IR Report & Message vol.8
Fiscal Year from January 1, 2010 to December 31, 2010

To Our Shareholders
Overview of Operations
During 2010, large-scale development of offshore oil andgas fields continued, especially offshore Brazil and WestAfrica. Although the influence of the oil spill in the Gulf ofMexico is anticipated to remain for several years, weexpect stable growth in the floating production facilities
market in both the medium and long terms.
In 2010, Petrobras, through its wholly owned subsidiary
PNBV, signed a letter of intent for the supply, charter, andoperation of an FPSO for the BM-S-9 (Guara) Block in thegiant "pre-salt" region of the Santos Basin. The Letter ofIntent was issued to the Schahin Group and MODEC, Inc.,
who have partnered for the latest leased FPSO. TheKenji Yamada
Chairman & CEO
MODEC, Inc.

BM-S-9 block is under concession to a consortium formedby Petrobras, BG, and Repsol. MODEC will convert theVLCC Radiant Jewel into the FPSO Cidade de Sao Paulo
MV23. Scheduled for delivery during the 4th quarter of2012; the FPSO will be installed in the Guara field.
Orders totaled 173,835 million yen (up 286.2% comparedWe are pleased to report to our shareholders thefinancial results and business activities ofMODEC, Inc. for fiscal year 2010 (from January 1,
2010 to December 31, 2010).

with 2009), including orders for changes of specifications
associated with ongoing projects and for operations
services. Although steady progress was made in FPSO
construction work, revenue, which was posted by thepercentage of completion method, passed its peak withthe delivery of large-scale projects. As a result, revenue
was 146,660 million yen (down 28.2%), including revenueof charter and operations services.

1Outlook for 2011
In the previous fiscal year, a temporary gain was posted inWith political uncertainty in North Africa and the Middle

association with a review of the agreement for the Tullow

East, oil prices exceeded US$90 per barrel. Nonetheless, oilproject. In contrast, in the fiscal year under review,

developers have held down investment in recent years

deferred profit increased in association with construction

because of uncertainties over advanced economies and thework. As a result, operating profit stood at 3,563 million

effect of the Gulf of Mexico oil spill.

yen (down 14.5% from 2009), and ordinary profit was
6,156 million yen (down 17.4%). Net income was 2,735

However, to ensure a stable supply of the primary energy,

million yen, up 13.4% from the previous fiscal year, whencontinuing exploration and development is needed overan extraordinary loss associated with the scrapping of an

the medium and long terms. There are consequently great

FPSO was posted.

expectations for projects to develop large oil and gas fields
discovered offshore Brazil and West Africa.

For the 2010 fiscal year, MODEC, Inc. paid an interim
dividend of 11.25 yen per share and a year-end dividend

The Company forecasts revenue of 120,000 million yen,of 11.25 yen per share, resulting in the total annual

ordinary profit of 4,000 million yen, and net income ofdividend of 22.50 yen.

2,900 million yen on a consolidated basis for 2011. For
these financial forecasts, the Company assumes anexchange rate of 85 yen per US dollar at the time of bookclosing (81.52 yen per US dollar for actual results in fiscal2010).

Revenue

Ordinary Profit
Millions of Japanese yen

250,000

9,000
204,225

200,000

Millions of Japanese yen

5,000

7,828

7,454

7,500
146,660

150,000 144,040 143,669

Net Income
Millions of Japanese yen

6,156

6,000

4,499

4,000
3,000

2,413

4,500
100,000

3,000

50,000
0

2,000

2,529

1,357
1,000

1,500
2007

2008

2009

2010

0

2,735

2007

2008

2009

2010

0

2007

2008

2009

2010

2

Review of Operations
Highlights in Consolidated Results for Fiscal Year 2010
Millions of Japanese yen

2007

2008

2009

2010

Orders126,792

319,61445,010173,835

Revenue

144,040

143,669

204,225

146,660

Ordinary Profit

7,828

2,529

7,454

6,156

Net Income

4,499

1,357

2,413

2,735

Net Income per Share (Japanese yen)

120.28

36.30

64.52

62.09

Net Assets

48,031

40,67840,07358,323

Total Assets

133,734

142,115

168,365

146,627

Orders by service types

Revenue by service types

Millions of Japanese yen

350,000

204,225
200,000
160,000

210,000
173,835
122,927

126,792
73,963

180,961
146,660

144,040 143,669
121,892 113,688

51,923400,000

118,643

120,000

300,000

80,000200,000

40,000100,000

338,42182,68999,413

2007

53,374
2008

45,01030,742
2009

43,147
2010

021,2622007

28,803
2008

17,61820,25820092010• Other• EPCI services• Lease, Charter and O&M services• MODEC Group’s share in the “Lease, Charter and O&M services” of the affiliates accounted for by the equity method

3524,142
221,487

500,000

156,238

70,0000Millions of Japanese yen

600,000

240,000

319,614265,105

280,000

140,000

Order backlogs by service types

Millions of Japanese yen0

2007

374,679
349,998
69,76476,701
144,765
168,218
136,330

134,436 136,966

2008

2009

160,1502010

Review by Service
EPCI Services

Lease, Charter, and O&M Services

Construction work for the FPSO Cidade de Santos MV20,the FPSO Cidade de Angra dos Reis MV22, the FPSO
PSVM, and the FPSO Kwame Nkrumah MV21 progressedsteadily. As a result, revenue from EPCI services was118,643 million yen, down 34.4% compared with 2009.

Revenue from Lease, Charter, and Operations & Maintenanceservices reached 20,258 million yen, up by 15.0% comparedwith 2009.

FPSO Kwame Nkrumah MV21

The MODEC Group provided charter services on the following
FPSO/FSOs:• FSO Ta’Kuntah (Mexico)• FPSO Jasmine Venture MV7 (Thailand)• FPSO MV8 Langsa Venture (Indonesia)• FPSO Baobab Ivoirien MV10 (Core d’Ivoire)• FPSO MODEC Venture 11 (Australia)• FSO Rong Doi MV12 (Vietnam)• FPSO Cidade do Rio de Janeiro MV14 (Brazil)• FSO Cidade de Macae MV15 (Brazil)• FPSO Stybarrow Venture MV16 (Australia)• FSO Rang Dong MV17 (Vietnam)• FPSO Cidade de Niteroi MV18 (Brazil)• FPSO Song Doc Pride MV19 (Vietnam)• FPSO Cidade de Santos MV20 (Brazil)• FPSO Kwame Nkrumah MV21 (Ghana)• FPSO Cidade de Angra dos Reis MV22 (Brazil)
Operation services of FPSOs that the oil companies own:
• FPSO Fluminense (Brazil)• FPSO Pyrenees Venture (Australia)

Other Services
FPSO Cidade de Angra dos Reis MV22

As after-sales services, the Company supplied spare parts andprovided engineering support for FPSOs and other facilities
the MODEC Group had constructed and delivered to oilcompanies. Revenue from other services totaled 7,759 millionyen.

4Financial Statements
Consolidated Balance Sheet
December 31, 2010

AssetsLiabilities and Net Assets
Millions ofJapanese yen

CURRENT ASSETS:
Cash and time deposits
Accounts receivable - trade
Inventories
Short-term loans receivable
Other current assets
Less-Allowance for bad debts
Total current assets
PROPERTY AND EQUIPMENT:
Vessels and equipment
Other

INTANGIBLE ASSETSOTHER ASSETS:
Investment securities
Long-term loans receivable
Other investments
Less-Allowance for bad debts

Total assets* The figures are rounded down to the nearest million yen.

¥12,12243,082875
31,291
10,767(3)
98,135

14,574458
15,0336,820

12,356
11,5632,722(4)26,638¥146,627

Millions ofJapanese yen
CURRENT LIABILITIES:
Accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Advances received
Provision for product warranties
Other current liabilities
Total current liabilities¥41,562
17,193
6,043
2,842
2,143
766
2,564
4,700
77,816

LONG-TERM LIABILITIES:Long-term loans payable
Severance and retirement benefits for employees
Long-term accounts payable
Deferred tax liabilities
Other long-term liabilities
Total long-term liabilities

8,140
158
301709
1,176
10,486NET ASSETSSHAREHOLDERS' EQUITY:
Common stock;authorized - 102,868,000 shares
outstanding - 46,408,000 shares
Capital surplus
Retained earnings
Less-Treasury stock at cost
Total shareholders' equity

20,185
20,91521,066(1)
62,166

ACCUMULATED GAINS (LOSSES) FROM VALUATION
AND TRANSLATION ADJUSTMENTS
Net unrealized holding gains (losses) on securities
Unrealized losses on hedging derivative, net of tax
Foreign currency translation adjustments
Total accumulated gains (losses) from valuationand translation adjustments
MINORITY INTERESTS IN CONSOLIDATEDSUBSIDIARIES:Total net assets
Total liabilities, net assets* The figures are rounded down to the nearest million yen.

5(9)
(123)
(8,403)(8,535)
4,693
58,323¥146,627

Consolidated Statement of Income
For year ended December 31, 2010

REVENUE
COST OF SALES
Gross profit

Millions ofJapanese yen¥146,660
134,595
12,065SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating profit

8,501
3,563

OTHER INCOME (EXPENSES):Interest income and dividend income
Interest expense
Equity in earnings of affiliates and unconsolidated subsidiaries
Foreign exchange gain (loss), netGain on disposal of fixed asset
Gain on revaluation of derivatives
Loss on liquidation of subsidiaries and affiliates, net
Other, net
Total other income (expenses)

1,351
(521)
2,568
(1,467)209391
(568)
304
2,267

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

5,831

INCOME TAXES:
Current
Prior
Deferred

2,303
161
(129)

INCOME BEFORE MINORITY INTERESTS

3,495

MINORITY INTERESTSNET INCOME

759¥2,735* The figures are rounded down to the nearest million yen.

6Financial Statements
Consolidated Statement of Cash Flow
For year ended December 31, 2010

Millions ofJapanese yen
CASH FLOW FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments to reconcile income before income
taxes and minority interests to net cash
provided by operating activities:
Depreciation and amortization
Amortization of goodwill
Provision for (reversal of) allowance for bad debts
Provision for severance and retirement benefits foremployees
Provision for product warrantyInterest income and dividend income
Interest expense
Foreign exchange (gains) losses
Gain on valuation of derivatives
Equity in earnings of affiliates andunconsolidated subsidiariesGain on disposal of fixed asset
Loss on liquidation of subsidiaries and affiliates
Decrease (Increase) in– Accounts receivable - trade– Inventories
Increase (Decrease) in– Accounts payable - trade– Consumption tax payable– Long term accounts payable
Other, net

Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities¥5,831

958
211
(88)
12
524
(1,351)
521
939
(391)
(2,568)
(209)
568
8,269
(133)
(8,461)
(53)
(110)
3,853
8,322
1,957(486)(2,291)¥7,502Millions ofJapanese yen
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment andintangible assets
Proceeds from sales of property andequipment and intangible assets
Purchases of investments in affiliates
Purchases of investments in subsidiary
Proceeds from purchase of investments insubsidiaries resulting in change inscope of consolidation
Decrease (Increase) in short-term loans receivable
Disbursement of long-term loans receivableCollection of long-term loans receivable
Proceeds from capital reduction in affiliate
Net cash used in investing activities(20,785)(2,162)246
1,411(21,635)

CASH FLOW FROM FINANCING ACTIVITIES:
Increase (Decrease) in short-term loans payable
Repayment of long-term loans payable
Purchase of treasury stock
Cash dividends paid
Proceeds from stock issue
Net cash provided by financing activities

2,594(9,617)
0(896)
15,588
7,668

EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OFYEAR
DECREASE IN CASH AND CASH EQUIVALENTS DUETO THE CHANGE OF CONSOLIDATION SCOPE
CASH AND CASH EQUIVALENTS AT ENDING OF YEAR
* The figures are rounded down to the nearest million yen.

7¥(623)778(2,167)(15)
1,684(2,970)(9,435)31,505(9,948)¥12,122

Consolidated Statement of Changes in Net Assets
For year ended December 31, 2010

Millions of Japanese yen

Shareholders' equity

Balance at December 31, 2009

Common stock

Capital surplus

12,391

13,121

7,794

7,794

Retainedearnings

Treasury stock

Total
shareholders'equity(1)

44,761

19,249Change in items
Issuance of new shares

15,588Cash dividends paid(896)(896)

Net Income

2,735

2,735

Others(22)

Purchases of treasury stock

(22)
00

Change in items other thanShareholders' Equity—

Total change in items

7,794

7,794

1,817

0

1,817

Balance at December 31, 2010

20,185

20,91521,066(1)

62,166Discrepancies in appraisals and conversions
Net unrealized
Foreign currency Total discrepancies
Deferred Hedge
holding gains onin appraisals andtranslation
Reservesecurities
conversions
adjustments
Balance at December 31, 2009(6)

(1,327)(5,191)(6,525)

Minority
Interests1,838

Total net assets
40,073

Change in items
Issuance of new shares

15,588Cash dividends paid

—

(896)

Net Income—

2,735

Others—(22)

Purchases of treasury stock—0

Change in items other thanShareholders' Equity

(2)

1,204

(3,211)(2,010)

2,855

844

Total change in items

(2)

1,204

(3,211)(2,010)2,855

18,250

Balance at December 31, 2010

(9)

(123)

(8,403)(8,535)

4,693

58,3238

Information
General Information
As of December 31, 2010

Company name

MODEC, Inc.

FoundedJune 1, 1987

Head office

Kasumigaseki Common Gate West Tower
2-1, Kasumigaseki 3-chome, Chiyoda-ku,
Tokyo 100-0013 Japan
TEL: +81.3.6203.0200
FAX: +81.3.5512.1600

Paid-in capitalBusiness• Lease, Operation & Maintenance servicesof FPSO and FSO
Subsidiaries and
40 Companies
Affiliated Companies
HSEQ Certificate• ISM Code• ISO 9001:2008

20,185,600,000 Japanese yen

Number of employees 101

• Turn-key EPCI contractor of FPSO, FSO,
TLP and CP Semi

• ISO 14001:2004[non-consolidated, including temporary employees]• OHSAS 18001:2004

2,410 [consolidated, including temporary employees]

Management
As of April 1, 2011

Directors

Executive Officers
President & Chief Executive Officer

Toshiro Miyazaki*

President & Chief Executive Officer

Yasuo AsamaManaging Director & Executive Managing Officer

Yasuo Asama*

Managing Director & Executive Managing Officer

Shashank Karve

Director & Executive Officer

Yoshihide Shimamura

Executive Managing Officer

Norio Nagata

External Director

Takashi Nishino

Executive Managing Officer

Shunichi Yamashita External Director

Shashank Karve*

Director & Executive Officer

Toshiaki Urashima

Masayoshi Otori

Executive Officer

Takeshi Setozaki

Executive Officer

Kiyoshi Nakamura

Executive Officer

External Director

Corporate Auditors

9*Executive officer also serving as a director.

Toshiro Miyazaki

Shuji Nakura

Corporate Auditor

Yoshihiro Takizawa

External Corporate Auditor

Akira Nishihata

External Corporate Auditor

Masaru Soda

External Corporate Auditor

Stock Information
As of December 31, 2010

Number of Authorized Shares

102,868,000

Number of Issued Shares

46,408,000

Number of Shareholders

8,471

Major Shareholders
As of December 31, 2010

Name
Mitsui Engineering & Shipbuilding Co., Ltd.

Number ofShares Held

Ratio ofShareholding (%)

23,251,000

50.10

Mitsui & Co., Ltd.

6,957,50014.99

Trust & Custody Services Bank, Ltd. (Pension Trust Account)

1,337,700

2.88

The Chase Manhattan Bank, NA London SL Omnibus Account

1,132,016

2.43

The Master Trust Bank of Japan, Ltd. (Trust Account)

957,700

2.06

Japan Trustee Services Bank, Ltd. (Trust Account 9)883,800

1.90

Morgan Stanley & Co. International Plc

758,598

1.63

Japan Trustee Services Bank, Ltd. (Trust Account)

686,500

1.47

Sojitz Corporation

431,000

0.92

Northern Trust Global Services Ltd Re Norwegian Clients Account430,200

0.92

Shareholders Breakdown
As of December 31, 2010

Number of shareholders
5431

Number of shares
115,486
3,641,392

127
25
6,251,622

5,680,300

8,234

30,719,200

Individuals, others
Financial institutions
Other Japanese companies
Non-Japanese
Securities companies

10Stock Information
Fiscal year end

December 31 of each year

General meeting ofshareholders

March of each year

Shareholder registration
date for year-end dividend

December 31 of each year

Shareholder registration
date for interim dividend

June 30 of each year

Shareholding unit

100 shares

Transfer agent

Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku,
Tokyo 105-8574, JapanTransfer agent office

Chuo Mitsui Trust and Banking Co., Ltd.
Transfer Agent Dept.
(Transfer Agent Administration Center)
8-4, Izumi 2-chome, Suginami-ku,
Tokyo 168-0063, Japan
Tel: +81.3.3323.7111

MODEC, Inc.
Kasumigaseki Common Gate West Tower
2-1, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo 100-0013
Japan
TEL: +81.3.6203.0200
http://www.modec.com