2016 Annual Report on Remuneration

The following section provides detail in respect of remuneration earned by the Directors during the year in line with the Directors' Remuneration Report approved by the shareholders at the Annual General Meeting held on 24 October 2014. PricewaterhouseCoopers LLP (PwC) have audited the Annual Report on Remuneration unless indicated otherwise.

Single Total Figure of Remuneration

The table below sets out the total remuneration for each person who has served as a Director in the period ended 30 June 2016. The table shows the remuneration for each such person in respect of the year ended 30 June 2016 and the year ended 30 June 2015:

	Salaries & Fees £0001		Benefits £0002		Annual Bonus £0003		Long Term Incentives £0004		Pension £0005		Total £000
	2016	2015	2016	2015	2016	2015	2016	20156	2016	2015	2016	2015
Ian Page	440	440	54	53	317	352	1,405	1,027	62	62	2,278	1,934
Anne-Francoise Nesmes	323	309	16	17	232	247	719	382	45	43	1,335	998
Tony Griffin7	232	220	28	29	167	176	371	374	25	26	823	825
Mike Redmond	126	126	—	—	—	—	—	—	—	—	126	126
Ishbel Macpherson8	43	43	—	—	—	—	—	—	—	—	43	43
Dr Chris Richards9	35	45	—	—	—	—	—	—	—	—	35	45
Julian Heslop	45	45	—	—	—	—	—	—	—	—	45	45
Tony Rice10	6	—	—	—	—	—	—	—	—	—	6	—
Total	1,250	1,228	98	99	716	775	2,495	1,783	132	131	4,691	4,016

Please note the following methodologies have been used in respect of the above table:

1. Salaries & Fees – this is the cash paid or received in respect of the relevant period.
2. Benefits – this represents the taxable value of all benefits paid or received in respect of the relevant period. The benefits provided include the use of a fully expensed car, medical cover and life assurance. SAYE options granted in the year have also been included in the benefits column. These have been valued using the fair value as per note 27 to the Group's financial statements.
3. Annual Bonus – this is the amount of cash bonus paid in respect of the relevant period.
4. Long Term Incentives – this is the value of any long term incentives vesting where the performance period ended in the relevant period.
5. Pension – this is the cash value of the employer contribution to the Group stakeholder personal pension scheme or, in the case of Tony Griffin, defined contribution pension plan plus the value of any salary supplement paid.
6. The 2015 value assigned to the long term incentives for Ian Page and Tony Griffin was shown in last year's Annual Report as an estimate, with the value determined by reference to a share price of £10.086 (being the average market value of a share over the last quarter of the Company's financial period ended on 30 June 2015). This has been restated to show the actual value determined by reference to a price of £11.68 (being the market value of a share on 15 March 2016, the date of vesting). The 2015 value assigned to the long term incentives for Anne-Francoise Nesmes reflected the value at the actual date of vesting (30 June 2015) rather than an estimate and, accordingly, has not been restated.
7. Tony Griffin's remuneration is paid in Euros but reported in Sterling for the purpose of this table. The exchange rate used for this purpose was 1.3045 for 2015 and 1.3432 for 2016. His salary was €311,949 for 2016 (reflecting six months at a salary of €299,449 and six months at a salary of €324,449) and €286,554 for 2015.
8. Ishbel Macpherson's fee increased to £48,000 from £43,000 on her appointment as Chairman of the Remuneration Committee, this has been pro-rated.
9. Chris Richards resigned on 8 April 2016.
10. Tony Rice was appointed on 5 May 2016.

Additional Disclosures in Respect of the Single Figure Table

Salaries and Fees

As disclosed in the Directors' Remuneration Report in the 2015 Annual Report, the Executive Directors' base salaries, excluding Ian Page, were reviewed in September 2015 in order that the review is aligned with the performance development review calendar to provide a clearer link between performance and reward. Ian Page elected to waive a review of his salary for the year ended 30 June 2016.

Following that review, Anne-Francoise Nesmes' and Tony Griffin's salaries were increased by 4.5% with effect from 1 July 2015, broadly in line with the average range of increases awarded to employees in the wider Group.

During the 2016 financial year, a comprehensive review of Tony Griffin's remuneration was undertaken, in light of changes to the scope of his role through the expansion of the Food producing Animal Products Business Unit and the geographic expansion in Europe into Italy, Austria, Poland and the Adriatic region, (this last being through the acquisition of Genera). Following this review, the Committee agreed that an increase in his salary was appropriate and, accordingly, his salary was increased by 8.35% to €324,449 with effect from 1 January 2016.

The Committee's approach to Executive Directors' salaries for the year ending 30 June 2017 is summarised in the Salary and Fees section.

The Chairman and other Non-Executive Directors are paid a fee for their role. The Senior Independent Director and the chairmen of the Remuneration Committee and Audit Committee receive an additional fee for those roles. No changes were made to any of these fees for the year ended 30 June 2016. Accordingly, the fees for the year ended 30 June 2016 were the same for the year ended 30 June 2015, as follows:

Office	Fee £000
Chairman	126
Non-Executive Director	40
Remuneration Committee Chairmanship additional fee	5
Audit Committee Chairmanship additional fee	5
Senior Independent Director additional fee	3

The approach in relation to the Chairman and Non-Executive Directors' fees for the year ending 30 June 2017 is summarised in the Salary and Fees section.

Annual Bonus

The Company operates an annual cash incentive scheme for the Executive Directors. Annual bonuses were awarded by the Committee in respect of the 2016 financial year having regard to the performance of the Group and personal performance objectives for the year.

The amount achieved for the year ended 30 June 2016 against targets for the 2016 financial year is as follows:

2016 Financial Year Targets	Amount Achieved for the Year Ended 30 June 2016
Underlying profit before tax performance: 10% of salary payable upon the achievement of 95% of Group profit target rising to 90% of salary payable upon the achievement of 110% of Group profit target	The underlying profit before tax target was £47.2 million. Actual underlying profit before tax was £49.7 million. This converted into an achievement of 103% of the profit target when translated at constant exchange rate resulting in a payment worth 62% of salary
Personal objectives: up to an additional 10% of salary was payable to Executive Directors upon the achievement of personal objectives*	Actual performance resulted in payment worth 10% of salary. The objectives are based on key aspects of delivering the Group's strategy*
Total Annual Bonus Earned for the Year Ended 30 June 2016	72% of salary

^* The Committee considers that the objectives for the forthcoming financial year (2017) are commercially sensitive as they give our competitors insight into our business plans and therefore are not detailed in this report.

Further information regarding the 2016 financial year personal objectives for each Executive Director and the performance achieved is given below.

The personal objectives of each Executive Director for the year ended 30 June 2016 are set on an individual basis and are closely linked to the corporate, financial, strategic and other non-financial objectives of the Company. This enables the Committee to reward the Executive Directors' contribution to both the annual financial performance and the achievement of specific objectives. A summary of the objectives is set out below along with a description of the performance against them. The Committee reviewed the performance of each Executive Director against their specific objectives based on a report by the Chief Executive Officer and with respect to the Chief Executive Officer, a report by the Chairman.

Director	Objective	Performance
Ian Page	Acquisitions	Completion of three acquisition, Genera d.d., Laboratorios Brovel S.A. de C.V., and Putney Inc., during the financial year
	Pipeline Delivery	Successful launch of Zycortal in US and European markets
Anne-Francoise Nesmes	Business Integration	Successful integration of three newly acquired businesses during the year
	Development of Supply Chain	Developed an integrated approach to Supply Chain management across DVP EU with DVP North America plan on track for delivery in forthcoming financial year
Tony Griffin	Geographical Expansion	Successful launch of new territory in Austria; Poland performing above expectations; and additional countries in the Adriatic region gained through acquisition of Genera
	Portfolio Focus	Set up a dedicated Food producing Animal Product Business Unit to identify growth opportunities, stem the previous year's decline and coordinate our response to a tough competitive environment
	Acquisition Integration	Successfully led the restructure and integration of Genera, delivered within expected timeframe

Based on the above assessment against objectives set, the Committee determined that the performance of Ian Page, Anne-Francoise Nesmes and Tony Griffin warranted maximum payout in relation to the non-financial elements of their respective bonuses. The Committee's approach to Executive Directors' annual bonus opportunities for the year ending 30 June 2017 is summarised in the Annual Bonus section.

LTIP Awards Vesting in Respect of the Year Ended 30 June 2016

The LTIP Awards granted on 27 November 2013 are due to vest on 27 November 2016. All of the Executive Directors were granted LTIP Awards on 27 November 2013, the performance targets for which are as follows: 50% of the Award is subject to a performance condition based on the Company's total shareholder return (TSR) performance over the performance period relative to the constituent companies of the FTSE 250 index (excluding investment trusts) over the performance period as follows:

TSR Performance	Vesting Percentage
Below median	0%
Median	25% of the TSR portion will vest
Between median and upper quartile	Pro-rata vesting between 25% and 100% based on the Company's ranking in the comparator group
Upper quartile	100% of the TSR portion will vest

50% of each Award is subject to a performance condition based on the growth in the Company's underlying diluted earnings per share (EPS) over the performance period as follows:

EPS compound annual growth rate	Vesting Percentage
<8% CAGR	0%
8% CAGR	25% of the EPS portion will vest
CAGR between 8% and 13%	Pro-rata vesting between 25% and 100%
>13% CAGR	100% of the EPS portion will vest

Both the TSR element and the EPS element are subject to an additional return on capital employed (ROCE) performance measure. Unless the Group's ROCE is 10% or more in the final year of the performance period, the Awards will lapse in full regardless of TSR and EPS performance. The percentage vesting will be reduced by 10% for every 1% that ROCE falls below 15%.

With respect to the performance conditions relating to the LTIP Award due to vest on 27 November 2016, the Company's TSR performance was over 65.7% compared with a 69.7% TSR for the upper quartile company in the comparator group. Therefore 92.5% of the TSR element will vest. In addition, the growth in the Group's underlying diluted EPS for the performance period was 13.6%. Accordingly, 100% of the EPS element will vest. Overall, taking into account that ROCE performance for 2016 was 16.1%, the LTIP Awards will vest as to 96.25% of maximum opportunity. In the single figure table, the value attributable to this Award is calculated by multiplying the number of shares in respect of which the Award is expected to vest by £11.299 (being the average market value of a share over the last quarter of the Company's financial period ended on 30 June 2016).

The details of the LTIP Awards granted during the year ended 30 June 2016 are set out below. The Committee's approach to Executive Directors' LTIP awards for the year ending 30 June 2017 is summarised in LTIP.

The aggregate gain made by the Executive Directors on share options and LTIP Awards exercised during 2016 was £1,803,017 (2015: £1,024,971).

Pension

All Executive Directors (excluding Tony Griffin) were members of the Dechra Pharmaceuticals PLC Group Stakeholder personal pension scheme throughout the year. Tony Griffin is a member of a defined benefit pension plan in the Netherlands. Contributions made by Dechra Pharmaceuticals PLC on behalf of the Executive Directors during the year equated to no more than 14% of pensionable salary for each Executive Director.

The annual allowance for tax relief on pension savings for individuals reduced from £40,000 to £10,000 on 6 April 2016. Anne-Francoise Nesmes elected to receive a salary supplement in lieu of the employer contribution over and above the £10,000 limit for the entire period under review. From 6 April 2016, Ian Page's pension savings reached the lifetime allowance and from this date he elected to receive his pension contributions as a salary supplement.

Tony Griffin is a member of the Basispensioen, a defined benefit pension plan established in the Netherlands. The table below sets out the arrangements for Tony Griffin for the period under review.

Accrued benefit at 1 July 2015	€10,161
Increase in accrued benefit excluding inflation allowance	€10,886
Increase in accrued benefit including inflation allowance	€10,965
Transfer value of benefit accrued during the period less member contributions	€13,000
Transfer value at 1 July 2015	€192,000
Transfer value at 30 June 2016	€206,000
Increase in transfer value over the period after member contribution	€14,000

The defined benefit pension plan is capped at €50,000. Pensionable salary over this cap is paid into a defined contribution plan. Following the implementation by the Dutch government of a reduction in the cap on maximum amount of pensionable income to €100,000, Tony Griffin elected to receive a salary supplement in lieu of the pension premium entitlement for earnings above €100,000. This was effective from 1 January 2015. The earliest date that an non-reduced pension is payable is 10 February 2040.

Chief Executive Officer Remuneration for Seven Previous Years

Year ended	Total single figure remuneration £000	Annual bonus payout (% of maximum opportunity)	LTIP vesting (% of maximum number of shares)
30 June 2016	2,278	72	96.25
30 June 2015	1,934	80	93.1
30 June 2014	1,589	80	100.0
30 June 2013	1,201	36	100.0
30 June 2012	682	60	0
30 June 2011	984	60	71.1
30 June 2010	768	44	100.0

Percentage Change in Chief Executive Officer Remuneration

The table below sets out in relation to salary, taxable benefits and annual bonus the percentage change in pay for Ian Page and the average percentage change for all UK based employees, comparing pay in respect of the year ended 30 June 2015 and the year ended 30 June 2016. For these purposes, UK employees were chosen as a comparator group reflecting that Ian Page is UK based and the number of UK employees was sufficiently large to provide a robust comparison. Employees outside the UK were not included in the comparator group since country specific differences could distort the comparison.

	Chief Executive Officer			Average per all UK based Employees
	2016 £000	2015 £000	Increase %	2016 £000	2015 £000	Increase %
Salary1	440	440	0	31.6	30.2	4.6
Taxable benefits2	54	52	3.8	1.6	1.5	6.7
Annual bonus	317	352	(9.9)	2.8	2.9	(3.4)

1. Ian Page elected to waive his salary increase for the 2016 and 2015 financial years.
2. Excludes SAYE options granted in the financial year.

Relative Importance of Spend on Pay

The following table sets out the percentage change in distributions to shareholders by way of dividend and share buyback and total remuneration paid to or receivable by all Group employees comparing the year ended 30 June 2015 and the year ended 30 June 2016.

	Year ended 30 June 2016 £000	Year ended 30 June 2015 £000	% change
Distributions to shareholders by way of dividend and share buyback	16,865	14,900	13.2
Overall expenditure on pay	56,504	45,613	23.9

Total Shareholder Return (TSR) Graph

The graph below shows the TSR performance of the Company over the past seven financial years compared with the TSR over the same period for the FTSE 250 Total Return Index. Throughout the financial year ended 30 June 2016 the Company has been a constituent member of the FTSE 250; for this reason it is considered that the TSR performance of the FTSE 250 Index is the appropriate comparator for this report.

Long Term Incentive Arrangements and Share Schemes:

LTIP Awards Made During the Year Ended 30 June 2016

Awards were granted to the Executive Directors on 15 September 2015, on the following basis:

	Type of award	Maximum opportunity	Number of shares	Face value at grant1	% of award vesting at threshold	Performance period
Ian Page	Nil cost option under the LTIP	200% of salary	90,721	£879,994	25%	1 July 2015 – 30 June 2018
Anne-Francoise Nesmes2	Nil cost option under the LTIP	150% of salary	49,933	£484,350	25%	1 July 2015 – 30 June 2018
Tony Griffin	Nil cost option under the LTIP	100% of salary	22,641	£219,618	25%	1 July 2015 – 30 June 2018

1. For these purposes, the face value of the Award is calculated by multiplying the number of shares by £9.70 (being the average share price used to determine the number of shares comprised in the Awards).
2. Anne-Francoise Nesmes' Awards lapsed when she left the business on 31 July 2016.

50% of each Award is subject to a performance condition based on the Company's TSR performance over the performance period relative to the constituent companies of the FTSE 250 index (excluding investment trusts) over the performance period as follows:

TSR Performance	Vesting Percentage
Below median	0%
Median	25% of the TSR portion will vest
Between median and upper quartile	Pro-rata vesting between 25% and 100% based on the Company's ranking in the comparator group
Upper quartile	100% of the TSR portion will vest

50% of each Award is subject to a performance condition based on the growth in the Group's underlying diluted EPS over the performance period. As referred to in the Letter from the Remuneration Committee Chairman, following the acquisitions of Genera and Putney in 2016, we have adjusted the EPS growth targets for these Awards to increase the EPS growth requirement for maximum vesting, recognising the additional earnings forecasted. For ease of reference, we have set out below the original and revised EPS growth targets, as follows:

Original EPS compound annual growth rate	Adjusted EPS compound annual growth rate	Vesting Percentage
<8% CAGR	<8% CAGR	0%
8% CAGR	8% CAGR	25% of the EPS portion will vest
CAGR between 8% and 13%	CAGR between 8% and 16%	Pro-rata vesting between 25% and 100%
>13% CAGR	>16% CAGR	100% of the EPS portion will vest

Both the TSR element and the EPS element are subject to an additional ROCE performance measure. Unless the Group's ROCE is 10% or more in the final year of the performance period, the Awards will lapse in full regardless of TSR and EPS performance. The percentage vesting will be reduced by 10% for every 1% that ROCE falls below 15%.

SAYE Options Granted in the Year

No Directors were granted SAYE options during the year ended 30 June 2016.

Payments to Past Directors (Unaudited)

There were no payments made to past Directors during the period.

Payments for Loss of Office (Unaudited)

There were no payments for loss of office made to Directors during the period. Anne-Francoise Nesmes left the business on 31 July 2016. No payments for loss of office were made to her in the year ended 30 June 2016 nor will be made in the year ended 30 June 2017. Anne-Francoise remained with the business for the whole of the 2016 financial year and, accordingly, earned a bonus for the year, as referred to in Annual Bonus. In accordance with the rules of the LTIP, Anne-Francoise's LTIP Award granted in November 2013 will vest in November 2016 as she remained with the business for the whole performance period. Her LTIP Award granted in September 2014 and her LTIP Award granted in September 2015 lapsed on 31 July 2016.

Shareholding Guidelines and Statement of Directors' Shareholdings and Interests:

Executive Directors

By the third anniversary of their appointment to the Board, Executive Directors are required to have acquired and retained a holding of Dechra shares equivalent to the value of at least 100% of their base salaries. Thereafter, by the fifth anniversary of appointment, the Chief Executive Officer and the Chief Financial Officer are required to have acquired and retained a holding equivalent to the value of at least 200% and 150% respectively of their base salary. The holdings of the Executive Directors and their families as at 30 June 2016 are as follows:

Name	Appointment date	Ordinary shares Number	Ordinary shares £000*	% of salary
Ian Page	13 June 1997	752,166	8,815	2,003
Anne-Francoise Nesmes	22 April 2013	39,502	463	143
Tony Griffin	1 November 2012	52,104	611	263

^*Calculated using the share price as at 30 June 2016.

Non-Executive Directors

By the third anniversary of their appointment to the Board, Non-Executive Directors are required to have acquired and retained a holding of Dechra shares equivalent to the value of at least 50% of their annual base fee. The holdings of the Non-Executive Directors and their families as at 30 June 2016 are as follows:

Name	Appointment date	Ordinary shares Number	Ordinary shares £000*	% of base fee
Mike Redmond	19 April 2001	73,417	860	683
Ishbel Macpherson	1 February 2013	5,848	69	171
Julian Heslop	1 January 2013	10,000	117	293
Tony Rice	5 May 2016	20,000	234	586

^*Calculated using the share price as at 30 June 2016.

There have been no changes in the holdings of the Directors between 30 June and 5 September 2016.

Executive Directors' Interests under Share Schemes
 Long Term Incentive Plan

Awards held under the Long Term Incentive Plan by each person who was a Director at 30 June 2016 are as follows:

	Award date	Number of shares at 30 June 2015	Granted during the year	Lapsed during the year	Exercised during the year	Number of shares at 30 June 2016	Status	Performance period
Ian Page	5 March 2013	94,420	—	(6,515)	(87,905)	—	Vested	2012–2015
	27 November 2013	129,211	—	—	—	129,211	Unvested	2013–2016
	15 September 2014	115,334	—	—	—	115,334	Unvested	2014–2017
	15 September 2015	—	90,721	—	—	90,721	Unvested	2015–2018
Anne-Francoise Nesmes	27 September 20131	41,739	—	(2,880)	(38,859)	—	Vested	2012–2015
	27 November 2013	66,079	—	—	—	66,079	Unvested	2013–2016
	15 September 20142	60,747	—	—	—	60,747	Unvested	2014–2017
	15 September 20152	—	49,933	—	—	49,933	Unvested	2015–2018
Tony Griffin	5 March 2013	34,401	—	(2,374)	(32,027)	—	Vested	2012–2015
	27 November 2013	34,129	—	—	—	34,129	Unvested	2013–2016
	15 September 2014	29,937	—	—	—	29,937	Unvested	2014–2017
	15 September 2015	—	22,641	—	—	22,641	Unvested	2015–2018

1. This Award is the Recruitment Award granted to Anne-Francoise Nesmes, and was subject to the same performance conditions as those applying to the LTIP Awards granted on 5 March 2013. It was granted outside the rules of the LTIP.
2. These Awards lapsed on 31 July 2016.

SAYE Scheme

Options held under the SAYE Scheme by each person who was a Director at 30 June 2016 are shown below:

	Date of grant	Number of options	Option price	Exercise date
Ian Page	7 April 2014	1,630	£5.52	May 2017
	13 October 2014	1,465	£6.14	December 2017
Anne-Francoise Nesmes1	7 April 2014	1,630	£5.52	May 2017
	13 October 2014	1,465	£6.14	December 2017

1. These options lapsed on 31 July 2016

Implementation of the Directors' Remuneration Policy in the Year Ending 30 June 2017 (Unaudited):

The Directors' Remuneration Policy will be implemented in the year ending 30 June 2017 in line with the way in which it has been implemented in the year ended 30 June 2016.

Recruitment Arrangements for the New Chief Financial Officer

Anne-Francoise Nesmes left the business on 31 July 2016. Anne-Francoise's replacement, Richard Cotton, is expected to join the Company in January 2017, and the remuneration package has been determined in accordance with the shareholder approved Directors' Remuneration Policy. Richard Cotton's remuneration package will include a salary of £350,000 and a bonus opportunity of 100% of salary (in accordance with the Policy), which will be pro-rated for the 2017 financial year to reflect his period in service during that year. As part of his recruitment, Richard will be granted two 'buy out' awards in respect of incentives forfeited as a consequence of joining Dechra. Each Award will be over shares with a value of £350,000 at the date of grant. The first Award will vest one year after Richard joins Dechra, subject to his performance in role. The second Award will be subject to the same performance conditions as apply to the LTIP Awards granted in September 2015 (as adjusted) and will vest following the assessment of those performance conditions following the end of the performance period in June 2018. Each Award may be reduced to take account of any relevant performance conditions for the forfeited awards not being achieved. Richard will not receive an Award under the LTIP in respect of the year ended 30 June 2017.

Malus and Clawback

Malus provisions apply to the annual bonus and LTIP Awards, and clawback provisions apply to the annual bonus and LTIP Awards granted after 1 July 2015. These provisions will enable the Committee to require repayment of some or all of an Award for up to two years following payment in the event of material misstatement in the financial statements or gross misconduct on the part of the participant.

Salary and Fees

The next review of Executive Directors' salaries will be undertaken in September 2016. It is planned that Tony Griffin's salary for 2017 will increase in line with the range of increases proposed for the wider workforce. It is also planned during the forthcoming financial year to review Ian Page's salary (which has not changed since January 2014). An independent external review will be undertaken in light of the exceptional change in size and complexity of the Group.

No changes will be made to the fee for the Chairman for the year ending 30 June 2017. In terms of the remaining Non-Executive Directors, it has been agreed to increase the base fee from £40,000 to £50,000 per annum. This increase is effective from 1 July 2016. There will be no changes to the additional fees.

Annual Bonus

No changes have been made to the bonus structure, consequently Executive Directors will have a bonus opportunity of 100% of salary for the year ending 30 June 2017, on the same basis as for the year ended 30 June 2016. Details of the bonus structure can be found above. In the opinion of the Board, the performance targets applying to the annual bonus are commercially sensitive, and prospective disclosure could provide competitors with insight into the Group's business plans and expectations. However, the Company will disclose how any bonus earned relates to performance against targets on a retrospective basis when the targets are no longer considered commercially sensitive, as shown above in respect of bonuses for the Group's 2016 financial year.

LTIP

The Committee proposes that LTIP Awards for the year ending 30 June 2017 (the 2017 Grant) will be made at the level of 200% of salary for Ian Page and 100% of salary for Tony Griffin. As with the Awards granted in respect of the 2016 financial year, the performance measures for the Awards will be based on TSR (50%) and EPS (50%), with an underpin based on ROCE. The TSR targets will be the same as for the Awards made in the 2016 financial year, details of which can be found above. Richard Cotton will not receive an Award under the LTIP in respect of the year ending 30 June 2017 other than the buy-out awards in respect of incentives forfeited as a result of joining Dechra as outlined above.

As referred to in the Letter from the Remuneration Committee Chairman, the EPS growth target required for maximum vesting for the 2017 Grant has been increased to 20% CAGR to reflect the higher forecast earnings as a result of the acquisitions of Genera and Putney. Accordingly, the EPS targets for the 2017 Grant are:

EPS compound annual growth rate	Vesting Percentage
<8% CAGR	0%
8% CAGR	25% of the EPS portion will vest
CAGR between 8% and 20%	Pro-rata vesting between 25% and 100%
>20% CAGR	100% of the EPS portion will vest

Both the TSR element and the EPS element will be subject to an additional ROCE performance measure. Unless the Company's ROCE is 10% or more in the final year of the performance period, the Awards will lapse in full regardless of TSR and EPS performance. The percentage vesting will be reduced by 10% for every 1% that ROCE falls below 15%.

Consideration by Directors of Matters Relating to Directors' Remuneration:

Governance

The Board has overall responsibility for the Group's Remuneration Policy and the setting of the Non-Executive Directors' fees, although the task of determining and monitoring the remuneration packages of the Executive Directors and agreeing the Chairman's fee level has been delegated to the Committee.

Membership

Details of each members' attendance at the Committee's meetings is detailed in the Corporate Governance.

The Chief Executive Officer attended all meetings held during the financial year in order to assist on matters concerning remuneration of other senior executives within the Group. However, he was not present during the part of the meetings where his own remuneration was discussed. Furthermore, the Group HR Director has attended all meetings held during the financial year.

Responsibilities

The Committee has its own terms of reference, which are approved by the Board. These are reviewed on an annual basis to ensure that they continue to adhere to best practice. During the 2016 financial year this review took place at the June meeting. Copies can be obtained via the Company website at www.dechra.com. The Committee Chairman and the Company Secretary are available to shareholders to discuss the Remuneration Policy.

An overview of the Committee's terms of reference are provided in the Corporate Governance.

Policy on External Appointments

The Company recognises that Executive Directors may be invited to become Non-Executive Directors of other companies and that this can help broaden the skills and experience of a Director. Executive Directors are only permitted to accept external appointments with the approval of the Board.

The only Executive Director to hold an external appointment is Ian Page. He is Non-Executive Chairman of Sanford DeLand Asset Management Limited, a position which he has held since 7 October 2010. During the year, Ian Page received no remuneration for this appointment.

Advisers

The following have provided advice to the Committee during the year in relation to its consideration of matters relating to Directors' remuneration:

• Chief Executive Officer, Chief Financial Officer, Group HR Director and Company Secretary; and
• Deloitte LLP (Deloitte).

Deloitte is retained to provide independent advice to the Committee as required. Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the Code of Conduct in relation to executive remuneration consulting in the UK. Deloitte's fees for providing remuneration advice to the Committee were £11,500 for the year ended 30 June 2016. The Committee assesses from time to time whether this appointment remains appropriate or should be put out to tender and takes into account the Remuneration Consultants Group Code of Conduct when considering this. Deloitte was appointed by the Committee and has provided share scheme advice and general remuneration advice to the Company. Details of additional services which Deloitte provided to Dechra are detailed in the Audit Committee Report.

Statement of Voting at Last Annual General Meeting

The Company remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. The following table sets out actual voting in respect of the advisory vote on the Directors' Remuneration Report and the binding vote on the Remuneration Policy at the Company's Annual General Meeting on 23 October 2015 and 24 October 2014 respectively:

Resolution	Votes for	% of vote	Votes against	% of vote	Votes withheld
To approve Remuneration Report	69,175,413	99.43	394,203	0.57	107,863
To approve Remuneration Policy	66,935,753	98.32	1,140,380	1.68	302,814

Directors' Remuneration Policy

Dechra's Directors' Remuneration Policy was approved by shareholders at the Annual General Meeting held on 24 October 2014 with 98.32% of all votes cast in favour. The full Policy can be found at www.dechra.com.

The Policy Tables of the Directors' Remuneration Policy are provided below as it is considered these would be most helpful for shareholders to have repeated here. However, to aid reading in relation to the application of the Policy for 2017, certain date references have been updated.

Policy Table for Executive Directors:

Element: Base Salary
Purpose and link to strategy Core element of fixed remuneration reflecting the individual's role and experience.
Operation The Committee ordinarily reviews base salaries annually taking into account a number of factors including (but not limited to) the value of the individual, their skills and experience and performance. The Committee also takes into consideration: pay increases within the Group more generally; and Group organisation, profitability and prevailing market conditions.	Performance measure Not applicable.
Maximum opportunity Whilst there is no maximum salary, increases will normally be in line with the level of salary increase awarded (in percentage of salary terms) to other employees in the Group. However, higher increases may be awarded in certain circumstances, such as: on promotion or in the event of an increase in scope of the role or the individual's responsibilities; where an individual has been appointed to the Board at a lower than typical market salary to allow for growth in the role in which case larger increases may be awarded to move salary positioning to a typical market level as the individual gains experience; change in size and complexity of the Group; and/or significant market movement. Such increases may be implemented over such time period as the Committee deems appropriate.
Element: Pension
Purpose and link to strategy Help retain and recruit employees and provide appropriate income in retirement.
Operation The Company operates a Group Stakeholder personal pension scheme that has been effective since 1 July 2005. All Executive Directors excluding Tony Griffin are members of this scheme. Tony Griffin participates in a defined benefit pension plan which has been established in the Netherlands. This is a funded career average pay arrangement, where pensionable salary is subject to a €50,000 cap. Salary over this cap is paid into a defined contribution pension plan.	Performance measure Not applicable.
Maximum opportunity The Company contributes up to 14% of salary to a pension scheme on behalf of the Executive Directors, and/or as a salary supplement in lieu of pension contributions where appropriate.
Element: Benefits
Purpose and link to strategy Provided on a market competitive basis.
Operation The Company provides benefits in line with market practice and includes the use of a fully expensed car, medical cover and life assurance scheme. Other benefits may be provided based on individual circumstances, which may include relocation costs and expatriate allowances.	Performance measure Not applicable.
Maximum opportunity Whilst the Committee has not set an absolute maximum on the level of benefits Executive Directors may receive, the value is set at a level which the Committee considers to be appropriately positioned taking into account relevant market levels based on the nature and location of the role and individual circumstances.
Element: Annual Bonus
Purpose and link to strategy The executive bonus scheme rewards Executive Directors for achieving financial and strategic targets in the relevant year by reference to operational targets and individual objectives.
Operation Targets are reviewed annually and any payout is determined by the Committee after the year end based on targets set for the financial period. The Committee has discretion to amend the payout should any formulaic output not reflect the Committee's assessment of overall business performance.	Performance measure Operational targets (which may be based on financial or strategic measures) and individual objectives are determined at the beginning of the financial year. The personal objectives for the Chief Executive Officer are set by the Chairman. The personal objectives for other Executive Directors are set by the Chief Executive Officer. At least 75% of the bonus opportunity is based on financial measures (which may include profit before tax). For financial measures, up to 15% of the maximum for the financial element is earned for threshold performance, rising to up to 50% of the maximum for the financial element for target performance and 100% of the maximum for the financial element for maximum performance. Vesting of the bonus in respect of strategic measures or individual objectives will be between 0% and 100% based on the Committee's assessment of the extent to which the relevant metric or objective has been met. For 2017, a bonus of up to 90% of salary may be earned based on underlying profit before tax targets and up to 10% of salary based on personal objectives, which include non-financial targets,as described in Annual Bonus.
Maximum opportunity Maximum bonus opportunity for Executive Directors is 100% of base salary.
Element: Long Term Incentive Plan (LTIP)
Purpose and link to strategy The LTIP provides a clear link between the remuneration of the Executive Directors and the creation of value for shareholders by rewarding the Executive Directors for the achievement of longer term objectives aligned to shareholders' interests.
Operation The Committee intends to make long term incentive awards under the existing LTIP. Under the LTIP, the Committee may grant Awards as conditional shares, as nil cost options, as forfeitable shares or as cash settled equivalents (or may settle in cash a share award). An additional payment (in the form of cash or shares) may be made in respect of shares which vest under the LTIP to reflect the value of dividends which would have been paid on those shares during the vesting period (this payment may assume that dividends had been reinvested in Dechra shares on a cumulative basis). Awards under the LTIP granted in November 2013 are subject to a malus provision enabling the Committee to revoke Awards in the event of a material misstatement of the financial statements. For Awards granted after 1 July 2014, the malus provision has been extended to provide the ability to revoke, reduce or impose further conditions on unvested Awards in the event of serious reputational damage to the Company or if a previous annual bonus opportunity has paid out at a higher level than would have been the case but for the material misstatement or serious reputational damage to the Company. The Company also has in place a Company Share Option Plan (CSOP). Awards under the CSOP take the form of options to acquire shares, with a per share exercise price equal to the market value of a share at the date of grant. The Committee may at its discretion structure awards as Approved Performance Share Plan (APSP) Awards comprising both a tax qualifying option granted under the CSOP and LTIP Award, with the vesting of the LTIP Award scaled back to take account of any gain made on exercise of the approved option. Other than to enable the grant of APSP Awards, the Company does not intend to grant awards under both the LTIP and CSOP in the same grant period. Where an APSP Award is granted, the qualifying option under the CSOP will be subject to a malus provision to the extent permitted in accordance with the applicable legislation.	Performance measure Performance measures under the LTIP will be based on financial measures (which may include, but are not limited to, earnings per share growth, relative total shareholder return, return on capital employed and free cash flow). At least 50% of any Award will be subject to a performance measure based on earnings per share. Awards will vest as to 25% for threshold performance, increasing to 100% for maximum performance. Where an option under the CSOP is granted as part of an APSP Award, the CSOP option will be subject to the same performance condition as the LTIP Award. For 2017, LTIP performance targets will be based 50% on total shareholder return (TSR) and 50% on earnings per share (EPS), with each element subject to an underpin based on return on capital employed (ROCE) as described in LTIP.
Maximum opportunity The maximum award level under the LTIP in respect of any financial year is 200% of salary. For the 2017 financial year, the following award levels will apply: Chief Executive Officer — 200% Other Executive Directors — 100% Although no Award will be made to the Chief Financial Officer in respect of the year ending 30 June 2017 other than the buy-out awards in respect of incentives forfeited as a result of joining Dechra as outlined in Recruitment Arrangements for the New Chief Financial Officer, the intention is that he will be eligible to receive an Award of up to 150% in September 2017. If an APSP Award is granted, the option under the CSOP may be granted over shares with a value of up to £30,000, or any other applicable HMRC limit going forward. Because of the scale back of the LTIP element of the APSP Award, the value of shares subject to the CSOP option will not count towards the limits referred to above. Other than where a CSOP option is granted as part of an APSP award, options under the CSOP will not be granted to Executive Directors.
Element: All Employee Share Plans
Purpose and link to strategy Provision of the SAYE to Executive Directors creates staff alignment with the Group and provides a sense of ownership. Executive Directors may participate in such other all employee share plan as may be introduced from time to time.
Operation Tax qualifying monthly savings scheme facilitating the purchase of shares at a discount. Any other all employee share plan would be operated for Executive Directors in accordance with its rules and on the same basis as for other employees.	Performance measure Not subject to performance conditions in line with the HMRC qualifying operation of such plans.
Maximum opportunity The limit on participation under the SAYE scheme will be that set in accordance with the applicable tax legislation from time to time. The contribution limit is £500 per month currently. The limit on participation under any other all employee share plan would be determined in accordance with the plan rules (and, where relevant, applicable legislation) and would be the same for the Executive Directors as for other relevant employees.

The Committee may amend the terms of awards and options under its share plans in accordance with the plan rules in the event of a variation of Dechra's share capital or a demerger, special dividend or other similar event or otherwise in accordance with the rules of those plans.

Policy Table for Non-Executive Directors:

Element	Purpose and link to strategy	Operation	Opportunity
Fees and benefits	To provide fees within a market competitive range to recruit and retain Non-Executive Directors of a high calibre with the requisite experience required to achieve success for the Company and its shareholders.	The fees of the Chairman are determined by the Committee and the fees of the Non-Executive Directors are determined by the Board following a recommendation from both the Chief Executive Officer and the Chairman. Non-Executive Directors are not eligible to participate in any of the Company's share schemes, incentive schemes or pension schemes. Non-Executive Directors may be eligible to receive benefits such as travel and other reasonable expenses.	Non-Executive Directors are paid a basic fee with additional fees paid for the chairing of Committees. An additional fee is also paid for the role of Senior Independent Director. Where benefits are provided to Non-Executive Directors they will be provided at a level considered to be appropriate taking into account the individual circumstances.

This Directors' Remuneration Report, excluding the Directors' Remuneration Policy, will be put to an advisory vote at the Annual General Meeting on 21 October 2016. The Directors' Remuneration Report was approved by the Board on 5 September 2016 and signed on its behalf by: