HEI Exhibit 13(a)

SELECTED FINANCIAL DATA
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc. and subsidiaries




Years ended December 31                  1994           1993              1992                1991                 1990
--------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
                                                                                                 
RESULTS OF OPERATIONS
Revenues                               $1,188,523     $1,142,170        $1,031,383         $  993,242          $  928,702
Net income (loss)                      
    Continuing operations              $   73,030     $   61,684        $   61,715         $   55,620          $   42,895
    Discontinued operations                    --        (13,025)          (73,297)              (794)                707
--------------------------------------------------------------------------------------------------------------------------
                                       $   73,030     $   48,659        $  (11,582)        $   54,826          $   43,602
==========================================================================================================================
Earnings (loss) per common share                                 
    Continuing operations              $     2.60     $     2.38        $     2.54         $     2.43          $     1.99
    Discontinued operations                    --          (0.50)            (3.02)             (0.03)               0.03
--------------------------------------------------------------------------------------------------------------------------
                                       $     2.60     $     1.88        $    (0.48)        $     2.40          $     2.02
==========================================================================================================================
Return on average common equity              11.0%           8.2%             (2.1)%             10.0%                8.7%
==========================================================================================================================
FINANCIAL POSITION *                   
Total assets                           $5,174,464     $4,521,592        $4,142,768         $3,716,872          $3,502,023
Deposit liabilities of the             
 savings bank subsidiary                2,129,310      2,091,583         2,032,869          1,615,361           1,511,291
Advances from Federal Home             
 Loan Bank to the savings bank      
 subsidiary                               616,374        289,674           194,099            258,593             205,716
Long-term debt, net                       718,240        697,836           582,475            525,641             463,362
Preferred stock of electric            
 utility subsidiaries                  
 Subject to mandatory redemption           44,844         46,730            48,920             50,665              52,210
 Not subject to mandatory redemption       48,293         48,293            36,293             36,293              36,293

Stockholders' equity                      682,089        643,028           547,741            581,446             510,543
                                       
COMMON STOCK DATA                      
Book value per common share *               23.80          23.23             22.12              24.36               23.29
Market price range per common share                          
    High                                    36.50          38.88             44.63              37.88               40.00
    Low                                     29.88          31.00             34.75              29.38               27.25
    Yearend                                 32.38          35.88             37.25              36.75               31.63
Dividends per common share                   2.33           2.29              2.25               2.21                2.17
Dividend payout ratio                          90%           121%               nm                 92%                107%
Dividend payout ratio-continuing 
 operations                                    90%            95%               88%                91%                109%
Market price to book value               
 per common share *                           136%           154%              168%               151%                136%
Price earnings ratio **                      12.5x          15.1x             14.7x              15.1x               15.9x
Common shares outstanding              
 (thousands)                           
    Weighted average                       28,137         25,938            24,275             22,882              21,559
    Geographic distribution            
     of ownership *                    
      State of Hawaii ***                   7,278          6,969             6,663              6,399               6,100
      Other                                21,377         20,706            18,099             17,468              15,818
--------------------------------------------------------------------------------------------------------------------------
            Total shares                  
             outstanding                   28,655         27,675            24,762             23,867              21,918
--------------------------------------------------------------------------------------------------------------------------
Stockholders by geographic             
 distribution *                        
   State of Hawaii ***                     21,896         22,092            21,305             20,441              18,053
   Other                                   18,830         18,374            16,891             15,598              13,883
--------------------------------------------------------------------------------------------------------------------------
        Total stockholders                 40,726         40,466            38,196             36,039              31,936
==========================================================================================================================
 
 
nm  Not meaningful.
*   At December 31.
**  Calculated using yearend market price per common share divided by
    earnings per common share from continuing operations.
*** Does not include depository and brokerage accounts, which may contain
    additional shares beneficially owned by Hawaii stockholders.
 
See Note 2, "Discontinued operations" in the "Notes to Consolidated Financial
Statements" for a discussion of the Company's former property and casualty
insurance business and wind energy business.

                                      25

 
SEGMENT FINANCIAL INFORMATION
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc. and subsidiaries




Years ended December 31                1994                 1993              1992
--------------------------------------------------------------------------------------
(in thousands)
                                                                  
REVENUES
Electric utility                     $  913,719          $  879,110        $  778,690
Savings bank                            215,525             199,734           202,995
Other                                    59,279              63,326            49,698
--------------------------------------------------------------------------------------
                                     $1,188,523          $1,142,170        $1,031,383
======================================================================================
OPERATING INCOME (LOSS)
Electric utility                     $  136,628          $  119,565        $  103,841
Savings bank                             42,525              44,117            31,327
Other                                    (5,020)             (6,044)            1,051
--------------------------------------------------------------------------------------
                                     $  174,133          $  157,638        $  136,219
======================================================================================
DEPRECIATION AND AMORTIZATION OF 
 PROPERTY, PLANT AND EQUIPMENT
Electric utility                     $   63,779          $   55,960        $   53,856
Savings bank                              3,551               3,167             2,852
Other                                     4,926               5,187             5,220
--------------------------------------------------------------------------------------
                                     $   72,256          $   64,314        $   61,928
======================================================================================
CAPITAL EXPENDITURES
Electric utility                     $  195,525          $  212,916        $  188,323
Savings bank                             11,316               3,920             4,828
Other                                     2,749               3,822             4,283
--------------------------------------------------------------------------------------
                                     $  209,590          $  220,658        $  197,434
======================================================================================
IDENTIFIABLE ASSETS (AT
 DECEMBER 31)
Electric utility                     $1,889,120          $1,703,276        $1,501,330
Savings bank                          3,115,651           2,618,485         2,461,694
Other                                   169,693             199,831           179,072
--------------------------------------------------------------------------------------
                                      5,174,464           4,521,592         4,142,096
Net assets of discontinued                   --                  --               672
 operations
--------------------------------------------------------------------------------------
                                     $5,174,464          $4,521,592        $4,142,768
======================================================================================

 
As of January 1, 1993, Hawaiian Electric Industries, Inc. (HEI) refined its
method of determining costs chargeable to its subsidiaries by identifying
additional common costs categories, increasing the number of cost causation
factors used to allocate common costs and utilizing timesheets. The refinements
resulted in lower allocations to subsidiaries and more expenses retained at
corporate in 1993 and 1994.
 
HEI's principal segments are as follows:
 
ELECTRIC UTILITY
--------------------------------------------------------------------------------
Hawaiian Electric Company, Inc. and its wholly owned subsidiaries, Hawaii
Electric Light Company, Inc. and Maui Electric Company, Limited, are operating
electric public utilities in the business of generating, purchasing,
transmitting, distributing and selling electric energy, and are regulated by the
Public Utilities Commission of the State of Hawaii (PUC).
 
SAVINGS BANK
--------------------------------------------------------------------------------
American Savings Bank, F.S.B. (ASB) is a Federally chartered savings bank
providing a full range of banking services to individual and corporate customers
through its branch system in Hawaii. ASB is subject to examination and
comprehensive regulation by the Department of Treasury, Office of Thrift
Supervision and the Federal Deposit Insurance Corporation, and is also subject
to regulations of the Board of Governors of the Federal Reserve System.
 
OTHER
--------------------------------------------------------------------------------
Hawaiian Tug & Barge Corp. provides tugboat and charter barge services in Hawaii
and the Pacific area and, together with its subsidiary, Young Brothers, Limited
(YB), provides general freight and containerized cargo transportation between
the Hawaiian Islands. YB operates as an authorized common carrier that services
all major ports in Hawaii under the Hawaii Water Carrier Act and is regulated by
the PUC.

Malama Pacific Corp. and its wholly owned subsidiaries invest in and develop
real estate.

HEI Investment Corp. invests primarily in leveraged leases.

Pacific Energy Conservation Services, Inc. (PECS) is a nonutility service
company formed in 1994 to promote energy conservation in Hawaii and the Pacific
Basin. PECS had no operations in 1994.

Other also includes amounts for HEI, HEI Diversified, Inc. and intercompany
eliminations.

                                       26

 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
The following discussion should be read in conjunction with the consolidated
financial statements and accompanying notes.

RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc. (HEI) and its subsidiaries (collectively, the
Company) reported net income of $2.60 per share in 1994, due to the results of
its major operating segments-the electric utility and the savings bank-partly
offset by losses in the "other" segment. Earnings per share from continuing
operations for 1994 increased 9% over 1993 due primarily to increased electric
utility earnings.

  Many factors affected HEI's 1994 consolidated results, including Hawaii's
economic environment. Although Hawaii's economy grew rapidly in the late 1980's,
the economy slowed from 1991 through 1993 due to the effects of the Gulf War and
Hurricane Iniki as well as the U.S. and Japan recessions. In 1994, for the first
time in many years, Hawaii's unemployment rate exceeded the national average.
This unusual recessionary period appears to be over. A modest economic recovery
began in 1994 led by Hawaii's key industry, tourism. Visitor arrivals were up
about 5.4% over 1993, the first annual increase since 1990, largely as a result
of U.S. economic expansion and the economic recovery in Japan. However, the
near-term impact of the January 1995 earthquake in Japan, the flood in Los
Angeles and the devaluation of the Mexican peso on visitor arrivals to Hawaii is
uncertain.

  The Company from time to time considers various strategies designed to enhance
its competitive position and to increase its ability to adapt to and anticipate
changes in its  businesses. These strategies may include the formation or
acquisition of new businesses. The Company may from time to time be engaged in
preliminary discussions, either internally or with third parties, regarding
these potential strategies. No assurances can be given as to whether any of
these strategies will be successfully implemented or any potential transaction
will actually occur, or the ultimate effect of any such transaction or strategy
on the Company's financial condition or competitive position. In 1995, HEI is
forming a new subsidiary to pursue independent power projects in Asia, beginning
with the Philippines.

  With continuing economic growth in the U.S. and Asia and the stabilization of
the construction industry and defense spending in Hawaii, Hawaii's economy is
expected to continue its recovery and grow moderately during the second half of
the 1990's. By providing essential services in Hawaii, HEI management believes
that the Company is well positioned to take advantage of Hawaii's projected
growth.
 
CONSOLIDATED
--------------------------------------------------------------------------------


                                                        %                   %                   %
                                            1994     CHANGE     1993     change     1992     change
---------------------------------------------------------------------------------------------------
(in millions, except per share amounts)
                                                                           
Revenues                                   $1,189         4    $1,142        11    $1,031         4
Operating income                              174        10       158        16       136         2

Net income (loss)
  Continuing operations                    $ 73.0        18    $ 61.7        --    $ 61.7        11
  Discontinued operations                      --       100     (13.0)       82     (73.3)       nm
---------------------------------------------------------------------------------------------------
                                           $ 73.0        50    $ 48.7        nm    $(11.6)       nm
===================================================================================================
Earnings (loss) per common share
  Continuing operations                    $ 2.60         9    $ 2.38        (6)   $ 2.54         5
  Discontinued operations                      --       100     (0.50)       83     (3.02)       nm
---------------------------------------------------------------------------------------------------
                                           $ 2.60        38    $ 1.88        nm    $(0.48)       nm
===================================================================================================
Weighted average number of common
 shares outstanding                          28.1         8      25.9         7      24.3         6

Effective tax rate for continuing
 operations                                    42%                 43%                 32%



nm   Not meaningful.

                                       27

 
The following discussion should be read in conjunction with the segment
discussions.

. The increase in 1994 net income from continuing operations compared to 1993
was due to improved results of the electric utility and "other" segments, partly
offset by a 2% decrease in net income of the savings bank segment.

. 1993 results include $15.0 million in after-tax losses from the settlement of
a lawsuit involving the discontinued operations of The Hawaiian Insurance &
Guaranty Co., Limited and its subsidiaries (the HIG Group) and $2.0 million in
after-tax gain from the reversal of a reserve after the sale of the discontinued
operations of Hawaiian Electric Renewable Systems, Inc. (HERS), the Company's
former wind energy business.

. 1993 income from continuing operations was flat when compared to 1992 and
included increases in net income from the savings bank and electric utility
segments, offset by an increase in net loss from the "other" segment.

. 1992 results include $73.3 million in after-tax losses from the discontinued
operations of the HIG Group and HERS. Higher earnings from continuing operations
resulted from increases at the electric utility and savings bank segments.

. The effective tax rate was higher in 1994 and 1993 than in 1992 primarily due
to the following: (1) a 1% increase in the federal income tax rate commencing in
1993; (2) the use of gross-up accounting for income taxes related to the
allowance for funds used during construction (AFUDC) under Statement of
Financial Accounting Standards (SFAS) No. 109 effective January 1, 1993; (3) the
treatment of Maritime Administration Capital Contribution Fund (CCF)
contributions as temporary (rather than permanent) differences between financial
reporting and tax income under SFAS No. 109 effective January 1, 1993; and (4)
the utilization of capital loss carryforwards in 1992.

. Dividends per common share increased in 1994 to $2.33, from $2.29 in 1993 and
$2.25 in 1992. HEI and its predecessor company, Hawaiian Electric Company, Inc.
(HECO), have paid dividends continuously since 1901. Dividends per share have
been higher each year since 1964. Although the Company's long-term goal is to
have dividend growth keep pace with inflation, the Company believes that recent
payout ratios (the percentages of earnings paid out in dividends) have been too
high. The Company believes that a payout ratio of 80% or less is more
appropriate and, in the future, hopes to increase earnings faster than dividends
to reduce the payout ratio. One of the keys to improved earnings is continued
regulatory support as evidenced by timely rate case decisions by the Hawaii
Public Utilities Commission (PUC). Another key to long-term growth in earnings
is growth and expansion of the Company.  Thus, the Company is looking at
opportunities to grow in Hawaii, Asia and the Pacific.

Following is a general discussion of revenues, expenses and operating income by
business segment. Segment information is also shown in "Segment Financial
Information" on page 26 and in the "Notes to Consolidated Financial Statements."
 
ELECTRIC UTILITY
--------------------------------------------------------------------------------


                                                       %                  %                  %
                                            1994    CHANGE     1993    change     1992    change
------------------------------------------------------------------------------------------------
(in millions, except per barrel amounts
 and number of employees)
                                                                           
Revenues/1/                                $  914        4    $  879       13    $  779        5
Expenses
Fuel oil                                      187      (12)      213       (5)      226      (18)
Purchased power                               272        5       259       50       173       62
Other                                         318       11       287        4       276        7
Operating income                              137       14       120       15       104        4
Allowance for funds used
   during construction                         13       21        11       22         9       67
Net income                                     62       19        52        5        49       18
Average price per barrel of fuel oil/1/     18.92      (10)    21.09        7     19.69      (14)
Kilowatthour sales                          8,593        3     8,325       --     8,332        3
Number of employees                         2,219       --     2,226        5     2,118        5


/1/ The rate schedules of the electric utilities contain energy cost adjustment
clauses under which electric rates are adjusted for changes in the weighted
average price paid for fuel oil and certain components of purchased energy
costs, and the relative amounts of company-generated power and purchased power.
Accordingly, changes in fuel oil and certain components of purchased energy
costs are passed on to customers.

                                       28

 
. In 1994, the electric utilities' revenues increased 4% compared to 1993
primarily due to rate relief granted by the PUC and a 3.2% increase in
kilowatthour sales of electricity, partly offset by lower fuel oil prices. The
kilowatthour sales increase reflects the gradual recovery of Hawaii's economy
and the effects of warmer weather. Fuel oil expense declined because of lower
fuel oil prices and lower company generated kilowatthours. Purchased power
expense was higher due to an increase in kilowatthours purchased. The 11%
increase in other expenses was due to a 14% increase in depreciation expense as
a result of plant additions, a 12% increase in other operation and maintenance
expenses and a 6% increase in taxes, other than income taxes. Other operation
and maintenance expenses in 1994 increased partly because 1993 expenses reflect
a one-time reduction of $4 million due to the establishment under SFAS No. 71 of
a regulatory asset for vacation earned by employees, but not yet taken.
Operating income for 1994 increased 14% compared to 1993 due in part to rate
relief and higher kilowatthour sales, partly offset by the increased expenses.
Consolidated HECO's return on average common equity for 1994 was 10.2%, compared
to 9.7% for 1993 and 10.5% for 1992.

. 1993 revenues increased 13% over 1992 due in part to rate relief received in
late 1992, primarily to recover purchased power expenses. Kilowatthour sales of
electricity for the year were down 0.1% compared to 1992 primarily because of
cooler weather, a downturn in Hawaii's economy and conservation. Fuel oil
expense was lower despite higher fuel oil prices because fewer kilowatthours
were generated as purchased power increased. Purchased power expense increased
with a full year of purchases from a major independent power producer. The 4%
increase in other expenses was partly due to a 4% increase in depreciation
expense as a result of plant additions and a 13% increase in taxes, other than
income taxes. Operating income for 1993 increased 15% compared to 1992 due in
part to rate relief, lower management service fees from HEI and the one-time
reduction in expense due to the establishment of a regulatory asset for vacation
earned by employees, but not yet taken.

. 1992 revenues increased 5% over 1991 due to higher kilowatthour sales of
electricity and rate relief, partly offset by lower fuel oil prices. Higher 1992
operating income was primarily due to rate relief and increased kilowatthour
sales, offset in part by higher expenses. Net income increased 18% as a result
of the higher operating income and higher AFUDC due to higher construction work-
in-progress balances. HECO and its subsidiaries do not provide electric service
to the island of Kauai and were not significantly affected by Hurricane Iniki,
which struck Kauai in September 1992.

COMPETITION

The electric utility industry has become increasingly competitive due to
regulatory and technological developments. Competition is affected by factors
including price, reliability of service, new technologies and governmental
regulations. Competition in Hawaii is also affected by the scarcity of
generation sites and lack of interconnections.

  The Energy Policy Act of 1992 encourages competition by allowing both
utilities and nonutilities to form generation subsidiaries without becoming
subject to regulation under the Public Utility Holding Company Act of 1935. To
date, HECO and its subsidiaries have not faced this type of competition.
However, management cannot predict the future impact, if any, of the Energy
Policy Act of 1992 on the Company.

  On the demand-side, a new kind of competitor-the energy service company-is
seeking customers in government and private business and promising to help them
reduce utility bills. On Oahu, one of these companies worked with a large
military housing project, installing energy-efficient equipment that decreased
the facility's electricity consumption by one-third. In August 1994, HEI formed
a new nonutility energy service company, Pacific Energy Conservation Services,
Inc. (PECS), to promote energy conservation in Hawaii and the Pacific Basin.
PECS is considering potential projects to install, finance, operate and maintain
energy conservation equipment, while sharing a percentage of the saved energy
costs with its clients.

                                       29

 
  In response to increased competition, HECO and its subsidiaries are looking at
strategies to enhance their competitive position, including increasing efforts
to  provide reliable electric service at a reasonable cost, offering customers
new choices regarding the services provided and promoting new technologies like
electric vehicles.

REGULATION OF ELECTRIC UTILITY RATES

The PUC has broad discretion in its regulation of the rates charged by HEI's
electric utility subsidiaries and in other matters. Any adverse decision by the
PUC concerning the level or method of determining electric utility rates, the
authorized returns on equity or other matters, or any prolonged delay in
rendering a decision in a rate or other proceeding, could have a material
adverse effect on the Company's financial condition and results of operations.
Upon a showing of probable entitlement, the PUC is required to issue an interim
decision in a rate case within 10 months from the date of filing a completed
application if the evidentiary hearing is completed (subject to extension for 30
days if the evidentiary hearing is not completed). There is no time limit for
rendering a final decision. Interim rate increases are subject to refund with
interest, pending the final outcome of the case.

RECENT RATE REQUESTS

Postretirement benefits other than pensions
-------------------------------------------

In November 1994, the PUC issued a decision and order in a generic docket opened
in February 1992 with respect to the accounting and rate-making treatment of the
costs of postretirement benefits other than pensions (PBOP). The decision and
order authorized full recovery of PBOP costs determined pursuant to SFAS No.
106, effective January 1, 1995. The decision and order also allowed the recovery
of the regulatory assets related to PBOP costs, over the next 18 years. These
regulatory assets were recognized by HECO, Hawaii Electric Light Company, Inc.
(HELCO), Maui Electric Company, Limited (MECO) and Young Brothers, Limited (YB)
for PBOP costs accrued from January 1, 1993 through December 31, 1994 and
amounted to $36.7 million for the four companies at December 31, 1994. This
order will result in additional annual revenues of approximately $10.0 million,
$1.8 million, $1.9 million and $1.0 million for HECO, HELCO, MECO and YB,
respectively, to cover the increase in PBOP expense. See Note 17 in the "Notes
to Consolidated Financial Statements," for further information.

Hawaiian Electric Company, Inc.
-------------------------------

. In July 1993, HECO applied to the PUC for permission to increase electric
rates, based on a 1994 test year and a 12.6% return on average common equity
(which was later increased to 12.75%). The increase requested, as subsequently
revised, represented an increase of 8.6% over rates in effect at the time of the
revised filing, or $53.8 million in additional annual revenues. The revised
requested increase was needed to cover rising operating costs (including PBOP
costs discussed above) and to cover the cost of new capital projects to maintain
and improve service reliability.

  In December 1994, HECO received a final decision and order from the PUC
authorizing a $40.5 million, or 6.5%, increase in annual revenues, effective
January 1, 1995 and based on a 12.15% return on average common equity. The order
granted HECO an increase of approximately $3.5 million in annual revenues, in
addition to reaffirming interim increases that took effect in April, May and
November 1994. The final decision and order, together with  the PBOP decision
and order, resulted in $50.5 million of annual rate relief.

. In December 1993, HECO applied to the PUC for permission to increase electric
rates, based on a 1995 test year and a 12.3% return on average common equity
(which was later increased to 13.25%). The requested increase, as subsequently
revised, represented an increase of approximately 5%, or  $38.5 million in
additional annual revenues, over rates in effect at the time of the revised
filing (which rates included interim rate relief granted on the 1994 test year
application). The revised requested increase is needed to cover rising operating
costs (including PBOP costs discussed above) and costs of new capital projects
to maintain and improve service reliability.

                                       30

 
  The PUC completed hearings in November 1994 on HECO's rate increase request
based on  a 1995 test year. In December 1994, HECO received an interim decision
and order authorizing an increase of $13.2 million, or 1.9%, in annual revenues.
Approximately $10.6 million of the interim increase took effect January 1, 1995,
which was the beginning of the test year. The balance is effective in steps in
May and November 1995. The interim order was based on a 12.6% return on average
common equity.

Hawaii Electric Light Company, Inc.
-----------------------------------

. In November 1993, HELCO applied to the PUC for permission to increase electric
rates to provide $15.8 million in annual revenues, or a 13.4% increase over the
rates then in effect. The requested increase is based on a 1994 test year and a
12.4% return on average common equity (which was later increased to 13.1%). The
increase is needed to cover the costs of plant and equipment, operating costs
necessary to maintain and improve service and provide reliable power and PBOP
costs discussed above. In February 1995, HELCO received a final decision and
order from the PUC authorizing a $13.7 million, or 11.8%, increase in annual
revenues, based on a 12.6% return on average common equity. The order granted
HELCO an increase of approximately $0.1 million in annual revenues, in addition
to reaffirming interim increases that took effect in August and November 1994.
The final decision and order, together with the PBOP decision and order,
resulted in $15.5 million of annual rate relief.

. In June 1994, HELCO filed a notice of intent to file an application for a
general rate increase using a 1995 test year. The increase is expected to be
required primarily to cover investments in new generating units. The application
has not yet been filed and may be filed based on a 1996 test year.

Maui Electric Company, Limited
------------------------------

. In November 1991, MECO filed a request to increase rates. In January 1993,
MECO revised its requested increase to $11.4 million annually, or 10% over the
rates then in effect, based on a 13.0% return on average common equity. Most of
the proposed increase reflected the costs of adding a 58-MW combined-cycle
generating unit on Maui in three phases and PBOP costs discussed above. In 1993,
MECO received four interim decisions which authorized step increases totaling
$8.2 million in annual revenues. In August 1994, MECO received the final
decision and order from the PUC granting an increase of $8.1 million in annual
revenues, or approximately 7.0%, based on a 12.75% return on average common
equity. That action, together with the PBOP decision and order, resulted in $10
million of annual rate relief.

. In December 1994, MECO filed a notice of intent to request rate relief, based
on a 1996 test year.

  Management cannot predict with certainty when decisions in pending or future
rate cases will be rendered or the amount of any interim or final rate increase
that will be granted.


 
SAVINGS BANK
                                               %                   %                   %
                                   1994     CHANGE     1993     change     1992     change
------------------------------------------------------------------------------------------
(in millions)
                                                                   
Revenues                          $  216         8    $  200        (2)   $  203         2
Net interest income                   99         4        96        23        78        21
Operating income                      43        (4)       44        41        31        24
Net income                            25        (2)       25        36        19        24
Interest-earning assets
 Average balance                  $2,700        15    $2,356         7    $2,207        15
 Weighted average yield             7.53%       (6)     8.01%       (8)     8.73%      (11)
Interest-bearing liabilities
 Average balance                  $2,611        13    $2,306         6    $2,171        14
 Weighted average rate              3.98%       (1)     4.02%      (24)     5.28%      (20)
Interest rate spread                3.55%      (11)     3.99%       16      3.45%        6


                                       31

 
American Savings Bank, F.S.B. (ASB) earnings depend primarily on net interest
income, the difference between the interest income earned on interest-earning
assets (loans receivable, mortgage-backed securities and investments) and
interest expense incurred on interest-bearing liabilities (deposit liabilities
and borrowings). ASB's loan volumes and yields are affected by market interest
rates, competition, demand for real estate financing, availability of funds and
management's responses to these factors. Other factors affecting ASB's operating
results include income from servicing loans and expenses from operations.

. 1994 net interest income increased 4% over 1993, despite an 11% decrease in
interest rate spread, due to a $392 million higher average balance of loans and
mortgage-backed securities. Operating and net income declined slightly due to an
increased provision for loan losses, higher compensation and employee benefits
expenses and higher trading portfolio losses. The decline was offset in part by
interest income on a tax refund from an amended tax return.

  In 1994, the federal funds rate, which is the rate charged by banks for
overnight loans to each other and which has a significant influence on consumer
rates, increased 2.5% to 5.5%. In February 1995, the federal funds rate
increased 0.5% to 6.0%.

  The demand for mortgage loans has decreased partly due to the rising interest
rates and the slow real estate market. Also, the recent recession in Hawaii
contributed to a trend of increased loan delinquencies. In 1994, nonaccrual and
renegotiated loans increased $17 million and the allowance for loan losses
increased $3 million. As Hawaii's economy begins its recovery, management
expects to see a reversal in the trend of increased delinquencies.

  Another unfavorable trend has been the outflow of deposits partly due to
competition from money market funds. In 1994, there was a small increase in
deposits due to interest credited, partly offset by an outflow of deposit
accounts. For funding loans and purchasing mortgage-backed securities, ASB has
turned to higher cost advances from the Federal Home Loan Bank and securities
sold under agreements to repurchase. The use of higher cost sources of funds put
downward pressure on ASB's interest rate spread.

  The decrease in interest rate spread can also be attributed to the changing
interest rate environment. During 1993, falling interest rates resulted in
improved interest rate spreads as interest-bearing liabilities repriced downward
at a faster pace than interest-earning assets. During 1994, the rising interest
rates caused the cost of interest-bearing liabilities to increase.  However,
yields on interest-earning assets in 1994 decreased 48 basis points due in part
to 1993's refinancings and repricing of adjustable loans and mortgage-backed
securities. In the future, ASB's cost of interest-bearing liabilities may
further increase, which may result in a decreased interest rate spread and lower
net interest income. If interest rates stabilize, however, ASB's spread is
expected to improve as adjustable-rate mortgages reprice to market levels.

. 1993 net interest income increased 23% over 1992 due to the significantly
lower cost of funds and a higher average balance of loans. The 1993 interest
rate spread increased 16% over 1992. The increase in net interest income was
partially offset by higher administrative and general expenses, including $0.8
million of higher federal insurance premiums for deposits.

. 1992 net interest income increased 21% over 1991 due largely to a higher
average balance of interest-earning assets, a low interest rate environment and
a 6% increase in the interest rate spread resulting from an inflow of low-cost
deposits. The $290 million increase in the average balance of interest-earning
assets was funded primarily with low-cost deposits.

                                       32

 


OTHER
                                         %                  %                 %
                              1994    CHANGE     1993    change    1992    change
---------------------------------------------------------------------------------
(in millions)
                                                          
Revenues                     $  59        (6)   $  63        27    $  50       (8)
Operating income (loss)         (5)       17       (6)       nm        1      (86)

nm  Not meaningful.

The "Other" business segment includes results of operations from Hawaiian Tug &
Barge Corp. (HTB) and its subsidiary, YB, which are maritime freight
transportation companies; HEI Investment Corp. (HEIIC), which is a company
primarily holding investments in leveraged leases; Malama Pacific Corp. (MPC)
and its subsidiaries, which are real estate investment and development
companies; PECS, a newly formed energy service company with no operations in
1994; HEI and HEI Diversified, Inc. (HEIDI), parent companies; and eliminations
of intercompany transactions.

. The freight transportation subsidiaries recorded operating income of $3.6
million in 1994, compared with an operating loss of $0.1 million in 1993 and
operating income of $3.4 million in 1992. The increase in 1994 was due in part
to higher harbor assists and contract tows and a gain on the sale of a barge.
Despite YB's rate increases in 1993, HTB's consolidated operating results were
down significantly in 1993 compared to 1992 due in part to lower charter
revenues at HTB, the termination of an oil hauling contract in mid-1992 and
losses on the sale of vessels when HTB exited the heavy fuel-oil shipping
business.  The decrease in operating income in 1992 was due in part to higher
maintenance costs from drydocking more barges and higher depreciation expense.
HTB and YB have been hampered by Hawaii's recent recession and decreased
construction activity.

  In May 1994, YB filed an application with the PUC to increase rates by
approximately $2.4 million annually. In September 1994, YB filed a stipulated
agreement with the PUC indicating YB and the Consumer Advocate had agreed to
stipulate to a 6% general rate increase, or approximately $2.0 million annually.
The increase took effect in December 1994. Also, see the PBOP discussion under
the "Electric utility - Recent rate requests" section.

. In 1993, HEIIC refinanced the nonrecourse debt supporting a leveraged lease,
resulting in additional income, which was largely offset by the cumulative
effect of the 1% federal income tax rate increase. No new investments are
currently planned for HEIIC.

. MPC's operating loss was $1.5 million in 1994, compared with an operating loss
of $0.6 million in 1993 and $1.3 million in 1992. MPC's real estate development
activities have been impacted by the slow real estate market in Hawaii. MPC sold
fewer units in 1994 than 1993 and fewer units in 1993 than 1992. Writedowns were
taken for the carrying value of certain real estate projects in 1994, 1993 and
1992. See Note 6 in the "Notes to Consolidated Financial Statements" for a
further discussion on MPC and its subsidiaries.

. The HEI and HEIDI corporate operating loss increased $1.0 million in 1994
compared to 1993 due in part to higher employee benefits expense. The HEI and
HEIDI corporate operating loss increased $4.6 million in 1993 compared to 1992
primarily due to a refinement in the method of identifying costs chargeable to
subsidiaries, resulting in lower allocations to subsidiaries and more expenses
retained at corporate. See page 26 for more information on the corporate
allocation methodology refinement.

DISCONTINUED OPERATIONS
--------------------------------------------------------------------------------
See Note 2 in the "Notes to Consolidated Financial Statements" for information
on the discontinued operations of the HIG Group and HERS.

                                       33

 
ACCOUNTING FOR THE EFFECTS OF CERTAIN TYPES OF REGULATION
--------------------------------------------------------------------------------
The electric utility companies and YB follow the accounting prescribed by SFAS
No. 71, "Accounting for the Effects of Certain Types of Regulation." SFAS No. 71
provides guidance in preparing financial statements for most public utilities.
Under SFAS No. 71, if regulation provides assurance that incurred costs will be
recovered in the future, those costs must be capitalized rather than expensed.
If the continued application of SFAS No. 71 would no longer be appropriate--due
to increased competition or regulatory, legislative or judicial actions or
otherwise--the financial effects of the resulting accounting change, including a
write-off of all regulatory assets, could be material.

ENVIRONMENTAL MATTERS
--------------------------------------------------------------------------------
HEI and its subsidiaries are subject to numerous laws and regulations which are
designed to protect the environment, and include air and water quality controls,
hazardous waste and toxic substance controls and the Federal Oil Pollution Act
of 1990.  HEI's electric utility subsidiaries are exempt from certain
environmental requirements applicable on the U.S. mainland.  For example, the
electric utility subsidiaries are exempt from the acid rain provisions of the
1990 Clean Air Act amendments.  However, HEI and its subsidiaries are subject to
environmental laws and regulations which could potentially impact the Company in
terms of operating existing facilities, constructing and operating new
facilities and ensuring the proper cleanup and disposal of hazardous waste and
toxic substances. Management believes that the recovery through rates of most,
if not all, of any costs incurred by HECO and its subsidiaries in complying with
these environmental requirements would be allowed by the PUC. However, as with
other costs reviewed by the PUC in the rate-making process, costs incurred by
HECO and its subsidiaries in complying with these environmental requirements may
not be fully allowed by the PUC for rate-making purposes. Based on information
available to the Company, management is not aware of any contingent liabilities
relating to environmental matters that would have a material adverse effect on
the Company.

ELECTRIC AND MAGNETIC FIELDS
--------------------------------------------------------------------------------
Research is ongoing about the potential adverse health effects from exposure to
electric and magnetic fields (EMF). However, the scientific community has not
yet reached a consensus on the nature of any health effects. HECO and its
subsidiaries are participating in utility industry funded studies on the subject
and are taking steps to reduce EMF, where practical, in the design of new
transmission and distribution facilities. The Company cannot predict the impact,
if any, the EMF issue may have on the Company in the future.

EFFECTS OF INFLATION
--------------------------------------------------------------------------------
Inflation, as measured by the U.S. Consumer Price Index, averaged 2.6% in 1994
and 3.0% in 1993 and 1992. Although the rate of inflation over the past three
years has been relatively low compared with the late 1970's and early 1980's,
inflation continues to have an impact on HEI's operations.

  Inflation increases operating costs and the replacement cost of assets.
Subsidiaries with significant physical assets, such as the electric utility
companies, replace assets at much higher costs and must request rate relief to
maintain adequate earnings. In the past, the PUC has generally approved rate
relief to cover the effects of inflation. In 1992, 1993 and 1994, the electric
utility companies received rate relief, in part to cover increases due to
inflation in operating expenses and construction costs.

ACCOUNTING CHANGES
--------------------------------------------------------------------------------
See Note 1 in the "Notes to Consolidated Financial Statements."

                                       34

 
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------------------------------------------------------

CONSOLIDATED
-------------------------------------------------------------------------------

The Company believes that its ability to generate cash, both internally from
operations and externally from debt and equity issues, is adequate to maintain
sufficient liquidity to fund its construction programs and to cover debt and
other cash requirements in the foreseeable future.

  The Company's total assets were $5.2 billion and $4.5 billion at December 31,
1994 and 1993, respectively. Asset growth in 1994 stemmed from growth in ASB's
loan and mortgage-backed securities portfolios and capital expenditures by the
electric utility companies.

  The consolidated capital structure of HEI was as follows:


 
December 31                                    1994            1993
------------------------------------------------------------------------
(in millions)
                                                         
Short-term borrowings                      $  137     8%   $   40      3%
Long-term debt, net                           718    44       698     47
Preferred stock of electric utility          
 subsidiaries                                  93     6        95      6
Common stock equity                           682    42       643     44
------------------------------------------------------------------------
                                           $1,630   100%   $1,476    100%
========================================================================

ASB's deposit liabilities, securities sold under agreements to repurchase and
advances from the Federal Home Loan Bank are not included in the table above.

  HEI plans to maintain its debt and equity structure close to the levels at
December 31, 1994 and 1993 through the issuance of short-term and long-term
debt, the  issuance of preferred stock by the electric utilities, retained
earnings and the issuance of common stock by HEI through public offerings, the
Dividend Reinvestment and Stock Purchase Plan and other plans.

  As of February 15, 1995, the Standard & Poor's (S&P), Moody's Investors
Service (Moody's) and Duff & Phelps Credit Rating Co.'s (Duff & Phelps) ratings
of HEI's and HECO's securities were as follows:


 
                                       S&P      Moody's   Duff & Phelps  
------------------------------------------------------------------------  
                                                       
                                                                       
HEI                                                                    
---                                                                    
                                                                       
Medium-term notes                      BBB      Baa2      BBB+         
Commercial paper                       A-2      P-2       Duff 2       
                                                                       
HECO                                                                   
----                                                                   
                                                                       
First mortgage bonds                   BBB+     A3        A            
Unsecured notes                        BBB      Baa1      A-           
Cumulative preferred stock             BBB      baa1      BBB+         
Commercial paper                       A-2      P-2       Duff 1-        


The above ratings are not recommendations to buy, sell or hold any securities,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies.


In January 1995, S&P revised its ratings outlook on HEI and HECO to "stable"
from "negative" citing recent PUC decisions which demonstrate a continuing trend
of regulatory support for the electric utility subsidiaries' heavy construction
program and HEI's commitment to a well balanced capital structure. Neither HEI
nor HECO management can predict with certainty future rating agency actions or
their effects on the future cost of capital to HEI or HECO.

  At December 31, 1994, $178 million of a $250 million registered medium-term
note program was available for offering by HEI.

                                       35

 
  Operating activities provided net cash of $130 million in 1994, $139 million
in 1993 and $98 million in 1992. Investing activities such as capital
expenditures and the origination and purchases of loans and mortgage-backed
securities accounted for a significant portion of the net cash used of $713
million in 1994, $352 million in 1993 and $392 million in 1992. Financing
activities provided net cash of $554 million in 1994, $172 million in 1993 and
$395 million in 1992. In 1994, significant amounts of cash came from the net
increases in advances from the Federal Home Loan Bank, securities sold under
agreements to repurchase and short-term borrowings.

  A portion of net assets of HECO and ASB are not available for transfer to HEI
in the form of dividends, loans or advances without regulatory approval.
However, such restrictions are not expected to significantly affect the
operations of HEI, its ability to pay dividends on its common stock or its
ability to meet other cash obligations. (See Note 18 in the "Notes to
Consolidated Financial Statements.")

  Total HEI consolidated financing requirements for 1995 through 1999, including
net capital expenditures, debt retirements (excluding repayments of Advances to
Federal Home Loan Bank and repurchases of securities sold under agreements to
repurchase) and sinking fund requirements, are currently estimated to total $1.1
billion. Of this amount, approximately $0.8 billion are for net capital
expenditures (mostly relating to the electric utility companies' net capital
expenditures described below). HEI consolidated internal sources, after the
payment of HEI dividends, are expected to provide approximately 56% of the
consolidated financing requirements, with debt and equity financing providing
the remaining requirements. Over the five-year period 1995 through 1999, HEI
estimates that it will require approximately $161 million in common equity,
other than retained earnings, which is expected to be provided principally by
HEI's Dividend Reinvestment and Stock Purchase Plan and the Hawaiian Electric
Industries Retirement Savings Plan.

Following is a discussion of the liquidity and capital resources of HEI's
largest segments.

ELECTRIC UTILITY
--------------------------------------------------------------------------------
HECO's consolidated capital structure was as follows:



December 31                                    1994             1993
------------------------------------------------------------------------
(in millions)
                                                        
Short-term borrowings from
   nonaffiliates and affiliate             $  118     9%   $   41      3%
Long-term debt, net                           489    37       485     41
Preferred stock
   Subject to mandatory redemption             45     3        47      4
   Not subject to mandatory redemption         48     4        48      4
Common stock equity                           634    47       570     48
------------------------------------------------------------------------
                                           $1,334   100%   $1,191    100%
========================================================================


In 1994, the electric utility companies used $186 million in cash for capital
expenditures and $29 million for common stock dividends. Operations provided
$102 million in cash and $15 million of cash came from third-party contributions
in aid of construction. Financing activities provided $78 million, including a
$77 million net increase in short-term borrowings. Also, HEI provided $30
million of cash through its purchase of HECO common stock.

  The electric utility's consolidated financing requirements for 1995 through
1999, including net capital expenditures, debt retirements and sinking fund
requirements, are estimated to total $850 million. HECO's consolidated internal
sources, after the payment of common stock and preferred stock dividends, are
currently expected to provide approximately 60% of the total $850 million
requirements, with debt and equity financing providing the remaining
requirements. HECO currently estimates that it will require approximately $60
million in common equity, other than retained earnings, over the five-year
period 1995 through 1999. The PUC must approve issuances of long-term debt and
equity for HECO, HELCO and MECO.

                                       36

 
  Capital expenditures include the costs of projects which are required to meet
expected load growth, to improve reliability and to replace and upgrade existing
equipment. Net capital expenditures for the five-year period 1995 through 1999
are currently estimated to total $750 million. Approximately 70% of gross
capital expenditures, including AFUDC and capital expenditures funded by third
party cash contributions in aid of construction, is for transmission and
distribution projects, with the remaining 30% primarily for generation projects.
At December 31, 1994, purchase commitments other than fuel and power purchase
contracts were approximately $83 million, including amounts for construction
projects. (Also see Note 4 in the "Notes to Consolidated Financial Statements"
for a discussion of fuel and power purchase commitments.)

  For 1995, electric utility net capital expenditures are estimated to be $170
million and gross capital expenditures are estimated to be $205 million, of
which approximately 65% is for transmission and distribution projects. An
estimated $40 million is planned for new generation projects. Drawdowns of
proceeds from the sale of tax-exempt special purpose revenue bonds,  sales of
common stock to HEI and the generation of funds from internal sources are
expected to provide the cash needed for the net capital expenditures.

  Capital expenditure estimates and the timing of construction projects are
reviewed periodically by management and may change significantly as a result of
many considerations, including changes in economic conditions, changes in
forecasts of kilowatthour sales and peak load, the availability of alternate
energy and purchased power, the availability of generating sites and
transmission and distribution corridors, the ability to obtain adequate and
timely rate relief, escalation in construction costs, demand-side management
programs and requirements of environmental and other regulatory and permitting
authorities.

  In January 1995, the Department of Budget and Finance of the State of Hawaii
issued tax-exempt special purpose revenue bonds in the principal amount of $47
million, with a maturity of 30 years and a fixed coupon interest rate of 6.60%,
and loaned the proceeds from the sale to HECO, HELCO and MECO. The bonds were
issued at a discount, resulting in a yield of approximately 6.75%. As of
December 31, 1994, an additional $170 million of revenue bonds had been
authorized by the Hawaii Legislature for issuance prior to the end of 1997.


 
SAVINGS BANK
------------------------------------------------------------------------------------------
December 31                                     1994                           1993
------------------------------------------------------------------------------------------
                                                          %                              % 
                                           $            change         $            change
------------------------------------------------------------------------------------------
(in millions)
                                                                           
Assets                                     $3,116           19         $2,618            6          
Loans receivable                            1,824            5          1,735           19          
Mortgage-backed securities                  1,067           69            630          (11)         
Deposit liabilities                         2,129            2          2,092            3          
Securities sold under agreements to         
 repurchase                                   123           nm            --          (100)          
Advances from Federal Home Loan Bank          616          113            290           49           
  
nm  Not meaningful.

As of September 30, 1994, ASB was the fourth largest financial institution in
the state based on total assets of $2.9 billion. In 1994, ASB's total assets
increased primarily due to originations and purchases of loans and mortgage-
backed securities of $937 million, partly offset by repayments of $413 million.
Loans and deposits continued to grow in 1994, although at a slower pace than in
1993 and 1992.

   At December 31, 1994, loans which do not accrue interest totaled $23.8
million or 1.31% of net loans outstanding. At the end of 1994, there were only
three properties acquired in settlement of loans valued at $0.8 million.

  For 1994, cash used by investing activities was $540 million, due largely to
the origination of loans receivable and the purchase of mortgage-backed
securities, partly offset by principal repayments. Cash provided by financing
activities included a net increase of $327 million in advances from the Federal
Home Loan Bank, $122 million in securities sold under agreements to repurchase
and $38 million in deposit liabilities, partly offset by common stock dividends
of $15 million.

                                       37

 
  Deposits traditionally have been the principal source of ASB's funds for use
in lending, meeting liquidity requirements and making investments. ASB also
derives funds from receipt of interest and principal on outstanding loans
receivable and mortgage-backed securities, borrowings from the Federal Home Loan
Bank of Seattle, securities sold under agreements to repurchase and other
sources. In the last two years, advances from the Federal Home Loan Bank have
become a more significant source of funds as the demand for deposits has
decreased. Using higher cost sources of funds puts downward pressure on ASB's
net interest income.

  Minimum liquidity levels are currently governed by the regulations adopted by
the Office of Thrift Supervision (OTS). ASB was in compliance with OTS liquidity
requirements as of December 31, 1994.

  OTS regulations require each savings association to have regulatory capital at
least sufficient to meet three requirements: tangible capital and core
(leverage) capital of 1.5% and 3.0%, respectively, of adjusted total assets; and
a risk-based capital standard equal to 8.0% of risk-weighted assets. As of
December 31, 1994, ASB was in compliance with the minimum capital requirements
with a tangible capital ratio of 4.9%, a core capital ratio of 5.2% and a risk-
based capital ratio of 11.4%.

  The OTS adopted a rule adding an interest rate risk (IRR) component to the
existing risk-based capital requirement. Institutions with an "above normal"
level of IRR exposure may be required to hold additional capital. "Above normal"
IRR is defined as any percentage decline in market value of an institution's
portfolio equity in excess of 2% of the market value of its assets which would
result from an immediate 200 basis point change in interest rates. Although the
regulation generally became effective January 1, 1994, the IRR capital
deduction, which was to go into effect with the September 1994 Thrift Financial
Report, has been waived until the OTS finalizes the process under which
institutions may appeal such capital deductions. This means that in calculating
the risk-based capital requirement, ASB was not required to deduct capital for
IRR, and did not report such a deduction for the December 1994
Thrift Financial Report. However, based on the lowest IRR reported as of the
three prior quarter-ends, ASB would not have been required to hold additional
capital at December 31, 1994, if the new rule had been in effect at that time.

  The Federal Deposit Insurance Corporation Improvement Act of 1991 established
a statutory framework for closer monitoring of insured depository institutions
in order to ensure "prompt corrective action" by regulators as an institution's
capital position declines.  The OTS rules for prompt corrective action,
effective on December 19, 1992, define the capital measures for five capital
categories (well-capitalized, adequately capitalized, under-capitalized,
significantly under-capitalized and critically under-capitalized), and provide
for progressively more stringent restrictions and supervision as capital levels
decline. To be classified as "well-capitalized," an institution must have a
"leverage ratio" of 5%, a "Tier-1 risk-based ratio" of 6% and a "total risk-
based ratio" of 10%. As of December 31, 1994, ASB believes that based on OTS
capital standards it would have been classified as "well-capitalized" with a
leverage ratio of 5.2%, a Tier-1 risk-based ratio of 11.0% and a total risk-
based ratio of 11.4%.

  ASB believes that a satisfactory regulatory capital position provides a basis
for public confidence, affords protection to depositors, helps to ensure
continued access to capital markets on favorable terms and provides a foundation
for anticipated growth.

  On September 29, 1994, the Reigle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (Interstate Banking Act) was signed into law. The
Interstate Banking Act will create a uniform system of interstate banking in the
U.S. Also, subject to certain limitations, it will permit interstate branching
by U.S. banks, marking a major departure from previous law. Although the
Interstate Banking Act applies only to banks, it could nonetheless affect the
competitive balance among banks, thrifts and other financial institutions and
the level of competition among financial institutions doing business in Hawaii.

                                       38

 
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
The Board of Directors and Stockholders
Hawaiian Electric Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Hawaiian
Electric Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, retained earnings and cash flows
for each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hawaiian Electric
Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.

As discussed in Note 14 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
Additionally, as discussed in Note 17 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
postretirement benefits other than pensions.


/s/ KPMG Peat Marwick LLP
Honolulu, Hawaii
January 25, 1995

                                       39

 
CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------------------------------------------
 
Hawaiian Electric Industries, Inc. and subsidiaries



Years ended December 31                          1994          1993          1992
---------------------------------------------------------------------------------
(in thousands, except per share amounts)
                                                              
REVENUES
Electric utility                           $  913,719    $  879,110    $  778,690
Savings bank                                  215,525       199,734       202,995
Other                                          59,279        63,326        49,698
---------------------------------------------------------------------------------
                                            1,188,523     1,142,170     1,031,383
---------------------------------------------------------------------------------
EXPENSES
Electric utility                              777,091       759,545       674,849
Savings bank                                  173,000       155,617       171,668
Other                                          64,299        69,370        48,647
---------------------------------------------------------------------------------
                                            1,014,390       984,532       895,164
---------------------------------------------------------------------------------
OPERATING INCOME (LOSS)
Electric utility                              136,628       119,565       103,841
Savings bank                                   42,525        44,117        31,327
Other                                          (5,020)       (6,044)        1,051
---------------------------------------------------------------------------------
                                              174,133       157,638       136,219
---------------------------------------------------------------------------------
Interest expense--electric utility and        
 other                                        (54,028)      (53,192)      (47,141)
Allowance for borrowed funds used               
 during construction                            4,043         3,869         2,095
Preferred stock dividends of electric          
 utility subsidiaries                          (7,163)       (6,518)       (6,710)
Allowance for equity funds used during          
 construction                                   9,064         6,973         6,781
---------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS             
 BEFORE INCOME TAXES                          126,049       108,770        91,244
Income taxes                                   53,019        47,086        29,529
---------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS              73,030        61,684        61,715
---------------------------------------------------------------------------------
DISCONTINUED OPERATIONS, NET OF INCOME
 TAXES
     Loss from operations                          --            --       (57,090)
     Loss on disposal                              --       (13,025)      (16,207)
---------------------------------------------------------------------------------
LOSS FROM DISCONTINUED OPERATIONS                  --       (13,025)      (73,297)
---------------------------------------------------------------------------------
NET INCOME (LOSS)                          $   73,030    $   48,659    $  (11,582)
=================================================================================
EARNINGS (LOSS) PER COMMON SHARE
    CONTINUING OPERATIONS                       $2.60         $2.38         $2.54
    DISCONTINUED OPERATIONS                        --         (0.50)        (3.02)
---------------------------------------------------------------------------------
                                                $2.60         $1.88        $(0.48)
=================================================================================
DIVIDENDS PER COMMON SHARE                      $2.33         $2.29         $2.25
=================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON              
 SHARES OUTSTANDING                            28,137        25,938        24,275
=================================================================================
 
 
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
-------------------------------------------------------------------------------

Hawaiian Electric Industries, Inc. and subsidiaries
 
 
 
Years ended December 31                          1994          1993          1992
---------------------------------------------------------------------------------
(in thousands)
                                                               
RETAINED EARNINGS, BEGINNING OF YEAR       $  128,318    $  138,484    $  204,663
Net income (loss)                              73,030        48,659       (11,582)
Common stock dividends                        (65,513)      (58,825)      (54,597)
---------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR             $  135,835    $  128,318    $  138,484
=================================================================================
 
 
See accompanying "Notes to Consolidated Financial Statements."

                                       40

 
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc. and subsidiaries



 
December 31                                                  1994                      1993
-------------------------------------------------------------------------------------------
(in thousands)
                                                                      
ASSETS
Cash and equivalents                                   $   87,623                $  116,260
Accounts receivable and unbilled                          
 revenues, net                                            130,762                   117,116
Inventories, at average cost                               43,126                    39,405
Real estate developments                                   33,956                    29,673
Loans receivable, net                                   1,824,055                 1,735,098
Marketable securities (estimated market
 value $1,051,673 and $710,369)                         1,099,810                   698,755 
Other investments                                          77,297                    77,106
Property, plant and equipment, net
    Land                                 $   33,861                $   33,103
    Plant and equipment                   2,220,213                 2,058,201
    Construction in progress                171,251                   129,875
                                         ----------                ---------- 
                                          2,425,325                 2,221,179
   Less - accumulated depreciation         (747,503)    1,677,822    (678,190)    1,542,989
                                         ----------                ----------
Regulatory assets                                          95,257                    62,543
Other                                                      59,301                    52,983
Goodwill and other intangibles                             45,455                    49,664
-------------------------------------------------------------------------------------------
                                                       $5,174,464                $4,521,592
===========================================================================================
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                       $   97,210                $   88,628
Deposit liabilities                                     2,129,310                 2,091,583
Short-term borrowings                                     136,755                    40,416
Securities sold under agreements to                       
 repurchase                                               123,301                        --
Advances from Federal Home Loan Bank                      616,374                   289,674
Long-term debt, net                                       718,240                   697,836
Deferred income taxes                                     172,930                   168,329
Unamortized tax credits                                    45,954                    44,357
Contributions in aid of construction                      178,635                   165,005
Other                                                     180,529                   197,713
-------------------------------------------------------------------------------------------
                                                        4,399,238                 3,783,541
-------------------------------------------------------------------------------------------
 
PREFERRED STOCK OF ELECTRIC UTILITY
 SUBSIDIARIES
Subject to mandatory redemption                            44,844                    46,730
Not subject to mandatory redemption                        48,293                    48,293
-------------------------------------------------------------------------------------------
                                                           93,137                    95,023
-------------------------------------------------------------------------------------------
 
STOCKHOLDERS' EQUITY
Preferred stock, no par value,
 authorized 10,000 shares; issued:  none                       --                        --
Common stock, no par value, authorized
 100,000 shares; issued and outstanding:  
 28,655 shares and 27,675 shares                          546,254                   514,710  
Retained earnings                                         135,835                   128,318
-------------------------------------------------------------------------------------------
                                                          682,089                   643,028
-------------------------------------------------------------------------------------------
                                                       $5,174,464                $4,521,592
===========================================================================================
 
 
See accompanying "Notes to Consolidated Financial Statements."

                                       41

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc. and subsidiaries


 

Years ended December 31                         1994         1993         1992
------------------------------------------------------------------------------
(in thousands)
                                                             
CASH FLOWS FROM OPERATING ACTIVITIES

Income from continuing operations          $  73,030    $  61,684    $  61,715
Adjustments to reconcile income from
 continuing operations to net cash
 provided by operating activities
   Depreciation and amortization of        
     property, plant and equipment            72,256       64,314       61,928
   Other amortization                           (660)         (88)         784
   Deferred income taxes and tax           
     credits, net                              9,161        3,164       (4,530)
   Changes in assets and
     liabilities, net of effects from
     disposal of businesses,
     acquisition of partnership
     interest and acquisition of
     control of joint venture
       Decrease (increase) in              
         accounts receivable and
         unbilled revenues, net              (13,646)       1,108      (17,515)
       Decrease (increase) in                
         inventories                          (3,721)        (453)       2,593  
       Decrease (increase) in            
         other securities held for
         trading                              45,396      (22,359)      (9,161)
       Increase in regulatory            
         assets                               (9,885)      (9,606)      (2,921)
       Increase in accounts payable            8,582        6,248        8,474
       Changes in other assets and      
         liabilities                         (17,570)      35,401       (3,614)
------------------------------------------------------------------------------
                                             162,943      139,413       97,753
Cash flows used by discontinued              
 operations                                  (32,623)         (92)          --
------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING               
 ACTIVITIES                                  130,320      139,321       97,753 
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans receivable originated and             
 purchased                                  (515,070)    (557,009)    (585,292)
Principal repayments on loans receivable     225,002      288,932      268,672
Proceeds from sale of loans receivable         2,138          633        5,208
"Held-to-maturity" mortgage-backed          
 securities purchased                       (421,649)    (190,517)    (216,289)
Principal repayments on                      
 "held-to-maturity" mortgage-backed
 securities                                  187,967      269,816      307,364
Capital expenditures                        (200,526)    (213,685)    (190,653)
Contributions in aid of construction          15,112       20,158       17,949
Other                                         (5,695)      29,980       25,953
------------------------------------------------------------------------------
                                            (712,721)    (351,692)    (367,088)
Net investment in discontinued                   
 operations                                       --           --      (24,751)
------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES       (712,721)    (351,692)    (391,839)
------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit liabilities           37,727       58,714      417,508
Net increase (decrease) in short-term
 borrowings with original maturities of
 three months or less                        101,688      (93,247)      92,303
Proceeds from other short-term                 
 borrowings                                    1,008       25,622       36,000
Repayment of other short-term borrowings      (6,357)     (72,707)          --
Proceeds from securities sold under          
 agreements to repurchase                    145,669           --       43,000
Repurchase of securities sold under          
 agreements to repurchase                    (23,330)     (27,000)    (145,200)
Proceeds from advances from Federal          
 Home Loan Bank                              998,200      194,692       32,900
Principal payments on advances from         
 Federal Home Loan Bank                     (671,500)     (99,117)     (97,400)
Proceeds from issuance of long-term debt      87,814      193,788       83,736
Repayment of long-term debt                  (75,427)     (70,801)     (43,436)
Proceeds from issuance of electric               
 utility subsidiaries' preferred stock            --       12,000           --
Redemption of electric utility                
 subsidiaries' preferred stock                (1,886)      (2,190)      (1,745)
Net proceeds from issuance of common          
 stock                                        13,602       88,658       18,248
Common stock dividends                       (47,676)     (42,012)     (39,214)
Other                                         (5,768)       5,477       (1,595)
------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING               
 ACTIVITIES                                  553,764      171,877      395,105
------------------------------------------------------------------------------
Net increase (decrease) in cash and          
 equivalents                                 (28,637)     (40,494)     101,019
Cash and equivalents, beginning of year      116,260      156,754       55,735
------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF YEAR          $  87,623    $ 116,260    $ 156,754
==============================================================================
 
 
See accompanying "Notes to Consolidated Financial Statements."

                                       42

 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
GENERAL
--------------------------------------------------------------------------------
BASIS OF FINANCIAL STATEMENT PRESENTATION.  The financial statements have been
prepared in conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.

  Material estimates that are particularly susceptible to significant change
relate to the determination of regulatory assets, the allowance for loan losses,
the provision for costs in excess of net realizable values of real estate
projects and the provisions for losses relating to the disposal of discontinued
businesses. Management believes that such assets, allowances and provisions have
been appropriately established in accordance with generally accepted accounting
principles.

CONSOLIDATION.  The consolidated financial statements include the accounts of
Hawaiian Electric Industries, Inc. (HEI), a holding company, and its direct and
indirect wholly owned subsidiaries (collectively, the Company). HEI's
subsidiaries are Hawaiian Electric Company, Inc. (HECO), parent company of
Hawaii Electric Light Company, Inc. (HELCO) and Maui Electric Company, Limited
(MECO); HEI Diversified, Inc. (HEIDI), parent company of American Savings Bank,
F.S.B. (ASB); Hawaiian Tug & Barge Corp. (HTB), parent company of Young
Brothers, Limited (YB); Lalamilo Ventures, Inc. (LVI); Malama Pacific Corp.
(MPC), parent company of several real estate subsidiaries; HEI Investment Corp.
(HEIIC); and Pacific Energy Conservation Services, Inc.

  All significant intercompany accounts and transactions have been eliminated in
consolidation.

PUBLIC UTILITY COMMISSION REGULATION.  The electric utility subsidiaries and YB
are regulated by the Public Utilities Commission of the State of Hawaii (PUC)
and account for the effects of regulation under Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types
of Regulation." As a result, the actions of regulators can affect the timing of
recognition of revenues, expenses, assets and liabilities.

INVESTMENTS.

DEBT AND EQUITY SECURITIES.  In May 1993, the Financial Accounting Standards
Board (FASB)  issued SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." The Company adopted the provisions of SFAS No. 115
effective January 1, 1994, and the implementation of SFAS No. 115 did not have a
material effect on the Company's financial condition or results of operations.

  Debt securities that the Company has the positive intent and ability to hold
to maturity are classified as held-to-maturity securities and reported at
amortized cost.

  Equity securities (with readily determinable fair values) and debt securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings.

  Equity securities (with readily determinable fair values) and debt securities
not classified as either held-to-maturity securities or trading securities are
classified as available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders' equity.

                                       43

 
OTHER INVESTMENTS.  Investments in joint ventures and other investments for
which the Company has the ability to exercise significant influence over the
operating and financing policies of the enterprise are accounted for under the
equity method.
 
  For held-to-maturity investments, available-for-sale investments and other
investments described above, declines in value determined to be other than
temporary are reflected in net income.   The specific identification method is
used in determining realized gains and losses on the sale of securities.

PROPERTY, PLANT AND EQUIPMENT.  Property, plant and equipment are stated at
cost. The cost of plant constructed by the electric utility subsidiaries
includes applicable engineering, supervision, administrative and general
expenses, and an allowance for the cost of funds used during the construction
period. Upon the ordinary retirement or sale of electric utility plant, no gain
or loss is recognized. The cost of the plant retired or sold and the cost of
removal (net of salvage obtained) are charged to accumulated depreciation.

POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS.  Pension costs are charged primarily
to expense and electric utility plant. The Company's policy is to fund pension
costs in amounts consistent with the requirements of the Employee Retirement
Income Security Act.

  Certain health care and/or life insurance benefits are provided to retired
employees (substantially all of whom become eligible for these benefits upon
retirement) and the employees' beneficiaries and covered dependents. Effective
January 1, 1993, the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires that
the expected cost of postretirement benefits other than pensions be accrued
during the years in which employees render service (see Note 17). Previously,
the cost of these benefits were recognized when paid. The resulting change in
the method of accounting for postretirement benefits other than pensions had no
material effect on net income for 1993, primarily due to the regulated nature of
the electric utility subsidiaries and YB.

  In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." This statement requires employers to recognize the
obligation to provide postemployment benefits in accordance with SFAS No. 43,
"Accounting for Compensated Absences," if the obligation is attributable to
employees' services already rendered, employees' rights to those benefits
accumulate or vest, payment of the benefits is probable, and the amount of the
benefits can be reasonably estimated. The Company adopted the provisions of SFAS
No. 112 on January 1, 1994. The implementation of SFAS No. 112 did not have a
material effect on the Company's financial condition or results of operations.

DEPRECIATION AND AMORTIZATION.  Depreciation of plant and equipment is computed
primarily using the straight-line method over the estimated useful lives of the
assets.

  Goodwill relates to the acquisition of ASB and is being amortized on a
straight-line basis over 25 years. Core deposit intangibles are being amortized
each year at the greater of the actual attrition rate of such deposit base or
10% of the original value. Subsequent to its acquisition, ASB evaluates whether
later events or circumstances have occurred that indicate the remaining
estimated useful life of an intangible asset may warrant revision or that the
remaining balance of an intangible asset may not be recoverable. When factors
indicate that an intangible asset should be evaluated for possible impairment,
ASB will use an estimate of undiscounted future cash flows over the remaining
useful life of the asset in measuring whether the intangible asset is
recoverable.

                                       44

 
ENVIRONMENTAL EXPENDITURES.  In general, environmental contamination treatment
costs are charged to expense, unless it is probable such costs will be recovered
through rates authorized by the PUC. Also, environmental costs are capitalized
if: the costs extend the life, increase the capacity, or improve the safety or
efficiency of property owned; the costs mitigate or prevent environmental
contamination that has yet to occur and that otherwise may result from future
operations; or the costs are incurred in preparing property for sale.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the cost can be reasonably estimated. Corresponding regulatory
assets are recorded when it is probable that such costs would be allowed by the
PUC as reasonable and necessary costs of service to be recovered in future
rates.

INCOME TAXES.  The Company adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes" effective January 1, 1993. Previously, income taxes were
recognized in accordance with the provisions of Accounting Principles Board
Opinion No. 11. The resulting change in the method of accounting for income
taxes had no material effect on net income for 1993, primarily due to the
regulated nature of the electric utility subsidiaries and YB (see Note 14).

  Federal and state tax credits are deferred and amortized over the estimated
useful lives of the properties which qualified for the credits.

EARNINGS PER COMMON SHARE.  Earnings per common share are based upon the
weighted average number of shares of common stock outstanding. The dilutive
effect of stock options is not material.

CASH FLOWS.  The Company considers cash on hand, deposits in banks, deposits
with the Federal Home Loan Bank, money market accounts, certificates of deposit,
short-term commercial paper and reverse repurchase agreements with original
maturities of three months or less to be cash and equivalents.

RECLASSIFICATIONS.  Certain reclassifications have been made to prior years'
consolidated financial statements to conform to the 1994 presentation.

ACCOUNTING CHANGES - 1995 IMPLEMENTATION.  In May 1993, the FASB issued SFAS No.
114 "Accounting by Creditors for Impairment of a Loan." The Company adopted the
provisions of SFAS No. 114, as amended by SFAS No. 118, effective January 1,
1995. The adoption did not have a material effect on the Company's financial
condition and, in the opinion of management, will not have a material effect on
the Company's 1995 results of operations.

ELECTRIC UTILITY
--------------------------------------------------------------------------------
CONTRIBUTIONS IN AID OF CONSTRUCTION.  The electric utility subsidiaries receive
contributions from customers for special construction requirements. As directed
by the PUC, the contributions are amortized on a straight-line basis over 30
years which approximates the estimated useful lives of the facilities for which
the contributions were received. This amortization is an offset against
depreciation expense.

ELECTRIC UTILITY REVENUES.  Electric utility revenues are based on rates
authorized by the PUC and include revenues applicable to electric energy
consumed in the accounting period but not yet billed to the customers. The rate
schedules of the electric utility subsidiaries include energy cost adjustment
clauses under which electric rates are adjusted for changes in the weighted
average price paid for fuel oil and certain components of purchased power, and
the relative amounts of company-generated and purchased power.

                                       45

 
SAVINGS BANK
--------------------------------------------------------------------------------
LOANS RECEIVABLE.  Any discount or premium on loans is amortized over the
estimated life of the loan using the level-yield method.

  The valuation allowance for estimated losses on loans receivable is provided
to the extent that such losses are expected to be incurred.

  The accrual of interest on a loan is discontinued when the loan becomes more
than 90 days delinquent or on an earlier basis when there is reasonable doubt as
to its collectability.

REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS.  Real estate acquired in settlement
of loans is recorded at the lower of cost or fair value less estimated selling
expenses.

LOAN ORIGINATION AND COMMITMENT FEES.  Loan origination fees (net of direct loan
origination costs) are deferred and recognized as an adjustment of yield over
the life of the loan. Nonrefundable commitment fees (net of direct loan
origination costs, if applicable) for commitments to originate or purchase loans
are deferred and, if the commitment is exercised, recognized as an adjustment of
yield over the life of the loan. If the commitment expires unexercised,
nonrefundable commitment fees are recognized as income upon expiration of the
commitment.

2. DISCONTINUED OPERATIONS
--------------------------------------------------------------------------------
HAWAIIAN ELECTRIC RENEWABLE SYSTEMS, INC.
--------------------------------------------------------------------------------
In October 1992, the HEI Board of Directors ratified management's September 30,
1992 plan to exit the nonutility wind energy business because of chronic
mechanical problems with its wind turbines and continuing operating losses. In
March 1993, HEI sold the stock of Hawaiian Electric Renewable Systems, Inc.
(HERS) to The New World Power Corporation for an amount which was not material.
In 1993, in connection with the sale of HERS, HEI reversed reserves for HERS'
disposal costs that were no longer needed due to the terms of the sale,
resulting in a gain on disposal of $2.0 million (net of $1.2 million of income
taxes).

  In 1992, HERS operating revenues were $0.6 million, loss from operations was
$5.5 million (net of $8.1 million of income tax benefits) and loss on disposal
was $8.1 million (net of $9.0 million of income tax benefits).

THE HAWAIIAN INSURANCE & GUARANTY COMPANY, LIMITED
--------------------------------------------------------------------------------
The Hawaiian Insurance & Guaranty Company, Limited (HIG) and its subsidiaries
(collectively, the HIG Group) are property and casualty insurance companies.
HEIDI was the holder of record of all the common stock of HIG until August 16,
1994. In December 1992, due to a significant increase in the estimate of
policyholder claims from Hurricane Iniki, the HEI Board of Directors had
concluded that it would not contribute additional capital to HIG and the
remaining investment in the HIG Group was written off. On December 24, 1992, a
formal rehabilitation order vested full control over the HIG Group in the
Insurance Commissioner (the Rehabilitator) and her deputies.

                                       46

 
  On April 12, 1993, the Rehabilitator, the HIG Group and others filed a
complaint against HEI, HEIDI and others. The complaint, which was subsequently
amended, set forth several separate counts, including claims to the effect that
HEI and/or HEIDI should be held liable for HIG's obligations and claims that
directors and officers of HEI, HEIDI and the HIG Group were responsible for the
losses suffered by the HIG Group. In 1994, HEI, HEIDI, the named directors and
officers, the Rehabilitator and others signed an agreement to settle the
lawsuit. In August 1994, $32 million was disbursed to the Rehabilitator, at
which time a release of claims against HEI, its affiliates and their past and
present officers and directors became effective. HEI is seeking reimbursement
for the settlement and defense costs from its insurance carriers. One of HEI's
insurance carriers has filed a declaratory relief action seeking resolution of
insurance coverage and other policy issues, and HEI has filed counterclaims.
Trial is scheduled for October 1995. Recoveries from HEI's insurance carriers,
if any, will be recognized when realized.

  The settlement of the lawsuit resulted in a loss on disposal of $15.0 million
(net of $9.2 million of income tax benefits) in 1993. In 1992, HIG operating
revenues were $80.7 million, loss from operations was $51.6 million (net of
$28.5 million of income tax benefits) and loss on disposal was $8.1 million (net
of $5.0 million of income tax benefits).

  In December 1994, five insurance agencies, which had served as insurance
agents for the HIG Group, filed a complaint against HEI, HEIDI and others. The
complaint set forth several causes of action, including breach of contract and
piercing the corporate veil. The plaintiffs ask for relief from the defendants,
including compensatory damages for lost commissions, lost business and lost
profits in an amount to be proven at trial and punitive damages. In the opinion
of management, losses, if any, resulting from the ultimate outcome of the
lawsuit will not have a material adverse effect on the Company's financial
condition or results of operations.

3. SEGMENT FINANCIAL INFORMATION
--------------------------------------------------------------------------------
Segment financial information on page 26 is incorporated herein by reference.

                                       47

 
4. ELECTRIC UTILITY SUBSIDIARY
--------------------------------------------------------------------------------
Hawaiian Electric Company, Inc. and subsidiaries
Selected consolidated financial information


 
INCOME STATEMENT DATA
Years ended December 31                        1994        1993            1992
-------------------------------------------------------------------------------
(in thousands)
                                                                 
REVENUES
Operating revenues                         $907,308    $874,010        $776,929
Other--nonregulated                           6,411       5,100           1,761
-------------------------------------------------------------------------------
                                            913,719     879,110         778,690
-------------------------------------------------------------------------------
 
EXPENSES
Fuel oil                                    186,717     213,285         225,611
Purchased power                             271,636     258,723         172,761
Other operation                             121,740     105,957         105,303
Maintenance                                  46,427      44,281          44,653
Depreciation                                 63,779      55,960          53,856
OpTaxes, other than income taxes             85,877      80,712          71,452
Other--nonregulated                             915         627           1,213
-------------------------------------------------------------------------------
                                            777,091     759,545         674,849
-------------------------------------------------------------------------------
Operating income from regulated and         
 nonregulated activities                    136,628     119,565         103,841
Allowance for equity funds used during       
 construction                                 9,064       6,973           6,781
Interest and other charges                  (40,187)    (37,384)        (35,196)
Allowance for borrowed funds used            
 during construction                          4,043       3,869           2,095
-------------------------------------------------------------------------------
Income before income taxes and
 preferred stock dividends of HECO          109,548      93,023          77,521
Income taxes                                 43,587      36,897          23,843
-------------------------------------------------------------------------------
Income before preferred stock dividends     
 of HECO                                     65,961      56,126          53,678
Preferred stock dividends of HECO             4,316       4,421           4,525
-------------------------------------------------------------------------------
Net income for common stock                $ 61,645    $ 51,705        $ 49,153
===============================================================================
 



BALANCE SHEET DATA
December 31                                                      1994          1993
-------------------------------------------------------------------------------------
(dollars in thousands)
                                                                      
ASSETS
Utility plant, at cost
  Property, plant and equipment                              $2,129,274    $1,976,192
  Less accumulated depreciation                                (702,945)     (641,230)
  Construction in progress                                      164,247       126,342
-------------------------------------------------------------------------------------
Net utility plant                                             1,590,576     1,461,304
Accounts receivable, net                                         70,708        64,012
Unbilled revenues, net                                           38,435        34,735
Regulatory assets                                                92,524        61,078
Other                                                            96,877        82,147
-------------------------------------------------------------------------------------
                                                             $1,889,120    $1,703,276
=====================================================================================
 
CAPITALIZATION AND LIABILITIES
Common stock equity                                          $  633,901    $  570,663
Cumulative preferred stock
  Not subject to mandatory redemption, dividend rates of                
   4.25-8.875%                                                   48,293        48,293
  Subject to mandatory redemption, dividend rates of 
   7.68-13.75%                                                   44,844        46,730
Long-term debt, net                                             489,586       484,736
-------------------------------------------------------------------------------------
Total capitalization                                          1,216,624     1,150,422
Short-term borrowings from nonaffiliates and affiliate          117,866        40,928
Deferred income taxes                                           108,362       107,449
Unamortized tax credits                                          44,939        43,348
Contributions in aid of construction                            178,635       165,005
Other                                                           222,694       196,124
-------------------------------------------------------------------------------------
                                                             $1,889,120    $1,703,276
=====================================================================================


                                       48

 
CUMULATIVE PREFERRED STOCK.  Certain cumulative preferred shares of HECO and its
subsidiaries are redeemable at the option of the respective company at a premium
or par. The remaining cumulative preferred shares are subject to mandatory
sinking fund provisions at par and optional redemption provisions at a premium.
The total sinking fund requirements on preferred stock subject to mandatory
redemption from 1995 to 1999 are $2 million each year.

INDEBTEDNESS.  See Notes 10 and 11.

MAJOR CUSTOMERS.  The electric utility subsidiaries derived 10% of their
operating revenues from the sale of electricity to various federal government
agencies amounting to $89 million in 1994, $91 million in 1993 and $78 million
in 1992.

COMMITMENTS AND CONTINGENCIES.

FUEL CONTRACTS AND OTHER PURCHASE COMMITMENTS.  HECO and its subsidiaries have
contractual agreements to purchase a minimum amount of 0.5% sulfur residual fuel
oil and 0.4% sulfur diesel fuel through 1995. The prices under these contracts
are tied to market prices of petroleum products as reported in Singapore and the
U.S. Pacific Northwest. Based on the average price per barrel prevailing on
January 1, 1995, the estimated amount of required purchases for 1995 is $171
million. The actual amount of purchases in 1995 could vary substantially from
such estimates as a result of changes in market prices and other factors. HECO
and its subsidiaries purchased $186 million, $205 million and $216 million of
fuel under these or prior contractual agreements in 1994, 1993 and 1992,
respectively. New contracts to replace expiring ones are expected to be entered
into in the normal course of business.

  At December 31, 1994, HECO and its subsidiaries had purchase commitments,
other than fuel and power purchase contracts, amounting to approximately $83
million.

POWER PURCHASE AGREEMENTS.  At December 31, 1994, HECO and its subsidiaries had
power purchase agreements for 465 megawatts (MW) of firm capacity representing
approximately 22% of the total of their generating capabilities and purchased
power firm capacities.  Rate recovery is allowed for energy and firm capacity
payments under these agreements.  Assuming that each of the agreements remains
in place and the minimum availability criteria in the power purchase agreements
are met [including HELCO's agreement in principle with Hilo Coast Processing
Company (HCPC)-see discussion which follows], aggregate minimum fixed capacity
charges are expected to be approximately $107 million in 1995, $109 million in
each of 1996 and 1997, $106 million in 1998, $109 million in 1999 and $2.1
billion thereafter.

  In general, payments under the power purchase agreements for 465 MW of firm
capacity are based upon available capacity and energy. Payments for capacity
generally are not required if the contracted capacity is not available, and
payments are reduced, under certain conditions, if available capacity drops
below contracted levels. In general, the payment rates for capacity have been
predetermined for the terms of the agreements. The energy payment will vary over
the terms of the agreements and HECO and its subsidiaries may pass on changes in
the fuel component of the energy charges to customers through the energy cost
adjustment clause in its rate schedules. HECO and its subsidiaries do not
operate nor participate in the operation of any of the facilities that provide
power under the agreements. Title to the facilities does not pass to HECO nor
its subsidiaries upon expiration of the agreements, and the agreements do not
contain bargain purchase options with respect to the facilities.

                                       49

 
  HELCO has a power purchase agreement with HCPC for 18 MW of firm capacity. On
December 12, 1994, HCPC filed a Chapter 11 bankruptcy petition and advised HELCO
that it would cease operating its plant in December 1994. HELCO obtained a
temporary restraining order and, later, an extension of such order, requiring
HCPC to continue operations of the HCPC facility through March 7, 1995, with
HELCO to pay an additional amount for the power HCPC supplies. On January 5,
1995, HELCO and HCPC entered into an agreement in principle, subject to the
negotiation and execution of a definitive agreement, amending the existing power
purchase agreement through December 1999. The definitive agreement must be
approved by the bankruptcy court and is subject to cancellation by HELCO if not
approved by the PUC within 180 days of its execution. If unable to purchase
power from HCPC as contemplated by the agreement in principle, HELCO would be
operating with a slim generation margin and might have to initiate planned
service interruptions (rolling blackouts) until it is able to arrange for
additional generation.

HELCO RELIABILITY INVESTIGATION.  In July 1991, following service interruptions
and rolling blackouts instituted on the island of Hawaii, the PUC initiated an
investigation into the reliability of HELCO's system and held hearings. Further
hearings were held in July 1992 following additional service interruptions and
rolling blackouts. The PUC may formulate minimum reliability standards for
HELCO, use the standards to assess HELCO's system reliability, and re-examine
the rate increase approved in October 1992 to see whether any adjustments are
appropriate. In the opinion of management, any adjustment by the PUC to its
October 1992 rate increase resulting from the reliability investigation would
not have a material adverse effect on the Company's financial condition or
results of operations.

  Subsequent to the hearings on HELCO's reliability, HELCO's generation margin
improved. However, HELCO's generation margin was adversely affected by the
cessation of operations by Hamakua Sugar Company in 1994 and will be further
adversely affected if an agreement in principle that HELCO has reached with HCPC
is not implemented. See "Power purchase agreements" above.

  HELCO is proceeding with plans to install two 20-MW combustion turbines in
1995 or 1996, followed by an 18-MW heat steam recovery generator in 1997.
However, two independent power producers have each filed with the PUC separate
complaints against HELCO, alleging that they are entitled to a power purchase
contract to provide all or part of the capacity.

  Also, HELCO has encountered procedural and other difficulties in obtaining the
necessary air permit and Conservation District Use Permit (CDUP) which would
allow the combined-cycle unit to be constructed. As a result of these permitting
delays, HELCO's unit installation schedule has been adversely impacted and HELCO
is exploring other alternatives to meet projected energy needs, including any
viable, timely and cost-effective nonutility generation alternative. However,
until additional generation is in place, management believes that there is a
significant risk of capacity shortages on the island of Hawaii that could result
in rolling blackouts.

                                       50

 
HECO POWER OUTAGE.  On April 9, 1991, HECO experienced a power outage that
affected all customers on the island of Oahu. The PUC initiated an investigation
of the outage, which was consolidated with a pending investigation of an outage
that occurred in 1988.

  Power Technologies, Inc. (PTI), an independent consultant hired by HECO with
the approval of the PUC, investigated the outage. HECO is implementing certain
of PTI's recommendations and is either studying or disagrees with certain of the
other recommendations. Management cannot predict the timing and outcome of any
PUC decision and order that may be issued, if any, with respect to the outages
or PTI's recommendations.

  HECO's PUC-approved tariff states that HECO is not liable for interruptions or
insufficiency of supply when the cause was beyond HECO's control. Nevertheless,
HECO received 3,063 customer claims, which totaled approximately $7.8 million,
within the time limit to file claims. 1,530 of these claims are for property
damage and most have been settled, with no admission of liability, or closed as
of December 31, 1994. The other 1,533 claims involve personal injury or economic
loss, such as lost profits, and generally have not been covered by settlement.

  Seven direct or indirect business customers have filed a lawsuit against HECO
on behalf of themselves and an alleged class, claiming $75 million in
compensatory damages and additional unspecified amounts for punitive damages
because of the April 9, 1991 outage.  HECO has filed an answer which denies the
principal allegations in the complaint. The class has not been certified. Trial
has been set for January 1996.

  HECO recorded a liability of $1 million for the total amount of expected
defense costs and settlements with respect to the outage. In the opinion of
management, losses (if any) in excess of the amount for which provision has been
made, net of estimated insurance recoveries, resulting from the ultimate outcome
of the lawsuit and claims related to the April 1991 outage will not have a
material adverse effect on the Company.

MANAGEMENT SERVICES FEES.  HEI charges to HECO and its subsidiaries for general
management and administrative services totaled $2.4 million, $2.3 million and
$5.6 million in 1994, 1993 and 1992, respectively.

                                       51

 
5. SAVINGS BANK SUBSIDIARY
-------------------------------------------------------------------------------
                                                                                
American Savings Bank, F.S.B. and subsidiaries
Selected consolidated financial information



INCOME STATEMENT DATA
Years ended December 31                      1994         1993          1992
-------------------------------------------------------------------------------
(in thousands)
                                                            
Interest income                            $203,373    $  188,619    $  192,644
Interest expense                            103,906        92,701       114,748
-------------------------------------------------------------------------------
Net interest income                          99,467        95,918        77,896
Provision for losses                         (3,983)         (779)       (1,494)
Other income                                 12,152        11,115        10,351
Operating, administrative and general       
 expenses                                   (65,111)      (62,137)      (53,915)
-------------------------------------------------------------------------------
Operating income                             42,525        44,117        32,838
Income taxes                                 17,760        18,835        13,280
-------------------------------------------------------------------------------
Net income                                 $ 24,765    $   25,282    $   19,558
===============================================================================
 

 
 
BALANCE SHEET DATA
December 31                                                  1994          1993
-------------------------------------------------------------------------------
(in thousands)
                                                                
ASSETS
Cash and equivalents                                   $   76,502    $   77,610
Investment securities                                      32,523        68,599
Mortgage-backed securities                              1,067,287       630,156
Loans receivable, net                                   1,824,055     1,735,098
Other                                                      69,829        57,358
Goodwill and other intangibles                             45,455        49,664
-------------------------------------------------------------------------------
                                                       $3,115,651    $2,618,485
===============================================================================

LIABILITIES AND EQUITY
Deposit liabilities                                    $2,129,310    $2,091,583
Securities sold under agreements to repurchase            123,301            --
Advances from Federal Home Loan Bank                      616,374       289,674
Other                                                      51,078        52,717
-------------------------------------------------------------------------------
                                                        2,920,063     2,433,974
Common stock equity                                       195,588       184,511
-------------------------------------------------------------------------------
                                                       $3,115,651    $2,618,485
===============================================================================



INVESTMENT AND MORTGAGE-BACKED SECURITIES. Investment and mortgage-backed
securities consisted of the following:



December 31                                 1994                                                       1993
-----------------------------------------------------------------------------------------------------------------------------
                                    Gross       Gross      Estimated                         Gross       Gross      Estimated
                     Carrying    unrealized  unrealized     market              Carrying   unrealized  unrealized    market
                      value         gains      losses       value                value       gains       losses       value
-----------------------------------------------------------------------------------------------------------------------------
(in thousands)
                                                                                            
Investment securities:
   Securities held  
     for trading   $       --    $   --    $     --     $        --             $ 45,396    $    --    $    --     $ 45,396
   Stock in FHLB
      of Seattle       32,523        --          --          32,523               23,203         --         --       23,203
-----------------------------------------------------------------------------------------------------------------------------
                       32,523        --          --          32,523               68,599         --         --       68,599
-----------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities:
   Private-issue      707,260       243     (28,858)        678,645              465,373      4,339     (1,440)     468,272
   FHLMC               75,546     1,899      (1,331)         76,114              117,803      8,024         --      125,827
   GNMA                78,693       185      (6,285)         72,593               42,539        906       (629)      42,816
   FNMA               205,788       557     (14,547)        191,798                4,441        414         --        4,855
-----------------------------------------------------------------------------------------------------------------------------
                    1,067,287     2,884     (51,021)      1,019,150              630,156     13,683     (2,069)     641,770
-----------------------------------------------------------------------------------------------------------------------------
                   $1,099,810    $2,884    $(51,021)    $ 1,051,673             $698,755    $13,683    $(2,069)    $710,369
=============================================================================================================================


                                       52

 
ASB has private-issue mortgage-backed securities and mortgage-backed securities
purchased from the Federal Home Loan Mortgage Corporation (FHLMC), Government
National Mortgage Association (GNMA) and Federal National Mortgage Association
(FNMA). All such mortgage-backed securities as of December 31, 1994 are
classified as "held-to-maturity" securities.

  Contractual maturities are not presented for ASB's mortgage-backed securities
held for investment because these securities are not due at a single maturity
date.

  The weighted average interest rate for mortgage-backed securities at December
31, 1994 and 1993 was 6.21% and 6.65%, respectively.

  Mortgage-backed securities with a carrying value of approximately $862 million
and $469 million at December 31, 1994 and 1993, respectively, were pledged as
collateral to secure public funds, deposits with the Federal Reserve Bank of San
Francisco and advances from the Federal Home Loan Bank (FHLB) of Seattle. At
December 31, 1994, mortgage-backed securities sold under agreements to
repurchase had a carrying value of $137 million.

  ASB did not sell mortgage-backed securities or other securities held for
investment in 1994, 1993 or 1992.

  In 1994 and 1993, proceeds from the sale of trading securities were
approximately $59 million and $30 million, respectively, resulting in a net loss
of $2.0 million and a net gain of $0.1 million, respectively. There were no
sales of investment securities during 1992.

LOANS RECEIVABLE. Loans receivable consisted of the following:



December 31                                   1994          1993
-------------------------------------------------------------------
(in thousands)
                                                   
Real estate loans
  Conventional                             $1,636,282    $1,584,218
  Construction and development                 32,074        26,526
  Troubled debt restructurings                 16,151         3,397
-------------------------------------------------------------------
                                            1,684,507     1,614,141
Loans secured by savings deposits              15,378        15,015
Consumer loans                                144,505       129,961
Commercial loans                               27,981        24,494
-------------------------------------------------------------------
                                            1,872,371     1,783,611
Undisbursed portion of loans in process       (18,312)      (16,315)
Deferred fees and discounts, including
 net purchase accounting discounts            (21,211)      (26,884)
 
Allowance for loan losses                      (8,793)       (5,314)
-------------------------------------------------------------------
 
 
                                           $1,824,055    $1,735,098
===================================================================


  At December 31, 1994 and 1993, the weighted average interest rate for loans
receivable was 7.73% and 7.63%, respectively.

  At December 31, 1994 and 1993, nonaccrual and renegotiated loans were $25
million and $8 million, respectively.

  ASB services real estate loans ($327 million, $178 million and $311 million at
December 31, 1994, 1993 and 1992, respectively) which are not included in the
accompanying consolidated financial statements.  Fees earned for servicing loans
are reported as income when the related mortgage loan payments are collected.
Loan servicing costs are charged to expense as incurred.

  Mortgage loan commitments of approximately $35 million are not reflected on
the balance sheet as of December 31, 1994. Of such commitments, $29 million were
for variable-rate mortgage loans and $6 million were for fixed-rate mortgage
loans.

  In January 1995, ASB entered into a pool purchase contract to sell to and
service for the FNMA certain 15-year and 30-year conventional fixed-rate, level
payment residential mortgage loans in the amount of $200 million. In addition,
the FNMA agreed to issue its Guaranteed Mortgage Pass-Through Securities backed
by these same mortgages.

                                       53

 
ALLOWANCE FOR LOAN LOSSES.  For 1994, 1993 and 1992, net charge-offs amounted to
$0.5 million, $0.6 million and $0.2 million, respectively. For 1994, 1993 and
1992, the ratio of net charge-offs to average loans outstanding was 0.03%, 0.04%
and 0.01%, respectively.

REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS.  At December 31, 1994 and 1993, ASB
had real estate acquired in settlement of loans of $0.8 million and $0.2
million, respectively.

DEPOSIT LIABILITIES.  Deposit liabilities consisted of the following:


 
December 31                          1994                           1993
---------------------------------------------------------------------------
                            Weighted                 Weighted
                             average                  average
                              rate        amount       rate        Amount
--------------------------------------------------------------------------- 
(dollars in thousands)
                                                     
Commercial checking              -- %   $   18,444        -- %   $   17,405
Other checking                  2.39       250,350       2.42       255,838
Passbook                        3.49     1,112,230       3.48     1,211,330
Money market                    3.51        70,860       3.11       106,362
Term certificates               5.08       677,426       4.40       500,648
---------------------------------------------------------------------------
                                3.84%   $2,129,310       3.52%   $2,091,583
===========================================================================

At December 31, 1994 and 1993, deposit accounts of $100,000 or more totaled $407
million and $438 million, respectively.

  The approximate scheduled maturities of term certificates outstanding at
December 31, 1994 were $373 million in 1995, $180 million in 1996, $33 million
in 1997, $11 million in 1998 and $21 million in 1999.

  The interest expense on savings deposits by type of deposit was as follows:


 
Years ended December 31         1994      1993      1992
----------------------------------------------------------
(in thousands)
                                          
Interest-bearing checking      $ 5,997   $ 6,679   $ 9,982
Passbook                        42,624    42,021    34,645
Money market                     2,670     3,758     6,447
Term certificates               25,218    25,193    43,265
----------------------------------------------------------
                               $76,509   $77,651   $94,339
==========================================================


SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.  At December 31, 1994,
securities sold under agreements to repurchase consisted of mortgage-backed
securities sold under fixed-coupon agreements. Other than Federal Home Loan
Mortgage Corporation (FHLMC) mortgage-backed securities, the securities
underlying the agreements were delivered to the brokers/dealers who arranged the
transactions. The FHLMC mortgage-backed securities are book-entry securities and
were delivered by appropriate entry into the counterparties' accounts at the
Federal Reserve System. At December 31, 1994, the $137 million carrying value of
securities underlying the agreements remained in ASB's asset accounts.  The
obligation to repurchase securities sold is reflected as a liability in the
consolidated balance sheets. At December 31, 1994, approximately $123 million of
agreements to repurchase substantially the same securities were outstanding. At
December 31, 1994, the weighted average interest rate on securities sold under
agreements to repurchase was 6.22% and the weighted average remaining days to
maturity was 118 days. Securities sold under agreements to repurchase averaged
$21 million, $20 million and $66 million during 1994, 1993 and 1992,
respectively, and the maximum amount outstanding at any month-end during 1994,
1993 and 1992 was $123 million, $27 million and $125 million, respectively.

                                       54

 
ADVANCES FROM FEDERAL HOME LOAN BANK.  Advances from the FHLB, secured by
mortgage-backed securities and stock in the FHLB, were summarized as follows:


 
December 31                         1994                         1993
-----------------------------------------------------------------------
                            Weighted               Weighted
                             average                average
                              rate       Amount      rate       Amount
-----------------------------------------------------------------------
(dollars in thousands)
                                                   
Due in
1994                              --%   $     --       6.40%   $ 73,000
1995                            6.39     337,822       8.33      16,822
1996                            6.56     116,060       7.23      58,360
1997                            5.77      94,800       5.99      73,800
1998                            4.96      36,392       4.96      36,392
1999                            4.98      20,300       4.98      20,300
Thereafter                      4.98      11,000       4.98      11,000
----------------------------------------------------------------------- 
                                6.17%   $616,374       6.24%   $289,674
=======================================================================


As a member of the FHLB system, ASB is required to own a specific number of
shares of capital stock of the FHLB of Seattle and is required to maintain cash
and investments in U.S. Government and other qualifying securities in an amount
equal to 5% of the amount of its savings accounts and other obligations due
within one year.

COMMON STOCK EQUITY.  As of December 31, 1994, ASB was in compliance with the
minimum capital requirements under the Office of Thrift Supervision regulations.

MANAGEMENT SERVICES FEES.  In the second quarter of 1992, HEI changed its method
of billing corporate-level expenses to ASB such that only certain direct
charges, rather than fully-allocated costs, were billed to ASB.  However, no
change was made by HEI in the manner in which corporate-level expenses for that
year were allocated for segment reporting purposes.  Thus, operating income for
the savings bank segment differs from the operating income reported in the
separate financial statements of ASB for 1992 because of corporate-level
expenses which were allocated to the segment, but were not billed. In 1994 and
1993, corporate-level expenses allocated to the savings bank segment did not
differ from the amount billed to ASB, and operating income for the savings bank
segment did not differ from the operating income reported in the separate
financial statements of ASB. For segment reporting purposes, HEI expenses
allocated to the savings bank segment for general management and administrative
services totaled $0.8 million, $0.8 million and $2.0 million for 1994, 1993 and
1992, respectively.

6. REAL ESTATE SUBSIDIARY
-------------------------------------------------------------------------------

At December 31, 1994 and 1993, MPC and its subsidiaries' total real estate
project inventory, equity investment in real estate joint ventures and loans and
advances to unconsolidated joint ventures or joint venture partners amounted to
$51 million and $49 million, respectively.

RELATED PARTY TRANSACTIONS.  Two joint ventures involve partnerships in which a
director of HEI has significant interests. Another joint venture involves a
corporate partner in which the family of an HEI officer has a significant
interest. Investments in joint ventures with related parties totaled $13 million
and $15 million at  December 31, 1994 and 1993, respectively.

                                       55

 
COMMITMENTS AND CONTINGENCIES.  At December 31, 1994, MPC or its subsidiaries
had issued (i) guaranties under which they were jointly and severally
contingently liable with their joint venture partners for $1.9 million of
outstanding loans and (ii) payment guaranties under which MPC or its
subsidiaries were severally contingently liable for $7.2 million of outstanding
loans and $7.1 million of additional undrawn loan facilities. At December 31,
1994, HEI had agreed with the lenders of construction loans and loan facilities,
of which approximately $13.3 million was outstanding and $7.9 million was
undrawn, that it will maintain ownership of 100% of the stock of MPC and that it
intends, subject to good and prudent business practices, to keep MPC financially
sound and responsible to meet its obligations.

7. OTHER INVESTMENTS
--------------------------------------------------------------------------------

  Other investments, which have no ready market, consisted of the following:


 
December 31                               1994      1993
----------------------------------------------------------
(in thousands)
                                             
Leveraged leases (see Note 8)            $54,372   $53,115
Real estate joint venture interests       15,259    17,494
Other                                      7,666     6,497
----------------------------------------------------------
                                         $77,297   $77,106
==========================================================


Realized gains and losses from the sale and writedown of other investments were
not material in 1994, 1993 or 1992.

8. INVESTMENT IN LEVERAGED LEASES
--------------------------------------------------------------------------------
HEIIC owns commercial real estate which is subject to several leveraged lease
agreements entered into in 1987. The initial lease terms expire in 2009 and
2010, after which the lessees have options to renew the leases at fixed rentals
for additional periods of up to 28 years. The real estate reverts back to HEIIC
at the end of the last renewal term if not purchased by the lessees.

  HEIIC also has a 15% ownership interest in an 818-MW coal-fired generating
unit, which is subject to a leveraged lease agreement entered into in 1985 and
expiring in 2013. The lessee has options to renew the lease at fixed rentals for
at least 8.5 additional years, and thereafter at fair market rentals.

                                       56

 
  In 1993, HEIIC refinanced approximately $13 million of nonrecourse debt
supporting one of the leveraged leases, reducing the interest rate from 16.75%
to 8.68%. As a result of the refinancing, 1993 net income increased by $1.1
million and an additional $7.5 million of net income from the leveraged lease
will be recognized over the remaining life of the lease.

  HEIIC's net investment in leveraged leases was as follows:


 
December 31                                  1994        1993
---------------------------------------------------------------
(in thousands)
                                                 
Rentals receivable, net of principal       
 and interest on nonrecourse debt          $ 61,994    $ 62,225
Estimated residual value of leased assets    35,266      35,268
Less unearned income                        (42,888)    (44,378)
---------------------------------------------------------------
Investment in leveraged leases               54,372      53,115
Less deferred income taxes arising from    
 leveraged leases                           (46,277)    (45,418)  
---------------------------------------------------------------
                                           $  8,095    $  7,697
===============================================================
 
 
9. REGULATORY ASSETS
------------------------------------------------------------------------------- 

Regulatory assets at December 31, 1994 and 1993 included the following
deferred costs:

 
 
December 31                                    1994        1993
-----------------------------------------------------------------
(in thousands)
                                                    
Postretirement benefits other than pensions   $36,670     $19,210
Income taxes                                   23,522      16,297
Unamortized debt expense on retired issuances   7,513       5,435
Integrated resource planning costs              7,189       4,661
Computer system development costs               6,090       3,152
Vacation earned, but not yet taken              5,972       5,494
Preliminary plant costs on suspended project    5,768       5,199
Other                                           2,533       3,095
-----------------------------------------------------------------
                                              $95,257     $62,543
=================================================================


10. SHORT-TERM BORROWINGS
--------------------------------------------------------------------------------
Short-term borrowings at December 31, 1994 and 1993 had a weighted average
interest rate of 6.5% and 4.7%, respectively, and consisted of commercial paper
and bank loans.

  At December 31, 1994 and 1993, HEI maintained bank lines of credit which
totaled $50 million and HECO maintained bank lines of credit which totaled $125
million and $108 million, respectively. The HEI and HECO lines of credit support
the issuance of commercial paper. There were no borrowings under any line of
credit during 1994 or 1993.

                                       57

 
11. LONG-TERM DEBT
--------------------------------------------------------------------------------
Long-term debt consisted of the following:



December 31                                                                                                    1994        1993
-------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
                                                                                                                
First mortgage bonds 
   4.55-5.75%, due in various years through 1997                                                           $ 24,000    $ 24,000
   7.63-7.88%, due in various years through 2003                                                             22,000      22,000
   8.50-9.88%, due in various years through 2016                                                                 --      43,000
   10.75%, due 2005                                                                                              --       5,000
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                             46,000      94,000
-------------------------------------------------------------------------------------------------------------------------------
Obligations to the State of Hawaii for the repayment of special purpose
 revenue bonds issued on behalf of electric utility subsidiaries
   6.88% refunding series 1987, due 2012                                                                     57,500      57,500
   7.20% series 1984, due 2014                                                                               11,400      11,400
   7.63% series 1988, due 2018                                                                               50,000      50,000
   7.35-7.60% series 1990, due 2020                                                                         100,000     100,000
   6.55% series 1992, due 2022                                                                               60,000      60,000
   5.45% series 1993, due 2023                                                                              100,000     100,000
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                            378,900     378,900
   Less funds on deposit with trustees                                                                       (3,391)    (56,205)
   Less unamortized discount                                                                                 (1,923)     (1,986)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                            373,586     320,709
-------------------------------------------------------------------------------------------------------------------------------
Promissory notes
   4.85-5.83%, due in various years through 1998                                                             70,000      70,000
   6.26-7.59%, due in various years through 2003                                                            113,000     113,000
   8.20-9.90%, due in various years through 2011                                                             72,700     100,100
   Variable rate (6.45% at December 31, 1994), due 1999                                                      35,000          --
   Variable rate (9.25% at December 31, 1994), due 2001                                                       7,954          --
   Other                                                                                                         --          27
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                            298,654     283,127
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                           $718,240    $697,836
===============================================================================================================================


The first mortgage bonds are secured by separate indentures which purport to be
liens on substantially all of the real and personal property now owned or
hereafter acquired by the respective electric utility subsidiaries.

  At December 31, 1994, the aggregate principal payments required on long-term
debt for 1995 through 1999 are $23 million in 1995, $68 million in 1996, $65
million in 1997, $52 million in 1998 and $42 million in 1999.

  In January 1995, the Department of Budget and Finance of the State of Hawaii
issued tax-exempt special purpose revenue bonds in the principal amount of $47
million, with a maturity of 30 years and a fixed coupon interest rate of 6.60%,
and loaned the proceeds from the sale to  HECO, HELCO and MECO. The bonds were
issued at a discount, resulting in a yield of approximately 6.75%.

                                       58

 
12. COMMON STOCK
--------------------------------------------------------------------------------
Changes to common stock were as follows:


 
                                       1994                     1993                 1992
-------------------------------------------------------------------------------------------
                                          Common               Common               Common
                                Shares     Stock     Shares     stock     Shares     stock
-------------------------------------------------------------------------------------------
(in thousands)
                                                                 
Balance, beginning of year      27,675   $514,710    24,762   $409,257    23,867   $376,783
Issuance of common stock 
  Public offering                   --         --     2,000     74,500        --         --
  Dividend reinvestment and
    stock purchase plan            869     28,087       758     28,013       703     27,102
  HEI retirement savings and
    other plans                    111      3,605       155      5,637       192      6,822
Expenses and other                  --       (148)       --     (2,697)       --     (1,450)
-------------------------------------------------------------------------------------------
 
Balance, end of year            28,655   $546,254    27,675   $514,710    24,762   $409,257
===========================================================================================


At December 31, 1994, the Company had reserved a total of 4,552,000 shares of
common stock for future issuance under the Dividend Reinvestment and Stock
Purchase Plan, Hawaiian Electric Industries Retirement Savings Plan, 1987 Stock
Option and Incentive Plan and other plans.

13. INTEREST EXPENSE
--------------------------------------------------------------------------------
Interest expense by segment (including amounts capitalized as allowance for
borrowed funds used during construction and excluding interest on nonrecourse
debt on leveraged leases) was as follows:



Years ended December 31                                          1994       1993       1992
-------------------------------------------------------------------------------------------
(in thousands)
                                                                          
Electric utility                                             $ 37,340   $ 35,287   $ 33,011
Other                                                          16,688     17,905     14,130
-------------------------------------------------------------------------------------------
                                                               54,028     53,192     47,141
Savings bank                                                  103,906     92,701    114,748
-------------------------------------------------------------------------------------------
                                                             $157,934   $145,893   $161,889
===========================================================================================


14. INCOME TAXES
--------------------------------------------------------------------------------
In February 1992, the FASB issued SFAS No. 109, "Accounting for Income Taxes,"
which requires companies to use the asset and liability method of accounting for
income taxes.  The objective of the asset and liability method is to establish
deferred tax assets and liabilities for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such deferred tax
assets or liabilities are realized or settled.

                                       59

 
  Effective January 1, 1993, the Company adopted SFAS No. 109. The resulting
change in the method of accounting for income taxes had no material effect on
net income for 1993 primarily due to the regulated nature of the electric
utility subsidiaries and YB. For these PUC regulated subsidiaries, the net
increase in deferred income taxes payable arising from the adoption of SFAS No.
109 is recoverable through future rates and has been recorded as a regulatory
asset. In 1993, additional income tax expense of $1.8 million was recognized
under SFAS No. 109 as a result of the 1% increase in the maximum corporate
income tax rate enacted by the Omnibus Budget Reconciliation Act of 1993.

  Total income tax expense (benefit) was recorded as follows:


 
Years ended December 31                      1994       1993       1992
-------------------------------------------------------------------------
(in thousands)
                                                        
Continuing operations                      $53,019    $47,086    $ 29,529
Discontinued operations                         --     (7,982)    (50,623)
-------------------------------------------------------------------------
                                           $53,019    $39,104    $(21,094)
=========================================================================

 
The components of income taxes attributable to income from continuing 
operations were as follows:

 
 
Years ended December 31                       1994       1993        1992
-------------------------------------------------------------------------
(in thousands)
                                                        
Federal
  Current                                  $40,798    $40,537    $ 32,425
  Deferred                                   4,665       (152)     (7,085)
  Deferred tax credits, net                   (278)        50      (1,777)
-------------------------------------------------------------------------
                                            45,185     40,435      23,563
-------------------------------------------------------------------------
State
  Current                                    3,060      3,385       1,634
  Deferred                                   1,218       (475)       (332)
  Deferred tax credits, net                  3,556      3,741       4,664
-------------------------------------------------------------------------
                                             7,834      6,651       5,966
-------------------------------------------------------------------------
 
                                           $53,019    $47,086    $ 29,529
=========================================================================


Under Accounting Principles Board Opinion No. 11, the sources of timing
differences in the recognition of revenues and expenses for tax and financial
reporting purposes related to the 1992 provision for deferred income taxes were
as follows:


 
Year ended December 31                                               1992
-------------------------------------------------------------------------
(in thousands)
                                                              
Excess of tax depreciation over financial reporting 
 straight-line depreciation                                       $ 2,977
Excess tax deductions from leveraged leases                         2,099
Interest capitalized for tax purposes                              (3,347)
Gain on sale of land deferred for financial 
 reporting purposes                                                (4,737)
Contributions in aid of construction and customer 
 advances, net                                                     (6,095) 
Other                                                               1,686
-------------------------------------------------------------------------
 
                                                                  $(7,417)
=========================================================================


                                       60

 
A reconciliation of the amount of income taxes attributable to income from
continuing operations computed at the federal statutory rate to the amount
provided in the Company's consolidated statements of income was as follows:


 
Years ended December 31                      1994       1993           1992
------------------------------------------------------------------------------
(in thousands)
                                                            
Federal statutory income tax rate               35%         35%             34%
Amount at the federal statutory income    
 tax rate                                  $44,117     $38,070         $31,023
State income taxes, net of effect on     
 federal income taxes                        5,092       4,323           3,938
Preferred stock dividends of electric 
 utility subsidiaries                        2,507       2,281           2,281
Difference between financial reporting
 and tax straight-line depreciation for 
 which no deferred taxes were provided          --          --           3,015
Amortization of contributions in aid of 
 construction                                   --          --          (1,658)
Amortization of utility deferred income
 taxes in excess of current rates               --          --          (1,675)
Amortization of deferred tax credits            --          --          (1,776)
Allowance for funds used during  
 construction                                   --          --          (2,375)
Utilization of capital loss   
 carryforwards                                  --          --          (3,317)
Other, net                                   1,303       2,412              73
------------------------------------------------------------------------------
                                            $53,019     $47,086        $29,529
==============================================================================

 
Deferred tax assets and deferred tax liabilities were comprised of the 
 following:

 
 
December 31                                               1994            1993
------------------------------------------------------------------------------
(in thousands)
                                                               
Deferred tax assets
   Property, plant and equipment                      $  7,424        $  6,133
   Contributions in aid of construction  
    and customer advances                               52,892          44,932
   Other                                                29,947          25,435
------------------------------------------------------------------------------
                                                        90,263          76,500
------------------------------------------------------------------------------
Deferred tax liabilities
   Property, plant and equipment                       165,835         162,671
   Leveraged leases                                     46,277          45,418
   Regulatory asset                                      8,897           6,237
   Other                                                42,184          29,324
------------------------------------------------------------------------------
                                                       263,193         243,650
   Discontinued operations                                  --           1,179
------------------------------------------------------------------------------
                                                       263,193         244,829
------------------------------------------------------------------------------
Deferred income taxes                                 $172,930        $168,329
==============================================================================


There was no valuation allowance provided for deferred tax assets at December
31, 1994 or 1993.

15. CASH FLOWS
------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION.  In 1994, 1993 and 1992, cash
paid for interest (including interest paid by the savings bank, but excluding
interest paid on nonrecourse debt on leveraged leases), net of capitalized
amounts which were not material, amounted to $154 million, $142 million and $159
million, respectively. In 1994, 1993 and 1992, cash paid for interest on
nonrecourse debt on leveraged leases amounted to $9 million, $10 million and $11
million, respectively.

  In 1994, 1993 and 1992, cash paid for income taxes amounted to $47 million, $6
million and $29 million, respectively. In 1993, tax benefits were realized from
the discontinued operations of the HIG Group.

                                       61

 
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES.  In 1994, ASB received $203
million in mortgage-backed securities in exchange for loans.

  Common stock dividends reinvested by shareholders in HEI common stock in
noncash transactions amounted to $18 million, $17 million and $15 million in
1994, 1993 and 1992, respectively.

  Effective in 1993, HECO recognized the estimated fair value of noncash
contributions in aid of construction received in 1993 and prior years, which
increased both plant and contributions in aid of construction by $26 million.
The estimated fair value of noncash contributions in aid of construction
received in 1994 amounted to $6 million.

  The allowance for equity funds used during construction, which was capitalized
as part of the cost of electric utility plant, amounted to $9 million, $7
million and $7 million in 1994, 1993 and 1992, respectively.

  In 1994, a consolidated real estate joint venture, in which the Company has a
controlling interest, closed on an option to purchase approximately 147 acres of
land. Of the total land purchase price of $9.9 million, the joint venture issued
mortgage notes payable of $8.0 million in noncash consideration.

16. STOCK OPTION AND INCENTIVE PLAN
--------------------------------------------------------------------------------
Under the 1987 Stock Option and Incentive Plan, as amended, an aggregate of
1,250,000 shares of common stock may be issued to officers and key employees as
incentive stock options, nonqualified stock options, restricted stock, stock
appreciation rights, stock payments or dividend equivalents.

  Only nonqualified stock options have been granted to date. For these options,
the purchase price of common stock was based on the market value of the common
stock on or near the date of grant. Options may be exercised as determined by
the Compensation Committee of the Board of Directors, but in no event after 10
years and one day from the date of grant in the case of nonqualified stock
options.

  Nonqualified stock option transactions were as follows:


                                             1994        1993        1992
---------------------------------------------------------------------------
                                                          
Options outstanding, beginning of year      463,458     359,000     227,500
Granted                                      97,000     123,000     209,000
Exercised                                        --     (18,542)    (75,625)
Canceled                                     (3,125)         --      (1,875)
---------------------------------------------------------------------------
 
 
Options outstanding, end of year            557,333     463,458     359,000
===========================================================================
 
 
Options exercisable, December 31            330,958     235,458     189,625
===========================================================================
Price range for options
  Exercised
    High                                        $--         $36         $36
    Low                                          --          30          27
  Outstanding, December 31
    High                                         41          41          41
    Low                                          30          30          30
===========================================================================


                                       62

 
17. RETIREMENT BENEFITS
-------------------------------------------------------------------------------

PENSIONS.  The Company has several defined benefit pension plans which cover
substantially all employees. Benefits are based on the employees' years of
service and base compensation.

  The funded status of the pension plans and the amounts recognized in the
consolidated financial statements were as follows:


 
December 31                                              1994        1993
---------------------------------------------------------------------------
(in thousands)
                                                             
Accumulated benefit obligation
Vested                                                 $308,888    $293,627
Nonvested                                                32,948      43,543
---------------------------------------------------------------------------
                                                       $341,836    $337,170
===========================================================================
Projected benefit obligation                           $420,512    $432,435
Plan assets at fair value, primarily equity
 securities and fixed income investments                400,956     410,369
---------------------------------------------------------------------------
Projected benefit obligation in excess of plan          
 assets                                                  19,556      22,066
Unrecognized prior service cost                          (3,600)     (2,401)
Unrecognized net gain                                     6,844       4,958
Unrecognized net transition obligation                  (19,878)    (22,259)
Adjustment required to recognize minimum liability        1,251       1,985
---------------------------------------------------------------------------
Accrued pension liability                              $  4,173    $  4,349
===========================================================================
 
 
Plans with an accumulated benefit obligation exceeding assets were not
 material.
  Net periodic pension cost included the following components:

 
 
Years ended December 31                        1994        1993        1992
---------------------------------------------------------------------------
(in thousands)
                                                           
Service cost--benefits earned during      
 the period                                $ 16,834    $ 11,423    $ 10,358
Interest cost on projected benefit          
 obligation                                  30,067      27,350      27,401
Actual loss (return) on plan assets          11,520     (56,710)    (14,050)
Amortization and deferral, net              (39,001)     35,607      (5,721)
---------------------------------------------------------------------------
                                           $ 19,420    $ 17,670    $ 17,988
===========================================================================


Of these net periodic pension costs, $14 million, $12 million and $12 million
were expensed in 1994, 1993 and 1992, respectively, and the remaining amounts
were charged primarily to electric utility plant.

  For all pension plans, at December 31, 1994 and 1993, the discount rate
assumed in determining the actuarial present value of the projected benefit
obligation was 8% and 7%, respectively. For 1994, 1993 and 1992, the expected
long-term rate of return on assets was 8% and the assumed rate of increase in
future compensation levels was 5%.

  For most of the plans, the transition obligation (the projected benefit
obligation in excess of plan assets at January 1, 1987) is being amortized
ratably over 16 years beginning in 1987.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.  The Company provides various
postretirement benefits other than pensions to eligible employees upon
retirement. Health and life insurance benefits are provided to eligible
employees of HEI, HECO and its subsidiaries, and YB upon their retirement.
Health benefits are provided with contributions by retirees toward costs based
on their years of service and retirement date. Generally, employees are eligible
for these benefits if, upon retirement, they participate in one of the Company's
defined benefit pension plans. The Company began funding some of these benefits
near yearend 1994. Through December 31, 1992, the cost of postretirement
benefits other than pensions had not been recognized until paid (i.e., the pay-
as-you-go method). Payments for postretirement benefits other than pensions
amounted to $3 million in 1992.

                                       63

 
  Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
accrual, during the years that an employee renders the necessary service, of the
expected cost of providing postretirement benefits other than pensions to that
employee and the employee's beneficiaries and covered dependents. The transition
obligation is being amortized ratably over 20 years beginning in 1993.

  In February 1992, the PUC opened a generic docket to determine whether SFAS
No. 106 should be adopted for rate-making purposes. In November 1994, the PUC
issued a decision and order authorizing recovery of the full cost
ofpostretirement benefits other than pensions effective January 1, 1995. HECO,
HELCO, MECO and YB are required to establish trust funds and to deposit into
these funds the recovered SFAS No. 106 costs. The regulatory asset established
from January 1, 1993 through December 31, 1994 for postretirement benefits other
than pensions is being amortized ratably over 18 years beginning in 1995 for
rate-making and financial reporting purposes.

  The funded status of the postretirement benefit plans and the amounts
recognized in the consolidated financial statements were as follows:


 
December 31,                                  1994         1993
-----------------------------------------------------------------
(in thousands)
                                                  
Accumulated postretirement benefit
 obligation
Retirees                                   $  61,932    $  61,498
Fully eligible active plan participants       36,287       33,086
Other active plan participants                49,427       53,760
-----------------------------------------------------------------
                                             147,646      148,344
Plan assets at fair value, primarily          
 fixed income investments                      2,833           --
-----------------------------------------------------------------
 
Accumulated postretirement benefit          
 obligation in excess of plan assets         144,813      148,344
Unrecognized net gain (loss)                   8,423         (880)
Unrecognized net transition obligation      (118,701)    (127,940)
-----------------------------------------------------------------
 
 
Accrued postretirement benefits           
 liability                                 $  34,535    $  19,524
=================================================================


At December 31, 1994 and 1993, the assumed discount rate used to measure the
accumulated postretirement benefit obligation was 8% and 7%, respectively. For
1994 and 1993, the assumed rate of increase in future compensation levels was
5%.

  Net periodic postretirement benefit cost included the following components:


 
Years ended December 31              1994      1993
-----------------------------------------------------
(in thousands)
                                        
Service cost                        $ 5,269   $ 5,712
Interest cost                        10,066    11,216
Amortization and deferral, net        6,734     6,733
-----------------------------------------------------
 
 
                                    $22,069   $23,661
=====================================================


Of the net periodic postretirement benefit cost, $3 million was expensed in each
of 1994 and 1993, and the remaining amount was charged primarily to regulatory
assets and also to electric utility plant and other accounts.

  At December 31, 1994, the assumed health care trend rates for 1995 and future
years were as follows: medical, 7.5%; dental, 6%; and vision, 5%.

  A 1% increase in the trend rate for health care costs would have increased the
accumulated postretirement benefit obligation at December 31, 1994 by
approximately $21 million and the service and interest costs for 1994 by
approximately $3 million.

                                       64

 
18. REGULATORY RESTRICTIONS ON NET ASSETS
--------------------------------------------------------------------------------
At December 31, 1994, net assets (assets less liabilities) of approximately $510
million were not available for transfer to HEI from its subsidiaries in the form
of dividends, loans or advances without regulatory approval. However, HEI
expects that the regulatory restrictions will not materially affect the
operations of the Company nor its ability to pay dividends on its common stock.

19. SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
--------------------------------------------------------------------------------
Substantially all of the Company's business activity is with customers located
in the State of Hawaii. Most of the financial instruments reflected on the
consolidated balance sheets are based in the State of Hawaii, except for the
mortgage-backed securities. Substantially all real estate loans receivable are
secured by real estate in Hawaii. ASB's policy is to require mortgage insurance
on all real estate loans with a loan to appraisal ratio in excess of 80%.

  At December 31, 1994, ASB's private-issue mortgage-backed securities
represented whole or participating interests in pools of first mortgage loans
collateralized by real estate in the continental United States, and
approximately 61% of the portfolio was collateralized by real estate in
California. At December 31, 1994, substantially all private-issue mortgage-
backed securities were rated investment grade by various securities rating
agencies.

20. FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value of
each applicable class of financial instruments for which it is practicable to
estimate that value:

CASH AND EQUIVALENTS.  The carrying amount approximates fair value because of
the short maturity of these instruments.

LOANS RECEIVABLE.  For certain homogeneous categories of loans, such as some
residential mortgages, credit card receivables, and other consumer loans, fair
value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The fair value
of other types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for similar remaining maturities.

MARKETABLE SECURITIES.  Fair value is based on quoted market prices or dealer
quotes.

DEPOSIT LIABILITIES.  Under SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," the fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining maturities.

SHORT-TERM BORROWINGS.  The carrying amount approximates fair value because of
the short maturity of these instruments.

                                       65

 
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.  Dealer quotes currently
available to ASB for securities sold under agreements to repurchase with similar
terms and remaining maturities are used to estimate fair value.

ADVANCES FROM FEDERAL HOME LOAN BANK AND LONG-TERM DEBT.  Fair value is
estimated based on the quoted market prices for the same or similar issues or on
the current rates offered for debt of the same or similar remaining maturities.

PREFERRED STOCK OF ELECTRIC UTILITY SUBSIDIARIES SUBJECT TO MANDATORY
REDEMPTION.  There are no quoted market prices for the electric utility
subsidiaries' preferred stocks. Fair value is estimated based on quoted market
prices for similar issues of preferred stock.

  The estimated fair values of certain of the Company's financial instruments
were as follows:



December 31                                                       1994                               1993
----------------------------------------------------------------------------------------------------------------------
                                                         Carrying      Estimated           Carrying        Estimated
                                                          amount      fair value            amount         fair value
----------------------------------------------------------------------------------------------------------------------
(in thousands)
                                                                                                
FINANCIAL ASSETS
  Cash and equivalents                               $   87,623         $   87,623           $  116,260    $  116,260
  Loans receivable, net                               1,824,055          1,756,650            1,735,098     1,801,044
  Marketable securities                               1,099,810          1,051,673              698,755       710,369
  Other investments for which it is not                   
   practicable to estimate fair value/1/                  7,666                 na                6,497            na
FINANCIAL LIABILITIES
  Deposit liabilities                                 2,129,310          2,111,481            2,091,583     2,095,850
  Short-term borrowings                                 136,755            136,755               40,416        40,416
  Securities sold under  agreements to repurchase       123,301            121,064                   --            --
  Advances from Federal Home Loan Bank                  616,374            605,271              289,674       301,537
  Long-term debt, net                                   718,240            682,956              697,836       722,347
PREFERRED STOCK OF ELECTRIC UTILITY SUBSIDIARIES
 SUBJECT TO MANDATORY  REDEMPTION                        44,844             46,478               46,730        49,583
 
OFF-BALANCE SHEET
  Commitments to extend credit/2/
  Financial guaranties written/3/
----------------------------------------------------------------------------------------------------------------------
 
/1/ At December 31, 1994 and 1993, the other investments for which it is not
    practicable to estimate fair value consists primarily of an investment
    representing approximately 10% of the issued common stock of an untraded
    company; that investment had a carrying value of $5.2 million and $5.5
    million at December 31, 1994 and 1993, respectively. At December 31, 1993,
    the total assets reported by this company were $61 million and the common
    stockholders' equity was $56 million. For 1993, revenues were $1.0 million,
    net realized and unrealized gain on investments was $8.0 million and net
    income was $3.7 million.

/2/ At December 31, 1994 and 1993, neither the commitment fees received on
    commitments to extend credit nor the fair value thereof were significant to
    the consolidated financial statements of the Company.

/3/ At December 31, 1994 and 1993, MPC or its subsidiaries had issued guaranties
    of loans with outstanding balances of $9.1 million and $6.7 million,
    respectively. All such loans are collateralized by real property. These
    guaranties relate to borrowings from third parties which bear interest at
    rates ranging from prime plus 1.0% to prime plus 1.5%. It is not practicable
    to estimate the fair value of these guaranties.

na  Not available.

LIMITATIONS.  Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

  Fair value estimates are provided for certain existing on- and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments. In addition, the tax ramifications related to
the realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered.

                                       66

 
21. QUARTERLY INFORMATION (UNAUDITED)
-------------------------------------------------------------------------------

Selected quarterly information was as follows:


                                                                 Quarter ended                                          YEAR ENDED
--------------------------------------------------------------------------------------------------------------
1994                                     March 31             June 30            Sept. 30             Dec. 31             DEC. 31
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
 
                                                                                                          
Revenues                                 $265,042            $284,556            $319,156            $319,769            $1,188,523
 
Operating income                           33,404              42,955              51,550              46,224               174,133
 
Net income                                 11,788              17,632              22,691              20,919                73,030
 
Earnings per common share /1/                0.42                0.63                0.80                0.73                  2.60
Dividends per common share                   0.58                0.58                0.58                0.59                  2.33
Market price per common share /2/
  High                                      36.50               34.63               33.88               32.88                 36.50
  Low                                       32.00               30.25               30.00               29.88                 29.88
-----------------------------------------------------------------------------------------------------------------------------------
 
1993
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
 
Revenues                                 $279,348            $281,645            $299,486            $281,691            $1,142,170
 
Operating income                           28,331              43,919              40,458              44,930               157,638
 
Net income (loss)
  Continuing operations                  $  9,292            $ 18,977            $ 16,088            $ 17,327            $   61,684
  Discontinued operations                   1,800                  --                  --             (14,825)              (13,025)
-----------------------------------------------------------------------------------------------------------------------------------
                                         $ 11,092            $ 18,977            $ 16,088            $  2,502            $   48,659
===================================================================================================================================
Earnings (loss) per common share /1/
  Continuing operations                  $   0.38            $   0.76            $   0.61            $   0.63            $     2.38
  Discontinued operations                    0.07                  --                  --               (0.54)                (0.50)
-----------------------------------------------------------------------------------------------------------------------------------
                                         $   0.45            $   0.76            $   0.61            $   0.09            $     1.88
===================================================================================================================================
Dividends per common share               $   0.57            $   0.57            $   0.57            $   0.58            $     2.29
Market price per common share /2/
  High                                      38.88               38.50               38.63               38.75                 38.88
  Low                                       35.38               31.00               37.13               34.25                 31.00
-----------------------------------------------------------------------------------------------------------------------------------
 
/1/ The quarterly earnings per common share are based upon the weighted 
    average number of shares of common stock outstanding in each quarter.

/2/ Market prices shown are as reported on the NYSE Composite Tape. The common
    stock of HEI is traded on the New York and Pacific Stock Exchanges under 
    the symbol HE.

                                       67

 

                                                                                              
DIRECTORS
 
Committees of the Board of      Robert F. Clarke, 52 (1)              Victor Hao Li, S.J.D., 53 (2)     Diane J. Plotts, 59 (1,2)
 Directors                      President and                         Co-chairman                       General Partner           
                                Chief Executive Officer               Asia Pacific Consulting Group     Mideast and China Trading
                                Hawaiian Electric Industries, Inc.    (international business           Company (real estate 
(1)  EXECUTIVE:                 1989                                  consultant)                       development) 1987          
Richard Henderson, Chairman                                           1988                                               
(2)  AUDIT:                     Edwin L. Carter, 69 (1, 3)                                              Oswald K. Stender, 63 (3)   
Diane J. Plotts, Chairman       Retired President and                 Bill D. Mills, 43 (3)             Trustee
(3)  COMPENSATION:              Chief Executive Officer               Chairman of the Board and         Kamehameha Schools/Bishop   
Edwin L. Carter, Chairman       Bishop Trust Company, Ltd.            Chief Executive Officer           Estate                      
(4)  NOMINATING:                (financial services)                  Bill Mills Development and        (charitable trust)          
Jeffrey N. Watanabe, Chairman   1985                                  Investment Company, Inc.          1993                        
                                                                      (real estate development)                                     
                                John D. Field, 69  (2)                1988                              Kelvin H. Taketa, 40 (2)    
                                Retired Vice President-                                                 Vice President and          
                                Regulatory Affairs                    A. Maurice Myers, 54 (4)          Director-Asia Pacific Region
                                GTE Service Corporation               President and                     The Nature Conservancy      
                                (telecommunications services)         Chief Operating Officer           (international conservation 
                                1986                                  America West Airlines, Inc.       nonprofit) 
                                                                      (commercial air                   1993
                                Richard Henderson, 66 (1, 3)          transportation services)          
                                President                             1991                              Jeffrey N. Watanabe, 52 (1, 
                                HSC, Inc.                                                               3, 4)                       
                                (real estate investment and           Ruth M. Ono, Ph.D., 59 (2)        Partner                     
                                development)                          Vice President                    Watanabe, Ing & Kawashima   
                                1981                                  The Queen's Health Systems        (private law firm)          
                                                                      (hospital and health care         1987                       
                                Ben F. Kaito, 68 (1, 2, 4)            services)                                                     
                                Of Counsel                            1987                              Harwood D. Williamson, 63  
                                Kaito & Ishida                                                          President and Chief        
                                (private law firm)                                                      Executive Officer          
                                1981                                                                    Hawaiian Electric Company, 
                                                                                                        Inc.                       
                                                                                                        1985                        
                                                                                                        
 
Subsidiary Outside Directors    Gladys C. Baisa, 54                   Tom C. Kiely, 44                  Denzil W. Rose, 69
                                Executive Director                    The Kiely Co., Inc.               Retired President and
                                Maui Economic Opportunity, Inc.       (marketing consultants)           General Manager
                                (nonprofit human services)            American Savings Bank, F.S.B.     Hawaii Motors, Inc.
                                Maui Electric Company, Ltd.           1994                              (automobile dealership)
                                1995                                                                    Hawaii Electric Light 
                                                                      Mildred D. Kosaki, 70             Company, Inc.
                                Jorge G. Camara, M.D., 44             Specialist in education           1960 
                                Camara Eye Clinic                     research                          
                                (ophthalmology)                       Hawaiian Electric Company,        Anne M. Takabuki, 38        
                                American Savings Bank, F.S.B.         Inc.                              Vice President              
                                1990                                  1973                              and General Counsel         
                                                                                                        Wailea Resort Company, Ltd. 
                                Joseph W. Hartley, Jr., 61            Sanford J. Langa, 65              (resort and commercial      
                                President and                         Partner                           development)                
                                Chief Executive Officer               Langa, Breen & Wiltsie            Maui Electric Company, Ltd. 
                                Maui Land & Pineapple Company,        (private law firm)                1993
                                Inc.                                  Maui Electric Company, Ltd.       
                                (resort and commercial                1961                              Donald K. Yamada, 63       
                                development, agriculture)                                               President                  
                                Maui Electric Company, Ltd.           B. Martin Luna, 56                Yamada Diversified          
                                1993 (resigned effective March 1,     Partner                           Corporation                 
                                1995)                                 Carlsmith, Ball, Wichman,         (construction and trucking  
                                                                      Murray, Case & Ichiki             services)                   
                                Louise K. Y. Ing, 43                  (private law firm)                Hawaii Electric Light       
                                Partner                               Maui Electric Company, Ltd.       Company, Inc.               
                                Alston Hunt Floyd & Ing               1978                              1985                       
                                (private law firm)                                                                                 
                                American Savings Bank, F.S.B.                                           Paul C. Yuen, Ph.D., 66    
                                1994                                                                    Dean, College of Engineering
                                                                                                        University of Hawaii-Manoa 
                                                                                                        (higher education)         
                                                                                                        Hawaiian Electric Company, 
                                                                                                        Inc.                       
                                                                                                        1993                        

                                                                                                        
  

Year denotes year of appointment or
election to the board of directors
 
                                        68