ff.  of the  AktG
            (German Stock  Corporation  Act).  For this purpose,  however,  the
            share  capital may only be increased on one or more  occasions by a
            total of up to  [E]2,432,000.00  through the issue of up to a total
            of 950,000 new no-par value shares,

        *   if the  new  shares  are  issued  to the  employees  of SGL  Carbon
            Aktiengesellschaft  or affiliates of SGL Carbon  Aktiengesellschaft
            as defined by sections 15 ff. of the AktG who are  participating in
            SGL  Carbon   Aktiengesellschaft's  stock  option  plan.  For  this
            purpose, however, the share capital may only be increased on one or
            more occasions by a total of up to [E]640,000.00  through the issue
            of a total of up to 250,000 new no-par value shares,

        *   if the new shares are issued as part of a capital increase for non-
            cash contributions for the purpose of acquiring companies, parts of
            companies, or equity interests,

        *   by a total of up to  [E]5,597,299.20,  if the new shares are issued
            during a capital increase for cash contributions at a price that is
            not significantly lower than the market price.

    The Executive  Committee was also  authorized by the Annual General Meeting
on May 3, 2001 to increase the Company's share capital by up to  [E]21,058,304,
with the consent of the  Supervisory  Board, on one or more occasions up to May
2, 2006 by issuing  8,225,900 new no-par value shares for cash and/or  non-cash
contributions   (authorized   capital   Ia).   Shareholders   must  be  granted
subscription rights.  However, the Executive Committee is authorized to exclude
fractions from the  shareholders'  subscription  rights with the consent of the
Supervisory Board. The Executive Committee is also

                                      F-21

<PAGE>

authorized to exclude all shareholders' subscription rights with the consent of
the  Supervisory   Board  in  order  to  issue  the  new  shares  for  non-cash
contributions for the purpose of acquiring companies or equity interests.

    The share  capital of the Company  has been  contingently  increased  by an
additional [E]3,840,000,  composed of 1,500,000 no-par value bearer shares with
a notional  value of [E]2.56  each.  The  contingent  capital  increase will be
implemented  only  insofar as the  holders of  conversion  rights  attached  to
convertible  bonds  issued in  September  2000 in the amount of  [E]133,650,000
exercise their conversion  rights,  or insofar as holders of convertible  bonds
who are obliged to convert  such bonds  issued by SGL Carbon or a wholly  owned
direct or indirect  subsidiary of SGL Carbon on the basis of the  authorization
approved  by the  Annual  General  Meeting  on April  27,  2000  fulfill  their
conversion obligation.  The new shares carry dividend rights from the beginning
of the fiscal year in which they are created due to the exercise of  conversion
or option rights or through fulfillment of the conversion obligation.

    The share capital has been contingently increased by an additional notional
[E]4,096,000.  The  contingent  capital  increase will be  implemented  only by
issuing up to 1,600,000 new no-par value shares  carrying  dividend rights from
the  beginning  of the fiscal  year in which they were  issued and will only be
implemented insofar as the owners of subscription rights issued under the terms
of the Company's stock option plan on the basis of the  authorization  approved
on April 27, 2000 exercise their subscription rights.

    The Annual General  Meeting on May 3, 2001 approved to contingent  increase
in the share capital by up to [E]5,520,499.20 by issuing up to 2,156,445 bearer
shares. The contingent capital increase serves to grant option rights under the
terms and  conditions of the options to the holders of warrants from bonds with
warrants or of conversion rights under the terms and conditions of the bonds to
the holders of convertible bonds which, in accordance with the authorization of
the Annual General  Meeting on May 3, 2001, are issued up to May 2, 2006 by SGL
Carbon  Aktiengesellschaft  or a wholly owned direct or indirect  subsidiary of
SGL Carbon Aktiengesellschaft. The new shares will be issued at the exercise or
conversion  price  to be  determined  in  accordance  with  the  aforementioned
resolution.  The contingent  capital  increase will be implemented  only to the
extent  that the  holders  of the bonds  with  warrants  or  convertible  bonds
exercise  their option or conversion  rights,  or that bond holders  obliged to
convert meet their  obligation to do so. The new shares carry  dividend  rights
from the  beginning  of the fiscal year in which they are  created  through the
exercise  of  conversion  or  option  rights  or  through  the  fulfillment  of
conversion obligations.  The Executive Committee is authorized to determine the
further details of the  implementation of the contingent  capital increase with
the consent of the Supervisory Board.

    [E]45,911  was  withdrawn   from  the  reserve  for  treasury   shares  and
appropriated to other retained earnings.  The accumulated deficit of SGL Carbon
AG of [E]9,600,000 will be carried forward to new account.

    On January 31, 2003, the Executive Committee approved,  with the consent of
the  Supervisory  Board on February  11,  2003,  to use part of the  authorized
capital  (authorized  capital I) to increase the share capital by [E]820,500.48
by issuing 320,508 new shares. The new shares carry dividend rights starting in
fiscal year 2002.


20. PROVISIONS FOR PENSIONS AND OTHER EMPLOYEE BENEFITS

<TABLE>
<CAPTION>
                                                           DEC. 31,  DEC. 31,
                                                               2002      2001
                                                           --------  --------
                                                               [E]M      [E]M
<S>                                                              <C>       <C>
Pension provision for direct commitments..................     158.8     154.3
Pension provision for indirect commitments................      16.4      16.4
Other.....................................................      15.4      22.4
                                                            --------  --------
                                                               190.6     193.1
                                                            ========  ========

</TABLE>

                                      F-22

<PAGE>

    There  are  various  arrangements  worldwide  in the SGL  Carbon  Group for
retirement benefit and surviving  spouses' pensions for its employees.  Some of
the arrangements are tied to the  remuneration  level of the employees,  others
involve  fixed amounts that depend on the  classification  of the employees (in
terms of both  salary  class and  level in the  corporate  hierarchy).  Certain
arrangements also provide for future increases based on indexed inflation.

    The differing  pension plans for the employees of SGL Carbon AG, SGL Carbon
GmbH and the former SGL  Technik  GmbH were  standardized  as of April 1, 2000.
Claims by employees  from  pension  plans that arose prior to April 1, 2000 are
not affected,  and the financial  obligations arising under these pension plans
remain in the SGL Carbon Group, where they are covered by provisions. The basis
of the new pension plan is the legally  independent  pension fund for employees
of the Hoechst Group,  which is funded by employee and employer  contributions.
The  contributions of the SGL Carbon Group to this pension fund are linked by a
certain  formula  to the  contributions  paid  into  this  pension  fund by the
employees. The payments by companies to such defined contribution pension funds
are expensed as incurred in the period concerned.

    In the  case of  defined  contribution  pension  plans,  the  company  pays
contributions  to  pension  insurance  funds  on  the  basis  of  statutory  or
contractual  provisions.  The company has no obligations  other than to pay the
contributions.  Current  contribution  payments  are  recognized  as  operating
expenses in the period concerned.

    The provisions for defined benefit plans are calculated using the projected
unit  credit  method.  Measurement  is based  on the  legal,  economic  and tax
circumstances  in the country  concerned.  Most of the obligations from current
pensions and  entitlements  under pension  plans in the European  companies are
covered by the  provisions  carried on the balance  sheet.  The North  American
subsidiaries have country-specific  pension plans, most of which are covered by
pension  funds.  At certain  companies in the SGL Carbon Group,  the provisions
also  cover  amounts  for  post-employment  medical  care as well as  severance
payments.  The future  obligations are calculated using actuarial methods based
on conservative estimates of the relevant parameters.  Recognition of actuarial
gains and losses uses the 10% corridor rule.  Personnel  turnover is determined
on a company-by-company basis. The actuarial measurements are based on country-
specific mortality tables. Pension provisions amounting to [E]12 million have a
term of less than one year.

    The following  parameters  are applied to the most  significant  countries:
Germany and the US.

    Calculation basis and parameters for pension provisions

<TABLE>
<CAPTION>
                                                        GERMAN
                                                        PLANS       US-PLANS
                                                     -----------  ------------
                                                     2002   2001   2002   2001
                                                     ----  -----  -----  -----

<S>                                                   <C>    <C>    <C>    <C>
Discount Rate.......................................  6.0%   6.0%  6.75%   7.5%
Salary growth.......................................  3.0%  2.75%   3.0%   4.0%
Expected rate of return on plan assets..............   ---    ---   9.0%  10.0%


</TABLE>

                                      F-23

<PAGE>

    Changes in the present value of funded obligations and in plan assets for
pension provisions for direct commitments are presented below:

<TABLE>
<CAPTION>
CHANGES IN PRESENT VALUE OF FUNDED OBLIGATIONS                     2002   2001
                                                                  -----  -----

<S>                                                                 <C>    <C>
Present value at Jan. 1.........................................  234.8  217.7
Current service cost............................................    5.5    5.1
Interest cost...................................................   14.2   14.2
Acturarial gains/losses.........................................    6.6    6.0
Benefits paid...................................................  (12.1) (11.5)
Changes in basis of consolidation...............................    0.0    0.1
Exchange differences............................................   (4.2)   3.2
                                                                  -----  -----
Projected benefit obligations at Dec. 31........................  244.8  234.8
                                                                  =====  =====
CHANGES IN PLAN ASSETS
Plan assets at Jan. 1...........................................   51.6   58.9
Return on plan assets...........................................   (5.7)  (9.1)
Contributions paid..............................................    2.9    1.9
Benefits paid...................................................   (3.7)  (3.4)
Exchange differences............................................    0.2    3.3
                                                                  -----  -----
Plan assets at Dec. 31..........................................   45.3   51.6
                                                                  =====  =====
Funding Status..................................................  199.5  183.2
Unrecognized actuarial gains/losses.............................  (40.7) (28.9)
                                                                  -----  -----
Provision at Dec. 31............................................  158.8  154.3
                                                                  =====  =====

</TABLE>

                                      F-24

<PAGE>

    Pension expenses are composed as follows:

<TABLE>
<CAPTION>
[E]M                                                           2002  2001  2000
                                                               ----  ----  ----

<S>                                                             <C>   <C>   <C>
Current service costs........................................   5.5   5.1   5.5
Interest cost................................................  14.2  14.2  14.2
Expected return on plan assets...............................  (4.5) (5.8) (5.4)
Amortization of actuarial gains/losses.......................   0.7   0.2   0.2
                                                               ----  ----  ----
PENSION EXPENSES FROM DEFINED BENEFIT PLANS..................  15.9  13.7  14.5
                                                               ----  ----  ----
Pension expenses from defined contribution plans.............   2.8   3.6   3.2
                                                               ----  ----  ----
PENSION EXPENSES.............................................  18.7  17.3  17.7
                                                               ====  ====  ====

</TABLE>

21. OTHER PROVISIONS

<TABLE>
<CAPTION>
                                                  RESTRUCTURING
                                                  AND ANTITRUST
[E]M                          TAXES  STAFF COSTS          RISKS  MISCELLANEOUS  TOTAL
                              -----  -----------  -------------  -------------  -----

<S>                             <C>          <C>            <C>            <C>    <C>
Balance at Jan. 1, 2002.....   10.5         45.4           71.1           37.6  164.6
Changes in basis of
  consolidation.............    0.0         (0.2)           0.0           (0.1)  (0.3)
Utilized....................   (9.6)       (12.3)         (15.0)         (12.1) (49.0)
Released....................   (0.1)        (6.5)          (0.8)         (13.0) (20.4)
Additions...................    1.8         19.3           22.0           15.6   58.7
Other changes...............   (0.3)        (2.4)          (1.5)          (0.2)  (4.4)
                              -----  -----------  -------------  -------------  -----
Balance at Dec. 31, 2002....    2.3         43.3           75.8           27.8  149.2
                              -----  -----------  -------------  -------------  -----
(thereof with a term of less
  than one year)                0.3         36.2           75.7           23.1  135.3
                              =====  ===========  =============  =============  =====

</TABLE>

    The provisions for taxes contain  amounts for tax risks of fiscal years not
yet finally assessed by the tax  authorities.  The sharp drop in provisions for
taxes in the  current  fiscal  year is due to the fact that  several tax audits
were  finalized in Germany.  Provisions for staff costs relate in particular to
provisions  for  annual  bonuses,  jubilee  benefits,  partial  retirement  and
outstanding vacation.

    Although we intend to file an appeal with the European Court in relation to
the antitrust fine on our Graphite  Specialties  activities levied by the EU in
December 2002, we have  increased the  provisions for antitrust  risks by [E]22
million.  The addition to provisions for  restructuring  and antitrust risks in
the prior  year was made to cover the costs of closing  three  plants in the US
and restructuring of remaining units, as well as other  restructuring  expenses
of [E]0.9 million.  In addition to the amounts transferred to the restructuring
provisions,  the amount  expensed  in the prior year  included  write-downs  of
inventories  amounting to [E]15 million and write-downs of property,  plant and
equipment amounting to [E]9.8 million.

    Miscellaneous  other  provisions  relate to provisions  for various  risks,
including  provisions for bonuses,  rebates and onerous contracts  amounting to
[E]7.2 million (2001: [E]11.9 million),  provisions for warranties amounting to
[E]2.0 million (2001: [E]2.9 million),  provisions for environmental protection
costs  amounting to [E]3.4  million (2001:  [E]4.2  million) and provisions for
other risks.

                                      F-25

<PAGE>

22. LIABILITIES

<TABLE>
<CAPTION>
[E]M                                                             DEC. 31, 2002  DEC. 31, 2001
                                                                 -------------  -------------

<S>                                                                        <C>            <C>
FINANCIAL LIABILITIES
Bank loans and overdrafts......................................          313.5          359.5
Commercial paper...............................................            0.0           37.0
Convertible and exchangeable bonds.............................          135.0          135.0
Other financial liabilities....................................            0.0            7.4
                                                                 -------------  -------------
                                                                         448.5          538.9

TRADE PAYABLES
thereof due within one year 110.5 million (2001: 107.7 million)          110.5          107.7
OTHER LIABILITIES
Customer advances received
thereof due within one year 0.8 million (2001: 7.3 million)....            0.8            7.3
Payable to subsidiaries
thereof due within one year 6.0 million (2001: 3.8 million)....            6.0            3.8
Miscellaneous other liabilities................................          144.4          186.1
                                                                 -------------  -------------
                                                                         151.2          197.2
                                                                 -------------  -------------
TOTAL..........................................................          710.2          843.8
                                                                 =============  =============

</TABLE>

    133,650  bonds with  warrants  of  [E]1,000  each were  issued as part of a
convertible  bond on September 18, 2000 at 100% of the principal  amount.  They
bear interest of 3.5% p.a. on their principal  amount.  The bonds with warrants
can be converted at any time into fully paid-up,  no-par value bearer shares of
SGL Carbon AG in the period from October 18, 2000 to  September  4, 2005.  Each
bond with  warrants in the principal  amount of [E]1,000 can be converted  into
11.2233 shares subject to adjustment of the  conversion  price.  The bonds with
warrants  will be repaid  on  September  18,  2005 at their  principal  amount,
provided that they have not been repaid or converted at an earlier date.

    The weighted average rate of interest on financial liabilities was 4.4% for
2002 (previous  year:  4.8%).  Bank loans and overdrafts  amounting to [E]189.6
million as of December  31, 2002 and  [E]26.0  million as of December  31, 2001
bore  interest at fixed rates of up to 5.9%.  The  remaining  bank loans relate
mainly to short-term [E] and USD loans at rates of interest of between 3.8% and
5.9%.

    A [E]200.0 million  commercial paper program launched by SGL Carbon in 1996
was no longer drawn as of December 31, 2002 (2001: [E]37.0 million).

    In December 2002, SGL Carbon and various German and foreign Group companies
entered a syndicated loan agreement  totaling [E]510 million with a term of two
and a half years.  This amount  includes  the bank  guarantee  to the  European
Commission and a working capital facility.  The loan was granted subject to the
condition  that the Group  complies with standard bank  covenants,  such as the
ratio of net debt to EBITDA and EBITDA to interest expense. Non-compliance with
the  covenants  or  other  obligations  in the loan  agreement  may  result  in
additional expenses and, if repeated, the lenders could demand repayment of the
loan ahead of schedule.  Various  assets,  in  particular  property,  plant and
equipment, inventories and receivables were pledged as security for the loan.

    Based on the  total  credit  lines  under the new  syndicated  loan and the
credit  lines used as of December  31,  2002,  the SGL Carbon  Group had credit
lines of [E]111 million available.

    In fiscal year 2002, the advance payments  received totaling [E]7.5 million
were offset against the corresponding  inventories for each individual project.
The other  liabilities  relate  primarily to discounted  liabilities  for North
American  antitrust  proceedings  amounting to [E]80.9 million (2001:  [E]109.2
million),  wages and  salaries  amounting  to [E]16.3  million  (2001:  [E]16.1
million),  negative fair values for financial  derivatives  of [E]12.2  million
(2001:  [E]4.6 million),  and taxes amounting to [E]6.4 million (2001:  [E]12.5
million).  Social security liabilities amounted to [E]6.7 million (2001: [E]5.2
million).

                                      F-26

<PAGE>

The maturity  structure of the total amounts of financial and other liabilities
due in each of the next five years and the  remainder  thereafter  is presented
below:

<TABLE>
<CAPTION>
                                                                      WITH MORE
                                                                      THAN FIVE
                                                                       YEARS TO
                                                                       MATURITY
[E]M                                   2003  2004   2005  2006  2007       [E]M
                                      -----  ----  -----  ----  ----  ---------

<S>                                     <C>   <C>    <C>   <C>   <C>        <C>
Financial liabilities...............  193.1   5.3  213.0   7.7  21.4        8.0
Other liabilities...................   70.7  17.4   24.8  24.1   7.4        0.0

</TABLE>

    Deferred  grants from third parties as defined by IAS 20 amounted to [E]1.6
million as of December  31, 2002 (2001:  [E]2.0  million).  [E]0.2  million was
recognized in income during the year under review.  There are no deferred gains
on sale and leaseback transactions.


23. DEFERRED TAX LIABILITIES

    Deferred  tax   liabilities   result  from   differing   depreciation   and
amortization  methods applied in the tax accounts and in the IFRS/IAS financial
statements,  from capitalized finance leases, and from measurement  differences
in the  carrying  amounts  of  inventories  between  the tax  accounts  and the
IFRS/IAS consolidated financial statements.  Most deferred tax liabilities have
more than one year to maturity.


    CONSOLIDATED CASH FLOW DISCLOSURES

24. DISCLOSURES ON THE CONSOLIDATED CASH FLOW STATEMENT

    The consolidated cash flow statement  presents changes in the cash and cash
equivalents  of the SGL Carbon Group  through  inflows and outflows of cash and
cash  equivalents  over the  course  of a  reporting  period.  Cash  flows  are
classified by operating,  investing  and financing  activities.  The effects of
first-time  consolidation and deconsolidation  were eliminated.  The prior year
figures  were  adjusted  for  currency   changes  in  fiscal  year  2001.   The
presentation is supplemented by a  reconciliation  to cash and cash equivalents
as reported  in the balance  sheet.  The amounts of foreign  subsidiaries  have
generally  been  translated  at  average  rates  for the year in the cash  flow
statement. By contrast, cash and cash equivalents are translated at the closing
rate, as in the balance sheet.

    Cash provided by operating  activities  includes  interest  received in the
amount of [E]1.0  million and interest  paid in the amount of [E]28.0  million.
Net taxes paid  after  refunds  amounted  to  [E]22.3  million.  Bank loans and
overdrafts were reduced by [E]46.0 million to cut financing requirements. Group
debt also fell by [E]37 million due to the repayment of commercial paper.

    Cash used includes  payments for the  acquisition  of noncurrent  financial
assets.  Details on these  payments are  contained in note 3. A total of [E]0.7
million was paid for the acquisition of noncurrent financial assets.

                                      F-27

<PAGE>

    OTHER DISCLOSURES

25. COMMITMENTS AND CONTINGENCIES

    There  were no  liabilities  on bills  as of  December  31,  2002 or in the
previous year. There were guarantee  obligations of [E]45.0 million and [E]39.4
million  at  December  31,  2002  and  2001,   respectively.   Other  financial
obligations  from  orders  relating to approved  capital  projects  amounted to
[E]21.1 million and [E]31.2  million at December 31, 2002 and 2001.  Certain of
these  capital  projects  involve  expenses to be incurred  after more than one
year. There were also rental and lease  obligations for land and buildings,  IT
equipment, motor vehicles and other items of property, plant and equipment with
terms up to 2006 amounting to [E]12.3  million and [E]12.5  million at December
31,  2002 and  2001.  For  fiscal  year  2002,  they are  distributed  over the
following years as shown below:
<TABLE>
<CAPTION>
                                                              2007 AND
[E] M                               2003  2004  2005  2006  THEREAFTER
                                   -----  ----  ----  ----  ----------

<S>                                  <C>   <C>   <C>   <C>         <C>
Operating leases.................    3.2   1.8   0.7   0.6         4.8
Finance leases...................    0.3   0.3   0.2   0.2         0.2
- discounts included.............  (0.1)
= Present value of finance leases    1.1


</TABLE>

    There were no payments from subleases in the two fiscal years.  The finance
leases relate solely to leased items of property,  plant and equipment that are
entered into under  standard  leasing  arrangements  without  special  purchase
options.  There were provisions for environmental  protection  obligations at a
number  of the SGL  Carbon  Group's  production  sites,  principally  in  North
America,  in the amount of [E]3.4  million and [E]4.2  million at December  31,
2002 and 2001.

    A number of legal actions,  court  proceedings and law suits are pending or
may be  instituted  or asserted in the future,  including  those  arising  from
alleged  defects  in the  products  of  the  SGL  Carbon  Group,  from  product
warranties and environmental protection matters.

    Litigation is subject to many uncertainties,  and the outcome of individual
cases cannot be predicted with any certainty.  There are reasonable indications
to suggest that the SGL Carbon  Group may be  adversely  affected by rulings in
certain cases.  Identifiable risks are adequately covered by the recognition of
corresponding provisions.


    PENDING ANTITRUST PROCEEDINGS AND CLAIMS

    The  antitrust  proceedings  in the US and in Canada  have been  concluded.
Following negotiations with the US antitrust authorities, we obtained a payment
extension  in 2002 for our  remaining  obligations.  According  to the original
repayment  schedule,  we had to pay a total of $65  million  in 2002 and  2003.
Under the new plan,  a total of $15 million  must be repaid in these two years.
The postponement of payments totaling $50 million to the period 2004 -2007 will
further improve the Company's  financial  position.  In July 2001, the European
Commission  imposed  a fine  for  anti-competitive  practices  in the  graphite
electrodes  market. We have appealed against the [E]80.2 million fine, which we
believe is unacceptable because of unlawful double jeopardy. After we deposited
a bank  guarantee,  payment has been suspended  until a final decision has been
made.  In December  2002,  the European  Commission  imposed a fine of [E]27.75
million  on  SGL  Carbon  AG for  anti-competitive  practices  in the  graphite
specialties  market. We will file an appeal with the European Court,  citing in
particular double jeopardy and gross unreasonableness. Additional provisions of
[E]22 million have been recognized to cover these antitrust risks.


26. RELATED PARTY DISCLOSURES

    During the course of its business activities,  the SGL Carbon Group renders
services  for  related  companies  and  persons.  In turn,  these  persons  and
companies  deliver goods or render  services to the SGL Carbon Group as part of
their business purpose.  All these  transactions are settled on an arm's length
basis.  Receivables from  unconsolidated  subsidiaries and associates amount to
[E]12.9 million,  and the corresponding  liabilities  amount to [E]6.4 million.
Details are  presented  in the notes to the relevant  balance  sheet and income
statement items.

                                      F-28

<PAGE>

    In August 2001, Paul W. Pendorf was appointed  Chief  Executive  Officer of
HITCO Carbon  Composites Inc.  (HITCO).  Mr. Pendorf has acquired a 6% minority
interest  in this  company.  The SGL  Carbon  Group  has  granted a loan to Mr.
Pendorf,  secured by the proceeds  from the sale of his shares,  to finance the
purchase price. The  shareholders  agreement also provides for options that can
be exercised by both sides at a variable price after no later than four years.

    Mr.  Pendorf is also a  shareholder  in a company (AMT II) that has entered
into two  service  and option  agreements  with  HITCO.  Under the terms of the
option agreement,  AMT II has an option to buy up to 43% of the shares of HITCO
on the basis of a defined  calculation  formula.  This option  expires after no
later than three  years or after  exercise  of the put or call  option from the
shareholders'  agreement  (see  above).  SGL Carbon can prolong the option by a
further year.

    At December 31, 2002 and 2001, there were also call-in  obligations of $3.6
million  and $36.2  million,  respectively,  for  shares  in an  unconsolidated
subsidiary.  The  contribution of the company to a joint venture in fiscal year
2002 and the resulting  reduction of the commitment has  significantly  reduced
this amount.


27. INFORMATION ON FINANCIAL INSTRUMENTS

    Financial  instruments  are  contracts  that give rise to both a  financial
asset of one  enterprise  and a financial  liability  or equity  instrument  of
another  enterprise.  According  to IAS 32,  these  include  primary  financial
instruments,  such as trade receivables,  trade payables,  financial assets and
financial  liabilities.  They also include  derivatives  used to hedge interest
rate or foreign currency risks.


    PRIMARY FINANCIAL INSTRUMENTS

    Primary financial  instruments are carried on the balance sheet.  Financial
instruments  carried  as assets  are  reported  at cost,  net of any  valuation
allowances required.  Financial instruments carried as liabilities are reported
at their notional amount or at the higher redemption amount.

    The credit or default  risk results  from the risk that a  counterparty  is
unable to meet its  obligations.  As we do not  generally  enter  into  set-off
agreements  with our  customers,  the amounts  reported  on the  balance  sheet
represent the maximum default risk.

    Foreign   currency  risks  arise  where   receivables  or  liabilities  are
denominated  in a currency  other than the company's  local  currency.  Hedging
occurs  firstly  as a result of  naturally  closed  positions,  where a foreign
currency  receivable  in the  SGL  Carbon  Group  is  matched  by  one or  more
liabilities  in the same  currency  with  equivalent  maturities  and  amounts.
Derivatives are used only for hedging  purposes for foreign currency risks that
cannot be covered by natural hedges.


    DERIVATIVES

    The SGL Carbon Group may be exposed to risks from changes in interest rates
and exchange  rates during the course of its business  activities.  Derivatives
are used purely for hedging  purposes  and to reduce such risks.  No  financial
instruments  are held for  trading  purposes.  The use of such  instruments  is
governed  by  internal   instructions.   Risk  is   estimated   and   monitored
continuously.

    The  SGL  Carbon  Group  is  exposed  to  a  credit  risk  that  arises  if
counterparties are unable to perform their contractual obligations.  Derivative
contracts  are  entered  into  exclusively  with   internationally   recognized
financial institutions to reduce the credit risk. In addition, all transactions
are  monitored  by SGL  Carbon's  central  finance  department.  The  Executive
Committee  does not believe that  involvement in such  transactions  materially
adversely affects the Group's financial position.


    NOTIONAL AMOUNTS

    The notional amounts are the aggregate of all underlying  purchase and sale
amounts  involving  non-Group  third  parties.  The  amounts  presented  in the
following  table  therefore  do not  represent  the  amounts  exchanged  by the
parties,  and are therefore no indication of the liabilities arising to the SGL
Carbon Group from these financial instruments.

                                      F-29

<PAGE>

    The notional  amounts and fair values of the  financial  instruments  as of
December 31, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>
                                                  NOTIONAL AMOUNTS                                FAIR VALUES
                                    BOUGHT           SOLD          TOTAL          TOTAL          TOTAL          TOTAL
                             DEC. 31, 2002  DEC. 31, 2002  DEC. 31, 2002  DEC. 31, 2001                 DEC. 31, 2001
                                      [E]M           [E]M           [E]M           [E]M  DEC. 31, 2002           [E]M
                             -------------  -------------  -------------  -------------  -------------  -------------

<S>                                    <C>            <C>            <C>            <C>            <C>            <C>
Foreign currency contracts:
USD currency forward.......            3.9          170.3          174.2          242.6            5.7           (4.1)
GBP........................            0.6           52.0           52.6           50.6            0.8           (1.0)
Other currency forward.....            6.3            1.1            7.4            2.2            0.2            0.2
Currency option............           99.1           93.6          192.7          201.0          (10.2)           1.6
Participating forward
  contracts................            0.0            0.8            0.8            2.4            0.0           (0.1)
Interest rate contracts:
Interest rate swaps........            0.0          103.2          103.2            3.8           (0.7)           0.1
Interest rate options......           15.3            0.0           15.3           15.3            0.0            0.0


</TABLE>

    Currency  forwards  and options are used  primarily  to hedge  existing and
future foreign currency  receivables and liabilities.  The objective of hedging
transactions  in the SGL Carbon  Group is to reduce the risks  inherent  in its
receivables  and  liabilities  denominated in foreign  currencies from exchange
rate  fluctuations.  The  underlying  transactions  in the  individual  foreign
currencies  are  almost  fully  hedged  on the  basis of the net  position  per
currency.   The  maturities  are  based  on  the  maturity  of  the  underlying
transaction, and range from several days to several months.

    The fair value of  derivatives is the price at which one party would assume
the rights and/or  obligations from another party.  Fair values are measured as
follows on the basis of the market  information  available at the balance sheet
date, using standard market valuation methods:

        *   Currency  hedges are measured on the basis of  reference  rates and
            reflect  forward  premiums  and  discounts.  Currency  options  are
            measured using recognized option pricing models.

        *   Interest  rate  contracts  are measured on the basis of  discounted
            expected future cash flows,  with market rates of interest  applied
            for the remaining maturity of the instruments.

        *   Interest rate options are measured using recognized  option pricing
            models (incl. Black-Scholes).

    The fair values are determined by independent  financial service providers.
In the  case of  derivatives,  there  is a  credit  risk in the  amount  of the
positive fair values of the derivatives.

    A zero cost option was  entered  into to hedge the USD  liability  from the
antitrust  fine.  The  premium to be paid for buying  the  option  matches  the
premium resulting from the sale of the option.

    The SGL Carbon Group conducts interest rate option and swap transactions to
optimize its  financing  costs.  In fiscal years 2002 and 2001,  the SGL Carbon
Group used  interest  rate swaps to convert part of its  financial  liabilities
from fixed-interest liabilities into floating rate liabilities.

    Foreign  currency hedges in binding  contracts or future  transactions  are
accounted for as fair value hedges in accordance with IAS 39.103.  The hedge is
measured at cost at inception.  Changes in the fair values of derivatives  from
subsequent  remeasurement are recognized  immediately in net profit or loss and
the carrying  amount of the hedged item is  adjusted.  Gains or losses from the
remeasurement  of  interest  rate  hedges  designated  as fair value  hedges of
floating rate bank loans are also recognized in profit or loss.

                                      F-30

<PAGE>

28. SEGMENT REPORTING

    The SGL Carbon Group operates in the following areas:

    *    CARBON AND GRAPHITE [CG]

         Graphite electrodes and carbon products (electrodes,  cathodes, furnace
         linings)

    *    GRAPHITE SPECIALTIES [GS]

         Products for industrial applications, mechanical carbons and electrical
         contacts, carbon fibers/composites

    *    CORROSION PROTECTION [CP]

         Process technology and surface protection

         and

    *    SGL TECHNOLOGIES [SGL T]

         Graphite  foils,   carbon  fibers,   expanded   graphite  and  fabrics,
         composites, carbon-ceramic brake discs and fuel cell components.

    External  sales  revenue  relates  almost  exclusively  to revenue from the
supply of  products.  Trading  revenues or other  revenues  are  insignificant.
Intersegment revenue is generally based on market-driven  transfer prices, less
selling and administrative  expenses. In exceptional cases, cost-based transfer
prices may be used.  The Other  segment  relates to  companies  that  primarily
render  services  to the other  Business  Areas,  and  includes  SGL Carbon AG.
Consolidation   adjustments   relate  to  the   elimination   of   intersegment
transactions.  Non-cash  expenses  resulted  primarily  from  the  increase  in
antitrust  provisions in the amount of [E]22 million in the Other segment.  The
European  foils  business  was moved from the GS segment to the T segment as of
January 1, 2002. The comparative figures for the businesses in fiscal year 2001
were adjusted. Certain information on the businesses of the SGL Carbon Group is
presented below (primary segment  reporting format in accordance with IAS 14.50
ff.).


                                      F-31

<PAGE>

<TABLE>
<CAPTION>
                                                                                             SGL
                                                                          CONSOLIDATION   CARBON
[E]M                                      CG     GS     CP   SGLT  OTHER    ADJUSTMENTS    GROUP
<S>                                      <C>    <C>    <C>    <C>    <C>            <C>      <C>
------------------------------------------------------------------------------------------------
2002
Net sales revenue....................  550.7  195.9  212.4  150.4    2.9            0.0  1,112.3
INTER-SEGMENT REVENUE................  396.5   44.5   16.3    4.4   44.4         (506.1)     0.0
                                       -----  -----  -----  -----  -----  -------------  -------

Total net sales revenue..............  947.2  240.4  228.7  154.8   47.3         (506.1) 1,112.3
Profit/loss from operation*..........   51.9    1.9    4.8  (11.7) (18.3)           0.0     28.6
Investment in property, plant
  and equipment......................   22.6    6.3    2.5    9.3    0.8            0.0     41.5
Depreciation and amortization expense   38.5   15.6    9.8   17.2    0.1            0.0     81.2
Capital employed.....................    462    199    135    202     31              0      967
Debt.................................  103.3   44.5   30.1   45.1  225.5            0.0    448.5
2001
Net sales revenue....................  619.8  230.7  235.8  135.1   11.9            0.0  1,233.3
Inter-segment revenue................  364.6   50.9   19.1    3.6   30.3         (468.5)     0.0
                                       -----  -----  -----  -----  -----  -------------  -------
Total net sales revenue..............  984.4  281.6  254.9  138.7   42.2         (468.5) 1,233.3
Profit/loss from operations*)........   78.9   22.3   12.6  (33.7) (21.4)           0.0     58.7
Investment in property, plant
  and equipment......................   45.1   12.6    5.0   26.3    1.6            0.0     90.6
Depreciation and
  amortization expense*).............   38.4   19.2   10.3   17.7    0.3            0.0     85.9
Capital employed.....................    569    274    162    203      5              0    1,213
Debt.................................  152.3   73.4   43.4   54.4  215.4            0.0    538.9
2000
Net sales revenue....................  619.5  242.0  247.3  151.8    1.9            0.0  1,265.5
Inter-segment revenue................  373.1   49.1   15.4    2.0   30.0         (469.9)     0.0
                                       -----  -----  -----  -----  -----  -------------  -------
Total net sales revenue..............  992.6  305.6  262.7  139.3   32.2         (469.9) 1,262.5
Profit/loss from operations*)........  108.0   16.9   (1.4) (17.3) (27.0)           0.0     79.2
Investment in property, plant
  and equipment......................   33.1    9.2    4.7   19.9    0.3            0.0     67.2
Depreciation and
  amortization expense*).............   34.1   23.5   12.0   13.0    0.3            0.0     82.9
Capital employed.....................    529    272    155    192     68              0    1,216
Debt.................................  149.3   76.7   43.7   54.2  178.5            0.0    502.4

</TABLE>

*)before cost of antitrust risks and restructuring expense.



                                      F-32

<PAGE>

<TABLE>
<CAPTION>
                                                                                    CENTRAL AND                            SGL
                                                       EUROPE EXCL.                       SOUTH         CONSOLIDATION   CARBON
DM                                            GERMANY       GERMANY  NORTH AMERICA      AMERICA  OTHER    ADJUSTMENTS    GROUP
                                              -------  ------------  -------------  -----------  -----  -------------  -------

<S>                                               <C>           <C>            <C>          <C>    <C>            <C>      <C>
2002
Net sales revenue (by destination)..........    216.6         373.8          281.6         63.4  176.9            0.0  1,112.3
Net sales revenue (by company)
 Third-party customers .....................    409.5         422.9          267.8          5.1    7.0            0.0  1,112.3
 Intercompany sales revenue ................    179.4         269.5           56.8          0.0    9.4         (506.1)     0.0
                                              -------  ------------  -------------  -----------  -----  -------------  -------

Total net sales revenue.....................    588.9         692.4          324.6          5.1    7.4         (506.1) 1,112.3
Export sales from Germany...................    369.3           0.0            0.0          0.0    0.0            0.0    369.3
Capital employed............................      304           338            312            4      9              0      967
Investments in property, plant and equipment     17.1          12.1           11.8            4      9              0     41.5

2001
Net sales revenue (by destination)..........    246.0         409.2          315.8         63.1  199.2            0.0  1,233.3
Net sales revenue (by company)
 Third-party customers .....................    457.8         439.7          319.1          8.0    8.7            0.0  1,233.3
 Intercompany sales revenue ................    178.3         237.1           53.1          0.0    0.0         (468.5)     0.0
                                              -------  ------------  -------------  -----------  -----  -------------  -------
Total net sales revenue.....................    636.1         676.8          372.2          8.0    8.7         (468.5) 1,233.3
Export sales from Germany...................    360.7           0.0            0.0          0.0    0.0            0.0    360.7
Capital employed............................      404           386            410            4      9              0    1.213
Investments in property, plant
and equipment...............................     40.0          23.3           26.6          0.0    0.7            0.0     90.6

2000
Net sales revenue (by destination)..........    241.0         359.6          390.6         79.9  191.4            0.0  1,262.5
Net sales revenue (by company)
 Third party customers .....................    468.1          42.4          370.8          1.9    9.3            0.0  1,262.5
 Intercompany sales revenue ................    169.8         236.6           62.8          0.0    0.7         (469.9)     0.0
                                              -------  ------------  -------------  -----------  -----  -------------  -------
Total net sales revenue.....................    637.9         649.0          433.6          1.9   10.0         (469.9) 1,262.5
Export Sales from Germany...................    377.7           0.0            0.0          0.0    0.0            0.0    377.7
Capital employed............................      379           367            457            1     12                   1.216
Investment in property, plant and
equipment...................................     19.6          29.6           18.0          0.0    0.0            0.0     67.2

</TABLE>

29. LIST OF SHAREHOLDINGS

    The list of shareholdings is filed with the Wiesbaden  commercial register.
It will also be available for inspection at the Annual  General  Meeting of SGL
Carbon Aktiengesellschaft on April 30, 2003.


30. REMUNERATION OF THE SUPERVISORY BOARD AND EXECUTIVE COMMITTEE OF SGL CARBON
    AG

    The total  remuneration of the Supervisory Board amounts to [E]0.3 million.
The  remuneration  of the Executive  Committee  amounts to [E]1.6  million plus
participation  in the  management  incentive  plans (see note 31). Based on the
remuneration  paid to the  Executive  Committee  in the year  under  review the
variable component amounts to 60%.

    The total  remuneration of former members of management and their surviving
dependents  amounts to [E]0.1  million.  [E]1.1  million has been  provided for
pension  obligations  to former  members  of  management  and  their  surviving
dependents.

    The active members of the Executive  Committee hold shares in SGL Carbon AG
privately. At December 31, 2002, these totaled 55,055 shares and 3,093 ADRs.

    The  names  of the  members  of the  Supervisory  Board  and the  Executive
Committee are listed in Item 6.

                                      F-33

<PAGE>

31. MANAGEMENT INCENTIVE PLANS

    In 1996, the Company introduced management incentive plans in order to link
management compensation to enterprise value.


    STOCK APPRECIATION RIGHTS PLAN (SAR)

    By means of the SAR Plan of April 1996/January 1997, SGL enabled members of
the Executive Committee and management to participate in the development of the
market price of the Company's  shares by  allocating  stock  options.  The plan
covers a total of 840,500 options, of which 797,300 (637,350 already exercised)
were allocated to 74 members of the Executive  Committee and senior  management
as of December 31, 2002.

    The options  allocated to each  participant  were vested in installments of
20% per annum each on January 1 for the previous  fiscal year  (vesting  period
1997 until 2001). Each issued option can be exercised between March 1 and March
15 of each year, and on March 15, 2006 at the latest.

    Options  attributable to participants  who are not members of the Executive
Committee are exercised by buying  ordinary shares of SGL Carbon AG in exchange
for  payment of the  exercise  price.  This  portion  of the SAR is  recognized
directly  in equity in the  Group.  The  exercise  of options by members of the
Executive Committee results in the members receiving a cash amount representing
the difference between the exercise price and the official average price of the
Company's  shares fixed by the Frankfurt Stock Exchange on March 16 of the year
the option is  exercised.  A  provision  is  recognized  for the options of the
Executive  Committee in the amount of the  difference  between the option price
and the price at the balance sheet date. The payment is eliminated  against the
provision when the option is exercised.


    LONG-TERM CASH INCENTIVE PLAN (LTCI)

    The Long-Term  Cash  Incentive  Plan (the LTCI Plan),  established in 2002,
enables the Executive  Committee and selected  members of management to receive
cash  bonuses for the years 2002 to 2004,  provided  that  certain  performance
targets  defined by the  Supervisory  Board are met in the period  2002 to 2004
inclusive.  The  maximum  total  bonus  amounts to [E]7.8  million.  Of the net
proceeds  from the LTCI premium,  an amount equal to 15% of the gross  proceeds
must be used by the  participants  to buy  shares of SGL  Carbon AG. The shares
must be locked up for 12 months. A provision is recognized ratably to match the
performance  targets met at the reporting  date. The  corresponding  expense is
carried under other operating  expenses as with the SAR plans. The additions to
provisions  for the  Executive  Committee  in fiscal year 2002 amount to [E]275
thousand.


    SHARE OWNERSHIP PLAN

    Under the Share Ownership Plan, all employees of the Company in Germany and
Austria  were  offered 25, 50, or 60 shares at a price of [E]4.42 per share for
the first 25 or 50 shares (basic offer) and at a price of [E]5.50 per share for
the additional 10 shares (additional  offer).  1,631 employees  participated in
this Plan and purchased a total of 88,775  shares.  These shares were issued on
the basis of the capital  increase  from  authorized  capital in 2002 (see note
17). The shares of the basic offer are subject to a two-year  internal  lock-up
until November 30, 2004, and those of the additional  offer to a one-year lock-
up until November 30, 2003.


    STOCK PURCHASE PLAN

    The  Company's  Stock  Purchase  Plan was approved by the  Ordinary  Annual
General  Meeting on April 27, 2000.  There are plans to issue up to 250,000 new
shares from  authorized  capital to service the Stock  Purchase Plan. No shares
have been issued to date under the Stock Purchase Plan.

    Under the Stock Purchase Plan, the Supervisory Board is authorized to grant
shares of the Company to members of the Executive Committee,  and the Executive
Committee is authorized to issue shares to senior executives of the Company and
to members of management and senior  executives of Group companies.  Shares for
participants in the plan who are not members of the

                                      F-34

<PAGE>

Executive   Committee  are  created  from  a  capital   increase  for  non-cash
contributions from bonus claims. A share buy-back is planned for members of the
Executive  Committee.  Such stock bonuses will be granted to participants under
the Stock Purchase Plan.

    To  participate  in the Stock  Purchase  Plan,  the selected  employees and
Executive  Committee  members must purchase  shares of the Company on the stock
exchange.  The purchase  price must not exceed 50% of their bonus in accordance
with the annual bonus plan. The purchased  shares are held for  participants in
safe  custody  in a  blocked  securities  account  for two years  (the  lock-up
period). During the lock-up period,  participants may not dispose of the shares
in order not to  forfeit  their  right to  subscribe  for  matching  shares (as
defined below) at the end of the Stock Purchase Plan.

    After the lock-up period, each non-Executive Committee participant receives
new shares  from  authorized  capital and  members of the  Executive  Committee
receive new shares from the share buy-back (the "matching shares").  The number
of new shares and shares from the share  buy-back for members of the  Executive
Committee  corresponds  to the number of shares held for  participants  in safe
custody in the blocked securities account.  Participants who are not members of
the Executive Committee contribute their bonus claims as non-cash contributions
and receive the released shares and the matching shares.

    A provision is recognized  at the balance  sheet date for all  participants
who are  entitled to bonuses.  The bonus is measured at the market value of the
shares to which the employees are entitled in addition to their own shares.  If
employees  contribute their bonus  entitlements to SGL Carbon AG, the provision
is reclassified to issued capital or the share premium.


    STOCK OPTION PLAN

    The Company's Stock Option Plan was approved by the Ordinary Annual General
Meeting on April 27,  2000.  There are plans to issue up to 1.6 million  shares
from  contingent  capital to service the Stock Option Plan. The options will be
granted up until the end of 2004.  507,000 options were granted under the terms
of the Stock  Option Plan in fiscal  year 2002,  bringing  the total  number of
options  granted  to  date  to  998,500.  Under  the  Stock  Option  Plan,  the
Supervisory Board is authorized to grant stock options on shares of the Company
to members of the Executive  Committee.  The Stock Option Plan  authorizes  the
Executive  Committee to grant stock options to senior executives of the Company
designated by the  Executive  Committee  and to members of the  management  and
remaining senior executives of majority owned subsidiaries.

    The stock options are distributed as follows:

    *    Executive Committee: up to 30%;

    *    senior executives of the Company: up to 20%;

    *    members of management of Group companies: up to 20%; and

    *    remaining senior executives of Group companies: up to 30%.

    The term of the  options is ten years and begins on the date of grant.  The
options expire without the holders having a claim for  compensation if they are
not exercised before the end of the ten-year term.

    The options may not be exercised  before the end of a two-year period which
begins on the day  following  the date of grant.  This period is followed by an
eight-year  exercise  period.  Within  this  period,  the  options  may only be
exercised on trading days during defined  periods (the "exercise  window").  In
each calendar year, there are two exercise windows, each comprising ten trading
days following publication of the interim report and the annual report.

    The  options  can  only  be  exercised  if  the  Company  has  reached  its
performance  target  at the time of  exercise.  The  performance  target  is to
increase  the total  return on the shares of the  Company.  The total return is
composed of the share price and the reinvested dividends. The total return must
exceed the exercise price for an option by at least 15%.

                                      F-35

<PAGE>

    The exercise  price is calculated on the basis of the average  closing price
of SGL Carbon AG shares in the Frankfurt Stock  Exchange's  XETRA trading system
on the 20 trading  days prior to issuance of the  options.  Incidental  costs of
purchase are not taken into account.  The minimum  exercise  price to be paid is
the notional value of each share.

    After exercising the options,  participants must retain a minimum number of
SGL  Carbon AG shares  amounting  to 15% of the  gross  proceeds  for a further
twelve months. When the options are exercised,  the portion of the subscription
price exceeding the notional value is credited directly to the share premium.

    Changes in the equity  compensation plans in accordance with IAS 19.147 are
as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES/OPTIONS                                 SAR     STOCK    STOCK
                                                              PURCHASE   OPTION
                                                                  PLAN     PLAN
<S>                                                      <C>       <C>      <C>
                                                   ---------  --------  -------
Balance at Jan. 1, 2002..........................    163,550    31,316  491,500
Additions........................................               43,123  507,000
Expired/Returned.................................     (3,600)
Exercised........................................
                                                   ---------  --------  -------
Balance at Dec. 31, 2002.........................    159,950    74,439  998,500
                                                   ---------  --------  -------
Average exerise price ( )........................      33.03       ---    42.77
Expiration dates.................................  3/15/2006     2010/2011/2012
Fair value Dec, 2002/m...........................        0.0       0.0      0.0
                                                   ---------  --------  -------

</TABLE>

    The SAR and Stock Option Plans are "out of the money".  This means that the
fair value is zero,  because  the  exercise  price is higher  than the  current
market  price.  The  various  equity  compensation  programs  resulted in a net
expense of [E]0.3 million in fiscal year 2002.


32. EXEMPTION IN ACCORDANCE WITH SECTION 264 (3) OF THE HGB

    The following companies,  which are included in the consolidated  financial
statements  of SGL Carbon AG, made use of the  provision  in section 264 (3) of
the HGB: SGL Carbon GmbH,  Meitingen;  SGL Carbon Beteiligung GmbH,  Meitingen;
SGL Technologies GmbH, Meitingen;  SGL Brakes GmbH, Meitingen; SGL Information-
Services GmbH, Augsburg.


33. DECLARATION OF CONFORMITY WITH THE GERMAN CORPORATE GOVERNANCE PRINCIPLES IN
    ACCORDANCE WITH SECTION 285 (16) OF THE HGB

    The Executive Committee and the Supervisory Board have decided to implement
the  recommendations  of the  Government  Commission  on the  German  Corporate
Governance Code with the exceptions  listed below and have issued the following
declaration  of compliance in accordance  with section 161 of the  Aktiengesetz
(AktG -- German Stock Corporation Act):

    SGL Carbon AG complies with the recommendations of the Government Commission
on the German Corporate Governance Code with the following exceptions:

    *    SGL  Carbon  AG's  Articles  of  Association  provide  solely for fixed
         compensation for members of the Supervisory Board as well as additional
         compensation for committee work.

    *    The D&O  insurance  policy  contracted by the Company for the Executive
         Committee and the Supervisory Board does not include a deductible.

    The   declaration   of   compliance   is   published  on  the  Internet  at
www.sglcarbon.com.

                                      F-36

<PAGE>

34. SIGNIFICANT DIFFERENCES BETWEEN INTERNATIONAL ACCOUNTING STANDARDS ("IAS")
    AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)

    SGL AG prepared the  consolidated  financial  statements in accordance with
German GAAP (HGB) for the years until Dec, 31 2000. In 2001 the company adopted
IAS and has prepared the consolidated  financial  statements in accordance with
IAS for all years presented. International Accounting Standards (IAS) differ in
certain significant  respects from U.S. GAAP. The significant  differences that
affect the consolidated net income (loss) and  shareholders'  equity of the SGL
CARBON Group are set out below:

    a)   Business Acquisitions and Goodwill

    Prior to the  adoption  of IAS 22  (revised  1993) on January 1, 1995,  the
Group wrote-off all goodwill directly to equity in accordance with IAS existing
at that time.  The  adoption  of IAS 22 (revised  1993) did not  require  prior
period restatement.  Accordingly, a U.S. GAAP difference exists with respect to
the recognition of goodwill and amortization before January 1, 1995 and for the
amortization  of  goodwill  after  January  1,  2002.  For the  purpose  of the
reconciliation  to U.S. GAAP, the pre-1995  goodwill was amortized  through the
statement of  operations  over the  estimated  useful lives between five and 20
years.  Since  January 1, 2002  under U.S.  GAAP  goodwill  is no longer  being
amortized over the estimated useful live but an annual impairment test per SFAS
142 must be performed. Under IAS positive and negative goodwill in total of [E]
5.1 million  were still  amortized  in 2002 and  accordingly  a  reconciliation
difference exists.

    The SGL CARBON Group's U.S. GAAP unamortized  positive goodwill at December
31, 2002 and 2001 was [E] 136.1 and [E] 145.6 million,  respectively  ([E] 95.3
and [E] 109.3  million,  respectively,  capitalized  under  IAS).  The  Group's
unamortized  negative goodwill as of December 31, 2002 and 2001 was [E] 0.0 and
[E] 13.8  million,  respectively  ([E] 4.4 and [E] 3.6  million,  respectively,
capitalized  under  IAS).  The  remaining  balance of  negative  Goodwill as of
January 1, 2002 was  written  off and  recognized  as the effect of a change in
accounting  principle.  The Company  estimates that such net goodwill would, at
December  31,  2002 and 2001,  be  allocated  among its  industry  segments  as
follows:  Carbon and  Graphite:  47.5 [E] and [E] 38.2  million,  respectively,
Graphite Specialties:  25.4 [E] and [E] 20.8 million , respectively,  Corrosion
Protection: 22.4 [E] and [E] 22.1 million,  respectively, and SGL Technologies:
40.8 [E] and [E] 50.7 million, respectively.

    For U.S. GAAP purposes,  in accordance with SFAS 142,  starting  January 1,
2002 goodwill is no longer being  amortized but tested  annually for impairment
at the level of reporting units.  Goodwill is tested for impairment using a two
step  process  that  begins  with an  determination  of the  fair  value of the
reporting  unit. The first step is a screen for potential  impairment,  and the
second step measures the amount of impairment, if any.

    If SFAS 142 had been  applied  already  in 2001 and 2000,  net  profit  and
earnings per share would have been as follows:

<TABLE>
<CAPTION>
                                                    2002    2001   2000
<S>                             <C>          <C>     <C>     <C>    <C>
                                -----------  ----  -----  ------  -----

Net loss *)...................  As reported  [E]m  (22.0) (148.0)  (3.3)
Goodwill amortization.........               [E]m    0.0     7.1    7.9
Net (loss)/profit *)..........  adjusted     [E]m  (22.0) (140.9)   4.6
Earnings per share basic (EPS)  As reported  [E]   (1.01)  (6.87) (0.15)
Goodwill amortization.........               [E]     0.0    0.33   0.36
Earnings per share basic (EPS)  adjusted     [E]   (1.01)  (6.54)  0.21

</TABLE>

*)before Cumulative Changes in Accounting Principles

    b)   Internal Use Software and  Interest  Capitalization  on Tangible  Fixed
         Assets

    Statement of Position  (SOP) 98-1 provides  guidance on accounting  for the
costs of computer  software  developed  or obtained for internal use under U.S.
GAAP.  Under U.S. GAAP  overhead  costs should not be  capitalized  as costs of
internal-use  software  while under IAS directly  allocated  overhead costs are
included.  During the year ended  December  31, 2002 the SGL Group  capitalized
software costs of [E] 2.7 million under U.S. GAAP.

                                      F-37

<PAGE>

    U.S.  GAAP  requires  the  capitalization  of interest  costs as part of the
historical  cost of  assets  requiring  a period of time to  construct.  Per IAS
benchmark treatment interest cost ("Borrowing Costs") should be recognized as an
expense in the period  which they occur.  The company has elected to use the IAS
benchmark  treatment,  which  results  in  differences  to  U.S.  GAAP  for  the
accounting of borrowing  costs.  During the years ended December 31, 2002,  2001
and 2000 the SGL Group  capitalized  interest under U.S. GAAP of [E] 0.0,[E] 0.0
and [E] 2.8 million, respectively.

    c)   Inventory Valuation

    IAS 2  "Inventories"  identifies two  alternatives  as benchmark  valuation
methods, the FIFO method and the weighted-average  cost method. The LIFO method
is  permitted  as an  allowed  alternative.  In  valuing  inventories  for  IAS
reporting,  the  Company has elected to apply the  benchmark  method  using the
weighted  average  cost  method..  For certain  inventories  held in the United
States of America,  for U.S.  GAAP  reconciliation  purposes we have elected to
continue  recording  their  inventories  on the LIFO  method,  consistent  with
historical accounting practices. This is due, in part, to U.S. income tax laws,
regulations,  and rulings,  which  require that an entity using LIFO for income
tax purposes must use LIFO in its  financial  statements  (the LIFO  Conformity
Rule).

    d)   Pension Provisions

    Under IAS,  pension  costs and similar  obligations  are  accounted  for in
accordance with IAS 19, "Employee Benefits". For purposes of U.S. GAAP, pension
costs for defined  benefit plans are accounted for in accordance  with SFAS No.
87  "Employers'  Accounting  for Pensions"  and the  disclosure is presented in
accordance with SFAS No. 132 "Employers'  Disclosures  about Pensions and Other
Post-retirement  Benefits". SFAS 87 requires that companies located outside the
United States adopt the provisions of SFAS 87 for fiscal years  beginning after
December 15, 1988. Due to the significant  period of time which elapsed between
the date when SFAS 87 would have been  required to be adopted and the time when
the SGL Group first  determined  to prepare U.S.  GAAP  financial  information,
adoption of the  provisions  of SFAS 87 as of January 1, 1989 was not feasible.
Accordingly,  SFAS 87 has been adopted from January 1, 1993.  As of the date of
adoption,  the SGL Group's total  transition  obligation  was [E] 16.1 million.
Such  transition   obligation  is  being  amortized  over  a  15  year  period.
Accordingly,  as of December 31, 1993, [E] 5.4 million,  representing 5/15 (the
elapsed five year period between the required  adoption date of January 1, 1989
and  December  31,  1993) of the  total  transition  obligation,  was  recorded
directly against U.S. GAAP shareholders' equity.

    IAS 19  ("Employee  Benefits")  as  applied  by the Group is  substantially
similar  to  the  methodology  required  under  SFAS  No.  87.  The  transition
provisions in IAS 19 permit the cumulative effect of an accounting change to be
either  recognized  immediately  or delayed and  recognized on a  straight-line
basis over a period of up to five years from the date of  adoption  of IAS 19's
requirements (its transition  period ends in 2004 for enterprises  adopting IAS
19 as of its effective date). SFAS 87 permitted only delayed recognition of the
transition  amount on a straight-line  basis over the average remaining service
period of plan  participants or over 15 years if the average  remaining service
period  is less  than 15 years  (its  transition  period  ends in 2001 for most
enterprises).

    Upon adoption of IAS 19, the company  elected to recognize  the  cumulative
effect of an accounting change immediately.  Consequently,  the amortization of
the transition  obligation in accordance  with SFAS 87, creates a difference in
the pension liability valuation and corresponding  annual pension charge trough
December  31,  2003.  Under IAS changes in the market  value of plan assets are
recognized in the calculation immediately, while they are deferred over 5 years
under U.S. GAAP.

    The interest component of additions to the pension provision has been shown
as an expense in the financial result per IAS, which is below operating profit.
Under U.S. GAAP, the interest  component of additions to the pension  provision
is included in operating profit.

    e)   Incentive Plans

    IAS  provides  that in the absence of a specific  International  Accounting
Standard  or an  Interpretation  of  the  Standing  Interpretations  Committee,
management  should use its judgement in  developing  an accounting  policy that
provides the most useful  information  to users of the  enterprise's  financial
statements. In making this judgement, management should consider, among others,

                                      F-38

<PAGE>

    pronouncements  of other  standard  setting  bodies and  accepted  industry
practices.  We have  elected,  for purposes of IAS  reporting,  to continue the
accounting  treatment for the incentive plans discussed below,  consistent with
prior practices under the German Commercial Code ("German GAAP").

    We  provide   incentive   compensation  for  employees   meeting  specified
performance  targets.  This incentive  compensation is satisfied in the form of
SGL stock.  Under IAS, the incentive  compensation  is recognized as an expense
and  corresponding  increase  in capital  upon  issuance  of the  stock,  which
historically  occurs  in  the  period  subsequent  to the  year  to  which  the
performance relates. U.S. GAAP matches the cost of the bonus with the period in
which the services are rendered.

<TABLE>
<CAPTION>
                                IAS                                     U.S. GAAP
<S>                             <C>                                     <C>
Leveraged Executive             In 1996, total cost of the plan of [E]  Annually, one fifth of the total
Asset Plan (LEAP)               36.6 million was accounted for as       expenditure is accounted for as
                                extraordinary expenses. The             personnel expenditure. In 1996,
                                contribution of Hoechst AG of [E]       the contribution of Hoechst AG
                                25.6 million was accounted for as       was treated as additional paid -in
                                extraordinary ncome in 1996.            icapital without effect on income.
Stock Appreciation Rights Plan  With respect to the SAR rights          Compensation expense is
(SAR)                           exercisable annually by the             recognized for all participants
                                members of the Executive                vested during the year in an
                                Committee, pro rata provisions          amount equal to the difference
                                are made. The exercise of SAR           between the ordinary share price
                                rights by the remaining                 and exercise price.
                                beneficiaries has no effect on net
                                income as they receive new shares
                                to be issued out of authorized
                                capital.

</TABLE>

    The LEAP plan expired in June 2001.  Under IAS and U.S.  GAAP the Long-Term
Cash  Incentive  Plan  (LTCI)  is  accounted  for  using  the  same  accounting
principles.

    f)   Restructuring

    One of the significant  differences  between the restructuring  guidance in
IAS 37,  "Commitments  and  Contingencies"  and the guidance in Emerging Issues
Task Force  (EITF)  Issue 94-3  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other Costs to Exit an Activity  (including  Certain
Costs  Incurred in a  Restructuring)"  is found in the criteria for the initial
recognition of a restructuring  provision.  For employee termination  benefits,
EITF 94-3  requires  that prior to the date of the  financial  statements,  the
benefit arrangement be communicated to employees,  including  sufficient detail
to enable  employees  to  determine  the type and amount of benefits  they will
receive  when  they  are   terminated.   IAS  37  does  not  require  that  the
communication to employees be such detail, rather that the communication simply
include the main features of the plan. As a result,  there may be situations in
which an enterprise following IAS 37 could recognize a restructuring  provision
before it would be permitted to do so if it were following EITF 94-3.

    The  development  of  restructuring  provisions per IAS and U.S. GAAP is as
follows:

<TABLE>
<CAPTION>
(IN [E] MILLION)                IAS  U.S. GAAP
<S>                             <C>        <C>
Balance at January 1, 2002     17.1        9.2
Utilized                      -14.5       -8.2
Released                       -0.8        0.0
Balance at December 31, 2002    1.8        1.0


</TABLE>
    The major difference between IAS and U.S. GAAP at the beginning of 2002 was
related to provisions  established in Europe under IAS, which had not fulfilled
all the recognition requirements under U.S. GAAP.

                                      F-39

<PAGE>
    g)   First Time Adoption of IAS

    IAS 12 "Income  Taxes"  requires  recognition  of a deffered tax asset if a
future realization of a tax benefit is probable.  Although the term probable is
not defined for  purposes of applying IAS 12, SGL has  interpreted  the term to
indicate a higher level of likelihood  than "more likely than not". More likely
than not is the  criterion for  recognition  of a deferred tax asset under U.S.
GAAP, a level of likelihood  defined as more than 50%. Thus, the recognition of
a valuation allowance under IAS has preceeded the recognition under U.S. GAAP.

    Deferred tax assets on tax loss  carryforwards  have been recognized in the
IAS  consolidated  financial  statements  on the basis of  five-year  projected
earnings before taxes of the individual companies consolidated. The projections
reflect  uncertainties  about certain  assumptions and other general conditions
and, in certain cases,  deferred tax assets on tax loss  carryforwards have not
been recognized.

    At  first-time   preparation  of  IAS  annual  financial   statements,   the
recognition  of deferred  tax assets on tax loss  carryforwards  in the U.S. was
adjusted  retrospectively  for the reporting  periods;  these  adjustments  also
resulted in changes  compared  with the IAS amounts  previously  reported in the
published  quarterly  reports.  Deferred tax assets on tax loss carryforwards in
the U.S. was written down in full in the 2001 consolidated  financial statements
as a consequence  of the recession in the USA and the economic  situation in the
US steel industry.  To ensure a comparable basis for the projection  prepared at
end-2000  as regards  uncertainties  surrounding  the U.S.  economy and the U.S.
steel  industry,  the analysis  horizon used as the basis for  recognizing  U.S.
deferred  taxes at the end of  fiscal  year  2000 had to be  truncated  to three
years.  This  valuation  allowance,  in the  amount  of [E]  37.6  million,  was
retroactively reflected in the 2000 year for IAS application, in contrast to the
recognition in 2001 for U.S. GAAP  reporting.  The remaining  portion in 2001 of
the  reconciling  item,  "First time  adoption of IAS" in the amount of [E] 11.7
million represents items which are not related to income taxes.

    h)   Deferred Taxes -- IAS to U.S. GAAP Reconciliation

    The items discussed above create differences between the book (according to
U.S.  GAAP)  and  tax  basis  of the  assets  and  liabilities,  requiring  the
recognition  of  associated  deferred  tax  assets and  liabilities.  With some
exceptions   deferred  tax  assets  and  liabilities  are  recognized  for  all
differences  between the book and tax basis of the assets and liabilities using
future statutory tax rates. In addition,  a valuation  allowance is established
when it is more likely than not that deferred tax assets will not be realized.


                                      F-40

<PAGE>

RECONCILIATION TO U.S. GAAP

    The following is a summary of the significant adjustments to net income and
shareholders'  equity  which would be required  if U.S.  GAAP had been  applied
instead of IAS. Earnings per share have been presented before Cumulative Change
in Accounting  Principles.  The  translation of the 2002 amounts from Euro into
U.S.  dollars has been made using the middle  rate of exchange on December  31,
2002 (1.0415 USD = 1 [E] ):

<TABLE>
<CAPTION>
ALL NUMBERS IN MILLION EXCEPT PER                            2002   2002    2001   2000
  SHARE DATA                                          NOTE   US-$   EURO    EURO   EURO
                                                            -----  -----  ------  -----

<S>                                                    <C>    <C>    <C>     <C>    <C>
Net loss per IAS as reported in the
  consolidated income statement.....................        (24.6) (23.6)  (95.2) (36.0)
Adjustments to conform with US-GAAP:
  Business acquisition and goodwill.................   (a)    5.3    5.1    (2.7)  (1.6)
  Internal Use Software and Interest capitalization.   (b)   (3.1)  (3.0)   (0.9)   2.2
  Inventory.........................................   (c)   (6.0)  (5.8)   (3.9)   2.1
  Pension provision.................................   (d)   (2.2)  (2.1)   (1.1)  (1.1)
  Incentive plans...................................   (e)   (2.3)  (2.2)   (4.9)  (9.3)
  Restructuring.....................................   (f)   (7.4)  (7.1)   (7.9)  (0.0)
  First time adoption of IAS........................   (g)    0.0    0.0   (49.3)  37.6
  Deferred Taxes --- IAS to U.S. GAAP reconciliation   (h)    5.3    5.1    (5.7)   2.8
                                                            -----  -----  ------  -----
Net loss in accordance with US-GAAP ................        (23.0) (22.0) (148.0)  (3.3)
  Cumulative Change in Accounting Principles........          9.8    9.4     0.0    0.0
Net loss after Cumulative Change in
  Accounting Principals.............................        (13.2) (12.6) (148.0)  (3.3)
Basic earnings per share in accordance with US-GAAP         (1.05) (1.01)  (6.87) (0.15)
Diluted earnings per share in
  accordance with US-GAAP...........................        (1.05) (1.01)  (6.87) (0.15)
Equity per IAS as reported in the
  consolidated balance sheet........................        204.4  196.3   255.2
Adjustments to conform with US-
  GAAP:
  Business acquisition and goodwill.................   (a)   47.1   45.2    26.9
  Internal Use Software and Interest capitalization.   (b)    1.1    1.1     4.3
  Inventory.........................................   (c)   (0.7)  (0.7)   (7.1)
  Pension provision.................................   (d)  (27.4) (26.3)  (11.5)
  Incentive plans...................................   (e)   (7.0)  (6.7)  (10.0)
  Restructuring.....................................   (f)    0.8    0.8     7.9
  First time adoption of IAS........................   (g)    0.0    0.0     0.0
  Deferred Taxes --- IAS to U.S.
  GAAP reconciliation...............................   (h)    0.0    0.0    (1.6)
                                                            -----  -----  ------  -----
Equity in accordance with US-
  GAAP..............................................        218.3  209.7   264.1

</TABLE>

35. ADDITIONAL DISCLOSURE INFORMATION REQUIRED BY U.S. GAAP

    The disclosures discussed in this footnote are based on the entities
consolidated for IAS.

                                      F-41

<PAGE>

A.  OTHER POSTRETIREMENT BENEFITS

    For purposes of  disclosure  in accordance  with U.S.  GAAP,  the following
information for the SGL Group's material other postretirement  benefit plans is
provided  in  accordance  with the  requirements  of SFAS No.  106  "Employers'
Accounting for Postretirement Benefits Other Than Pensions."

    Certain of the SGL Group's U.S.  operations  provide  health care and other
benefits to most of their  retired  employees  and their  eligible  dependents.
Minimum service under the plan has been defined as ten years.

    Net postretirement  benefit expense for the postretirement benefit plan for
the years  ended  December  31,  2002,  2001 and 2000  included  the  following
components:

<TABLE>
<CAPTION>
                                                                2002  2001  2000
                                                                EURO  EURO  EURO
<S>                                                              <C>   <C>   <C>
                                                                ----  ----  ----

Service cost-benefits attributed to service during the period.   0.2   0.2   0.2
Interest cost on accumulated postretirement benefit obligation   2.0   2.3   1.9
Amortization and deferral.....................................   0.0   0.4   0.1
                                                                ----  ----  ----

Net periodic postretirement benefit cost......................   2.2   2.9   2.2
                                                                ====  ====  ====

</TABLE>

    Following is a summary of the changes in the accumulated benefit obligation
for postretirement benefits during 2002 and 2001:

<TABLE>
<CAPTION>
                                                                      2002  2001
                                                                      EURO  EURO
<S>                                                                    <C>   <C>
Benefit obligation at the beginning of the year....................   30.5  24.9
Foreign currency translation.......................................   (4.7)  1.4
Service cost.......................................................    0.2   0.2
Interest cost......................................................    2.0   2.3
Curtailment/settlement and Change in Plan provision................   (3.0)  0.0
Plan participant contributions.....................................    0.5   0.5
Actuarial loss.....................................................    5.5   5.5
Benefits paid......................................................   (4.0) (4.3)
                                                                     -----  ----
Benefit obligation at the end of the year..........................   27.0  30.5
Unrecognized net loss..............................................  (11.4) (9.4)
Unrecognized prior service cost....................................    1.0   0.0
                                                                     -----  ----
Net amount recognized..............................................   14.6  21.1
                                                                     =====  ====
</TABLE>

    The  health  care  cost  trends  used  in   determining   the   accumulated
postretirement  benefit  obligation  for 2002 and 2001 were 0.0% and 6.0%.  The
health care cost trend rate is expected to remain at 0.0%.  This assumption has
a  significant  effect on the amounts  reported.  For example,  increasing  the
assumed  trend by 1% would  increase  the  accumulated  postretirement  benefit
obligation  and the  service  and  interest  cost  components  of net  periodic
postretirement  benefit cost for the years ended  December 31, 2002 and 2001 by
approximately  [E] 0.0  million and [E] 0.6 million and [E] 0.2 million and [E]
0.0 million,  respectively.  Decreasing  the assumed trend by 1% would decrease
the accumulated  postretirement benefit obligation and the service and interest
cost components of net periodic  postretirement benefit cost for the year ended
December  31,  2002 by  approximately  [E] 0.0 and [E]  0.2,  respectively.  In
determining the accumulated  postretirement  benefit  obligation,  the weighted
average  discount rate used was 6.75% and 7.5% for the years ended December 31,
2002 and 2001, respectively.

                                      F-42

<PAGE>

    Under IAS, the Company  included  [E] 10.4 million in 2002,  [E] 9.9 in 2001
and [E] 9.2  million in 2000 of interest  costs  associated  with the  Company's
provision for pension and similar  obligations  in interest  expense.  U.S. GAAP
does not allow the interest cost  associated  with the provision for pension and
similar obligations to be recorded as a component of interest expense.

B.  INCOME TAXES

    In 2000, the German  government  enacted new tax Legislation  which,  among
other  changes,  reduced the Group's  statutory  corporate  tax rate for German
companies  from 40% on retained  earnings to 30% on  distributed  earnings to a
uniform 25%,  effective for the Group's year beginning  January 1, 2001.  Since
the Tax  Reduction  Act became  effective  in January  2001,  the net profit of
German companies has been subject to a standard 25% rate of corporation tax. In
September  2002,  the  rate of  German  corporation  tax for  fiscal  2003  was
increased to 26.5%.  The impact of this tax  increase,  which is limited to one
year, is not of material  importance  and Notes to the  Consolidated  Financial
Statements  has  therefore  not been  included in the  calculation  of deferred
taxes.  A  solidarity  surcharge of 5.5% is added to the  corporation  tax rate
resulting  in an  aggregate  corporation  tax rate for 2001 and 2002 of  26.4%.
Together  with the trade tax burden of 12%, the German  income tax rate amounts
to a total of 38.4%.  The effects of the  reductions  in the tax rate and other
tax law  changes on the  deferred  tax assets and  liabilities  of the  Group's
German  companies  were  recognized  in the year of  enactment  and resulted in
deferred tax expense for 2000 of [E] 16.0 million .

    Under U.S. GAAP, the effective income tax rate would  approximate  17.3% in
2002, 96.6 % in 2001 and 120.2% in 2000.

    At  December  31, 2002 and 2001,  the SGL Group had tax loss  carryforwards
amounting  to   approximately   [E]  315.4   million  and  [E]  322.6   million
respectively.   Some  of  the  tax  credit   carryforwards  have  an  unlimited
carryforward  period under local tax laws. For U.S. GAAP  purposes,  a deferred
tax valuation  allowance on tax loss  carryfowards  in 2002 of [E] 79.3 million
(2001:  [E]  114.8) has been  established  against  deferred  tax  assets.  The
reductions in 2002 are due to the deconsolidation of a subsidiary.

    The  valuation  allowances  at  December  31,  2002 and  2001  are  derived
principally  from tax loss  carryforwards  in the United  States and the United
Kingdom, the realization of which is unlikely,  based on projected tax earnings
in the next five year period. Tax benefits relating to the valuation  allowance
for deferred tax assets at December 31, 2002 that are  subsequently  recognized
will be reflected in the consolidated  statement of operations of the period in
which the event occurs.

    Under U.S.  GAAP, the SGL Group would have recorded net deferred tax assets
at December  31, 2002 and 2001 of [E] 54.7 and [E] 42.1 million  consisting  of
deferred tax assets relating to tax loss carryforwards at December 31, 2002 and
2001 of [E] 39.7 and [E] 31.2  million,  respectively,  and other  deferred tax
assets  of [E]  53.7 and [E]  52.7  million,  respectively,  and  deferred  tax
liabilities of [E] 38.7and [E] 41.8 million, respectively.

    In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion of the deferred tax assets
will not be realized.  The evidence  considered  in  determining  the valuation
allowance   includes  the  scheduled  reversal  of  deferred  tax  liabilities,
projected  future  taxable  income and tax  planning  strategies.  The ultimate
realization  of deferred tax assets is dependent  upon the generation of future
taxable income during the periods in which those temporary  differences  become
deductible.

    Deferred taxes have not been provided on undistributed  earnings of foreign
subsidiaries as these amounts are deemed to be permanently reinvested.

C.  SFAS NO. 130 "REPORTING COMPREHENSIVE INCOME"

    SFAS No. 130 requires  disclosures  regarding  comprehensive  income. These
include  all  changes in equity not  transacted  with  owners of the  business.
Comprehensive income is comprised as follows:

                                      F-43

<PAGE>

<TABLE>
<CAPTION>
[E] MILLION                                                                      2002    2001
<S>                                                                               <C>     <C>
                                                                                -----  ------
Consolidated net loss US GAAP after Cumulative Change in Accounting
  Principles..................................................................  (12.6) (148.0)
Other comprehensive income, net of tax
  Change in cumulative translation adjustment.................................  (23.7)   13.0
  Minimum pension liability adjustment........................................  (18.1)   (8.4)
Other comprehensive income....................................................  (41.8)   (4.6)
Comprehensive income/loss.....................................................  (54.4) (143.4)

</TABLE>

    The  other  comprehensive  income  relates  exclusively  to the  cumulative
translation adjustment and an additional minimum pension liability.

D.  STOCK COMPENSATION PLANS

    The costs of the stock  compensation  plan (for purposes of the calculation
of the reconciliation from IAS to US GAAP) have been calculated pursuant to the
provisions  of APB  Opinion  No.  25.  SFAS 123  "Accounting  for  Stock  Based
Compensation"  amended by SFAS 148 requires  additional  disclosure of the pro-
forma income statement impact of the effect of the accounting treatment.

    At  December  31,  2002,  there  were a total of  998,500  shares (in 2002:
507,000)  available  for  grant  under  the stock  option  plan.  The per share
weighted-average  fair value of stock options  granted during 2002 were [E]10.3
and  [E]14.5  and  during  2001  [E]28.7  at the date of grant  using the Black
Scholes  option-pricing  model (excluding a dividend yield assumption) with the
following assumptions: 2002 -- volatility 40%, risk-free interest rate of 5.0%,
and an expected life of 6 years;  2001 -- volatility  30%,  risk-free  interest
rate of 5.0% and an expected life of 6 years.

    Had the Company determined compensation cost based on the fair value at the
grant date for its stock  options  under SFAS No. 123 amended by SFAS 148,  the
Company's net loss would have been increased to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                                               2002    2001
                                                              -----  ------
<S>                                <C>                <C>      <C>      <C>
Net loss *)......................  As reported        [E]m   (22.0)  (148.0)
Add: ............................  APB 25 result      [E]m    (0.2)    (1.5)
Deduct:..........................  SFAS 123 expense   [E]m    (3.7)    (2.6)
Net loss *)......................  Pro forma          [E]m   (25.9)  (152.3)
Earnings per share basic (EPS)...  As reported        [E]    (1.01)   (6.87)
Earnings per share basic (EPS)...  Pro forma          [E]    (1.18)   (7.07)

</TABLE>

*) before Cumulative Changes in Accounting Principles

E.  NON-CURRENT ASSETS

    Accounts  receivable trade due after one year at December 31, 2002 and 2001
amounting to [E] 0.3 million and [E] 0.4 million  would be  classified  as non-
current  assets  under U.S.  GAAP.  There were no other  receivables  and other
assets  due  after  one  year at  December  31,  2002 and  2001  that  would be
classified as non-current assets under U.S. GAAP.

F.  IMPLEMENTATION OF NEW U.S. ACCOUNTING PRONOUNCEMENTS

    In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase  method of accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141 also  specifies
criteria  for  intangible   assets  acquired  in  a  purchase  method  business
combination must meet to be recognized and reported apart from goodwill, noting
that  any  purchase  price  allocable  to an  assembled  workforce  may  not be
accounted for  separately.  Statement 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized,  but instead tested
for impairment at least annually in accordance with the provisions of Statement
142. Statement 142 also requires that intangible assets

                                      F-44

<PAGE>

with estimable useful lives be amortized over their respective estimated useful
lives to their  estimated  residual  values,  and  reviewed for  impairment  in
accordance  with FAS Statement No. 121,  Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of.

    The Company  adopted the  provisions of SFAS 141 and SFAS 142 as of July 1,
2001, and January 1, 2002, respectively. These Statements require that goodwill
acquired  in a business  combination  completed  after June 30,  2001,  and any
intangible  asset  determined to have an indefinite  useful life acquired after
June  30,  2001,  should  not  be  amortized.  Goodwill  acquired  in  business
combinations  completed  before July 1, 2001,  and any  intangible  assets with
indefinite  useful lives acquired  before July 1, 2001,  were  amortized  until
December 31, 2001.

    SFAS 142 required the Group to evaluate its existing  intangible assets and
goodwill and to make any necessary  reclassifications  in order to conform with
the new separation  requirements at the date of adoption.  The Group reassessed
the estimated  useful lives and residual values of all intangible  assets other
than goodwill and determined that no adjustments regarding amortization periods
were necessary.

    In  connection  with  the  transitional  impairment  evaluation,  SFAS  142
required SGL to perform an assessment  of whether  there is an indication  that
goodwill  is  impaired  as of January  1, 2002.  To  accomplish  this,  SGL (1)
identified  its reporting  units,  (2)  determined  the carrying  value of each
reporting unit by assigning the assets and liabilities,  including the existing
goodwill and intangible  assets,  to those reporting  units, and (3) determined
the fair value of each  reporting  unit.  SGL completed  this first step of the
transitional  assessment  for all of the  Group's  reporting  units by June 30,
2002, and determined there was no indication that goodwill had been impaired as
of January 1, 2002. Accordingly, no transitional goodwill impairment charge was
necessary.

    And  finally,  any  unamortized  negative  goodwill  existing  at the  date
Statement 142 was adopted was written off as the cumulative  effect of a change
in accounting principle.

    As of  December  31,  2002,  the Company  had under U.S.  GAAP  unamortized
goodwill  in the amount of [E] 136.1  million,  no  unamortizable  identifiable
intangible  assets  and no  unamortized  negative  goodwill,  all of which were
subject to the transition  provisions of Statements  141 and 142.  Amortization
expense related to goodwill and negative  goodwill was [E] 0.0, [E] 7.0 and [E]
7.9 million for the years ended December 31, 2002, 2001, and 2000.

    In June 2001, the Financial Accounting Standards Board issued Statement No.
143,  Accounting for Asset Retirement  Obligations,  which addresses  financial
accounting  and reporting for  obligations  associated  with the  retirement of
tangible  long-lived  assets and the associated  asset  retirement  costs.  The
standard applies to legal  obligations  associated with the retirement of long-
lived assets that result from the  acquisition,  construction,  development and
(or) normal use of the asset.

    Statement  No. 143 requires that the fair value of a liability for an asset
retirement  obligation be recognized in the period in which it is incurred if a
reasonable  estimate of fair value can be made. The fair value of the liability
is added to the carrying  amount of the  associated  asset and this  additional
carrying  amount is  depreciated  over the life of the asset.  The liability is
accreted at the end of each period through charges to operating expense. If the
obligation is settled for other than the carrying amount of the liability,  the
Company  will  recognize a gain or loss on  settlement.  The SGL Group does not
expect any material impact regarding the adoption of SFAS 143 effective January
1, 2003.

    In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of  Long-Lived  Assets." SFAS 144 retains the current  requirement  to
recognize an impairment loss only if the carrying amounts of long-lived  assets
to be held and used are not recoverable from their expected undiscounted future
cash flows.  However,  goodwill is no longer  required to be allocated to these
long-lived assets when determining  their carrying  amounts.  SFAS 144 requires
that a long-lived  asset to be abandoned,  exchanged  for a similar  productive
asset, or distributed to owners in a spin-off be considered held and used until
it is disposed.  However, SFAS 144 requires the depreciable life of an asset to
be abandoned be revised. SFAS 144 requires all long-lived assets to be disposed
of by sale be recorded at the lower of its  carrying  amount or fair value less
cost to sell and to cease depreciation (amortization).  Therefore, discontinued
operations are no longer measured on a net realizable value

                                      F-45

<PAGE>

basis, and future operating losses are no longer  recognized before they occur.
The Company has adopted  SFAS 144  effective  January 1, 2002.  The adoption of
SFAS 144 did not have a material impact on the Group's financial statements.

    In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement 13 and Technical  Corrections."  SFAS
145 requires  gains and losses on  extinguishments  of debt to be classified as
gains or losses from continuing  operations rather than as extraordinary  items
as  previously  required  under SFAS 4,  unless  the gains and losses  meet the
criteria to be  classified as  extraordinary  pursuant to APB 30. SFAS 145 also
amends SFAS 13, "Accounting for Leases," to eliminate an inconsistency  between
the required  accounting  for  sale-lease  back  transactions  and the required
accounting for certain lease  modifications that have economic effects that are
similar to sale-lease back transactions.  The rescission of SFAS 4 is effective
for fiscal years  beginning  after May 15,  2002.  The  provisions  of SFAS 145
related to SFAS 13 are effective for transactions occurring after May 15, 2002.
We do not expect to have a material  impact  regarding the adoption of SFAS 145
on the Group's consolidated financial statements.

    In July 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." The Statement requires that a liability for
costs  associated with exit or disposal  activities be recognized in the period
in which the costs are incurred if a  reasonable  estimate of fair value can be
made.  Under current  accounting  guidance,  a liability can be recognized when
management has committed to an exit plan. The  requirements  under SFAS 146 are
effective  prospectively  for  exit  or  disposal  activities  initiated  after
December 31, 2002. Restatement of previously issued financial statements is not
permitted.  The adoption of this Statement  will affect the Group's  accounting
for exit and disposal activities initiated after December 31, 2002.

    On December 31, 2002 the Financial  Accounting  Standards Board issued SFAS
No. 148 "Accounting for Stock-Based Compensation -- Transition and Disclosure",
which  amends the  disclosure  requirements  relating to  stock-based  employee
compensation  previously  contained in SFAS No. 123. The amendments in SFAS No.
148 relevant to the SGL Group are  effective  for all fiscal years ending after
December  15,  2002.  The  disclosure  requirements  have been  included in the
additional  information provided on U.S. GAAP, see Note 35d to our Consolidated
Financial Statements.

    In November 2002, FASB Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" was issued. FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
It also clarifies that a guarantor is required to recognize, at the inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The required disclosures
and a roll-forward of product warranty liabilities are effective for financial
statements of interim or annual periods ending after December 15, 2002. At this
time, we do not believe that the adoption of this interpretation will have a
material effect on our financial statements.

    In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB 51. The
primary objectives of FIN 46 are to provide guidance on the identification of
entities for which control is achieved through means other than through voting
rights ("variable interest entities" or "VIEs") and how to determine when and
which business enterprise should consolidate the VIE (the "primary
beneficiary"). This new model for consolidation applies to an entity in which
either (1) the equity investors (if any) do not have a controlling financial
interest or (2) the equity investment at risk is insufficient to finance that
entity's activities without receiving additional subordinated financial support
from other parties. In addition, FIN 46 requires that both the primary
beneficiary and all other enterprises with a significant variable interest in a
VIE make additional disclosures. We are currently evaluating the impact of FIN
46 on our financial statements, but do not expect that there will be any
material impact.

                                     F-46

<PAGE>
G.  COMMITMENTS AND CONTINGENCIES

    The SGL Group is involved in various  claims and legal  actions  arising in
the ordinary course of business.  Litigation is subject to many  uncertainties,
and the outcome of individual matters is not predictable with assurance.  It is
reasonably  possible  that the final  resolution  of some of these  matters may
require the SGL Group to make expenditures,  in excess of established reserves,
over an  extended  period  of time and in a range of  amounts  that  cannot  be
reasonably  estimated.  Although the final resolution of any such matters could
have a material effect on the Company's  consolidated  operating  results for a
particular  reporting period in which an adjustment of the estimated reserve is
recorded,   management  believes  that  any  resulting  adjustment  should  not
materially affect its consolidated  financial position.  See Item 8 for details
to legal proceedings.

    It is not possible to predict with  certainty the ultimate  outcome of such
actions  however  management  believes  that  while  any  settlements  could be
significant  to the  Company's  results of operations or liquidity in a year of
settlement  such  amount  would  not  have a  material  adverse  effect  on the
Company's financial position.

H.  EARNINGS (LOSS) PER SHARE

    Under  U.S.  GAAP,  earnings  per share are  calculated  and  presented  in
accordance with the provisions of Statement of Financial  Accounting  Standards
No. 128,  "Earnings per Share",  which requires the  presentation of both basic
and diluted earnings per share information for all periods presented. Basic net
profit/(loss)  per  share  is  computed  by  dividing  net  income/(loss),   as
calculated in accordance  with U.S.  GAAP,  by the weighted  average  number of
shares outstanding of 21,813,930 in 2002,  21,530,563 in 2001 and 21,376,753 in
2000.  Diluted net profit  /(loss) per share includes the effect of incremental
shares,  if any, that would have been outstanding  under the share option plans
or other  obligations  to issue such  shares.  Due to the fact that there was a
loss in all reported periods there was no difference  between basic and diluted
(loss) per share.

I.  CASH FLOW STATEMENTS -- CHANGES IN CORPORATE DEBT

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                    2002      2001      2000
                                                    EURO      EURO      EURO
                                                  ------    ------    ------
<S>                                                  <C>       <C>       <C>
Proceeds from corporate debt....................   166.1     276.5     431.8
Repayment of corporate debt.....................  (256.5)   (240.0)   (334.0)
                                                  ------    ------    ------
                                                   (90.4)     36.5      97.8

</TABLE>

J.  DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

    The  Company is a limited  user of  derivative  financial  instruments.  It
primarily  utilize  interest rate swap and cap agreements and forward  exchange
contracts  to  manage   exposures  to  interest   rate  and  foreign   currency
fluctuations.  The Company is not party to leveraged  derivatives  and does not
hold or issue derivative instruments for speculative purposes.

    The  notional/contract  amount of  derivatives  do not represent the amount
exchanged  by the  parties  and thus are not a measure of the  exposure  of the
Company through its use of derivatives.  The amounts  exchanged during the term
of the derivatives are calculated on the basis of the notional/contract amounts
and the other contractual conditions of the derivatives.

    Management  actively  evaluates  the  credit  worthiness  of the  financial
institutions which are counter parties to derivative  instruments,  and it does
not expect any counter  parties to fail to meet their  obligations.  The credit
exposure of derivative instruments is represented by the unrealized gain in the
underlying instrument.

    The estimated fair value of on-balance sheet financial  instruments  (cash,
receivables,  payables, accrued expenses, other liabilities and long-term debt)
are  considered to approximate  their carrying value because such  instruments,
except for long-term debt, have short maturity.  In the case of long-term debt,
interest may be revised  periodically  to current market rates. At December 31,
2002 and 2001 the estimated fair value of derivative financial  instruments has
been disclosed in note 27.

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    The SGL Group adopted SFAS 133 effective January 1, 2001. The SGL Group has
elected not to adopt hedge  accounting  provisions in accordance  with SFAS 133
for its hedging derivatives.

K.  CONCENTRATION OF CREDIT RISKS

    Financial   instruments  which   potentially   subject  the  SGL  Group  to
concentrations  of  credit  risk  consist  principally  of  cash  and  accounts
receivable.  Management believes,  however, that the loss due to credit risk to
be  incurred  by the  Company if parties to these  financial  instruments  fail
completely to perform  according to the terms of the contracts is not material.
Due to the refinancing of the company encumbrances have been installed,  please
refer to Item 10 (Material  Contracts).The  Company  estimates an allowance for
doubtful  accounts  based on the credit  worthiness of its customers as well as
general economic conditions.  Consequently,  an adverse change in those factors
could affect estimates of bad debts.

L.  WARRANTY OBLIGATIONS

    The Company  warrants to the  purchasers  of its line of products  that the
product  will be free of defects  in  material  and  workmanship.  The  Company
records the  estimated  cost that may be incurred  under its  warranties at the
time the product  revenue is  recognized  based upon the  relationship  between
historical  and  anticipated  warranty  costs and sales  volumes.  The  Company
periodically  assesses  the  adequacy of its recorded  warranty  liability  and
adjusts the amounts as necessary. While the Company believes that its estimated
liability for product  warranties is adequate and that the judgment  applied is
appropriate,  the  estimated  liability  for product  warranties  could  differ
materially from actual future warranty costs.

M.  OTHER

    No loans to  executive  or  supervisory  board  members  were granted as of
December 31, 2002.

36. SUBSEQUENT EVENTS

    On January 7, 2003 SGL  received the cash  proceeds out of the  refinancing
agreement  signed on  December  20, 2002 and used the  proceeds to  refinance a
substantial  part of the  old  financial  debt.  Details  to  this  refinancing
agreement  are  explained  in Item  10,  "Additional  Information  --  Material
Contracts" and in the exhibit 2 of this annual report.

    All shares in SGL PanTrac Gesellschaft fur elektrische Kontakte mbH, Berlin
(PanTrac), were sold to E-Carbon S.A., Brussels, a third-party enterprise,  and
were transferred in January 2003.  PanTrac was still fully  consolidated in the
consolidated financial statements for fiscal year 2002.

         As of April 8, 2003 SGL sold all shares in Risomesa S.p.A., Milan (the
Italian operation for machined electrical carbon products) to the Schunk Group,
Germany.  Risomesa was still fully  consolidated in the consolidated  financial
statements for fiscal year 2002.



































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