Our fundamental principles for all our activities are commitment to business ethics rules and “zero tolerance” to bribery and corruption. We regulate the basis of our understanding of ethics and rules to be applied through the “Tofaş Code of Ethics and Application Principles.” Besides, our approach to corruption and bribery is clearly defined in our Anti-Bribery and Anti-Corruption Policy.

Our principles and policies regarding business ethics and anti-corruption cover the topics of compliance business conduct with business ethics, protection of all kinds of corporate assets and information, the prevention of conflict of interest, issues to be considered during the establishment of business relations and partnerships, health and safety in working environment, and anti-bribery and anti-corruption practices. Breach reporting mechanisms and the disciplinary rules and sanction in case of any violation are also defined in our policy, and procedures and processes are monitored precisely. The 10th principle of United Nations Global Compact (UNGC) on anti-corruption signed by our shareholder Koç Holding, is an integral part of our business ethics and anti-corruption approach.

Within business ethics and anti-corruption program, in tandem with Tofaş Ethics Committee and the Internal Audit Department, we follow a compliance program that includes risk-based assessments, monitoring, auditing, reporting and training activities. The principle of segregation of duties is adopted to prevent corruption, and the necessary check points are defined. The functionality and efficiency of business processes and check points is reviewed through periodical audits conducted by Internal Audit Department. In addition, independent audit teams perform audits on the business processes and financial statements at least twice a year.

The Board of Directors is primarily responsible for conducting all company activities in accordance with legal regulations the Tofaş Business Ethics Rules and Tofaş Anti-Bribery and Anti-Corruption Policy. This responsibility is exercised through Tofaş Ethics Committee nominated by our Board of Directors. The Ethics Committee is composed of CEO, Chief Legal Officer, Human Resources Director and other related directors. Committee gathers at every 6 months or upon call from any of its members. Tofaş Ethics Committee is responsible for the dissemination and the understanding of ethical principles through the company, the communication with internal and external stakeholders, the revision activities when necessary, its effective management, the investigation and settlement of the employees’ and third parties’ notice of violations, establishing a commission of inquiry if necessary, implementing the decision according to the discipline procedure, and informing the related authorities. Sanctions, even contract cancellations to be applied in case of breaches are held according to Tofaş Code of Ethics and Staff Regulations.

Tofaş Ethics Committee is also responsible for monitoring and auditing of compliance with anti-bribery and anti-corruption policy and code of ethics. Internal audit department conducts periodical auditing activities regarding compliance with such codes and policies on behalf of the Tofaş Ethics Committee. Risks related to code of ethics, bribery and corruption are identified through risk-based assessment. Several factors including the quality of the activity, the place of conduct, internal and external risks, and current internal controls are considered in risk-based assessments. Bribery and corruption risks are key criteria in detecting internal and external risks. For instance, units that work directly with public and private sector suppliers and customers are considered as exposed to higher risks.

An audit plan is prepared to review effectiveness and strengthen internal control in necessary areas according to the risk assessment results conducted by internal audit department. This audit plan is submitted for approval and review to Audit Committee. Besides, as a result of the risk-based assessment results, departments that have relatively higher risk level are included primarily to the audit plan or subject to routine controls. Corruption and bribery risks are handled in these auditing activities, and risk-mitigating controls are evaluated. In case of inefficient control levels, the related departments conduct corrective actions. Internal Audit Department submits the audit results both verbally and in written form to the General Manager and the Audit Committee, operating under the Board of Directors. The results of significant complaints, problems and inspections are assessed and reviewed at least quarterly by Board Sub-committees via Internal Audit Department and Ethics Committee. There are no bribery or corruption cases observed in the audits conducted in 2017.

All employees are responsible for protecting our values and principles of ethics and acting in accordance with working principles, and moreover, they give a signed declaration of commitment. In this context, our code of ethics and anti-bribery and anti-corruption policy are communicated with all employees. In addition to declaration of commitments we received from current employees, code of ethics and anti-bribery and corruption policy are submitted to newly hired colleagues by signature. Moreover, compulsory orientation trainings offered to newly hired employees, henceforth, includes code of ethics. As of December 2017, the relevant personnel participate in breifing meetings program about the code of ethics based on their units. During the reporting period, a total of 35 employees participated in the very first briefing meeting in December 2017. All senior and mid-level managers are responsible for attaching the necessary importance to the code of ethics and the accordance of employees to these codes. It is evident in our Anti-Bribery and Anti-Corruption Policy that Tofaş employees cannot be deemed responsible for any loss that the company suffers due to their actions compliant with ethical rules. Not only employees, but Board members, suppliers and dealers, namely all business partners and all stakeholders must fully obey these codes and policies. Compliance to business ethics and anti-corruption rules are an integral part of our activities, and we strive to improve them constantly.

We continuously communicate our rules and policies regarding business ethics and anti-corruption with our business partners via platforms such as website and periodical publications. We improved our online training program based on feedbacks gathered from suppliers and dealers that completed our online program on code of ethics and anti-bribery. Moreover, we consult to dealers, suppliers and non-governmental organizations when prioritizing subjects that shall be included in the sustainability report. According to this consultation, 95% of the relevant stakeholders identified business ethics and anti-corruption subject as the top priority.

We conduct due diligence processes including anti-bribery and anti-corruption issues before establishing commercial partnerships and selecting business partners such as suppliers and dealers. We choose business partners who shall comply with our rules and policies. Before establishing a partnership, we evaluate prospective partners according to specific criteria including ethical compliance.

Objective criteria specified in internal procedures are taken into account when selecting agents or companies that Tofaş will receive goods or services from. Aforementioned criteria include subjects such as corruption and bribery risks, and the pre-assessments are conducted jointly by the related business unit and purchasing department. During the selection and determination of procurement amounts regarding companies complying with the criteria, the purchasing department evaluates the alternatives and selects the most beneficial option for Tofaş. We basically adopt the ethics principles, fairness and transparency in selecting suppliers. These agents or companies only receive payment on the condition that their services comply with the rules and policies of Tofaş and related laws and regulations. We established the necessary checkpoints on business processes in order to ensure the suitability of payments in return of a service; Internal Audit Department periodically tests the efficiency of these checkpoints. We include relevant regulations and code of ethics in contracts signed with business partners; and we declare that any breach of these clauses will result in the termination of contract. In addition, we monitor the performance of our business partners related to anti-bribery and anti-corruption. There are no bribery or corruption cases submitted us related to our business partners in 2017.

In order to recognize and adopt Tofaş Code of Ethics, we conduct online training and refresher activities that include Code of Ethics and Anti-bribery and Anti-corruption Policy. In addition to theoretical information, this training program includes case studies that one may encounter in business life and is offered not only to employees but suppliers and dealers as well. As of the end of 2017, a total of 5,238 employees, 3,228 of which were dealer employees have received online training. We believe that awareness on anti-bribery and anti-corruption has improved compared to the previous reporting period thanks to the online trainings we offered in 2016 (online ethics training which is updated in the first quarter of 2018, was assigned as a compulsory program to all employees, and as of the end of March 2018, 226 personnel have completed this training). In 2017, we renewed employee declarations on conflict of interest.

The efficiency of anti-bribery and anti-corruption policies, mechanisms and reporting tools are evaluated independently by sub-committees of the Board at least once a year. In this context, mechanisms, systems and procedures we developed in regard to anti-bribery and anti-corruption was evaluated independently and approved by Audit Committee of Tofaş Board of Directors. The assessment result is publicly available in our website in committee meeting minutes dated 01.02.2018. .

We monitor individuals and companies in the black list formed according to information gathered from various sources such as public authorities, international data providers and social media sources in order to comply with current regulations and corporate codes. Based on our procedures, we detect agents, suppliers, contractors and customers that are known or suspected to give bribe, and we commence the termination process of ongoing contracts with these parties.

Easy to access and open whistleblowing channels are established to detect any situations violating Code of Ethics and Anti-bribery and Anti-corruption Policy. In order to create employee awareness, employees, suppliers and other stakeholders are reminded about the whistleblowing channels at certain intervals. Employees, business partners and all other stakeholders can send e-mails to [email protected] anonymously or with their names, notifying any suspicious situation they believe to violate these codes and policies. In addition, notifications made to corporate addresses or shared with employees are also assessed.

Ethics Committee ensures the confidentiality of shared information and the interrogation. This Committee ensures that employees that notify any suspicious violation of anti-bribery and corruption policy are not subject to any negative reactions. This is clearly emphasized in Tofaş Code of Ethics and Anti-Bribery and Anti-Corruption Policy.

In 2017, there were no case of bribery observed in our company; there was no reported case of bribery amongst the notifications made through our whistleblowing channels. In 2017, there are no cases of corruption notified to the company. In 2017, Tofaş has received 14 notifications on different subjects via these communication channels. The results of these notifications are as follows:

Notifications Received via Whistleblowing Channels	2017		2016	2015
Disciplinary Sanction	5		3	2
Unconformity Not Detected	9		6	3
TOTAL	14		9	5

As explicitly stated in Code of Ethics, Tofaş cannot be a part of any political or ideological thought, trend or organization; and cannot provide financial, pro-bono or moral support to activities or campaigns of any political parties, politicians or candidates whether directly or indirectly. In the frame of transparent relations, we established with public institutions, we share know-how mutually and respond openly to demands of information regarding our sector. In addition, we work to express general industrial issues via the studies conducted by industrial non-governmental organizations. We act in fair competition rules without sacrificing full compliance principle to laws and procedures in case public institutions become customers or when participating tenders.

Our company meticulously evaluates every opinion, view and suggestion received from our stakeholders regarding ethical compliance, anti-bribery and anti-corruption; integrate them into current applications. In this context, we are in collaboration with TEID (Ethics and Reputation Society) which is the most active platform and non-governmental organization in Turkey in regards to anti-bribery and anti-corruption and the necessary precautions against them. TEID plays an important role in the flow of information on anti-bribery mechanisms from stakeholders to our company. Two managers of our company are on active duty in the board of directors of TEID. We closely follow the events of TEID in which knowledge and perspectives are shared in regards to anti-corruption; Internal Audit Department participates in these events as well. Beside membership fee, Tofaş does not pay TEID any fee for their support.

We evaluate and improve the efficiency of our anti-corruption program and reporting system according to improvement suggestions through the “Survey on Efficiency of Anti-Corruption Programs” prepared annually by TEID based on the best practice guidelines of OECD and UN. Our company is also a member and active participant of TEID, UN, OECD and B20 working groups in order to monitor the international developments in this regard.

Our company has attended the largest collective action on anti-corruption in Europe in accordance with its objective to become the leader of the sector in anti-corruption. Being among the 140 signatories of “Joint Business Ethics Declaration,” TOFAŞ maintains to be the first and only signatory from automotive sector and encourages large-scale suppliers to participate in the same collective action.

Tofaş Code of Ethics, Anti-bribery and Anti-corruption Policy, and the details of other functions are available in www.tofas.com.tr/en/sustainability/Pages/CorporateGovernance/EthicalConduct.aspx