2023 ANNUAL REPORTWE EXPAND OUR REACH TO NEWMARKETS AND CONTINENTS THROUGHOUR INNOVATIVE MOBILITY SOLUTIONS.

“Electric Evolution”, Karsan’s intrinsic electric vehicle venture, is a journey inwhich it reinvents itself with cutting-edge technologies and leads the evolution of
the transportation industry by driving societies forward.

KARSAN ANNUAL REPORT 2023

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WE TRANSFORM OUR SUPERIORITY
IN R&D AND TECHNOLOGY INTO
INNOVATIONS THAT ADD VALUE TO
LIFE.
As Karsan leads the way in the evolution of electricity, it is also one stepahead in the future of mobility. Pioneering vehicles of various sizes and designs
are the fruits of innovative and advanced engineering solutions for cities’
evolving needs.

3WE ENHANCE OUR CONTRIBUTION
TO A GREENER FUTURE THROUGH
ELECTRIC EVOLUTION, OUR ELECTRIC
DEVELOPMENT JOURNEY.
Over the past 4 years, Karsan’s electric minibus and bus sales constituted
90% of Türkiye’s overall e-bus exports. Karsan has established itself as the firstand only brand in Europe to provide a comprehensive range of fully electric
products for public transportation, ranging from 6 meters to 18 meters.

KARSAN ANNUAL REPORT 2023

CONTENTS

7KIRAÇA HOLDİNG

30

AUTOMOTIVE INDUSTRY OVERVIEW

7

CAPITAL AND SHAREHOLDING STRUCTURE

342023 ACTIVITIES8KARSAN OVERVIEW

40

HUMAN RESOURCES

14

OUR VISION, OUR MISSION, OUR VALUES64

CORPORATE SOCIAL RESPONSIBILITY

15

KARSAN’S BUSINESS MODEL

66

R&D, ONE STEP AHEAD OF INNOVATION

16LETTER FROM THE CHAIRMAN OF THE BOARD

70

SUSTAINABILITY

18

BOARD OF DIRECTORS

78

ASSESSMENT OF FINANCIAL RESULTS

20 BOARD COMMITTEES80

EVENTS AFTER BALANCE SHEET DATE

22 LETTER FROM THE CEO

80

OTHER MATTERS-INFORMATION FOR SHAREHOLDERS

24

81

INFORMATION ON COMPANY SHARES

26 REMUNERATION POLICY FOR SENIOR EXECUTIVES AND BOARD MEMBERS

81

ACTIVITIES OF INVESTOR RELATIONS DEPARTMENT

28 CORPORATE GOVERNANCE COMPLIANCE REPORT

82 DECLARATIONS OF INDEPENDENCE BY THE NOMINEES FOR BOARD MEMBERSHIP

28 BOARD OF DIRECTORS EVALUATION ABOUT CORPORATE RISK MANAGEMENT, INTERNAL AUDIT AND INTERNALCONTROL SYSTEM

85

INDEPENDENT AUDITOR’S REPORT ON ANNUAL REPORT OF THE BOARD OF DIRECTORS

86

CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2023 AND INDEPENDENT AUDITOR’S REPORTSENIOR MANAGEMENT

29 DIRECT OR INDIRECT SUBSIDIARIES OF THE COMPANY
29 ISSUED CAPITAL MARKET INSTRUMENTS
29 CREDIT RATING

6

DIRECTORYDISCLAIMERKARSAN ANNUAL REPORT 2023KIRAÇA HOLDİNG

CAPITAL AND SHAREHOLDINGSTRUCTURE(As of December 31, 2023)
Kıraça Holding leverages its expertise in the automotive and other industrial sectors through its ownershipof various brands in the automotive, automotive spare parts, and energy markets, providing added value tothe country’s economy by creating employment opportunities and innovative products.
The Suna and İnan Kıraç Foundation, established by İnan Kıraç together with his wife Suna Kıraç and theirdaughter İpek Kıraç, actively contributes to our country in the areas of culture, art, education, and healthand carries out its mission by collaborating with prestigious institutions in their fields, such as the Pera
Museum and the Istanbul Research Institute.
All employees of the Kıraça Holding family take pride in developing world-class services and products witha strong awareness of the responsibility of our mission and under the guidance of our corporate values.

COMPANY’S TITLE
Kıraça Holding A.Ş.
Group A PreferredGroup B
Other
Group A PreferredGroup BTOTALSHARE AMOUNT (TL)
526,618,813
64,028,613
462,590,200
373,381,188
1,554,776
371,826,412
900,000,000

SHARE RATIO (%)
58.51
7.11
51.4
41.49
0.17
41.31
100

As of year-end of 2023, Karsan’s free-float rate listed under the Central Registry Agency (CRA) is 39.44%.
DISCLOSURE ON PREFERRED SHARES AND VOTING RIGHTS OF SHARES
According to Article 8 of the Articles of Association, the article on Board of Directors, Group A shares
possesses a right of “privilege to nominate candidates for the election of members of the Board of
Directors”. The Company’s Articles of Association does not feature a privilege on the use of votes.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION DURING THE REPORTING PERIOD
No amendment was made on the Articles of Association in 2023.

The founding mission of Kıraça Holding is to drive all its stakeholders andTürkiye forward through generating profitability and ensuring sustainable
development by means of the implementation of effective business models
and the introduction of innovative products in the areas where it operates.

Registered Capital Ceiling: 1,500,000,000
Issued Capital: TL 900,000,000

7

KARSAN ANNUAL REPORT 2023

KARSAN OVERVIEW
A 57-YEAR-OLD SUCCESS STORY CRAFTED WITH A SUSTAINABLE BUSINESS MODELA ROBUST AND RESOLUTE STANCE THROUGHOUT THE ENTIRE VALUE CHAIN

With a 57-year history in the Turkish automotive industry, Karsan engages in production at its state-of-the-art
facilities for leading global automotive companies, including its own brand in the commercial vehicle segment.

Karsan, which continues its operations to develop and introduce “innovative products and services” in the
public transportation sector, particularly focuses on bolstering the primary manufacturer/OEM business line.

Karsan’s factory in Hasanağa, Bursa, which has been producing commercial vehicles since 1981, has thecapacity to produce 20 thousand vehicles in a single shift per year.

Karsan manages the entire automotive value chain, from R&D to production, marketing to sales, and aftersales operations. The Company produces eco-friendly Jest and Atak models under its own brand. Following
the consecutive launches of Karsan e-JEST in 2018, Karsan e-ATAK in 2019, Autonomous e-ATAK in 2021, 10m,
12m, and 18m models of the Karsan e-ATA family in the same year, and e-ATA HYDROGEN in 2022, Karsan
succeeded in establishing itself as the first and sole company in Europe to offer a fully electric product range
from 6 meters to 18 meters. At the end of 2023, it became the first European producer to penetrate theJapanese market with the right-hand drive 6-meter e-JEST.

Hasanağa Factory, where all kinds of vehicles can be produced, from passenger cars to heavy trucks, fromminivans to buses, is situated at a distance of 30 km from the city center of Bursa and encompasses a total
area of 203 thousand m2, with 99 thousand m2 designated as enclosed area.
SOLE INDEPENDENT MULTI-BRAND VEHICLE PRODUCER
Karsan, which is the sole independent multi-brand vehicle producer in the Turkish automotive industry,collaborates with its business partners and licensors to develop new and existing product derivatives inaccordance with its vision of being one step ahead in the future of mobility.

Karsan, which has been producing commercial vehicles since 1966,
addresses the evolving needs of cities with its agile business model andcollaborations.

Agile business model
8

ELECTRIC VEHICLES ADDING VALUE TO HUMAN LIFE IN 22 COUNTRIES ACROSS 3 CONTINENTS
Karsan provides services with its electric vehicles in 22 countries on 3 continents, spanning from the UnitedStates to Japan. Karsan, which produces 10-12-18 meter buses for Menarinibus, has also been producing
Megane Sedan cars for the Renault brand since 2022. In addition to vehicle production, Karsan also provides
industrial services at its factory, situated in the Organized Industrial Zone.

KARSAN ANNUAL REPORT 2023

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10

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KARSAN ANNUAL REPORT 2023

OUR VISION, OUR MISSION, OUR VALUES
Our Vision

Our Mission

Our Values

Being one step ahead in the
future of mobility.

To deliver innovative, sustainable,
and inspiring solutions andofferings to meet the needs ofcustomers in the global landtransportation market.

Respect for Humanity Behind the brand of
Karsan, our people stand as one big family.
Our relationships with our colleagues and all
our stakeholders determine the value we giveto humans and human dignity. As we work,
we conduct ourselves professionally, takeresponsibility, develop both ourselves and Karsan,
using current technology and methods while we
aim to inspire others.

Our Quality Behind our quality lies the high-

Our Reputation Behind our reputation is ourcustomers at the heart of our business. We takeresponsibility to regain their trust every day, tomake their lives easier.

focus on quality, our approach to customers andhundreds of behaviors that we all carry out everyday. We aim for the highest quality in everything
we do, we always work for the better.

Attaining Sustainable Growth in Europe andNorth America

14

Operational Processes
That Generate Distinction

performance, innovative, flexible and sustainableproducts We aim for the highest quality ineverything we do, we always work for the better.
While maintaining our quality, our actions areenvironmentally responsible, we aim to reduce ourcarbon footprint and bring innovative solutions toenvironmental problems.
Our Customers We have the satisfaction of our

Becoming a Pioneer in Future Mobility Technology
and Collaborations

KARSAN ANNUAL REPORT 2023

KARSAN’S BUSINESS MODELOUR BRANDSTO ESTABLISH PRESENCE IN THE GLOBAL
MARKET WITH PRODUCTS UNDER KARSAN
BRAND
To become a player in-demand in the global
market through sustained investment in
Karsan’s own brand.

PRODUCTION FOR GLOBAL BRANDS

INDUSTRIAL SERVICES

To oversee the production of products byglobal manufacturers on their behalf. To
ensure continuity of capacity throughproduction for renowned brands.

Providing services such as tractor cabin,spare parts sales, garage management

Production for Global
BrandsMenarinibus
Renault

Establishing Presence in the
Global Market with Products
Under Karsan Brand

e-ATA, e-JEST,
e-ATAK and Otonom e-ATAK

Industrial Services

Tractor Cabins
Spare Parts Sales
Garage Management

Through the development of innovative
product solutions that aim to leave a betterworld for the future generations, Karsan’s
brands proceed on their way, driving
cities worldwide to the future, societies
to a greener planet, businesses towards
profitability, and business partners towards
success.
Karsan Jest minibus Atak midibus, thepioneering vehicle of its class, with e-ATA,
e-JEST, e-ATAK, and Autonomous e-ATAK
vehicles developed with over 57 years of
Karsan’s entrepreneurial spirit, continues
delivering the highest quality services
through technological, innovative, andinspiring solutions.

15

KARSAN ANNUAL REPORT 2023

LETTER FROM THE CHAIRMAN OF THE BOARD
Dear Stakeholders,
As Karsan, we have left behind significant milestones in our pursuit of establishing ourselves as a global
brand in our journey that we set off on in 1966. We have become one of the leading producers anddevelopers of next-generation mobility solutions in Europe. Our industry successfully navigated thechallenges encountered, resulting in notable growth in total production, domestic market volume, andexports within our country’s automotive industry. As the domestic market reached a record high, ourautomotive industry remained committed to serving as the driving force of the country’s economy.
In the automotive industry, change and development have begun to become more apparent. We continued
to expand our global presence in 2023, a period characterized by significant progress in the transition frominternal combustion to electric engines. Aligned with our vision of being “One Step Ahead in the Future of
Mobility”, we played a key role in the electric transformation of public transportation in Europe as well asin Türkiye. We sustain our expansion by securing significant tenders in Europe with our next-generationelectric vehicles, developed by our expert R&D team and high-tech production power.
Our goal is to make the Karsan brand one of Europe’s top 5 players through e-Volution, our electric
development journey. In addition to our electric models, we continue to garner interest with our hydrogenand driverless models. In 2023, industry authorities recognized these innovative vehicles and awarded themin various categories. By the end of the year, approximately 1000 of our electric vehicles were operational ona global scale. Moreover, we signed new partnerships abroad and new businesses with our existing partners
last year.

At Karsan, we are making great strides towards establishing ourselves
as a global brand. We provide robust support in transforming thetransportation infrastructure of numerous European cities through ourelectric vehicles.

Agile Business Model
16

KARSAN ANNUAL REPORT 2023

At Karsan, we are making great strides in our journey to become a global brand. We provide robust support
for the transformation of transportation infrastructure in numerous European cities through our electricvehicles. We have also strengthened our presence in the North American market while simultaneously
expanding our export markets. We have expanded our collaboration with our distributor there for theAmerican market. We penetrated Japan, a right-hand drive market, for the first time as a Turkish brand. We
continued to grow in Romania and Italy, our primary target markets.
We, as Karsan, continued to undertake exemplary work to promote gender equality policies in the industry.
Our efforts to augment the number of women in employment, which we started in 2019 with 57 women
employees, evolved into remarkable growth within a short period of time. By the end of 2023, 9.63 percent,or 259, of Karsan employees will be women. Furthermore, this percentage reaches up to 15.68 percent
among workers in blue-collar positions. We are committed to significantly increasing the representation of
women in our workforce in a short time, aiming to surpass the current 9.63 percent and achieve double-digit
figures.

With our innovative and success-driven corporate culture, we are committed to demonstrating ourachievements in the Turkish market also throughout Europe. We will celebrate our 60th anniversary in
2026. As we approach our 60th anniversary, I would like to extend my appreciation to our shareholders,customers, business partners, and all stakeholders who have provided support to us throughout this journey.
Additionally, I would like to acknowledge our esteemed colleagues who have helped us achieve our goals.
Kind regards,İnan KIRAÇ
Chairman of the Board
Karsan Otomotiv Sanayii ve Ticaret A.Ş.

17

KARSAN ANNUAL REPORT 2023

BOARD OF DIRECTORSİnan KIRAÇ
Chairman of the Board of Directors

Giancarlo BOSCHETTI
Vice Chairman of the Board of Directors

Okan BAŞ Yönetim Kurulu
Executive Board Member and CEO

Mehmet ALTAN SUNGAR
Member of the Board of Directors

Fatma Füsun Akkal Bozok
Member of the Board of Directors

Karsan Otomotiv Sanayii ve Ticaret A.S. İnanKıraç started his career in 1961 as a sales clerk at
Ormak A.Ş., a subsidiary of the Koç Group. He has
a professional experience of 62 years. In 1966,
he was appointed General Manager of Otoyol, amanufacturer of Fiat trucks and midi-buses. In
1970, he became the General Manager of Tofaş Oto
Ticaret A.Ş., the marketing and distribution company
of Fiat brand cars produced in Turkey. Kıraç firstbecame Koç Holding’s Vice President in charge ofTofaş and then Koç Holding A.Ş. He was appointed
President of the Automotive Group. Until his
retirement in 1998, Kıraç served as the Chairman of
the Executive Committee (CEO) of Koç Holding A.Ş.
He witnessed every moment of the developmentof the Turkish automotive industry, worked as aprofessional manager and put his signature on
many giant factories.

Giancarlo Boschetti, who studied MechanicalEngineering and Economics, started his careerin 1964 at the Fiat Group. He has a professional
experience of 59 years. After nearly 40 years ofvarious roles within the Fiat Group, Boschetti served
as Global CEO of Iveco S.p.A. from 1991 to 2001 andas Global CEO of Fiat Auto S.p.A. from 2002 to 2003.
Giancarlo Boschetti continues to work as a board
member in many international companies.

Okan Baş, who completed his undergraduate
education at Boğaziçi University MechanicalEngineering Department and his master’s degree at
Clemson University (USA) Mechanical Engineering
Department, has a professional experience of
36 years. He started his career as a MechanicalEngineer in Tofaş Bursa Factory Engineering Support
Department in 1987 and undertook different duties
at Tofaş until June 2016. Between 1991 and 2002,
he worked as Workshop Production Chief, Engine
Production Unit Manager, Body Production UnitManager, Assembly Production Unit Manager andDoblò Product Responsible at Tofaş Bursa Factory,
and between 2002 and 2016, he worked as AfterSales Director, Mini Cargo Project Responsible,
After-Sales Spare Parts Director, Fiat Business Unit
Director, Egea Project and Business Development
Director at Tofaş Head Office Istanbul. Okan Baş
was appointed CEO of Karsan Otomotiv Sanayii ve
Ticaret A.Ş. on 1 July 2016.

Mehmet Altan Sungar started to work as an intern
at Royal Lastik Tevzi A.Ş., one of the Koç Holding
companies, while he was a student at the Academyof Economic and Commercial Sciences in 1963. He
has a professional experience of 60 years. Sungar
worked as the assistant regional manager in theaccounting department and marketing departmentin the same company, and also took part in theestablishment of the dealer organization as theregional manager in various regions of Turkey.
Sungar, who took part in the establishment phaseof Otoyol Marketing Company in 1975, served as
Marketing Manager, Deputy General Manager and
Deputy General Manager in the same company.
,Sungar worked at Istanbul Oto A.Ş., a Tofaş Group
company, as the CEO and Board Member from 1985
to 2001. In the same period, he served as a memberof the Automotive Professional Committee of the
Istanbul Chamber of Commerce, and expert witness
before the courts. Sungar, who worked as General
Manager and Board Member at Karsan A.Ş. between
2001 and 2004; Between 2004 and 2012, worked
as a partner and consultant at TURAVEL (Tourism,
Education and Consultancy) company.

Fatma Füsun Akkal Bozok completed her academic
education with a master’s degree from Boğaziçi
University Faculty of Administrative Sciences anda PhD degree from Istanbul University Faculty ofBusiness Administration. She started her career in1980 at Arthur Andersen Auditing Company. She
has a professional experience of 43 years. She
joined Koç Group in 1983, and first worked as an
Audit Specialist and then Deputy Coordinator in the
Audit and Financial Group department.. She worked
as the Audit and Financial Group Coordinator within
the Holding for 11 years starting from 1922. Between
2003 and 2006, she was the Finance Group
Director. Akkal is a faculty member of the Sabanci
University. Akkal also served as an Independent
Board Member at Bizim Toptan Mağazaları A.Ş.
and Akiş GYO. She is currently an Independent
Board Member of Ford Otomotiv Sanayi and a
Board Member of Gözde Girişim Sermayesi and
Kocaer Çelik.

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KARSAN ANNUAL REPORT 2023

Muhsin Mengütürk
Member of the Board of Directors

Nevzat TÜFEKÇİOĞLU
Independent Board Member

Müfit ATASEVEN
Independent Board Member

Ahmet Nezih OLCAY

Prof. Muhsin Mengütürk received his M.S. and
Ph.D. degrees from the Faculty of Engineering at
Duke University, USA (Durham, North Carolina) andstarted his career at the Westinghouse ResearchCenter (Pittsburgh, Pennsylvania) as the Leader of
the Turbine Erosion Department of the Renewable
Energy Project of the U.S. Government. He has
a professional experience of 49 years. In 1976,
he was appointed as Assistant Professor andAssociate Professor at Boğaziçi University, Facultyof Engineering, and in 1984 he was promoted toprofessor and graduated from Istanbul Technical
University. He was appointed as the deputy dean of
the Faculty of Aeronautics and Space Departments.
Mengütürk, who was the Founding Deputy General
Manager of Türk Eximbank between 1988 and1992; He was the Founding General Manager ofBayındır Hayat Sigorta between 1992 and 1995,
and the Chairman of the Capital Markets Board
between 1997 and 2000. After completing his termat the CMB, he worked as Chairman of the Boardof Directors at Güneş Hayat Sigorta, Vakıf Emeklilik,
Ankara Sigorta and Ankara Emeklilik companies,
and as a Board Member at Ata Holding between
2001 and 2006. Mengütürk served as a Board
Member at Doğuş Holding between 2006 and2018. Mengütürk is also a member of the Board of
Directors of the Global Relations Forum (GRF).

After graduating from Ankara University, Facultyof Political Sciences, Department of Economics
and Finance, Nevzat Tüfekçioğlu was appointed
as Deputy Account Specialist of the Ministry of
Finance in 1963 and as Account Specialist of the
Ministry of Finance in 1966. He has a professional
experience of 60 years. He left public service in 1974
and served as Deputy Coordinator, Coordinator, Vice
President and Head of the Audit and Financial Groupin the Koç Holding Financial Group, respectively,
and retired in 2001. Tüfekçioğlu served as the
Auditor of Koç Holding A.Ş. between 2001-2006,
as a Member of the Board of Directors of Evyap
A.Ş. between 2005-2006 and as a Member of theBoard of Directors of Kıraça Holding A.Ş. between
2013-2017 He is currently a member of the Boardof Directors of Entek Elektrik Üretimi A.Ş., a memberof the Board of Directors of the Suna-İnan Kıraç
Foundation, a member of the Board of Directorsof the Family Health and Planning Foundation ofTurkey, and also serves as a Consultant at the Vehbi
Koç Foundation. He also works as auditor at The
Educational Volunteers Foundation of Türkiye (TEGV)and Geyre Foundation.

After completing his undergraduate studies at
Ankara University, Faculty of Political Sciences,
Department of Business Administration, Müfit
Ataseven pursued further education andprofessional development. He first obtained a
DEA-Doctoral Qualification diploma at Université
Paris IX Dauphine University. Following that, heconducted State Doctorate research focused on theautomotive industry in Turkey. He has a professional
experience of 41 years. Additionally, he participatedin the specialized program at Fontainebleau INSEAD,
further enhancing his expertise in the field. Between
1982 and 1988, Ataseven served as Second
Manager in the Investments and Subsidiaries
Department of OYAK General Directorate and as amember of the Board of Directors and Supervisory
Board of Oyak-Renault, Mais, Omsan, Tukaş, Entaş,Adana Çimento and Oyak Menkul Değerler. Later,
between 1988 and 1997, Ataseven held the positionsof French Commercial Director (DCF), project
manager of the Dealership Organization “Dealer
Profile”, Central Marketing Director - Marketing
Pricing Director, Le Havre Branch Manager,
Head of International Operations (DOI) special
representative at Renault SA in France. Ataseven,who served as Renault Mais Commercial Deputy
General Manager between 1997-2003 and as TOFAŞ
Commercial General Manager between 2003-2007,
also served as OYDER General Coordinator, Citroën
Baylas General Manager, Board Member in Baylas
and Baytur, Member of the Executive Board of
DEIK Turkish-French Business Council, Memberof the Board of Directors of ODD and Chairmanof the Council. Ataseven taught as a lecturer
at Galatasaray University and as a parttime
lecturer at Bilkent University, and is currently aStrategic Partner in the Executive Development
Unit of Sabancı University and a Manager at MEFA
Consulting and Interactifs Turkey, which he foundedin 2009.

Born in 1947, Nezih Olcay graduated from the ItalianHigh School and then from the Istanbul Academyof Economic and Commercial Sciences with a
Bachelor of Business Administration. Olcay started
to work at Tofaş Türk Otomobil Fabrikası A.Ş. in 1971
and worked as Accounting Manager, Financial
Manager, External Relations Group Manager,
Accounting, Finance and Control Group Deputy
Director and Financial Director respectively andretired at the end of 2007. He has a professional
experience of 52 years. During his years at Tofaş
Türk Otomobil Fabrikası A.Ş., he served as a memberof the board of directors of various companies
affiliated with the Koç Group. Between 2008 and2012, he served as General Coordinator, Vice
Chairman and Chairman of the Board of Directorsof Plastiform Sanayi ve Ticaret A.Ş. and as anindependent member of the Board of Directors of
Otokar Otomotiv ve Savunma Sanayi A.Ş. between
2014 and 2019.

Independent Board Member

19

KARSAN ANNUAL REPORT 2023

BOARD COMMITTEES
The duties and working principles of the Board Committees have been published and disclosed to the
public on the Public Disclosure Platform and in the investor relations section of www.karsan.com.tr

https://www.karsan.com/en/investor-relations/corporate-governance/board-committees-and-working-principles

BOARD COMMITTEES AS OF 31.12.2023

Committee
Audit Committee
Corporate Governance Committee

Early Detection of Risk Committee

Committee Member
Nevzat Tüfekçioğlu
Ahmet Nezih Olcay
Müfit Ataseven
Muhsin Mengütürk
Evren Uçak(*)
Nevzat Tüfekçioğlu
Fatma Füsun Akkal Bozok
Mehmet Altan Sungar

Role on the Committee
ChairmanMemberChairmanMemberMemberChairmanMemberMemberQualification
Independent Member
Independent Member
Independent Member
Non-Executive Member
Executive
Independent Member
Non-Executive Member
Non-Executive Member

Meeting Frequency
At least 4 times per year in 3-monthintervals
At least 2 times per year
At least 6 times per year in 2-monthintervals

As per the guidelines outlined in Article 11 of the Corporate Governance Communiqué numbered CMB II-17.1, the Investor Relations
Department Manager has been appointed to the Corporate Governance Committee.

(*)

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS DURING THE YEAR AND ATTENDANCE RATE OF
BOARD MEMBERS AT THESE MEETINGSThe Board of Directors convenes in person as needed to address the Company’s matters, inaccordance with the Turkish Commercial Code and the pertinent provisions of our Articles of
Association. Additionally, when necessary, decisions are made through the circulation of documents,
as permitted by the 4th paragraph of Article 390 of the Turkish Commercial Code. In 2023, a grand
total of 21 decisions were made, with a 100% participation rate.

20

PAYMENTS PROVIDED TO BOARD OF DIRECTORS MEMBERS
The financial statement footnotes include the total of rights, benefits, and wages provided to the Membersof the Board of Directors and Senior Managers for the period 1 January - 31 December 2023, amounting to
TL 40,141 thousand. These footnotes have been published on PDP and the Company website. The Ordinary
General Assembly on 25 May 2023 approved a resolution to provide a monthly gross payment of TL 28,350 to
the Independent Board Members and TL 23,100 to each member of the Board of Directors, effective from the
beginning of the month following the General Assembly.

KARSAN ANNUAL REPORT 2023

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KARSAN ANNUAL REPORT 2023

LETTER FROM THE CEO
Esteemed Stakeholders,
As the Karsan family, which grows constantly, we are pleased to conclude another year full of achievements.
By striving with the vision of being “one step ahead in the future of mobility”, we have maintained our leadingrole in the renewal of public transportation infrastructure worldwide, particularly in Europe. As a result of
our accurate and innovative efforts, we have consistently achieved higher levels of success in our existing
markets in 2023, and we have also diversified our operations by penetrating new markets.
As Karsan, we introduced our initial fully electric model, e-JEST, to the world in 2018, anticipating theforthcoming electric transformation within the industry. Then, we swiftly launched e-ATAK, which madeour Company ready for the transformation of the European public transportation industry. Electric vehicle
production constituted one of our steps in our pursuit of a fully autonomous, eco-friendly product range. In
this sense, we developed Autonomous e-ATAK and put them into service on the roads at the beginning of
2021. Thus, as Karsan, we have established ourselves as the first and only brand in Europe to provide a 100
percent electric product range in all sizes, ranging from 6 meters to 18 meters. We continued to reap the fruitsof these preparations in 2023.

As a result of our accurate and innovative efforts, we have consistently
achieved higher levels of success in our existing markets in 2023, andwe have also expanded our field of activity by penetrating new markets.

Expanding field of activity
22

Karsan ascended its ranking in the market from 9th to 6th place in 2023, attaining a 5.9 percent share in theEuropean electric public transportation market. In 2023, we exported 436 Karsan-branded vehicles worldwide,
particularly to Europe. Thus, our total electric vehicle pool in 23 countries around the world reached 968 units.
As a result of our recent agreements, electric vehicles bearing the Karsan brand have become available in avast geography spanning from North America to Japan. Even though we focused on Europe, we persistently
expanded our contribution to the economy as a Türkiye brand. In the last 4 years, 85% of the electric
public transportation vehicles registered in Europe that originated in Türkiye belong to Karsan. As Karsan,
we concluded the year 2023 with a growth of 46 percent and a turnover of over TL 7.8 billion. Our export
operations accounted for 58 percent of our total revenue. Our growth in electric vehicles continued last year,
as we increased their share in our total revenue to 47 percent. By the end of last year, our electric vehicle
turnover had increased from TL 2.4 billion in 2022 to TL 3.5 billion. We have already received 303 electricvehicle orders for 2024. We increased our pace and transitioned to the 3rd shift in September for the Renault
Megane model, for which we commenced production at the end of 2022.
We have signed agreements that will lead the way in the electric transformation of the transportation
infrastructure of European cities. We kept broadening our playing field while strengthening our presencein Romania and Italy, which are among our primary markets. We penetrated the North American market in
2022. Last year, we expanded our exports to Canada and also shook hands with our distributor in the country,KARSAN ANNUAL REPORT 2023

Damera, for the American market. By virtue of this agreement pertaining to the American market, the total
number of electric vehicles delivered in North America by 2023 has amounted to 130. At present, our e-JEST
vehicles are providing service to local people in various Canadian and American cities. One of our primarygoals in 2023 was to expand our operations in the North American market, and we achieved it.
Another positive development that excited us was the signing of a framework contract with CONSIP S.P.A., theItalian Central Purchasing Office, in May 2023. We have received orders for a combined total of 156 electricminibuses and buses from 7 distinct operators within the scope of the framework contract, consisting of 6
and 8-meter electric lots. We plan to deliver the order, which includes 156 electric vehicles with a total valueof EUR 78.3 million, in 2024 and subsequent years. Thus, as Karsan, we will provide services with e-JEST and
e-ATAK vehicles in the cities of Catania, Palermo, Messina, Lucca, Reggio Calabria, Vicenza, and Siracusa.
Based on the 2023 rankings in Italy, Karsan secured the 3rd position in the electric public transportation
market, boasting a total of 71 electric vehicle pools.
In Chitila, Romania, we won the tender for 23 electric vehicles last year. Within the scope of the tender,
we installed a total of 28 charging stations, including both fast and slow charging options, in Chitila, alongwith our e-ATAK and 12-meter e-ATA electric buses. By the end of 2023, the number of electric vehicles weexported to Romania reached 237, and the Karsan brand closed the year in second place in the electric public
transportation market of the country.
In addition, as Karsan, we penetrated the Japanese market with e-JEST at the end of last year. The Japanesemarket represents a significant breakthrough for us. Concurrently, our studies on right-hand drive countries
such as the UK and Indonesia are progressing at full speed. We consider the Japanese market a critical step to
expanding our playing field on a global scale.
In 2023, we also signed an autonomous vehicle sales contract with the Norwegian VY Group, one of the major
public transportation authorities in the Scandinavian countries. In March 2024, we delivered an 8-meter
Autonomous e-ATAK for use in Tampere, Finland. Since 2022, Autonomous e-ATAK has been operational in
Stavanger, Norway, transporting passengers along a 5-kilometer route. It has been in operation for 1.5 years
on the Michigan State University campus in the United States. We recently expanded the route in the city ofStavanger by updating it with a route that includes a tunnel, and we successfully passed another challenging
test by being the first autonomous vehicle to pass through the tunnel. We have commissioned Autonomous
e-ATAK in 6 distinct locations, including France, Romania, and Türkiye. We transported more than 26,000
passengers while accumulating 70,000 kilometers of autonomous driving experience with the Autonomous
e-ATAK, the first passenger-carrying autonomous bus in the United States and Europe.

Our e-JEST and e-ATAK models have played a crucial role in Karsan’s success in Europe. Karsan e-JEST has
been the electric minibus market leader in Europe in 2023 as well. E-JEST, which has maintained the top
position for 4 years, holds a 28.5 percent share in the electric minibus market. Likewise, E-ATAK has beenleading its segment in Europe for 4 years. Based on the 2023 year-end data, e-ATAK once again became theleader of the electric midibus segment in Europe, with a 24 percent share.
We continued to receive awards for our accomplishments in 2023. Autonomous e-ATAK received theprestigious “Excellent Product Design” award from the German Design Council, which is the foremost authority
on design and branding in Germany. The Autonomous e-ATAK won the award in the digitally enhanced driving
category at the Busworld Digital Awards at the Busworld Fair, which attracted wide international participation.
As Karsan, we were recognized with two awards from Global Business & Finance Magazine. Karsan, with its
Electric Evolution concept, was honored with awards in the Most Preferred Electric Transportation Provider
Europe 2023 and Most Inspiring Transportation Solutions Provider Türkiye 2023 categories. Furthermore, wewere deemed worthy of the Bronze Stevie Award for e-ATA Hydrogen in the Product & Service category fromthe Stevie Awards, one of the leading award programs in the business world.
We continue to grow with all our strength, driven by our vision of being “one step ahead in the future ofmobility”. I would like to extend my sincere gratitude to all of you, our esteemed shareholders, valued
employees, customers, business partners, and all our stakeholders, who stand by us as we progress towards
becoming a global brand and whose support we deeply feel at every stage of the journey.
Best Regards,
Okan Baş
CEO
Karsan Otomotiv Sanayii ve Ticaret A.Ş.

23

KARSAN ANNUAL REPORT 2023

SENIOR MANAGEMENT

Okan BAŞ
Executive Board Member and CEO
Okan Baş, who completed his
undergraduate education at Boğaziçi
University Mechanical Engineering
Department and his master’s degree at
Clemson University (USA) MechanicalEngineering Department, started his
career as a Mechanical Engineer inTofaş Bursa Factory Engineering Support
Department in 1987 and undertook
different duties at Tofaş until June
2016. Between 1991 and 2002, heworked as Workshop Production Chief,Engine Production Unit Manager, Body
Production Unit Manager, Assembly
Production Unit Manager and Doblò
Product Responsible at Tofaş Bursa
Factory, and between 2002 and 2016,
he worked as After- Sales Director, Mini
Cargo Project Responsible, After-Sales
Spare Parts Director, Fiat Business Unit
Director, Egea Project and Business
Development Director at Tofaş Head
Office Istanbul. Okan Baş was appointed
CEO of Karsan Otomotiv Sanayii ve
Ticaret A.Ş. on 1 July 2016.

24

Kenan KAYA
Deputy General Manager of Financial
Affairs and FinanceKaya, who completed his undergraduate
education at Marmara University,
Department of Finance, started his careerin the Financial Affairs Department of
Döktaş Dökümcülük A.Ş. in 2006 andworked in the fields of treasury andreporting until 2011. Between 2011 and2013, he held managerial positions atAktaş Holding with various responsibilities
in the fields of Finance, Budget Planning,
Reporting and Control. Between 2013 and2016, he worked as Country Controller
and Financial and Administrative Affairs
Manager at Sofiteks A.Ş. Kaya, who
has been a member of Karsan since 1
February 2016, primarily served as the
Budget Planning and Control Department
and the Accounting Manager by proxy
between 2016 and 2018. As of 1 January
2019, Kaya has been serving as the
Deputy General Manager of Financial
Affairs and Finance.

Ahmet Muzaffer ARPACIOĞLU
Domestic Market Sales and External
Relations AssistantGeneral Manager
Arpacıoğlu, who completed his
undergraduate education in Marmara
University, Department of Business
Administration in English and his master’s
degree (MBA) in Business Administration
at Birmingham University, started
his career as a sales coordinator at
Kofisa Foreign Trade Company in 1988.
Afterwards, Arpacıoğlu continued his
career as Regional Manager and Fleet
Sales Manager at Tofaş Oto Ticaret
between 1990 and 1997, then as Regional
Coordinator, and in 1997 he assumed theposition of Assistant General Manager
at Karsan Pazarlama A.Ş. He worked as
Sales Director at Automobiles Peugeot
between 2000-2009 and as General
Manager at Karland A.Ş. between 20092016. Arpacıoğlu, who served as theGeneral Manager of Karsan Pazarlama
between April 2016 and February 2017,has been serving as the Executive
Board Member at Karland Otomotiv
since February 2017. Arpacıoğlu, who
successfully fulfilled his duty as Deputy
General Manager of Commercial Affairs
at Karsan between February 2017 andDecember 2020, continues to contributeto the commercial affairs activities of ourCompany as Deputy General Manager
of Internal Market Sales and External
Relations since December 2020.

Alper BULUCU
Deputy General Manager of Industrial
Operations
Bulucu, who completed his
undergraduate education in the
Department of Mechanical Engineering
at Istanbul Technical University, started
his career in 2000 as a Welding Engineer
in the Body and Welding Departmentof Karsan Otomotiv Sanayii ve Ticaret
A.Ş. and has undertaken different duties
until today. Between 2000 and 2009, heworked as Welding Engineer, Paint andAssembly Method Officer, Assembly Plant
Production Senior Officer and between
2009 and 2015 as Program and Business
Development Manager, during thisperiod he managed the Hyundai Motor
Company and Renault Trucks programs.
Bulucu, who was appointed as Production
Director in 2015, has been working as
Deputy General Manager of Industrial
Operations at Karsan Otomotiv Sanayi ve
Ticaret A.Ş. as of March 2020.
Alper Bulucu has been appointed as
Deputy General Manager of Product
Program, Business Development,
Corporate Strategy and Innovation as of 1
February 2024.

*

Deniz ÇETİN
Deputy General Manager of Exports

Ahmet Özgür DOĞAN
Supply Chain Director

After graduating from Yıldız Technical
University, Department of MechanicalEngineering, he received his MBA
education at Goldey-Beacom College inthe USA and then completed his master’s
degree in Automotive Engineering atBoğaziçi University. Çetin, who started
his career as a design engineer at
Mercedes-Benz Türk A.Ş. in 2004, worked
as an after-sales field coordinator ininternational markets at Temsa Global
A.Ş. between 2007-2011 and then worked
as the Customer Relations Regional
Manager at General Motors Turkey
between 2011-2012. Between 2012
and 2020, he worked as International
Aftermarket Department Manager, SpareParts Sales Manager and Key Customer
Sales Manager at Temsa Ulaşım Araçları
A.Ş., respectively, and then worked as theCountry Manager responsible for North
American operations in the last 4 years.
As of the end of 2020, Çetin has been
serving as the Deputy General Manager
of Exports at Karsan.

Ahmet Özgür Doğan, who completed
his undergraduate education in Uludağ
University Industrial Engineering
Department in 2003, worked in project,sales and quality units in automotive
supplier industry companies until 2007.
Between 2007 and 2010, he started towork as MCV Project Spare Parts Export
Responsible at Tofaş Bursa factory.
Between 2010 and 2017, he worked as
Supply Chain Development Specialist,
Supply Chain Design Manager, Transport,
Capacity and Supplier Development
Manager respectively. Between 2017 and
2021, he held the position of Supply Chain
Development Manager. Doğan has been
appointed as the Supply Chain Director at
Karsan Otomotiv as of 1 October 2021.

Aslı ÖR
Marketing and Export Operations
Director
After completing his undergraduate
education in the Department of Business
Administration in German at Marmara
University, Ör started his professional
life as a Marketing Specialist at Anadolu
Isuzu in 2006 and has been continuing
his career at Tofaş since 2007. At Tofaş,he worked in many different areas suchas CRM, pricing, product management,
marketing programs and campaign
management. Between 2014 and 2017,
he worked in the positions of ProductMarketing Director and Marketing
Business Development Manager. Ör,
who started to work at Karsan as of
September 2017, served as Marketing
Manager in our company until 2020 andhas been serving as Marketing and Export
Director since March 2020.

KARSAN ANNUAL REPORT 2023Barış HULİSİOĞLU
R&D Director

Ergün KORU
Purchasing Director

Mustafa TÜKENMEZ
Quality Director

Mücahit KORKUT
Human Resources Director

After completing his undergraduate(2001) and graduate (2006) degrees
in Mechanical Engineering at Uludağ
University, Barış Hulisioğlu started his
career as a Design Engineer at Hexagon
Engineering in 2006. He worked as Team
Leader between 2009-2013 and Project
Leader between 2013-2017 at Hexagon
Engineering and worked in automotive,
defense industry and marine projects.
Hulisioğlu started his career at Karsan
Otomotiv in 2017 as Product and Project
Engineering Manager and has been
serving as R&D Director since November
2020.

After graduating from Istanbul Technical
University in 2001, Department of
Mechanical Engineering, he completed
his master’s degree in Business
Administration at Uludağ University. Asof 2023, he continues his doctoral thesis
studies in Business Administration. He
also completed the ‘Highly Effective
Leadership’ certificate programs of
Cambridge University in 2020 andthe ‘Professional Coaching’ certificate
programs of Adler Central Europe in
2021. Koru, who started his career asa Quality Engineer at Otosima A.Ş. in
2002, served as Production and Quality
Manager, Engineering Manager, FactoryManager respectively. After working
as Cost Engineer, Supplier Quality andDevelopment Manager, New Project
Purchasing and Method PlanningManager at Tofaş Türk Otomobil Fabrikası
A.Ş. between 2007- 2018, he worked
as -Cost Improvement and System
Development Manager at TürkTraktör ve
Ziraat Makineleri A.Ş. between 2018-2021.
Koru started as Quality Manager at
Karsan in 2021 and after serving as
Quality Director, he has been serving as
Purchasing Director as of May 2022.

He completed his bachelor’s and master’s
degrees in Mechanical Engineering at
Middle East Technical University. After
graduating, Tükenmez started to work atTofaş and worked in different positions
at Tofaş Automobile factory and Fiat
between 1992 and 2022. Respectively
he worked as Method Engineer between
1992-1995, Production Engineer between
1995-2000, Mechanical Production Lines
Production Engineering Responsible
between 2000-2001, Production
Engineering Coordinatorship Responsible
between 2001-2002, Business Excellence
System Team Manager between
2002-2003, Production Engineering
Transmission Machining System
Responsible between 2003-2006, Project
Coordinator between 2006-2008, ProductReliability and Product Evaluation Unit
between 2008-2011 He worked as Doblò
Model Quality Manager between 20132015, Product Quality Manager between
2015-2022, Production Quality Manager
between 2017-2022. Tükenmez, whostarted at Karsan Otomotiv in 2022, is the
Quality Director.

After graduating from Middle East
Technical University, Departmentof Mechanical Engineering, Korkut
started his career as a Maintenance
Investment Engineer at Çemtaş Çelik
Makina Sanayi ve Ticaret A.Ş. in 1989
and worked at Tofaş Türk Otomobil
Fabrikası A.Ş. between 1991 and 2018.
He worked as Method Engineer, Total
Quality Officer, Quality Model Manager,
After Sales Technical Training Manager,
Dealer Human Resources Manager, Tofaş
Academy Manager, Human Resources
Area Manager respectively. Korkut
started as Human Resources Manager
in 2018 and has been working as Human
Resources Director as of June 2022.

Haydar VURAL
Digital Transformation, Information
Technologies, Cyber Security Agile
LeaderAfter graduating from Boğaziçi University,
Department of Computer Engineering,he completed his master’s degree in
Computer Engineering at the same
university and his MBA at Bologna
Business School. He started his career asa research assistant at a university, andthen worked as an analyst programmer
at Yapı Kredi Bank between 2003-2006,
and ran the business, which he founded,
between 2006-2008. Between 2008
and 2018, he assumed managerial
responsibilities in different positions at
Akbank, Finansbank, Garanti Bank andAvivaSA Emeklilik ve Hayat, respectively.
Then, for five years, he led the corporate
artificial intelligence transformation atTofaş, in addition to his role as information
technologies management in production
and commercial areas. He has been
serving as the Digital Transformation,
Information Technologies and Cyber
Security Agile Leader at Karsan since2023.

Hazım Kubilay DİNÇER
Aftermarket and Spare Parts DirectorÇağdaş ADIYEKE
Export Director

Dinçer, who completed his undergraduate
education in the Department of
Mechanical Engineering at Middle East
Technical University, started his career
as a Mechanical Engineer in the Method
Body Department at Tofaş Bursa Factoryin 1992 and assumed different duties
at Tofaş until April 2017. Between 1992
and 2006, he worked as a Workshop
Engineer, Product Process Specialist,
Body Production Engineering Specialist,
Industrial Product Specialist, Palio-AlbeaDoblò Quality Model Manager, R&D Doblò
Platform Quality Manager at Tofaş Bursa
Factory and between 2006 and 2017 heworked as After-Sales Technical Manager
at Tofaş Head Office Istanbul. Dinçer
was appointed Directorate of After-Sales
Services at Karsan Otomotiv Sanayii ve
Ticaret A.Ş. on 1 April 2017. Since 1 March
2020, he has been serving as the Directorof Aftermarket and Spare Parts.

Adıyeke completed his bachelor’s
degree in Mechanical Engineeringat Yıldız Technical University, and his
master’s degree at the University ofSurrey. Adıyeke started his career as an
After-Sales Regional Coordinator in 2011,
and worked as a Regional Sales Manager
at Temsa for approximately 7 years
starting from 2014. Adıyeke, who also
took on Board Membership roles in ourgroup companies, served as International
Sales Group Manager at Karsan
Otomotiv Sanayii ve Ticaret A.Ş. As of
November 2023, he has been working
as International Sales Director at Karsan
Otomotiv Sanayi ve Ticaret A.Ş.

25

KARSAN ANNUAL REPORT 2023

REMUNERATION POLICY FOR SENIOR EXECUTIVES AND BOARD MEMBERS
This policy document outlines the remuneration
systems and practices for our senior executives,
consisting of our Board of Directors members,Company Leader, and Business Leaders. In
accordance with the Turkish Commercial Codeand Article 13 of Karsan Otomotiv Sanayii ve
Ticaret A.Ş.’s Articles of Association, a fixedsalary is set every year at the ordinary general
assembly meeting for board membershipfunctions, applicable to all members of the boardof directors. Members of the board of directors arepaid on a pro rata basis, considering their termof office, from the time of their appointment until
their resignation. The policy for senior executives,
as outlined below, also governs the payment
of Executive Board members. In addition to the
fixed salary determined at the general assembly,
members who are assigned to fulfill certain
functions that go beyond board membership inorder to contribute to the Company’s operations
may be provided with additional benefits for thisfunction they assume, based on the opinion of

26

the Corporate Governance Committee. Payment
plans based on the Company’s performance
are not applicable to the compensation of
independent Board members. The Company cancover the expenses (transportation, telephone,insurance, etc.) incurred by the members of theBoard of Directors due to their contributions to
the Company. Two components make up senior
executive salaries: fixed and performance-based.
Within the scope of our remuneration policy,
wage and benefit management is organized
and implemented as fair, objective, appreciatinghigh performance, competitive, rewarding, andmotivating. Fixed salaries for senior executives
are determined by considering international
standards and legal requirements, taking into
account the macroeconomic data in the market,
market wage policies, the size and long-termgoals of the Company, and the positions of theindividuals. The remuneration policy is designed toenhance employee motivation and loyalty whileconsidering internal wage balances and market

competitiveness, and to attract highly qualified
employees who can contribute to the Company’s
success in achieving its strategic business goals.
Senior executive bonuses are determined based on
various factors, such as the bonus base, company
performance, and individual performance, in a way
to incentivize the achievement and surpassingof the Company’s business targets while also
promoting outstanding performance by promoting
sustainable success. Information about the criteria
is summarized below:• Company Performance: Company performanceis assessed by evaluating the financial andoperational (market share, exports, international
operations, productivity, etc.) targets set for
the Company at the beginning of each year
and reviewing them at the end of the period.
When setting company goals, sustainability ofsuccess and progress compared to previous
years are considered.

• Individual Performance: When evaluating
individual performance, individual andcollective targets and key result indicators set
by senior managers in collaboration with theirteams and managers are considered. During
the evaluation of individual performance, in
addition to the financial aspects, the principles
of long-term sustainable improvement andcompliance with Environment, Social, andCorporate Governance (ESG) policies are also
taken into consideration. The total amounts
determined in accordance with the above
principles and paid to senior executives andmembers of the Board of Directors during theyear are presented to the shareholders at thesubsequent general assembly meeting for theirinformation and/or approval, as per the legal
requirements.

KARSAN ANNUAL REPORT 2023

As per the Turkish Commercial Code and applicable regulations, the members of the Company’s Board of
Directors were elected during the Ordinary General Assembly on 25 May 2023. Their term is set for one year,
or until their successors are elected, in accordance with the Company’s articles of association.
MEMBERS OF THE BOARD OF DIRECTORS AS OF 31 DECEMBER 2023

KARSAN BOARD OF DIRECTORSİnan Kıraç Chairman of the Board
Giancarlo Boschetti Vice Chairman of the Board
Okan Baş Managing Member of the Board and CEO

Board of Directors

Position

Date of Appointment

Nevzat Tüfekçioğlu Independent Member of the Boardİnan Kıraç

Chairman of the Board

25.05.2023

Ahmet Nezih Olcay Independent Member of the Board

Giancarlo Boschetti

Vice Chairman of the Board

25.05.2023

Müfit Ataseven Independent Member of the Board

Okan Baş

Managing Member of the Board

25.05.2023

Mehmet Altan Sungar Member of the Board

Nevzat Tüfekçioğlu

Independent Member of the Board

25.05.2023

Fatma Füsun Akkal Bozok Member of the Board

Ahmet Nezih Olcay

Independent Member of the Board

25.05.2023

Müfit Ataseven

Independent Member of the Board

25.05.2023

Mehmet Altan Sungar

Member of the Board

25.05.2023

Fatma Füsun Akkal Bozok

Member of the Board

25.05.2023

Muhsin Mengütürk

Member of the Board

25.05.2023

Muhsin Mengütürk Member of the Board

DUTIES AND AUTHORITIES OF THE BOARD OF DIRECTORSThe Chairman and Members of the Board of Directors are responsible for fulfilling their duties and exercising
their authorities as outlined in the applicable articles of the Turkish Commercial Code and the Company’s
Articles of Association. The Chairman of the Board of Directors and the Members of the Board of Directors
possess the necessary authorities as outlined in the relevant articles of the Turkish Commercial Code andArticle 11 of the Company’s Articles of Association.

27

KARSAN ANNUAL REPORT 2023

CORPORATE GOVERNANCE COMPLIANCE REPORTBOARD OF DIRECTORS EVALUATION ABOUTCORPORATE RISK MANAGEMENT, INTERNAL AUDITAND INTERNAL CONTROL SYSTEM

Pursuant to the decision of the Capital Markets Board (CMB) dated 10.01.2019 and numbered 2/49, within thescope of the Corporate Governance Communiqué numbered CMB II-17.1, the format to be followed by thecompanies required to prepare the Corporate Governance Principles Compliance Report has been redefined.
Corporate Governance Compliance Reporting for the period 01.01.2023–31.12.2023 can be accessed throughthe link below on our website. Our Company consistently publishes the required updates on the Public
Disclosure Platform and on our website.

Karsan conducts its operations in a manner that is transparent, accountable, fair, and responsible. By
incorporating the suggestions of the pertinent Board of Directors committees, the Board of Directors
establishes internal control systems, such as risk management, information systems, and processes, that
aim to mitigate the potential impacts of risks on the Company’s stakeholders, particularly the shareholders.
The Board of Directors of Karsan Otomotiv oversees and acts on behalf of the Company by ensuring that thebalance between risk, growth, and return remains optimal through strategic decision-making that adheres
to a rational and prudent risk management framework, with the Company’s long-term interests being the
primary consideration.

https://www.karsan.com/tr/yatirimci-iliskileri/kurumsal-yonetim/kurumsal-yonetim-uyum-raporu

The responsibility for managing and reporting risks at Karsan Otomotiv has been transferred from theLegal and Internal Audit Coordination department to the Corporate Risk Management and Internal Audit
department. The Enterprise Risk Management and Internal Audit Department leads the implementation ofrisk management and reporting operations, ensuring collaboration with all other departments. Risks arethoroughly studied and assessed during regularly scheduled workshops. The Corporate Risk Management
and Internal Audit Department directly reports to the CEO of Karsan through the Audit Committee and Early
Detection of Risk Committee, which are both assigned by the Board of Directors. In 2023, the Audit Committee
generated a total of 6 reports. The Early Detection of Risk Committee assesses the risks identified fromtasks conducted under the approved plan, taking into account the institution’s risk appetite, with the aimof establishing an effective internal control system through the implementation of action plans developed
through risk-focused internal audits.

28

KARSAN ANNUAL REPORT 2023

DIRECT OR INDIRECT SUBSIDIARIES OF THE
COMPANY

Company

Field of Activity

Karsan Otomotiv Sanayi Mamulleri
Distributor
Pazarlama A.Ş.

ISSUED CAPITAL MARKET INSTRUMENTS

Direct andIndirect
Partnership
Ratio

Effective
Partnership
Ratio

6.43%

6.43%

Karsan USA LLC(*)

Sales, Marketing

100%

100%

Karsan Europe SRL

Sales, Marketing

100%

100%

28.59%

28.59%

100%

100%

Industria Italiana Autobus S.P.A
Karsan İç ve Dış Ticaret A.Ş.

Bus Production, Distribution andMarketingDomestic and International Sales
and Marketing of Vehicles and Spare
Parts

Karsan North America LLC(**)

Sales, Marketing

100%

100%

Hervouet Corporate Industry SAS(HCI)Automotive and Spare Parts
Marketing

50%

50%

Hervouet Corporate Lease SAS

Financial Leasing

50%

50%

To participate in tenders to be conducted by local authorities in the United States, Karsan has established a New York, United States-based
company called Karsan USA LLC, of which it is the sole owner and for which no capital transfer is required during the establishment phase. No capitaltransfer has occurred to the Company, and as such, the Group’s financial position is unaffected.

(*)

To participate in tenders to be conducted by local authorities in the United States, Karsan has established a New York, United States-based
company called Karsan USA LLC, of which it is the sole owner and for which no capital transfer is required during the establishment phase. No capitaltransfer has occurred to the Company, and it is not included in the consolidated financial statements due to its inactive status.

(**)

The coupon payments have been continually made for the bonds in circulation in 2023, which wereapproved by the Capital Markets Board on 7 May 2020, in which the controlling partner Kıraça Holding A.Ş.
acted as guarantor, and within the scope of the TL 400 million issuance ceiling. The bond, with ISIN code
TRSKRSN72311, 1,093-day maturity, quarterly coupon payment, variable interest rate, and principal payment
at the end of maturity, with a nominal value of TL 42.8 million, was redeemed on 21 July 2023.
Within the scope of the TL 600 million issuance ceiling, approved by the Capital Markets Board on 31.08.2023,
with the controlling partner Kıraça Holding A.Ş. as guarantor, the financing bonus issuance with ISIN code
TRFKRSNE2419, nominal amount of TL 350,000,000, quarterly coupon payment, and 364 days maturity(maturity date 04.10.2024) was completed on 06.10.2023.
Relevant disclosures regarding bond issuance and bond coupon payments are published on the Public
Disclosure Platform and the Company’s website (www.karsan.com.tr) in accordance with CMB legislation.
https://www.karsan.com/en/investor-relations/special-circumstance-disclosures

CREDIT RATING
In the Credit Rating Report dated 22 September 2023 prepared by JCR Avrasya Rating Inc. (JCR), ourCompany’s long- and short-term national ratings have been assigned in an investment grade category as‘BBB+ (Trk)/Stable’ and ‘J2 (Trk)/Stable’, respectively. Our Company’s international ratings are restricted to thecountry rating. There is no conflict of interest between JCR and our Company.

29

KARSAN ANNUAL REPORT 2023

AUTOMOTIVE INDUSTRY OVERVIEW
European Automotive Market* (thousand units)

12,92914,135

13,6092021

European Automotive Market (thousand units)

15,345

15,172

13,3012022

14.1%
The sales volume in theEuropean commercial
automotive market recorded a
14.1% increase in 2023.

1,468

1,353

1,276

Production

Sales2

Sales

2021

2023

2022

Source: AMA (Automotive Manufacturers Association)

European City Bus Market*

European Minibus Market*

3.259

11,731

2021*Vehicles heavier than 8.5 tons
Source: Chatrou CME Solutions

30

40.8%

15,098

2022

3,981

6,154

9,410

8,944

2023

An increase of 55.2% was
observed in the Turkish
automotive market in
2023.

Production1

AB27 + United Kingdom. Source : OICA
2
AB27 + EFTA + United Kingdom. Source: ACEA

13,404

1,284

827

773

1

14,99055.2%

The European city bus market
grew by 12.7% in 2023, whilst theelectric city bus market grewby 54.6%. The electric city bus
market has reached 40.8% of theoverall city bus market.

Electric
Other
Total

2023

38.2%

10,009
8,947
185

470

7,980
340

9,539
8,762

2021
*Vehicles between 3.5-8.0 tons.
Source: Chatrou CME Solutions

The European minibus market
experienced a growth rate of
26.6%, while the electric minibus
market witnessed a growth rateof 38.2%.

7,640

2022

2023

Electric
Other
Total

KARSAN ANNUAL REPORT 2023

Turkey Automotive Market - Commercial Vehicle (thousand units)

35.0%

542

493

516

317
234

211

2021

Turkey Automotive Market - Minibus Sales

2022

Source: AMA (Automotive Manufacturers Association)

2023

The number of production unitsof commercial vehicles in the
Turkish automotive sector hada decrease of 4.8%. The sales
volumes experienced a 35.0%
increase.

19,5368,347

100.1%In 2023, minibus sales increasedby 100.1% compared to thepreceding year.

9,761

Production

Production

Sales

Sales

2021

2022

2023

Source: ADMA (Automotive Distributors’ and Mobility Association)

Karsan Electric Bus and Minibus Sales in 2023

374 units
2018-2023 Cumulative Karsan Electric Bus and Minibus Export

968 units

31

KARSAN FAALİYET
ANNUAL REPORTRAPORU2023
2023

32

KARSAN ANNUAL REPORT 2023

Karsan is one of the leading electric vehicle producers and the market leader with its intrinsic electricvehicles. Over the past 57 years, Karsan’s vision has undergone transformation and evolved to its present
state. “Why?” you might wonder. Because Karsan firmly believes in the future and holds the convictionthat the future has already arrived. Karsan remains committed to providing solutions that address andanticipate future requirements as well as those of the present. The Company leads the transformation throughits aspiration to drive societies forward, strong business partners, superior design and technology, andgroundbreaking electric and autonomous vehicles traveling millions of kilometers across the world. Karsan
continues to invest in the future for the ideal of silent and clean driving all over the world, going beyond
reducing the carbon footprint through its zero-emission, 100% electric vehicles.
“Electric Evolution”, Karsan’s intrinsic electric vehicle venture, is a journey in which it reinvents itself with
cutting-edge technologies and leads the evolution of the transportation industry by driving societies forward.

While Karsan leads the way in the evolution of electricity, it is also one step ahead in the future of mobility. The
pioneering vehicles of their classes, e-JEST, e-ATAK, Autonomous e-ATAK and e-ATA series vehicles, which range
in size and design from 6m to 18m, are the fruits of innovative and advanced engineering solutions. During thepast four years, Karsan’s electric minibus and bus sales accounted for 85% of Türkiye’s e-bus exports.
Karsan has succeeded in establishing itself as the first and sole company in Europe to offer a fully electric
product range from 6 meters to 18 meters.

Karsan brings the electric vehicles of the future to life today throughthe development of innovative solutions driven by enthusiasm.

57-year-old, young, and dynamic Karsan has been working with a startup spirit for the last 6 years, drawing energy from the competencies it
has built in its deep-rooted past!

Start-up
33

KARSAN ANNUAL REPORT 2023

2023 ACTIVITIESLANDING IN JAPAN WITH THE RIGHT-HAND DRIVE ELECTRIC E-JEST

AFTER EUROPE, KARSAN IS NOW ELECTRIFYING PUBLIC TRANSPORTATIONIN NORTH AMERICA.

Karsan, which plays a leading role in the transformation of electric and autonomous public transportationin Europe, has expanded its services to the Japanese market following its success in North America.

Karsan, which provides high-tech mobility solutions with the vision of being “One Step Ahead in the Futureof Mobility”, has identified North America as its new target market, following Europe.

Karsan, which has been actively marketing its products in Japan since October 2022, signed a
distributorship agreement with ALTECH Co. Ltd., one of the country’s leading companies, in April 2023.

Within this context, the Company penetrated the Canadian market at the beginning of the year throughits distributor, Damera. In December, a new agreement was established with the subject business partner,
specifying the geographical area of collaboration to include the US market.

In December 2023, Karsan held a ceremony at the Turkish Embassy in Japan to introduce the e-JEST, thefirst right-hand drive vehicle in the brand’s history.

The first right-hand drive vehicle, e-JEST, was introduced at a ceremony
hosted at the Turkish Embassy in Japan in December 2023.
34

Karsan recently exported e-JEST models to Saint John, Canada, and delivered 15 e-JEST models to Oakville,
known for being the country’s most habitable city.

KARSAN ANNUAL REPORT 2023

ENHANCING OPERATIONS IN THE ITALIAN MARKET

18 E-ATA BUSES TO SERVE IN BOLOGNA WERE DELIVERED TO TPER

Karsan, which plays a pioneering role in the electrification of the transportation infrastructure of Europe
as well as Türkiye, garners the recognition of world countries for the high-tech models it develops. Karsan,
which gained prominence through its electric vehicle deliveries as part of the recently won Consip tenderin Italy, has recently signed a dealership agreement with K-Mobility S.R.L., the new subsidiary of Maurelli
Distribuzione, Sinvest and VFM Company, one of the strong companies in the automotive industry in the
country.

Karsan, which pioneers the transformation of the public transportation industry with the high-tech
products it develops, continues to be Europe’s choice with its innovative products. Last year, the Company
delivered 24 e-ATA vehicles ordered by TPER in Italy. The e-ATA vehicles, the first electric 18-meter vehicle
in the city and the first pantograph electric 18-meter vehicle in Italy, began their service in Bologna.

High-tech models that garner the recognition of countries worldwide
35

KARSAN ANNUAL REPORT 2023

2023 ACTIVITIESTHE STAR OF BRUSSELS BUSWORLD 2023

KARSAN AT THE UITP GLOBAL PUBLIC TRANSPORT SUMMIT HELD IN
BARCELONA

Karsan presents its technology and production capabilities to consumers through the world’s leading fairs
and organizations. Within this framework, Karsan has participated in Busworld 2023, the largest bus fairin the industry, showcasing its high-tech production capability, innovative prowess, and commitment toproviding excellent service.

Karsan addressed attendees at the UITP Global
Public Transportation Summit about the 6-meter
e-JEST, 8-meter Autonomous e-ATAK, and12-meter e-ATA Hydrogen models.

Karsan has participated in Busworld 2023, showcasing its high-tech production
capability, innovative prowess, and commitment to providing excellent service.
36

KARSAN ANNUAL REPORT 2023

TWO AWARDS FOR ELECTRIC
EVOLUTION STRATEGY

50 JEST VEHICLES TO KARABÜK MUNICIPALITYOUR ENVIRONMENTALLY FRIENDLY
MODELS STARTED SERVICE IN
İZMİR ÖDEMİŞ

Karsan continued to crown its achievements with
global awards in 2023 as well. Global Business& Finance Magazine honored Karsan with twoawards for its Electric Evolution strategy in thisregard.

Alongside its expansion throughout the European market, Karsan is also actively pursuing its operations in
Türkiye. Karsan, a company that assists local governments in Türkiye in upgrading their vehicle fleets withstate-of-the-art models including cutting-edge technology, has delivered 50 Jest vehicles to Karabük.

As part of Karsan’s operations in Türkiye, nextgeneration and environmentally friendly Karsan
vehicles were put in service in İzmir Ödemiş.

Two awards from Global Business & Finance Magazine for Electric
Evolution strategy
37

KARSAN ANNUAL REPORT 2023

2023 ACTIVITIESLEADER OF ROMANIA’S ELECTRIC PUBLIC TRANSPORTATION POOLRANKED MUCH HIGHER IN THE EXPORT CHAMPIONS RANKING

Karsan, a company that has made significant strides in establishing a global brand, continues to benefit
from its efforts in European markets. Karsan is swiftly expanding its presence in Romania, one of its
significant primary markets, by consecutively winning tenders. Karsan, which has reached a pool of 189
electric vehicles in the country since 2019, currently operates its fleet of vehicles in 15 cities.

In 2023, Karsan continued to reflect the achievements it attained through its innovative models in its
export data. Karsan was honored with an award in the silver category at the Export Champions Awards
organized by the Automotive Industry Exporters’ Association (OİB).

38

KARSAN ANNUAL REPORT 2023

KARSAN’S 12 METER ELECTRIC BUS, KARSAN E-JEST HAS MAINTAINED ITS POSITION AS
THE E-ATA, IS EN ROUTE TO ROMANIA THE LEADER IN THE EUROPEAN MARKET FOR FOURCONSECUTIVE YEARSKARSAN E-ATAK HAS BECOME THE LEADER OF THE
EUROPEAN MARKET FOR THE FOURTH TIME

Having won the tender to supply 23 electricvehicles held in Chitila, Romania, Karsan has
exported the 12-meter e-ATA for the first time, in
addition to the 8-meter e-ATAK.

e-ATAK, a standout model in its industry from Karsan, renowned for its topnotch minibuses, midibuses, and buses, continues to gain recognition with its
impressive sales performance in Europe. e-ATAK maintained its position as theleader in its segment, just as it has for the preceding three years, capturing a
24% market share in 2023.

Karsan e-JEST, which maintained its leadership in 2023 as the pioneering brandof the market, sustained its leading position for the fourth year with a 28.5%
share in the European electric minibus market. According to this market share,
Karsan e-JEST is one of every four vehicles registered in the electric minibus
class, ranging from 3.5-8 tons.

39

KARSAN ANNUAL REPORT 2023

HUMAN RESOURCES
Behind all achievements are the team spirit among Karsan employees, the deep-rooted corporate culture,and their profound affection and respect for one another, all of which play a key role. From the perspectiveof its employees, Karsan is a family, not just a place of employment. Karsan people provide mutual
support, celebrate one another’s achievements, and stand by each other during our challenging times. Thissynergy is the essence and focus of Karsan’s corporate achievements.
KARSAN POSITIVE IS AN INTERNAL COMMUNICATION TRANSFORMATION MOVEMENT LAUNCHED IN 2017,
WHICH ADOPTS POSITIVE BEHAVIOR IN ALL PROCESSES.
An external consulting firm unaffiliated with HR assisted in forming focus groups and holding assessment
meetings with over 100 employees in 2016 to determine the current status. In response to the feedback of
the employees, the Karsan Positive movement was launched in order to enhance employee engagement
and productivity and reinforce internal communication. In accordance with the new principle, allprocesses, with a particular emphasis on our vision, mission, and values, were redesigned, reviewed,
and reimplemented together with the employees. New projects have been initiated annually under the
auspices of Karsan Positive.

OUR EMPLOYEES ARE THE HEART AND SOUL OF OUR ORGANIZATION!

The Karsan Positive internal communication transformation movement,
initiated in 2017, embraces a culture of positivity in all aspects of its
operations.

40

The core strategy of Karsan Positive is to promote positivity in both organizational culture and businessresults.

KARSAN ANNUAL REPORT 2023

WHAT DOES “KARSAN POSITIVE” MEAN?
POSITIVE KARSAN EMPLOYEEPOSITIVE KARSAN

Positive in our communication: Our language,
our approach, the positive tone in all ourcorrespondence.

Positivity in Our Quality,
Customers and Business Results

Positive in Our Responsibility: Taking full ownershipand proactively pursuing the assigned tasks.

The Karsan Leaders embraced the Karsan Positive
process and made a commitment to serve as rolemodels, providing support to foster the expansionof this culture. As a demonstration of theircommitment, the Positive Leaders listed below
signed the Positive Karsan manifesto and shared itwith the employees.

Positive in Our Leadership: Fairness, transparency,
open communication, serving as role model leaders.
Positive in Our Touch: Taking ideas into
consideration, evaluating and rewarding them.
POSITIVE LEADERS, POSITIVE KARSAN MANIFESTO
Our definition of positivity at Karsan includes
striving for the better every day, acknowledging
and appreciating each other’s accomplishments,
fostering a culture of sharing and embracing new
ideas, and ultimately, celebrating the successstories we will create together.
As Karsan leaders, we are aware of our
responsibilities to foster positivity. We, as
leaders, are the first to experience the virtuesof apologizing, recognizing achievements, andimproving through feedback. Whenever weencounter a challenge, we always start by

conducting a thorough self-analysis and taking
full responsibility for both our weaknesses andstrengths.
We are aware that leadership extends beyond
running towards business results, and that beinga real role model sometimes means being thevoice of our colleagues, always being a supportive
listener and a guide. We highly appreciate theirsuggestions in any situation, and we strive toensure that all our actions inspire their creativity,
positivity, and effectiveness in their work.

EXCHANGE OF INFORMATION
Within the workplace, employees are informed
about management decisions and practices
through following methods:
Information is shared through regular “InternalCommunication Meetings” that involve theactive participation of all employees. The CEO
also engages in these organizations, which areheld every 6 months. Announcements are madevia the social communication e-mail address
Karsan.iciletisim@karsan.com.tr. The content is
meticulously crafted to be warm, sincere, positive,
clear, and easily comprehensible.
The Social Committee, made up of voluntary
employees, compiles news (employee news,
Company updates, and information aboutorganizations, etc.), and this monthly compilation
is published in KMAG Magazine, the corporate
communication publication of Kıraça Holding, of
which we are part.
Billboards serve as a means of disseminating
information about social organizations (theater,
cinema, etc.).

Within the framework of social organizations,employee enthusiasm and interaction areenhanced by the implementation of backgammon,
bowling, basketball, and football competitions, aswell as Company-wide excursions.
The announcement boards and internal
communication e-mail address provide a variety of
information, including birthday celebrations, news
about employees becoming parents, excursion
notifications, press coverage, notable current
publications, news of losses and condolences,
social responsibility organizations in which theCompany participates, official and religious holiday
celebrations, new year celebration messages,
announcements of events such as theater andcinema, discount agreements, awards andachievements, achievements of employees’
children, invitations to holiday greeting gatherings,
launch announcements, and holiday chocolate
and food distribution announcements.
Employees are informed about newly implemented
practices and projects interactively throughworkshops. In order to reach all employees, e-mailaddresses with Karsan Positive extensions havebeen assigned to our entire blue-collar team.

As Karsan leaders, we strive to embody the prideand privilege of being positive role models.

41

KARSAN ANNUAL REPORT 2023

HUMAN RESOURCES

Open and transparent communication is essential
at Karsan.
Following the implementation of each practice, minisurveys are conducted via the “e-survey” system toimprove processes, assess and enhance satisfaction,and gather employees’ opinions and suggestions.
This ensures employees are active participantsin the process. Employee suggestions, requests,
and complaints are received via notification boxes
and designated zones for wishes, requests, andcomplaints on the Karsan Positive Intranet.
a. Collaborative Decision Making:

COUNSELING
Actions are planned by actively seeking opinions
and suggestions from employees through focus
groups created with Karsan Positive. Activity
planning is conducted by gathering input from
employees through surveys to identify their
expectations for social activities. Through meal
surveys, employee feedback is collected andconsidered, enabling each employee to choose
the main dish for the following day using digital
screens in the cafeteria.

Actions are taken by considering the opinions andsuggestions of employees through the employee
satisfaction survey.
The union organized in Karsan is the Turkish Metal
Union.
The Company representative also fulfills the roleof the occupational health and safety employee
representative. The upper committees, whichconvene every two months, provide a platform forboth management and employee representatives
to come together and collectively make decisions.

Karsan conducts practices that exceed national legislation requirements.

Innovative practices
42

To address occupational health and safety
risks, employees are called upon to complete a“threat hunting” form, and their comments aresubsequently gathered and analyzed. Furthermore,
the organization consistently seeks employee
feedback to identify areas for improvement. Within
this specific framework, employees improvetheir work performance by utilizing Kaizen, acontinuous improvement methodology. For all
matters related to the blue-collar team, decisions
are made collaboratively in consultation with union
workplace representatives.

b. Collective Bargaining:
The collective bargaining proceedings at Karsan
are conducted in accordance with the collective
bargaining agreement between the Turkish Metal
Union and MESS. The contract renewal period ismanaged in a balanced manner, with a cooperative
attitude from Karsan management, union leaders,and employees, ensuring that it does not disrupt
production processes or labor harmony. ThroughKarsan Positive culture, collective bargaining
processes are followed meticulously, considering
employee loyalty and sense of belonging.
c. Innovative Practices Exceeding National
Legislation Requirements
Highlights from the practices and activities
conducted with Karsan Positive
A Rewarding and Recognition System was designedby convening voluntary employees from eachdepartment, irrespective of hierarchical structure.
Purpose of the system:• Fostering a culture of appreciation andrecognition,• Making the invisible visible,• Applauding the efforts and having others applaud,• Establishing a transparent structure whereanyone can nominate another.

KARSAN ANNUAL REPORT 2023

KARSAN POSITIVE MANIFESTO“As Karsan employees, we are the heroes of thesame story.
People are the center of our business, and eachvehicle we produce is the result of the combined
effort and responsibility of our entire team.
As we recognize that our most glorious days resulted
from our efforts, we firmly hold the conviction thatthrough collaborative effort, we can overcome eventhe most severe challenges. We strive to ensurethat the Karsan brand is widely acknowledged
for its exceptional performance, innovation, andcommitment to sustainability...
Our definition of positivity at Karsan includes
striving for the better every day, acknowledging andappreciating one another’s achievements, fostering
a culture of sharing and embracing new ideas, andultimately, celebrating the success stories we will
create together.
We are fully aware that no goal is unachievable,
provided that each of us assumes responsibility andmaintains a positive perspective on both the present
and the future.
We are fully aware that Karsan is who we are.

In order to promote the adoption of the manifesto,
Karsan Positive Manifesto was distributed to all
employees in the form of a magnet. Additionally,
several objects were designed to boost employee
motivation, and photos of employees wereincorporated into the wall decorations. The social
activity club was established with volunteers fromvarious departments. Weekly meetings are held,and projects are designed and implemented aspart of the annual social activity plan. To illustrate,during the reporting period, a nursing home visit
was conducted as part of the “Hand in Hand with
the Elderly Project” within the scope of social
responsibility projects.

KARSAN POSITIVE PORTAL

Zones designated on the portal:

As a reflection of the digitalizing world, thetraditional printed materials (social organization
timetables, announcements, etc.) that are
displayed on the notice boards at Karsan have
gradually lost their impact and relevance. Having
an effective communication channel is crucial
for effectively spreading corporate culture andenhancing employee satisfaction and sense of
belonging. Karsan launched the Karsan Positive
Communication Portal towards the end of 2019,
which enhances employee productivity andsatisfaction, facilitates access to informationand documents, contributes to corporate culture
cultivation, and preserves corporate memory.

My Personal Information zone, which is restricted
to individuals themselves

Regardless of time or location, the portal offers
convenient access to personal/institutional
information and documents that may be required
during the remote working process.
As a result of the steps taken towards digitalization,
Karsan was honored with the Business, Business
Culture, and Workforce Transformation Award in
the Turkish Confederation of Employer Associations(TİSK) Joint Future Program.

Payroll, Statement of Employment, Annual Leave
Balance, Training Records, Flexible Working
tracking screen, etc.
CORPORATE INFORMATION ZONE
Corporate Business Practices, Corporate
Information, 3-D Campus Plan, Emergency Plans,
Emergency Numbers, Training Library, Contracted
Institutions, Second-Hand Ads, Organizational
Charts with Photos, Visa Documents by Country,
Excursion Programs and Online Application Forms
Event Photograph Gallery, Monthly Lunch Menus,
Service Bus Lists, Telephone Directory, Health
Information Corner, Social Learning Platform,
Online Surveys, Birthday Celebration Zone,
Welcome Messages for Newly Joined Employees,
Social Space for Congratulatory Messages for
Employees’ Newborns, Online Magazines ofCompany and Holding, Karsan News in the Press,
Global News, Date/Time, Daily Exchange Rates,
Weather Updates, Corporate Announcements,
Favorite Links (E-Government, Salary Bank, TDK,etc.), and Wishes and Requests Zone.

And we, the people of Karsan, are fully aware of thefact that whatever we have done, we did it together,and whatever we will do, we will do it together.”43

KARSAN ANNUAL REPORT 2023

HUMAN RESOURCES• Our latest “Women Leaders Development”
initiatives carried out under the Karsan
Positive framework earned us the 2021
Stevie Awards Silver Winner award, the ILO
Award for the Company Best Implementing
Social Dialogue,• Behavioral Competency Results

Karsan’s combined training programs aim to fostersocial dialogue. We integrate the employees’
paradigms with Karsan Positive through personal
development training sessions to achieve positive
results.

• Positive Career results• Satisfaction rate of internship processes• Awards received:• The 2019 Éducorp Corporate Training andDevelopment Award• Corporate Trust• Trust in the Market• Social Trust

LEADERSHIP AT THE SPEED OF TRUSTThe primary objective of the program is for Karsan
leaders to establish a working environment built
on a culture of trust. The program content provides
valuable insights on building trust in personal
and professional relationships and achieving
sustainable prosperity in all aspects of life.

Through their participation in the “Leadership at
the Speed of Trust” development program, Karsan
leaders develop awareness on how to implement
a new language and set of behaviors within the
Company and make this situation sustainable
shortly after completing the training.

Within the scope of the training program, five main
topics are covered, starting with personal reliability
and ending with social trust.

Through effective tools and processes to sustain
learning for 52 weeks following the study session,leaders are equipped with the skills to ensure that
their teams remain committed to achieving results
and are more accountable.

• Increase in Company Profit

The findings regarding the obtained results:• Trust in Relationships

In the training content, information is shared
about how trust is built through behaviors and how
behaviors can be developed to deserve trust, andsimply understanding this can have a significant
impact on our lives.

• Business Results Performance

KARSAN TRAINING PROGRAMS• Personal Reliability

According to the feedback from the training groups
in 2023, the participants’ post-training satisfaction
rate was 100%.

Karsan aims to foster social dialogue through combined training programs

Social Dialogue
44

KARSAN ANNUAL REPORT 2023

THE 7 HABITS OF HIGHLY EFFECTIVE PEOPLE
A 3-day “7 Habits of Highly Effective People”
training was incorporated into the Orientation
program to ensure the sustainability of Karsan
Positive Culture by disseminating it to all White
Collar employees.
Thus, the main principles committed by the entire
senior management team within the scope of the“Positive Leaders, Positive Karsan” Manifesto are
reinforced by this training, and the Karsan culture
is instilled in the newly hired employees of theCompany.
In relation to the following objectives, we provide
essential information, explain strategies foraddressing potential practice challenges, andmonitor Company practices:• Taking further responsibility and initiative forbusiness results,• Developing more productive business
relationships in accordance with the “Win-Win”
principle,• Developing listening and communication skills,• Solving problems creatively and managing
disputes better,• Adopting a “Continuous Development Mindset”
and improving work-life balance.
The significance of the main principles that
establish the basis of an effective and productive
life, which will impact not only the businessenvironment but also private life and will direct
individuals toward becoming contributors tosociety as a whole, is emphasized.
According to the feedback from the training groups
in 2023, the participants’ post-training satisfaction
rate was 99.2%.

Fringe Benefits
Karsan provides a range of fringe benefits that aredesigned to enhance employee satisfaction andoverall quality of life.
These rights are:• Combined Insurance Policy (Private Health
Insurance + Supplementary Insurance)• Company-Contributed Private Pension System• Company Phone• Company Vehicle (Management)• Meal• Service Bus• Paid Leaves (Relocation Assistance, etc.)• Rewarding and Recognition System• Shoe Voucher• Towel and Soap Allowance• Food Assistance (During Ramadan)• Chocolate (During Holidays)• Allowance for the Ramadan Feast• Allowance for Eid al-Adha• Heating Allowance• Annual Leave Allowance• Marriage Allowance• Birth Allowance• Death Allowance• Child Allowance• Tuition Aid• Koç Family Card
• Messt Card
• Unishop• Fitbrokoli Free Dietitian Service• Establishing business goals and monitoring theirprogress,• Being more organized by improving planningand time management skills,

45

KARSAN ANNUAL REPORT 2023

HUMAN RESOURCESFLEXIBLE WORKING PRACTICE

Birthday Leave

Flexible Working Hours

As part of our continuous improvement efforts,
as of January 2023, a 1-day birthday leave (paidleave) practice has been introduced for employees
to benefit from during their birthday months sothat they can fully celebrate their birthdays with
their loved ones.

Employees are provided the opportunity to arrive
late and leave early so that they can easily carryout their daily responsibilities. In this case, it ispossible to compensate for the minus hours byworking plus hours within the same month or thefollowing month, as long as it does not exceed
11 hours per day. When merely plus work occurs
in the given month, and if this period is 9 hours
or more, “Flexible Leave” practice (Paid Leave) is
implemented, which will allow them to take time offin exchange for their plus work.

WORK-LIFE BALANCE AT KARSAN
Karsan adopts a working model that enables its
employees to maintain a healthy work-life balance.
With Flexible Working Model,
Through the e-surveys on employee motivationand commitment to the workplace, a satisfaction
rate of 80% was measured, and necessary actions

were taken based on the feedback received.
Furthermore, it was observed that there was adecrease in employee turnover, a better balance
between absenteeism and overtime rates, animprovement in productivity, a reputation as theemployer of choice, and an overall increase incompetitiveness.

The first woman production manager in Karsan’s history wasappointed in 2023.

A significant step46

Working from Home/Remotely
Employees have the option to work from home/remotely for up to 2 days a week on a voluntarybasis.
Special Leave
Colleagues who have been with the Company forat least 1 year are entitled to take unpaid leave
for up to a period of 1 month for various reasons(education, parenting, supporting a dependent,
health-related matters, etc.).

HUMAN RESOURCES PROFILE AT KARSAN
By the end of 2023, a total of 2,494 individuals
work on Karsan’s 5 different campuses. Women
represent 10% of the workforce.
This rate is consistently increasing due to theCompany’s commitment to promoting genderequality and the implementation of associatedpractices. The reporting period marked a historicoccasion for the workplace with the appointmentof the first woman production manager. Thisdevelopment constitutes a great source of pride for
Karsan management and family.
By virtue of the importance attached to diversity
and the modern approach adopted, teammatesfrom all generations work at Karsan. As a resultof the Company’s commitment to hiring young
employees, the rate of employees under theKARSAN ANNUAL REPORT 2023

MANAGEMENT BY OBJECTIVES (OKR
SYSTEM)age of 25 joining the Company with the Young
Talent Program and objective recruitment policies
has reached 18%. The percentage of employees
between the ages of 26-34 is 13%. While the rateof employees between the ages of 35-44, wholead Karsan to the future is 24%, the percentage of
employees between the ages of 44-55, who shedlight on the Company with their experiences is 12%.
The percentage of employees over the age of 55,
which indicates the Company’s consideration andcommitment to hiring retirees, stands at 12%.
RECRUITMENT PRACTICES
Karsan utilizes competency-based interview
methodologies in its recruitment processes.
The candidates’ technical and behavioral
competencies are assessed using a specificformat during the evaluations. To achieve optimal
performance, it is essential to effectively assess
both technical and behavioral data in the HR
Evaluation Form. Decisions about prospective
contributions to the organization are madecollaboratively between the department and the
Human Resources Directorate.

Recruitment is conducted in a non-discriminatory
manner, without considering the candidates’
identities or criteria such as gender, language,
religion, race, etc. Within the framework of the“Joint Gender Equality Project” with the ILO, specificmeasures were devised and executed in 2019 toaddress the recruitment process. Due to theseactions, the annual rise in the proportion of women
employed in production line positions is 2%, andtheir progress is closely monitored.
ORIENTATION
Based on the feedback provided by the employees,
areas for improvement were identified in theorientation processes, and a focus group wasestablished, including employees from various
departments. When establishing the focus group,
it was ensured to include employees from all levels(experts, engineers, managers, and directors) in thegroup to assess the ideas and perspectives of all
employees.
The focus of the working group was on the
improvement suggestions, wishes, andexpectations of current employees. With the new
study, all departments will have the opportunity
to participate in the process, which will help
accelerate adaptation and harmony with thecompany culture. Additionally, the feature oftransferring information and providing guidance
will strengthen team awareness.

The performance management system has
undergone a transition to the OKR (Objectives and
Key Results) system in order to foster a culture thatencompasses all Karsan employees, is committed
to a common vision and objective, and prioritizes thegeneration of significant impacts.
Karsan places social sustainability as the core
principle of its corporate values and businessstrategy. The Company prioritizes the rights andwell-being of its employees and is committed
to ensuring fair compensation, safe working
environments, and equal opportunities. The situation
not only enhances employee motivation andsatisfaction but also fosters a positive workplaceculture and empowers employees to get the mostout of their capabilities and potential. Karsan
monitors performance management using the OKR
system. All organizational units, including the CEO,strive for environmental, social, and governance(ESG) performance and receive compensation basedon the outcomes of sustainability initiatives. In thisregard, Karsan conducts the Positive Career processwith Gender Equality and Human Resources Policies
and the Positive Career Procedure developed toensure equal considerations in the promotion
process in employment practices. The Company has
adopted equal pay for equal work in its remunerationand salary policies. The work performed is thedecisive factor in the Company’s salary andremuneration policies; gender is not a consideration.

Our organization has developed its compensation
system in accordance with the Korn Ferry Hay
Group’s methodology, adhering to the job family andlevel structure. BDO conducts quarterly audits of all
payroll processes, despite not specifically targeting
the remuneration process. PwC also conducts auditsof the wage and payroll processes pertaining to our
R&D employees.
The purpose of OKR is to foster focus, harmony,commitment, transparency, and measurability
across departments, colleagues, oneself, and theCompany as a whole. The OKR system outlines
the vision, aligns with Company goals, generates
impact, and is both achievable and measurable.
By implementing the OKR system, employees areactively involved in the goal-setting process. This
ensures alignment between the Company’s goals
and the individual goals of each employee, allowing
for effective coordination in achieving both sets ofgoals.
With the clarity and visibility of OKR goals,
employees are able to effortlessly track bothCompany-wide and individual goals in a transparent
setting. Implementing trackable quarterly goals
supports an agile approach.
Sharing the goals enabled the organization toserve the whole and be a part of the team. In
general, the Company has established a system
where employees integrate into the Company andserve the whole, fostering transparent and open
communication, focusing on success, and striving
for development and improvement.

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HUMAN RESOURCES• Goals• Job descriptions (Technical skills)• Behavioral competencies• Legal and system requirements (Occupational Health and Safety, Quality, Environment, Energy, Information
Security Management Systems, Laws, etc.)
Experiential Learning- 70%
It refers to the development achieved through numerous projects (process improvements, cost savings, error
rate reduction, etc.), a variety of tasks, challenging experiences, etc.
Learning from Others- 20%
It refers to the development provided by tools such as learning the job from experienced employees (mostly
from managers), mentoring, feedback, teamwork, developing an action plan, etc.

CONTINUOUS DEVELOPMENT AND
TRAINING AT KARSAN
Ensuring continuous development of the competence(technical and behavioral) of all employees inaccordance with Company goals, strategies, andemployee development plans, as well as identifying
and planning for training requirements, evaluating theeffectiveness of training, and monitoring the progressof development plans, are crucial aspects of HR
functions.

The 70-20-10 development model, whichhas proven effective in the context of adultdevelopment, serves as the foundation for
Karsan’s training and development programs.

Structured Learning- 10%

Employee development plans are designed
under four headings by using the Karsan
Training Development Tracking Application and inagreement with the manager.

Furthermore, the Human Resources department designs position-specific development programs and assigns
them to relevant employees.

Karsan designs its training and development programs using the 70-20-10
model.

70-20-1048

It refers to the development provided through training programs, seminars, workshops, books, articles, andother resources.

• Development programs tailored to specific positions• New hires development program• Potential employees development program• Production leaders/managers development program• New managers development program, etc.

KARSAN ANNUAL REPORT 2023

POSITIVE CAREER (WHITE COLLAR)

POSITIVE LEADERSHIP (BLUE COLLAR)

THE NEW MANAGER DEVELOPMENT PROGRAM

Karsan primarily operates the Positive Career(Internal Rotation) Procedure for horizontal andvertical new staffing needs that emerge throughout
the recruitment process.

The Positive Leadership process is a promotion
program that offers blue-collar employees theopportunity to develop themselves in line with theircareer goals.

When the needs cannot be fulfilled internally,
career portals are utilized to recruit from externalsources. The primary objective is to provide all
employees with equitable opportunities throughout
a positive career progression, to facilitate theirdevelopment, and to create opportunities in which
they can leverage their specialized skills.

Throughout the process, interviews are conductedwith Human Resources, position managers,
and independent managers. Employees who
successfully complete all the steps can advancetheir careers as Team Leaders.

With the launch of the Karsan Positive process in
2016, a radical transformation movement began in
the Company and management culture. Current“Leader-Managers” who promote employee
development and motivation, possess exceptional
communication skills, and excel at establishingand managing effective teams have emerged asprominent figures. This program was specificallydeveloped to improve leadership-management
skills and contribute to the managementleadership vision in alignment with Company goals
and strategies. The New Manager Development
Program provides participants with content that
fosters a deep understanding of leadershipmanagement through in-depth discussion
sessions, thorough case analyses, and intensive
group studies, in which practices are supported
entirely by real-life examples from today’s business

Additionally, Positive Career facilitates complete
engagement in the effective execution of theorganization’s talent management process. All
candidates are evaluated equally, irrespective of
their age, gender, or departmental affiliation.
Providing feedback in the event that the process
does not yield a positive outcome demonstrates
that the process is transparent and developmental.
The Positive Career process provides confidence
and motivation as it enables employees to create
new opportunities for themselves without leaving
their current company, in line with their careerplanning and development goals.

As part of the “Positive Leadership” processlaunched in 2021, 85 internal advertisements
were posted by the end of 2023, and out of 425
applications received, 107 employees were chosen
to take on the role as team leaders. Additionally, 2Blue Collar Group Leaders were promoted as White
Collar Production Leaders.

world. At Karsan, our training and development
program is structured in a modular format. The
2023 New Manager Development Program
feedback indicates a 97.5% satisfaction rate among
the participants after the training.
Examples of Participant Feedback:It is a training that the entire management teamthat is expected to lead should receive. It was not
merely theoretical but rather a practical training
program. The training language and content arevery helpful. The fact that I attended training during
my new management period has been highly
effective, etc.

The satisfaction rate of New
Manager Development Program
participants after the training was
97.5%.

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HUMAN RESOURCES

EXAMPLES FROM KARSAN CULTURE
Initiated in 2017, the cultural transformation
journey continues through various practices
implemented under the Karsan Positive framework.
• A positive equality project was launched incollaboration with the ILO, promoting genderequality. Karsan has been a signatory to boththe WEPs and the UN Global Compact Platform.
Within this context,• The first woman production manager was
appointed,• A dedicated staff of Gender Equality Internal
Trainers was established,• In 2022, women were employed in productionlines for the first time, and since then, thenumber of women employees has steadily
increased to reach a total of 259 to date,• Gender Equality and Zero Tolerance forViolence policies have been established,• Karsan Electric Vehicles Technology Laboratory
has made a substantial contribution to preparing
the future generation for corporate life throughthe “Positive Internship Program” in partnershipwith the Ministry of National Education.
• The Positive Career and Leadership process for
Career Opportunities was implemented, andall manager selections and 30% rotation were
executed as part of this initiative.
• The “Gene Positive Orientation” program waslaunched to convey a positive culture to new
employees.
• A recognition and appreciation system thatvalues, applauds, and rewards ideas has been
implemented.
• More gatherings were facilitated by holding
internal communication meetings.
• To facilitate friendly interactions, a bus in the
production range was modified, and a “CafePositive” rest area was built.

• In line with the Zero Tolerance to Violence
perspective, a collaboration protocol has beensigned with Mor Salkım Women’s Solidarity
Association.

Karsan acts in compliance with the UN Global Compact.

UN Global Compact
50• Hundreds of people’s lives have been touchedthrough social responsibility projects.
• In order to disseminate the corporate
culture and sustain the processes, over 50
practices have been transitioned to the digital
environment through the implementation of the“Karsan Positive Communication Portal”.
Karsan has always prioritized the interests of its
employees, making salary payments on Fridays
when the last working day falls on a weekend andon Saturdays if it falls on a Monday.
We strive for the better every day, applauding
each other’s achievements more, sharing more,and embracing new ideas. As we proceed on ourjourney with the awareness that our colleagues
are the primary driving force that will propel ourorganization to its targeted future.

ETHICS
Statement of Compliance with Legal
Requirements and Karsan’s Code of EthicalConduct
As a minimum standard for its operations, Karsan
acknowledges and complies with the applicablelegal regulations of the countries in which it
conducts business, pertinent international law
principles, and business ethics standards.
As an extension of this principle, the “Karsan
Code of Ethical Conduct” is presented asconfirmation that the operations of the Company
will be conducted in a manner that is transparent,
accountable, responsible, and fair. Karsan iscommitted to complying with all rules andprocedures outlined in the Karsan Code of EthicalConduct and the Company policies that areassociated with this statement.
Karsan commits to upholding the rules establishedby the OECD Multinational Enterprises Guide andthe principles delineated in the UN Global Compact
within its operational pursuits.

KARSAN ANNUAL REPORT 2023

The Scope of Implementation
Karsan Code of Ethical Conduct applies to allindividuals affiliated with Karsan, including
managers, employees, subsidiaries with a majority
ownership stake, representatives, suppliers,
and commercial partners such as dealers andapproved services.
All pertinent stakeholders are required to adhere
to all procedures and directives established inalignment with this statement, with the aim ofsafeguarding the corporate identity and reputationof Karsan. Hence, it is imperative that all pertinent
stakeholders, particularly Karsan management andemployees, possess the requisite proficiencies intheir respective domains of expertise and refrainfrom engaging in conduct and activities that may
compromise the reputation of the Company.
Karsan Code of Ethical Conduct document is madeavailable in a digital format on the official website
of Karsan, ensuring accessibility to all whom it may
concern.
One of Karsan’s strategic objectives is to institutea success-driven operational framework that has
its basis in the Company’s culture. To establish a

corporate culture, Karsan published the “Positive
Leaders Manifesto” as part of the “Karsan Positive”
culture. In this context, the developed vision andstrategy were reviewed, and a business strategy
focused on the Company and its employees wasformulated.
Karsan oversees performance management,
technical competence development, and training
planning based on this scope and aligned with
Company goals and management systematics.
Senior management of the Company convenes
annually in November and December for catchballmeetings to discuss the “vision”, “five-year
strategy”, and “Company material issues” for theupcoming year.
As a result of these meetings, participants are
required to input objectives into the OKR system,
wherein they will collectively strive towards
a shared objective based on the overarchingvision and strategy. This system establishes
targets for various positions, including Company,
Deputy General Managers, Directors, Managers,
Supervisors, and Experts, to align with the overall
strategy and management philosophy. Ensuringtransparent communication in strategy andtarget dissemination is of utmost importance for
Karsan. The system allows all employees to accessand view the target cards of each employee atevery level within the Company, along with theirrespective impacts on their target cards. In thissystem, where achievements are visible andacknowledged by all stakeholders, it is possible toestablish shared objectives that promote teamworkand effective communication.
The OKR system is applicable to all employees at
Karsan. In this context, all employees of Karsan
can engage in Company- and goal-oriented
activities ranging from Company strategy toCompany main goals.
Training development plans are established on anannual basis, contingent upon the primary goals,
strategy and priorities of the Company.
Once performance targets have been established,development cards are generated for employees.
Every development card that is generated isassociated with the individual’s job description,
Company priority, or technical competency. In thisparticular implementation, employees adhere to
the 70-20-10 rule. Education comprises only 10% of

the overall process of learning. Within the 20% part,
individuals have the opportunity to seek guidancefrom a mentor who is affiliated with the Company,in the 70% part, it is expected that the acquired
training is put into practice.
Thus, it is aimed at facilitating the internalizationof acquired knowledge through the utilizationof objectives and strategies, resulting in mutual
benefits for both the factory and the individual.
The OKR training program communicates Karsan’s
main goals and how to connect them end-to-end,
enabling managers and above-ranking staff todisseminate the strategy and convey it to theircolleagues. KPIs for this group of employees aremonitored monthly on a CEO level.
All managers assume the responsibility of setting
goals and KPIs for both themselves and theirrespective teams towards the Company’s main
goals and strategy.
During Company communication meetings, thesenior management consistently reiterates its
main goals and strategy to all employees on aquarterly basis, and they provide updates on thecurrent status and future plans.

The OKR system is applicable to all employees at Karsan.

OKR
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HUMAN RESOURCES

In the “Start” phase, by creating a transformation
road map, critical roles were set, and 2 pilot teams
were established. Training was organized for themembers of the pilot teams. In September 2023,
work of 2 teams started under the leadership of
the agile coach. Regularly scheduled meetings
are held with the project managers and the agile
coach within the Company, the performances ofthe pilot teams and the compliance of the agiletransformation with Karsan culture are assessed.

AGILE CULTURE
At Karsan, an agile transformation journey isundertaken to update the business methodology
and streamline the processes. With agiletransformation, the aim is to update not just thebusiness model, but also the organizational culture,in order to create a next-generation methodology.

Karsan agile transformation journey is comprisedof three phases.
In the “Discover” phase, Agile Leadership training
was provided to Karsan management team.
Afterwards, an organizational assessment survey
was conducted, and one-on-one interviews were
held with the stakeholders, thereby assessing thecurrent status of the organization.

Karsan is undergoing an agile transformation.

Agile Culture52

In the “Diffuse” phase, it is aimed at increasing
the number of agile teams and realizing culturaltransformation by establishing the dissemination
strategy.

Particular attention was paid to ensuring thatthe distribution of tasks among team members
did not include people at the management levelin strategic roles like Project Owner and Scrum
Master, allowing employees from the expert/
engineer staff to assume different responsibilities.
In review meetings held biweekly, work outcomes,
achievements, risks, and obstacles were sharedwith senior management and stakeholders,fostering a trust environment and disseminating
a culture of transparent communication andfeedback.
Based on the feedback from the project teammembers, there have been significant gains inareas such as team spirit, common goal setting,transparent communication, focus, rhythm
and discipline, empathy, holistic perspective,prioritization within the team, productivity,
accountability, planning, time management, andflexibility in the context of agile transformation.

KARSAN ANNUAL REPORT 2023

SUGGESTION SYSTEM AND
PARTICIPATION STATUS
Ensuring all employees’ participation is critical
for the implementation of the World Class
Manufacturing (WCM) methodology and thedissemination of lean culture.
Karsan utilizes the suggestion system to enhance
employee engagement, evaluate, and implement
employees’ ideas. All employees have theopportunity to provide suggestions on various
matters, such as Occupational Health and Safety(OHS), quality, environment, energy, etc., and to
track the status of their suggestions.

In this context,

EXCELLENCE JOURNEY OF KARSAN• In 2021, 2,938 suggestions were provided by
employees, and a participation rate of 75% wasachieved. In 2022, a participation rate of 97%
was achieved with 3,822 suggestions, and in
2023, the participation rate increased to 110%with 4,647 suggestions.

In 2018, Karsan adopted the World Class Manufacturing(WCM) system, which aims at enhancing production
competitiveness through systematic improvementand development. The purpose of this choice was toimplement the Company’s principles of production
excellence and continuous development through asystem that is widely recognized in the industry and ona global scale.

• In 2021, 70% of the suggestions provided by
employees were approved, and Kaizen studies
were completed. This rate increased to 80% in
2022 and 82% in 2023, and the relevant Kaizen
studies have been completed.
• The implementation of Kaizen studies led to theachievement of a soft income of TL 2.5 million
in 2021, TL 8 million in 2022, and TL 300 million
in 2023.
The foundations for continuous improvement
activities across Karsan operations date back to
2003. The ISO 9001 Quality Management System
was initially implemented in 2003, followed by the
implementation of the ISO 14001, IATF 16949, and
OHSAS 18001 system standards and Lean Teamand Kaizen practices in 2004.

Karsan has adopted the World Class Manufacturing (WCM) systematic.

The WCM Model, Our Fundamental Principles andGoals• Occupational Safety (S): İAttaining a state ofzero occupational accidents• Quality (Q): Achieving production quality at thehighest level worldwide• Cost Waste (C): Minimizing switching costs andmaximizing efficiency through loss reduction.
• Delivery (D): Reducing delivery flow time to meetcustomer expectations
WCM Management Structure:
The effective execution and monitoring of WCM
activities across Karsan falls under the purview of
the Workforce Planning and WCM Directorate.
The first priority within WCM’s scope is to ensure
the participation of all employees. It is essential

to motivate all employees to identify issues andgenerate effective solutions. Efficiently addressing
identified issues, generating permanent solutions,achieving targeted results, and continuously
improving, progressing, and sharing constituteessential aspects of this methodology. The
second and most important priority is thoroughly
identifying waste and losses and promptly taking
action to find effective solutions.
Karsan manages a comprehensive set of 20
aspects within the scope of WCM, consisting of 10
technical and 10 managerial elements, employing
the “7 Steps” methodology.
If waste is detected, the steps of using theappropriate method to eliminate it andstandardizing systematic improvement in line withthe established goals are followed.
A survey is conducted annually to assess the WCM
activities at Karsan Factory. After evaluating a totalof 314 feedback obtained from the current survey
study, areas for improvement were identified, andaction plans were developed to address them. During
the reporting period, all transformation improvement
and Kaizen targets for the production facility wereachieved. In this process, Karsan employees who
demonstrated exceptional performance with their
dedicated efforts were rewarded in accordance with
the Recognition and Appreciation system.

WCM
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HUMAN RESOURCES• SMAT Days
• Safety Captain• Safety Patrol• Near Miss and Hazard Notification
SMAT DAYS

OCCUPATIONAL SAFETY
MANAGEMENT SYSTEM
Karsan is committed to eliminating risks by
preventing risky situations that have thepotential to lead to accidents and injuries in theworkplace and during production, as well as
meeting employees’ expectations for safe working
conditions by ensuring continuous improvement in
occupational safety.

Analysis of incidents, the identification andassessment of risks, internal audits, enhanced
technology in machines and the workplace,training/education, and control are all examples ofstudies conducted in order to significantly minimize
accidents and foster an accident prevention
culture. Karsan implements the following practices
within this framework:

Karsan’s unwavering goal is continuous improvement in occupational safety.

Occupational Safety
54

At the Karsan Factory, SMAT audits are thoroughfield audits conducted at different times and invarious areas of the facility by staff members at
all levels, including top management. SMAT Days
are scheduled monthly, on different days for eachdepartment. A team comprising the department’s
senior manager, director, manager, production
leader, and operators leads these audits. The audit

takes place at the work station, where interviews
are conducted with at least two operators.
• Operators are closely monitored during theirwork to identify any potential hazards or risky
behaviors.
• A safety interview is conducted with a minimumof two operators, using pre-prepared questions
to engage them in the activities and increase
their awareness of occupational safety issues.
SAFETY CAPTAIN
Every team leader assigns an operator to serve as
the OHS captain for a period of two weeks. Aftera 15-minute training session, the OHS captainputs on the armband and begins their duty. EveryOHS captain has the duty to spot instances ofHazardous Conduct and conduct SMAT with
two operators during their assignment. On the
Hazardous Situation/Conduct notification card,
every OHS captain records the risks they detect.

KARSAN ANNUAL REPORT 2023

SAFETY PATROL

NEAR-MISS AND HAZARD NOTIFICATION

These are unscheduled field visits led by the
management and conducted collectively.
During these field visits, it is critical to detecthazardous conduct and conditions, take action,and immediately identify those responsible. An
occupational safety patrol is performed oncea week for 60 minutes with the participation of
all relevant senior management. The primary
distinction between this implementation and the
SMAT audit lies in the collective observation andcomments on hazardous conditions.

Employees document near misses or hazards intheir work areas through photographs or videos,summarize the incident with station information,and share the incident report via WhatsApp to thenumber 0549 749 36 26.
The implementation of these key practices serves
the following purposes:• Dissemination of an occupational safety culture
by engaging employees at all levels in thefactory• Detecting hazardous conduct and conditions toprevent accidents• Management’s use of SMAT audits as a tool toensure safe conduct• Operator participation in the occupational safetysystem• Demonstrating management involvement• Being a role model

Areas for improvement are prioritized at the senior management
workshops.
OTHER FEEDBACK MECHANISMS AT KARSAN
Karsan receives feedback from its employees via a variety of channels. These include:• Mini surveys conducted specifically on processes and practices,• Karsan Positive Portal’s online platform, where all employees provide feedback from the wishes/suggestions, and complaints zone,• Working Life Evaluation surveys, in which overall satisfaction is assessed at certain intervals and areas for
improvement are identified,
One-to-one feedback is provided for wishes/requests and complaints submitted through the Karsan Positive Portal.
Through e-surveys, areas for development are identified and prioritized in the senior management workshop.
Each issue is then classified into one of 6 categories, and action is monitored under the sponsorship of Karsan
management. Information about planned short-, medium-, and long-term actions, as well as finalized ones, isshared with the employees through management meetings, internal communication, or e-mail.

Unscheduled occupational safety patrol practice

60 min.
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HUMAN RESOURCES

RECOGNITION-APPRECIATION AND REWARDING
Within the scope of Karsan Positive, recognition-appreciation and rewarding practices are conducted in orderto foster a culture of appreciation and recognition, to make the invisible visible, to applaud the effort and haveothers applaud, and to establish a transparent structure where anyone can nominate another.

Karsan Changemaker Employees Awards

Management Awards

This award recognizes the outstanding efforts of
Karsan employees who choose to be a part of thesolution to the problems around them, are active,
demonstrate initiative, develop innovative solutions
for concrete and sustainable change, and inspireothers through their stories. This category grants
awards for both business results and exemplary
conduct that reinforces Company values.

The goal is for management to instantly recognize
achievements in order to inspire and motivate
the team. This allows managers to instantly
appreciate their employees, integrating thispractice into everyday operations and establishingappreciation as part of the corporate culture.
Unless senior management expresses a contrary
opinion, the Human Resources and Budget
Planning Directorates increase the number ofmanagement awards every year in proportion to
the increase in the minimum wage. The relevant
departments multiply the determined amount by
the number of employees in the department andbudget it accordingly. Each department’s manager
determines the content of the award.

People who go beyond their goals by taking
ownership of a task, even if it falls outside theirassigned goals, are duly recognized and rewarded.
Contributions to Karsan’s values, quality, people(including internal customers, business partners,
and society), customer satisfaction, employer
reputation, and the environment are all consideredduring the evaluation stage.

CEO’s Exclusive Award:
This category entails assessing the individual’sor project’s performance and conduct in orderto determine who is deserving of recognition.
The CEO, or the person they deem appropriate,
conducts the evaluation. Individuals or projects
that meet the criteria to receive the award arerecognized with a plaque and the CEO’s Exclusive
Award.

Recognition-appreciation and rewarding practices are conducted at Karsan.

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Seniority Awards

Suggestion System Awards

Kaizen Awards

Seniority PlaqueWithin this category, employee suggestions
regarding improvement initiatives related to
Kaizen and cost reduction are assessed.

It is the category in which all improvement
activities that generate both soft and hard income
and transform Kaizen when implemented areassessed.

In this category, employees’ loyalty to theCompany is appreciated and encouraged,
and the duration of service of those who havecompleted 5 years or more of seniority is taken
into consideration. The Severance Account iscalculated annually on 31 December, considering
the employee’s total actual period of employment
within Karsan or Kıraça Holding group companies.
At the beginning of the following year, Human
Resources presents employees who havecompleted 5 and its multiples years of seniority
with a plaque of recognition and appreciation torecognize their dedication and years of service.
Retirement Bonuses
Employees who have worked at Karsan for at leastten years continuously and who have met all therequirements (day, year, and age) considerednecessary by the Social Security Institution for
retirement and who have left their jobs due toretirement are eligible for retirement bonuses inaccordance with their year of seniority. While
calculating the bonus amount, the employee’s
last gross income and their total seniority years at
Karsan are considered. The Company calculates
and pays 0.1 salary (total years of service x 0.1
salary) to the employee for each year of seniority,
classifying it as “other income” in the last payroll.

The assessments from the first supervisor, FI, andCRT play a crucial role in determining the eligibilityof suggestions received from the M-files suggestion
system for an award. When deciding who should
receive awards, the M-Files suggestion system
record is taken as a reference. In the suggestion
notification, the individual who expresses thesuggestion idea through the system or via theTeam/Group Leader is considered to be the person
making the suggestion.
On topics determined in line with Company
operations and strategies, accepted suggestions
are evaluated when 20% of the number offoresight suggestions is reached or in four-month
periods (April-August-December). The Human
Resources Directorate, Product Cost Engineering
Management, Accounting Directorate, Workforce
Planning and WCM Directorate review the content
and amount of awards annually and implement
them with management approval.

Awards are presented monthly for the Best
Standard Kaizen, OHS Category, and Best Rapid
Kaizen in the Cost Category, and every 4 months
for the Top 3 Major Kaizens. The Workforce
Planning and WCM Directorate notifies awardwinning employees through a written document,
SMS, or e-mail.
The content and amount of awards to bepresented are reviewed annually by the Human
Resources Directorate, Accounting Directorate,
Workforce Planning and WCM Directorate andare implemented with the approval of senior
management as needed.
R&D Activities Awards
The assessment of invention notifications, higher
education support, scientific publications, andprojects in national and international support
programs within the scope of R&D activities falls
under this category.

The R&D Award committee convenes every
two months to conduct a general assessment.
When the number of award topics reaches five,it becomes essential to conduct an assessment
within one week, without waiting for periodic
assessments. The assessment forms with wet
signatures are submitted to the Human Resources
department in the third week of each month. At theend of the relevant month, the employees receive
the awards.
Internal Trainer and Internal Training Material
Preparation Awards
This category encompasses the assessmentof activities such as enhancing employee
motivation, capitalizing on employees’ knowledge,
experience, and expertise, documenting theorganization’s know-how, ensuring employees’
active engagement in training and development
initiatives, and ensuring system continuity.
At the conclusion of the corresponding month,awards are provided for internal training materials
that fall under the reward criteria, as well as forinternal training delivered in accordance with the
documents’ scope, which is also reflected in theemployees’ payrolls.

The R&D Award committee convenes every two months to conduct a
general assessment.

R&D Award
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HUMAN RESOURCES

GENDER EQUALITY
Active involvement of women in all areas of life is critical for achieving sustainable development in theeconomy and social life.

In this journey, which was set forth with the slogan“If women are empowered, society becomesstronger”, it is crucial to increase the women’s
employment rate and ensure equal opportunities
for women and men in the workplace in order for
Türkiye to achieve its development goals.

The “Karsan Positive Equality Team,” which consistsof an equal number of women and men employedin management and production at Karsan, wasestablished in order to determine the project
activities, ensure their continuity, and monitor
them.

Karsan is committed to promoting theempowerment of women in both business andThis team conducted case analyses, utilized
employee survey results, engaged in in-depth
discussion sessions, and developed the project’s
business plan utilizing actual business-world
examples and established goals. The plan was
subsequently presented to senior management for
approval. The process has commenced with theapproval of the project, and the team convenes ona monthly basis to execute the planned activities
and ensure the continual progress of the actions
taken.

social life on a global scale.
In July 2019, Karsan signed a protocol with
the International Labor Organization (ILO) toenhance gender equality and increase women’s
employment, and the Company remains
committed to progressing these efforts.
The project aims at:• Prioritizing a cultural shift to enhance equality
between men and women at Karsan,• Promoting women’s employment throughcultural shift,• Developing improvement plans on aspects
such as equal voice, inclusive employment,a violence-free working environment, andwork-life balance and taking appropriate actions
accordingly.

“Karsan Positive Equality Team” was established at Karsan.

Equality58

The Karsan Positive Equality Plan is composedof 57 items. For each item of the plan, Activity
Performance Indicators have been established,accompanied by detailed descriptions of themonitoring and reporting periods, the methods
employed, and the individuals responsible for theactions.

KARSAN ANNUAL REPORT 2023

Within this scope:

The results:• A “Cooperation Protocol in Vocational andTechnical Education” was signed with the
Bursa Governorship and the Bursa Provincial
Directorate of National Education. “Karsan
Electric Vehicles Technology Laboratory” hasbeen the first laboratory in Türkiye to train
students on electric vehicles.

• The Human Resources Policy was updated,
and the Gender Equality and Zero Tolerance toViolence Policy (the world’s first workplace policy
passed in compliance with ILO Convention No.
190) was developed and implemented with theapproval of senior management. Consequently,
the business processes underwent revisions toreflect these enhancements.

• Karsan created the “Women’s Leadership
Development Program” for the first time.
• The Gender Equality Internal Trainer Team wasestablished at Karsan and continued to provide
training for newly hired employees.
• Karsan has become a signatory to the Women’s
Empowerment Principles (WEPs).
• Karsan has formally declared its commitment to
the UN Global Compact Platform.
• A collaboration protocol was signed with Mor
Salkım Women’s Solidarity Association.

• The Positive Career Process was redesigned andimplemented.
• The Zero Tolerance to Violence Procedure wasdeveloped and implemented.
• The first woman Production Manager was
appointed at Karsan.

In 2023, 97 women employees started working on the production lines.

• With the launch of new projects, women
employees were hired to work on our Company’s
production lines for the first time. In 2023, 97
women employees started working on the
production lines.
• Due to the efforts put forth since thebeginning of the project, the rate of women in
management positions has increased to 15%.
• As a result of the work carried out since thebeginning of the project, the rate of women
employees at Karsan has increased to 38%.

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HUMAN RESOURCES

Highlights from the activities• Karsan grants scholarships to all students who
participate in vocational training and internshipprograms in the actual production environment,
and receive laboratory training. Karsanprioritizes the employment of graduates.

• Karsan is committed to directly contributing to
the Quality Education (4) and Gender Equality (5)SDGs through its operations.

• During the reporting period, a total of 33
students were granted scholarships from theSuna and İnan Kıraç Foundation.

• Karsan Electric Vehicles Technology Laboratoryis the first laboratory in Türkiye dedicated toproviding students with specialized training onelectric vehicles.

• At Karsan, the employment rate for laboratory
students who graduated and applied to ourCompany was 100%.

Karsan also promotes the inclusion of women
graduates from vocational high schools under the
Positive Equality Program in the workforce.

KARSAN ELECTRIC VEHICLES TECHNOLOGY LABORATORY
In order to support qualified and sustainable vocational education in the automotive industry, the “Cooperation
Protocol in Vocational and Technical Education” was signed with the Bursa Governorship and the Bursa
Provincial Directorate of National Education in 2020, and the “Karsan Electric Vehicles Technology Laboratory”
was established within the Vocational High School.

Graduates of the Karsan Electric Vehicles Technology Laboratory will
be equipped to create added value to the industry and cutting-edge
technologies in the future.

Cutting-edge technologies
60• To enhance the representation of qualified
women in production, it is ensured that at least
50% of the students undergoing training are
women.
• Karsan’s engineers provide informational training
to teachers working in the laboratory about
the Company’s product range and production
technologies.

KARSAN ANNUAL REPORT 2023

Continuously improving the competence of all
employees in line with Company goals, strategies,
and employee development plans, identifying
and planning training needs, assessing theeffectiveness of training programs, and closely
monitoring development plans are among the
crucial aspects of HR responsibilities.
Karsan designs its training and development
programs using the 70-20-10 development model,
which has demonstrated effectiveness in thecontext of adult development.
One-on-one interviews with employees andmanagers, along with needs analysis studies,lead to the design of employee development
plans under five main headings. These plans are
facilitated by the “Karsan Training Development
Tracking Application”, which was designed andlaunched in 2022.
Goals• Job descriptions (Technical skills)• Behavioral competencies• Legal and system requirements (Occupational
Health and Safety, Quality, Environment, Energy,
Information Security Management Systems,
Laws, etc.)

Experiential Learning- 70%

Learning from Others- 20%

Structured Learning- 10%

It refers to the development achieved throughnumerous projects (process improvements,
cost savings, error rate reduction, etc.), avariety of tasks, challenging experiences, etc.

It refers to the development provided by tools
such as learning the job from experienced
employees (mostly from managers), mentoring,
feedback, teamwork, developing an action plan,etc.

It refers to the development provided throughtraining programs, seminars, workshops, books,
articles, and other resources.

70%

20%

On-the-job training

Learning from the experiences of others

10%

Learning by reading or studying

At Karsan, Human Resources department designs position-specific development programs and assigns them to relevant employees.
• Development programs tailored to specific positions• New hires development program• Project-based development programs• Potential employees development program• Production leaders/managers development program• New managers development program, etc.

• Personal Development

61

KARSAN ANNUAL REPORT 2023

HUMAN RESOURCES
Total Training (person x hours)

47,836
Hourly-paid

40,551
27,181

28,88920,954

16,7609,124Monthly-paid

148%

20,851
15,524

16,360

7,600

7,732

11,83012,130

7,924

8,628

2018

2019

2020

2021

19,70020,6552022

2023

Total training hours
increased by 5% in
2023 for monthly wage
earners, 30% for hourly
wage earners and 18%
in total

Total Education (hours per person)

Female
Male
Total

55
49

24

17 19

27

32

28
20

2019

2018

36

31

14 15

13

2020

2021

22

32

18 19

15

In 2023, the total
number of training hours
per person was 19.

2023

2022

Employee Development Assessment (recovery rate)
Competency Breakdown

2021

2022
Improvement (%) Current Status

2023

Current Status

TargetResultBehavioral Competency

1.4

1.3

2.4

Job Description - Technical Competency

1.4

1.2

2.3

2.1

57

2.4

Goal

1.4

1.2

2.2

2.1

57

2.4

Legal/System Requirement

1.2

1.1

2.3

2.4

45

2.1

2.3

2.2

62

TargetResult2.4

2.1

Improvement (%) Current Status

TargetResultImprovement (%)

2.09

64

69

1.33

2.36

2.1

67

1.24

2.21

2.13

58

2.2

63

1.16

2.2

2.00

58

52

1.12

2.12

2.02

55

Personal Development

-

1.3

2.3

2.1

64

-

-

-

1.21

2.22

2.05

59

Average

1.4

1.2

2.3

2.2

57

2.3

2.2

63

1.2

2.2

2.1

59

*Based on year-end manager assessments of the scorecards that had “Approved” status at the beginning of the year.

62

KARSAN ANNUAL REPORT 2023

GENDER EQUALITY AT KARSAN

Milestones of Karsan’s gender equality journey…

Karsan is a signatory of the UN Global Compact.

2019- A protocol was signed with the ILO toenhance gender equality and promote women’s
employment.

Karsan crowns its journey, which started with thegoal of enhancing gender equality, by taking newsteps.
In 2019, the Company implemented the protocol
signed with the International Labor Organization(ILO) to enhance gender equality and promotewomen’s employment and joined the UN Global
Compact as a signatory.
With this step, Karsan reiterated its commitment
to complying with the principles of the UN Global
Compact, which outline the responsibilities
of companies in terms of human rights, labor
standards, the environment, and anti-corruption,
and aligning its operations with these principles.
In addition to its achievements in production andexports, Karsan is also an exemplary company
with its efforts to promote gender equality.
The signing ceremony has taken place!
Global Compact Türkiye held a special signingceremony for its new members for the 2021–2022
period. Alper Bulucu, the Deputy General Manager
of Industrial Operations, attended the signingceremony, representing Karsan.

2020- Joined the Women’s Empowerment
Principles (WEPs) initiative, which was establishedby the partnership of the UN Global Compact
and the UN Gender Equality and Women’s
Empowerment Unit (UN Women).
2020- In this context, two major policies were
published. “Gender Equality Policy” and “ZeroTolerance to Violence Policy” were establishedwithin the scope of the Global 16-Day Campaign
against Gender-Based Violence, which started
on 25th November, the International Day for the
Elimination of Violence Against Women, and ended
on 10th December, Human Rights Day.

Number of Women Employees by Year2023 -

259 women (129 Women employed on Production Line)

2022 -

163 women (36 Women employed on Production Line)

2021 -

67 women (0 Women employed on Production Line)

2020 -

58 women (0 Women employed on Production Line)Special arrangements for women working on the Production Line

Number of WCs:

2021- A collaboration protocol was signed withMor Salkım Women’s Solidarity Association andCounseling Center. A mechanism has been
established through which the association will
provide assistance to Karsan employees and theirfamily members.

Examples of initiatives

8

Number of showers:
Dressing room capacity:8

2,100 people.

Progression of Number of Women Workforce at Karsan
Total Workforce

Women Workforce

Women Workforce %• 2019- The Federation of Turkish Automotive Maintenance Associations (TOBFED)- Women’s Employment

2023

2,494

259

10%

• 2019- BUSİAD Doğan Ersöz Award - Supporting gender equality in the workplace

2022

1,860

163

9%

• 2021- The Stevie Awards, Silver Stevie Award - Winning the Achievement in Leadership Development for
Women Award

2021

1,062

67

6%

2020

1,059

58

5%

• 2022- Women were employed to work on production lines for the first time at Karsan

63

KARSAN ANNUAL REPORT 2023

CORPORATE SOCIAL RESPONSIBILITY

We ran for our earthquake-affected disabledchildren at the Istanbul Marathon!

We Pursued Goodness in the EKER I RUN Running
Festival

The Karsan Running Team participated in the
Istanbul Marathon on 5 November, with the aim ofproviding immediate access to material support,
rehabilitation, and special education services fordisabled children affected by the earthquakes in 11
provinces on 6 February.

The Karsan Running Team ran on 1 October 2023,
to contribute to TEGV’s quality education support
as part of the “Faces of the Republic Running for
Education” project on the occasion of the 100th
Anniversary of the Republic.

With the donations received, we were able to cover
the basic rehabilitation costs for our 5 children.

The Karsan Running Team, with its collected
donations, became the second organization to
make the largest contribution to TEGV’s campaign,
resulting in 61 students achieving access to quality
education.

On 23 April, we were present with our earthquake
survivor children! – “No Child Left Without a
Book!” Campaign for 23 April
Karsan celebrated 23 April National Sovereignty
and Children’s Day by getting together withthe earthquake survivor children residing in
the dormitory of the Higher Education Student
Loans and Dormitories Institution (KYK) at Uludağ
University. In order to divert the children’s attention
from the severe trauma they endured, though fora short period of time, a festival was organizedfeaturing performances such as magicians, clowns,
puppet shows, Hacivat Karagöz, and various games.
On 23 April, bags filled with books collected during
the book campaign, which was organized withthe participation of Karsan employees and under
the slogan “No Child Left Without a Book!” were
distributed as gifts to children.
Karsan is committed to addressing the psychologicaldistress caused by the earthquake with unwavering
determination, actively supporting children in
rebuilding positive connections with their lives.

64

LÖSEV Stand
Karsan provided an LSV Shop stand in its
Akçalar factory to provide assistance for LÖSEV,an organization dedicated to addressing thechallenges faced by children with leukemia andtheir families.
The LSV Shop sells exclusively handmade productsthat are crafted in the LÖSEV workshops by our
rehabilitated young people and mothers of children
with leukemia.
The staff of Karsan demonstrated great enthusiasm
for the stand that was established in collaboration
with the LÖSEV Bursa Office. The proceeds thatwere generated from the sales supported children
diagnosed with leukemia, individuals of all ages
suffering cancer, and survivors of natural disasters
residing in the earthquake-stricken region.

KARSAN ANNUAL REPORT 2023

On International Women’s Day, We Stood by the
Women Who Survived the Earthquake!

We Have Demonstrated Solidarity Throughout theDevastating Earthquake!

On International Women’s Day 2023, Karsan
provided a donation to the Turkish Education
Foundation’s “Let It Not Be Left Halfway (Yarıda
Kalmasın!) 2023 Scholarship Fund” on behalf ofeach of its women employees and supported theeducation of students affected by disasters.

With the support of Karsan employees, who
promptly took action to heal the wounds of the 6
February 2023 earthquake disaster and contributeto the relief efforts, the materials on the priority
need list were procured and delivered to the region
via AFAD.

On International Women’s Day, hygiene packages
were prepared in collaboration with Unilever with
the intention of providing a modest assistanceto women impacted by the earthquake. These
packages were subsequently sold as gifts for the
women who are earthquake survivors. 300 hygiene
packages, funded by contributions from employeesof Karsan, were distributed to women affected by
the earthquakes who had relocated to Bursa andwere residing in KYK dormitories.

The Red Crescent Blood Donation Campaign
In 2023, as in previous years, the employees of
Karsan provided a significant contribution to the
Blood Donation Campaign, which was organized incollaboration with the Bursa Red Crescent Blood
Donation Center, by donating blood. Officials fromthe Red Crescent Blood Donation Center expressed
their gratitude for their significant participation
and attentiveness by visiting the Karsan HOSAB
Factory.

65

KARSAN ANNUAL REPORT 2023

R&D, ONE STEP AHEAD OF INNOVATION
TodaySağdanDireksiyonlu
e-JEST

USPS 1. Prototype
Atak/Star DSL

2014
Concept V1
Peugeot
Partner CNG
Project

2010

2017

2018
e-JEST

Jest DSL

2019
e-ATAK

2021

Autonomous
e-ATAK

2022
10-12-18m
e-ATA

2023
e-ATA
Hydrogen

2013

2009
Karsan, as a company that possesses thecapability to develop products meeting the
evolving needs of countries and even cities byintegrating innovative designs based on customer
expectations and societal requirements, has been
serving the industry employing various businessmodels since 1981.

Karsan R&D Center continues its innovative
product development process by incorporating
society-oriented sustainable mobility solutions into
the design of Main OEM products.

Karsan R&D Center, which makes significant
contributions to the journey to zero emissions bycomplying with carbon reduction commitments
within the scope of European regulations throughits innovative products in the field of mobility, aims
to be one step ahead of innovation in terms ofsustainable mobility.

Karsan, which has been steering the industry
with the product-process approach that it hasdeveloped and continues to develop since its
establishment, became an R&D Center that wasentitled to be accredited by the Ministry of Industry
and Technology of the Republic of Türkiye on 22
July 2019.
Integrating university-industry collaborations into
its strategic alliances, Karsan R&D Center has beendeveloping innovative products and leading themarket for many years.

Karsan R&D Center aims to be one step ahead of innovation in terms ofsustainable mobility.

R&D Center66

KARSAN ANNUAL REPORT 2023

Karsan R&D Center, which is located on a total areaof 1,394 m2, includes a prototype workshop and an
Electrical-Electronics Laboratory,
The R&D Center has played a crucial role inenhancing Karsan’s brand value, with its 100%
domestic 6 meter e-JEST and 8 meter e-ATAK
vehicles achieving market leadership in Europe
consecutively through its innovation-driven
developments.
The Autonomous Atak Electric, the first 100%
electric and driverless bus of Europe and theUnited States, ready for use in real road conditions,developed through strategic partnerships andproduct-oriented studies, was presented for theinspection of President Recep Tayyip Erdoğan,Minister of Industry and Technology Mustafa
Varank, and the accompanying delegationin February 2021, and a special tour of the
Presidential Complex was conducted by a level 4
autonomous vehicle with no driver present in thedriver’s seat. The subject vehicle was presented to
the Presidency of the Republic of Türkiye as a gift
to serve visitors within the Complex.
Thanks to the expertise acquired in thedevelopment of electric vehicles converted fromfossil fuel vehicles, long commercial vehicles
designed to be electric from the origin have been
introduced to the market.

Our commercial vehicle group, consisting ofvehicles of 10, 12, and 18 m in length, is one of
the key product groups that can be utilized tocommercialize the know-how of the Karsan R&D
Center under the e-ATA brand.
As a result of the development studies conductedon the e-ATA product group, the e-ATA HYDROGEN(FUELCELL) vehicle group was developed andglobally launched in Hannover, Germany, in
2022. The prototype vehicle’s incorporation ofenvironmentally friendly materials significantly
impacted the market and garnered significant
admiration.
The e-ATA HYDROGEN vehicle, for which anotherprototype has been produced within the scopeof customer demands, is projected to becommercialized in 2024. The developed vehicle
also earned the Sustainable Vehicle Award.
As Karsan progresses in its R&D studies focusedon the development of innovative products, it
continues to make changes in its organizational
structure to disseminate this culture of innovation.

Sustainable innovation in mobility R&D
Karsan conducts its P&D and R&D studies witha particular focus on the development andsustainability of societies.
Karsan is committed to promoting thedecarbonization efforts of sustainable mobility by
utilizing cutting-edge technologies in the products
it develops.
Karsan R&D Center, which has been working on thedigital transformation of mobility for many years,
ensures that customer demands are met througheco-friendly methods.
The stages of sustainable innovation in mobility
R&D at Karsan are as follows:• Technology Tracking• The Future of the Market and Tracking Customer
Requirements• P&D and R&D Processes• Products and After-Sales Services

In 2024, the R&D Center, the heart of Karsan,
will continue to strive to be “one step ahead ofinnovation.”
Projects developed by the Karsan R&D Center
The R&D Center’s expenditures for the projects
undertaken have increased twofold compared to2022, reaching a total of TL 153 million.
In 2024, autonomous vehicle developments andnext generation fuel technologies will be theprimary focus.
Since its establishment, Karsan has commissioned
all the projects it has developed with R&D
awareness. While developing a project, Karsan
R&D Center utilizes technological trends, scientificevents, cost reduction studies, customer demands,
and innovations introduced through other projects.
Sustainability, the green environment, andemission mitigation measures hold major
significance in the development of projects.

By prioritizing end-to-end sustainability
throughout its processes, Karsan conducted its
operations with the vision of ‘One Step Ahead in
the Future of Mobility’ in 2023.

67

KARSAN ANNUAL REPORT 2023

R&D, ONE STEP AHEAD OF INNOVATION

Following the R&D studies conducted incollaboration with ASELSAN, sustainable vehicles
for the Istanbul Adalar (Princes’ Islands) district
were launched in 2023. By means of these vehicles
specifically developed for this Adalar district,eco-friendly mobility has been made accessible toeveryone and everywhere.

Joint projects with nationally and internationallyrenowned companies such as BMW, Katech,
Renault, Bosch, Menarinibus, Ford, Optival, andAdastec are examples of the first approach.
The Karsan R&D Center also conducts new
project development studies through academic
collaborations.

Karsan R&D Center national and international
collaborations

Within this framework, Türkiye’s leading
universities, such as Bursa Uludağ University,
Bursa Technical University, Koç University, METU,TOBB, and ITU, constitute just a few of thesecollaborations.

Karsan R&D Center adopts two strategic
approaches in its projects:

The Karsan R&D Center has successfully
managed 40 projects since 2019, when it received
accreditation from the ministry.
32 of the projects have been successfullycompleted, while work on 8 continues.

Karsan achieved the distinction of being thefirst Turkish company to penetrate the Japanesemarket through the development of the e-JEST RHD
right-hand drive vehicle by the R&D Center in 2023,
thereby enhancing its global brand value.

Karsan R&D Center has completed 32 projects and continues to work on
8 of them.

R&D Projects
68• Establishing strategic partnerships withcompanies that possess specialized expertise in
their respective fields,• To ensure that the know-how acquired throughthe partnership is effectively incorporated anddisseminated within the institution.

Karsan R&D Center professionals, who are highly
skilled in their respective fields, provide technicalinstruction to university students as part of thecollaboration with universities.
European Union Applications
With the vision of ‘One Step Ahead in the Future of
Mobility’, Karsan R&D Center assessed the impactsof the innovative products it developed subsequent
to the projects it conducted on a national basis in
2023 through the submission of applications toEuropean Union Project calls.

KARSAN ANNUAL REPORT 2023

In line with this strategic decision, theIncentive Unit of Karsan R&D Center followed
the international calls, managed to join the
consortiums in a short period of time, andsubmitted applications for a total of 3 European
Union project calls.

Participation in Consortia and Workshops

Karsan, which participated in the RobiCarr projectas an industrial partner in the MIND4MACHINES Call2 call under the chairmanship of Istanbul Academy(ISO), enabled the autonomous robot to travel
around the factory area for data collection andanalysis purposes.

“Green Hydrogen” is the workshop that mostappropriately aligns with Karsan strategies.

With support from the European Union and various
funds, the Karsan R&D Center has participated innumerous workshops to contribute to innovative
product development processes.

Additionally, partnership options for consortiums
were assessed through participation in different
workshops.

With the intention of increasing its submissions forinternational funding in 2024, the R&D Center also
aims to showcase its achievements in innovation
within this field.

Current Status of the Karsan R&D Center
Intellectual and Industrial Property Rights
As of the end of 2023, Karsan has obtained atotal of 9 utility model protections and 14 patents
pertaining to intellectual and industrial rights since
its establishment in 1966.
As an outcome of the innovative projects it
developed, the Karsan R&D Center increased thenumber of intellectual property rights applications
it filed with the Turkish Patent Institute from three
in 2021 to five in 2022 and nine in 2023.
In 2023, numerous development studies that weredeveloped but designated as trade secrets by theCompany were finalized.

INVESTMENTS AND UTILIZATION OF INCENTIVES
The application for an “Investment Incentive
Certificate” that our Company submitted in supportof its planned investment in product diversification
was granted approval on 6 October 2021, by theGeneral Directorate of Incentive Implementation
and Foreign Capital of the Ministry of Industry andTechnology. The incentive certificate is endorsed
for an investment in the sum of TL 240,767,880.
The following incentive items are provided for theinvestment evaluated in the 4th Region under thepurview of “Regional Incentive Practices”:• Social security premium support (employer’s
share)• Tax Reduction• Customs Duty Exemption• VAT Exemption• Interest Rate Support

A topic appropriately aligned with Karsan strategies

Green Hydrogen
69

KARSAN ANNUAL REPORT 2023

SUSTAINABILITY
A total of 125 Company representatives andapproximately 50 external stakeholders wereinvolved in this process. Throughout the processof establishing and implementing sustainability
material issues, consistent communication andcollaboration with stakeholders was ensured.
Updates on sustainability efforts and developments
were regularly shared.
As an integral component of this procedure,
annual sustainability reports regularly released,
providing transparent information regarding thesustainability goals and improvements made inattaining them.
At Karsan, the establishment of sustainability
material issues is achieved through theimplementation of a comprehensive procedure.
This procedure has been developed in accordancewith identified needs and expectations, taking
into consideration the perspectives of various
stakeholders and adhering to the guidelines set
forth by GRI Standards.

The Investor Relations Coordinator, who is part ofour sustainability committee, along with employees
from OHS Environment and Sustainability
Management, collectively possess four Corporate
Sustainability Specialist Certificates.

Material issues identified by double-materiality analysis

Karsan’s material issues
70

The strategic significance of the material issues
and their relevance to stakeholders have been
determined through a meticulous and thoroughanalysis process. Following the completion of thisdouble materiality evaluation, a comprehensive
assessment has yielded a total of 26 material
issues, all of which have been incorporated into themateriality matrix.

In the context of strategic management andbusiness processes, ESG endeavors are regularly
reported to senior management and board
members on a quarterly basis, integrating withcorporate risk and opportunity processes. Climatechange risks and opportunities are disclosed in theannual report and sustainability report.
Annually, the Company conducts a materiality
index study based on a 10*10 matrix structure,adhering to GRI standards and taking into accountall external stakeholders. This assessment
establishes an ESG materiality scheme, involving
all stakeholders and delineating Karsan’s 1st,
2nd, and 3rd degree material topics in terms ofsustainability.
Karsan has devised a plan that will enable its
suppliers to report their ESG standards within theframework of the green procurement process in
2024. Process studies have commenced.
As a result of these efforts, Karsan Otomotiv
disclosed its CDP Supplier Engagement score of
B- in 2023.

KARSAN ANNUAL REPORT 2023

Karsan’s 32 social, 34 environmental, and 13
governance key performance indicators received
GRI verification in 2022. The Company aims tosubmit an equivalent number of ESG indicators for
GRI verification in 2023.
Karsan’s ESG efforts affect 100% of the Company’s
products, as well as 90% of its external production
processes and products.
Karsan has classified the material issues
necessary to achieve its sustainability goals into
three distinct levels.
First-degree material issues include a range ofimportant considerations, such as customer
satisfaction, traffic and passenger safety, R&D/
Product Development/Innovation studies, epidemic
management, and employee rights. Our firstdegree material issues encompass the efficientutilization of raw materials, ethical principles andpractices, occupational health and safety, financial

performance of the Company, prevention of bribery
and corruption, and employee training and career
management.
There are several factors that contribute to
identifying the most critical and effective areasin our business processes and operations,
including employee satisfaction, energy
efficiency management, employee retention,
local procurement, digitalization and IoT, corporate
governance, equal opportunity and diversity,
inclusion, renewable energy generation, andadvanced technology utilization.
The second-degree material issues identified
at Karsan include the contribution to the local
economy, World Class Manufacturing (WCM),
contribution to the economy of the country,
protection of biodiversity, complaint mechanisms,
climate change and greenhouse gas management,water management, adherence to Environmental,
Social, and Governance (ESG) principles incorporate procurement, creating a positive social
impact, and employee performance management.
These topics represent our ongoing efforts tooptimize the social, environmental, and financial
impacts of our business operations and goals.
Third-degree material issues determined by
Karsan include relations with the local community,
contribution to society, information security
management, local employment, and the creationof employment. These matters significantly
contribute to the emphasis on community
relations, data security, and local employment
efforts. Simultaneously, these matters serve as
the foundation for achieving long-lasting andsustainable growth and success.
The three materiality levels outlined by Karsan
serve as guiding principles for its sustainability
journey and play an essential role in shaping future
strategies.

Karsan’s ESG efforts affect 100% of the Company’s products, as well as
90% of its external production processes and products.

ESG efforts
71

KARSAN ANNUAL REPORT 2023

SUSTAINABILITYKEY STRATEGIC ISSUES AND SDGs
Occupational Health and Safety
Karsan ensures that the health and safetyof every employee are protected in all of its
production facilities as well as operational areas.

To ensure the systematic execution of this
responsibility, adherence to the globally recognized
ISO 45001 Occupational Health and Safety
System Standard is maintained. Repeating WCM
applications and regular external audits on a yearlybasis ensures system reliability.

ISO 45001 standard is employed in the implementation and auditing of
OHS policies at Karsan.

ISO 45001
72

Internal audit professionals in Karsan conduct
certification audits for ISO 45001 and WCM Step,
while the Ministry of Family, Labor, and Social
Security of the Republic of Turkey conducts
inspections randomly.

to addressing sustainability objectives. Thisapproach also aligns with the 7th SDG “Accessto Affordable and Clean Energy”, the 13th SDG“Climate Action” and the 12th SDG “Responsible
Production and Consumption”.

The implementation of occupational health andsafety policies and strategies in Karsan is in directalignment with the Sustainable Development Goals(SDGs), which are goals established by the United
Nations.

The implementation and supervision ofoccupational health and safety policies inaccordance with the ISO 45001 standard serve
as proof that Karsan has adopted international
best practices. This aligns with the 17th SDG,
“Global Partnership for Sustainable Development,”
and demonstrates that Karsan is committed toattaining sustainable development goals throughadherence to international standards and working
with global partnerships.

The 8th Sustainable Development Goal (SDG),“Decent Work and Economic Growth,” provides
the clearest illustration of this alignment. This
goal aims to ensure that all employees have safe
and secure jobs and to achieve economic growthequally. By securing the health and safety of its
employees and providing a safe work environment,
Karsan contributes to this goal.
Furthermore, the integration of the Occupational
Health and Safety Department with theEnvironment, Energy, and Sustainability
departments enables a comprehensive approach

The ongoing evaluation and audit proceduresof Karsan ensure the efficacy and continual
improvement of occupational health andsafety policies. This aligns with SDG 9 “Industry,Innovation and Infrastructure” and SDG 12“Responsible Production and Consumption”,
as these processes demonstrate that Karsan
promotes sustainable and responsible production
through continuous improvement and innovation.

KARSAN ANNUAL REPORT 2023

Karsan’s sustainability goals and the progress it has
made in achieving these goals are transparently sharedwith its stakeholders.

73

KARSAN ANNUAL REPORT 2023

SUSTAINABILITY

74

Material Topic

Activities and contributions of KARSAN

Climate Change

Karsan integrates its corporate risk process with climatechange related risks, and plans and implements therequired actions. Within this framework, it aims to present
the planned actions to the Board of Directors via thecorporate risk management process and execute themthrough the Sustainability Committee, beginning in 2024.

Environmental
Management

As part of its environmental management efforts, theCompany also assesses its environmental performance at
the raw material supply stage. Furthermore, it manages
its operations during the production phase by adhering
to global standards, such as ISO 14001, ISO 50001, andWCM. Karsan has started to analyze the environmental
impacts of its products and calculated product-based
environmental impact and carbon footprint values for the
12-meter electric vehicle. Additionally, Karsan collaborates
with its stakeholders to foster a sustainable world within
the scope of SDG 17 'Partnerships for Goals', focusing on
projects such as EU Horizon and SAYEM.

SocialDevelopment

Karsan aims to achieve its goals focusing on contributing
to the provision and increase of qualified employment withthe contribution and support it provides to its employees.
The corporate culture shaped by the non-discriminatory
Human Resources policy is among Karsan's primarygoals, with the intention of disseminating this culture to all
stakeholders and society at large.

Relevant SDGs

Material Topic

Activities and contributions of KARSAN

Gender Equality

Karsan believes that equal participation in the labor
force is among the most decisive factors in the progressof society. In this regard, within the scope of the "Modelfor the Development of Gender Equality in Companies"
agreement signed with the international labor organizationin 2019, a particular goal was established to achieve
annual increases in women's employment compared tothe preceding year.

Human Rights

Karsan plans to implement sustainability projects incollaboration with its internal subcontractors in 2024, aspart of its Human Resources Policy and UN Global Compact
membership. Within this context, the Company has set
goals to contribute to education and provide support
to animal shelters through the Social Responsibility
projects it plans to conduct. Karsan maintains continuous
monitoring and assessment of potential risks pertaining
to ethical violations, child labor, and human rights. In
this particular context, the acquisition of data pertaining
to ethical violations proceeds through the anonymouscomplaint e-mail notification channel (etik@karsan.com.
tr), while control mechanisms are implemented with theaim of preventing financial losses. Karsan adheres to theregulations and guidelines pertaining to the employment
of individuals below the age of 18, ensuring that noworkers of such age are employed. Furthermore, as partof its Human Resources policy, Karsan is committed torefraining from employing individuals through coercion or
involuntary means.

Relevant SDGsKARSAN ANNUAL REPORT 2023

Material Topic

Activities and contributions of KARSAN

Education/
Training

Raising the R&D Center employees’ level of educationand the number of domestic and international training
programs they will participate in: Karsan Academy tracks
each employee’s annual progress in both their technicaland social domains and sets targets for training on theirdevelopment cards.

Water and Energy
Management

Global developments in water resources and consumption
are closely monitored at Karsan, where water
management measures are implemented through aconscious and effective approach. Our operations utilize
water extracted from wells located within our production
facility By virtue of Karsan’s water consumption reduction
strategies and environmentally friendly policies, it isobserved that these developments create a positiveenvironmental impact. These strategies not only enhancethe operational efficacy of Karsan but also make aglobal contribution towards the protection of water
resources. The structural regulations implemented inorder to achieve the “goal of becoming a carbon-neutral
continent in 2050” specified in the European Green
Deal are of great interest to Turkish companies, such as
Karsan, which realize 80% of exports to EU countries in
the automotive industry. The continuity of exports in theautomotive industry necessitates the implementation oftransformation and regulations in the EU market, as well as
the improvement of product standards and the adoption of
the circular economy model. Karsan complies with energy
management standards in pursuit of a 90% reduction
in transportation-related greenhouse gas emissions by
2050, which aligns with the European Commission’s goalof achieving a carbon-neutral EU by 2050. Additionally,
Karsan aims to meet the energy needs in its productionlines from 100% renewable energy in 2024.

Relevant SDGs

Material Topic

Activities and contributions of KARSAN

Smart and Ecofriendly Mobility

Karsan is committed to providing eco-friendly, safer andsmarter mobility solutions on a global scale by leveraging
its robust R&D infrastructure and innovative design andengineering capacity. Studies are being conducted
for the implementation of pioneering practices in thisfield Investments focusing on "Industry, Innovation, andInfrastructure" (Goal 9) have concentrated on R&D andinnovation development with the advent of digitalization.
Under the vision of "One Step Ahead in the Future of
Mobility", next-generation transportation steps are taken,
and projects that have mitigated environmental impacts
and can address behavioral changes in our customers
are developed. Considerable emphasis is placed on
addressing potential challenges in terms of mobility
arising from global population growth and urbanization,
while also developing eco-friendly and accessible options
for transportation. By virtue of our Driverless Electric andAutonomous Vehicles, new public transportation models
are being developed with the objective of optimizing traffic
and passenger safety. By means of the Autonomous
e-Atak project, which shapes the future of transportation,
our country is represented in the international market in
the best way, and we contribute to the development of"Sustainable Cities and Communities" (Goal 11).

Supply Chain
Management

Karsan prioritizes sustainability in supply operations andproduct preferences, conducting thorough inspections
on both suppliers and purchased products to ensure
continuous development and improvement. As part ofthe studies that have gained momentum with the Green
Procurement workshop, it is aimed at evaluating anddeveloping suppliers in terms of their environmental,
technological, and social aspects. For this reason, Goal 12“Responsible Consumption and Production”, Goal 8 “Decent
Work and Economic Growth” and Goal 17 “Partnerships forGoals” have been included among Karsan's material topics.

Relevant SDGs

75

KARSAN ANNUAL REPORT 2023

SUSTAINABILITY

SMART AND GREEN MOBILITY
Karsan is committed to providing eco-friendly, safer
and smarter mobility solutions on a global scaleby leveraging its robust R&D infrastructure andinnovative design and engineering capacity.
Striving to implement pioneering practices, Karsan
has concentrated its investments on R&D andinnovation development, focusing on the 9th SDG- “Industry, Innovation and Infrastructure” and 12th
SDG - “Responsible Consumption and Production”
goals, along with its digitalization efforts.
Under the vision of “One Step Ahead in the Futureof Mobility”, new generation transportation steps
are taken, and projects that have mitigatedenvironmental impacts and can address behavioral
changes of our customers are developed.
Considerable emphasis is placed on the challenges
that may arise in terms of mobility due to global
population growth and urbanization, as well as
the development of environmentally friendly andaccessible options for transportation. By virtue of ourdriverless electric and autonomous vehicles, newpublic transportation models are being developed withan objective of optimizing traffic and passenger safety.
By means of the autonomous e-Atak project,, whichshapes the future of transportation, our country
is represented in the international market in thebest way and we contribute to the development of“Sustainable Cities and Communities” (Goal 11).
In this journey, the significance of the goal of“Partnerships for the Goal” (Goal 17) is acknowledged
and efforts are made to establish partnerships on anational and international scale.
76

CLIMATE CHANGE AND ENVIRONMENTAL
MANAGEMENT
Effective management of environmental impacts is
one of Karsan’s key sustainability material issues.
The management of environmental impacts isamong the fundamental aspects of the WCM
methodology. Climate change is one of the major
acute and chronic risks encountered in recent
years. Numerous scientists, policymakers, industry
organizations, and independent organizations fromaround the globe propose a variety of sanctions,
regulations, and measures to address this issue.
Karsan, being a significant player in the automotive
industry and a leader in electric vehicle production,is aware of the risks associated with climate change
and considers its responsibilities in this regard withthe utmost seriousness. Electric vehicles provide aneffective solution to climate change by significantly
reducing carbon dioxide emissions. The automotive
industry, being a prominent sector characterized by
the prevalence of fossil fuel vehicles, significantly
contributes to the emission of greenhouse gases.
Nevertheless, Karsan’s emphasis on fully utilizing
electric vehicles contributes much to mitigating thisenvironmental impact. Climate change-induced
extreme weather phenomena may also have an
impact on the dependability and lifespan of vehicles.
As a consequence, Karsan develops and implements
innovative vehicle design solutions with the aim ofenhancing climate resilience and optimizing energy
efficiency.
Karsan manages these risks within the frameworkof its Environment and Climate Change policy,
identifying environmental risks and opportunities
and incorporating them into company operations.

Furthermore, it develops numerous solutions toboost energy efficiency and reduce emissions toalmost zero in the future by acting in accordancewith the goals established by the sustainable
development strategy. These goals include effectiveenergy, water and waste management, fuelefficiency, reducing direct and indirect emissions,and reducing environmental impacts through theuse of environmentally friendly raw materials. Steps
have been taken focusing on the UN Sustainable
Development Goals. This situation shows Karsan’scommitment to combating climate change and its
commitment to lead in this regard.
Efforts have been made within the organizational
structure to effectively manage sustainability
issues. As Karsan, our primary emphasis lies in the
pursuit of overall goals while actively addressing
both direct and indirect impacts. The objective is toraise awareness about sustainability, specificallyfocusing on Goal 12, which pertains to “Responsible
Production and Consumption”.
Efficiency in raw material and resource consumption
was ensured, thus supporting customers in reducing
their negative impact on the environment. Therefore,
Goal 13, which focuses on “Climate Action,” hasemerged as one of the material issues goals.
Under the framework of Goal 17, “Partnerships
for Goals,” significant efforts have been made tofoster collaboration and collective effort in order toestablish a sustainable world at large.
The environmental management activities wereconducted in accordance with the ISO 14001
Environmental Management System Standard.
Karsan Environmental Policy, which encompasses
environmental management principles, is available

for access on the Company’s official website.
All activities are conducted in accordance withestablished principles, with a focus on mitigating
environmental impacts. The maintenance ofsystem reliability is ensured by conducting regular
independent external audits and certification
activities.
Additionally, it is inspected by the Ministry ofEnvironment, Urbanization, and Climate Change of
the Republic of Turkey as well.
During the reporting period, there were no instancesof complaints, legal actions, or any form of financial
or in-kind penalties filed as a result of noncompliance with environmental legislation. The ISO
50001 Energy Management System Standard has
been incorporated into our management system
portfolio starting in 2021, alongside the existing
ISO 14001 Standard. In this context, all requisite
preparations were conducted and training activities
were executed during the reporting period.
Environment and energy management, which is an
essential part of the risk management process, iscarried out through a distribution of responsibilities
starting from the Board of Directors and extending
to the production units. Managers responsible forenvironmental and energy management processes
also operate in the main production units. Within thescope of sustainability management studies, teams
have been established to address environmental
and energy management issues. Environmental andenergy management performance has also been
considered part of the WCM methodology and is
instrumental in assessing both the corporate andindividual performance of managers across all levels,from senior management to field operations.

KARSAN ANNUAL REPORT 2023

SUPPLY CHAIN MANAGEMENT

SOCIAL DEVELOPMENT

The recent production disruptions experienced
in the automotive industry due to shortages ofraw materials and semi-finished products haveprovided Karsan with the opportunity to further
emphasize the significance of uninterrupted value
creation. As this experience shows, importanceis attached to every link of the value chain for
an uninterrupted, efficient, and evolving value
creation and preservation process. Karsan has
effectively managed the value chain in its entirety,
ensuring uninterrupted production activity evenin challenging circumstances. Karsan perceives
suppliers not solely as production actors fromwhich goods or services are procured but rather
as strategic business partners that contributevalue. Karsan prioritizes sustainability in its supply
operations and product preferences; an inspection
process is implemented for both suppliers andpurchased products, which ensures the Company’s
ongoing progress and improvement. Within thescope of the studies that gained momentum with
the Green Procurement Workshop, it is aimed atevaluating and developing suppliers in terms ofboth environmental, technological, and social
aspects. For this reason, Goal 12 “Responsible
Consumption and Production”, Goal 8 “Decent Workand Economic Growth” and Goal 17 “Partnerships
for Goals” have been included among Karsan’smaterial issues.

With over half a century of experience and flexible
production capacity in the automotive industry,
Karsan is an exemplary commercial vehicle
producer that provides design, engineering, andproduction solutions to the world’s most prestigious
brands.
Within the scope of activities carried out on anational and international scale, R&D projects haveplayed a significant role in the development of theknow-how of the domestic automotive industry,and local alternative solutions were provided to thecountry’s transportation needs by adopting smart
mobility approach. In addition, it contributes to thecountry’s economy through the augmentation ofexport inputs and the cultivation of a highly skilledworkforce. Within this particular context, it is worth
noting that 52% of operational activities in the year
2022 were derived from export revenues, resulting
in a substantial inflow of foreign exchange into ourcountry. It is believed that these competencies andactivities make significant contributions in line with
Goal 9: “Industry Innovation and Infrastructure”.
This contribution and support are among thetargets outlined in Goal 8: “Decent Work andEconomic Growth”, which focuses on contributing
to the provision and increase of qualified
employment. The corporate culture shaped by thenon-discriminatory Human Resources policy isamong Karsan’s primary goals, with the intentionof disseminating this culture to all stakeholders
and society at large. In this regard, within thescope of the “Model for the Development of Gender

Equality in Companies” agreement signed with theinternational labor organization in 2019, a particulargoal was established to achieve an annual
increase of at least 2% in women’s employment
compared to the previous year. In light of thesestudies, it is essential to both set an example forsociety and disseminate this perspective acrossthe entire value chain. In this direction, Goal 5“Gender Equality”, which is the SDG for the purpose
and targets, has been adopted.
Gender Equality Policy has been establishedin Karsan. All stakeholders were duly notified,
and the policy was disseminated. Karsan fully
supports women employees in all operational andmanagerial processes, as part of its collaboration
with the ILO. This process also involves theselection of board members. In 2023, Karsan’sboard of directors includes one woman member,which accounts for 11% of the total. Furthermore,
Karsan annually publishes its Sustainability
Report, which adheres to GRI standards, disclosing
information on the number and proportion of
women managers, women white-collar employees,
and women blue-collar employees.
Karsan is committed to upholding its genderequality policy and aims to monitor the
representation of women among its stakeholders.
With the Green purchasing project planned to be
implemented in 2024, the ESG criteria will include
considerations such as the representation of
women employees and management within the
suppliers.

2023
Number of Employees
Number of Accidents
Number of Fatal Cases
Number of Occupational Diseases
Number of Lost Days Due to
Accidents
Accident Frequency Rate
Occupational Disease Rate (ODR)
Lost Day Rate

2,503
46
0
0
295
9.4
0
0.06

Electricity Consumption (GJ)
Total Electricity Consumption
Natural gas
Grand total

2023
90,144
97,688187,832

Groundwater (m3)
1st Quality Water (m3)Sewage (m3)

175,622
15,382
99,963

Waste Components(tons)
Paper
Plastic
Metal
Industrial Sewage
SludgeOther (Dangerous)
Other (Non-hazardous)
Total

2023
Waste Directed
Waste for Recovery/
Recycling
610.65610.65170.48170.48198.84198.84
17.18

17.18

876.681,099.26
2,973.09

876.681,099.26
2,973.09

77

KARSAN ANNUAL REPORT 2023

ASSESSMENT OF FINANCIAL RESULTS
PRODUCTION AND SALESCAPACITY UTILIZATION RATE

Below are the production figures for our Company, categorized by product type, in comparison to the previous
period.
Product Type
Karsan Diesel
Karsan Electric
Menarinibus
Renault Megane
TOTAL

January-December 2023
(Quantity)
349
369
22
41.32742.067January-December 2022
(Quantity)
337
302
96
5.312
6.047

Below are the sales figures and revenues for our Company, categorized by product type, in comparison to theprevious period.
Product Type
Karsan Diesel
Karsan Electric
Menarinibus
Renault Megane
TOTAL
Product Type
Karsan Diesel
Karsan Electric
Menarinibus
Contracted and Industrial
Production
Others (**)
TOTAL
(**)

January-December 2023
(Quantity)
368
374
22
41,32742,091January-December 2022
(Quantity)
330
287
96
5,312
6,025

January-December 2023 Sales
Revenue (TL thousand)
691,196
3,462,190
175,676

January-December 2022 Sales
Revenue (TL thousand)
574,694
2,413,573
508,063

2,740,300
754,299
7,823,662

1,258,133
606,889
5,361,351

Other item consists of revenue generated from the sales of spare parts and materials, after-sales services, etc.

78

Capacity Utilization Rate (%)

January- December 2023
68.7%

January- December 2022
31.10%*In the January-December period of 2023, the current capacity is 61,189 vehicles/year. However, it is calculated by estimating the capacity utilizationof the Renault project starting from the 10th month.

Our Company’s current capacity is 61,189 vehicles/year. As of 2023, a total of 42,067 vehicles were producedwith a capacity utilization rate of 68.7%.

KARSAN ANNUAL REPORT 2023

SUMMARY FINANCIAL STATEMENTS

KEY INDICATORS AND RATIOS

Summary Balance Sheet(TL thousand)Current Assets
Fixed Assets
Total Assets

31 December 2023
5,765,902
6,963,608
12,729,510

31 December 2022
5,429,951
6,907,059
12,337,010

Liabilities
Short-Term Liabilities
Long Term Liabilities
EquityTotal Liabilities

31 December 2023
5,972,254
1,479,580
5,277,676
12,729,510

31 December 2022
5,952,719
1,669,098
4,715,193
12,337,010

January- December 2023
7,547,685
1,568,040
1,451,424
619,840January- December 2022
5,264,421
727,260
580,988(167,110)

Summary Income Statement
Revenues
Gross profit (*)
Operating Profit/(Loss)
Period Profit/(Loss)* Gross profit from financial activities is included.

The total assets of the Company increased from TL 12,337,010 million in 2022 to TL 12,729,510 million as of2023. The revenue amount for 2022 was TL 5,264,421 million, which rose to TL 7,547,685 million in 2023, andthe real operating profit, which was TL 580,988 million in 2022, reached TL 1,451,424 million in 2023.

Key Indicators (TL)
Gross Profit Margin
Operating Profit Margin
Net Profit Margin

31 December 2023
0.20
0.19
0.08

31 December 2022
0.14
0.11
(0.03)

Liquidity Ratios
Current Ratio
Liquidity Ratio
Cash Ratio

31 December 2023
0.97
0.76
0.17

31 December 2022
0.91
0.66
0.01

Financial Structure Ratios
Total Liabilities/Equity
Short Term Liabilities / Total Assets
Long Term Liabilities / Total Assets
Tangible Assets /(Equity + Long
Term Liabilities)

31 December 2023
1.41
0.47
0.12

31 December 2022
1.62
0.48
0.14

0.61

0.64

Profitability Ratios
Return on Assets
Return on Equity

31 December 2023
0.05
0.12

31 December 2022
(0.01)(0.04)79

KARSAN ANNUAL REPORT 2023

EVENTS AFTER BALANCE SHEETDATEOTHER MATTERS-INFORMATIONFOR SHAREHOLDERS

On 03.01.2024; Our Company announced the Senior Management Change material event disclosure on PDP.

Our Company’s investor presentations, which provide insights into our projections for 2023
and future periods, can be accessed from the link below.

On 05.01.2024; Our Company announced the 1st Coupon Payment notification of our bill with ISIN code
TRFKRSNE2419 on PDP.
On 12.01.2024; Our Company announced the material event disclosure regarding the Strike Decision on PDP.
On 18.01.2024; Our Company announced the material event disclosure regarding reaching an agreement in
the Collective Bargaining Agreement Process on PDP.
On 18.01.2024; Our Company announced its notification regarding the Board of Directors’ Decision on Lease
Certificate Issuance on PDP.
On 24.01.2024; Our Company announced its notification regarding the CMB Application for Issuance Ceiling on
PDP.
On 29.02.2024; Our Company announced the material event disclosure regarding the signing of a contract
with the Municipality of Rotterdam, Netherlands, for the sale of Autonomous e-ATAK on PDP.
On 12.03.2024; Our Company announced its notification regarding CMB Approval of Lease Certificate Issuance
Ceiling (TL 700 million) on PDP.

80

https://www.karsan.com/en/investor-relations/investor-presentations-list

KARSAN ANNUAL REPORT 2023

INFORMATION ON COMPANYSHARES

ACTIVITIES OF INVESTORRELATIONS DEPARTMENT

Karsan Otomotiv Sanayii ve Ticaret A.Ş. began trading on Borsa Istanbul on 21 February 2000. As of the end of2023, Karsan Otomotiv Sanayii ve Ticaret A.Ş. is featured in the following the indices and stock information:

In our Company, the Investor Relations Department reports directly to the Deputy General Manager ofFinancial Affairs.

Issuer Name: KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş.

Investor Relations
Department
Evren Uçak

Title

Licence

Investor Relations
Coordinator,
Corporate GovernanceCommittee Member

Capital Market Activities Level 3 License (License
No: 208176), Corporate Governance Rating License(License No: 702477), Credit Rating License (License
No: 603366), Derivative Instruments License (License
No: 308811), Housing Appraisal License (License No:
917036)

Seda Uludağ

Investor Relations
Officer

Stock Market: BORSA İSTANBUL (BIST)
Market Included: STAR MARKET
BIST Indices: BIST STARS / BIST 100-30 / BIST PARTICIPATION 100 / BIST PARTICIPATION 30 / BIST
SUSTAINABILITY / BIST METAL GOODS, MACHINERY / BIST ALL / BIST INDUSTRIAL / BIST BURSA / BISTPARTICIPATION 50 / BIST 100 / BIST SUSTAINABILITY PARTICIPATION / B IST PARTICIPATION ALL
BIST Ticker: KARSN
Bloomberg Ticker: KARSN.TI
Reuters Ticker: KARSN.IS

The Investor Relations Department aims at providing accurate, timely, and consistent information to existingand potential investors about the Company, reducing the Company’s cost of capital by adhering to Corporate
Governance Principles, and ensuring a two-way interaction between Board of Directors and the participants incapital markets. The Department works in coordination with relevant Company units to promptly address thequestions and inquiries of shareholders, excluding confidential information and trade secrets. The Company
Disclosure Policy mandates equal treatment for all participants in the capital market in terms of exercising
their right to be informed and review information, and announcements are made simultaneously and withidentical content.
The Company immediately makes public disclosures through the Public Disclosure Platform regarding
developments that may impact the exercise of shareholders’ rights and shares information within the scope ofthe content disclosed to the public. Information and disclosures are updated on the Company’s website for the
information of investors.
Investor Relations Department Contact information:
Phone Number : +90 224 484 21 80
Fax Number : +90 224 484 21 69
E-mail : yatirimciiliskileri@karsan.com.tr
www.karsan.com/tr/yatirimci-iliskileri/bize-ulasin)81

KARSAN ANNUAL REPORT 2023

DECLARATIONS OF INDEPENDENCE BY THE NOMINEES FOR BOARD
MEMBERSHIPKARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş.

university that is in compliance with the relevant legislation;

DECLARATION OF INDEPENDENCE BY THE NOMINEE FOR BOARD MEMBERSHIPe) am deemed to be residing in Turkey according to the Income Tax Law No.193 of 31/12/1960;

Within the framework of the Capital Markets Legislation, I declare that I am aware that I am qualified as an“independent member” of the board of directors who meets all of the following criteria, and in this context, I
hereby declare that:f) can make positive contributions to the operations of the Company, maintain my objectivity in conflicts ofinterests between the Company and the shareholders, and I have strong ethical standards, professional
reputation and experience to freely take decisions by considering the rights of the stakeholders;a) do not have a relationship in terms of employment at an administrative level to take upon significant duty
and responsibilities within the last five years, I do not own more than 5% of the capital or voting rights
or privileged shares either jointly or solely or I have not established a significant commercial relation
between Karsan Otomotiv Sanayii ve Ticaret A.Ş (Company)., companies on which the Company holds
control of management or significant effect and shareholders who hold control of management of theCompany or have significant effect in the Company and legal entities on which these shareholders holdcontrol of management and myself, my spouse and my relatives by blood or marriage up to second
degree;g) will be able to allocate time for the company business sufficient to follow up operations of the Company
and to duly fulfill the assigned duties;b) have not been a shareholder (5% and more), an employee at an administrative level to take uponsignificant duty and responsibilities or member of board of directors within the last five years in companies
that the Company purchases or sells goods or service at a significant level within the framework of thecontracts executed, especially on audit (including tax audit, statutory audit, internal audit), rating andconsulting of the Company, at the time period when the Company purchases or sells services or goods;h) hereby acknowledge and agree that I have not been serving as a member in the Board of Directors of theCompany for more than six years in the last decade;i) am not an independent board member in more than three of the companies whose management
is controlled by the Company or the controlling shareholders of the Company and in more than fivecompanies in total which are traded on the stock exchange;j) have not been registered or announced on behalf of the legal entity selected as the member of Board of
Directors;k) shall immediately inform the Board of Directors and resign in case of occurrence of any event whichconflicts with my independence.
Ahmet Nezih OLCAYc) have professional education, knowledge and experience in order to duly fulfill the duties assigned for being
an independent board member;d) As of the day of my nomination I am not and in the event that I am elected, for the term of my duty I will
not be a full time employee at public authorities and institutions except being an academic member at

If the partnerships within the scope of this paragraph are inactive in the last 3 accounting periods, there will be no violation of the independence
criteria. Within the scope of this paragraph, if the ratio of the turnover/pre-tax profit obtained from a significant commercial relationship to the total
turnover/pre-tax profit obtained from businesses of the same nature is 20% or more for an independent member nominee or any of the partnership, it
is considered that independence is impaired.
2
TFRS 10 provisions are used to determine whether there is a significant degree of control, and TMS 28 provisions are used to determine whether
there is a significant degree of influence.
182

KARSAN ANNUAL REPORT 2023

DECLARATIONS OF INDEPENDENCE BY THE NOMINEES FOR BOARD
MEMBERSHIPKARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş.

e) am deemed to be residing in Turkey according to the Income Tax Law No.193 of 31/12/1960;

DECLARATION OF INDEPENDENCE BY THE NOMINEE FOR BOARD MEMBERSHIP

f)

Within the framework of the Capital Markets Legislation, I declare that I am aware that I am qualified as an“independent member” of the board of directors who meets all of the following criteria, and in this context, I
hereby declare that:a) do not have a relationship in terms of employment at an administrative level to take upon significant duty
and responsibilities within the last five years, I do not own more than 5% of the capital or voting rights
or privileged shares either jointly or solely or I have not established a significant commercial relation
between Karsan Otomotiv Sanayii ve Ticaret A.Ş (Company)., companies on which the Company holds
control of management or significant effect and shareholders who hold control of management of theCompany or have significant effect in the Company and legal entities on which these shareholders holdcontrol of management and myself, my spouse and my relatives by blood or marriage up to second
degree;b) have not been a shareholder (5% and more), an employee at an administrative level to take uponsignificant duty and responsibilities or member of board of directors within the last five years incompanies that the Company purchases or sells goods or service at a significant level within theframework of the contracts executed, especially on audit (including tax audit, statutory audit, internal
audit), rating and consulting of the Company, at the time period when the Company purchases or sells
services or goods;

can make positive contributions to the operations of the Company, maintain my objectivity in conflicts ofinterests between the Company and the shareholders, and I have strong ethical standards, professional
reputation and experience to freely take decisions by considering the rights of the stakeholders;g) will be able to allocate time for the company business sufficient to follow up operations of the Company
and to duly fulfill the assigned duties;h) hereby acknowledge and agree that I have not been serving as a member in the Board of Directors of theCompany for more than six years in the last decade;i)am not an independent board member in more than three of the companies whose management
is controlled by the Company or the controlling shareholders of the Company and in more than fivecompanies in total which are traded on the stock exchange;j)have not been registered or announced on behalf of the legal entity selected as the member of Board of
Directors;k) shall immediately inform the Board of Directors and resign in case of occurrence of any event whichconflicts with my independence.
Müfit ATASEVENc) have professional education, knowledge and experience in order to duly fulfill the duties assigned forbeing an independent board member;d) As of the day of my nomination I am not and in the event that I am elected, for the term of my duty I will
not be a full time employee at public authorities and institutions except being an academic member atuniversity that is in compliance with the relevant legislation;

If the partnerships within the scope of this paragraph are inactive in the last 3 accounting periods, there will be no violation of the independence
criteria. Within the scope of this paragraph, if the ratio of the turnover/pre-tax profit obtained from a significant commercial relationship to the total
turnover/pre-tax profit obtained from businesses of the same nature is 20% or more for an independent member nominee or any of the partnership, it
is considered that independence is impaired.
2
TFRS 10 provisions are used to determine whether there is a significant degree of control, and TMS 28 provisions are used to determine whether
there is a significant degree of influence.
183

KARSAN ANNUAL REPORT 2023

DECLARATIONS OF INDEPENDENCE BY THE NOMINEES FOR BOARD
MEMBERSHIPKARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş.

e) am deemed to be residing in Turkey according to the Income Tax Law No.193 of 31/12/1960;

DECLARATION OF INDEPENDENCE BY THE NOMINEE FOR BOARD MEMBERSHIP

f)

Within the framework of the Capital Markets Legislation, I declare that I am aware that I am qualified as an“independent member” of the board of directors who meets all of the following criteria, and in this context, I
hereby declare that:a) do not have a relationship in terms of employment at an administrative level to take upon significant duty
and responsibilities within the last five years, I do not own more than 5% of the capital or voting rights
or privileged shares either jointly or solely or I have not established a significant commercial relation
between Karsan Otomotiv Sanayii ve Ticaret A.Ş (Company)., companies on which the Company holds
control of management or significant effect and shareholders who hold control of management of theCompany or have significant effect in the Company and legal entities on which these shareholders holdcontrol of management and myself, my spouse and my relatives by blood or marriage up to second
degree;b) have not been a shareholder (5% and more), an employee at an administrative level to take uponsignificant duty and responsibilities or member of board of directors within the last five years incompanies that the Company purchases or sells goods or service at a significant level within theframework of the contracts executed, especially on audit (including tax audit, statutory audit, internal
audit), rating and consulting of the Company, at the time period when the Company purchases or sells
services or goods;

can make positive contributions to the operations of the Company, maintain my objectivity in conflicts ofinterests between the Company and the shareholders, and I have strong ethical standards, professional
reputation and experience to freely take decisions by considering the rights of the stakeholders;g) will be able to allocate time for the company business sufficient to follow up operations of the Company
and to duly fulfill the assigned duties;h) hereby acknowledge and agree that I have not been serving as a member in the Board of Directors of theCompany for more than six years in the last decade;i)am not an independent board member in more than three of the companies whose management
is controlled by the Company or the controlling shareholders of the Company and in more than fivecompanies in total which are traded on the stock exchange;j)have not been registered or announced on behalf of the legal entity selected as the member of Board of
Directors;k) shall immediately inform the Board of Directors and resign in case of occurrence of any event whichconflicts with my independence.
Nevzat TÜFEKÇİOĞLU

c) have professional education, knowledge and experience in order to duly fulfill the duties assigned forbeing an independent board member;d) As of the day of my nomination I am not and in the event that I am elected, for the term of my duty I will
not be a full time employee at public authorities and institutions except being an academic member atuniversity that is in compliance with the relevant legislation;

If the partnerships within the scope of this paragraph are inactive in the last 3 accounting periods, there will be no violation of the independence
criteria. Within the scope of this paragraph, if the ratio of the turnover/pre-tax profit obtained from a significant commercial relationship to the total
turnover/pre-tax profit obtained from businesses of the same nature is 20% or more for an independent member nominee or any of the partnership, it
is considered that independence is impaired.
2
TFRS 10 provisions are used to determine whether there is a significant degree of control, and TMS 28 provisions are used to determine whether
there is a significant degree of influence.
184

KARSAN ANNUAL REPORT 2023

CONVENIENCE TRANSLATION INTO ENGLISH OF

INDEPENDENT AUDITOR’S REPORT ON ANNUAL REPORT OF THE
BOARD OF DIRECTORS
To the General Assembly of Karsan Otomotiv Sanayii ve Ticaret Anonim Şirketi1) Opinion
We have audited the annual report of Karsan Otomotiv Sanayii ve Ticaret Anonim Şirketi (“Company”) and its
subsidiaries (the “Group”) for the accounting period 1 January 2023 – 31 December 2023.
According to our opinion, financial information provided in the annual report of the board of directors and mattersaddressed by the Board of Directors about the position of the Group are presented fairly and consistent with theaudited full set of consolidated financial statements and with the findings we obtained during our audit in allmaterial respects.
2) Basis of the Opinion
Our independent audit has been conducted in line with the Independent Auditing Standards (IAS) which are part of
Turkish Auditing Standards promulgated by the Public Oversight, Accounting and Auditing Standards Authority ofTurkey (POA). Our responsibilities under these standards have been explained in detail in the section of our report
titled Responsibilities of the Independent Auditor about Independent Audit of Annual Report. Pursuant to the Ethical
Rules published by POA for the Independent Auditors (including Independent Standards) (“Ethical Rules”) and ethicalprovisions stipulated in the applicable legislation about independent audits, we declare that we are and we work
independent of the Group. Ethical Rules and other responsibilities determined in the applicable legislation about
ethical conduct have been complied with and duly fulfilled by us. We believe that independent audit evidence wehave obtained during independent audit is sufficient and appropriate to provide a basis for our opinion.
3) Our Auditor Opinion on Full Set of Consolidated financial statements
We have expressed an unqualified opinion about the full set of consolidated financial statements concerning theaccounting period 1 January 2023 – 31 December 2023 in our audit report dated 18 April 2024.
4) Other matter
The Group’s consolidated financial statements for the accounting period ending on 31 December 2022 were auditedby another independent auditor and an unqualified opinion was given regarding these consolidated financial
statements on 7 March 2023.
5) Responsibility of the Board of Directors about Annual Reportb) Preparing annual report to reflect operations of the Group in that year and its financial position accurately,completely, directly, fairly and honestly in all respects. In this report, financial position will be evaluated basedon the consolidated consolidated financial statements. The report also points out development areas for theGroup and potential risks affecting the Group. Evaluation made by the board of directors regarding thesesubjects is also presented in the report.
c) Report further includes following details:- Events occurring in the Group after the accounting period and having special importance for the Group,- Research and development activities carried out by the Group,- Remuneration, fees, premiums, bonus and other financial benefits and allowance, repayment of costs of travel,
accommodation and representation, in-kind and cash allowances, insurance and similar securities provided tothe members of the board of directors and members of the top management.
In preparing the annual report, board of directors takes into account those arrangements made under secondary
legislation issued by the Ministry of Trade and other relevant authorities.
6) Responsibility of the Independent Auditor about Independent Audit of Annual Report
Pursuant to the provisions of TCC and the Communiqué, our purpose is to express an opinion on whether financial
information provided in the annual report of the board of directors and matters addressed by the Board of Directors
in this report are fairly presented and consistent with the Group’s audited consolidated financial statements andwith the findings we obtained during our independent audit and to issue a report based on this opinion.
Our independent audit has been conducted in line with ISA and independent audit standards as endorsed by the CapitalMarkets Board. These standards require compliance with the ethical provisions and the independent audit to be plannedand performed to obtain reasonable assurance on whether financial information provided in the annual report of theboard of directors and matters addressed by the Board of Directors in this report are fairly presented and consistent with
the Group’s audited consolidated financial statements and with the findings we obtained during our audit.
Auditor who conducted and finalized this independent audit is Selçuk Şahin.
Istanbul,
18 April 2024

Group Management has the following responsibilities in connection with annual report pursuant to articles 514 and516 of Turkish Commercial Code numbered 6102 (“TCC”) and “Communiqué on Principles of Financial Reporting in
Capital Markets” numbered II-14.1 (“Communiqué”) as issued by the Capital Markets Board (“CMB”) of Turkey:

BDO Denet Bağımsız Denetim ve Danışmanlık A.Ş.
Member, BDO International Networka) Preparing and submitting the annual report to the general assembly within the first three months following thebalance sheet date.

Selçuk Şahin, SMMM
Partner in Charge
85

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A. Ş. AND ITS SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2023 AND INDEPENDENT AUDITOR’S REPORT

86

INDEPENDENT AUDITOR’S REPORTTo the General Assembly of Karsan Otomotiv Sanayii ve Ticaret A.Ş.

3) Key Audit MattersA) Report on the Audit of the Consolidated Financial Statements

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.

1) Opinion
We have audited the consolidated financial statements of Karsan Otomotiv Sanayii ve Ticaret A.Ş (“the Company”)
and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as at 31 December
2023, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement ofchanges in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Group as at 31 December 2023, and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with Turkish Financial Reporting Standards (TFRS).

Key Audit Matter
Revaluation of Tangible Assets
As of 31 December 2023, as can be seen in Note 11,
the Group has property, plant and equipment consistingof buildings and land with a net book value of TL
2,243,353 (31 December 2022: TL 2,195,310), which
are recognized at fair value in the consolidated financial
statements and revalued on 31 December 2023.

2) Basis for Opinion

The fair value of these buildings and land was determinedby an independent valuation company in 2023.

We conducted our audit in accordance with standards on auditing accepted within the framework of the regulationsof the Capital Markets Board and the Standards on Independent Auditing (“SIA”) which is a part of Turkish AuditingStandards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for
Independent Auditors (including Standards on Independent Auditing) (“Code of Ethics”) published by the POA, and the
CMB legislation and the other relevant legislation, together with the ethical requirements that are relevant to our auditof the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

How the Matter was Addressed in the Audit
During our audit, we performed the following audit
procedures in relation to the fair value of property, plantand equipment:• We assessed the competence, licences and objectivityof the independent valuers selected by management,• The support of the valuation experts of anotherorganization has been obtained and the measurementof the related valuation report has been submitted to
the review and evaluation of the valuation experts,

As property, plant and equipment constitute a significant
portion of the Group’s total assets and the valuation• The appropriateness of the valuation methods usedmethods applied involve significant estimates andby the valuation experts in the valuation report of theassumptions that are not readily observable in theland and buildings included in tangible fixed assets has
market, the revaluation calculation of land and buildings isbeen evaluated,considered as a key audit matter.
• It has been assessed whether the assessed values arewithin an acceptable range by comparing them withthe market prices of land and buildings,
We did not have any significant findings as a result of
these studies we carried out regarding the revaluation of
tangible assets.

87

INDEPENDENT AUDITOR’S REPORTKey Audit Matter
Revenue recognition
Revenue is recognized at the transaction price inaccordance with TFRS 15 “Revenue from Contracts with
Customers”. The transaction price is the amount that theentity expects to be entitled to in return for transferring
the promised goods to the customer, excluding amounts
collected on behalf of third parties. When the Grouptransfers control of goods and services to customers, therelated amount is recognised as revenue in the financial
statements.

How the Matter was Addressed in the Audit
The following procedures were performed in relation to
the audit of revenue:• Understanding the sales processes and assessing thedesign of controls over the processes,• Application of material analytical procedures forrevenue,• Performing tests with sampling method regarding theaccuracy of sales invoices and matching these invoices
Revenue is the most important indicator in the evaluation
with dispatch notes,of the Group’s performance. Revenue is of significant• Testing that the control of the products in the invoices
importance for performance monitoring and has been
selected by sampling method, especially for the sales
identified as a key audit matter for our audit as it ismade at the end of the period, is transferred to thethe most significant financial statement item for thecustomer,statement of profit or loss and other comprehensive
income for the year ended 31 December 2023.
• For the trade receivable balances selected by sampling
method, verification letters were received from theDisclosures on the Group’s accounting policies andcustomers and the compliance of the responses
amounts regarding revenue are included in Note 2.5 andreceived with the accounting records was checked.
Note 20.
We did not have any significant findings as a result of
these studies we carried out regarding the recognition ofrevenue.

88

Key Audit Matter
How the Matter was Addressed in the Audit
TAS 29 “Financial Reporting in High Inflation Economies” Application
The following audit procedures were applied regarding the
The Group has started to apply “TAS 29
Financial reporting in Hyperinflation Economies” application of TAS 29 “Financial Reporting in High Inflation
Economies”:
in the preparation of its consolidated financial
statements since the functional currency of theGroup is Turkish Lira which is the currency of a • We discussed the Group’s current processes and accounting
policies with the management, and we understood andhyperinflationary economy as per TAS 29 as ofevaluated the relevant control principles, designed andDecember 31, 2023.
implemented by management resulting from the implementationof TAS 29.
In accordance with the guidance in TAS 29, theGroup used the Turkey Consumer Price Index to• We checked whether monetary and non-monetary items wereprepare inflation adjusted consolidated financial
determined correctly.
statements. The principles application of inflation
adjustment is disclosed in Note 2.1.1.
• We verified the general price index rates used in calculations
correspond with the coefficients in the Consumer Price Index in
The implementation of TAS 29 has included
Turkey published by the Turkish Statistical Institute, and tested
pervasive and material effects on thethe mathematical accuracy of the restatement non-monetaryconsolidated financial statements anditems, income statement, and cash flow statement to reflect
the included estimations of the company
the impact of inflation.
management. The preparation of financial• The mathematical accuracy of the calculations for the effects
statements using a current purchasing powerof high inflation in the readjustment of the consolidated
approach requires complex procedures andstatement of financial position, consolidated statement oftransaction to ensure accurate results. We
profit or loss and other comprehensive income and consolidated
considered the application of TAS 29 to bestatement of cash flows has been tested.
a key audit matter due to the existence of
estimations applied in the restatement, the high • We evaluated the appropriateness and adequacy of disclosuresdegree of complexity in calculations and thein the notes to the financial statements related to theexistence of the risk of the data used in theimplementation of TAS 29 in accordance with TFRS.
restatement being incomplete or inaccurate.
As a result of the audit work performed regarding the applicationof TAS 29, we did not have any material findings4) Other matter
The Group’s consolidated financial statements for the accounting period ending on 31 December 2022 were audited byanother independent auditor and an unqualified opinion was given regarding these consolidated financial statements on
7 March 2023.
5) Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
The Group management is responsible for the preparation and fair presentation of the consolidated financial statementsin accordance with TFRS, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
6) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Responsibilities of independent auditors in an independent audit are as follows:
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with the standards accepted within the framework of the regulations of the Capital Markets Board and
SIA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the standards on auditing accepted within the framework of the regulations of
the Capital Markets Board and SIA, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion (The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control).
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on theaudit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause theGroup to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

89

KARSAN ANNUAL REPORT 2023

We communicate with those charged with governance regarding, among other matters, the planned scope and timingof the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
B. Reports on Independent Auditor’s Responsibilities Arising from Other Regulatory Requirements
1. Pursuant to the fourth paragraph of Article 402 of the Turkish Commercial Code (“TCC”), no significant matter hascome to our attention that causes us to believe that for the period 1 January – 31 December 2023, the Company’s
bookkeeping activities and financial statements are not in compliance with TCC and provisions of the Company’s
articles of association in relation to financial reporting.
2. Pursuant to the fourth paragraph of Article 402 of the TCC, the Board of Directors provided to us the necessary
explanations and required documents in connection with the audit.
3. Pursuant to the fourth paragraph of Article 398 of TCC no. 6102; Auditors’ Report on System and Committee of
Early Identification of Risks is presented to the Board of Directors of the Company on 5 April 2024.

90

The engagement partner on the audit resulting in this independent auditor’s report is Selçuk Şahin.
İstanbul,
18 April 2024
BDO Denet Bağımsız Denetim
ve Danışmanlık A.Ş.
Member, BDO International Network

Selçuk Şahin, SMMM
Partner in Charge

KARSAN ANNUAL REPORT 2023

TABLE OF CONTENTS

92

AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2023

129

15. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES93

AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2023

130

16. COMMITMENTS

94

AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023

131

17. EMPLOYEE BENEFITS

95

AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023

133

18. OTHER ASSETS AND LIABILITIES

133

19. CAPITAL, RESERVES AND OTHER EQUITY ITEMS

96

AUDITED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023

134

20. REVENUE AND COST OF SALES

97-156 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
97

1.

ORGANIZATION AND FIELD OF ACTIVITY OF THE GROUP

98

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS

117

3. INTERESTS IN OTHER BUSINESSES AND BUSINESS COMBINATIONS

118

4. SEGMENT REPORTING

119

5. RELATED PARTY DISCLOSURES

121

6. TRADE RECEIVABLES AND PAYABLES

122

7. RECEIVABLES AND PAYABLES FROM FINANCIAL OPERATIONS

123

8. OTHER RECEIVABLES

123

9. INVENTORY

123

10. PREPAID EXPENSES AND DEFERRED INCOME

124

11. TANGIBLE FIXED ASSETS

126

12. INTANGIBLE FIXED ASSETS

127

13. LEASING TRANSACTIONS

128

14. GOVERNMENT GRANTS AND ASSISTANCE

135
21. GENERAL AND ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND 				 DEVELOPMENT EXPENSES
137

22. OTHER OPERATING INCOME AND EXPENSES

137

23. INCOME AND EXPENSES FROM INVESTING ACTIVITIES

138

24. TYPES OF EXPENSES

138

25. FINANCIAL EXPENSES

138

26. ANALYSIS OF OTHER COMPREHENSIVE INCOME

140

27. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)

143

28. EARNINGS/(LOSS) PER SHARE)

143

29. DERIVATIVES

144

30. FINANCIAL INSTRUMENTS

147

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS

154

32. FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

156

33. FEES FOR SERVICES RECEIVED FROM INDEPENDENT AUDITORS

156

34. EVENTS AFTER THE REPORTING PERIOD

156

35. NOTES TO THE CASH FLOW STATEMENT

91KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENT OFFINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

Note
References
ASSETS
Liquid Assets
Cash and Cash Equivalents
Financial Investments
Trade Receivables
Trade receivables from Related parties
Trade receivables from Third parties
Receivables from Financial Operations
Receivables from Third parties due to Financial
Operations
Other Receivables
Other Receivables from Third parties
Derivatives
Inventory
Prepaid Expenses
Assets Related to Current Period Tax
Other Liquid Assets

92

36
30

5
6

7

8
29
9
10
27
18

AuditedCurrent Period
31 December 2023

AuditedPrevious Period
31 December 2022

5.765.902
1.027.082
118.4232.315.801
498
2.315.303
124.4235.429.951
73.705
177.689
2.681.605
1.157
2.680.448
116.083

124.423291.919291.919134.9811.255.500
320.264
4.204
173.305

116.083
237.002237.002179.691
1.480.397
224.4314.458
254.890

Note
References
Fixed Assets
Financial investments
Trade receivables
Trade receivables from Third parties
Receivables from Financial Operations
Receivables from Third parties due to Financial
Operations
Derivatives
Tangible Fixed Assets
Right of Use Assets
Intangible Fixed Assets
Goodwill
Other Intangible Fixed Assets
Prepaid Expenses
Deferred Tax Asset
Other Fixed Assets
EQUITIES TOTAL

The accompanying notes are an integral part of these consolidated financial statements.

30

6

7
29
11
13
12

10
27
18

AuditedCurrent Period
31 December 2023
6.963.608
244.343
221.061221.061331.796

AuditedPrevious Period
31 December 2022
6.907.059
275.324325.201
325.201464.732331.796111.297
4.113.904
39.6671.226.678
47.212
1.179.466
2.179
672.575
108
12.729.510

464.732
58.8244.092.624
56.8201.531.115
47.212
1.483.903
14.51787.902
12.337.010

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENT OFFINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

Note
References
LIABILITIESShort Term Liabilities
Short Term Borrowings
Short Term Part of Long-Term Borrowings
Short Term Payables from Leasing Transactions
Trade Payables
Trade Payables to Related parties
Trade Payables to Third parties
Employee Benefits Liabilities
Other Payables
Other Payables to Related parties
Deferred Income
Current Tax Liability
Short Term Provisions
Short Term Provisions for Employee Benefits
Other Short Term Provisions
Other Short Term Liabilities
Long Term Liabilities
Long Term Borrowings
Other Payables
Other Payables to Related parties
Long Term Payables from Leasing Transactions
Long Term Provisions
Long Term Provisions for Employee Benefits
Other Long Term Provisions
Deferred Income
Deferred Tax Liability

30
30
13

5
6
17
5
10
27
17
15
18

30

5
13
17
15
10
27

AuditedCurrent Period
31 December 2023

AuditedPrevious Period
31 December 2022

5.972.254
2.312.324
709.024
24.2891.877.052
109.469
1.767.583
78.159184.767
184.767
391.887
365.92830.343335.585
28.8245.952.719
3.269.678
774.13116.0181.582.387.
79.3941.502.993
59.49663.3003.624
135.190
21.963113.22748.8951.479.580
743.332
260.000
260.000
17.384397.895
201.586
196.30960.969-1.669.098
1.060.310
26.776355.366
216.947138.41929.244
197.402

EQUITIES
Equities of Parent Company
Paid-up Capital
Capital Adjustment Differences
Equity Contribution for Merger
Share Premiums/Discounts
Other Comprehensive Income or Expenses not to be
Reclassified to Profit or Loss
Accumulated Remeasurement Losses of Revaluation
and Remeasurement Gains
Defined Benefit Plans
Other Comprehensive Income or Expenses to be
Reclassified to Profit or Loss
Change arising from Foreign Currency Translation
Differences
Gains on Fair Value Measurement of Financial
Investments
Hedging Gains/Losses
Restricted Reserves
Previous Years’ Losses
Net Period Profit (Loss)
Non-controlling Interest
LIABILITIES TOTAL

The accompanying notes are an integral part of these consolidated financial statements.

Note
References
19
19

26
19

AuditedCurrent Period
31 December 2023
5.277.676
5.244.514
900.000
6.926.453
33.719107.038

AuditedPrevious Period
31 December 2022
4.715.193
4.665.296
900.000
6.926.453
33.719107.038610.149660.942673.436(63.287)

724.477(63.535)(237.179)(230.615)

66.45918.547(107.045)(196.593)
17.549(3.749.790)
636.575
33.16212.729.510(107.045)(142.117)
17.549(3.544.030)(205.760)
49.897
12.337.010

93KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

AuditedCurrent Period
31 December 2023

AuditedPrevious Period
31 December 2022

7.547.685(6.255.622)
1.292.063
275.9775.264.421(4.634.091)
630.330
96.9301.568.040

727.260(362.383)(789.244)(14.081)1.122.433(73.341)(324.078)(518.657)(15.854)735.693(23.376)

1.451.424

580.98833.965(81.350)

86.217-1.404.039

667.205(2.376.533)
761.465(1.489.245)
582.987(211.029)(239.053)

27
27

830.869
830.869

71.943(3.683)75.62628

619.840(16.735)
636.5750,707(167.110)
38.650(205.760)(0,229)Note
References
Revenue
Cost of Sales (-)
Gross Profit from Trade Operations
Gross Profit from Financial Operations

20
20
20

GROSS PROFIT/(LOSS)
General and Administrative Expenses (-)
Marketing Expenses (-)
Research & Development Expenses (-)
Other Operating Incomes
Other Operating Expenses (-)

21
21
21
22
22

OPERATING PROFIT (LOSS)
Investing Income
Investing expenses (-)

23
23

OPERATING PROFIT (LOSS)
BEFORE FINANCIAL EXPENSES
Financial Expenses (-)
Monetary Profit/(Loss)

25

PRE-TAX PROFIT/(LOSS)
Tax Income/(Expenses)
Current Tax (Expense)
Deferred Tax Income/(Expense)
PROFIT (LOSS) FOR THE PERIOD
Non-controlling Interest
Controlling Interest
Profit/(Loss) per share (piaster)

94

Note
References
OTHER COMPREHENSIVE INCOME/(LOSSES):
Items not to be Reclassified to Profit or Loss
Revaluation Increase for Tangible Fixed Assets
Tax Effect on Revaluation Increases for Tangible Fixed Assets
Loss on Remeasurement of Defined Benefit Plans
Tax Effect for Losses on Defined Benefit Plans Remeasurement
Items to be Reclassified to Profit or Loss
Foreign Currency Translation Differences
Hedging Losses
Tax Effect on Hedging Losses
Other Comprehensive Income/(Expenses)
TOTAL COMPREHENSIVE INCOME
Distribution of Total Comprehensive Income:Non-controlling Interest
Controlling Interest

The accompanying notes are an integral part of these consolidated financial statements.

11
27
17
27

26
27

AuditedCurrent Period
31 December 2023

AuditedPrevious Period
31 December 2022

(50.793)(68.053)
17.012330(82)(6.564)47.912(76.654)22.178(57.357)

660.942905.595(181.118)(79.419)15.884(114.340)
27.777(177.646)
35.529546.602562.483
562.483(16.735)
579.218

379.492
379.492
38.650340.842KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

Other Comprehensive Income andExpenses not to be Reclassified
to Profit or Loss
Accumulated
Remeasurement
CapitalEquityShare Revaluation and Gains/Losses ofPaid-up Adjustment Contribution Premiums/ Remeasurement Defined Benefit
capital Differences for Merger Discounts
Gains/Losses
Plans

Other Comprehensive Income andExpenses to be Reclassified toProfit or Loss
Gains onForeignfair Value
Currency Measurement
Translationof Financial
HedgingDifferences
Investments Gains/Losses

Accumulated Profits

Restricted
Reserves

Previous
Years’ Net Period
Losses Profit/(Loss)

Equitiesof Parent
Company

Noncontrolling
Interest

Equities
4.335.701
379.492546.602(167.110)

Balances as of January 1, 2022 (Beginning of Period)
Transfers
Total Comprehensive Income/(Expense)
Other Comprehensive Income/(Expense)
Period Profit

900.000 6.926.453-

33.719-107.038-

724.477724.477-(63.535)(63.535)-(9.230)27.77727.777-(107.045)-(142.117)(142.117)-17.007542-(3.811.163)
267.133-

267.675(267.675)(205.760)(205.760)

4.324.454
340.842546.602(205.760)

11.24738.65038.650

Balances as of 31 December 2022 (Period-End)

900.000 6.926.453

33.719107.038

724.477(63.535)

18.547(107.045)(142.117)

17.549 (3.544.030)(205.760)

4.665.296

49.8974.715.193

Balances as of January 1, 2023 (Beginning of Period)
Transfers
Total Comprehensive Income/(Expense)
Other Comprehensive Income/(Expense)
Period Profit

900.000 6.926.453-

33.719-107.038-

724.477(51.041)(51.041)-(63.535)248
248-

18.54747.91247.912-(107.045)-(142.117)(54.476)(54.476)-

17.549 (3.544.030)- (205.760)-(205.760)
205.760
636.575
636.575

4.665.296
579.218(57.357)
636.575

49.897(16.735)(16.735)

4.715.193
562.483(57.357)
619.840

Balances as of 31 December 2023 (Period-End)

900.000 6.926.453

33.719107.038

673.436(63.287)

66.459(107.045)(196.593)

17.549 (3.749.790)

636.575

5.244.514

33.162

5.277.676

The accompanying notes are an integral part of these consolidated financial statements.

95

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

AUDITED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE PERIOD OF 1 JANUARY - 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

Note
References
CASH FLOW FROM OPERATING ACTIVITIESProfit/(Loss) for the Period
Adjustments for Reconciliation of Net Loss for the Period- Adjustments for Depreciation and Amortization Expenses- Adjustments for Impairment/Reversal of Impairment- Adjustments for Impairment of Receivables- Adjustments for Impairment/Reversal of Inventory- Adjustments for Provisions- Adjustments for Provisions for Employee Benefits- Adjustments for Other Provisions- Adjustments for Interest (Income) and Expenses- Adjustments to Interest Income- Adjustments to Interest Expense- Adjustments for Unrealized Foreign Exchange Differences- Adjustments for Fair Value (Gains) and Losses- Adjustments for Tax Expense- Adjustments for Gains on Disposal of Fixed Assets- Monetary Loss/Income
Changes in Working Capital- Adjustments for Increase in Trade Receivables- Decrease in trade receivables from Related parties- Increase in trade receivables from Related parties- Adjustment for (Increase)/Decrease in Inventory- Decrease in Other Assets for Operations- Adjustment for Increase/(Decrease) in Trade Payables- Decrease in Trade Payables to Related parties- Increase/(Decrease) in Trade Payables to Third parties- Decrease in Other Liabilities related to Operations96

11-12-13

6-21-22
9
17
15
22-23
22-25
23
27
23

AuditedCurrent Period
1 January 31 December 2023

AuditedPrevious Period
1 January 31 December 2022

1.345.282
619.840(737.619)
316.424
41.57128.88412.687506.9584.987
501.971
8.225
8.225
577.200
30.981(655.561)(1.563.417)(930.570)(167.110)(91.811)412.962
60.54259.725817
184.089(31.601)
215.690528.539(90.745)619.284549.149
97.622(71.943)(1.227)(1.851.544)

1.521.870
441.060659
440.401
223.847218.273294.665
30.075264.590344.025(590.275)
250.290
1.001
249.289(529.144)(595.015)
285.263
54.054231.209(1.669)Note
References
Cash Flows from Operating Activities- Interest Earned- Interest Paid
- Payments made within the scope of Provisions for Employee
Benefits- Tax Payments- Other Cash Outflows
CASH FLOWS FROM INVESTMENTS- Cash Inflows from Sale of Intangible Fixed Assets- Cash Outflows from Purchase of Tangible Fixed Assets- Cash Outflows from Purchase of Intangible Assets- Other Cash Inflows/Outflows, (Net)- Interest Earned
CASH FLOWS FROM FINANCIAL ACTIVITIES- Cash Inflows from Borrowings- Cash Outflows from Borrowings- Cash Outflows from Debt Payments arising from Lease
Agreements- Interest Paid
- Other Cash Inflows (Outflows)
INFLATION IMPACT ON CASH AND CASH EQUIVALENTS
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS BEFORE THE EFFECT OF FOREIGN CURRENCY
TRANSLATİON DIFFERENCES)
Effect of Foreign Currency Translation Differences on Cash andCash Equivalents
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIODCASH AND CASH EQUIVALENTS AT END OF PERIOD

The accompanying notes are an integral part of these consolidated financial statements.

22
22
17
27
15

11
12
30
23

36
36

AuditedCurrent Period
1 January 31 December 2023

AuditedPrevious Period
1 January 31 December 2022

1.404.091-(849.196)
51.955(6.186)(55.620)(3.189)(429.338)7.900(458.609)(21.392)
42.763(104.568)
6.519.565(6.328.738)(13.073)(4.517)(109.553)(285.742)
2.057(431.671)(20.559)
125.64138.790979.9908.800.807(7.235.961)(26.178)(268.252)(965)
81.573(39.726)(565.063)
19.93311.095892.949(225.227)

60.42819.975953.377
73.7051.027.082(205.252)
278.957
73.705KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

1. ORGANIZATION AND FIELD OF ACTIVITY OF THE GROUP

Associates

Stock Exchange

Type of Operations

Karsan Otomotiv Sanayii ve Ticaret A.Ş. (“the Company”) is incorporated in Bursa, Turkey. The address of the Company
is Hasanağa Organized Industrial Zone (HOSAB), Sanayi Caddesi, 16225, Nilüfer-Bursa.

Karsan Otomotiv Sanayi Mamulleri Pazarlama A.Ş. (“Karsan Pazarlama”)-

Sales and Distribution

Related party Group: Kıraça Holding A.Ş.

Dividends payable:

Stock Exchange: Borsa Istanbul Star Market
The Company was established in order to establish all kinds of auto assembly and bodywork facilities in Turkey, topurchase and participate in already established ones, to import automobiles for bodywork manufacturing, to make andsell all kinds of auto bodywork. The Company’s fields of activity are to manufacture, import and export motor vehicles
for various automotive brands. Within the same scope, it provides industrial services to automotive main and subindustries.
Areas of operation related to the Group’s continuing operations and details of the reporting by geographical segments
are disclosed in Note 4.
As of 31 December 2023, the average number of employees working during the year is 2.496 (31 December 2022:
1.354).
The main shareholder of the Group and the party that holds the controlling interest is Kıraça Holding A.Ş.
The details of the Group’s subsidiaries, associates and joint ventures are as follows:
Subsidiaries
Stock Exchange

Type of Operations

Karsan İç ve Dış Ticaret A.Ş.
Karsan Europe S.R.L.
Karsan USA LLC (*)
Hervouet Corporate Industry (HCI) (**)
Hervouet Corporate Lease (HCL) (**)

Sales and marketing
Sales and marketing
Sales and marketing
Sales and marketing
Sales and marketing-(*)
On 26 April 2010, the Company established Karsan USA LLC, a wholly owned subsidiary of Karsan Otomotiv, with its head office in New York, USA
under the said title which does not require any capital transfer, in order to participate in the tenders to be held by local authorities in the USA in relation
to a taxi model project. There has been no capital transfer to the company and it has not been included in the consolidated financial statements since it
is inactive.

Within the framework of the Company’s objective to increase its competitiveness and efficiency in foreign markets, the Company acquired 2,400
shares with a nominal value of TRY 4,515 (EUR 700,000) in order to increase its market share in France and to participate in public tenders in order tohave a 50% share in the capital of Hervouet Corporate Industry, its distributor based in France. The first capital payment amounting to TRY 2.653 (EUR
400.000) was made on June 17, 2019 and the second capital payment amounting to TRY 1.863 (EUR 300.000) was made on July 31, 2019.

(**)

Publicly traded companies distribute dividends in accordance with the CMB’s Communiqué on Dividends No. II-19.1,
effective as of February 1, 2014.
Companies distribute their profits within the framework of the profit distribution policies to be determined by
the general assembly and in accordance with the provisions of the relevant legislation. Within the scope of thecommuniqué, a minimum distribution rate has not been determined. Companies pay dividends as specified in theirarticles of association or dividend distribution policies.

Approval of financial statements:
The financial statements were approved by the Board of Directors and authorized for issue on 18 April 2024. The
General Assembly has the authority to amend the financial statements.
Declaration of Compliance with Turkish Financial Reporting Standards (TFRS)
The accompanying financial statements have been drawn up in accordance with the Communiqué Serial II, No: 14.1
“Communiqué on the Principles of Financial Reporting in Capital Markets” (“the Communiqué”) published in the Official
Gazette dated June 13, 2013 and numbered 28676 by the Capital Markets Board (“CMB”) and are based on the
Turkish Financial Reporting Standards (“TFRS”) promulgated by the Public Oversight Accounting and Auditing Standards
Authority (“KGK”) in accordance with Article 5 of the Communiqué and the related appendices and interpretations
thereof.
In addition, the financial statements are presented in accordance with the formats specified in the “Announcement
on TFRS Taxonomy” published by KGK on October 4, 2022 and the Financial Statement Examples and User Guide
published by CMB.
The financial statements are drawn up on the historical cost basis, except for the presentation of non-derivative
financial instruments at fair value and revaluation of tangible fixed assets. The historical cost is generally based on thefair value of the consideration paid for the assets.
97

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

1. ORGANIZATION AND FIELD OF ACTIVITY OF THE GROUP (CONTINUED)

The table below shows the development of the CPI over the last three years and as of 31 December 2023:

Currency Used
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). The results and financial position of each entity are
expressed in TRY, which is the functional currency of the Group and the presentation currency for the consolidated
financial statements.
2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS
2.1 Basic Principles of Presentation
Restatement of financial statements in high inflation periods
With the announcement made by the Public Oversight Accounting and Auditing Standards Authority (KGK) on
November 23, 2023 and in accordance with the decision of the Capital Markets Board of Turkey (CMB) dated
December 28, 2023 and numbered 81/1820, issuers and capital market institutions that prepare their consolidated
financial statements in accordance with Turkish Accounting Standards/Turkish Financial Reporting Standards, havedecided to prepare their consolidated financial statements as of 31 December 2023 by applying the provisions of TAS
29 “Financial Reporting in Hyperinflationary Economies”.
The consolidated financial statements of the Group as of 31 December 2023 have been restated for the changes
in the general purchasing power of the functional currency in accordance with TAS 29 - Financial Reporting inHyperinflationary Economies (“TAS 29”). TAS 29 requires that consolidated financial statements issued in the currencyof a hyperinflationary economy be stated in terms of the measuring unit current at the date of the consolidated
statement of financial position and that prior period consolidated financial statements be restated in the same terms.
Therefore, the consolidated financial statements of the Group as of 31 December 2022 have been restated on apurchasing power basis as of 31 December 2023.
One of the features that makes the application of TAS 29 mandatory is the cumulative three-year inflation rate
approaching or exceeding 100%. Based on the Turkey-wide Consumer Price Index (“CPI”) announced by the Turkish
Statistical Institute (“TurkStat”), the cumulative three-year inflation rate in Turkey reached 268.3% as of 31 December
2023. However, IAS 29 does not specify 100% as the absolute rate at which hyperinflation occurs and it is a matterof judgment whether the consolidated financial statements should be restated in accordance with IAS 29. Moreover,hyperinflation is also determined by the characteristics of a country’s economic environment.
98

Annual Index
Annual Inflation
Cumulative Inflation (from 2021)
Correction coefficient2023
1,859.38
64.77%
268.24%1.00002022
1,128.45
64.27%
156.18%1.647732021
686.9536.07%
55.83%
2.70672

During an inflationary period, an entity whose monetary assets exceed its monetary liabilities loses purchasing power,
while an entity whose monetary liabilities exceed its monetary assets gains purchasing power to the extent that its
assets and liabilities are not linked to a price level. The gain or loss on the net monetary position is recognized in thestatement of profit or loss as monetary gain (loss)
The Group has restated all non-monetary items to reflect the effect of inflation adjustment reporting in terms of thecurrent measuring unit as at 31 December 2023. Monetary items have not been restated since they are expressed interms of the current measurement unit as at 31 December 2023.
Comparative Information and Restatement of Financial Statements of the Prior Period
The consolidated financial statements of the Group are prepared comparatively with the prior period in order to allow
the evaluation of the financial position and performance trends. In order to maintain consistency with the presentationof the current period consolidated financial statements, comparative information is reclassified and significant
differences are explained if necessary. In the current period, the Group has not made any reclassifications in the priorperiod financial statements.

Going Concern Assumption
The consolidated financial statements have been prepared on a going concern basis, which assumes that the Group willrealize the benefits from its assets and settle its liabilities within the next year and in the normal course of business.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

The consolidated financial statements include the financial statements of the Company and entities controlled by theCompany and its subsidiaries. Control is achieved when the Company fulfils the following conditions:

2.1 Basic Principles of Presentation (continued)– to have power over the investee company/asset;

As of 31 December 2023, the Group has accumulated losses amounting to TRY 3.113.215 (31 December 2022: TRY
3.749.790 loss) including the net profit for the current period and as of the same date, short term liabilities exceeded
Liquid Assets by TRY 206.352 (31 December 2022: TRY 522.768 deficit). As of the end of 2023, the Group has
a working capital deficit as some of the trade receivables are expected to be collected in long term and some of theborrowings are short term. As of 31 December 2023, the Group has operating profit amounting to TRY 1.451.424
and net profit for the period amounting to TRY 619.840. In the budget and forecast studies for 2024, the GroupManagement expects an increase in operating profitability with the scale that will be formed from the growth inrevenue and anticipates that this level will generate cash inflow to close the current working capital deficit. For thesereasons, the Group management does not foresee any risk to net working capital for the Group’s ability to continue asa going concern.

– to use its power in such a way as to have an impact on returns.
If a situation or an event that may cause a change in at least one of the criteria listed above arises, the Company
reassesses whether it has control over its investment.
In cases where the Company does not have majority voting rights over the investee company/asset, it has control
power over the investee company/asset if it has sufficient voting rights to direct/manage the activities of the related
investment alone. The Company considers all relevant facts and circumstances in assessing whether a majority of thevoting power in the relevant investment is sufficient to give it control, including the following factors:– Comparison of the voting rights held by the Company and the voting rights held by other shareholders;

Principles Regarding Consolidation– Potential voting rights held by the Company and other shareholders;

As of 31 December 2023 and 2022, the details of the Group’s subsidiaries are as follows:

Company’s Title

Field of Activity

Currency

Karsan İç ve Dış Ticaret A.Ş.
Karsan USA LLC (*)
Karsan Europe S.R.L.
Hervouet Corporate Industry (HCI)
Hervouet Corporate Lease (HCL)

Sales and marketing
Sales and marketing
Sales and marketing
Sales and marketing
Sales and marketing

TRY
USD
EUR
EUR
EUR

(*)

– to be open to or entitled to variable returns from the investee company/asset; and– Rights arising from other contractual agreements andProportion of the Group’s shareholdingin the capital and voting rights (%)
31 December 2023 31 December 2022
100%
100%
100%
50%
50%

100%
100%
100%
50%
50%

As explained in detail in Note 1, it has not been included in the financial statements dated 31 December 2023 and 2022 by full consolidation method.

– Other circumstances that may indicate whether the Company has the current power to direct the relevant activities(including voting at the general shareholders’ meetings in previous periods) when decisions need to be madeConsolidation of a subsidiary commences when the Company obtains control over the subsidiary and ends when the
Company loses control. The income and expenses of subsidiaries acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other comprehensive income from the date of acquisition to the dateof disposal.
Profit or loss and each component of other comprehensive income are attributable to the owners of the parent and to
non-controlling interests. Total Comprehensive Income of subsidiaries is attributed to the owners of the parent and to
the non-controlling interest, even if the non-controlling interest results in a negative balance.
Where necessary, adjustments have been made to the financial statements of subsidiaries to conform to the Group’s
accounting policies.
All intragroup assets and liabilities, equity, income and expenses and cash flows relating to transactions between Group
entities are eliminated on consolidation.
99

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

An associate is an entity over which the Group has significant influence. Significant influence is the power toparticipate, individually or jointly, in the financial and operating policy decisions of an entity without the power tocontrol.

2.1 Basic Principles of Presentation (continued)
Principles of Consolidation (continued)

Changes in the share capital of the Group’s existing subsidiary
Changes in the Group’s ownership interests in subsidiaries that do not result in a loss of control are accounted foras equity transactions. The carrying amounts of the Group’s interest and the non-controlling interest are adjusted toreflect changes in their respective interests in subsidiaries. Any difference between the amount by which the noncontrolling interest is adjusted and the fair value of the consideration received or paid is recognized directly in Equities
as the Group’s interest in the subsidiary.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii)the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controllinginterest. Amounts previously recognized in other comprehensive income in relation to that subsidiary are accounted for
as if the Company had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit orloss or transferred directly to retained earnings in accordance with TFRS).The fair value of the investment remaining
after the sale of the subsidiary at the date on which control is lost is regarded as the fair value on initial recognition
as determined in accordance with TFRS 9 Financial Instruments or, where applicable, the cost on initial recognition of
an investment in an associate or a jointly controlled entity
Interests in associates and joint ventures

Company’s Title
Karsan Otomotiv Sanayi Mamulleri
Pazarlama A.Ş. (“Karsan Pazarlama”) (*)

Currency

Distributor

Turkish Lira

Group’s interest in share capital andvoting rights (%)
31 December 2023 31 December 2022
6.43%

6.43%

(*)
After the capital increase in Karsan Pazarlama Sanayi Mamulleri Pazarlama A.Ş. in January 2021, Karsan Otomotiv Sanayii ve Ticaret A.Ş.’sshareholding in the capital and voting rights decreased from 25% to 6.43%. As a result, since the Group does not have significant influence over thecompany, it is classified as “Financial asset at fair value through other comprehensive income”.

100

In the accompanying financial statements, the results of operations, assets and liabilities of associates and joint
ventures are accounted for using the equity method of accounting, except for those accounted for as held for sale inaccordance with TFRS 5. Under the equity method, associates or joint ventures are carried in the consolidated balance
sheet at cost adjusted by the Group’s share of the post-acquisition changes in the net assets of the associate or
joint venture, less any impairment in value of the associate or joint venture. Losses of an associate or joint venture
in excess of the Group’s interest in the associate or joint venture (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the associate or joint venture) are not recognized. Additional
losses are recognized only if the Group has incurred legal or constructive obligations or made payments on behalf of
the associate or joint venture.
Gains and losses arising from transactions between a Group entity and an associate of the Group are eliminated to theextent of the Group’s interest in the associate or joint venture.
2.2 Changes in Accounting Policies
Significant changes in accounting policies are applied retrospectively and prior period financial statements are restated.
The Group has not made any changes in accounting policies due to the effects of changes in standards in the current
year.

As at 31 December 2023 and 2022, the details of the Group’s associates and joint ventures are as follows:
Field of
Activity

A joint venture is a venture in which the parties having joint control of an arrangement have rights to the net assets
in the joint arrangement. Joint control is the contractual sharing of control over an economic activity. Such control isconsidered to exist when decisions about the relevant activities require the unanimous consent of the parties sharing
control.

2.3 Changes in Accounting Estimates and Errors
If the changes in accounting estimates are for only one period, they are applied in the period in which the change
is made and if they are for future periods, they are applied both in the period in which the change is made andprospectively in future periods. The Group has not made any significant changes in accounting estimates in the current
year.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)b) Standards issued as of 31 December 2023 but not yet effective and not early adopted:

2.4 New and Revised Turkish Financial Reporting Standards

Amendment to TAS 1 (Long-term liabilities with contractual terms)

As of 31 December 2023, the accounting policies adopted in preparation of the consolidated financial statements forthe year ended 31 December 2023 are consistent with those of the previous financial year, except for the adoption of
new and amended Turkish Accounting Standards (“TAS”)/Turkish Financial Reporting Standards (“TFRS”) and TAS/TFRS
interpretations effective as of January 1, 2023. The effects of these standards and interpretations on the financial
position and performance of the Group are disclosed in the related paragraphs.

Effective for the annual reporting periods beginning on or after 1 January 2024. These amendments clarify how
conditions that an entity must satisfy within twelve months after the reporting period affect the classification of aliability. The amendments are also intended to improve the information that an entity provides about liabilities that are
subject to those conditions.

Standards, amendments and interpretations issued and effective as of 31 December 2023:
a) New Standards, Amendments and Interpretations Effective 1 January 2023:
Minor amendments to TAS 1, Implementation Statement 2 and TAS 8
Effective for the annual reporting periods beginning on or after 1 January 2023. These amendments are intended
to improve accounting policy disclosures and help users of financial statements to distinguish between changes inaccounting estimates and changes in accounting policies.
Amendment to TAS 12 (Deferred tax on assets and liabilities arising from a single transaction)
Effective for the annual reporting periods beginning on or after 1 January 2023. These amendments require companies
to recognize deferred tax on transactions that, when first recognized in the financial statements, give rise to taxable
and deductible temporary differences in equal amounts.
Amendment to TAS 12 (International tax reform)
The temporary exemption is effective for the year ending in December 2023 and the disclosure requirements are
effective for accounting periods beginning after 1 January 2023 with early adoption permitted. These amendments
provide companies with a temporary relief on accounting for deferred taxes arising from the Minimum Tax
Implementation Guide (international tax reform). The amendments also include disclosure requirements for affectedcompanies

TFRS 16 (Sale and leaseback transactions)
Effective for annual periods beginning on or after 1 January 2024. These amendments include the sale and leaseback
provisions in TFRS 16, which clarify how an entity should account for a sale and leaseback transaction after thetransaction date. Sale and leaseback transactions where some or all of the lease payments are variable lease paymentsthat are not linked to an index or rate are likely to be affected.
Amendments to TAS 7 and TFRS 7 on supplier financing arrangements,
Effective for annual periods beginning on or after 1 January 2024. These amendments require disclosures to increasetransparency about supplier financing arrangements and their impact on an entity’s liabilities, cash flows and liquidity
risks. The disclosure requirements are the IASB’s (International Accounting Standards Board) response to investor
concerns that some entities’ supplier financing arrangements are not sufficiently clear and hinder investor analysis.
TAS 21 (Lack of Interchangeability)
Effective for annual periods beginning on or after 1 January 2025. An entity is affected if it has a transaction or
activity in a foreign currency that is not convertible into another currency at a particular measurement date for aparticular purpose. A currency is convertible when the ability to obtain another currency is available (with a normal
administrative delay) and the transaction is settled through a market or clearing mechanism that creates enforceable
rights and obligations.

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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Revenue

2.5 Summary of Significant Accounting Policies

Revenue is recognized in the consolidated financial statements in accordance with the five-step model below.

Related Parties– Defining contracts with customers– Defining performance obligations in contracts

A related party is a person or entity that is related to the entity that prepares its financial statements (the reporting
entity).

– Determining the transaction price in contracts(a) A person, or a close member of that person’s family, is related to a reporting entity if that person,– Revenue recognition(i)

has control or joint control over the reporting entity; or(ii) has significant influence over the reporting entity; or(iii) is a member of the key management personnel of the reporting entity or a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following conditions are met(i)the entity and the reporting entity are members of the same group (i.e. every parent, subsidiary and fellow 		subsidiary is related to each other); and(ii) the reporting entity is an associate or joint venture of the other entity (or of a member of a group of which
the other entity is a member); or(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third party and the other entity is an associate of the third party.
(v) The entity has a post-employment benefit plan for the benefit of employees of the reporting entity or an 		
entity related to the reporting entity. If the reporting entity itself has such a plan, the sponsoring employers
are also related to the reporting entity.

The Group evaluates the goods or services promised in each contract with customers and assesses whether the goods
or services represent a separate performance obligation.
For each performance obligation, it is determined at the inception of the contract whether the performance obligation
is to be satisfied over time or at a specified point in time. When the Group transfers control of a good or service overtime and therefore fulfils the performance obligations associated with the related sales over time, the Group recognizes
revenue over time by measuring the progress towards complete fulfilment of those performance obligations.
When the Group fulfils its performance obligation by transferring a promised good or service to a customer, the Group
recognizes the transaction price corresponding to this performance obligation as revenue in the consolidated financial
statements. The goods or services are transferred when (or as) the customers obtain control of the goods or services.
The Group considers the following while assessing transfer of control of the goods or services sold to the customer:– The Group’s right to collect the goods or services,– the customer’s legal ownership of the goods or service,(vi) If the entity is controlled or jointly controlled by a person identified in (a).

– transfer of possession of goods or services,(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management
personnel of the entity (or a parent of the entity).

– the customer’s ownership of the significant risks and rewards arising from ownership of the goods or services,

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related
party, whether or not consideration is received.

102– Allocation of the transaction price to performance obligations– the conditions of the customer’s acceptance of the goods or service.

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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Financial activities

2.5 Summary of Significant Accounting Policies (continued)

Financial activities include finance lease transactions in which the Group is the lessor under TFRS 16 - “Leases”.

Revenue (continued)

The Group has evaluated the terms of the contract signed with Renault within the scope of TFRS 16 - Leases.

The Group does not adjust the amount of consideration promised for the effect of a significant financing element if,
at the inception of the contract, the Group estimates that the period between the date when the promised goods orservices are transferred to the customer and the date when the customer pays for those goods or services will be
one year or less. However, where there is a significant element of financing in the revenue, the amount of revenue isdetermined by discounting the future cash receipts at the interest rate included in the financing element. The difference
is recognized in the appropriate period as other operating income.

Sales of vehicles with Karsan brand
The Group recognizes revenue from own brand vehicles in the consolidated financial statements at the time of sale inaccordance with the above mentioned policy.

Revenue from extended warranty and maintenance service sales
The Group sells warranties and maintenance services for its products for periods starting from the end of the statutory
warranty period. The price of the additional commitments is considered to be a separate contractual service fromthe products sold. Therefore, the Group recognizes the service to be provided for the sale of extended warranties andmaintenance services as a separate performance obligation.

Bus sales (Tenders)
The Group recognizes the tender revenue under public (municipal) tenders in the consolidated financial statements upondelivery of the buses. The Group provides five-year after-sales maintenance and repair services within the scope ofthe tenders and recognizes the cost of such services in the consolidated financial statements simultaneously with themaintenance and repair provision revenue.

(a) The agreement depends on the investment financed by the Group.
(b) The agreement transferred the right to use the investment to Oyak Renault Otomobil Fabrikaları A.Ş.
(c) The right to control the investment and the products produced through the investment has been fully transferred toRenault.
(d) Lease payments for the investment can be made separately from other payments.
As a result, the Group has classified these investments as finance leases, where all risks are transferred to Oyak
Renault Otomobil Fabrikaları A.Ş.
Under finance leases, the leased asset is recognized as a receivable equal to the net lease investment. Finance income
from finance leases is recognized as a fixed periodic rate of return on the net investment in the leased asset. Lease
payments received are deducted from the gross amount of the lease investment to reduce principal and unearned
finance income (Note: 7). Unearned finance income is the difference between the gross lease investment and thepresent value of the gross investment at the interest rate implicit in the lease. The implied interest rate is the discountrate at the inception of the lease that equals the sum of the minimum lease payments and the unguaranteed salvage
value to the fair value of the leased asset plus the initial costs.
Revenue recognized at the beginning of the lease term is the fair value of the leased asset or, if lower, the present
value of the minimum lease payments to be received by the lessor, calculated using a market interest rate. The cost of
sales recognized at the beginning of the lease term is the cost of the leased asset. The difference between the sales
revenue recognized by the Group and the cost of sales is the gain on sale.

Dividend and interest income:
Dividend income from equity investments is recognized when the right to receive dividends is established (as long as
the Group will receive the economic benefits and the income can be measured reliably).
Interest income on financial assets is recognized when it is probable that the Group will receive the economic benefits
and the income can be measured reliably. Interest income is accrued over the remaining life of the financial asset using
the effective interest rate that discounts estimated future cash inflows over the expected life of the asset to its
carrying amount.
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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)
2.5 Summary of Significant Accounting Policies (continued)
Inventory
Inventories are stated at the lower of cost and net realizable value. Cost, including an appropriate proportion of fixedand variable overheads, is allocated to inventories using the most appropriate method for each class of inventory, withthe majority being valued using the weighted average method. Net realizable value is the estimated selling price in theordinary course of business, less the estimated costs of completion and the estimated costs necessary to make thesale. When the net realizable value of inventories is less than cost, inventories are written down to net realizable value
and the expense is recognized in the income statement in the year of the write-down or loss. An impairment loss
is reversed when the circumstances that previously caused inventories to be written down to net realizable value nolonger exist or when there is evidence of an increase in net realizable value due to changes in economic conditions. The
amount of the reversal is limited to the amount of the previously recognized impairment loss.
Tangible Fixed Assets
Land and buildings held for use in the production or supply of goods or services or for administrative purposes arestated at revalued amounts. The revalued amount is the fair value at the revaluation date less any accumulated
depreciation and any accumulated impairment losses arising in subsequent periods. Revaluations are made at regularintervals so that the fair value at the balance sheet date does not differ materially from the carrying amount. The
Group adopted the revaluation model for land and buildings from March 2009 and for buildings from May 2015. The
last revaluation of the Group’s land and buildings will take place on 12 October 2023 and will be reflected in the
consolidated financial statements as at 30 September 2023.
The increase arising from the revaluation of such land and buildings is recognized in the revaluation reserve in equity.
The increase in the carrying amount of the revalued property, plant and equipment is recognized in the statement of
profit or loss to the extent of the impairment loss previously recognized in the statement of profit or loss. A decreasein the carrying amount of the revalued land and buildings is recognized in profit or loss to the extent that it exceeds
the balance in the revaluation reserve related to the previous revaluation of the asset.

104

Assets under construction for administrative or other purposes not yet determined are stated at cost less any
impairment losses. Legal fees are also included in the cost. Borrowing costs are capitalized for assets that will takea substantial period of time to get ready for their intended use or sale. When the construction of these assets iscompleted and they are ready for their intended use, they are reclassified to property, plant and equipment. Suchassets are depreciated when they are ready for use, in accordance with the depreciation method used for other fixed
assets.
Depreciation of revalued buildings is recognized in the statement of profit or loss. When the revalued property is sold or
withdrawn from service, the remaining balance in the revaluation reserve is transferred directly to retained earnings. No
transfer is made from the revaluation reserve to retained earnings unless the asset is derecognized.
Property, plant and equipment, other than land and construction in progress, are depreciated over their estimated useful
lives using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed
at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under financial leasing arrangements are depreciated over their expected useful lives in the same way as
owned assets. Where it is uncertain whether ownership will be obtained at the end of the lease term, the asset isdepreciated over the shorter of its estimated useful life and the lease term.
Tangible fixed assets are derecognized when they are disposed of or when no future economic benefits are expectedfrom their use or disposal. Any gain or loss arising on the disposal or retirement of a tangible fixed asset is determinedas the difference between the disposal proceeds and the carrying amount of the asset and is recognized in the income
statement.
Leasing Transactions
Group in the case of a lessee
The Group assesses whether an arrangement is, or contains, a lease at the inception of the arrangement. The Group
recognizes the right-of-use asset and the related lease liability for all leases in which it is the lessee, except for shortterm leases (leases with terms of 12 months or less) and leases of low-value assets. For these leases, the Group
recognizes lease payments as an operating expense on a straight-line basis over the lease term, unless there is anothersystematic basis that better reflects the timing of the economic benefits to be obtained from the leased assets.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)The Group has not made any such changes during the periods presented in the financial statements.

2.5 Summary of Significant Accounting Policies (continued)

Right of use assets comprise the initial measurement of the corresponding lease liability, lease payments made on or
before the commencement date and other direct initial costs. These assets are subsequently measured at cost lessaccumulated depreciation and impairment losses.

Leasing Transactions (continued)
Group in the case of a lessee (continued)
On initial recognition, lease liabilities are measured at the present value of the minimum lease payments, discounted
at the lease’s effective interest rate. If this rate is not predetermined, the Group uses an alternative borrowing rate
determined by the Group.
Lease payments included in the measurement of the lease liability consist of the following:– Fixed lease payments (essentially fixed payments) less any lease incentives;– Variable lease payments linked to an index or rate, initially measured by reference to an index or rate at the
inception of the lease;– The amount of debt expected to be paid by the lessee under residual value guarantees;– The exercise price of payment options if the lessee would reasonably exercise the payment options; and– The lease termination penalty, if there is a right to terminate the lease during the lease term.
The lease liability is presented as a separate line item in the consolidated balance sheet. Lease liabilities aresubsequently measured by increasing the net carrying amount to reflect the interest on the lease liability (using theeffective interest method) and decreasing the net carrying amount to reflect the lease payments made. The Groupremeasures the lease liability (and makes appropriate changes to the related right of use asset) when
– There is a change in the lease term or in the assessment of the exercise of a purchase option, the lease liability isremeasured by discounting the revised lease payments using the revised discount rate;

A provision is recognized in accordance with TAS 37 when the Group incurs costs necessary to dismantle and remove
a leased asset, restore the site on which the asset is located or restore the underlying asset to working order inaccordance with the terms of the lease. These costs are included in the related right of use asset unless they are
incurred to produce inventories.
Right of use assets are depreciated over the shorter of the lease term and the useful life of the underlying asset. The
associated right-of-use asset is depreciated over the useful life of the host asset when ownership of the underlying
asset is transferred or when the Group intends to exercise a purchase option based on the cost of the right-of-use
asset. Depreciation commences at the inception of the lease.
Right of use assets are presented as a separate line item in the consolidated statement of financial position.
The Group applies TAS 36 to determine whether right-of-use assets are impaired and recognizes all identified
impairment losses as described in the ‘Tangible Fixed Assets’ policy.
Variable rents that are not dependent on an index or rate are excluded from the measurement of the lease liability andthe right of use asset. Related payments are recognized as an expense in the period in which the underlying event or
events giving rise to the payments occur and are included in ‘other expenses’ in the income statement.
As a practical expedient, TFRS 16 allows a lessee to account for all leases and non-lease elements as a single leaseand not to present the non-lease elements separately. The Group has not made use of this practical expedient.

– The lease liability is remeasured by discounting the revised lease payments at the original discount rate when there
is a change in the lease payments due to changes in the index, the interest rate or a change in the expected
payment of the committed residual value (a revised discount rate is used when the change in the lease payments isdue to a change in the variable interest rate);– A lease is modified and the lease modification is not accounted for as a separate lease, the lease liability is restatedby discounting the revised lease payments using the revised discount rate.
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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)
2.5 Summary of Significant Accounting Policies (continued)
Intangible Fixed Assets

Intangible Fixed Assets Acquired
Acquired intangible fixed assets with finite useful lives are stated at cost less accumulated amortization andaccumulated impairment losses. These assets are amortized on a straight-line basis over their estimated useful lives.
The estimated useful lives and the amortization method are reviewed at each year-end and the effects of any changes
in estimates are accounted for prospectively. Acquired intangible assets with indefinite useful lives are stated at costless accumulated impairment losses (1-20 years).

Internally generated intangible assets arising from development activities (or the development phase of an internal
project) are only recognized when all of the following conditions are met:
– It is technically feasible to complete the intangible asset so that it is ready for use or sale, the intention tocomplete, use or sell the intangible asset– The intangible asset can be used or sold
– It is clear how the asset is likely to generate future economic benefits,– Adequate technical, financial and other resources are available to complete the development of the intangible asset
and to use or sell the asset; and– The development costs of the asset can be measured reliably during the development process.

Computer software

The amount of an internally generated intangible fixed asset is the total expenditure incurred from the date on which
the intangible asset meets the recognition criteria described above. Where internally generated intangible assets are notrecognized, development expenditure is recognized as an expense in the period in which it is incurred.

Acquired computer software is capitalized at the time of acquisition and at the cost incurred from the time ofacquisition until the software is ready for use. These costs are amortized over their useful lives (1-5 years).

Subsequent to initial recognition, internally generated intangible assets, like separately acquired intangible assets, arecarried at cost less accumulated amortization and accumulated impairment losses.

Costs associated with the development and maintenance of computer software are recognized in the income
statement in the period in which they are incurred. Costs that are directly attributable to the development ofidentifiable and unique software products controlled by the Group and that will generate economic benefits in excess of
costs for more than one year are recognized as intangible assets. Costs include the cost of the employees who develop
the software and a proportion of production overheads.

Derecognition of intangible assets

Internally generated Intangible Fixed Assets- Research & Development Expenses
Capitalized development costs represent expenditure incurred within the Group for the development of vehicles
produced. Internally generated intangible fixed assets are capitalized at cost when it is probable that future economic
benefits will flow to the Group.
Research costs are recognized in the income statement in the period in which they are incurred.

106

An intangible fixed asset is derecognized when it is disposed of or when no future economic benefits are expectedfrom its use or disposal. The gain or loss arising on derecognition of an intangible asset is calculated as the difference,
if any, between the net proceeds from the disposal of the asset and its carrying amount. This difference is recognizedin the income statement when the asset is derecognized.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Borrowing Costs

2.5 Summary of Significant Accounting Policies (continued)

For assets that take a substantial period of time to get ready for their intended use or sale (qualifying assets),borrowing costs that are directly attributable to the acquisition, construction or production of the asset are included in
the cost of the asset until the asset is ready for its intended use or sale.

Impairment of Intangible Fixed Assets other than Tangible Fixed Assets and Goodwill
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible fixed assets to determine
whether there is any impairment in value. If assets are impaired, the recoverable amount of the assets, if any, ismeasured to determine the amount of impairment. When the recoverable amount of an asset cannot be measured,
the Group measures the recoverable amount of the cash-generating unit associated with the asset. If a reasonable
and consistent basis of allocation can be determined, the assets of the company are allocated to the cash- generating
units. Where this is not possible, Group assets are allocated to the smallest cash-generating unit for the purpose ofdetermining a reasonable and consistent basis of allocation.
Intangible fixed assets with indefinite useful lives that are not available for use are tested for impairment at least
annually or whenever there is an indication of impairment. The recoverable amount of an asset or cash-generating unit
is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future
cash flows expected to be derived from an asset or cash-generating unit. Value in use is calculated using a pre-tax
discount rate that reflects current market assessments of the value in use of the asset and the risks specific to theasset that are not taken into account in the estimation of future cash flows.
If the recoverable amount of an asset (or cash-generating unit) is less than its carrying amount, the carrying amountof the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized directlyin the income statement unless the asset is carried at revalued amount. In this case, the impairment loss is recognized
as a revaluation decrease.
If an impairment loss is reversed in a subsequent period, the carrying amount of the asset (or its cash-generating unit)
is increased to reflect the revised estimate of its recoverable amount.
The increased carrying amount should not exceed the carrying amount that the asset (or its cash-generating unit)
would have had if no impairment loss had been recognized for the asset in prior periods. A reversal of an impairment
loss is recognized immediately in profit or loss, unless the asset is carried at a revalued amount. A reversal of an
impairment loss on a revalued asset is recognized as a revaluation increase.

Where the Group borrows funds for general purposes and some of those funds are used to finance the acquisition ofa qualifying asset, the amount of borrowing costs that can be capitalized is determined by applying a capitalization rate
to the expenditure incurred in relation to that asset. This capitalization rate is the weighted average of the borrowing
costs of all the Group’s borrowings during the period, excluding borrowings for the acquisition of qualifying assets.
Financial Instruments
Financial assets and financial liabilities are recognized in the Group’s balance sheet when the Group becomes a party
to the contractual provisions of the financial instrument. Financial assets and financial liabilities are initially recognizedat fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities(other than financial assets and liabilities at fair value through profit or loss) are added to or deducted from the fairvalue of those financial assets and liabilities on initial recognition. Transaction costs that are directly attributable to theacquisition or issue of financial assets and liabilities are recognized directly in the income statement.

Financial assets
Financial assets that are traded in the normal course of business are recognized or derecognized on the trade date.
The Group classifies its financial assets as either at amortized cost, at fair value through other comprehensive income
or at fair value through profit or loss on subsequent recognition based on (a) the entity’s business model for managing
financial assets and (b) the characteristics of the contractual cash flows of the financial asset. When an entitychanges its business model for managing financial assets, it reclassifies all affected financial assets. The reclassificationof financial assets is applied prospectively from the date of reclassification. In such cases, no adjustment is made topreviously recognized gains, losses (including impairment gains or losses) or interest.

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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)(i) Amortized cost and effective interest method

2.5 Summary of Significant Accounting Policies (continued)

Interest income on financial assets carried at amortized cost is calculated using the effective interest method. The
effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest
income over the relevant period. This income is calculated by applying the effective interest rate to the gross carrying
amount of the financial asset, with the exception of:Financial assets (continued)
Classification of financial assets
Financial assets that meet the following conditions are subsequently measured at amortized cost:– the financial asset is held within a business model whose objective is to collect the contractual cash flows; and– the contractual terms of the financial asset give rise to cash flows at specified dates that are solely payments ofprincipal and interest on the principal outstanding.
– Financial assets that meet the following conditions are measured at fair value through other comprehensive income:– The financial asset is held within a business model whose objective is to collect the contractual cash flows and sell
the financial asset; and– the contractual terms of the financial asset give rise to cash flows at specified dates that are solely payments ofprincipal and interest on the principal outstanding.
If a financial asset is not measured at amortized cost or fair value through other comprehensive income, it is measured
at fair value through profit or loss.
On initial recognition, the Group may make an irrevocable election to recognize subsequent changes in the fair value of
an investment in an equity instrument that is not held for trading in other comprehensive income.

(a) financial assets that were credit impaired at acquisition or origination. For such financial assets, the entity applies
the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
(b) financial assets that were not credit-impaired financial assets when acquired or originated but subsequently
become credit-impaired financial assets. For such financial assets, the entity applies the effective interest rate to
the amortized cost of the asset at subsequent reporting dates.
Interest income is subsequently recognized using the effective interest method for debt instruments measured atamortized cost and at fair value through other comprehensive income.
(ii) Financial assets at fair value through profit or loss
Financial assets that do not meet the criteria to be measured at amortized cost or at fair value through othercomprehensive income are measured at fair value through profit or loss.
Financial assets at fair value through profit or loss are measured at fair value at the end of each reporting period andall changes in fair value are recognized in the income statement, unless the financial assets are designated as hedging
instruments (see policy on hedge accounting).
(iii) Equity instruments at fair value through other comprehensive income
On initial recognition, the Group may make an irrevocable election to recognize subsequent changes in the fair value of
an investment in an equity instrument that is not held for trading in other comprehensive income.

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KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Foreign exchange gains and losses

2.5 Summary of Significant Accounting Policies (continued)

The carrying amount of financial assets denominated in a foreign currency is determined in that foreign currency andtranslated at the exchange rate at the end of each reporting period. In particularFinancial assets (continued)
Classification of financial assets (continued)(ii) Financial assets at fair value through profit or loss (continued)
A financial asset is classified as held for trading if it is– acquired with the intention of selling in the near term; or– on initial recognition, is part of a portfolio of specific financial instruments that the Group manages together andthere is recent evidence that the Group has a pattern of short-term profit-taking; or– a derivative instrument (other than a financial guarantee contract or a derivative that is a designated and effective
hedging instrument).
Investments in equity instruments at fair value through other comprehensive income are initially recognized at fairvalue plus transaction costs. Gains and losses arising from changes in fair value are subsequently recognized in othercomprehensive income and accumulated in the revaluation reserve. On disposal of an equity investment, the cumulative
gain or loss is transferred to retained earnings.
Dividends on equity instruments are recognized in profit or loss in accordance with TFRS 9, unless they represent
a partial recovery of the cost of the investment. Dividends are recognized in the income statement in ‘Income frominvesting activities’.
The Group has reclassified changes in the fair value of equity instruments that are not held for trading purposes toother comprehensive income, as disclosed in Note 30.

– Exchange differences on financial assets carried at amortized cost that are not part of a designated hedging
relationship are recognized in the income statement;– Exchange differences arising on the amortized cost of debt instruments that are measured at fair value throughother comprehensive income and that are not part of a designated hedging relationship are recognized in the income
statement. All other exchange differences are recognized in other comprehensive income;– for financial assets at fair value through profit or loss that are not part of a designated hedging relationship,exchange differences are recognized in the income statement; and– Exchange differences on equity instruments measured at fair value through other comprehensive income arerecognized in other comprehensive income.
Impairment of financial assets
The Group recognizes an allowance in the financial statements for expected credit losses on debt instruments, leasereceivables, trade receivables, assets arising from contracts with customers and investments in financial guarantee
contracts that are carried at amortized cost or fair value through other comprehensive income. The amount of
expected credit loss is revised at each reporting date to reflect changes in credit risk since the initial recognition of thefinancial asset.
The Group uses the simplified approach for trade receivables and assets arising from contracts with customers that do
not have a significant financing element and calculates impairment losses at an amount equal to the expected credit
loss over the life of the related financial assets.
For all other financial instruments, the Group recognizes lifetime expected credit losses if there has been a significant
increase in credit risk since initial recognition. However, if the credit risk of the financial instrument has not increased
significantly since initial recognition, the Group recognizes an allowance equal to 12 months of expected credit losses
for that financial instrument.

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KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Financial liabilities

2.5 Summary of Significant Accounting Policies (continued)

An entity measures a financial liability at fair value on initial recognition. On initial recognition of liabilities other thanthose at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue ofthe liability are added to fair value.

Financial assets (continued)
Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of default, the loss given default (i.e. themagnitude of the loss given default) and the amount at risk at default. The assessment of probability of default andloss given default is based on historical data adjusted by forward-looking information. The amount at risk of default offinancial assets is the gross carrying amount of the assets at the balance sheet date.
The expected credit loss on financial assets is the present value of the difference between all contractually agreed
cash flows that the Group expects to collect as they fall due and all cash flows that the Group expects to lose (allcash losses), calculated using the initial effective interest rate (or credit-adjusted effective interest rate for financial
assets that were credit impaired at acquisition or origination).
Derecognition of financial assets
The Group derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset
expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset
to another entity.
When a financial asset carried at amortized cost is derecognized, the difference between the carrying amountof the asset and the consideration received or receivable is recognized in the income statement. In addition, on
derecognition of a debt instrument measured at fair value through other comprehensive income, the cumulative gainor loss previously recognized in the revaluation reserve is reclassified to the income statement. On derecognition ofan equity instrument that the Group has elected to designate upon initial recognition as at fair value through othercomprehensive income, the cumulative gain or loss previously accumulated in the revaluation reserve is not recognizedin the income statement but is transferred directly to retained earnings.

110

On subsequent recognition, the entity classifies all financial liabilities as at amortized cost, with the exception of thefollowing(a) financial liabilities at fair value through profit or loss: These liabilities, including derivatives, are subsequently
measured at fair value.
(b) Financial liabilities that arise when the transfer of a financial asset does not meet the derecognition criteria or
when the continuing relationship approach is applied: When the Group continues to recognize an asset in thefinancial statements to the extent of its continuing involvement, it also recognizes a corresponding liability in thefinancial statements. The transferred asset and the associated liability are measured to reflect the rights andobligations that the Group continues to retain. The liability associated with the transferred asset is measured in
the same way as the net carrying amount of the transferred asset.
(c) contingent consideration recognized by the acquirer in a business combination to which TFRS 3 applies: Afterinitial recognition, changes in the fair value of such contingent consideration are measured at fair value throughprofit or loss.
The entity does not reclassify financial liabilities.
Derecognition of financial liabilities
The Group derecognizes financial liabilities only when the Group’s obligations have been discharged or cancelled or have
expired. The difference between the carrying amount of the derecognized financial liability and the amount paid or
payable, including any non-cash assets transferred or liabilities assumed, is recognized in the income statement.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)
2.5 Summary of Significant Accounting Policies (continued)
Derivative financial instruments
Detailed information on derivative financial instruments is given in Note 29.
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at fair value at each reporting date. The resulting gain or loss is recognized in the income statement unlessthe derivative is designated and effective as a hedging instrument.
A derivative with a positive fair value is recognized as a financial asset and a derivative with a negative fair value isrecognized as a financial liability. Derivative instruments are not offset and are not presented on a net basis unless theGroup has a legal right and intention to offset the recognized amounts. A derivative instrument is recognized as a noncurrent asset or liability when it has a remaining maturity greater than 12 months and is not expected to be realized or
settled within 12 months. Other derivatives are classified as current assets or liabilities.
Hedge accounting
The Group designates certain derivative financial instruments as hedges of foreign currency risk and interest rate risk
arising from fair value hedges, cash flow hedges or, where appropriate, hedges of net investments in foreign operations.
Foreign currency hedges of firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument andhedged item, together with its risk management objectives and strategies for managing the various hedges. The Groupalso makes the following assessments of the effectiveness of the hedging instrument at inception and on an ongoingbasis:– there is an economic relationship between the hedged item and the hedging instrument;– the credit risk effect does not drive the changes in value arising from the economic relationship; and– the hedging relationship is the same as the ratio of the amount of the hedged item that the Group actually hedges
to the amount of the hedging instrument that the Group actually uses to hedge that amount.

If the hedging relationship does not meet the hedge effectiveness criteria for the hedge ratio, but the risk management
objectives for that designated hedging relationship remain the same, the Group changes the hedge ratio of the hedging
relationship to meet the required criteria (e.g. by rebalancing the hedge). For all hedging relationships that include
forward contracts, the Group designates as the hedging instrument the entire fair value measurement risk of theforward contracts (i.e. including the forward elements).
Details of the fair values of derivative financial instruments used for hedging purposes are disclosed in
Notes 29 and 31.
Business Combinations
Business combinations are accounted for using the purchase method. The consideration transferred in a businesscombination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the acquirer, the liabilities assumed by the acquirer to the former owners of the acquiree and the equity
interests issued by the acquirer. Acquisition costs are generally recognized as an expense when incurred.
Identifiable assets acquired and liabilities assumed are recognized at their fair values at the acquisition date. The
following items are not recognized:– Deferred tax assets or liabilities and employee benefit assets or liabilities are recognized and measured in accordancewith TAS 12 Income Taxes and TAS 19 Employee Benefits respectively;– Liabilities or equity instruments relating to the acquiree’s share-based payment arrangements or the Group’s
share-based payment arrangements entered into to replace the acquiree’s share-based payment arrangements arerecognized and measured at the acquisition date in accordance with TFRS 2 Share-based Payment.
– Assets (or disposal groups) classified as held for sale in accordance with TFRS 5 Non-current Assets Held for Saleand Discontinued Operations are accounted for in accordance with TFRS 5.
Goodwill is measured as the excess of the consideration transferred, plus the fair value of any non-controlling interestin the acquiree and, in the case of a step acquisition, the fair value of any previously held equity interest in theacquiree, over the net fair value of the acquiree’s identifiable assets acquired and liabilities assumed at the acquisition
date. If, after reassessment, the net amount of the acquiree’s identifiable assets acquired and liabilities assumed
exceeds the sum of the fair value of the consideration transferred, the non-controlling interest in the acquiree and, if
any, the fair value of the acquirer’s pre-acquisition interest in the acquiree, that amount is recognized directly in theincome statement as a bargain purchase gain.
111

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Goodwill

2.5 Summary of Significant Accounting Policies (continued)

Goodwill arising on acquisition is measured at cost at the acquisition date, less any impairment losses. For the purposeof impairment testing, goodwill is allocated to the Group’s cash-generating units (or groups of cash-generating units)that are expected to benefit from the synergies of the combination. The cash-generating unit to which goodwill isallocated is tested for impairment annually. If there are indications that the unit may be impaired, the impairment test
is performed more frequently. If the recoverable amount of the cash-generating unit is less than its carrying amount,
an impairment loss is recognized first against the goodwill allocated to the unit and then against the carrying amountof the assets within the unit. Any impairment loss on goodwill is recognized immediately in the income statement.
Impairment losses on goodwill are not reversed in subsequent periods.

Business Combinations (continued)
Non-controlling interests, which represent shareholders’ interests and entitle the holders to a proportionate share of the
net assets of the entity on liquidation, are initially measured either at fair value or at the amount of the acquiree’s
identifiable net assets recognized in proportion to the non-controlling interests.
When the consideration transferred by the Group in a business combination includes contingent consideration, thecontingent consideration is measured at fair value at the acquisition date and included in the consideration transferredin the business combination.
If, as a result of additional information that becomes available during the measurement period, an adjustment to thefair value of the contingent consideration is required, it is made retrospectively against goodwill. The measurement
period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized
in a business combination. This period should not exceed one year from the acquisition date.
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration
classified as equity is not remeasured and any subsequent payment is recognized in equity. The fair value of othercontingent consideration is remeasured and changes are recognized in the income statement.
In a business combination achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured
to fair value at the acquisition date (i.e. the date the Group obtains control) and the resulting gain or loss, if any, isrecognized in profit or loss. Amounts relating to the acquiree’s investment previously recognized in other comprehensive
income are transferred to the income statement on the assumption that the acquiree disposes of the investment.
When the purchase accounting for a business combination is not complete at the end of the reporting period in which
the combination occurs, the Group recognizes provisional amounts for the items for which the accounting is incomplete.
These provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized,
to reflect new information obtained about facts and circumstances that existed at the acquisition date that may
affect the amounts recognized at the acquisition date.

112

On disposal of the relevant cash-generating unit, the amount determined for goodwill is included in the calculation of
the gain or loss on disposal.
The Group’s policy on goodwill arising on the acquisition of associates is disclosed under ‘Associates’.
Effects of Exchange Rate Changes
Foreign Currency Transactions and Balances
The financial statements of each Group company are presented in the currency of the primary economic environment
in which the company operates (its functional currency). The results and financial position of each entity are expressedin TRY, which is the entity’s functional currency and the presentation currency of the consolidated financial statements.
In preparing the financial statements of each entity, transactions in foreign currencies (currencies other than TRY) arerecorded at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominatedin foreign currencies are translated to TRY at the exchange rates prevailing at the balance sheet date. Non-monetary
items at fair value through profit or loss denominated in foreign currencies are translated to TRY at the exchange
rates prevailing on the date when the fair value was determined. Non-monetary items in foreign currencies that aremeasured at historical cost are not re-translated.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Events after the reporting period

2.5 Summary of Significant Accounting Policies (continued)

Subsequent events include all events that occur between the balance sheet date and the date on which the financial
statements are authorized for issue, even if they occur after the announcement of the results or other selectedfinancial information.

Effects of Exchange Rate Changes (continued)
Foreign Currency Transactions and Balances (continued)
Exchange differences are recognized in the income statement in the period in which they arise, except as noted below:– Exchange differences relating to assets under construction for future use, which are treated as an adjustment to
the interest cost of foreign currency denominated liabilities and included in the cost of such assets,– exchange differences arising on transactions entered into to hedge foreign currency risks,– exchange differences arising on monetary receivables and payables from foreign operations that form part of the
net investment in a foreign operation, which are recognized in the translation reserve and recognized in the income
statement on disposal of the net investment, and for which there is no intention or ability to settle.
Financial Statements of Subsidiaries, Joint Ventures and Associates Operating in Foreign Countries
Assets and liabilities of the Group’s foreign operations are translated to TRY in the consolidated financial statements
at the exchange rates prevailing at the balance sheet date. Income and expense items are translated at averageexchange rates for the period, unless there have been significant fluctuations in exchange rates during the period, inwhich case the exchange rates at the dates of the transactions are used (in the case of significant fluctuations, theexchange rates at the dates of the transactions are used). The resulting exchange differences are recognized in othercomprehensive income and accumulated in a separate component of equity.
Earnings per ShareThe Group adjusts the amounts recognized in the financial statements when events that require adjustment occur after
the balance sheet date.
Provisions, Contingent Assets and Liabilities
Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that theGroup will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the most reliable estimate of the expenditure required to settle the obligation
at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. If theprovision is measured using the estimated cash flows required to settle the present obligation, the carrying amount of
the provision is the present value of those cash flows.
When some or all of the economic benefits required to settle provision are expected to be received from a third party,
the receivable is recognized as an asset when it is virtually certain that the reimbursement will be received and theamount of the receivable can be reliably measured.
The Group sells warranty obligations for its products for the period from the end of the statutory warranty period. The
price of additional repair and maintenance services, other than warranty services, is determined separately from theproducts sold and is considered to be a separate contractual service. Therefore, the Group recognizes the service to beprovided as a result of sales of repair and maintenance services as a separate performance obligation (Note 15).

Earnings per share as reported in the consolidated income statement are calculated by dividing the net profit by theweighted average number of shares outstanding during the year.
In Turkey, companies may increase their share capital by distributing “bonus shares” to shareholders out of retained
earnings. Such bonus share distributions are treated as shares issued for the purpose of calculating earnings per share.
Accordingly, the weighted average number of shares used in the earnings per share calculations is calculated taking
into account the retrospective effect of such share distributions.
113

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Government Grants and Assistance

2.5 Summary of Significant Accounting Policies (continued)

Government grants are not recognized until there is reasonable assurance that the entity will comply with theconditions attached to the grants and that the grants will be received.

Warranties
Provisions for warranty costs are recognized at the date of sale of the related products and are based on
management’s best estimate of the expenditure required to settle the Group’s obligations.
Segment Reporting of Financial Information
Segment reporting is organized to be consistent with the reporting to the Group’s chief operating decision maker.
The Group’s chief operating decision maker is responsible for making decisions about resources to be allocated to thesegments and for assessing the performance of the segments. Segments included in ‘Other’ have been aggregated forsegment reporting purposes as they do not meet the quantitative thresholds to be a reportable segment.
A reportable segment is an industry segment or a geographical segment for which segment information is required
to be disclosed. Business segments are those that provide a particular good or service or a group of related goods
or services and that are subject to risks and returns that are different from those of other segments of the Group.
Geographical segments are segments of the Group that provide goods or services within a particular economic
environment and are subject to risks and returns that are different from those of other segments operating in othereconomic environments.
For an industry or geographical segment to be identified as a reportable segment, its reported revenue, including sales
to external customers and intersegment sales or transfers, must be 10 percent or more of the total revenue of all
operating segments, internal and external, or 10 percent or more of the total reported profit or loss, or its assets
must be 10 percent or more of the total assets of all industry or geographical segments. If management believes thatsegment information is useful to users of the financial statements, business or geographical segments that do notmeet either of the above quantitative thresholds may also be considered reportable segments and information about
them may be disclosed separately (Note 4).

114

Government grants are recognized in the income statement on a systematic basis over the period in which the costs
that the grants are intended to compensate for are recognized as expenses. Government grants that are financing
instruments should be recognized in the balance sheet as unearned income and released to the income statement on asystematic basis over the useful lives of the related assets, rather than being recognized in the income statement as
an offset to the cost that they finance.
Government grants that are intended to compensate for expenses or losses already incurred or that provide the entitywith immediate financial assistance without incurring future costs are recognized in the income statement in the period
in which they become receivable.
The benefit of a loan from the government at a lower interest rate than the market rate is considered to be agovernment grant. The benefit of the lower interest rate is measured as the difference between the initial carrying
amount of the loan and the gain realized.
Taxes calculated on Corporate Income
Turkish tax legislation does not allow a parent company and its subsidiary to file a consolidated tax return. Therefore,
the provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a
separate entity basis.
Income tax expense represents the sum of current tax payable and deferred tax.

Current Tax
The current tax liability is based on the taxable profit for the period. The taxable profit differs from the profit reported
in the income statement because it excludes items of income or expense that are taxable or deductible in other years
and also excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantially enacted at the balance sheet date.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)

Current and deferred tax

2.5 Summary of Significant Accounting Policies (continued)

Tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity.
Otherwise the tax is recognized in equity together with the related transaction.

Taxes calculated on Corporate Income (continued)

Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and their corresponding tax bases, using the balance sheet liability method. Deferred tax liabilities
are recognized for all taxable temporary differences, while deferred tax assets arising from deductible temporary
differences are recognized to the extent that it is probable that future taxable profit will be available against which
the deductible temporary difference can be utilized. Such assets and liabilities are not recognized if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for all taxable temporary differences associated with investments in subsidiaries
and associates and interests in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax
assets arising from taxable temporary differences associated with such investments and interests are recognized tothe extent that it is probable that there will be sufficient taxable profit against which to utilize the benefits of thetemporary differences and it is probable that the temporary differences will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which theliability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover orsettle the carrying amount of its assets and liabilities.

Employee Benefits

Severance payments:
In accordance with Turkish law and collective bargaining agreements, lump sum payments are made to employees who
retire or involuntarily leave the Group. Such payments are considered as part of a defined benefit plan under the revised
TAS 19 Employee Benefits (“TAS 19”).
The liability recognized in the balance sheet for post-employment benefits is determined by estimating the net present
value of the Group’s probable future obligation as a result of the retirement of all employees. All actuarial gains andlosses are recognized in other comprehensive income.
Cash Flow Statement
The cash flow statement classifies and presents the cash flows for the period into operating, investing and financing
activities.
Capital and dividends
Ordinary shares are classified as equity. Dividends on ordinary shares are recognized as a deduction from retained
earnings in the period in which the dividend is declared.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities, when they relate to income taxes levied by the same taxation authority and when theGroup intends to settle its current tax assets and liabilities on a net basis.

115

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)(d) Deferred tax assets

2.6 Significant Accounting Judgments, Estimates and Assumptions

The Group recognizes deferred tax assets and liabilities based on temporary differences arising between the financial
statements prepared in accordance with TFRS and the financial statements prepared for tax purposes. The Group has
deferred tax assets arising from unused tax losses and other deductible temporary differences that can be offset
against future profits. In recognizing these deferred tax assets, the Group has considered future profit forecasts andthe expiry dates of losses incurred in current periods. To the extent that the ultimate tax consequences of thesedifferences differ from the amounts initially recognized, such differences will affect the income tax and deferred tax
assets and liabilities in the periods in which they are determined (Note 27).

Critical judgements made by the Group in the application of its accounting policies
In the process of applying the accounting policies described in note 2.5, management has made the following
judgements that have a significant effect on the amounts recognized in the financial statements:(a) Provisions on the determination of the time of fulfilment of the obligations
In making its assessment, management considers the detailed conditions set out in TFRS 15 for the fulfilment of theperformance obligations and the recognition of the related transaction fees as revenue, in particular whether control of
the goods and services has passed to the customer. (Note 20)(b) Useful lives of tangible and intangible fixed assets
Tangible and intangible assets (land and buildings) are stated at cost less accumulated depreciation and impairment
losses, if any. Depreciation is provided on a straight-line basis over the useful lives of the assets. The useful lives are
based on management’s best estimates and are reviewed at each balance sheet date and adjusted where necessary(Notes 11, 12 and 13).

(c) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be madeof the amount of the obligation. The Group considers past and current realization rates in determining the provision
estimates (Note 15).

116(e) Provision for doubtful receivables
The Group establishes provisions for doubtful receivables based on past experience of overdue receivables for which itis probable that collection is impaired (Note 6).

(f) Construction in progress and capitalized development costs
As of 31 December 2023, construction in progress amounting to TRY 1,504,176 (31 December 2022: TRY 1,298,220)
consists of tangible and intangible assets related to ongoing projects. These projects will be capitalized and depreciatedupon completion. In addition, the Group has development costs related to projects capitalized under intangible assets
amounting to TRY 1,006,621 (31 December 2021: TRY 1,222,097). Assets under construction and development costs
that are no longer expected to generate future economic benefits are amortized as an expense during the period.
Management has made its best estimate of the economic benefits to be derived from the investments in excess of
their carrying amounts. (Notes 11 and 12)(g) Capitalization of borrowing costs
The Group capitalizes borrowing costs that are directly attributable to the production of qualifying assets. Details ofborrowing costs capitalized during the period are disclosed in Note 11.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

2. PRINCIPLES OF PRESENTATION OF FINANCIAL STATEMENTS (CONTINUED)(l) Estimated impairment of goodwill

2.6 Significant Accounting Judgments, Estimates and Assumptions (continued)
Critical judgements made by the Group in the application of its accounting policies (continued)

The Group tests goodwill for impairment annually in accordance with the accounting policy described in note 2.5. The
recoverable amounts of cash-generating units are determined based on value-in-use calculations. These calculations
require the use of estimates.

(h) Inventory impairment

3. INTERESTS IN OTHER BUSINESSES AND BUSINESS COMBINATIONSInventory impairment is determined in accordance with the Group’s accounting policy and is calculated by assessing theperiod of inactivity of the inventories and possible impairment (Note 9).(i) Investment allowance, R&D allowance andinterest deduction on cash capital increases a result of the assessment made, the Group has recognized a deferred tax
asset of TRY 415,320 (31 December 2022: TRY 286,466,466) (Note: 27) based on the investment of TRY 1,781,702(31 December 2022: TRY 1,432,330) within the scope of the incentive based on the preliminary determinations, as
the Group expects to benefit from reduced corporate income tax in subsequent periods under the Corporate Income Tax
Law No. 5520. When the amount of investment eligible for incentives is finalized, if the amount of investment eligible
for incentives differs from the Group’s determination in the current period, such differences may affect the deferred
tax assets.

Associates and financial investments(j) Calculation of loss provisions
In calculating expected loss provisions, the Group uses reasonable and supportable forward-looking information based onassumptions about various future economic conditions and how they will affect each other. The loss given default isan estimate of the loss that will occur. It is based on the difference between what the lender expects to collect andthe contractual cash flows, taking into account cash flows from collateral and credit enhancements. The probability ofdefault is an important input to the measurement of expected credit losses. The probability of default is an estimateof the probability of default over a given period of time and its calculation involves historical data, assumptions andexpectations of future conditions.

(k) Control over HCI Company
As the Group owns only 50% of HCI Company, HCI Company is defined as a subsidiary of the Group in Note 3. Basedon the contracts signed between the Group and other investors, the Group has the power to change and appoint themembers of the board of directors who have the power to manage the related activities of HCI Company. Therefore,
management has concluded that the Group has the power to govern the relevant activities of the Company andtherefore the Group has control over HCI Company.

Details of significant associates and financial investments:
As of 31 December 2023 and 31 December 2022, the details of the Group’s significant joint ventures are as follows:

Company’s Title

Field of
Activity

FX

Karsan Otomotiv Sanayi Mamulleri
Pazarlama A.Ş. (“Karsan Pazarlama”) (*)

Distributor

Turkish Lira

Group’s shareholding in the capital andrate of voting rights (%)
31 December 2023 31 December 2022

6.43%

6.43%

After the capital increase in Karsan Pazarlama Sanayi Mamulleri Pazarlama A.Ş. in January 2021, Karsan Otomotiv Sanayii ve Ticaret A.Ş.’sshareholding in the capital and voting rights decreased from 25% to 6.43%. As a result, since the Group does not have significant influence over thecompany, it is classified as “Financial asset at fair value through other comprehensive income”.
(*)

Summarized financial information about significant associates and financial investments included in the consolidated
financial statements of the Group is disclosed below. This summarized financial information represents the amounts
in the financial statements of associates prepared in accordance with TFRS and adjusted by the Group for the equity
method.
Karsan Otomotiv Sanayi Mamulleri Pazarlama A.Ş.
Due to the negative net assets of Karsan Otomotiv Sanayi Mamulleri Pazarlama A.Ş., the Company presents Karsan
Otomotiv Sanayi Mamulleri Pazarlama A.Ş. at zero value in the consolidated financial statements.

117

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

4. SEGMENT REPORTING
A reportable segment is an industry segment or a geographical segment for which segment information is required
to be disclosed. Business segments are those that provide a particular good or service or a group of related goods
or services and that are subject to risks and returns that are different from those of other segments of the Group.
Geographical segments are those that provide goods or services within a particular economic environment and that are
subject to risks and returns that are different from those of the Group’s other segments operating in other economic
environments. Information on operating segments based on the Group’s internal reporting is as follows:

TurkeyItaly
Romania
USA
FrancePortugal
GreeceSpain
IsraelBulgaria
CroatiaJapan
Belgium
PolandGermany
Switzerland
Lithuania
Hungary
UkraineIraq
Slovakia
Austria
Luxembourg
CanadaOther

118

1 January31 December 2023

1 January31 December2022

3.317.650
1.419.514
1.323.301
623.383585.097167.565
105.21587.97779.17055.42521.14421.854
8.759
1.644
1.663
1.263
1.187
893
754
164
29
11
-

2.590.639
242.694
830.440478.743
93.37030.468130.258
191.22221.04017.327591.637
119.023
24.4907.823.662

5.361.351

The Group’s principal activity is the manufacture of motor vehicles and related equipment and spare parts. The Grouphas four operating segments, which include information used by the Group’s management to evaluate performanceand decide on the allocation of resources. These operating segments are Karsan branded products, where the Group
reports on commercial vehicles produced under its own brand; industrial and spare parts sales, where the Group
reports on spare parts, tractor cab and primer coating operations; and other branded sales, where the Group reports oncommercial vehicles produced for other brands. While operating profit or loss is included in the regular assessment ofsegment performance, other operating income and expenses are not allocated. The majority of the Group’s assets andliabilities are located in Turkey. In addition, segment assets and liabilities have not been reported as there is no periodic
disclosure of assets and liabilities to the chief operating decision maker. The Group management analyzes the financial
data through the consolidated financial statements prepared in accordance with TFRS.
1 January - 31 December 2023
Revenue
Cost of Sales (-)
Gross Profit/(loss) from Trade
Operations
Gross profit from financial activities

Total
7.547.685(6.255.622)

Karsan Branded Industrial and
Other
Products Spare parts Branded Sales
Other
4.251.781
374.1422.544.258 377.504(3.206.771)(235.766)(2.407.011) (406.074)

1.292.063
275.977

1.045.010
155.464138.376
13.680137.247
93.029(28.570)
13.803Gross profit/(loss)

1.568.040

1.200.474

152.056

230.276(14.767)

Marketing Expenses (-)
General and Administrative Expenses (-)
Research & Development Expenses (-)
Other Operating Incomes
Other operating expenses (-)(789.243)(362.384)(14.081)1.122.433(73.341)(735.892)(266.316)(14.080)
1.041.060(68.025)(53.352)(10.955)-(85.112)81.373(5.317)-

Operating profit/(loss)

1.451.424

1.157.221

87.749221.220(14.767)

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

4. SEGMENT REPORTING (CONTINUED)
1 January - 31 December 2022
Revenue
Cost of Sales (-)
Gross Profit/(loss) from Trade
Operations
Gross profit from financial activities

The details of transactions between the Group and other related parties are disclosed below.
Total
5.264.421(4.634.091)

Karsan Branded Industrial and
Other
Products Spare parts Branded Sales
3.077.126
358.240
1.610.274(2.186.470)(254.134) (1.958.386)

Other
218.781(235.101)

630.330
96.930890.656-

104.106-(348.112)96.930(16.320)-Gross profit/(loss)

727.260

890.656

104.106(251.182)(16.320)

Marketing Expenses (-)
General and Administrative Expenses (-)
Research & Development Expenses (-)
Other Operating Incomes
Other operating expenses (-)(518.658)(324.077)(15.854)735.693(23.376)(423.383)(223.560)(14.560)
247.073
192.319(66.236)(18.874)
86.237(38.067)(81.643)(1.294)371.718(164.089)(29.039)30.665(13.539)

Operating profit/(loss)

580.988668.545

67.166(126.490)

Balances with related parties
Kıraça Holding A.Ş.
Karsan Otomotiv Sanayi Mamülleri
Pazarlama A.Ş.
Karland Otomotiv A.Ş.
Karsan North America LLC
Sirena Marine Denizcilik ve Ticaret A.Ş.
Kök Ziraat Turizm San. ve Tic. A.Ş.
Kırsan Turizm ve Otomotiv San. ve Tic. A.Ş.
Karsan USA
Kar İnşaat Taahhüt San. ve Tic. A.Ş.

Receivables
Short term Trade

31 December 2023
Short term
Short term
Trade
Other

PayablesLong term Other-(68.902)(184.767)(260.000)

498
-

(336)
(3.147)(21.771)(8.553)(4.981)(1.680)
(99)

-

-

498

(109.469)(184.767)(260.000)(28.233)

5. RELATED PARTY DISCLOSURES
Transactions between the Company and its subsidiaries that are related parties of the Company are not disclosed inthis note since they are eliminated on consolidation.
Trade receivables from related parties generally arise from sales transactions and have an approximate maturity of 75
days.
Trade payables to related parties generally arise from purchase transactions and their approximate maturities are 75
days.

119

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

5. RELATED PARTY DISCLOSURES (CONTINUED)

1 January - 31 December 2022
31 December 2022
Receivables
Short term
Trade

Balances with related parties
Kıraça Holding A.Ş.
Karsan Otomotiv Sanayi Mamülleri Pazarlama A.Ş.
Karland Otomotiv A.Ş.
Sirena Marine Denizcilik ve Ticaret A.Ş.
Kök Ziraat Turizm San. ve Tic. A.Ş.
Kırsan Turizm ve Otomotiv San. ve Tic. A.Ş.
Kar İnşaat Taahhüt San. ve Tic. A.Ş.

PayablesShort term

1.157
-

(14.044)(1.427)(53.881)(6.169)(3.805)
(68)

1.157

(79.394)

1 January - 31 December 2023

Related Party Transactions
Kıraça Holding A.Ş.
Kırsan Turizm ve Otomotiv San.ve
Tic. A.Ş.
Karland Otomotiv A.Ş.
Kök Ziraat Turizm San. ve Tic. A.Ş.
Kar İnşaat Taahhüt San. ve Tic. A.Ş.
Sirena Marine Denizcilik ve TicaretA.Ş.
Karsan Otomotiv Sanayi Mamülleri
Pazarlama A.Ş.

120

Service
Procurement

Purchases

Sales

Interest
EarnedInterest
Paid

Leasing
Expense

Other
Income/(Costs)(28.443)---(126.156)(1.331)(1.168)(32.941)(1.566)(5.356)
(64)

(120)
-

677
-

-

-

(8.786)-(6)(3.082)--(55.663)

2

-

-

-

(4)

(17)

(1.089)

-

-

-

-

256

(68.387)(56.872)679-(126.156)(10.117)(4.004)

Related Party Transactions
Kıraça Holding A.Ş.
Kırsan Turizm ve Otomotiv San.ve
Tic. A.Ş.
Karland Otomotiv A.Ş.
Kök Ziraat Turizm San. ve Tic. A.Ş.
Kar İnşaat Taahhüt San. ve Tic. A.Ş.
Sirena Marine Denizcilik ve Ticaret A.Ş.
Karsan Otomotiv Sanayi Mamülleri
Pazarlama A.Ş.

Service
Procurement Purchases

Sales

Interest
EarnedInterest
Paid

Other
Leasing Income/Expense (Costs)(33.157)

-

-

-

(199)

-

(1.453)(28.830)(1.030)
(58)
-

(113)
(48.112)

6.101
17

-

(269)
(4.179)(8.056)-(3.836)--(1.356)

-

-

-

-

259

(63.075)(49.581)

6.118-(4.647)(8.056)(5.030)

The Group receives information systems, human resources, financial and other consultancy services from Kıraça
Holding.
The Group supplies Sirena Marine with certain interior components, molds and equipment for the production ofminibuses, midibuses and buses.
The Group receives services from Kırsan Turizm for advertising, social activities and travel expenses.
The Group pays monthly rent to Kök Ziraat A.Ş. for the office in Istanbul. Security, natural gas, maintenance, repairs,
cleaning and other common expenses of the office are invoiced monthly by Kök Ziraat A.Ş. In addition, the factorybuilding in Bursa Organized Industrial Zone is rented from Kök Ziraat A.Ş.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

5. RELATED PARTY DISCLOSURES (CONTINUED)

Long term trade receivables

Benefits provided to senior management:

Trade receivables (*)

The Company’s senior management consists of the members of the Board of Directors, the Executive Committee andthe Company’s General Manager and Deputy General Managers. The benefits provided to key management personnel
include salaries, bonuses, health insurance and transportation. The benefits provided to key management personnel
during the period were as follows:
1 January31 December 2023

1 January31 December 2022

19.70422.58619.70422.586

Wages and other short-term benefits

6. TRADE RECEIVABLES AND PAYABLESa) Trade receivables:
As of the balance sheet date, the details of the Group’s trade receivables are as follows:
Short term trade receivables
Trade receivables
Notes receivable
Trade receivables from related parties (Note: 5)
Income accruals (*)
Provision for doubtful trade receivables (-)
Provision for expected loss (-)(*)

31 December 2023
2.265.640
498
168.839(78.043)(41.133)

31 December 2022
2.793.562
280
1.157
34.807(93.856)(54.345)2.315.801

2.681.605

Income accruals consist of price difference income accrued in relation to the Group’s projects.

(*)

31 December 2023

31 December 2022

221.061

325.201

221.061

325.201

Long term trade receivables arising from a municipal tender won by the Group.

Trade receivables represent amounts due from customers for goods sold or services rendered in the normal courseof business. Trade receivables consist of short-term trade receivables with a general maturity of 30 to 60 days andreceivables from local authorities with a maturity of more than one year. The Group holds its trade receivables tocollect the contractual cash flows and accordingly they are measured at amortized cost using the effective interest
method.
1 January31 December 2023

1 January31 December 2022

Restated opening balance at 1 January
Expense for the period (Note: 21)
Inflation Impact(54.345)(900)
14.112(36.933)(31.862)
14.450

Closing Balance(41.133)(54.345)

Movements in the provision for expected losses

The Group measures impairment of trade receivables based on lifetime expected credit losses. Expected credit losseson trade receivables are estimated using an allowance matrix, which is developed by analyzing customers’ historicaldefaults, analyzing their current financial position and taking into account the general economic conditions of theindustry in which the customer operates and conditions at the reporting date.
There have been no significant changes in management’s estimates and assumptions during the period.
The Group’s standard terms for trade receivables are between 30 and 60 days (31 December 2022: 30 to 60 days).
The allowance for doubtful trade receivables is determined based on past experience of bad debts. Accrued exchange
differences on doubtful trade receivables denominated in foreign currencies are included in provisions and the sameamount is included in foreign exchange gains and losses.
121

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

7. RECEIVABLES AND PAYABLES FROM FINANCIAL OPERATIONS

6. TRADE RECEIVABLES AND PAYABLES (CONTINUED)
Movements in the Group’s provision for doubtful trade receivables are as follows
1 January31 December 2023

1 January31 December 2022

Opening balance
Expense for the period (Note: 21)
Reversal of provisions
Foreign Currency Translation Differences
Inflation Impact(93.856)(27.984)74
43.723(72.235)(27.863)893
5.349

Closing balance(78.043)(93.856)

Movements in provision for doubtful trade receivables

The nature and level of risks related to trade and other receivables are disclosed in Note 31.
b) Trade Payables:

Short-term finance lease receivables (*)

Long-term finance lease receivables (*)

Total finance lease receivables

Trade Payables
Trade Payables to Related parties (Note:5)

124.423116.083

124.423116.083331.796464.732331.796464.732456.219580.815

The payment schedule of the finance lease receivable is as follows

31 December 2023

31 December 2022

(1.767.583)(109.469)(1.502.993)(79.394)(1.877.052)(1.582.387)

The average payment term of the Group’s trade payables is 90-120 days (31 December 2022: 90-120 days).
The Group has financial risk management policies in place to ensure that all borrowings are repaid within the borrowing
period.

122

31 December 2022(*)
Consists of receivables classified as finance lease receivables as a result of the evaluation of the investments made in relation to the contract signedwith Oyak Renault, following the conclusion that the terms of the contract in question include a finance lease transaction within the scope of TFRS 16
Leases. Total as of 31 December 2023 EUR 16,272 (31 December 2022: EUR 17,500)

As of the balance sheet date, the details of the Group’s trade payables are as follows:
Short-term trade payables

31 December 2023

2023
2024
2025
2026
2027

31 December 2023
Minimum financial
lease receivables
Interest
125.330(907)
125.330(907)
125.330(907)
83.555(605)
459.545(3.326)

Asset total
124.423
124.423
124.42382.950456.21931 December 2022
Minimum financial
lease receivables
Interest
138.344(22.261)
138.463(22.280)
138.463(22.280)
138.463(22.280)
138.463(22.280)692.196(111.381)

Asset total
116.083116.183116.183116.183116.183
580.815

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

8. OTHER RECEIVABLES
Other Short Term Receivables
Deposits and guarantees given
Miscellaneous receivables from third parties

10. PREPAID EXPENSES AND DEFERRED INCOME
31 December 2023
51.504240.415
291.91931 December 2022
20.815216.187237.002

Short Term Prepaid Expenses
Prepayments in Supply Contracts
Prepaid Expenses

9. INVENTORY

Raw materials and supplies
Semi-finished products
Products
Commercial goods
Goods in transit
Provision for impairment of inventory (-)

31 December 2023

31 December 2022

746.870202.653
96.376158.22577.960(26.584)

777.766302.605115.696231.12367.104(13.897)1.255.500

1.480.397

Long Term Prepaid Expenses
Prepaid expenses for fixed asset purchasing

Short-Term Deferred Income
Advances received
Prepayments (*)

For the period 1 January - 31 December 2023, TRY 2,938,682 (1 January - 31 December 2022: TRY 3,421,005) of theGroup’s cost of sales account is related to the consumption of raw materials.
During the current year, the Group has identified inventories that have not been moved for various periods. Accordingly,
a provision for impairment of inventories amounting to TRY 26,584 (31 December 2021: TRY 13,897) has beenrecognized.
Movements in provision for impairment on inventory
Opening balance
Period expense (*)
Inflation Adjustment
Closing balance(*)

1 January31 December 2023
(13.897)(20.719)8.032(26.584)

1 January31 December 2022
(19.647)
(817)
6.567
(13.897)

Long Term Deferred Income
Prepayments (*)(*)

31 December 2023

31 December 2022

314.6075.657

207.857
16.574320.264224.431

31 December 2023

31 December 2022

2.179

14.5172.179

14.51731 December 2023

31 December 2022

337.272
54.61542.27421.026391.887

63.30031 December 2023

31 December 2022

60.96929.24460.96929.244

Prepayments represent the portion of customer service fees received in advance.

Inventory impairment expense is recognized in cost of sales.

123

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

11. TANGIBLE FIXED ASSETS
Subsurface
Property,
Real & Surface
Plant &
estateRights Buildings Equipment
Cost Value
1.616.217
Opening balance as of
1 January 2023
Purchases
Transfer
Outflows(68.053)
Revaluation Fund
Foreign currencytranslation differences 1.548.164
Closing balance as of
31 December 2023
Accumulated
Depreciation
Opening balance as of
31 December 2023
Expenses for theperiodOutflows
Foreign Currency
Translation
Differences
Closing balance as of
31 December 2023
Net book value as of
31 December 2023

230.230 698.428 1.443.877

Fixtures

Special Construction
Costs in Progress

32.734372.862

11.891

Total

173.936
2.395
4.977
2.497
- (682.225)
18.36617.6283.423- (322.077) (4.239)
6.693-

364.096561.478(158.140) (150.666)- (1.010.985)- (68.053)
25.059227.786

877.34150.3621.504.176

784.91060.9017.652

5.061.292- (176.249) (119.334) (954.103)(18.249) (337.804) (6.096)-(1.611.835)-(8.623)-(62.817)-(41.838)489.787(8.767)-(1.806)301.116(1.457)--(125.308)
790.903---(1.137)

(4)

(7)

-

-

(1.148)(38.501) (7.553)-(947.388)- (184.872)

1.548.164

42.914(182.151) (507.291) (27.020)

695.190277.61923.34222.40099

Subsurface
Property,
Real & Surface
Plant &
estateRights Buildings Equipment Vehicles

1.298.220 5.704.459(2.444)-The depreciation charge for the period is disclosed in note 24.

124

VehiclesIn 2023, borrowing costs related to the purchase of property, plant and equipment will not be capitalized, thecorresponding amounts for 2023 and 2022 are netted in the cash flow statement under “Cash outflow for purchaseof property, plant and equipment”.

1.504.176

4.113.904

Cost Value
Opening balance as of
1 January 2022
Purchases
Revaluation fundTransfers frominvestments inprogress
Foreign currency
exchange differences
Closing balance as of
31 December 2022

Accumulated
Depreciation
Opening balance as of
1 January 2022
Expenses for theperiodForeign Currency
Exchange Differences
Closing balance as of
31 December 2022
Closing balance as of
31 December 2022

710.622905.595

230.189 439.444 1.360.976
41 225.330
1.233-

Fixtures

Special Construction
Costs in Progress

27.4855.205-

372.534228-

11.891-739.874
661.784-

3.893.015
893.821905.595

Total

-

-

26.28676.606-30-(103.438)

(516)

-

-

7.368

5.062

44

70

-

-

12.544230.230 698.428 1.443.877

32.734372.862

11.8911.298.220 5.704.459(167.109) (87.936) (893.057) (16.649) (333.896) (4.624)- (1.503.271)

1.616.217-(60.978)(1.593)(3.895)(1.472)-(107.853)

(68)

(7)

(13)

-

-

(711)

- (176.249) (119.334) (954.103) (18.249) (337.804) (6.096)-(1.611.835)-

1.616.217(9.140) (30.775)
-

(623)

53.981 579.094

489.774

14.48535.0585.795

1.298.220 4.092.624

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

11. TANGIBLE FIXED ASSETS (CONTINUED)

As of 31 December 2023 and 31 December 2022, information about the land and buildings owned by the Group andthe fair value hierarchy of these assets is shown in the table below:

Depreciation periods for tangible fixed assets are as following:
Subsurface and surface rights
Buildings
Property, plant and equipment
VehiclesFixtures
Special Costs

Economic Lifetime
5-25 years
7-50 years
1-25 years
4-5 years
3-20 years

Akçalar and Nilüfer
Land
Building

31 December 2023

Level 1TRY

Fair value as of
the reporting date
Level 2TRY

1.548.164
695.190-

1.548.164
695.190-

31 December 2022

Level 1TRY

Fair value as of
the reporting date
Level 2TRY

Level 3TRY

1.616.217
579.093-

1.616.217
579.093-

Fair value measurement of the Group’s lands and buildings
Land and buildings owned by the Group are carried at revalued amounts, being the fair value at the revaluation dateless accumulated depreciation and accumulated impairment losses. The fair value of land and buildings owned by theGroup was determined by Vakıf Gayrimenkul Değerleme A.Ş., an independent valuation company. Vakıf GayrimenkulDeğerleme A.Ş. is authorized by the CMB and provides property valuation services in accordance with capital market
legislation and has sufficient experience and qualifications in determining the fair value of properties in the relevant
regions.
The fair value of the owned land is determined using the arm’s length comparison method.

Akçalar and Nilüfer
Land
Building

Level 3TRY

The Group’s land and buildings were last revalued by independent appraisers on 12 October 2023. The revaluations are
based on current market conditions. The revaluation reserve, net of deferred taxes, is recognized in other comprehensive
income.

The fair value of buildings is determined using the cost model and the direct capitalization model.

125

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

12. INTANGIBLE FIXED ASSETS

Cost Value
Opening balance as of 1 January 2023
Outflows
Transfers from investments in progress
Foreign currency exchange differences
Closing balance as of 31 December 2023

RightsCapitalized
development expenses

Total

583.113(328.829)
8.418
262.7023.151.776(858.537)
150.6672.443.906

3.734.889(1.187.366)
150.6678.418
2.706.608

Accumulated Amortization Shares
Opening balance as of 1 January 2023
Expenses for the period
Outflows
Closing balance as of 31 December 2023

(321.307)(15.144)246.594(89.857)(1.929.679)(155.114)
647.508(1.437.285)(2.250.986)(170.258)
894.102(1.527.142)

Net Asset Value as of 31 December 2023

172.845

1.006.621

1.179.466

Cost Value
Opening balance as of 1 January 2022
Inflows
Transfers from investments in progress
Foreign currency exchange differences
Closing balance as of 31 December 2022
Accumulated Amortization Shares
Opening balance as of 1 January 2022
Expenses for the period

Rights563,346
11.967516
5.284
583.113

Capitalized
development
expenses
3.143.376
8.273
127
3.151.776

Total
3.708.722
20.240516
5.411
3.734.889(288.496)(32.811)(321.307)(1.674.349)(255.330)(1.929.679)(1.962.845)(288.141)(2.250.986)

261.806

1.222.097

1.483.903

Closing balance as of 31 December 2022
Net Asset Value as of 31 December 2022

Other intangible fixed assets include the cost of software used and in-house development costs of other intangible
fixed assets.
The breakdown of amortization expense for the period is disclosed in Note 21.

126

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

13. LEASING TRANSACTIONS

12. INTANGIBLE FIXED ASSETS (CONTINUED)
Goodwill
In order to increase its market, share in France and to participate in public tenders, the Company acquired 2,400
shares with a nominal value of TRY 4,515 (EUR 700,000), representing a 50% stake in the capital of Hervouet
Corporate Industry, its distributor in France. The first capital payment of TRY 2,653 (EUR 400,000) will be made on
17 June 2019 and the second capital payment of TRY 1,863 (EUR 300,000) will be made on 31 July 2019. Goodwill of
TRY 47,212 arising from the acquisition will continue to be recognized in the consolidated financial statements until 31
December 2023
2023

Cost value at the beginning of the period
Closing value

Long-term lease borrowings arising from right of use assets
47.21247.21247.21247.212

The amortization periods used for intangible fixed assets are as follows:
Capitalized development costs
RightsBorrowings from Short Term Lease Payables
Short Term Lease Borrowings Arising from Right of Use
Assets2022

Cost value

Economic Lifetime
5-15 years
3-15 years

31 December 2023

31 December 2022

10.2694.582

14.02011.43624.28916.01817.38426.77617.38426.776

Leasing Transactions

The leased assets are buildings related to the production line. The Group’s obligations under finance leases are securedby the lessor’s title to the leased asset. The interest rates on finance leases are fixed at the inception of the lease forthe entire term of the lease. The average contractual effective interest rate is approximately 0.25% per annum (2022:
0.25%).
Maturity distribution:
2023
2024
2025
2026
Total

31 December 2023

31 December 2022

24.28912.6264.758
41.67316.01810.52112.4343.820
42.793127

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

13. LEASING TRANSACTIONS (CONTINUED)

Right of use assets

Buildings

VehiclesTotalb) Leases (right of use assets, as lessor):

Cost
1 January 2022
Changes in lease agreements
31 December 2022

84.886
11.49396.379

3.770
3.770

88.656
11.493100.149

Accumulated Depreciation
1 January 2022
Current period depreciation
31 December 2022

(22.591)(16.968)(39.559)(3.770)(3.770)(26.361)(16.968)(43.329)

Net Book Value

56.820

The Group leases buildings, facilities and vehicles. The average lease term is 5 years (2022: 3 to 5 years).
Right of use assets

Buildings

Vehicles

Total

Cost
1 January 2023
Changes in lease agreements
Outflows
31 December 2023

96.3793.705
100.084

3.770(3.770)-100.149
3.705(3.770)100.084

Accumulated Depreciation
1 January 2023
Current period depreciation
Outflows
31 December 2023

(39.559)(20.858)(60.417)(3.770)3.770-(43.329)(20.858)3.770(60.417)

Net Book Value

39.66739.66756.82014. GOVERNMENT GRANTS AND ASSISTANCEThe Company’s application to obtain an “R&D Centre” certificate within the scope of Law No. 5746 on Supporting
Research, Development and Design Activities was evaluated by the Ministry of Industry and Technology and theCompany was granted an “R&D Centre” certificate with effect from 22 July 2019.
The application for “Investment Incentive Certificate” submitted to the General Directorate of Incentive Implementation
and Foreign Capital of the Ministry of Industry and Technology of the Republic of Turkey to link the investment plannedby the Company within the scope of product diversification to the Investment Incentive Certificate was approved on 6
October 2021. The final visa of the Incentive Certificate No. 528260 was completed on 26.03.2024 and the realized
investment amount is TRY 207,369.
The support elements related to the 4th Region provided for the investment evaluated within the framework of“Regional Incentive Practices” are as follows– Insurance Premium Employer’s share– Total amount of investment contribution– VAT exemption– Interest subsidy– Customs duty exemption

128

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

15. PROVISIONS, CONTINGENT ASSETS AND LIABILITIESShort Term Provisions

Movements in the provision for warranty expenses during the period are as follows:
31 December 2023

31 December 2022

116.742
3.183
7.568
193.634
14.45890.3852.005
4.093
16.744335.585

113.227

31 December 2023

31 December 2022

196.309138.419

196.309138.419

Provision for warranty expenses (i)Provision for sales discounts (ii)
Litigation provision (iii)
Provisions for collective bargaining agreements (iv)
OtherLong Term Provisions
Provision for warranty expenses (i)(i) The Group provides warranty services for vehicles sold under warranty for a period of time after the date of sale,
which varies depending on the vehicle model.
(ii) Consists of price difference discounts granted by the Group to dealers.

As of 1 January
Additional provision
Payments
Provision cancelled
Inflation impact
As of 31 December

2023

2022

228.804306.843(77.952)(37.400)(89.944)330.351232.250
261.483(73.360)(100.703)(90.866)228.804

2023

2022

2.005
24.549(23.063)
(308)
3.183

5.576
27.949(28.075)(1.593)(1.852)2.005

The movement of provision for sales discounts during the period is as follows:

As of 1 January
Additional provision (Note 20)
Payments
Provision cancelled
Inflation impact
As of 31 December(iii) Provisions for various litigation risks of the Group.
(iv) Consists of pay provisions for the part of the period covered by the Group’s collective bargaining agreement forthe period from September 2023 to 31 August 2025.

129

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

15. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (CONTINUED)

16. COMMITMENTS

The movement of provision for litigation during the period is as follows:

Guarantees-Liens-Mortgages (“GLMs”)

As of 1 January
Additional provision
Inflation impact
As of 31 December

2023

2022

As of 31 December 2023 and 31 December 2022, the Group’s guarantee/lien/position is as follows:

4.093
6.731
(3.256)
7.568

4.601
1.599
(2.107)
4.093

31 December 2023
A. Total amount of GLMs given on behalf of its own legal entity- Guarantee- Mortgage- Letter of Credit
B. Total amount of GLMs given in favor of subsidiaries included in thescope of full consolidation- Guarantee- Lien- Mortgage
C. Total amount of GLMs given for the execution of ordinary commercial
activities in order to ensure the debts of other third parties- Guarantee- Lien- Mortgage
D. Total amount of other GLMs given
i. Total amount of GLMs given in favor of the main shareholder- Guarantee- Lien- Mortgage
ii. Total amount of GLMs given in favor of other group companies notincluded in the scope of items B & C- Guarantee- Lien- Mortgageiii. GLMs given in favor of third parties not included in the scope ofitem C- Guarantee- Lien- Mortgage

Movements in the provision for collective bargaining agreements during the period are as follows:

As of 1 January
Additional provision
Inflation impact
As of 31 December

2023

2022

233.442(39.808)
193.634

-

Total

TRY
Equivalent

TurkishLira

US
DollarEUR

Romanian
Leu

BulgarianLev

2.626.100
836.626
31.44091.720120.000-

4.400-

71.08222.000965

13.887
-

-

-

-

-

-

-

-

1.135
-

-

-

-

-

79
-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

3.495.301

211.7204.400

94.04713.887

79

The ratio of the Group’s other GLMs to the Group’s equity is 0% at 31 December 2023 (31 December 2022: 0%).

130

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

16. COMMITMENTS (CONTINUED)
Guarantees-Liens-Mortgages (“GLMs”) (continued)
As of 31 December 2023, liabilities to customs, tax and other public authorities amount to TRY 90,720 (31 December
2022: TRY 177,986), USD 4,400 (31 December 2022: USD 5,020), BGN 79, HUF 0 (31 December 2022: HUF
4,000), guarantees in the amount of EUR 71,082 (31 December 2022: EUR 92. 809), letters of credit of EUR 1,184(31 December 2022: EUR 1,184) issued for the purchase of raw materials and supplies but not actually imported
and mortgages on land and buildings of TRY 197,728 and EUR 22,000 (31 December 2022: TRY 197,728 and EUR
22,000) granted as part of long-term loans.
31 December 2022
A. Total amount of GLMs given on behalf of its own legal entity- Guarantee- Mortgage- Letter of Credit
B. Total amount of GLMs given in favor of subsidiaries included in thescope of full consolidation- Guarantee- Lien- Mortgage
C. Total amount of GLMs given for the execution of ordinary commercial
activities in order to ensure the debts of other third parties- Guarantee- Lien- Mortgage
D. Total amount of other GLMs given
i. Total amount of GLMs given in favor of the main shareholder- Guarantee- Lien- Mortgage
ii. Total amount of GLMs given in favor of other group companies notincluded in the scope of items B & C- Guarantee- Lien- Mortgageiii. GLMs given in favor of third parties not included in the scope ofitem C- Guarantee- Lien- Mortgage
Total

TRY
Equivalent3.446.945
920.368
38.899TurkishLira
177.986
197.728-

US
Dollar5.020-

EUR92.80922.0001.184

Romanian
Leu
9.911
-

Bulgarian
Lev
4.000
-

164.204
-

-

-

4.999
-

-

-

1.319
-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

4.571.735

375.7145.020

120.992

9.911

4.000

Letters of guarantee and cheques received
Direct borrowing system

31 December 2023

31 December 2022

746.16144.384116.553
24.533790.545141.086

31 December 2023

31 December 2022

50.04728.11237.90121.59578.15959.49631 December 2023

31 December 2022

30.34321.96330.34321.963

17. EMPLOYEE BENEFITS
Employee Benefits Liabilities

Social security contributions
Wages payable to employees

Short Term Provisions for Employee Benefits

Provision for unused annual leave

131

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

17. EMPLOYEE BENEFITS (CONTINUED)
Long Term Provisions for Employee Benefits

The significant estimates used in the calculation of retirement pay liability are discount rate and probability of voluntary
retirement.
1 January31 December 2023

1 January31 December 2022

Provision as of 1 January

216.947166.666

Service cost
Interest cost
Employment termination benefits paid (-)
Actuarial loss/(gain)
Inflation impact

31.54175.631(55.620)(330)(66.583)

24.83635.807(13.073)
79.419(76.708)

Provision as of 31 December

201.586216.947

Provision for severance pay:
Under Turkish labor law, the Group is required to pay termination benefits to any employee who has completed at least
one year of service and whose employment is terminated without just cause, who is called up for military service,
who dies or who retires after completing 25 years of service and reaching retirement age (58 for women and 60 formen).
As of 31 December 2023, the severance payment liability is subject to a monthly cap of TRY 23,489.83 (31December 2022: TRY 15,371.40).
There is no legal requirement to fund the termination benefit obligation. The provision for termination benefits is
calculated by estimating the present value of the company’s probable future obligation arising from the departure of
employees. TAS 19 Employee Benefits requires the use of actuarial methods to estimate the Group’s obligations under
defined benefit plans. Accordingly, the actuarial assumptions used in the calculation of the total liability are set out
below:The main assumption is that the maximum liability for each year of service will increase in line with inflation, andthe discount rate used is the expected real rate adjusted for the effects of future inflation. Therefore, the provisions
in the accompanying financial statements as at 31 December 2023 are calculated by estimating the present value of
the Group’s probable future obligation arising from the retirement of employees. The provisions at each balance sheet
date have been calculated using an annual inflation rate of 23.62% and an interest rate of 28.34%, resulting in areal discount rate of approximately 3.82% (31 December 2022: 3. 48%).The maximum amount of TRY 35,058.58
effective from 1 January 2024 (1 January 2023: TRY 19,982.83) has been considered in the calculation of the Group’s
provision for termination benefits.

132

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

18. OTHER ASSETS AND LIABILITIES

19. CAPITAL, RESERVES AND OTHER EQUITY ITEMSOther Liquid Assets

31 December 2023

31 December 2022

Carried forward VAT
Other Liquid Assets

154.633
18.672232.160
22.730The paid-up capital structure of the Company as at 31 December 2023 and 2022 is as follows:

173.305254.890

31 December 2023

31 December 2022

Kıraça Holding A.Ş.
Publicly traded portion
Other

108
-

87.90210887.902Other Short Term Liabilities

31 December 2023

31 December 2022

Taxes and funds payable
Other payables and liabilities

28.054770

46.7642.131

28.82448.895

Other Fixed Assets
Deposits and Guarantees Given
VAT to be deducted in future yearsa) Capital/Adjustment to share capital of cross shareholding

Shareholders

Nominal capital%

31 December 2023%

31 December 2022

58.51
39.44
2.05

526.590354.960
18.450

58,51
39,44
2,05

526.590354.960
18.450100

900.000100

900.000

Inflation adjustment

6.926.453

6.926.453

Adjusted capital

7.826.453

7.826.453

As of 31 December 2023, the Group’s share capital consists of 6,558,338,851 Group A shares and 83,441,661,149
Group B shares. The nominal value of the shares is TRY 0.01 per share. All shares issued were paid for in cash.
Pursuant to Article 8 of the Company’s Articles of Association, Group A shareholders have the privilege of electing
five of the seven members of the Board of Directors, if the Board of Directors consists of seven members, and sixof the nine members of the Board of Directors, if the Board of Directors consists of nine members, from among thecandidates nominated by Group A shareholders.
b) Restricted Reserves

Legal Reserves

31 December 2023

31 December 2022

17.54917.54917.54917.549133

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

19. CAPITAL, RESERVES AND OTHER EQUITY ITEMS (CONTINUED)

The effect of previous years’ losses in the balance sheet prepared in accordance with TAS/TFRS as part of thefirst transition to TAS 29 is TRY (1,014,320) as at 1 January 2022 and the indexed amount of this amount as at 31
December 2023 is TRY (2,745,479).

b) Restricted Reserves (contınued)
The General Legal Reserve is appropriated from the statutory profits at the rate of 5% per annum until the totalreserve reaches 20% of the Group’s (the Company’s) paid-up capital. The Other Legal Reserve is appropriated at
the rate of 10% of the total amount to be distributed to the shareholders after payment of a 5% dividend to theshareholders. According to the Turkish Commercial Code, if the General Legal Reserve does not exceed half of theshare capital or registered capital, it can only be used to cover losses, to continue the business when the business is
not doing well or to take measures to prevent unemployment and mitigate its consequences.

The comparison of the inflation-adjusted equity items in the Company’s financial statements as at 31 December 2023
with the inflation-adjusted amounts in the financial statements prepared in accordance with Law No. 6762 and otherlegislation is as follows:

Dividend distribution:
Listed companies distribute dividends in accordance with the CMB’s Communiqué on Dividend Distribution No. II-19.1,
effective from 1 February 2014.
Companies distribute their profits in accordance with the profit distribution policy to be adopted by the General
Assembly and in compliance with the provisions of the relevant legislation. No minimum distribution rate has been set
under the aforementioned communiqué. Companies pay dividends in accordance with their Articles of Association or
profit distribution policy.
Previous Years’ Losses
The details of retained earnings as of 31 December 2023 and 31 December 2022 are as follows:

Previous Years’ Losses

31 December 2023

31 December 2022

(3.749.790)(3.544.030)(3.749.790)(3.544.030)

31 December 2023
Capital Adjustment Differences
Restricted Reserves

Inflation adjusted
amounts in TAS/TFRS
consolidated financial
statements
6.926.453
17.549Difference recognized inretained earnings
3.205.877
182.912

1 January31 December 2023

1 January31 December 2023

3.527.313
4.171.149
232.811(337.863)(45.725)

3.811.098
1.651.018
76.463(234.278)(39.880)

7.547.685

5.264.421

20. REVENUE AND COST OF SALESa) SalesDomestic sales
Foreign sales
Other revenues
Sales returns (-)
Sales discounts (-) (*)

(*)

134

Amounts restated for theeffects of inflation in thefinancial statements inaccordance with the Law No.
6762 and other legislation
10.132.330
200.461

Provisions for trade discounts amounting to TRY 24,549 (2022: TRY 27,949) consist of provisions for trade discounts (Note 15).

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

20. REVENUE AND COST OF SALES (CONTINUED)The Group meets its performance obligations by transferring goods and services over time and at a specific point intime. This is consistent with the revenue information disclosed for each reportable segment in accordance with TFRS
8 (Note 4).
1 January31 December 2023

1 January31 December 2022

Karsan branded products
Industrial and spare parts
Other brand sales
Other brand vehicle sales
After-sales service
Other

4.251.781
374.1422.544.258
2.520.890
23.368377.504

3.077.126
358.240
1.610.274
1.600.696
9.578
218.781

Total

7.547.685

5.264.421

1 January31 December 2023

1 January31 December 2022

(2.938.682)(815.091)(718.525)(272.274)(99.951)(19.321)(394.057)(977.796)(19.925)(3.421.005)(250.193)(439.339)(376.091)
173.99322.845(192.032)(150.923)(1.346)(6.255.622)(4.634.091)b) Cost of Sales
Cost of raw materials and supplies
Direct labor costs
General production costs
Depreciation and amortization
Change in inventories of semi-finished goods
Change in finished goods
Cost of goods soldCost of services rendered
Change in inventory provisionsc) Financial incomes
Gross Profit from Financial Operations (*)

1 January31 December 2022

1 January31 December 2022

275.977275.977

96.93096.93021. GENERAL AND ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES

Marketing Expenses (-)
General and Administrative Expenses (-)
Research & Development Expenses (-)

1 January31 December 2023

1 January31 December 2022

(789.244)(362.383)(14.081)(518.657)(324.078)(15.854)(1.165.708)(858.589)

135

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

21. GENERAL AND ADMINISTRATIVE EXPENSES, MARKETING EXPENSES, RESEARCH AND DEVELOPMENT EXPENSES(CONTINUED)b) Details of General and Administrative Expensesa) Details of Marketing Expenses

Warranty expenses
Sales, research and development expenses
Personnel expenses
Advertising expenses
Transport and travel expenses
Transport and insurance costs
Rental expenses
Depreciation expenses
Subcontracting costs
Energy costs
Customer and channel management costs
Communication expenses
Dealer and Authorized Service Meeting Expenses
Licensing costs
Other costs

136

1 January31 December 2023

1 January31 December 2022

(282.882)(159.695)(150.386)(45.945)(38.821)(18.836)(10.818)(7.321)(8.316)(2.145)(1.178)(758)(441)(61.702)(160.780)(12.428)(106.195)(77.062)(38.245)(15.708)(13.836)(9.325)(9.559)(4.212)(7.460)(800)(7.464)(26)(55.557)(789.244)(518.657)

Personnel expenses
Holding company expenses
Provision for doubtful accounts
Subcontracting expenses
Amortization expense
Audit and consultancy fees
Depreciation of assets
Litigation provisions
Business licenses and patents
Provision for expected losses
Personnel expenses

1 January31 December 2023

1 January31 December 2022

(154.936)(93.837)(27.984)(21.820)(18.761)(16.744)(7.124)(5.330)(2.895)(900)(12.052)(85.168)(46.793)(31.862)(12.231)(21.725)(37.238)(18.872)(4.880)(27.863)(37.446)(362.383)(324.078)

1 January31 December 2023

1 January31 December 2022

(5.096)(6.295)(1.883)(807)(5.821)(6.548)(2.438)(1.047)(14.081)(15.854)c) Details of Research & Development Expenses

Depreciation and amortization (Note 10)
Outsourced services
Personnel expenses
Other expenses

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

22. OTHER OPERATING INCOME AND EXPENSES

23. INCOME AND EXPENSES FROM INVESTING ACTIVITIES

Details of other operating income as of 31 December 2023 and 2022 are as follows

As of 31 December 2023 and 2022, details of investment income for the years ended 31 December 2023 and 2022
are as follows:

Foreign exchange gains from operating activities
Interest income from trading operations
Provision for credit losses
Other

1 January31 December 2023

1 January31 December 2022

916.552
15.26356
190.562571.51551.955112.223

1.122.433

735.693

Details of other operating expenses at 31 December 2023 and 2022 are as follows:

Provision expense (-)
Interest expense on trading balances
Other

1 January31 December 2023

1 January31 December 2022

(16.186)(14.062)(43.093)(2.065)(6.186)(15.125)(73.341)(23.376)

Interest income from time deposits
Gain on sale of fixed assets
Net gain on financial assets at fair value through profit or loss (*)

1 January31 December 2023

1 January31 December 2022

42.763(8.798)38.7902.678
44.74933.96586.217

As of 31 December 2023 and 2022, details of investment expenses for the years ended 31 December 2023 and2022 are as follows:

Net loss on financial assets at fair value through profit or loss (*)

1 January31 December 2023

1 January31 December 2022

(81.350)-(81.350)(*)
Maas Global OY, which is the Group’s ‘financial asset at fair value through profit or loss’, ceased operations at the end of 2023 and entered into
liquidation. There are no future expectations. The amount of the investment will be recognized as an investment expense and removed from the financial
statements. (31 December 2022: 44,749)

137

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

25. FINANCIAL EXPENSES

24. TYPES OF EXPENSES

Use of raw materials
General production costs
Direct labor costs
Warranty expenses
Personnel expenses
Cost of goods soldCost of services sold
Depreciation and amortization (Note: 11-12)
Advertising expenses
Holding company expenses
Consulting expenses
Provision for doubtful debts (Note: 6)
Subcontracting expenses
Transport and insurance expenses
Rental expenses
Depreciation of assets (note 13)
Dealer and authorized service meeting expenses
Change in inventory provisions
Provision for anticipated losses (Note 6)
Movements in finished goods
Change in inventories of semi-finished goods
Other

138

1 January31 December 2023

1 January31 December 2022

(2.938.682)(718.525)(815.091)(282.882)(307.205)(394.057)(977.797)(316.424)(45.945)(93.837)(16.744)(27.984)(30.136)(18.836)(10.818)(7.124)(441)(19.926)(900)(19.321)(99.951)(278.705)(3.470.336)(439.339)(250.193)(160.780)(193.800)(192.032)(150.924)(363.632)(77.062)(46.793)(37.238)(27.864)(28.338)(15.708)(13.836)(18.872)(7.464)(1.347)(31.862)
22.845173.995(162.100)(7.421.331)(5.492.680)

Net foreign exchange losses on financing activities
Interest expense
Factoring expenses
Bond expenses
Other

1 January31 December 2023

1 January31 December 2022

(1.417.115)(660.742)(193.644)(51.519)(53.513)(790.022)(473.597)(99.688)(125.938)(2.376.533)(1.489.245)

31 December 2023

31 December 2022

673.436(63.287)(196.593)
66.459(107.045)

724.477(63.535)(142.117)
18.547(107.045)

372.970

430.327

26. ANALYSIS OF OTHER COMPREHENSIVE INCOME

Property, plant and equipment revaluation fund
Loss on remeasurement of defined benefit plans
Hedging gains/losses
Foreign Currency translation reserve
Change in fair value of financial investments

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

Foreign currency exchange fund:

26. ANALYSIS OF OTHER COMPREHENSIVE INCOME (CONTINUED)
Tangible Fixed Assets revaluation fund:Tangible Fixed Assets revaluation fund:
Balance at the beginning of the year
Increase from revaluation of tangible fixed assets
Balance at end of period

1 January31 December 2023
724.477(51.041)673.436

1 January31 December 2022
724.477724.477

Law No. 7061 ‘Law amending certain tax laws and certain other laws’ was published in the Official Gazette of 5
December 2017 under number 30261. Article 89 of this Law amends Article 5 of the Corporate Tax Law, entitled‘Exemptions’. Subparagraph (a) of the first paragraph of the article reduces the 75% exemption applied to gains fromthe sale of immovable property included in the assets of corporations for two full years to 50%. This provision enteredinto force on 5 December 2017.
The Tangible Fixed Assets Revaluation Fund arises from the revaluation of buildings and land. When a revalued building
or land is sold, the portion of the revaluation reserve relating to the asset sold is transferred directly to retained
earnings.

Balance at beginning of period
Exchange difference for the period
Balance at end of period

Balance at the beginning of the period
Loss for the period
Balance at the end of the period

1 January31 December 2022
(63.535)(63.535)

1 January31 December 2022
(9.230)27.77718.547

1 January31 December 2023
(107.045)

1 January31 December 2022
(107.045)--(107.045)(107.045)

1 January31 December 2023

1 January31 December 2022-

Fair value measurement of financial investments

Balance at the beginning of the period
Change in fair value measurement offinancial investments
Balance at end of period
Hedging fund losses:

Remeasurement (loss) arising from defined benefit plans):
1 January31 December 2023
(63.535)
248(63.287)

1 January31 December 2023
18.54747.91266.459Balance at beginning of period
Loss/(gain) arising from the recognition of cash flow hedges

Balance at the end of the period(142.117)(54.476)(142.117)(196.593)(142.117)139

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

26. ANALYSIS OF OTHER COMPREHENSIVE INCOME (CONTINUED)

Tax effects on other comprehensive income are as follows:An effective cash flow hedge relationship exists between foreign currency denominated short-term borrowings related
to capital expenditure (non-derivative hedging instrument) and highly probable foreign currency revenues from actualand expected future sales of commercial vehicles for export (hedged item). As part of the production agreements
entered into in response to tenders received, the Group links a portion of the estimated sales revenues to be received
from January 2023 to November 2023 to short-term loan liabilities.
27. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES)
Amounts relating to current tax
Current tax assets
Current income tax liabilities

Current tax asset/(liability):
Current corporate tax provision
Less: Prepaid taxes and funds

31 December 2023

31 December 2022

4.204
4.204

4.458
(3.624)834

31 December 2023

31 December 2022

(4.204)(4.204)3.624(4.458)(834)

Actuarial Gains and Losses from Pension Plans
Tax Effect on Hedging Losses
Change in Fixed Assets Value Increase Fund
Foreign Currency Translation Fund
Other comprehensive income/(loss) for the period

Actuarial Gains and Losses from Pension Plans
Tax Effect on Hedging Losses
Change in Fixed Assets Value Increase Fund
Foreign Currency Exchange Fund
Other comprehensive income/(loss) for the period

1 January - 31 December 2023
Pre-tax amount Tax expense/income
Amount after tax
330
(82)
245
(76.654)22.178(54.476)(68.053)
17.012(51.041)47.91247.912(96.465)

39.108(57.360)

1 January - 31 December 2022
Pre-tax amount Tax expense/income
Amount after tax(79.419)15.884(63.533)(177.646)
35.529(142.117)905.595(181.118)
724.477
27.77727.777676.307(129.705)

546.604

Corporate Tax
Tax expense comprises the following:
31 December 2023

31 December 2022

Current tax expense
Deferred tax expense

830.869(3.683)75.626

Total tax expense

830.869

71.943140

The Group is subject to corporate taxation in Turkey. Provision has been made in the accompanying financial
statements for the estimated charge based on the Group’s results for the current period. Turkish tax legislation does
not allow a parent company and its subsidiaries to file a consolidated tax return. Therefore, the tax liabilities reflectedin these consolidated financial statements have been calculated on a separate entity basis.
The corporate income tax rate to be applied to taxable income is calculated on the tax base remaining after adding
back non-deductible expenses and deducting tax-exempt income, non-taxable income and other deductions (prior year
losses, if any, and investment incentives used, if any).

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

27. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (CONTINUED)

Corporate Tax (continued)
The corporate tax rate applicable in Turkey will be 25% in 2023 and 20% thereafter (2022: 23%).
Law No. 7061 “Law Amending Certain Tax Laws and Certain Other Laws” was published in the Official Gazette on
5 December 2017 and is numbered 30261. Article 89 of this Law amends Article 5 of the Income Tax Law entitled“Exemptions”. Subparagraph (a) of the first paragraph of the article applies the exemptions to gains from the saleof immovable property included in the assets of corporations for two full years. The 75% exemption was reduced to50%. This regulation came into force on 5 December 2017
Pursuant to the “Decree amending the Decree on Government Aid for Investments” numbered 2017/9917, published in
the Official Gazette of 22 February 2017 and numbered 29987; within the scope of investment incentive certificatesissued for the manufacturing industry (“US-97 Code: 15-37”) within the scope of investment incentive certificatesissued for the manufacturing industry (“US-97 Code: 15-37”) based on Decree no. 2012/3305 and previous decisions,for investment expenditures realized between 1 January 2017 and 31 December 2017; the investment contribution
rates to be applied in tax deduction support within the scope of regional, large-scale and strategic incentive practices
are applied by adding 15 points to the investment contribution rate valid in each region, corporate tax or income tax
deduction at the rate of 100% in all regions, and the ratio of the investment contribution amount to be applied to theinvestor’s income from other activities during the investment period is 100%, without any transaction on the incentive
certificate.

Deferred Tax
The Group recognizes deferred tax assets and liabilities based on temporary differences arising between the financial
statements prepared in accordance with TFRS and the financial statements prepared for tax purposes. These
differences generally result in the recognition of income and expenses in different periods for TFRS and tax purposes
and are summarized below.

As entities in Turkey are not allowed to file consolidated tax returns, subsidiaries with deferred tax assets are notoffset against subsidiaries with deferred tax liabilities and are presented separately.
Deferred tax assets/(liabilities):
Deductible financial losses
Revaluation and depreciation of property, plant andequipment/amortization of other intangible assets
Investment incentives (Note:14)
Income accruals
Derivatives
Provision for warranty expenses
Provision for employment termination benefits
Deferred tax assets arising from cash capital increase
Effect of inventory adjustments
Adjustments related to bonds
Litigation provision
Leave and wage provision
Provision for sales discounts
Adjustments to trade receivables
Collective bargaining agreement provisions
Hedge accounting adjustments
Other

31 December 2023

31 December 2022

50.09222.895145.837345.971(35.729)(60.752)
19.79750.39769.349(24.312)10.479
1.271
4.254
491
(2.309)44.08422.17831.477(693.941)
286.466(3.248)(51.205)45.76143.39064.914(3.008)
433
819
4.393
400
35.167672.575(197.402)

35.53013.832The tax rate used for the calculation of deferred tax assets and liabilities is 25% (2022: 20%) on expected temporary
timing differences.

141

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

27. INCOME TAXES (INCLUDING DEFERRED TAX ASSETS AND LIABILITIES) (CONTINUED)

The reconciliation of the tax expense for the period to the profit for the period is as follows:

Deferred Tax (continued)
As of 31 December 2023, the Group has accumulated tax losses of TRY 200,370 (31 December 2022: TRY 114,476).
The Group’s management has recognized a deferred tax asset of TRY 50,092 (31 December 2021: TRY 22,895) on
tax loss carryforwards of TRY 200,370 (31 December 2021: TRY 114,476) which the Group’s management considers it
probable it will be able to utilize within the five year forecast period, based on whether it will be possible to generatetaxable profit before the expiry of the accumulated tax losses.
The years in which the right to use the carry forward accumulated losses will expire are as follows:

Expires in 2023
Expires in 2024
Expires in 2025
Expires in 2026
Expires in 2027
Expires in 2028

31 December 2023

31 December 2022

33.105
1.148
6.594
68.53890.985200.370

54.5481.892
10.86547.171114.476

As of 31 December 2023 and 2022, the movements in deferred tax assets/(liabilities) for the year are as follows:
31 December 2023

31 December 2022

Restated opening balance as of 1 January
Recognized in the statement of profit or loss
Recognized in equity(197.402)
830.869
39.108(143.323)
75.626(129.705)

Closing balance as of 30 June

672.575(197.402)

Deferred tax asset/(liability) movements:

142

1 January31 December 2023

1 January31 December 2022

(211.029)(239.053)

Tax impact- Tax exemption and effect of non-deductible expenses- deferred tax effect recognized on accumulated losses- Deferred tax effect of investment incentives- Tax deduction effect of cash capital increase- tax rate change- non-taxable inflation adjustments- other(54.733)
27.921241.465
29.953543.31251.951(83.886)6.879
211.580
10.51154.448(146.925)
26.215

Tax provision income/(expense) in the income statement

830.869

71.943

Reconciliation of tax provision:
Profit/(loss) before tax
Income tax rate 25% (2022: 23%)KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

28. EARNINGS/(LOSS) PER SHARE)
The weighted average number of Group shares and earnings per share calculations for the periods ended 31 December
2023 and 31 December 2022 are as follows (assuming no bonus shares:

Weighted average number of shares in circulation
Net profit for the year attributable to equity holders of theparent (piaster)
Earnings per share (piaster) (per share)

1 January31 December 2023
90.000.000.000

1 January31 December 2022
90.000.000.000

636.5750,707(205.760)(0,229)31 December 2023
AssetsLiabilities
134.981-31 December 2022
AssetsLiabilities
179.691-134.981179.691-111.297--

58.824--111.297-

58.824-246.278-238.515-

29. DERIVATIVES

Short-term
Forward contracts
Currency call and put options
Hedging contracts at fair value
through profit or loss
Long-term
Forward contracts
Currency call and put options
Hedging contracts at fair value
through profit or loss

The Group hedges the foreign exchange risk on its balance sheet by borrowing in the same currency against the foreignexchange risk arising from the amounts of foreign currency sales that are highly probable of being realized in the future
as defined in the Group’s contracts and budget. In this context, the repayments of the foreign currency borrowings
that are subject to hedge accounting and designated as hedging instruments are matched with the cash flows of theforeign currency sales that are expected to be realized on the reporting date and that are designated as hedged items
under hedge accounting. As part of the Group’s foreign currency risk management strategy, the Group applies hedge
accounting to hedge the foreign currency risk component of the cash flow risk of highly probable forecast transactions
and has recorded the unrealized foreign exchange differences on the hedging instrument under derivative financial
instruments.
At the balance sheet date, the total notional amount of the foreign currency-denominated expected net selling pricethat the Group is committed to realize and that is not yet due is as follows:

Fair value hedge accounting agreement

31 December 2023

31 December 2022

336.088336.088476.185476.185

As of 31 December 2023, the Group has no foreign currency derivatives (2022: none).

143

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

30. FINANCIAL INSTRUMENTS

Long Term Financial Investments

Financial Assets

Details of the Group’s financial assets at fair value through profit or loss/other comprehensive income are as follows:

Short Term Financial Investments
Restricted bank balances (*)
Currency hedged deposits (**)(*)

31 December 2023
118.423118.423

31 December 2022
31.068146.621177.689

Current financial assets consist of restricted bank balances related to borrowings and cash collateral.

As at 31 December 2023, the Company has a foreign currency translated (Euro) currency hedged TRY account. The closing date of the hedged foreign
currency deposit account is 4 March 2024. The related balance is nominal TRY 117,570 of currency hedged deposits with a maturity date of 4 March2024 and an interest rate of 34%.

Financial assets at fair value throughother comprehensive income
Industria Italiana Autobus S.P.A (IIA) (*)
Financial assets at fair value throughprofit or loss
Maas Global OY (**)(**)

Share Ratio

31 December 2023

Share Ratio

31 December 2022

28,59%

244.343

28,59%

142.929-244.3434,57%

132.395
275.324(*)
As of 12 December 2018, the Group participated in the capital of Industria Italiana Autobus (“IIA”), which manufactures vehicles under the Menarinibus
brand, with an amount of TRY 21,883 (EUR 3,629,642) and its shareholding increased from 5% to 70%. On the other hand, at the General Meetingof IIA held on 29 January 2019, the Company’s shareholding in IIA decreased to 28.59% as a result of the Italian state institution INVITALIA S.P.A.
exercising its right to increase its capital proportionately. The Company participated in the capital increase in the amount of 8,295,024 in 2019 andincreased its total participation in the capital of IIA from EUR 5,129,642 (TRY 26,927) to EUR 11,924,666 (TRY 78,635). On 24 February 2020,
the Company increased its total investment to TRY 78,760 with a capital payment of TRY 125 (EUR 19,000). In September 2021, TRY 48,031 (EUR
4,683,160) and on 9 March 2023, TRY 151,528 (EUR 7,580,406) were offset against the Company’s trade receivables, bringing the total investment
amount to TRY 244,343.

As a result of the valuation of the investment based on discounted cash flow projections, no change in value has been recognized in the consolidatedbalance sheet at 31 December 2023 (31 December 2022: not recognized).
The Group owns 28.59% of the share capital of Industria Italiana Autobus (“IIA”), which is active in the production, distribution and marketing of buses.
However, the Group’s management has concluded that the Group has neither control nor significant influence over this company in accordance with TAS28 and it is presented as an investment in the consolidated financial statements. The other shareholders of IIA are subsidiaries of Italian public entities.
Maas Global OY, which is the Group’s ‘financial asset at fair value through profit or loss’, has ceased operations at the end of 2023 and has enteredinto liquidation. There are no future expectations. The investment amount here has been recognized under expenses from investing activities and removed
from the financial statements (Note 23).

(**)

144

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

30. FINANCIAL INSTRUMENTS (CONTINUED)

Bank Loans:

Financial Liabilities
The details of financial liabilities carried at amortized cost are as follows:
Financial Liabilities
Short-term bank loans
Current portion of long-term bank loans
Bonds, principal, instalments and interest
Factoring liabilities

Long Term Bank Loans

31 December 2023

31 December 2022

1.803.790
709.024
391.917116.6172.873.988
774.13172.686
323.005

3.021.348

4.043.810

743.332
743.332

1.060.310
1.060.310

3.764.680

5.104.120

Currency

Weighted average
effective interest

31 December 2023
Short-termLong-term

TRY
EUR

27.81%
9.41%

448.746
2.064.068

14.584728.7482.512.814

743.332

Currency

Weighted average
effective interest rate

31 December 2022
Short-termLong-term

TRY
EUR
USD

26.02%
4.74%
14.7%

953.3662.648.454
46.29965.223995.087-

3.648.119

1.060.310

31 December 2023

31 December 2022

2.512.814
112.33173.772557.229-3.648.119
455.912237.874
213.231153.2933.256.146

4.708.429

The maturities of bank loans are as follows:

Payable in 1 year
Payable in 1 - 2 years
Payable in 2-3 years
Payable in 3-4 years
Payable in 4-5 years

145

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

30. FINANCIAL INSTRUMENTS (CONTINUED)

1 January 2022

Financing
cash flows

Non-cashchanges
Exchange rate
difference andinterest accrual

2.885.986
53.294361.039

1.556.288(44.421)38.811

699.11131.4264.072(432.956)
2.495(8.232)4.708.429
42.793395.691

3.300.319

1.550.678

734.609(438.693)

5.146.913

Financial Liabilities (continued)
The fair value of long-term debt is presented below:
Long-term bank loans
Total payables

31 December 2023
743.332

31 December 2022
1.060.310

743.332

1.060.310

Bank borrowings
Leasing liabilities
Other financial liabilities

Reconciliation of liabilities arising from financing activities
The cash and non-cash changes in the Group’s liabilities arising from financing activities are shown in the table below.
Financing liabilities are cash flows that have been or will be reclassified to cash flows from financing activities in theGroup’s consolidated statement of cash flows.

Bank borrowings
Leasing liabilities
Other financial liabilities

146

1 January 2023

Financing
cash flows

Non-cashchanges
Exchange rate
difference andinterest accrual

4.708.429
42.793395.691

233.880(4.438.517)(79.422)164.7404.454.219
347.813(1.850.903)(30.842)(155.548)

3.256.146
27.653508.534

5.146.913(4.284.059)

4.966.772(2.037.293)

3.792.333

31 December 2023

31 December 2022

Issued Debt Instruments:

Current part of bonds issued
Inflation
impactInflation
impact31 December 2023

31 December 2022

391.91772.686391.91772.686On 31 August 2023, the Company received approval from the Capital Markets Board (CMB) for a maximum bond issueof TRY 600 million to be allotted and/or sold to qualified investors. Under this issuance ceiling, the sale of bonds witha nominal value of TRY 350 million, with a fixed coupon payment every 3 months, a maturity of 364 days and aredemption date of 4 October 2024 was realized on 4-5 October 2023.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

30. FINANCIAL INSTRUMENTS (CONTINUED)

In line with other companies in the industry, it analyses capital using the leverage ratio. This ratio is calculated as net
debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings
as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated by adding theequity item in the consolidated balance sheet and net debt.

Financial Liabilities (continued)
The maturities of the bonds are as follows:
Currency

Effective interest rate %

TRY

51%

Currency

Effective interest rate %TRY

4.64% + GDS (*)(*)

31 December 2023
Short-termLong-term

391.917391.91731 December 2022
Short-term

In 2023, the Group’s strategy remains unchanged from 2018. At 31 December 2023 and 2022, the gearing ratio,
which is calculated as net debt less cash and cash equivalents and short-term investments less financial debts,
divided by total capital, is as follows:-

Long-term

72.68672.686-

Represents the interest rate of benchmark Government Debt Securities.

Financial Liabilities
Less: Cash and Cash Equivalents
Net Debt
Total Equity
Total Capital
Net Debt/Total Capital Ratio

31 December 2023

31 December 2022

3.764.680(1.027.082)
2.737.598
5.277.676
8.015.274

5.104.120(73.705)
5.030.415
4.718.759
9.749.174

34%

52%

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTSb) Financial Risk Factorsa) Capital risk management

The Group’s activities expose it to market risk (currency risk, fair value interest rate risk, cash flow interest rate risk
and price risk), credit risk and liquidity risk. The Group’s risk management program is generally focused on minimizing
the potential adverse effects of uncertainty in the financial markets on the Group’s financial performance. The Group
uses derivatives to hedge its exposure to various financial risks.

The Group manages its capital to ensure the Group’s ability to continue as a going concern while maximizing returns tostakeholders by optimizing the balance between debt and equity.
The Group’s capital structure consists of debt, including the borrowings disclosed in Note 30, and equity attributable toequity holders of the parent, which consists of cash and cash equivalents, issued share capital, reserves and retained
earnings.

Risk management is carried out in accordance with policies approved by the Board of Directors. In terms of risk policy,
financial risks are identified and assessed by the Group’s senior management and risk mitigation tools are implemented
in collaboration with the Group’s operating units.

The Group’s Board of Directors reviews the capital structure twice a year. During these reviews, the Board assesses
the cost of capital and the risks associated with each class of capital. Based on the recommendations of the Board,
the Group aims to stabilize its capital structure through the payment of dividends, the issue of new shares and therepurchase of shares, as well as through the raising of new debt or the repayment of existing debt.
147

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

Credit risk exposure by type of financial instrument

Other Receivables

Related
Party

Third
Parties

Related
Party

Third
PartiesBank
Deposits

Receivables from
Financial Operations

498

2.536.364-

268.661

897.166456.219- Portion of the maximum risk covered by the guarantee withsecurities, etc.(**)-

746.161

-

-

-

-

A. Net book value of financial assets that are neither past due
nor impaired

498

1.248.527-

268.661

897.166456.219

B. Net book value of assets that are past due but not impaired-

1.287.837

-

-

-

-

- Portion of net value guaranteed by collateral, etc.

-

438.722

-

-

-

-

b) Financial risk factors (continued)b.1) Credit risk management
In order to minimize credit risk, the Group’s policy is to work with creditworthy counterparties and to obtain collateral
where deemed necessary to reduce the risk of financial loss in the event of default.
When accepting a new customer, the creditworthiness of the customer is assessed by the relevant departments andappropriate credit limits are set, taking collateral where deemed necessary.
The Group also has procedures in place to establish customer limits and follow-up mechanisms for overdue receivables.
The Group’s trade receivables comprise a large number of customers in various industries and geographical areas. Credit
evaluations are performed on an ongoing basis on customer trade receivables. In addition, management evaluates its
trade payables and financial assets on a customer and asset basis at each balance sheet date and ensures that thenecessary provisions for uncollectible amounts are provided for in the consolidated financial statements. In this context,
management believes that the Group’s exposure to credit risk at the reporting date is significantly reduced.

31 December 2023
Maximum credit risk exposure as of the reporting date
(A+B+C+D) (*)

C. Net book value of impaired assets- Past due (gross carrying amount)-

119.176

-

-

-

-

- Impairment (-)-(119.176)

-

-

-

-

- Portion of net value under guarantee with collaterals, etc.

-

-

-

-

-

-

- Not past due (gross carrying amount)

-

-

-

-

-

-

- Impairment (-)

-

-

-

-

-

-

- Portion of net value under guarantee with collaterals, etc.

-

-

-

-

-

-

-

-

-

-

-

-

D. Off-balance sheet items exposed to credit risk

148

Receivables
Trade receivables(*)

The amount does not take into account credit enhancers such as guarantees received.

(**)

Guarantees consist of guarantee notes and guarantee cheques received from customers.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

Credit risk is the risk that a counterparty to a financial instrument will default on its contractual obligations, causing
financial loss to the Group. The Group seeks to mitigate credit risk by dealing only with creditworthy counterparties
and, where possible, by obtaining adequate collateral. The Group’s exposure to credit risk and the creditworthiness of its
customers are monitored on an ongoing basis. Credit risk is managed through customer limits, which are reviewed andapproved annually by the Risk Management Committee.

b) Financial risk factors (continued)b.1) Credit risk management (continued)
Credit risk exposure by types of financial instruments

31 December 2022
Maximum credit risk exposure as of the reporting date
(A+B+C+D) (*)- Portion of the maximum risk covered by the guarantee withsecurities, etc.(**)

Receivables
Trade receivables
Other Receivables
RelatedThird
RelatedThird
Party
Parties
Party
Parties

Banks
Deposit

Receivables from
Financial Operations

1.157

3.005.649-

227.250

92.311580.815-104.223

-

-

-

-

1.157

1.550.658-

227.250

92.311580.815

B. Net book value of assets that are past due but not impaired- Portion of net value guaranteed by collateral, etc.

-

1.454.991
13.759----C. Net book value of impaired assets- Past due (gross carrying amount)- Impairment (-)- Portion of net value under guarantee with collaterals, etc.
- Not past due (gross carrying amount)- Impairment (-)- Portion of net value under guarantee with collaterals, etc.

-

148.202(148.202)
-

-

-

-

-

D. Off-balance sheet items exposed to credit risk

-

-

-

-

-

-

(**)

The aging of overdue receivables is as follows:
31 December 2023

A. Net book value of financial assets that are neither past due
nor impaired(*)

Trade receivables comprise a large number of customers in different sectors and geographical areas. Credit
assessments of customer trade receivables are performed on an ongoing basis and receivables are insured where
deemed necessary.

The amount does not take into account credit enhancers such as guarantees received.
Guarantees consist of guarantee notes and guarantee cheques received from customers.

Trade receivables

Total

244.601
246.477521.099275.660
1.287.837

244.601
246.477521.099275.660
1.287.837

746

746

Trade receivables

Total

1-30 days past due
1-3 months past due
3-12 months past due
1-5 years past due
More than 5 years past due
Total past due receivables

1.018.974
256.843124.730
54.4441.454.991

1.018.974
256.843124.730
54.4441.454.991

Portion guaranteed withcollateral etc.

190.600

190.600

1-30 days past due
1-3 months past due
3-12 months past due
1-5 years past due
Total past due receivables

Portion guaranteed with collateral etc.
31 December 2022

149

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

31 December 2022b.2) Liquidity risk management
The primary responsibility for liquidity risk management rests with the Board of Directors. The Board has established an
appropriate liquidity risk management framework for the short, medium and long term funding and liquidity requirementsof the Group’s management. The Group manages liquidity risk by regularly monitoring forecast and actual cash flows
and by matching maturities of financial assets and liabilities to ensure that sufficient cash and borrowing reserves aremaintained.
The following table summarizes the maturity profile of the Group’s non-derivative and derivative financial liabilities
by contractual repayment date. Non-derivative financial liabilities are undiscounted and based on the earliest payment
dates. Interest payable on these liabilities is included in the table below. Derivative financial liabilities are based on
undiscounted net cash inflows and outflows. Forward contracts are settled on a net basis for forward contracts thatare payable on a gross basis and are realized on undiscounted gross cash inflows and outflows. Where receivables orpayables are not fixed, the amount recognized is determined using the interest rate derived from the yield curves atthe balance sheet date.

31 December 2023

150

Book Value

Total contractual cash
outflows (I+II+III)

4.708.429
72.68642.793323.005
1.582.387
48.8966.778.196

5.091.266
81.39943.258323.005
1.582.387
48.896
7.170.211<3
3-12months (I) months (II)1-5
years (III)1.897.841
4.357
1.376
290.145
1.157.714
3.351.433

1.156.936
38.211
1.195.147

2.036.489
77.0423.671
32.860424.673
48.8962.623.631

The Group’s activities expose it primarily to financial risks associated with changes in foreign currency exchange rates
and interest rates, as described below. The Group uses a variety of derivative financial instruments to manage its
exposure to changes in foreign currency exchange rates and interest rates, including the following– Forward foreign exchange contracts, which are used to hedge the foreign exchange risk arising from purchases andsales in foreign currencies.

Liquidity risk table:

Contractual maturities
Non-derivative financial liabilities
Bank loans
Borrowings for the issue of bonds
Leasing liabilities
Factoring liabilities
Trade payables
Other payables
Total liabilities

Contractual maturities
Non-derivative financial liabilities
Bank loans
Borrowings for the issue of bonds
Leasing liabilities
Factoring liabilities
Trade payables
Other payables
Total liabilities

Market risk is also assessed using sensitivity analysis and stress scenarios.
Book Value

Total contractual cash
outflows (I+II+III)

3.256.146
391.91741.673116.6171.877.052
28.8245.712.229

3.523.901
391.91745.841116.6171.877.052
28.8245.984.152<3
3-12
months (I) months (II)1-5
years (III)1.461.832
20.3791.732.890
3.215.101

1.067.304
7.027
1.074.331

994.765
391.91718.435116.617144.162
28.824
1.694.720

There have been no changes in the Group’s exposure to market risk or in the methods of managing and measuringmarket risk during the year.

b.3.1) Currency risk management
Transactions in foreign currencies expose the Group to foreign exchange risk. Foreign exchange risk is managed throughforward foreign exchange contracts based on approved policies.

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

31 December 2022
TRY Equivalent(Functional
Currency)

USD

EUR

Roman
Leu

British
Pound

Other

Trade Receivables

2.045.191

323

53.35542.448-107

2a. Monetary Financial Assets

50.509

22

1.488

133

1

-

-

-

-

-

-

-

b.3.1) Currency risk management (continued)
The composition of the Group’s monetary and non-monetary assets and liabilities denominated in foreign currencies atthe balance sheet date is as follows:

1. Trade Receivables
2a. Monetary Financial Assets
2b. Non-monetary Financial Assets
3. Other
4. LIQUID ASSETS
5. Trade receivables
6a. Monetary Financial Assets
6b. Non-monetary Financial Assets
7. Other
8. FIXED ASSETS
9. EQUITIES TOTAL
10. Trade Payables
11. Financial Liabilities
12a. Other Monetary Liabilities
12b. Other Non-Monetary Liabilities
13. SHORT-TERM LIABILITIES
14. Trade Payables
15. Financial Liabilities
16a. Other Monetary Liabilities
16b. Other Non-Monetary Liabilities
17. LONG TERM LIABILITIES
18. TOTAL LIABILITIES
19. Net asset/liability position of off-balance sheet derivatives(19a-19b)
19a. Amount of off-balance-sheet foreign currency derivatives
classified as assets
19b. Amount of passive off-balance sheet foreign currency
derivatives
20. Net foreign currency assets liability position (9-18+19)
21. Net foreign currency asset/liability position of monetary items(1+2a+5+6a-10-11-12a-14-15-16a)
22. Total fair value of financial instruments designated as foreign
currency hedges
23. Hedged portion of foreign currency assets
24. Hedged portion of foreign currency liabilities
25. Export
26. Import

1.

31 December 2023

2b. Non-monetary Financial Assets
3. Other

116.083

-

3.534

-

-

-

4. LIQUID ASSETS

2.211.783

345

58.37742.581

1

107

5. Trade receivables

TRY Equivalent(Functional
currency)

USD

EUR

RON

CAD

CNY

JPY

Other

2.073.433
510.155
344.134
2.927.722
2.927.722
621.182
2.064.068
4.448
2.689.698
728.748728.7483.418.446

7.921
27
1.650
9.598
9.598
1.402
1
1.403
1.403

54.83713.7388.989
77.56477.56415.46763.25213578.85422.33222.332101.186

8.197
2.628
143
10.96810.968
1
1
1

23
2.006
9
2.038
2.038
144
144
144

3.484
3.484
3.484

2.702
2.702
2.702

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

8.195 (23.622))

10.9671.894 (3.484) (2.702)-

23. Hedged portion of foreign currency assets

2.331.860-

70.991

25. Export

2.832.428

6

26. Import

1.379.314

6.305(490.724)(834.858)

6.545(32.611)10.824

1.885 (3.484) (2.702)-

530.987
4.504.750 29.625
1.920.810 29.625

16.272147.375
147.375-- 18.400 128.553
27 18.400
384-

206.787

-

6.295

-

-

-

6a. Monetary Financial Assets

-

-

-

-

-

-

6b. Non-monetary Financial Assets

-

-

-

-

-

-

464.732-

14.148---

8. FIXED ASSETS

671.519-

20.443---

9. EQUITIES TOTAL

2.883.302

345

78.82042.581

1

107

10. Trade Payables

796.689

2.554

21.510

296

8

1.822

11.

2.694.752

1.500

80.484---12a. Other Monetary Liabilities

-

-

-

-

-

-

12b. Other Non-Monetary Liabilities

-

-

-

-

-

-

3.491.441

4.054

101.994

296

8

1.822

7.

Other

Financial Liabilities

13. SHORT-TERM LIABILITIES
14. Trade Payables

-

-

-

-

-

-

995.087-

30.240---16a. Other Monetary Liabilities

-

-

-

-

-

-

16b. Other Non-Monetary Liabilities

-

-

-

-

-

-

995.087-

30.240---4.486.528

4.054

132.234

296

8

1.822

20. Net foreign currency assets liability position (9-18+19)(1.603.226)(3.709)(53.414)42.285(7)(1.715)

21. Net foreign currency asset/liability position of monetary items(1+2a+5+6a-10-11-12a-14-15-16a)(2.597.615)(3.709) (83.686)

42.285(7)(1.715)---84.35335.473-4.793

41.311

-

200

8.226

15. Financial Liabilities

17. LONG TERM LIABILITIES
18. TOTAL LIABILITIES
19. Net asset/liability position of off-balance sheet derivatives

151

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

31 December 2023
Profit/Loss
EquityAppreciation ofDepreciation of
Appreciation ofDepreciation offoreign currency
foreign currency
foreign currency
foreign currency

Sensitivity to Exchange Rate Risk
The Group is mainly exposed to foreign exchange risk in USD and EUR.
The following table details the Group’s sensitivity to a 10% increase and decrease in the US dollar and euro exchange
rates. 10% is the sensitivity rate used for internal reporting of foreign exchange risk to key management personnel andrepresents management’s assessment of the potential change in foreign exchange rates. The sensitivity analysis only
includes outstanding monetary items denominated in foreign currencies at the year end and adjusts their translation
at the year-end for a 10% change in exchange rates. This analysis includes both external borrowings and borrowings
for foreign operations within the Group that are denominated in a currency other than the functional currency of theborrower and lender. A positive value represents an increase in profit/loss and other equity items.
Management believes that the sensitivity analysis does not fully reflect the foreign currency risk as the year-end
foreign currency risk analysis does not reflect the foreign currency risk during the year.

In case of a 10% appreciation of the US Dollar
against TRY
1- USD net asset/liability
2- US Dollar hedged portion (-)
3- USD net effect (1 +2)
In case of a 10% appreciation of Euro against TRY
4- Euro net asset/liability
5- Euro hedged portion (-)
6- Euro net effect (4+5)
In case of a 10% appreciation of RON against TRY
7- RON foreign currency net asset/liability
8- Portion hedged from RON foreign currency risk(-)
9- RON Foreign Currency Assets net effect (7+8)
In case of a 10% appreciation of CAD against TRY
10- CAD foreign currency net asset/liability
11- CAD foreign currency hedged portion (-)
12- CAD Foreign Currency Assets net effect (10+11)
In case of a 10% appreciation of CNY against TRY
13- CNY foreign currency net asset/liability
14- Portion hedged from CNY foreign currency risk(-)
15- Net effect of CNY Foreign Currency Assets(10+11)
In case of a 10% appreciation of JPY against TRY
16- JPY foreign currency net asset/liability
17- JPY foreign currency hedged portion (-)
18- JPY Foreign Currency Assets net effect (10+11)
TOTAL (3 + 6 + 9 + 12 + 15 + 18)

152

19.26719.267(19.267)(19.267)

19.26719.267(19.267)(19.267)(106.417)(106.417)

106.417106.417(106.417)(106.417)

106.417106.4177.048(7.048)7.048(7.048)7.048(7.048)7.048(7.048)

4.184
4.184

(4.184)(4.184)

4.184
4.184

(4.184)(4.184)(1.455)1.455(1.455)

1.455

-

-

-

-

(1.455)1.455(1.455)1.455(5.643)(5.643)

5.643
5.643

(5.643)(5.643)

5.643
5.643

(83.016)83.016(83.016)83.016KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

Fair value hedge accounting transactions:b.3.1) Foreign exchange risk management (continued)

The table below provides details of fair value hedge accounting contracts that were not realized at the reporting date.

Sensitivity to Exchange Rate Risk (continued)

Contracts for fairvalue hedges ofrisk accounting
transactions:Averageexchange rate
2023
2022
TRY
TRY

3 months after

9,97

31 December 2022
Profit/LossAppreciation ofDepreciation offoreign currency
foreign currency
In case of a 10% appreciation of the US Dollar
against TRY
1- USD net asset/liability
3- USD net effect (1 +2)
In case of a 10% appreciation of Euro against TRY
4- Euro net asset/liability
5- Euro hedged portion (-)
6- Euro net effect (4+5)
In case of a 10% appreciation of RON against TRY
7- RON foreign currency net asset/liability
8- Portion hedged from RON foreign currency risk(-)
9- RON Foreign Currency Assets net effect (7+8)
In case of a 10% appreciation of GBP against TRY
10- GBP foreign currency net asset/liability
12- Net effect of GBP Foreign Currency Assets(10+11)Equity Profit/LossAppreciation ofDepreciation offoreign currency
foreign currency(11.424)(11.424)

11.424
11.424(11.424)(11.424)

11.424
11.424(175.447)
233.187
57.740175.447(233.187)(57.740)(175.447)
233.187
57.740175.447(233.187)(57.740)

27.913(27.913)27.913(27.913)27.913(27.913)27.913(27.913)

(21)

21

318

(318)

(21)

21

318

(318)

In case of a 10% appreciation of Other FX against
TRY
13- Other foreign currency net assets/liabilities
15- Net effect of Other Foreign Currency Assets(13+14)(5.709)5.709(5.658)5.658(5.709)5.709(5.658)5.658

TOTAL (3 + 6 + 9 + 12 + 15)

68.499(68.499)

68.889(68.889)

Foreign currency
2023
2022
TRY
TRY

Contract value
2023
2022
TRY
TRY

Fair value
2023
2022
TRY
TRY

9,97 336.088

476.18589.810 237.670 246.278 238.515

336.088476.18589.810 237.670 246.278

238.515b.3.2) Interest rate risk management
The Group’s fixed and variable rate borrowings expose the Group to interest rate risk. The Group manages this risk
by maintaining an appropriate mix of fixed and floating rate borrowings through the use of interest rate swaps andforward interest rate contracts. Hedging strategies are regularly reviewed to ensure that they are consistent withinterest rate expectations and identified risk. The objective is to determine the optimal hedging strategy, to review thebalance sheet position and to control the interest expense at different interest rates.
Information on the Group’s exposure to interest rate risk on financial assets and liabilities is given in the Liquidity risk
management section of these Notes.

153

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

31. NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS (CONTINUED)

32. FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

Interest rate sensitivity

Classes and fair values of financial instruments:

The Group’s interest rate sensitive financial instruments are as follows:
Interest Rate Position Table
31 December 2023

31 December 2022

3.297.819

672.717

Fixed Rate Instruments
Financial Liabilities
Floating Rate Securities
Financial Liabilities

508.5344.401.510

31 December 2023
Financial assets
Cash and Cash Equivalents
Trade receivables
Trade receivables from
related parties
Finance lease receivables
Financial investments
Other Receivables
Derivatives
Financial liabilities
Financial liabilities
Lease liabilities
Trade Payables
Payables to Related Parties
Other liabilities

Amounts at
Financial
fair value
assets through othercarried at comprehensive
amortized costincomeAmounts at
Financial
fair value
liabilities
throughcarried at
profit or loss amortized cost

1.027.082
2.315.303

-

-

498
456.219118.423
268.661--246.278--

Book value Note
1.027.082
2.315.303

36
6

498
456.219118.423
268.661246.278(3.764.680) (3.764.680)(41.673)(41.673)(1.767.583) (1.767.583)(109.469)(109.469)(28.824)(28.824)

5
7
30
8
29

The Group management believes that the carrying amounts of financial instruments reflect their fair values.

154

30
13
6
5
18

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

32. FINANCIAL INSTRUMENTS (FAIR VALUE AND HEDGE ACCOUNTING DISCLOSURES)

Fair Value of Financial Instruments

Classes and fair values of financial instruments:– The fair value of financial assets and liabilities is determined as follows:

31 December 2022
Financial assets
Cash and Cash Equivalents
Trade receivables
Trade receivables from
related parties
Finance lease receivables
Financial investments
Other Receivables
Derivatives
Financial liabilities
Financial liabilities
Payables from leasingtransactions
Trade payables
Payables to Related Parties
Other liabilities

Financialassetscarried atamortized cost

Amounts atfair value
through othercomprehensive
income73.7052.681.605

-

-

1.157
580.815
177.689237.002---

Amounts at
Financialfairliabilities
value throughmeasured at
profit or loss amortized cost

– Level 1: Financial assets and liabilities are measured at quoted prices in active markets for identical assets andliabilities.
– Level 2: Financial assets and liabilities are valued using inputs other than quoted prices included within Level 1 thatare observable, either directly or indirectly, for the asset or liability.
Book Value Note

– Level 3: Financial assets and liabilities are valued using inputs that are not based on observable market data used todetermine the fair value of the asset or liability.

-

73.7052.681.605

36
6– Level classification of financial assets and liabilities measured at fair value:

238.515-

1.157
580.815
177.689237.002238.515

5
7
30
8
29

-

-

(5.104.120)(5.104.120)

30

-

-

(42.793)(1.502.993)(79.394)(48.895)(42.793)(1.502.993)(79.394)(48.895)

13
6
5
18

The Group management believes that the carrying amounts of financial instruments reflect their fair values.

Certain of the Group’s financial assets and liabilities are carried at fair value at each balance sheet date. The tablebelow shows how the fair values of these financial assets and liabilities are determined:
Fair value
Not based on
Fair value with inputs that
Financial Assets/ 31 December 31 December Fair value Valuation
significant observable are not based on observable
Financial Liabilities
2023
2022 leveltechniquedata they entereddata relationship
Financial assets
244.343
142.929 Third Level The determination The effect ofA positive change in theat fair valueof fair value isperpetual growth
perpetual growth rate ofthrough otherbased on theand discount rates
the related financial asset
comprehensive
market approach on the value of the results in an increase in theincomeand the venture financial asset
fair value of the financial
capital valuation
asset. Similarly, an increase
model.
in the discount rates
underlying the estimatesused will decrease the fairvalue of the financial asset.
Financial assets
132.395 Third Level The determination The effect ofA positive change in theat fair valueof fair value isperpetual growth
perpetual growth rate ofthrough profit
based on theand discount rates
the related financial asset
or loss
market approach on the value of the results in an increase in theand the venture financial asset
fair value of the financial
capital valuation
asset. Similarly, an increase
model.
in the discount rates
underlying the estimatesused will decrease the fairvalue of the financial asset.
155

KARSAN ANNUAL REPORT 2023

KARSAN OTOMOTİV SANAYİİ VE TİCARET A.Ş. AND ITS SUBSIDIARIESNOTES TO AUDITED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION AS OF 31 DECEMBER 2023
(Amounts expressed in thousands of Turkish Lira (“TRY”) in terms of the purchasing power of TRY as of 31.12.2023, unless otherwise stated.)

35. NOTES TO THE CASH FLOW STATEMENT

33. FEES FOR SERVICES RECEIVED FROM INDEPENDENT AUDITORSFor the periods 1 January - 31 December 2023 and 1 January - 31 December 2022, the Group’s fees for services
received from the independent auditor are as follows:

Independent auditors’ fees for the period
Fees for tax advisory services
Fees for other assurance services

2023

2022

1.010
170
1.180

3.281
316
3.597

34. EVENTS AFTER THE REPORTING PERIOD
On 3 January 2024, the Group announced the change in the senior management of PDP.
On 5 January 2024, the Group announced the first coupon payment of the bond with ISIN code TRFKRSNE2419 on
PDP.

Cash in the bank
Sight deposits
Time deposits maturing in less than three months
Cheques received
Cheques and payment orders issued
Other cash and cash equivalents

31 December 2023

31 December 2022

897.166
888.166
9.000
97.5709.000
23.346
1.027.082

61.24358.6072.636
12.46273.705The nature and level of risk associated with cash and cash equivalents are disclosed in Note 31.
Details of the Group’s time deposits at 31 December 2023 and 2022 are as follows:
Currency
TRY

Interest Rate (%)
40%

Maturity Date
2 January 2024

Original Amount
9.000

On 12 January 2024, the Group announced the material event disclosure relating to the strike decision on PDP.
On 18 January 2024, the Group announced the material event disclosure related to the agreement in the collective
bargaining process on PDP.
On 18 January 2024, the Group announced the material event disclosure related to the decision of the Board of
Directors to issue Sukuk on PDP.
On 24 January 2024, the Group announced the Material Event Disclosure relating to the CMB Application on theIssuance Ceiling on PDP.
On 29 February 2024, the Group disclosed a material event disclosure on PDP regarding the signing of a contract with
the Municipality of Rotterdam, the Netherlands, for the sale of autonomous e-ATAK.
On 12 March 2024, our company announced the material event disclosure regarding the CMB approval of the Sukukissuance ceiling (TRY 700 million) on PDP.
156

31 December 2023
9.000
9.000

Currency
TRY
TRY

Interest Rate (%)
18.50%
14.75%

Maturity Date
2 January 2023
2 January 2023

Original Amount
2.471.594
164.773

Currency
2.472
164
2.636

DIRECTORYDISCLAIMER

HEADQUARTERS

The Board of Directors Report, Auditor Report, Consolidated Financial Statements, and Independent Audit
Report regarding the 2023 activities and accounts included in this Annual Report have been meticulously
prepared in strict adherence to the applicable laws. This report has been intended to provide information to
our shareholders, and undue reliance should not be placed on it when making any investment decisions.
The forward-looking statements and estimated figures included in the Report represent the perspectives ofCompany management regarding the future situation, and actual results may differ materially depending on
the variables and projections involved in the forward-looking estimated figures. Accordingly, Karsan Otomotiv
Sanayii ve Ticaret A.Ş. or its Board members, consultants, or employees cannot be held liable for any loss
or damage that a person may suffer, directly or indirectly, as a result of any information or communication
contained within the scope of this Report or as a result of any information based on or not included in thisReport. As of the time of preparing this Report, all information contained is believed to be accurate, andKarsan Otomotiv Sanayii ve Ticaret A.Ş. cannot be held liable for any errors that may have occurred during
the writing and printing phases.

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