Equity Plans atMerlin Entertainments

Swings, Roundabouts and Fisha Wizard Combination

Stephen Diosi, Ashurst (UK)Fiona Rose, Merlin Entertainments (UK)

Who are we?Fiona RoseDeputy Group Company SecretaryMerlin Entertainments plcT: +44 (0)1202 440002E: fiona.rose@merlinentertainments.biz

Stephen DiosiCounsel, employee benefits and incentivesAshurst LLPT: +44 (0)20 7859 1249E: stephen.diosi@ashurst.com

What we are going to cover• A case study of how Merlin has made use of equity for its employees both

before and after its IPO in 2013• A bit about Merlin• The IPO – some details• Culture of equity participation• Pre-IPO employee incentives• Shifting to a listed environment – the impact on existing arrangements and the

demand for new ones• A closer look at the global all employee Sharesave planBut first, a short video.

Merlin’s history

1979It 

started with a fish

1979First SEA LIFE

opens in OBAN Scotland

1999Merlin

Entertainments is formed

2000-2006SEA LIFE expands

in Continental Europe

2005Merlin acquires the LEGOLAND

Parks

2006Merlin acquires

Gardaland

2007Merlin acquires The Tussauds

Group

2011Merlin acquires

Sydney Attractions Group

2012Merlin acquires

Living and Leisure Australia

Where next ?

2013Merlin floats on the

London Stock Exchange

2014Opened our

100th

Attraction

Culture of equity participation

Unique Culture, Unique Company• The Merlin Way

– We love what we do – We care – We are innovative and fast moving – We do what we say – We make every £, $, € ... count – We take ownership– …and we make it fun!

• Equity participation – long desired objective

• CEO award programme introduced in 2010

Employee Engagement Striving to be the best company to work for in our industry

Share Schemes – Pre IPO1999 Introduction of first management equity scheme.

58 senior managers participated in a Share Option Scheme

2005 The secondary buy-out provided a ‘partial exit’ and rollover of the Share Option Scheme into a new share plan for existing participants The senior management that joined Merlin as part of the LEGOLAND acquisition joined the new share plan which increased the number of participants to 130

2007 The acquisition of the Tussauds Group saw a ‘partial exit’ for the 130 existing employees, with a further 150 employees joining the scheme.

2010 CVC acquired Dubai International Capital’s share in Merlin. The 280 employees received a ‘partial exit’ and rollover into a new share plan. New employees/promotions since the initial grant received phantom shares. Introduction of the CEO award scheme.

2013 IPO. A complete exit from the old share scheme, phantom shares and CEO awards

Employee Equity ParticipationThe CEO Award Plan was aimed at extending equity participation to as many employees as possible as recognition for long service and/or outstanding contribution.

In 2012 the Merlin CEO Award Plan was awarded ‘Most Effective Motivation or Incentive Strategy’ by Employee Benefits Magazine

Numbers of Awards

Year Long Service Outstanding Contribution

Total

2010 272 566 838

2011 206 480 686

2012 497 242 739

Total 975 1,288 2,263

“It is like it has always been there. Everyone is fully engaged with the scheme.

We have 90 attractions and 30 different languages. From a global perspective, for everyone to embrace it

multiculturally is really satisfying.”

CEO Award Scheme

The IPO

The IPO• Admission to trading on the Official List of the London Stock Exchange• Global offer – sale by existing shareholders• Merlin Share Plan Nominee was one of the Selling Shareholders• Aim was to raise approximately £200 million• Admission on 13 November 2013• Float price of 315p• Currently FTSE250 with a market capitalisation of approximately £3.9 billion

Shifting to a listed environmentImpact on existing arrangements

• A complete exit from the old share scheme, phantom shares and CEO awards• Conversion of shares into new listed shares and partial sale. Lock-up

arrangements on the balance• Additional awards• Interaction with the Merlin employee benefit trust (letters of wishes and

directions)• Specific personalised communications detailing the exit mechanism and the

financial impact sent to each employee within 3 hours of the IPO share price announcement

• Account had to be taken of local law requirements, e.g. US

Post IPO - New plans• Performance Share Plan – top 2 levels of senior management. Two

performance conditions measured over a 3 year period

• Deferred Bonus Plan – aligned to the PSP

• Company Share Option Plan – 3rd layer of senior management. No performance conditions

• All Employee Sharesave

2014 All Employee Sharesave• Key objectives included:

– ensure Merlin employees from around the world have the opportunity to participate in the success of the Group and have a slice of the equity

– consistency of global operation• Launched in 23 jurisdictions:

EUNorth America Australasia

11 States

Basic operation:

2014 All Employee Sharesave

Share Option Savings Contract

Buy Shares

Features:• Option over a specified number of shares• Fixed monthly savings: £5-£250 (or local equivalent) for 3 years• Purchase price at 20% discount• Must remain an employee, but good leaver reasons• At end of savings period, three choices:

o Buy shares and holdo Buy shares and sello Take savings back

3 years 3 years

2014 All Employee SharesaveLegal and tax challenges

Challenge Solution

• Regulatory • Global feasibility and co-ordination of advice

• Phantom options in Australia, New Zealand and China

• US state filings

• Monthly savings • Savings contracto Legal contract with a bank

in UKo “own choice” arrangement

for other jurisdictionso enforcement issues

2014 All Employee Sharesave (cont’d)

• More bespoke arrangements where necessary, in particular UK, Belgium and US

• Tax treatment

• Overall operational global consistency

• Tailored where necessary, in particular in the US to comply with S.423 US Tax Code

• Data protection • Consent letters/appropriate notifications

Challenge Solution

2014 All Employee SharesaveAdministration Challenges

Challenge

• First experience

• Timing

• Data Collection– 23 countries– No single employee database– Testing and Validation– Late entries

Solution

• Engaged with share plan administrators

• Gave ourselves time (or so we thought!)

• Employed an excel wizard on a fixed term contract

– Cross referenced data several ways– Local HR reviewed data files– Individual packs sent out after main mailing

All Employee Sharesave -Communications

• Posters• Table talkers• Webinars for HR teams• Printed and Electronic Brochures• Welcome Video from CEO• Personalised invitation letter from CEO• Workshops• Updates on employee intranet

All Employee Sharesave - FeedbackTea Colaianni – HR Director

“It’s great to see so may of our employees taking up the opportunity to become Merlin Shareholders and own a piece of the magic!”

Julie Gallagher – London Cluster

“We have had a fantastic response to the scheme here in London from all attractions. I can safely say I’ve had more enquiries about this than any other initiative/benefit that we have implemented which is just great!”

All Employee Sharesave - FeedbackBente Noringriis – LEGOLAND Billund, Denmark

“Many of our employees ask how many in LEGOLAND Billund chose to participate in Sharesave. We ended up with a 74% take-up which I would consider a Merlin success story and thus positive to tell. Our colleagues love the interactive booklet. You’ve done a great job with this roll out.”

All Employee Sharesave - FeedbackAngela Wang – Shanghai cluster

“Can you please send me the introduction webinar for HR? It is so professional to me, I need to study. Thank you!”

Claire Jenkins – feedback received on moving her from UK to Australia plan after the launch

“IT WORKED!!!!!!!! - THANK YOU!!!!!!!!!!!”

All Employee SharesaveEmployee take-up

Numbers of employees

Year Eligible Participated %

UK (SAYE) 3,417 1,374 40.2

USA (423b) 2,536 523 20.6

ROW (ISAYE) 3,540 856 24.2

Total 9,493 2,753 29.0

Any questions?