(1)

Description of Business. Prior to June 29, 2012, Alexander & Baldwin, Inc. ("A&B" or the "Company") was a wholly owned subsidiary of Alexander & Baldwin Holdings, Inc. ("Holdings"). On June 29, 2012, Holdings distributed to its shareholders all of the shares of A&B stock in a tax-free distribution (the "Separation"). Holders of Holdings common stock received one share of A&B common stock for each share of Holdings common stock held at the close of business on June 18, 2012, the record date. On July 2, 2012, A&B began regular trading on the New York Stock Exchange under the ticker symbol "ALEX" as an independent, public company. A&B is headquartered in Honolulu and operates in three segments in two industries-Real Estate and Agribusiness.

Real Estate: The Real Estate Industry consists of two segments, both of which have operations in Hawaii and on the Mainland. The Real Estate Development and Sales segment generates its revenues through the development and sale of land and commercial and residential properties. The Real Estate Leasing segment owns, operates, and manages retail, office, and industrial properties. Real estate activities are conducted through A&B Properties, Inc. and various other wholly owned subsidiaries of A&B.

Agribusiness: Agribusiness, which contains one segment, produces bulk raw sugar, specialty food grade sugars, and molasses; markets and distributes specialty food-grade sugars; provides general trucking services, mobile equipment maintenance, and repair services in Hawaii; and generates and sells electricity, to the extent not used in the Company's Agribusiness operations.

Separation. On June 29, 2012, the Company completed its legal separation from Alexander & Baldwin Holdings, Inc. In connection with the Separation, Holdings entered into several agreements with the Company that govern the ongoing relationship between Holdings and the Company, including a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement and Transition Services Agreement.

Additionally, in connection with the Separation and pursuant to the terms of the Separation Agreement with Holdings:

·	Holdings contributed $159.3 million to A&B, which was used to pay down A&B's revolving credit facilities;

·	Intercompany receivables, payables, loans and other accounts between A&B and its subsidiaries and Holdings and its subsidiaries, in existence immediately prior to the Separation were satisfied and/or settled; and

·	Intercompany agreements and all other arrangements in effect immediately prior to the distribution have been terminated or canceled, subject to certain exceptions.

Separation expenses were $4.4 million and $6.1 million for the three and six months ended June 30, 2012, respectively, and were primarily related to professional fees. Included in these separation expenses were $0.8 million of incremental share-based compensation recognized in the second quarter related to the exchange of existing employee options with replacement options in the new company. Cash separation costs are expected to total approximately $14 million and, in addition to professional fees, cash separation costs also included debt refinancing fees related to its new credit facilities that will be amortized to expense over time and accrued income taxes that will be paid on previously deferred intercompany gains.

On June 4, 2012, in connection with the Separation, A&B entered into an amended three-year unsecured note purchase and private shelf agreement ("A&B Note Agreement") with Prudential Investment Management, Inc. ("PIM") and certain affiliates of PIM under which A&B may issue notes in an aggregate amount up to $300 million less the sum of all principal amounts then outstanding. The A&B Note Agreement replaces a $50 million private shelf agreement between Holdings and Prudential dated April 25, 2001 and a $400 million private shelf agreement between Holdings and Prudential dated April 19, 2006, as amended. Under the A&B Note Agreement, approximately $207 million of existing notes, consisting of the Series A Notes, Series B Notes, Series C Notes, Series D Notes, and 2001 Notes (collectively, the "A&B Pru Notes"), were amended or replaced. The interest rates of the A&B Pru Notes remained unchanged, but the Series AX Notes, Series BX Notes, and Series CX Notes extended the maturity dates of the Series A Notes, Series B Notes, and Series C Notes which they replace.

Principal negative covenants contained in the A&B Note Agreement include the requirements that:

(a)

A&B's consolidated shareholders equity not be less than the sum of $612 million plus, to the extent positive, 25 percent of consolidated net income for each fiscal quarter ended after March 31, 2012;

(b)

A&B's ratio of adjusted earnings before interest, taxes, depreciation and amortization (commonly referred to as "EBITDA") to fixed charges, as defined, not be less than 1.50 to 1.00 at the end of any fiscal quarter;

(c)

A&B's ratio of debt to total adjusted asset value, as defined, not be greater than 0.50 to 1.00;

(d)

A&B's ratio of unencumbered income producing assets value to unsecured debt, as defined, not be less than 1.75 to 1.00; and

(e)

The aggregate principal amount of priority debt, as defined, at any time should not exceed 20 percent of total adjusted asset value, as defined.

On June 4, 2012, also in connection with the Separation, A&B entered into an agreement (the "A&B Revolving Credit Agreement") with First Hawaiian Bank ("FHB"), Bank of America, N.A. ("BAML"), and the other lenders party thereto, for a revolving credit facility. The A&B Revolving Credit Agreement supersedes Holdings' $230 million Credit Agreement, dated August 5, 2011, with FHB, BAML, and the other lenders party thereto.

The A&B Revolving Credit Agreement, which expires in June 2017, provides A&B with an aggregate $260 million, 5-year unsecured commitment ("A&B Senior Credit Facility"), with an uncommitted $90 million increase option. The A&B Senior Credit Facility also provides for a $100 million sub-limit for the issuance of standby and commercial letters of credit and a $50 million sub-limit for swing line loans.

The A&B Senior Credit Facility is subject to commitment fees, letter of credit fees and interest on draws based on A&B's ratio of total debt to total adjusted asset value ("A&B Credit Ratio"), as defined. Commitment fees and letter of credit fees are computed using rates tied to a sliding scale, which range from 0.15% to 0.35% for commitment fees and 1.50% to 2.50% for letter of credit fees, based on the A&B Credit Ratio. Interest rates on draws under the A&B Senior Credit Facility are also tied to a sliding scale of rates based on the A&B Credit Ratio, plus London Interbank Offered Rate ("LIBOR") for the applicable borrowing period. These rates range from 1.50% to 2.50% plus LIBOR. Alternatively, A&B may select an interest rate based on a "base rate option," as defined in the agreement.

Amounts drawn under the A&B Senior Credit Facility are expected to bear interest at rates ranging from 1.70% to 1.90% plus LIBOR, based on estimates of A&B's Credit Ratio. The maturity date for revolving draws under the A&B Senior Credit Facility ranges from one week to six months, at A&B's option. Amounts drawn under the swing line bear interest at a rate agreed between A&B and BAML, and swing line loans mature no later than ten business days from the date of the draw.

The A&B Revolving Credit Agreement contains various restrictive covenants that are substantially the same as those contained in the A&B Note Agreement. Both the A&B Revolving Credit Agreement and the A&B Note Purchase Agreement contain customary representations and warranties and events of default. At June 30, 2012, the Company believes it was in compliance with all of its covenants. While there can be no assurance that the Company will remain in compliance with its covenants, the Company expects that it will remain in compliance.