IR Report & Message vol.9
Fiscal Year from January 1, 2011 to December 31, 2011

To Our Shareholders
Overview of Operations
During the consolidated fiscal year, oil prices remained
high at approximately US$90, supported by the strong
demand from China and India. Continued politicaluncertainty in the Middle East has prompted expectations
for further development of the large offshore oil fields,
especially in Brazil and Africa. In this environment,
businesses related to floating production facilities are set
to continue to experience steady growth.
We received the following two new orders in 2011.

Toshiro Miyazaki
President & CEO
MODEC, Inc.

We are pleased to report to our shareholders thefinancial results and business activities ofMODEC, Inc. for fiscal year 2011 (from January 1,2011 to December 31, 2011).

1- OSX-3 FPSO Project
In July 2011, OSX 3 Leasing B.V. signed an EPCI contract
for the supply of the OSX-3 FPSO, a Floating, Production,Storage, and Offloading (FPSO) vessel to be utilized withinblock BM-C-39 of the Campos Basin, offshore Brazil, onthe Waikiki Pero Inga fields. OSX 3 Leasing B.V. is asubsidiary of OSX Brasil S.A., an EBX Group Company.
MODEC is responsible for the engineering, procurement,construction, mobilization, installation, and commissioningof the FPSO.
- Petrobras Cernambi Sul FPSO Project
In September 2011, Petróleo Brasileiro S.A. ("Petrobras"),through its subsidiary Tupi B.V., on behalf of Consortium
BM-S-11, signed a Letter of Intent (LOI) for the supply,charter, and operations of a Floating, Production, Storage,and Offloading (FPSO) vessel for the BM-S-11 block(Cernambi South) in the giant "pre-salt" region of theSantos Basin with its water depth of 2,300m. The BM-S-11
block is under concession to a consortium formed byPetrobras (65%), BG Group (25%), and Petrogal Brasil S.A– Galp Energia (10%).

With the contribution of the above new projects, orders
totaled 277,710 million yen (up 59.8% year on year) on aconsolidated basis. Revenue was 129,968 million yen(down 11.4%), reflecting FPSO construction work and theprovision of charter and operations services. Operating
profit stood at 293 million yen (a decline of 91.8% fromthe previous fiscal year), principally reflecting the fact thatthe delivery of existing large-scale projects progressed in
the previous fiscal year and income based on thepercentage of completion method was not fully recorded
because orders for large new projects were received in thesecond half of the fiscal year.

For the 2011 fiscal year, MODEC, Inc. paid an interim
dividend of 12.50 yen per share and a year-end dividendof 12.50 yen per share, resulting in the total annual
dividend of 25.00 yen.

Outlook for 2012
The Company forecasts revenue of 150,000 million yen,ordinary profit of 5,000 million yen and net income of
3,500 million yen on a consolidated basis for 2012. For
these financial forecasts, the Company assumes anexchange rate of 80 yen per US dollar at the time of bookclosing (77.74 yen per US dollar for actual results in fiscal2011).

Ordinary profit amounted to 5,055 million yen (down
17.9% year on year) and net income came to 3,067
million yen (up 12.1%), chiefly reflecting an increase inequity in earnings of affiliates and unconsolidated
subsidiaries as a result of FPSO sales.

Revenue

Ordinary Profit
Millions of Japanese yen

250,000

8,000

146,660

150,000 143,669

129,968

5,055

3,000
2,413

2008

2009

2010

2011

0

3,067

1,357

2,529
1,000

2,000

50,000

2,735

2,000

4,000

100,000

0

6,156

6,000

Millions of Japanese yen

4,000

7,454

204,225

200,000

Net Income
Millions of Japanese yen

2008

2009

2010

2011

02008

2009

2010

2011

2

Review of Operations
Highlights in Consolidated Results for Fiscal Year 2011
Millions of Japanese yen

2008

2009

2010

2011

Orders319,61445,010173,835

277,710

Revenue

143,669

204,225

146,660

129,968

Ordinary Profit

2,529

7,454

6,156

5,055

Net Income

1,357

2,413

2,735

3,067

Net Income per Share (Japanese yen)

36.30

64.52

62.09

66.11

Net Assets

40,67840,07358,32352,230Total Assets

142,115

168,365

146,627

124,130

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

Order backlogs
Millions of Japanese yen

400,000

Millions of Japanese yen

400,000

359,375

355,924

Millions of Japanese yen

400,000

319,614300,000

277,710300,000

300,000

213,667
200,000

229,914200,000

173,835

100,000

200,000

100,000

168,218

186,706
136,330 144,765

100,000

45,010032008

2009

2010

2011

02008

2009

2010

2011

020082009

2010

2011

EPCI Services

Lease, Charter and O&M Services

Following projects were under construction in 2011:• FPSO PSVM (Angola)• FPSO Cidade de Sao Paulo MV23 (Brazil)• FPSO OSX-3 (Brazil)• FPSO Cidade de Mangaratiba MV24 (Brazil)

The MODEC Group provided charter services on the following
FPSO/FSOs:• FSO Ta’Kuntah (Mexico)• FPSO Jasmine Venture MV7 (Thailand)*Charter terminated in June 2011

• FPSO MV8 Langsa Venture (Indonesia)*Charter terminated in January 2011

• 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 Kwame Nkrumah MV21 (Ghana)*Client purchased the FPSO in December 2011
(MODEC continues to provide O&M services)• FPSO Cidade de Angra dos Reis MV22 (Brazil)
Operation services of FPSOs that the oil companies own:
• FPSO Fluminense (Brazil)• FPSO Pyrenees Venture (Australia)

FPSO PSVM

4

Financial Statements
Consolidated Balance Sheet
December 31, 2011

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¥17,320
48,4862,315
6,244
7,696(345)
81,717PROPERTY AND EQUIPMENT:
Vessels and equipment
Other
Total property and equipment

11,462500
11,963INTANGIBLE ASSETS:

6,429

INVESTMENTS AND OTHER ASSETS:
Investment securities
Long-term loans receivable
Other investments
Total investments and other assets

10,901
8,754
4,364
24,020Total assets¥124,130

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

5,255
168
3,687
9,111

NET 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
20,91523,027(1)
64,127

ACCUMULATED GAINS (LOSSES) FROM VALUATION
AND TRANSLATION ADJUSTMENTS:
Unrealized losses on available-for-sales securities,
net of taxes
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 and net assets* The figures are rounded down to the nearest million yen.

5¥46,232
1,999
3,459
3,878
2,746
1,525
1,889
1,056
62,788(11)(6,579)(10,182)(16,772)

4,876
52,230¥124,130

Consolidated Statement of Income
For year ended December 31, 2011

REVENUE
COST OF SALES
Gross profit

Millions ofJapanese yen¥129,968
122,352
7,615

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating profit

7,322
293

OTHER INCOME (EXPENSES):Interest income and dividend income
Interest expense
Equity in earnings of affiliates and unconsolidated subsidiaries
Loss on valuation of derivatives
Foreign exchange gain (loss), net
Gain on sales of subsidiaries and affiliates' stock
Impairment loss
Provision of allowance for doubtful accounts
Other, net
Total other income (expenses)

1,402
(613)
5,197(387)(1,000)65(278)
(305)
162
4,243

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS:

4,536

INCOME TAXES:
Current
Prior
Deferred

1,950
1,015
(1,715)

INCOME BEFORE MINORITY INTERESTS

3,287

MINORITY INTERESTSNET INCOME

219¥3,067* The figures are rounded down to the nearest million yen.

6Financial Statements
Consolidated Statement of Cash Flow
For year ended December 31, 2011

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 (reversal of) severance and retirement
benefits for employees
Provision for (reversal of) directors' bonuses
Provision for (reversal of) product warranty
Provision of (reversal of) allowance for doubtful
accounts
Interest income and dividend income
Interest expense
Foreign exchange (gains) losses
Loss (Gain) on valuation of derivatives
Equity in earnings of affiliates and unconsolidated
subsidiaries
Gain on sales of subsidiaries' stocks
Impairment loss
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

7¥4,536

2,773
257
32
96(596)305(1,402)613
717
387(5,197)(65)
278(4,806)(1,482)Millions ofJapanese yen
CASH FLOW FROM INVESTING ACTIVITIES:
Decrease (Increase) in short-term loans receivable
Disbursement of long-term loans receivable
Purchases of property and equipment andintangible assets
Purchases of investments in affiliates
Purchases of investments in subsidiaries
Payments for sales of investments in subsidiaries
resulting in change in scope of consolidation
Net cash provided by investing activities
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (Decrease) in short-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR
CASH AND CASH EQUIVALENTS AT ENDING OF YEAR
* The figures are rounded down to the nearest million yen.

9,016
(39)
(301)
(526)
4,514
3,761
(648)
(2,835)¥4,792¥30,793(3,343)(1,364)(3,347)(1,222)(63)
21,453(14,411)(5,149)(1,101)(20,662)
(384)
5,197
12,122¥17,320

Consolidated Statement of Changes in Net Assets
For year ended December 31, 2011

Millions of Japanese yen

Shareholders' equity

Balance at December 31, 2010

Common stock

Capital surplus

20,185

20,915RetainedearningsTreasury stock

Total
shareholders'equity(1)

62,166

21,066

Change in items
Cash dividends paid

(1,102)(1,102)Net Income

3,067

3,067

(4)

(4)

OthersChange in items other thanShareholders' Equity
Total change in items
Balance at December 31, 2011

—
—

—

1,960

—

1,960

20,185

20,91523,027(1)

64,127Discrepancies in appraisals and conversions
Unrealized losses Unrealized losses
Foreign currency Total discrepancies
on available-foron hedging
in appraisals andtranslation
sales securities,
derivatives,conversions
adjustments
net of taxesnet of taxes
Balance at December 31, 2010

(9)

(123)

(8,403)(8,535)

Minority
Interests
4,693

Total net assets

58,323

Change in items
Cash dividends paid—

(1,102)Net Income—

3,067

Others—(4)

Change in items other thanShareholders' Equity(2)(6,455)(1,778)(8,237)183(8,053)

Total change in items(2)(6,455)(1,778)(8,237)183(6,093)

Balance at December 31, 2011(11)

(6,579)(10,182)(16,772)

4,876

52,2308

Information
General Information
As of December 31, 2011

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 services
of FPSO and FSO
Subsidiaries and39 Companies
Affiliated Companies
HSEQ Certificate• ISM Code• ISO 9001:2008

20,185,600,000 Japanese yen

Number of employees 123

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

• ISO 14001:2004[non-consolidated, including contract employees]• OHSAS 18001:20042,548 [consolidated, including contract employees]

Management
As of April 1, 2012

Directors

Corporate Auditors

Toshiro Miyazaki

President & Chief Executive Officer

Shuji Nakura

Corporate Auditor

Yasuo AsamaManaging Director & Chief Operating Officer

Yoshihiro Takizawa

External Corporate Auditor

Shunichi Yamashita External Director

Takehiko Tsubokawa

External Corporate Auditor

Masafumi Okada

External Director

Hiroki Higuchi

External Corporate Auditor

Ichizo Kobayashi

External Director

Stock Information
As of December 31, 2011

Number of Authorized Shares

102,868,000

Number of Issued Shares

46,408,000

Number of Shareholders

8,2589Major Shareholders
As of December 31, 2011

Name
Mitsui Engineering & Shipbuilding Co., Ltd.

Number ofShares Held

Ratio ofShareholding (%)

23,251,000

50.10

Mitsui & Co., Ltd.

6,957,500

14.99

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

1,163,900

2.50

JP Morgan Chase Bank 385166

1,024,800

2.20

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

947,300

2.04

Japan Trustee Services Bank, Ltd. (Trust Account 9)877,700

1.89

Japan Trustee Services Bank, Ltd. (Trust Account)

701,600

1.51

CBLDN DNB S/A FEARNLEY FONDS ASA512,900

1.10Sojitz Corporation

431,000

0.92

Nomura Asset Management U.K. Limited Sub A/C Evergreen Nominees Ltd

382,600

0.82

Shareholders Breakdown
As of December 31, 2011

Number of Shareholders
5130

Number of Shares Held
150,3623,570,471

134
33
6,394,467

5,587,400

8,010

30,705,300

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 yearShareholder 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, Japan

Transfer 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*	The Chuo Mitsui Trust and Banking Co., Ltd., Chuo Mitsui Asset Trust andBanking Co., Ltd. and the Sumitomo Trust and Banking Co., Ltd. will merge
to form Sumitomo Mitsui Trust Bank, Ltd. effective on April 1, 2012.
The merger is subject to the approval of the relevant authorities.	Since April 1, 2012 is a banking holiday, the custody service will start fromApril 2, 2012.
Transfer agent		 4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo		 Sumitomo Mitsui Trust Bank, Ltd.
Transfer agent office		 Sumitomo Mitsui Trust Bank, Ltd.		 Transfer Agent Dept.		 (Address and phone number will be the same.)

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