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instructed Dr. Bajaj to base his value conclusion regarding the
oil and gas component of MIL’s portfolio on the 33.5-percent
minority interest discount factor for those assets appearing in
the 1996 HFBE appraisal report. On that basis, we find that the
minority interest discount factor for MIL’s oil and gas
investments is 33.5 percent.
3. Determination of the Minority Interest Discount
The minority interest discount factors determined above
yield a weighted average discount of 15.18 percent, determined as
follows:31
Percent Percent
Asset Percent Disc. Weighted
Class of NAV Factor Average
Equities 20.6 10.0 2.06
Bonds 45.5 10.0 4.55
R.E. pships. 29.4 23.3 6.85
Real estate 3.3 40.0 1.32
Oil and gas 1.2 33.5 0.40
discount 15.18
Rounding to the nearest percentage point, we conclude that the
appropriate minority interest discount with respect to the gifted
interest is 15 percent.
D. Marketability Discount
1. Introduction
The parties agree that, to reflect the lack of a ready
market for assignee interests in MIL, an additional discount
(after applying the minority interest discount) should be applied
31 Mr. Frazier and Dr. Bajaj agree on the percentages of
NAV assigned to each asset class.
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