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holder (1) would have no say in MIL’s investment strategy, and
(2) could not unilaterally recoup his investment by forcing MIL
either to redeem his interest or to undergo a complete
liquidation. Mr. Frazier and Dr. Bajaj agree that the
hypothetical “willing buyer” of the gifted interest would account
for such lack of control by demanding a reduced sales price;
i.e., a price that is less than the gifted interest’s pro rata
share of MIL’s NAV. They further agree that, in the case of an
investment company such as MIL, the minority interest discount
should equal the weighted average of minority interest discount
factors determined for each type of investment held by MIL:
equities, municipal bonds, real estate interests, and oil and gas
interests.
2. Discount Factors by Asset Class
a. Equity Portfolio
Mr. Frazier and Dr. Bajaj both determine the minority
interest discount factor for MIL’s equity portfolio by reference
to publicly traded, closed end equity investment funds.
Specifically, they both derive a range of discounts by
determining for a sample of closed end equity funds the discount
at which a share of each sample fund trades relative to its pro
rata share of the NAV of the fund.14 They differ in their
14 Unlike a shareholder of an open-end fund, a shareholder
of a closed end fund cannot, at will, by tendering his shares to
the fund for repurchase, obtain the liquidation value of his
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