Aselsan Elektronik Sanayi ve Ticaret Anonim Sirketi : Financial Report 09-2023

(Convenience Translation of Consolidated Financial

Statements and Related Disclosures and Footnotes

Originally Issued in Turkish)

ASELSAN ELEKTRONİK

SANAYİ VE TİCARET ANONİM ŞİRKETİ

AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS

AS OF AND FOR THE NINE-MONTH

PERIOD ENDED 30 SEPTEMBER 2023

31 October 2023

This report contains condensed consolidated interim financial information and related disclosures and footnotes comprising 45 pages.

CONTENT	PAGE
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	1-3
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	4-5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	6
CONSOLIDATED STATEMENT OF CASH FLOWS	7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	8-45
NOTE
1.	ORGANIZATION AND OPERATIONS OF THE GROUP	8
2.	BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS	9
3.	CASH AND CASH EQUIVALENTS	18
4.	RELATED PARTY DISCLOSURES	19
5.	TRADE RECEIVABLES AND PAYABLES	23
6.	INVENTORIES	24
7.	PREPAID EXPENSES AND DEFERRED INCOME	25
8.	PROPERTY, PLANT AND EQUIPMENT	26
9.	PROVISIONS, CONTINGENT ASSETS AND LIABILITIES	27
10.	TAX	28
11.	COMMITMENTS AND CONTINGENCIES	29
12.	EMPLOYEE BENEFITS	32
13.	SHARE CAPITAL, RESERVES AND OTHER EQUITY ITEMS	34
14.	REVENUE AND COST OF SALES	35
15.	OTHER OPERATING INCOME AND EXPENSES	36
16.	FINANCIAL INCOME	36
17.	FINANCIAL EXPENSES	36
18.	EARNINGS PER SHARE	37
19.	FINANCIAL LIABILITIES	37
20.	FOREIGN EXCHANGE POSITION	40
21.	EVENTS AFTER THE REPORTING PERIOD	45

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

			Not Limited
			Reviewed		Audited
	Note		30 September		31 December
	References	2023	2022
ASSETS
Current Assets		50.239.060	38.299.445
Cash and Cash Equivalents	3	1.727.103	5.686.996
Trade Receivables	5	20.134.641	14.888.340
From Related Parties	4	8.785.959	6.242.612
From Third Parties		11.348.682	8.645.728
Other Receivables		1.096.826	1.026.644
From Related Parties	4	10.428	5.580
From Third Parties		1.086.398	1.021.064
Inventories	6	19.759.068	12.592.653
Prepaid Expenses	7	5.356.073	3.154.875
From Related Parties	4	1.445.090	1.199.891
From Third Parties		3.910.983	1.954.984
Other Current Assets		2.165.349	949.937
Non-Current Assets		49.112.709	37.744.396
Financial Investments		4.296.191	4.288.363
Trade Receivables	5	24.820.772	18.973.918
From Related Parties	4	18.703.465	14.301.569
From Third Parties		6.117.307	4.672.349
Other Receivables		7.178	5.983
From Third Parties		7.178	5.983
Equity Accounted Investments		464.827	298.477
Property, Plant and Equipment	8	8.270.922	6.327.444
Intangible Assets	8	6.175.760	3.531.910
Prepaid Expenses	7	1.023.290	761.483
From Related Parties	4	176.096	100.440
From Third Parties		847.194	661.043
Deferred Tax Assets	10	2.838.490	2.082.110
Other Non-Current Assets		1.215.279	1.474.708
TOTAL ASSETS			99.351.769		76.043.841

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

1

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

			Not Limited
			Reviewed		Audited
	Note		30 September		31 December
	References	2023	2022
LIABILITIES
Current Liabilities		40.072.767	29.651.397
Short-term Financial Liabilities	19	7.769.834	5.602.536
Short-term Portion of Long-term Financial Liabilities	19	6.834.138	4.161.402
Trade Payables	5	11.823.883	9.775.271
To Related Parties	4	3.106.135	2.654.902
To Third Parties		8.717.748	7.120.369
Employee Benefit Obligations		1.100.123	637.239
Other Payables		465.985	369.944
To Related Parties	4	400.000	306.989
To Third Parties		65.985	62.955
Government Grants and Incentives		67.213	69.856
Deferred Income	7	6.383.452	4.100.087
To Related Parties	4	2.164.348	1.661.385
To Third Parties		4.219.104	2.438.702
Corporate Tax Liability		462.110	182
Short-term Provisions		5.068.025	4.881.364
For Employee Benefits	12	483.221	871.333
Other	9	4.584.804	4.010.031
Other Current Liabilities		98.004	53.516
Non-Current Liabilities		9.968.530	6.531.475
Long-term Financial Liabilities	19	1.861.295	1.069.683
Trade Payables	5	168.319	72.720
To Third Parties	4	168.319	72.720
Other Payables		21.192	16.289
To Third Parties		21.192	16.289
Deferred Income	7	4.523.122	2.157.322
To Related Parties	4	1.991.047	1.320.021
To Third Parties		2.532.075	837.301
Long-term Provisions		3.388.257	3.210.595
Long-term Provisions for Employee Benefits	12	719.481	579.397
Other	9	2.668.776	2.631.198
Other Non-Current Liabilities		6.345	4.866

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

2

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

			Not Limited
			Reviewed		Audited
	Note		30 September		31 December
	References		2023		2022
EQUITY		49.310.472	39.860.969
Equity Attributable to Equity Holders of the Parent		49.024.724	39.636.982
Share Capital	13	4.560.000	2.280.000
Inflation Adjustments on Share Capital Differences	13	98.621	98.621
Share Premiums		2.796.723	2.796.723
Other Comprehensive Income / (Expense) that will not be
Reclassified to Profit or (Loss)		628.365	780.009
Gain on Revaluation of Property, Plant and Equipment		1.100.324	1.100.324
Gain/ Loss on Remeasurement of Defined Benefit Plans		(471.959)	(320.315)
Other Cumulative Comprehensive Income / (Expense) will be
Reclassified to Profit/Loss		4.340.291	4.202.072
Gain (Loss) on Financial Assets That Fair Value Difference
Reflected in Other Comprehensive income		4.002.881	4.002.881
Cumulative Translation Adjustments		337.410	199.191
Restricted Reserves	13	642.665	612.077
Retained Earnings		26.156.892	16.951.819
Net Profit for the Year		9.801.167	11.915.661
Non-Controlling Interests		285.748	223.987
TOTAL LIABILITIES AND EQUITY			99.351.769		76.043.841

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

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ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS and OTHER COMPREHENSIVE INCOME FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

		Not Limited		Not Limited		Not Limited		Not Limited
		Reviewed		Reviewed		Reviewed		Reviewed
		1 January-		1 July-		1 January-		1 July-
	Notes	30 September		30 September		30 September		30 September
	References	2023	2023	2022	2022
PROFIT OR LOSS
Revenue	14	32.066.743	13.999.863	17.728.397	6.887.190
Cost of Sales (-)	14	(22.557.651)	(10.248.005)	(12.286.169)	(4.864.211)
GROSS PROFIT		9.509.092	3.751.858	5.442.228	2.022.979
General Administrative Expenses (-)		(1.568.649)	(654.297)
Marketing Expenses (-)		(714.935)	(357.044)	(784.379)	(350.493)
Research and Development Expenses (-)		(754.768)	(271.892)	(499.021)	(212.240)
Other Operating Income	15	17.902.672	5.879.209	(466.917)	(205.298)
Other Operating Expenses (-)	15	(10.012.296)	(3.541.366)	8.895.656	2.491.510
OPERATING PROFIT		14.361.116	4.806.468	6.822.622	2.054.152
Income from investing activities		21.814	2.805	6.325	755
Expense From Investing Activities		(8)	--	--	--
Shares of profit/(losses) of Equity Accounted
Investees		(6.622)	(1.702)	(18.688)	(13.179)
OPERATING PROFIT BEFORE FINANCIAL EXPENSE		14.376.300	4.807.571	6.810.259	2.041.728
Financial Income	16	779.361	392.933	590.248	37.694
Financial Expense (-)	17	(4.898.240)	(1.105.007)	(2.066.354)	(482.928)
PROFIT BEFORE TAX FROM CONTINUING
OPERATIONS		10.257.421	4.095.497	5.334.153	1.596.494
Tax Income from Continuing Operations	10	(407.094)	348.725	401.081	341.929
- Current Corporate Tax Expense(-)		(1.125.563)	(9.678)	(1.730)	(599)
- Deferred Tax Income		718.469	358.403	402.811	342.528
PROFIT FOR THE PERIOD FROM CONTINUING
OPERATIONS		9.850.327	4.444.222	5.735.234	1.938.423
Profit for the Period Attributable to
Non-Controlling Interest		49.160	56.538	(56.732)	(17.936)
Owners of the Company	18	9.801.167		4.387.684		5.791.966		1.956.359
		9.850.327	4.444.222	5.735.234	1.938.423
Earnings for per 100 Shares (in full kuruş)	18	214,94	96,22	254,03	85,8

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

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ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS and OTHER COMPREHENSIVE INCOME FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

			Not Limited		Not Limited		Not Limited		Not Limited
			Reviewed		Reviewed		Reviewed		Reviewed
			1 January-		1 July-		1 January-		1 July-
	Note		30 September		30 September		30 September		30 September
	References	2023	2023	2022	2022
PROFIT FOR THE PERIOD FROM CONTINUING
OPERATIONS
Items that will not to be reclassified
subsequently in Profit or Loss		(151.644)	(8.999)	(123.771)	(4.976)
Loss on Remeasurement of Defined Benefit
Plans	12	(189.555)	(11.249)	(154.714)	(6.220)
Deferred Tax Income / (Expense)		37.911	2.250	30.943	1.244
Items that may be reclassified subsequently to
profit or loss		138.219	18.306	82.211	31.400
Foreign Currency Translation Differences		138.219	18.306	82.211	31.400
OTHER COMPREHENSIVE INCOME		(13.425)	9.307	(41.560)	26.424
TOTAL COMPREHENSIVE INCOME		9.836.902	4.453.529	5.693.674	1.964.847
Total Comprehensive Income Attributable to
Non-Controlling Interest		49.160	56.538	(56.732)	(17.936)
Main Shareholders		9.787.742	4.396.991	5.750.406	1.982.783
			9.836.902		4.453.529		5.693.674		1.964.847

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

5

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTH ENDED 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

				Other Comprehensive Income /		Other Comprehensive Income
				Expense that will not to be		/ Expense that may not to be
				Reclassified Subsequently to		Reclassified Subsequently to
				Profit or Loss		Profit or Loss		Retained Earnings
							Gain (Loss)
							on Financial
							Assets That
							Fair Value
							Difference
		Inflation	Share				Reflect in					Equity
		Adjustments	Issuance		Remeasurement		Other				Net	Attributable to	Non-
	Share	on Share	Premiums/	Revaluation	of Defined		Comprehensi	Translation	Restricted	Retained	Profit/(Loss)	Owners of the	Controlling
	Capital	Capital	(Discounts)	Reserves	Benefit Plans		ve income	Reserves	Reserves	Earnings	for the Year	Company	Interests	Equity
Balance as of 1 January 2022	2.280.000	98.621	2.796.723	309.535	(123.119)	2.034.249	143.537	542.341	10.350.992	7.130.563	25.563.442	271.768	25.835.210
Transfers	--	--	--	--	--	--	--	69.736	6.600.827	(6.670.563)	--	--	--
Capital Increase	--	--	--	--	--	--	--	--	--	--	--	--	--
Total Comprehensive Income	--	--	--	--	(123.771)	--	82.211	--	--	5.791.966	5.750.406	(56.732)	5.693.674
Dividends	--	--	--	--	--	--	--	--	--	(460.000)	(460.000)	(229)	(460.229)
Balance as of 30 September
2022 (Closing Balance)	2.280.000	98.621	2.796.723	309.535	(246.890)	2.034.249	225.748	612.077	16.951.819	5.791.966	30.853.848	214.807	31.068.655
Balance as of 1 January 2023	2.280.000	98.621	2.796.723	1.100.324	(320.315)	4.002.881	199.191	612.077	16.951.819	11.915.661	39.636.982	223.987	39.860.969
Transfers	--	--	--	--	--	--	--	30.588	11.485.073	(11.515.661)	--	--	--
Capital Increase	2.280.000	--	--	--	--	--	--	--	(2.280.000)	--	--	--	--
Total Comprehensive Income	--	--	--	--	(151.644)	--	138.219	--	--	9.801.167	9.787.742	49.160	9.836.902
Dividends	--	--	--	--	--	--	--	--	--	(400.000)	(400.000)	--	(400.000)
Consolidation Effect of New
Share Acquisitions	--	--	--	--	--	--	--	--	--	--	--	12.601	12.601
Balance as of 30 September
2023 (Closing Balance)	4.560.000	98.621	2.796.723	1.100.324	(471.959)	4.002.881	337.410	642.665	26.156.892	9.801.167	49.024.724	285.748	49.310.472

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

6

ASELSAN ELEKTRONİK SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTH ENDED 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

		Not Limited	Not Limited
		Reviewed	Reviewed
		1 January-	1 January-
	Note	30 September	30 September
	References	2023	2022
A.Cash Flows from Operating Activities		80.014	558.672
Profit for the Period		9.850.327	5.735.234
Adjustments to Reconcile Profit for the Period		6.467.218	3.643.435
- Adjustments for Depreciation and Amortization Expense	8	682.011	414.921
- Adjustments for Impairment Loss (Reversal of Impairment Loss)		8.882	(22.936)
Adjustments for Impairment Loss (Reversal of Impairment Loss) of Receivables	5	21.681	558
Adjustments for Impairment Loss (Reversal of Impairment Loss) of Inventories	6	(12.799)	(23.494)
-Adjustments for Provisions		1.253.259	1.299.711
Adjustments for (Reversal of) Provisions Related with Employee Benefits	12	(236.613)	87.096
Adjustments for (Reversal of) Lawsuit and/or Penalty Provisions		781.182	581.122
Adjustments for (Reversal of) Warranty Provisions		841.002	649.482
Adjustments for (Reversal of) Other Provisions		(132.312)	(17.989)
-Adjustments for Interest (Income) Expenses		(189.368)	(6.273)
Adjustments for Interest Income		(491.422)	(320.099)
Adjustments for Interest Expense		302.054	313.826
- Adjustments for Retained Profit of Equity Accounted Investees		6.622	18.688
- Adjustments for Tax (Income)/Expenses		407.094	(401.081)
-Other Adjustments for which Cash Effects are Investing or Financing Cash Flow		3.461.397	1.278.299
-Other Adjustments to Reconcile Profit (Loss)		837.321	1.062.106
Changes in Working Capital		(14.495.404)	(8.236.074)
- Decrease (Increase) in Trade Receivables		(4.128.984)	(2.532.769)
- Decrease (Increase) in Other Receivables Related with Operations		(71.377)	124.466
- Decrease (Increase) in Inventories	6	(7.088.284)	(3.726.304)
- Decrease (Increase) in Prepaid Expenses	7	(2.456.595)	(1.055.282)
- Increase (Decrease) in Trade Payables	5	2.612.759	(176.849)
- Increase (Decrease) in Employee Benefit Obligations	12	462.884	256.722
-Adjustments for Stage of Completion of Construction or Service Contracts in
Progress		(7.685.571)	(3.007.047)
- Increase (Decrease) in Other Operating Payables		(299.056)	(278.725)
- Increase (Decrease) in Government Grants and Subsidies		(2.643)	(2.756)
- Increase (Decrease) in Deferred Income		5.046.831	2.839.378
- Other Increase (Decrease) in Working Capital		(885.368)	(676.908)
Cash Flows From Operations		1.822.141	1.142.595
Payments Related with Provisions for Employee Benefits	12	(200.970)	(89.225)
Payments Related with Other Provisions		(877.521)	(492.297)
Income Taxes Refund (Paid)		(663.636)	(2.401)
B.Cash Flows From Investing Activities		(6.680.699)	(4.229.864)
Proceeds from Sales of Property, Plant, Equipment and Intangible Assets		6.004	5.532
Purchase of Property, Plant and Equipment	8	(2.471.091)	(1.526.558)
Purchase of Intangible Assets	8	(4.047.037)	(2.528.487)
Dividends Received		10.428	4.958
Other Cash Inflows (Outflows)		(179.003)	(185.309)
C.Cash Flows From Financing Activities		2.159.822	2.308.820
Proceeds from Borrowings		9.576.368	7.239.648
Repayments of Borrowings		(7.416.546)	(4.930.828)
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS BEFORE
EFFECT OF EXCHANGE RATE CHANGES (A+B+C)		(4.440.863)	(1.362.372)
D. EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		482.746	222.521
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D)		(3.958.117)	(1.139.851)
E.CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		5.685.115	2.491.606
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (A+B+C+D+E)	3	1.726.998	1.351.755

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

7

ASELSAN ELEKTRONİK SANAYİ VE TİCARET A.Ş. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH ENDED 30 SEPTEMBER 2023

(Amounts are expressed in thousands of Turkish Lira (''TL'') and in thousands of "Foreign Currency" unless otherwise stated.)

1. ORGANIZATION AND OPERATIONS OF THE GROUP

ASELSAN Elektronik Sanayi ve Ticaret Anonim Şirketi ("the Company") was established in order to engage principally in research, development, engineering, production, tests, assembly, integration and sales, after sales support, consultancy and trading activities, to provide and conduct all sorts of activities for project preparation, engineering, consultancy, service providing, training, contracting, construction, publishing, trading, operation and internet services regarding various software, equipment, system, tools, material and platforms in the fields of electrical, electronics, microwave, electro-optics, guidance, computer, data processing, encryption, security, mechanics, chemistry and related areas within the army, navy, air force and aerospace applications to all institutions, organizations, companies and individual consumers.

The Company was established at the end of 1975 as a corporation by Turkish Land Forces Foundation. The Company commenced its production activities in Macunköy Facilities in early 1979.

As of the reporting date, the Company has been organized under five divisions under the Vice Presidential Sector with regard to investment and production requirements of projects. These divisions comprise Communication and Information Technologies Vice Presidency (''HBT''), Radar and Electronic Warfare Systems Vice Presidency (''REHİS''), Defence Systems Technologies Vice Presidency (''SST'') and Microelectronics, Guidance & Electro-Optics Vice Presidency (''MGEO'') and Transportation, Security, Energy, Automation and Medical Systems Vice Presidency (''UGES'').

In addition to the Vice Presidencies above, the Company organization also includes the Financial Management Vice Presidency, Corporate Management Vice Presidency, Technology and Strategy Management Vice Presidency, Business Development, Marketing Vice Presidency, Supply Chain Management Vice Presidency and R&D Management Vice Presidency making a total of six Vice Presidencies; in addition to these, there are also Legal Affairs and Private Secreteriat.

The Internal Audit Department and Board of Directors Planning and Coordination Management have been established under the Board of Directors.

The Company maintains production and engineering operations in Ankara, Macunköy, Akyurt and Gölbaşı campuses and engineering operations in METU Teknokent, Hacettepe Teknokent, Gebze IT Valley and Teknopark İstanbul. General Management is located in Ankara Macunköy.

Turkish Armed Forces Foundation ("TSKGV") is the main shareholder of the Company which holds 74,20 percent of the capital and maintains control of the Company. TSKGV was established on 17 June 1987 with the law number 3388, in order to manufacture or import guns, equipment and appliances needed for Turkish Armed Forces.

The Company is registered to Capital Markets Board of Türkiye ("CMB") and its shares have been quoted in Borsa İstanbul Anonim Şirketi ("BIST") since 1990. As of 30 September 2023, 25,80 percent of the Company's shares are publicly traded (31 December 2022: 25,80 percent) (Note 13).

The Company's trade registry address is Mehmet Akif Ersoy Mahallesi İstiklal Marşı Caddesi No:16

06200 Yenimahalle/Ankara. The average number of personnel employed by the Group as of 30 September 2023 is 11.454 (31 December 2022: 10.948).

8