<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Hawaiian Electric Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Bowne of Los Angeles
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HAWAIIAN ELECTRIC INDUSTRIES, INC. - PO BOX 730 - HONOLULU, HI 96808-0730
[LOGO]
Robert F. Clarke
President and
Chief Executive Officer
March 10, 1995
Dear Fellow Stockholder:
On behalf of the Board of Directors, it is once again my pleasure to invite
you to attend the Annual Meeting of Stockholders of Hawaiian Electric
Industries, Inc. (HEI). The meeting will be held on the Company's premises in
Room 805 on the eighth floor of the Pacific Tower in Honolulu, Hawaii on April
25, 1995, at 9:30 a.m. A map showing the location of the meeting site appears on
the back of the Proxy Statement.
The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. In addition, we will review significant events of 1994
and their impact on you and your Company. Corporate officers will be available
before and after the meeting to talk with you and answer any questions you may
have.
As a stockholder of HEI, it is important that your views be represented. We
ask that you promptly sign, date and return the enclosed proxy in the postage
prepaid envelope.
I join the management team of HEI in expressing our appreciation for your
confidence and support. I look forward to seeing you at the Annual Meeting in
Honolulu.
Sincerely,
[SIGNATURE]
[LOGO] Recycled
<PAGE> 3
- --------------------------------------------------------------------------------
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 RICHARDS STREET
HONOLULU, HAWAII 96813
[LOGO]
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1995
To the Holders of Common Stock
Notice is hereby given that the Annual Meeting of Stockholders of Hawaiian
Electric Industries, Inc. will be held on Tuesday, April 25, 1995, at 9:30 a.m.
in the Pacific Tower, 8th floor, Room 805, 1001 Bishop Street, Honolulu, Hawaii
96813, for the following purposes:
1. To elect a Class I director.
2. To elect five Class II directors.
3. To elect the independent auditor of the Company.
4. To transact such other business as may be properly brought before
the meeting.
Only holders of record of Common Stock at the close of business on February
15, 1995, will be entitled to vote at the meeting. The stock transfer books of
the Company will remain open.
All stockholders are urged to attend the meeting in person or by proxy. It
is important that your shares be represented at the meeting, regardless of the
size of your holding. Therefore, we urge you to SIGN, DATE and RETURN AS SOON AS
POSSIBLE the enclosed proxy in the postage prepaid envelope furnished for that
purpose.
Your attention is directed to the Proxy Statement which appears on the
following pages.
Betty Ann M. Splinter, Secretary
Hawaiian Electric Industries, Inc.
Honolulu, Hawaii
March 10, 1995
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction......................................................................... 1
Voting Rights........................................................................ 1
Election of Directors................................................................ 2
Management Proposal 1. Election of Class I Director............................. 3
Management Proposal 2. Election of Class II Directors........................... 3
Board of Directors................................................................... 7
Committees of the Board......................................................... 7
Remuneration of Directors and Attendance at Meetings............................ 8
Nonemployee Director Retirement Plan............................................ 8
Indemnification and Limitation of Liability.......................................... 9
Security Ownership of Directors and Executive Officers............................... 10
Security Ownership of Certain Beneficial Owner....................................... 11
Section 16 Proxy Statement Disclosure................................................ 11
Executive Management Compensation.................................................... 12
Summary Compensation Table...................................................... 12
Option Grants in Last Fiscal Year............................................... 13
Aggregated Option Exercises and Fiscal Year-End Option Values................... 14
Long-Term Incentive Plan ("LTIP") Awards........................................ 15
Pension Plans................................................................... 16
Change-in-Control Agreements.................................................... 17
Compensation Committee Report on Executive Compensation......................... 18
Stockholder Performance Graph................................................... 23
Compensation Committee Interlocks and Insider Participation..................... 24
Indebtedness of Management........................................................... 25
Transactions with Management and Directors........................................... 26
Management Proposal 3. Election of Auditor........................................... 26
Stockholder Proposals................................................................ 26
Other Business....................................................................... 27
</TABLE>
<PAGE> 5
HAWAIIAN ELECTRIC INDUSTRIES, INC.
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This Proxy Statement is furnished to stockholders by Hawaiian Electric
Industries, Inc. (the "Company") in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders of the Company to be held on April
25, 1995, and at all adjournments thereof. The mailing address of the principal
executive offices of the Company is P.O. Box 730, Honolulu, Hawaii 96808. This
Proxy Statement and the accompanying form of proxy, together with the Company's
annual report to stockholders for the fiscal year ended December 31, 1994, are
being sent to stockholders commencing approximately March 10, 1995.
The annual report is not to be regarded as proxy soliciting material or as
a communication by means of which any solicitation is to be made.
All of the expenses of the solicitation of proxies for the Annual Meeting
will be borne by the Company. The Company may request banks, brokerage houses
and other custodians, nominees, and fiduciaries to forward proxies and proxy
material to the beneficial owners of stock of the Company and to request
authority for the execution of proxies. In such a case the Company may reimburse
such banks, brokerage houses, custodians, nominees and fiduciaries for their
expenses. Proxies may be solicited personally, or by telephone, telegram or mail
by certain directors, officers and regular employees of the Company without
additional compensation for such services. In addition, the Company has retained
D. F. King & Co., Inc., to assist in the solicitation of proxies for an
estimated fee not to exceed $8,000, plus reimbursement of reasonable
out-of-pocket expenses.
VOTING RIGHTS
Only holders of Common Stock of record at the close of business on February
15, 1995, will be entitled to vote. On February 15, 1995, 28,762,655 shares of
Common Stock were outstanding. Each share of Common Stock is entitled to one
vote on each of the matters presented at the Annual Meeting. Under the By-Laws
of the Company, the holders of voting stock of the Company do not have
cumulative voting rights in the election of directors.
If you execute and return the enclosed proxy, you may revoke the proxy
before the Annual Meeting at any time by sending a written revocation to the
Company. The By-Laws of the Company provide, however, that if you attend the
Annual Meeting and wish to vote, your ballot at the meeting will cancel any
proxy that you have previously given. Unless your proxy is mutilated or
otherwise received in such form or at such time as to render it not votable, the
shares represented by your proxy will be voted as directed, and if no direction
is indicated it will be voted for all management proposals, as set forth in this
Proxy Statement. If you wish to give a proxy to someone other than the holders
of the Company's proxies, you may cross out all three names appearing on the
enclosed proxy and insert the name of another person to vote the shares at the
meeting. For your convenience, a self-addressed envelope is enclosed, requiring
no postage if mailed within the United States.
The holders of a majority of the shares of the Company's Common Stock,
present in person or by proxy at the Annual Meeting, constitute a quorum for the
transaction of business. Electing a Class I director, electing Class II
directors, and electing the independent auditor require the affirmative vote of
a majority of such quorum. For purposes of determining whether a proposal has
received a majority vote, abstentions will be included in the vote totals.
Therefore, in the case of all matters brought before the meeting other than the
election of directors, abstentions will have the effect of a vote against the
proposal. In instances where brokers are prohibited from exercising
<PAGE> 6
discretionary authority for beneficial owners who have not returned a proxy
(broker nonvotes), those shares will not be included in the vote totals and,
therefore, will have no effect on the vote.
D. F. King & Co. will act as tabulator for broker and bank proxies while
the Company has contracted with an affiliate company to act as tabulator for the
proxies of the other stockholders of record for the Annual Meeting. The identity
and vote of any stockholder shall not be disclosed to any persons other than
those acting as tabulators except (i) as necessary to meet applicable legal
requirements, (ii) in the case of any contested proxy solicitation, as may be
necessary to permit proper parties to verify the propriety of proxies presented
by any person and the results of the voting, and (iii) in the event a
shareholder has made a written comment on the proxy form.
If you own shares of HEI stock in the Dividend Reinvestment and Stock
Purchase Plan (DRIP) and/or the Hawaiian Electric Industries Retirement Savings
Plan (HEIRS) (including shares held in the Hawaiian Electric Industries Stock
Ownership Plan which was originally adopted as a Tax Reduction Act Stock
Ownership Plan ("TRASOP")), your share ownership is shown on the enclosed proxy.
The respective plan trustee will vote the shares of stock held in the Plans in
accordance with the directions received from shareholders participating in the
Plans. For both DRIP and HEIRS (excluding TRASOP), the trustee will vote all the
shares of Common Stock for which it has received no voting instruction in the
same proportion as it votes shares for which it receives instruction. The
trustee is prohibited from voting the shares in TRASOP for which it receives no
voting instruction.
ELECTION OF DIRECTORS
The Board of Directors currently consists of 14 persons, divided into three
classes of nearly equal size: Class I, Class II, and Class III, with the term of
office of one class expiring each year. The number of Class I directors was
reduced to four as a result of the retirement of Thurston Twigg-Smith on April
19, 1994. Terms for all four current Class I directors expire in 1997 (including
the Class I nominee being proposed for election at this Annual Meeting) and for
all five Class III directors in 1996. All five Class II directors are being
proposed for election at this Annual Meeting for a new three-year term expiring
in 1998.
The persons named in the proxy will vote your stock for the election of one
director to serve in Class I and five directors to serve in Class II of the
Company's Board of Directors for terms expiring at the 1997 and 1998 Annual
Meeting, respectively, and thereafter until their successors are duly elected
and qualified.
Although it is not contemplated that any Board of Directors nominee will
decline or be unable to serve, should such a situation arise prior to the
meeting, the proxy holders may vote in their discretion for a suitable
substitute. Each nominee for director, except Class I nominee, James K. Scott,
is now serving on the Board.
2
<PAGE> 7
MANAGEMENT PROPOSAL 1. ELECTION OF CLASS I DIRECTOR
In 1995, the Board of Directors, upon the recommendation of the Nominating
Committee, is recommending to the stockholders the election of James K. Scott as
a Class I director to fill the vacancy created by the retirement of Thurston
Twigg-Smith in 1994. Dr. Scott would hold office until the 1997 Annual Meeting
of Stockholders and thereafter until his successor is duly elected and
qualified.
The following sets forth the business experience during the past five years
and other directorships of Dr. Scott.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF JAMES K. SCOTT TO SERVE AS A CLASS I DIRECTOR.
JAMES K. SCOTT, ED. D.
AGE 43
[PHOTO] President of Punahou School since August 1994. From
1985 to June 1994, he served as Headmaster of The Catlin
Gabel School in Portland, Oregon. He is also a trustee of
The College Board.
MANAGEMENT PROPOSAL 2. ELECTION OF CLASS II DIRECTORS
The current five Class II directors are being proposed for election for new
three-year terms (expiring in 1998) at this Annual Meeting.
The following sets forth the name, age, year first elected or appointed as
a director of the Company, positions with the Company or business experience
during the past five years, and a list of directorships of the five nominees for
Class II directors as well as the Class III and I directors who will continue to
serve on the Board of Directors pursuant to their prior elections.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF THE NOMINEES TO SERVE AS CLASS II DIRECTORS.
3
<PAGE> 8
NOMINEES FOR CLASS II DIRECTORS --
Terms would end at the 1998 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
[PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO]
VICTOR HAO LI, S.J.D. DIANE J. PLOTTS KELVIN H. TAKETA JEFFREY N. WATANABE HARWOOD D. WILLIAMSON
AGE 53 AGE 59 AGE 40 AGE 52 AGE 63
DIRECTOR SINCE 1988 DIRECTOR SINCE 1987 DIRECTOR SINCE 1993 DIRECTOR SINCE 1987 DIRECTOR SINCE 1985
Co-chairman, Asia General partner of Vice president and Partner in the law Senior vice president
Pacific Consulting Mideast and China director of the Asia firm of Watanabe, of the Company.
Group and Consulting Trading Company, Pacific Region, The Ing & Kawashima. President, chief
Professor of Law, formerly known as Nature Conservancy. executive officer,
Stanford University. Hemmeter Investment Director of American and director of
Company. Director of HISCO, Savings Bank, F.S.B., Hawaiian Electric
Director of Hawaiian Ltd. and Sustainable Hawaiian Electric Company, Inc. and
Electric Industries Director of Hawaiian Conservation. Industries Charitable chairman of the
Charitable Foundation, Electric Company, Inc., Foundation, Grace boards of Maui
AES China Generating Malama Pacific Corp. Pacific Corporation Electric Company,
Corporation, The and its subsidiary and affiliates, Limited and Hawaii
Immigrant Center, companies, Hawaii Suntory Resorts, Electric Light
and Pacific States Theatre Center, Inc., Hawaiian Host, Company, Inc.
University. University of Inc., Bishop Museum,
Chairman of the Hawaii Foundation, Child and Family Director of American
Board of Queen's Pacific Forum, Service--Project Savings Bank, F.S.B.,
International Center for Strategic Philippines, Hawaiian Tug & Barge
Corporation. and International Rehabilitation Corp., Young Brothers,
Member, Board Studies, Plaza Club, Hospital of the Limited, Malama
of Managers, and Honolulu Pacific, Chamber of Pacific Corp.,
Mid-Pacific Country Club. Commerce of Hawaii, Hawaiian Electric
Institute. PATH Housing Industries Charitable
Development Foundation, Aloha
Corporation, and United Way, and First
the University of Night Honolulu.
Hawaii Foundation. Vice president and
Trustee, Children's director of the
Television Workshop, Western Energy and
Blood Bank of Hawaii, Communication
Hawaii Maritime Association.
Center, Rehabilitation Chairman, Hawaiian
Hospital of the Educational Council.
Pacific Foundation, Member, Board of
The Nature Conservancy Regents, Chaminade
of Hawaii, The Queen's University of Honolulu.
Medical Center, and
the Smithsonian
Institution
National Board.
Chairman of the board
of Alger Foundation.
Vice chairman, 1994
Aloha United Way
Campaign.
</TABLE>
4
<PAGE> 9
CLASS III DIRECTORS --
Directors continuing in office with terms ending at the 1996 Annual Meeting.
<TABLE>
<S> <C> <C> <C> <C>
[PHOTO] [PHOTO] [PHOTO] [PHOTO] [PHOTO]
EDWIN L. CARTER RICHARD HENDERSON BEN F. KAITO BILL D. MILLS OSWALD K. STENDER
AGE 69 AGE 66 AGE 68 AGE 43 AGE 63
DIRECTOR SINCE 1985 DIRECTOR SINCE 1981 DIRECTOR SINCE 1981 DIRECTOR SINCE 1988 DIRECTOR SINCE 1993
President and President and Of counsel in the Chairman of the Trustee, Kamehameha
director director of HSC, Inc. and law firm of Kaito & board and chief Schools/Bishop
of Bishop Trust its subsidiaries. Ishida. executive officer Estate.
Company, Limited of Bill Mills
from 1984 until his Director of Director of Development and Director of Hawaii
retirement in May Hawaiian Electric Hawaiian Electric Investment Company, Community
1993. Company, Inc., Company, Inc., Inc. Reinvestment Corp.,
Hawaii Electric Malama Pacific Pacific Housing
Director of HEI Light Company, Corp. and its Director of Assistance
Investment Corp. Inc., Hawaiian Tug subsidiary Grace Pacific Corporation, Hawaii
and Hawaii Council on & Barge Corp., companies, American Corporation, Hawaii Real Estate
Economic Education. Young Brothers, Savings Bank, Theatre Center, and Research and
Chairman, Board of Limited, Jones F.S.B., and Historic Hawaii Education Center,
Regents, Chaminade Spacelink, Ltd., Hawaiian Electric Foundation. Hawaii Nature
University of InterIsland Industries Trustee, Hawaii Center, Friends of
Honolulu. Petroleum, Inc., Charitable Pacific University Iolani Palace, and
Director and past Hawaii Island Foundation. Member, and The Nature Help, Understanding
president of the Economic Board of Regents, Conservancy of and Group Support
Aloha Council, Boy Development Board, Tokai International Hawaii. Member, (HUGS). Director
Scouts of America. Big Island College. Board of Governors, and past president
National Substance Abuse Iolani School. of the American
director and past Council, United Way Right of Way
president of the Statewide Association.
Pacific Region of Association of President, Mutual
the Navy League of the Hawaii, and Hawaii Housing Association
United States. Island Chamber of Wharton Real Estate
Honorary member and Commerce. Treasurer Center. Trustee,
past chairman of and director of The Cash Assets Trust,
the Bishop Museum Island of Hawaii Hawaiian Tax-Free
Board of Directors. YMCA. President and Trust, Pacific
Member, Board of trustee, Lyman Capital Funds, The
Managers, Mid-Pacific House Memorial Nature Conservancy
Institute and Board Museum. of Hawaii, and
of Management, Armed Academy of the
Services YMCA. Mr. Henderson was Pacific. Member,
Trustee and the chairman of the Board of Governors,
treasurer, board of Ocean Iolani School.
Board of Trustees Farms of Hawaii, Chairman of
of the Academy of the Inc. (OFH), an East-West Center.
Pacific. aquaculture company
that filed a
petition in June
1992 for voluntary
bankruptcy under
Chapter 7 of the
U.S. Bankruptcy
Code. The assets of
OFH in the
bankruptcy
proceedings were
abandoned to the
secured creditor,
and the Trustee was
discharged. HSC,
Inc. owned an
approximate 1%
interest in OFH.
</TABLE>
5
<PAGE> 10
CLASS I DIRECTORS --
Directors continuing in office with terms ending at the 1997 Annual Meeting.
<TABLE>
<S> <C> <C> <C>
[PHOTO] [PHOTO] [PHOTO] [PHOTO]
ROBERT F. CLARKE JOHN D. FIELD A. MAURICE MYERS RUTH M. ONO, PH.D.
AGE 52 AGE 69 AGE 54 AGE 59
DIRECTOR SINCE 1989 DIRECTOR SINCE 1986 DIRECTOR SINCE 1991 DIRECTOR SINCE 1987
President and chief Vice president-- President, chief Vice president of
executive officer regulatory affairs operating officer, The Queen's Health
of the Company. of GTE Service and director of Systems.
Corporation from America West
Chairman of the 1982 until his Airlines, Inc. Director of American
board of Hawaiian retirement in From June 1985 to Savings Bank, F.S.B.,
Electric Company, October 1985. December 1993, he Aloha United Way,
Inc., American was president and Japanese Cultural
Savings Bank, chief executive Center of Hawaii,
F.S.B., officer of Aloha Japan-America Society
Hawaiian Tug & Airgroup, Inc. of Hawaii, Air Force
Barge Corp., Young Civilian Advisory
Brothers, Limited, Director of Greater Council, Plaza
Malama Pacific Phoenix Economic Club, Hawaii
Corp., and Pacific Council. Member, Children's Trust Fund,
Energy Conservation National Board of Urasenke Foundation,
Services, Inc. Advisors, Tokushukai
President and University of International, Inc.,
director of Hawaiian Arizona. Leadership America
Electric Industries National Advisory
Charitable Board, and Soroptimist
Foundation. Chairman, International of the
1994 Aloha United Way Americas Foundation.
Campaign. Director of Vice chairman of
Chamber of Commerce of the board of
Hawaii and PATH Queen's International
Housing Development Corporation. Honorary
Corporation. Dean and Visiting
Member, Hawaii Professor of Toho
Business Roundtable. University School of
Trustee, The Nature Medicine. Member,
Conservancy of Board of Regents,
Hawaii and Hawaii University of Hawaii
Pacific University. and the Spark M.
Matsunaga Peace
Foundation Board of
Governors.
</TABLE>
6
<PAGE> 11
BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board of Directors has four standing committees: Audit, Compensation,
Executive and Nominating. The names of the members, number of meetings held in
1994, and the duties and responsibilities of each committee are shown in the
table below.
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS HELD PRINCIPAL DUTIES AND
COMMITTEE MEMBERS DURING 1994 RESPONSIBILITIES
- ------------- ---------------------- ------------- ------------------------------------
<S> <C> <C> <C>
AUDIT Diane J. Plotts* 6 Reviews with management, the
John D. Field internal auditor and the Company's
Ben F. Kaito independent auditor the activities
Victor H. Li of the internal auditor, the results
Ruth M. Ono of the annual audit by the
Kelvin H. Taketa independent auditor and the
financial statements which are
included in the Company's annual
report to stockholders. The Audit
Committee holds such meetings as it
deems advisable to review the
financial operations of the Company.
COMPENSATION Edwin L. Carter* 2 Reviews the current salary
Richard Henderson administration policies and
Bill D. Mills compensation strategy of the
Oswald K. Stender Company. See pages 18 to 22 for the
Jeffrey N. Watanabe Compensation Committee Report on
Executive Compensation.
EXECUTIVE Richard Henderson* 1 Reviews and discusses organizational
Edwin L. Carter and other matters. The Executive
Robert F. Clarke** Committee possesses and exercises
Ben F. Kaito such powers of the Board as are
Diane J. Plotts expressly delegated to it by the
Jeffrey N. Watanabe Board from time to time and is
responsible for considering and
making recommendations to the Board
concerning any questions relating to
the business and affairs of the
Company.
NOMINATING Jeffrey N. Watanabe* 1 Recommends to the Board of Directors
Ben F. Kaito the slate of nominees for director
A. Maurice Myers to be submitted to the stockholders
at the Annual Meeting. The committee
will consider recommendations for
nominees for director from all
sources, including stockholders.
Stockholders who wish to recommend
nominees should write to the
Company's Nominating Committee, in
care of the Secretary, Hawaiian
Electric Industries, Inc., P.O. Box
730, Honolulu, Hawaii 96808. Such
recommendations must be received by
December 11, 1995, to be considered
for the 1996 Annual Meeting of
Stockholders.
</TABLE>
- ---------------
*denotes chair
**employee director
7
<PAGE> 12
REMUNERATION OF DIRECTORS AND ATTENDANCE AT MEETINGS
In 1994, the nonemployee directors were paid a retainer of $12,000,
one-half of which was distributed in the Common Stock of the Company pursuant to
the Nonemployee Director Stock Plan and one-half of which was distributed in
cash. The number of shares of stock distributed to each director was based on a
price of $33.28 per share, which was equal to the average of the daily high and
low sales prices of HEI Common Stock for all trading days in March 1994, divided
into $6,000, with a cash payment made in lieu of any fractional share. The cash
portion of the retainer was paid quarterly in equal installments. Beginning in
1995, in order to receive payment of the fourth quarter installment of the cash
portion of the retainer, directors are required to have attended at least 75
percent of the combined total of all Board meetings and all meetings of Board
committees on which the director serves.
In addition, a fee of $700 was paid in cash to each director for each Board
and committee meeting attended by the director. Chairmen of the respective
committees were paid an additional $100 for each committee meeting attended.
Effective May 1, 1994, members of the Board of Directors who are employees of
the Company were no longer compensated for attendance at any meetings of the
Board or committees of the Board.
In 1994, there were twelve regular monthly meetings and two special
meetings of the Board of Directors. All incumbent directors attended at least
75% of the combined total meetings of the Board and committees on which they
served, except Bill D. Mills, A. Maurice Myers, and Oswald K. Stender.
NONEMPLOYEE DIRECTOR RETIREMENT PLAN
The Nonemployee Director Retirement Plan, which is not funded, was
established in 1989 and provides certain retirement benefits to nonemployee
directors of the Company or any subsidiary of the Company that elects to
participate in the Plan. No director who serves as an officer or employee of the
Company or any of its subsidiaries is entitled to receive benefits under the
Plan. Upon retirement from service as a nonemployee director or age 65,
whichever is later, nonemployee directors who have served for at least five
consecutive years (including years prior to adoption of the Plan) and who meet
the other requirements of the Plan receive payments each year in an amount equal
to the annual retainer which was established for the year in which the
nonemployee director retired. The annual payments will continue to be paid for a
period equal to the number of years of active service accumulated by a
nonemployee director as provided in the Plan or terminate in the event of the
nonemployee director's death. Thurston Twigg-Smith, who retired in 1994, is the
only former nonemployee director receiving payments pursuant to the Plan.
8
<PAGE> 13
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company has entered into Indemnity Agreements with each of the
Company's directors and executive officers in substantially the form approved by
stockholders at the 1989 Annual Meeting. Each Indemnity Agreement provides for
mandatory indemnification of the director or officer to the fullest extent
permitted by law, including indemnification against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action by or in the right of the
Company. The Indemnity Agreement provides for the mandatory payment of expenses
incurred by the director or officer in defending a threatened or actual
proceeding before its final disposition, subject to the obligation to repay such
expenses if it is later determined that the officer or director is not entitled
to indemnification.
Each Indemnity Agreement specifically excludes indemnification (i) with
respect to proceedings initiated by the officer or director unless the Board of
Directors determines indemnification to be appropriate; (ii) with respect to
amounts covered by insurance or payable otherwise than under the Indemnity
Agreement; (iii) on account of profits made from the purchase or sale of stock
by a director or officer which are subject to the "short-swing profits"
liability provisions of federal or state securities laws; (iv) on account of an
action or omission of the officer or director finally adjudicated to be willful
misconduct or to have been knowingly fraudulent or deliberately dishonest; or
(v) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not permitted by law.
The Securities and Exchange Commission takes the position that
indemnification against liability arising under the Securities Act of 1933 is
contrary to public policy and is unenforceable.
At the 1990 Annual Meeting, the stockholders approved a proposal to amend
the Restated Articles of Incorporation of the Company to add a new Article
Fourteenth eliminating the personal liability of its directors for monetary
damages to the fullest extent permitted by Hawaii law.
9
<PAGE> 14
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Common Stock beneficially owned by
each nominee and director, named executive officers as listed in the Summary
Compensation Table on page 12, and by directors and executive officers as a
group, as of February 15, 1995, based on information furnished by the respective
individuals.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK
NAME OF INDIVIDUAL AND NATURE OF
OR GROUP BENEFICIAL OWNERSHIP TOTAL
- ------------------ -------------------- -------
<S> <C> <C>
NONEMPLOYEE DIRECTORS
Edwin L. Carter......................................................... 2,351(a) 2,351
----------
John D. Field........................................................... 851(a)
1,076(b)
1,944(d) 3,871
----------
Richard Henderson....................................................... 1,353(a) 1,353
----------
Ben F. Kaito............................................................ 1,733(a) 1,733
----------
Victor Hao Li........................................................... 1,013(b)
234(c) 1,247
----------
Bill D. Mills........................................................... 2,917(a)
4(c) 2,921
----------
A. Maurice Myers........................................................ 55(a)
938(b) 993
----------
Ruth M. Ono............................................................. 795(a) 795
----------
Diane J. Plotts......................................................... 1,101(a) 1,101
----------
James K. Scott.......................................................... 0 0
----------
Oswald K. Stender....................................................... 956(a) 956
----------
Kelvin H. Taketa........................................................ 1,224(a) 1,224
----------
Jeffrey N. Watanabe..................................................... 929(a)
437(b)
2(c)
951(e) 2,319
----------
EMPLOYEE DIRECTORS AND EXECUTIVE OFFICERS
Robert F. Clarke........................................................ 2,978(a)
9,546(b)
109,163(f) 121,687
----------
Harwood D. Williamson................................................... 14,739(a)
73,341(f) 88,080
----------
OTHER NAMED EXECUTIVE OFFICERS
----------
Peter C. Lewis.......................................................... 2,561(a)
244(c)
9,727(f) 12,532
----------
Wayne K. Minami......................................................... 1,345(a)
2,498(b)
1,098(c)
15,669(f) 20,610
----------
Robert F. Mougeot....................................................... 3,178(a)
24,525(f) 27,703
----------
All directors and executive officers as a group (24 persons)............ 44,475(a)
15,564(b)
2,684(c)
1,944(d)
951(e)
259,331(f) 324,949*
----------
</TABLE>
10
<PAGE> 15
- ---------------
* The current directors and executive officers of Hawaiian Electric Industries
as a group beneficially owned 1.1% of the Company's Common Stock on February
15, 1995, and no one director or officer owned more than 0.4% of such stock.
(a) Sole voting and investment power.
(b) Shared voting and investment power (shares registered in name of respective
individual and spouse).
(c) Shares owned by spouse, children or other relatives sharing the home of the
director or an officer in the group and in which personal interest of the
director or officer is disclaimed.
(d) Mr. Field is co-trustee of the Catharine P. Field Trust and shares voting
and investment powers over the 1,944 shares.
(e) Mr. Watanabe is sub-trustee of the Jeffrey N. Watanabe Profit Sharing Plan
Sub-Trust and has sole voting and investment powers over the 951 shares.
(f) Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 15, 1995, under the 1987 Stock
Option and Incentive Plan, as amended.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER
The following table sets forth information as to the beneficial ownership
of each person known to the Company to own more than 5% of the outstanding
Common Stock as of December 31, 1994.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED(1) CLASS
---------------- ------------ ----------
<S> <C> <C>
Franklin/Templeton 2,166,480 7.6%
Group of Funds
777 Mariners Island Boulevard
P.O. Box 7777
San Mateo, California 94403
</TABLE>
- ---------------
(1) This information is based on a Schedule 13G, dated February 10, 1995 filed
with the Securities and Exchange Commission that discloses that the
Franklin/Templeton Group of Funds has sole voting power over 2,165,480
shares and shared dispositive power over 2,166,480 shares.
SECTION 16 PROXY STATEMENT DISCLOSURE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
that officers, directors, and holders of more than 10% of the Common Stock file
reports of their trading in equity securities of the Company with the Securities
and Exchange Commission. Based on a review of Section 16 forms filed by its
reporting persons during the last fiscal year, the Company believes that its
reporting persons complied with all applicable Section 16 filing requirements,
except Mr. Myers and Mr. Stender. Mr. Myers did not report the shares purchased
through automatic reinvestment of dividends in a dividend reinvestment program
offered by a broker on his Form 5 for the years ending 1992 and 1993. Mr.
Stender did not report one sale of Common Stock in November 1994. The
transactions for both Mr. Myers and Mr. Stender were reported on the current
Form 5, which was timely filed.
11
<PAGE> 16
EXECUTIVE MANAGEMENT COMPENSATION
The Executive Management Compensation section contains the following tables
and a graph: Summary Compensation Table; Option Grants in Last Fiscal Year;
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values; Long-Term Incentive Plan -- Awards in Last Fiscal Year; and Stockholder
Performance Graph. Also included in this section of the Proxy Statement is a
Pension Plan Table, a report on Change-in-Control agreements, a report on
executive compensation which has been issued by the Compensation Committee of
the Board of Directors, and a discussion of Compensation Committee Interlocks
and Insider Participation.
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the annual and
long-term compensation of the chief executive officer and the four other most
highly compensated executive officers of the Company serving at the end of 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
------------------------------- AWARDS
OTHER ---------- PAYOUTS ALL
ANNUAL SECURITIES ---------- OTHER
COMPEN- UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY(1) BONUS(2) SATION(3) OPTIONS(4) PAYOUTS(5) SATION(6)
POSITION YEAR ($) ($) ($) (#) ($) ($)
------------------ ---- --------- -------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Clarke...................... 1994 $452,967 $199,149 $101,033 20,000 $ -- $14,195
President & CEO 1993 403,800 160,578 -0- 15,000 127,500 10,942
1992 374,800 -0- -0- 75,000 -0- -0-
Harwood D. Williamson................. 1994 387,367 100,174 76,465 15,000 -- 20,663
Senior Vice President 1993 341,333 -0- 68,544 8,000 66,150 18,843
1992 316,666 37,288 62,750 48,000 -0- -0-
Wayne K. Minami....................... 1994 219,733 39,166 -0- 8,000 -- 72
President & CEO 1993 203,300 66,894 -0- 5,000 104,755 54
American Savings Bank 1992 189,367 66,615 -0- 5,000 53,500 -0-
Robert F. Mougeot..................... 1994 206,667 58,608 -0- 5,000 -- 7,147
Financial Vice President 1993 195,666 41,059 -0- 5,000 45,675 5,517
1992 182,000 -0- -0- 5,000 -0- -0-
Peter C. Lewis........................ 1994 179,667 53,561 -0- 5,000 -- 10,809
V.P.--Administration 1993 171,333 40,006 -0- 5,000 37,800 10,320
1992 162,833 -0- -0- 5,000 -0- -0-
</TABLE>
- ---------------
(1) Includes a one-time lump sum transitional payment in 1994, representing two
years of "normalized" insider directors' fees following a decision by the
Compensation Committee to discontinue all insider directors' fees, effective
May 1, 1994; the table includes lump sum payments of $40,000 for Mr. Clarke,
$49,000 for Mr. Williamson and $9,800 for Mr. Minami. Also includes
directors' fees of $6,300 for the period January 1 through April 30, 1994,
$23,800 for 1993 and $24,800 for 1992 for Mr. Clarke; directors' fees of
$7,700 for the period January 1 through April 30, 1994, $28,000 for 1993 and
$25,000 for 1992 for Mr. Williamson; and directors' fees of $1,400 for the
period January 1 through April 30, 1994, $4,900 for 1993 and $4,700 for 1992
for Mr. Minami.
(2) The named executive officers are eligible for an incentive award under the
Company's annual Executive Incentive Compensation Plan ("EICP"). EICP bonus
payouts for the previous year's performance period are made in the first two
months of the year following the previous year's performance period; if
there is a payout, the amount is reflected as bonus compensation in the
table for the previous year for the named executive.
(3) Covers interest earned on deferred compensation and includes above-market
earnings in the amount of $70,055 for 1994, $63,467 for 1993 and $57,498 for
1992 on deferred annual and long-term incentive plan payouts for Mr.
Williamson. Covers perquisites of $101,033 for
12
<PAGE> 17
Mr. Clarke for 1994 for which he recognized imputed income under the
Internal Revenue Code, including $91,306 under the category club membership
(representing once in a lifetime reimbursement of initiation fees of $48,000
grossed up for taxes, plus reimbursement of monthly dues not grossed up for
taxes).
(4) Includes special one-time, premium-priced grant without dividend equivalents
for Messrs. Clarke and Williamson in 1992. Other options granted in 1994 and
earlier years contained dividend equivalents as further described below
under the heading Option Grants in Last Fiscal Year.
(5) LTIP payouts are determined in April each year for the 3-year cycle ending
on December 31 of the previous calendar year; if there is a payout, the
amount is reflected as LTIP compensation in the table for the previous year
for the named executive officers. In April 1994, LTIP payouts were made for
the 1991-1993 performance cycle and are reflected as LTIP compensation in
the table for 1993. The determination of whether there will be a payout
under the 1992-1994 LTIP will not be made until April of this year.
(6) Represents amounts accrued by the Company in 1993 and 1994 for certain death
benefits provided to the named executive officers, as more fully covered in
the Compensation Committee Report on page 21 under the heading, "Other
Compensation Plans". In 1992, the Company did not accrue for these benefits.
OPTION GRANTS IN LAST FISCAL YEAR
Set forth in the following table is information on the stock options which
were granted to the five named executive officers on April 11, 1994, all of
which were nonqualified stock options. The practice of granting stock options,
which include dividend equivalent shares, has been followed each year since
1987.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF GRANT
UNDERLYING TOTAL OPTIONS DATE
OPTIONS GRANTED TO EXERCISE PRESENT
GRANTED(1) EMPLOYEES IN PRICE VALUE(2)
(#) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)
---------- ------------- --------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Robert F. Clarke....... 20,000 18% $33.28 April 11, 2004 $172,200
Harwood D. Williamson.. 15,000 13 33.28 April 11, 2004 129,150
Wayne K. Minami........ 8,000 7 33.28 April 11, 2004 68,880
Robert F. Mougeot...... 5,000 4 33.28 April 11, 2004 43,050
Peter C. Lewis......... 5,000 4 33.28 April 11, 2004 43,050
</TABLE>
- ---------------
(1) For the 53,000 option shares granted with an exercise price of $33.28 per
share, additional dividend equivalent shares are granted at no additional
cost throughout the four-year vesting period (vesting in equal installments)
which begins on the date of grant. Dividend equivalents are computed, as of
each dividend record date, both with respect to the number of shares under
the option and with respect to the number of dividend equivalent shares
previously credited to the participant and not issued during the period
prior to the dividend record date. Accelerated vesting is provided in the
event a Change-in-Control occurs. No stock appreciation rights have been
granted under the Company's current benefit plans.
(2) Based on a Binomial Option Pricing Model which is a variation of the
Black-Scholes Option Pricing Model. For the stock options granted on April
11, 1994, with a 10-year option period, an exercise price of $33.28, and
with additional dividend equivalent shares granted for the first four years
of the option, the Binomial Value is $8.61 per share. The following
assumptions were used in the model: Stock Price: $33.28; Exercise Price:
$33.28; Term: 10 years; Volatility: 0.127; Interest Rate: 7.30%; and
Dividend Yield: 6.72%. The following were the valuation results: Binomial
Option Value: $4.07; Dividend Credit Value: $3.98; and Total Value: $8.61.
13
<PAGE> 18
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
No stock options were exercised by the named executive officers in 1994.
The following table shows the number of unexercised options and the value of in
the money unexercised options, including dividend equivalents at the end of
1994. Under the Stock Option and Incentive Plan, dividend equivalents have been
granted to each executive officer as part of the stock option grant, except for
the one-time, premium-priced grants to Messrs. Clarke and Williamson in May
1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to which
the option is exercised during the period between the grant and the exercise of
the option. Dividend equivalents are computed, as of each dividend record date
throughout the four-year vesting period (vesting in equal installments), which
begins on the date of grant, both with respect to the number of shares
underlying the option and with respect to the number of dividend equivalent
shares previously credited to the executive officer and not issued during the
period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (INCLUDING IN THE MONEY OPTIONS
DIVIDEND EQUIVALENTS) INCLUDING DIVIDEND EQUIVALENTS)
DIVIDEND VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)(2)
SHARES EQUIVALENTS VALUE REALIZED -------------------- ------------------------------
ACQUIRED ACQUIRED REALIZED ON DIVIDEND EXERCISABLE EXERCISABLE/
ON EXERCISE ON EXERCISE ON OPTIONS EQUIVALENTS UNEXERCISABLE UNEXERCISABLE
(#) (#) ($) ($) (#) ($)
------------ ------------ ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Clarke .... -- -- -- -- 100,336/47,512 $56,356/0
Harwood D. Williamson -- -- -- -- 67,510/29,914 56,356/0
Wayne K. Minami...... -- -- -- -- 12,381/17,244 0/0
Robert F. Mougeot.... -- -- -- -- 22,014/14,078 56,356/0
Peter C. Lewis....... -- -- -- -- 10,770/14,078 0/0
</TABLE>
- ---------------
(1) No options were in the money (where the option price is less than the
closing price on December 31, 1994) except the 1989 stock option grant with
dividend equivalents with an exercise price of $30.24 per share.
(2) Value based on closing price of $32.375 per share on the New York Stock
Exchange on December 31, 1994.
14
<PAGE> 19
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS
The table below sets forth a listing of LTIP awards made to the named
executive officers during 1994. The table shows potential payments that are tied
to the achievement of better than average performance over a three-year period
(1994-1996) relating to three separate goals for all the named executive
officers except Mr. Minami, who has a fourth goal in addition to the three goals
listed immediately below.
The three goals are (1) earnings per share (weighted 30%), (2) return on
average common equity (weighted 30%), and (3) total return to shareholders
(weighted 40%). The weighting of each goal applies to all the named executive
officers except Mr. Minami. The Company's performance is measured against the
Edison Electric Institute Index of 100 Investor-Owned Electric Companies as of
December 31, 1996 ("Peer Group"). This is the same peer group of companies used
for the Stockholder Performance Graph shown on page 23. However, the performance
of the LTIP Peer Group is calculated on a noncapitalized weighted basis whereas
the Stockholder Performance Graph is calculated on a capitalized weighted basis.
The LTIP uses a noncapitalized weighted basis so as not to give a
disproportionate emphasis to the larger companies in the Edison Electric
Institute Index. For Mr. Minami, the three goals set forth above are weighted
(1) earnings per share (15%), (2) return on average common equity (15%), and (3)
total return to shareholders (20%). Mr. Minami's fourth goal (weighted 50%) is
based on an unlevered return on average common equity for American Savings Bank
for the same three-year LTIP cycle.
Threshold minimum awards with respect to each goal will be earned if the
Company's performance equals 100% of the average performance of the Peer Group
with respect to that goal. Mr. Minami's threshold minimum for his fourth goal,
which must be achieved in at least two out of three years during the LTIP cycle,
is an unlevered return on average common equity of 12%. Maximum awards will be
earned on the earnings per share goal if the Company's performance is 130% of
the earnings per share average of the Peer Group. Maximum awards will be earned
on the return on average common equity and total return to shareholders goals if
the Company's performance is 110% of the average of the return on average common
equity and total return to shareholders of the Peer Group. For Mr. Minami, the
maximum award on his fourth goal will be earned if the unlevered return on
average common equity equals or exceeds 16%. Earned awards are distributed in
the form of 60% cash and 40% Company Common Stock with the maximum award level
for each executive officer ranging from 75% to 100% of the midpoint of the
officer's salary grade range at the end of the performance cycle.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
---------------------------
PERFORMANCE CYCLE THRESHOLD(1) MAXIMUM
ENDING DATE ($) ($)
----------------- ------------ --------
<S> <C> <C> <C>
Robert F. Clarke..................... 12/31/96 $154,110 $467,000
Harwood D. Williamson................ 12/31/96 88,250 264,750
Wayne K. Minami...................... 12/31/96 60,750 182,250
Robert F. Mougeot.................... 12/31/96 55,750 167,250
Peter C. Lewis....................... 12/31/96 46,250 138,750
</TABLE>
- ---------------
(1) Assumes meeting minimum threshold on all 3 goals; however, if only one goal
(weighted 30%) is met, the minimum threshold estimated future payout would
be: Mr. Clarke -- $46,233; Mr. Williamson -- $26,475; Mr. Minami -- $18,225;
Mr. Mougeot -- $16,725; and Mr. Lewis -- $13,875. There is no LTIP payout
unless the minimum threshold is met on at least one of the three goals.
15
<PAGE> 20
PENSION PLANS
The following table shows the estimated annual pension benefits payable
upon retirement to all regular employees (including the named executive officers
except Mr. Minami) of the Company and its electric utility subsidiaries not
represented by collective bargaining agreements. The table is based on
retirement at normal retirement age under the Company's noncontributory,
qualified defined benefit pension plan ("Retirement Plan"), based on
remuneration that is covered under the plan and years of service with the
Company and all of its subsidiaries. Also included are benefits payable under
the Company's noncontributory, nonqualified excess benefit plan ("Excess Plan")
and excess pay supplemental executive retirement plan ("Excess Pay SERP") which
provide benefits that would otherwise be denied employees by reason of certain
Internal Revenue Code limitations on qualified plan benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000........................ $ 30,600 $ 40,800 $ 51,000 $ 61,200 $ 67,000
150,000........................ 45,900 61,200 76,500 91,800 100,500
200,000........................ 61,200 81,600 102,000 122,400 134,000
250,000........................ 76,500 102,000 127,500 153,000 167,500
300,000........................ 91,800 122,400 153,000 183,600 201,000
350,000........................ 107,100 142,800 178,500 214,200 234,500
400,000........................ 122,400 163,200 204,000 244,800 268,000
450,000........................ 137,700 183,600 229,500 275,400 301,500
</TABLE>
The Retirement Plan provides a monthly retirement pension for life.
Benefits are determined by multiplying the product of years of credited service
and 2.04% (product not to exceed 67%) times the participant's average base
salary for any consecutive 36 months that would produce the highest monthly
average (highest monthly average converted to annualized remuneration in the
Pension Plan Table above).
As of December 31, 1994, the named executive officers had the following
number of years of credited service under the Company's Retirement Plan: Mr.
Clarke, 7 years; Mr. Williamson, 38 years; Mr. Mougeot, 6 years; and Mr. Lewis,
26 years. One of the named executive officers, Mr. Minami, is covered by a
separate qualified pension plan from American Savings Bank ("ASB Retirement
Plan"). Benefits under the ASB Retirement Plan are determined by multiplying the
product of years of credited service (not to exceed 35 years) and 1.5% times the
participant's average pay for the highest 5 out of the last 10 years, times
years of service. Mr. Minami has 8 years of credited service under this Plan and
the estimated annual benefit under this Plan payable to Mr. Minami in the form
of a straight life annuity projected to age 65 is $46,500, based on his current
compensation level.
Internal Revenue Code Sections 401(a) and 415 limit a participant's
compensation that can be recognized under qualified retirement plans (the
Retirement Plan and the ASB Retirement Plan) and the amount of benefits a
participant can receive from those plans. The limit on the maximum compensation
for 1994 under Section 401(a) is $242,280 for the Company's Retirement Plan and
$150,000 for the ASB Retirement Plan. In 1994, the Company adopted a
nonqualified Excess Pay SERP designed to provide benefits that cannot be paid
from the qualified retirement plans due to the maximum compensation limit under
Section 401(a).
The limit on the maximum benefit that a participant can receive from the
qualified retirement plans under Section 415 for 1994 is $118,800 at retirement
age 65. The Company has adopted a nonqualified Excess Plan designed to provide
benefits that cannot be paid from the qualified plans due to the maximum limit.
16
<PAGE> 21
The table above shows the estimated combined annual retirement benefits
payable to regular employees, including Messrs. Mougeot and Lewis under the
Retirement Plan, Excess Plan, and Excess Pay SERP in the form of a straight life
annuity at age 65 at various levels of average base salary and years of service.
Benefits are in addition to amounts payable by Social Security.
The Company maintains two Supplemental Executive Retirement Plans ("HEI
SERP" and the American Savings Bank "ASB SERP") for certain executive officers.
Messrs. Clarke and Williamson participate in the HEI SERP and Mr. Minami
participates in the ASB SERP and, therefore, are not eligible to participate in
the Excess Plan or Excess Pay SERP. Benefits under the HEI SERP and ASB SERP are
in addition to qualified retirement benefits payable from the Company's
Retirement Plan and the ASB Retirement Plan.
Under the HEI SERP, at age 60, the executive is eligible to receive a
benefit of up to 60% (depending on years of credited service) of the
participant's average compensation, including amounts received under the annual
Executive Incentive Compensation Plan ("EICP") in the highest three out of the
last five years of service, reduced by the participant's primary Social Security
benefit and the benefit payable from the Company's Retirement Plan, but in no
event less than the benefit that would have been payable under the Excess Plan
or the Excess Pay SERP (after taking into consideration the reduction of the
benefit payable from the Company's qualified Retirement Plan). The HEI SERP
provides for reduced early retirement benefits at age 50 with 15 years of
service or age 55 with 5 years of service, and survivor benefits in the form of
an annuity in the event of the participant's death after becoming eligible for
early retirement. Mr. Clarke and Mr. Williamson are currently approved for
coverage under the HEI SERP. The overall total retirement benefits, payable to
Mr. Clarke in the form of a straight life annuity projected to age 65 is
$237,976, based on his current compensation level ($61,690 from the qualified
Retirement Plan and $176,286 from the HEI SERP). The overall total retirement
benefits, payable to Mr. Williamson in the form of a straight life annuity
projected to age 65 is $247,057, based on his current compensation level
($118,800 from the qualified Retirement Plan and $128,257 from the HEI SERP).
The ASB SERP provides a benefit at age 65 of up to 60% (depending upon
years of credited service) of the participant's average compensation (including
50% of the amounts received under the EICP) in the highest five consecutive
years out of the last ten years of service, reduced by the participant's primary
Social Security benefit and the benefit payable from the ASB Retirement Plan.
The ASB SERP also provides for termination and survivor benefits in certain
circumstances. Mr. Minami is currently approved for coverage under the ASB SERP.
The overall total retirement benefits payable to Mr. Minami in the form of a
straight life annuity projected to age 65 is $121,750, based on his current
compensation level ($46,500 from the qualified ASB Retirement Plan and $75,250
from the ASB SERP).
CHANGE-IN-CONTROL AGREEMENTS
Since 1989, the Company has entered into Change-in-Control Agreements with
certain executives, including the executives named in the Summary Compensation
Table, to encourage and ensure their continued attention and dedication to the
performance of their assigned duties without distraction in the event of
potentially disturbing circumstances arising from the possibility of a
change-in-control of the Company.
Each Agreement provides that benefits, compensation and position
responsibility of these officers will remain at existing levels for a period of
two years following a "Change-in-Control," unless the "Expiration Date" of the
Agreement has occurred. A "Change-in-Control" is defined to include a
change-in-control required to be reported under the proxy rules in effect on the
date of the agreements, the acquisition by a person (as defined under the
Securities Exchange Act of 1934) of 25% or more of the voting securities of the
Company, or specified changes in the composition of the Board of Directors of
the Company following a merger, tender offer or certain other corporate
transactions. "Expiration Date" is defined as the earliest to occur of (a) two
years after a change-
17
<PAGE> 22
in-control, (b) termination of the executive's employment by the Company for
"Cause" (as defined in the Agreement) or by the executive other than for "Good
Reason" (as defined in the Agreement), (c) retirement, or (d) termination of the
Agreement by the Company's Board of Directors, or termination of the executive's
employment, prior to a change-in-control. If the employment of one of these
executives is terminated after a change-in-control and prior to the Expiration
Date by the Company other than for cause or disability, or by the executive for
good reason, the Company is obligated to provide a lump sum severance equal to
2.99 times the executive's average W-2 earnings for the last five years (or such
lesser period that the executive has been employed by the Company), subject to
certain limitations. Based on W-2 earnings for the five most recent years
(1990-1994), the lump sum severance would be as follows: Mr. Clarke --
$1,516,826; Mr. Williamson -- $1,133,837; Mr. Minami -- $843,952; Mr.
Mougeot -- $691,223 and Mr. Lewis -- $772,192. In the event of a
change-in-control, all outstanding stock options would become immediately
exercisable.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
Decisions on executive compensation are made by the Compensation Committee
of the Board which is composed of five independent nonemployee directors. All
decisions by the Compensation Committee are reviewed by the full Board except
for decisions about the Company's stock-based plans, which must be made solely
by the committee in order to satisfy Securities Exchange Act Rule 16b-3.
The committee has retained the services of an independent compensation
consulting firm to assist in executive compensation matters.
Executive Compensation Philosophy
The Compensation Committee's philosophy with respect to the Company's
executive officers, including the chief executive officer, is designed to (1)
maintain a compensation program that is equitable in a competitive marketplace,
(2) provide compensation opportunities that integrate pay with the Company's
annual and long-term performance goals which reinforce growth in stockholder
value, (3) recognize and reward individual initiative and achievements, and (4)
allow the Company to attract, retain, and motivate qualified executives who are
critical to the Company's success.
The committee endorses the position that stock ownership by management is
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value. Thus, the committee has increasingly utilized
stock options and stock payouts in the compensation program for the executive
officers with a goal of increasing stock ownership over time.
Executive Compensation Program
The Company's executive compensation program consists of three main
components: (1) base salary, (2) potential for an annual bonus based on overall
Company financial and operational performance as well as individual performance,
and (3) the opportunity to earn long-term cash and stock-based incentives which
are intended to encourage the achievement of superior results over time and to
align executive officer and stockholder interests. The second and third elements
constitute the "at-risk" portion of the compensation program and are designed to
link the interests of the executive with those of the stockholders. This means
that total compensation for each executive is variable and may fluctuate
significantly from year to year depending on the short-and long-term performance
of the Company as well as the subsidiary companies.
18
<PAGE> 23
Base Salary
Salaries for executive officers are reviewed by the committee in April of
each year in consultation with the committee's independent compensation
consultant. The consultant, at the direction of the committee, examines the
position responsibilities of each incumbent officer at HEI and each of its
subsidiaries against similar positions in similar organizations. All
compensation references represent the fiftieth percentile or midpoint of pay
practices found in companies which are similar in size and marketplace
orientation. The specific surveys used are at the consultant's recommendation
based on the consultant's knowledge of appropriate references given the
organization's overall compensation philosophy. For executive officers at the
holding company level, the competitive references are drawn from compensation
surveys of other electric utilities (weighted 75%) and general industry
(weighted 25%); for utility executive officers, the competitive references are
drawn exclusively from compensation surveys of other electric utilities; for
financial institution executive officers, the references are drawn exclusively
from compensation surveys of other financial institutions; for interisland
freight transportation executive officers, compensation references are drawn
from other transportation companies (weighted 50%) and general industry
(weighted 50%); and for real estate related executive officers, the compensation
surveys encompass companies within the real estate industry. Based on the
information from these surveys, the consultant recommends a salary range for
each executive officer position. The midpoint of the range approximates the
fiftieth percentile of the survey data and the range has a spread of plus and
minus 20% around this midpoint. Based on the consultant's recommendation, the
committee has determined that it is not economically feasible to survey all 100
investor-owned electric utilities used in the Stockholder Performance Graph.
Instead the consultant provides the committee with references from two surveys
of electric utilities which include many, but not all, of the 100 investor-owned
electric utility companies. These surveys include one conducted by the Edison
Electric Institute in which the Company participates and one conducted by
Executive Compensation Surveys in which the Company does not participate. Actual
setting of an executive officer's base salary (except for Robert F. Clarke,
President and Chief Executive Officer of HEI) within the recommended range is
based on Mr. Clarke's recommendation and the committee's approval.
Mr. Clarke's base salary is determined through the committee's overall
evaluation of his performance during the preceding year. This evaluation is
subjective in nature and takes into account all aspects of his responsibilities
at the total discretion of the committee. Based on the survey data provided by
the consultant, the resulting salary range recommendation, and the committee's
overall evaluation of Mr. Clarke's performance during 1993, Mr. Clarke's base
salary was raised from $390,000 annually to an annual rate of $415,000 effective
May 1, 1994. The $25,000 increase aligned Mr. Clarke's base salary more closely
to the midpoint of his salary range. Mr. Clarke's new base salary was
approximately 4% below the consultant's findings with respect to the fiftieth
percentile of competitive references.
Annual Executive Incentive Compensation Plan
Under the annual Executive Incentive Compensation Plan ("EICP"), annual
incentive awards are granted upon the achievement of financial and nonfinancial
performance measures as established by the committee in the early part of each
calendar year. The financial measures are stated in terms of minimum, target and
maximum goals. One of the financial measures is directly linked to financial
operating budgets submitted to the Company's Board of Directors for approval in
December of the previous year. These financial measures are earnings related for
all named executive officers and include criteria such as earnings per share for
the named executive Company officers and net income for the named executive
officers who are subsidiary presidents (Mr. Williamson and Mr. Minami). Other
financial measures for the named executive Company officers relate to (1) a
comparison of the Company's total return to shareholders in 1994 measured
against the Edison Electric Institute Peer Group of electric utility companies
included in the Stockholder Performance Graph for the same period and (2)
measurement of individual officers'
19
<PAGE> 24
actual administrative and general expenses for 1994 against budgeted expenses
established at the beginning of the year. Nonfinancial measures for the named
executive Company officers are based on individual objectives established for
each officer, except for Mr. Clarke, and are related primarily to each officer's
individual area of responsibility and are approved by the committee. Mr. Clarke
makes a recommendation to the committee each year as to whether the named
executive Company officers have achieved their nonfinancial individual goals.
For the two named executive officers who are subsidiary presidents, company
specific operational and strategic goals make up the remainder of their EICP
goals.
The EICP has a minimum financial performance threshold linked to earnings
per share or net income (based on whether measurement is at the Company or
subsidiary company level) which must be achieved before a bonus can be
considered. The maximum awards under the EICP differ for each of the named
executive officers, ranging from a low of 37% to a high of 60% of the midpoint
of the salary grade range at the end of the performance period for Mr. Clarke.
The minimum, target and maximum EICP potential award levels for each of the
named executive officers are established by the committee each year based on
recommendations from the committee's independent compensation consultant. The
consultant bases its recommendations on an assessment of competitive practices
from a cross section of all industries, including some of the electric utility
companies included in the Stockholder Performance Graph.
Under the 1994 EICP, Mr. Clarke received a payout of $199,149 in early
1995. This resulted from achievement of (1) the earnings per share goal
(weighted 70%) at a level just above target, (2) total return to shareholders
(weighted 20%) where the performance was above the maximum level and (3) lower
than forecast 1994 administrative and general expenses for the Company (weighted
10%) above the target level. The EICP award for Mr. Clarke was exclusively based
on the foregoing measures. No further adjustment was made by the committee.
Long-Term Incentive Plan
The Company provides a long-term incentive plan ("LTIP") that is linked to
the long-term financial performance of the Company. All awards under the LTIP
are paid 60% in cash and 40% in HEI Common Stock. The LTIP opportunity is
measured against the achievement of financial criteria established by the
committee for a three-year period. A new performance period of three years
starts each year. In April 1994, the committee established the financial
measures for the 1994-1996 cycle which included (1) change in earnings per share
(weighted 30%), (2) return on average common equity (weighted 30%), and (3)
total return to stockholders (weighted 40%), comparing the Company's results
against the Edison Electric Institute Peer Group of electric utility companies
included in the Stockholder Performance Graph. The weighting of each goal
applies to all the named executive officers except Mr. Minami who has a fourth
LTIP goal (weighted 50%) which is discussed in the Long-Term Incentive Plan
("LTIP") Awards section on page 15. The four LTIP financial performance goals
above were selected by the committee because they represented a meaningful
method of reinforcing growth in stockholder value over time. The achievement of
each of the four goals is expressed in terms of minimum and maximum levels. The
minimum and maximum LTIP potential award levels for each of the named executive
officers are established by the committee each year based on recommendations
from the committee's independent compensation consultant. The consultant bases
its recommendations on an assessment of competitive practices from a cross
section of all industries, including some of the electric utility companies
included in the Stockholder Performance Graph. These goals are covered in more
detail in the discussion of the Long-Term Incentive Plan ("LTIP") Awards section
on page 15.
For the three-year cycle ending December 31, 1993, Mr. Clarke received an
LTIP payout of $127,500 in April 1994. This resulted from achievement of the
earnings per share goal (weighted 30%) where the performance was above the
maximum level when measured against the earnings per share performance of the
peer group for the same three-year period.
20
<PAGE> 25
The peer group for the 1991-1993 LTIP is not the same as the Edison
Electric Institute Index of 100 Investor-Owned Electric Companies which is used
in the Stockholder Performance Graph. The 1991-1993 LTIP peer group was
established in the spring of 1991 before the establishment of the Edison
Electric Institute peer group index and is comprised of thirteen diversified
electric utility companies which had the common characteristic with HEI of being
partially diversified and not being limited strictly to electric utility
operations at the time the peer group was established. These thirteen companies
were: Baltimore Gas & Electric Co., CILCORP Inc., Dominion Resources, Inc., Duke
Power Company, Florida Progress Corp., Houston Industries, Inc., IES Industries,
Inc., Midwest Resources, Inc., PacifiCorp, Portland General Corporation,
SCEcorp, TECO Energy, Inc., and The Washington Water Power Company.
At the April 1993 Compensation Committee meeting, the committee decided,
for the first time, to broaden the peer group for the 1993-1995 LTIP cycle to
include the 100 companies listed in the Edison Electric Institute Index of 100
Investor-Owned Electric Companies.
Stock Options
The committee can grant nonqualified stock options, incentive stock
options, restricted stock, stock appreciation rights, and dividend equivalents
pursuant to the 1987 Stock Option and Incentive Plan of Hawaiian Electric
Industries, Inc. (as amended and restated effective April 21, 1992), which was
previously approved by the stockholders. To date, only nonqualified stock
options and dividend equivalents have been issued under the Plan. Biennially,
the committee requests its independent compensation consultant to assess
competitive practices with respect to stock option grants from a cross section
of all industries, including some of the electric utility companies included in
the Stockholder Performance Graph. Based on this assessment, the consultant
recommends a range of stock option grants for each named executive officer. This
range takes into account the fact that a portion of the officer's long-term
incentive opportunity is delivered through participation in the LTIP. In
granting stock options, the committee takes into consideration the amount and
value of current options outstanding. The grants are intended to retain the
officers and to motivate them to improve long-term stock performance. Grants are
at average fair market value which is based on the average of the daily high and
low sales prices of the Company's Common Stock on the New York Stock Exchange
during the calendar month preceding the date of grant. Stock options generally
vest in equal installments over a four-year period.
The 1994 stock option grant to Mr. Clarke of 20,000 shares of HEI Common
Stock plus dividend equivalents was based on the consultant's recommendation and
the independent evaluation of an appropriate award level by the committee. In
this evaluation, the committee took into account prior grants to Mr. Clarke and
an overall subjective evaluation of his job performance. To receive the dividend
equivalents which accrue only during the first four years following the stock
option grant, Mr. Clarke must exercise the stock options.
Other Compensation Plans
At the April meeting of the committee last year, Mr. Clarke was added as a
participant in the Company's Supplemental Executive Retirement Plan ("HEI
SERP"). It was the judgement of the committee that Mr. Clarke, as chief
executive officer of the Company, should be added to the HEI SERP. The
committee's independent compensation consultant concurred with this decision.
This Plan is described on page 17 of the Proxy Statement.
The Company has adopted certain broad-based employee benefit plans and has
adopted certain executive retirement and life insurance plans in which its named
executive officers participate. Other than the HEI Retirement Savings Plan
(which qualifies under Section 401(k) of the Internal Revenue Code), which
offers the Company's Common Stock as one of the investment options to further
align employees' and stockholders' long-term financial interests, benefits under
these other plans are not tied to Company performance.
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<PAGE> 26
For the named executive officers and certain other employees, the Company
provides additional retirement benefits which are discussed on pages 16 and 17.
In the event of death during employment, the Company also provides all the named
executive officers, except Mr. Minami, and certain other employees with $50,000
term life insurance plus an amount equal to two times the employee's salary at
the date of death, paid by the Company on an after-tax basis to the employee's
beneficiary. If the employee dies after retirement, this benefit is reduced to
$20,000 term life insurance plus an amount equal to one times the employee's
salary at retirement, also on an after-tax basis. For Mr. Minami, American
Savings Bank provides term life insurance equal to one and one-half times his
salary at the date of death, in the event of death during employment. After
retirement, the benefit is reduced to $5,000.
Finally, the committee has reviewed the provisions of Section 162(m) of the
Internal Revenue Code (IRC), which was enacted in 1993, relating to the $1
million deduction cap for executive salaries and believes that no compensation
for the five highest paid named executives will be governed by this regulation
during 1995. Compensation alternatives to comply with IRC 162(m) will be
considered by the committee at the appropriate time.
SUBMITTED BY THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
EDWIN L. CARTER, CHAIRMAN
RICHARD HENDERSON
BILL D. MILLS
OSWALD K. STENDER
JEFFREY N. WATANABE
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<PAGE> 27
STOCKHOLDER PERFORMANCE GRAPH
Set forth below is a Comparison of Five-Year Cumulative Total Return graph
comparing the cumulative total stockholder return on the Company's Common Stock
against the cumulative total return of companies listed on the Standard & Poor's
500 Stock Index and the Edison Electric Institute ("EEI") Index of 100
Investor-Owned Electric Companies. The 100 companies comprising the EEI Index
serve 99% of the customers of the investor-owned electric utility industry. The
graph is based on the market price of the common stock for all the companies at
December 31 each year and assumes that $100 was invested on December 31, 1989,
in the Company's Common Stock and the common stock of all the companies and that
dividends were reinvested for all companies.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG HAWAIIAN ELECTRIC INDUSTRIES, INC.,
S&P 500 INDEX, AND EDISON ELECTRIC INSTITUTE INDEX
1989-1994
FISCAL YEAR BASIS: 12
<TABLE>
<CAPTION>
RETURN RETURN RETURN RETURN RETURN
COMPANY/INDEX NAME 1990 1991 1992 1993 1994
---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
HAWAIIAN ELECTRIC INDS............ -15.91 23.90 7.38 2.42 -3.05
S&P 500........................... -3.11 30.47 7.62 10.08 1.32
EEI 100 INDEX..................... -1.25 29.68 10.06 11.72 -12.87
</TABLE>
<TABLE>
<CAPTION>
INDEXED/CUMULATIVE RETURNS
BASE
PERIOD RETURN RETURN RETURN RETURN RETURN
COMPANY/INDEX NAME 1989 1990 1991 1992 1993 1994
---------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HAWAIIAN ELECTRIC INDS............ 100 84.09 104.18 111.87 114.58 111.09
S&P 500........................... 100 96.89 126.42 136.05 149.76 151.74
EEI 100 INDEX..................... 100 98.75 128.06 140.94 157.46 137.19
</TABLE>
<PAGE> 28
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee serving at the end of 1994 were
Edwin L. Carter, Chairman, and Richard Henderson, Bill D. Mills, Oswald K.
Stender, and Jeffrey N. Watanabe, members. Two members of the Compensation
Committee, Richard Henderson and Jeffrey N. Watanabe, are involved in various
relationships with the Company.
American Savings Bank, F.S.B. ("ASB"), a subsidiary of the Company,
previously offered preferential rate loans to its directors, including
individuals who are also directors or executive officers of the Company.
However, in August 1989, the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") provided that savings institutions would
henceforth be subject to provisions of the Federal Reserve Act which prohibit
loans to directors and executive officers of the insured institution or its
commonly owned affiliates on terms more favorable than available to the general
public.
The following schedule shows detailed information on a preferential rate
loan made by ASB to Mr. Watanabe, whose aggregate indebtedness to ASB exceeded
$60,000 during 1994. This loan, which was made prior to the enactment of FIRREA,
will not be affected by the new prohibitions against preferential loans unless
it is renegotiated or otherwise significantly modified. The first mortgage loan
rate was based on ASB's policy for employees and directors using a formula of
.50% above the cost of funds or .50% above the Applicable Federal Rate
established by the Internal Revenue Service, whichever is greater.
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1994 12/31/94 TRANSACTION CHARGED
----------- ----------- -------------- -------
<S> <C> <C> <C> <C>
Jeffrey N. Watanabe.................. $ 323,179 $ 317,849 First Mortgage 7.50%
</TABLE>
In addition, Mr. Watanabe is a partner in the law firm of Watanabe, Ing &
Kawashima that provided legal services to the Company and three of its
subsidiaries in 1994.
Malama Pacific Corp. ("MPC"), a subsidiary of the Company, is engaged in
real estate development activities. Two of MPC's subsidiaries are currently
involved in partnerships in which Mr. Henderson has a significant interest. Both
of the transactions described below were negotiated on an arm's length basis and
were approved by the disinterested members of the HEI Board.
Sunrise Estates. Malama Development Corp. ("Malama Development"), a wholly
owned subsidiary of Malama Pacific Corp., and HSC, Inc. ("HSC"), are partners in
a general partnership known as Sunrise Estates which is completing the
development and sale of the final 9-lot increment of a project consisting of 165
one-acre residential agricultural lots in Hilo, Hawaii. HSC is the managing
partner of the partnership. No management fees were paid in 1994, and there were
no sales made in 1994. Malama Development and HSC have each contributed $200,000
to the partnership and have each received distributions of $1,136,639. Malama
Development and HSC share equally in the profits and losses of the partnership.
As of December 31, 1994, 95% of the lots were sold. Mr. Henderson and members of
his family own, directly or indirectly, approximately 76% of the stock of HSC.
Sunrise Estates II. Malama Elua Corp. ("Malama Elua"), a wholly owned
subsidiary of Malama Pacific Corp., and HSC are partners in a general
partnership known as Sunrise Estates II which will develop and market
approximately 140 one-acre residential agricultural lots in Hilo, Hawaii,
adjacent to the Sunrise Estates development. The property was purchased by HSC
in June 1990 for $2.1 million. In 1991, the partnership purchased the
development property from HSC at an agreed upon fair market value of $2.7
million, subject to a bank loan of $2.1 million. The valuation of the property
interest transferred by HSC to the Sunrise Estates II partnership was negotiated
and took into account HSC's incurred acquisition, carrying, and development
costs as well as existing market conditions. HSC is the managing partner of the
partnership. As of December 31, 1994, Malama Elua
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<PAGE> 29
and HSC have each contributed $300,000 to the partnership, and have advanced
$364,000 and $812,000, respectively, to the partnership. The partners will share
equally in the profits and losses of the partnership.
INDEBTEDNESS OF MANAGEMENT
As disclosed in the above section on Compensation Committee Interlocks and
Insider Participation on page 24, ASB previously offered preferential rate loans
to its directors, including individuals who are also directors or executive
officers of the Company prior to the enactment of FIRREA.
In addition to Mr. Watanabe, two other directors (one of whom is also an
executive officer) of the Company, whose aggregate indebtedness to ASB exceeded
$60,000 at any time during 1994, received these preferential rate loans.
Detailed information on these loans is listed below (and on page 24 for Mr.
Watanabe).
<TABLE>
<CAPTION>
LARGEST LOAN
LOAN AMOUNT AVERAGE
AMOUNT OUTSTANDING INTEREST
OUTSTANDING ON TYPE OF RATE
DURING 1994 12/31/94 TRANSACTION(1) CHARGED(2)
------------ ------------ --------------- -----------
<S> <C> <C> <C> <C>
Robert F. Clarke................ $375,570 $ -0-* First Mortgage 7.50%
Ruth M. Ono..................... $187,409 $184,588 First Mortgage 7.50%
</TABLE>
- ---------------
* Mr. Clarke's loan was paid off in March 1994.
(1) All loans were made prior to the enactment of FIRREA restrictions.
(2) The first mortgage rate is based on ASB's policy for employees and directors
using a formula of .50% above the cost of funds or .50% above the Applicable
Federal Rate established by the Internal Revenue Service, whichever is
greater.
ASB has made other loans, established lines of credit and issued credit
cards to directors and executive officers of the Company, and to members of
their immediate families. These loans and extensions of credit have been made in
the ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
In addition, ASB has purchased a 25% participation interest in two loans
made by Bank of Hawaii to Finance Realty Company, Ltd. ("Finance Realty") and
Finance Holdings, Ltd. The family of the spouse of Constance H. Lau, the
Treasurer of the Company, owns approximately one-sixth of the common stock of
Finance Enterprises, the parent company of Finance Realty and Finance Holdings,
Ltd. ASB's 25% participation interest in both loans was made in the ordinary
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
In addition to the above loans financed by ASB, Robert F. Mougeot,
Financial Vice President of the Company, is indebted to the Company in the
amount of $165,000 by reason of a loan made to him by the Company in 1989 to
finance his purchase of the fee simple interest in his home. The loan is an
interest only loan, at an interest rate of 8.01%, with the entire principal
balance of the loan due on March 1, 2004.
25
<PAGE> 30
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
Malama Development and Malama Elua, wholly owned subsidiaries of MPC, are
each in partnership with HSC, a corporation in which a director of the Company
and his family own 76% of the stock. The partnerships and their real estate
development activities are discussed on pages 24 and 25 in the section on
Compensation Committee Interlocks and Insider Participation.
In addition, Malama Mohala Corp. ("Malama Mohala"), a wholly owned
subsidiary of MPC, is involved in a partnership with Finance Enterprises in
which the family of Ms. Lau, the Treasurer of the Company, owns approximately
one-sixth of the common stock. Finance Enterprises is the parent company of
Finance Realty, Ltd., Palailai Holdings, Inc. ("PHI"), Finance Home Builders,
Ltd., and Finance Factors Limited.
Palailai Associates. Malama Mohala and PHI are equal partners in a general
partnership known as Palailai Associates ("Palailai") which is currently
developing homes in Makakilo, Hawaii. PHI's parent company, Finance Realty,
Ltd., received $652,486 in management fees, $659,063 for development cost
reimbursement, and $475,749 in sales commissions from the partnership during
1994. Finance Home Builders, Ltd., a general contractor and affiliate of PHI and
Finance Realty, received payments of $6,501,224 during 1994 under its contract
with Palailai for the construction of homes. The partnership also earned $20,588
of interest income from Finance Factors Limited.
Finally, one director is a partner in a law firm that performed legal
services for the Company and certain of its subsidiaries during 1994, as
described on page 24.
MANAGEMENT PROPOSAL 3. ELECTION OF AUDITOR
The firm of KPMG Peat Marwick LLP, independent certified public
accountants, has been the auditor of the Company since 1981. The Board of
Directors recommends the election of KPMG Peat Marwick LLP as the auditor of the
Company for the fiscal year 1995 and thereafter until its successor is duly
elected.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire to
do so and to respond to appropriate questions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting must be received by the Company by November 13, 1995, for inclusion in
the Proxy Statement and form of proxy for the 1996 Annual Meeting of
Stockholders. Proposals should be sent to the attention of the Secretary of the
Company.
26
<PAGE> 31
OTHER BUSINESS
The Company knows of no other business to be presented at the Annual
Meeting, but if further matters do properly come before the meeting, the holders
of your proxy will vote your stock in accordance with their best judgment.
Under the By-Laws of the Company, if a stockholder of record wishes to
present a matter of business which may be properly brought before the Annual
Meeting, the stockholder must give notice in writing to the Secretary of the
Company no later than March 27, 1995. The notice must state a brief description
of such business, the name and address of the stockholder, the number of shares
of Common Stock owned by the stockholder, and any material interest of the
stockholder in such business.
YOU ARE URGED TO DATE, SIGN AND RETURN YOUR PROXY AS SOON AS POSSIBLE to
make certain that your shares will be voted at the meeting. If you attend the
meeting, as we hope you will, you may vote your shares in person.
By Order of the Board of Directors
Betty Ann M. Splinter, Secretary
March 10, 1995
27
<PAGE> 32
[MAP]
28
<PAGE> 33
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 Richards Street, Honolulu, Hawaii 96813
[LOGO]
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 25, 1995, AT 9:30 A.M., IN THE
PACIFIC TOWER, 8TH FLOOR, ROOM 805, 1001 BISHOP STREET, HONOLULU, HAWAII 96813.
The undersigned hereby constitutes and appoints Robert F. Clarke, Richard
Henderson and Ben F. Kaito and each of them the proxy of the undersigned, with
full power of substitution, to vote all the Common Stock of the Company which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders to
be held on April 25, 1995, or at any adjournment thereof.
Said proxies are instructed to vote as indicated below. IF NO DIRECTION IS
INDICATED, SAID PROXIES WILL VOTE FOR ALL NOMINEES IN CLASS I AND CLASS II AND
FOR PROPOSAL 3. Said proxies are also authorized to vote in their discretion
with respect to any other matters which may come before the meeting.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of James K. Scott as Class I director (term ending at the 1997
Annual Meeting)
(CHECK ONE BOX ONLY)
/ / FOR / / WITHHOLD AUTHORITY
2. Election of Class II Directors (term ending at the 1998 Annual Meeting)
Victor Hao Li, Diane J. Plotts, Kelvin H. Taketa, Jeffrey N. Watanabe and
Harwood D. Williamson
(CHECK ONE BOX ONLY)
To vote FOR all Nominees named above, check this box. / /
To WITHHOLD AUTHORITY to vote for all Nominees named above, check this
box. / /
To vote FOR all Nominees named above except the following (to withhold
authority for any particular Nominee, write the Nominee's name in the
following space):
______________________________________________________________________
3. Election of KPMG Peat Marwick as auditor (CHECK ONE BOX ONLY)
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE SIGN YOUR NAME exactly as it appears at the top of this proxy. Joint
owners should each sign personally. Attorney, Executor, Administrator, Trustee
or Guardian should indicate full title. If address is incorrect, please give us
the correct one.)
Dated________________________, 1995 ___________________________________
Signature (no witness required)
___________________________________
Signature (if held jointly)
PLEASE COMPLETE AND RETURN ENTIRE PROXY
