4 Remuneration Committee Meetings Held

Areas of Focus this Year

• 2019 Salary and Bonus review
• Review and approval of grant of share options/awards and vesting of share awards
• Review of Employee Stock Purchase Plan
• Implications of 2018 Corporate Governance Code

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Committee membership and attendance
Ishbel Macpherson Date Joined: 1 February 2013	4/4		Lawson Macartney Date Joined: 1 December 2016	4/4
Tony Rice Date Joined: 5 May 2016	4/4		Lisa Bright Date Joined: 1 February 2019	2/4
Julian Heslop Date Joined: 1 January 2013	4/4

Dear Shareholder

I am pleased to present the Directors' Remuneration Report for the year ended 30 June 2019.

The report is divided into two sections: the Annual Report on Remuneration, followed by an abbreviated form of our Directors' Remuneration Policy (the full version can be found at www.dechra.com). The Annual Report on Remuneration provides details of the amounts earned in respect of the 2019 financial year and how the Directors' Remuneration Policy (the Policy) will be implemented in the 2020 financial year.

The Directors' Remuneration Report (excluding the Policy) will be subject to an advisory vote at the 2019 Annual General Meeting.

Our Directors' Remuneration Policy

The Policy was approved by shareholders at the Annual General Meeting on 20 October 2017, with 98.88% of all votes cast in favour, and will remain in force until 2020. We review the application of this Policy regularly, with a view to ensuring it remains appropriate, linked to strategy and reflective of developing market practices.

No changes to the Policy are proposed for the forthcoming year. The performance metrics for the bonus and LTIP awards for 2020 are set out in the Directors' Remuneration Report. An annual review of Executive salaries is undertaken in September along with all employees. This allows us to optimise the link between performance and reward for all employees. It is our expectation that any increases to the Executive Directors' salaries will be in line with the range of increases for the wider workforce.

Executive Director Remuneration Decisions in 2019

The table below summarises the implementation of the Policy for Executive Directors in respect of the 2019 financial year.

Element	Implementation
Salary	Richard Cotton's and Tony Griffin's salaries were increased by 3.0%, which was broadly in line with the average range of increases awarded to employees throughout the Group. Ian Page notified the Committee that he did not wish to be considered for a salary increase in 2019 and, accordingly, his salary for 2019 was not increased
Retirement Benefit	Pension contribution of 14%
Annual Bonus	Maximum opportunity of 100% of base salary We have delivered underlying profit before tax during the year of £117.4 million at AER, an improvement of 24.1% at constant exchange rates (25.3% at actual exchange rates) on the prior year. Reflecting the performance of the Group in relation to profit targets and the performance of Executive Directors against personal objectives as described in the Directors' Remuneration Report, bonuses for the year equal to 72% of salary have been earned by Ian Page and Tony Griffin. Richard Cotton resigned from the Company in the year and consequently did not earn a bonus for the year. The annual bonus is subject to malus and clawback provisions
Long Term Incentive Plan	Awards of 200% for Ian Page, 150% for Richard Cotton, and 100% for Tony Griffin were granted during the year. These awards are subject to a two year holding period. Richard Cotton's award lapsed in connection with his resignation from the Company. LTIP awards granted to Ian Page and Tony Griffin in September 2016 are scheduled to vest on 16 September 2019: as to 100% of the TSR element (50% of the total award) reflecting upper quartile performance; and as to 100% of the underlying diluted EPS element (50% of the total award) reflecting that the compound annual growth in the underlying diluted EPS at 28.3% was above the maximum threshold of 25%. In aggregate, taking into account the ROCE underpin (reflecting that the ROCE at 15.5% had not fallen below 15.0%), the LTIP awards vested as to 100%. See the Directors' Remuneration Report for further details. Awards made under the LTIP are subject to malus and clawback provisions

Directorate Changes

As previously announced, Richard Cotton resigned as an Executive Director on 3 April 2019 and left the business on 28 June 2019. In accordance with the rules of the Company's LTIP, all of his LTIP awards lapsed. In addition, he was not entitled to a bonus for the year ended 30 June 2019.

Global SAYE

The Committee recognises the benefits of employee share ownership and following shareholder approval at the Annual General Meeting in October 2018 the Directors have adopted a qualifying Employee Stock Purchase Plan for USA employees. We are proposing to make an initial offer to our USA employees in October 2019.

Forward Looking

This is the final year under the current remuneration framework as we will seek approval for a new Directors' Remuneration Policy at the 2020 Annual General Meeting. Therefore, the Committee will be reviewing the current remuneration framework with its advisers during the forthcoming year with a view to ensuring that the remuneration package continues to:

• promote the long term success of Dechra;
• provide appropriate alignment between Dechra's strategic goals, shareholder returns and executive reward; and
• have a competitive mix of base salary and short and long term incentives, with appropriate performance conditions attached to variable remuneration.

The Committee will also look to revise the Policy to continue the alignment between remuneration and the evolving strategic direction of our business, as well as to align with the new UK Corporate Governance Code (2018 Code). In particular, it will seek to ensure that the Remuneration policy and practices are clear, simple, predictable, proportionate, identify and mitigate against risk, and are aligned to the Company's purpose, Values and strategy.

The 2018 Code and new regulations on the reporting of directors' remuneration were published during the year, and have introduced a number of remuneration reporting reforms. Compliance with the 2018 Code and new regulations is effective for Dechra's financial year beginning 1 July 2019, and will be reported on in Dechra's 2020 Annual Report. However, the Company has already adopted the following:

New Regulations 2018
Chief Executive Pay Ratio	See the Directors' Remunerarion Report
2018 UK Corporate Governance Code
Requirement for the Committee chair to have previously served on a remuneration committee for at least a year	The Committee complies with this requirement and the terms of reference have been amended accordingly
Minimum vesting and post-vesting holding periods for executive share awards extended to five years	The LTIP awards are subject to a three year vesting period and, in respect of awards granted from 2018 onwards, a two year holding period
Remuneration schemes and policies should enable the use of discretion to override formulaic outcomes	The performance conditions for the LTIP awards to be made in respect of the year ending 30 June 2020 and future years will include discretion to override formulaic outcomes, as described in the Directors' Remuneration Report

The Board/Committee will address the following in the forthcoming year:

• Review of workforce remuneration and related policies, and the alignment of incentives and rewards with culture when setting the policy for Executive Director remuneration;
• Formal policy for post-employment shareholding requirements;
• The requirement to align pension arrangements to those of the wider workforce;
• Engagement with the workforce to explain how executive remuneration aligns with wider Group pay policy;
• The review of the Senior Executive Team's remuneration; and
• Share price impact and scenario reporting.

The Committee will also be considering the remuneration arrangement for the Chief Financial Officer once an appointment has been made.

Shareholder Views

We consult with shareholders on policy and on any significant events and take shareholders' views into account before finalising our proposals. The Committee and I believe that ongoing dialogue with our major shareholders is of key importance. Should you have any queries in relation to this report, please contact me or the Company Secretary.