LINKLATERS & PAINES (NEW YORK)
885 THIRD AVENUE, SUITE 2600
NEW YORK, NEW YORK 10022
FAX (212) 751-9335
TELEX 127812
30 November 2000
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Dear Sirs:
FT 474 GLOBAL TARGET 15 PORTFOLIO-DECEMBER 2000 SERIES
1. We have acted as special United Kingdom ("UK") taxation
advisers in connection with the issue of units ("Units") in
the Global Target 15 Portfolio, December 2000 Series (the
"Trust") on the basis of directions given to us by Chapman
and Cutler, counsel to yourselves.
2. This opinion is limited to UK taxation law as applied in
practice on the date hereof by the Inland Revenue and is
given on the basis that it will be governed by and construed
in accordance with English law as enacted.
3. For the purpose of this opinion, the only documentation
which we have examined is a draft prospectus for FT 474
dated 13 November 2000 comprising The Dow Target 5
Portfolio, December 2000 Series; The Dow Target 10
Portfolio, December 2000 Series; The S&P Target 10
Portfolio, December 2000 Series; The Nasdaq Target 15
Portfolio, December 2000 Series, The Dow Dividend and
Repurchase Target 5 Portfolio, December 2000 Series, Value
Line Target Portfolio, December 2000 Series, The Dow
Dividend and Repurchase Target 10 Portfolio, December 2000
Series; the Total Target Portfolio, December 2000 Series and
the Trust (together the "Funds") (the "Prospectus"). We
have been advised by Chapman and Cutler that there will be
no material differences between the Prospectus and the final
prospectus to be issued for the Funds to be dated 30
November 2000. Terms defined in the Prospectus bear the
same meaning herein.
4. We have assumed for the purposes of this opinion that:
4.1. a holder of Units ("Unit holder") is, under the terms
of the Indenture governing the Trust, entitled to have
paid to him (subject to a deduction for annual
expenses, including total applicable custodial fees and
certain other costs associated with foreign trading and
annual Trustee's, Sponsor's, portfolio supervisory,
evaluation and administrative fees and expenses) his
pro rata share of all the income which arises to the
Trust from the investments in the Trust, and that,
under the governing law of the Indenture, this is a
right as against the assets of the Trust rather than a
right enforceable in damages only against the Trustee;
4.2. subject as provided in paragraph 9 below, for taxation
purposes the Trustee is not a UK resident and is a US
resident;
4.3. the general administration of the Trust will be carried
out only in the US;
4.4. no Units are registered in a register kept in the UK by
or on behalf of the Trustee;
4.5. the Trust is not treated as a corporation for US tax
purposes;
4.6. the structure, including the investment strategy of the
Trust, will be substantially the same as that set out
in the Prospectus; and
4.7. each Unit holder is neither resident nor ordinarily
resident in the UK (and has not been resident or
ordinarily resident in the UK), nor is any such Unit
holder carrying on a trade in the UK through a branch
or agent in the UK.
5. We understand that the portfolio of the Trust will consist
of the common stock of the five companies with the lowest
per share stock price of the ten companies in each of the
Dow Jones Industrial Average, the Financial Times Industrial
Ordinary Share Index and the Hang Seng Index respectively
having the highest dividend yield in the respective index as
at the close of business on the business day prior to the
date of the final prospectus to be issued for the Funds in
respect of the stocks comprised in the Dow Jones Industrial
Average and three business days prior to the date of the
final prospectus to be issued for the Funds in respect of
stock comprised in the Financial Times Industrial Ordinary
Share Index and the Hang Seng Index; and that the Trust will
hold such common stocks for a period of approximately
thirteen months, after which time the Trust will terminate
and the stocks will be sold. We address UK tax issues in
relation only to the common stocks of companies in the
Financial Times Industrial Ordinary Share Index comprised in
the portfolio of the Trust (the "UK Equities").
6. Where a dividend which carries a tax credit to which an
individual resident in the United Kingdom would be entitled
under United Kingdom law is paid by a UK resident company to
a qualifying US resident which (either alone or together
with one or more associated corporations) controls directly
or indirectly less than 10 percent of the voting stock of
that UK company, the qualifying US resident is entitled
under the terms of the double taxation treaty between the US
and the UK (the "Treaty"), on making a claim to the UK
Inland Revenue, to a payment of a tax credit less a
withholding tax of 15 percent of the aggregate amount of the
tax credit and the dividend.
Section 30 of the Finance (No. 2) Act 1997 provides that the
tax credit attached to a dividend paid by a UK company on or
after April 6, 1999 is equal to one-ninth of the dividend.
Therefore, on payment by a UK company of a dividend of 90
pounds on or after April 6, 1999, a tax credit of 10 pounds
will arise. The tax credit is less than 15 per cent of the
aggregate amount of the tax credit and divided (i.e. 15 per
cent of 100). A qualifying US resident which (either alone
or together with one or more associated corporations)
controls directly or indirectly less than 10 percent of the
voting stock of that UK company will therefore not be
entitled to any payment in respect of that tax credit under
the Treaty in respect of dividends paid on UK Equities.
This opinion does not consider whether a Unit holder will be
a qualifying US resident for the purposes of the Treaty
since, for the reasons explained above, even if a Unit
holder did satisfy the necessary criteria to be a qualifying
US resident, the Unit holder would not be entitled to
repayment under the Treaty of any part of the tax credit.
7. The Trust may be held to be trading in stock rather than
holding stock for investment purposes by virtue, inter alia,
of the length of the time for which the stock is held. If
the stock is purchased and sold through a UK resident agent,
then, if the Trust is held to be trading in such stock,
profits made on its subsequent disposal may, subject to 8
below, be liable to United Kingdom tax on income.
8. Under current law, the Trust's liability to tax on such
profits will be limited to the amount of tax (if any)
withheld from the Trust's income provided such profits
derive from transactions carried out on behalf of the Trust
by a UK agent where the following conditions are satisfied:
8.1. the transactions from which the profits are derived are
investment transactions;
8.2. the agent carries on a business of providing investment
management services;
8.3. the transactions are carried out by the agent on behalf
of the Trust in the ordinary course of that business;
8.4. the remuneration received by the agent is at a rate
which is not less than that which is customary for the
type of business concerned;
8.5. the agent acts for the Trust in an independent
capacity.
The agent will act in an independent capacity if the
relationship between the agent and the Trust, taking
account of its legal, financial and commercial
characteristics, is one which would exist between
independent persons dealing at arm's length. This will
be regarded as the case by the UK Inland Revenue if,
for example, the provision of services by the agent to
the Trust (and any connected person) does not form a
substantial part of the agent's business (namely where
it does not exceed 70 percent of the agent's business,
by reference to fees or some other measure if
appropriate).
In addition, this condition will be regarded as
satisfied by the UK Inland Revenue if interests in the
Trust, a collective fund, are freely marketed;
8.6. the agent (and persons connected with the agent) do not
have a beneficial interest in more than 20 percent of
the Trust's income derived from the investment
transactions (excluding reasonable management fees paid
to the agent); and
8.7. the agent acts in no other capacity in the UK for the
Trust.
Further, where stock is purchased and sold by the Trust
through a UK broker in the ordinary course of a
brokerage business carried on in the UK by that broker,
and the remuneration which the broker receives for the
transactions is at a rate which is no less than that
which is customary for that class of business and the
broker acts in no other capacity for the Trust in the
UK, profits arising from transactions carried out
through that broker will not be liable to UK tax.
Accordingly, unless a Unit holder, being neither
resident nor ordinarily resident in the UK, has a
presence in the UK (other than through an agent or a
broker acting in the manner described above) in
connection with which the Units are held, the Unit
holder will not be charged to UK tax on such profits.
9. If the Trustee has a presence in the UK, then it is
technically possible that income or gains of the Fund could
be assessed upon the Trustee, whether arising from
securities (which includes stock) or from dealings in those
securities. We understand that the Trustee has a branch in
the UK. However, we consider that any such risk should be
remote provided that:
9.1. the UK branch of the Trustee will not have any
involvement with establishing or managing the Fund or
its assets nor derive income or gains from the Fund or
its assets.
9.2. any income derived by the Trustee will be derived by it (see
6.1 above) as a resident of the US for the purposes of the
Treaty; and
The Trustee (in its capacity as recipient of income on
behalf of the Trust) will be a resident of the US for
Treaty purposes to the extent that the income derived
by the Trust is subject to US tax as the income of a US
resident, either in the hands of the Trust itself or in
the hands of its beneficiaries.
We have assumed that the Trust will not be subject to
US tax on its income and that such income will be
treated as income of the beneficiaries of the Trust for
US purposes. Accordingly, the Trust would be a US
resident for the purposes of the Treaty only to the
extent that the beneficiaries would be taxable in the
US on such income or treated as so taxable by agreement
between the relevant authorities. The provisions of
the Treaty have been extended to grant resident status
to tax exempt charitable trusts and pension funds. We
understand that this is confirmed on the US Treasury
side by its "Technical Explanation" of the Treaty
issued on March 9, 1977.
10. Where the Trustee makes capital gains on the disposal of the
UK Equities, a Unit holder will not be liable to UK capital
gains tax on those gains.
11. UK stamp duty will generally be payable at the rate of 0.5%
of the consideration (rounded to the nearest multiple of 5)
in respect of a transfer of the shares in UK incorporated
companies or in respect of transfers to be effected on a UK
share register. UK stamp duty reserve tax will generally be
payable on the entering into of an unconditional agreement
to transfer such shares, or on a conditional agreement to
transfer such shares becoming unconditional, at the rate of
0.5 percent of the consideration to be provided. The tax
will generally be paid by the purchaser of such shares.
No UK stamp duty or stamp duty reserve tax should be payable
on an agreement to transfer nor a transfer of Units,
provided that such transfer is neither executed in nor
brought into the UK.
12. In our opinion, the taxation paragraphs contained on page 34
of the Prospectus under the heading "United Kingdom
Taxation," as governed by the general words appearing
immediately under that heading, which relate to the Trust
and which are to be contained in the final prospectus to be
issued for the Funds, represent a fair summary of material
UK taxation consequences for a US resident Unit holder of
Units in the Trust.
13. This opinion is addressed to you on the understanding that
you (and only you) may rely upon it in connection with the
issue and sale of the Units (and for no other purpose).
This opinion may not be quoted or referred to in any public
document or filed with any governmental agency or other
person without our written consent. We understand that it
is intended to produce a copy of this opinion to the
Trustee. We consent to the provision of this opinion to the
Trustee and confirm that, insofar as this opinion relates to
the UK tax consequences for the Trust and US persons
holdings Units in the Trust, the Trustee may similarly rely
upon it in connection with the issue and sale of Units.
However you should note that this opinion does not consider
the UK tax consequences for the Trustee arising from its
duties in respect of the Trust under the Indenture.
We consent further to the reference which is made in the
prospectus to be issued for the Fund to our opinion as to
the UK tax consequences to US persons holding Units in the
Trust.
Yours faithfully
Linklaters & Paines
