- 40 -
Dr. Bajaj applies his “new fund” analysis, discussed above
in the context of MIL’s equity portfolio, to MIL’s bond portfolio
as well. Again, Dr. Bajaj’s analysis fails to recognize that,
while MIL was a relatively new entity on the valuation date, its
bond portfolio had been in place (in the hands of the
contributing partners) for years. For that reason and the other
reasons discussed supra in section V.C.2.a.(3), we reject this
portion of Dr. Bajaj’s analysis.
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 bond
portfolio, we utilize the average discount of the sample funds
under consideration.24
(4) Summary
In determining the appropriate minority interest discount
factor for MIL’s bond portfolio, we utilize (1) Dr. Bajaj’s price
and NAV data as of January 12, 1996, (2) a sample of funds
consisting of the 62 single-State funds in Dr. Bajaj’s sample
that do not have scheduled liquidation dates, and (3) the average
discount of the sample funds. The resulting discount factor is
9.76 percent, which we round up to 10 percent.
24 In their reports, Mr. Frazier and Dr. Bajaj determine
the average, but not the weighted average, of the discounts with
respect to the bond funds in their respective samples. We follow
the same approach here.
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