- 36 -
cited by Dr. Bajaj (the initial diminution of fund NAV relative
to issue proceeds due to flotation and other startup costs, the
prevalence of new funds in “hot” investment sectors, and the
initial lack of management inefficiencies) simply do not readily
translate from the public capital markets to the hypothetical
private sale of an interest in MIL.
Because we are unpersuaded by the respective arguments of
Mr. Frazier and Dr. Bajaj for a higher than average or lower than
average minority interest discount factor for MIL’s equity
portfolio, we utilize the average discount of the sample funds
under consideration.21
(4) Summary
In determining the appropriate minority interest discount
factor for MIL’s equity portfolio, we utilize (1) Dr. Bajaj’s
price and NAV data as of January 12, 1996 (with the exception of
Liberty All Star Growth Fund, for which we utilize NAV data from
January 5, 1996, contained in the record); (2) Dr. Bajaj’s sample
of funds, with the addition of Liberty All Star Growth Fund; and
20(...continued)
general partners of MIL were to agree to make a timely sec. 754
election with respect to MIL. See secs. 754, 743(b); sec. 1.755-
1(b)(1)(ii), Income Tax Regs. The same would be true with
respect to any postcontribution unrealized appreciation with
respect to MIL’s assets.
21 In their reports, Mr. Frazier and Dr. Bajaj determine
the average, but not the weighted average, of the discounts with
respect to the equity funds in their respective samples. We
follow the same approach here.
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011