PLEASE PROMPTLY VOTE YOUR SHARES WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. You can vote by calling the toll-free number, scanning the QR code on your mobile device, or using the Internet. Voting instructions are included on your proxy card, voter instruction form or Notice of Internet Availability of Proxy Materials, as applicable. If you received a paper copy of the proxy materials, you can vote by any of these methods or by mail. If you vote by mail, please complete and sign the proxy card and return it promptly in the envelope provided. The proxy may be revoked by you at any time, and giving your proxy will not affect your right to vote in person if you attend the Annual Meeting. If you plan to attend the Annual Meeting and require directions, please call (419) 247-2800 or write to the Senior Vice President-Administration and Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615.

		GENERAL INFORMATION   Page 1

 

		PROPOSAL 1—ELECTION OF DIRECTORS   Page 3

 

		DIRECTOR COMPENSATION   Page 8

 

			CORPORATE GOVERNANCE   Page 9
			9			Director Stock Ownership Guidelines
			9			Board Leadership Structure
			10			Independence and Meetings
			11			Committee Assignments and Rotation
			11			Audit Committee
			11			Compensation Committee
			12			Executive Committee
			12			Investment Committee
			12			Nominating/Corporate Governance Committee
			13			Planning Committee
			13			Risk Management
			13			Succession Planning
			14			Sustainability
			14			Pledging and Hedging
			14			Clawback Policy
			14			Communications with the Board
			14			Good Governance Practices

 

		EXECUTIVE OFFICERS   Page 15

 

		SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT AND CERTAIN BENEFICIAL OWNERS   Page 17
		17		Security Ownership of Directors and Management Table
		17		Section 16(a) Compliance
		18		Certain Beneficial Owners Table
		18		Certain Relationships and Related Transactions

			PROPOSAL 2—RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   Page 19
			19			Audit Fees
			20			Pre-Approval Policies and Procedures
			20			Audit Committee Report

 

		PROPOSAL 3—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION   Page 21

 

			EXECUTIVE COMPENSATION   Page 22
			22			Executive Summary
			24			Compensation Discussion and Analysis
			53			Compensation Committee Report
			54			Summary Compensation Table
			55			2013 Grants of Plan-Based Awards Table
			56			Employment Agreements
			57			2013 Outstanding Equity Awards at Fiscal Year-End Table
			59			2013 Option Exercises and Stock Vested Table
			59			2013 Pension Benefits Table
			60			Potential Payments Upon Termination or Change in Corporate Control
			63			Quantification of Benefits
			65			Risk Management and Compensation

 

		EQUITY COMPENSATION PLAN INFORMATION   Page 66

 

		PROPOSAL 4—AMENDMENT TO THE SECOND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK   Page 67

 

		OTHER MATTERS   Page 69

 

Notice of Electronic Availability of Proxy Materials

As permitted by the rules of the Securities and Exchange Commission (the “SEC”), Health Care REIT, Inc. (the “Company”) is making these proxy materials available to shareholders primarily via the Internet. By doing so, the Company reduces the printing and delivery costs and the environmental impact of its Annual Meeting. Accordingly, the Company is sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to the Company’s shareholders. The Notice contains instructions on how to access the Company’s proxy materials and how to vote online or by telephone. If you would like to receive a paper copy of the proxy materials, please follow the instructions in the Notice.

Why am I receiving these materials?

The Board of Directors of the Company has made these materials available to you on the Internet or has delivered printed copies to you by mail in connection with the solicitation of proxies on its behalf to be used in voting at the Annual Meeting of Shareholders (the “Annual Meeting”), which is scheduled to be held on Thursday, May 1, 2014 at 10:00 a.m. Eastern Time as set forth in the Notice of Annual Meeting of Shareholders. The approximate date on which these materials will be first made available or sent to shareholders is March 21, 2014.

What is included in these materials?

These materials include:

 

•

this proxy statement for the Annual Meeting (the “Proxy Statement”); and

•

the Company’s Annual Report for the year ended December 31, 2013 (the “Annual Report”).

If you received printed copies by mail, these materials also include the proxy card for the Annual Meeting. A copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, including the financial statements and the schedules thereto, as filed with the SEC, is available on the Company’s website at www.hcreit.com or may be obtained without charge by writing to the Senior Vice President-Administration and Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615.

What proposals will be voted on at the Annual Meeting?

At the Annual Meeting, the shareholders will be asked to: (1) elect ten directors (Proposal 1), (2) ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year 2014 (Proposal 2), (3) approve, on an advisory or non-binding basis, the compensation of the Company’s Named Executive Officers (as defined below in the section “Executive Compensation”) (Proposal 3), (4) approve an amendment to the Second Restated Certificate of Incorporation to increase the number of authorized shares of common stock for general corporate purposes (Proposal 4), and (5) transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

How does the Board of Directors recommend I vote?

The Board of Directors unanimously recommends that you vote:

 

•

“FOR” each of the nominees to the Board of Directors (Proposal 1);

•

“FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year 2014 (Proposal 2);

 

•

“FOR” the approval, on an advisory or non-binding basis, of the compensation of the Company’s Named Executive Officers (Proposal 3); and

 

•

“FOR” the approval of an amendment to the Second Restated Certificate of Incorporation to increase the number of authorized shares of common stock for general corporate purposes (Proposal 4).

Who may vote at the Annual Meeting?

As of March 4, 2014, the Company had outstanding 290,873,659 shares of common stock, $1.00 par value per share. The common stock constitutes the only class of voting securities of the Company entitled to vote at the Annual Meeting. Shareholders of record at the close of business on March 4, 2014 are entitled to notice of, and to vote at, the Annual Meeting and any adjournments thereof. Each share of common stock is entitled to one vote on all matters to come before the Annual Meeting.

If I am a shareholder of record of the Company’s shares, how do I vote?

A shareholder of record can vote in one of four ways:

Via the Internet:  You may vote by proxy via the Internet by following the instructions provided in the Notice or on your proxy card.

By telephone:  You may vote by proxy by calling the telephone number provided in the Notice or on your proxy card.

By mail:  If you receive printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by filling out the proxy card and returning it in the envelope provided.

In person:  You may vote in person at the Annual Meeting by requesting a ballot when you arrive. You must bring valid picture identification, such as a driver’s license or passport, and you may be requested to provide proof of stock ownership as of March 4, 2014.

All shares that have been properly voted by proxy and not revoked will be voted at the Annual Meeting in accordance with the instructions contained in the proxy. Shares represented by proxy cards that are signed and returned without any voting instructions will be voted consistent with the Board’s recommendations.

Once I have submitted my proxy, is it possible for me to change or revoke my proxy?

Any shareholder giving a proxy has the right to revoke it any time before it is voted by (1) filing a written revocation with the Senior Vice President-Administration and Corporate Secretary of the Company, (2) filing a duly executed proxy bearing a later date, or (3) attending the Annual Meeting and voting in person. A written revocation, as described in (1) above, will not be effective until the notice thereof has been received by the Senior Vice President-Administration and Corporate Secretary of the Company.

 

Who is paying for the cost of this proxy solicitation?

The Company is paying the costs of the solicitation of proxies. Proxies may be solicited by directors and officers of the Company by mail, in writing, by telephone, electronically, by personal interview, or by other means of communication. The Company will reimburse directors and officers for their reasonable out-of-pocket expenses in connection with such solicitation. The Company will request brokers and nominees who hold shares in their names to furnish these proxy materials to the persons for whom they hold shares and will reimburse such brokers and nominees for their reasonable out-of-pocket expenses in connection therewith. The Company has hired AST Phoenix Advisors to solicit proxies for a fee not to exceed $9,500, plus expenses and other customary charges.

What constitutes a quorum at the Annual Meeting?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the total number of shares of voting securities outstanding on the record date shall constitute a quorum for the transaction of business by such holders at the Annual Meeting.

How will votes be tabulated at the Annual Meeting?

All votes will be tabulated by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

How are abstentions and broker non-votes treated?

Abstentions will be counted as present or represented for purposes of determining the presence or absence of a quorum for the Annual Meeting. In the election of the directors (Proposal 1), you may vote “for,” “against” or “abstain” with respect to each of the nominees. If you elect to abstain in the election of directors, the abstention will not impact the election of directors. In tabulating the voting results for the election of directors, only “for” and “against” votes are counted. For the other items of business, you may vote “for,” “against” or “abstain.” If you elect to abstain, the abstention will have the same effect as an “against” vote.

A “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner votes on one proposal, but does not vote on another proposal because the broker does not have discretionary voting power for the other proposal and has not received instructions from the beneficial owner. Broker non-votes will be counted as present or represented for purposes of determining the presence or absence of a quorum for the Annual Meeting, but will not be counted for purposes of determining the number of shares entitled to vote with respect to any proposal for which the broker lacks discretionary authority. Brokers do not have discretionary authority with respect to the election of the directors (Proposal 1) or the advisory vote to approve Named Executive Officer compensation (Proposal 3).

I share an address with another shareholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

The Company has adopted an SEC-approved procedure called “householding.” Under this procedure, the Company delivers a single copy of the Notice and, if applicable, this Proxy Statement and the Annual Report to multiple shareholders who share the same address unless the Company receives contrary instructions from any shareholder at that address. This procedure is designed to reduce printing and mailing costs and the environmental impact of the Annual Meeting.

Shareholders residing at such an address who wish to receive separate copies of the Notice and, if applicable, this Proxy Statement and the Annual Report in the future and shareholders who are receiving multiple copies of these materials now and wish to receive just one set of materials in the future, should write to the Senior Vice President-Administration and Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615 or call (419) 247-2800 to request a change. These materials are also available on the Internet at www.hcreit.com/proxy.

Where are the Company’s principal executive offices located and what is the Company’s main telephone number?

The Company’s principal executive offices are located at 4500 Dorr Street, Toledo, Ohio 43615. The Company’s telephone number is (419) 247-2800.

What is the deadline to submit shareholder proposals intended for inclusion in the Company’s proxy materials for the 2015 Annual Meeting?

Any shareholder proposals intended for inclusion in the Company’s proxy materials for the 2015 Annual Meeting must be submitted to Erin C. Ibele, Senior Vice President-Administration and Corporate Secretary of the Company, in writing no later than November 21, 2014. In addition, under the Company’s By-Laws, in order for a shareholder to present a proposal for consideration at an annual meeting other than by means of inclusion in the Company’s proxy materials for such meeting, the shareholder must provide a written notice to the Senior Vice President-Administration and Corporate Secretary not more than 120 days prior to the meeting and not less than 45 days before the date on which the Company first mailed or otherwise gave notice for the prior year’s annual meeting. For purposes of the 2015 Annual Meeting, such a written notice must be received by the Senior Vice President-Administration and Corporate Secretary by February 4, 2015. If a shareholder does not meet this deadline, (1) the officer presiding at the meeting may declare that the proposal will be disregarded because it was not properly brought before the meeting and (2) the persons named in the proxies solicited by the Board of Directors for the meeting may use their discretionary voting authority to vote “against” the proposal.

 

The shares represented by the proxies will be voted “for” the election of each of the nominees named below, unless you indicate in the proxy that your vote should be cast “against” any or all of them or that you “abstain.” Each nominee elected as a director will continue in office until his or her successor has been duly elected and qualified, or until the earliest of his or her resignation, removal or death. If any nominee declines or is unable to accept such nomination to serve as a director, events which the Board does not now expect, the proxies reserve the right to substitute another person as a Board nominee, or to reduce the number of Board nominees, as they shall deem advisable. The proxy solicited hereby will not be voted to elect more than ten directors.

Except in a contested election, each Board nominee will be elected only if the number of votes cast “for” the nominee’s election exceeds the number of votes cast “against” such nominee’s election. In a contested election (where a determination is made that the number of director nominees is expected to exceed the number of directors to be elected at a meeting), the vote standard will be a plurality of the votes cast with respect to such director.

Under the Company’s By-Laws, any incumbent director nominee who receives a greater number of votes “against” his or her election than votes “for” such election will tender

his or her resignation for consideration by the Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee will recommend to the Board the action to be taken with respect to such offer of resignation. The Board will then act on the Nominating/Corporate Governance Committee’s recommendation within 90 days from the date of the certification of election results and publicly disclose its decision and the rationale behind it.

As discussed in more detail below under “Corporate Governance,” the Board believes that its directors and nominees for director should, among other things, (1) have significant leadership experience at a complex organization, (2) be accustomed to dealing with complex problems, and (3) have the education, experience and skills to exercise sound business judgment. In evaluating its directors and nominees for director, the Nominating/Corporate Governance Committee looks at the overall size and structure of the Board and strives to assemble a Board that is skilled, diverse, well-rounded and experienced. The specific experiences, qualifications, skills and attributes of each of the directors are described in this proposal. These experiences, along with the directors’ integrity, sound judgment and commitment to the Company, led the Board to conclude that each of these directors should be elected to serve on the Board.

 

DIRECTOR STOCK OWNERSHIP GUIDELINES

In February 2013, the Compensation Committee revised the Company’s minimum stock ownership policy to require each non-employee director, within five years of joining the Board or February 7, 2013, whichever is later, to own shares of common stock or deferred stock units with a fair market value of at least four times his or her annual cash fee.

Mr. Chapman, as the Chief Executive Officer and President of the Company, is required, within five years of his date of hire, to own shares of the Company’s common stock with a fair market value at least five times his annual base salary.

BOARD LEADERSHIP STRUCTURE

The Board is responsible for the selection of the Chairman of the Board and the Chief Executive Officer. The Board believes it is in the best interests of the Company for the Board to make a determination regarding whether to separate the roles of Chairman and Chief Executive Officer based upon the circumstances. Accordingly, these roles may be filled by one individual or by two different individuals (and during the course of its history, the Company has utilized each leadership model). The Board has established a leadership structure in which responsibilities are allocated between the Chairman of the Board and Chief Executive Officer on the one hand and the independent Lead Director on the other. The Board believes this allocation of responsibilities provides for dynamic Board leadership while maintaining strong independence and is therefore an effective and appropriate leadership structure.

Chairman of the Board and Chief Executive Officer.  Currently, Mr. Chapman serves as the Chairman, Chief Executive Officer and President of the Company. The Board has determined that this leadership structure is appropriate for the Company given the background, skills and experience of Mr. Chapman and the sustained growth and performance of the Company under Mr. Chapman’s leadership. The Board periodically reviews and assesses the Company’s leadership structure in connection with its review of succession planning. During this review, in addition to determining whether the roles of Chairman of the Board and Chief Executive Officer should continue to be filled by one person, the Board consults with Mr. Chapman regarding future candidates for senior leadership positions, succession timing for those positions, and development plans for the candidates with the greatest potential. This process ensures a detailed discussion about all senior leadership positions, including the Chairman of the Board and Chief Executive Officer roles, ensures continuity of leadership over the long term and forms the basis on which the Company makes ongoing leadership assignments. See “Executive Officers” below for a description of the roles, background and experience of the executive officers of the Company.

Lead Director.  As discussed above, the Board periodically reviews the appropriateness and effectiveness of its leadership structure. Beginning in early 2013, the Board undertook a review of the existing presiding or lead director role. In addition to validating the current leadership structure of Mr. Chapman continuing to serve as Chairman of the Board and Chief Executive Officer, the review culminated in

approval of amendments to the Company’s Corporate Governance Guidelines in February 2014, that included an expansive description of the Lead Director role as well as the appointment by the independent directors of Mr. Donahue as Lead Director. Prior to Mr. Donahue’s appointment, Mr. Grua served as the presiding director of executive sessions of non-employee directors and independent directors with the duties prescribed by the New York Stock Exchange. Mr. Donahue’s term as Lead Director is for a one-year term (coterminous with his term as director) with up to four one-year term renewals (assuming his re-election to the Board), unless otherwise agreed to by a majority of the independent directors. The Lead Director’s duties include, but are not limited to:

 

•

presiding at all meetings of the Board at which the Chairman and Chief Executive Officer is not present, including executive sessions of the independent directors;

•

calling meetings of the independent directors;

•

serving as a liaison between the Chairman and Chief Executive Officer and the independent directors;

•

consulting with the Chief Executive Officer regarding agendas for Board meetings as well as contributing to and approving them;

•

approving Board meeting schedules to assure there is sufficient time for discussion of all agenda items;

•

assuring that the scope, quality, quantity and timeliness of the flow of information between management and the Board is adequate for the Board to effectively and responsibly perform its duties;

•

interviewing all Board candidates in coordination with the Chair of the Nominating/Corporate Governance Committee, and making recommendations to such Committee and the Board;

•

collaborating with the Nominating/Corporate Governance, Compensation and Executive Committees to delineate the respective roles of these committees and the Lead Director with respect to the Chief Executive Officer’s retention, compensation, evaluation and termination;

•

approving the retention of consultants who will report directly to a committee or the Board, unless this task is specifically delegated to a Board committee or committees;

•

being available to consult and communicate with major shareholders in coordination with the Company’s investor relations group; and

•

performing such other duties as the Board may request.

 

Mr. Chapman presides at all meetings of the shareholders and of the Board of Directors (except at meetings or sessions of the independent directors) and generally supervises the business of the Company. The Board met six times during the year ended December 31, 2013. Executive sessions of non-employee directors are held after regularly scheduled meetings of the Board and an executive session of independent directors is held at least once each year as required by the New York Stock Exchange, but is usually held after each regularly scheduled Board meeting if not more frequently. The Lead Director presides at all such sessions or meetings of the independent directors.

The Board believes that its leadership structure – a combined Chairman of the Board and Chief Executive Officer role, a Board that includes ten independent directors out of eleven, and a proactive, independent Lead Director – promotes candid discourse and effective corporate governance. This structure maintains an effective balance between a strong and strategic Chairman and Chief Executive Officer and a diligent and independent Board. This leadership structure has served the Company and its shareholders well, and remains the most appropriate structure for the Company at this time.

INDEPENDENCE AND MEETINGS

The Board has adopted Corporate Governance Guidelines that meet the listing standards adopted by the New York Stock Exchange and a Code of Business Conduct and Ethics that meets the New York Stock Exchange’s listing standards and complies with the rules of the Securities and Exchange Commission. The Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on the Company’s website at www.hcreit.com.

Pursuant to the Corporate Governance Guidelines, the Board undertook a review of director independence in February 2014. During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family, and the Company and its subsidiaries and affiliates. The purpose of this review was to determine whether any relationships or transactions were inconsistent with a determination that a director is independent.

The Board determined that other than Mr. Chapman, all of the directors (Mr. Ballard, Mr. DeRosa, Mr. Donahue,

Mr. Grua, Mr. Klipsch, Mr. Naughton, Ms. Oster, Mr. Otten, Ms. Pelham and Mr. Trumbull) meet the specific minimum independence requirements of the New York Stock Exchange. The Board also determined that, other than Mr. Chapman, all of the directors (Mr. Ballard, Mr. DeRosa, Mr. Donahue, Mr. Grua, Mr. Klipsch, Mr. Naughton, Ms. Oster, Mr. Otten, Ms. Pelham and Mr. Trumbull) have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and are therefore independent under the general independence standards of the New York Stock Exchange and the Corporate Governance Guidelines. Mr. Chapman is not independent because he is the Chief Executive Officer and President of the Company.

The Board determined that all of the members of the Audit Committee (Mr. Ballard, Mr. Grua, Mr. Naughton and Mr. Trumbull) are independent under the general independence standards of the New York Stock Exchange and the Corporate Governance Guidelines and under the separate independence standards for audit committee members under Rule 10A-3 of the Securities Exchange Act of 1934, as amended.

Additionally, the Board determined that all of the members of the Compensation Committee (Mr. DeRosa, Mr. Grua, Ms. Oster and Ms. Pelham) are independent, non-employee and outside directors, as the case may be, under the rules of the New York Stock Exchange, Securities and Exchange Commission and Internal Revenue Service. Finally, the Board determined that all of the members of the Nominating/ Corporate Governance Committee (Mr. DeRosa, Mr. Donahue, Ms. Oster and Ms. Pelham) are independent under the rules of the New York Stock Exchange.

The Company’s policy is to schedule a meeting of the Board on the date of the annual meeting of shareholders and all of the directors are encouraged to attend that meeting. All directors attended last year’s annual meeting of shareholders.

The Board has standing Audit, Compensation, Executive, Investment, Nominating/Corporate Governance and Planning Committees. In 2013, all incumbent directors attended at least 75% of the aggregate of the meetings of the Board and the committees on which they served.

 

COMMITTEE ASSIGNMENTS AND ROTATION

The Nominating/Corporate Governance Committee periodically reviews committee assignments and makes recommendations to the Board for rotations of assignments and appointment of committee chairs, as appropriate. Effective March 1, 2014, the Board, upon the Nominating/Corporate Governance Committee’s recommendation, made the following changes:

•

Moved Mr. Ballard from the Compensation Committee to the Audit Committee;

•

Moved Mr. DeRosa from the Audit Committee to the Compensation Committee and appointed him as Chair of the Compensation Committee;

•

Moved Mr. Donahue from the Compensation Committee and appointed him to the Nominating/Corporate Governance Committee and as the independent Lead Director;

•

Moved Mr. Grua from the Executive and Nominating/Corporate Governance Committees to the Audit and Compensation Committees;

•

Moved Mr. Otten from the Audit and Nominating/Corporate Governance Committees;

•

Appointed Mr. Chapman as Chair of the Executive Committee;

•

Appointed Mr. Naughton to the Audit Committee;

•

Appointed Ms. Oster to the Executive and Nominating/Corporate Governance Committees and as Chair of the Nominating/Corporate Governance Committee;

•

Appointed Ms. Pelham to the Nominating/Corporate Governance Committee; and

•

Appointed Mr. Trumbull to the Executive Committee and as Chair of the Audit Committee.

AUDIT COMMITTEE

The Audit Committee has the authority and responsibility to engage and discharge the independent registered public accounting firm, pre-approve all audit and non-audit services to be provided by such firm, review the plan and results of the auditing engagement, review management’s evaluation of the adequacy of the Company’s system of internal control over financial reporting, direct and supervise investigations into matters within the scope of its duties, and perform the duties set forth in its written charter and such other duties as

are required by applicable laws or securities exchange rules. The Audit Committee met five times during the year ended December 31, 2013. The members of the Audit Committee are Mr. Ballard, Mr. Grua, Mr. Naughton and Mr. Trumbull, with Mr. Trumbull serving as Chair.

The Audit Committee is comprised solely of directors who are not officers or employees of the Company and who the Board has determined have the requisite financial literacy to serve on the Audit Committee. Additionally, the Board determined that no member of the Committee has any material relationship with the Company that might interfere with the exercise of the member’s independent judgment and that each member meets the standards of independence established by the Securities and Exchange Commission and the New York Stock Exchange. See “Independence and Meetings” above for a discussion of independence determinations.

The Board, after reviewing all of the relevant facts and circumstances, determined that Mr. Ballard, Mr. Grua, Mr. Naughton and Mr. Trumbull are “audit committee financial experts.”

The Audit Committee is governed by a written charter approved by the Board of Directors. The charter is available on the Company’s website at www.hcreit.com.

COMPENSATION COMMITTEE

The Compensation Committee is responsible for determining the nature and amount of compensation for executive officers. The Compensation Committee met nine times during the year ended December 31, 2013. The members of the Compensation Committee are Mr. DeRosa, Mr. Grua, Ms. Oster and Ms. Pelham, with Mr. DeRosa serving as Chair. The Board determined that the members of the Compensation Committee are independent, non-employee and outside directors, as the case may be, under the rules of the New York Stock Exchange, Securities and Exchange Commission and Internal Revenue Service. The Compensation Committee is governed by a written charter approved by the Board of Directors. The charter is available on the Company’s website at www.hcreit.com. See “Compensation Discussion and Analysis” for additional information regarding the Compensation Committee.

 

EXECUTIVE COMMITTEE

The function of the Executive Committee is to exercise all the powers of the Board (except any powers specifically reserved to the Board) between meetings of the Board. The Executive Committee is also responsible for reviewing and approving the Company’s investments between meetings of the Investment Committee. The Executive Committee met eight times during the year ended December 31, 2013. The members of the Executive Committee are Mr. Chapman, Mr. DeRosa, Mr. Donahue, Ms. Oster and Mr. Trumbull, with Mr.  Chapman serving as Chair.

INVESTMENT COMMITTEE

The function of the Investment Committee is to review and approve the Company’s investments in health care and seniors housing real estate. During the year ended December 31, 2013, the Investment Committee met four times. Each member of the Board is a member of the Investment Committee. The Executive Committee is responsible for reviewing and approving the Company’s investments between meetings of the Investment Committee.

NOMINATING/CORPORATE GOVERNANCE COMMITTEE

Responsibilities and Members. The Nominating/Corporate Governance Committee is responsible for reviewing and interviewing qualified candidates to serve on the Board, to make nominations to fill vacancies on the Board and to select the nominees for the directors to be elected by the shareholders at each annual meeting. In addition, the Committee is responsible for evaluating, implementing and overseeing the standards and guidelines for the governance of the Company, including monitoring compliance with those standards and guidelines, developing and implementing succession plans and evaluating the performance of the Board. The Nominating/Corporate Governance Committee met five times during the year ended December 31, 2013. The members of the Nominating/Corporate Governance Committee are Mr. DeRosa, Mr. Donahue, Ms. Oster and Ms. Pelham, with Ms. Oster serving as Chair.

The Committee is comprised solely of directors who are not officers or employees of the Company. The Board has determined that no member of the Committee has any material relationship with the Company that might interfere with the member’s exercise of his or her independent judgment and that each member meets the standards of independence established by the New York Stock Exchange.

The Nominating/Corporate Governance Committee is governed by a written charter approved by the Board of Directors. The charter is available on the Company’s website at www.hcreit.com.

Consideration of Director Nominees. The Board believes that a nominee for director should be or have been a senior manager, chief operating officer, chief financial officer or chief executive officer of a complex organization such as a corporation, university, foundation or governmental entity or unit or, if in a professional capacity, be accustomed to dealing with complex problems, or otherwise have obtained and excelled in a position of leadership. In addition, directors and

nominees for director should have the education, experience, intelligence, independence, fairness, reasoning ability, practical wisdom and vision to exercise sound business judgment and should have high personal and professional ethics, strength of character, integrity and values. Also, directors and nominees for director should be available and willing to attend regularly scheduled meetings of the Board and its committees and otherwise able to contribute a reasonable amount of time to the Company’s affairs, with participation on other boards of directors encouraged to provide breadth of experience to the Board. Unless otherwise determined by the Board, no person shall be nominated for election as a director after his or her 75^th birthday.

In identifying and evaluating nominees for director, the Committee first looks at the overall size and structure of the Board each year to determine the need to add or remove directors. Second, taking into consideration the characteristics mentioned above, the Committee determines if there are any specific qualities or skills that would complement the existing strengths of the Board. The Committee takes diversity into account in identifying and evaluating nominees for director. The Committee considers diversity in terms of (1) professional experience, including experience in the Company’s primary business segments and in areas of possible future expansion, (2) educational background and (3) age, race, gender and national origin.

The Committee uses multiple sources for identifying and evaluating nominees for director, including referrals from current directors and management, and may seek input from third party executive search firms retained at the Company’s expense. If the Committee retains one or more search firms, such firms may be asked to identify possible nominees, interview and screen such nominees and act as a liaison between the Committee and each nominee during the screening and evaluation process.

The Committee will review the résumé and qualifications of each candidate based on the criteria described above, and determine whether the candidate would add value to the Board. With respect to candidates that are determined by the Committee to be potential nominees, the Committee will obtain such background and reference checks as it deems necessary, and the Chair of the Committee and the Chairman of the Board will interview qualified candidates. Once it is determined that a candidate is a good prospect, the candidate will be invited to meet the other members of the Committee. If the candidate is approved by the Committee, the candidate will have an opportunity to meet with the remaining directors and management. At the end of this process, if the Committee determines that the candidate will be able to add value to the Board and the candidate expresses his or her interest in serving on the Board, the Committee will then recommend to the Board that the candidate stand for election by the shareholders or fill a vacancy or newly created position on the Board. Each year, the Board and the Committee evaluate the size, composition and diversity of the Board as part of the Board and Committee self-evaluation process. These self-evaluations help the Committee assess the effectiveness of the foregoing procedures for identifying and evaluating nominees for director.

 

A third-party recruiting firm retained by the Committee identified, evaluated and recommended Mr. Naughton as a potential nominee for director. The Committee, through the process described above, recommended to the Board that Mr. Naughton be appointed as a director. Mr. Naughton was appointed by the Board in December 2013.

The Committee will consider qualified nominees recommended by shareholders who may submit recommendations to the Committee in care of the Senior Vice President-Administration and Corporate Secretary, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615. The Committee requires that shareholder recommendations for director nominees be submitted by November 21, 2014 and be accompanied by (1) the name, age, business address and, if known, residence address of the nominee, (2) the principal occupation or employment of the nominee for at least the last five years and a description of the qualifications of the nominee, (3) the class or series and number of shares of the Company’s stock that are owned beneficially or of record by the nominee and (4) any other information relating to the nominee that is required to be disclosed in solicitations for proxies for election of directors under Regulation 14A of the Securities Exchange Act of 1934, as amended, together with a written statement from the nominee that he or she is willing to be nominated and desires to serve, if elected.

Also, the shareholder making the nomination should include (1) his or her name and record address, together with the name and address of any other shareholder known to be supporting the nominee and (2) the class or series and number of shares of the Company’s stock that are owned beneficially or of record by the shareholder making the nomination and by any other supporting shareholders. Nominees for director who are recommended by shareholders will be evaluated in the same manner as any other nominee for director.

In addition to the right of shareholders to recommend director nominees to the Committee, the By-Laws provide that a shareholder entitled to vote for the election of directors may make nominations at a meeting of shareholders of persons for election to the Board if the shareholder has complied with specified prior notice requirements. To be timely, a shareholder’s notice of an intent to nominate a director at a meeting of shareholders must be in writing and delivered to the Senior Vice President-Administration and Corporate Secretary not more than 120 days prior to the meeting and not less than 45 days before the date on which the Company first mailed or otherwise gave notice for the prior year’s annual meeting of shareholders. With respect to the 2015 Annual Meeting, such a notice must be received by the Senior Vice President-Administration and Corporate Secretary by February 4, 2015. The By-Laws further require that such a notice include all of the information specified in the preceding paragraph for shareholder recommendations to the Committee for director nominees.

The Company may require that the proposed nominee furnish other information as the Company may reasonably request to assist in determining the eligibility of the proposed

nominee to serve as a director. At any meeting of shareholders, the Chairman of the Board may disregard the purported nomination of any person not made in compliance with these procedures.

PLANNING COMMITTEE

The function of the Planning Committee is to assist management with identifying strategic opportunities for the Company. The Planning Committee met one time during the year ended December 31, 2013. Each member of the Board is a member of the Planning Committee.

RISK MANAGEMENT

The Board of Directors, as a whole and at the committee level, plays a vital role in overseeing the management of the Company’s risks. The Board reviews the Company’s significant risk exposure, including operational, strategic, financial, legal and regulatory risks, the specific management of material risks and the Company’s policy regarding enterprise risk management (“ERM”).

Collectively, management is responsible for ensuring the Company’s significant risks are identified and managed effectively and that their controls are regularly reviewed by Internal Audit. In addition, management is responsible for ensuring appropriate risk management policies and standards exist, and by doing so, integrates enterprise-wide risk management into the Company’s decision-making process.

To that end, the Company has implemented an ERM program and an internal ERM advisory committee charged with ensuring significant risks are identified, managed and monitored adequately to minimize the Company’s material risk exposure. This structure helps ensure that information regarding significant risk exposure is actively communicated to management, the appropriate Board committees and the Board of Directors.

SUCCESSION PLANNING

The Board of Directors and senior management are actively engaged in management succession planning. The Compensation Committee conducts an annual review of the Chief Executive Officer’s performance and oversees the evaluation of other members of senior management. At least annually, the Board reviews succession plans for the Chief Executive Officer and other members of senior management, and, at least quarterly, the Nominating/Corporate Governance Committee reviews development and succession priorities for the Chief Executive Officer and other members of senior management. Succession planning addresses both succession in the ordinary course of business and contingency planning in case of unexpected events. Each member of senior management meets quarterly with the Chief Executive Officer and with members of the Board to discuss development plans and opportunities. From time to time, the Chief Executive Officer makes his recommendations and evaluations of potential successors, along with a review of any development plans for such individuals.

 

SUSTAINABILITY

In 2013, the Company expanded its commitment to sustainability through stakeholder engagement and public disclosure. The Company completed the Carbon Disclosure Project survey and the Global Real Estate Sustainability Benchmark survey and published its first Global Reporting Initiative guided annual sustainability report. The Company views its sustainability program as a platform to communicate about and improve on the Company’s core functions and guiding strategies. To view the Company’s sustainability report, visit www.hcreit.com/sustainability.

PLEDGING AND HEDGING

The Company’s insider trading policy prohibits the Company’s directors and executive officers from entering into hedging or monetization transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans.

CLAWBACK POLICY

If the Company is required to prepare a financial restatement due to the Company’s material non-compliance with any financial reporting requirement, the Compensation Committee may require any of the Company’s executive officers and certain other covered officers to repay to the Company that part of the incentive compensation received by such officer during the three-year period preceding the publication of the restated financial statement that the Compensation Committee determines was in excess of the

amount that such officer would have received had such incentive compensation been calculated based on the financial results reported in the restated financial statement. The amount and form of the compensation to be recouped is determined by the Compensation Committee in its discretion.

COMMUNICATIONS WITH THE BOARD

Shareholders and other parties interested in communicating with the Board of Directors or any specific directors, including the independent Lead Director, or the non-employee or independent directors as a group, may do so by writing to the Board of Directors, Health Care REIT, Inc., 4500 Dorr Street, Toledo, Ohio 43615. The Nominating/Corporate Governance Committee has approved a process for handling letters received by the Company and addressed to members of the Board. Under that process, the Senior Vice President-Administration and Corporate Secretary of the Company reviews all such correspondence and regularly forwards to the Board a summary of the correspondence (with copies of the correspondence attached) that, in the opinion of the Senior Vice President-Administration and Corporate Secretary, relates to the functions of the Board or committees thereof or that she otherwise determines requires their attention (for example, if the communication received relates to questions, concerns or complaints regarding accounting, internal control over financial reporting and auditing matters, it will be summarized and forwarded to the Chair of the Audit Committee for review). Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of such correspondence.

 

GOOD GOVERNANCE PRACTICES

A commitment to strong and sustainable governance practices are hallmarks of the Board’s stewardship on behalf of shareholders. As such, the Company continuously reviews its practices to ensure effective collaboration of management and the Board.

 

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Of the Board’s eleven directors, ten are independent, including an independent Lead Director.

 

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Directors are elected annually by a majority of votes cast in an uncontested election.

 

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The Board has adopted and published committee charters to guide its oversight.

 

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On an annual basis, the Board conducts self and peer evaluations, reviews Board independence and undertakes key committee self-evaluations.

 

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New directors receive an orientation.

 

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The Company has stock ownership guidelines for executives and directors.

 

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The Company has specific policies and practices to align executive compensation with long-term shareholder interests.

 

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The Board reviews management succession plans at least annually.

The Company has a written policy requiring all material transactions with related parties to be approved or ratified by the Nominating/Corporate Governance Committee. The policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which (1) the aggregate amount involved will or may be expected to exceed $100,000 in any calendar year, (2) the Company is a participant, and (3) any related party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity).

In determining whether to approve or ratify a transaction, the Nominating/Corporate Governance Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. The Board has determined that transactions that involve any employment by the

Company of an executive officer of the Company shall be deemed to be pre-approved if the related compensation is required to be reported in the Company’s proxy statement under Item 402 of Regulation S-K because the person is a Named Executive Officer, or if the executive officer is not a Named Executive Officer and the compensation would have been reported in the Company’s proxy statement if the executive officer had been a Named Executive Officer (and the Company’s Compensation Committee approved or recommended that the Board approve such compensation). The Board also has pre-approved certain transactions that involve any compensation paid to a director if the compensation is required to be reported in the Company’s proxy statement under Item 402 of Regulation S-K, certain charitable contributions by the Company if the related party is an employee or a director of the charitable institution, and any transaction where the related party’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock receive the same benefit on a pro rata basis.

 

The Audit Committee is directly responsible for the appointment, retention, compensation, evaluation and oversight of the Company’s independent registered public accounting firm. The Audit Committee has selected Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2014. Ernst & Young LLP has served as the Company’s independent registered public accounting firm since the Company’s inception in 1970. The Audit Committee periodically considers whether, in order to assure continuing auditor independence, it should adopt a policy requiring the regular rotation of the independent registered public accounting firm. The Audit Committee (and in particular the Chair of the Audit Committee) ensures the rotation of the lead (or coordinating) audit partner and is directly involved in the selection of Ernst & Young LLP’s lead audit partner. The Audit Committee and the Board believe that the continued retention of Ernst & Young LLP as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders.

Although the submission of this matter for approval by shareholders is not legally required, the Board believes that such submission follows sound business practice and is in the best interests of the shareholders. If this appointment is not ratified by the holders of a majority of the shares of voting securities present in person or by proxy at the Annual Meeting, the Audit Committee will consider the selection of another accounting firm. If such a selection were made, it may not become effective until 2015 because of the difficulty and expense of making a substitution. Representatives of the firm of Ernst & Young LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Fees for professional services provided by Ernst & Young LLP in each of the last two fiscal years, in each of the following categories, are as follows:

 

Audit fees include fees associated with the annual audit, the review of the Company’s quarterly reports on Form 10-Q and services that generally only the independent registered public accounting firm can provide such as comfort letters, consents and assistance with review of documents to be filed with or furnished to the Securities and Exchange Commission.

Audit-related fees include fees associated with assurance and related services that are traditionally performed by an independent accountant, and include access to research databases and consultations concerning financial accounting and reporting standards.

Tax fees include fees for tax compliance and tax planning and tax advice services. Tax compliance involves the preparation of original and amended tax returns, claims for refund and tax payment-planning services and assistance with tax audits and appeals. Tax planning and tax advice encompass a diverse

range of services, including advice related to acquisitions, and requests for rulings or technical advice from taxing authorities.

The increase in tax fees in 2013 is primarily due to the increase in tax return preparation related to the significant increase in the Company’s acquisitions in 2010 through 2013. Beginning in 2012, the Company initiated a process to create a more robust internal tax compliance function and began to transition certain domestic tax compliance activity from Ernst & Young LLP to the Company. Once complete, the Company anticipates that this transition will result in a decrease in the percentage of fees for tax services to the total fees paid to Ernst & Young LLP.

All other fees include fees for insurance and risk management advisory services.

None of the foregoing fees were paid for services, the sole business purpose of which was tax avoidance, or the tax treatment of which would not be supported by the Code and related regulations.

 

The Audit Committee has developed policies and procedures concerning its pre-approval of the performance of audit and non-audit services for the Company by Ernst & Young LLP and is responsible for the audit fee negotiations associated with the engagement of Ernst & Young LLP. At its quarterly meetings, the Audit Committee gives its prior approval for particular audit and non-audit services within the following categories of services that it desires the independent registered public accounting firm to undertake: audit services, audit-related services, tax compliance services, tax planning and tax advice services and other services. Prior to giving its approval, the Committee reviews the written descriptions of these services provided by Ernst & Young LLP and the estimated fees for these services. All other non-audit services must be pre-approved on an individual engagement basis. If there is any question as to whether a proposed service has

been pre-approved, management and the independent registered public accounting firm together must contact the Audit Committee to obtain clarification or, if necessary, pre-approval.

All of the audit services, audit-related services, tax compliance services, tax planning and tax advice services and other services provided to the Company by Ernst & Young LLP during the year ended December 31, 2013 were pre-approved by the Audit Committee.

Where specific Audit Committee approval of non-audit services is required, the Chair of the Audit Committee may pre-approve the engagement subject to a presentation to the full Audit Committee at its next regularly scheduled meeting.

 

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. In fulfilling its oversight responsibilities this past year, the Committee reviewed the audited financial statements with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

The Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards (including Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board). In addition, the Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding such firm’s communications with the Committee concerning independence. The Committee has also discussed with the independent registered public accounting firm such firm’s

independence from management and the Company and considered the compatibility of non-audit services with such firm’s independence.

The Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for its audit. The Committee met with such firm, with and without management present, to discuss the results of its examinations, its evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Committee held five meetings during the year ended December 31, 2013.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the Securities and Exchange Commission. The Committee and the Board have also recommended, subject to shareholder ratification, the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm. Mr. DeRosa, Mr. Otten and Mr. Trumbull were each members of the Committee in 2013 and participated in the reviews and discussions described above. Mr. Ballard, Mr. Grua and Mr. Naughton were appointed to the Audit Committee effective March 1, 2014, so they did not take part in such reviews and discussions.

 

2013 BONUS REDUCTION FOR ALL EXECUTIVE OFFICERS

As described above, the Company had many significant accomplishments in 2013 including generating a three-year annualized total shareholder return of 9.5%, ranking HCN in the 80th percentile versus its compensation peer group outlined on pages 31-32. However, in light of the Company’s 2013 total shareholder return of -8.4%, the Compensation Committee took discretionary action and reduced 2013 long-term incentive pay awards for the absolute total shareholder return metric by 33% and the individual performance metric by approximately 20% for all executives (including Mr. Chapman) from what they would have received under “normal” scoring. Refer to page 49 for more details regarding the Compensation Committee’s discretionary pay reductions.

The Company significantly changed the compensation program structure in 2013.

 

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Strengthened the link between pay and performance and aligned management and shareholder interests through short and long-term objectives.

 

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Enhanced the balanced scorecard approach by increasing the rigor of the annual cash incentive measures and by bifurcating the annual long-term incentive program into an annual program and a three-year forward looking program.

The Company believes that these changes will improve shareholder returns and create meaningful shareholder value over the long term.

Peer		Industry		Market   Capitalization
Public Storage		Self-Storage		$	25.9 billion
Equity Residential		Multi-family		$	18.7 billion
Prologis, Inc.		Industrial		$	18.4 billion
General Growth   Properties, Inc.		Regional Mall		$	18.3 billion
Ventas, Inc.		Health Care		$	16.8 billion
HCP, Inc.		Health Care		$	16.6 billion
Vornado Realty Trust		Diversified		$	16.6 billion
Health Care REIT, Inc.		Health Care		$	15.5 billion
Boston Properties		Office		$	15.4 billion
AvalonBay   Communities, Inc.		Multi-family		$	15.3 billion
Host Hotels &   Resorts, Inc.		Hotel		$	14.7 billion

Source: SNL Financial, data as of 12/31/13.

 

               Source: Key Banc, data as of 12/31/13.

 

Findings from the Peer Group review indicated that the current place for Mr. Chapman’s total target remuneration (sum of base salary, cash bonus and equity awards) is at the 38^th percentile relative to the CEOs of the Peer Group. The review also indicated that the target total remuneration for the NEOs (in the aggregate) is approximately at the 25^th percentile relative to the top five named executive officers (in the aggregate) in the Peer Group. The market median is the desired competitive position for Mr. Chapman and the other NEOs (in the aggregate), respectively, with higher pay opportunities if performance achievements exceed expectations on an absolute and relative basis. The current placement is below the desired market median for the Company’s NEOs as a result of the newly revised peer group and the Compensation Committee’s decision not to adjust compensation opportunity for 2014. For HCN and the peers, the Company included the annualized, target value of any participation in future programs.

The Company’s relative compensation levels compared to relative enterprise growth, total capitalization growth and total shareholder return during the period 2011 – 2013 is depicted in the chart to the right.

 

         Sources: Key Banc, data as of 12/31/13.

                        SNL Financial, data as of 12/31/13.

 

9.5% THREE-YEAR ANNUAL TOTAL RETURN

 

PEER GROUP COMPARISONS		INDEX COMPARISONS

$5.7 BILLION 2013 GROSS INVESTMENTS

The Company completed $5.7 billion in gross new investments in 2013, which represents the second largest amount of investments in any single year of its history.

 

 

    171 CONSECUTIVE DIVIDENDS

    CONTINUED GEOGRAPHIC EXPANSION

    OPERATED EFFICIENTLY

CHAPMAN EMPLOYMENT AGREEMENT

In addition to eliminating Mr. Chapman’s annual extension grant, the Compensation Committee ensured his new employment agreement included the following provisions, which the Company considers “best practices”:

 

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Not evergreen – term is defined

 

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No guaranteed payments

 

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No automatic compensation increases

 

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Double-trigger for severance and acceleration of time-based equity awards upon a change in corporate control (performance-based awards will be evaluated at the time of the change in corporate control)

 

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No excise tax gross-ups

 

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Severance is based on a formula that includes salary and average bonus received (not maximum bonus)

In 2013, the Compensation Committee granted a 3.0% base salary increase for all NEOs compared to an average increase of 3.5% in base salary for the named executive officers in the Company’s Peer Group and an average increase of 6.2% for CEOs in the Peer Group.

In 2014, in light of the Company’s negative one-year 2013 total shareholder return, the Compensation Committee froze base salaries for all NEOs.

Mr. Chapman

 

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Represented Health Care REIT externally, including with the Company’s operators, shareholders, industry organizations, investment banks and the media to enhance the Company’s reputation and competitive advantage

 

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Facilitated the growth of the Company to become the largest healthcare REIT by enterprise value and the 8th largest publicly traded REIT

 

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Oversaw the completion of the Company’s largest acquisition, Sunrise Senior Living

 

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Retained senior leadership team and facilitated the achievement of corporate strategic goals designed to enhance long-term shareholder value

 

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Led efforts to improve seniors housing sector, including consolidation of complementary companies and platforms and the development of internal operator teams and infrastructure

 

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Provided the Board of Directors with strong substantive input on the succession planning process

 

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Oversaw the management and continued improvement of internal personnel

 

*In light of the Company’s negative 2013 total shareholder return, the Compensation Committee reduced Mr. Chapman’s individual performance score associated with the annual long-term incentive plan to approximately 67.5% of maximum payout from 85%.

Mr. Estes

 

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Completed year with highest FFO and FAD multiples among peer group

 

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Managed the Company through several successful capital transactions including:

 

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Completed $1.7 billion secondary equity offering, largest in sector during 2013, at the highest per share price in the Company’s history

 

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Completed $400 million 10+-year US debt issuance, priced to yield 4.626%

 

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Completed inaugural £550 million 15-year UK debt issuance, priced to yield 4.875%

 

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Closed new $2.25 billion credit line, priced at L+117.5 bps

 

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Closed new $500 million US term-loan, priced at L+135 bps

 

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Achieved S&P rating increase to BBB from BBB- in May 2013 (first ratings upgrade since 2007)

 

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Named to Institutional Investor Magazine’s 2014 All-Executive team among best CFOs in REIT industry, the second time in three years

 

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Hosted successful Investor Day in Philadelphia in May and Bank Day in Toledo in June

 

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Served as Company board observer on key operator boards

 

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Conducted an extensive shareholder outreach program by directly calling over 38% of shareholders to discuss the Company’s 2012 performance, executive pay for performance alignment and to solicit feedback on the Company’s compensation program

 

*In light of the Company’s negative 2013 total shareholder return, the Compensation Committee reduced Mr. Estes’ individual performance score associated with the annual long-term incentive plan to approximately 67.5% of maximum payout from 85%.

Mr. Brinker

 

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Oversaw $5.7 billion of gross investments in 2013 including the Sunrise Senior Living and Revera acquisitions and the Company’s continued international expansion into the United Kingdom and Canada

 

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Supervised the pricing and structuring of new investments in a manner that increased shareholder value

 

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Hired and trained personnel and established systems and protocols to maximize long-term NOI growth in the seniors housing portfolio

 

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Implemented the investment team realignment, which consolidates the historical silos of underwriting, origination, asset management, reporting, and corporate services into one investment team

 

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Established a network of operators, lenders, brokers, investment bankers, advisors, lawyers, and general industry contacts in the United Kingdom and Canada

 

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Solidified the Company’s international presence by establishing a Health Care REIT office and partnering with three high-quality operators in the United Kingdom and overseeing the completion of our Revera Canadian investment

 

*In light of the Company’s negative 2013 total shareholder return, the Compensation Committee reduced Mr. Brinker’s individual performance score associated with the annual long-term incentive plan to approximately 75% of maximum payout from 95%.

Mr. Herman

 

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Oversaw the management of the Company’s seniors housing and care portfolio including monitoring operator performance, new investment opportunities and asset sales

 

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Drove significant same store cash NOI growth in the Company’s seniors housing operating properties and its triple net leased properties

 

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Held four Executive Forums involving the Company’s top operators and implemented a group purchasing arrangement

 

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Enhanced the Company’s industry presence with trade associations including Board representation on ALFA, ASHA and NIC and working with OneVoice to merge ALFA/ASHA

 

*In light of the Company’s negative 2013 total shareholder return, the Compensation Committee reduced Mr. Herman’s individual performance score associated with the annual long-term incentive plan to approximately 67.5% of maximum payout from 85%.

Mr. Miller

 

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Managed the legal team in connection with structuring, negotiating and documenting $5.7 billion of new investments in 2013

 

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Supervised the creation and delivery of Health Care REIT’s first sustainability report

 

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Oversaw and provided valuable guidance for the medical facilities group including investments and asset sales, generating industry leading medical office building occupancy and significant retention rates

 

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Managed the successful implementation of key information systems’ objectives, with a particular focus on improving tax, budgeting, document management and accounting functionality

 

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Oversaw the continued implementation of the Company’s strategic plan in all facets of the organization, including new investments, seniors housing and medical facilities asset management and corporate initiatives

 

*In light of the Company’s negative 2013 total shareholder return, the Compensation Committee reduced Mr. Miller’s individual performance score associated with the

annual long-term incentive plan to approximately 65% of maximum payout from 80%.

Normalized Funds from Operations (FFO) per share.				Weighting
2013 Goal:		Threshold:  $3.70, +5.1% growth   Target:  $3.78, +7.4% growth   High:  $3.85, +9.4% growth

Why the Company chose this measure:  FFO is a common Non-GAAP measure of operating performance for REITs because it provides insight into the earnings generated from the real estate platform. FFO means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairments of depreciable assets, plus real estate depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests. Normalized FFO for 2013 represents FFO adjusted for transactions costs, provision for loan losses and net gains (or losses) on derivatives and extinguishments of debt. This measure is included in the compensation program because it is the measure most commonly used by analysts to assess the performance of REITs. If the Company achieves a level of normalized FFO per share as a result of inappropriate amounts of leverage, the Compensation Committee may determine that bonuses should not be paid for this goal. The weighting for this measure was decreased in 2013 to 20% and 15% for the CEO and NEOs, respectively (from 32% and 24% in 2012).

How the Compensation Committee set the 2013 goal:  In its 2013 initial public guidance, the Company projected normalized FFO in a range of $3.70 to $3.80 per diluted share. As such, threshold performance for this measure was set at the low-end of the Company’s initial public guidance range. Target performance was set at $0.03 above the midpoint of the initial guidance range and high score was set at $0.05 above the high end. As a result, high performance would only be achieved if the Company significantly exceeded the high end of the initial public guidance range.