Morgan Stanley

Claire Kent and Morgan Stanley Research Vindicated

Jun 30, 2006

Paris —

Today the Paris Court of Appeal overturned the findings of the Commercial Court regarding the contents of Morgan Stanley's research on LVMH.

The euro 30 million damages award has also been overturned. Morgan Stanley today will be demanding the return of the amounts already paid to LVMH, together with interest.

"We are delighted that the Paris Court of Appeal has dismissed the core of LVMH's claims", said Patrick Ponsolle, Chairman of Morgan Stanley in France.

"On the allegations of biased research, Morgan Stanley's reputation, and that of its analyst, Claire Kent, have been completely vindicated", continued Ponsolle. "This represents an important victory for freedom of expression, analyst independence and the industry as a whole."

All that has been upheld are the Commercial Court's findings of errors in the disclosure section at the end of Morgan Stanley's research and in one press interview.

The Court and a Court appointed expert will now decide what damages should be awarded to LVMH, limited to those errors.

The Court of Appeal has come to the same view as the AMF1 which undertook a thorough investigation of Morgan Stanley's research on LVMH and concluded that it was well argued, consistent and not misleading.

"This case should never have been brought and, in dismissing the core of LVMH's claims, the Court of Appeal's judgment sends a clear message to companies who try to use the threat of legal action to influence analysts' opinions", added Ponsolle.

Morgan Stanley (NYSE: MS) is a global financial services firm and a market leader in securities, investment management and credit services. With more than 600 offices in 30 countries, Morgan Stanley connects people, ideas and capital to help clients achieve their financial aspirations.

1 AMF = Autorité des Marchés Financiers, the French market regulator

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Note to Editors:

Key findings by the Paris Court of Appeal on Morgan Stanley's research

The Court of Appeal found no fault in any of LVMH's criticisms of Morgan Stanley's research, namely:

  • The reference to a possible downgrade in LVMH's credit rating: "Morgan Stanley's comment was reasonable and cannot be regarded as wrongdoing."

  • The reference to the maturity of the Louis Vuitton brand: "Morgan Stanley did nothing wrong in referring to maturity."

  • The reference to LVMH's exposure to the yen: "These comments can not have done any harm to LVMH."

  • Views of LVMH management: "Morgan Stanley's opinions, like those expressed by other analysts, were based on actual facts, expressed without exaggeration and with no intention to cause harm, and did not constitute a fault."

  • The application of a 10% discount to LVMH in one of Morgan Stanley's share valuation methods: "Morgan Stanley's opinion was based on a well reasoned method. This opinion did not constitute a civil tort."

  • Campaign of denigration: "LVMH's claim that Morgan Stanley set out to denigrate it is not proven."
The AMF Report
  • The AMF, the French market regulator, undertook a thorough investigation of Morgan Stanley's equity research, during which, over a 15-month period, it conducted interviews, studied every word of Morgan Stanley's research, LVMH press releases, releases by ratings agencies, numerous press articles and the market in LVMH shares from 26 February 2001 to the end of 2002.

  • The AMF's report concluded that Morgan Stanley's equity research was well argued, consistent and not misleading. The AMF also concluded that there was no correlation between Morgan Stanley's opinions and the performance of LVMH's share price, and made the point that the performance of the share price was also influenced by LVMH's own performance.