We would like to express our sincere gratitude to our shareholders and other stakeholders for your continued support of Bank of the Ryukyus. Once again this year we have prepared an annual report to facilitate your understanding of the Bank’s business performance and financial position.

The Japanese economy continued to grow during the term under review, against the backdrop of a firm trend in capital investment, which was made possible by high capacity utilization rates and excellent corporate earnings. The economy was also underpinned by a solid undertone in both consumer spending and exports.

In Okinawa, the continued popularity of the prefecture as a holiday resort region led to the influx of an increased number of tourists, as airlines laid on more flights and hotels were able to accommodate more guests thanks to new construction. Consumer spending in the prefecture showed a firm undertone, while the construction industry benefited from increased spending on private-sector construction, particularly homes. As a result, the industry ended the year with a moderate growth over the previous term. Employment conditions throughout the period under review continued to improve as a whole, and the number of corporate bankruptcies declined somewhat from the previous term.

Mindful of the importance of repaying the Bank’s public fund debt, the management of the Bank actively took on the new challenge of switching the Bank’s management stance from defensive to offensive. As a set of guidelines for this process, the new medium-term business plan Challenge 51 was drawn up, and actions under this plan have been implemented since April 1, 2007.

The new plan incorporates three core strategies: 1) strengthening the Bank’s ability to serve as a financial institution focused on the provision of solutions to customers’ business problems; 2) creating a new brand image for the Bank; and 3) reorganizing the Bank’s management structure to make possible sustainable growth over the long term. Through the implementation of these three strategies, we aim to achieve the undisputed status of leading bank in Okinawa Prefecture in terms both of value of deposits and loans, and of service quality.

Through the steady implementation of the new medium-term plan, we are working to ensure that the Bank enjoys the strong trust and support of the Okinawan public, so that the Bank comes to be regarded as a truly indispensable player in the economy and society of the prefecture.

July 2007

Isao Oshiro,

President