UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                                   FORM 10-Q

          [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1996
                                       OR
          [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
 
Exact Name of Registrant as             Commission     I.R.S. Employer
   Specified in Its Charter             File Number   Identification No.
- -------------------------------------   -----------   ------------------
 
HAWAIIAN ELECTRIC INDUSTRIES, INC.         1-8503         99-0208097

                           and Principal Subsidiary

HAWAIIAN ELECTRIC COMPANY, INC.            1-4955         99-0040500


                                STATE OF HAWAII
- --------------------------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                  900 RICHARDS STREET, HONOLULU, HAWAII 96813
- --------------------------------------------------------------------------------
             (Address of principal executive offices and zip code)

            HAWAIIAN ELECTRIC INDUSTRIES, INC. ----- (808) 543-5662
             HAWAIIAN ELECTRIC COMPANY, INC. ------- (808) 543-7771
- --------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                      NONE
- --------------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                    report)

================================================================================


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    No  
                                          -----    -----

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
 
Class of Common Stock                           Outstanding August 1, 1996
- --------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc.        
 (Without Par Value)...................   30,425,824 Shares
Hawaiian Electric Company, Inc. ($6       
 2/3 Par Value)........................   12,302,657 Shares (not publicly 
                                                             traded)
 
================================================================================


 
              Hawaiian Electric Industries, Inc. and subsidiaries
                Hawaiian Electric Company, Inc. and subsidiaries
                     Form 10-Q--Quarter ended June 30, 1996

                                     INDEX
                                                                      Page No.

Glossary of terms.....................................................   ii

                         PART I.  FINANCIAL INFORMATION

Item 1. Financial statements

        Hawaiian Electric Industries, Inc. and subsidiaries
        ---------------------------------------------------
        Consolidated balance sheets (unaudited) - June 30, 1996
          and December 31, 1995.......................................   1

        Consolidated statements of income (unaudited) - three and six
         months ended June 30, 1996 and 1995..........................   2

        Consolidated statements of retained earnings (unaudited) -
         three and six months ended June 30, 1996 and 1995............   2

        Consolidated statements of cash flows (unaudited) - six months
          ended June 30, 1996 and 1995................................   3

        Notes to consolidated financial statements (unaudited)........   4

        Hawaiian Electric Company, Inc. and subsidiaries
        ------------------------------------------------
        Consolidated balance sheets (unaudited) - June 30, 1996
          and December 31, 1995.......................................   9

        Consolidated statements of income (unaudited) - three and six
         months ended June 30, 1996 and 1995..........................   10

        Consolidated statements of retained earnings (unaudited) -
         three and six months ended June 30, 1996 and 1995.............  10

        Consolidated statements of cash flows (unaudited) - six months
          ended June 30, 1996 and 1995.................................  11

        Notes to consolidated financial statements (unaudited).........  12

Item 2. Management's discussion and analysis of financial condition and
          results of operations........................................  16

                          PART II.  OTHER INFORMATION

Item 1.     Legal proceedings..........................................  25
Item 5.     Other information..........................................  25
Item 6.     Exhibits and reports on Form 8-K...........................  27
Signatures.............................................................  27
 
                                       i


 
              Hawaiian Electric Industries, Inc. and subsidiaries
                Hawaiian Electric Company, Inc. and subsidiaries
                     Form 10-Q--Quarter ended June 30, 1996

                               GLOSSARY OF TERMS


 
TERMS                                              DEFINITIONS
- -----                                              -----------
                             
 
AFUDC                           Allowance for funds used during construction
 
ASB                             American Savings Bank, F.S.B., a wholly owned
                                 subsidiary of HEI Diversified, Inc. and parent
                                 company of American Savings Investment Services
                                 Corp., ASB Service Corporation,
                                 AdCommunications, Inc. and Associated Mortgage,
                                 Inc.
  
BIF                             Bank Insurance Fund
 
BLNR                            Board of Land and Natural Resources of the State
                                 of Hawaii
 
CDUP                            Conservation District Use Permit amendment
 
COMPANY                         Hawaiian Electric Industries, Inc. and its
                                 direct and indirect subsidiaries, including,
                                 without limitation, Hawaiian Electric Company,
                                 Inc., Maui Electric Company, Limited, Hawaii
                                 Electric Light Company, Inc., HEI Investment
                                 Corp., Malama Pacific Corp. and its
                                 subsidiaries, Hawaiian Tug & Barge Corp., Young
                                 Brothers, Limited, HEI Diversified, Inc.,
                                 American Savings Bank, F.S.B. and its
                                 subsidiaries, Lalamilo Ventures, Inc. and HEI
                                 Power Corp. and its subsidiaries
 
D&O                             Decision and Order
 
DOH                             Department of Health of the State of Hawaii
 
EMF                             Electric and magnetic fields
 
EPA                             Environmental Protection Agency - federal
 
FASB                            Financial Accounting Standards Board
 
FDIC                            Federal Deposit Insurance Corporation
 
FHLB                            Federal Home Loan Bank
 
HECO                            Hawaiian Electric Company, Inc., a wholly owned
                                 electric utility subsidiary of Hawaiian Electric
                                 Industries, Inc. and parent company of Maui
                                 Electric Company, Limited and Hawaii Electric
                                 Light Company, Inc.
 
HEI                             Hawaiian Electric Industries, Inc., parent
                                 company of Hawaiian Electric Company, Inc., HEI
                                 Investment Corp., Malama Pacific Corp., Hawaiian
                                 Tug & Barge Corp., Lalamilo Ventures, Inc., HEI
                                 Diversified, Inc., Pacific Energy Conservation
                                 Services, Inc. and HEI Power Corp.
 
HEIDI                           HEI Diversified, Inc., a wholly owned subsidiary
                                 of Hawaiian Electric Industries, Inc. and the
                                 parent company of American Savings Bank, F.S.B.

                                       ii

 
                          GLOSSARY OF TERMS, CONTINUED


 
TERMS                                              DEFINITIONS
- -----                                              -----------
                             
 
HEIIC                           HEI Investment Corp., a wholly owned subsidiary
                                 of Hawaiian Electric Industries, Inc.
 
HEIPC                           HEI Power Corp., a wholly owned subsidiary of
                                 Hawaiian Electric Industries, Inc., and the
                                 parent company of several subsidiaries
 
HELCO                           Hawaii Electric Light Company, Inc., a wholly
                                 owned electric utility subsidiary of Hawaiian
                                 Electric Company, Inc.
 
HIG                             The Hawaiian Insurance & Guaranty Company,
                                 Limited, an insurance company which was placed
                                 in state rehabilitation proceedings.  HEI
                                 Diversified, Inc. was the holder of record of
                                 HIG's common stock prior to August 16, 1994
 
HTB                             Hawaiian Tug & Barge Corp., a wholly owned
                                 subsidiary of Hawaiian Electric Industries, Inc.
                                 and parent company of Young Brothers, Limited
 
IPP                             Independent power producer
 
IRP                             Integrated resource plan
 
IRR                             Interest rate risk
 
KCP                             Kawaihae Cogeneration Partners
 
KWH                             Kilowatthour
 
MECO                            Maui Electric Company, Limited, a wholly owned
                                 electric utility subsidiary of Hawaiian
                                 Electric Company, Inc.
 
MPC                             Malama Pacific Corp., a wholly owned subsidiary
                                 of Hawaiian Electric Industries, Inc. and
                                 parent company of several real estate
                                 subsidiaries
 
MW                              Megawatt
 
OTS                             Office of Thrift Supervision, Department of
                                 Treasury
 
PGV                             Puna Geothermal Venture
 
PSD                             Prevention of Significant Deterioration/Covered
                                 Source Permit
 
PUC                             Public Utilities Commission of the State of
                                 Hawaii
 
ROACE                           Return on average common equity
 
SAIF                            Savings Association Insurance Fund
 
SEC                             Securities and Exchange Commission
 
SFAS                            Statement of Financial Accounting Standards
 
YB                              Young Brothers, Limited, a wholly owned
                                 subsidiary of Hawaiian Tug & Barge Corp.
 
                                      iii

 


                        PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

ITEM 1.  FINANCIAL STATEMENTS
- -------------------------------

Hawaiian Electric Industries, Inc. and subsidiaries
CONSOLIDATED BALANCE SHEETS (UNAUDITED)



                                                                       June 30,                     December 31,
(in thousands)                                                           1996                           1995
- ----------------------------------------------------------------------------------------------------------------
                                                                                            
ASSETS
Cash and equivalents...............................................   $   90,300                    $  130,833
Accounts receivable and  unbilled revenues, net....................      147,835                       142,505
Inventories, at average cost.......................................       44,289                        35,258
Real estate developments...........................................       34,392                        35,023
Marketable securities..............................................    1,409,358                     1,479,552
Other investments..................................................       74,046                        74,325
Loans receivable, net..............................................    1,903,529                     1,687,801
Property, plant and equipment, net of accumulated
     depreciation of $854,344 and $815,547.........................    1,854,425                     1,808,195
Regulatory assets..................................................      101,928                        99,693
Other..............................................................       72,285                        69,315
Goodwill and other intangibles.....................................       39,140                        41,245
                                                                      ----------                    ----------
                                                                      $5,771,527                    $5,603,745
                                                                      ==========                    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable...................................................   $   97,394                    $   94,806
Deposit liabilities................................................    2,259,024                     2,223,755
Short-term borrowings..............................................      166,377                       181,825
Securities sold under agreements to repurchase.....................      455,252                       412,521
Advances from Federal Home Loan Bank...............................      526,774                       501,274

Long-term debt.....................................................      818,358                       758,463
Deferred income taxes..............................................      184,748                       182,101
Unamortized tax credits............................................       47,978                        46,965
Contributions in aid of construction...............................      193,862                       191,854
Other..............................................................      179,882                       190,535
                                                                      ----------                    ----------
                                                                       4,929,649                     4,784,099
                                                                      ----------                    ----------
PREFERRED STOCK OF ELECTRIC UTILITY SUBSIDIARIES
Subject to mandatory redemption....................................       39,350                        41,750
Not subject to mandatory  redemption...............................       48,293                        48,293
                                                                      ----------                    ----------
                                                                          87,643                        90,043
                                                                      ----------                    ----------
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 30,365  shares and 29,773 shares...........      605,785                       585,387

Retained earnings..................................................      148,450                       144,216
                                                                      ----------                    ----------
                                                                         754,235                       729,603
                                                                      ----------                    ----------
                                                                      $5,771,527                    $5,603,745
                                                                      ==========                    ==========


See accompanying notes to consolidated financial statements.

                                       1



Hawaiian Electric Industries, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



                                                                 Three months ended                  Six months ended
                                                                     June 30,                            June 30,
                                                             ------------------------          -------------------------
(in thousands, except per share amounts                         1996            1995             1996            1995
 and ratio of earnings to fixed charges)
- -------------------------------------------------------------------------------------------------------------------------
                                                                                                    
REVENUES
Electric utility...................................           $264,987         $244,506         $512,824         $477,027
Savings bank.......................................             66,278           61,605          132,070          122,322
Other..............................................             15,978           13,786           28,518           26,822
                                                              --------         --------          -------         --------
                                                               347,243          319,897          673,412          626,171
                                                              --------         --------          -------         --------
EXPENSES                                                               
Electric utility...................................            221,612          206,207          430,710          403,315
Savings bank.......................................             56,076           51,762          111,912          102,254
Other..............................................             18,143           15,858           32,643           30,223
                                                              --------         --------         --------         --------
                                                               295,831          273,827          575,265          535,792
                                                              --------         --------         --------         --------
OPERATING INCOME (LOSS)
Electric utility...................................             43,375           38,299           82,114           73,712
Savings bank.......................................             10,202            9,843           20,158           20,068
Other..............................................             (2,165)          (2,072)          (4,125)          (3,401)
                                                              --------         --------         --------         --------
                                                                51,412           46,070           98,147           90,379
                                                              --------         --------         --------         --------

Interest expense--electric utility and other.......            (16,090)         (15,515)         (32,249)         (30,467)
Allowance for borrowed funds used
 during construction...............................              1,154            1,338            2,504            2,505
Preferred stock dividends of electric
 utility subsidiaries..............................             (1,666)          (1,726)          (3,341)          (3,457)
Allowance for equity funds used during
 construction......................................              2,147            2,618            4,798            4,985
                                                              --------         --------         --------         --------
INCOME BEFORE INCOME TAXES.........................             36,957           32,785           69,859           63,945
Income taxes.......................................             15,594           13,905           29,627           27,218
                                                              --------         --------         --------         --------
NET INCOME.........................................           $ 21,363         $ 18,880         $ 40,232         $ 36,727
                                                              ========         ========         ========         ========
Earnings per common share..........................              $0.71            $0.65            $1.34            $1.27
                                                              ========         ========         ========         ========
Dividends per common share.........................              $0.60            $0.59            $1.20            $1.18
                                                              ========         ========         ========         ========
Weighted average number of common
 shares outstanding................................             30,182           29,063           30,033           28,919
                                                              ========         ========         ========         ========

Ratio of earnings to fixed charges (SEC method)
   Excluding interest on ASB deposits..............                                                 1.96             1.93
                                                                                                ========         ========
   Including interest on ASB deposits..............                                                 1.57             1.56
                                                                                                ========         ========



Hawaiian Electric Industries, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS  (UNAUDITED)




                                                                 Three months ended                  Six months ended
                                                                     June 30,                           June 30,
                                                              --------------------------        -------------------------
(in thousands)                                                    1996           1995             1996            1995
- -------------------------------------------------------------------------------------------------------------------------
                                                                                                    
RETAINED EARNINGS, BEGINNING OF PERIOD.............           $145,172          $136,712        $144,216        $135,835
Net income.........................................             21,363            18,880          40,232          36,727
Common stock dividends.............................            (18,085)          (17,130)        (35,998)        (34,100)
                                                              --------          --------        --------        --------
RETAINED EARNINGS, END OF PERIOD...................           $148,450          $138,462        $148,450        $138,462
                                                              ========          ========        ========        ========

 
See accompanying notes to consolidated financial statements.

                                       2

 
Hawaiian Electric Industries, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                              Six months ended
                                                  June 30,
                                        -------------------------
(in thousands)                               1996         1995
- -----------------------------------------------------------------
                                                   
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..............................   $  40,232    $  36,727
Adjustments to reconcile net income to
 net cash provided by operating 
 activities
      Depreciation and amortization of        
       property, plant and equipment....      41,204       38,429
      Other amortization................       6,481          776
      Deferred income taxes and tax           
       credits, net.....................       4,744        6,074
      Allowance for equity funds used     
       during construction..............      (4,798)      (4,985)
      Changes in assets and liabilities
            Increase in accounts              
             receivable and unbilled
             revenues, net..............      (5,330)     (11,850)
            Decrease (increase) in            
             inventories................      (9,031)       5,092
            Decrease (increase) in real         
             estate developments........         631         (685)
            Increase in regulatory           
             assets.....................      (1,676)      (2,394)
            Increase (decrease) in            
             accounts payable...........       2,588       (6,472)
            Changes in other assets and      
             liabilities................     (16,997)      (9,153)
                                           ---------    ---------
NET CASH PROVIDED BY OPERATING              
 ACTIVITIES.............................      58,048       51,559
                                           ---------    ---------
 
CASH FLOWS FROM INVESTING ACTIVITIES
Loans receivable originated and             
 purchased..............................    (308,574)    (158,696)
Principal repayments on loans
 receivable.............................      90,691       64,061
Proceeds from sale of loans receivable..       2,092        3,582
Held-to-maturity mortgage-backed            
 securities purchased...................    (112,581)     (79,566)
Principal repayments on                 
 held-to-maturity mortgage-backed
 securities.............................     182,907       63,084
Capital expenditures....................     (85,540)    (102,892)
Contributions in aid of construction....       5,984        6,414
Other...................................       1,164        1,066
                                           ---------    ---------
NET CASH USED IN INVESTING ACTIVITIES...    (223,857)    (202,947)
                                           ---------    ---------
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit liabilities.....      35,269       34,072
Net increase (decrease) in short-term
 borrowings with original maturities of      
 three months or less...................     (14,738)      30,135
Proceeds from other short-term                 
 borrowings.............................         608          745
Repayment of other short-term
 borrowings.............................      (1,318)      (1,593)
Proceeds from securities sold under         
 agreements to repurchase...............     384,100      326,500
Repurchase of securities sold under         
 agreements to repurchase...............    (341,000)    (172,339)
Proceeds from advances from Federal         
 Home Loan Bank.........................     323,200      251,200
Principal payments on advances from        
 Federal Home Loan Bank.................    (297,700)    (338,700)
Proceeds from issuance of long-term
 debt...................................      77,242       48,213
Repayment of long-term debt.............     (17,400)     (13,400)
Redemption of electric utility                
 subsidiaries' preferred stock..........      (2,400)      (1,554)
Net proceeds from issuance of common        
 stock..................................       9,746       10,112
Common stock dividends..................     (25,377)     (24,510)
Other...................................      (4,956)      (5,681)
                                           ---------    ---------
NET CASH PROVIDED BY FINANCING           
 ACTIVITIES.............................     125,276      143,200
                                           ---------    ---------
Net decrease in cash and equivalents....     (40,533)      (8,188)
Cash and equivalents, beginning of                      
 period.................................     130,833       87,623
                                           ---------    ---------
CASH AND EQUIVALENTS, END OF PERIOD.....   $  90,300    $  79,435
                                           =========    ========= 

 
See accompanying notes to consolidated financial statements.


                                       3

Hawaiian Electric Industries, Inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)  BASIS OF PRESENTATION
- --------------------------

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Securities and Exchange
Commission (SEC) Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
incorporated by reference in HEI's Annual Report on SEC Form 10-K for the year
ended December 31, 1995 (as amended) and the consolidated financial statements
and the notes thereto in HEI's Quarterly Report on SEC Form 10-Q for the quarter
ended March 31, 1996.

In the opinion of HEI's management, the accompanying unaudited consolidated
financial statements contain all material adjustments required by generally
accepted accounting principles to present fairly the Company's financial
position as of June 30, 1996 and December 31, 1995, and the results of its
operations for the three months and six months ended June 30, 1996 and 1995, and
its cash flows for the six months ended June 30, 1996 and 1995. All such
adjustments are of a normal recurring nature, unless otherwise disclosed in this
Form 10-Q or other referenced material. Results of operations for interim
periods are not necessarily indicative of results for the full year.

(2)  ELECTRIC UTILITY SUBSIDIARY
- --------------------------------

For Hawaiian Electric Company, Inc.'s consolidated financial information,
including its commitments and contingencies, see pages 9 through 15.

(3)  SAVINGS BANK SUBSIDIARY
- ----------------------------------------
SELECTED CONSOLIDATED FINANCIAL
 INFORMATION

American Savings Bank, F.S.B. and
 subsidiaries
Income statement data

 
 
                                            Three months ended             Six months ended
                                                 June 30,                      June 30,
                                           --------------------          --------------------
(in thousands)                             1996            1995          1996           1995
- ---------------------------------------------------------------------------------------------
                                                                             
Interest income.........................   $ 62,374    $ 57,928         $124,454     $115,561
Interest expense........................     37,727      34,999           75,265       67,974
                                           --------    --------         --------     --------
NET INTEREST INCOME.....................     24,647      22,929           49,189       47,587
Provision for losses....................       (471)       (240)            (891)        (625)
Other income............................      3,904       3,677            7,616        6,761
Operating, administrative and general       
 expenses...............................    (17,878)    (16,523)         (35,756)     (33,655)
                                           --------    --------         --------     --------
OPERATING INCOME........................     10,202       9,843           20,158       20,068
Income taxes............................      4,256       4,139            8,422        8,415
                                           --------    --------         --------     --------
NET INCOME..............................   $  5,946    $  5,704         $ 11,736     $ 11,653
                                           ========    ========         ========     ========


                                       4

 
American Savings Bank, F.S.B. and subsidiaries
Balance sheet data

  
 
                                               June 30,         December 31,
(in thousands)                                   1996               1995 
- ----------------------------------------------------------------------------
                                                             
ASSETS
Cash and equivalents....................      $   86,927          $  129,678
Held-to-maturity investment securities..          36,053              34,720
Held-to-maturity mortgage-backed               1,373,305           1,444,832
 securities.............................
Loans receivable, net...................       1,903,529           1,687,801
Other...................................          74,632              75,150
Goodwill and other intangibles..........          39,140              41,245
                                              ----------          ----------
                                              $3,513,586          $3,413,426
                                              ==========          ==========
LIABILITIES AND EQUITY                                            
Deposit liabilities.....................      $2,259,024          $2,223,755
Securities sold under agreements to              455,252             412,521
 repurchase.............................                          
Advances from Federal Home Loan Bank....         526,774             501,274
Other...................................          59,895              57,973
                                              ----------          ----------
                                               3,300,945           3,195,523
Common stock equity.....................         212,641             217,903
                                              ----------          ----------
                                              $3,513,586          $3,413,426
                                              ==========          ==========
 

PROPOSED LEGISLATION AFFECTING FINANCIAL INSTITUTIONS


The deposit accounts of ASB and other thrifts are insured by the Savings
Association Insurance Fund (SAIF). The deposit accounts of commercial banks are
insured by the Bank Insurance Fund (BIF). The SAIF and BIF are administered by
the Federal Deposit Insurance Corporation (FDIC). In order to capitalize these
funds, thrifts and banks have in the past paid costs of insurance ranging from
23 cents to 31 cents per $100 of deposits. However, under existing law, the FDIC
may reduce these assessment rates when the SAIF and BIF individually reach a
designated 1.25% reserve ratio. The BIF reached the designated reserve ratio in
1995, but the SAIF is unlikely to do so at present insurance rates for several
years. Effective January 1996, well-capitalized banks pay only the legally
required annual minimum of $2,000 for BIF insurance. For all other BIF
institutions, the FDIC deposit insurance assessment rates range from 3 to 27
cents per $100 of deposits. While the FDIC reduced the deposit assessments paid
by banks, it maintained the 23 to 31 cents per $100 of deposits assessment for
thrifts, depending on their risk classification. This disparity places ASB and
other thrifts at a disadvantage in competing with commercial banks.

There have been a number of legislative proposals to address this situation,
including making a one-time or phased-in assessment of thrifts to permit
capitalization of the SAIF up to required levels, followed by a merger of the
two funds; eliminating or reducing the disparity in the assessment rates paid by
banks or thrifts if the SAIF is recapitalized through the assessment; and
merging bank and thrift charters. Certain of these proposals, if adopted, could
have a material adverse effect on the Company. For example, if a one-time
assessment of 85 cents for every $100 of deposits is imposed, it is estimated
that ASB would be assessed approximately $18 million on a pretax basis
($11 million after-tax), based on ASB's deposit liabilities as of March 31,
1995. If thrift and bank charters are merged, HEI and its other subsidiaries
might become subject to the restrictions on the permissible activities of a bank
holding company.  While certain of the proposals under consideration would
grandfather the activities of existing savings and loan holding companies,
management cannot predict whether or in what form any of these proposals might
ultimately be adopted or the extent to which the business of the Company or ASB
might be affected.

(4)  REAL ESTATE SUBSIDIARY
- ---------------------------

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 $49 million and $50 million at
June 30, 1996 and December 31, 1995, respectively. MPC's present focus is to
reduce its current investment in real estate development assets and increase
cash flow by continuing the development and sales of its existing projects.
There are currently no plans to invest in new projects.

                                       5


At June 30, 1996, MPC or its subsidiaries had issued (i) guaranties under which
they were jointly and severally contingently liable with their joint venture
partners for $2.3 million of outstanding loans and (ii) payment guaranties under
which MPC or its subsidiaries were severally contingently liable for
$5.1 million of outstanding loans and $4.0 million of additional undrawn loan
facilities. All such loans are collateralized by real property. At June 30,
1996, HEI had agreed with the lenders of construction loans and loan facilities,
of which approximately $9.1 million was outstanding and $4.8 million was
undrawn, that it will maintain ownership of l00% 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 as guarantor.

(5)  CASH FLOWS
- ---------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest (net of capitalized amounts) and income taxes was as
follows:



                                                                            Six months ended
                                                                                June 30,
                                                                          ---------------------
(in thousands)                                                              1996      1995
- -----------------------------------------------------------------------------------------------
                                                                                
Interest (including interest paid by savings bank, but excluding interest      
 paid on nonrecourse debt from leveraged leases).........................  $105,138   $92,457
                                                                           ========   =======   
Interest on nonrecourse debt from leveraged leases.......................  $  4,142   $ 4,534
                                                                           ========   =======   
Income taxes.............................................................  $ 21,397   $19,809
                                                                           ========   =======   

 
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES

In the six months ended June 30, 1995, ASB received $223 million in mortgage-
backed securities in exchange for loans.

Common stock dividends reinvested by shareholders in HEI common stock in noncash
transactions amounted to $10.6 million and $9.6 million for the six months ended
June 30, 1996 and 1995, respectively.

The allowance for equity funds used during construction, which was capitalized
as part of the cost of electric utility plant, amounted to $4.8 million and
$5.0 million for the six months ended June 30, 1996 and 1995, respectively.

(6)  ACCOUNTING CHANGES--1996 IMPLEMENTATION
- --------------------------------------------

LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that long-lived assets and certain identifiable intangibles held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected future cash flows derived from an asset
is less than the carrying amount of the asset, an impairment loss is recognized.
Measurement of that loss is based on the fair value of the asset.

Generally, SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. SFAS No. 121 also requires that a rate-regulated
enterprise recognize an impairment loss for the amount of costs excluded by a
regulator from the enterprise's rate base. The Company adopted the provisions of
SFAS No. 121 on January 1, 1996. The adoption of SFAS No. 121 did not have a
material effect on the Company's financial condition or results of operations.

                                       6

 
MORTGAGE SERVICING RIGHTS AND TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 requires that a mortgage banking enterprise (as defined)
that acquires mortgage servicing rights through either the purchase or
origination of mortgage loans and sells or securitizes those loans with
servicing rights retained should allocate the total cost of the mortgage loans
to the mortgage servicing rights and the loans based on their relative fair
values, if it is practicable to estimate those fair values. ASB adopted the
provisions of SFAS No. 122 on January 1, 1996. The adoption of SFAS No. 122 did
not have a material effect on the Company's financial condition or results of
operations.

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards based on the consistent application
of a financial-components approach that focuses on control.  Under that
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished.  SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 125 amends or supersedes various
statements, including superseding SFAS No. 122.  SFAS No. 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively.  The
Company will adopt the provisions of SFAS No. 125 on January 1, 1997, but has
not determined the impact of the adoption.

STOCK-BASED COMPENSATION

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation, but does not require an entity to adopt the new
method for purposes of preparing its basic financial statements. For entities
not adopting the new method, SFAS No. 123 requires footnote disclosure of
proforma net income and earnings per share information as if the fair value
based method had been adopted. The disclosure requirements of SFAS No. 123 are
effective for financial statements for fiscal years beginning after December 15,
1995. The Company will comply with the disclosure requirements of SFAS No. 123
in its annual financial statements for 1996.

(7)  DISCONTINUED OPERATIONS
- ----------------------------

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 concluded
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 of
the State of Hawaii (the Rehabilitator) and her deputies.

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 that directors and officers
of HEI, HEIDI and the HIG Group were responsible for the losses suffered by the
HIG Group and claims that HEI and/or HEIDI should be held liable for HIG's
obligations. The lawsuit was settled in early 1994 and $32 million was disbursed
to the Rehabilitator. In exchange, all the plaintiffs released their claims
against HEI, its affiliates and their past and present officers and directors.

The $32 million settlement amount, less income tax benefits and certain amounts
recognized in previously established reserves, resulted in a $15 million after-
tax charge to discontinued operations in 1993. HEI and HEIDI are seeking
reimbursement for the settlement and defense costs from their insurance
carriers. One of the insurance carriers filed a declaratory relief action in the
U.S. District Court for Hawaii seeking resolution of insurance coverage and
other policy issues, and HEI and HEIDI filed counterclaims. On December 15,
1995, the judge ruled on motions for partial summary judgment that had been
argued in June 1995. The District Court found that HEI and HEIDI did not breach
their

                                       7


insurance contract and that the settlement they entered into was reasonable.
Among the issues left for consideration by the District Court include
plaintiff's defense of allocation. In June 1996, the District Court held a
hearing on cross-motions for summary judgment with respect to the remaining
issues in the case, but the District Court has not yet ruled on these motions.
In the event any issues remain for trial after the Court rules on these motions,
a trial date must be set. Recoveries from HEI's insurance carriers, if any, will
be recognized when realized.

(8)  CONTINGENCIES
- ------------------

ENVIRONMENTAL REGULATION -- HAZARDOUS WASTE AND TOXIC SUBSTANCES CONTROL

By letters in January and February 1995, the Department of Health of the State
of Hawaii (DOH) advised HECO, HTB, YB and others that the DOH was conducting an
investigation to determine the nature and extent of actual or potential releases
of hazardous substances, oil, pollutants or contaminants at or near Honolulu
Harbor. The DOH letter to HECO requested information regarding past hazardous
substances and oil spills that may have occurred at HECO's Honolulu power plant
and nearby fuel storage and pipeline facilities which are located near Honolulu
Harbor. HECO submitted a response to the DOH on April 28, 1995. The DOH letters
to HTB and YB requested information regarding past hazardous substances and oil
spills that may have occurred at Pier 21 and Piers 24-29 in Honolulu Harbor. HTB
and YB provided responses to the DOH letters. Based on a limited review of the
responses received from HECO, HTB, YB and others, the DOH issued letters on
December 18, 1995, indicating that the DOH has identified a number of parties,
including HECO, HTB and YB, who appear to be either potentially responsible for
the contamination and/or operate their facilities upon contaminated land. The
DOH met with these identified parties on January 24, 1996 to inform them of its
findings and to establish the framework to determine remedial and cleanup
requirements. The DOH's goal is the formation of a voluntary response group
comprised of these identified parties. The Honolulu Harbor area of investigation
was divided into four units, with the highest priority area (Iwilei Area) to be
addressed first. The DOH met again with the identified parties in March and May
1996. Because the process for determining appropriate remedial and cleanup
action, if any, is at an early stage, management cannot predict at this time the
costs of future site analysis, remediation and cleanup requirements, if any, nor
can it estimate when such costs, if any, would be incurred. Certain of the costs
incurred, if any, may be claimed and covered under existing insurance policies,
but such coverage is not determinable at this time.

                                       8

 
Hawaiian Electric Company, Inc. and subsidiaries
CONSOLIDATED BALANCE SHEETS  (UNAUDITED)




                                                  June 30,     December 31,
(in thousands, except par value)                    1996           1995
- ---------------------------------------------------------------------------
                                                         
                                          
ASSETS                                    
Utility plant, at cost                    
   Property, plant and equipment........         $2,349,603      $2,291,545
   Construction in progress.............            212,973         191,460
   Less--accumulated depreciation.......           (797,228)       (762,770)
                                                 ----------      ----------
         NET UTILITY PLANT..............          1,765,348       1,720,235
                                                 ----------      ----------
Current assets                                                   
   Cash and equivalents.................              1,965              20
   Customer accounts receivable, net....             77,422          67,698
   Accrued unbilled revenues, net.......             39,997          43,695
   Other accounts receivable, net.......              3,795           5,355
   Fuel oil stock, at average cost......             23,747          13,469
   Materials and supplies, at average                
    cost................................             19,189          20,538
   Prepayments and other................              2,433           2,297
                                                 ----------      ----------
         TOTAL CURRENT ASSETS...........            168,548         153,072
                                                 ----------      ----------
Other assets                                                     
   Regulatory assets....................             99,426          97,114
   Other................................             48,326          45,862
                                                 ----------      ----------
         TOTAL OTHER ASSETS.............            147,752         142,976
                                                 ----------      ----------
                                                 $2,081,648      $2,016,283
                                                 ==========      ==========
                                                                 
CAPITALIZATION AND LIABILITIES                                   
Capitalization                                                   
   Common stock, $6 2/3 par value,                               
    authorized 50,000 shares; 
    outstanding 12,303 shares...........         $   82,031      $   82,031 
   Premium on capital stock.............            271,480         271,449
   Retained earnings....................            356,644         343,425
                                                 ----------      ----------
         COMMON STOCK EQUITY............            710,155         696,905
   Cumulative preferred stock                                    
      Not subject to mandatory                     
       redemption.......................             48,293          48,293
      Subject to mandatory redemption...             37,555          39,955
   Long-term debt, net..................            541,504         487,306
                                                 ----------      ----------
         TOTAL CAPITALIZATION...........          1,337,507       1,272,459
                                                 ----------      ----------
Current liabilities                                              
   Long-term debt due within one year...             43,000          29,903
   Preferred stock sinking fund                 
    requirements........................              1,795           1,795
   Short-term borrowings - nonaffiliates            121,208         131,753
   Short-term borrowings - affiliate....             12,400           7,000
   Accounts payable.....................             52,052          48,691
   Interest and preferred dividends              
    payable.............................             10,515           9,954
   Taxes accrued........................             37,234          42,968
   Other................................             25,822          37,573
                                                 ----------      ----------
         TOTAL CURRENT LIABILITIES......            304,026         309,637
                                                 ----------      ----------
Deferred credits and other liabilities                           
   Deferred income taxes................            118,226         116,963
   Unamortized tax credits..............             46,946          45,935
   Other................................             81,081          79,435
                                                 ----------      ----------
         TOTAL DEFERRED CREDITS AND                              
          OTHER LIABILITIES.............            246,253         242,333
                                                 ----------      ----------
Contributions in aid of construction....            193,862         191,854
                                                 ----------      ----------
                                                 $2,081,648      $2,016,283
                                                 ==========      ==========
  

See accompanying notes to HECO's consolidated financial statements.

                                       9

 
Hawaiian Electric Company, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



                                                Three months ended       Six months ended    
                                                     June 30,                 June 30,       
(in thousands, except for ratio of            ----------------------    --------------------   
 earnings to fixed charges)                     1996          1995       1996         1995   
- -------------------------------------------------------------------------------------------- 
                                                                                
OPERATING REVENUES......................      $262,807      $242,646    $508,751    $473,822
                                              --------      --------    --------    --------
OPERATING EXPENSES                                                                  
Fuel oil................................        61,665        48,816     115,287      97,293
Purchased power.........................        69,798        70,890     137,605     134,743
Other operation.........................        35,978        34,212      69,569      68,395
Maintenance.............................        11,448        12,411      23,393      23,633
Depreciation and amortization...........        18,338        17,028      36,681      34,010
Taxes, other than income taxes..........        24,312        22,688      48,020      44,767
Income taxes............................        13,660        12,096      25,893      23,270
                                              --------      --------    --------    --------
                                               235,199       218,141     456,448     426,111
                                              --------      --------    --------    --------
OPERATING INCOME........................        27,608        24,505      52,303      47,711
                                              --------      --------    --------    --------
OTHER INCOME                                                            
Allowance for equity funds used                                         
   during construction..................         2,147         2,618       4,798       4,985
Other, net..............................         2,165         1,710       4,016       2,947
                                              --------      --------    --------    --------
                                                 4,312         4,328       8,814       7,932
                                              --------      --------    --------    --------
INCOME BEFORE INTEREST AND OTHER CHARGES        31,920        28,833      61,117      55,643
                                              --------      --------    --------    --------
INTEREST AND OTHER CHARGES                                                          
Interest on long-term debt..............         8,735         8,587      17,263      16,665
Amortization of net bond premium and                                                         
 expense................................           320           320         635         634 
Other interest charges..................         2,465         1,998       4,955       4,052
Allowance for borrowed funds used                                                   
   during construction..................        (1,154)       (1,338)     (2,504)     (2,505)
Preferred stock dividends of                                                                 
 subsidiaries...........................           702           692       1,404       1,384 
                                              --------      --------    --------    --------
                                                11,068        10,259      21,753      20,230
                                              --------      --------    --------    --------
                                                                                    
INCOME BEFORE PREFERRED STOCK DIVIDENDS                                             
   OF HECO..............................        20,852        18,574      39,364      35,413
Preferred stock dividends of HECO.......           964         1,034       1,937       2,073
                                              --------      --------    --------    --------
NET INCOME FOR COMMON STOCK.............      $ 19,888      $ 17,540    $ 37,427    $ 33,340
                                              ========      ========    ========    ========
Ratio of earnings to fixed charges                                                  
   (SEC method).........................                                    3.46        3.34
                                                                        ========    ========

 
Hawaiian Electric Company, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
 
 
                                                 Three months ended       Six months ended    
                                                      June 30,                June 30,       
                                              ----------------------    -------------------- 
(in thousands)                                   1996          1995       1996        1995 
- --------------------------------------------------------------------------------------------
                                                                         
RETAINED EARNINGS, BEGINNING OF PERIOD..      $349,910      $315,408    $343,425    $308,535
Net income for common stock.............        19,888        17,540      37,427      33,340
Common stock dividends..................       (13,154)       (7,900)    (24,208)    (16,827)
                                              --------      --------    --------    --------
RETAINED EARNINGS, END OF PERIOD........      $356,644      $325,048    $356,644    $325,048
                                              ========      ========    ========    ========
 

HEI owns all the common stock of HECO. Therefore, per share data with respect to
shares of common stock of HECO are not meaningful.

See accompanying notes to HECO's consolidated financial statements.

                                      10


Hawaiian Electric Company, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                                                                             Six months ended
                                                                                                  June 30,
                                                                                       ----------------------------
(in thousands)                                                                         1996                   1995
- --------------------------------------------------------------------------------------------------------------------
                                                                                                      
CASH FLOWS FROM OPERATING ACTIVITIES
Income before preferred stock dividends of HECO.................................     $ 39,364               $ 35,413
Adjustments to reconcile income before preferred stock dividends of
 HECO to net cash provided by operating activities
      Depreciation and amortization of property, plant and equipment............       36,681                 34,010
      Other amortization........................................................        4,574                  2,816
      Deferred income taxes.....................................................        1,302                  1,837
      Tax credits, net..........................................................        1,840                  2,174
      Allowance for equity funds used during construction.......................       (4,798)                (4,985)
  Changes in assets and liabilities
      Increase in accounts receivable...........................................       (8,164)                (7,741)
      Decrease (increase) in accrued unbilled revenues..........................        3,698                   (300)
      Decrease (increase) in fuel oil stock.....................................      (10,278)                 5,281
      Decrease (increase) in materials and supplies.............................        1,349                    (72)
      Increase in regulatory assets.............................................       (1,676)                (2,394)
      Increase (decrease) in accounts payable...................................        3,361                 (7,645)
      Increase in interest and preferred dividends payable......................          561                  1,166
      Changes in other assets and liabilities...................................      (21,899)               (14,012)
                                                                                     --------               --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................................       45,915                 45,548
                                                                                     --------               --------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................................................      (79,820)               (95,741)
Contributions in aid of construction............................................        5,984                  6,414
Increase in notes receivable....................................................         (391)                    --
                                                                                     --------               --------
NET CASH USED IN INVESTING ACTIVITIES...........................................      (74,227)               (89,327)
                                                                                     --------               --------

CASH FLOWS FROM FINANCING ACTIVITIES
Common stock dividends..........................................................      (24,208)               (16,827)
Preferred stock dividends.......................................................       (1,937)                (2,073)
Proceeds from issuance of long-term debt........................................       67,242                 48,213
Repayment of long-term debt.....................................................           --                (11,000)
Redemption of preferred stock...................................................       (2,400)                (1,554)
Net increase (decrease) in short-term borrowings from nonaffiliates
  and affiliate with original maturities of three months or less................       (5,145)                20,899
Other...........................................................................       (3,295)                (4,134)
                                                                                     --------               --------
NET CASH PROVIDED BY FINANCING ACTIVITIES.......................................       30,257                 33,524
                                                                                     --------               --------

Net increase (decrease) in cash and equivalents.................................        1,945                (10,255)
Cash and equivalents, beginning of period.......................................           20                 10,694
                                                                                     --------               --------
CASH AND EQUIVALENTS, END OF PERIOD.............................................     $  1,965               $    439
                                                                                     ========               ========


See accompanying notes to HECO's consolidated financial statements.

                                        11


 
Hawaiian Electric Company, Inc. and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)  BASIS OF PRESENTATION
- --------------------------

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to SEC Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated by reference in HECO's Annual
Report on SEC Form 10-K for the year ended December 31, 1995 (as amended) and
the consolidated financial statements and the notes thereto in HECO's Quarterly
Report on SEC Form 10-Q for the quarter ended March 31, 1996.

In the opinion of HECO's management, the accompanying unaudited consolidated
financial statements contain all material adjustments required by generally
accepted accounting principles to present fairly the financial position of HECO
and its subsidiaries as of June 30, 1996 and December 31, 1995, and the results
of their operations for the three months and six months ended June 30, 1996 and
1995, and their cash flows for the six months ended June 30, 1996 and 1995. All
such adjustments are of a normal recurring nature, unless otherwise disclosed in
this Form 10-Q or other referenced material. Results of operations for interim
periods are not necessarily indicative of results for the full year.

(2)  CASH FLOWS
- ---------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest (net of capitalized amounts) and income taxes was as
follows:



 
                                           Six months ended
                                               June 30,
                                           -----------------
(in thousands)                              1996      1995
- ------------------------------------------------------------
                                               
Interest................................   $19,788   $17,332
                                           =======   =======
                                                     
Income taxes............................   $16,411   $19,174
                                           =======   =======
 


SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES

The allowance for equity funds used during construction, which was capitalized
as part of the cost of electric utility plant, amounted to $4.8 million and
$5.0 million for the six months ended June 30, 1996 and 1995, respectively.

(3)  COMMITMENTS AND CONTINGENCIES
- ----------------------------------

HELCO POWER SITUATION

BACKGROUND.  In 1991, HELCO identified the need beginning in 1994 for additional
- ----------
generation to provide for forecasted load growth while maintaining a
satisfactory generation reserve margin, to address uncertainties about future
deliveries of power from existing firm power producers and to permit the
retirement of older generating units. In the same year, the Hawaii Public
Utilities Commission (PUC) issued an order calling for an investigation of the
reliability of HELCO's system following service interruptions and rolling
blackouts instituted on the island of Hawaii. HELCO added firm capacity to its
system in August 1992 (a 20-MW HELCO-owned unit) and in June 1993 (pursuant to a
power purchase agreement for 25 MW of firm capacity). HELCO also proceeded with
plans to install at its Keahole power plant site two 20-MW combustion turbines
(CT-4 and CT-5), followed by an 18-MW heat steam recovery generator (ST-7), at
which time these units would be converted to a 56-MW (net) combined-cycle unit.
In January 1994, the PUC approved expenditures for CT-4, which HELCO had

                                      12


planned to install in late 1994, and in September 1995, the PUC conditionally
approved expenditures for CT-5 and ST-7.

Despite HELCO's best efforts to install the necessary additional generation, the
schedule for the installation of HELCO's phased combined-cycle unit at HELCO's
Keahole power plant site was revised due to delays in obtaining approval of the
air quality Prevention of Significant Deterioration/Covered Source Permit (PSD)
and the Conservation District Use Permit amendment (CDUP) for the Keahole power
plant site.

CDUP DELAYS.  In late 1995, a contested case hearing with respect to the CDUP
- -----------
was conducted and the hearing officer recommended denial of the CDUP
application. On April 22, 1996, the Hawaii Board of Land and Natural Resources
(BLNR) issued a written order in which it stated that it had voted 3 in favor
and 2 against a motion to accept the hearing officer's recommendation and that
HELCO's CDUP application was denied. On May 10, 1996 the BLNR issued an amended
order which no longer stated that the application was denied, but rather that it
would not issue a permit based on that vote. HELCO's position is that denial of
the CDUP application requires the favorable vote of at least 4 members of the
BLNR, and that the failure of the BLNR to take effective action results in HELCO
being entitled to its CDUP by operation of law. HELCO has filed both a complaint
for declaratory judgment (basically asking that HELCO be allowed to put its land
to the use requested and asking that BLNR and others act consistently with that
purpose) and a protective appeal of the original BLNR order. Other parties have
been allowed to intervene or cross-appeal, respectively, in those actions. On
July 25, 1996, the Third Circuit Court consolidated HELCO'S cases and set an
expedited schedule which results in oral arguments on September 30, 1996. A
decision is anticipated shortly thereafter. These proceedings may further delay,
if not prevent, HELCO's project.

PSD PERMIT DELAYS.  The Hawaii Department of Health (DOH) forwarded HELCO's PSD
- -----------------
permit to the Environmental Protection Agency (EPA) for its approval.  In a
November 1995 letter to the DOH, the EPA declined to sign HELCO's PSD permit.
HELCO requested that the EPA reconsider this decision and the EPA agreed to
reconsider based on additional information supplied by HELCO. In a second letter
dated February 6, 1996, the EPA set forth information to be considered by HELCO,
and HELCO responded to the EPA's positions by letter dated March 8, 1996. By
letter dated April 8, the EPA restated its determinations and indicated that
further documentation is required from HELCO in order for the EPA to consider
HELCO'S positions. By letter dated June 5, 1996 to the DOH, the EPA stated that
it had reviewed HELCO's letter to the DOH dated April 3, 1996 in which HELCO
proposed to reduce net nitrogen oxide emission increases at Keahole by retiring
and/or reducing output of certain existing diesel units, that it found the
netting approach procedurally and substantively acceptable, and that if emission
increases were kept below significance levels it would not require the use of
any particular emission control technology. In addition, the EPA has requested
that the DOH reconsider the use of low sulfur naphtha fuel as best available
control technology for sulfur dioxide emissions. HELCO has submitted information
showing that the use of such fuel in the Keahole unit is economically
infeasible. The DOH is still reviewing this issue. Information exchange and
discussions with the EPA and the DOH are ongoing. If the EPA does not sign a
permit forwarded by the DOH, this may further delay, if not prevent, HELCO's
project.

IPP COMPLAINTS.  Two independent power producers (IPPs), Kawaihae Cogeneration
- --------------
Partners (KCP) and Enserch Development Corporation (Enserch), filed separate
complaints against HELCO with the PUC, alleging that they are entitled to power
purchase contracts to provide HELCO with additional capacity which, under
HELCO's current estimates of generating capacity requirements, would be in place
of HELCO's planned 56-MW combined-cycle unit at Keahole. In July 1995, the PUC
issued a decision and order in the docket involving KCP. In the order, the PUC
stated its position on various issues affecting HELCO's avoided cost
calculations (several of which were contrary to HELCO's recommendations). In
September 1995, HELCO provided proposals to the two IPPs, and further
negotiations were undertaken. Status reports on the negotiations with the two
IPPs were filed with the PUC.

In September 1995, the PUC allowed HELCO to continue to pursue construction of
and commit expenditures for the second combustion turbine and the steam recovery
generator for its planned combined-cycle unit, stating in its order that "no
part of the project may be included in HELCO's rate base unless and until the
project is in fact installed, and is used and useful for utility purposes."  In
view of permitting delays and the need for power, the PUC also ordered HELCO to
continue negotiating with 

                                      13


the IPPs and directed that the facility to be built should be the one that can
be most expeditiously put into service at "allowable cost."

On January 26, 1996, the PUC ordered that the KCP docket be reopened and that
HELCO and KCP continue in good faith to negotiate a power purchase agreement,
file a list of unresolved issues requiring PUC guidance and meet with the PUC on
March 27, 1996. Status reports were filed during March and the meeting was held
as scheduled. On March 20, 1996, the PUC ordered that HELCO and Enserch file
status reports with the PUC and, if requested by either party on or before
April 15, 1996, hold a hearing on April 25, 1996. Status reports were filed by
Enserch and HELCO during April and the hearing was held as scheduled. Additional
written submissions were made to the PUC by the parties in the Enserch docket on
June 14, 1996. The PUC may provide guidance to the IPPs and HELCO concerning
certain issues as their negotiations continue.

COSTS INCURRED.  If HELCO's negotiations with the IPPs result in a power
- --------------
purchase agreement and/or if HELCO's combined-cycle unit is not installed, HELCO
may be required to write off a portion of the costs incurred in its efforts to
put into service its combined-cycle unit ($46.3 million as of June 30, 1996) if
such costs ultimately are not recoverable from customers or others. The $46.3
million includes approximately $26.7 million for equipment and material
purchases, approximately $9.8 million for planning, engineering, permitting,
site development and other costs and approximately $9.8 million as an allowance
for funds used during construction (AFUDC). Management cannot determine at this
time whether the negotiations with the IPPs will result in a power purchase
agreement, or whether HELCO's combined cycle unit will be installed, or the
amount of incurred costs, if any, that may not be recoverable from customers or
others.

CONTINGENCY PLANNING.  In June 1995, HELCO filed with the PUC its generation
- --------------------
resource contingency plan detailing alternatives and mitigation measures to
address possible further delays in obtaining the permits necessary to construct
its combined-cycle unit. HELCO has arranged for additional firm capacity to be
provided by its existing firm power producers, obtained contracts shifting loads
to off-peak hours, begun implementing in January 1996 its energy-efficiency
demand-side management programs and deferred generation unit retirements. These
measures have helped HELCO maintain its reserve margin and reduce the risk of
capacity shortages. In January 1996, the PUC opened a generic docket relating to
HELCO's contingency plan. Pursuant to the PUC order, HELCO submitted updated
information to the PUC on March 18, 1996.

ENVIRONMENTAL REGULATION--HAZARDOUS WASTE AND TOXIC SUBSTANCES CONTROLS

See note (8), "Contingencies," in HEI's "Notes to consolidated financial
statements."

INTERIM RATE INCREASES

Amounts recovered under interim rates in excess of final approved rates are
subject to refund with interest. At June 30, 1996, previously recorded revenue
amounts recognized under interim rate increases and subject to refund were not
significant.

(4)  ACCOUNTING CHANGE
- ----------------------

See note (6), "Accounting changes--Long-lived assets," in HEI's "Notes to
consolidated financial statements."

                                      14

 
(5)  SUMMARIZED FINANCIAL INFORMATION
- -------------------------------------

Summarized financial information for HECO's consolidated subsidiaries, HELCO and
MECO, is as follows:

BALANCE SHEET DATA



                                                                      HELCO                         MECO
                                                              -----------------------       -----------------------
                                                              June 30,   December 31,        June 30,   December 31,    
(in thousands)                                                  1996       1995                1996         1995     
- -------------------------------------------------------------------------------------------------------------------
                                                                                               
Current assets............................................    $ 26,405     $ 23,485          $ 28,581     $ 27,161
Noncurrent assets.........................................     376,689      368,785           330,365      306,191
                                                              --------     --------          --------     --------
                                                              $403,094     $392,270          $358,946     $333,352
                                                              ========     ========          ========     ========

Common stock equity.......................................    $137,890     $136,930          $127,820     $126,458
Cumulative preferred stock
    Not subject to mandatory redemption...................      10,000       10,000             8,000        8,000
    Subject to mandatory redemption.......................       7,500        7,500             6,055        6,055
Current liabilities.......................................      64,692       64,233            61,014       57,551
Noncurrent liabilities....................................     183,012      173,607           156,057      135,288
                                                              --------     --------          --------     --------
                                                              $403,094     $392,270          $358,946     $333,352
                                                              ========     ========          ========     ========
 

INCOME STATEMENT DATA

 
 
                                                   HELCO                                           MECO                       
                                 -------------------------------------------    ---------------------------------------------- 
                                   Three months ended      Six months ended       Three months ended       Six months ended    
                                         June 30,              June 30,                June   30,              June 30,        
                                 ----------------------   ------------------    ---------------------    --------------------- 
(in thousands)                      1996       1995         1996       1995         1996       1995        1996       1995    
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                             
Operating revenues............    $37,481    $33,551      $72,670    $66,246      $35,416    $31,448     $68,211    $61,241
Operating income..............      4,768      3,933        7,457      7,356        3,695      4,147       7,625      7,890
Net income for common stock...      3,023      3,111        5,162      5,659        3,105      2,810       6,272      5,099
 
 
(6)  RECONCILIATION OF ELECTRIC UTILITY OPERATING INCOME PER HEI AND HECO
- -------------------------------------------------------------------------
     CONSOLIDATED STATEMENTS OF INCOME
     ---------------------------------

 
 
                                                               Three months ended              Six months ended
                                                                    June 30,                       June 30,
                                                              --------------------           ---------------------
(in thousands)                                                  1996         1995              1996         1995
- ------------------------------------------------------------------------------------------------------------------
                                                                                               
Operating income from regulated and nonregulated
 activities before income taxes (per HEI
 consolidated statements of income).......................    $ 43,375     $ 38,299          $ 82,114     $ 73,712
Deduct:
  Income taxes on regulated activities....................     (13,660)     (12,096)          (25,893)     (23,270)
  Revenues from nonregulated activities...................      (2,180)      (1,860)           (4,073)      (3,205)
Add:
  Expenses from nonregulated activities..................           73          162               155          474
                                                              --------     --------          --------     --------
Operating income from regulated activities after income
 taxes (per HECO consolidated statements of income).......    $ 27,608     $ 24,505          $ 52,303     $ 47,711
                                                              ========     ========          ========     ========


                                      15

 
ITEM 2.  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


CONSOLIDATED
- ------------
                                Three months ended
                                     June 30,               
(in thousands, except per      --------------------        %       Primary reason(s) for
share amounts)                  1996       1995          change    significant change*
- ------------------------------------------------------------------------------------------------------
                                                       
Revenues.....................   $347,243   $319,897        9       Increase for all
                                                                   segments
 
Operating income.............     51,412     46,070       12       Increase for the electric utility
                                                                   and savings bank segments
 
Net income...................     21,363     18,880       13       Higher operating income, partly
                                                                   offset by higher interest expense
                                                                   due to higher average borrowings and
                                                                   lower AFUDC
 
Earnings per common share....       0.71       0.65        9       See explanation for "net income,"
                                                                   partly offset by an increase in
                                                                   shares outstanding
Weighted average number of
 common shares outstanding...     30,182     29,063        4       Issuances under the Dividend
                                                                   Reinvestment and Stock Purchase
                                                                   Plan and other plans
  
                                 Six months ended
                                      June 30,               
(in thousands, except per      --------------------       %        Primary reason(s) for
share amounts)                    1996       1995       change     significant change*
- ------------------------------------------------------------------------------------------------------
Revenues.....................   $673,412   $626,171        8       Increase for all segments
 
Operating income.............     98,147     90,379        9       Increase for the electric utility
                                                                   segment
 
Net income...................     40,232     36,727       10       Higher operating income, partly
                                                                   offset by higher interest expense
                                                                   due to higher average borrowings

Earnings per common share....       1.34       1.27        6       See explanation for "net income,"  
                                                                   partly offset by an increase in         
                                                                   shares outstanding                       
                                  
Weighted average number of
 common shares outstanding...     30,033     28,919        4       Issuances under the Dividend
                                                                   Reinvestment and Stock Purchase
                                                                   Plan and other plans
 

*  Also see segment discussions which follow.

                                      16


During the first six months of 1996, electric rates at HEI's three electric
utility subsidiaries were designed to provide lower returns on average common
equity (ROACEs) than the allowed ROACEs in effect during the first six months of
1995. The Hawaii Public Utilities Commission (PUC) decisions and orders (D&Os)
issued in December 1995 and the first six months of 1996 established allowed
ROACEs ranging from 11.40% to 11.65%, compared with ROACEs greater than 12% in
effect in the first half of 1995. The PUC issued an order in December 1995 for
HECO which lowered electric rates retroactive to January 1, 1995, and required a
refund to customers. Had the lower rates actually been in effect from January 1,
1995, consolidated HEI's 1996 second quarter earnings per share would have
exceeded earnings per share for the second quarter of 1995 by approximately
11 cents, or 18%, and consolidated HEI's earnings per share for the first half
of 1996 would have exceeded earnings per share for the first half of 1995 by
approximately 16 cents, or 14%.

Following is a general discussion of revenues, expenses and operating income by
business segment.

ELECTRIC UTILITY
- ----------------

   
  
                                Three months ended   
                                      June 30,
(in thousands, except per       ------------------       %        Primary reason(s) for
barrel amounts                   1996        1995      change     significant change      
- ---------------------------------------------------------------------------------------
                                                      
Revenues.....................     $264,987   $244,506      8      4.3% increase in KWH sales
                                                                  ($10 million), higher rates
                                                                  ($2 million) and higher
                                                                  fuel oil prices ($9 million)
                                                                  which are recovered
                                                                  through rates
Expenses
 Fuel oil....................       61,665     48,816     26      Higher fuel oil prices and
                                                                  more KWHs generated
 
 Purchased power.............       69,798     70,890     (2)     Less KWHs purchased,
                                                                  partly offset by higher fuel
                                                                  oil prices
 
 Other.......................       90,149     86,501      4      Higher other operation
                                                                  expense, depreciation
                                                                  expense and taxes, other
                                                                  than income taxes, partly
                                                                  offset by lower maintenance
                                                                  expense
 
Operating income.............       43,375     38,299     13      Higher revenues, partly offset
                                                                  by higher fuel oil and other
                                                                  expenses
 
Net income...................       19,888     17,540     13      Higher operating income, partly
                                                                  offset by higher interest
                                                                  expense and lower AFUDC
 
Fuel oil price per barrel....        23.11      20.56     12


                                      17

 



                                  Six months ended                                 
                                      June 30,
(in thousands, except per       ---------------------      %        Primary reason(s) for
barrel amounts)                     1996       1995     change       significant change
- ----------------------------------------------------------------------------------------------
                                                     
Revenues.....................     $512,824   $477,027    8       3.6% increase in KWH sales
                                                                 ($17 million), higher rates
                                                                 ($3 million) and higher fuel
                                                                 oil prices ($15 million)
                                                                 which are recovered
                                                                 through rates
 
Expenses

 Fuel oil....................      115,287     97,293   18       Higher fuel oil prices and more
                                                                 KWHs generated
 
 Purchased power.............      137,605    134,743    2       Higher purchased energy prices,
                                                                 partly due to higher fuel oil
                                                                 prices
 
 Other.......................      177,818    171,279    4       Higher other operation
                                                                 expense, depreciation
                                                                 expense and taxes, other
                                                                 than income taxes
 
Operating income.............       82,114     73,712   11       Higher revenues,
                                                                 partly offset by higher
                                                                 expenses
 
Net income...................       37,427     33,340   12       Higher operating income, partly
                                                                 offset by higher interest
                                                                 expense
 
Fuel oil price per barrel....        22.83      20.19   13


Had the lower rates in the PUC's December 1995 D&O for HECO been in effect from
January 1, 1995, consolidated HECO's 1996 second quarter net income would have
exceeded net income for the second quarter of 1995 by approximately 23%, and
consolidated HECO's net income for six months ended June 30, 1996 would have
exceeded net income for the first half of 1995 by approximately 22%.
Kilowatthour sales in the second quarter and first half of 1996 increased 4.3%
and 3.6%, respectively, from the same periods in 1995, partly due to increases
in visitor arrivals and the number of customers and warmer weather. Also, the
electric utilities have been controlling their other operation and maintenance
expenses.

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 D&O 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 D&O 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 D&O 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 D&O. Interim rate increases are subject to refund with interest, pending
the final outcome of the case. Management cannot predict with certainty when
D&Os in pending or future rate cases will be rendered or the amount of any
interim or final rate increase that will be granted.

                                      18


Recent rate requests
- --------------------
Hawaiian Electric Company, Inc.
- -------------------------------
 .  In December 1993, HECO filed a request to increase rates based on a 1995 test
year. HECO requested a 4.1% increase (as revised), or $28.2 million in annual
revenues, based on a 13.25% ROACE. In December 1995, HECO received a final D&O
authorizing a 1.3%, or $9.1 million, increase in annual revenues, based on an
11.4% ROACE. The D&O required a refund to customers because HECO had previously
received four interim increases totaling $18.9 million on an annualized basis,
or $9.8 million more than the amount that was finally approved. The reduced rate
relief resulted primarily from the lower ROACE used by the PUC in the final D&O
because of decreases in interest rates subsequent to the first interim increase,
which was effective January 1, 1995 and was based on a 12.6% ROACE. The refund
amount of $10.2 million (representing amounts received under interim rates in
excess of final approved rates, with interest thereon), of which $10 million was
accrued in December 1995, was returned to customers in the first half of 1996.
The D&O also did not provide revenue to cover costs relating to postretirement
executive life insurance. HECO and its subsidiaries wrote off a regulatory asset
relating to such costs, resulting in a fourth quarter 1995 after-tax charge of
$1.1 million.

Hawaii Electric Light Company, Inc.
- -----------------------------------
 .  In March 1995, HELCO filed a request to increase rates based on a 1996 test
year. In February 1996, HELCO revised its requested increase to 6.2%, or
$8.9 million in annual revenues, based on a 12.5% ROACE. In March 1996, HELCO
received an interim D&O authorizing a 4.8%, or $6.8 million, increase in annual
revenues, based on an 11.65% ROACE, effective March 4, 1996.

 .  HELCO is considering filing a request to increase rates based on a 1997 test
year. At this time, however, it appears unlikely.

Maui Electric Company, Limited
- ------------------------------
 .  In February 1995, MECO filed a request to increase rates based on a 1996 test
year. MECO's final requested increase was 3.8%, or $5.0 million in annual
revenues, based on an 11.5% ROACE. In January 1996, MECO received an interim D&O
authorizing an increase of 2.8%, or $3.7 million in annual revenues, based on an
11.5% ROACE, effective February 1, 1996.

 .  In May 1996, MECO filed a request to increase rates based on a 1997 test
year. MECO requested an increase of 13%, or $18.9 million in annual revenues
over rates in effect at the time of filing, based on a 12.9% ROACE.

SAVINGS BANK
- ------------
 
 
                                 Three months ended
                                      June 30,                
                                 ------------------         %
(in thousands)                    1996        1995        change       Primary reason(s) for significant change
- ---------------------------------------------------------------------------------------------------------------
                                                            
Revenues.....................    $66,278     $61,605         8         Higher interest income as a result of
                                                                       higher average loans receivable and
                                                                       mortgage-backed securities balances,
                                                                       partly offset by lower yields
 
Operating income.............     10,202       9,843         4         Higher net interest income, offset by 
                                                                       higher compensation and employee
                                                                       benefits expenses
 
Net income...................      5,946       5,704         4         Higher operating income

Interest rate spread.........       2.79%       2.88%                  12 basis points decrease in the weighted
                                                                       average yield on interest-earning assets,
                                                                       partly offset by 3 basis points decrease
                                                                       in the weighted average rate on interest-
                                                                       bearing liabilities

 
                                      19

 


 
                                  Six months ended
                                       June 30,            
                                  -----------------          %
(in thousands)                    1996         1995        change       Primary reason(s) for significant change
- ----------------------------------------------------------------------------------------------------------------
                                                            
Revenues.....................   $132,070    $122,322         8           Higher interest income as a result of
                                                                         higher average mortgage-backed
                                                                         securities balance, partly offset by lower
                                                                         yield
 
Operating income.............     20,158      20,068        --           Higher net interest income, offset by
                                                                         higher compensation and employee
                                                                         benefits expenses and higher office
                                                                         occupancy expense
 
Net income...................     11,736      11,653         1           Higher operating income
 
Interest rate spread.........       2.82%       2.98%                    10 basis points decrease in the weighted
                                                                         average yield on interest-earning assets
                                                                         and 6 basis points increase in the
                                                                         weighted average rate on interest-
                                                                         bearing liabilities


Several factors contributed to the decrease in ASB's interest rate spread -- the
difference between the weighted average yield on interest-earning assets and the
weighted average rate on interest-bearing liabilities. One of the primary
factors was the flattening of the yield curve beginning in 1995. Comparing
second quarter 1996 to the same period in 1995, the weighted average rate on
interest-bearing liabilities remained relatively constant, while the weighted
average rate on interest-earning assets decreased. Comparing the first half of
1996 to the same period in 1995, the weighted average rate on interest-bearing
liabilities increased, while the weighted average rate on interest-earning
assets decreased.

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 (FHLB) of
Seattle, securities sold under agreements to repurchase and other sources. In
recent years, securities sold under agreements to repurchase and advances from
the FHLB of Seattle have become more significant sources of funds as the demand
for deposits decreased. Using sources of funds with a higher cost than deposits
puts downward pressure on ASB's net interest income.

In 1995, the federal funds rate, which is the rate charged by banks for
overnight loans to each other and which has a significant influence on deposit
and loans receivable rates, increased from 5.5% to 6.0% and declined to 5.5% by
year end. In the first six months of 1996, the federal funds rate decreased 25
basis points to 5.25%.

                                      20

 
OTHER
- -----
 
 
                                  Three months ended
                                       June 30,
                                  ------------------      %
(in thousands)                     1996        1995     change   Primary reason(s) for significant change
- ---------------------------------------------------------------------------------------------------------
                                                     
Revenues.....................     $15,978    $13,786      16     Real estate subsidiary sale of land in
                                                                 downtown Honolulu to a developer for a
                                                                 residential condominium
 
Operating loss...............      (2,165)    (2,072)     NM     Higher administrative and general
                                                                 expenses at corporate, partly offset
                                                                 by real estate subsidiary sale of land 
                                                                 in downtown Honolulu
 

 
  
                                   Six months ended
                                       June 30, 
                                  ------------------      %
(in thousands)                      1996       1995     change   Primary reason(s) for significant change
- ---------------------------------------------------------------------------------------------------------
                                                     
Revenues.....................     $28,518    $26,822       6     Real estate subsidiary sale of land in
                                                                 downtown Honolulu to a developer for a
                                                                 residential condominium
 
Operating loss...............      (4,125)    (3,401)     NM     Lower general freight revenue at freight
                                                                 transportation subsidiaries and the 
                                                                 startup costs of HEIPC, partly offset
                                                                 by real estate subsidiary sale of land 
                                                                 in downtown Honolulu

NM  Not meaningful.

The "Other" business segment includes results of operations from HTB and its
subsidiary, YB, which are maritime freight transportation companies; HEIIC,
which is a company primarily holding investments in leveraged leases; MPC and
its subsidiaries, which are real estate development and investment companies;
HEIPC and subsidiaries, which have been and will be formed from time to time to
pursue independent power projects and energy services projects in Asia and the
Pacific; HEI and HEIDI, which are holding companies; and eliminations of
intercompany transactions.

FREIGHT TRANSPORTATION

The freight transportation subsidiaries recorded operating income of
$0.5 million and $0.9 million in the second quarter and first half of 1996,
respectively, compared with $0.6 million and $1.5 million in the same periods of
1995. The decrease in operating income was a result of lower general freight
revenues as the freight transportation subsidiaries continue to be negatively
impacted by the slow economic activity on the neighbor islands and the slow
construction industry. In June 1996, YB filed a request with the PUC for a
general rate increase based on a 1996 test year.  YB requested an increase of
9.9%, or $3.5 million in annual revenues, based on a 15.15% ROACE.

REAL ESTATE

The real estate subsidiaries recorded operating income of $0.7 million and
$0.4 million in the second quarter and first half of 1996, respectively,
compared with operating losses of $0.4 million and $0.6 million in the same
periods of 1995. In April 1996, MPC sold land in downtown Honolulu to a
developer for a pretax gain of $1.1 million. MPC's other real estate development
activities continue to be negatively impacted by the slow real estate market in
Hawaii. It is not expected that there will be significant growth in Hawaii's
economy or a rebound in Hawaii's real estate market in the near term. MPC's
present focus is to reduce its current investment in real estate development
assets and increase cash flow by continuing the development and sales of its
existing projects. There are currently no plans to invest in new projects. For
further information on MPC, see note (4) in HEI's "Notes to consolidated
financial statements."

                                      21


 
OTHER

HEIPC was formed in March 1995 and its operating loss (i.e., startup costs) for
the first half of 1996 was $1.0 million, compared with $0.5 million for the
first half of 1995.

In December 1995, HEIPC signed a "Memorandum of Understanding" with Agusan Power
Corporation, Agusan Del Norte Electric Cooperative, Inc. and the provincial
government of Agusan Del Norte for a 67% interest in a $28 million, 22-megawatt
(MW) hydroelectric plant in the Philippines. The project is in a preliminary
stage for HEIPC. No assurances can be given as to whether the project will be
successfully completed.

In February 1996, HEIPC signed a "Memorandum of Understanding" with Beacon Hill
Associates, Inc. for a 50% interest in a 60-MW naphtha-fueled combined-cycle
power plant in Phnom Penh, Cambodia.  However, in June 1996, HEIPC withdrew from
negotiations with Beacon Hill Associates, Inc.

DISCONTINUED OPERATIONS
- -----------------------

See note (7) in HEI's "Notes to consolidated financial statements" for
information on the discontinued operations of HIG.

ACCOUNTING CHANGES
- ------------------

For a discussion of Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of"; SFAS No. 122, "Accounting for Mortgage Servicing Rights"; and
SFAS No. 123, "Accounting for Stock-Based Compensation"; and SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," see note (6) in HEI's "Notes to consolidated financial
statements."


                              FINANCIAL CONDITION

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

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

The consolidated capital structure of HEI was as follows:


 
(in millions)                       June 30, 1996     December 31, 1995
- -----------------------------------------------------------------------
                                                       
Short-term borrowings........       $  167     9%     $  182        10%
Long-term debt...............          818    45         758        43
Preferred stock of electric             
 utility subsidiaries........           88     5          90         5
Common stock equity..........          754    41         730        42
                                    ------   ---      ------       ---
                                    $1,827   100%     $1,760       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.

For the first six months of 1996, net cash provided by operating activities was
$58 million. Net cash used in investing activities was $224 million, largely due
to ASB's loan originations, net of repayments, and consolidated HECO's capital
expenditures. Net cash provided by financing activities was $125 million as a
result of several factors, including net increases in long-term debt, securities
sold under agreements to repurchase, advances from FHLB and deposit liabilities,
partly offset by a decrease in short-term borrowings and by common stock
dividends.

Total HEI consolidated financing requirements for 1996 through 2000 (excluding
any financing requirements HEIPC may have), including net capital expenditures
(which excludes the allowance for funds used during construction and capital
expenditures funded by third-party cash contributions in aid of construction),
debt retirements (excluding repayments of advances from FHLB of Seattle and
securities sold under agreements to repurchase) and sinking fund requirements,
are currently estimated to total $1.1 billion. Of this amount, approximately
$0.9 billion are for net capital expenditures (mostly relating to the electric
utilities' net capital expenditures described below). HEI consolidated internal

                                      22


sources, after the payment of HEI dividends, are expected to provide
approximately 57% of the consolidated financing requirements, with debt and
equity financing providing the remaining requirements. Over the five-year period
1996 through 2000, HEI estimates that it will require approximately $172 million
in new common equity, in addition to 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. The additional equity
will be used to fund the electric utilities' common equity requirements related
to their capital expenditure programs and to reduce HEI's overall borrowing
level. Additional common equity in excess of the $172 million described above,
and additional debt financing, may be required for the development of
independent power projects and energy services projects by HEIPC in Asia and the
Pacific.

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:



(in millions)                       June 30, 1996     December 31, 1995
- -----------------------------------------------------------------------
                                                     
Short-term borrowings from
 nonaffiliates and affiliate......  $  134     9%       $  139    10%
Long-term debt....................     584    38           517    36
Preferred stock...................      88     6            90     6
Common stock equity...............     710    47           697    48
                                    ------   ---        ------   ---
                                    $1,516   100%       $1,443   100%
                                    ======   ===        ======   ===


Operating activities provided $46 million in net cash during the first six
months of 1996. Investing activities used cash of $74 million primarily for
capital expenditures, net of contributions in aid of construction. Financing
activities provided cash of $30 million through an increase in long-term debt,
partly offset by a net decrease in short-term borrowings, payment of common and
preferred dividends and the sinking fund redemption of preferred stock.

During May 1996, the Department of Budget and Finance of the State of Hawaii
issued $75 million of special purpose revenue bonds on behalf of HECO, HELCO and
MECO at a discount, resulting in a yield of 6.375%. As of June 30, 1996, an
additional $95 million of revenue bonds had been authorized by the Hawaii
Legislature for issuance prior to the end of 1997.  In July 1996, an additional
$150 million of revenue bonds was authorized by the Hawaii Legislature for
issuance prior to the end of 1999.

The electric utilities' consolidated financing requirements for 1996 through
2000, including net capital expenditures, debt retirements and sinking fund
requirements, are estimated to total $887 million. HECO's consolidated internal
sources, after the payment of common and preferred stock dividends, are
currently expected to provide approximately 64% of the total $887 million
requirements, with debt and equity financing providing the remaining
requirements. HECO currently estimates that it will require approximately
$64 million in new common equity, in addition to  retained earnings, over the
five-year period 1996 through 2000. The PUC must approve issuances of long-term
debt and equity by HECO, HELCO and MECO.

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 1996 through 2000
are currently estimated to total $805 million. Approximately 65% of gross
capital expenditures, including the allowance for funds used during construction
and capital expenditures funded by third-party cash contributions in aid of
construction, is for transmission and distribution projects, with the remaining
35% primarily for generation projects.

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 KWH sales and peak load, the availability of 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.

                                      23


SAVINGS BANK
- ------------
 
 
                                                                                 %
(in millions)                              June 30, 1996   December 31, 1995   change
- -------------------------------------------------------------------------------------
                                                                      
Assets..................................       $3,514            $3,413           3
Mortgage-backed securities..............        1,373             1,445          (5)
Loans receivable........................        1,904             1,688          13
Deposit liabilities.....................        2,259             2,224           2
Securities sold under agreements to               455               413          10
 repurchase.............................                                    
Advances from Federal Home Loan Bank....          527               501           5


At March 31, 1996, ASB was the fourth largest financial institution in the state
based on total assets of $3.4 billion and the third largest financial
institution based on deposits of $2.3 billion. The 13% increase in loans
receivable was partly due to the fact that ASB's refinancings of other
institutions loans were high in the first half of 1996.  This trend, however, is
not expected to continue in the second half of 1996.

For the first six months of 1996, cash used in ASB's investing activities was
$146 million, due largely to the origination of loans receivable, partly offset
by principal repayments. Cash provided by financing activities was $86 million
as a result of a net increase of $43 million in securities sold under agreements
to repurchase, $35 million in deposit liabilities and $26 million in advances
from the FHLB of Seattle, partly offset by the return of an $11 million capital
contribution and common stock dividends of $7 million.

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 June 30, 1996.

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 growth. As of June 30, 1996, ASB was in compliance with the OTS minimum
capital requirements (noted in parenthesis) with a tangible capital ratio of
5.01% (1.5%), a core capital ratio of 5.14% (3.0%) and a risk-based capital
ratio of 11.97% (8.0%).

The OTS has 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 will be required to deduct an amount from total capital
and may be required to hold additional capital. Although the rule became
effective January 1, 1994, the OTS has provided a waiver of the IRR capital
deduction until it can finalize an appeals process for institutions subject to
such deductions. As of June 30, 1996, ASB would not have been required to deduct
an amount from total capital or to hold additional capital if the rule adding
the IRR component had been implemented.

Federal Deposit Insurance Corporation regulations restrict the ability of
financial institutions that are not well-capitalized to offer interest rates on
deposits that are significantly higher than the rates offered by competing
institutions. As of June 30, 1996, ASB was well-capitalized (ratio requirements
noted in parenthesis) with a leverage ratio of 5.14% (5.0%), a Tier-1 risk-based
ratio of 11.25% (6.0%) and a total risk-based ratio of 11.97% (10.0%).

Significant interstate banking legislation has been enacted at both the federal
and state levels. Under the federal Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, a bank holding company may acquire control of a bank in
any state, subject to certain restrictions. Under Hawaii law which takes effect
on June 1, 1997, a bank chartered under Hawaii law may merge with an out-of-
state bank and convert all branches of both banks into branches of a single
bank, subject to certain restrictions. Although the federal and Hawaii laws
apply only to banks, such legislation may nonetheless affect the competitive
balance among banks, thrifts and other financial institutions and the level of
competition among financial institutions doing business in Hawaii.

For a discussion of proposed legislation affecting financial institutions, see
note (3) in HEI's "Notes to consolidated financial statements."

                                      24

 
                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
- --------------------------

There are no significant developments except as set forth in HEI's and HECO's
"Notes to consolidated financial statements," management's discussion and
analysis of financial condition and results of operations and Item 5, "Other
information."

ITEM 5.  OTHER INFORMATION
- --------------------------

A.  WAIAU-CAMPBELL INDUSTRIAL PARK TRANSMISSION LINES

In 1993, the PUC held hearings concerning Part 2 of the Waiau-Campbell
Industrial Park (CIP) 138-kilovolt transmission lines. These lines are part of a
second transmission corridor in West Oahu, running approximately 15 miles
between CIP and HECO's Waiau power plant. The new lines were needed (1) to
increase system reliability, (2) to provide additional transmission capacity to
meet expected load growth and (3) to provide transmission capacity for existing
and new power generation projects planned for West Oahu. HECO experienced
community opposition over the proposed placement of portions of these lines
based in part on the potential effects of the lines on aesthetics and the
concern of some that the electric and magnetic fields (EMF) from the power lines
may have adverse health effects. HECO witnesses addressed EMF, the route
selection process (which involved extensive public input), as well as
engineering and related subjects.

One proposal by those who oppose the route of the overhead lines was to place
Part 2 of the Waiau-CIP lines underground. HECO estimated that this proposal
would cost approximately $100 million more than the cost of overhead lines. In
April 1994, the PUC issued a decision which permitted HECO to construct the
lines above ground. While the PUC recognized the concerns of aesthetics and EMF,
it felt that neither concern was sufficient to justify the added cost of
undergrounding the lines. In May 1994, appeals to the state Supreme Court were
filed by intervenors in the PUC proceeding requesting that the Court overturn
the PUC's ruling that allowed HECO to construct the lines above ground. No stay
of the PUC order was entered. HECO completed construction of the overhead lines
which were placed in service in August 1995. In June 1996, the state Supreme
Court affirmed the decision of the PUC.

B.   HELCO's and MECO's Integrated Resource Plans (IRPs)

In May 1996, the PUC issued D&Os in which it approved HELCO's and MECO's
respective IRPs and Action Plans. The PUC also approved HELCO's and MECO's
mechanisms for recovery of demand-side management program expenditures, net lost
revenues and shareholder incentives.

HELCO was also ordered to conduct a study to determine the cost-effectiveness of
establishing spinning reserve criteria and to submit the study to the PUC with
its next IRP or with its next application to commit generation capacity funds,
whichever submittal occurs earlier.

C.  Puna Geothermal Venture (PGV)

On February 12, 1996, HELCO and PGV executed an amendment to the existing power
purchase agreement, under which PGV would be obligated to provide an additional
5 MW of firm capacity to HELCO commencing in late 1996. The amendment was
approved by the PUC in August 1996. Such additional capacity will assist HELCO
in addressing its capacity situation.

D.  MECO Maalaea Unit 14

Following a unit overhaul, emission compliance tests conducted for MECO's
Maalaea Unit 14 in October 1995 and documented in November 1995 indicated that
particulate emissions were in excess of Prevention of Significant
Deterioration/Covered Source Permit (PSD) limits. Corrective actions included
fine tuning of the combustion turbine's fuel nozzles in December 1995, and a
retest in February 1996 confirmed that the unit returned to compliance with PSD
limits. All test reports were submitted to the Department of Health of the State
of Hawaii (DOH). By letter dated July 15, 1996, the DOH indicated that a Notice
of Violation will be issued for the past violations. Management does not believe
that the issuance or final resolution of the Notice of Violation will have a
material adverse effect on consolidated HECO's financial condition or results of
operations.

                                      25


E.  Ratio of earnings to fixed charges

The following tables set forth the ratio of earnings to fixed charges for HEI
and its subsidiaries for the periods indicated:

     RATIO OF EARNINGS TO FIXED CHARGES EXCLUDING INTEREST ON ASB DEPOSITS
                                        ---------


 
                Six months          Years Ended December 31,    
                  ended         --------------------------------
              June 30, 1996     1995   1994   1993   1992   1991
              -------------     ----   ----   ----   ----   ----
                                              
                   1.96         1.94   2.22   2.25   2.08   1.99
                   ====         ====   ====   ====   ====   ==== 
 
 
     RATIO OF EARNINGS TO FIXED CHARGES INCLUDING INTEREST ON ASB DEPOSITS
                                        ---------
 
 
                Six months          Years Ended December 31,    
                  ended         --------------------------------
              June 30, 1996     1995   1994   1993   1992   1991
              -------------     ----   ----   ----   ----   ----
                                              
                   1.57         1.57   1.69   1.65   1.50   1.46
                   ====         ====   ====   ====   ====   ==== 


For purposes of calculating the ratio of earnings to fixed charges, "earnings"
represent the sum of (i) pretax income from continuing operations (excluding
undistributed net income or net loss from less than fifty-percent-owned persons)
and (ii) fixed charges (as hereinafter defined, but excluding capitalized
interest). "Fixed charges" are calculated both excluding and including interest
on ASB's deposits during the applicable periods and represent the sum of (i)
interest, whether capitalized or expensed, incurred by HEI and its subsidiaries
plus their proportionate share of interest on debt to outsiders incurred by
fifty-percent-owned persons, but excluding interest on nonrecourse debt from
leveraged leases which is not included in interest expense in HEI's consolidated
statements of income, (ii) amortization of debt expense and discount or premium
related to any indebtedness, whether capitalized or expensed, (iii) the interest
factor in rental expense and (iv) the preferred stock dividend requirements of
HEI's subsidiaries, increased to an amount representing the pretax earnings
required to cover such dividend requirements.

The following table sets forth the ratio of earnings to fixed charges for HECO
and its subsidiaries for the periods indicated:

     RATIO OF EARNINGS TO FIXED CHARGES
 
 
                Six months          Years Ended December 31,    
                  ended         --------------------------------
              June 30, 1996     1995   1994   1993   1992   1991
              -------------     ----   ----   ----   ----   ----
                                               
                   3.46         3.46   3.47   3.25   3.03   2.82
                   ====         ====   ====   ====   ====   ====


For purposes of calculating the ratio of earnings to fixed charges, "earnings"
represent the sum of (i) pretax income before preferred stock dividends of HECO
and (ii) fixed charges (as hereinafter defined, but excluding the allowance for
borrowed funds used during construction). "Fixed charges" represent the sum of
(i) interest, whether capitalized or expensed, incurred by HECO and its
subsidiaries, (ii) amortization of debt expense and discount or premium related
to any indebtedness, whether capitalized or expensed, (iii) the interest factor
in rental expense and (iv) the preferred stock dividend requirements of HELCO
and MECO, increased to an amount representing the pretax earnings required to
cover such dividend requirements.
 
                                      26

 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------

(a)  EXHIBITS
HEI               Hawaiian Electric Industries, Inc. and subsidiaries
Exhibit 12.1      Computation of ratio of earnings to fixed charges,
                  six months ended June 30, 1996 and 1995
 
HECO              Hawaiian Electric Company, Inc. and subsidiaries
Exhibit 12.2      Computation of ratio of earnings to fixed charges,
                  six months ended June 30, 1996 and 1995
 
HEI               Hawaiian Electric Industries, Inc. and subsidiaries
Exhibit 27.1      Financial Data Schedule
                  June 30, 1996 and six months ended June 30, 1996
 
HECO              Hawaiian Electric Company, Inc. and subsidiaries
Exhibit 27.2      Financial Data Schedule
                  June 30, 1996 and six months ended June 30, 1996


(b)  REPORTS ON FORM 8-K

During the quarter, HEI and HECO filed a Current Report on Form 8-K dated April
30, 1996, under "Item 5. Other Events."





                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized. The signature of each registrant shall
be deemed to relate only to matters having reference to that registrant and any
subsidiaries thereof.

HAWAIIAN ELECTRIC INDUSTRIES, INC.          HAWAIIAN ELECTRIC COMPANY, INC.
                      (Registrant)                             (Registrant)



By  /s/ Curtis Y. Harada                    By  /s/ Paul Oyer
   ---------------------                      -----------------
   Curtis Y. Harada                           Paul Oyer
   Controller                                 Financial Vice President and 
   (Principal Accounting Officer of HEI)        Treasurer
                                              (Principal Financial Officer of 
                                                HECO)

Date:  August 6, 1996                       Date:  August 6, 1996


                                      27