We would like to extend our sincere thanks for your continued support of the Bank of the Ryukyus. We have prepared the present annual report to further the public's understanding of our bank.

Regarding the recent operating environment, the local economy remains sluggish despite improvement in Japan's economy as a whole, centered on major companies. Many issues must be resolved before small and medium-sized companies will be able to show a full-scale recovery in performance.

Amid these circumstances, the Bank, in accordance with the plan drafted in August 2003 to strengthen relationship banking functions, is making its utmost efforts to facilitate both fund procurement by small and medium-sized companies (SMEs) and business restructuring by corporate borrowers.  In this way, the Bank is working to revitalize the local economy by enhancing financing for SMEs while simultaneously ensuring the soundness of its asset portfolio and securing profitability.

The Bank's medium-term management plan, Quality 2003, has already begun to yield results.  In fiscal 2004, the final year of the three-year plan, we are placing top priority on the establishment of a stable earnings structure.  To this end, the Bank is working to expand financing for corporate customers, reduce non-performing loans, promote a wide range of services for individuals, and improve the quality of our business processes.

Customers are expected to become increasingly selective in their dealings with financial institutions.  The Bank of the Ryukyus is working to build closer ties with its customers and develop the capabilities to handle all its customers' financial needs. We plan to build a strong financial base to maintain the trust of the local community and the market.

July 2004

Isao Oshiro

President