SGL CARBON AG

Rheingaustrasse 182 D-65203 Wiesbaden

Phone +49 (611) 60 29-100 Fax +49 (611) 60 29-101 Website: www.sglcarbon.com

Head Office Investor Relations

Upcoming Events

Year-End Press Conference and Analyst Meeting,

2003

Frankfurt am Main, Conference Call

April 30 Annual General Meeting, Wiesbaden

May 14 Q1 Shareholders' Letter, Conference Call

August 12 Q2 Shareholders' Letter, Conference Call

March 16 Year-End Press Conference (to be confirmed) April 30 Annual General Meeting (to be confirmed)

Fall Press Conference and Analyst Meeting,

March 13 Annual Report,

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 1

June 30 Form 20-F

November 11 Q3 Shareholders' Letter,

2004

Frankfurt am Main, Conference Call

Germany

Mission

Core Businesses

Optimize cash flow.

global focus.

and profit potential.

and engineering.

Strengthen global market position. Achieve cost and technology leadership.

New Businesses (SGL Technologies)

Develop new businesses with high growth

Concentrate on core competencies:

Leverage carbon fiber to composite value chain.

SGL Excellence

SGL Carbon is the world's largest manufacturer of carbon, graphite and composite

profitability and quality. With around 30 sites and a customer-oriented

materials. In the manufacturing industry and the aerospace sector, our products

sales and service network today SGL Carbon is a company with a

and system solutions allow our customers to improve their efficiency, safety,

and employees.

Understand and satisfy customer requirements. Create value for our customers, shareholders

Build trust and encourage knowledge sharing, continuous learning, open feedback and communication among all employees. Take responsibility and lead by example. Develop people and promote teamwork.

Provide a climate that meets all legal, personnel

Build a Corporate Identity throughout the Company.

and environmental obligations.

high temperature technology, advanced materials,

Annual Report 2002

Focused on Customers.

Understand demands. Develop solutions. Create value.

SGL Carbon is the world's largest manufacturer of carbon, graphite and composite materials. In the manufacturing industry and the aerospace sector, our products and system solutions allow our customers to improve their efficiency, safety, profitability and quality. With around 30 sites and a customer-oriented sales and service network today SGL Carbon is a company with a global focus.

Mission

Annual Report 2002

Focused on Customers.

Understand demands. Develop solutions. Create value.

SGL CARBON GROUP

Annual Report 2002

SGL CARBON AG

Rheingaustrasse 182 D-65203 Wiesbaden

Phone +49 (611) 60 29-100 Fax +49 (611) 60 29-101 Website: www.sglcarbon.com

Head Office Investor Relations

Upcoming Events

Year-End Press Conference and Analyst Meeting,

2003

Frankfurt am Main, Conference Call

April 30 Annual General Meeting, Wiesbaden

May 14 Q1 Shareholders' Letter, Conference Call

August 12 Q2 Shareholders' Letter, Conference Call

March 16 Year-End Press Conference (to be confirmed) April 30 Annual General Meeting (to be confirmed)

Fall Press Conference and Analyst Meeting,

March 13 Annual Report,

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 1

June 30 Form 20-F

November 11 Q3 Shareholders' Letter,

2004

Frankfurt am Main, Conference Call

Germany

Core Businesses

Strengthen global market position.
Achieve cost and technology leadership.
Optimize cash flow.

New Businesses (SGL Technologies)

Develop new businesses with high growth and profit potential.
Leverage carbon fiber to composite value chain.
Concentrate on core competencies: high temperature technology, advanced materials, and engineering.

SGL Excellence

Understand and satisfy customer requirements.
Create value for our customers, shareholders and employees.
Build trust and encourage knowledge sharing, continuous learning, open feedback and communication among all employees.
Take responsibility and lead by example.
Develop people and promote teamwork.
Provide a climate that meets all legal, personnel and environmental obligations.
Build a Corporate Identity throughout the Company.

Key Figures SGL CARBON worldwide

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 2

	2002 (€ million)	2001 (€ million)	Change (%)
Sales revenues	1,112	1,233	– 10
Carbon and Graphite	551	620	– 11
Graphite Specialties1	196	231	– 15
Corrosion Protection	212	236	– 10
SGL Technologies1	150	135	11
Profit from operations2	29	59	– 51
Carbon and Graphite3	52	79	– 34
Graphite Specialties1, 3	2	22	– 91
Corrosion Protection3	5	13	– 62
SGL Technologies1	– 12	– 34	– 65
Return on Sales4	3%	5%
Profit/loss before tax	– 27	– 66	– 59
Net loss for the period	– 24	– 95	– 75
Earnings per share (€)	– 1.08	– 4.42	– 76
Profit from operations before depreciation 2 and amortization (EBITDA)	110	145	– 24
Cash provided by operating activities5, 6	149	93	60
Investments in property, plant and equipment	41	91	– 55
Depreciation of property, plant and equipment7	71	78	– 9
Research and development costs	25	31	– 19
Working capital8	385	549	– 30
Capital employed9	967	1,213	– 20
Equity	196	255	– 23
Total assets	1,286	1,495	– 14
Gearing10	2.2	2.1
Number of employees (at end of year)	7,360	8,197	– 10
Market capitalization (at end of year)	175	488	– 64

¹ Reclassification of the graphite foils business from Graphite Specialties to SGL Technologies
² Before provisions for antitrust risks and restructuring expenses
³ Before restructuring expenses
⁴ Ratio of profit from operations to sales revenues
⁵ After adjustments for exchange rate effects
and before antitrust payments
⁶ Please refer to page 48

⁷ Not including extraordinary depreciation associated with restructuring

AFRICA/ASIA

SGL ACOTEC S.a.r.l. MAROC, Safi

SGL ACOTEC (Wuhan) Co. Ltd., Wuhan

SGL ACOTEC Singapore Pte. Ltd., Singapore

EUROPE

Germany

Austria

France

SGL CARBON AG, Wiesbaden

SGL CARBON GmbH, Meitingen SGL TECHNOLOGIES GmbH, Meitingen SGL BRAKES GmbH, Meitingen SGL ACOTEC GmbH, Siershahn KCH Beteiligungs GmbH, Siershahn SGL PanTrac GmbH, Berlin

SGL CARBON Europe

SGL CARBON GmbH & Co., Steeg

SGL CARBON S.A., Chedde SGL TECHNIC S.A., Grenoble SGL ACOTEC S.a.r.l., Houdain

SGL CARBON Beteiligung GmbH, Wiesbaden

Great Britain

Italy

Poland

Spain

RK Carbon International Ltd., Wilmslow SGL TECHNIC Ltd., Muir of Ord P.G. Lawton Ltd., Halifax SGL CARBON Ltd., Alcester SGL ACOTEC Ltd., Sandbach

SGL CARBON S.p.A., Milan SGL Risomesa S.p.A., Milan SGL ACOTEC S.p.A., Milan

SGL CARBON S.A., Nowy Sacz SGL ACOTEC Polska Sp. z.o.o., Kielce ZEW Zaklady Elektrod Weglowych S.A., Ratibor

SGL CARBON S.A., La Coruña

Morocco

AMERICA

SGL ACOTEC Ltda., São Paulo

Ceilcote S.A. de C.V., Mexico City

HITCO CARBON Composites Inc., Gardena

SGL CARBON LLC., Charlotte M.G.P. Inc., Robesonia

SGL TECHNIC Inc., Valencia SGL ACOTEC Inc., Strongsville

SGL Canada Inc., Lachute

Brazil

Major consolidated companies

SGL CARBON worldwide

Key Figures and Overview of Business Areas

Overview of Business Areas

Share of Group Sales

50% 18% 19%

Carbon and Graphite [CG] Graphite Specialties [GS] Corrosion Protection [CP] SGL Technologies [T]

Share of Group Sales

13%

Products/Applications Brake Discs

and Fabrics

Customer Industries Automotive Electronics Energy

Aircraft Construction

Defense Semiconductors Chemicals

Fuel Cell Components Carbon Fibers, Yarns

Aerospace Applications Industrial Composites Expanded Graphite

Products/Applications Process Technology Surface Protection

Customer Industries Chemicals Plant Construction

Environmental Protection

Energy Transportation Pharmaceuticals

Metallurgy

Products/Applications Technical Carbon Semiconductors Mechanical Carbon Electrical Contacts

Customer Industries Chemicals Energy

Glass and Ceramics Semiconductor Technology

Mechanical Engineering

Metallurgy Automotive

Share of Group Sales

Products/Applications Graphite Electrodes

Carbon Electrodes Furnace Linings

Customer Industries

Steel Aluminum Metallurgy

Cathodes

Canada

Mexico

USA

Singapore

China

⁸ Carrying amounts of inventories and trade receivables less trade payables
⁹ Carrying amounts of property, plant and equipment, intangible assets and working capital
¹⁰ Ratio of financial liabilities less cash and cash equivalents to equity

Key Figures SGL CARBON worldwide Overview of Business Areas

¹ Reclassification of the graphite foils business from Graphite Specialties to SGL Technologies ² Before provisions for antitrust risks and restructuring

Profit from operations before depreciation

and amortization (EBITDA)

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 2

⁷ Not including extraordinary depreciation associated

⁸ Carrying amounts of inventories and trade receivables

2002 2001 Change (€ million) (€ million) (%)

Sales revenues 1,112 1,233 – 10 Carbon and Graphite 551 620 – 11 Graphite Specialties1 196 231 – 15 Corrosion Protection 212 236 – 10 SGL Technologies1 150 135 11 Profit from operations² 29 59 – 51 Carbon and Graphite3 52 79 – 34 Graphite Specialties1, 3 2 22 – 91 Corrosion Protection3 5 13 – 62 SGL Technologies1 – 12 – 34 – 65

Return on Sales4 3% 5%

Profit/loss before tax – 27 – 66 – 59 Net loss for the period – 24 – 95 – 75

Earnings per share (€) – 1.08 – 4.42 – 76

Cash provided by operating activities5, 6 149 93 60 Investments in property, plant and equipment 41 91 – 55 Depreciation of property, plant and equipment7 71 78 – 9 Research and development costs 25 31 – 19

Working capital⁸ 385 549 – 30 Capital employed9 967 1,213 – 20 Equity 196 255 – 23 Total assets 1,286 1,495 – 14

Number of employees (at end of year) 7,360 8,197 – 10 Market capitalization (at end of year) 175 488 – 64

Gearing10 2.2 2.1

⁹ Carrying amounts of property, plant and equipment,

intangible assets and working capital ¹⁰ Ratio of financial liabilities less cash and cash

with restructuring

² 110 145 – 24

less trade payables

equivalents to equity

⁴ Ratio of profit from operations to sales revenues ⁵ After adjustments for exchange rate effects

expenses

³ Before restructuring expenses

and before antitrust payments ⁶ Please refer to page 48

AFRICA/ASIA

SGL ACOTEC S.a.r.l. MAROC, Safi

SGL ACOTEC (Wuhan) Co. Ltd., Wuhan

SGL ACOTEC Singapore Pte. Ltd., Singapore

EUROPE

Germany

Austria

France

SGL CARBON AG, Wiesbaden

SGL CARBON GmbH, Meitingen SGL TECHNOLOGIES GmbH, Meitingen SGL BRAKES GmbH, Meitingen SGL ACOTEC GmbH, Siershahn KCH Beteiligungs GmbH, Siershahn SGL PanTrac GmbH, Berlin

SGL CARBON Europe

SGL CARBON GmbH & Co., Steeg

SGL CARBON S.A., Chedde SGL TECHNIC S.A., Grenoble SGL ACOTEC S.a.r.l., Houdain

SGL CARBON Beteiligung GmbH, Wiesbaden

Great Britain

Italy

Poland

Spain

RK Carbon International Ltd., Wilmslow SGL TECHNIC Ltd., Muir of Ord P.G. Lawton Ltd., Halifax SGL CARBON Ltd., Alcester SGL ACOTEC Ltd., Sandbach

SGL CARBON S.p.A., Milan SGL Risomesa S.p.A., Milan SGL ACOTEC S.p.A., Milan

SGL CARBON S.A., Nowy Sacz SGL ACOTEC Polska Sp. z.o.o., Kielce ZEW Zaklady Elektrod Weglowych S.A., Ratibor

SGL CARBON S.A., La Coruña

Morocco

AMERICA

SGL ACOTEC Ltda., São Paulo

Ceilcote S.A. de C.V., Mexico City

HITCO CARBON Composites Inc., Gardena

SGL CARBON LLC., Charlotte M.G.P. Inc., Robesonia

SGL TECHNIC Inc., Valencia SGL ACOTEC Inc., Strongsville

SGL Canada Inc., Lachute

Brazil

Major consolidated companies

SGL CARBON worldwide

Canada

Mexico

USA

Singapore

China

Carbon and Graphite

Graphite Specialties

Corrosion Protection

SGL Technologies

Business in 2002 Company Goals 2002 and 2003 SGL Excellence Corporate Governance	2 6 8 10
Group Management Report Business developments within the Group Business developments Balance sheet structure Liquidity and capital resources Investments and depreciation Research and development Environmental protection and health and safety Risk report Outlook for 2003	12 15 17 18 19 19 21 22 23
Annual financial statements of SGL Carbon AG (condensed)	25
Business Reporting Carbon and Graphite [CG] Graphite Specialties [GS] Corrosion Protection [CP] SGL Technologies [T] Our Shares	28 32 36 40 42
Human Resources Consolidated Financial Statements	44
and Notes Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements	46 47 48 49 50
Report of the Supervisory Board Supervisory Board Executive Committee Management Highlights 2002 History Contact Details and Acknowledgements	84 87 88 89 90 91 92

Robert J. Koehler Chairman of the Executive Committee

Business in 2002

Questions to the Chairman of the Executive Committee, Robert J. Koehler

Mr. Koehler, looking back, how would you summarize fiscal 2002?

For the first time in decades, the economy slumped in all the key regions – America, Europe and Asia – at the same time, even slipping into recession in some cases. The recovery expected by the second half of 2002 at the latest did not happen. Our customers in the chemicals and semiconductor industries were hit by the economic crisis as well. Only the steel industry began to show slight signs of recovery after the specific crisis in the US and the end of destocking in Europe.

How did SGL Carbon develop in this difficult environment?

Given this environment, we did well. Our key goal in 2002 was to increase cash flow so that we could lower our debt. We increased cash flow considerably by making significant reductions in working capital and tightly controlling capital spending. However, lowering inventories also reduced capacity utilization and, as a result, our profit from operations suffered. The restructuring program introduced at the end of 2001 allowed us to cut costs considerably in Carbon and Graphite and Graphite Specialties. Cost-cutting measures were also successful in Corrosion Protection and SGL Technologies.

Did you succeed in reducing the Company's financial liabilities?

Absolutely: instead of our original target of 5% for 2002, we cut net debt by 19%. We were even able to reduce working capital by 30%.

And yet you were unable to reach your earnings target for 2002.

It's true that, in late 2001/early 2002, our goal was to keep our operating result at roughly the same level as the previous year. By the end of the first quarter of 2002, however, given the evident economic downturn, we decided to accelerate our restructuring measures. We had originally announced staff cuts of 430 employees for 2002. Instead, we reduced our payroll by more than 800 people – incurring corresponding charges in the year under review. Parallel to this, we accelerated our inventory reduction measures beyond plan, which had a negative impact on our operating result, as described above. Finally, cost-cutting measures at CG and GS were more successful than expected, as a result of which we needed to take a valuation charge for inventories, thus further reducing profit from operations. For us, 2002 was a year of restructuring. The fact that we accelerated the measures that needed to be taken over the course of the year, in some cases bringing them forward to the year under review, will pay off in coming years.

Bruno Toniolo, Klaus Warning Members of the Executive Committee

What was the reason behind SGL Carbon's refinancing?

In order to cover SGL Carbon's medium-term finance requirements, we refinanced our debt by taking out a syndicated loan at reasonable conditions in December 2002. The refinancing package will allow us to remain flexible and has created a stable basis for our long-term, internationallyoriented strategy. Besides, in light of the difficult economic environment, we see the fact that the banks granted us this loan as proof of their confidence in our Company.

Isn't the refinancing package expensive, and what will happen after the loan expires?

Naturally, medium-term planning security for loans has its price: the initial interest rate is roughly 6%, which is only around 1% more than our previous average rate. The loan has a term of two and a half years. When we come to negotiate follow-up financing with the banks at the end of this period, SGL Carbon will have reduced its debt further and will certainly be in better economic shape than it is today.

How do you intend to further reduce debt?

By continuing increasing cash flow. The key lever in achieving this now is improving our profit from operations. We are also going to continue reducing working capital, though our success in 2002 means that we no longer have as much potential to do this.

What progress have you made with the "SGL Excellence" improvement initiative?

The goal of this Group-wide initiative is to continuously create customer value by permanently strengthening the Company's competitiveness. The first year of our improvement initiative went very well: for example, we launched 42 projects to increase cash flow and profit as part of our Six Sigma measures. These projects already made positive contributions to cash flow and profit in their first year. And more than 200 employees worldwide have already been trained to help implement these projects.

»2002 was a year of restructuring. We have accelerated and brought forward the necessary measures, and this will pay off in coming years. «

Business in 2002

Hariolf Kottmann Member of the Executive Committee

Theodore H. Breyer Member of the Executive Committee

Turning to Corporate Governance: has the German Government Commission's Code been implemented in your Company?

This is not a new topic for us. After all, back in 1999 – as the MDAX representative on the German Panel on Corporate Governance – we played an active role in the preparatory work on extending German corporate governance and aligning it with the interests of shareholders. The Government Commission's new German Corporate Governance Code, which came into effect at the end of 2002 and which we expressly welcome, was the next logical step in this process. We only had to slightly augment our own existing Corporate Governance Principles to meet the Code's recommendations. Our Principles were approved by the Executive Committee and the Supervisory Board in December 2002. The key components of these Principles and our declaration of conformity are described in more detail in a separate section of this Annual Report.

What are your expectations for 2003?

I am skeptical as to whether there will be an appreciable recovery in the global economy in the course of 2003. We are not, therefore, expecting a significant pickup in demand from our customer industries. However, our accelerated restructuring and cost-cutting programs will positively affect results, and we are aiming to break even at SGL Technologies. Overall, we want to see a clear improvement in our profit from operations as compared to 2002. However, our main goal in 2003 is to continue reducing debt.

What can shareholders expect from SGL Carbon in 2003?

There's no question that most shareholders were extremely disappointed by stock exchange performance in 2002: financial markets the world over were in crisis, some share prices fell into an abyss from which they have yet to emerge, and billions of euros of assets were destroyed. SGL Carbon's shares were also hit by this trend. On top of this, damaging market rumors put pressure on our shares as well. However, thanks to the refinancing package and our positive outlook for the next years, we believe that our share price has the potential to recover. Our stable financial situation will pay off for our customers and employees, too. Our customers can continue to count on SGL Carbon as a sound partner, and we will remain a reliable employer for our staff. In this context, I would like to thank all our stakeholders for the successful cooperation in fiscal 2002 and for the trust they continue to put in our Company.

» Our main goal in 2003 is to

continue reducing debt. «

Company Goals 2002/2003

Company Goals and Status 2002

Group

2002 Company Goals and Status 2002 Group
Cash flow	Goal: Significant increase Status: €135 million increase in free cash flow	Comment: Reduction of investments and working capital
Working capital	Goal: Reduction by more than 5% Status: Reduction by 30%	Comment: Significant inventory reduction
Net debt	Goal: Reduction by more than 5% Status: Reduction by 19%	Comment: Higher cash flow for debt repayment

Established Businesses CG, GS, CP

CG and GS organization	Goal: Streamlining of organization Status: Transformation of CG and GS into global business units reporting directly to members of the Executive Committee	Comment: Adjustment of organizational structures to match globalization by customers and competitors; streamlining of management levels
Restructuring CG and GS	Goal: Reduction of costs by €22 million Status: Reduction of costs by €30 million	Comment: Closure of four locations in the US, further specialization of production sites

SGL Technologies

Business Area	Goal: Reduction of losses by 50% Status: Reduction of losses by 65%	Comment: Significant cost reductions and increases in sales revenue in all businesses
New products	Goal: Alliances/joint ventures Status: Alliances intensified	Comment: Increased cooperation with automotive manufacturers in the brake disc business
Composites	Goal: Expansion of aerospace business Status: Strengthening of the defense business in the US	Comment: Additional business from new projects and orders
Fibers	Goal: Increase in sales revenue Status: Increase in sales revenue of 21%	Comment: Higher demand for fibers

Company Goals 2002/2003

7

Company Goals 2003

Group	Company Goals 2003	2003
Profit from operations	Goal: Substantial improvement	Comment: Lower cost base and slight increase in volumes and prices
Net debt	Goal: Further reduction of debt	Comment: Higher profit from operations and limited investment volume
SGL Excellence	Goal: Contribution to earnings of €10 million	Comment: Rollout of SIX SIGMA projects throughout the entire Company to ensure continuous improvement

Established Businesses CG, GS, CP

Profit from operations	Goal: Increase in all businesses	Comment: Continuation of the restructuring programs at CG and GS; increase in sales revenue
Prices	Goal: Increase for graphite electrodes	Comment: Price increase of €100 –200/ton in the course of the year compared to prices in Q4/2002.

SGL Technologies

Business Area	Goal: To further reduce losses and nearly break even in profit from operations	Comment: Increase in sales revenue of around 10% and further cost cuts
New products	Goal: Business expansion	Comment: Increase in productivity and winning new customers for the brake disc business. Innovations in expanded graphite.
Composites	Goal: Expansion of aerospace business	Comment: New orders in US (HITCO) and establishment of European business. Strategic review of smaller products. Increase in sales revenue in excess of 15%.
Fibers	Goal: To expand the product range	Comment: Development of new applications. Examination of joint venture opportunities.

SGL Excellence

SGL Excellence is a program which aims to create a corporate culture of continuous improvement. Our employees are at the heart of this process.

The SIX SIGMA methodology

SGL Excellence uses the proven SIX SIGMA methodology. This uses clear goals, detailed measurement and analysis of existing workflows, and the implementation and monitoring of improvements to achieve the sustained optimization of Company processes.

Results after one year

Before SIX SIGMA could be implemented successfully, the infrastructure for it had to be put into place within the Company. SIX SIGMA is based on the successful deployment of highly-motivated employees who are trained in the special methodology and its application via external training courses. After one year, 212 employees have been trained, including a total of 38 so-called "Black Belts". These are project leaders who are relieved of their existing responsibilities and after completing a four-week training course, implement three to four improvement projects a year with different teams. In addition, SGL Carbon currently boasts three "Master Black Belts". These coach the project teams, coordinate all SIX SIGMA projects within the Company, and train team members.

SGL Excellence

In 2002, increasing cash flow was a priority. This was mainly achieved through projects to reduce inventories and receivables.

Targets for 2003

The projects started in 2002 and those for 2003 are expected to produce improvements of €10 million. The systematic application of the SIX SIGMA methodology will lead to further sustained reduction in the cost structure and to an increase in cash flow. In addition, an increasing number of projects will be initiated with the goal of improving customer benefits and customer satisfaction. We will also make our internal processes measurable and focus them on the basics.

Improving customer benefits

Example: From order to delivery

Operational Excellence:

Systematic application of the SIX SIGMA methodology in the GS business unit in Bonn allowed the latter to significantly improve the process between incoming order and customer delivery.

The use of "lean tools" such as Kanban (pull production) led to a 30% reduction in work in process (WIP) inventories.

The number of delayed deliveries was reduced by 90%.

Commercial Excellence:

This project also involved the examination of administrative tasks in order to improve the focus on our customers' needs.

Workflow improvements enabled a 35% reduction in turnaround times.

The application of the SIX SIGMA methodology is the critical success factor in enabling us to improve our competitiveness in the long term.

Corporate Governance

SGL Carbon AG's Corporate Governance Principles are intended to guarantee transparent and responsible management and supervision of the Company aimed at increasing its enterprise value. Their purpose is to constantly promote the confidence of our shareholders, business partners and employees, as well as that of the general public.

As the MDAX representative on the German Panel on Corporate Governance, we have been actively supporting the preparatory work for more far-reaching, shareholder-oriented corporate governance in Germany since 1999. This preparatory work led to the publication of SGL Carbon AG's Corporate Governance Principles. An updated version of these Principles, which were extended to include the recommendations of the Government Commission on the German Corporate Governance Code, was adopted by the Executive Committee and the Supervisory Board at the end of 2002.

The Principles are intended to make the work of the Executive Committee and the Supervisory Board (and the way in which they interact) more transparent, as well as to define the responsibilities of these bodies more precisely. They can be broken down into the following core elements:

1. Legal basis

This provides the general framework for SGL Carbon AG's Articles of Association and Corporate Governance Principles.

2. Principles governing the work of the Executive Committee

These include the allocation of responsibilities and cooperation within the Executive Committee, cooperation with the operating units, organizational principles of the Company, duties to supply information, rules for conflicts of interest and own-account transactions, as well as remuneration guidelines.

3. Principles governing the work of the Supervisory Board

These cover, in particular, the responsibilities and duties of the Supervisory Board, the adoption of resolutions, rules for conflicts of interest and own-account transactions, as well as attendance at meetings. The Supervisory Board has a Personnel Committee, a Finance and Audit Committee and a Strategy Committee, which gives the Supervisory Board a greater degree of involvement in the development of Company strategy. Each committee's tasks and how they cooperate with the Supervisory Board as a whole are precisely defined.

4. Regulations on the cooperation between the Executive Committee and the Supervisory Board

Among other things, these include the principles governing information and communication between the bodies and in the committees as well as the principles governing the preparation of meetings.

5. Specific guidelines

These provide guidelines for communication with the financial markets, preventing insider trading, and SGL Carbon's compliance policy. The latter monitors the special non-disclosure obligations of the members of the Executive Committee and the Supervisory Board as well as observance of the rules governing insider trading and the "Global Antitrust Compliance Policy". These guidelines contain an explanation of the legal situation and rules of conduct for SGL Carbon's Executive Committee, Supervisory Board and employees, which are communicated regularly in special training courses.

SGL Carbon AG's Corporate Governance Principles comply 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 for fixed compensation for members of the Supervisory Board as well as additional compensation for committee work. We believe that these regulations are suited to our Company and we will therefore retain them for the foreseeable future.
The D&O insurance policy taken out by the Company for the Executive Committee and the Supervisory Board does not include a deductible. We are in agreement with the Supervisory Board that a deductible is not a suitable method of improving responsible conduct by the Executive Committee and the Supervisory Board. Furthermore, such deductibles are not customary abroad.

As a sign of their agreement and personal commitment, all of the members of SGL Carbon AG's Executive Committee and Supervisory Board have signed the Corporate Governance Principles. The Principles will be amended as necessary in the future to reflect further developments in legislation, recommendations and actual practice.

» The purpose of the Corporate Governance Principles is to promote the confidence of our shareholders, business partners and employees as well as that of the general public. «

Economic environment

As expected, the global economy did not recover in 2002. The economic and geopolitical effects of September 11, 2001 on an already weak economy and the increasing threat of war in the Middle East further impacted the global economy.

This development affected most of our customer industries and led, among other things, 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 semiconductors market. In contrast, the steel industry almost matched 2001 production levels for the full year, despite the difficult economic environment and bankruptcies among US steel producers. The protective tariffs imposed on US steel imports since March 2002 led to a reduction in supply. This resulted in price increases on the American market, which had a follow-on effect in Europe and Asia.

Business developments within the Group

Consolidated sales revenue down on previous year

At €1,112 million, consolidated sales revenue was down 10% year-on-year. The encouraging business developments at SGL Technologies were unable to offset the slump in the price of graphite electrodes and the downturn in key customer industries for our established businesses.

This affected the breakdown of sales revenue from our Business Areas: while the proportion of business accounted for by Carbon and Graphite [CG] fell from 51% to 50% and that of Graphite Specialties [GS] from 20% to 18%, the share attributable to SGL Technologies [T] increased to 13% (previous year: 10%). Corrosion Protection [CP] remained unchanged at 19%.

Changes in the regional sales revenue breakdown were minimal: there was 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%), whereas the rest of Europe and the remaining world rose to 34% (previous year: 33%) and to 22% (previous year: 21%), respectively.

Gross profit down on previous year

Gross profit amounted to €226 million, 23% below the previous year, and the gross return on sales fell from 24% to 20%. This development is mainly due to the drop in the price of graphite electrodes, the reduction of inventory levels (which partly affected earnings), and the economic slump in the customer industries for our GS and CP businesses. We were able to prevent a further drop in the gross return on sales with our restructuring program in CG and GS, which was approved at the end of 2001. The cost-cutting measures developed better than expected, contributing to lower cost of sales than in the previous year.

At €139 million, selling expenses were down 10% on the previous year's figure (€154 million). We were also able to significantly reduce research and development costs in the period under review by 18% to €25 million (€31 million). General and administrative expenses were cut by €10 million to €48 million. At €15 million, net other operating income and expenses increased by around €5 million from the previous year.

Drag on earnings due to weak economy, provisions and special factors

The profit from operations before costs relating to antitrust proceedings and restructuring expenses fell from €59 million in the previous year to €29 million.

In addition to lower sales mainly in GS and CP and the deterioration in prices of graphite electrodes, two special factors are primarily attributable to this:

Firstly, although the planned reduction in inventory levels at CG and GS led to an improvement in cash flow, it also resulted in a further decrease in capacity utilization, and, in turn, to lower absorption of our fixed costs. This affected earnings by approximately €18 million. Secondly, although the restructuring measures introduced in CG substantially improved our cost position, this led to a lower valuation of inventories (and resulting charge) at the end of the year.

As part of its investigation of the graphite industry for anti-competitive behavior between 1992 and 1997, which has been ongoing since 1997, the European Commission imposed a fine of €28 million on SGL Carbon AG in December 2002 with regard to its Graphite Specialties activities. We

do not believe this fine to be justified and will lodge an appeal against the decision with the European Court. However, in order to cover any possible risks, we have increased the existing antitrust provision by €22 million as a precautionary measure.

In addition to the restructuring program for CG and GS in North America, which was resolved at the end of 2001, we identified further cost-cutting potential in 2002 and took immediate action. Restructuring measures in the European CP and GS businesses that were implemented ahead of schedule led to 287 additional positions being eliminated. These actions resulted in a one-time charge on profit from operations of approximately €8 million.

The consolidated loss from operations including costs relating to antitrust proceedings and restructuring expenses therefore amounted to €–2 million in the year under review (previous year: €–17 million).

Net financing costs almost halved in comparison to previous year

In fiscal year 2002, net financing costs were reduced by €23 million to €25 million. Due to lower interest rates and the reduction of our net debt, net interest expense on loans fell to €25 million (previous year: €26 million). At €10 million, the interest component of additions to pension provisions remained almost unchanged. The translation at the balance sheet date of our US antitrust liabilities into euros led to a positive non-cash exchange rate effect of around €4 million (previous year: €–5 million) due to the weakness of the US dollar.This effect also contains the market valuation of the derivative financial instruments used to hedge currency risks relating to our US antitrust liabilities, which are denominated in dollars. The rescheduling of the US antitrust authorities' payment plan and the related non-cash accrued interest on dollar liabilities due between 2003 and 2007 also made a positive contribution of €3 million to the net financing costs (previous year: €–3 million).

Net loss after taxes improves

The tax income for the fiscal year was the result of the recognition of tax loss carryforwards. These exceeded the tax liabilities resulting from the positive earnings in foreign companies which could not be offset against loss carryforwards generated by other companies. As in the previous year, we did not recognize deferred tax assets on the losses incurred in the US and in Great Britain. In 2002, the addition to the provision for antitrust risks was treated as a non-tax deductible expense for consolidated reporting purposes. If both of these effects had been taken into account, the net loss after taxes for 2002 would have been reduced by an additional approximately €19 million.

In fiscal year 2002, the net loss improved to €–24 million (previous year: €–95 million). Earnings per share amounted to €–1.08 (previous year: €–4.42).

Restructuring of CG and GS implemented successfully

The restructuring and cost-cutting program designed to reorganize and further improve the efficiency of our global graphite business, which was approved at the end of 2001, is developing better than expected. Specialization at the CG production sites is well underway. We have reduced our headcount by 482 and improved the efficiency of production processes, which has resulted in a sustained reduction in production costs.

US feedstock production in the GS Business Area has been consolidated further. Our highest-cost site, Niagara Falls, was closed in order to improve capacity utilization at our Morganton site. We consolidated further processing and finishing in St. Mary's by closing our Dallas and Hillsboro sites. In addition to the rationalization effects, these measures resulted in an additional elimination of 115 positions. Our restructuring program allowed us to realize cost savings of €30 million in 2002, €8 million more than originally expected. We also anticipate further cost savings to be made in the coming year.

Business developments

Carbon and Graphite [CG]: Results affected by price pressure and restructuring At €551 million, CG sales revenue in fiscal 2002 was down 11% on the previous year. In the first quarter in particular, the slump in the steel industry in Japan and North America and the inventory reduction in Europe had an effect. The steel industry recovered slowly over the rest of the year, but could not make up for the slump at the beginning of the year. Sales volumes of graphite electrodes fell by 2% to 173,000 tons. The average price of graphite electrodes dropped by 16% to €2,248 per ton in the reporting period. This development was mainly due to existing overcapacity.

Profit from operations (€m) Profit from operations by Business Area (€m)

	2002	2001	Change (%)
CG	52	1 79	– 34
GS	1 2	1 22	– 91
CP	1 5	13	– 62
T	– 12	– 34	– 65
Corporate costs	– 18	– 21	– 15
Group	29	59	– 51

¹ HGB (German Commercial Code)

² before costs relating to antitrust proceedings and restructuring expenses

¹ before restructuring expenses

Due to continuing strong demand from the aluminum industry, sales revenue from cathodes was up 21% to €91 million. Furnace lining sales revenue, on the other hand, remained unchanged at €14 million. We were also able to increase sales revenue from carbon electrodes for silicon production by 11% to €42 million.

Profit from operations fell in fiscal year 2002 to €52 million (previous year: €79 million). The cost savings only partly offset lower prices for graphite electrodes in Europe and North America. The reduced production costs from our restructuring program resulted in a one-time non-cash impairment loss of €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 and the lower cost coverage due to the decline in sales revenue affected profit from operations by €6 million.

Graphite Specialties [GS]: Profit from operations impacted by inventory reduction and declining demand

As a consequence of the ongoing economic weakness in our customer industries (semiconductors, chemicals, and mechanical and plant engineering), sales revenue declined by 15% to €196 million. This affected all product areas with the exception of mechanical carbons. In addition to weak sales, the planned reduction in inventory levels affected earnings by €12 million, due to the high level of internal value added and associated high fixed costs portions. At €2 million, profit from operations before restructuring measures was down €20 million year-on-year. The cost savings of around €7 million from the restructuring program were unable to offset these negative effects. Additional restructuring measures in Europe, which were accelerated from 2003, resulted in the reduction of 91 positions and impacted earnings by €5 million. This resulted in a loss from operations of €–3 million after restructuring measures.

Corrosion Protection [CP]: Economic downturn leads to low capacity utilization CP sales revenue fell by 10% to €212 million in the year under review. This was mainly caused by the reluctance of our key customer industries to invest, an overall drop in maintenance and repair expenditures, as well as the postponement of orders by our customers in the chemical, energy and environmental industries. This development influenced all product areas.

It also led us to accelerate additional structural adjustments originally planned for the coming years to fiscal 2002. In the course of these restructuring measures, a total of 196 positions were eliminated at our two German sites in Siershahn and Bornum, as well as in Houston (USA) and at various other sites. The costs involved amounted to around €4 million in the year under review. At €5 million, the profit from operations before restructuring expenses was down from last year's level (€13 million), as the ongoing rationalization measures could not fully compensate for the decline in capacity utilization. This led to a profit from operations after restructuring expenses of €1 million in 2002.

SGL Technologies [T]: Loss reduction exceeds expectations

In the fiscal year under review, sales revenue by SGL Technologies increased by 11% to €150 million. The defense business of our US subsidiary HITCO developed particularly encouragingly: sales revenue increased by 15%. We were also able to increase sales volumes of oxidized carbon fibers for the aircraft industry and composites for the automotive industry.

With a loss from operations of €–12 million, we managed to reduce the loss recorded last year (€–34 million) by more than our original target of 50%. The start-up costs incurred in the commencement of our full-scale production of carbon-ceramic brake discs, underutilization of our fiber facilities and expenses relating to the further development of both fuel cell components and the defense business still affected results. However, we have been able to substantially reduce the losses in these areas.

Balance sheet structure

Total assets at the end of 2002 amounted to €1,286 million, down from the prior year-end by €209 million, of which €89 million is due to exchange rate effects. The main reasons for the €84 million decline in noncurrent assets were foreign currency translation effects (€50 million) and depreciation and amortization in excess of capital expenditures by €27 million. We substantially reduced our working capital (net carrying amounts of inventories and trade receivables less trade payables); the 30% drop to €385 million (previous year: €549 million) is mainly due to the targeted reduction of inventories (€–106 million) as well as to a drop in receivables (€–54 million). As a result of these measures, we were able to reduce our net financial liabilities by €100 million, or 19%, to €427 million. Our gearing – the ratio of net financial liabilities to equity – rose slightly to 2.2 (previous year: 2.1). Equity declined from €255 million to €196 million, mainly due to exchange rate effects, as well as costs relating to antitrust proceedings and restructuring expenses. As a result, the equity ratio fell to 15% (previous year: 17%).

Balance sheet structure (%)

Liquidity and capital resources

Debt down substantially, refinancing arrangements concluded successfully In the year under review, we further reduced our net financial liabilities (financial liabilities less cash and cash equivalents) by €100 million from €527 million to €427 million. The key measures included a significant reduction in working capital, planned cut-backs in capital expenditures in property, plant and equipment (€41 million against €91 million in 2001) and lower antitrust payments as a result of the rescheduling of the payment plan agreed with the US antitrust authorities in the first quarter of 2002. At the end of the fiscal year, sales of receivables had reached €41 million (end of 2001: €11 million). Cash provided by operating activities after adjustment for exchange rate effects increased to €139 million, compared with €56 million in the last fiscal year. At the same time, we increased our free cash flow (cash provided by operating activities minus cash used in investing activities) by €135 million, to €98 million. This indicates that the reduction in net financial liabilities was funded primarily from operations.

In December 2002, we concluded a comprehensive financing package of firm loan commitments amounting to €510 million. The syndicated loan has a term of two and a half years and was secured at normal market conditions. Together with the existing €134 million convertible bond, this covers SGL Carbon's entire financial liabilities, including the antitrust fines. The loan has been 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. The syndicated loan provides a solid basis for the Group's medium-term financing requirements.

Profit from operations before depreciation and amortization (EBITDA) and before antitrust risks and restructuring expenses amounted to €110 million, down roughly €35 million year-on-year. At €242 million in total, our established businesses continued to generate strongly positive cash

	2002	2001
Sales revenue	1,112	1,233
Costs of sales	– 886	– 941
Gross profit	226	292
Selling/administration/general expenses	– 197	– 233
Profit from operations	29	59
Costs relating to antitrust proceedings and restructuring expenses	– 30	– 76
Net financing costs	– 26	– 49
Loss before tax	– 27	– 66
Income tax benefit/expense	3	– 29
Net loss for the period	– 24	– 95

Income statement, summary (€m)

flows before restructuring expenses (and before capital spending). SGL Technologies' net financing requirements fell to €3 million, down €35 million from last year's level.

In fiscal year 2002, the cash used in financing activities related to the repayment of loans and hence to the reduction of our net financial liabilities.

Investments and depreciation

Investments down by more than half

Following the sharp rise in the previous year, capital expenditures in property, plant and equipment fell by 55% to €41 million, approximately €30 million lower than depreciation. 55% of these investments were attributable to CG, 13% to GS, 8% to CP and 24% to SGL T. Capital expenditures in property, plant and equipment were primarily for replacement and maintenance purposes. As planned, investments at SGL T fell substantially following the conclusion of the comprehensive investment program undertaken in recent years.

Investments in 2003 to match previous year

Having completed our investments at SGL T for the time being, we expect Group capital expenditures in 2003 to remain at last year's level, again around €30 million lower than depreciation.

Research and development

As part of our restructuring program, we improved the efficiency of our research and development activities and cut expenditure in this area by 18% year-on-year to €25 million.

CG: Electrodes demonstrate high mechanical strain tolerance

Intensive research and development allows us to constantly improve the product qualities of our graphite electrodes. For example, we were able to significantly reduce the risk of material breakage, which can occur when electrodes are subject to extreme mechanical strain. This improved mechanical strain tolerance gives our graphite electrodes a considerable competitive advantage.

Capital expenditures in property, plant and equipment (€m)

	2002	2001
CG	23	45
GS	6	13
CP	2	5
T	9	26
Other	1	2
Group	41	91

R&D expenditure (€m)

	2002	2001
CG	8	9
GS	5	7
CP	2	2
T	9	9
Other	1	4
Group	25	31

GS: New material reduces customers' production costs

We developed a new material for isostatically-molded graphites and successfully introduced it onto the market. This material is already being used extensively in the continuous casting of metals and in the semiconductor industry. We have also developed a new crucible material for the semiconductor industry, which is helping to considerably reduce our customers' production costs for wafer manufacture.

CP: Efficient bonded tube system for chemical plants

In its CP Business Area, SGL Carbon developed a special new bonded tube system that can be used in place of metals. These lightweight plastic tube systems are chemical-resistant, vacuumtight and more cost-effective than existing systems.

Polymer floor prevents static charging

We developed a polymer base with high chemical resistance that can be used by the electronics industry to prevent static charges building up. This helps to substantially reduce the failure rate of electronic components as a result of undesired electric discharges.

SGL T: Expanded graphite for latent heat storage systems

Adding expanded graphite to latent heat storage systems increases their thermal conductivity substantially, allowing smaller heat storage systems to be designed. At the same time, expanded graphite is opening up new applications in the areas of automobile air conditioning, home heating technology, and a variety of industrial processes.

Injection-molded bipolar plates for fuel cells

New developments in injection molding technology mean that graphite bipolar plates for fuel cells can now be manufactured economically in large quantities.

The low-cost production of fuel cell components (bipolar plates and gas diffusion layers) by SGL T is a key contribution to the commercialization of fuel cells. These cells offer promising future prospects for both mobile and stationary applications.

Environmental protection, health and safety

Total expenditures on environmental protection, health and safety in the workplace and risk prevention in the period under review amounted to €25 million. Of this figure, €6 million was invested in new installations and measures relating to technical environmental protection installations, while ongoing operating costs amounted to €19 million. Expenditures on health and safety in the workplace and technical risk prevention amounted to €3 million.

We pressed ahead with our systematic industrial and occupational safety measures. Days lost and the number of accidents both increased slightly year-on-year. However, the low number of accidents at SGL Carbon compared with the industry average is proof of our continuing high safety standards.

Despite the strained economic situation, we are continuing to implement specific measures aimed at achieving a sustained improvement in environmental protection, health and safety in the workplace, and risk prevention. In 2002, our environmental protection activities focused on the installation of three state-of-the-art waste gas combustion plants in Italy and Germany. We also installed a solid-waste recycling plant in Germany with the aim of reducing pollution, improving efficiency and cutting our energy requirements.

Work accidents and days lost

	2002	2001	2000	1999
Accidents per 200,000 hours worked	2.38	1.9	1.4	1.2
Days lost per 200,000 hours worked	80	65	38	48
Safety performance index	21,542	12,164	3,561	4,899

Risk report

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

Operational risks

We believe that the main operational risks for 2003 stem from the ongoing weakness of the global economy, particularly with regard to its impact on price and volume development. Other operational risks relate to higher than anticipated raw materials, energy, and personnel costs. All of our businesses, and especially our growth businesses, are subject to technological development risks. The market may grow at a slower rate than anticipated, and planned cost reductions may not occur. These factors are monitored on an ongoing basis within the businesses and via quarterly reports produced for the Executive Committee, which provide details of material variances.

Financial risks

Financial risks primarily relate to the syndicated loan which was obtained at the end of December 2002. Non-compliance with the agreed covenants could result in the suspension of this agreement, and a short-term extension of these coverage ratios would then have to be negotiated with the banks. This could lead to additional costs or, in the case of repeated instances, to the termination of the credit lines. We are countering this risk with a tough liquidity policy, plus rolling liquidity and financial planning based on the earnings and cash flow estimates provided by the operating units, which are updated on an ongoing basis. Our existing credit facilities, which include the syndicated loan, the convertible bond and local credit lines, cover the Group's foreseeable financing requirements.

We are also exposed to financial risks in the form of changes in interest and exchange rates, which we hedge using derivative financial instruments. Risk minimization is the overriding principle for all of the activities we undertake involving derivative financial instruments, which are employed exclusively for hedging purposes. The trading and monitoring functions are kept separate, and we also perform regular risk appraisals and independent audits in this area.

Risks arising from antitrust proceedings

The antitrust proceedings in the US and Canada have been concluded. Our appeal to the European Court of First Instance against the fine imposed by the European Commission in July 2001 with regard to graphite electrodes is still pending. We will be filing an appeal with the European Court soon against the fine imposed with regard to specialty graphites in December 2002. The outcome of these proceedings remains uncertain at present.

Events after the balance sheet date

All shares in SGL PanTrac GmbH were sold and transferred in January 2003.

Outlook for 2003

Only moderate recovery of global economy expected

We do not expect the global economy to recover significantly in 2003. Slow economic growth in the US and economic recovery in Japan will be offset by a merely sluggish recovery in Europe. However, these forecasts carry high economic risks. We expect investment demand in our customer industries, chemicals and semiconductor technology, to pick up only as the year progresses. In the steel industry, we are forecasting steady development for the year as a whole. Nonetheless, we expect the Group's results to improve significantly year-on-year, reflecting the positive effects from our cost reduction actions, higher graphite electrode prices and a further substantial increase in the result of SGL Technologies.

CG: Stable demand

Demand from the steel industry in the US, Europe and Asia is likely to lead to higher sales volumes of graphite electrodes and cathodes in 2003 as a whole. The ongoing consolidation in the graphite electrode industry should lead to a further reduction in capacity, and hence a shortage in supply. In light of these developments, we believe that we will be able to successfully implement our already announced price increases for graphite electrodes. Pressing ahead with our restructuring program will also allow us to further improve our cost position. Consequently, we are forecasting a substantial increase in earnings.

GS: No significant economic recovery

In the course of the year 2003, we are not anticipating a significant economic recovery in our customer industries (chemicals, furnace construction and metallurgy). However, we expect the order situation in North America to improve.

Reorganization, cost reduction measures and the strategic reorientation of GS are likely to result in a substantial increase in earnings.

CP: Customer industries reluctant to invest

With regard to our CP business, we are not forecasting any notable economic recovery for the current fiscal year. Economic behavior in our key industries, and in particular chemicals and plant engineering, is still characterized by a marked reluctance to spend money on maintenance and investment. However, our ongoing restructuring and cost reduction measures and the large order placed by an Australian magnesium producer should more than offset this development. For this reason, we expect the profit from operations to increase substantially in fiscal year 2003, although sales revenue growth will be only moderate.

SGL T: Further reduction in losses

For 2003 as a whole, we are forecasting a further increase in sales revenue from our carbon fibers and carbon-ceramic brake discs, as well as from the defense business operated by our US subsidiary HITCO.

Lower manufacturing costs for carbon fibers and carbon-ceramic brake discs will further reduce the loss from operations. Our goal is to almost break even for the year as a whole.

Liquidity and capital resources

The new financial framework provided by our refinancing package will provide us with sufficient funds in the course of the year to cover peaks in demand.

Our adherence to the Group coverage ratios set by the banks is guaranteed by the expected reduction in the loss from operations and the renewed restriction of investment volumes in 2003.

Annual financial statements of SGL Carbon AG (condensed)*

Balance Sheet

	Dec. 31,	Dec. 31,
€m	2002	2001
ASSETS
Intangible assets/property, plant and equipment	34	21
Noncurrent financial assets	379	382
Noncurrent assets	413	403
Receivables and other assets	486	532
Cash, marketable securities, prepaid expenses	1	0
Current assets	487	532
Total assets	900	935
EQUITY AND LIABILITIES
Equity	245	245
Provisions and special tax-allowable reserves	96	79
Financial liabilities	358	462
Other liabilities	201	149
Total equity and liabilities	900	935

* according to HGB – German Commercial Code

Income Statement

€m	2002	2001
Net investment income	28	47
Result of ordinary activities	22	28
Taxes	– 2	– 8
Net loss for the year	0	– 9
Unappropriated surplus/Accumulated deficit	– 9	– 9

Our annual report contains statements on future developments that are based on currently available information and that involve risks and uncertainties that could lead to actual results deviating from these forward-looking statements. These risks and uncertainties include, for example, unforeseeable changes in political, economic and business conditions, particularly in the area of electrosteel production, the competitive situation, interest rate and currency developments, technological developments and other risks and unanticipated circumstances. We see other risks in price developments, unexpected developments relating to acquired and consolidated companies, ongoing restructuring measures and unforeseeable occurrences in conjunction with the reviews to be performed by the European antitrust authorities. SGL Carbon does not intend to update these forward-looking statements.

Our electric steel production has become more cost-efficient. Thanks to the 800 mm graphite electrode developed with SGL Carbon, we can produce more steel in less time.

[Ulrich Eggers, Managing Director of Salzgitter AG's Peine steelworks, Peine, Germany]

High-voltage steel recycling. Salzgitter AG's modern melting furnace is equipped with SGL Carbon's new, high-performance 800 mm graphite electrodes. An innovation that kills two birds with one stone, enabling the development of improved melting furnaces and making them more productive at the same time. This reduces costs.

Carbon and Graphite [CG]

SGL Carbon is a leading provider of carbon and graphite. Graphite electrodes, which are used in electric arc furnaces to produce electrosteel, are our most important products in the CG business. We also produce carbon electrodes and cathodes for use in metallurgy and in the aluminum industry. Our furnace linings are used in the production of pig iron.

Mid-year turnaround

The recession in CG's markets continued to affect business development through mid-2002. The import duties imposed by the US government led to a recovery in the American steel industry in the second half of the year. Demand also picked up in the Asian and European markets, particularly in the area of specialty steels.

Successful restructuring

In order to keep up with our customers' increasing globalization and the intensified competitive environment, we implemented a restructuring and cost-cutting program designed to reorganize and further improve the efficiency of our global graphite business at the end of 2001 already. Specialization of CG production sites is well underway, and we reduced headcount by one-fifth while improving the efficiency of our production processes. These restructuring efforts have resulted in a permanent reduction of our cost base.

Decrease in sales revenue and earnings

CG sales revenue totaled €551 million, a decrease of 11% compared with the prior year. Demand recovered substantially during the year and remained almost unchanged, as global sales volumes

	2002	2001	Change (%)
Sales revenue	551	620	– 11
Profit from operations before depreciation and amortization	90	1171	– 23
Profit from operations	52	791	– 34
Return on sales (in %)	9	132
Capital expenditures	23	45	– 49	1 before restructuring
Depreciation and amortization	38	38	0	expenses 2 based on profit
Research and development	8	9	– 11	from operations
Employees (Dec. 31)	3,041	3,523	– 14	before restructuring expenses

Key figures CG (€m)

amounted to 173,000 tons in 2002 in contrast to 175,000 tons in the prior year. However, prices continued to decline – our average price for graphite electrodes was €2,248/ton, a decline of 16% on the prior year.

Profit from operations totaled €52 million, down 34%. This result reflected not only the drop in prices but also a one-time charge of €6 million due to the revaluation of inventories at significantly reduced production costs.

800 mm graphite electrode proves a major success

In 2001, we launched the world's first 800 mm graphite electrode on the market. A major success, this electrode offers a 20% improvement in our customers' efficiency by enabling increased productivity and reduced energy consumption. Together with further quality improvements to our graphite electrodes, this gives us an important competitive advantage that our customers appreciate.

Our joint venture with the Japanese graphite electrode manufacturer TOKAI in Shanghai is developing according to plan. This alliance provides SGL Carbon with improved access to the Chinese steel market, the largest and fastest-growing steel market in the world.

The global trend towards graphitized cathodes is continuing uninterruptedly. We were able to further increase our market share for this important component of aluminum smelting furnaces. We also strengthened our position as the global number 1 in the market for carbon electrodes for silicon and phosphorous production.

2003: Signs of recovery

Given the cyclical nature of our markets, we expect increased sales volumes in 2003. Our order book is already well filled and indicates sustained high utilization of our production capacities. At the beginning of February 2003 we announced a price increase for graphite electrodes. We expect the graphite industry to continue its consolidation, which could lead to a further reduction in global production capacities.

As Europe's largest manufacturer of silicon wafers for solar cells, we rely on SGL Carbon's ultrapure graphites, which are tailor-made to meet our technological demands.

[Dr. Armin Müller, Head of Production Crystallization and R&D, Deutsche Solar AG, Freiberg, Germany]

The sun is an inexhaustible source of energy. In order to use it, high-performance solar cells, which are produced using Deutsche Solar AG's silicon wafers, are required. Graphite is a key component in the manufacture of these wafers. SGL Carbon produces ultrapure graphites that are tailored to customers' needs.

Graphite Specialties

Graphite Specialties [GS]

SGL Carbon is a leading provider of graphite specialties and is the only company in the world to have mastered every manufacturing process. This enables us to provide a broad range of different applications and industries with graphite materials and system solutions.

Continuing economic slump in key industries

The Graphite Specialties Business Area was hit particularly hard by the continuing economic slump in almost all of its target sectors – such as the semiconductor and chemical industries as well as mechanical and plant engineering – and the resulting decline in the number of incoming orders. Poor demand in these areas could not be fully offset by other successful businesses.

Inventory reductions affect earnings

At €196 million, sales revenue was down 15% on the previous year. Despite comprehensive cost-cutting measures, the operating result before restructuring expenses fell by €20 million to €2 million. The focus of our working capital management was on the reduction of inventory. Along with lower capacity utilization at our plants and restructuring measures in Europe that were implemented ahead of schedule, this affected earnings in the year under review. The sustained cost cuts from the restructuring program that was approved at the end of 2001 were unable to offset this completely.

Global focus of the organization

At the beginning of the year under review, we reorganized the GS business. A new internal structure, organized by function, will allow us to better meet the challenges posed by rapid

	2002	2001	Change (%)
Sales revenue	196	231	– 15
Profit from operations before depreciation and amortization1	18	41	– 56
Profit from operations1	2	22	– 91
Return on sales2 (in %)	1	10
Capital expenditures	6	13	– 54	1 before restructuring expenses
Depreciation and amortization	16	193	– 16	2 based on profit from operations before restructuring
Research and development	5	7	– 29
Employees (Dec. 31)	1,476	1,682	– 12	expenses 3 before write-downs

Key figures GS (€m)

Graphite Specialties

changes at both customers and competitors. In addition, we are reviewing all of our business processes in detail with the goal of simplifying, standardizing, modernizing and accelerating them. The Six Sigma approach used in the SGL Excellence initiative has been successfully introduced in all areas. The savings already realized in the first year are proof of success.

New developments reduce customers' production costs

We successfully introduced a new material for isostatically-molded graphites onto the market. This material is already being used extensively in the continuous casting of metals and in the semiconductor industry, where it is helping to lower our customers' production costs considerably. We have also developed a new crucible material for the semiconductor industry, which allows wafers to be manufactured at lower cost. This is what we mean by creating value for our customers.

Upswing in alternative energies

We were able to expand our position in the relatively new market for solar technology at a level substantially in excess of market growth (approx. 20% per year). We are a major supplier of equipment for the manufacture of solar cells and offer a wide range of graphite products used to line silicon crucibles and furnaces.

Restructuring measures will bear fruit in 2003

Although we do not expect our customer industries to pick up to any great extent, the restructuring program that we introduced at the end of 2001 will play a key role in compensating the ongoing decline in demand in fiscal year 2003. This should lead to a moderate improvement in our profit from operations. With the sale of SGL PanTrac GmbH, Berlin, at the beginning of 2003, we took our first step toward a complete withdrawal from the manufacture of electrical contacts.

We have identified additional cost-cutting potential and are confident that we will be able to further improve our position in the US, in Europe and Asia.

One-stop services. The demand for system solutions is rising. SGL Carbon is the only company in the world to offer a complete range of industrial corrosion protection services in one package. For example, we supplied a system of coordinated corrosion-resistant materials and equipment, including the entire process development stage, for the construction of ECI Elektro-Chemie GmbH's two new gas and acid synthesis units.

We produce basic and hydrochemicals. When it comes to corrosion protection, we rely on SGL Carbon's system solutions, since these save us time and reduce our development costs.

[Dr. Jürgen Baune, Managing Director, ECI Elektro-Chemie GmbH, Bitterfeld, Germany]

Corrosion Protection [CP]

SGL Carbon is the only manufacturer worldwide with a complete range of products and services for industrial corrosion protection. The consistent implementation of our systems approach in the form of a full-service package to the customer is just as important to our success as the ongoing development of our product and service portfolio, with its strong focus on the needs of our customers.

Order postponements due to economic downturn

In light of the ongoing crisis in the global economy, our customers in the chemical, energy and environmental sectors continued their cautious policy on investment and maintenance expenditures. Numerous planned major projects were postponed or cancelled. These developments particularly hit our surface protection business. At €212 million, sales revenue of Corrosion Protection was down 10% year-on-year.

Reduction in staff affects profits

Our current rationalization measures are having the desired effect. In the year under review, we reduced costs and brought forward measures that were originally planned for 2003. The related headcount reduction costs – we reduced the number of employees by around 9% in total – decreased profits by €4 million. This contributed to a profit from operations before restructuring expenses of €5 million, which is down €8 million from last year's figure.

	2002	2001	Change (%)
Sales revenue	212	236	– 10
Profit from operations before depreciation and amortization	151	23	– 35
Profit from operations	51	13	– 62
Return on sales (in %)	22	6
Capital expenditures	2	5	– 60	1 before restructuring
Depreciation and amortization	10	10	0	expenses 2 based on profit from operations
Research and development	2	2	0
Employees (Dec. 31)	2,034	2,230	– 9	before restructuring expenses

Key figures CP (Mio. €)

Corrosion Protection

Our plastic applications business has developed a completely new bonded tube system made of fiberglass-reinforced plastic lined with a modified PTFE material. This new system will allow the operators of chemical plants that are subject to corrosive usage to address new applications not previously possible with conventional bonded plastic tube systems.

Focus on China

In spite of the ailing economy, the surface protection business of our Chinese subsidiary reported a substantial increase in the number of incoming orders. We want to expand our activities in China and in Asia in general in fiscal 2003.

Major contract for Australian magnesium project

We acquired a major new customer in our international activities. The order involves the construction of key segments of a planned large-scale production plant for the Australian Magnesium Corporation. With a volume of €27 million by 2004, this is the largest contract in the history of our Corrosion Protection business. The contract from Australia is testimony to SGL Carbon's strong position in the group of globally leading competitors in the industrial corrosion protection sector.

Better results expected

In fiscal 2003 we will continue to implement our systems approach in the international markets. We expect efficiency to be improved and costs reduced further in the course of our SGL Excellence projects. Due to the continued reluctance of our customers to spend money on investment and maintenance, we expect sales revenue to increase only moderately. However, our restructuring and cost-cutting measures, as well as the substantial Australian order, should result in a noticeable improvement in operating profit.

[Dale W. Mizer, Program Management, HITCO Carbon Composites, Inc., Gardena, USA]

Airplanes have to be safe. And efficient. Just like the Boeing C-17 Globemaster III military transporter. This aircraft not only transports heavy cargo over long distances, but can also land on short runways. Developed with state-of-the-art technology. The tail cone on the rear of the C-17 is manufactured using an innovative carbon composite. Supplied by HITCO Carbon Composites Inc., a US subsidiary of SGL Carbon AG, which has been commended by Boeing for top quality and safety. SGL Technologies

SGL Technologies [T]

Based on SGL Carbon's competencies for high-technology materials, processes and applications, SGL Technologies is developing new business opportunities. This new growth business is unique in covering the entire value chain from fibers through to composites.

Positive development in all areas

In fiscal year 2002, our SGL T growth business managed to buck the general trend in a weak market environment. The carbon fibers, expanded graphite (foils), aerospace composites and brake discs businesses developed better than planned. We have established a leading position in many of these emerging businesses. For example, we are the market leader in expanded graphite, one of the leading providers of carbon fibers, and an important producer of fuel cell components.

Losses halved

Sales revenue increased by 11% to €150 million, mainly as a result of the successful US defense business as well as good results in carbon fibers. Successful cost-cutting measures – most notably in the fibers and fuel cell businesses – had a positive effect on earnings development, which was better than expected. At €–12 million, we exceeded our target of halving last year's loss.

Considerable potential in Aerospace Composites

In the defense business, our US subsidiary HITCO concluded a Special Security Agreement for defense contracts with the US government. This agreement grants HITCO long-term access to

	2002	2001	Change (%)
Sales revenue	150	135	11
Profit from operations before depreciation and amortization	5	– 16	–
Loss from operations	– 12	– 34	– 65
Return on sales (in %)	– 8	– 25
Capital expenditures	9	26	– 65
Depreciation and amortization	17	18	– 6
Research and development	9	9	0
Employees (Dec. 31)	757	705	7

Key figures T (€m)

new defense projects that are otherwise only open to US companies. For example, HITCO received a major follow-on contract from Boeing for the production of large carbon components for the fuselage of C-17 Globemaster III military transport aircraft, around 20 of which are produced each year. In addition, Airbus Deutschland GmbH has awarded us a strategically important contract for the supply of tail unit components for the scheduled new Airbus A-380.

Brake disc series production started

Our new production plant for carbon-ceramic brake discs in Meitingen, which started operation in July 2002, makes us the only full-scale production supplier worldwide. At €24 million, investment costs were 10% lower than originally approved for the project. Our cooperation with Porsche is going well, and we are also driving forward brake disc development projects for sports cars and luxury vehicles with several major car manufacturers.

Further developments in injection molding technology for fuel cell components

Our fuel cell components business for stationary applications is developing well. We are involved in several major projects and have adjusted our resources to the market. Further developments in injection molding technology now allow graphite bipolar plates for fuel cells to be manufactured economically in large quantities.

Goal to almost break even in 2003

In light of the ongoing positive development in all of our businesses, we expect results to improve further in 2003. Due to the increased use of composites in the construction of rotor blades, we plan to become active in the wind energy sector. We are also confident that we will receive further orders for the supply of carbon-ceramic brake discs, and that we will win additional projects in our defense business. Our overall goal is to more or less break even in 2003.

Our Shares

Our Shares

2002 was a dark year for investors, with the slump on the international stock markets continuing. SGL Carbon's shares were unable to escape this trend and reached an alltime low at the beginning of October, although they recovered substantially by the end of the year.

The German stock market – bottom of the European league

Due to the global recession and political uncertainty, the German stock market was hit by reluctance amongst both domestic and foreign investors. In this environment, the DAX lost 44% of its value year-on-year. This represented the biggest drop in over 50 years, also making the DAX last year's poorest performer amongst the Western European stock markets.

Stock price development affected by uncertainty

SGL Carbon's shares reached an annual high of €28.70 on January 10, 2002. From then on, the price declined until September in line with the MDAX. This development was caused by an ongoing difficult period caused by the reluctance of our customer industries to invest. At the end of June, rumors surrounding possible problems in our refinancing negotiations led to SGL Carbon's share price falling below the €20.00 mark. Following further speculation at the end of September – this time surrounding the level of a possible EU fine for anti-competitive behavior in the area of Graphite Specialties – our share price lost ground again and hit an all-time low of €5.10 on October 8. Following a recovery accompanied by substantial volatility, our shares closed at €8.01

Key figures for SGL Carbon shares (€)

	2002	2001
Earnings per share	– 1.08	– 4.42
Equity per share	8.96	11.83
Equity ratio (%)	15	17
Return on sales (%)	3	5
Share price: high	28.70	70.80	1 1 ordinary share = 3 ADRs
Share price: low	5.10	16.00	2 according to the Executive
Share price: year-end	8.01	22.65	Committee's resolution (Jan. 23, 2002) to increase the share
Number of shares (piece)1	2 21,864,450	21,564,450	capital and the Supervisory Board's consent (Jan. 28, 2002)

Our Shares

on the last trading day of the year, down 64% from €22.55 at the end of the previous year. However, they started 2003 with a sustained recovery and had risen to €11.46 by the end of February.

Market capitalization fell from €488 million at the end of 2001 to €175 million at the end of 2002. However, with an average of 78,000 shares a day being traded on the Xetra electronic system, the trading volume increased substantially compared to the previous year (69,000 shares).

Open communication, especially in difficult times

SGL Carbon's investor relations work is characterized by continuity and transparency. Especially in the difficult times last year when our share price was low, we maintained continual contact with our shareholders at numerous events as well as via all relevant media. At a series of roadshows in the US, Great Britain, Canada, Switzerland, Austria and Germany, we not only reinforced our relationship with our existing shareholders but also established valuable new contacts with potential investors.

SGL Carbon is one of the first companies to have been admitted to the Prime Standard, the new quality segment of the German stock market with the highest transparency requirements.

Promoting and strengthening confidence

We do not expect the economy to recover substantially in 2003. However, having successfully implemented its restructuring program, SGL Carbon considers itself to be well-equipped to weather a period of economic stagnation. Now that the uncertainties surrounding the EU fine and our debt refinancing have been cleared up, our communication will focus on SGL Carbon's positive outlook and prospects. We are confident that good operating results will strengthen shareholder confidence and have a positive effect on SGL Carbon's share price again.

Development of share price (€)

Human Resources

In a difficult market environment, we can only succeed with qualified and motivated employees. Our human resources policy promotes the ongoing development of our employees and, as such, is one of the key elements of our competitiveness.

Headcount reduced

The SGL Carbon Group employed 7,360 people at the end of 2002, 837 less than at the end of the previous year, primarily due to our restructuring measures.

The number of people employed in our established businesses Carbon and Graphite, Graphite Specialties and Corrosion Protection during the year declined by 884 to 6,551 at December 31, 2002 (2001: 7,435). As a result of the transfer of the Graphite Foils business from Graphite Specialties to SGL Technologies, the headcount in our growth business rose by 52 to 757 at the end of 2002 (December 31, 2001: 705).

High participation in stock purchase plans

The "matching shares" bonus program introduced in 2001 for members of the Executive Committee and approximately 150 Group managers was offered again in 2002. Over half of those entitled to take advantage of this offer invested up to 50% of their annual bonus to purchase SGL Carbon stock. After a two-year lock-up period, they will then receive the same number of shares from the Company. The Executive Committee and Group managers have invested a total of €1.1 million in SGL Carbon shares.

During 2002 we distributed about 277,000 shares with a value of €7.3 million as part of our bonus program for non-executive employees. Almost half of our employees took the opportunity to buy employee shares, which are eligible for tax relief, purchasing a total of 88,800 shares.

Human Resources

"People Excellence" – the key to corporate success

Adapting to changing market structures and competitive conditions also involves preparing our employees for these changes. Our "People Excellence" program, one of the three pillars of the Group-wide improvement initiative "SGL Excellence", is designed to meet these demands.

This initiative focuses on the recruitment of qualified employees, the further development of their existing qualifications and competencies and the acquisition of new ones, as well as on the long-term retention of excellent employees within the Company.

The Executive Committee and the management of the operating units are committed to implementing several employee development processes and programs created by our human resources and organizational development experts. In this way, they are providing strong support for these necessary changes, which have already been introduced in part.

Providing all employees the opportunity to play an active and focused role in these programs encourages the development of strengths and talents. The combination of existing knowledge and increasing levels of experience is one of the key foundation stones for corporate success.

Management training intensified

In 2002 we built on the leadership training program for management initiated last year to develop further courses for management employees. The leadership initiative for top management was also continued.

The targeted use of instruments such as 360° feedback, for example, highlights those areas in need of improvement and makes progress visible. This leadership initiative is expected to include all levels of management Group-wide by 2004. The knowledge and skills acquired as part of this initiative will help us to successfully meet the challenges that lie ahead.

Staff costs (€m)

	2002	2001
Compensation	298	326
Social security payments and welfare costs	51	60
Pension plan costs	19	17
Total	368	403

46

⁴⁶ Consolidated Income Statement

		2002	2001
	Note	€m	€m

Sales revenue	28	1,112.3	1,233.3
Cost of sales		– 886.5	– 941.8
Gross profit		225.8	291.5
Selling expenses		– 139.4	– 154.5
Research costs		– 25.4	– 31.1
General and administrative expenses	4	– 47.5	– 57.8
Other operating income, net	5	15.1	10.6
Profit from operations before costs relating to antitrust
proceedings and restructuring, net		28.6	58.7
Costs relating to antitrust proceedings	6	– 22.0	– 35.0
Restructuring expenses	6	– 8.3	– 41.0
Loss from operations		– 1.7	– 17.3
Net financing costs	7	– 25.5	– 48.5
Loss before tax		– 27.2	– 65.8
Income tax benefit/expense	9	3.6	– 29.2
Net loss for the period before minority interests		– 23.6	– 95.0
Minority interests		0.0	– 0.2
Net loss for the period		– 23.6	– 95.2

Basic earnings per share (EPS) (in €)	10	– 1.08	– 4.42
Diluted earnings per share (EPS) (in €)	10	– 1.08	– 4.42

Consolidated Balance Sheet ⁴⁷

	Note	Dec. 31, 2002 €m	Dec. 31, 2001 €m

ASSETS
Intangible assets	11	103.8	111.2
Property, plant and equipment	12	477.3	553.5
Noncurrent financial assets	13	33.2	34.0
Noncurrent assets		614.3	698.7
Inventories	14	288.4	394.2
Trade receivables	15	208.1	262.2
Other receivables and other current assets	16	60.7	47.4
Receivables and other current assets		268.8	309.6
Cash and cash equivalents	17	21.5	12.1
Current assets		578.7	715.9
Deferred tax assets	18	93.4	80.4
Total assets		1,286.4	1,495.0
EQUITY AND LIABILITIES Issued capital		56.0	55.2
Share premium		111.3	111.3
Retained earnings		52.6	183.9
Accumulated deficit		– 23.6	– 95.2
Equity	19	196.3	255.2
Minority interests		1.4	1.6
Equity and minority interests		197.7	256.8
Provisions for pensions and other employee benefits	20	190.6	193.1
Other provisions	21	149.2	164.6
Provisions		339.8	357.7
Financial liabilities		448.5	538.9
Trade payables		110.5	107.7
Other liabilities		151.2	197.2
Liabilities	22	710.2	843.8
Deferred tax liabilities	23	38.7	36.7
Total equity and liabilities		1,286.4	1,495.0

4 00

⁴⁸ Consolidated Cash Flow Statement¹

	2002 €m	2001 €m

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before taxes	– 27.2	– 65.8
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss/gain on sale of property, plant and equipment	– 2.8	1.0
Loss/gain on sale of noncurrent financial assets	– 1.0	0.0
Depreciation and amortization expense	81.4	86.8
Write-downs of noncurrent assets	0.0	9.8
Taxes paid	– 22.3	– 13.6
Change in provisions, net	– 2.8	16.3
Changes in working capital
Inventories	82.7	– 26.8
Write-downs of inventories	0.0	15.0
Trade receivables	44.7	33.8
Trade payables	6.8	6.2
Other operating assets/liabilities	– 10.4	30.0
Cash provided by operating activities before payment of antitrust fines	149.1	92.7
Payments relating to antitrust proceedings	– 10.1	– 36.9
Cash provided by operating activities	139.0	55.8

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property, plant and equipment, and intangible assets	– 53.6	– 96.1
Proceeds from sale of property, plant and equipment, and intangible assets	7.8	3.8
Payments for noncurrent financial assets	– 0.7	– 5.7
Proceeds from sale of noncurrent financial assets	5.6	5.5
Cash used in investing activities	– 40.9	– 92.5

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in financial liabilities	– 87.6	36.5
Dividends paid	– 0.2	– 0.1
Net proceeds from capital increase	0.8	2.2
Cash used in/provided by financing activities	– 87.0	38.6
Effect of foreign exchange rate changes	– 1.7	0.4
Net increase in cash and cash equivalents	9.4	2.3
Cash and cash equivalents at beginning of year	12.1	9.8
Cash and cash equivalents at end of year	21.5	12.1

¹ adjusted for currency translation effects

Consolidated Statement of Changes in Equity ⁴⁹

€m	Issued capital	Share premium	Retained earnings	thereof from currency trans- lation	Unappro priated surplus/ Accumu lated deficit	Equity	Minority interests	Total

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		– 23.6
Other recognized gains and losses							– 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

Summary of accounting policies 1

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 (€) and are presented in millions of euros (€m), rounded to the nearest 0.1 million. Conversion from Deutsche Mark to euros was based on the official DM:€ 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. Hidden reserves or liabilities 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 over whom 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.

⁵¹ 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.

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:

		€ middle rates at the balance sheet date		Average rate €
	ISO-Code	Dec. 31, 2002	Dec. 31, 2001	2002	2001
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 (1:100)	PLN	4.0202	3.5068	3.8894	3.6815

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. Production costs also include an appropriate share of materials and production overheads. Borrowing costs are not included in production costs. 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 values

⁵² or, 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.

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 and 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.

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.

⁵³ 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.

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.

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.

⁵⁴ Explanation of significant differences between German accounting principles and the International Accounting Standards in the SGL Carbon Group 2

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.
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 prevailing at the balance sheet date. Foreign currency liabilities must be translated at the rate prevailing at the transaction date or at the higher rate prevailing at the balance sheet date. The IFRSs/IASs require all foreign currency receivables and liabilities to be translated at the middle rate prevailing 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.

Acquisitions/divestitures and basis of consolidation 3

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 €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., São 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 €1.8 million. In addition, the interest in SGL Acotec (Wuhan) Co. Ltd., Wuhan (China), was increased from 70% to 90%. €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.

All shares in SGL PanTrac Gesellschaft für 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 43 (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 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.

⁵⁶ Consolidated income statement and consolidated balance sheet disclosures

Note 28 presents a breakdown of sales revenue by Business Area.

General and administrative expenses 4

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.

Other operating income/expenses

Other operating income is primarily composed of income from the reversal of provisions (€10.4 million), in particular staff cost and warranty provisions, insurance compensation (€4.9 million), income from the disposal of noncurrent assets (€4.5 million), income from changes in bad debt allowances on receivables (€2.8 million), the amortization of negative goodwill (€2.3 million) and exchange rate gains (€1.8 million).

The major items of other operating expenses are amortization of goodwill (€7.4 million), additions to provisions, exchange rate losses (€1.6 million) and losses on the disposal of noncurrent assets (€0.6 million).

Costs relating to antitrust proceedings and restructuring expenses 6

€m	2002	2001
Costs relating to antitrust proceedings	22.0	35.0
Restructuring expenses	8.3	41.0
Total	30.3	76.0

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).

⁵⁷ Net financing costs 7

€m	2002	2001
Net investment income	– 1.8	3.2
Interest on other securities and long-term loans	0.1	0.5
Other interest and similar income	2.1	2.0
(thereof from subsidiaries)	(0.0)	(0.2)
Interest on borrowings and other interest expense	– 27.4	– 28.4
Accrued interest on liabilities from antitrust proceedings	3.4	– 2.7
Interest component of additions to pension provisions	– 10.4	– 9.9
Interest expense, net	– 32.2	– 38.5
Other net financial income/net financing costs	8.5	– 13.2
Total	– 25.5	– 48.5

Net financing costs include non-cash expenses amounting to €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 €1 million in 2001 from interest on borrowings and other interest expense to other net financial income/net financing costs.

Other disclosures 8

Cost of materials

€m	2002	2001
Cost of raw materials and consumables used and of goods purchased and held for resale	242.2	297.1
Cost of purchased services	61.3	78.2
Total	303.5	375.3

Staff costs

€m	2002	2001
Wages and salaries	298.1	326.0
Social security contributions, retirement and other benefit costs (thereof for pensions)	70.1 (18.7)	77.2 (17.3)
Total	368.2	403.2

⁵⁸ Other taxes

Other taxes are reported in the appropriate functional expense. The total expense was €9.8 million in 2002 and €9.7 million in 2001.

Breakdown of employees

Annual average number of employees:	2002	2001
Production and auxiliary plants	5,465	6,103
Sales and marketing	638	655
Research	307	487
Administration, other functions	1,294	1,246
Total	7,704	8,491

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.

Income tax benefit/expense 9

The tax benefit/expense is composed as follows (€m):	2002	2001
Current income tax expense
Germany	– 2.1	– 5.6
Rest of world	– 5.7	– 16.8
Deferred taxes
Germany	11.1	– 1.6
Rest of world	0.3	– 5.2
Total	3.6	– 29.2

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

€m	2002	2001
Net loss before tax	– 27.2	– 65.8
Expected tax benefit at 38.4%	10.4	25.3
Change in expected tax income due to:
non-deductable expenses (incl. goodwill amortization)
and tax-exempt income	– 7.6	– 16.4
Taxation differences at foreign companies	3.3	– 0.5
Prior-period taxes	4.0	– 5.2
Effect of change in tax rate	0.0	– 0.7
Change in valuation allowance against deferred tax assets	– 11.4	– 31.6
Other	4.9	– 0.1
Effective tax benefit (+)/expense (–)	3.6	– 29.2

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.

Earnings per Share (EPS) 10

Basic earnings per share are calculated by dividing the net profit or loss attributable to SGL Carbon shareholders (2002: €–23.6 million; 2001: €–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.

⁶⁰ Intangible assets 11

	Industrial
	rights,
€m	software and		Negative
	similar rights	Goodwill	goodwill	Total
Historical cost:
Balance at Jan. 1, 2002	24.0	140.6	– 8.3	156.3
Change in basis of consolidation	0.0	0.0	0.0	0.0
Currency translation	– 1.0	– 8.5	– 3.1	– 12.6
Additions	12.0	0.1	0.0	12.1
Disposals	– 0.6	0.0	0.0	– 0.6
Balance at Dec. 31, 2002	34.4	132.2	– 11.4	155.2
Cumulative amortization:
Balance at Jan. 1, 2002	18.5	31.3	– 4.7	45.1
Change in basis of consolidation	0.0	0.0	0.0	0.0
Currency translation	– 1.2	– 1.8	0.0	– 3.0
Additions	4.8	7.4	– 2.3	9.9
Disposals	– 0.6	0.0	0.0	– 0.6
Balance at Dec. 31, 2002	21.5	36.9	– 7.0	51.4
Carrying amount at Dec. 31, 2002	12.9	95.3	– 4.4	103.8

Historical cost:
Balance at Jan. 1, 2001	24.3	138.2	– 8.3	154.2
Change in basis of consolidation	0.0	0.0	0.0	0.0
Currency translation	0.9	3.8	0.0	4.7
Additions	1.1	4.4	0.0	5.5
Disposals	– 2.3	– 5.8	0.0	– 8.1
Balance at Dec. 31, 2001	24.0	140.6	–8.3	156.3
Cumulative amortization:
Balance at Jan. 1, 2001	15.7	22.7	– 0.7	37.7
Change in basis of consolidation	0.0	0.0	0.0	0.0
Currency translation	1.0	0.3	0.0	1.3
Additions	3.5	8.4	– 4.0	7.9
Disposals	– 1.7	– 0.1	0.0	– 1.8
Balance at Dec. 31, 2001	18.5	31.3	– 4.7	45.1
Carrying amount at Dec. 31, 2001	5.5	109.3	– 3.6	111.2

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 €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.

12 Property, plant and equipment

€m	Land, land rights and buildings	Technical equipment and machinery	Other equipment, operating and office equipment	Advance payments and assets under construction	Total

Historical cost:
Balance at Jan. 1, 2002	395.8	1,106.6	142.5	52.9	1,697.8
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 in 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 of additions of €28.9 million and reclassifications of operational equipment of €39.8 million

Additions in property, plant and equipment fell by €49.1 million in the year under review, from €90.6 million to €41.5 million. In fiscal year 2002, €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 €1.4 million at December 31, 2002.

Balance at Dec. 31, 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

13 Noncurrent financial assets

	Invest- ments	Noncurrent	Other noncurrent
€m	in sub- sidiaries	financial investments	financial assets	Total

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

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.

⁶³ Inventories 14

€m	Dec. 31, 2002	Dec. 31, 2001
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/less payments received	– 6.4	0.6
Total	288.4	394.2

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 €5.8 million. Advances received amounting to €7.5 million were netted against inventories for the first time in 2002. Write-downs were only reversed to a limited extent.

Trade receivables 15

€m	Dec. 31, 2002	Dec. 31, 2001
Customers (thereof with more than one year to maturity)	198.1 (0.3)	256.0 (0.4)
Subsidiaries	10.0	6.2
Total	208.1	262.2

Trade receivables are reported net of specific allowances for doubtful accounts amounting to €9.6 million as of December 31, 2002 and €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 €41.2 million and €11.4 million, respectively.

Other receivables and other current assets 16

€m	Dec. 31, 2002	Dec. 31, 2001
Other receivables from subsidiaries	2.9	0.2
Other current assets	57.8	47.2
(thereof with more than one year to maturity)	(0.0)	(0.0)
Total	60.7	47.4

Other current assets relate primarily to recoverable taxes amounting to €19.8 million, positive fair values of financial derivatives totaling €8.7 million, prepaid expenses of €7.0 million, insurance claims, short-term loans receivable, purchase price receivables for noncurrent assets sold, and miscellaneous receivables.

⁶⁴ Cash and cash equivalents 17

€m	Dec. 31, 2002	Dec. 31, 2001
Cash and bank balances	21.4	11.6
Financial instruments	0.1	0.5
Total	21.5	12.1

The increase in bank balances as compared to the prior year is mainly due to reporting date effects at a subsidiary in Poland.

On February 28, 2002 the Company purchased 300,000 own shares at €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 €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 €7.17 each (a total of €455,251). Using the initial portfolio of 2,027 shares, 88,775 shares (notional €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 €4.42 each and 8,950 shares at a price of €5.50 each. As a result, no further treasury 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.

Deferred tax assets 18

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.

⁶⁵ Equity 19

The classification of items of equity is presented in the consolidated statement of changes in equity on page 49.

The share capital of SGL Carbon as of December 31, 2002 amounted to €55,972,992 and is composed of 21,864,450 no-par value bearer shares.

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 €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 €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 €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 €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 €640,000.00 through the issue of a total of up to 250,000 new no-par value shares,
⁶⁶ 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 €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 €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 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 €3,840,000, composed of 1,500,000 no-par value bearer shares with a notional value of €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 €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 €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 resolved to contingently increase the share capital by up to €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.

⁶⁷ €45,911 was withdrawn from the reserve for treasury shares and appropriated to other retained earnings. The accumulated deficit of SGL Carbon AG of €9,600,000 will be carried forward to new account.

On January 31, 2003, the Executive Committee resolved, 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 €820,500.48 by issuing 320,508 new shares. The new shares carry dividend rights starting in fiscal year 2002.

Provisions for pensions and other employee benefits 20

€m	Dec. 31, 2002	Dec. 31, 2001
Pensions provisions for direct commitments	158.8	154.3
Pensions provisions for indirect commitments	16.4	16.4
Other	15.4	22.4
Total	190.6	193.1

There are various arrangements worldwide in the SGL Carbon Group for retirement benefit and surviving dependents 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

⁶⁸ 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 €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

%	German plans 2002	German plans 2001	US plans 2002	US plans 2001
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

Changes in the present value of funded obligations and in plan assets for pension provisions for direct commitments are presented below:

€m	2002	2001
Changes in present value of funded obligations:
Present value at Jan. 1	234.8	217.7
Current service cost	5.5	5.1
Interest cost	14.2	14.2
Actuarial 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
Present value of funded 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
Pension provision at Dec. 31	158.8	154.3

⁶⁹ Pension expenses are composed as follows:

€m	2002	2001
Current service cost	5.5	5.1
Interest cost	14.2	14.2
Expected return on plan assets	– 4.5	– 5.8
Amortization of actuarial gains/losses	0.7	0.2
Pension expenses from defined benefit plans	15.9	13.7
Pension expenses from defined contribution plans	2.8	3.6
Pension expenses	18.7	17.3

Other provisions 21

€m	Taxes	Staff costs	Restructuring and antitrust risks	Miscel- laneous	Total

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)

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 €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 existing units there, as well as other restructuring expenses of €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 €15 million and write-downs of property, plant and equipment amounting to €9.8 million.

Miscellaneous other provisions relate to provisions for various risks, including provisions for bonuses, rebates and onerous contracts amounting to €7.2 million (2001: €11.9 million), provisions for warranties amounting to €2.0 million (2001: €2.9 million), provisions for environmental protection costs amounting to €3.4 million (2001: €4.2 million) and provisions for other risks.

⁷⁰ Liabilities 22

€m	Dec. 31, 2002	Dec. 31, 2001
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
Financial liabilities	448.5	538.9
Trade payables (thereof due within one year)	110.5 (110.5)	107.7 (107.7)
Customer advances received (thereof due within one year)	0.8 (0.8)	7.3 (7.3)
Payable to subsidiaries (thereof due within one year)	6.0 (6.0)	3.8 (3.8)
Miscellaneous other liabilities	144.4	186.1
Other liabilities	151.2	197.2
Total	710.2	843.8

133,650 bonds with warrants of €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 €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 €189.6 million as of December 31, 2002 and €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 € and USD loans at rates of interest of between 3.8% and 5.9%.

A €200.0 million commercial paper program launched by SGL Carbon in 1996 was no longer drawn as of December 31, 2002 (2001: €37.0 million).

In December 2002, SGL Carbon and various German and foreign Group companies entered a syndicated loan agreement totaling €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.

⁷¹ 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 €111 million available.

In fiscal year 2002, the advance payments received totaling €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 €80.9 million (2001: €109.2 million), wages and salaries amounting to €16.3 million (2001: €16.1 million), negative fair values for financial derivatives of €12.2 million (2001: €4.6 million), and taxes amounting to €6.4 million (2001: €12.5 million). Social security liabilities amounted to €6.7 million (2001: €5.2 million).

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:

€m	2003	2004	2005	2006	2007	With more than five years to maturity
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

Deferred grants from third parties as defined by IAS 20 amounted to €1.6 million as of December 31, 2002 (2001: €2.0 million). €0.2 million was recognized in income during the year under review. There are no deferred gains on sale and leaseback transactions.

Deferred tax liabilities 23

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.

⁷² Consolidated cash flow disclosures

Disclosures on the consolidated cash flow statement 24

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 €1.0 million and interest paid in the amount of €28.0 million. Net taxes paid after refunds amounted to €22.3 million. Bank loans and overdrafts were reduced by €46.0 million to cut financing requirements. Group debt also fell by €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 €0.7 million was paid for the acquisition of noncurrent financial assets.

Other disclosures

Commitments and contingencies 25

There were no liabilities on bills as of December 31, 2002 or in the previous year. There were guarantee obligations of €45.0 million and €39.4 million at December 31, 2002 and 2001, respectively. Other financial obligations from orders relating to approved capital projects amounted to €21.1 million and €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 €12.3 million and €12.5 million at December 31, 2002 and 2001. For fiscal year 2002, they are distributed over the following years as shown below:

€m	2003	2004	2005	2006	2007 and thereafter
Operating leases	3.2	1.8	0.7	0.6	4.8
Finance leases	0.3	0.3	0.2	0.2	0.2
discount included	– 0.1
Present value of finance leases	1.1

⁷³ 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 €3.4 million and €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 €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 €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 €22 million have been recognized to cover these antitrust risks.

Related party disclosures 26

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 €12.9 million, and the corresponding liabilities amount to €6.4 million. Details are presented in the notes to the relevant balance sheet and income statement items.

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.

⁷⁴ 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.

Information on financial instruments 27

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.

⁷⁵ 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.

The notional amounts and fair values of the financial instruments as of December 31, 2002 and 2001 were as follows:

		Notional amounts	Fair values
€m	Bought Dec. 31, 2002	Sold Dec. 31, 2002	Total Dec. 31, 2002	Total Dec. 31, 2001	Total Dec. 31, 2002	Total Dec. 31, 2001
Foreign currency contracts:
USD currency forwards	3.9	170.3	174.2	242.6	5.7	– 4.1
GBP currency forwards	0.6	52.0	52.6	50.6	0.8	– 1.0
Other currency forwards	6.3	1.1	7.4	2.2	0.2	0.2
Currency options	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

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.

⁷⁶ 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.

Segment reporting 28

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 [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 €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.).

					Consolidation		SGL
€m	CG	GS	CP	T	Other	adjust- ments	Carbon Group
2002
Net sales revenue	550.7	195.9	212.4	150.4	2.9	0.0	1,112.3
Intersegment 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 operations*	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
Intersegment 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

* before costs relating to antitrust proceedings and restructuring expenses

		Europe		Central	Consolidation		SGL
€m	Germany	excl. Germany	North America	and South America	Other	adjust- ments	Carbon Group
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	0.4	– 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
Investment in property, plant
and equipment	17.1	12.1	11.8	0.1	0.4	0.0	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
Investment in property, plant and equipment	40.0	23.3	26.6	0.0	0.7	0.0	90.6

⁷⁸ List of shareholdings 29

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.

Remuneration of the Supervisory Board and Executive Committee of SGL Carbon AG 30

The total remuneration of the Supervisory Board amounts to €0,3 million. The remuneration of the Executive Committee amounts to €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 €0,1 million.

€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 on pages 87– 89.

Management incentive plans 31

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.

⁷⁹ 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 premiums 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 €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 €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 €4.42 per share for the first 25 or 50 shares (basic offer) and at a price of €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 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.

⁸⁰ 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%.

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.

⁸¹ Changes in the equity compensation plans in accordance with IAS 19.147 are as follows:

Number of shares/options

		Stock purchase	Stock option
	SAR	plan	plan
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 exercise price €	33.03	–	42.77
Expiration dates	Mar. 15, 2006		2010/2011/2012
Fair value at Dec. 31, 2002/€m	0.0	0.0	0.0

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 €0.3 million in fiscal year 2002.

Exemption in accordance with section 264 (3) of the HGB 32

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.

Declaration of conformity with the German Corporate Governance Principles in accordance with section 285 (16) of the HGB 33

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 conformity 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 taken out by the Company for the Executive Committee and the Supervisory Board does not include a deductible.

The declaration of conformity is published on the Internet at www.sglcarbon.com.

Wiesbaden, February 27, 2003 SGL Carbon AG The Executive Committee

Significant consolidated companies

						Employees
		Interest %	Interest held via	Equity €m	Sales revenue €m	at Dec. 31, 2002
1. SGL CARBON AG	Wiesbaden (Germany)
2. SGL CARBON Beteiligung GmbH	Wiesbaden (Germany)	100	1	167	0	0
3. SGL CARBON GmbH	Meitingen (Germany)	100	1	55	543	1,581
4. SGL TECHNOLOGIES GmbH	Meitingen (Germany)	100	1	4	28	146
5. SGL BRAKES GmbH	Meitingen (Germany)	100	4	5	8	92
6. SGL ACOTEC GmbH	Siershahn (Germany)	100	1	75	144	1,210
7. SGL PanTrac GmbH	Berlin (Germany)	100	1	1	11	77
8. KCH Beteiligungs GmbH	Siershahn (Germany)	100	6	24	0	0
9. SGL CARBON S.A.	Nowy Sacz (Poland)	100	2	64	65	494
10. ZEW Zaklady Elektrod Weglowych S.A.	Ratibor (Poland)	97.2	1	20	49	532
11. SGL CARBON S.p.A.	Milan (Italy)	99.7	2	48	117	482
12. SGL CARBON S.A.	La Coruña (Spain)	99.9	2	47	78	151
13. SGL CARBON S.A.	Chedde (France)	100	1	41	36	181
14. SGL CARBON GmbH & Co.	Steeg (Austria)	100	1	13	44	140
15. RK Carbon International Ltd.	Wilmslow (UK)	100	4	0	0	0
SGL TECHNIC Ltd.	Muir of Ord (UK)	100	15	– 9	29	121
P. G. Lawton Ltd.	Halifax (UK)	100	15
16. SGL TECHNIC S.A.	Grenoble (France)	100	6	8	20	173
17. SGL Risomesa S.p.A.	Milan (Italy)	100	2	6	9	59
18. SGL CARBON Ltd.	Alcester (UK)	100	1	3	11	42
19. SGL CARBON LLC.	Charlotte (USA)	100	2	108	167	560
M.G.P. LLC	Topton (USA)	100	19	19	8	37
HITCO CARBON Composites Inc.	Gardena (USA)	94	19	50	55	238
SGL TECHNIC Inc.	Valencia (USA)	100	19	41	40	166
20. SGL Canada Inc.	Lachute (Canada)	100	1	13	52	91
21. SGL ACOTEC S.a.r.l.	Houdain (France)	100	8	8	13	129
22. SGL ACOTEC S.a.r.l. Maroc	Safi (Morocco)	100	21	1	4	91
23. SGL ACOTEC Ltd.	Sandbach (UK)	100	8	2	13	86
24. SGL ACOTEC S.p.A.	Milan (Italy)	100	8	3	6	38
25. SGL ACOTEC Polska Sp. z o.o.	Kielce (Poland)	51	8	0	2	26
26. Ceilcote Ing. Corrosion S.A. de C.V.	Mexico City (Mexico)	51	8	0	1	11
27. SGL ACOTEC Singapore Pte. Ltd.	Singapore (Singapore)	100	8	0	2	18
28. SGL ACOTEC Inc.	Strongsville (USA)	100	8	5	20	65
29. SGL ACOTEC Ltda.	São Paulo (Brazil)	100	6	0	4	63
30. SGL ACOTEC (Wuhan) Co. Ltd.	Wuhan (China)	90	6	0	3	140

Auditors' Report

⁸³ Auditors' Report

We have audited the consolidated financial statements of SGL Carbon Aktiengesellschaft for the fiscal year January 1 to December 31, 2002, comprising the balance sheet, income statement, statement of changes in equity, cash flow statement and notes. The preparation and content of the consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit, whether the consolidated financial statements are in conformity with International Accounting Standards (IAS).

We conducted our audit of the consolidated financial statements in accordance with German auditing requirements and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW), as well as in accordance with the International Standards on Auditing (ISA). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements are examined on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial position, results of operations and cash flows of the Group for the fiscal year in accordance with International Accounting Standards.

Our audit, which also extends to the Group management report prepared by the Company's management for the fiscal year January 1 to December 31, 2002, has not led to any reservations. In our opinion, on the whole the Group management report together with the other disclosures in the consolidated financial statements provides a suitable understanding of the Group's position and suitably presents the risks of future development. We also confirm that the consolidated financial statements and the Group management report for the fiscal year January 1 to December 31, 2002 satisfy the conditions required for the Company's exemption from its obligation to prepare consolidated financial statements and a Group management report in accordance with German law.

Munich, February 27, 2003

BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Goppelt Sucker Wirtschaftsprüfer Wirtschaftsprüfer

Report of the Supervisory Board

Prof. Dr. Utz-Hellmuth Felcht Chairman of the Supervisory Board

Report of the Supervisory Board

Communication with the Executive Committee

In the year under review, the Supervisory Board of SGL Carbon AG performed the responsibilities assigned to it in accordance with the law, the Articles of Association as well as its own by-laws, and monitored and advised the Company's management. The Executive Committee informed the Supervisory Board verbally and in writing about the course of business and the Company's situation. In addition, the Chairman of the Supervisory Board held regular discussions with the Executive Committee and the members of the Supervisory Board. He was kept constantly informed about important business developments and decisions. He was apprised of the content of resolutions passed in Executive Committee meetings, which were explained as necessary. The members of the Supervisory Board also held several individual discussions with the Executive Committee.

Before the four regular Supervisory Board meetings, discussions were held between the Executive Committee and the employee representatives on the Supervisory Board with the aim of promoting mutual understanding of the Company's business policy and encouraging ongoing communication. The Executive Committee also held one additional consultation session with the shareholder representatives in order to discuss strategic issues and acquisition projects. All members of the Supervisory Board were present for at least half of the meetings.

Focus of the consultations

The main topics covered in the consultations were the market environment, the economic and financial situation of the Company as well as acquisition and divestment projects. Particular consideration was given to the Company's risk management system, to the budget targets for 2003, and to the medium-term business and financial planning. As agreed with the auditors and in response to stricter statutory provisions, the Company revised its existing risk management system and defined the responsibilities for continuous monitoring in specific Group guidelines, which were presented at the meeting of the Supervisory Board on September 6, 2002. This extended framework was also used as the basis for the discussion and approval of the core risks involved in the mid-term planning for 2003 –2006.

At all meetings, the Supervisory Board kept itself informed of the status and success of the restructuring program in the Carbon and Graphite [CG] and Graphite Specialties [GS] businesses, as well as of the measures to increase cash flow and reduce debt. In particular, the Supervisory Board accompanied closely the efforts made by the Executive Committee to refinance the Company. Following an extensive review of the situation at the meeting on December 5, 2002, the Supervisory Board approved the refinancing concept unanimously.

Report of the Supervisory Board

Corporate Governance

In the year under review, the Supervisory Board addressed the changes in the law regarding corporate governance in both Germany and the US. In this context, the Executive Committee drew up a new version of SGL Carbon AG's Corporate Governance Principles in order to bring the version approved in March 2002 in line with the recommendations of the German Corporate Governance Code published in the mean time and, to the extent possible, comply with the provisions of the US Sarbanes-Oxley Act. The Supervisory Board approved the new Corporate Governance Principles at the meeting held on December 5, 2002. SGL Carbon complies with the recommendations of the Code with the following exceptions:

In accordance with SGL Carbon AG's Articles of Association, members of the Supervisory Board receive fixed compensation only, as well as additional compensation for committee work.
The D&O insurance policy taken out by the Company for the Executive Committee and the Supervisory Board does not include a deductible.

Having settled most outstanding claims, the Supervisory Board also continued to keep itself informed of the status of the ongoing antitrust investigations into anti-competitive behavior, and of the related legal proceedings. The consultations were held at the regular meetings, by the special Ad hoc Committee formed for this purpose, and at an additional extraordinary meeting. In this context, the Supervisory Board acknowledged the EU Commission's decision (December 17, 2002) to impose a fine for anti-competitive behavior in Graphite Specialties within the framework of the ongoing investigations into the graphite industry since 1997, and the Company's intention to again appeal against the decision to the European Court. The Supervisory Board emphasizes that SGL Carbon AG's Corporate Governance Principles contain a "Global Antitrust Compliance Policy", which is backed up by intensive Group-wide training sessions.

2002 annual financial statements

The Supervisory Board satisfied itself in both the Finance and Audit Committee as well as in the plenary session held on March 7, 2003 that the accounting, the annual financial statements of SGL Carbon AG and the consolidated financial statements as of December 31, 2002, as well as the management reports of SGL Carbon AG and the SGL Carbon Group were audited by BDO Deutsche Warentreuhand Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Munich, and that they were issued with an unqualified audit opinion. The audit was commissioned in due order by the Supervisory Board. In line with the terms of engagement, the audit was also extended to cover the Company's new risk management system. The audit reports on the consolidated and annual financial statements were forwarded to all Supervisory Board members on a timely basis. The Supervisory Board reviewed these documents itself and approved the auditors' findings

Report of the Supervisory Board

Committee reports

The Finance and Audit Committee held one meeting in the year under review. In the presence of the auditors, it dealt in particular with the annual financial statements and the proper accounting treatment for derivative financial instruments. The members of this Committee were also informed outside the meetings of the measures taken by the Executive Committee regarding refinancing.

The Personnel Committee met four times. It focused on updating the Executive Committee's contracts and pensions, and reviewing the Company's expiring and new incentive programs. The issue of additional stock options for the Executive Committee and senior management was approved.

The Strategy Committee met once. This meeting concentrated primarily on the strategic reorientation in Graphite Specialties [GS] and the concepts to improve profitability as part of the Company-wide SGL Excellence initiative.

Personnel issues

Karl-Heinz Schneider resigned from the Supervisory Board on June 11, 2002. Jürgen Kerner was appointed by the registry court as his successor effective September 13, 2002. Hans-Georg Bartel passed away on November 20, 2002, following a serious illness. The Supervisory Board honors the memory of Hans-Georg Bartel, who was highly regarded by all members for his active and knowledgeable cooperation. Hans-Werner Zorn was judicially appointed as his successor in February 2003.

In the meeting dated September 6, 2002, Dr. Klaus Warning was reappointed to the Executive Committee of SGL Carbon AG for the period from July 1, 2003 to June 30, 2006.

In order to assist in the endeavors to ensure a solid long-term financing of the Company, the Executive Committee signed a temporary consulting contract with Hansgeorg Hofmann on June 24, 2002, which was approved by the Supervisory Board.

Wiesbaden, March 7, 2003 The Supervisory Board

Prof. Dr. Utz-Hellmuth Felcht Chairman

Supervisory Board

Prof. Dr. rer. nat. Utz-Hellmuth Felcht Chairman

Chairman of the Board of Management of Degussa AG, Düsseldorf
Internal board memberships: Goldschmidt AG1, Essen SKW Stickstoffwerke Piesteritz GmbH1, Lutherstadt Wittenberg (until Aug. 20, 2002) SKW Metallurgie AG1, Trostberg
External board membership: Gerling-Konzern Globale Rückversicherungs-AG, Cologne (all Germany)

Franz Schaffer Deputy Chairman Metalworker, SGL CARBON GmbH, Meitingen

External board memberships: Ökumenische Sozialstation Meitingen und Umgebung gGmbH, Meitingen Wohnungsbau GmbH Markt Meitingen, Meitingen (all Germany)

Hans-Georg Bartel (passed away Nov. 11, 2002) Electrician, SGL CARBON GmbH, Bonn, Germany

Peter Fischer Lawyer, SGL CARBON AG, Wiesbaden, Germany

Dr.-Ing. Claus Hendricks Former Member of the Board of Management of Thyssen Krupp Stahl AG, Duisburg
Internal board memberships: Berkenhoff GmbH, Heuchelheim Edelstahlwerke Witten-Krefeld GmbH, Witten Krupp Edelstahlprofile GmbH, Siegen
External board memberships: Pro Lean Consulting AG, Düsseldorf SKW Metall Chemie GmbH, Trostberg

Thyssen Schienen Technik GmbH, Duisburg (all Germany)

Hansgeorg B. Hofmann Banker/Entrepreneur, London, Great Britain
External board memberships: adv.orga Beteiligungen AG, Munich, Germany Equinet AG1, Frankfurt/Main, Germany
Jürgen Kerner (since Sep. 13, 2002) 2. Bevollmächtiger Authorized Representative of IG Metall Verwaltungsstelle Augsburg, Augsburg, Germany
External board membership: Fujitsu-Siemens Computers GmbH, Munich, Germany
Dr.-Ing. Hubert Lienhard Member of the Board of Management of Voith AG, Heidenheim, Germany
Internal board memberships: Voith Turbo Beteiligungs GmbH & Co. KG, Heidenheim, Germany

Voith Paper Holding GmbH & Co. KG, Heidenheim, Germany Voith Fabrics Inc., Raleigh, NC, USA

External board memberships: Kaefer Isoliertechnik GmbH & Co. KG, Bremen, Germany Sulzer AG, Winterthur, Switzerland
Jacques Loppion Président du Conseil d'Administration Groupe SNPE S.A., Paris
External board memberships: Giat Industries S.A., Versailles Algéco S.A., Paris Groupe Gascogne, Saint-Paul-les-Dax (all France) KME AG, Osnabrück, Germany

Lutz Mühring

Representative of IG Metall, Verwaltungsstelle Bonn-Rhein-Sieg, Siegburg, Germany
External board membership: WBG Wohnungsbaugesellschaft Bonn mbH, Bonn, Germany
Karl-Heinz Schneider (until June 11, 2002) Authorized Representative of IG Metall, Verwaltungsstelle Augsburg, Augsburg, Germany
External board memberships: Eurocopter Deutschland GmbH, Donauwörth Federal-Mogul GmbH, Friedberg Zoo Augsburg GmbH, Augsburg Augsburger Flughafen GmbH, Augsburg (all Germany)

Heinz Schroth Business Administrator, SGL ACOTEC GmbH, Meitingen, Germany

Andrew H. Simon OBE MBA Consultant and Supervisory Board Member in various companies
External board memberships: Associated British Ports plc., London Hampson plc., Dudley Brake Bros. Ltd., Ashford Dalkia UK plc, London Zeus Group Ltd.1, Dudley Ascent Investments Ltd.1, London (all Great Britain), Kaffee Partner Holding GmbH1, Osnabrück, Germany Finning International Inc., Vancouver, Canada
Hans-Werner Zorn (since Feb. 27, 2003) Technician Mechanical Engineering, SGL CARBON GmbH, Bonn, Germany

¹ Chairman of the Supervisory Board

Executive Committee

Robert J. Koehler Chairman

Chief Executive Officer SGL CARBON AG

Responsible for: Corporate Development and Strategy, Corporate Communications, Investor Relations, Management Development
External board memberships: Benteler AG1, Paderborn, Germany Wacker-Chemie GmbH, Munich, Germany Pfleiderer AG, Neumarkt, Germany New Russia Fund, Luxembourg

Theodore H. Breyer

Responsible for: Carbon and Graphite, America, Purchasing
Internal board memberships: HITCO CARBON COMPOSITES Inc., Gardena, USA SGL CARBON LLC., Charlotte, USA

Dr. Hariolf Kottmann

Responsible for: Graphite Specialties, Corrosion Protection, Asia, Eastern Europe, SGL Excellence
Internal board memberships: SGL ACOTEC GmbH1, Siershahn, Germany SGL CARBON ASIA PACIFIC Sdn Bhd1, Malaysia SGL CARBON Japan Ltd.1, Tokyo, Japan SGL TOKAI CARBON Ltd.1, Shanghai, China SGL CARBON Far East Ltd.1, Shanghai, China

Dr. Bruno Toniolo

Responsible for: Group Treasury, Group Accounting, Management Reporting, Information Services, Internal Audit, Risk Management, Western Europe
Internal board memberships: Radion-Finanziaria S.p.A., Milan, Italy SGL CARBON Finance, Dublin, Irleland SGL CARBON S.A., Engis, Belgium SGL CARBON S.A., Chedde, France SGL CARBON S.A.1, Nowy Sacz, Poland SGL CARBON S.A., La Coruña, Spain SGL CARBON S.p.A., Milan, Italy SGL TECHNIC S.A., Grenoble, France SGL CARBON GmbH1, Meitingen, Germany ZEW S.A.1, Ratibor, Poland SGL ACOTEC GmbH, Siershahn, Germany

Dr. Klaus Warning

Responsible for: SGL TECHNOLOGIES GmbH, Human Resources, Legal, Research and Development, Technology, Environmental Protection, Health and Safety External memberships:
University Ilmenau/Advisory Council, Ilmenau, Germany European Carbon and Graphite Association

(ECGA)/Board of Directors, Brussels, Belgium Commerzbank Hessen/State Advisory Council, Frankfurt/Main, Germany

Management

Business Units

Carbon and Graphite Armin Bruch Dr. Franz Berger Scott Carlton Dr. Reinhard Janta Dr. Dieter Klein Dr. Alberto Martinez

Graphite Specialties Markus Mirgeler Volker Rechtmann Dr. Christfried Schlosser Dr. Martin Schwarz Dr. Gerd Wingefeld

Corrosion Protection Dr. Thomas Kosack Dr. Günter Hermann Bodo Mierke Frank Schulten

SGL Technologies Dr. Jan Verdenhalven Gernot Hochegger Dieter Fial

Corporate Service Functions

Reinhard Damerow Group Treasury

Wilhelm Hauf Group Accounting

Dr. Joachim Heins-Bunde Corporate Planning and Coordination

Beate Hillebrecht-Harris Corporate Center HR

Peter Hoffman President SGL CARBON LLC

Dave Kucharski Group Purchasing

Helmut Mühlbradt HR-Senior Management/Legal

Dr. Michael Riedel Group Quality Leader

Dr. Harald Tillmanns Global Environment, Health and Safety

Thomas Werner Group Information Services

Dr. Doug Wilson Corporate Technology Highlights 2002

Highlights 2002

April

Joint venture with TOKAI in China

In April 2002 in Tokyo, SGL Carbon AG and TOKAI Carbon Co. Ltd., Tokyo/Japan, sign the contract for the joint venture agreed the previous year for the production, marketing, and sale of graphite electrodes for the Chinese market.

July

Full-scale production of brake discs starts

In July 2002, SGL Carbon starts large-scale production of its carbon-ceramic brake discs as planned in its new, certified factory in Meitingen, near Augsburg, Germany. SGL constructed and commissioned the new production facility, which is located at its largest German site, in only 15 months.

01 FEB

AUG

SEP

OCT

NOV

DEC

MAY

JUN

JUL

MAR

APR

JAN

March

Five-Point Program

In March 2002, SGL Carbon launches a Five-Point Program aimed at increasing its enterprise value. This program aims to increase returns, improve the Company's capital structure, optimize its portfolio, implement SGL Excellence and establish the Corporate Governance Principles. In this way, SGL is adjusting to the changes in both the structure of the market and its competitive environment.

November

In November 2002, HITCO Carbon Composites Inc., SGL Carbon's US subsidiary, secures an order from Airbus Deutschland GmbH, Hamburg, Germany, to supply components made of carbon fiber composites for the tail fin of the new Airbus A-380. The order covers the design and production of the truss structure for the fin.

December

Refinancing successfully concluded

In December 2002, SGL Carbon concludes a comprehensive financing package of firm loan commitments amounting to €510 million. The syndicated loan, which is lead-managed by Deutsche Bank and Dresdner Bank, has a term of two and a half years.

History

1878	The production of charcoal rods begins in Berlin, Germany, at "Gebr. Siemens & Co" (Gesco).
1892	Production of anodes for chlor-alkali electrolysis starts at Chemische Fabrik, Griesheim, Germany
1896	"Planiawerke AG für Kohlefabrikation", a factory producing carbon products, is founded in Ratibor, Poland.
1910	Gesco establishes a plant for carbon electrodes in Berlin.
1920	Gesco builds a graphitizing plant in Meitingen, Germany.
1928	Planiawerke and Gesco merge to form "Siemens Planiawerke AG für Kohlefabrikate".
1949	Chemische Fabrik Griesheim merges with Meitingen facility to form "Siemens Plania Chemisches Werk Griesheim"
1953	"Siemens Plania Chemisches Werk Griesheim" merges with Hoechst AG.
1967	"Siemens Planiawerke AG für Kohlefabrikate" merges with Hoechst AG's electrode production facilities in Griesheim to form "SIGRI ELEKTROGRAPHIT GmbH".
1985	The Company is renamed SIGRI GmbH.
1992	SIGRI merges with Great Lakes Carbon Corporation (GLC), a wholly owned subsidiary of Horsehead Industries Inc., (USA). The Company is renamed Sigri Great Lakes Carbon GmbH.
1993	Pechiney S.A.'s graphite activities (France, Belgium, Spain) are integrated into the Company.
1994	The Company is transformed into a stock corporation (AG).
1995	Initial Public Offering (IPO). The Company acquires the Specialty Graphite business belonging to the Carbide/Graphite Group (USA), sells Ringsdorff Sinter GmbH, and hives off SGL TECHNIK GmbH. The Company also acquires Polgraph (Poland) and Vicarb (France, USA).
1996	Placement of the remaining shares held by Hoechst AG. The Company is listed on the New York Stock Exchange (NYSE).
1997	The Technology and Specialty Graphite Business Areas are strengthened by the acquisition of HITCO, RK Carbon, M.G.P., EKL, and David Hart. A joint venture is set up with Shanghai Carbon Works (China).
1998	SGL CARBON AG becomes a holding company and hives off its operating business to the newly formed SGL CARBON GmbH.
1999	Acquisition of Keramchemie Germany. Formation of SGL CARBON Beteiligung GmbH.
2000	The Technology Business Area is reorganized into "Corrosion Protection" and "Fibers and Composites", pursuing the growth businesses of brake discs and fuel cell components. Keramchemie and HAW LININGS are integrated into SGL TECHNIK GmbH and the company is renamed SGL ACOTEC GmbH.
2001	The Fibers and Composites Business Area is reorganized and renamed SGL Technologies. Acquisition of ZEW (Poland).
2002	Merger of the four regional Business Units within Carbon and Graphite and Graphite Specialties to form two global businesses reporting directly to the Executive Committee.

Contact Details/Acknowledgements

Contact Details

Investor Relations

SGL CARBON AG, Rheingaustrasse 182, D-65203 Wiesbaden, Germany Phone: +49 (611) 60 29-100, Fax: +49 (611) 60 29-101, e-mail: [email protected]

These materials are available on written request from: SGL CARBON AG, Corporate Communications, Rheingaustrasse 182, D-65203 Wiesbaden, Germany

Annual Report (German/English)
Form 20-F (English, primarily for shareholders in the US and analysts)
Shareholders' letters for Q1, Q2 and Q3 (German/English)

These materials and additional information are also available via our homepage: www.sglcarbon.com

Despositary Bank for American Shareholders:

Morgan Guaranty Trust, Company of New York, 60 Wall Street, New York, N.Y. 10260, USA

Acknowledgements

Annual Report: SGL CARBON GROUP Published by: SGL CARBON AG, Head Office

Concept, design and production: 3st kommunikation

Photos: Stefan Wildhirt, Offenbach (p. 26, 30, 34); Tim Long, Los Angeles, USA (p. 38); Roger Richter, Wiesbaden (p. 2– 5); Burkhard Domke; SGL Carbon; 3st kommunikation English translation: Fry & Bonthrone Partnerschaft, Mainz-Kastel, Germany Editorial support: FinKom Gesellschaft für Finanzkommunikation mbH, Usingen, Germany

Key Figures SGL CARBON worldwide

Major consolidated companies

AMERICA

Brazil

SGL ACOTEC Ltda., São Paulo Canada

SGL Canada Inc., Lachute

Mexico Ceilcote S.A. de C.V., Mexico City

USA

SGL CARBON LLC., Charlotte M.G.P. Inc., Robesonia HITCO CARBON Composites Inc., Gardena SGL TECHNIC Inc., Valencia SGL ACOTEC Inc., Strongsville

AFRICA/ASIA

Morocco SGL ACOTEC S.a.r.l. MAROC, Safi

Singapore SGL ACOTEC Singapore Pte. Ltd., Singapore EUROPE

Germany

Austria

France

SGL CARBON AG, Wiesbaden

SGL CARBON GmbH, Meitingen SGL TECHNOLOGIES GmbH, Meitingen SGL BRAKES GmbH, Meitingen SGL ACOTEC GmbH, Siershahn KCH Beteiligungs GmbH, Siershahn SGL PanTrac GmbH, Berlin

SGL CARBON Europe

SGL CARBON GmbH & Co., Steeg

SGL CARBON S.A., Chedde SGL TECHNIC S.A., Grenoble SGL ACOTEC S.a.r.l., Houdain

SGL CARBON Beteiligung GmbH, Wiesbaden

Great Britain

Italy

Poland

Spain

RK Carbon International Ltd., Wilmslow SGL TECHNIC Ltd., Muir of Ord P.G. Lawton Ltd., Halifax SGL CARBON Ltd., Alcester SGL ACOTEC Ltd., Sandbach

SGL CARBON S.p.A., Milan SGL Risomesa S.p.A., Milan SGL ACOTEC S.p.A., Milan

SGL CARBON S.A., Nowy Sacz SGL ACOTEC Polska Sp. z.o.o., Kielce ZEW Zaklady Elektrod Weglowych S.A., Ratibor

SGL CARBON S.A., La Coruña

China SGL ACOTEC (Wuhan) Co. Ltd., Wuhan

Key Figures and Overview of Business Areas

¹ Reclassification of the graphite foils business from Graphite Specialties to SGL Technologies ² Before provisions for antitrust risks and restructuring

Profit from operations before depreciation

and amortization (EBITDA)

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 2

⁷ Not including extraordinary depreciation associated

⁸ Carrying amounts of inventories and trade receivables

2002 2001 Change (€ million) (€ million) (%) Overview of Business Areas

Share of Group Sales

50% 18% 19%

Carbon and Graphite [CG] Graphite Specialties [GS] Corrosion Protection [CP] SGL Technologies [T]

Share of Group Sales

13%

Products/Applications Brake Discs

and Fabrics

Customer Industries Automotive Electronics Energy

Aircraft Construction

Defense Semiconductors Chemicals

Fuel Cell Components Carbon Fibers, Yarns

Aerospace Applications Industrial Composites Expanded Graphite

Products/Applications Process Technology Surface Protection

Customer Industries Chemicals Plant Construction

Environmental Protection

Energy Transportation Pharmaceuticals

Metallurgy

Products/Applications Technical Carbon Semiconductors Mechanical Carbon Electrical Contacts

Customer Industries Chemicals Energy

Glass and Ceramics Semiconductor Technology

Mechanical Engineering

Metallurgy Automotive

Share of Group Sales

Products/Applications Graphite Electrodes

Carbon Electrodes Furnace Linings

Customer Industries

Steel Aluminum Metallurgy

Cathodes

Return on Sales4 3% 5%

Profit/loss before tax – 27 – 66 – 59 Net loss for the period – 24 – 95 – 75

Earnings per share (€) – 1.08 – 4.42 – 76

Working capital⁸ 385 549 – 30 Capital employed9 967 1,213 – 20 Equity 196 255 – 23 Total assets 1,286 1,495 – 14

Number of employees (at end of year) 7,360 8,197 – 10 Market capitalization (at end of year) 175 488 – 64

Gearing10 2.2 2.1

⁹ Carrying amounts of property, plant and equipment,

intangible assets and working capital ¹⁰ Ratio of financial liabilities less cash and cash

with restructuring

² 110 145 – 24

less trade payables

equivalents to equity

⁴ Ratio of profit from operations to sales revenues ⁵ After adjustments for exchange rate effects

expenses

³ Before restructuring expenses

and before antitrust payments ⁶ Please refer to page 48

EUROPE

AFRICA/ASIA

SGL ACOTEC S.a.r.l. MAROC, Safi

SGL ACOTEC (Wuhan) Co. Ltd., Wuhan

SGL ACOTEC Singapore Pte. Ltd., Singapore

Morocco

AMERICA

SGL ACOTEC Ltda., São Paulo

Ceilcote S.A. de C.V., Mexico City

HITCO CARBON Composites Inc., Gardena

SGL CARBON LLC., Charlotte M.G.P. Inc., Robesonia

SGL TECHNIC Inc., Valencia SGL ACOTEC Inc., Strongsville

SGL Canada Inc., Lachute

Brazil

Major consolidated companies

SGL CARBON worldwide

Key Figures and Overview of Business Areas

Key Figures SGL CARBON worldwide

Carbon and Graphite [CG] Graphite Specialties [GS] Corrosion Protection [CP] SGL Technologies [T]

Share of Group Sales

50% 18% 19%

Share of Group Sales

13%

Products/Applications Brake Discs

and Fabrics

Customer Industries Automotive Electronics Energy

Aircraft Construction

Defense Semiconductors Chemicals

Fuel Cell Components Carbon Fibers, Yarns

Aerospace Applications Industrial Composites Expanded Graphite

Products/Applications Process Technology Surface Protection

Customer Industries Chemicals Plant Construction

Environmental Protection

Energy Transportation Pharmaceuticals

Metallurgy

Products/Applications Technical Carbon Semiconductors Mechanical Carbon Electrical Contacts

Customer Industries Chemicals Energy

Glass and Ceramics Semiconductor Technology

Mechanical Engineering

Metallurgy Automotive

Overview of Business Areas

Share of Group Sales

Products/Applications Graphite Electrodes

Carbon Electrodes Furnace Linings

Customer Industries

Steel Aluminum Metallurgy

Cathodes

¹ Reclassification of the graphite foils business from Graphite Specialties to SGL Technologies ² Before provisions for antitrust risks and restructuring

Profit from operations before depreciation

and amortization (EBITDA)

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 2

⁷ Not including extraordinary depreciation associated

⁸ Carrying amounts of inventories and trade receivables

2002 2001 Change (€ million) (€ million) (%)

Return on Sales4 3% 5%

Profit/loss before tax – 27 – 66 – 59 Net loss for the period – 24 – 95 – 75

Earnings per share (€) – 1.08 – 4.42 – 76

Working capital⁸ 385 549 – 30 Capital employed9 967 1,213 – 20 Equity 196 255 – 23 Total assets 1,286 1,495 – 14

Number of employees (at end of year) 7,360 8,197 – 10 Market capitalization (at end of year) 175 488 – 64

Gearing10 2.2 2.1

⁹ Carrying amounts of property, plant and equipment,

intangible assets and working capital ¹⁰ Ratio of financial liabilities less cash and cash

with restructuring

² 110 145 – 24

less trade payables

equivalents to equity

⁴ Ratio of profit from operations to sales revenues ⁵ After adjustments for exchange rate effects

expenses

³ Before restructuring expenses

and before antitrust payments ⁶ Please refer to page 48

Canada

Mexico

USA

Singapore

China

Germany

SGL CARBON AG, Wiesbaden SGL CARBON Beteiligung GmbH, Wiesbaden SGL CARBON GmbH, Meitingen SGL TECHNOLOGIES GmbH, Meitingen SGL BRAKES GmbH, Meitingen SGL ACOTEC GmbH, Siershahn KCH Beteiligungs GmbH, Siershahn SGL PanTrac GmbH, Berlin

Austria

SGL CARBON GmbH & Co., Steeg

France

SGL CARBON S.A., Chedde SGL TECHNIC S.A., Grenoble SGL ACOTEC S.a.r.l., Houdain

Great Britain

RK Carbon International Ltd., Wilmslow SGL TECHNIC Ltd., Muir of Ord P.G. Lawton Ltd., Halifax SGL CARBON Ltd., Alcester SGL ACOTEC Ltd., Sandbach

Italy

SGL CARBON S.p.A., Milan SGL Risomesa S.p.A., Milan SGL ACOTEC S.p.A., Milan

Poland

SGL CARBON S.A., Nowy Sacz SGL ACOTEC Polska Sp. z.o.o., Kielce ZEW Zaklady Elektrod Weglowych S.A., Ratibor

Spain

SGL CARBON S.A., La Coruña

Upcoming Events

Annual Report 2002

Mission

Core Businesses

Optimize cash flow.

global focus.

and profit potential.

and engineering.

Strengthen global market position. Achieve cost and technology leadership.

New Businesses (SGL Technologies)

Develop new businesses with high growth

Concentrate on core competencies:

Leverage carbon fiber to composite value chain.

SGL Excellence

SGL Carbon is the world's largest manufacturer of carbon, graphite and composite

profitability and quality. With around 30 sites and a customer-oriented

materials. In the manufacturing industry and the aerospace sector, our products

sales and service network today SGL Carbon is a company with a

and system solutions allow our customers to improve their efficiency, safety,

and employees.

Understand and satisfy customer requirements. Create value for our customers, shareholders

Build trust and encourage knowledge sharing, continuous learning, open feedback and communication among all employees. Take responsibility and lead by example. Develop people and promote teamwork.

Provide a climate that meets all legal, personnel

Build a Corporate Identity throughout the Company.

and environmental obligations.

high temperature technology, advanced materials,

Focused on Customers.

Understand demands. Develop solutions. Create value.

SGL CARBON GROUP

Annual Report 2002

2003

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 1

March 13	Annual Report,
	Year-End Press Conference and Analyst Meeting,
	Frankfurt am Main,
	Conference Call
April 30	Annual General Meeting, Wiesbaden
May 14	Q1 Shareholders' Letter, Conference Call
June 30	Form 20-F
August 12	Q2 Shareholders' Letter, Conference Call
November 11	Q3 Shareholders' Letter,
	Fall Press Conference and Analyst Meeting,
	Frankfurt am Main,
	Conference Call

2004

March 16 Year-End Press Conference (to be confirmed)

SGL CARBON AG

Rheingaustrasse 182 D-65203 Wiesbaden

Phone +49 (611) 60 29-100 Fax +49 (611) 60 29-101 Website: www.sglcarbon.com

Head Office Investor Relations

Germany

April 30 Annual General Meeting (to be confirmed)

SGL CARBON AG

Upcoming Events

Year-End Press Conference and Analyst Meeting,

2003

Frankfurt am Main, Conference Call

April 30 Annual General Meeting, Wiesbaden

May 14 Q1 Shareholders' Letter, Conference Call

August 12 Q2 Shareholders' Letter, Conference Call

March 16 Year-End Press Conference (to be confirmed) April 30 Annual General Meeting (to be confirmed)

Fall Press Conference and Analyst Meeting,

March 13 Annual Report,

230441/SGL/Umschlag_E 12.03.2003 15:07 Uhr Seite 1

June 30 Form 20-F

November 11 Q3 Shareholders' Letter,

2004

Frankfurt am Main, Conference Call

Head Office Investor Relations

Rheingaustrasse 182 D-65203 Wiesbaden Germany Phone +49 (611) 60 29-100 Fax +49 (611) 60 29-101 Website: www.sglcarbon.com Annual Report 2002

Mission

Core Businesses

Optimize cash flow.

global focus.

and profit potential.

and engineering.

Strengthen global market position. Achieve cost and technology leadership.

New Businesses (SGL Technologies)

Develop new businesses with high growth

Concentrate on core competencies:

Leverage carbon fiber to composite value chain.

SGL Excellence

SGL Carbon is the world's largest manufacturer of carbon, graphite and composite

profitability and quality. With around 30 sites and a customer-oriented

materials. In the manufacturing industry and the aerospace sector, our products

sales and service network today SGL Carbon is a company with a

and system solutions allow our customers to improve their efficiency, safety,

and employees.

Understand and satisfy customer requirements. Create value for our customers, shareholders

Build trust and encourage knowledge sharing, continuous learning, open feedback and communication among all employees. Take responsibility and lead by example. Develop people and promote teamwork.

Provide a climate that meets all legal, personnel

Build a Corporate Identity throughout the Company.

and environmental obligations.

high temperature technology, advanced materials,

Focused on Customers.

Understand demands. Develop solutions. Create value.

SGL CARBON GROUP

Annual Report 2002

AI assistant

SGL CARBON SE — Annual Report 2002

389_10-k_2003-03-13_c6069023-c31f-4777-9180-aee0e10f6d5e.pdf

Annual Report 2002

Focused on Customers.

Mission

Core Businesses

New Businesses (SGL Technologies)

SGL Excellence

Key Figures SGL CARBON worldwide

Key Figures SGL CARBON worldwide Overview of Business Areas

Business in 2002

Questions to the Chairman of the Executive Committee, Robert J. Koehler

Mr. Koehler, looking back, how would you summarize fiscal 2002?

How did SGL Carbon develop in this difficult environment?

Did you succeed in reducing the Company's financial liabilities?

And yet you were unable to reach your earnings target for 2002.

What was the reason behind SGL Carbon's refinancing?

Isn't the refinancing package expensive, and what will happen after the loan expires?

How do you intend to further reduce debt?

What progress have you made with the "SGL Excellence" improvement initiative?

Turning to Corporate Governance: has the German Government Commission's Code been implemented in your Company?

What are your expectations for 2003?

What can shareholders expect from SGL Carbon in 2003?

Company Goals 2002/2003

Company Goals and Status 2002

Group

Established Businesses CG, GS, CP

SGL Technologies

7

Company Goals 2003

Established Businesses CG, GS, CP

SGL Technologies

SGL Excellence

The SIX SIGMA methodology

Results after one year

Targets for 2003

Improving customer benefits

Example: From order to delivery

Commercial Excellence:

Corporate Governance

Corporate Governance

1. Legal basis

2. Principles governing the work of the Executive Committee

3. Principles governing the work of the Supervisory Board

4. Regulations on the cooperation between the Executive Committee and the Supervisory Board

5. Specific guidelines

Economic environment

Business developments within the Group

Gross profit down on previous year

Drag on earnings due to weak economy, provisions and special factors

Net financing costs almost halved in comparison to previous year

Net loss after taxes improves

Restructuring of CG and GS implemented successfully

Business developments

Profit from operations (€m) Profit from operations by Business Area (€m)

Graphite Specialties [GS]: Profit from operations impacted by inventory reduction and declining demand

SGL Technologies [T]: Loss reduction exceeds expectations

Balance sheet structure

Balance sheet structure (%)

Liquidity and capital resources

Income statement, summary (€m)

Investments and depreciation

Investments down by more than half

Investments in 2003 to match previous year

Research and development

CG: Electrodes demonstrate high mechanical strain tolerance

Capital expenditures in property, plant and equipment (€m)

R&D expenditure (€m)

GS: New material reduces customers' production costs

CP: Efficient bonded tube system for chemical plants

Polymer floor prevents static charging

SGL T: Expanded graphite for latent heat storage systems

Injection-molded bipolar plates for fuel cells

Environmental protection, health and safety

Work accidents and days lost

Risk report

Operational risks

Financial risks

Risks arising from antitrust proceedings

SGL CARBON SE Annual Report 2002

⁴⁶ Consolidated Income Statement

Consolidated Balance Sheet ⁴⁷

⁴⁸ Consolidated Cash Flow Statement¹

Consolidated Statement of Changes in Equity ⁴⁹

⁵¹ Foreign currency translation