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 your understanding.

In the summer of the term under review, it became clear that Japan’s economy was back on the recovery tract, thanks to progress in inventory adjustments in the IT sector and a pickup in exports. An increase in capital investment was seen, and consumer spending was firm. In Okinawa, the economy maintained its recovery trend on the whole. Although the construction sector was generally sluggish, the tourist sector was brisk. As a result of the continued popularity of Okinawa as a tourist destination, there was an increase in visitors, airline flights to the islands, and new hotels and resorts. Consumer spending was also firm. Employment improved, and the number of corporate bankruptcies reached an all-time low.

The Bank of the Ryukyus had nearly completed the disposal of nonperforming loans in fiscal 2005. In April 2005, we launched a new medium-term management plan under the name Leap 2005, and made steady progress toward achieving the goals of this plan. The specific goals are to increase our earnings capability by pursuing potentially profitable businesses, and to build a sound financial position. To achieve these goals, we are working to: 1) expand our customer base; 2) redesign our work procedures; and 3) create a system to support a more long-term, strategic approach to management.

The various measures included in this medium-term management plan have the objectives of increasing the Bank’s competitiveness, raising its profitability, and maintaining the trust of the people of Okinawa. In these ways, we are working to offer a full range of banking services that will satisfy our customers’ diverse needs.

In viewutinher methods.

July 2006

Isao Oshiro,

President