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shares to a participant, the shares with respect to such award will, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for awards under the 2010 Plan. If any award (other than a share appreciation right) is settled in part or in full in cash, the shares settled in cash will again be available for issuance in connection with future awards granted under the 2010 Plan. Notwithstanding the foregoing, shares surrendered or withheld as payment of either the exercise price of an award granted under the 2010 Plan (including shares otherwise underlying an award of a share appreciation right that are retained by HEI to account for the grant price of such share appreciation right) and/or withholding taxes in respect of such an award will no longer be available for grant under the 2010 Plan. All shares may be made subject to awards of incentive stock options.

        To the extent required to comply with the requirements of Section 162(m), the aggregate number of shares subject to awards (other than other cash-based awards) awarded to any one participant during any calendar year may not, subject to certain equitable adjustments as provided in the 2010 Plan, exceed 100,000 shares, and the maximum value of the aggregate payment that any participant may receive with respect to other cash-based awards in any calendar year is $2,000,000.

        The closing price per share of HEI Common Stock on the New York Stock Exchange on March 3, 2010 was $20.66.

Types of Awards

        The 2010 Plan provides for the grant of stock options (including incentive stock options), share appreciation rights, restricted shares, deferred shares, performance shares, other share-based awards and other cash-based awards.

        Options.    The grant of each option will be memorialized in an award agreement, containing such terms and conditions as the administrator will determine. The administrator will have sole and complete authority to determine the participants to whom options will be granted under the 2010 Plan, the number of shares to be issued. Becausesubject to options and the terms and conditions of options (including whether the option is an incentive stock option), provided that the exercise price of each option may not be less than 100% of the fair market value (as defined in the 2010 Plan) of the underlying HEI Common Stock on the date of grant. If a participant owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Internal Revenue Code) more than 10% of the combined voting power of all classes of stock of HEI or of any of its subsidiaries and an incentive stock option is granted to such participant, the exercise price of such an incentive stock option (to the extent required at the time of grant by the Internal Revenue Code) will be no less than 110% of the fair market value of the HEI Common Stock on the date such incentive stock option is granted. The term of any option granted under the 2010 Plan may not exceed 10 years, provided, however, that if an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Internal Revenue Code) more than 10% of the combined voting power of all classes of stock of HEI or of any of its subsidiaries and an incentive stock option is granted to such employee, the term of such incentive stock option (to the extent required by the Internal Revenue Code at the time of grant) will be no more than 5 years from the date of grant. Notwithstanding the foregoing, the administrator will have the authority to accelerate the exercisability of any outstanding option at such time and under such circumstances as the administrator, in its sole discretion, deems appropriate.

        Options may be exercised in whole or in part by giving written notice of exercise to HEI specifying the number of shares to be purchased, accompanied by payment in full of the aggregate exercise price of the shares so purchased in cash or its equivalent. As determined by the administrator, in its sole discretion, payment for any options in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the administrator (including the withholding of shares otherwise issuable upon exercise), (ii) in the form of unrestricted shares already

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resolution establishingowned by the participant subject to certain conditions, (iii) any other form of consideration approved by the administrator and permitted by applicable law or (iv) any combination of the foregoing. A participant will have no rights to dividends or any other rights of a shareholder with respect to the shares subject to an option until the participant has given written notice of exercise, paid in full for such shares and satisfied the requirements of the 2010 Plan, and the shares are delivered to the participant.

        To the extent that the aggregate fair market value (as defined in the 2010 Plan) of shares of HEI Common Stock with respect to which incentive stock options granted to a participant under the 2010 Plan and all other option plans of HEI or of any subsidiary of HEI become exercisable for the first time by the participant during any calendar year exceeds $100,000 (as determined in accordance with Section 422(d) of the Internal Revenue Code), the portion of such incentive stock options in excess of $100,000 will be treated as a nonqualified stock option.

        Share Appreciation Rights.    Share appreciation rights may be granted either alone (Free Standing Rights) or in conjunction with all or part of any option granted under the 2010 Plan (Related Rights). Subject to Section 409A of the Internal Revenue Code, in the case of nonqualified stock options, Related Rights may be granted either at or after the time of the grant of such option. In the case of an incentive stock option, Related Rights may be granted only at the time of the grant of the incentive stock option. The administrator will determine the participants to whom, and the time or times at which, grants of share appreciation rights will be made, the number of shares to be awarded, the price per share and all other conditions of share appreciation rights. Share appreciation rights will contain such additional terms and conditions, not inconsistent with the terms of the Series A Junior Participating Preferred Stock is considered part of HEI's Articles of Incorporation, however, elimination of this series of preferred stock requires shareholder approval. By approving2010 Plan, as the proposed Amended and Restated Articles of Incorporation, which makeadministrator will deem desirable, as set forth in an award agreement. Notwithstanding the foregoing, no referenceRelated Right may be granted for more shares than are subject to the Seriesoption to which it relates and any share appreciation right must be granted with an exercise price not less than the fair market value of the underlying HEI Common Stock on the date of grant.

        A Junior Participating Preferred Stock, shareholdersparticipant will have no rights to dividends or any other rights of a shareholder with respect to the shares subject to a share appreciation right until the participant has given written notice of its exercise, paid in full for such shares and satisfied the requirements of the 2010 Plan, and the shares are delivered to the participant.

        Upon the exercise of a Free Standing Right, the participant will be approvingentitled to receive up to, but not more than, that number of shares equal in value to the eliminationexcess of the Seriesfair market value as of the date of exercise over the price per share specified in the Free Standing Right multiplied by the number of shares in respect of which the Free Standing Right is being exercised.

        Share appreciation rights that are Related Rights will be exercisable only at such time or times and to the extent that the options to which they relate are exercisable. A Junior PreferredRelated Right granted in connection with an incentive stock option will be exercisable only if and when the fair market value (as defined in the 2010 Plan) of shares of the HEI Common Stock effectivesubject to the incentive stock option exceeds the exercise price of such option. A Related Right may be exercised by a participant by surrendering the applicable portion of the related option, upon filingwhich the Amendedparticipant will be entitled to receive up to, but not more than, that number of shares equal in value to the excess of the fair market value as of the date of exercise over the exercise price specified in the related option multiplied by the number of shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, will no longer be exercisable to the extent the Related Rights have been so exercised.

        The administrator may determine to settle the exercise of a share appreciation right in cash in lieu of shares (or in any combination of shares and Restated Articlescash). The term of Incorporationeach Related Right will be the term of the option to which it relates, and no share appreciation right will be exercisable more than 10 years after the date such right is granted.

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        Restricted Shares, Deferred Shares and Performance Shares.    The grant of each award of restricted shares, deferred shares and performance shares will be memorialized in an award agreement, containing such terms and conditions as the administrator will determine. The administrator will have sole and complete authority to determine the participants to whom awards of restricted shares, deferred shares and performance shares will be granted under the 2010 Plan, the number of shares to be subject to the awards and the terms and conditions of the awards, including whether the vesting of such an award will be restricted by time or subject to the attainment of one or more performance goals (as described below). The restricted shares, deferred shares and performance shares will be subject to restrictions and conditions pursuant to the 2010 Plan and as determined by the administrator at the time of grant or, subject to Section 409A of the Internal Revenue Code, at a later time. The administrator may, in its sole discretion, provide for the lapse of restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain performance related goals; provided, however, that this sentence will not apply to any award which is intended to qualify as "performance-based compensation" under Section 162(m). Except as provided in the applicable award agreement, the participant will generally have the rights of a shareholder of HEI with respect to restricted shares or performance shares during the restricted period. The participant will generally not have the rights of a shareholder with respect to shares subject to deferred shares during the restricted period; provided, however, that, subject to Section 409A of the Internal Revenue Code, an amount equal to dividends declared during the restricted period with respect to the number of shares covered by deferred shares will, unless otherwise set forth in the applicable award agreement, be paid to the participant at the same time as dividends are paid to HEI's shareholders generally, provided that the participant is then providing services to HEI or any affiliate of HEI.

        Other Share-Based or Cash-Based Awards.    The administrator is authorized to grant awards to participants in the form of other share-based awards or other cash-based awards, as deemed by the administrator to be consistent with the Hawaii Departmentpurposes of Commercethe 2010 Plan and Consumer Affairs.as evidenced by an award agreement. The administrator will determine the terms and conditions of such awards, consistent with the terms of the 2010 Plan, at the date of grant or thereafter, including any performance goals and performance periods.

Performance Goals

        Under the 2010 Plan, the administrator has the authority to determine that vesting or payment of an award will be subject to the attainment of one or more performance goals. The performance goals may include any combination of, or a specified increase or decrease of, one or more of the following over a specified period:

•

earnings before all or any interest, taxes, depreciation and/or amortization;



•

net income (before or after taxes);



•

earnings per share of HEI Common Stock;



•

market share, gross revenue, and return on assets;



•

cost reduction goals and operating expenses;



•

earnings from continuing operations, levels of expense, cost or liability;



•

performance against operational budgets;



•

a participant's individual operational project goals;



•

return on average common equity;

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•

individual performance goals;



•

total return to shareholders and shareholder value added;



•

free cash flow;



•

modified free cash flow (net income plus depreciation and amortization less net capital expenditures);



•

pre-tax, pre-provision income;



•

net interest margin;



•

efficiency ratio; and



•

net charge offs.

        Where applicable, the performance goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of HEI or its affiliates, or a division or strategic business unit of HEI, or may be applied to the performance of HEI relative to a market index, a group of other companies or a combination thereof, all as determined by the administrator. The performance goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be made (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Each of the foregoing performance goals will be determined in accordance with generally accepted accounting principles and will be subject to certification by the administrator, provided that the administrator will have the authority to make equitable adjustments to the performance goals in recognition of unusual or nonrecurring events affecting HEI or any of its affiliates or the financial statements of HEI or any of its affiliates, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, in any case to the extent such adjustment does not cause a loss of deduction under Section 162(m).

Termination of Employment

        Unless the applicable award agreement provides otherwise, in the event that the employment of a participant with HEI or any of its affiliates terminates for any reason other than cause, retirement, disability (each such term as defined in the 2010 Plan) or death, the participant's options and share appreciation rights:

•

to the extent exercisable at the time of such termination, will remain exercisable until the date that is one year after such termination, on which date they will expire; and



•

to the extent that they were not exercisable at the time of such termination, will expire at the close of business on the date of such termination.

        The one-year period described above will be extended to three years after the date of such termination in the event of the participant's death during such one-year period.

        Unless the applicable award agreement provides otherwise, in the event that the employment of a participant with HEI and all of its affiliates terminates on account of retirement, disability or death, the participant's options and share appreciation rights, to the extent that they were exercisable at the time of such termination, will become fully vested and will remain exercisable until the date that is three years after such termination, on which date they will expire. In the event of the termination of a

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participant's employment for cause, all outstanding options and share appreciation rights granted to such participant will expire at the commencement of business on the date of such termination.

        In the event of the termination of employment with HEI and all of its affiliates of a participant who has been granted one or more Related Rights, such rights will be exercisable at such time or times and subject to such terms and conditions as set forth in the related options.

        The rights of participants granted restricted shares, deferred shares or performance shares upon termination of employment with HEI or any affiliate thereof during the restricted period will be set forth in the applicable award agreement.

        Notwithstanding the foregoing, no option or share appreciation right will be exercisable after the expiration of its term.

Effect of a Change in Control

        Except as otherwise provided in an award agreement or in an individual agreement between a participant and HEI, in the event of a change in control of HEI (as defined in the 2010 Plan), the surviving entity or acquiring entity (or the surviving or acquiring entity's parent company) will assume all awards outstanding under the 2010 Plan or will substitute for them with similar awards. Any such assumed or substituted award will provide that, if the participant's employment with HEI or an affiliate of HEI (or any successor) is terminated within 24 months following the change in control by HEI or an affiliate without cause or by the participant with good reason (as defined in the 2010 Plan), the award will become fully vested and exercisable and all restrictions on such awards will immediately lapse (with all performance goals or other vesting criteria deemed achieved at 100% of target levels), and each such award that is an option or share appreciation right will remain exercisable for not less than one year following such termination of employment.

        To the extent the surviving entity (or acquiring entity or parent company, as the case may be) refuses to assume or substitute for outstanding awards:

•

all outstanding awards will become fully vested and exercisable and all restrictions on such awards will immediately lapse (with all performance goals or other vesting criteria deemed achieved at 100% of target levels);



•

with respect to options and share appreciation rights, the participant will have the right to exercise such awards for a period of time determined by the administrator, or will be entitled to receive an amount in cash equal to the excess (if any) of the number of shares subject to such awards multiplied by the per share consideration paid as of the date of the occurrence of the change in control for the shares, minus the aggregate exercise price of such awards; and



•

all awards not assumed, continued or substituted will terminate upon the change in control.

Transferability of Awards

        Unless otherwise determined by the administrator or provided in an award agreement, awards will not be transferable by a participant except by will or the laws of descent and distribution and will be exercisable during the lifetime of a participant only by such participant or his guardian or legal representative.

Amendment or Termination of the 2010 Plan

        The Board may amend, alter or terminate the 2010 Plan, or amend an award, at any time, but no amendment, alteration or termination may be made that would impair the rights of a participant under any award without such participant's consent. Shareholder approval is required for any amendment that would increase the total number of shares (unless pursuant to an equitable adjustment as set forth in

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the 2010 Plan), materially increase plan benefits, materially alter eligibility provisions or extend the maximum option term under the plan, or as otherwise required by law or applicable rule.

        In addition, the administrator may not reduce the exercise price of an outstanding option or share appreciation right by amending its terms or by canceling such award in exchange for cash or the grant of a new award without first obtaining approval from the shareholders of HEI.

Term of the 2010 Plan

        No awards may be made after the ten-year anniversary of the date on which shareholders approve the 2010 Plan but awards made before such tenth anniversary may extend beyond the tenth anniversary date.

New 2010 Plan Benefits

        The benefits to be derived under the 2010 Plan by participants cannot be determined, since the ultimate value of awards under the 2010 Plan depends on several factors, including the market value of HEI Common Stock, and future grants under the 2010 Plan will be made at the sole discretion of the administrator, based on a variety of considerations.

Certain Federal Income Tax Consequences

The following discussion of certain relevant federal income tax effects applicable to stock options and share appreciation rights granted under the 2010 Plan is a summary only, and reference is made to the Internal Revenue Code and the applicable regulations and rulings thereunder for a complete statement of all relevant federal tax provisions.

Options

        With respect to nonqualified stock options, the grantee will recognize no income upon grant of the option, and, upon exercise, will recognize ordinary income to the extent of the excess of the fair market value of the shares on the date of option exercise over the amount paid by the grantee for the shares. Upon a subsequent disposition of the shares received under the option, the grantee generally will recognize capital gain or loss to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition.

        In general, no taxable income is realized by a grantee upon the grant of an incentive stock option. If shares are issued to a grantee (option shares) pursuant to the exercise of an incentive stock option granted under the 2010 Plan and the grantee does not dispose of the option shares within the two-year period after the date of grant or within one year after the receipt of such option shares by the grantee (disqualifying disposition), then, generally (i) the grantee will not realize ordinary income upon exercise and (ii) upon sale of such option shares, any amount realized in excess of the exercise price paid for the option shares will be taxed to such grantee as capital gain (or loss). The amount by which the fair market value of the HEI Common Stock on the exercise date of an incentive stock option exceeds the purchase price generally will constitute an item which increases the grantee's "alternative minimum taxable income" (as defined in the Internal Revenue Code).

        If option shares acquired upon the exercise of an incentive stock option are disposed of in a disqualifying disposition, the grantee generally would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the option shares) over the exercise price paid for the option shares.

        Subject to certain exceptions, an option generally will not be treated as an incentive stock option if it is exercised more than three months following termination of employment. If an incentive stock

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option is exercised at a time when it no longer qualifies as an incentive stock option, such option will be treated as a nonqualified stock option as discussed above.

        In general, HEI will receive an income tax deduction at the same time and in the same amount as the employee recognizes ordinary income.

Share Appreciation Rights

        The recipient of a grant of share appreciation rights will not realize taxable income and HEI will not be entitled to a deduction with respect to such grant on the date of such grant. Upon the exercise of a share appreciation right, the recipient will realize ordinary income equal to the fair market value of any shares received at the time of exercise. In general, HEI will be entitled to a corresponding deduction, equal to the amount of income realized.

Section 409A of the Internal Revenue Code

        The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code (Section 409A), which imposes restrictions on "nonqualified deferred compensation" (as defined in Section 409A). Section 409A generally applies to amounts deferred after December 31, 2004. Generally, options and share appreciation rights with an exercise price at least equal to the fair market value of the underlying stock on the date of grant and restricted stock will not be considered deferred compensation if such awards do not include any other feature providing for the deferral of compensation. Failure to follow the provisions of Section 409A can result in taxation to the grantee of a 20% additional income tax and interest on the taxable amount and, depending on the state, additional state taxes. It is intended that payments and benefits under the 2010 Plan comply with or be exempt from Section 409A. If taxes or penalties under Section 409A are imposed on a grantee in connection with the 2010 Plan, such grantee will be solely responsible and liable for the satisfaction of all such taxes and penalties, and neither HEI nor any affiliate will have any obligation to indemnify or otherwise hold the grantee (or any beneficiary) harmless from any or all of such taxes or penalties.

Vote Required

        Under the NYSE listing standards, the 2010 Plan will be approved if a majority of the votes cast are in favor of such approval, so long as the total votes cast represent more than 50% of all shares entitled to vote. Abstentions will be considered votes cast and will have the same effect as voting against the proposal. Broker nonvotes will have no effect on the outcome of the vote on the 2010 Plan.

        YOUR BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDED2010 EQUITY AND RESTATED ARTICLES OF INCORPORATION.INCENTIVE PLAN.

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Nominees for Class I directors whose terms expire at the 2012 Annual Meeting

		Shirley J. Daniel, Ph.D., C.P.A. Age 55 Director Since 2002 Professor of Accountancy, Shidler College of Business, University of Hawaii-Manoa since 1986.     Director of American Savings Bank, F.S.B., a subsidiary of HEI.
		Constance H. Lau Age 56 Director 2001 to 2004 and since May 2006 President and Chief Executive Officer of Hawaiian Electric Industries, Inc. since May 2006. Chairman and Chief Executive Officer of American Savings Bank, F.S.B., a subsidiary of HEI, since February 2008. Chairman, President and Chief Executive Officer of American Savings Bank, F.S.B., from May 2006 to January 2008. President, Chief Executive Officer and director of American Savings Bank, F.S.B., from June 2001 to May 2006. Chairman of Hawaiian Electric Company, Inc., a subsidiary of HEI, since May 2006.     Director of Hawaiian Electric Industries Charitable Foundation, Alexander & Baldwin, Inc., Hawaii Bankers Association, Associated Electric and Gas Insurance Services, Ltd., Consuelo Zobel Alger Foundation and Maunalani Foundation. Trustee, Punahou School. Member, Hawaii Business Roundtable.
		A. Maurice Myers Age 68 Director Since 1991 Chairman, President and Chief Executive Officer of Waste Management, Inc. (environmental services), Houston, Texas from November 1999 to November 2004; now retired.     Director of BIS Industries, Ltd. and member of the Oceanic Time Warner Cable advisory board. Chairman Emeritus, Keep America Beautiful.
		James K. Scott, Ed.D. Age 57 Director Since 1995 President of Punahou School since 1994.     Director of American Savings Bank, F.S.B., a subsidiary of HEI, and Hawaii Association of Independent Schools. Chairman, Secondary School Admission Test Board. Trustee, Blood Bank of Hawaii and Barstow Foundation.

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ContinuingEquity compensation plan information

        Information as of December 31, 2009 about HEI Common Stock that may be issued upon the exercise of awards granted under all of the company's equity compensation plans was as follows:

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Nominees for Class II directors whose terms expire at the 20102013 Annual Meeting

		Thomas B. Fargo, age 61, director since 2005 Age 60Audit Committee Member and Compensation Committee Chair Director Since Business experience and other public company and HEI affiliate directorships since 2005 •       Operating Executive Board Member, J.F. Lehman & Company (private equity firm), since 2008 •       Owner, Fargo Associates,  LLC (defense and homeland/national security consultancy), since 2005 •       Chief Executive Officer, Hawaii Superferry, Inc. (interisland ferry), 2008-2009 •       President, Trex Enterprises Corporation (defense research and development firm), 2005-2008 •       Commander, U.S. Pacific Command, 2002-2005 •       Director since 2008 and Audit Committee Member, Northrop Grumman Corporation •       Director, Hawaiian Holdings, Inc., 2005-2008 •       Director since 2005 and Audit Committee Member, Hawaiian Electric Company, Inc. (HEI subsidiary)
		Skills and qualifications for HEI Board service •       Extensive knowledge of the U.S. military, a major customer of HEI's electric utility subsidiary.
		•       Leadership, strategic planning and financial and nonfinancial risk assessment skills developed over 39 years of leading 9 organizations ranging in size from 130 to 300,000 people and managing budgets up to $8 billion.
		•       Experience with corporate governance, including audit, compensation and governance committees, from service on several public and private company boards.

		Kelvin H. Taketa, age 55, director since 1993 Nominating and Corporate Governance Committee Chair Business experience and other public company and HEI affiliate directorships since 2005 •       President and Chief Executive Officer, Hawaii Superferry, Inc.Community Foundation, since April 2008.     President, Trex Enterprises Corporation from April 2005 to April 2008. Commander, U.S. Pacific Command from May 2002 to February 2005. 1998 •       Director, of Hawaiian Electric Company, Inc. (HEI subsidiary), a subsidiary of HEI; United Services Automobile Association; Northrup Grumman Corporation;since 2004 Skills and Japan-America Society of Hawaii. Trustee, Hawaii Pacific University and Iolani School board of governors. National Vice Chair, Pearl Harbor Memorial Fund.
		Diane J. Plotts Age 73 Director Since 1987qualifications for HEI Board service Business advisor since 2000.     Director of American Savings Bank, F.S.B., a subsidiary of HEI. Trustee, Kamehameha Schools.
		Kelvin H. Taketa Age 54 Director Since 1993 •       Executive management experience with responsibility for overseeing more than $405 million in charitable assets as President and Chief Executive Officer of the Hawaii Community Foundation.
		•       Proficiency in risk assessment, strategic planning and organizational leadership as well as marketing and public relations obtained from his current position at the Hawaii Community Foundation since 1998. and his prior experience as Vice President and Executive Director of Hawaiian Electricthe Asia/Pacific Region for The Nature Conservancy and as Founder, Managing Partner and Director of Sunrise Capital Inc.
		•       Knowledge of corporate and nonprofit governance issues gained from his prior service as a director for Grove Farm Company, Inc., a subsidiaryhis current service as Vice Chair of HEI;the Independent Sector;Sector and Sunrise Capital, Inc., a private equity aquaculture development company.through publishing articles and lecturing on governance of tax-exempt organizations.

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		Jeffrey N. Watanabe Age 66 Director Since 1987, age 67, director since 1987 Honorary Of Counsel inChairman of the law firm of Watanabe Ing LLPBoard since July 2007. Senior partner,2006 and Executive Committee Chair Business experience and other public company and HEI affiliate directorships since 2005 •       Managing Partner, Watanabe Ing & Komeiji LLP, from 1972 to June 2007.     Chairman of Hawaiian Electric Industries,1972-2007 (now retired) •       Director since 2003 and Compensation and Corporate Governance Committee Member, Alexander & Baldwin, Inc. •       Director ofsince 1988 and Audit and Executive Committee Member, American Savings Bank, F.S.B. (HEI subsidiary) •       Director, Hawaiian Electric Company, Inc. (HEI subsidiary), from 1999-2006 and since 2008 Skills and qualifications for HEI Board service •       Broad business, legal, corporate governance and leadership experience from serving as Managing Partner of the law firm he founded, advising clients on a variety of business and legal matters for 35 years and from serving on a dozen public and private company and nonprofit boards and committees, including his current service on the Compensation and Corporate Governance Committees for Alexander & Baldwin, Inc.
		•       Specific experience with strategic planning from providing strategic counsel to local business clients and prospective investors from the continental United States and the Asia Pacific region for 25 years of his law practice.
		•       Experience in public utility regulation from practicing law before the Hawaii Public Utilities Commission, which regulates HEI's utility subsidiaries.

Class II director whose term will expire at the 2010 Annual Meeting

		Diane J. Plotts, age 74, director since 1987 Audit Committee Chair and Compensation and Executive Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       Independent business advisor since 2000 •       Director since 1996 and Audit Committee Chair, American Savings Bank, F.S.B., each (HEI subsidiary) Skills and qualifications for HEI Board service •       35 years of executive leadership, financial oversight, risk management and strategic planning experience from serving as General Partner and Director of Hemmeter Investment Company.
		•       Bank and corporate governance experience from serving as a subsidiaryfounding director of HEI; Hawaiian Electric Industries Charitable Foundation; Alexander & Baldwin, Inc.; Cellular Bioengineering, Inc.; First Insurance Companythe former Bank of Honolulu for 8 years.
		•       Fluency in organizational governance matters and boardroom dynamics from serving on a variety of nonprofit boards, including the University of Hawaii Ltd.; Grace Pacific Corporation; Mid-Week Printing, Inc./Oahu Publications, Inc.; Tissue Genesis, Inc.;Board of Regents, Aloha United Way, Hawaii Community Foundation and Trex Enterprises Corporation. Trustee, Consuelo Zobel Alger Foundation, Punahou School, and Sesame Workshop.University of Hawaii Foundation.

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Continuing Class III directors whose terms expire at the 2011 Annual Meeting

		Don E. Carroll Age 67 Director Since 1996, age 68, director since 1996 Compensation Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       Retired Chairman, of Oceanic Time Warner Cable Advisory Board, from February 2001 to April 2005; now retired.since 2004 •       Director since 2004 and Audit Committee Member, American Savings Bank, F.S.B. (HEI subsidiary) Skills and qualifications for HEI Board service •       38 years of executive and finance management experience as President and Vice President, Finance of Time Warner CableOceanic Cable.
		•       Experience with financial institutions and executive compensation and compensation program oversight from 1985 to April 2005.serving as Chair of the Compensation Committee for Island Insurance Company, Ltd. and as a member of the Compensation Committee for Pacific Guardian Life.
		•       In-depth knowledge and familiarity with issues facing HEI and its banking subsidiary gained from 14 years of service as a director for HEI and 6 years of service as a director for American Savings Bank, F.S.B.

		Richard W. Gushman, II, age 64, director since 2007 Nominating and Corporate Governance Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       President and Owner, DGM Group (real estate development firm), since 1973 •       Managing Partner, Summit Financial Resources (financial services company), since 1994 •       Director since 2002 and Audit Committee Member, American Savings Bank, F.S.B. (HEI subsidiary) Skills and qualifications for HEI Board service •       Demonstrated business leadership and financial management skills gained from executive management, financial stewardship and corporate governance leadership roles as chief executive officer of DGM Group for 37 years and Managing Partner of Summit Financial Resources for 16 years.
		•       Extensive experience in governance, board leadership and financial oversight from serving on a variety of corporate, advisory and community organization boards and in financial stewardship roles, including his current service as a director of James Campbell Company LLC and as a member of the state of Hawaii Department of Hawaiian Home Lands and the Office of Hawaiian Affairs Advisory Boards.
		•       Valuable entrepreneurial and hands-on perspective and experience from having grown the real estate development practice he started in 1973 into the DGM Group.

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		Victor H. Li, S.J.D., age 68, director since 1988 Compensation Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       Co-Chairman, Asia Pacific Consulting Group (Pacific region trade consultancy), since 1992 •       Director, American Savings Bank, F.S.B. (HEI subsidiary), since 2004 Skills and qualifications for HEI Board service •       Thoughtful leadership and consensus-building skills and marketing and strategic planning experience acquired through his current position for the last 18 years as Co-Chairman of the Asia Pacific Consulting Group, and his former position for 10 years as chief executive for the East-West Center.
		•       Long-term knowledge and understanding of HEI's operations and strategic goals after 20 years on the Board.
		•       Prior energy and public company board experience from serving as a director at Grumman Corporation and AES China Generating Co. Ltd.

		Barry K. Taniguchi, age 63, director since 2004 Audit Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       President and Chief Executive Officer, KTA Super Stores (grocery store chain), since 1989 •       President, K. Taniguchi Ltd. (real estate lessor), since 1989 •       Director, American Savings Bank, F.S.B. (HEI subsidiary), since 2002 •       Director since 2001 and Audit Committee Chair, Hawaiian Electric Company, Inc. (HEI subsidiary) •       Director, Hawaii Electric Light Company, Inc. (HEI subsidiary), 1997-2009 •       Director, Maui Electric Company, Limited (HEI subsidiary), 2006-2009
		Skills and qualifications for HEI Board service •       Current knowledge of and experience with the business community on the island of Hawaii, which is served by one of HEI's utility subsidiaries, Hawaii Electric Light Company, Inc., from serving in his current chief executive officer positions for the last 23 years.
		•       Accounting and auditing knowledge and experience gained from obtaining a public accounting certification and working as an auditor and as a controller.
		•       Extensive board experience and leadership roles in community and civic organizations, including from his current service on the boards of Hawaii Employers Mutual Insurance Company and Hawaii Community Foundation and as Chair of the Hawaii Island Economic Development Board.

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Continuing Class I directors whose terms expire at the 2012 Annual Meeting

		Shirley J. Daniel, Ph.D., C.P.A., age 56, director since 2002 Audit Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       Professor of Accountancy, Shidler College of Business, University of Hawaii at Manoa, since 1995 •       Director, American Savings Bank, F.S.B. (HEI subsidiary), since 2004 Skills and qualifications for HEI Board service •       Current expertise in accounting, auditing and corporate governance from teaching courses on these subjects at the Shidler College of Business.
		•       Business and leadership experience from her current service as Director for the Pacific Asian Management Institute and Center for International Business Education and Research and from her prior service as Managing Director for the Pacific Asian Center for Entrepreneurship and E-Business.
		•       Prior experience in accounting and auditing from being a licensed certified public accountant and from working as an auditor and audit manager with the international accounting firm Arthur Young & Company (currently Ernst & Young LLP).

		Constance H. Lau, age 58, director 2001-2004 and since 2006 Executive Committee Member Current and prior positions with the company •       President and Chief Executive Officer and Director, HEI, since 2006 •       Chairman of the Board, Hawaiian Electric Company, Inc. (HEI subsidiary), since 2006 •       Chairman of the Board and Chief Executive Officer, American Savings Bank, F.S.B. (HEI subsidiary), since 2008 •       Chairman of the Board, President and Chief Executive Officer, American Savings Bank, F.S.B., a subsidiary of HEI; Island Insurance Company; Pacific Guardian Life; and The 200 Club. Member of the advisory boards of Oceanic Time Warner Cable and Boy Scouts of America-Aloha Council.2006-2008
		Richard W. Gushman, II Age 63 Director Since 2007 •       President and Owner of DGM Group since 1988. Chief Executive Officer and Director, of American Savings Bank, F.S.B., a subsidiary of HEI; Outrigger Enterprises; Servco Pacific2001-2006 •       Senior Executive Vice President and Chief Operating Officer and Director, American Savings Bank, F.S.B., 1999-2001
		•       Treasurer, HEI, 1989-1999
		•       Financial Vice President and Treasurer, HEI Power Corp. (former HEI subsidiary), 1997-1999
		•       Treasurer, Hawaiian Electric Company, Inc.;, and James Campbell Corp.Assistant Treasurer, HEI, 1987-1989
		•       Assistant Corporate Counsel, Hawaiian Electric Company,  Inc., LLC. Managing Partner of Summit Financial Resources. Trustee1984-1987
		Other public company directorships since 2005 •       Director since 2004 and Audit Committee Member, Alexander & Baldwin, Inc.
		Skills and qualifications for HEI Board service •       Intimate understanding of the Estate of James Campbellcompany from serving in various chief executive, chief operating and Hawaii Community Foundation. Member of advisory boards of Boysother executive, finance and Girls Club of Hawaiilegal positions at HEI and Department of Hawaiian Home Lands.its subsidiaries over the last 25 years.
		•       Familiarity with current management and corporate governance practices from her current service as a director and Audit Committee member for Alexander & Baldwin, Inc. and as a director of AEGIS Insurance Services, Inc.
		•       Experience with financial oversight and expansive knowledge of the Hawaii business community and the local communities that compose the company's customer bases from serving as a director or investment committee chairperson for various local industry, business development and educational organizations.

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		A. Maurice Myers, age 69, director since 1991 Compensation Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       Chief Executive Officer and Director, POS Hawaii LLC (provider of point-of-sale business systems for restaurants and retailers), since 2009 •       Chief Executive Officer and Director, Wine Country Kitchens LLC (manufacturer of gourmet food products), since 2007 •       Chairman, Chief Executive Officer and President, Waste Management, Inc. (waste and environmental services provider), 1999-2004 •       Director, Hawaiian Electric Company, Inc. (HEI subsidiary), 2004-2006 and since 2009 Victor H. Li, S.J.D.Skills and qualifications for HEI Board service Age 67 Director Since 1988 Co-chairman, Asia Pacific Consulting Group since 1992. •       20 years of public company executive and board leadership experience as Chairman, Chief Executive Officer and President Li Xing School Foundation since 1989.     Director of American Saving Bank, F.S.B.Waste Management, Inc., a subsidiaryChairman, Chief Executive Officer and President of HEI. Trustee, Pan Asian Repertory Theatre.
		Barry K. Taniguchi Age 61 Director Since 2004 Yellow Corporation, President of America West Airlines and Chief Executive Officer and President of KTA Super StoresAloha Airgroup, Inc.
		•       Practiced skills in risk assessment, strategic planning, financial oversight, customer and public relations and marketing exercised in leading successful restructuring efforts at Waste Management, Yellow Corporation and America West Airlines.
		•       Diverse business experience and public and private company board experience, including from his prior service as a director and Compensation Committee Chair for Tesoro Corporation and as a director for BIS Industries Limited and Cheap Tickets.

		James K. Scott, Ed.D., age 58, director since 1989.1995 Audit and Nominating and Corporate Governance Committee Member Business experience and other public company and HEI affiliate directorships since 2005 •       President, Punahou School (K-12 independent school), since 1994 •       Director, of Hawaiian Electric Company, Inc. and American Savings Bank, F.S.B. (HEI subsidiary), each a subsidiarysince 2008 Skills and qualifications for HEI Board service •       Recognized leadership and executive management skills as President of HEI;Punahou School for 16 years. •       25 years of experience developing and executing strategic plans as the chief executive at two independent schools, including overseeing fundraising programs and admissions/marketing functions.
		•       Governance and board leadership experience from his current positions as Chair of the Secondary School Admission Test Board, director and former Chair of the Hawaii Electric Light Company, Inc.Association of Independent Schools, member of the Board of Governors of the Pacific and Maui Electric Company, Limited, each a subsidiaryAsian Affairs Council and member of Hawaiian Electric Company, Inc.; Hawaii Employers Mutual Insurance Corporation; and Hawaii Island Economic Development Board. Trustee, Hawaii Community Foundation, Public Schoolsthe Advisory Board of Hawaii Foundation, Tax Foundationthe Klingenstein Center of Hawaii, and Lyman House Memorial Museum. Chair, The Food Basket-Hawaii Island's Foodbank. Vice Chair, Hawaii Health System Corporation Corporate Board.Teachers College at Columbia University.

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Corporate Governance

What are HEI's governance policies and guidelines?

        In 2008,2009, the Board and management continued to review and monitor corporate governance trends and best practices to comply with the corporate governance requirements of the New York Stock Exchange, Listed Company Manual andregulations of the Securities and Exchange Commission regulations.and rules and regulations of the Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation and Office of Thrift Supervision applicable to HEI as a bank holding company. As part of an annual review, the HEI Categorical Standards of Director Independence (see Appendix B), Corporate Governance Guidelines Revised Code of Conduct (which includes the code of ethics for the HEI Chief Executive Officer, Financial Vice President and Controller), and charters for the Audit, Compensation, Executive and Nominating and Corporate Governance Committees were reviewed and revised as deemed appropriate by the Board. Current copiesThese documents, and HEI's Corporate Code of these documents may be foundConduct, are available on HEI's website at www.hei.comwww.hei.com.

What is the Board's leadership structure?

        Mr. Watanabe has served as the nonexecutive Chairman of the Board since 2006, upon the retirement of former HEI Chairman, President and Chief Executive Officer, Robert F. Clarke. Also since that time, Ms. Lau has served as HEI's President and Chief Executive Officer and has been the only employee director on the Board. Prior to Mr. Watanabe becoming Chairman, the Board had an independent lead director.

        Mr. Watanabe has served on the Board since 1987, but has never been employed by HEI or any HEI subsidiary. The Board has determined that he is independent. Among the many skills and qualifications that Mr. Watanabe brings to the Board, the Board considered (i) his extensive experience in corporate and nonprofit governance from serving on other public company, private company and nonprofit boards; (ii) his reputation for effective consensus and relationship building and business and community leadership, including leadership of his former law firm, and (iii) his willingness and dedication to committing the hard work and time necessary to successfully lead the Board.

        As HEI's Chairman, Mr. Watanabe's key responsibilities are to:

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lead Board and shareholder meetings and executive sessions of the independent directors, including executive sessions at which the performance of the Chief Executive Officer is evaluated by the Board;



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attend all meetings of the Audit, Compensation and Nominating and Corporate Governance Committees of the Board as an observer and chair the Executive Committee of the Board;



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serve on the boards of HEI's primary operating subsidiaries, Hawaiian Electric Company and American Savings Bank, and chair executive sessions of the independent directors of these subsidiary boards;



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work closely with management to develop meeting agendas and materials for the Board and subsidiary boards;



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be available to other Board and subsidiary board members and management for questions and consultation; and



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ensure and assist communications among Board members and Board committees and between the Board and management.

        The Board's Corporate Governance Guidelines provide that if the Chairman and Chief Executive Officer positions are held by the same individual, or if the Board determines that the Chairman is not independent, the independent directors should designate an independent director to serve as Lead Director. If a Lead Director is designated, the Lead Director's responsibilities would be to: (i) preside at Board and shareholder meetings when the Chairman is not present, (ii) preside at executive sessions

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of the independent directors, (iii) facilitate communication between the independent directors and the Chairman or the Board as a whole, (iv) call meetings of the nonmanagement or independent directors in printexecutive session, (v) participate in approving meeting agendas, schedules and materials for the Board, and (vi) perform other functions described in the Corporate Governance Guidelines or as determined by the Board from time to time.

        The Board believes that its current leadership structure, which provides for an independent nonemployee Chairman, or an independent Lead Director if the Chairman is not independent, is appropriate and effective in light of HEI's current operations, strategic plans and overall corporate governance structure for several reasons. First, the Board believes that having an independent Chairman or Lead Director has been important in establishing a tone at the top for both the Board and the company that encourages constructive expression of views that may differ from those of senior management. Second, the Board believes that the presence of an independent Chairman or Lead Director, particularly at this time of growing government and investor scrutiny of public and financial company boards, demonstrates the Board's desire to inspire confidence in the company's regulators and shareholders that the Board is committed to serving the best interests of the company and its shareholders and not the best interests of management. Third, the Board recognizes that the company has an uncommon corporate governance structure in that the boards of its two primary operating subsidiaries are also composed mostly of nonemployee directors and that the HEI Chairman plays an important leadership role at these subsidiary boards. For instance, in addition to chairing executive sessions of the nonemployee directors and attending meetings of the audit committees of these subsidiary boards, the Chairman leads each subsidiary board in conducting its annual performance evaluation and assists communications between each of these boards and management of the respective subsidiary company and among members of each subsidiary board.

What is the Board's role in risk oversight?

        HEI is a holding company that operates principally through its electric public utility and bank subsidiaries. At the holding company and subsidiary levels, the company faces a variety of risks, including operational risks, regulatory and legal compliance risks, credit and interest rate risks, competitive risks and liquidity risks. Developing and implementing strategies to manage these risks is the responsibility of management, and that responsibility is carried out by assignments of responsibility to various officers and other employees of the company under the direction of HEI's Chief Financial Officer, who also serves as HEI's chief risk officer. The role of the Board is to oversee the management of these risks.

        The Board's specific risk oversight functions are as follows:

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The Board has considered and approved a consolidated enterprise risk management (ERM) system recommended by management. The system is designed to identify and assess risks at the holding company and subsidiary levels so the information can be reported to the Board, along with proposed strategies for mitigating significant risks. The structure of the ERM system is decentralized, with separate chief risk officers at each of HEI's primary operating subsidiaries, Hawaiian Electric Company and American Savings Bank. The chief risk officer of Hawaiian Electric Company is also responsible for identifying, assessing and reporting risks at the company's utility subsidiaries that operate on the islands of Hawaii and Maui. Each subsidiary chief risk officer reports directly to the subsidiary President and functionally to HEI's chief risk officer. The Board believes this decentralized risk management structure is appropriate and effective for the company's diverse operations and holding company structure because it allows for industry-specific risk identification and management at the subsidiary levels while also ensuring an integrated and consolidated view of risk at the holding company level by HEI's chief risk officer. In connection with approving this ERM system, the Board reviewed a catalog of risks and management's assessment of those risks reported by HEI's chief risk officer. As part of

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the Board's ongoing risk oversight, HEI's chief risk officer is responsible for providing regular reports to the Board and Audit Committee on the condition of those risks, any shareholderchanges to the risk catalog or management's assessment of those risks, and any other risk management matters that the Board may request from time to time. The Board and Audit Committee also receive reports from the company's internal auditor evaluating the effectiveness of management's implementation of the approved ERM system.

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The Board has assigned to the Compensation Committee the specific risk oversight responsibility of reviewing whether the company's compensation policies or practices are reasonably likely to have a material adverse effect on the company and of recommending new or revised policies and practices to address any such risks identified. The Compensation Committee reports the results of its review and any recommendations to the Board. The results of the Compensation Committee's review are also communicated to the Audit Committee through HEI's chief risk officer. Both the Audit and Compensation Committees are composed entirely of independent directors. Currently, two members of the Compensation Committee (Ms. Plotts and Mr. Fargo) also serve on the Audit Committee.



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The Board has assigned to the Audit Committee the specific risk oversight responsibilities of reviewing the company's major financial risk exposures and the steps management has taken to monitor and control such exposures and overseeing HEI's Code of Conduct compliance program, including the establishment of procedures for direct reporting of potential accounting and auditing issues to the Audit Committee. The Audit Committee reports the results of this review to the Board each quarter.



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The Board has also assigned to the Audit Committee the responsibility of assisting the Board in overseeing the overall risk management strategy of the company. In order to assist the Board with overall risk oversight, the Audit Committee is specifically required to discuss policies with respect to risk assessment and risk management, including the guidelines and policies governing the process by which risk assessment and risk management are undertaken at the company, and to report to the Board the committee's discussion and findings so that the entire Board can respond to changes in the company's risk profile.



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In addition to overall risk oversight by the HEI Board, the boards of HEI's primary operating subsidiaries, Hawaiian Electric Company and American Savings Bank, are specifically responsible for overseeing risks at their respective companies and may assign certain risk-related responsibilities to their respective audit or other committees. Under the decentralized ERM structure discussed above, risk management activities at the subsidiary levels are reported to these subsidiary boards through the subsidiary chief risk officers. The HEI Board and/or Audit Committee may be invited to participate in risk oversight discussions by these subsidiary boards and/or audit committees. The information from these subsidiary board or audit committee sessions are also reported to the Board by the subsidiary chief risk officers (or their representatives), who requests them.functionally report to HEI's chief risk officer on risk management matters. These subsidiary boards are composed mostly of nonemployee directors. The subsidiary audit committees are composed entirely of nonemployee directors who meet the independence requirements for audit committee members of companies listed on the New York Stock Exchange.



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At least annually, the Board conducts a strategic planning and risk review. As part of this review, the Board reviews fundamental financial and business strategies and assesses the major risks facing the company and options to mitigate those risks. To facilitate strategic planning through constructive dialogue among management and Board members, members of management who are not directors may be invited to participate in the review. Based on the review, the Board and senior management, including the HEI chief risk officer, identify key issues to be addressed during the course of the next calendar year.

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        The Board believes that risk oversight is one of the areas in which having an independent Chairman or Lead Director is especially important in order to ensure that views that may differ from those of management are expressed. Since the HEI Chairman attends the meetings of the Board, the subsidiary boards and their respective committees, the HEI Chairman is also in a unique position to assist with communications regarding risk oversight and risk management among the Board and its committees, between the subsidiary boards and their respective committees and between directors and management.

How does the Board select nominees for the Board?

        The Nominating and Corporate Governance Committee considersof the Board assists the Board in identifying and evaluating persons for nomination or re-nomination for Board service. To identify qualified candidates for Board membership, the committee may consider persons suggested by its members and other Board members, as well as by management and shareholders. The Committeeshareholders or may retain a third-party search firm to help identify candidates from time to time.

        Among the qualifications considered in the Nominating and Corporate Governance Committee's assessment of a proposed candidate are knowledge, experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, and absence of conflicts of interest.potentially qualified candidates. The Committee believes that the Board should reflect a diversity of experience, gender, ethnicity, and age. The Committee also considers other relevant factors as it deems appropriate including, but not limited to, current composition of the Board, balance of independent and non-independent directors, and need for financial expertise.

        Once candidates are identified, the Nominating and Corporate Governance Committee may review publicly available information to assess whether the candidate should be considered further. If the Committee determines that the candidate warrants further consideration, the Chairman of the Committee or another member of the Committee will contact the person and, if the person indicates a willingness to be considered for service on the Board, the candidate will be asked to provide information such as accomplishments and qualifications and one or more interviews may be conducted. The Committee members may contact one or more references provided by the candidate or other members of the business community who may have first-hand knowledge of the candidate's qualifications and accomplishments. Thecommittee's evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

        Once a person is identified as a potential director candidate, the committee may review publicly available information to assess whether the candidate should be further considered. If so, a committee member or designated representative for the committee will contact the person. If the person is willing to be considered for nomination, the person is asked to provide additional information regarding his or her background, his or her specific skills, experience and qualifications for Board service, and any direct or indirect relationships with the company. In addition, one or more interviews may be conducted with committee and Board members and committee members may contact one or more references provided by the candidate or others who would have first-hand knowledge of the candidate's qualifications.

        In evaluating the qualifications of all candidates (including incumbent directors) for nomination or re-nomination, the committee considers:

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the candidate's independence, knowledge (including relevant industry knowledge), experience, skills, substantive areas of expertise, financial literacy, diversity, personal and professional integrity, character, business judgment, achievements, reputation, ability to represent the interests of all shareholders, time availability in light of other commitments, dedication, absence of conflicts of interest and other factors required to be considered under applicable laws, rules or regulations or that the committee considers appropriate in the context of the needs of the Board;



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with respect to incumbent directors, the annual self-evaluation of the individual director, his or her current qualifications and his or her contributions to the Board;



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the current composition of the Board and its committees; and



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the compatibility of the candidate to work collegially with members of the Board.

        The Board considers the recommendations of the Nominating and Corporate Governance Committee and then makes the final decision whether to approve and extend an invitation to a candidate to join the Board upon appointment or election, subject to any approvals required by law, rule or regulation.

Does the Board consider diversity in identifying nominees for the Board?

        In assisting the Board to identify qualified candidates to serve on the Board, the Nominating and Corporate Governance Committee considers the gender and racial minority diversity of the candidate. The Board believes it functions most effectively with members who collectively possess a range of substantive expertise, skills and experience in areas that are relevant to leading the company in

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accordance with the Board's fiduciary responsibilities. The Board also believes that having a board composed of members who can collectively contribute a range of perspectives, including perspectives that may arise from being female or a racial minority, improves the quality of the Board's deliberations and decisions because it enables the Board to view issues from a variety of angles and thus more richly and completely. As the company's operations and strategic plans and the Board's composition may evolve over time, the Nominating and Corporate Governance Committee is charged with identifying and assessing the appropriate mix of knowledge areas, qualifications and personal attributes contributed by Board members that will bring the most strategic and decision-making advantage to the company.

        With operations almost exclusively in the state of Hawaii, it is natural and advantageous that our Board be composed primarily of members who live and work in the state and have firsthand knowledge of and experience with our customer base and political and regulatory environment. Since a large pool of potential candidates for Board membership come from this state, the Board benefits from the unique racial diversity that exists in Hawaii. Of twelve Board members, six members (or 50%) are Caucasian, five members (or 42%) are Asian American and one member (or 8%) is Caucasian, Asian American and native Hawaiian. Three Board members (or 25%) are female.

        The Board also recognizes that, due to Hawaii's geographic isolation from the continental United States and the comparatively small number of public companies, banks and regulated utilities in Hawaii, the Board also benefits from having directors who have gained business experience at companies located in the continental United States because those Board members can and have contributed valuable information about experiences they have had working at or serving on the boards of other public companies and companies in similar industries, which also contributes to the breadth of perspectives on the Board.

How can shareholders communicate with the directors?

        Shareholders and all interestedInterested parties, may contact (1) any member of the Board, including the nonemployee Chairman of the Board and any employee director or (2) the nonemployee directors as a group, by mail. Toshareholders, desiring to communicate with the Board, any individual director or anythe nonmanagement or independent directors as a group of directors, correspondence should be addressedregarding matters pertaining to the Boardbusiness or any such individual or group by either name or title. All suchoperations of HEI may address their correspondence should be sent in care of the Corporate Secretary, Hawaiian Electric Industries, Inc., P. O.P.O. Box 730, Honolulu, HI 96808-0730. The mail will be forwarded, unopened,HEI Corporate Secretary may review, sort and summarize all such correspondence in order to facilitate communications to the named individualBoard. In addition, the HEI Corporate Secretary has the discretion to handle any director or, in the casecommunication that is an ordinary course of a group,business matter, including routine questions, complaints, comments and related communications that can appropriately be handled by management. Directors may at any time request copies of all correspondence addressed to the Chairmanthem. The charter of the Board.HEI Audit Committee, which is available at www.hei.com, sets forth procedures for submitting complaints or concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters on a confidential, anonymous basis.

How doesDoes the Board evaluate itself?

        The Board followsconducts an annual process of evaluating the operationsevaluation to determine whether it and effectivenessits committees are functioning effectively. In addition, each director annually evaluates his or her performance as a director and members of the Board as a whole, as well as self-evaluations by individual directors up for election. In reviewingAudit, Compensation and Nominating and Corporate Governance Committees annually evaluate the Board as

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a whole, directors evaluate and comment on board structure, meetings, responsibilities, performance of directors and relationship between the Board and management. Directors who are nominees for reelection evaluate their own individual meeting preparation, participation in meetings, contributions to the group, knowledge of the issues and concerns of HEI and understanding of the role of the Board in the governance of HEI.each committee on which he or she serves. The Board and self-evaluation forms are submitted toevaluation process is overseen by the Nominating and Corporate Governance Committee, for its review, after whichin consultation with the Committee recommends to the Board any procedures and practices to be adopted to improve the operationsChairman. The chairperson of the Board. The Chairman of theNominating and Corporate Governance Committee or the nonemployee Chairman of the Board may meet with individual directors to discuss their performance, as he or she deems appropriate.

        As required by the New York Stock Exchange corporate governance listing standards, the Audit, Compensation, and Nominating and Corporate Governance Committees developed a process for self-evaluation whereby committee members reviewed and evaluated their respective committee charters and committee meetings. The Audit Committee also reviewed and evaluated its duties and responsibilities, its relationships with management and the internal and external auditors and the qualificationsTable of its members, including financial expertise.Contents

Who are the independent directors of the Board?

        Under HEI's Corporate Governance Guidelines, a majority of Board members must qualify as independent under the listing standards of the New York Stock Exchange (NYSE) and any additional requirements as determined by the Board from time to time.

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For a director to be considered independent under NYSE listing standards, the Board must affirmatively determine that the director does not have any direct or indirect material relationship with HEI or its consolidated subsidiaries, in compliancesubsidiaries. The NYSE listing standards also specify circumstances under which a director may not be considered independent, such as when the director has been an employee of the company within the last three fiscal years, if the director has had certain relationships with the New York Stock Exchange corporate governance listing standards. company's external or internal auditor within the last three fiscal years or when the company has made or received payments for goods or services to entities with which the director or an immediate family member (as defined by NYSE) of the director has specified affiliations and the aggregate amount of such payments in any year within the last three fiscal years exceeds the greater of $1 million or 2% of such entity's consolidated gross revenues for the last fiscal year.



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The Board has established categorical standards to assist it in determining director independence. In applying these standards,also adopted Categorical Standards for Director Independence (HEI Categorical Standards), which are set forth inattached as Appendix C to this Proxy StatementB and are also available on HEI's website at www.hei.com,www.hei.com. The HEI Categorical Standards specify circumstances under which a director may not be considered independent. In addition to the specific circumstances that would preclude an independence finding under the NYSE listing standards, the HEI Categorical Standards provide that a director is not independent where HEI and its subsidiaries have made charitable contributions to nonprofit organizations with which the director or an immediate family member (as defined in the HEI Categorical Standards) of the director has specified affiliations and the aggregate amount of such contributions in any year within the last three fiscal years exceeds the greater of $1 million or 2% of such organization's total annual charitable receipts for the last fiscal year.

        The Nominating and Corporate Governance Committee and the Board considers all relevant factsconsidered the information below, which was provided by the directors and/or HEI or its subsidiaries, concerning relationships between (i) HEI or its subsidiaries and circumstances in making a determination(ii) the director, the director's immediate family members (as defined by NYSE) or entities with which any of independence.

        Inthe directors or immediate family members have certain affiliations. Based on its annual reviewsconsideration of director independence,the relationships described below and the recommendations of the Nominating and Corporate Governance Committee, the Board affirmatively determined that withall of the exceptionnonemployee directors of Constance H.HEI (Messrs. Carroll, Fargo, Gushman, Li, Myers, Scott, Taketa, Taniguchi, Watanabe and Mses. Daniel and Plotts) are independent. The remaining director, Ms. Lau, HEI's President and Chief Executive Officer, who is the only employee director of HEI, each director, nominee for director,HEI.

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With respect to Messrs. Gushman, Li, Scott, Taniguchi and each person who served as a director in 2008 has no direct or indirect material relationship with HEI or its consolidated subsidiaries and is independent. In making these determinations,Ms. Daniel, the Board considered the relationships listed below:

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with respectamounts paid during the last three fiscal years to Shirley J. Daniel, Thomas B. Fargo, Richard W. Gushman, II, Victor H. Li, James K. Scott, Kelvin H. Taketa, Barry K. Taniguchipurchase electricity from HEI subsidiaries, Hawaiian Electric Company or Hawaii Electric Light Company (the sole public utilities providing electricity to the islands of Oahu and Bill D. Mills (who resigned as an HEI director in 2008)Hawaii, respectively), the amount of electricity purchased from HEI's electric utility subsidiaries by entities for whichemploying these nonemployee directors serve or served at any time in 2008 as employees, officers or advisors or in which nonemployeethese directors have ownership interests or immediate family members who serve as officersother affiliations. None of suchthe amounts paid by any of these entities excluding from the calculationfor electricity (excluding pass-through surcharges for fuel and for Hawaii state revenue taxes,taxes) within the last three fiscal years exceeded the thresholds in the NYSE listing standards or HEI Categorical Standards that would automatically result in a director not being independent (i.e., the greater of $1 million or 2% of such entity's consolidated gross revenues for the last fiscal year). The Board also considered that Hawaiian Electric Company and Hawaii Electric Light Company are the sole source of electric power on the islands of Oahu and Hawaii, respectively, and that the rates charged by these public utilities for electricity are fixed by state regulatory authority. Since purchasers of electricity from Hawaiian Electric Company and Hawaii Electric Light Company have no choice as to supplier and no




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ability to negotiate rates or other terms, the Board determined that these relationships do not impair the independence of these directors.

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With respect to Messrs. Carroll, Fargo, Gushman, Li, Myers, Taketa, Taniguchi, Watanabe and Mses. Daniel and Plotts, the Board considered the amount of charitable contributions during the last three fiscal years from HEI and its subsidiaries to nonprofit organizations where these directors or their immediate family members serve as employees, directors, officers or trustees. None of the contributions made to such nonprofit organizations within the last three fiscal years exceeded the threshold in the HEI Categorical Standards that would automatically result in a director not being independent (i.e., the greater of $1 million or 2% of such organization's total annual charitable receipts for the last fiscal year). In addition, no donation made by the company exceeded $200,000 per entity in any single fiscal year during the last three fiscal years. In determining that none of these relationships affected director independence, the Board considered that company policy requires that charitable contributions from HEI or its subsidiaries that directly benefit entities from which an HEI director receives compensation are to be pre-approved by the Nominating and Corporate Governance Committee and ratified by the Board.



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withWith respect to Don E.Messrs. Carroll, Shirley J.Gushman, Li, Watanabe and Mses. Daniel Thomas B. Fargo, Richard W. Gushman, II, Victor H. Li, Diane J.and Plotts, and Jeffrey N. Watanabe,the Board considered preferential rate mortgage loans and other extensions of credit made to these nonemployee directors by HEI's banking subsidiary, American Savings Bank, F.S.B., to these nonemployee directors and entities for which these nonemployee directors serve or served at any time in 2008 as executive officers or in which these nonemployee directors have ownership interests, including the preferential rate mortgage loans described under "Are"Other Relationships and Related Person Transactions—Are there any related person transactions with HEI or its subsidiaries?" below and determined that none of these relationships affected the independence of these directors. As of June 30, 2006, American Savings Bank no longer extends preferential rate loans to directors. Preferential rate mortgage loans existing on pages 66-67,June 30, 2006, including those to the directors named above, were grandfathered.



•

withWith respect to Don E. Carroll, Shirley J. Daniel, Thomas B. Fargo, Richard W.Messrs. Gushman, II, Diane J. Plotts, Kelvin H.Scott, Taketa, Barry K. Taniguchi Jeffrey N.and Watanabe, and Bill D. Mills (who resigned as an HEIthe Board considered other director in 2008), the amount of charitable contributions made by HEI and its subsidiaries to tax-exempt organizations and schools for which nonemployee directors or their immediate family members serve as employees, officers, board members or trustees,




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•

with respect to Thomas B. Fargo, James K. Scott, Kelvin H. Taketa and Jeffrey N. Watanabe, other directorships, trusteeships or officer positions held by these nonemployeethose directors at entities for which another HEI director or former executive officer of HEI serves or served at any time during 2008 as an officer,a director or trustee and determined that none of these relationships affected the independence of these directors. None of these relationships resulted in a compensation committee interlock or would automatically preclude an independence finding under the NYSE listing standards or HEI Categorical Standards.



•

withWith respect to Don E.Mr. Carroll, the employment ofBoard considered that his son atis employed in a nonofficer position by HEI's banking subsidiary, American Savings Bank, F.S.B., in a non-officer capacity,



•

with respect to Jeffrey N. Watanabe, his status as retired partner and honorary Of Counsel to the law firm of Watanabe Ing LLP, which performs legal services for certain of HEI's subsidiaries, and the retirement benefits he receives from the firm, which were fixed at the time of his retirement in 2007 and aredetermined that this relationship does not tied to the firm's profitability, and



•

with respect to Diane J. Plotts, her serviceimpair Mr. Carroll's independence as a trustee of a private trust that leases land and an office building to one of HEI's electric utility subsidiaries and the amount of lease payments under the long-term lease.director.

None of the relationships described above exceeded the applicable thresholds in HEI's categorical standards for director independence or were determined by the Board to be a direct or indirect material relationship that would impair a nonemployee director's independence.


What otherDoes the Board practices does HEI have?meet in executive session without management present?


        The nonemployee directors meet regularly in executive sessions without management present. In 2008,2009, these sessions were chaired by Jeffrey N.Mr. Watanabe, who is the Chairman of the Board.Board and an independent nonemployee director. Mr. Watanabe may request that other nonemployee directors chair the executive sessions.

        Information related to issues to be considered at a Board or Committee meeting and other materials are distributed, to the extent practical, to the directors in advance of the meeting to allow for review prior to the meeting.


Board of Directors

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How often did the Board of Directors meet in 2008?2009?


        In 2008,2009, there were seventeennine regular meetings and twoone special meetingsmeeting of the Board of Directors. All directors attended at least 75% of the combined total number of meetings of the Board and Board committees on which they served (during the periods they served).served.


Did all directors attend last year's Annual Meeting?


        All members of the Board of Directorsdirectors attended the 2008 Annual Meeting2009 annual meeting of Shareholders.shareholders. HEI encourages theall directors to attend each year's Annual Meetingannual meeting of Shareholders.shareholders.




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Committees of the Board

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What committees has the Board established and how often did they meet?


        The Board of Directors has four standing committees: Audit, Compensation, Executive and Nominating and Corporate Governance. Members of these committees are generally appointed annually by the Board, taking into consideration the recommendation of the Nominating and Corporate Governance Committee. The names of thetable below shows current committee members are shown on the table below. In addition, the table below also showsand the number of meetings of each committee held in 2008.2009.

Name		Audit		Compensation		Executive		Nominating and Corporate Governance
Don E. Carroll				X
Shirley J. Daniel		X
Thomas B. Fargo (1)		X		X	(4)
Richard W. Gushman, II								X
Constance H. Lau (2)						X
Victor H. Li				X
Bill D. Mills (3)				X
A. Maurice Myers				X
Diane J. Plotts		X	(4)	X		X
James K. Scott		X						X
Kelvin H. Taketa								X	(4)
Barry K. Taniguchi		X
Jeffrey N. Watanabe						X	(4)
Number of Meetings in 2008		4		8		0		6

Name		Audit		Compensation		Executive		Nominating and Corporate Governance
Don E. Carroll				X
Shirley J. Daniel		X
Thomas B. Fargo		X		X	(2)
Richard W. Gushman, II								X
Constance H. Lau (1)						X
Victor H. Li				X
A. Maurice Myers				X
Diane J. Plotts		X	(2)	X		X
James K. Scott		X						X
Kelvin H. Taketa								X	(2)
Barry K. Taniguchi		X
Jeffrey N. Watanabe						X	(2)
Number of Meetings in 2009		4		4		0		4

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(1)

Admiral Fargo was appointed Compensation Committee Chairman on May 6, 2008.



(2)

Ms. Lau is an employee director. All other directors have been determined to be independent. See "Corporate Governance—Who are the independent directors of the Board?" above.



(3)

Mr. Mills was Compensation Committee Chairman from 2004 to May 6, 2008. He retired from the Board on July 9, 2008.



(4)(2)

Committee Chairman.Chairperson.


What are the primary functions of each of the four committees?


•      Audit Committee

        The Audit Committeeprimary functions of HEI's standing committees are described below. Each committee operates and acts under a written charter, which was adopted andcharters that are approved by the Board and may be foundavailable on HEI's website at www.hei.comwww.hei.com. Each of the Audit, Compensation and Nominating and Corporate Governance Committees may form subcommittees of its members and delegate authority to its subcommittees.

Audit Committee

        The Audit Committee is available in print to any shareholder who requests it. The Committee provides independent and objective oversight ofresponsible for overseeing (1) HEI's (1) financial reporting processes and internal controls, (2) the performance of HEI's internal auditor, (3) risk assessment and risk management policies set by management and (4) the Corporate Code of Conduct compliance program for HEI and its subsidiaries. In addition, the committee is directly responsible for the appointment, compensation and oversight of the independent registered public accounting firm performingthat audits of HEI's consolidated financial statements (3) internal controls, (4) risk assessment and risk management policies set by managementmaintains procedures for receiving and (5) oversight of relatedreviewing confidential




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person transactionsreports to the committee of officers. Thepotential accounting and auditing concerns. See "Audit Committee also reviews and approves or disapproves related person transactionsReport" below for officers and reviews and resolves complaints from any employee regarding accounting, internal controls or auditing matters.additional information about the Audit Committee.

        All Audit Committee members of the Committee are independent directors as independence for audit committee members is defined in the listing standards of the New York Stock Exchange. Admiral Fargo, a member ofand qualified to serve on the committee is also a member of the audit committee of Northrop Grumman Corporation, a publicly traded company. See pages 68-69 forpursuant to NYSE and SEC requirements and the Audit Committee Report.meets the other applicable requirements of the Securities Exchange Act of 1934. None of the Audit Committee members serve on the audit committees of more than two other public companies.

•      Compensation Committee

        The responsibilities of the Compensation Committee operates and acts under a written charter, which was adopted and approved byinclude (1) overseeing the Board and may be found on HEI's website at www.hei.com and is available in print to any shareholder who requests it. The Committee oversees HEI's employee and director compensation and employee benefit plans and practices, including its executive compensation plans and programs for employees, executives and nonemployee directors of HEI and its subsidiaries, including equity and incentive plans, (2) reviewing the extent to which risks that may arise from the company's compensation policies and equity-based plans.practices, if any, may have a material adverse effect on the company and recommending changes to address any such risks and (3) assessing the independence of any compensation consultant involved in determining or recommending director or executive compensation. See "Compensation Discussion and Analysis—Compensation Process," pages 19-20,Process" and "Other Relationships and Related Person Transactions—Compensation Committee Interlocks and Insider Participation" below for additional discussion of the role ofinformation about the Compensation Committee, including the scope of the authority, the extent to which it may delegate authority and any role of the compensation consultant or executive officers in the compensation process.Committee.

        TheAll Compensation Committee consists of three or more directors as determined from time to time by the Board. Each member of the Committee ismembers are independent and qualified to serve on the Committeecommittee pursuant to theNYSE requirements of the New York Stock Exchange. At least a majority of the members of the Committee qualifiesand also qualify as "nonemployee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code. The Committee may form subcommitteesAt least a majority of itsthe members and delegate its authority to the subcommittee. The Nonemployee Director Subcommittee of the Compensation Committee qualifies as "nonemployee directors" as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934. The Compensation Committee has theformed and delegated authority to a Nonemployee Director Subcommittee to make equity grants on behalf of the Committee.committee.

        See Compensation Committee Interlocks and Insider Participation on page 67.

•      Executive Committee

        The Executive Committee operatesmay exercise the power and acts under a written charter, which was adopted and approved byauthority of the Board and may be found on HEI's website at www.hei.com andwhen it appears to its members that action is available in print to any shareholder who requests it. The Committee is authorized to act on matters brought before it whennecessary and a meeting of the full Board is impractical. It may also consider any other mattermatters concerning HEI that may arise from time to time.time between Board meetings. The Committeecommittee is currently comprisedcomposed of the Chairman of the Board, who chairs the committee, the Audit Committee Chairperson and the HEI President and Chief Executive Officer and one additional independent director.Officer.

•      Nominating and Corporate Governance Committee

        The functions of the Nominating and Corporate Governance Committee operates and acts under a written charter, which was adopted and approved by the Board and may be found on HEI's website at www.hei.com and is available in print to any shareholder who requests it. All members of the Committee are independent directors as defined in the listing standards of the New York Stock Exchange. Its functions include (1) reviewingevaluating the background and qualifications of potential nominees for the boardBoard and for the boards of directors of HEI and its subsidiary companies presented by shareholders, directors and management,HEI's subsidiaries, (2) recommending to the Board the slate ofdirector nominees to be submitted to shareholders for election at the next Annual Meeting,annual meeting, (3) assessing the independence of directors and nominees, (4) recommending the slate of executive officers to be appointed by the Board and subsidiary boards, (5) advising the Board with respect to matters of Board and committee composition and procedures, (4)(6) overseeing the annual evaluation of the Board (5) reviewing nonemployee director related person transactions and (6) overseeing(7) making recommendations to the Board and the boards of HEI's subsidiaries regarding corporate governance matters generally.

and board succession planning matters. See "Corporate Governance" above for additional information regarding the section onactivities of the Nominating and Corporate Governance on pages 11-12 for a discussion concerning the involvement of this Committee on matters relating to corporate governance.Committee.




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Compensation Committee Report

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        The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis that follows. Based on that review and discussion, the Compensation Committee recommended andto the Board concurred, that the Compensation Discussion and Analysis be included in this proxy statement.Proxy Statement.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE
THE HEI BOARD OF DIRECTORS
Thomas B. Fargo, ChairmanChairperson
Don E. Carroll
Victor H. Li
A. Maurice Myers
Diane J. Plotts


Compensation Discussion and Analysis

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Who were the named executive officers for HEI in 2008?2009?


        For 2008,2009, the named executive officers of HEI were:

1.

Constance H. Lau, President and Chief Executive Officer of HEI; Chairman of the Board of Hawaiian Electric Company Inc. ("Hawaiian Electric Company")(HEI subsidiary); and Chairman of the Board and Chief Executive Officer of American Savings Bank F.S.B. ("American Savings Bank")(HEI subsidiary).



2.

Eric K. Yeaman,James A. Ajello, HEI Senior Financial Vice President, Treasurer and Chief Financial Officer fromsince January 1, 2008 to January 31, 2008, and Hawaiian Electric Company Senior Executive Vice President and Chief Operating Officer from February 1, 2008 to June 12, 2008.26, 2009.



3.

Curtis Y. Harada, HEI Controller, from January 1, 2008 to December 7, 2008. He was promoted to HEI Vice President, Internal Audit since November 9, 2009. Mr. Harada served as HEI Controller and Chief Accounting Officer on December 8, 2008. He served as HEI Acting Financial Vice President, Treasurer and Chief Financial Officer from February 1, 2008 to January 25, 2009. On2009 and as HEI Vice President, Controller and Chief Accounting Officer from January 26, 2009 James A. Ajello joined HEIto November 8, 2009. He is included as Senior Financial Vice President, Treasurer anda named executive officer solely because he served as acting Chief Financial Officer.Officer for part of 2009, and he is not presently expected to be a named executive officer in future periods. Accordingly, some of the discussion and analysis below, to the extent forward-looking, is made without reference to Mr. Harada.



4.

Chester A. Richardson, HEI Vice President-General Counsel. He was promoted to HEI Senior Vice President-GeneralPresident, General Counsel, Secretary and Chief Administrative Officer on December 8, 2008.Officer. Mr. Richardson's role was expanded to include the duties of the HEI Corporate Secretary, effective September 28, 2009.



5.

T. Michael May,Richard M. Rosenblum, Hawaiian Electric Company President and Chief Executive Officer of Hawaiian Electric Company.since January 1, 2009. Mr. Rosenblum succeeded T. Michael May, who retired as of December 31, 2008. On January 1, 2009, Richard M. Rosenblum joined Hawaiian Electric Company as President and Chief Executive Officer.



6.

Timothy K. Schools, Senior Executive Vice President and Chief Operating Officer of American Savings Bank from January 1, 2008 to January 31, 2008, and American Savings Bank President since February 1, 2008.President.


Summary of Results


        In 20062009, HEI and 2007, HEI, Hawaiian Electric Companyits subsidiaries continued to aggressively pursue initiatives to improve operating and American Savings Bank did not meet their respective minimum financial thresholdsperformance in order to be in a better position to weather the economic downturn and no annual executive incentive bonuses were paid to executives at HEI, Hawaiian Electric Company or American Savings Bank. Forgrow earnings and improve capital efficiency as conditions improve.

•

The utility subsidiaries made investments in critical reliability projects and sought timely cost recovery and return on those investments. In the past three

face of lower kilowatthour sales and lower and slower rate relief, management took responsible action to contain and defer spending. As a




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long-term performance periods (2003 - 2005, 2004 - 2006,result, the utilities were able to substantially offset the negative impact of lower than expected revenues. Simultaneously, the utilities executed the first steps in carrying out their roles in the Hawaii Clean Energy Initiative, a landmark multi-year agreement with the state of Hawaii aimed at achieving among the most aggressive clean energy goals in the nation and 2005 - 2007), no HEI (holding company) long-term incentive goals were achieved and no HEI long-term incentive awards were paid to HEI executives (although Ms. Lau did receive long-term incentive awardsa sustainable, clean energy future for subsidiary bank goals that were set when she was American Savings Bank President and Chief Executive Officer).

        In 2008, HEI successfully achieved its annual and long-term incentive goals. HEI's stock price and total returns outperformed manythe state. As a result of its utility peers. The utility regained financial strength primarily due tothese efforts in 2009, Hawaiian Electric Company received further interim rate relief in its 2009 test year rate case for Hawaiian Electric Companyrecovery of costs for a new biodiesel generating station on February 19, 2010, and on the same date, received approval of the joint proposal with the Consumer Advocate for a new method of setting electric rates called "decoupling", which will help the utility to be financially viable while it assists in the last quarter of 2007. On October 20, 2008, Hawaiian Electric Companyimplementing state policy to reduce Hawaii's dependence on oil.

•

The bank experienced higher impairment charges and the State of Hawaii announced an ambitious agreement to speed up the State's move toward renewable energy, positioning Hawaii at the forefront of clean energy leadership and providing the potential to change the utility's business model. In June 2008, American Savings Bank substantially completed the restructuring of its balance sheet through the sale of approximately $1.3 billion of mortgage-relatedlosses on investment securities and provisions for loan losses than in prior years, driven by the early extinguishment of $1.2 billion of certain borrowingseconomic recession; however, its net loan charge-offs remained low compared to strengthen future profitabilitythe industry. Despite the economic conditions, the bank increased its capital ratios of net interest marginto enhance financial soundness and return on assets, while remaining "well-capitalized" and without significantly impacting futurecontinued a comprehensive campaign to improve net income and interest rate risk. The restructuring allowedprofitability that it began in 2008. In 2009, the bank to pay a dividend to HEI of $54.7 million on September 9, 2008 to fund HEI's third quarter common dividend and reduce HEI's commercial paper levels. Excluding the one-time charge related to the balance sheet restructuring, bank earnings improved, benefitting from a steeper yield curve, good credit quality and lower expenses resulting fromrefined its target for performance improvement initiatives. Basedas it began to exceed its original goals set in 2008.

        In 2009, HEI's consolidated net income was $83 million, or $0.91 per share. However, excluding the $19.3 million, or $0.21 per share, loss from the nonrecurring liquidation of private-issue mortgage-related securities at the bank, HEI's adjusted consolidated net income was $102.3 million, or $1.12 per share. Despite the economic headwinds faced by HEI and all businesses generally in 2009, HEI was able to preserve earnings, maintain its dividend, achieve a positive total return to shareholders in 2009 and, at the same time, continue to move forward on these results,key strategic initiatives, positioning it for improved performance and shareholder value creation in the Compensation Committee decided to award incentives to each of the named executive officers as detailed below.near future.


Executive Summary of Significant Changes


        The Compensation Committee has the responsibility for recommending therecommends total compensation programprograms for executives of HEI and its subsidiaries, subject to the approval of the Board. In 2008,2009, the Compensation Committee held eightfour meetings to approve the overall executive compensation program design. The Committeecommittee held lengthy discussions, with and without management present, regarding best pay practices and trends. TheIn 2009, the Compensation Committee substantially revampedrevised HEI's executive compensation programs to comply with new regulations, to establish leadingincorporate best practices and to align executive compensation more directly with shareholder interests. The primary purpose of the changes was to make HEI's executive compensation more performance based.performance-based.

        The following are some of the major revisions made to the executive compensation programs in 2008:

•

The HEI Supplemental Executive Retirement Plan was frozen, effective December 31, 2008. The HEI Supplemental Executive Retirement Plan is a noncontributory, nonqualified plan that was adopted by HEI, effective January 1, 1989, forprogram impacting the benefit of its Chief Executive Officer and other executives designated by the Compensation Committee in recognition of the integral role of these critical executives. This enhanced supplementalabove-named executive retirement plan gave participants the potential for additional retirement income. The Compensation Committee decided to freeze this plan because of the expense of maintaining these benefits, the recognition of current economic times, and in light of what it considers to be best practices. In deciding to freeze this plan, the Compensation Committee concluded that the inclusion of annual incentive compensation in addition to salary in the calculation of the supplemental pension benefit, while competitive with other utilities at the time the provision was enacted, is not consistent with HEI's philosophy to emphasize performance-based rewards. At the time of the freeze of benefit accruals, Constance Lau, the HEI President and Chief Executive Officer, was the only active employee participating in the HEI Supplemental Executive Retirement Plan. When she retires, Ms. Lau will receive benefits that she accrued and earned under this plan through December 31, 2008. Beginning on January 1, 2009, she will be a participant in the HEI Excess Pay Plan. Because it does not include the value of annual incentive compensation in the calculation of the




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supplemental pension benefit, the pension Ms. Lau will earn under the HEI Excess Pay Plan is more in line with what other employees and executives receive upon retirement and thus provides for a more equitable compensation program.

•

The American Savings Bank Supplemental Executive Retirement, Disability, and Death Benefit Plan was frozen, effective December 31, 2008 to enhance the focus on performance-based rewards as noted above. This plan included half of a participant's annual incentive compensation in addition to salary in the calculation of the supplemental pension benefit. At the time of the freeze, Timothy Schools, the American Savings Bank President, was the only active named executive officer participating in this plan. Because the American Savings Bank Retirement Plan, a qualified defined benefit plan, was frozen on December 31, 2007, the freezing of the American Savings Bank Supplemental Executive Retirement, Disability, and Death Benefit Plan aligns the retirement benefits received by American Savings Bank executives with what other American Savings Bank employees receive upon retirement and thus provides for a more equitable compensation program.



•

The HEI Excess Pay Plan, HEI Supplemental Executive Retirement Plan, American Savings Bank Supplemental Executive Retirement, Disability, and Death Benefit Plan, HEI Executives' Deferred Compensation Plan, HEI Non-Employee Directors' Deferred Compensation Plan, and American Savings Bank Select Deferred Compensation Plan, each a nonqualified deferred compensation plan, were amended and restated effective January 1, 2009, to comply with final regulations under Section 409A of the Internal Revenue Code. Benefits paid from all these plans (to the extent not earned and vested as of December 31, 2004) to "specified employees," as defined in Section 409A, on account of separation from service must be delayed until at least six months after the specified employee's separation from service. The plans were also amended so that a participant will forfeit all benefits if terminated for cause, defined as a violation of the HEI Corporate Code of Conduct, which governs HEI and its affiliated companies.



•

New change-in-control agreements were entered into with the named executive officers. The agreements are intended to provide income protection to officers in the event of a change in control of the company that also results in the named executive officers' loss of employment. Effective January 1, 2009, the severance multiples under these agreements, previously at 2.99 times W-2 average earnings, were changed to multiples of one to three times salary and bonus, depending on the executive's position. The change-in-control agreements continue to require both a change in control and a loss of a job in limited circumstances (i.e., a "double trigger"), as defined in the agreement.



•

Effective April 2008, a participant forfeits any potential annual or long-term incentive award if the participant terminates employment within the performance period (other than after a change in control) for any reason other than retirement, death or disability.

        The following are some of the major revisions that will be made to the executive programs in 2009:

•

Base salaries for the named executive officers, excluding salary adjustments for executives who have assumed or will assume additional responsibilities, will bewere frozen in 2009. The salary structure (cost of living adjustments to2009, reflecting the executive salary grades) will also be frozen in 2009.economic recession and similar actions by other companies.



•

Annual and long-term incentives for performance periods beginning in 2009 will bewere based on a percentage of an executive's base salary, rather than the salary midpoint of the executive's grade, to better reflect appropriate levels of compensation for individual contributions.contributors. Each incentive metric will havehas its own threshold.threshold for minimum level of performance.



•

The 2009-2011 long-term incentive plan will generally be paidawards were denominated 60% in cash and 40% in stock units, with a stock value determined at the beginning of the performance period, so that the awards will have a stronger linkage to improvements in shareholder value. The 2010-2012 long-term incentive plan will be paid 100% in stock, less an amount withheld for taxes, with the number of share units determined at the beginning of the performance period to reward




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participants for increases in share value and to better align executive incentives with shareholder interests.

•

Effective January 1, 2009, company-paid executive physicalsThe HEI Excess Pay Plan, HEI Executives' Deferred Compensation Plan and preferential loans to new American Savings Bank Select Deferred Compensation Plan, each a nonqualified deferred compensation plan, were amended so that a participant will forfeit all benefits if terminated for cause (defined as a violation of HEI's Corporate Code of Conduct, which applies to HEI and its subsidiaries).



•

The Executive Death Benefit Plan of HEI and Participating Subsidiaries was amended effective September 9, 2009 to close participation to otherwise newly eligible employees including executives, have been eliminated (althoughand to freeze benefits for existing loans will be grandfathered), inparticipants as of such date.



•

In keeping with HEI's philosophy to reduce nonperformance perquisites.nonperformance-based perquisites, (i) company-paid executive physicals were eliminated as of January 1, 2009 and (ii) as of July 1, 2009, American Savings Bank no longer extends preferential rate loans to employees, including executives (although preferential rate loans existing as of that date are grandfathered).



•

Effective May 1, 2009, automobile and gas allowances for subsidiary utility executives were eliminated and replaced with a one-time $10,000 increase to the eligible utility executive's base salary. Mr. Rosenblum did not receive this benefit when he was hired as Hawaiian Electric Company President and Chief Executive Officer effective January 1, 2009.



•

Effective August 2009, the electric rate discount benefit was eliminated for Hawaiian Electric Company directors, employees and retirees, including Ms. Lau and Mr. Rosenblum.



•

In 2009, the tax gross-up on club membership initiation fees was eliminated.



•

In 2009, restricted stock units will be awarded instead ofwere granted to certain named executive officers. The restricted stock awards. Restricted stock units will allow pro ratagenerally vest four years after issuance, but provide for pro-rata vesting upon an executive's retirement, death or disability, while discouraging departures prior to retirement.disability.



•

TheUnder HEI's stock ownership guidelines, the HEI President and Chief Executive Officer will be required tomust own five times (formerly two and a half times) her annual base salary in stock within five years fromshares of HEI Common Stock by the compliance date, which is January 1 of each year, following the fifth anniversary of the date the policy was changed on January 26, 2009. The policy was changed to be more consistent with what the Compensation Committee believes to be best practices. The other named executive officers, with the exception of Mr. Harada, are required to own one and a half times their respective base salaries in shares of HEI Common Stock by the compliance date following the fifth anniversary of their first becoming subject to the guidelines. See "Stock Ownership Information—Does HEI have stock ownership and retention guidelines for directors and officers?" below.

        HEI has either eliminated or restricted the use of tax gross-ups to named executive officers. There are no gross-ups in the change-in-control agreements given to the named executive officers and aggregate payments under the agreements are limited to the maximum amount deductible under Section 280G of the Internal Revenue Code. There are no tax gross-ups allowed on club membership initiation or membership fees. Tax gross-ups of death benefits have been restricted to the executives who participated in the applicable plan prior to September 9, 2009. Relocation and temporary housing expenses of Messrs. Ajello and Rosenblum were grossed up for taxes up to a certain limit to the extent the gross-ups were within the allowance for such expenses under their offers of employment. This is a common practice for executive relocation policies and was a condition of their recruitment.




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Compensation Process


Who is responsible for determining appropriate executive compensation?


        The Compensation Committee has the responsibility for recommending therecommends total compensation programprograms for HEI and its subsidiaries, subject to the approval of the Board. The Committeecommittee has authority to retain or terminate(or terminate) the services of consultants and advisors to provide advice to the Committee.committee. The Committeecommittee approves, modifies or rejects its consultants', advisors' or management's recommendations regarding executive compensation programs, including incentive compensation and equity-based plans. The Committeecommittee may delegate authority to a subcommittee of no fewer than two members of the Committeecommittee to determine matters such as equity compensation. The Board approves the actions of the Committee,committee and, where the executive works at a subsidiary of HEI, the actions of the Committeecommittee are also approved by the subsidiary board.

        The Board conducts an evaluation of the performance of the HEI President and Chief Executive Officer including her performance, in light of corporate goals and objectives relevant to her compensation. The Compensation Committee, with the assistance of its independent compensation consultant, recommends an executive compensation package for the HEI President and Chief Executive Officer based on the Board's evaluation. The independent directors of the Board approve the compensation of the HEI President and Chief Executive Officer.


Can the Compensation Committee modify or terminate executive compensation programs?


        The Compensation Committee reserves the right to amend, suspend or terminate any incentive programsprogram or any other executive compensation program.program, or any individual executive's participation in such programs. The Committeecommittee can exercise its discretion to reduce or increase (except to the extent an award or payout is intended to satisfy the requirements offor deductibility under Section 162(m) of the Internal Revenue Code) increase the size of any award or payout. In 2009, no portion of any bonus or long-term incentive compensation paid by HEI or any of its subsidiaries was nondeductible under Section 162(m).

        In making its compensation determinations, the Compensation Committee will consider financial, accounting and tax consequences, if appropriate. For instance, the Committeecommittee may determine that there should not be any incentive payout that would otherwise result solely from a new way of accounting for a financial measure. The Committee will also consider tax consequences if appropriate. For instance,As another example, the Committeecommittee will take into account tax deductibility in establishing executive compensation, but it reserves the right to award compensation even when not deductible if it is reasonable and appropriate.


Does HEI have the right to force executives to return compensation received?


        In 2007, the Compensation Committee approved, and the Board ratified, an executive compensation recovery policy for the recoupment of performance-based awards paid to executives who are found to be personally responsible for fraud, gross negligence, or intentional misconduct that causes




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HEI or any of its operating subsidiaries to restate all or a portion of its financial statements. The amount to be recovered from the executive will be the amount by which the performance-based award exceeded the amount that would have been payable to the executive had the financial statements been initially filed as restated, or any other amount (including, but not limited to, the entire award) that the Committee shall determine, but in no event will the amount to be recovered by HEI be less than the amount required to be repaid or recovered as a matter of law. The Committee has the discretion to determine whether HEI shall effect any such recovery (i) by seeking repayment from the executive, (ii) by reducing any other amount payable under any compensatory plan or program maintained by HEI, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards, or (iv) by any combination of the foregoing. In addition, HEI may dismiss an executive found to be personally responsible for the fraud, gross negligence, or intentional misconduct or take such other action to enforce the executive's obligations to HEI as it may deem appropriate based on the particular circumstances of the situation.


WhatWho is the role ofcompensation consultant and what is the compensation consultant?consultant's role?


        The Compensation Committee's independent compensation consultant isuntil December 2009 was Towers Perrin.Watson (formerly Towers Perrin). The Committee engagescommittee engaged Towers PerrinWatson to provide the Committee with advice and data with respect to compensation benchmarking and market practices. Towers Perrin worksWatson worked with the Compensation Committee Chairman and Committee members in recommendingto develop recommendations to the Board regarding executive compensation initiatives and proposed changes.

        In 2008,During the fourth quarter of 2009, the Compensation Committee engaged Towers Perrinconducted a request for proposal process to provideevaluate compensation consultants for future work, including a comprehensive review of HEI'sthe compensation and benefit policies and practices for executives. This review included HEI's peer group, compensation philosophy, compensation levels, incentive and stock plan design,of the named executive officers and other compensation components. The Committee authorized these projects to ensure that all of HEI's compensation and benefit programs align with its strategies, to enhance linkage of rewards to results that support shareholder value, to ensure fairness in the administration of plans, to simplify programs to drive greater understanding, to maintain the competitiveness of the program, and to manage costs within HEI's financial resources.

        Towers Perrin does not provide any other services to HEI and its subsidiaries other than the compensation services described above. Actuarial services tosenior executives at HEI, American Savings Bank and Hawaiian Electric Company. As a result of the selection evaluation process, Frederic W. Cook & Co., Inc. (Fred Cook & Co.) was retained in December 2009 as the Compensation Committee's independent compensation consultant, to provide information, analyses and advice regarding executive compensation.




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        In 2009, Towers Watson also performed some nonexecutive compensation consulting services for Hawaiian Electric Company, which value did not exceed $120,000. As part of the terms of its engagement, Fred Cook & Co. is not permitted to perform any services at the direction of the management of HEI or its subsidiaries. All services by Fred Cook & Co. are provided by Watson Wyatt Worldwide.at the direction of the Compensation Committee.

        In February 2010, Fred Cook & Co. concluded an executive compensation review on behalf of the Compensation Committee. The results of this review are discussed below.


What is the role of executive officers in determining named executive officer compensation?


        With the permission of the Compensation Committee, in 2008, the2009, HEI President and Chief Executive Officer, the HEI Senior Vice President-General Counsel and Chief Administrative Officer, the American Savings Bank President and other executives discussed with Towers Watson and provided perspectives to, Towers Perrin regardingFred Cook & Co. HEI's compensation philosophy and the methodology and metrics for computing executive incentives. Human resources and finance and other personnel provided data in response to the requests of the Compensation Committee'sCommittee, Towers Watson and Towers Perrin's requests.Fred Cook & Co.

        Although the HEI President and Chief Executive Officer is a director on the HEI Board, she did not participate in any Board decisions impacting her own compensation. In April 2008,February 2009, Ms. Lau recommended to the Compensation Committee a base salary increasesincrease effective March 2, 2009 for her direct reports: Mr. May, Mr. Harada,Richardson in recognition of his expanded job responsibilities as HEI's Chief Administrative Officer that were effective December 8, 2008.


How do HEI's compensation policies and Mr. Richardson.practices relate to HEI's risk management?


        HEI has an Enterprise Risk Management function that is principally responsible for identifying and managing risk across the holding company and its two operating companies, and for reporting high risk areas to the boards of directors and designated board committees. As a result, all HEI directors, including those who serve on the Compensation Committee, are aware of the risks which could have a material adverse effect on HEI. The Board (through its Compensation Committee) has assessed these risks and, with advice of its independent compensation consultant, has established HEI's compensation policies and practices and the specific executive compensation program described in this Compensation Discussion and Analysis. The Board and the Compensation Committee have concluded that the executive compensation program does not encourage unnecessary or excessive risk-taking.

        HEI's compensation policies and practices are designed to encourage executive management to maximize value for shareholders, while considering its key stakeholders, including customers, employees and regulators, and to discourage decisions that introduce risks that may have a material adverse effect on HEI. The executive compensation program is structured to pay for performance and align the executive officers' interests with shareholder interests, as well as encourage executives to focus on profitability, efficient use of capital, earnings growth and stock price appreciation in both the short and long terms. Because the executive officers are in a position to directly influence HEI's performance, compensation for executive officers involves a significant portion of pay that is "at risk" and tied directly to HEI performance—namely, the annual incentive bonus plan and the value of long-term equity-based incentives.

        In structuring the incentive compensation plans and setting the particular goals, targets and metrics for awards under those plans, the Compensation Committee incorporates the following elements and practices to encourage consistent leadership and appropriate and prudent decision-making among the named executive officers in a manner that requires cooperation and execution without taking unnecessary or excessive risks:

•

Financial performance objectives of the annual cash incentive program linked to approved budget guidelines and nonfinancial measures aligned with the interests of all of HEI's stakeholders.




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•

Alignment of financial and nonfinancial performance in the annual cash incentive programs for named executive officers, other officers and nonexecutive employees.



•

"Clawback" capability through an executive compensation recovery policy to recoup incentive awards paid to executives who are found to be personally responsible for fraud, gross negligence or intentional misconduct that causes a restatement of HEI's financial statements.



•

Greater financial opportunity in long-term incentive programs best realized through long-term total shareholder return, earnings growth, profitability and efficient use of capital, which mitigates excessive short-term risk-taking.



•

Share ownership guidelines provide for named executive officers to hold certain amounts of HEI stock, ensuring that each executive has a significant amount of personal wealth tied to the long-term performance of HEI.



•

Pro-rata payouts under the performance-based plans (above minimum thresholds), rather than an "all-or-nothing" approach.



•

Use of annual grants of long-term incentives vesting over a period of years to encourage executives to focus on sustaining HEI's long-term performance.



•

Use of a variety of performance metrics, both financial and nonfinancial (e.g., net income, return on average common equity and total shareholder return, among others) that correlate to long-term creation of shareholder value and are affected by management decisions.



•

A variable and nonformulaic goal-setting process, where prior performance and market conditions are considered relative to future expected performance to assess the reasonableness of the goals.



•

Board discretion in establishing performance goals and metrics, determining whether these goals have been achieved and administering all performance-based and equity awards, including the form of the award, such as cash or stock.



•

Continuous monitoring by the Board and the Compensation Committee through assessment of HEI's progress toward its goals in juxtaposition to risks faced by the enterprise, through management presentations at quarterly meetings and periodic written reports.


Compensation Program


What are the objectives of HEI's executive compensation programs?


        The following are the primary objectives of HEI's compensation programs:

•

Create aEncourage and reward performance relative to business plans and strategies that maximize the value HEI delivers to its shareholders and other key stakeholders, such as customers, employees, policymakers and regulators.



•

Provide compensation and benefits that are designed to be competitive advantagewith peer companies and relevant functional positions to attract, retain and motivate talented executives.



•

Emphasize performance-based rewards driven by results within the scope of the executive's role.responsibility or the responsibilities of the executive team as a group.



•

Provide compensation, benefits and perquisites that are designed to be competitive with peer companies.



•

Incent and reward performance relative to business plans and strategies that create and preserve shareholder value.



•

Provide differentiated reward strategies among HEI and its operating bank and utility subsidiaries to align with specific business needs and talent markets.



•

Maintain a culture of integrity, where there is no undue pressure to meet or exceed targets for personal gain, nor encouragement of employees to take undue or inappropriate risks.




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What is each element of executive compensation?


        To meet the compensation objectives described above, the compensation for named executive officers includes the following elements:

•

Base salary.



•

Annual performance-based cash incentive compensation.



•

Long-term performance-based equity and non-equitynonequity incentive compensation.compensation and service-based restricted stock units.



•

Health and welfare benefits and retirement benefits and limited perquisites.benefits.


Why does HEI choose to pay each element?


•

HEI chooses to pay its executives a base salary because it should pay value for value received, and salary for services rendered during the year recognizes the individual's position, responsibilities, experience, performance and performance.contributions.



•

HEI provides its executives the opportunity to earn annual cash incentives based on the achievement of goals (i) to build fundamental earnings in a controlled risk manner. The annual incentive goalsmanner to support the continued payment of the HEI dividend, (ii) to focus on nonfinancial measures important to HEI's stakeholders and (iii) to motivate executives and encourage their commitment to HEI's success. Shareholders and other stakeholders benefit from the achievement of these goals.



•

HEI provides longer-term incentives to support initiatives to provide long-term growth in shareholder value, to increase HEI's financial and strategic flexibility and to build the fundamental value of HEI's operating companies in their respective industries. HEI pays its executives in a mix of earned long-term incentives paid partially in HEI stock and service-based restricted stock or stock units in order to encourage stock ownership and alignment of the interests of executives and shareholders. HEI's long-term incentive plan rewards executives based on HEI's successful financial performance over rolling three-year performance periods. The three-year performance period provides balance with the shorter-term focus of the annual incentive compensation plan. In 2009, HEI paid its executives in a mix of earned long-term incentives paid partially in cash, HEI stock and service-based restricted stock units in order to encourage stock ownership and alignment of the interests of executives and shareholders. The 2010-2012 long-term incentive plan awards to all HEI executives will be paid entirely in stock, less an amount withheld for taxes, determined in share units set at the beginning of the performance period, to encourage even greater alignment of executives with shareholder interests. The long-term incentive plan also has a retention impact on the executives.



•

HEI paysprovides its executives health and welfare benefits and retirement benefits and limited perquisites to encourage executive health and retention, andas well as enabling HEI to be competitive with its peers.


How does HEI determine the amount for each element?


        HEI uses peer company comparisons to determine the amount of each element of executive compensation. Peer companies are companies which, in the aggregate, are similar in business focus, financial scope and valuation, provide similar products and services and are sources for talented employees. Peer companies are selected by the Compensation Committee's independent compensation consultant and are reviewed by the Compensation Committee. The resulting peer companies are used as a reference in determining appropriate pay levels and mix of pay components.

        Peer companies for HEI and its subsidiaries should reflect HEI's diverse businesses. HEI is a Hawaii-based holding company with a unique blend of two regulated operating subsidiaries, a bank and electric utilities. HEI supplies power to 95% of Hawaii's population through its electric utilities, Hawaiian Electric Company and its subsidiaries, Hawaii Electric Light Company Inc. and Maui Electric Company,




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Limited,Company, and provides a wide range of financial services to individuals and businesses through American Savings Bank, one of the state's largest financial institutions based on asset size. Among the objectives of the HEI compensation program are to provide differentiated reward strategies among HEI and its operating bank and utility subsidiaries to align with specific business needs and talent markets and to reward performance relative to strategic plans that support shareholder value.

        With the assistance of its compensation consultant, the Compensation Committee targets total compensation and each component at the median of relevant peers. The actual awards are differentiated based upon the performance of HEI and its operating subsidiaries and the individual's contribution. At more senior levels in the organization, a greater emphasis is placed upon the performance-based incentives and the actual compensation received under these plans is determined by the results of HEI and the operating subsidiaries and increases in shareholder value. Above median incentives may be given to individual executives for superior performance.

Peer companies are comprised of companies that, in aggregate, are similar in business focus, financial scope and valuation, are product and service competitors, provide sources for talent, and are similar with respect to cost-of-labor and cost-of-living. The peers also include companies that compete for talent in the same geographic area. The resulting2009

        In early 2009, Towers Watson conducted a peer companies are used as a reference in determining appropriate pay levels and mix of pay components.

        Because HEI is a Hawaii-based holding company with a unique blend of two regulated operating subsidiaries, a bank and electric utilities, the peer groups for holding company and operating unit executives differ. Towers Perrin conducted its 2008 peergroup selection by considering companies within a range of one-half to two times the size, based on assets, of HEI, Hawaiian Electric Company or American Savings Bank, or Hawaiian Electric Company, eliminating companies that had three-year total shareholder returns that were significantly negative.

•

To screen peer companies for HEI executives, Towers Watson reviewed electric utilities, multi-utilities, commercial banks, thrifts and mortgage finance companies with $1.25 to $5 billion in revenues, 1,700 to 7,040 employees and a market capitalization of $1.0 to $4.2 billion. Not all peers met all of the criteria.



•

To screen peer companies for Hawaiian Electric Company executives, Towers Watson reviewed electric utilities and multi-utilities with $1.0 to $4.2 billion in revenues, 1,070 to 4,300 employees and a return on average common equity greater than 5%.



•

To screen peer companies for American Savings Bank executives, Towers PerrinWatson reviewed commercial banks, thrifts and mortgage finance companies with $2.7 to $10.8 billion in assets, 665 to 2,600 employees and a return on assets greater than 1.0%. To screen

        The following were the HEI peer group companies for Hawaiian Electric Company executives, Towers Perrin reviewed electric utilities and multi-utilities with $1.0 to $4.2 billion in revenues, 1,070 to 4,300 employees, and a return on average common equity greater than 5%. To screen peer companies for HEI executives, Towers Perrin reviewed electric utilities, multi-utilities, commercial banks, thrifts and mortgage finance companies with $1.25 to $5 billion in revenues, 1,700 to 7,040 employees, and a market cap of $1.0 to $4.2 billion. Not all peers met all of the criteria.2009:

Banking/Financial Services Peers		Utility Peers*
Bank of Hawaii		Allegheny Energy
Central Pacific Financial		Alliant Energy
Citizens Republic Bancorp		Ameren
City National Bank		Entergy
CVB Financial		Great Plains Energy
F.N.B.		Mirant
Old National Bancorp		Northeast Utilities
Pacific Capital Bancorp		NSTAR
Park National		OGE Energy
Prosperity Bancshares		Pinnacle West Capital
SVB Financial Group		PNM Resources
Trustmark		Portland General Electric
Umpqua Holdings		PPL
Washington Federal		Puget Energy
		Questar
		Sempra Energy
		Sierra Pacific Resources
		TECO Energy
		Vectren
		Wisconsin Energy




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        The following are the American Saving Bank peer group companies:

Financial Services/Banking Peers
Bank of Hawaii Corp. Central Pacific Financial Corp. Citizens Republic Bancorp, Inc. City National Bank Corp. CVB Financial Corp. First Financial Bankshares, Inc. F.N.B. Corp. Frontier Financial Corp. Glacier Bancorp, Inc. NBT Bancorp, Inc.		Old National Bancorp Pacific Capital Bancorp Park National Corp. Prosperity Bancshares, Inc. Sterling Bancshares, Inc. SVB Financial Group Trustmark Corp. Umpqua Holdings Corp. Washington Federal, Inc. Westamerica Bancorporation

        The following arewere the Hawaiian Electric Company peer group companies:companies in 2009:

Utility Peers*
Allegheny Energy Inc.** Alliant Energy Corp. Ameren Corp.** Aquila Inc. Avista Corp. Entergy Corp.** Great Plains Energy, Inc. Mirant Corp. Northeast Utilities NSTAR OGE Energy Corp. Pinnacle West Capital Corp. PNM Resources, Inc.		Portland General Electric Co.
Alliant Energy		PPL Corp.**
Ameren		Puget Energy Inc.
Aquila		Questar Corp.
Avista		San Diego Gas & Electric Co.
Entergy		Sierra Pacific Resources
Great Plains Energy		TECO Energy Inc.
Mirant		UIL Holdings Corp.
Northeast Utilities		UniSource Energy Corp.
NSTAR		Vectren Corp.
OGE Energy		Westar Energy Inc.
Pinnacle West Capital		Wisconsin Energy Corp.
PNM Resources

The following arewere the HEIAmerican Savings Bank peer group companies:companies in 2009:

Banking/Financial Services/BankingServices Peers				Utility Peers*
Bank of Hawaii Corp.		Old National Bancorp
Central Pacific Financial Corp.		Pacific Capital Bancorp
Citizens Republic Bancorp Inc.		Park National
City National Bank Corp.		Prosperity Bancshares
CVB Financial Corp. F.N.B. Corp. Old National Bancorp Pacific Capital Bancorp Park National Corp. Prosperity		Sterling Bancshares Inc.
First Financial Bankshares		SVB Financial Group Trustmark Corp. Umpqua Holdings Corp. Washington Federal, Inc.
F.N.B.		Allegheny Energy, Inc. Alliant Energy Corp. Ameren Corp. Entergy Corp. Great Plains Energy, Inc. Mirant Corp. Northeast Utilities NSTAR OGE Energy Corp. Pinnacle West Capital Corp. PNM Resources, Inc. Portland General Electric Co. PPL Corp. Puget Energy Inc. Questar Corp. Sempra Energy Sierra Pacific Resources TECO Energy, Inc. Vectren Corp. Wisconsin Energy Corp.Trustmark
Frontier Financial		Umpqua Holdings
Glacier Bancorp		Washington Federal
NBT Bancorp		Westamerica Bancorporation

---

*

Through recent restructurings or name changes,Some company names have changed and some of the utility peers maycompanies no longer exist. These changes will be reflected atexist due to restructurings that occurred after the timeTowers Watson peer group selection was completed.

Peer companies in 2010

        As part of an enterprise-wide review of executive compensation in February 2010, Fred Cook & Co. conducted a peer group selection and compensation comparison in which the compensationsame utility peer data is reviewed in the next compensation assessment.



**

Utility holding company. Subsidiary benchmarks used forgroup would apply to HEI and Hawaiian Electric Company executives.and a banking peer group would apply to American Savings Bank.

•

To screen peer companies for HEI and Hawaiian Electric Company executives, compensation data from a peer group of 15 similarly-sized public utility companies and survey data from Towers Watson that covered both energy services and general industry companies were reviewed. The resulting primary comparator group includes 15 publicly-traded utilities with annual revenue between $1.5 and $6 billion, approximately half to three-times that of HEI. The results of the review revealed that the total direct compensation levels (i.e., annual cash compensation plus long-term incentive awards) of Ms. Lau and Messrs. Ajello and Richardson) are at the 25^th percentile and Mr. Rosenblum's total direct compensation is at the median level.



•

To screen peer companies for American Savings Bank executives, the compensation consultant reviewed compensation data from a 20-company peer group of high-performing regional banks and thrifts and survey data from Towers Watson that covered a broader set of financial services companies. The resulting comparator group includes 23 regional banks with total assets between approximately half and two-times that of ASB, or $2.6 to $10.5 billion, respectively. The results of the review reflected that Mr. Schools' total direct compensation is in the median to 75^th percentile range.




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        The following are the HEI and Hawaiian Electric Company peer group companies in 2010:

Utility Peers
Allegheny Energy		Pinnacle West Capital
Alliant Energy		PNM Resources
Great Plains Energy		Portland General Electric
Mirant		Questar
Northeast Utilities		TECO Energy
NSTAR		Vectren
NV Energy		Wisconsin Energy
OGE Energy

        The following are the American Savings Bank peer group companies in 2010:

Banking Peers
1st Source		Great Southern Bancorp
BancFirst		Hancock
Bank of Hawaii		IBERIABANK
Bank of the Ozarks		Independent Bank
City Holding Company		NBT Bancorp
Community Bank System		Oriental Financial Group
CVB Financial		Park National
Dime Community Bancshares		Prosperity Bancshares
First Financial Bankshares		Republic Bancorp
FirstMerit		United Bankshares
Flushing Financial		Westamerica Bancorporation
Glacier Bancorp


How does each element fit into HEI's overall compensation objectives?


        With the assistance of its compensation consultant, the Compensation Committee reviews each compensation element.element to determine whether it fits into HEI's overall compensation objectives. The committee also requests that, at least annually, management prepare, and the consultant review, tally sheets on each executive officer to determine how each executive's elements of pay, such as base salary, annual incentives, benefits and long-term incentives, compared to executives in functionally comparable positions at peer companies. The Compensation Committee uses this information to consider whether any element should be reduced or increased or whether the mix of elements should be changed.

        The Compensation Committee also reviewed internal equity amongstamong the top executivesnamed executive officers when developing pay recommendations. The Compensation Committee believes that the comparative compensation among the named executive officers is fair, considering job scope, experience, value to the organization and duties relative to the other named executive officers: Constance H. Lau holds multiple positions, as (i) President and Chief Executive Officer of HEI, (ii) Chairman of the Boards of Hawaiian Electric Company and American Savings Bank, and (iii) Chief Executive Officer of American Savings Bank. Her compensation reflects her leadership of a publicly traded mid-cap holding company and her responsibilities for guiding two diverse and regulated operating subsidiaries. Curtis Y. Harada, the HEI Vice President, Controller, and Chief Accounting Officer, was the certifying officer responsible for overseeing the financial performance of the holding company for eleven months of 2008. Chester A. Richardson is HEI Senior Vice President-General Counsel and Chief Administrative Officer and his compensation is commensurate with that role. The compensation of T. Michael May, former President and Chief Executive Officer of Hawaiian Electric Company who retired on December 31, 2008, and Timothy K. Schools, President of American Savings Bank, reflects their roles as heads of HEI's major operating subsidiaries.officers.


Compensation Elements


What are the base salaries of the named executive officers?


        In April 2008, the Board evaluated Ms. Lau's performance for the prior year and the Compensation Committee recommended to the Board a salary increase taking into consideration the Board's evaluation. Also, in April 2008, Ms. Lau recommended to the Compensation CommitteeThe base salary increases for Mr. May, Mr. Harada, and Mr. Richardson. After considering these recommendations, the following salary increasessalaries for the named executive officers effective May 1, 2008,are set forth in the 2009 Summary Compensation Table below.

        In February 2009, the named executive officers agreed to waive the merit increases, which were in the budget approved by the Board:

Name		% Base Salary Increase			$ Base Salary Increase			Base Salary, Effective May 1, 2008
Constance H. Lau (1)			3.5	%	$	25,800		$	771,800
Eric K. Yeaman (2)			—			—			414,000 430,000	(HEI) (HECO)
Curtis Y. Harada (3)			3.2	%		6,600			215,600
Chester A. Richardson (4)			3.7	%		11,400			321,400
T. Michael May (5)			3.0	%		17,900			615,900
Timothy K. Schools (6)			—			—			550,000

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(1)

Ms. Lau voluntarily proposed to forgo a salary increase in 2007 and the Compensation Committee and Boards, due to the Board agreed with her proposal.



(2)

Mr. Yeaman served as HEI Financial Vice President, Treasurereconomic downturn and Chief Financial Officerthe projected slow or minor growth for executive officer salaries based on general industry surveys obtained from January 1, 2008human resource consulting firms, excluding salary adjustments for named executive officers who assumed additional responsibilities or to January 31, 2008 at an annual salary of $414,000. On February 1, 2008, Mr. Yeaman transferred to Hawaiian Electric Company as its Senior Executive Vice President and Chief Operating Officer at an annual salary of $430,000. Because he was so recently promoted and had not served a year in his new role as Hawaiian Electric Company Senior Executive Vice President and Chief Operating Officer, Mr. Yeaman was not eligiblemake up for the Mayelimination of the HEI-paid car and gas allowances. Mr. Richardson was an exception to the salary freeze because he assumed additional responsibilities as HEI's Chief Administrative Officer in 2008 merit increase. He resigned from Hawaiian Electric Company on June 12, 2008.

and received a salary adjustment of 8.6%, or $27,600, effective March 2, 2009.




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(3)

Mr. Harada did not receive any salary adjustment in 2009, but did receive a bonus for the partial month that he served as HEI Controller and Acting Financial Vice President, Treasurer and Chief Financial Officer from February 1, 2008 to January 25, 2009. Mr. Harada receivedat a $15,000 monthly bonus for every month he served as Acting HEI Financial Vice President, Treasurer and Chief Financial Officer,rate of $15,000 while retaining his role and compensation as HEI Controller.Controller and Chief Accounting Officer. The bonus for Mr. Harada was based on the increased responsibilities in his new role. Having served 11 months in the role as Acting HEI Financial Vice President, Treasurer and Chief Financial Officer in 2008, his bonus in 2008 was $165,000 in addition to his annualized base salary of $215,600. On December 8, 2008, Mr. Harada was promoted to HEI Vice President, Controller and Chief Accounting Officer. Effective January 26, 2009, James A. Ajello joined HEI as Senior Financial Vice President, Treasurer and Chief Financial Officer.



(4)

Mr. Richardson was hired on August 6, 2007 as HEI Vice President-General Counsel. On December 8, 2008, Mr. Richardson was promoted to HEI Senior Vice President-General Counsel and Chief Administrative Officer. At its meeting on February 20, 2009, the Compensation Committee approved a salary adjustment of 8.6% or $27,600 for Mr. Richardson, effective March 2, 2009, in recognition of his increased responsibilities in his new role.



(5)

Mr. May retired as of December 31, 2008. In March 2008, Mr. May received a discretionary bonus of $100,000 for the utility's success in meeting project milestones that set the groundwork for improved financial performance in operational areas such as regulatory affairs, demand side management, and distributed and central unit generation, in addition to his annualized base salary of $615,900. Effective January 1, 2009, Richard M. Rosenblum joined Hawaiian Electric Company as President and Chief Executive Officer.



(6)

Mr. Schools was hired by American Savings Bank as Senior Executive Vice President & Chief Operating Officer on July 15, 2007 and received an annualized base salary of $450,000. On February 1, 2008, he was promoted to American Saving Bank President and his annual salary was increased to $550,000. Because he was so recently promoted and had not served a year in his new role as President, Mr. Schools was not eligibleacting chief financial officer for the May 2008 merit increase.

        Base salaries for the named executive officers, excluding salary adjustments for executives who assume additional responsibilities as has Mr. Richardson, will be frozen inHEI until January 25, 2009. The salary structure (cost of living adjustments to the executive salary grades) will also be frozen in 2009.




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What was HEI's 20082009 annual incentive plan and were there any payouts under this plan?


        HEI's annual incentive plan is otherwise known as the Executive Incentive Compensation Plan (EICP).Plan. The following were the award ranges, shown as a percentage of theannual base salary, midpoint (the middle salary level in a salary range for a particular job grade or position), that the Compensation Committee approved in February 2009 for the 20082009 annual incentive plan:

Name		Minimum			Target			Maximum			2008 salary midpoint
Constance H. Lau			42.5	%		85	%		170	%	$	776,000
Eric K. Yeaman (1)			25.0	%		50	%		100	%		405,000 441,000	(HEI) (HECO)
Curtis Y. Harada			20.0	%		40	%		80	%		213,000
Chester A. Richardson			22.5	%		45	%		90	%		334,000
T. Michael May			30.0	%		60	%		120	%		581,000
Timothy K. Schools (2)			30.0	%		60	%		120	%		468,000 532,000	(COO) (President)

---

(1)

Because Mr. Yeaman terminated his service with Hawaiian Electric Company on June 12, 2008, he forfeited his participation in the 2008 annual incentive plan, in accordance with revisions to the annual incentive plan adopted by the HEI Compensation Committee, effective April 2008, that provide that a participant generally forfeits any potential annual incentive award if the participant terminates employment within the performance period for any reason other than retirement, death or disability.



(2)

For the 2008 annual incentive plan, Mr. Schools' salary midpoint was prorated with one month at his American Savings Bank Senior Executive Vice President and Chief Operating Officer (COO) grade and 11 months at his President grade.

        In March 2008, the Compensation Committee set the following minimum financial thresholds that had to be met in order for the 2008 annual incentive awards to be paid:

•

HEI earnings per share minimum threshold of $1.26 per share for HEI executives (including Ms. Lau, Mr. Harada and Mr. Richardson),



•

Utility* net income minimum threshold of $90.2 million for executives of Hawaiian Electric Company and its subsidiaries (including Mr. May), and



•

Bank net income target threshold of $48.1 million for American Savings Bank executives (including Mr. Schools).

---

* Unless otherwise specified throughout this proxy statement, a reference to utility goals means utility consolidated goals, which include Hawaiian Electric Company and its subsidiaries Maui Electric Company, Limited and Hawaii Electric Light Company, Inc.

        In setting these award levels, the Compensation Committee recognized that adjustments would be appropriate in measuring whether these thresholds, as well as specific individual thresholds set for the named executive officers and others, had been met in the event that American Savings Bank implemented the restructuring of its balance sheet that was then under consideration. The restructuring, while beneficial to both the bank and HEI, was expected to entail an adverse impact on 2008 earnings, significantly downsize the assets of the bank, and also reduce the bank's equity, making possible a return of capital to HEI.




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        At its meeting on February 20, 2009, the Compensation Committee considered the effects of American Savings Bank's balance sheet restructuring, which was substantially completed in June of 2008, in its determination of annual incentive awards for 2008 performance. The restructuring was successful in that it allowed the bank to reduce the size of its balance sheet by approximately $1.1 billion, while enabling it to maintain its earnings power on a lower capital base. This allowed American Savings Bank to return $54.7 million of capital to HEI, which was used in part to pay down HEI's short-term borrowings. However, to achieve these benefits, American Savings Bank recognized an after-tax loss of $11.6 million on the sale of $1.3 billion of mortgage related securities and incurred an after-tax loss of $24 million on the early repayment of $1.2 billion of interest bearing liabilities, for a total charge of $35.6 million after-tax to 2008 earnings at American Savings Bank and HEI.

Name		Minimum			Target			Maximum
Constance H. Lau			42.5	%		85	%		170	%
James A. Ajello			25.0	%		50	%		100	%
Curtis Y. Harada			20.0	%		40	%		80	%
Chester A. Richardson			25.0	%		50	%		100	%
Richard M. Rosenblum			30.0	%		60	%		120	%
Timothy K. Schools			40.0	%		80	%		160	%

        The Compensation Committee determined, consistent with its March 2008 determination, that the $35.6 million charge to earnings resulting from the balance sheet restructuring should be excluded to arrive at adjusted earnings for 2008 to be used in determining whether the overall and individual thresholds had been met for 2008. Excluding this charge, HEI's adjusted earnings for 2008 were $125.9 million and ASB's adjusted earnings were $53.4 million. Using these adjusted net income figures for purposes of determining whether thresholds were met, HEI's adjusted earnings per share were $1.49 and American Savings Bank's return on assets (one of the individual metrics described below) was 0.875%. These results exceeded the corresponding general and individual HEI and American Savings Bank thresholds, as shown in the table below.

        In addition to the minimum thresholds on the respective company annual incentive programs, the Compensation Committee established minimum thresholds for each of the financial and other operational goals designed to align management decisions with shareholder value. The following table below lists the named executive officer performance metrics, weightings, minimum thresholds and target goals, actual/adjusted results achieved, and payouts for the 2008 annual incentive compensation plan:

Name		Weight			Performance Metric		Minimum Threshold (1)		Target Goal		Actual/Adjusted Results		Award
Constance H. Lau			40	%	HEI Earnings Per Share		$1.26 per share		$1.47 per share		$1.49 per share (2)		$   290,224
			30	%	Utility Free Cash Flow		($88.0 million)		($77.7 million)		($17.1 million)		395,760
			30	%	Bank Return on Assets		—		0.693%		0.875% (2)		395,760
			100	%									$1,081,744
Eric K. Yeaman			35	%	Utility Net Income		$90.2 million		$100.2 million				—
			35	%	Utility Free Cash Flow		($88.0 million)		($77.7 million)				—
			10	%	Preferred Energy Future		Meet project minimum schedule and minimum threshold		Meet project schedule Not to exceed budget				—
			10	%	Expand Renewable Generation		Meet project minimum schedule and minimum threshold		Meet project schedule Not to exceed budget				—
			10	%	Execute Regulatory Strategy		Implement by August 2008		Implement by July 2008				—
			100	%									—




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Name		Weight			Performance Metric		Minimum Threshold (1)		Target Goal		Actual/Adjusted Results		Award
Curtis Y. Harada			40	%	HEI Earnings Per Share		$1.26 per share		$1.47 per share		$1.49 per share (2)		$     37,488
			30	%	Utility Free Cash Flow		($88.0 million)		($77.7 million)		($17.1 million)		51,120
			30	%	Bank Return on Assets		—		0.693%		0.875% (2)		51,120
			100	%									$   139,728
Chester A. Richardson			40	%	HEI Earnings Per Share		$1.26 per share		$1.47 per share		$1.49 per share (2)		$     66,132
			30	%	Utility Free Cash Flow		($88.0 million)		($77.7 million)		($17.1 million)		90,180
			30	%	Bank Return on Assets		—		0.693%		0.875% (2)		90,180
			100	%									$   246,492
T. Michael May			35	%	Utility Net Income		$90.2 million		$100.2 million		$92.0 million		$  71,833
			35	%	Utility Free Cash Flow		($88.0 million)		($77.7 million)		($17.1 million)		244,020
			10	%	Preferred Energy Future		Meet project minimum schedule and minimum threshold		Meet project schedule Not to exceed budget		Not met		0
			10	%	Expand Renewable Generation		Meet project minimum schedule and minimum threshold		Meet project schedule Not to exceed budget		Achieved at target		34,860
			10	%	Execute Regulatory Strategy		Implement by August 2008		Implement by July 2008		Achieved at target		34,860
			100	%									$385,573




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Name		Weight			Performance Metric		Minimum Threshold (1)		Target Goal		Actual/Adjusted Results		Award
Timothy K. Schools			35	%	Bank Net Income		—		$48.1 million		$53.4 million (2)		$221,340
			35	%	Bank Return on Assets		—		0.693%		0.875% (2)		221,340
			10	%	Achieve regulatory compliance		—		Meet or exceed standards of well-managed peers		Achieved Maximum results		63,240
			7.5	%	Consumer Average Loan Balance (including home equity loans and excluding education loans growth)		$11.5 million		$12.8 million		$36.9 million		47,430
			7.5	%	Business banking average loan balance growth		$2.9 million		$3.2 million		$5.8 million		47,430
			5	%	Successfully improve Consumer/Business Banking Processing turn time		Meet minimum goal		Meet assigned goal		Achieved Maximum results		31,620
			100	%									$632,400

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(1)

Where there is no minimum threshold, the target threshold is the minimum threshold.



(2)

HEI earnings per share and American Savings Bank return on assets were adjusted as described in the text above to exclude the effects of the $35.6 million restructuring charge to HEI and bank net income.

        The abovemaximum goals were set by the Compensation Committee and approved by the Board in 2008 because they were believed to provide the necessary incentives to align executive compensation with shareholder value. Each target goal was based on the budget. The minimum performance reflected what the Compensation Committee believed to be investors' minimum expectations relative to other investment opportunities and the maximum goal provided greater upside potential for out-performance stretch goals. Each goal was aligned with HEI's or the operating company's strategic plan and determined by the Compensation Committee to be sufficiently difficult to be worthy of a bonus.

        The HEI executives had the heaviest weighting on earnings per share, which is a general measure of public company performance. The other two measures for HEI executives, utility free cash flow and bank return on assets, are operating measures of subsidiary financial success, which drives HEI performance. Excluding the impact of the bank's previously-disclosed balance sheet restructuring charge of $35.6 million or 42 cents per share, adjusted 2008 earnings at HEI were $125.9 million or $1.49 earnings per share, which was above the target goal. HEI's focus on improved operating performance and financial flexibility helped HEI to continue to post improved results in a year of unprecedented corporate failures, depressed economic conditions, frozen credit markets and a volatile equity market. HEI initiated strategic initiatives during 2008 at both its operating businesses and realized the benefits from those initiatives. Hawaiian Electric Company achieved a negative $17.1 million in utility free cash flow, which was above the maximum goal. The utility free cash flow for 2008 was due to higher net cash from operating activities resulting from lower than budgeted fuel oil costs, as well as scheduling of major capital projects. American Savings Bank also achieved a return on assets of 0.875%, excluding the restructuring charge to net income, which was above the maximum goal. American Savings Bank's




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balance sheet restructuring reduced the size of the bank's balance sheet by approximately $1.1 billion, while enabling the bank to maintain its earnings power on a lower capital base. The bank was able to maintain its core earnings in the face of a very challenging economic environment. The balance sheet restructuring positioned the bank to deal with the challenges ahead by improving its profitability measures, capital position and liquidity, while enabling the bank to dividend excess capital to HEI. In addition, the bank's efforts on improving efficiency helped buffer financial performance from deteriorating market conditions. Consequently, at its meeting on February 20, 2009, the Compensation Committee awarded Ms. Lau $1,081,744, Mr. Harada $139,728, and Mr. Richardson $246,492 in annual incentives.

        Mr. May's goals were focused on the utility. The two heaviest weightings for Mr. May's annual bonus were on utility net income and free cash flow, which were the key drivers of the utility's financial success in 2008; his other goals, based on facilitation of a preferred energy future to expand renewable generation and the execution of a regulatory strategy, were to reward successful execution of operational strategies. The preferred energy future goal involved Hawaiian Electric Company's progress on renewable fuels, such as biodiesel. In order for this goal to be achieved at the target level, Hawaiian Electric Company was required to successfully reach project milestones and submit all required filings with the Hawaii Public Utilities Commission for these activities. The expand renewable generation goal included activities to develop a comprehensive plan and assess strategies that would increase the utility's resources of renewable energy. In order for this goal to be achieved at the target level, Hawaiian Electric Company was required to issue a 100 megawatt renewable energy request for proposal, complete a wind integration study, and perform an assessment of wind integration mitigation strategies. The regulatory strategy execution goal involved the timely execution of Hawaiian Electric Company's rate case filing with the Hawaii Public Utilities Commission to support the financial health of the utility as it makes critical investments in infrastructure to support reliable service for customers and prepares for increased renewable energy production. Because the utility met its goals for net income and free cash flow, its expand renewable generation goal and its regulatory strategy goal, the Compensation Committee at its meeting on February 20, 2009, awarded Mr. May $385,573 in annual incentives.

        The Compensation Committee approved the terms of a letter agreement entered into on June 13, 2008, in which Hawaiian Electric Company agreed that if the incentive award for 2008 performance under the annual incentive compensation plan was less than the amount Mr. May would receive if his 2008 goals were achieved at his target levels, then Hawaiian Electric Company would make up that shortfall with an additional payment to Mr. May, in consideration of Mr. May's many years of service with the utility. Because Mr. May's actual annual incentive bonus for 2008 of $385,573 was greater than his potential target bonus of $348,600, no additional discretionary bonus was required to be paid by Hawaiian Electric Company to Mr. May.

        Mr. Schools' goals were focused on American Savings Bank. The two heaviest weightings for Mr. Schools' annual incentive were on bank net income and return on assets, which were the key drivers of the bank's financial success in 2008; his other goals were based on bank operational strategies to strengthen regulatory compliance, improve consumer average loan balances, encourage business banking average loan balance growth and successfully improve consumer/business banking turnover time. American Savings Bank had at or above maximum performance for each of Mr. Schools' goals in 2008. Consequently, at its meeting on February 20, 2009, the Compensation Committee awarded Mr. Schools $632,400 in annual incentives.

        The 2008 grants of annual incentive awards specific to the named executive officers are summarized in the 2008 Grants of Plan-Based Awards and related notes on page 47.




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What is HEI's 2009 annual incentive plan?


        The Compensation Committee substantially revamped HEI's 2009 annual executive incentive compensation plan as a result of Towers Perrin's executive compensation review of practices at peer companies and to provide a competitive program that aligns with current company strategies. The 2009 annual executive incentive compensation plan provides greater emphasis on differentiated reward strategies by company/business unit. The program will encourage HEI executives to focus on results that drive consolidated shareholder value rather than roll-up subsidiary results; encourage American Savings Bank executives to focus on performance improvement; and encourage Hawaiian Electric Company executives to focus on successful rate relief, the Hawaii Clean Energy Initiative and other utility metrics. In 2008, there was a minimum threshold for the entire annual incentive plan in order for awards to be made under the plan, as well as minimum thresholds for applicable metrics. In 2009, each metric will have its own threshold and there will not be an overall plan threshold.

        The Committee decided to simplify the program to drive greater understanding of performance measurement and plans. HEI executive goals are limited to two corporate financial measures to maintain focus of the holding company executives on these key metrics. On February 20, 2009, the Compensation Committee established the following performance metrics for the following named executive officers for the 2009 annual incentive plan:

Name		Weight			Performance Metric		Minimum Threshold		Target Goal
Constance H. Lau Curtis Y. Harada			60	%	HEI Return on Average Common Equity		7.1%		7.9%
Chester A. Richardson			40	%	HEI Net Income		$101.5 million		$112.8 million
			100	%
Timothy K. Schools			100	%	Bank Return on Assets		0.85%		0.95%

        There are no 2009compensation plan. Unless otherwise specified throughout this Proxy Statement, a reference to utility goals for Mr. May, who retired on December 31, 2008, or for Mr. Yeaman, whose resignation was effective on June 12, 2008. Mr. Ajellomeans consolidated goals of the utilities, which include Hawaiian Electric Company and Mr. Rosenblum are also participants in the 2009 annual incentive plan.

        HEI has return on average common equityits subsidiaries, Maui Electric Company and net income as its annual incentive compensation goals in 2009 because these are basic measures of financial success at HEI and for its shareholders. American Savings Bank is using a single profitability measure of return on assets in 2009, consistent with the need for the bank to focus on efficient use of assets to generate satisfactory returns. Traditionally, banks have measured returns relative to assets as a primary profitability measure. Banks make loans and take in deposits and the difference between the interest income received on loans, interest expense paid on deposits, less credit and other expenses, is their profit. Since most income is from the balance sheet, the balance sheet is an appropriate benchmark to use in comparing profitability from different banks or different business lines within a bank. Return on assets (net income divided by total average assets) is a simple and widely used benchmark.Hawaii Electric Light Company.

        In setting Mr. Schools' goals, the Compensation Committee determined to exclude one-time charges such as severance and lease buyouts in light of American Savings Bank's aggressive performance improvement project to reduce its cost structure and improve its efficiency, profitability and go-forward earnings. In addition, in light of the recent unprecedented volatility, illiquidity, uncertainty and unusually low asset valuations in the capital markets and in the banking industry, the Committeecommittee excluded the impact of other-than-temporary impairment charges and goodwill impairment charges and related impacts. The Committee,committee, however, retained the discretion to reduce any such award if the resulting payout iswas not in the best interest of American Savings BankHEI and exclude any gain from the sale of securities for which other-than-temporary impairment is excluded in any current or future bonus calculations.its shareholders. In setting HEI executives' goals for the Committeeother named executive officers, the committee also determined that any adjustments made at American




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made at American Savings Bank and Hawaiian Electric Company would also be applied for purposes of calculating HEI metrics.

Name		Weight			Performance Metric		Minimum Threshold		Target Goal		Maximum Goal
Constance H. Lau James A. Ajello Curtis Y. Harada			60	%	HEI Return on Average Common Equity		7.1%		7.9%		8.7%
Chester A. Richardson			40	%	HEI Net Income		$101.5 million		$112.8 million		$124.1 million
			100	%
Richard M. Rosenblum			30	%	HEI Net Income		$101.5 million		$112.8 million		$124.1 million
			20	%	HEI Return on Average Common Equity		7.1%		7.9%		8.7%
			20	%	Utility Net Income		$76.1 million		$84.5 million		$93.0 million
			10	%	Utility Safety (Total Cases Incident Rate)		4.65		4.25		3.88
			10	%	Hawaii Clean Energy Initiatives (HCEI) (including Big Wind)		Meet minimum project milestones		Meet target project milestones		Meet maximum project milestones
			10	%	HECO Customer Satisfaction		76.6%		78.2%		82.0%
			100	%
Timothy K. Schools			100	%	Bank Return on Assets		0.850%		0.950%		1.050%

        The proposed 2009 annual award will be determined as a percentage of base salary, instead of salary midpoint, which allows for awards to better reflect individual contribution. At its meeting on February 20, 2009,above goals were set by the Compensation Committee and approved by the following award rangesBoard in 2009 because they were believed to provide the necessary incentives to properly align executive compensation with shareholder value. HEI's goals of net income and return on average common equity are determined on a consolidated basis, and are thus impacted by the results from the bank and utility operating subsidiaries.

        Given the deterioration in the mainland housing market in 2009, and with further declines in the value of its private-issue mortgage-related securities expected, American Savings Bank sold $225 million of those securities in the fourth quarter of 2009 for a realized loss of $19.3 million net of tax. In determining the named executive officers, shown2009 annual incentive (and 2007-2009 long-term incentive) plan awards, the Compensation Committee viewed the loss resulting from the sale as a percentagethe equivalent of salary,the acceleration of future other-than-temporary impairment losses, which were an allowed authorized exclusion set by the Compensation Committee in establishing the goals and metrics for the 2009 annual incentive plan:plan in February 2009. The Compensation Committee, taking into account HEI's financial strategy (including the focus on improving the fundamental earnings power of its subsidiaries), thus concluded that the realized loss from the sale of those securities should be excluded for purposes of determining whether the 2009 compensation measures had been achieved.

Name		Minimum			Target			Maximum			2009 estimated salary
Constance H. Lau			42.5	%		85	%		170	%	$	771,800
Curtis Y. Harada			20	%		40	%		80	%		215,600
Chester A. Richardson (1)			25	%		50	%		100	%		344,400
Timothy K. Schools			40	%		80	%		160	%		550,000




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(1)

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        HEI's adjusted net income, after excluding from HEI consolidated net income the bank's realized loss from the sale of the private-issue mortgage-related securities ($19.3 million net of tax) and other approved exclusions ($12.6 million net of tax) for other-than-temporary impairment losses, lease buyouts and severance costs, was $114.9 million, which exceeds the 2009 target income of $112.8 million, and its adjusted return on common equity was 8.0%, which exceeds the 2009 target of 7.1%. As a result of the $31.9 million in exclusions, named executive officers Ms. Lau and Messrs. Ajello, Harada and Richardson received awards between the target and maximum level. Without the exclusion for the losses from the sale of private-issue mortgage-related securities, the HEI return on common equity and HEI net income goals would have been below minimum level. Ms. Lau voluntarily waived payment of the annual 2009 bonus to align with shareholders and help the company transition under the dividend earn-out strategy toward improved long-term fundamental performance and generation of shareholder value. Mr. Richardson'sRosenblum's bonus was impacted in part by the exclusions because half of his goals were based on HEI goals, with the other half being based on utility goals.

        After excluding the bank's realized loss from the sale of the private-issue mortgage-related securities and other approved exclusions from earnings, the bank's return on assets was 1.05%, which was at the maximum level for that performance metric. While the Compensation Committee concluded that it was appropriate to recognize the hard work performed in 2009 by American Savings Bank executives in pursuing the bank's aggressive performance improvement project, it also weighed the fact that, without excluding the realized securities losses, the bank's return on assets would be at a level below the minimum threshold for an annual incentive award. Accordingly, rather than allowing executives of American Savings Bank to achieve the maximum bonus level under the 2009 annual incentive award, if any, will be proratedplan based on two monthsall the exclusions, the Compensation Committee exercised its discretion under the Plan to reduce the awards to the level of awards payable for performance at his HEI Vice President-General Counsel salary120% of target, which was approximately the level of achievement that would have been reflected in HEI's results if the exclusions were taken into account. As a result of this analysis, Mr. Schools received an award based on performance at a level between the target and 10 monthsmaximum levels, instead of at his HEI Senior Vice President-General Counselthe maximum level.

        In 2009, the utility met the following annual incentive goals:

•

Utility Net Income at $79.4 million, which was between the minimum goal of $76.1 million and Chief Administrative Officer salary.the target goal of $84.5 million. Utility Net Income is the basic financial measurement of earnings for the year and contributes directly to HEI's net income, its earnings per share and support of its dividend to shareholders. Net income is a generally accepted accounting principle (GAAP) measure.



•

Utility Safety focuses on employee safety as measured by the Total Cases Incident Rate. This is a standard measure of safety performance, which is determined by the total number of Occupational Safety and Health Administration recordable cases × 200,000 productive hours divided by the total number of productive hours for the year, with the lower the Total Cases Incident Rate, the better. The goal was selected because of the importance of safety to every employee. The consolidated Total Cases Incident Rate was 3.95, which was between the target goal of 4.25 and the maximum goal of 3.88.



•

Hawaii Clean Energy Initiatives Big Wind/Renewables Integration. The Big Wind goal focuses the utility on meeting key milestones for development and integration of a major renewable energy resource. The potential renewable energy contributions from this project, combined with the contributions from ongoing projects to obtain renewable energy from sources including photovoltaics, biomass, geothermal, ocean energy and others, will help the utilities meet their commitments under the Hawaii Renewable Portfolio Standards law and the Hawaii Clean Energy Initiative, an agreement executed between the state of Hawaii and the utilities in October 2008 to proactively reduce the state's dependency on fossil fuel by moving towards a




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future of increasing renewable energy. In 2009, Hawaiian Electric Company met its Big Wind/Renewables Integration project milestone at the target level.

        As a result of achieving these goals, the following 2009 annual incentive awards were paid to the named executive officers in February 2010:

Name		Payout
Constance H. Lau		$	0	*
James A. Ajello		$	223,889
Curtis Y. Harada		$	99,119
Chester A. Richardson		$	197,916
Richard M. Rosenblum		$	322,289
Timothy K. Schools		$	528,000

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* Ms. Lau voluntarily waived her $753,999 payout and did not receive any annual incentive award payment for 2009.


What was HEI's 2006-20082007-2009 long-term incentive plan and were there any payouts under this plan?


        HEI's three-year performance incentive plan is otherwise known as the Long-Term Incentive Plan (LTIP).and provides awards measured over rolling three-year performance periods. In 2006,2007, the Compensation Committee approved the following award ranges, shown as a percentage of the salary midpoint (the middle salary level in a salary range for the 2006-2008 long-term incentive plana particular job grade or position), for the following individuals who are currently HEI named executive officers:

Name		Minimum			Target			Maximum			2008 salary midpoint
Constance H. Lau (1)			65	%		130	%		260	%	$	641,000 776,000	(ASB) (HEI)
Eric K. Yeaman (2)			30	%		60	%		130	%		405,000 441,000	(HEI) (HECO)
Curtis Y. Harada			20	%		40	%		80	%		213,000
T. Michael May			40	%		80	%		170	%		581,000

---

(1)

Forofficers who were participants in the 2006-20082007-2009 long-term incentive plan, Ms. Lau's salary midpoint was prorated with 4 months at her American Savings Bank Presidentplan:

Name		Minimum			Target			Maximum
Constance H. Lau			65	%		130	%		260	%
Curtis Y. Harada			20	%		40	%		80	%

        Messrs. Ajello, Richardson, Rosenblum and Chief Executive Officer grade and 32 months at her HEI President and Chief Executive Officer grade.



(2)

Because Mr. Yeaman terminated his service with Hawaiian Electric Company on June 12, 2008, he forfeited his participation in the 2006-2008 long-term incentive plan, in accordance with revisions to the long-term incentive plan adopted by the HEI Compensation Committee, effective April 2008, which provide that a participant generally forfeits any potential long-term incentive award if the participant terminates employment within the performance period for any reason other than retirement, death or disability.

        Mr. Richardson and Mr. Schools did not participate in the 2006-2008 long term2007-2009 long-term incentive plan because they became employed by Hawaiian Electric Industries and American Savings Bank, respectively, midway throughat their respective companies after the start of this performance period.

        Based on the Compensation Committee's view that achievement of these goals would enhance shareholder value during this performance period, HEI executives had three long-term goals: a total shareholder return goal based on performance at HEI, a return on average common equity goal at




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American Savings Bank,        The table below shows the performance metrics, weightings, minimum threshold and a return on average common equity goal at Hawaiian Electric Company (consolidated). Mr. May had a Total Shareholder Return goal, but with a lesser weighting than HEI holding company executives, since his primary focus was on improving utility financial metrics, such as utility return on average common equitytarget and average annual utility net income.

        After threemaximum goals for the 2007-2009 long-term incentive performance periods (2003-2005, 2004-2006, 2005-2007) where no HEI (holding company) long-term incentive goals were achieved and no HEI long-term incentive awards were paid to HEIplan. The executives (long-term incentive awards were paid to subsidiary executives forlisted below shared the achievement of subsidiary goals during these performance periods), HEI executives received a long-term incentive award for the 2006-2008 performance period. The long-term incentive award for this performance period was paid out 60% in cash and 40% in HEI Common Stock based on the stock value as of the time of the award. The stock component aligns executives' interests with shareholders.same goals.

Name		Weight			Performance Metric		Minimum Threshold		Target Goal		Actual Results		Payout
Constance H. Lau			40	%	Total Return to Shareholders		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		38.5th percentile of the Edison Electric Institute Index (1), (2)		$	281,951
			30	%	Bank Return on Average Common Equity		10.39%		11.23%		9.89% (3)			—
			30	%	Utility Return on Average Common Equity		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		12th percentile of the Edison Electric Institute Index (1), (2)			—
			100	%									$	281,951
Eric K. Yeaman			40	%	Total Return to Shareholders		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		38.5th percentile of the Edison Electric Institute Index (1), (2)			—
			30	%	Bank Return on Average Common Equity		10.39%		11.23%		9.89% (3)			—
			30	%	Utility Return on Average Common Equity		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		12th percentile of the Edison Electric Institute Index (1), (2)			—
			100	%										—




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Name		Weight			Performance Metric		Minimum Threshold		Target Goal		Actual Results		Payout
Curtis Y. Harada			40	%	Total Return to Shareholders		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		38.5th percentile of the Edison Electric Institute Index (1), (2)		$	24,282
			30	%	Bank Return on Average Common Equity		10.39%		11.23%		9.89% (3)			—
			30	%	Utility Return on Average Common Equity		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		12th percentile of the Edison Electric Institute Index (1), (2)			—
			100	%									$	24,282
T. Michael May			40	%	Utility Return on Average Common Equity		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		12th percentile of the Edison Electric Institute Index (1), (2)			—
			40	%	Utility Net Income		$89.465 million		$99.405 million		$73.0 million			—
			20	%	Total Return to Shareholders		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		38.5th percentile of the Edison Electric Institute Index (1), (2)			66,234
			100	%									$	66,234

Name		Weight			Performance Metric		Minimum Threshold		Target Goal		Maximum Goal
Constance H. Lau Curtis Y. Harada			40	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index (1)		50th percentile of the Edison Electric Institute Index (1)		70th percentile of the Edison Electric Institute Index (1)
			15	%	Utility Modified Free Cash Flow		$28.852 million		$32.058 million		$35.263 million
			15	%	Utility Return on Average Common Equity		80% of consolidated allowed return on equity		90% of consolidated allowed return on equity		100% of consolidated allowed return on equity
			15	%	Bank Net Income		$58.371 million		$64.856 million		$71.342 million
			15	%	Bank Return on Assets		0.862%		0.958%		1.054%
			100	%

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(1)

The Edison Electric Institute is an association of U.S. investor-owned electric companies that are representative of companies that are comparable investment alternatives to HEI. The Institute's members serve 95% of the ultimate customers in the investor-owned segment of the industry and represent approximately 70% of the U.S. electric power industry. The three-year Edison Electric Institute Index measures performance data for U.S. investor-owned electric utilities. The performance of the companies in the Index is calculated on a noncapitalized weighted basis so as not to give a disproportionate emphasis to the larger companies. Companies are added to or deleted tofrom the three-year index through acquisitions or merger or other changes in ownership. The Edison Electric Institute usesincludes a company in the index when it has three years of consistent comparable data.data in comparison to the peer group. HEI uses its ranking in the Edison Electric Institute Index to determine how well it performed in the three-year performance period for metrics such as return on average common equity




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andbased on total return to shareholders. In 2008,2009, the following companies were in the three-year Edison Electric Institute Index:

Allegheny Energy Inc. Allete Inc.ALLETE Alliant Energy Corp. Ameren Corp. American Electric Power Co. Avista Corp. Black Hills Corp Centerpoint Energy Inc. Central Vermont Public     Service Corp CH Energy CorpGroup CLECO Corp CMS Energy Corp Consolidated Edison Inc. Constellation Energy Group Inc. Dominion Resources Inc. DPL Inc. DTE Energy Co. Duke Energy Corp		Edison International El Paso Electric Co.		The Empire District Electric Co. Entergy Corp. Exelon Corp. First Energy Corp. FPL Group Inc. Great Plains Energy Inc. Hawaiian Electric     Industries Inc. Idacorp Inc.IDACORP Integrys Energy Group Maine and Maritimes Corp MDU Resources Group Inc MGE Energy Inc. NISOURCE Inc.NiSource Northeast Utilities Northwestern Corp.NorthWestern Energy NSTAR NV Energy Inc. OGE Energy Corp. Otter Tail Pepco Holdings		Otter Tail Corp. Pepco Holdings Inc. PG&E Corp. Pinnacle West Capital Corp. PPL Corp. PNM Resources Inc. Portland General Electric PPL Progress Energy Inc. Public Service Enterprise     Group Inc. Puget Energy, Inc. Scana Corp. Sempra Energy Southern Co. TECO Energy Inc. UIL Holdings Corp. UniSource Energy Corp. Unitil Corp. Vectren Westar Energy Inc. Wisconsin Energy Xcel Energy Inc Vectren Corp. Wisconsin Energy Corp.

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(2)

This metric was determined using a 33-month performance period instead of the usual 36-month performance period in order to determine results compared to peer data in time for the filing of this proxy statement.



(3)

American Savings Bank's return on average common equity was adjusted as described in the text above to exclude the effects of the $35.6 million restructuring charge.

        The above goals were set by the Compensation Committee and approved by the Board in 20062007, because they were believed to provide the necessary incentives to align executive compensation with shareholder value. The minimum performance levels reflected what the Compensation Committee believed to be investors' minimum expectations relative to other investment opportunities and the maximum goal provided greater upside potential for out-performanceperformance stretch goals. Each goal was aligned with HEI's or the operating company's strategic plan and determined by the Compensation Committee to be sufficiently difficult to be worthy of a bonus.

        The only goalgoals met in the 2006-20082007-2009 long-term performanceincentive plan waswere the minimum goal for HEI Total Return to Shareholders. Consequently, at its meetingShareholders, which was in the 35^th percentile for this period, and the American Savings Bank Return on Assets, which slightly exceeded the minimum goal. The American Savings Bank Return on Assets was 0.875% after allowed exclusions. A better Total Return to Shareholders and increased American Savings Bank Return on Assets benefits shareholders of HEI, employees and customers by increasing the overall financial strength of the HEI enterprise. Because of the achievement of these goals, in February 20, 2009,2010, the HEI Compensation Committee awarded Ms. Lau $281,951, Mr. Harada $24,282, and Mr. May $66,234approved the following long-term incentive awards under the 2007-2009 long-term incentive plan for the named executive officers who were in long-term incentives,the plan, payable 60% in cash and 40% in shares of HEI Common Stock.Stock based on the market value of the stock as of the time of the approval of the award:

Name		Payout
Constance H. Lau		$	338,106
Curtis Y. Harada		$	28,555


What is        In February 2010, Fred Cook & Co. found that HEI's 2007-2009total target direct compensation (target annual cash plus 2009 long-term incentive plan?
awards) is at the 25^th percentile for the named executive officers.

        HEI's 2007-2009 long-term incentive plan was explained in its 2007 proxy statement.




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What is HEI's 2008-2010 long-term incentive plan?


        InHEI's 2008-2010 long-term incentive plan was explained in the proxy statement for HEI's 2008 annual meeting of shareholders.


What is HEI's 2009-2011 long-term incentive plan?


        The Compensation Committee modified the design of the long-term incentive plan from the 2008-2010 performance period for the 2009-2011 performance period based on company strategy and recommendations of Towers Watson after its executive compensation review. Except for Mr. Schools, the 2009-2011 long-term incentive plan generally will be paid 60% in cash and 40% in shares of HEI Common Stock with a value determined at the beginning of the performance period, instead of at the time of the payment of the award. By determining share award levels as of the beginning of the performance period, the awards under the plan have a stronger linkage to improvements in shareholder value. Mr. Schools' 2009-2011 long-term incentive award will be granted in cash to link his incentive compensation solely with the performance of the bank.

        At its meeting on February 2008,20, 2009, the Compensation Committee approved the following long-term incentive award levelsgoals for the 2008-20102009-2011 long-term incentive plan performance period for each of the participating named executive officers if the following incentive performance goals for that period are met:officers:

Name		Weight			Performance Metric		Minimum Threshold		Target Goal
Constance H. Lau Curtis Y. Harada Chester A. Richardson			40	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index		50th percentile of the Edison Electric Institute Index
			15	%	Utility Free Cash Flow		($24.1 million)		($13.0 million)
			15	%	Utility Ratemaking Return on Average Common Equity vs. Allowed Return		90% of consolidated allowed rate of return on equity less 50 basis points		95% of consolidated allowed rate of return on equity less 50 basis points
			15	%	Bank Net Income		$55.277 million		$57.053 million
			15	%	Bank Return on Assets		0.789%		0.816%
			100	%
T. Michael May Eric K. Yeaman			50	%	Utility Free Cash Flow		($24.1 million)		($13.0 million)
			30	%	Utility Ratemaking Return on Average Common Equity vs. Allowed Return		90% of consolidated allowed rate of return on equity less 50 basis points		95% of consolidated allowed rate of return on equity less 50 basis points
			20	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index		50th percentile of the Edison Electric Institute Index
			100	%
Timothy K. Schools			40	%	Bank Net Income		$55.277 million		$57.053 million
			30	%	Bank Return on Assets		0.789%		0.816%
			30	%	Bank Efficiency Ratio		65.47%		64.83%
			100	%

Name		Weight			Performance Metric		Minimum Threshold		Target Goal		Maximum Goal
Constance H. Lau James A. Ajello Curtis Y. Harada Chester A. Richardson			60	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index		50th percentile of the Edison Electric Institute Index		70th percentile of the Edison Electric Institute Index
			40	%	HEI Return on Average Common Equity		9.1%		10.1%		11.1%
			100	%
Richard M. Rosenblum			60	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index		50th percentile of the Edison Electric Institute Index		70th percentile of the Edison Electric Institute Index
			20	%	HEI Return on Average Common Equity		9.1%		10.1%		11.1%
			20	%	Utility Return on Average Common Equity		90% of consolidated allowed return on equity		95% of consolidated allowed return on equity		100% of consolidated allowed return on equity
			100	%
Timothy K. Schools			70	%	Bank Return on Assets		1.0%		1.1%		1.2%
			30	%	Bank Net Income		$51-54 million		$56-59 million		$61-65 million
			100	%




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        The metrics used in this programCompensation Committee chose the above goals to encourage long-term achievement of HEI earnings and enhancement of shareholder value. Shareholders, customers and employees all benefit when these goals are met.

•

Total return to shareholders is a performance measure to show the return on stock to an investor. HEI's total return is compared to that of the Edison Electric Institute Index of investor-owned electric companies. It is a primary measure that reflects value created for shareholders compared to that created by other investor-owned electric companies.



•

HEI Return on Average Common Equity is the ratio of average net income over the three-year performance period divided by average common financial measures forequity as measured from the most part. Utility ratemakingbeginning of the performance period to the end of the period.



•

The utility return on average common equity vs.as a percentage of all allowed return is measured as the average consolidated return on average common equity for the three-year period compared to the average consolidated allowed return on common equity as determined by the Hawaii Public Utilities Commission for the three-year performance period. This is a useful measurement for comparing the utility's earnings to the earnings regulators have determined are reasonable in the most recent ratemaking proceeding of each respective utility. It also encourages executives to seek to have each utility earn its allowed regulated return. Bank efficiency ratioreturn, which is a measure of how efficiently the bank spends its fundsimportant to shareholders and to regulators, who share an interest in relation to the income it generates. The efficiency ratio is calculated as follows:

Noninterest Expense (excluding amortization of intangible assets)
Net interest income + noninterest income

        The Committee also determinedassuring that the financial impacts (gain and/or loss), if any,utility can attract capital at a reasonable cost to keep the cost of restructuring American Savings Bank's balance sheet in order to return capital to HEI (e.g., sale of investment securities, extinguishment of wholesale funding, sale of merchant services divisions) shall be excluded in calculating net income and return on assetsreasonable for purposes of determining performance under the 2008-2010 long-term incentive plan.

utility customers.


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        The following are the award levels for these incentives:

Name		Minimum			Target			Maximum			Super Maximum			2010 projected salary midpoint of position grade (5)
Constance H. Lau			65	%		130	%		260	%		—		$	815,000
Eric K. Yeaman (1)			30	%		60	%		130	%		—			426,000 463,000	(HEI) (HECO)
Curtis Y. Harada			20	%		40	%		80	%		—			224,000
Chester A. Richardson (2)			30	%		60	%		120	%		—			351,000
T. Michael May (3)			40	%		80	%		170	%		—			581,000
Timothy K. Schools (4)			40	%		80	%		100	%		175	%		482,000 559,000	(COO) (President)

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(1)•

Because Mr. Yeaman resigned from Hawaiian Electric Company, effective June 12, 2008, he forfeited his participation in the 2008-2010 long-term incentive plan.



(2)

Mr. Richardson's 2008-2010 long-term incentive award, if any, will be prorated based on 14 months at his HEI Vice President-General Counsel salary midpoint and 22 months at his HEI Senior Vice President-General Counsel and Chief Administrative Officer salary midpoint.



(3)

Because Mr. May retired effective December 31, 2008, his 2008-2010 long-term incentive award, if any, will be prorated for the one year that he served in the three-year performance period, but only if the applicable performance goals are achieved. Mr. May's award will be based upon his salary midpoint at retirement.



(4)

Mr. Schools' 2008-2010 long-term incentive award, if any, will be prorated based on one month at his American Savings Bank Senior Executive Vice President and Chief Operating Officer salary midpoint and 35 months at his President salary midpoint.



(5)

The award payouts will be based upon actual 2010 salary midpoints and not the projected midpoints cited here.

        In addition to the minimum, target and maximum levels, the American Savings Bank 2008-2010 long-term incentive plan has a fourth level, a super maximum level. Mr. Schools' estimated future payout under level four would be $974,507. This added level was done for this performance period to focus Mr. Schools and the other American Savings Bank executives on achieving the highest established goals, namely $68 million net income (a 42% increase over 2008 budget), 1.0% return on assets (26 basis points increase over 2008 budget), and a 61% efficiency ratio (832 basis point increase over 2008 budget). This fourth level was established for American Savings Bank executives in recognition for the extraordinary work that needs to be achieved by the bank in a short period to improve its performance.

        In addition to the basic long-term incentive plan, the Compensation Committee also approved supplemental long-term incentive award levels for the 2008-2010 period for each named executive officer so that HEI's long-term incentive program would be even more performance-based. Rather than providing restricted stock awards at the levels given in 2007, the Committee reduced the restricted stock awards given to the named executive officers and provided an additional supplemental long-term incentive opportunity, using the same goals, metrics, and exclusion as in the 2008-2010 long-term incentive plan. Payment of any awards that may be made under this supplemental 2008-2010 long-term incentive program will be paid in a combination of 50% cash and 50% stock (versus 60% cash and




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40% stock for the basic long-term incentive plan) to promote greater stock ownership and alignment with shareholder interests. The following are the award levels for these supplemental incentives:

Name		Minimum			Target			Maximum			2010 projected salary midpoint of position grade (5)
Constance H. Lau			13.5	%		27.0	%		54.0	%	$	815,000
Eric K. Yeaman (1)			7.5	%		15.0	%		32.5	%		426,000 463,000	(HEI) (HECO)
Curtis Y. Harada			6.5	%		10.0	%		20.0	%		224,000
Chester A. Richardson (2)			6.5	%		10.0	%		20.0	%		351,000
T. Michael May (3)			9.0	%		18.0	%		38.0	%		581,000
Timothy K. Schools (4)			10.0	%		20.0	%		42.0	%		482,000 559,000	(COO) (President)

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(1)

Because Mr. Yeaman terminated his service with Hawaiian Electric Company on June 12, 2008, he forfeited his participation in the 2008-2010 supplemental long-term incentive plan.



(2)

Mr. Richardson's supplemental 2008-2010 long-term incentive award, if any, will be prorated based on 14 months at his HEI Vice President-General Counsel salary midpoint and 22 months at his HEI Senior Vice President-General Counsel and Chief Administrative Officer salary midpoint.



(3)

Because Mr. May retired effective December 31, 2008, his supplemental 2008-2010 long-term incentive award, if any, will be prorated for the one year that he served in the three-year performance period, but only if the applicable performance goals are achieved. Mr. May's award will be based upon his salary midpoint at retirement.



(4)

Mr. Schools' supplemental 2008-2010 long-term incentive award, if any, will be prorated based on one month at his American Savings Bank Senior Executive Vice President and Chief Operating Officer salary midpoint and 35 months at his President salary midpoint.



(5)

The award payouts will be based upon actual 2010 salary midpoints and not the projected midpoints cited here.

        The 2008-2010 grant of long term incentive and supplemental long term incentive awards specific to the named executive officers are summarized in the 2008 Grants of Plan-Based Awards and related notes on page 47.


What is HEI's 2009-2011 long-term incentive plan?


        The Compensation Committee substantially modified the long-term incentive program for 2009-2011 based on company strategy and recommendations of Towers Perrin after its executive compensation review. The 2009-2011 long-term incentive plan generally will be paid 60% in cash and 40% in stock units with a value determined at the beginning of the performance period. By determining share award levels as of the beginning of the performance period, the awards under the plan have a stronger linkage to improvements in shareholder value. Any award for Mr. Schools, as President of American Savings Bank, will be granted in cash to align his incentive compensation solely with the performance of the bank.




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        At its meeting on February 20, 2009, the Compensation Committee approved the following long-term incentive performance metrics for the 2009-2011 period for each of the named executive officers:

Name		Weight			Performance Metric		Minimum Threshold		Target Goal
Constance H. Lau Curtis Y. Harada Chester A. Richardson			60	%	HEI Total Return to Shareholders		30th percentile of the Edison Electric Institute Index		50th percentile of the Edison Electric Institute Index
			40	%	HEI Return on Average Common Equity		9.1%		10.1%
			100	%
Timothy K. Schools			70	%	Bank Return on Assets		1.0%		1.1%
			30	%	Bank Net Income		$51 - $54 million		$56 - $59 million
			100	%

        Mr. Ajello and Mr. Rosenblum are also participants in the 2009-2011 long-term incentive plan.

        The Compensation Committee approved the HEI metrics because they simplify the program and align performance measurement with the scope of the role and responsibilities of these executive officers. Mr. Schools' long-term metrics, bank return on assets and bank net income, focus performance on the key bank value drivers. In setting Mr. Schools' goals, the Compensation Committee determined to exclude one-time charges such as severance and lease buyouts in light of American Savings Bank's aggressive performance improvement project to reduce its cost structure and improve its efficiency, profitability and go-forward earnings. In addition, in light of the unprecedented volatility, illiquidity, uncertainty and unusually low asset valuations in the capital markets and in the banking industry, the Compensation Committee excluded the impact of other-than-temporary impairment charges and goodwill impairment charges and related impacts. The Compensation Committee, however, retained the discretion to reduce any such award if the resulting payout is not in the best interest of American Savings BankHEI and exclude any gain from the sale of securities for which other-than-temporary impairment is excluded in any current or future bonus calculations. its shareholders.



•

In setting HEI executives' goals for the other named executive officers, the Compensation Committee also determined that any adjustments made at American Savings Bank and Hawaiian Electric Company would also be applied for purposes of calculating the HEI metrics.