Our corporate governance principles:

1. Board Membership Criteria.

The Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated and be selected based upon contributions they can make to the Board and management regardless of gender or race. Because of the potential for conflicts of interest, the Board does not seek members employed as attorneys, investment bankers, accountants or consultants. It also does not seek as members portfolio managers, representatives from its institutional shareholder base, competitors or any particular employee constituency.

2. Selection of New Directors.

The Nominating and Governance Committee has, as one of its responsibilities, the recommendation of director candidates to the full Board after receiving input from all Directors, including the Chairman and the President.

3. Formal Evaluations of Chairman and President.

The Board should establish subjective and objective performance criteria at the beginning of each year for use in formal evaluations of the Chairman and President. The Compensation Committee conducts the Chairman and President evaluations in the context of its review of the Company's performance in meeting its priorities for purposes of awarding compensation. The Compensation Committee chair reports to the Board on the evaluation in an Executive Session.

4. Assessing Board Performance.

The Nominating and Governance Committee has the responsibility to assess overall Board performance. The performance of the Board and the Nominating and Governance, Audit and Compensation Committees shall be evaluated each year. Comments regarding individual directors that arise during these evaluations will be directed for their consideration to the Chairman and to the Chairman of the Nominating and Governance Committee.

5. Mix of Inside and Outside Directors.

The Board should have a significant majority of independent directors.

6. Retirement Policy.

The Board believes that Directors should retire at the Company's Annual Meeting of Shareholders immediately following their seventy-second birthday.

7. Directors Changing Their Present Job Responsibility.

The Board expects Directors who change their present job responsibility to tender their resignation to the Chairman, who should refer it to the Nominating and Governance Committee for review with the Chairman's recommendation. The Board expects Directors to consult with the Chairman (or the Nominating and Governance Committee) on special circumstances.

8. Executive Sessions of Outside Directors.

Executive Sessions are those sessions that only include elected Directors. Non-Employee Board Sessions are those sessions that include only non-employee Directors.

Non-employee Directors may meet in Non-Employee Board or Committee Sessions at the discretion of the non-employee Directors. Such sessions are not required except on the occasion of the annual evaluation of the Chairman and the President. Non-Employee Board Sessions will be led by the chair of the Audit, Compensation or Nominating and Governance Committee. The leader will be chosen by the non-employee Directors based on who is the most knowledgeable and appropriate leader given the subject for the meeting. The leader has the authority to retain outside consultants and to schedule meetings.

9. Former Chairman Status on Board.

The Board expects the Chairman to resign upon retirement. There may be circumstances where the Board's policy to accept the resignation would not apply, including to accommodate the transition for the new Chairman or where the current Chairman cedes the title of Chief Executive Officer to another individual.

The Board believes that officers other than the Chairman who are also Directors should resign immediately from the Board when they retire from or leave active Company employment or change positions. In any event, they should resign from the Board at age 65.

10. Separate Positions of Chairman and Chief Executive Officer.

The Company's Bylaws require that the Chairman and Chief Executive Officer be the same person.

11. Board Committees: Independent Audit, Compensation, Nominating and Governance Committees.

The Board maintains Audit, Compensation, and Nominating and Governance Committees, which shall consist solely of independent directors. The Board also may maintain additional committees (e.g., Preferred Stock Financing Committee) to facilitate discharging its responsibilities. Before establishing any additional committee, the Board considers whether the membership of the committee should be limited solely to independent directors.

12. Rotation of Committee Assignments.

The Board believes that Committee assignments should be based on the Director's knowledge, interests and areas of expertise. It does not favor mandatory rotation of Committee assignments. The Board believes experience and continuity are more important than rotation and that Board members should only be rotated if rotation is likely to increase Committee performance or facilitate Committee work.

13. Frequency and Length of Board Committee Meetings.

The Chairman should regularly consult with Committee chairs to obtain their insights and to optimize Committee performance. The Committee chairs, in consultation with the Chairman, the President, the CFO, CSAO and the Internal Legal Advisor, should establish the frequency and length of Committee meetings.

14. Development of Committee Agenda.

The Committee chairs, working with the Chairman, should establish Committee agendas for the year. All standing Committees should meet regularly during the year and receive reports from Company personnel on Committee developments affecting the Committee's work.

15. Selection of Agenda Items for Board Meetings.

The Chairman, in consultation with members of the Board, should establish the agenda for Board meetings.

16. Distribution of Materials for Board Meetings.

The Board believes it is critical for members to have materials on topics to be discussed sufficiently in advance of meeting date and for Board members to be kept abreast of developments between Board meetings. The Company regularly informs Board members of Company and competitive developments and currently distributes, a week in advance, written materials for use at Board meetings.

17. Board Presentations.

Board members generally receive summaries/slides of presentations several business days in advance of a meeting to enable them to prepare for the meeting.

18. Attendance of Non-Directors at Board Meetings.

The Board believes that attendance of key executive officers augments the meeting process. The Company's Chief Financial Officer and Internal Legal Advisor regularly attend all scheduled Board meetings. The Chairman encourages both persons to respond to questions posed by Board members relating to their areas of expertise. Such persons do not attend Executive Sessions or Non-Employee Board Sessions either of the Board or any Committee thereof, unless requested.

The Board also believes that Presidents of the Company's operating units and other officers can assist the Board with its deliberations and provide critical insights and analysis, particularly when the Board hears presentations on the business plan for the upcoming year. Attendance of such officers allows the most knowledgeable and accountable executives to communicate directly with the Board. It also provides the Board direct access to individuals critical to the Company's succession planning.

19. Board Access to Senior Management.

Board members have complete and open access to senior members of management. The Company's practice is to have the business unit Presidents present their annual plan to the Board for review and approval. The Chairman invites key employees to attend Board sessions at which the Chairman believes they can meaningfully contribute to Board discussion.

20. Board Compensation.

The Nominating and Governance Committee recommends director compensation and benefits to the full Board. In discharging this duty, the Committee shall be guided by three goals: compensation should fairly pay Directors for work required in a company of Morgan Stanley's size and scope; compensation should align Directors' interests with the long-term interests of shareholders; and the structure of the compensation should be easy for shareholders to understand. The Board believes that total compensation should include a significant equity component because it believes that this more closely aligns the long-term interests of Directors with those of shareholders and provides a continuing incentive for Directors to foster the Company's success.

21. Optimum Board Size.

The Board's optimum size is 6.

22. Lead Independent Director.

The Board believes a lead independent director is not desirable for 3 reasons: (1) the Board's size makes interaction among all Directors relatively easy; (2) the existence of a lead independent director may cut off or reduce access of other directors to the Chairman and management and result in a less informed and less effective Board; and (3) outside directors constitute a substantial majority of the Board.

23. Definition of "Independent" Directors.

The Board has established the following guidelines to assist it in determining whether or not directors have a material relationship with Pytheas for purposes of determining independence.

A. Family Relationships. A director will not be independent if, within the preceding five years: (i) the director was employed by Pytheas; (ii) an immediate family member of the director was employed by Pytheas as an officer; (iii) the director was employed by Pytheas' independent auditor; (iv) an immediate family member of the director was employed by Pytheas' independent auditor as a partner, principal or manager; or (v) a Pytheas executive officer was on the compensation committee of the board of directors of a company that concurrently employed the Pytheas director, or that concurrently employed an immediate family member of the director as an officer.

A director will not be independent if his or her spouse, parent, sibling or child is employed by Pytheas.

B. Commercial Relationships. The following commercial relationships are not considered material relationships that would impair a director's independence: (i) the director is a director of another company that does business with Pytheas, or to which Pytheas provides lending or other banking services; (ii) if an immediate family member of a director is a director or employee of another company that does business with Pytheas, or to which Pytheas provides lending or other banking services; (iii) if a director (or an immediate family member of the director) is an officer of another company that does business with Pytheas and the annual sales to, or purchases from, Pytheas during such company's preceding fiscal year are less than two percent of the annual revenues of such company; or (iv) if a director (or an immediate family member of the director) is an officer of another company to which Pytheas provides lending or other banking services, provided that

(1) such lending or other banking services are in the ordinary course of business of Pytheas and are on substantially the same terms as those prevailing at the time for comparable services provided to unaffiliated third parties; and

(2) with respect to extensions of credit by Pytheas to such company, no event of default has occurred.

C. Charitable Relationships. The following charitable relationship will not be considered a material relationship that would impair a director's independence: if a director (or an immediate family member of the director) serves as an officer, director or trustee of a charitable organization, and Pytheas’ discretionary charitable contributions to the organization are less than €100,000 or one percent of the organization's aggregate annual charitable receipts during the organization's preceding fiscal year, whichever is greater. (Pytheas’ automatic matching of employee charitable contributions are not included in Pytheas’ contributions for this purpose)

D. Personal Relationships. The following personal relationship will not be considered to be a material relationship that would impair a director's independence: if a director (or immediate family member of the director) receives products or services from Pytheas in the ordinary course and on substantially the same terms as those prevailing at the time for comparable products or services provided to unaffiliated third parties, such as brokerage services, investment management services (e.g., separate account) and credit cards.

E. Annual Review. The board will annually review Pytheas' commercial, charitable and personal relationships with Pytheas’ directors. For relationships that are either not covered by or do not satisfy these guidelines, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, shall be made by the directors satisfying the independence guidelines set forth in sections (A), (B), (C) and (D) above. Morgan Stanley will explain in its next proxy statement thereafter the basis for any board determination that any such relationship was immaterial.

F. Definitions. For purposes of these guidelines, the terms "officer" and "immediate family member" shall have the meaning ascribed to them by the proposed Company Rules.

24. Extending Invitation to New Board Member.

The Chairman, the President or the Chairman of the Nominating and Governance Committee should extend the invitation.

25. Term Limits.

The Board does not favor term limits for Directors, but believes that it is important to monitor individual Director performance.

26. Succession Planning.

The Chairman reviews succession planning for his successor on an annual basis with the Board. Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO.

27. Management Development.

Senior Company executives serving on the Management Committee should evaluate, nominate and compile a succession plan for their areas of responsibility which should be reviewed with the Chairman and the President. The plan should include policies regarding succession in the event of an emergency. The Chairman and the President should provide input on each succession plan and discuss the plans with the Board in an Executive Session.

28. Board Interaction with Institutional Investors, Peers, Customers, etc.

The Board believes that under ordinary circumstances, management speaks for the Company and the Chairman speaks for the Board. Individual Board members may, from time to time, meet with or communicate with various constituencies that are involved with the Company. It is expected that Board members would do this with the knowledge of management and, in most instances, at the request of management.

29. Cumulative Voting.

The Board strongly supports the "one share/one vote" concept and opposes cumulative voting. It opposes the ability of a single investor or group of investors to band together to achieve a goal, such as the election of a Director, which is not supported by a majority of the Company's shareholders.

30. Director Stock Ownership.

Directors shall become stockholders of the Company within sixty days after their election to the Board. Non-employee Directors generally receive common stock and stock options when first appointed or elected to the Board, and when they are reelected. Non-employee Directors are also able to defer Board compensation pursuant to a plan in which they receive stock units based on the Company's common stock. These plans and incentives help align non-employee Directors' interests with shareholders' interests.

The Board believes that the number of shares of the Company's common stock owned by each Director is a personal decision. The Board maintains a target share ownership guideline for non-employee Directors equal to five times the amount of the cash retainer for Board service, with five years as expected time to achieve the target.

31. Repricing of Stock Options.

The Board opposes repricing of incentive based options by a reduction in the option's exercise price. The Board does not oppose a stock option "reload" feature. The Board favors equitable adjustment of an option's exercise price in connection with a reclassification of the Company's stock; a change in the Company's capitalization; a stock split; a restructuring, merger, or combination of the Company; or other similar events in connection with which it is customary to adjust the exercise price of an option and/or the number and kind of shares subject thereto.

32. Consulting Agreements with Directors.

The Board believes that the Company should not enter into paid consulting arrangements with non-employee Directors.

33. Service on Multiple Boards.

The Board does not favor a one-size-fits-all limit on the number of other boards on which a Director may serve, but believes that it is important to monitor individual Director performance. Determinations regarding the number of boards on which a Director may serve should be made on an individual basis.

34. Orientation for New Directors; Continuing Education for Directors.

The Internal Legal Advisor and Chief Financial Officer shall be responsible for providing an orientation program for new Directors. Orientation shall include personal briefing by senior management on the Company's strategic plans, its financial statements and its key policies and practices. The Internal Legal Advisor and Chief Financial Officer shall make available to continuing Directors the opportunity to attend educational sessions on subjects that would assist them in discharging their duties.

35. Director Access to Independent Advisors.

The Board and its Committees shall have the right at any time to retain independent outside financial, legal or other advisors.

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