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(3) Representative Discount Within the Range of Sample
Fund Discounts
Mr. Frazier concludes that, because an interest in MIL’s
equity portfolio would not compare favorably to an interest in an
institutional fund, the minority interest discount factor for
MIL’s equity portfolio should derive from the higher end of the
sample’s range of discounts. Dr. Bajaj, on the other hand,
concludes that such discount factor should derive from the lower
end of the range of discounts. For the reasons discussed below,
we find neither expert’s arguments convincing on that point.
Mr. Frazier concludes that a higher than average minority
interest discount factor for MIL’s equity portfolio is warranted
in part because of the relative anonymity of MIL’s investment
managers, the relatively small size of MIL’s equity portfolio,
and MIL’s policy of not making distributions (other than
distributions to satisfy tax obligations). However, Mr. Frazier
elsewhere testifies that, based on his regression analysis, there
is no clear correlation between the discounts observed in his
sample of closed end funds and any of the variables he analyzed,
including Morningstar rating (largely indicative of management
reputation), the size of the fund, and distributions as a
percentage of NAV. We are similarly unpersuaded by Mr. Frazier’s
18(...continued)
to such fund as of the valuation date. For purposes of our
analysis, we utilize the fund’s NAV and price data as of Jan. 5,
1996, which is in the record.
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