================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HAWAIIAN ELECTRIC INDUSTRIES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Hawaiian Electric Industries,Inc. hereby amends this Schedule 14A to
correct an error in the Summary Compensation Table on page 12 of the Proxy
Statement. The Chief Executive Officer information for 1999 in the Summary
Compensation Table on page 12 of the Proxy Statement was duplicated and the
information for 2000 was dropped. The error occurred only in the form that was
filed via EDGAR on March 15, 2001 and did not affect the actual Proxy Statement
that was mailed to Shareholders on March 15, 2001.
HAWAIIAN ELECTRIC INDUSTRIES, INC. . PO BOX 730 . HONOLULU, HI 96808-0730
LOGO OF HAWAIIAN ELECTRIC INDUSTRIES, INC.
Robert F. Clarke
Chairman, President and
Chief Executive Officer
March 14, 2001
Dear Fellow Stockholder:
On behalf of the Board of Directors, it is once again my pleasure to invite
you to attend the Annual Meeting of Stockholders of Hawaiian Electric
Industries, Inc. (HEI). The meeting will be held on the Company's premises in
Room 805 on the eighth floor of the Pacific Tower in Honolulu, Hawaii on
April 24, 2001, at 9:30 a.m. A map showing the location of the meeting site
appears on the last page of the Proxy Statement.
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement
describe the items of business to be discussed during the meeting. In addition,
we will review significant events of 2000 and their impact on you and your
Company. Corporate officers will be available before and after the meeting to
talk with you and answer any questions you may have.
As a stockholder of HEI, it is important that your views be represented.
Please help us obtain the quorum needed to conduct business at the meeting by
promptly voting your shares.
I join the management team of HEI in expressing our appreciation for your
confidence and support. I look forward to seeing you at the Annual Meeting in
Honolulu.
Sincerely,
/s/ Robert F. Clarke
Recycled
LOGO OF RECYCLED PAPER
--------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc.
900 Richards Street [LOGO OF HEI]
Honolulu, Hawaii 96813
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
Time and date 9:30 a.m. on Tuesday, April 24, 2001
Place Pacific Tower, 1001 Bishop Street, 8th floor,
Room 805, Honolulu, Hawaii
Items of Business 1. Elect five Class II directors.
2. Elect KPMG LLP as the Company's independent
auditor.
3. Transact any other business properly brought
before the meeting.
Record Date February 14, 2001
Annual Report The 2000 Annual Report to Stockholders (Appendix B)
and Summary Report to Stockholders, which are not a
part of the proxy solicitation material, have been
mailed along with this Notice and accompanying Proxy
Statement.
Proxy Voting It is important that your shares be represented and
voted at the Annual Meeting. Stockholders of record
may appoint proxies and vote their shares in one of
three ways:
. Via Internet pursuant to the instructions on the
proxy card;
. Calling the toll-free number on the proxy card; or
. Signing, dating, and mailing the proxy card in the
prepaid envelope provided.
Stockholders whose shares are held by a bank, broker, or
other financial intermediary (street name) should follow
the voting instruction card included by the intermediary.
If your shares are registered in street name, please
bring a letter from the intermediary or provide other
evidence of your beneficial ownership if you plan to
attend the Annual Meeting.
Any proxy may be revoked in the manner described in the
accompanying Proxy Statement.
By Order of the Board of Directors
March 14, 2001 Peter C. Lewis
Vice President-Administration and
Secretary
TABLE OF CONTENTS
Page
----
Voting Information......................................................... 1
Purpose.................................................................. 1
Who Can Vote............................................................. 1
How You Can Vote......................................................... 1
Revocation of Proxies.................................................... 2
Required Votes........................................................... 2
Who Will Count the Votes................................................. 2
Shares Held in Street Name............................................... 2
Expenses of Solicitation................................................. 3
Proposals You May Vote On.................................................. 3
Election of Class II Directors........................................... 3
Election of Auditor...................................................... 3
Nominees for Class II Directors............................................ 4
Continuing Class III Directors............................................. 5
Continuing Class I Directors............................................... 6
Board of Directors......................................................... 7
Corporate Governance..................................................... 7
Committees of the Board.................................................. 8
Recommendation for Director Nominee...................................... 9
Attendance at Meetings................................................... 9
Compensation of Directors................................................ 9
Nonemployee Director Retirement Plan..................................... 9
Indemnification and Limitation of Liability................................ 10
Security Ownership of Directors and Executive Officers..................... 11
Section 16(a) Beneficial Ownership Reporting Compliance.................... 11
Executive Management Compensation.......................................... 12
Summary Compensation Table............................................... 12
Option Grants in Last Fiscal Year ....................................... 13
Aggregated Option Exercises and Fiscal Year-End Option Values............ 14
Long-Term Incentive Plan (LTIP) Awards................................... 15
Pension Plans............................................................ 16
Change-in-Control Agreements ............................................ 18
Compensation Committee Report on Executive Compensation.................. 19
Stockholder Performance Graph............................................ 24
Audit Committee Report..................................................... 25
Indebtedness of Management................................................. 27
Transactions with Management and Others.................................... 28
Stockholder Proposals for 2002............................................. 28
Other Business............................................................. 28
Appendix A--HEI Audit Committee Charter.................................... A-1
Proxy Statement
VOTING INFORMATION
Purpose
Hawaiian Electric Industries, Inc. is soliciting proxies for the Annual
Meeting of Stockholders scheduled for April 24, 2001. The mailing address of
the principal executive offices of the Company is P.O. Box 730, Honolulu,
Hawaii 96808-0730.
The approximate mailing date for this Proxy Statement, form of proxy, and
annual and summary reports to stockholders for the fiscal year ended December
31, 2000, is March 14, 2001. The annual report and summary report are not
considered proxy soliciting material.
Who Can Vote
Stockholders of Common Stock at the close of business on February 14, 2001
(the record date), are entitled to vote. On February 14, 2001, 33,128,022
shares of Common Stock were outstanding. Each stockholder is entitled to one
vote for each share held. Under the By-Laws of the Company, stockholders do not
have cumulative voting rights in the election of directors.
How You Can Vote
You may vote by granting a proxy or, for shares held in street name, by
submitting voting instructions to your broker or nominee. In most instances,
you will be able to do this over the Internet, by telephone or by mail.
If you vote over the Internet or by telephone, please follow the instructions
included on your proxy card. If your shares are held in street name, please
follow the voting instruction card included by your broker or nominee.
If you vote by mail, sign and date your proxy and return it in the enclosed
prepaid envelope. You can specify on your proxy whether your shares should be
voted for all, some, or none of the nominees for director. You can also specify
whether you approve, disapprove, or abstain from the proposal to elect the
Company's independent auditor.
If you return your signed proxy but do not mark the boxes showing how you
wish to vote, we will vote your shares "FOR" the election of all nominees for
director and "FOR" the election of the Company's independent auditor.
You may also vote your shares by attending the meeting and voting in person.
In addition, if you wish to give your proxy to someone other than the
individuals listed on the enclosed proxy, cross out all three names and insert
the name of another person to vote your shares at the meeting.
Your share ownership is shown on the enclosed proxy, including your shares
held in the Dividend Reinvestment and Stock Purchase Plan (DRIP) and the
Hawaiian Electric Industries Retirement Savings Plan (HEIRS) (including shares
held in the Hawaiian Electric Industries Stock Ownership Plan, formerly the Tax
Reduction Act Stock Ownership Plan (TRASOP)). The respective
1
plan trustees will vote the shares of stock held in the Plans according to your
directions. For both DRIP and HEIRS (excluding TRASOP), the respective trustees
will vote all the shares of Common Stock for which they receive no voting
instructions in the same proportion as they vote shares for which they receive
instructions. The trustee cannot vote the shares in TRASOP for which it
receives no voting instructions.
Revocation of Proxies
You can revoke your proxy at any time before the Annual Meeting in one of
three ways:
(1) notify the Secretary of the Company in writing;
(2) return a properly signed, later-dated proxy; or
(3) vote in person at the meeting.
Required Votes
A quorum is needed to transact business at the Annual Meeting. A majority of
the outstanding shares present in person or represented by proxy constitutes a
quorum. The affirmative vote of more than 50% of the quorum is required to
elect the Class II directors and the Company's independent auditor. Abstentions
are counted as "shares present" at the meeting in determining whether a quorum
exists and have the effect of a vote against any proposal.
Who Will Count the Votes
Corporate Investor Communications, Inc. will act as tabulator for broker and
bank proxies and Proxy Services Corporation will act as tabulator for the
proxies of the other stockholders of record. Your identity and vote will not be
disclosed to persons other than those acting as tabulators except as follows:
(1) as required by law;
(2) to verify the validity of proxies and the results of the voting in the case
of a contested proxy solicitation; or
(3) when you write a comment on the proxy form.
Shares Held in Street Name
If your shares are held in the name of a brokerage firm or trustee or other
holder of record and you bring a letter from the holder of record or other
evidence of your beneficial ownership, you are invited to attend the meeting.
However, you may not vote at the meeting unless you obtain a legal proxy from
the brokerage firm or trustee.
Under New York Stock Exchange rules, your broker or nominee may vote your
shares on routine matters (such as the election of directors and the
independent auditor) if you do not give your broker or nominee specific
instructions. A broker does not have discretionary voting power with respect to
nonroutine proposals and cannot vote on these matters if you do not send the
broker your instructions. This is referred to as a "broker nonvote" and will be
considered as "shares present" at the meeting in determining whether a quorum
exists. Broker nonvotes, if any, have the effect of a vote to withhold
authority in connection with the election of directors and the effect of a vote
against other proposals at the meeting.
2
Expenses of Solicitation
The Company pays all expenses of the proxy solicitation. We hired Corporate
Investor Communications, Inc. to assist in the distribution of proxy materials
and solicitation of votes for $4,000 plus reasonable out-of-pocket expenses. In
addition, we will reimburse brokerage firms and other custodians, nominees, and
fiduciaries for their expenses to forward proxy and solicitation material to
stockholders.
PROPOSALS YOU MAY VOTE ON
1. Election of Class II Directors
The Board of Directors currently consists of 12 individuals who are divided
into three classes: Class I, Class II and Class III with the term of office of
one class expiring each year. Based on the recommendation of the Nominating and
Corporate Governance Committee, the Board of Directors has voted not to fill,
at this time, the position being vacated by Richard Henderson, who has reached
the mandatory retirement age as specified by Board resolution. Therefore, the
size of the Board will decrease from 12 to 11 immediately following Mr.
Henderson's retirement on April 24, 2001, and the size of Class III will be
reduced to three.
The five Class II nominees being proposed for election at this Annual Meeting
are Victor Hao Li, T. Michael May, Diane J. Plotts, Kelvin H. Taketa, and
Jeffrey N. Watanabe. Each of the nominees is currently a member of the Board of
Directors and has consented to serve for a new three-year term expiring at the
2004 Annual Meeting. If a nominee is unable to stand for election, the proxy
holders listed in the proxy may vote in their discretion for a suitable
substitute.
Terms for Class III directors will expire in 2002 and for Class I directors
in 2003.
Detailed information on each nominee and director is provided on pages 4 to
6.
YOUR BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE CLASS II DIRECTORS.
2. Election of Auditor
The firm of KPMG LLP, independent certified public accountants, has been the
auditor of the Company since 1981. The Board of Directors, upon the
recommendation of its Audit Committee, recommends the election of KPMG LLP as
the auditor of the Company for fiscal year 2001 and thereafter until its
successor is elected. Representatives of KPMG LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement and to respond to
appropriate questions.
YOUR BOARD RECOMMENDS THAT YOU VOTE FOR KPMG LLP AS AUDITOR OF THE COMPANY.
3
NOMINEES FOR CLASS II DIRECTORS
Terms would end at the 2004 Annual Meeting.
[Picture of [Picture of [Picture of [Picture of [Picture of
Victor Hao Li] T. Michael Diane J. Kelvin H. Jeffrey N.
May] Plotts] Taketa] Watanabe]
Victor Hao T. Michael Diane J. Kelvin H. Jeffrey N.
Li, S.J.D. May Plotts Taketa Watanabe
Age 59 Age 54 Age 65 Age 46 Age 58
Director Director Director Director Director
Since 1988 Since 1995 Since 1987 Since 1993 Since 1987
Co-chairman, Senior vice Business ad- President Partner in
Asia Pacific president of visor since and chief the law firm
Consulting the Company. 2000. Gen- executive of Watanabe,
Group. Gen- President, eral partner officer of Ing &
eral manag- chief execu- of Mideast the Hawaii Kawashima.
er, Smile tive officer and China Community Director of
Train, China. and director Trading Com- Foundation. Hawaiian
Director of of Hawaiian pany, for- Vice presi- Electric
Hawaiian Electric merly known dent and di- Company,
Electric In- Company, as Hemmeter rector of Inc.,
dustries Inc. and Investment the Asia Pa- American
Charitable chairman of Company from cific Re- Savings
Foundation, the boards 1993 to gion, The Bank,
HEI Power of Maui 2000. Nature Con- F.S.B., HEI
Corp. Trust- Electric Director of servancy Power Corp.,
ee, Japan- Company, Hawaiian from 1989 to Hawaiian
America In- Limited and Electric 1998. Electric In-
stitute of Hawaii Elec- Company, Director of dustries
Management tric Light Inc., Ameri- HEI Power Charitable
Science. Company, can Savings Corp., Foundation,
Consulting Inc. Bank, HISCO, Ltd., American
Professor of Director of F.S.B., Hookupu Classic Voy-
Law, Stan- Hawaiian Hawaii Fund, and ages, First
ford Univer- Electric In- Health Sys- Civic Insurance
sity. dustries tems Corpo- Ventures. Company of
Charitable ration, Hawaii, and
Foundation, Plaza Club, Grace Pa-
HEI Power and Honolulu cific Corpo-
Corp., and Country ration.
the Electric Club. Trust- Member, Ad-
Power Re- ee, visory
search In- Kamehameha Board, Oce-
stitute. Schools. anic Cable-
Member, Boy vision.
Scouts of Trustee,
America- Children and
Aloha Coun- Youth Foun-
cil Execu- dation of
tive Board the Philip-
and Japanese pines and
Chamber of Hawaii Com-
Commerce. munity Foun-
Trustee, dation.
Academy of Chair, Ses-
the Pacific. ame Work-
shop, The
Consuelo
Zobel Alger
Foundation,
and The Na-
ture Conser-
vancy of
Hawaii.
4
CONTINUING CLASS III DIRECTORS
Directors continuing in office with terms ending at the 2002 Annual Meeting.
[Picture of [Picture of [Picture of
Don E. Carrol] Bill D. Mills] Oswald K. Stender]
Don E. Bill D. Oswald K.
Carroll Mills Stender
Age 59 Age 49 Age 69
Director Director Director
Since 1996 Since 1988 Since 1993
President, Chairman of Real estate
chief execu- the board consultant
tive offi- and chief since June
cer, and di- executive 1999. Trust-
rector of officer of ee, Office of
Oceanic Ca- Bill Mills Hawaiian Af-
blevision. Development fairs since
Vice presi- and Invest- November
dent of Time ment Compa- 2000. Trust-
Warner Ca- ny, Inc. ee,
ble. Director, Kamehameha
Director of Grace Pa- Schools/
Pacific cific Corpo- Bishop Estate
Guardian ration. from January
Life and Trustee, 1990 to May
American Red Hawaii Pa- 1999.
Cross-- cific Uni- Director of
Hawaii Chap- versity, Hawaiian
ter. Secre- St. Andrew's Electric In-
tary-trea- Priory, and dustries
surer and The Nature Charitable
director of Conservancy Foundation,
the Hawaii of Hawaii. Grace Pacific
Cable Tele- Member, Corporation,
vision Asso- Board of Hawaii Commu-
ciation. Governors, nity Rein-
Treasurer Iolani vestment
and director School and Corp., Bishop
of Aloha Hawaii Com- Museum,
United Way. munity Foun- Friends of
Past presi- dation. Iolani Pal-
dent and di- ace, and
rector of U.S.S. Mis-
Hawaii Na- souri Founda-
ture Center. tion. Trust-
Chairman, ee, Cash As-
Oceanic Ca- sets Trust,
ble Founda- Hawaiian Tax-
tion. Past Free Trust,
president, Pacific Capi-
Boy Scouts tal Funds,
of America- and Kahi
Aloha Coun- Mohala
cil and The (Sutter
200 Club Ad- Health Pacif-
visory ic). Member,
Board. Mem- Board of Gov-
ber, Hawaii ernors,
Business Iolani School
Roundtable. and East-West
Center Foun-
dation.
5
CONTINUING CLASS I DIRECTORS
Directors continuing in office with terms ending at the 2003 Annual Meeting.
[Picture of [Picture of [Picture of
Robert F. Clarke] A. Maurice Myers] James K. Scott]
Robert F. A. Maurice James K. Scott,
Clarke Myers Ed.D.
Age 58 Age 60 Age 49
Director Since Director Since Director Since
1989 1991 1995
Chairman, Chairman, President of
president and president and Punahou
chief execu- chief School.
tive officer executive Director of
of the Compa- officer of Hawaiian
ny. Waste Electric
Chairman of Management, Company, Inc.,
the board of Inc. Pacific and
Hawaiian (environmental Asian Affairs
Electric services), Council, and
Company, Inc., Houston, Hawaii Public
American Texas, since Television.
Savings Bank, November 1999. President,
F.S.B., and Chairman, Hawaii
HEI Power president and Association of
Corp. chief Independent
President and executive Schools.
director of officer of Member,
Hawaiian Yellow Hawaiian
Electric Corporation Educational
Industries from April Council and
Charitable 1996 to Young
Foundation and November 1999. Presidents
Hycap Director of Organization.
Management, Pleasant
Inc. Director Holidays,
of Aloha Cheap Tickets,
United Way. Inc., and
Chairman, Greater
Advisory Board Houston
for the Partnership.
College of
Business
Administration
at the
University of
Hawaii--Manoa.
Member,
Oceanic
Cablevision
Advisory
Board, Hawaii
Business
Roundtable,
Council on
Revenues for
the State of
Hawaii, and
Air Force
Civilian
Advisory
Council.
Trustee, The
Nature
Conservancy of
Hawaii, Straub
Foundation,
and Hawaii
Pacific
University.
6
BOARD OF DIRECTORS
Corporate Governance
The management of the Company periodically reviews trends in corporate
governance with the Board. The Board of Directors has adopted an annual process
of evaluating the operations of the Board as a whole and each director
currently rates the following:
. mechanics of Board meetings (length of meetings, number of meetings,
adequacy of pre-meeting information, quality of presentations,
communications between meetings);
. meeting content/conduct (topics covered, amount of detail, climate for
open debate, time for discussion);
. Board organization/operation (size, mandatory retirement at age 70,
committee structure, exposure and access to management, and skills,
diversity and experience of directors);
. Board practices (executive compensation, executive succession planning,
selection of committee members, criteria for the selection and retention
of directors, compensation of directors); and
. overall performance of directors (understanding the business and
strategies, doing their homework, asking good questions, sharing
insights, attending meetings and keeping current on issues affecting the
business).
The Board also adopted an annual process for evaluating those directors whose
terms expire at the next Annual Meeting. The directors evaluate themselves on
various factors, including meeting preparation, attendance, participation at
meetings, and knowledge of issues and trends affecting the Company. The
evaluation forms for the Board as a whole and individual directors are then
submitted to the Nominating and Corporate Governance Committee before directors
are nominated for reelection to the Board. After reviewing the comments
received, the Nominating and Corporate Governance Committee recommends to the
Board any procedures and practices to be adopted to improve the operations of
the Board. The Chairman of the Nominating and Corporate Governance Committee
may meet with individual directors to discuss their performance.
7
Committees of the Board
The Board of Directors has four standing committees: Audit, Compensation,
Executive, and Nominating and Corporate Governance. The names of the members
and the number of meetings held in 2000 are shown in the table below:
Nominating
and
Corporate
Name Audit Compensation Executive Governance
-------------------------------------------------------------------
Don E. Carroll X X
-------------------------------------------------------------------
Robert F. Clarke* X
-------------------------------------------------------------------
Richard Henderson X** X**
-------------------------------------------------------------------
Victor Hao Li X
-------------------------------------------------------------------
T. Michael May*
-------------------------------------------------------------------
Bill D. Mills X X X
-------------------------------------------------------------------
A. Maurice Myers X X
-------------------------------------------------------------------
Diane J. Plotts X X** X
-------------------------------------------------------------------
James K. Scott X
-------------------------------------------------------------------
Oswald K. Stender X X
-------------------------------------------------------------------
Kelvin H. Taketa X
-------------------------------------------------------------------
Jeffrey N. Watanabe X X**
-------------------------------------------------------------------
Number of Meetings in
2000 5 2 0 1
--------
*Employee director
**Committee chair
The Audit Committee reviews the Company's auditing, accounting, financial
reporting, and internal control functions. All members of the committee are
nonemployee directors. See pages 25 and 26 for the Audit Committee Report and
Appendix A for the Audit Committee Charter.
The Compensation Committee reviews the current salary administration policies
and compensation strategy for the Company. All members of the committee are
nonemployee directors. The Compensation Committee annually evaluates the
performance of the Chairman. At least once a year, the Compensation Committee
meets in executive session with the other nonemployee directors of the Board to
discuss the Chairman's compensation and to evaluate the Chairman's performance.
See pages 19 to 23 for the Compensation Committee Report on Executive
Compensation.
The Executive Committee possesses and exercises the authority of the Board as
delegated by the Board and is responsible for considering and making
recommendations to the Board regarding any questions concerning the business
and affairs of the Company. The Committee is comprised of nonemployee directors
and the Chairman.
The Nominating and Corporate Governance Committee reviews and recommends to
the Board of Directors the slate of nominees to be submitted to the
stockholders for election at the next Annual Meeting. All members of the
committee are nonemployee directors. See page 7 for a discussion concerning the
involvement of this Committee on matters relating to corporate governance.
8
Recommendation for Director Nominee
You can recommend any person as a nominee for director of HEI by writing to
the Nominating and Corporate Governance Committee, in care of the Secretary,
Hawaiian Electric Industries, Inc., P. O. Box 730, Honolulu, Hawaii 96808-0730.
Recommendations must be received by December 12, 2001 for consideration by the
Committee for the 2002 Annual Meeting of Stockholders. The recommendation must
include the nominee's qualifications and other relevant biographical
information and confirmation of the nominee's consent to serve.
Attendance at Meetings
In 2000, there were ten regular monthly meetings and two special meetings of
the Board of Directors. All directors attended at least 75% of the combined
total meetings of the Board and Board committees on which they served.
Compensation of Directors
Nonemployee directors of the Company received the following compensation for
their services as directors during 2000 (employee members of the Board of
Directors receive no additional compensation for service as directors).
Compensation Amount
------------ ----------
Annual HEI Common Stock Grant 300 shares(1)
Annual Board Retainer $20,000(2)
Board Attendance Fee (per meeting) 1,000(3)
Committee Attendance Fee (per meeting) 1,000(3)
Committee Attendance Fee for Committee Chair (per meeting) 2,000(3)
----------
(1) The Board of Directors adopted the 1999 Nonemployee Company Director Stock
Grant Plan, whereby an annual 300-share stock grant is made to
participating directors for the purpose of further aligning directors' and
stockholders' interests in improving stockholder value.
(2) Paid quarterly in cash installments. In order to receive the fourth quarter
installment, directors are required to have attended at least 75% of the
combined total of all Board meetings and all meetings of Board committees
on which they serve.
(3) In the case of multiple meetings on the same day, only one fee is paid.
Nonemployee Director Retirement Plan
The Nonemployee Director Retirement Plan (which was approved by the
stockholders on April 17, 1990) provides certain retirement benefits to
nonemployee directors of the Company or any subsidiary of the Company upon
retirement from service as a director. The Plan provides an annual payment to
each director who serves for at least 5 consecutive years and meets other
requirements of the Plan in an amount equal to the annual retainer which was in
effect in the year that the nonemployee director retired. The payments are for
a period equal to the number of years of active service accumulated and
terminate in the event of the director's death.
At the meeting of the Board of Directors on December 17, 1996, the Board
voted to terminate the Nonemployee Director Retirement Plan as described above,
and pay the present value of the accrued retirement benefits to directors age
55 or younger or with 5 years of service or less as of April 22, 1997.
9
The retirement benefits for all other directors (Mr. Myers and Ms. Plotts)
were frozen as of December 31, 1996, and will be paid according to the terms of
the Plan based on the $15,000 annual retainer in effect on December 31, 1996.
The right of previously retired directors to receive benefits continues
according to the Plan.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company entered into Indemnity Agreements with each of its directors and
executive officers as approved by stockholders at the 1989 Annual Meeting. The
Indemnity Agreement provides for mandatory indemnification of the director or
officer to the fullest extent permitted by law. This includes indemnification
against all expenses (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred. The Indemnity Agreement
also provides for the mandatory payment of expenses incurred by the director or
officer in defending a proceeding. However, these expenses must be repaid if it
is later determined that the officer or director is not entitled to
indemnification.
The Indemnity Agreement excludes indemnification for:
. proceedings initiated by the officer or director unless the Board of
Directors determines indemnification to be appropriate;
. amounts covered by insurance;
. profits made from the purchase or sale of stock by a director or officer
which are subject to the "short-swing profits" liability provisions of
federal or state securities laws;
. an action or omission by the officer or director determined to be willful
misconduct or to have been knowingly fraudulent or deliberately
dishonest; or
. if an appropriate court determines that such indemnification is not
permitted by law.
At the 1990 Annual Meeting, the stockholders approved a proposal to amend the
Restated Articles of Incorporation of the Company to add a new Article
Fourteenth eliminating the personal liability of its directors for monetary
damages to the fullest extent permitted by Hawaii law.
10
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows how many shares of HEI Common Stock were owned as
of February 14, 2001 by each director, Named Executive Officer (as listed in
the Summary Compensation Table on page 12) and by all directors and executive
officers as a group.
Amount of Common Stock and Nature of Beneficial Ownership
----------------------------------------------------------------------------------------------------------
Name of Individual Sole Voting or Shared Voting or Other Beneficial
or Group Investment Power Investment Power(1) Ownership(2) Stock Options(3) Total
-----------------------------------------------------------------------------------------------------------
Nonemployee directors
Don E. Carroll 2,788 2,788
Richard Henderson 3,042 3,042
Victor Hao Li 4,178 352 4,530
Bill D. Mills 5,111 5 5,116
A. Maurice Myers 7,051 7,051
Diane J. Plotts 2,790 2,790
James K. Scott 2,177 2,177
Oswald K. Stender 4,948 4,948
Kelvin H. Taketa 2,110 2,110
Jeffrey N. Watanabe 3,406 266 2 3,674
Employee directors and
Named Executive
Officers
Robert F. Clarke 19,656 119,367 139,023
T. Michael May 6,611 49,514 56,125
Other Named Executive
Officers
Peter C. Lewis 2,862 367 7,724 10,953
Wayne K. Minami 2,131 9,191 46,538 57,860
Robert F. Mougeot 6,324 19,826 26,150
All directors and
executive officers as a
group (18 persons) 70,083 10,768 9,917 273,626 364,394(4)
----------
(1) Shares registered in name of the individual and spouse.
(2) Shares owned by spouse, children or other relatives sharing the home of the
director or officer in which the director or officer disclaims personal
interest.
(3) Stock options, including accompanying dividend equivalent shares,
exercisable within 60 days after February 14, 2001, under the 1987 Stock
Option and Incentive Plan (as amended and restated effective February 20,
1996).
(4) The directors and executive officers of HEI as a group beneficially owned
1.10% of HEI Common Stock on February 14, 2001 and no director or officer
owned more than .42% of such stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of forms filed by its reporting persons during the last
fiscal year, the Company believes that they complied with the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934.
11
EXECUTIVE MANAGEMENT COMPENSATION
Summary Compensation Table
The following summary compensation table shows the annual and long-term
compensation of the chief executive officer and the four other most highly
compensated executive officers of the Company and its subsidiaries serving
during 2000.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-----------------------------------------------------
Awards Payouts
-----------------
Securities
Other Annual Underlying LTIP All Other
Name and Principal Salary Bonus(1) Compensation Options(2) Payouts(3) Compensation(4)
Position Year ($) ($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------
Robert F. Clarke 2000 $604,000 $ -0- $-0- 50,000 $ -- $35,120
Chairman, President
& CEO 1999 532,000 427,349 -0- 50,000 87,487 28,503
1998 490,000 138,237 -0- 20,000 107,973 24,192
------------------------------------------------------------------------------------------------------
T. Michael May 2000 408,000 62,971 -0- 20,000 -- 17,117
Senior Vice
President; 1999 372,000 211,652 -0- 20,000 41,256 14,400
President & CEO,
HECO 1998 325,000 92,425 -0- 12,000 55,973 11,612
------------------------------------------------------------------------------------------------------
Wayne K. Minami 2000 333,000 147,884 -0- 20,000 -- N/A
President & CEO, 1999 303,000 156,013 -0- 20,000 18,792 N/A
American Savings
Bank, 1998 267,000 -0- -0- 10,000 21,114 N/A
F.S.B.
------------------------------------------------------------------------------------------------------
Robert F. Mougeot 2000 253,000 -0- -0- 7,000 -- 14,711
Financial Vice
President, 1999 245,000 96,135 -0- 7,000 28,404 13,126
Treasurer and Chief 1998 238,000 39,077 -0- 5,000 38,750 11,750
Financial Officer
------------------------------------------------------------------------------------------------------
Peter C. Lewis 2000 217,000 -0- -0- 5,000 -- 24,632
Vice President -- 1999 209,000 77,804 -0- 5,000 23,544 21,807
Administration and 1998 203,000 36,844 -0- 5,000 32,126 19,480
Secretary
----------
(1) The Named Executive Officers are eligible for an incentive award under the
Company's annual Executive Incentive Compensation Plan (EICP). EICP bonus
payouts are reflected as compensation for the year earned.
(2) Options granted for the three-year period 1998-2000 contained dividend
equivalents as further described below under the heading Option Grants in
Last Fiscal Year.
(3) Long-Term Incentive Plan (LTIP) payouts are determined in the second
quarter of each year for the three-year cycle ending on December 31 of the
previous calendar year. If there is a payout, the amount is reflected as
LTIP compensation in the table for the previous year for the Named
Executive Officers. In April 1999, LTIP payouts were made for the 1996-1998
performance cycle and are reflected as LTIP compensation in the table for
1998. In April 2000, LTIP payouts were made for the 1997-1999 performance
cycle and are reflected as LTIP compensation in the table for 1999. The
determination of whether there will be a payout under the 1998-2000 LTIP
will not be made until the second quarter of this year.
12
(4) Represents amounts accrued each year by the Company for certain
preretirement death benefits provided to the Named Executive Officers,
except Mr. Minami, as described in the Compensation Committee Report on
page 22 under the heading, "Other Compensation Plans."
Option Grants in Last Fiscal Year
The following table presents information on the nonqualified stock options
which were granted to the five Named Executive Officers on April 24, 2000. The
practice of granting stock options, which include dividend equivalent shares,
has been followed each year since 1987.
OPTION GRANTS IN LAST FISCAL YEAR
Number of
Securities Percent of Grant
Underlying Total Options Date
Options Granted to Exercise Present
Granted(1) Employees in Price Expiration Value(2)
Name (#) Fiscal Year ($/share) Date ($)
---- ---------- ------------- --------- -------------- --------
Robert F. Clarke........ 20,000 13% $29.48 April 24, 2010 $215,600
Robert F. Clarke........ 10,000 7 30.00 April 24, 2010 105,100
Robert F. Clarke........ 10,000 7 32.00 April 24, 2010 94,700
Robert F. Clarke........ 10,000 7 34.00 April 24, 2010 84,800
T. Michael May.......... 20,000 13 29.48 April 24, 2010 215,600
Wayne K. Minami......... 20,000 13 29.48 April 24, 2010 215,600
Robert F. Mougeot....... 7,000 5 29.48 April 24, 2010 75,460
Peter C. Lewis.......... 5,000 3 29.48 April 24, 2010 53,900
----------
(1) For the 72,000 option shares granted with an exercise price of $29.48 per
share and for each 10,000 option shares granted with exercise prices of
$30.00 per share, $32.00 per share and $34.00 per share, to the Named
Executive Officers, additional dividend equivalent shares are granted at
no additional cost throughout the four-year vesting period (vesting in
equal installments) which begins on the date of grant. Dividend
equivalents are computed, as of each dividend record date, both with
respect to the number of shares under the option and with respect to the
number of dividend equivalent shares previously credited to the
participant and not issued during the period prior to the dividend record
date. Accelerated vesting is provided in the event a Change-in-Control
occurs. No stock appreciation rights have been granted under the Company's
stock option plans.
(2) Based on a Binomial Option Pricing Model, which is a variation of the
Black-Scholes Option Pricing Model. For the stock options granted on April
24, 2000, with a 10-year option period, an exercise price of $29.48, and
with additional dividend equivalent shares granted for the first four years
of the option, the Binomial Value adjusted for forfeiture risk is $10.78
per share. The following assumptions were used in the model: Stock Price:
$33.44; Exercise Price: $29.48; Term: 10 years; Volatility: 0.1654;
Interest Rate: 6.28%; and Dividend Yield: 6.81%. The following were the
valuation results: Binomial Option Value: $5.56; Dividend Credit Value:
$5.22; and Total Value $10.78.
13
The same assumptions except for exercise price were used for the following
stock options. For the stock options granted on April 24, 2000, with an
exercise price of $30.00, the following were the valuation results: Binomial
Option Value: $5.33; Dividend Credit Value: $5.18; and Total Value $10.51.
For the stock options granted on April 24, 2000, with an exercise price of
$32.00, the following were the valuation results: Binomial Option Value:
$4.51; Dividend Credit Value: $4.96; and Total Value $9.47. For the stock
options granted on April 24, 2000, with an exercise price of $34.00, the
following were the valuation results: Binomial Option Value: $3.84; Dividend
Credit Value: $4.64; and Total Value $8.48.
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table shows the stock options, including dividend equivalents,
exercised by the Named Executive Officers in 2000. Also shown is the number of
securities underlying unexercised options and the value of unexercised in the
money options, including dividend equivalents, at the end of 2000. Under the
Stock Option and Incentive Plan, dividend equivalents have been granted to each
of the Named Executive Officers as part of the stock option grant, except for
Mr. May's 1995 stock option grant and a one-time, premium-priced grant to Mr.
Clarke in May 1992.
Dividend equivalents permit a participant who exercises a stock option to
obtain at no additional cost, in addition to the option shares, the amount of
dividends declared on the number of shares of Common Stock with respect to
which the option is exercised during the period between the grant and the
exercise of the option. Dividend equivalents are computed, as of each dividend
record date throughout the four-year vesting period (vesting in equal
installments), which begins on the date of grant, both with respect to the
number of shares underlying the option and with respect to the number of
dividend equivalent shares previously credited to the Named Executive Officer
and not issued during the period prior to the dividend record date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options (Including In the Money Options
Dividend Equivalents) (Including Dividend Equivalents)
Dividend Value at Fiscal Year-End at Fiscal Year-End(1)
Shares Equivalents Value Realized ---------------------- --------------------------------
Acquired Acquired Realized On Dividend Exercisable/ Exercisable/
On Exercise On Exercise On Options Equivalents Unexercisable Unexercisable
Name (#) (#) ($) ($) (#) ($)
---- ----------- ----------- ---------- ----------- ---------------------- --------------------------------
Robert F. Clarke.... -- -- $ -- $ -- 158,180/114,098 $887,584/727,098
T. Michael May...... -- -- -- -- 41,441/ 49,365 344,706/368,166
Wayne K. Minami..... -- -- -- -- 40,486/ 46,854 367,559/350,389
Robert F. Mougeot... -- -- -- -- 22,980/ 18,023 217,314/133,243
Peter C. Lewis...... 6,250 1,954 (17,063) 63,505 9,324/ 14,204 70,423/102,999
---------
(1) Value based on closing price of $37.19 per share on the New York Stock
Exchange on December 31, 2000.
14
Long-Term Incentive Plan (LTIP) Awards
The table on page 16 lists the LTIP awards made to the Named Executive
Officers during 2000. The table shows potential payments that are tied to the
achievement of better than average performance over a three-year period (2000-
2002) relating to two separate goals for all the Named Executive Officers
except Mr. May and Mr. Minami, who have a third goal in addition to the two
goals listed immediately below.
The two goals are (1) return on average common equity (weighted 60%), and (2)
total return to shareholders (weighted 40%). The weighting of each goal applies
to all the Named Executive Officers except Mr. May and Mr. Minami. The
Company's performance for the return on average common equity goal is based on
an internal goal. The Company's performance for the total return to
shareholders goal is measured against the Edison Electric Institute Index of
Investor-Owned Electric Companies (Peer Group) as of December 31, 2002. This is
the same Peer Group used for the Stockholder Performance Graph shown on page
24. However, the performance of the LTIP Peer Group is calculated on a
noncapitalized weighted basis whereas the Stockholder Performance Graph Peer
Group is calculated on a capitalized weighted basis. The LTIP uses a
noncapitalized weighted basis so as not to give a disproportionate emphasis to
the larger companies in the Edison Electric Institute Index. For Mr. May and
Mr. Minami, the two goals set forth above are weighted (1) return on average
common equity (30%), and (2) total return to shareholders (20%). Mr. May's
third goal (weighted 50%) is based on a prorated percent of allowed return on
average common equity for Hawaiian Electric Company, Inc. and subsidiaries
(consolidated HECO) for the same three-year LTIP cycle. Mr. Minami's third goal
(weighted 50%) is based on a return on average common equity for American
Savings Bank, F.S.B. (ASB) for the same three-year LTIP cycle.
The threshold for minimum awards with respect to the return on average common
equity goal for the Company is 10.75%. The threshold minimum award with respect
to the total return to shareholders will be earned if the Company's performance
is at the 40th percentile of the Peer Group. Mr. May's threshold minimum for
his third goal, which must be achieved in at least two out of three years
during the LTIP cycle, is a prorated percent of allowed return on average
common equity for consolidated HECO of 90%. Mr. Minami's threshold minimum for
his third goal, which must be achieved in at least two out of three years
during the LTIP cycle, is a return on average common equity for ASB of 12%.
Maximum awards with respect to the return on average common equity goal will be
earned if the Company's return on average common equity is 12.5%. Maximum
awards with respect to the total return to shareholders will be earned if the
Company's performance is measured at the 70th percentile of the Peer Group. For
Mr. May, the maximum award on his third goal will be earned if the prorated
percent of allowed return on average common equity for consolidated HECO equals
100%. For Mr. Minami, the maximum award on his third goal will be earned if the
return on average common equity for ASB equals 16%. Earned awards are
distributed in the form of 60% cash and 40% HEI Common Stock with the maximum
award level for each Named Executive Officer ranging from 75% to 100% of the
midpoint of the officer's salary grade range at the end of the three-year
performance period.
15
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
------------------------------
Three-Year Minimum
Performance Cycle Threshold(1) Target Maximum
Name Ending Date ($) ($) ($)
---- ----------------- ------------ -------- --------
Robert F. Clarke............... 12/31/02 $218,460 $440,230 $662,000
T. Michael May................. 12/31/02 103,250 206,500 309,750
Wayne K. Minami................ 12/31/02 94,000 188,000 282,000
Robert F. Mougeot.............. 12/31/02 71,000 142,000 213,000
Peter C. Lewis................. 12/31/02 58,750 117,500 176,250
----------
(1) Assumes meeting minimum threshold on all goals; however, if only one goal
(weighted 40%) is met, the minimum threshold estimated future payout would
be: Mr. Clarke -- $87,384; Mr. Mougeot -- $28,400; and Mr. Lewis --
$23,500. For Mr. May and Mr. Minami, if only one goal (weighted 20%) is
met, the minimum threshold estimated future payout would be $20,650 for Mr.
May and $18,800 for Mr. Minami. There is no LTIP payout unless the minimum
threshold is met on at least one of the goals.
Pension Plans
All regular employees (including the Named Executive Officers) are covered by
noncontributory, qualified defined benefit pension plans. The plans provide
retirement benefits at normal retirement (age 65), reduced early retirement
benefits and death benefits. The Named Executive Officers except Mr. Minami
participate in the Retirement Plan for Employees of HEI and Participating
Subsidiaries (HEI Plan). Mr. Minami is a participant in the American Savings
Bank Retirement Plan (ASB Plan). Mr. Clarke and Mr. May also participate in the
HEI Supplemental Executive Retirement Plan (HEI SERP) and Mr. Minami also
participates in the ASB Supplemental Retirement, Disability, and Death Benefit
Plan (ASB SERP) (see pages 17 and 18).
Some executives are affected by Internal Revenue Code limitations on
qualified plan benefits. They are, therefore, also covered under the HEI Excess
Benefit Plan (Excess Plan) and the HEI Excess Pay Supplemental Executive
Retirement Plan (Excess Pay SERP), which are noncontributory, nonqualified
plans.
The following table shows estimated annual pension benefits payable at
retirement under the HEI Plan, Excess Plan and Excess Pay SERP based on base
salary that is covered under the three plans and years of service with the
Company and all of its subsidiaries.
PENSION PLAN TABLE
Years of Service
----------------------------------------------------
Remuneration 5 10 15 20 25 30
------------ ------- -------- -------- -------- -------- --------
$200,000................... $20,400 $ 40,800 $ 61,200 $ 81,600 $102,000 $122,400
250,000................... 25,500 51,000 76,500 102,000 127,500 153,000
300,000................... 30,600 61,200 91,800 122,400 153,000 183,600
350,000................... 35,700 71,400 107,100 142,800 178,500 214,200
400,000................... 40,800 81,600 122,400 163,200 204,000 244,800
450,000................... 45,900 91,800 137,700 183,600 229,500 275,400
500,000................... 51,000 102,000 153,000 204,000 255,000 306,000
550,000................... 56,100 112,200 168,300 224,400 280,500 336,600
600,000................... 61,200 122,400 183,600 244,800 306,000 367,200
16
The HEI Plan provides a monthly retirement pension for life. Benefits are
determined by multiplying years of credited service and 2.04% (not to exceed
67%) times the participant's Final Average Compensation (average base salary
for any consecutive 36 months out of the last 10 years that produces the
highest monthly average). As of December 31, 2000, the Named Executive Officers
had the following number of years of credited service under the HEI Plan: Mr.
Clarke, 13 years; Mr. May, 8 years; Mr. Mougeot, 12 years; and Mr. Lewis, 32
years.
Benefits under the ASB Plan are determined by multiplying years of credited
service (not to exceed 35 years) and 1.5% times the participant's Final Average
Compensation (average compensation for the highest five of the last ten years
of credited service). As of December 31, 2000, Mr. Minami had 14 years of
credited service under the ASB Plan. His estimated annual benefit payable in
the form of a single life annuity projected to age 65 is $57,180 based on his
current compensation level.
Internal Revenue Code of 1986, as amended (IRC) Section 415 limits the
retirement benefit that a participant can receive from qualified retirement
plans such as the HEI Plan and ASB Plan. The limit for 2000 is $135,000 per
year at age 65. The Company adopted the Excess Plan to provide benefits that
cannot be paid from the qualified plans due to this maximum limit, based on the
same formula as the qualified plans.
IRC Section 401(a) limits a participant's compensation that can be recognized
under qualified retirement plans. The limit on the maximum compensation for
2000 under IRC Section 401(a) is $170,000. The Company adopted the Excess Pay
SERP to provide benefits that cannot be paid from the qualified plans due to
the maximum compensation limit under IRC Section 401(a), based on the same
formula as the qualified plans.
The Company also maintains two supplemental executive retirement plans (HEI
SERP and ASB SERP) for certain executive officers. Mr. Clarke and Mr. May
participate in the HEI SERP and Mr. Minami participates in the ASB SERP.
Benefits under the HEI SERP and ASB SERP are in addition to qualified
retirement benefits payable from the HEI Plan, the ASB Plan and Social
Security.
Under the HEI SERP, the executive is eligible to receive, at age 60, a
benefit of up to 60% (depending on years of credited service) of the
participant's average compensation, which includes amounts received under the
annual EICP in the highest three out of the last five years of service. The
benefit payable under the HEI SERP is reduced by the participant's primary
Social Security benefit and the benefit payable from the HEI Plan, but in no
event is it less than the benefit payable under the HEI Plan (before any IRC
Sections 415 and 401(a) reductions). The HEI SERP provides for reduced early
retirement benefits at age 50 with 15 years of service or age 55 with five
years of service, and survivor benefits in the form of an annuity in the event
of the participant's death after becoming eligible for early retirement. The
overall total retirement benefits payable to Mr. Clarke in the form of a
straight life annuity projected to age 65 is $303,237, based on his current
compensation level ($86,122 from the HEI Plan and $217,115 from the HEI SERP,
with no amounts owing from the Excess Plan or the Excess Pay SERP). The overall
total retirement benefits payable to Mr. May in the form of a straight life
annuity projected to age 65 is $182,588 based on his current compensation level
($74,033 from the HEI Plan and $108,555 from the HEI SERP, with no amounts
17
owing from the Excess Plan or the Excess Pay SERP). As of December 31, 2000,
Mr. Clarke had 13 years of credited service and Mr. May had 8 years of credited
service under the HEI SERP.
The ASB SERP provides a benefit at age 65 of up to 60% (depending upon years
of credited service) of the participant's average compensation (including 50%
of the amounts received under the EICP) in the highest five consecutive years
out of the last ten years of service, reduced by the participant's primary
Social Security benefit and the benefit payable from the ASB Plan, but in no
event is it less than the benefit payable under the ASB Plan (before any IRC
Sections 415 and 401(a) reductions). The ASB SERP also provides for termination
and survivor benefits in certain circumstances. The overall total retirement
benefits payable to Mr. Minami in the form of a straight life annuity projected
to age 65 is $204,449, based on his current compensation level ($57,180 from
the ASB Plan and $147,269 from the ASB SERP). As of December 31, 2000,
Mr. Minami had 14 years of credited service under the ASB SERP.
Change-in-Control Agreements
Since 1989, the Company has entered into Change-in-Control Agreements with
certain executives, including the Named Executive Officers listed in the
Summary Compensation Table, to encourage and ensure their continued attention
and dedication to the performance of their assigned duties without distraction
in the event of potentially disturbing circumstances arising from a change-in-
control of the Company.
Each Agreement provides that benefits, compensation and position
responsibility of these officers will remain at existing levels for a period of
two years following a "Change-in-Control," unless the "Expiration Date" of the
Agreement has occurred. A "Change-in-Control" is defined to include a change-
in-control required to be reported under the proxy rules in effect on the date
of the Agreements, the acquisition by a person (as defined under the Securities
Exchange Act of 1934) of 25% or more of the voting securities of the Company,
or specified changes in the composition of the Board of Directors of the
Company following a merger, tender offer or certain other corporate
transactions. "Expiration Date" is defined as the earliest to occur of the
following:
(1) two years after a change-in-control;
(2) termination of the executive's employment by the Company for "Cause" (as
defined in the Agreement) or by the executive other than for "Good
Reason" (as defined in the Agreement);
(3) retirement; or
(4) termination of the Agreement by the Company's Board of Directors, or
termination of the executive's employment, prior to a change-in-control.
If the employment of one of these executives is terminated after a change-in-
control and prior to the expiration date, the Company is obligated to provide a
lump sum severance equal to 2.99 times the executive's average W-2 earnings for
the last five years (or such lesser period that the executive has been employed
by the Company), subject to certain limitations. Based on W-2 earnings for the
five most recent years (1996-2000), the lump sum severance would be as follows:
Mr. Clarke -- $3,087,567; Mr. May -- $1,444,716; Mr. Minami -- $1,256,102;
Mr. Mougeot -- $1,128,076; and Mr. Lewis -- $1,051,799. In the event of a
change-in-control, all outstanding stock options would be accelerated and
become immediately exercisable.
18
Compensation Committee Report on Executive Compensation
Introduction
The Compensation Committee of the Board, which is composed entirely of
outside directors, makes decisions on executive compensation. The full Board
ratifies all decisions by the Committee.
The Committee has retained the services of an independent compensation
consulting firm to assist the Committee in executive compensation matters.
Executive Compensation Philosophy
The Committee applies the following principles for the executive compensation
program:
. maintains a compensation program that is fair in a competitive
marketplace;
. provides compensation opportunities that relate pay with the Company's
annual and long-term performance goals which support growth in
stockholder value;
. recognizes and rewards individual initiative and achievements; and
. allows the Company to attract, retain, and motivate qualified executives
who are critical to the Company's success.
The Committee believes that stock ownership by management is beneficial in
aligning management's and stockholders' interests in improving stockholder
value. It, therefore, uses stock options and stock payouts in the compensation
program for the executive officers with a goal of increasing their stock
ownership over time.
Executive Compensation Program
The Company's executive compensation program includes:
. base salary;
. potential for an annual bonus based on overall Company financial and
operational performance as well as individual performance; and
. the opportunity to earn long-term cash and stock-based incentives which
are intended to encourage the achievement of superior results over time
and to align executive officer and stockholder interests.
The second and third elements constitute the "at-risk" portion of the
compensation program and are designed to link the interests of the executive
with those of the stockholders. This means that total compensation for each
executive may change significantly from year to year depending on the short-
and long-term performance of the Company and its subsidiaries.
19
Base Salary
The Committee reviews salaries for executive officers in April of each year
in consultation with the Committee's independent compensation consultant. The
consultant examines the position responsibilities of each officer at HEI and
its subsidiaries against similar positions in similar organizations. All
compensation references represent the fiftieth percentile or midpoint of pay
practices found in similar organizations.
Salaries for executive officers of the various companies are based on
competitive references drawn from compensation surveys and are weighted as
follows:
. holding company -- other electric utilities (50%) and general industry
(50%)
. electric utilities -- other electric utilities (100%)
. financial institution -- other financial institutions (100%)
. international power producer -- private power producers (100%)
Based on the information from these surveys, the consultant recommends a
salary range for each executive officer position. The midpoint of the range
approximates the fiftieth percentile of the survey data and the range has a
spread of plus and minus 20% around this midpoint. Actual setting of an
executive officer's base salary (except for Mr. Clarke) is based on Mr.
Clarke's recommendation and the Committee's approval.
Mr. Clarke's base salary is determined through the Committee's overall
evaluation of his performance during the preceding year. This evaluation is
subjective in nature and takes into account all aspects of his responsibilities
at the discretion of the Committee. Based on the survey data provided by the
consultant, the resulting salary range recommendation, and the Committee's
overall evaluation of Mr. Clarke's performance during 1999, Mr. Clarke's base
salary was raised from an annual rate of $552,500 to an annual rate of
$630,000, effective May 1, 2000. The other Named Executive Officers also
received salary increases ranging from 3.2% to 6.3%.
Annual Executive Incentive Compensation Plan
Under the Executive Incentive Compensation Plan (EICP), annual incentive
awards are granted upon the achievement of financial and nonfinancial
performance measures established by the Committee in the early part of each
calendar year. The measures are stated in terms of minimum, target and maximum
goals. These measures, which may differ for individual Named Executive
Officers, include:
. earnings per share;
. company (subsidiary) net income;
. total return to shareholders measured against the Edison Electric
Institute Index of Investor-Owned Electric Companies (Peer Group) for
the same period;
. company (subsidiary) specific operational and strategic goals;
. measurement of individual officer's actual administrative and general
expenses against budgeted expenses established at the beginning of the
year; and
. individual officer's performance.
20
The EICP has a minimum financial performance threshold linked to earnings per
share or net income (based on whether the measurement is at the Company or
subsidiary level) which must be achieved before a bonus can be considered. The
maximum awards under the EICP differ for each of the Named Executive Officers,
currently ranging from a low of 53% to a high of 90% for Mr. Clarke based on
the midpoint of the salary grade range at the end of the year for each officer.
Each year the Committee establishes the minimum, target and maximum EICP
potential award levels for the Named Executive Officers based on
recommendations from the Committee's independent compensation consultant. The
consultant bases its recommendations on an assessment of competitive practices
from a cross-section of all industries, including some of the electric
companies included in the Stockholder Performance Graph.
Under the 2000 EICP, Mr. Clarke received no payout because HEI earnings per
share in 2000 were below the minimum threshold level needed to qualify for an
award. However, two of the Named Executive Officers, Mr. May and Mr. Minami,
received EICP awards under the 2000 EICP.
Long-Term Incentive Plan
The Company provides a long-term incentive plan (LTIP) that is linked to the
long-term financial performance of the Company. All awards under the LTIP are
paid 60% in cash and 40% in HEI Common Stock. The LTIP goals are based on
achieving financial criteria established by the Committee for a three-year
period. A new performance period of three years starts each year. In April
2000, the Committee established the financial measures for the 2000-2002 cycle
which included (1) return on average common equity (weighted 60%) and (2) total
return to stockholders (weighted 40%). The Company's results on the return on
average common equity is measured against an internal goal and the results on
the total return to stockholders goal is measured against the Peer Group. The
weighting of each goal applies to all the Named Executive Officers except Mr.
May and Mr. Minami who have a third LTIP goal (weighted 50%) which is discussed
in the Long-Term Incentive Plan (LTIP) Awards section on page 15. The first two
LTIP financial performance goals for the Named Executive Officers were selected
by the Committee because they represented a meaningful method of supporting
growth in stockholder value over time. The achievement of each of the goals is
expressed in terms of minimum, target and maximum levels. The LTIP award levels
for each of the Named Executive Officers are established by the Committee each
year based on recommendations from the Committee's independent compensation
consultant. The consultant bases its recommendations on an assessment of
competitive practices from a cross-section of all industries, including some of
the electric companies included in the Stockholder Performance Graph. These
goals are covered in more detail in the discussion of the Long-Term Incentive
Plan (LTIP) Awards on page 15.
For the three-year cycle ended December 31, 1999, all of the Named Executive
Officers received an LTIP payout for the return on average common equity goal,
weighted 40% for the Named Executive Officers except Mr. May and Mr. Minami
whose weighting for the goal was 20%. The Company's return on average common
equity for the three-year cycle, excluding one-time charges and discontinued
operations losses, was 11.22% compared to the average for the Peer Group of
11.12%. Mr. Clarke received a payout for this goal of $87,487 in April 2000.
There was no payout for the total return to stockholders' goal because the
Company's total return for the three-year cycle was below the average total
return of the Peer Group.
21
Stock Options
The Committee can grant nonqualified stock options, incentive stock options,
restricted stock, stock appreciation rights, and dividend equivalents based on
the 1987 Stock Option and Incentive Plan of Hawaiian Electric Industries, Inc.
(as amended and restated effective February 20, 1996), which was previously
approved by the stockholders. In 2000, only nonqualified stock options with
dividend equivalents has been issued under the Plan. Periodically, the
Committee requests its independent compensation consultant to assess
competitive practices with respect to stock option grants from a cross-section
of all industries, including some of the electric companies included in the
Stockholder Performance Graph. Based on this assessment, the consultant
recommends a range of stock option grants for each Named Executive Officer.
This range takes into account the fact that a portion of the officer's long-
term incentive opportunity is delivered through participation in the LTIP. In
granting stock options, the Committee takes into consideration the amount and
value of current options outstanding. The grants are intended to retain the
officers and to motivate them to improve long-term stock performance. Stock
options are granted at average fair market value which is based on the average
of the daily high and low sales prices of HEI Common Stock on the New York
Stock Exchange during the calendar month preceding the date of grant. Stock
options generally vest in equal installments over a four-year period.
In 2000, the Compensation Committee granted Mr. Clarke a stock option award
of 50,000 shares of HEI Common Stock plus dividend equivalents, as follows:
20,000 shares with an exercise price of $29.48 per share; 10,000 shares with an
exercise price of $30.00 per share; 10,000 shares with an exercise price of
$32.00 per share; and 10,000 shares with an exercise price of $34.00 per share.
The award was based on the consultant's recommendation and the independent
evaluation of an appropriate award level by the Committee. In this evaluation,
the Committee took into account prior grants to Mr. Clarke and an overall
subjective evaluation of his job performance. To receive the dividend
equivalents which accrue only during the first four years following a stock
option grant, Mr. Clarke must exercise the underlying stock option before the
expiration of the ten-year period from the date the option was granted.
Other Compensation Plans
The Named Executive Officers participate in certain broad-based employee
benefit plans and executive retirement and death benefits adopted by the
Company. Other than the HEI Retirement Savings Plan (which qualifies under
Section 401(k) of the Internal Revenue Code of 1986, as amended (IRC)), which
offers HEI Common Stock as one of the investment options, benefits under these
other plans are not tied to Company performance.
The Company provides additional retirement benefits which are discussed on
pages 16 to 18 for the Named Executive Officers and certain other employees. In
the event of death during active employment, the Company also provides all the
Named Executive Officers (except Mr. Minami) and certain other employees
$50,000 term life insurance plus an amount equal to two times the employee's
salary on an after-tax basis at the date of death, paid by the Company to the
employee's beneficiary. If the employee dies after retirement, this benefit is
reduced to $20,000 term life insurance plus an amount equal to one times the
employee's salary at retirement, also on an after-tax basis. For Mr. Minami,
American Savings Bank provides term life insurance equal to one and one-half
times his salary at the date of death in the event of death during active
employment.
22
Finally, the Committee reviewed the provisions of IRC Section 162(m),
relating to the $1 million deduction cap for executive salaries and believes
that no compensation for the five highest paid named executives will be
governed by this regulation during 2001. Compensation alternatives to comply
with IRC Section 162(m) will be considered by the Committee at the appropriate
time.
SUBMITTED BY THE
COMPENSATION COMMITTEE
OF THE HEI BOARD OF DIRECTORS
Diane J. Plotts, Chair
Don E. Carroll
Bill D. Mills
A. Maurice Myers
Oswald K. Stender
Kelvin H. Taketa
23
Stockholder Performance Graph
The graph below compares the cumulative total stockholder return on HEI
Common Stock against the cumulative total return of companies listed on
Standard & Poor's (S&P) 500 Stock Index and the Edison Electric Institute (EEl)
Index of Investor-Owned Electric Companies (71 companies were included in the
Index in 2000). The companies comprising the EEl Index serve over 90% of the
customers of the investor-owned electric utility industry. The graph is based
on the market price of common stock for all companies at December 31 each year
and assumes that $100 was invested on December 31, 1995 in HEI Common Stock and
the common stock of all companies and that dividends were reinvested for all
companies.
Comparison of Five-Year Cumulative Total Return
Among Hawaiian Electric Industries, Inc.,
S&P 500 Index, and EEI Index
1995-2000
PERFORMANCE GRAPH APPEARS HERE
HAWAIIAN
Measurement Period ELECTRIC S&P 500 EEI
(Fiscal Year Covered) INDUSTRIES INDEX INDEX
--------------------- ----------- -------- -------
Measurement Pt-1995 $100.00 $100.00 $100.00
FYE 1996 $ 99.67 $122.96 $101.2
FYE 1997 $120.58 $163.98 $128.9
FYE 1998 $126.52 $210.85 $146.8
FYE 1999 $ 97.51 $255.21 $119.5
FYE 2000 $135.43 $231.98 $176.82
24
Audit Committee Report
The Audit Committee is responsible for providing independent, objective
oversight of HEI's accounting functions and internal controls. The Committee is
composed of six directors whose independence is defined by the HEI charter and
the New York Stock Exchange listing standards. It operates and acts under a
written charter, which was adopted and approved by the Committee and the HEI
Board of Directors. A copy of the Audit Committee Charter is attached to this
Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent public accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee held five
meetings during 2000 and met with management and HEI's independent public
accountants, KPMG LLP, to review and discuss the audited consolidated financial
statements. The Committee believes that management maintains an effective
system of internal controls that results in fairly presented consolidated
financial statements. Discussions with KPMG LLP also included the matters
required by Statement on Auditing Standards No. 61 (Codification of Statements
on Auditing Standards (S)380), which incorporates information regarding the
scope and results of the audit.
Auditors' Independence
KPMG LLP provided the Committee with written disclosures and a letter
regarding its independence as required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committee). The disclosure and
discussion with KPMG LLP informed the Audit Committee of KPMG LLP's
independence and assisted the Committee in evaluating such independence.
Auditors' Fees
KPMG LLP provided both audit and nonaudit services to HEI in 2000. Their fees
for such services billed in the year ended December 31, 2000 are as follows:
Audit: $ 738,170
==========
Information technology: 0
Other:
Tax consulting 1,522,250
System conversion 270,000
Internal audit assistance 244,100
Other 267,920
----------
$2,304,270
==========
The Audit Committee reviewed the professional fees billed by KPMG LLP and
determined that the provision of nonaudit services did not negatively impact
the maintenance of the auditors' independence.
25
Based on its discussions with management and KPMG LLP and review of their
representations, the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in HEI's 2000 Annual
Report on Form 10-K.
SUBMITTED BY THE
AUDIT COMMITTEE
OF THE HEI BOARD OF DIRECTORS
Richard Henderson, Chair
Victor Hao Li
Bill D. Mills
Diane J. Plotts
James K. Scott
Kelvin H. Taketa
26
INDEBTEDNESS OF MANAGEMENT
American Savings Bank, F.S.B. (ASB), a subsidiary of the Company, offers
preferential rate loans to its directors and executive officers, as allowed by
the amended Federal Reserve Act.
Three ASB directors who are also directors of HEI (Mr. Clarke, Mr. Watanabe
and Ms. Plotts) and two Named Executive Officers of the Company (Mr. Lewis and
Mr. Minami), whose aggregate indebtedness to ASB exceeded $60,000 at any time
during 2000, received preferential rate loans as shown below.
Largest
Loan Loan Amount Average
Amount Outstanding Interest
Outstanding on Type of Rate
During 2000 1/31/01 Transaction Charged(1)
----------- ----------- -------------- ----------
Robert F. Clarke.............. $914,027 $ -0- First Mortgage 5.0%
Peter C. Lewis ............... 196,469 158,093 First Mortgage 6.3%
Wayne K. Minami............... 83,614 82,128 First Mortgage 5.0%
Diane J. Plotts............... 294,415 289,679 First Mortgage 5.0%
Jeffrey N. Watanabe........... 640,819 629,682 First Mortgage 5.0%
----------
(1) The first mortgage rate is based on ASB's policy for employees and
directors using a formula of .50% above the cost of funds or .50% above the
Applicable Federal Rate established by the Internal Revenue Service,
whichever is greater.
ASB made other loans, established lines of credit and issued credit cards to
directors and executive officers of the Company, and to members of their
immediate families. These loans and extensions of credit were made in the
ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
In addition to the above loans financed by ASB, T. Michael May (also a
director of the Company) is currently indebted to Hawaiian Electric Company,
Inc. in the amount of $100,000 for an employee relocation loan made to him in
1993. The loan is an interest only loan at an interest rate of 6.28%, with the
unpaid principal and interest due on June 30, 2004 or sooner if Mr. May ceases
to be an employee of Hawaiian Electric Company, Inc.
27
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Director Jeffrey Watanabe is a partner in the law firm of Watanabe, Ing &
Kawashima that performed legal services for the Company and certain of its
subsidiaries during 2000.
Currently American Savings Bank is pursuing litigation against PaineWebber to
obtain rescission and damages with respect to approximately $84 million of
securities which ASB purchased in 1999 and 2000. A sister of Dr. Victor Li, a
director of the Company, worked on the disputed transactions for PaineWebber.
Dr. Li never participated in any discussions or decisions regarding these
transactions. At this time, the Company does not know what financial interest,
if any, Dr. Li's sister had in the transactions.
STOCKHOLDER PROPOSALS FOR 2002
Stockholder proposals intended to be presented at the next Annual Meeting
must be received by the Company by November 10, 2001, for inclusion in the
Proxy Statement and form of proxy for the 2002 Annual Meeting of Stockholders.
Proposals should be sent to the attention of the Secretary of the Company.
OTHER BUSINESS
The Company knows of no other business to be presented at the Annual Meeting,
but if further matters do properly come before the meeting, the holders of your
proxy will vote your stock in accordance with their best judgment.
Additionally, HEI's advance notice by-law provision requires that any
stockholder who wishes to properly present business before the Annual Meeting
give notice to the Secretary of the Company no later than 60 days nor earlier
than 90 days prior to the anniversary date of the preceding year's annual
meeting. To be timely in the year 2002, such notice must be received by the
Secretary of the Company no later than February 24, 2002 nor earlier than
January 25, 2002. The notice must be in writing and state the reason and brief
description of the business, the name and address of the stockholder, the
number of shares of Common Stock owned by the stockholder, and any material
interest of the stockholder in such business, and include a representation that
the stockholder will present the business before the meeting in person or by
proxy.
Please vote your proxy as soon as possible to make certain that your shares
will be counted at the meeting. If you attend the meeting, as we hope you will,
you may vote your shares in person.
Peter C. Lewis, Vice President-
Administration and Secretary
March 14, 2001
28
APPENDIX A
HAWAIIAN ELECTRIC INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
There shall be a committee of the board of directors to be known as the Audit
Committee. The Audit Committee shall be composed of directors who are
independent of the management of Hawaiian Electric Industries, Inc. (the
Company) and are free of any relationship that, in the opinion of the board of
directors, might interfere with their exercise of independent judgment as a
Committee member.
The Audit Committee will consist of five members who shall be appointed, for
staggered terms of three years, by the board of directors. A chairman of the
Audit Committee shall be appointed by the board of directors. The Audit
Committee shall meet no less than four times a year.
The Audit Committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders,
and investment community relating to corporate accounting, reporting practices
of the Company, and the quality and integrity of the financial reports of the
Company. In so doing it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial and accounting
management of the Company.
In carrying out these responsibilities, the Audit Committee will:
1. Review and recommend to the directors the independent auditors to be
selected to audit the books of the Company and its subsidiaries.
2. Review with the independent auditors and financial management of the
Company the independent auditors' fee arrangements. Fees paid to the
independent accounting firm for management advisory services and a
description of the types of services received should be reviewed with
the Committee.
3. Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit including any comments or recommendations of the
independent auditors.
4. Review with the independent auditors and with the Company's financial
and accounting management the adequacy and effectiveness of the
internal auditing, accounting and financial controls of the Company,
and elicit any recommendations that they may have for the improvement
of such internal control procedures or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of such internal controls to expose any
payments, transactions or procedures which might be deemed illegal or
otherwise improper. Further, the Committee
should periodically review company policy statements in terms of their
adequately representing a code of conduct.
5. Review the internal audit function of the Company including the
proposed programs for the coming year and the coordination of such
programs with the independent auditors, with
A-1
particular attention to maintaining the best possible effective balance
between independent and internal auditing resources.
6. Prior to each meeting, but no less than quarterly, the Committee shall
be provided a summary of findings from completed internal audits and a
progress report on the proposed internal audit plan with explanations
for any deviations from the original plan.
7. The Committee should review the interim financial statements contained
in reports to shareholders with the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements presented to the shareholders. Any
changes in accounting principles or accounting for new items should be
reviewed.
8. Prior to the release of the annual report to shareholders, the
Committee should review the financial statements to be contained in
such report with the independent auditors to determine that the
independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Any
changes in accounting principles should be reviewed.
9. At all meetings of the Audit Committee, sufficient opportunity should
be made available for the independent auditors to meet with the members
of the Audit Committee without members of management present. Among the
items to be discussed in these meetings are the cooperation that the
independent auditors received during the course of their audit.
10. Minutes of all meetings of the Audit Committee shall be submitted to
the board of directors of the Company for approval.
11. The Committee should cause to be made an investigation into any matter
brought to its attention within the scopes of its duties, with the
power to retain outside counsel for this propose if, in its judgment,
that is appropriate.
In carrying out their responsibilities the Audit Committee's policies and
procedures should remain flexible in order that it can best react to changing
conditions and assure the directors and shareholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
A-2
[MAP APPEARS HERE]
HAWAIIAN ELECTRIC INDUSTRIES, INC.
900 Richards Street, Honolulu, Hawaii 96813
HEI
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 2001, AT 9:30 A.M., IN THE
PACIFIC TOWER, 8TH FLOOR, ROOM 805, 1001 BISHOP STREET, HONOLULU, HAWAII 96813.
The undersigned hereby constitutes and appoints Robert F. Clarke, Diane J.
Plotts and Jeffrey N. Watanabe and each of them the proxy of the undersigned,
with full power of substitution, to vote all the Common Stock of the Company
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held on April 24, 2001, or at any adjournment thereof.
Said proxies are instructed to vote as indicated below. If no direction is
indicated, said proxies will vote FOR all Nominees in Class II and FOR proposal
2. Said proxies are also authorized to vote in their discretion with respect to
any other matters that may come before the meeting.
The Board of Directors recommends a vote FOR the following proposals:
1. Election of Class II directors (term ending at the 2004 Annual Meeting)
(Check one box only)
[ ] To vote FOR ALL Nominees named below, check this box.
[ ] To WITHHOLD AUTHORITY to vote for ALL Nominees named below, check this
box.
[ ] To withhold authority for any particular Nominee, strike a line
through the Nominee's name listed below:
NOMINEES: Victor Hao Li
T. Michael May
Diane J. Plotts
Kelvin H. Taketa
Jeffrey N. Watanabe
2. Election of KPMG LLP as auditor (Check one box only)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign your name exactly as it appears at the top of this proxy. Joint
owners should each sign personally. Attorney, Executor, Administrator, Trustee
or Guardian should indicate full title. If address is incorrect, please give us
the correct one.)
_______________________________ Dated______________________, 2001
Signature (no witness required)
_______________________________
Signature (if held jointly)
--------------------------------------------
PLEASE COMPLETE AND RETURN ENTIRE PROXY
--------------------------------------------