IR Report & Message vol.12
Fiscal Year from January 1, 2014 to December 31, 2014

To Our Shareholders

Overview of Operations
During the consolidated fiscal year under review, theglobal economy continued to expand at a modest pace,underpinned by robust US growth driven by consumer
spending, which offset slower growth in emerging markets
and the eurozone.

Toshiro Miyazaki
President & CEO
MODEC, Inc.

We are pleased to report to our shareholders thefinancial results and business activities ofMODEC, Inc. for the 2014 fiscal year (from January 1,
2014 to December 31, 2014).

Looking at crude oil prices, WTI oil prices gained on
geopolitical risks through the first half of the year, before
plunging to the level of 50 dollars per barrel at the end of
the year amid worries about global oversupply. While thecurrent weakness in the oil market will affect the fielddevelopment plans in the short term, oil companies arenonetheless likely to continue the deepwater explorationand production activities, with a view to ensuring thesustainable supply of energy resources. Business related tofloating production systems, the MODEC Group's mainstaybusiness, is also expected to experience stable growth in
the medium and long term.
In December 2014, the Company and its Brazilian partner
Schahin Group received an order from Petróleo Brasileiro
S.A. ("Petrobras"), the Brazilian state oil company, for thesupply and charter services of an FPSO that would bedeployed at Tartaruga Verde and Tartaruga Mestiça fields
in the C-M-401 block in the Campos Basin.
With the contribution of this new project as well aschange orders in existing projects and orders for operation
services, orders totaled 395,762 million yen (down 23.7%year on year) on a consolidated basis. Revenue was1

378,523 million yen (up 48.8%), reflecting progress in
FPSO construction work.

of 16.25 yen per share, resulting in the total annual
dividend of 32.50 yen.

Operating profit stood at 8,566 million yen (up 131.3%),
reflecting progress in the FPSO construction work.
Ordinary profit amounted to 18,337 million yen (up15.9%) due to the posting of stable equity in earnings ofthe affiliates accounted for by the equity method engaged
in the lease business. Net income came to 5,422 million
yen (up 10.2%), mainly due to an increase in corporate
income taxes paid.

Outlook for 2015
The Company forecasts revenue of 300,000 million yen,operating profit of 3,000 million yen, ordinary profit of
9,000 million yen and net income of 3,000 million yen on
a consolidated basis for 2015. For these financial forecasts,
the Company assumes an exchange rate of 110 yen per
US dollar at the time of book closing (120.56 yen per US
dollar for actual results in fiscal 2014).

For the 2014 fiscal year, the Company paid an interim
dividend of 16.25 yen per share and a year-end dividend

2

Review of Operations

Revenue
400,000

378,523300,000

Millions of Japanese yen

20,000129,968
5,000

2012

2013

2014

Orders02011

2012

2013

2014

395,762

987,917896,669

543,692

800,000

551,265

400,000

250,0000

200,000

2011

2012

2014

Millions of Japanese yen

350,399359,375

2014

2013

600,000

500,000

2013

2012

703,869

750,000

200,000

3

2011

Millions of Japanese yen

342,667
277,7100Order backlogs for MODEC Group’s share in
the “Lease, Charter and O&M services” of theaffiliates accounted for by the equity method

1,000,000

2012

5,422

2,000

5,055

518,4822011

4,922

3,067

Order backlogs

600,000

0

5,130

9,296

Millions of Japanese yen

400,000

6,000

4,000

186,891

2011

Millions of Japanese yen

15,82010,000100,000

0

18,337

15,000254,401

200,000

Net Income

Ordinary Profit
Millions of Japanese yen

2013

2014

0

186,706

2011

2012

2013

2014

Consolidated Financial Highlights
Millions of Japanese yen

2011

2012

2013

2014

Orders277,710342,667

518,482395,762

Revenue

129,968

186,891

254,401

378,523

Ordinary Profit

5,055

9,296

15,82018,337Net Income

3,067

5,130

4,922

5,422

Net Income per Share (Japanese yen)

66.11

110.56106.07101.67

Net Assets

52,23060,38980,444

109,631

Total Assets

124,130

154,104

215,674

348,477

EPCI Services

Lease, Charter and O&M Services

Following projects were under construction in 2014:• FPSO Cidade de Mangaratiba MV24 (Brazil)

The MODEC Group provided charter services on the following
FPSO/FSOs:• FPSO Baobab Ivoirien MV10 (Cote 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 Cidade de Angra dos Reis MV22 (Brazil)• FPSO Cidade de Sao Paulo MV23 (Brazil)• FPSO Cidade de Mangaratiba MV24 (Brazil)*Delivered in 2014

• FPSO Cidade de Itaguai MV26 (Brazil)• FPSO Prof. John Evans Atta Mills (Ghana)• FPSO Cidade de Caraguatatuba MV27 (Brazil)• FPSO Cidade de Campos dos Goytacazes MV29 (Brazil)*New order in 2014

*Charter started in October 2014

The MODEC Group also provided operation & maintenanceservices on the following FPSOs that are owned by the oilcompanies:• FPSO Fluminense (Brazil)• FPSO Pyrenees Venture (Australia)• FPSO Kwame Nkrumah MV21 (Ghana)• FPSO Raroa (New Zealand)4

Financial Statements
Consolidated Balance Sheet
December 31, 2014

AssetsLiabilities and Net Assets
Millions ofJapanese yen

CURRENT ASSETS:
Cash and time deposits
Accounts receivable - trade
Inventories
Deferred tax assets
Short-term loans receivable
Other current assets
Less-Allowance for bad debts
Total current assets

30,632
168,012
5,929
4,815
41,008
10,075(481)
259,992

PROPERTY AND EQUIPMENT:
Vessels and equipment
Buildings and structures
OtherConstruction in progress
Total property and equipment

14,142139
2,616
26
16,924INTANGIBLE ASSETS:

7,795

INVESTMENTS AND OTHER ASSETS:
Investment securities
Long-term loans receivable
Deferred tax assets
Claims provable in bankruptcy, claims provable inrehabilitation and other
Other investments
Less - allowance for bad debts
Total investments and other assets

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

537,388
20,153
5,053
1,824
1,168
(1,824)
63,763

348,477

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

160,077
5,967
2,198
8,677
8,521
4,657
5,692
7,359
203,152

LONG-TERM LIABILITIES:Long-term loans payable
Deferred tax liabilitiesOther long-time liabilities
Total long-term liabilities

15,205615
19,87235,693

Total liabilities
NET ASSETSSHAREHOLDERS' EQUITY:
Common stock;authorized - 102,868,000 shares
outstanding - 56,408,000 shares
Capital surplus
Retained earnings
Less-treasury stock at cost
Total shareholders' equity
ACCUMULATED GAINS (LOSSES) FROM VALUATION:
Unrealized gains/(losses) on available-for-salesecurities, net of tax
Unrealized gains/(losses) on hedging derivative,
net of tax
Foreign currency translation adjustments
Retirement liability adjustments for foreignconsolidated subsidiaries, net of tax
Total accumulated gains (losses) from valuation

238,845

30,12230,852
34,338(1)
95,3111(13,741)
15,402(197)
1,464
12,855MINORITY INTERESTS IN CONSOLIDATEDSUBSIDIARIES:
Total net assets

109,631

Total liabilities and net assets

348,477

Consolidated Statement of Income
For year ended December 31, 2014

Revenue
COST OF SALES
Gross profit

Millions ofJapanese yen
378,523
356,565
21,958SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating profit

13,391
8,566

OTHER INCOME (EXPENSES):Interest income and dividend income
Interest expense
Commission fee
Equity in earnings of affiliates and unconsolidated subsidiaries
Foreign exchange gain (loss), net
Loss on disposal of property and equipment
Impairment loss
Loss on liquidation of subsidiaries and affiliates
Provision of allowance for doubtful accounts
Other, net
Total other income (expenses)

2,826
(740)
(153)
6,694
236
(1,207)
(604)
(214)
(229)
1,137
7,743

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

16,309INCOME TAXES:
Current
Prior
Deferred

10,916131(1,935)

INCOME BEFORE MINORITY INTERESTS

7,197

MINORITY INTERESTS

1,775

NET INCOME

5,4226Financial Statements
Consolidated Statement of Cash Flow
For year ended December 31, 2014

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 (used in) operating activities:
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (Decrease) of allowance for bad debts
Increase (Decrease) of severance and retirement
benefits for employees
Increase (Decrease) of directors' bonuses
Increase (Decrease) of product warranty
Increase (Decrease) of repairs
Interest income and dividend income
Interest expense
Foreign exchange (gains) losses
Equity in earnings of affiliates and unconsolidated
subsidiaries
Loss on disposal of property and equipment
Gain on liquidation of subsidiaries and affiliates
Decrease (Increase) in– Accounts receivable - trade– Inventories– Claims provable in bankruptcy, claims
provable in rehabilitation and other
Increase (Decrease) in– Accounts payable - trade– Consumption tax payableOther, net

Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

7

16,309

5,257
604
399
226
164
2,040
1,137(2,826)
740
884(6,694)
1,207
214(74,482)(1,916)(229)

63,499(1,179)9,419
14,633
3,693(860)(5,133)
12,333

Millions ofJapanese yen
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease (Increase) in short-term loans receivable
Disbursement of long-term loans receivableCollection of long-term loans receivable
Purchases of property and equipment andintangible assetsProceeds from sales of property and equipment
and intangible assets
Purchases of investments in subsidiaries andaffiliates
Proceeds from liquidation of subsidiaries andaffiliates
Net cash used in investing activities(18,033)

CASH FLOW FROM FINANCING ACTIVITIES:
Increase (Decrease) in short-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of stocks
Cash dividends paid
Repayments of finance lease obligations
Net cash provided by financing activities(4,584)(1,935)19,873(1,611)(29)
11,713

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
CASH AND CASH EQUIVALENTS AT ENDING OF YEAR

(4,826)(12,349)
2,876(3,755)
3(3)
20

2,833
8,846
21,78630,632

Consolidated Statement of Changes in Net Assets
For year ended December 31, 2014

Millions of Japanese yen

Shareholders' equity
Commonstock
Balance at January 1, 2014

Capitalsurplus20,185

20,915

9,936

9,936

Retainedearnings
30,528

Total
Shareholders’equity

Treasurystock(1)

71,628Change in items
Issuance of stocks

19,873

Cash dividends paid

(1,612)(1,612)Net Income

5,422

5,422

Change in items other thanShareholders' Equity
Total Change in items

9,936

9,936

3,809

—

23,683

Balance at December 31, 2014

30,12230,852

34,338(1)

95,311Discrepancies in appraisals and conversions

Balance at January 1, 2014

Unrealized
losses onavailable-forsale securities,
net of taxes

Unrealized
losses on
hedging
derivatives,
net of taxes

Foreigncurrencytranslation
adjustments(0)(4,977)

4,306

Minority
Retirement liability
Total
adjustments for discrepancies interests inforeign
in appraisals consolidated
subsidiaries
consolidated
andsubsidiaries
conversions(145)

(817)

9,633

Total netassets

80,444

Change in items
Issuance of stocks

19,873

Cash dividends paid

(1,612)Net Income

5,422

Change in items other thanShareholders' Equity
Total Change in items
Balance at December 31, 2014

1(8,763)

11,095

(52)

2,281

3,222

5,503

1(8,763)

11,095

(52)

2,281

3,222

29,187

1(13,741)

15,402(197)

1,46412,855

109,6318

Information
General Information
As of December 31, 2014

Company name

MODEC, Inc.

Ticker symbol

TSE 6269

Date Founded

June 1, 1987

Head officeNihonbashi Maruzen Tokyu Building
3-10, Nihonbashi 2-chome
Chuo-ku, Tokyo 103-0027
Japan
TEL: +81.3.5290.1200 (Main Line)
FAX: +81.3.5290.1505

Paid-in capital

30,122 million Japanese yen

Number of employees*including contract employees

HSEQ Certificate

175 [non-consolidated]
3,469 [consolidated]

MODEC is a general contractor specializing in engineering,procurement, construction and installation of floatingproduction systems including Floating Production, Storage
and Offloading (FPSO) vessels, Floating Storage andOffloading (FSO) vessels, Tension Leg Platforms (TLPs),P ro d u c t i o n S e m i - S u b m e r s i b l e s , M o b i l e O ff s h o re
Production Units (MOPUs) and other new technologies
which will meet the challenges of various types of gas
production floaters.
MODEC provides Floating Production System operationand maintenance services around the world.

• ISM Code• ISO 9001:2008• ISO 14001:2004• OHSAS 18001:2007• ISO/TS 29001:2010

Management
As of March 27, 2015

Directors

9Corporate Auditors

Toshiro Miyazaki

President & Chief Executive Officer

Shuji Nakura

Corporate Auditor

Shigeru Usami

Managing Director & Executive Managing Officer

Takehiko Tsubokawa

External Corporate Auditor

Teruhisa Konishi

Director & Executive Officer

Hiroki Higuchi

External Corporate Auditor

Akira Nishihata

External Director

Taku Yamamoto

External Corporate Auditor

Shinsuke Nippo

External Director

Takeshi Kanamori

External Director

Katsuya Natori

External Director

Stock Information
As of December 31, 2014

Number of Authorized Shares

102,868,000

Number of Issued Shares

56,408,000Number of Shareholders

21,705Major Shareholders
As of December 31, 2014

Number ofShares Held

Ratio ofShareholding (%)

Mitsui Engineering & Shipbuilding Co., Ltd.

28,261,000

50.10

Mitsui & Co., Ltd.

8,387,300

14.86

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

1,284,400

2.27Japan Trustee Services Bank, Ltd. (Trust Account)

645,500

1.14

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)474,500

0.84

CMBL S.A. RE MUTUAL FUNDS

450,200

0.79

The Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

338,400

0.59

THE BANK OF NEW YORK 133612

298,900

0.52

Japan Trustee Services Bank, Ltd. (Trust Account 6)

221,1000.39

Mitsui Sumitomo Insurance Co., Ltd.

220,0000.39

NameShareholders Breakdown
As of December 31, 2014

Number of Shareholders
127
35

16050

Number of Shares Held725,3033,607,172

10,435,824

4,764,800

21,33336,874,901

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

Sumitomo Mitsui Trust Bank, Ltd.
4-1, Marunouchi 1-Chome, Chiyoda-Ku,
Tokyo 100-8233 Japan

Transfer agent office

Sumitomo Mitsui Trust Bank, Ltd.
Stock Transfer Agency
Business Planning Dept.
8-4, Izumi 2-chome, Suginami-ku,
Tokyo 168-0063 Japan
Tel: +81.3.3323.7111

MODEC, Inc.
Nihonbashi Maruzen Tokyu Building
3-10, Nihonbashi 2-chome
Chuo-ku, Tokyo 103-0027
Japan
TEL: +81.3.5290.1200 (Main Line)
FAX: +81.3.5290.1505
http://www.modec.com

Cover : FPSO Cidade de Mangaratiba MV24
Photo by : Steferson Faria / Image Bank of Petrobras