ASIAN DEVELOPMENT BANK - Management Reports 2024

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INFORMATION STATEMENT

The Asian Development Bank (ADB) intends to issue its notes and bonds (Securities) from time to time with maturities and on terms determined by market conditions at the time of sale. ADB may sell the Securities to dealers or underwriters who may resell them or ADB may sell the Securities directly or through agents.

The specific currency, aggregate principal amount, maturity, interest rate or method for determining such rate, interest payment dates, purchase price to be paid by ADB, any terms for redemption or other special terms, form and denomination of any Securities, information as to stock exchange listing and the names of the dealers, underwriters or agents in connection with the sale of such Securities being offered by ADB at a particular time, as well as any other information that may be required, will be set forth in a prospectus or supplemental information statement or similar document.

AVAILABILITY OF INFORMATION

The Information Statement will be filed with the U.S. Securities and Exchange Commission electronically through the EDGAR system and will be available at the web address https://www.sec.gov/edgar.

ADB will provide, without charge, additional copies of this Information Statement upon request. Written or telephone requests should be directed to ADB’s principal office at 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines, Attention: Funding Division, Treasury Department, tel: +63 2 8632 4444, fax: +63 2 8636 2444 or to the following ADB representative offices: (i) Westendstrasse 28, 60325 Frankfurt am Main, Germany, tel: +49 69 2193 6400; (ii) Kasumigaseki Bldg. 8th Floor, 3-2-5 Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan, tel: +81 3 3504 3160, fax: +81 3 3504 3165; and (iii) 900 19th Street NW, Suite 700, Washington, D.C. 20006, U.S.A., tel: +1 202 984 0100.

The Information Statement is also available on ADB’s Investor Relations website at https://www.adb.org/work-with-us/investors . Other documents and information on ADB’s website are not intended to be incorporated by reference in this Information Statement.

Recipients of this Information Statement should retain it for future reference, since it is intended that each prospectus or supplemental information statement or similar document issued after the date hereof will refer to this Information Statement for a description of ADB and its financial condition, until a new information statement is issued.

23 April 2024

The issuance of this Information Statement or any prospectus or supplemental information statement or similar document and any offering and sale of Securities does not constitute a waiver by ADB or by any of its members, Governors, Alternate Governors, Executive Directors, Alternate Executive Directors, officers or employees of any of the rights, immunities, privileges or exemptions conferred upon any of them by the Agreement Establishing the Asian Development Bank or by any statute, law or regulation of any member of ADB or any political subdivision of any member, all of which are hereby expressly reserved.

No person is authorized to give any information or to make any representation not contained in this Information Statement, prospectus, any supplemental information statement or similar document. Any information or representation not contained herein must not be relied upon as having been authorized by ADB or by any of its dealers, underwriters or agents. Neither this Information Statement nor any prospectus or supplemental information statement or similar document constitutes an offer to sell or solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation.

Except as otherwise indicated, all amounts in this Information Statement and any prospectus or supplemental information statement or similar document are expressed in United States dollars.

This Information Statement contains forward-looking statements which may be identified by such terms as “believes”, “expects”, “intends” or similar expressions. Such statements involve a number of assumptions and estimates that are based on current expectations, which are subject to risks and uncertainties beyond ADB’s control. Consequently, actual future results could differ materially from those currently anticipated.

SUMMARY INFORMATION (As of 31 December 2023, unless otherwise indicated)

The Asian Development Bank (ADB) is an international organization established in 1966 and owned by its 68 members. Under Strategy 2030, which sets the direction for ADB to respond effectively to the changing needs of Asia and the Pacific, ADB continues to sustain its efforts to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. To achieve Strategy 2030’s vision, ADB focuses on seven operational priorities and in addition, focus on expanding private sector operations, catalyzing and mobilizing financial resources, and strengthening knowledge services. ADB assists its members and partners by providing loans, technical assistance, grants, guarantees, and equity investments to promote social and economic development.

ADB was founded mainly to act as a financial intermediary to transfer resources from global capital markets to developing member countries for economic development. Its ability to intermediate funds from global capital markets for lending to its developing members is an important element in achieving its development missions.

ADB’s five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People’s Republic of China (6.4%), India (6.3%), and Australia (5.8%).

Equity: ADB’s members have subscribed to $142,741 million of capital as of 31 December 2023, $7,153 million of which was for paid-in shares subscribed and the remainder of which is callable. The callable capital is available as needed for debt service payments and thus provides the ultimate backing for ADB’s borrowings and guarantees. It cannot be called to make loans.

Net Income: Net income for 2023 was $938 million, as compared to net income of $2,169 million in 2022. Allocable net income for the year ended 31 December 2023 was $1,423 million, compared with $1,099 million in 2022.

Lending Headroom: ADB’s lending limitation policy limits the total amount of disbursed loans, disbursed equity investments and related prudential buffer, and the maximum amount that could be demanded from ADB under its guarantee portfolio, to the total amount of ADB’s unimpaired subscribed capital, reserves, and surplus, exclusive of the special reserve. As of 31 December 2023, the total of such loans (including other debt securities), equity investments and related prudential buffer, and guarantees was $153,054 million ($146,516 million – 2022), compared with the maximum lending ceiling of $190,780 million ($188,206 million – 2022), which resulted in a headroom of $37,726 million ($41,690 million – 2022).

Risk Management: ADB seeks to mitigate exchange rate risks by matching its liabilities in various currencies with assets in those same currencies. ADB uses derivatives, including currency and interest rate swaps, in connection with its operations in order to reduce its borrowing costs, generate investment income, and manage its balance sheet risks. The derivative assets and liabilities totaled $96,283 million and $101,486 million, respectively. The notional principal amount of outstanding interest rate swaps totaled $102,693 million. To control its credit exposures on swaps, ADB has set credit rating requirements for counterparties. In addition, ADB requires all swap transactions to be subject to collateral support requirements.

The above information should be read in conjunction with the detailed information and financial statements appearing elsewhere in this Information Statement.

USE OF PROCEEDS

The net proceeds to ADB from the sale of Securities will be included in the ordinary capital resources of ADB and used in its ordinary operations. (See Part II C. Operating Activities ).

This document provides Management’s Discussion and Analysis (MD&A) of the financial condition and results of operations for the Asian Development Bank for the year ended 31 December 2023. ADB undertakes no obligation to update any forward looking statements.

EXECUTIVE SUMMARY

Under Strategy 2030, which sets the direction for the Asian Development Bank (ADB) to respond effectively to the changing needs of Asia and the Pacific, ADB continues to sustain its efforts to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. This overarching corporate strategy lays out seven operational priorities and other focus areas such as expanding private sector operations, catalyzing and mobilizing financial resources, and strengthening knowledge services.[1]

In 2023, ADB delivered total commitments of $23.6 billion ($20.5 billion – 2022) and disbursements of $17.8 billion ($19.7 billion – 2022).[2] As the development needs of its developing member countries (DMCs) become more demanding and the operating environment gets more complex, ADB continues to boost its capacity to deliver high-quality solutions and innovative initiatives efficiently and in a timely manner (footnote 1).

Financial Results: Ordinary capital resources (OCR) reported net income of $938 million ($2,169 million – 2022) and allocable net income of $1,423 million ($1,099 million – 2022) in 2023. The net income decreased mainly due to the unrealized losses from fair value changes of financial instruments. The allocable net income (non-GAAP measure) increased due to higher income from liquidity investments, release of provision for credit losses, and lower administrative expenses.

The OCR balance sheet continued to grow in line with its growing lending operations. Loans outstanding balance as of 31 December 2023 was $151.0 billion, a $6.7 billion increase from $144.3 billion at the end of 2022. Liquidity investments after swaps increased by $1.9 billion to $49.4 billion at the end of 2023 from $47.5 billion as of 31 December 2022. Borrowings after swaps increased by $6.3 billion to $152.4 billion as of 31 December 2023 from $146.1 billion at the end of 2022. In 2023, ADB issued $28.9 billion bonds ($36.1 billion – 2022).

Reference Rate Transition: The Flexible Loan Product (FLP) is the primary loan product for sovereign regular OCR and nonsovereign operations, replacing the London interbank offered rate (LIBOR)-based loan (LBL). All sovereign regular OCR LBLs completed the transition to FLP loans in 2022. As of 31 December 2023, all nonsovereign OCR LBLs completed the transition to FLP loans including certain loans temporarily using Synthetic United States dollar (USD) LIBOR[3] until the loan agreements’ amendments are finalized.

Capital Management Reforms: In September 2023, ADB’s Board of Directors approved the capital management reforms that unlocked $100 billion in new funding capacity over the next decade to address the overlapping, simultaneous crises in Asia and the Pacific, including climate change. The reforms, which were introduced through an update of ADB’s Capital Adequacy Framework (CAF), expanded ADB’s annual new commitment capacity and ADB’s ability to support development efforts across Asia and the Pacific.

New Operating Model:[4] ADB has adopted a new operating model that will enable ADB to increase its capacity as the region’s climate bank with an ambition to deliver $100 billion in cumulative climate finance during the period of 2019 through 2030; strengthen its work to develop the private sector and mobilize private investments in the region; provide a larger range of high-

1 ADB. 2023. Work Program and Budget Framework, 2024 – 2026. 2 The figures are for ordinary capital resources (OCR) and Special Funds. Special Funds include the Asian Development Fund (ADF), Technical Assistance Special Fund (TASF), Japan Special Fund (JSF), Regional Cooperation and Integration Fund (RCIF), Asia Pacific Disaster Response Fund (APDRF), Climate Change Fund (CCF) and Financial Sector Development Partnership Special Fund (FSDPSF).

3 The Synthetic USD LIBOR rate published by the Intercontinental Exchange Benchmark Administration Limited (IBA) as compelled by the relevant regulator, the United Kingdom (UK) Financial Conduct Authority (FCA).

4 ADB. 2022. Organizational Review: A New Operating Model to Accelerate ADB’s Transformation Toward Strategy 2030 and Beyond. Manila.

quality development solutions for its DMCs; and modernize ways of working to make it more responsive, agile and closer to clients. These four key shifts under the new operating model will help ADB to deliver the most impactful development solutions to its DMCs. The new operating model was rolled out in the second quarter of 2023.

Innovative Finance Facility for Climate in Asia and the Pacific Financing Partnership Facility (IF-CAP FPF):[5] In April 2023, ADB’s Board of Directors approved the establishment of IF-CAP FPF, a landmark program which could significantly ramp up support for the region in the battle against climate change. The IF-CAP FPF will include: (i) a multi-donor grant trust fund to support technical assistance, grant components of projects and other activities, and (ii) a multidonor guarantee trust fund as well as other guarantees and risk participations which will cover a portfolio of ADB sovereign loans to expand ADB’s lending headroom for new climate change projects. IF-CAP financing will contribute to ADB’s raised ambition for $100 billion from its own resources for climate change for 2019-2030.

International Finance Facility for Education (IFFEd) Trust Fund:[6] In April 2023, the Board of Directors approved: (i) the establishment of the IFFEd trust fund that will accept grant contributions from IFFEd and other fund donors, which will be used to finance grant components of projects, support technical assistance and other activities, and (ii) entering into a financing partnership with IFFEd which will provide a guarantee for a synthetic portfolio of ADB sovereign loans and sovereign-guaranteed loans with the potential to catalyze up to $2 billion in new education loans allowing ADB to meet its target for the sector.

5 ADB. 2023. Establishment of the Innovative Finance Facility for Climate in Asia and the Pacific Financing Partnership Facility Manila.

6 ADB. 2023. International Finance Facility for Education: Proposed Participation by the Asian Development Bank . Manila.

I. OVERVIEW

The Asian Development Bank (ADB), a multilateral development bank, was established in 1966 under the Agreement Establishing the Asian Development Bank (the Charter).[1] ADB is owned by 68 members, 49 of which are regional members providing 63.4% of its capital and 19 nonregional members providing 36.6% of its capital.

ADB provides various forms of financial assistance to its developing member countries (DMCs). The main instruments are loans, technical assistance (TA), grants, guarantees, and equity investments. These instruments are funded through ordinary capital resources (OCR), Special Funds, and trust funds. The Charter requires that funds from each resource be kept and used separately. Trust funds are generally funded by contributions and administered by ADB as the trustee.

ADB also offers debt management products to its sovereign and sovereign-guaranteed borrowers and entities fully guaranteed by members such as interest rate swaps and cross currency swaps (including local currency swaps) for their third-party liabilities. In addition, ADB provides policy dialogue and transaction advisory services to its DMCs and private sector clients to promote – public private partnerships in the region, and mobilizes financial resources through its cofinancing operations, which access official and other concessional, commercial, and export credit sources to maximize the development impact of its assistance. Cofinancing for ADB projects can be in the form of external loans, grants for TA and components of loans, equity investments, and credit enhancement products such as guarantees and syndications.

In 2023, ADB continued to focus on implementing Strategy 2030, its long-term corporate strategy, to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. ADB delivered total commitments of $23.6 billion ($20.5 billion – 2022) and total disbursements of $17.8 billion ($19.7 billion – 2022).[2]

ADB has adopted a new operating model to accelerate its transformation and more effectively serve the rapidly changing needs of its DMCs in Asia and the Pacific. The new operating model will enable ADB to increase its capacity as the region’s climate bank; strengthen its work to develop the private sector and mobilize private investments in the region; provide a larger range of high-quality development solutions for its DMCs; and modernize ways of working to make it more responsive, agile and closer to clients. These four key shifts will help ADB deliver on the development goals of Strategy 2030.

Underpinning its role as Asia and the Pacific’s climate bank, ADB has placed combating climate change and its consequences at the top of its development agenda. For the year ended 31 December 2023, ADB committed $9.8 billion in climate financing. ADB is scaling up support to address climate change, disaster risks, and environmental degradation, making headway toward its elevated ambition to deliver $100 billion in cumulative climate finance to its DMCs from 2019 to 2030.

In 2023, ADB has updated its capital adequacy framework unlocking $100 billion in new funding capacity over the next decade to address the overlapping, simultaneous crisis in Asia and the Pacific. In addition, ADB also (i) established the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP) which will expand ADB’s lending headroom for new climate projects; (ii) entered into sovereign exposure exchange agreements with other multilateral development banks

1 ADB. 1966. Agreement Establishing the Asian Development Bank . Manila.

2 The figures are for ordinary capital resources (OCR) and Special Funds. Special Funds include the Asian Development Fund (ADF), Technical Assistance Special Fund (TASF), Japan Special Fund (JSF), Regional Cooperation and Integration Fund (RCIF), Asia Pacific Disaster Response Fund (APDRF), Climate Change Fund (CCF) and Financial Sector Development Partnership Special Fund (FSDPSF).

(MDBs) to reduce portfolio concentration risks, and (iii) approved the establishment of the International Finance Facility for Education (IFFEd) trust fund which will provide a guarantee for a synthetic portfolio of ADB sovereign loans. The reforms or innovative initiatives are part of ADB’s response to the call for MDBs to do more with their resources and faster.

II. ORDINARY CAPITAL RESOURCES

OCR provides financial assistance to sovereign and nonsovereign borrowers in DMCs in the form of loans, equity investments, and other debt securities. In addition to direct lending, OCR also provides guarantees to assist DMC governments and nonsovereign borrowers in securing commercial funds for ADB-assisted projects and provides transaction advisory services to sovereign and nonsovereign clients.

Funding of OCR lending, investment and other ordinary operations comes from three distinct sources: borrowings from the capital markets and private placements; paid-in capital provided by shareholders; and accumulated retained income (reserves). To fund its OCR operations, ADB issues debt securities in the international and domestic capital markets. ADB's debt securities carry the highest possible investment ratings from three major international credit rating agencies. The funding strategy is aimed at ensuring availability of funds for operations at the most stable and lowest possible cost. Such strategy has enabled OCR to achieve cost-efficient funding levels for its borrowing members.

A. Basis of Financial Reporting

ADB’s basis of financial reporting are (i) statutory reporting, which is in accordance with accounting principles generally accepted in the United States (US GAAP) reporting requirements, and (ii) management reporting, which is used as the primary measure to make financial management decisions and to monitor key financial ratios. The key financial performance indicator under these two bases is net income for statutory reporting and allocable net income for management reporting.

Statutory reporting. ADB prepares OCR financial statements in accordance with US GAAP. ADB manages its balance sheet by selectively using derivatives to minimize interest rate and currency risks associated with its financial instruments. Derivatives are used to enhance asset and liability management of individual positions and overall portfolios. ADB has elected not to define any qualifying hedging relationships, not because economic hedges do not exist, but rather because the application of hedging criteria under the accounting standards does not make fully evident ADB’s risk management strategies.

ADB reports all derivative instruments on the balance sheet at fair value and recognizes the changes in fair value for the year as part of net income. To apply a consistent accounting treatment between the borrowings and their related swaps, ADB elects to measure all borrowings that are swapped or are intended to be swapped in the future at fair value. All investments for liquidity purpose, other debt securities classified as available for sale, and equity investments (except for those accounted for under the equity method) are reported at fair value. ADB continues to report its loans, other debt securities classified as held-to-maturity, and the remaining borrowings at amortized cost.

Management reporting (non-GAAP measure). ADB also reports OCR financial results based on internal management reporting basis which is used as the primary measure to make financial management decisions and to monitor key financial ratios.

ADB reports allocable net income, which is defined as net income after appropriation of guarantee fees to special reserve and certain adjustments reported in the cumulative revaluation adjustments account.[3] The cumulative revaluation adjustments account sets aside the impact of unrealized gains or losses from fair value changes associated with certain financial instruments and from translation adjustments of non-functional currencies, and unrealized gains or losses from equity investments accounted for under the equity method.

ADB intends to hold most borrowings and swaps until maturity or call, hence interim net unrealized gains and losses reported under the statutory reporting basis will generally converge with the net realized income and expenses that ADB recognizes over the life of these financial instruments.

For equity investments, ADB generally holds its investments until ADB’s development role has been fulfilled. Any gains or losses from equity investments recorded at fair value are realized and are deemed available for allocation when ADB exits the investments. Therefore, the periodic net unrealized gains or losses are excluded from the allocable net income until the exit date.

The management reporting basis balance sheet reconciled from the statutory reporting basis balance sheet as of 31 December 2023 is provided in the Appendix.

3 ADB’s Charter stipulates that the Board of Governors shall determine the allocation of net income annually.

B. Overall Financial Results

OCR reported net income of $938 million ($2,169 million – 2022) and allocable net income of $1,423 million ($1,099 million – 2022) for the year ended 31 December 2023. Table 1 presents the overall financial results for 2023 and 2022.

Table 1: Overall Financial Results for the Years Ended 31 December

($ million)

($million)
Item	2023 2022 Change
Revenue from loans — operationsa Sovereign regular Sovereign concessional Nonsovereign Revenue from investments for liquidity purpose Interest Realized losses on sale of investments Revenue from equity investments — operations Net realized gainsb Dividends and others Realized gains on equity method investmentsc Unrealized gains on equity method investmentsc Revenue from guarantees — operations Revenue from other debt securities — operations Interest and others Realized gains Revenue from other sources Borrowings and related expensesd Release of provision (Provision) for credit losses Administrative expenses — OCR Other expenses Net unrealized (losses) gains Fair value changes Reclassification of unrealized gains on divested equity investments b Translation adjustments of nonfunctional currencies	7,525 3,319 4,206 6,358 2,348 4,010 673 667 6 494 304 190 2,273 1,041 1,232 2,312 1,095 1,217 (39) (54) 15 86 98 (12) 24 71 (47) 13 12 1 27 2 25 22 13 9 28 31 (3) 48 38 10 48 37 11 – 1 (1) 64 56 8 (7,913) (2,639) (5,274) 66 (7) 73 (680) (775) 95 (24) (19) (5) (535) 1,026 (1,561) (539) 1,093 (1,632) (9) (63) 54 13 (4) 17
Net income	938 2,169 (1,231)
Appropriation of guarantee fees to special reserve	(28) (31) 3
Net income after appropriation of guarantee fees to special reserve	910 2,138 (1,228)
Adjustments Net unrealized losses (gains) Unrealized gains on equity method investmentsc	513 (1,039) 1,552 535 (1,026) 1,561 (22) (13) (9)
Allocable net income (non-GAAP measure)	1,423 1,099 324

( ) = negative, ADB = Asian Development Bank, OCR = ordinary capital resources

a Includes interest revenue, commitment charges, amortization of front-end fees and loan origination cost and interest on asset swaps. Excludes funding costs.

b Sale of equity investments in 2023 resulted in reclassification of the unrealized gains up to 31 December 2022 of $9 million ($63 million – up to 31 December 2021) to realized gains. The net realized gains up to the date of sale in 2023 amounted to $24 million ($71 million – 2022). c Pertains to ADB's proportionate share of gains or losses from equity method investments.

d Net of $1 million realized gains from early redemption of borrowings in 2022.

Net income. Net income for 2023 decreased to $938 million, from $2,169 million reported in 2022, mainly because of the unrealized losses from fair value change of financial instruments.

Allocable net income.[4] OCR allocable net income for 2023 increased to $1,423 million from $1,099 million in 2022, mainly due to the higher income from liquidity investments, release of provision for credit losses, and lower administrative expenses.

The change in net income and allocable net income were driven by the following factors.

Revenue from loans increased by $4,206 million primarily because of the higher average interest rates (Figure 1) applied to regular OCR loans and increase in average loans outstanding in 2023 (Figure 2),
Revenue from investments for liquidity purpose increased by $1,232 million mainly because of the $1,217 million increase in interest revenue driven by the yield improvement and increase in average balances (Figure 2),
Revenue from equity investments, excluding unrealized gains on equity method investments, decreased by $21 million ($64 million – 2023, $85 million – 2022) mainly due to the lower net realized gains from divestments, partially offset by the higher realized gains from equity method investments,
Borrowings and related expenses increased by $5,274 million mainly because of the higher level of short-term interest rates (Figure 1), and increase in average outstanding borrowings (Figure 2). Consistent with the market movements, average cost of borrowings under management reporting basis increased to 5.2% in 2023 from 1.9% in 2022,
Release of provision for credit losses amounted to $66 million for the year ended 31 December 2023. The release of provision in 2023 was mainly due to the improved economic conditions, nonsovereign exposure decline, repayments of impaired loans, and increased volume of risk transfers.
Administrative expenses of OCR decreased by $95 million primarily because of the lower net periodic pension and post-retirement medical benefit costs due to improved funded status, and

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4 Allocable net income is defined as net income after appropriation of guarantee fees to special reserve and certain adjustments set aside in the cumulative revaluation adjustments account.

$535 million net unrealized losses for the year ended 31 December 2023 ($1,026 million net unrealized gains – 2022) was largely due to the fair value losses of derivatives driven mainly by the change in medium- and long-term interest rates from end of 2022 levels (Table 2).

Table 2: Details of Net Unrealized Gains (Losses) for the Years Ended 31 December

($ million)

($million)
Item	2023	2022 Change
Fair value changes from:	(539)	1,093 (1,632)
Borrowings and related derivatives	49	355 (306)
Loans related derivatives	(401)	432 (833)
Investments related derivatives	(250)	245 (495)
Equity investments	63	61 2
Reclassification of unrealized gains on divested equity investment	(9)	(63) 54
Translation adjustments of nonfunctional currencies	13	(4) 17
Total	(535)	1,026 (1,561)

( ) = negative.

Selected Financial data . Selected financial data are presented in Table 3. For the year ended 31 December 2023, under statutory reporting, return on earning assets and return on equity decreased because of the lower net income compared to 2022. Under management reporting basis, the return on earning assets and return on equity increased because of the higher allocable net income. Return on loans, return on investments for liquidity purposes, and cost of borrowings, under both reporting bases, increased because of the higher levels of short-term interest rates in 2023 compared to 2022.

Table 3: Selected Financial Data

(%, unless otherwise stated)

Item			2023	2022	2021
Operational Highlights ($ million)
Loans, Guarantees, EI, and ODS Committeda			22,518	19,271	22,180
Loans, EI, and ODS Disbursements			17,077	18,834	17,828
Loans and ODS Principal Repayments and	Prepayments		10,585	9,237	8,514
Loans, EI, and ODS Outstanding			153,088	146,385	139,308
Statutory Reporting Basis
Net Income ($ million)			938	2,169	730
Return on Earning Assetsb			0.5	1.1	0.4
Return on Equity c			1.7	4.2	1.4
Return on Loansd			4.7	2.6	1.4
Return on Investments for Liquidity Purposee			3.9	2.6	1.5
Cost of Borrowings f			5.2	1.6	1.0
Management Reporting Basis (non-GAAP measure)		g
Allocable Net Incomeh($ million)			1,423	1,099	1,161
Return on Earning Assets b			0.7	0.6	0.6
Return on Equity c			2.7	2.1	2.2
Return on Loansd			5.0	2.3	1.2
Return on Investments for Liquidity Purpose	e		4.5	2.2	1.2
Cost of Borrowingsf			5.2	1.9	0.3
Capital Utilization Ratio i			70.0	83.9	74.0

EI = equity investments, ODS = other debt securities.

Note: All ratios are based on average monthly balances. Amounts and ratios are for the year ended 31 December except for outstanding balances and capital utilization ratio, which are as of year-end.
a Includes commitments under the private sector programs namely, the Trade and Supply Chain Finance and the Microfinance Program.
b Net income (for statutory reporting basis) or allocable net income (for management reporting basis) divided by average earning assets. Earning assets comprise investments for liquidity purpose, loans outstanding, equity investments, and other debt securities (all after swaps, if applicable).
c Net income (for statutory reporting basis) or allocable net income (for management reporting basis) divided by average equity balances.
d Interest revenue on loans, commitment fees, other revenue or expenses on loans and related swaps, and gains or losses on related swaps divided by average outstanding loans after swaps. For the year ended 31 December 2023, under statutory basis reporting, the return on regular and concessional OCR loans was 5.5% and 1.7%, respectively, while under management basis reporting, the return on regular and concessional OCR loans was 5.8% and 2.1%, respectively.
e Interest revenue and gains or losses on investments and related swaps divided by average balances of investments after swaps.
f Financial expenses and gains or losses on borrowings and related swaps divided by average outstanding borrowings after swaps.
g Management reporting basis ratios exclude impact of unrealized gains or losses from fair value changes associated with certain financial instruments, unrealized gains or losses on equity method investments, and nonnegotiable and noninterest-bearing demand obligations on account of subscribed capital.
h Allocable net income is defined as net income after appropriation of guarantee fees to special reserve and certain adjustments set aside in the cumulative revaluation adjustments account.
i Capital utilization ratio is the ratio of the total economic capital used to usable equity. The capital utilization ratio as of 31 December 2023 is computed based on the revised capital adequacy framework approved by the Board in September 2023. Capital utilization ratios for previous periods were based on the 2020 capital adequacy framework.

C. Operating Activities

ADB provides financial assistance under its ordinary operations to its DMCs through loans, guarantees, equity investments and other debt securities to help DMCs meet their development needs. ADB also provides policy dialogue and transaction advisory services to its DMCs and private sector clients to promote public–private partnerships in the region. ADB promotes cofinancing of its projects and programs to complement its assistance with funds from official and commercial sources, including export credit agencies. ADB uses commitments as the basis for corporate targets to measure operational performance for both sovereign and nonsovereign operations. Table 3 shows the 3-year trend in operational highlights.

1. Loans

ADB is authorized under the Charter to make, participate in or guarantee loans to its DMCs, to any of their agencies, instrumentalities or political subdivisions, and to any entities or enterprises operating within such countries, as well as to international or regional agencies or entities concerned with the economic development of the region. Such loans are made only for projects or programs of high developmental priority.

ADB’s projects undergo an evaluation and approval process that considers factors such as economic, social, environmental, technical, institutional and financial feasibility, integrity, governance, effect on the general development activity of the country, contribution to economic development, capacity of the borrowing country to service additional external debt, effect on domestic savings and balance of payments, impact of new technologies on productivity, and expansion of employment opportunities.

ADB generally requires that the proceeds of its loans and the proceeds of the loans it guarantees be used only for procurement of goods and services produced in and supplied from member countries. Loan disbursements must comply with the requirements specified in the loan agreements. ADB’s staff review progress and monitor compliance with ADB policies. ADB’s Independent Evaluation Department, reporting directly to ADB’s Board of Directors, evaluates the development effectiveness of ADB’s operations.

Lending Headroom. ADB’s lending limitation policy limits the total amount of disbursed loans, disbursed equity investments and related prudential buffer, and the maximum amount that could be demanded from ADB under its guarantee portfolio, to the total amount of ADB’s unimpaired subscribed capital, reserves, and surplus, exclusive of the special reserve. As of 31 December 2023, the total of such loans (including other debt securities), equity investments and related prudential buffer, and guarantees was $153,054 million ($146,516 million – 2022), compared to the maximum lending ceiling of $190,780 million ($188,206 million – 2022), which resulted in a headroom of $37,726 million ($41,690 million – 2022).

Loans — operations. ADB’s OCR lending falls into two categories: sovereign and nonsovereign. Sovereign loans consist of sovereign regular OCR loans and sovereign concessional OCR loans. Sovereign regular OCR loans are available to sovereign and sovereign-guaranteed borrowers in ADB DMCs that have attained higher economic development. Sovereign concessional OCR loans are available for the poorest and most vulnerable members of ADB. ADB also provides lending without sovereign guarantee to privately-held or state-owned or subsovereign entities. In its nonsovereign operations, ADB provides financial assistance based on market-based terms and conditions. ADB, as needed, will help mobilize additional debt from diverse institutions, such as private and public financial institutions and development partners.

OCR offers lending products broadly in three modalities:

Project – Also known as investment lending, it finances expenditures incurred for discrete investment projects and focuses on project implementation. Disbursements in this modality are linked to expenditures for inputs. Nonsovereign loans fall under this modality.
Policy-based – This modality provides sovereign budget support for structural reforms and development expenditure programs in DMCs. In certain circumstances, it may also be used to provide balance of payments or counter-cyclical fiscal support. It is linked to the implementation of policy reforms, disbursed quickly, and targeted to sector-wide and economy-wide impact.

Results-based – It supports government-owned sector programs and disburses ADB funds based on the achievement of program results.

Table 4 shows OCR’s loans outstanding by modality.

Table 4: OCR Loans Outstanding by Modality as of 31 December 2023 and 2022 ($ million)

	($ million)	($ million)
2023	Sovereign		NSO	Total
	Regular	Concessional

Project Loan	71,747	21,685	6,096	99,528
Policy-based Loan	35,862	10,291	–	46,153
Results-based Loan	5,198	700	–	5,898
Total Outstanding	112,807	32,676	6,096	151,579
Accounting adjustmentsa	227	(130)	(38)	59
	113,034	32,546	6,058	151,638
Allowance for credit losses on loans	(96)	(175)	(381)	(652)
Loans Outstanding 2022	112,938	32,371	5,677	150,986

Project Loan	68,689	21,449	6,513	96,651
Policy-based Loan	33,303	9,741	–	43,044
Results-based Loan	4,732	610	–	5,342
Total Outstanding	106,724	31,800	6,513	145,037
Accounting adjustmentsa	219	(154)	(42)	23
	106,943	31,646	6,471	145,060
Allowance for credit losses on loans	(116)	(193)	(426)	(735)
Loans Outstanding	106,827	31,453	6,045	144,325

– = nil, ( ) = negative, NSO = nonsovereign, OCR = ordinary capital resources. Note: Numbers may not sum precisely because of rounding. a Includes fair value adjustment on concessional loans, unamortized loan origination cost, and unamortized front-end fee.

A summary of the total OCR loan portfolio by member country as of 31 December 2023 is shown in OCR-6 of the Financial Statements. A breakdown by sector of total OCR loans as of 31 December 2023 and 2022 is shown in Figure 3.

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Figure 3: Sectoral Breakdown of OCR Loans
as of 31 December 2023 and 2022
($ billion)
2023: $151.6 billion 2022: $145.0 billion
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OCR = ordinary capital resources.
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Notes: Number may not sum precisely because of rounding. OCR loans include sovereign and nonsovereign loans outstanding and exclude $652 million ($735 million – 2022) allowance for credit losses, and $59 million ($23 million – 2022) accounting adjustments for fair value adjustment on concessional loans, unamortized loan origination cost, and unamortized front-end fee.

Expected credit loss. ADB measures expected credit losses for loans, guarantees, and held-tomaturity debt securities. Expected credit losses are calculated using three components: exposure at default, probability of default, and loss given default. Credit losses are measured over the contractual term (lifetime) of the asset or commitment based on all available information: historical experience, current conditions, and macroeconomic forecasts. ADB is also exposed to credit risks on off-balance sheet exposures and records a liability for credit losses on undisbursed loan and held-to-maturity other debt securities commitments, and guarantees.

As of 31 December 2023, total allowance for credit losses and liability for credit losses on off-balance sheet exposures decreased to $795 million ($844 million – 2022), driven by the improved economic conditions, nonsovereign exposure decline, repayments of impaired loans, and increased volume of risk transfers. Allowance for credit losses and liability for credit losses on off-balance sheet exposures are summarized in Table 5. Refer to Credit risk under Risk Management section for more information.

Table 5: Summary of Allowance for Credit Losses and Liability for Credit Losses on Off-Balance Sheet Exposures as of 31 December 2023 and 2022 ($ million)

Item	2023	2022

Allowance for credit losses on loans Sovereign regular OCR loans Sovereign concessional OCR loansa Nonsovereign loans Allowance for credit losses on other debt securities Liability for credit losses on off-balance sheet exposures	652 96 175 381 4 139	735 116 193 426 5 104
Totalb	795	844

OCR = ordinary capital resources.

Note: Numbers may not sum precisely because of rounding.

a Include allowance for heavily indebted poor countries debt relief ($43 million – 31 December 2023, $43 million – 31 December 2022).

b Excludes recoveries from risk transfer arrangements.

Status of loans. ADB places loans in non-accrual status when the principal, interest or other charges are overdue by more than 180 days or in case of loans that are not yet overdue by more than 180 days, when there is expectation that loan service payment will not be collected when they become due at the point when such information is known. Once a loan to a borrower is placed in non-accrual status, all other overdue loans to the same borrower will be placed in nonaccrual status. On the date a borrower’s loan is placed into non-accrual status, unpaid interest and other charges accrued are deducted from the revenue of the current period. As of 31 December 2023, there was one sovereign concessional loan borrower with 11 loans in nonaccrual status with outstanding amount of $528 million (one sovereign concessional loan borrower with 11 loans with outstanding amount of $525 million – 2022) and there were four nonsovereign borrowers with four loans in non-accrual status with outstanding amount of $134 million (seven nonsovereign borrowers with seven loans with outstanding amount of $180 million – 2022).

Summary of loan activities. Table 6 shows the summary of loan commitments and Table 7 shows the disbursements and repayments for sovereign regular OCR, sovereign concessional OCR and nonsovereign loans. For the year ended 31 December 2023, the total OCR loan commitments was $20,203 million, higher by $3,907 million or 24% compared to 2022, mainly due to the increase in sovereign regular, sovereign concessional and nonsovereign project loan commitments. The total loan disbursements in 2023 decreased to $16,854 million from $18,575 million in 2022 due to lower sovereign regular project loan disbursements and nonsovereign loan disbursements.

Table 6: OCR Loan Commitments for the Years Ended 31 December

($.million)

	Table 6: OCR Loan Commitments for the Years Ended 31 December ($.million)
	Numbera Amount Numbera Amount 2023 2022 Change
Sovereign Regular	56 14,602 54 12,253 2,349
Project	36 8,595 36 7,031 1,564
Policy-based	18 5,573 16 5,103 470
Results-based	2 434 2 120 314
Sovereign Concessional	38 4,159 40 3,136 1,023
Project	28 2,694 27 1,949 745
Policy-based	8 865 11 887 (22)
Results-based	2 600 2 300 300
Nonsovereign—Project	34 1,442 29 907 535
Total	128 20,203 123 16,296 3,907

( ) = negative, OCR = ordinary capital resources

Note: Amounts are based on exchange rates at loan signing date. Numbers may not sum precisely because of rounding. a Commitments for sovereign loans and nonsovereign project loans are counted based on the number of loans committed.

Table 7: OCR Loan Disbursements and Repayments for the Years Ended 31 December

($.million)

	for the Years Ended 31 December ($.million)
	Disbursements Repaymentsa Disbursements Repaymentsa 2023 2022
Sovereign Regular	12,974 6,853 14,758 5,234
Project	6,854 3,835 7,939 3,476
Policy-based	5,512 2,826 5,946 1,599
Results-based	607 192 872 159
Sovereign Concessional	2,651 1,921 2,421 1,862
Project	1,560 1,433 1,326 1,393
Policy-based	989 474 1,041 459
Results-based	102 13 55 10
Nonsovereignb	1,230 1,626 1,396 1,939
Total	16,854 10,400 18,575 9,035

OCR = ordinary capital resources

Note: Numbers may not sum precisely because of rounding.

a Includes prepayment of $70 million for one sovereign regular OCR loans and $251 million for 20 nonsovereign loans for the year ended 31 December 2023 ($40 million for 15 sovereign regular OCR loans and $674 million for 17 nonsovereign loans – 2022). Amounts are based on the United States dollar equivalent as of receipt of payment.

b Includes loan disbursement and repayments under the private sector programs.

Table 8: OCR Loans Outstanding by Product as of 31 December 2023 and 2022

($ million)

	as of 31 December 2023 and 2022 ($ million)	as of 31 December 2023 and 2022 ($ million)	as of 31 December 2023 and 2022 ($ million)	as of 31 December 2023 and 2022 ($ million)
	Sovereign Regular Concessional				Nonsovereign
	Regular
Product	2023	2022	2023	2022	2023	2022
Flexible loan producta	112,391	106,282	n/a	n/a	4,570	686
LIBOR-based loansb	–	–	n/a	n/a	–	4,279
Local currency loans	194	118	n/a	n/a	1,526	1,548
Concessional loans	n/a	n/a	32,676	31,800	n/a	n/a
Pool-based single currency loansb	222	324	n/a	n/a	n/a	n/a
Total Oustanding	112,807	106,724	32,676	31,800	6,096	6,513
Accounting adjustmentsc	227	219	(130)	(154)	(38)	(42)
Allowance for credit losses	(96)	(116)	(175)	(193)	(381)	(426)
Loans Outstanding	112,938	106,827	32,371	31,453	5,677	6,045

– = nil, n/a = not applicable, ( ) = negative, LIBOR = London interbank offered rate, LBL = LIBOR-based loan, OCR = ordinary capital resources, PSCL = Pool-based single currency loan

Note: Numbers may not sum precisely because of rounding.

a Includes fixed rate loans amounting to $8,578 million for sovereign regular OCR loans and $538 million for nonsovereign loans as of 31 December 2023 ($9,396 million for sovereign regular OCR and $163 million for nonsovereign loans – 2022).

b LBLs and PSCLs are legacy loan products and are no longer offered. Nonsovereign LBLs include fixed rate loans amounting to $445 million in 2022.

c Includes fair value adjustment on concessional loans, unamortized loan origination cost, and unamortized front-end fee.

Sovereign regular OCR loans. The Flexible Loan Product (FLP) is the primary loan product for sovereign regular OCR. The cost-base[5] rate used for FLP loans are the Secured Overnight Financing Rate (SOFR) compounded in arrears for US dollar-denominated loans and the Tokyo Overnight Average Rate (TONA) compounded in arrears for yen-denominated loans. FLP loans have a lending rate consisting of the cost-base rate, lending spread, rebates or surcharges, and maturity premiums, if applicable (Table 9). If the lending rate calculated for any 6-month interest period is negative, the interest rate floor of zero will apply.

The FLP is designed to meet demand by borrowers for loan products that suit project needs and effectively manage their external debt. ADB provides sovereign regular OCR borrowers of FLP loans with options to manage their interest rate and exchange rate risks, while providing low intermediation risk to ADB. Borrowers may request a conversion of all or any portion of the principal amount of the loan through: (i) conversions to any standard currency or changes to the loan currency of all or part of the disbursed or undisbursed loan amounts; (ii) conversions to any nonstandard currency in which ADB can effectively intermediate (other than for conversions to a local currency) or changes to the loan currency of all or a part of the disbursed or undisbursed loan amounts; (iii) an interest rate conversion from floating to fixed or vice-versa of all or part of the disbursed or undisbursed loan amounts at the time of disbursement; and (iv) an establishment of an interest rate cap or an interest rate collar on a floating rate. For the year ended 31 December 2023, ADB executed one interest rate and one combined currency and interest rate conversions totaling $633 million (five interest rate and currency conversions totaling $2 billion – 2022).

Local currency loans (LCLs) are offered to sovereign borrowers in different local currencies of which ADB can intermediate. ADB responds to the evolving financial needs of borrowers to reduce their currency mismatch in DMCs. LCLs may be made on a fixed or floating rate basis with an effective contractual spread. Floating rate LCLs typically reset every three or six months. The cost-base rate of an LCL is determined by its financing mode.

5 The Euro Interbank Offered Rate (EURIBOR) and New Zealand Dollar (NZD) bank bill rate will continue to be used for Euro and NZD loans, respectively.

Table 9 shows the summary of charges on sovereign regular OCR FLP loans and LCLs as of 31 December 2023.

Table 9: Summary of Charges on Sovereign Regular OCR Flexible Loan Product and Local Currency Loans as of 31 December 2023 (basis point)

Item	FLP	CSF	SPBL
A. Loan Term	For project and results- based, flexible loan terms of up to 19 years of average loan maturity; For policy- based, loan term of 15 years including a grace period of up to 3 years	Loan term of 7 years, including a grace period of up to 3 years	Loan term of 5 to 8 years, including a grace period of up to 3 years
B. Cost-Base Rate 1. US dollar 2. Yen 3. Euro 4. New Zealand dollar	6-month SOFR compounded in arrears 6-month TONA compounded in arrears 6-month EURIBOR 6-month Bank Bill Rate
C. Lending Spreada	50	75	200
1. < 9 years 2. 9 years up to 13 years 3. >13 years up to 16 years 4. >16 years up to 19 years D. Maturity Premiumb for loans with average maturity of	0 0 – 40 0 – 50 0 – 75
E. Surcharge or (Rebate)c 1. US dollar 2. Yen 3. Euro 4. New Zealand dollar	22 (35) 4 52	37
F. Commitment Chargesd	15	15	75

( ) = negative, CSF = Countercyclical Support Facility, EURIBOR = Euro Interbank Offered Rate, FLP = Flexible Loan Product, LCL = local currency loan, OCR = ordinary capital resources, SOFR = Secured Overnight Financing Rate, SPBL = special policybased loan, TONA = Tokyo Overnight Average Rate, US = United States.

a The current FLP and LCL effective contractual spread is 50 basis points for loans negotiated on or after 1 January 2014. The terms of emergency assistance loans are similar to FLP terms.

b For loans which formal negotiations were completed on or after 1 April 2012, a maturity premium is added to the contractual spread and applied for the entire life of the loan. A limit of 19 years applies to the average loan maturity of FLP loans and LCLs. For all loans to regular OCR-only borrowing countries, approved on or after 1 January 2021, a new pricing structure was implemented to adjust the pricing framework and introduce diversity in the current flat pricing structure for countries in different stages of development. The new maturity premium is applied for the life of a loan regardless of country group changes during the tenor of the loan.

c To maintain the principle of the cost pass-through pricing policy, ADB passes on its actual funding cost margin to its borrowers through a surcharge or rebate and these are incorporated into the interest rate for the succeeding interest period. Rebates or surcharges for all FLPs are determined in January and July every year on the basis of the average funding cost margin below or above the relevant benchmark for the preceding 6 months. The information presented is applicable for 1 July to 31 December 2023.
d The commitment charge is levied on undisbursed balances beginning 60 days after signing of the applicable loan agreement. For loans under contingent disaster financing, the borrower will pay, in lieu of commitment charges, a front-end fee of 25 or 10 basis points of the committed loan amount depending on the contingent disaster financing option.

Sovereign concessional OCR loans. ADB offers sovereign concessional OCR loans to eligible DMCs. Concessional loans represent the concessional financing to DMCs with (i) per capita gross national income below the International Development Association (IDA) operational cut-off; (ii) least developed countries with per capita gross national income above the IDA operational cut-off; and (iii) per capita gross national income above the IDA operational cut-off with limited or lack of creditworthiness. Table 10 shows the summary of lending terms on currently available sovereign concessional OCR loans.

Table 10: Sovereign Concessional OCR Loan Terms as of 31 December 2023

Terms	Concessional Assistance-Only Countriesa	OCR Blend Countriesb, c	SIDS	Emergency Assistance
A. Maturity (years)	24 – 32	25	40	40
B. Grace period (years)	8	5	10	10
C. Interest rate during the grace period	1.0%	2.0%	1.0%	1.0%
D. Interest rate during the amortization period	1.5%	2.0%	1.0%	1.0%
E. Principal repayment
1. First 10 years after the grace period	Equal	Equal	2.0%d	2.0%d
2. Year thereafter	Equal	Equal	4.0%d	4.0%d

COVID-19 = coronavirus disease, OCR = ordinary capital resources, SIDS = small island developing states Note: Sovereign concessional OCR loans under the COVID-19 pandemic response option have the same lending terms as those for standard policy-based loans. a Countries that are eligible for sovereign concessional OCR loans and/or Asian Development Fund grants. b Countries that are eligible for both sovereign regular and concessional OCR loans. c Applicable for projects with loan negotiations completed on or after 1 January 2013. d Principal repayment will be calculated based on the approved loan amount multiplied by the annual rate of 2.0% for the first 10 years after the grace period and 4.0% thereafter.

The borrowers of sovereign concessional OCR loans may choose a currency of liability in special drawing rights (SDR) or a currency that is available under ADB’s FLP and in the SDR basket, subject to ADB's confirmation of the availability of such currency. As of 31 December 2023, about 97% (96% – 2022) of the sovereign concessional OCR loans were in SDR (62%) and US dollars (35%).

Nonsovereign loans. The FLP is the primary loan product for nonsovereign operations. Similar with the sovereign regular OCR loans, the cost-base rate used for FLP loans are SOFR compounded in arrears as primary option together with the optional Term SOFR for US dollardenominated loans, and the TONA compounded in arrears is the cost-base rate for yendenominated loans. As of 31 December 2023, all nonsovereign LBLs completed the transition to FLP loans, including certain loans temporarily using Synthetic United States dollar (USD) LIBOR[6] until the contracts’ amendments are finalized.

ADB applies market-based pricing to determine the lending spread, front-end fees, and commitment charges, and other fees for each loan. The lending spread is intended to cover ADB’s risk exposure to specific borrowers and projects and the front-end fee to cover the administrative costs incurred in loan origination. Front-end fees are typically 1% to 1.25% depending on the transaction. ADB applies a commitment fee (typically 0.50% to 1.0% per year) on the undisbursed loan balance.

ADB provides certain nonsovereign borrowers with conversion options of all or any portion of the principal amount of the loan through: (i) a currency conversion from a local currency to US dollar or vice versa; and (ii) an interest rate conversion from floating to fixed or vice versa. For the year ended 31 December 2023, ADB executed two interest rate and one currency conversions totaling $13 million (three interest rate and one currency conversions totaling $37 million – 2022).

6 The United Kingdom (UK) Financial Conduct Authority (FCA) compelled the Intercontinental Exchange Benchmark Administration Limited (IBA) under the UK Benchmarks Regulation to continue publishing 1-, 3- and 6-month US dollar LIBOR settings until 30 September 2024 using an unrepresentative `synthetic' methodology. These rates are to referred to as, “Synthetic USD LIBOR”, and apply for such US dollar LIBOR settings in all unremediated legacy contracts (except cleared derivatives) until 30 September 2024 to help ensure an orderly wind-down of LIBOR.

LCLs are also offered to nonsovereign borrowers in different local currencies which ADB can effectively intermediate. ADB responds to the evolving financial needs of borrowers to reduce their currency mismatch in DMCs. LCLs are priced based on relevant local currency funding benchmarks or ADB’s funding costs and a credit spread.

Sovereign and nonsovereign loan cofinancing. In 2023, a total of $9,209 million sovereign loan cofinancing was committed for 28 projects, of which $2,563 million is under full and partial ADB administration while $6,646 million are not administered; and a total of $2,340 million nonsovereign loan cofinancing was committed for 20 projects. (Refer to Note F of OCR Financial Statements for loans administered by ADB as of 31 December 2023).

2. Equity Investments

ADB provides financial assistance through equity investments to help capital-constrained, but economically important, investee companies. ADB's equity investments may be in the form of direct investments or through private equity funds.

The Charter allows the use of OCR for equity investments up to 10% of ADB’s unimpaired paidin capital actually paid up at any given time together with reserves and surplus, excluding special reserves. At the end of 2023, the total equity investment portfolio for OCR, including prudential buffers, was $1,772 million ($1,773 million – 2022), or about 33% (33% – 2022) of the ceiling defined by the Charter.[7]

In 2023, ADB committed four equity investments totaling $105 million (six equity investments totaling $147 million – 2022), disbursed $142 million ($197 million – 2022), and received $121 million from capital distributions and full or partial divestments in 37 projects ($114 million from 25 projects – 2022). The divestments were carried out in a manner consistent with good business practices, after ADB’s development role in its investments had been fulfilled and without destabilizing the companies. Table 11 shows ADB's equity investments as of 31 December 2023 and 2022.

Table 11: Outstanding Equity Investments as of 31 December 2023 and 2022 ($ million)

Item	2023	2022
Direct investments	784	759
Private equity funds	799	679
Total equity investments	1,583	1,438

3. Guarantees

Guarantees are typically designed to facilitate cofinancing by mitigating the risk exposure of commercial lenders and capital market investors. Guarantees can be provided when ADB has a direct or indirect participation in a project or a related sector, through a loan, equity investment or technical assistance. ADB provides two primary guarantee products–a partial credit guarantee and a partial risk guarantee. ADB’s credit guarantee is designed as credit enhancements for eligible projects to cover risks that the project and its commercial cofinancing partners cannot easily absorb or manage on their own. ADB also provides partial risk guarantees to cover specifically defined political risks such as expropriation, currency inconvertibility or non-transfer.

7 Prudential buffer represents 80% and 100% of the signed and undisbursed amounts for private equity funds and direct equity investments, respectively.

Reducing these risks can make a significant difference in mobilizing private sector financing for projects.

Private Sector Programs. ADB’s private sector programs include the Trade and Supply Chain Finance (TSCFP) and Microfinance programs (MFP).

Trade and Supply Chain Finance Program. The Trade Finance Program and the Supply Chain Finance Program were merged to create operational efficiency and more wholistic solutions to clients.

The TSCFP has two main streams of activity: (i) It provides guarantees and loans through partner banks to close market gaps for trade finance, including among small and mediumsized businesses, to generate the trade-led growth and jobs that underpin development; and (ii) It delivers knowledge products, services, and solutions to make global trade and supply chains green, resilient, inclusive, transparent and socially responsible.

For the year ended 31 December 2023, TSCFP provided total loans and guarantees financed by ADB amounting to $1,786 million ($2,566 million – 2022) in trade through 62 bank partners under Trade Finance and 8 corporate obligors under Supply Chain Finance in 16 countries.

TSCFP transactions have average maturity of less than 180 days and this short average tenor enables an efficient use of its $2,450 million limit. As of 31 December 2023, TSCFP guarantees outstanding amounted to $1,369 million ($1,790 million – 2022) and loans outstanding amounted to $166 million ($181 million – 2022). Of the outstanding TSCFP loans and guarantees, $858 million were risk transferred to private insurance companies ($919 million – 2022), resulting to a net exposure of $677 million ($1,052 million – 2022).

Microfinance Program. The MFP provides risk participation on revolving basis for loans made by commercial financial institutions to microfinance institutions in ADB's DMCs. As of 31 December 2023, MFP revolving cover is up to $600 million. The program provided guarantees financed by ADB amounting to $232 million in 2023 ($170 million – 2022) and the outstanding guarantee amount as of 31 December 2023 was $208 million ($162 million – 2022).

Table 12 shows the commitments under the private sector programs.

Table 12: OCR Commitments under Private Sector Programs for the Years Ended 31 December

($.million)

	($.million)
	2023 2022 Change
Short-term Long-term Totala	1,678 2,467 (789) 340 269 71
	2,018 2,736 (718)

MFP = Microfinance Program, OCR = ordinary capital resources, TSCFP = Trade and Supply Chain Finance Program Note: Short-term has maturity of less than 365 days. Long-term has maturity of 365 days or more. a Includes $1,479 million guarantees ($2,299 million – 2022) and $307 million loans ($267 million – 2022) under TSCFP, and $232 million ($170 million – 2022) guarantees under MFP.

Private sector program cofinancing. For the year ended 31 December 2023, total commitments under private sector program cofinancing amounted to $3,146 million ($5,340 million – 2022).

Exposure Exchange Agreement. The exposure exchange agreement (EEA) provides for the simultaneous exchange of credit risk coverage for potential non-accrual events on the exchanged sovereign exposures. In case of non-accrual events, the party providing protection would pay the other counterparty interest for any period the covered exposure is in nonaccrual, and principal when the covered exposure is fully or partially written-off. The EEA transaction is treated as an exchange of two separate financial guarantees (guarantee provided and guarantee received). In July 2023, ADB signed a $1.0 billion sovereign EEA with the African Development Bank, in addition to its existing $2.5 billion sovereign EEA with the Inter-American Development Bank. As of 31 December 2023, ADB’s total amount of guarantee provided and received under its EEA with peer multilateral development banks amounted to $3.5 billion ($2.5 billion – 31 December 2022).

Refer to Note G of OCR Financial Statements for ADB’s outstanding and maximum potential exposure on guarantees as of 31 December 2023 and 2022.

4. Other Debt Securities

ADB’s financial assistance to DMCs may be made by way of subscription to an entity’s debt instruments such as bonds and debentures issued for the purpose of financing development projects. For the year ended 31 December 2023, other debt securities commitment amounted to $166 million ($71 million – 2022) and disbursements amounted to $81 million ($62 million – 2022). As of 31 December 2023, other debt securities amounted to $519 million ($622 million – 2022).

5. Syndications

Syndications refer to the pooling of financing and sharing of risk among financiers. It enables ADB to extend larger financing packages to clients, and to transfer some of the risks associated with its loans and guarantees to other financing partners.[8] Thus, syndications allow ADB to meet clients’ financing requirements that exceed its risk appetite, and decrease and diversify the risk profile of ADB’s financing portfolio. Syndications may be on a funded or unfunded basis, and they may be arranged on an individual, portfolio, or any other basis consistent with industry practices. In 2023, eight projects received $301 million of total syndicated loans where ADB was lender of record (two projects totaling $95 million – 2022).[9]

6. Transaction Advisory Services

ADB provides transaction advisory services (TAS) to assist public and private sector clients structure and procure viable public-private partnership (PPP) projects, ensuring proper risk allocation, value, and affordability. ADB also manages the Asia Pacific Project Preparation Facility (AP3F)—a multi-donor trust fund—to help prepare and monitor PPP projects, build government capacity, and create an enabling environment for PPPs.

In 2023, commercial closure was achieved for one TAS, mobilizing $250 million in capital commitments from the private sector. As of 31 December 2023, ADB was implementing 35 TAS mandates and AP3F project preparations, with a total estimated capital investment of $7.1 billion.

7. Debt Management Products

ADB offers debt management products to members and entities fully guaranteed by members in relation to their third-party liabilities. Debt management products offered by ADB include interest rate swaps, cross currency swaps and local currency swaps (transforming a foreign currency liability into a local currency liability only).

8 Depending on whether ADB retains risk or not, ADB may or may not have a contingent liability.

9 B-loan is a tranche of a direct loan nominally advanced by ADB, subject to eligible financial institutions taking funded risk participation within such a tranche and without recourse to ADB. It complements an A-loan financed by ADB.

D. Funding Resources

ADB’s ordinary operations are funded from ADB’s OCR, which consist primarily of its subscribed capital stock, proceeds from its borrowings, and funds derived from its ordinary operations.

1. Equity

ADB had 68 members as of 31 December 2023, with Japan and the United States as the two largest shareholders. Out of the 68 members, 27 members are non-borrowing members holding 66.8% of total shareholdings with a total voting power of 61.4%. The capital subscription of all ADB members is shown in OCR-8 of the Financial Statements.

As of 31 December 2023, ADB’s total authorized capital of 10,639,083 shares valued at $142,741 million was fully subscribed, which consisted of $7,153 million paid-in and $135,588 million callable capital. The details of ADB’s equity as of 31 December 2023 and 2022 are shown in Table 13.

Table 13: Details of Equity as of 31 December 2023 and 2022

($ million)

	2023	2022
Authorized (SDR106,391)
Subscribed (SDR106,391)	142,741	141,589
Less: Callable capital subscribed	135,588	134,494
Paid-in capital subscribed	7,153	7,095
Less: Other adjustmentsa	40	53
	7,113	7,042
Add:(1) ADF assets transferb	30,748	30,748
(2) Other reservesc	17,433	16,424
Total Equity	55,294	54,214

ADF = Asian Development Fund, SDR = special drawing rights, OCR = ordinary capital resources. a Comprises discount and nonnegotiable, noninterest-bearing demand obligations on account of subscribed capital. (See OCR-1 of the Financial Statements). b The transfer of ADF assets to OCR on 1 January 2017 was treated as a contribution from ADF which was recognized as a one-time income. c Includes ordinary reserve, special reserve, surplus, cumulative revaluation adjustments, and net income after appropriation less net notional amounts required to maintain value of currency holdings, and accumulated other comprehensive loss. (See OCR-1 of the Financial Statements).

Callable capital. Callable capital can be called only if required to meet ADB’s obligations incurred on borrowings or guarantees under OCR. No call has ever been made on ADB’s callable capital.

Paid-in capital. ADB’s paid-in capital may be freely used in its ordinary operations, except that DMCs have the right under the Charter to restrict the use of a portion of their paid-in capital to make payments for goods and services produced and intended for use in their respective territories. (See Note C of the OCR Financial Statements).

Total equity. Total equity increased to $55,294 million as of 31 December 2023 from $54,214 million as of 31 December 2022. This mainly resulted from: (i) $938 million net income in 2023; (ii) $701 million net unrealized holding gains; offset by (iii) $382 million allocation of 2022 net income to Special Funds.

Allocation of OCR net income. In accordance with Article 40 of the Charter, the Board of Governors annually approves the allocation of the previous year’s net income to reserves and/or surplus. In addition, to the extent feasible, it approves the transfer of part of net income to Special Funds to support development activities in the DMCs. In May 2023 and 2022, the Board of Governors approved the allocation of OCR’s net income for 2022 and 2021, respectively, as shown in Table 14.

Table 14: Allocation of OCR Net Income for the years ended 31 December ($ million)

($million)
	2022 2021
Net Income Adjustment to cumulative revaluation adjustments Appropriation of guarantee fees to special reserve Allocable net income (non-GAAP measure) Allocation to ordinary reserve Allocation to special funds Asian Development Fund Technical Assistance Special Fund Total Allocated Net Income	2,169 730 (1,039) 468 (31) (37) 1,099 1,161 716 778 292 292 90 90 1,099 1,161

( ) = negative, OCR = ordinary capital resources. Note: Numbers may not sum precisely because of rounding.

2. Borrowings

General Borrowing Policies. Under the Charter, ADB may borrow only with the approval of the country in whose market ADB’s obligations are to be sold and the member in whose currency such obligations are to be denominated. ADB must also obtain the approvals of the relevant countries so that the proceeds of its borrowings may be exchanged for the currency of any member without restriction. The Charter also requires ADB, before determining to sell its obligations in a particular country, to consider the amount of previous borrowings in that country, the amount of previous borrowings in other countries, and the availability of funds in such other countries, giving due regard to the general principle that its borrowings should to the greatest extent possible be diversified as to country of borrowing.

Funding Operations. ADB raises funds for its ordinary operations through the issue and sale of debt obligations in the international capital markets. ADB’s primary borrowing objective is to ensure the availability of funds for its operations at the most stable and lowest possible cost. Subject to this objective, ADB seeks to diversify its funding sources across markets, instruments, and maturities. In 2023, ADB continued to diversify its funding platform by issuing across a broad range of currencies, in both public issue and private placement format, introducing new currencies and engaging new investors. ADB continues to offer thematic bonds (Table 15).

Table 15: Overview of Outstanding Thematic Bonds

	Amount	Maturity range of
Themes	($million)	bonds issueda
Gender	7,780	1 to 20 years
Green	7,542	2 to 14 years
Health	3,817	1 to 20 years
Education	1,050	2 to 10 years
Water	571	1 to 15 years
Blue	328	10 to 15years
Total Outstanding Thematic Bonds	21,089

Note: Numbers may not sum precisely because of rounding.

a Refers to maturity from bond’s issue date. Bonds with call options are assumed to be called on the first call or trigger date.

2023 funding operations. In 2023, ADB raised the equivalent of $28,913 million from 140 borrowing transactions ($36,109 million from 134 borrowing transactions – 2022). The new borrowings were raised in 25 currencies (22 currencies – 2022).[10] The average maturity to first call date of these borrowings was 4.6 years (4.8 years – 2022) at the time of issue. Of the 2023 borrowings, $23,325 million was raised through 32 public offerings and the remaining $5,589 million was raised through 108 private placements. OCR borrowings after swaps as of 31 December 2023 amounted to $152,360 million ($146,053 million – 2022).

ADB also raised $9,312 million ($14,146 million – 2022) under its Euro-Commercial Paper Program (ECP). Of the ECPs issued in 2023, $2,605 million were outstanding as of 31 December 2023 ($2,615 million – 2022). Table 16 shows details of 2023 borrowings as compared to 2022.

Table 16: Borrowings ($ million)

($ million)
Item	2023	2022
Bonds
Total Principal Amount	28,913	36,109
Average Maturity to First Call (years)	4.6	4.8
Average Final Maturity (years)	4.9	5.1
Euro Commercial Papers
Total Principal Amount	9,312	14,146
Number of Transactions	70	111

As part of short-term liquidity management, ADB executed 105 repurchase transactions totaling $17.2 billion in principal amount. There were no outstanding transactions as of 31 December 2023.

Use of derivatives. ADB undertakes currency and interest rate swaps to cost-efficiently, and on a fully-hedged basis, raise the currencies needed for its operations, while maintaining its borrowing presence in major capital markets. Figures 4 and 5 show the effects of swaps on the currency composition and interest rate structure of ADB’s outstanding borrowings as of 31 December 2023. Interest rate swaps are also used for asset and liability management purposes to match the liabilities with the interest rate characteristics of assets such as loans and liquidity investments.

10 Australian dollar, Azerbaijan manat, Botswana pula, Brazilian real, Canadian dollar, Chilean peso, Chinese yuan, Colombian peso, Egyptian pound, Euro, Georgian lari, Hong Kong dollar, Hungarian forint, Kazakhstan tenge, Mexican peso, Mongolian togrog, New Zealand dollar, Nigerian naira, Peruvian sol, Polish zloty, Pound sterling, South African rand, Swedish krona, Swiss franc, and US dollar.

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Figure 4: Effect of Swaps on Currency Composition of Borrowings
as of 31 December 2023
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(%)
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a Other currencies include Azerbaijan manat, Botswana pula, Brazilian real, Chilean peso, Chinese yuan, Colombian peso, Egyptian pound, Georgian lari, Ghana cedi, Hong Kong dollar, Hungarian forint, Indian rupee, Indonesian rupiah, Japanese yen, Kazakhstan tenge, Mexican peso, Mongolian togrog, Nigerian naira, Norwegian krone, Pakistan rupee, Peruvian sol, Polish zloty, Russian ruble, South African rand, Swedish krona, Swiss franc, Turkish lira, and Ukraine hryvnia.

b Other currencies include Euro, Chinese yuan, Japanese yen, Georgian lari, Indian rupee, Indonesian rupiah, Kazakhstan tenge, Pakistan rupee, and Mongolian togrog.

Figure 5: Effect of Swaps on Interest Rate Structure of Borrowings as of 31 December 2023

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(%)
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E. Liquidity Management

1. Liquidity Portfolio

The liquidity portfolio helps ensure the uninterrupted availability of funds to meet loan disbursements, debt servicing, and other cash requirements; provides a liquidity buffer in the event of financial stress; and contributes to ADB’s earning base. ADB’s Investment Authority governs ADB’s investments in liquid assets. The primary objective is to maintain the security and liquidity of the funds invested. Subject to these two parameters, ADB seeks to maximize the total return on its investments. At the end of 2023, ADB held liquid investments in 20 currencies.

Liquid investments are held in government or government-related debt instruments, time deposits, and other unconditional obligations of banks and financial institutions. To a limited extent, they are also held in corporate bonds that are rated at least A–. These investments are held in five portfolios—equity-funded liquidity, debt-funded liquidity, cash cushion, operational cash, and ad hoc—all of which have different risk profiles and performance benchmarks.

The year-end balance of the portfolios in 2023 and 2022 is presented in Table 17. The amortized cost and fair value returns of the portfolios are presented in Table 18.

Table 17: Year-End Balance of Investment Portfolio as of 31 December 2023 and 2022 ($ million)

Item	2023	2022
Equity-Funded Liquidity Portfolio	19,891	19,164
Debt-Funded Liquidity Portfolio	20,420	20,084
Cash Cushion Portfolio	7,575	7,079
Operational Cash Portfolio	327	144
Ad hoc Portfolio	1,170	1,012
Total	49,383	47,483

Note: Including securities transferred under repurchase agreements, securities purchased under resale arrangements, and investment related swaps. The composition of the liquidity portfolio may shift from year to year as part of ongoing liquidity management.

Table 18: Return on Investment Portfolio

(%)

	(%)
Item	2023 2022 2023 2022 Amortized Cost Fair Value
Equity-Funded Liquidity Portfolio Debt-Funded Liquidity Portfolioa Cash Cushion Portfolio Operational Cash Portfolio Ad hoc Portfolio	2.5 1.6 4.9 (5.4) 0.4 0.4 0.4 0.4 5.5 1.9 5.5 1.9 4.9 1.5 4.9 1.5 2.3 2.2 5.2 (11.5)

Note: The amortized returns are based on income from investments and realized gains and losses reported in the Statement of Income and Expenses. The fair value return incorporate unrealized gains and losses reported in other comprehensive income and loss and movements are dependent on prevailing market environment. a Spread over funding cost

The equity-funded liquidity portfolio (ELP) is invested to ensure that the primary objective of a liquidity buffer is met. Cash inflows and outflows are minimized to maximize the total return relative to a defined level of risk. The portfolio has been funded mostly by equity, and the average duration of the major currencies in the portfolio was about 2.6 years (2.9 years – 2022) as of 31 December 2023.

The debt-funded liquidity portfolio is used to support medium-term funding needs and is funded by debt to provide flexibility in executing the funding program over the medium-term to permit opportunistic borrowing ahead of cash flow needs, and to bolster ADB access to short-term funding through continuous presence in the market.

The cash cushion portfolio holds the proceeds of ADB’s borrowing transactions pending disbursement. It is invested in short-term instruments and aims to maximize the spread earned between the borrowing cost and the investment income.

The operational cash portfolio, designed to meet net cash requirements over a 1-month horizon, is funded by debt and invested in short-term highly liquid money market instruments.

The ad hoc portfolio is established for transparent tracking and monitoring of liquidity proceeds to hold special-purpose liquidity.

2. Prudential Minimum Liquidity

Holding appropriate levels of liquidity ensures uninterrupted lending support to DMCs. ADB’s prudential minimum liquidity (PML) is set at 12-month liquidity coverage and it is 100% of ADB’s one-year net cash requirement (NCR) where NCR is equal to cash outflows less cash inflows. Cash outflows include disbursements for operations, redemptions on ADB’s debt instruments and OCR net income transfers. Cash inflows mainly represent income from operations, repayments and prepayments from borrowers and capital subscription payments. Maintaining the PML is designed to enable ADB to cover NCR for 12 months without borrowing from the capital markets. The liquidity levels and cash requirements are monitored periodically in accordance with ADB’s liquidity policy. As of 31 December 2023, ADB’s aggregate liquidity holding remained above the 2023 PML requirement.

3. Contractual Cash Obligations

In the normal course of business, ADB enters into contractual obligations that may require shortterm and long-term future cash payments. Table 19 summarizes ADB’s significant contractual cash obligations as of 31 December 2023. Long-term debt includes medium- and long-term borrowings. Other long-term liabilities correspond to future lease payments and accrued liabilities.

Table 19: Contractual Cash Obligations As of 31 December 2023 ($ million)

Item	within oneyear more than oneyear Total Maturities
Long-Term Debt Undisbured Commitmentsa Other Liabilities	30,904 112,361 143,265 12,418 38,750 51,168 623 41 664
Total	43,945 151,152 195,097

a Includes undisbursed commitments for loans, equity investments and other debt securities.

As a triple-A rated borrower, ADB raises funds regularly through bond issuances in the international capital markets in a cost-effective manner, which demonstrates ADB’s ability to meet the required cash requirements in the long term. Furthermore, ADB’s capital structure provides an additional level of security as callable capital is available to meet debt obligations in the unlikely event of large-scale default by ADB’s borrowers. ADB has never made a call on callable capital.

F. Risk Management

ADB faces various kinds of risks in carrying out its mandate, including financial, operational, and other organizational risks. ADB has a risk management framework that is built on the three core components of governance, policies, and processes.

Governance starts with the Board of Directors, which plays a key role in reviewing and approving risk policies that define ADB's risk appetite. ADB maintains an independent risk management office and has various management committees with responsibilities to oversee bank-wide risk issues. ADB’s Risk Committee monitors and discusses risks, recommends proposed risk policies and actions to the President, and provides senior management oversight on risk policy matters to ensure that ADB maintains its superior credit standing. The office of risk management reports quarterly to the Audit and Risk Committee of the Board on the development of the risks in ADB’s operations.

ADB monitors the credit profile of existing transactions in the operations portfolio, conducts risk assessments of new nonsovereign transactions, and assumes responsibility for resolving distressed transactions when necessary. It also monitors market and credit risks in treasury operations, such as the credit quality of counterparties, interest rate risk, and foreign exchange risk. In addition, ADB has developed an operational risk management framework for the institution. For the aggregate portfolio, ADB monitors limits and concentrations; computes expected credit losses; and assesses its capital adequacy.

Risks to which ADB is exposed in carrying out its mission include credit risk, market risk, liquidity risk, and operational risk. This section discusses (i) risk management of each key risk, (ii) ADB’s capital adequacy—ADB’s ultimate protection against unexpected losses, and (iii) asset and liability management.

1. Credit Risk

Credit risk is the risk of loss that could result if a borrower or counterparty defaults or if its creditworthiness deteriorates. Related to credit risk, ADB also faces concentration risk, which arises when a high proportion of the portfolio is allocated to a specific country, industry sector, obligor, type of instrument, or individual borrower.

ADB assigns a risk rating to each loan, guarantee, debt security, and treasury counterparty (Table 20). For nonsovereign transactions, the rating typically is not better than that of the sovereign.

Table 20: Asian Development Bank Internal Risk Rating Scale

ADB Internal	Credit Rating
Rating Scale	Agency Equivalent	ADB Definitions
1	AAA / Aaa to A / A2	Lowest expectation of credit risk
2	A– / A3	Very low credit risk
3	BBB+ / Baa1	Low credit risk
4	BBB / Baa2	Low credit risk
5	BBB– / Baa3	Low to medium credit risk
6	BB+ / Ba1	Medium credit risk
7	BB / Ba2	Medium credit risk
8	BB– / Ba3	Medium credit risk
9	B+ / B1	Significant credit risk
10	B / B2	Significant credit risk
11	B– / B3	Significant credit risk
12	CCC+ / Caa1	High credit risk
13	CCC / Caa2 to C	Very high credit risk
14	D	Default

ADB is exposed to credit risk in its sovereign, nonsovereign, and treasury operations. The sovereign portfolio includes sovereign loans and guarantees as well as one equity investment, while the nonsovereign portfolio includes nonsovereign loans and guarantees, equity investments (direct and private equity funds), and other debt securities. The treasury portfolio includes fixedincome securities, cash and cash equivalents, and derivatives. Table 21 details the total risk exposure and weighted average risk rating for each asset class.[11]

11 The average risk ratings are based on the average probability of default weighted by the outstanding credit exposure which is related back to the internal rating scale based on the probability of default for each internal risk rating category. The probabilities of default are updated regularly. The computation of the average risk rating for the period uses the most recent set of probabilities of default available at the end of the corresponding period.

Table 21: Total Risk Exposure as of 31 December 2023 and 2022

Item	Exposure Rating Exposure Rating ($million) (1–14) ($million) (1–14) 2023 2022
Loans and guaranteesa a. Sovereign operationsb 1. Regular OCR Loans and guarantees 2. Concessional OCR Loans b. Nonsovereign operations Equity Investmentsc a. Sovereign operations b. Nonsovereign operations Treasuryd a. Fixed income b. Cash instruments c. Derivatives	153,527 147,386 145,703 10.0 / B 138,774 10.0 / B 113,094 9.3 / B+ 107,042 9.2 / B+ 32,609 11.2 / B– 31,732 11.1 / B– 7,824 9.9 / B 8,612 9.9 / B 1,581 1,435 168 n/a 166 n/a 1,413 n/a 1,269 n/a 49,328 AA 48,758 AA 37,366 AA 34,296 AA 11,956 A+ 14,438 AA– 6 A+ 24 AA–
Aggregate Exposure	204,436 197,579

n/a = not applicable

Note: Numbers may not sum up precisely because of rounding.

a Sum of outstanding loan balances, present value of guaranteed obligation, and securities classified as debt net of specific provision.

b As of 31 December 2023, $3.5 billion of the sovereign loan and guarantee credit exposure is part of the exposure exchange mechanism with peer MDBs. The amount indicated excludes the ADB sovereign loans which are guaranteed by the MDB and includes the same amount of ADB guarantee issued to that MDB as part of the exchange. c At fair values.

d Average rating based on ratings from international credit rating agencies.

Credit risk in the sovereign portfolio. Sovereign credit risk is the risk that a sovereign borrower or guarantor will default on its loan or guarantee obligations. ADB manages its sovereign credit risk through provision for credit losses as well as by maintaining conservative equity levels. ADB’s sovereign regular OCR loan operations have experienced no loss of principal. Countries that previously had delayed payments eventually repaid and returned their loans to accrual status.

Sovereign loan and guarantee exposure. The average credit rating of the sovereign loan and guarantee portfolio remained unchanged at 10.0 (B) as of 31 December 2023 and 2022 (Figure 6).

Figure 6: Sovereign Loan and Guarantee Exposure by Credit Quality as of 31 December 2023 and 2022 (%)

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Notes: Low credit risk = exposures with risk rating 1–5, medium credit risk = exposures with risk rating 6–8, significant credit risk = exposures with risk rating 9–11, high credit risk = exposures with risk rating 12–14. Percentages may not total 100% because of rounding.

Sovereign concentrations. ADB has assumed some concentration risk to fulfill its development mandate. The three largest borrowers—India, the People’s Republic of China, and the Philippines—represented 39% of the portfolio in 2023 (Figure 7).

Figure 7: Sovereign Country Exposure as of 31 December 2023 and 2022 ($ billion, unless otherwise stated)

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Note: The sum of disbursed and outstanding loan balances, present value of guaranteed obligations and fair values of equities.

To reduce concentration risk and maintain a well-capitalized balance sheet, ADB approved in 2020 a policy framework for exchanges of sovereign exposures among MDBs. The EEA provides for the simultaneous exchange of credit risk coverage for potential non-accrual events on the exchanged sovereign exposures. In case of non-accrual events, the party providing protection

would pay the other counterparty interest for any period the covered exposure is in nonaccrual, and principal when the covered exposure is fully or partially written-off. ADB and the InterAmerican Development Bank signed the first exposure exchange agreement in 2020 and the second one in 2022, together amounting to $2.5 billion. In July 2023, ADB entered into an additional $1 billion sovereign exposure exchange with the African Development Bank. The EEA is treated as exchanges of separate financial guarantees (guarantees provided and guarantees received).

Credit and equity risks in the nonsovereign portfolio. Nonsovereign credit risk is the risk that a borrower will default on a loan, debt security or guarantee obligation for which ADB does not have recourse to a sovereign entity. Equity risk is the risk of losses arising from movements in equity prices. While the aggregate nonsovereign exposure is smaller in size than the sovereign exposure, the credit risk in individual transactions is more significant. In addition, ADB’s exposure is concentrated in the utilities and finance sectors. ADB employs various policy-based measures to manage these risks.

The Investment Committee and the Risk Committee oversee risks in the nonsovereign portfolio. The Investment Committee reviews all new nonsovereign transactions for creditworthiness and pricing. The Risk Committee oversees all risks in ADB’s balance sheet and operations, and reviews and endorses proposed changes to risk policies. It also monitors aggregate nonsovereign portfolio risks and individual transactions with deteriorating creditworthiness.

ADB manages nonsovereign credit risk by assessing all new transactions at the concept clearance stage and before final approval. Following approval, all exposures are reviewed at least annually; more frequent reviews are performed for those that are more vulnerable to default or have defaulted. In each review, ADB assesses whether the risk profile has changed; takes necessary actions to mitigate risks and either confirms or adjusts the risk rating. For equity risk, ADB updates the valuation for equity investments including assessing whether impairments are considered permanent. ADB also enters into risk transfer agreements to reduce its exposure to selected nonsovereign transactions and to enhance the granularity of its portfolio.

ADB manages expected credit losses from nonsovereign credit portfolio as well as known or highly probable losses in individual loans, debt securities or guarantees through allowance for credit losses and liability for credit losses on off-balance sheet exposures.

ADB uses limits for countries, industry sectors, corporate groups, obligors, products, and individual transactions to manage concentration risk in the nonsovereign portfolio.

Nonsovereign loan, guarantee, and debt security exposure . ADB assigns a risk rating to each nonsovereign loan, guarantee, and debt security. The average credit rating of the nonsovereign portfolio remained unchanged at 9.9 (B) as of 31 December 2023 and 2022 (Figure 8).

Credit exposure is considered impaired when it is unlikely that ADB will be able to collect all amounts due in accordance with contractual terms. Impaired credit exposure includes all rated transactions, namely (i) loans, (ii) guarantees, and (iii) debt securities that are held to maturity and reported at amortized cost, which are extended to borrowers rated 13 and 14 on ADB’s 14-point rating scale. Impaired exposure in percentage of gross nonsovereign credit exposure before provisions slightly increased to 5.4% of total in 2023 compared to 4.6% in 2022 largely because of the decrease in the nonsovereign operations exposure and a downgrade of the foreign currency country ceiling in one of the developing member countries during 2023.

Refer to Note F of OCR Financial Statements for additional information.

Figure 8: Nonsovereign Loan and Guarantee Exposure by Credit Quality as of 31 December 2023 and 2022 (%)

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Nonsovereign equity exposure. The nonsovereign equity investment portfolio has two components: (i) direct equity investments, where ADB owns shares in investee companies; and (ii) private equity funds, where ADB has partial ownership of a private equity fund, managed by a fund manager, which acquires equity stakes in investee companies. ADB’s nonsovereign equity investment portfolio increased by $144 million in 2023 from 2022 due to portfolio investments appreciation and disbursements exceeding proceeds from divestments during the year. Refer to Note H of OCR Financial Statements for additional information.

Nonsovereign concentrations. The three largest nonsovereign country exposures as of 31 December 2023 were India (15%), the People’s Republic of China (13%), and Thailand (12%). The exposure of the top three countries represented 40% of the portfolio as of 31 December 2023 (39% – 2022) (Figure 9). There is a passive breach of the country and financial sector limits applicable to Sri Lanka due to a prior sovereign downgrade. ADB’s nonsovereign exposure to Sri Lanka is not significant, amounting to $24 million as of 31 December 2023. All other country exposures are within applicable ADB exposure limits.

Figure 9: Nonsovereign Country Exposure[a ] as of 31 December 2023 and 2022

($ billion, unless otherwise stated)

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a The sum of disbursed and outstanding loan balances and other debt securities, present value of guaranteed obligations and fair values of equities. Percentages may not total 100% because of rounding.

ADB employs the Global Industry Classification Standard for its nonsovereign exposures. Under this standard, utilities represent the largest nonsovereign sector exposures (Figure 10). ADB maintains higher exposures to this sector because of its importance to economic development. In addition, the high level of exposure to the utilities sector is deemed acceptable from a risk perspective because of the lack of correlation between the utilities sector in one country and another. The utilities sector is also fragmented into seven major sub-industries. To mitigate sector concentration risk, ADB conducts additional monitoring and reporting on this sector and employs specialists in these areas.

Figure 10: Nonsovereign Sector Exposure as of 31 December 2023 and 2022

($ billion, unless otherwise stated)

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Note: Percentages may not total 100% because of rounding.

Expected credit loss. ADB’s expected credit losses are measured over the remaining lifetime of loans and certain debt securities. Expected losses for off-balance sheet credit exposures are also measured for undisbursed loan and held-to-maturity debt securities, commitments and guarantees.

The expected credit losses as of 31 December 2023 for sovereign and nonsovereign operations (loans, guarantees, and held-to-maturity other debt securities) was $321 million and $474 million, respectively ($357 million and $487 million – 2022). The net change from 2022 was mainly because of updated lower probabilities of default, a lower nonsovereign exposure, more volatile macroeconomic environment, and the credit rating changes of some of ADB’s borrowers in 2023. Expected loss as a percentage of the total loan and guarantee portfolio in 2023 is at 0.2% for sovereign (0.3% – 2022) and 5.9% for nonsovereign (5.5% – 2022).

Credit risk in ADB’s treasury operations. Issuer default and counterparty default are credit risks that affect ADB’s liquidity portfolio. Issuer default is the risk that a bond issuer will default on its interest and/or principal payments, while counterparty default is the risk that a counterparty will not meet its contractual obligations to ADB.

To mitigate issuer and counterparty credit risks, ADB generally transacts only with institutions rated by reputable international rating agencies and satisfy a minimum rating criteria. The liquidity portfolio is also invested in highly rated assets, with substantial allocation to money market instruments and government and government-related securities. In addition, ADB has established exposure limits for its bond investments, depository relationships, and other investments.

ADB has established counterparty eligibility criteria to mitigate counterparty credit risk arising through derivative transactions. In general, ADB will only undertake swap transactions with counterparties that meet the required minimum counterparty credit rating, have executed an International Swaps and Derivatives Association (ISDA) Master Agreement, and have signed a Credit Support Annex (CSA). Under the CSA, derivative positions are marked to market daily, and the resulting exposures are generally collateralized by cash or eligible government securities. ADB sets exposure limits for individual swap counterparties and monitors these limits against current and potential future exposures. ADB enforces daily collateral calls as needed to ensure that counterparties meet their collateral obligations.

As of 31 December 2023, ADB’s treasury portfolio comprises fixed income securities, high credit quality cash deposits and derivative instruments with a weighted average credit rating of AA, and with 98% of the portfolio rated A– or better. Figure 11 provides the breakdown of treasury portfolio by type and counterparty credit risk rating.

Figure 11: Breakdown of Treasury Credit Exposure as of 31 December 2023 ($ billion, unless otherwise stated) Notes: 0.0 = amount less than $0.05 billion. 0% = percentage less than 0.5%.

As of 31 December 2023 and 2022, no fixed-income instruments, derivatives, or other treasury exposures were past due or impaired.

Fixed income. Sovereign and sovereign-guaranteed securities, and those issued by government-related enterprises (including supranationals and excluding mortgage-backed securities) represent 72% of ADB’s fixed income assets. The remainder is in corporate bonds that are subject to a minimum rating requirement of A–, asset-backed securities (ABS) that are subject to a minimum rating requirement of AAA, and US agency mortgage-backed securities (Agency MBS) that are subject to a minimum rating requirement of AA+ (Figure 12). ADB will continue to monitor market developments closely and adjust its risk exposure accordingly.

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Figure 12: Fixed Income Portfolio by Asset Class
as of 31 December 2023 and 2022
($ billion, unless otherwise stated)
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Cash deposits. Credit risk from investment deposits is considered low. ADB invests with depository institutions that satisfy a minimum long-term average credit rating requirement. ADB maintains a watch list of institutions that it perceives as potentially riskier than its credit rating represents based on an internal credit risk assessment including probability of default metrics. The size of the investment deposit is limited by the counterparty’s tier one common equity and external credit rating.

Derivatives . All eligible swap counterparties satisfy a minimum credit rating requirement. Current exposure to counterparties rated below AA– is generally fully collateralized, while the uncollateralized exposure to those rated AA– and above are subject to specified thresholds. At the end of 2023, swap counterparty marked-to-market exposures were generally fully collateralized. Uncollateralized exposures to several banks were in line with established thresholds and minimum transfer amounts; banks that had collateral shortfalls were issued margin calls.

Country exposure. At the end of 2023, treasury credit risk exposure was allocated across 33 countries with the largest five exposures presented in Figure 13.

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Figure 13: Treasury Country Exposure
as of 31 December 2023 and 2022
($ billion, unless otherwise stated)
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2. Market Risk

Market risk is the risk of loss on financial instruments because of changes in market prices. ADB principally faces two forms of market risk: (i) interest rate risk; and (ii) foreign exchange risk.

Interest rate. Interest rate risk in the operations portfolio is hedged on the basis that borrowers’ interest and principal payments are matched to ADB’s borrowing expenses. Therefore, the borrower must assume or hedge the risk of fluctuating interest rates, whereas ADB’s margins remain largely constant.

ADB is primarily exposed to interest rate risk through the liquidity portfolio. ADB monitors and manages interest rate risks in the liquidity portfolio by employing various quantitative methods.

ADB uses duration, interest rate value-at-risk (VaR) and expected shortfall (ES) to measure interest rate risk in the liquidity portfolio. Duration measures the sensitivity of the portfolio’s value to a parallel change in interest rates. Interest rate VaR provides an estimate of the portfolio’s

potential loss at a certain confidence level within a defined timeframe. Expected shortfall is a measure of the magnitude and changes to the treasury portfolio’s tail risk over time and supplements the interest rate VaR. ADB reports VaR and ES with a 95% confidence level at a 1-year time horizon. Duration, VaR, and ES are ADB’s primary monitoring tools for interest rate risk across the liquidity portfolio.

Foreign exchange . ADB minimizes exposure to exchange rate risk in its operations by matching where possible the currencies of its assets with the currencies of its liabilities. Borrowed funds or funds to be invested may only be converted into other currencies provided that they are fully hedged through cross currency swaps or forward exchange rate agreements. However, because of its multicurrency operations, ADB is exposed to fluctuations in reported US dollar because of currency translation adjustments.

Value-at-risk and expected shortfall. The interest rate 1-year VaR of the total OCR decreased from 1.56% of ADB’s equity on 31 December 2022 to 1.30% on 31 December 2023. This means a 5.0% probability exists that the portfolio will lose more than $687 million due to interest rate moves over the next year. The decrease of the interest rate 1-year VaR was attributed to lower duration in 2023 compared to the previous year, and lower interest rate volatility. The expected shortfall that measures the possible tail risk was reported at 1.61% of ADB’s equity on 31 December 2023.

Duration. Interest rate sensitivity of total OCR, as reflected in its weighted portfolio duration, decreased from 1.15 years as of the end of 2022 to 1.05 years as of the end of 2023.

Stress testing . ADB measures how sensitive the total OCR is to parallel shifts in interest rates. If interest rates were to rise 2%, the total OCR would be expected to lose 2.1% of net asset value (NAV) ($1,036 million). ADB also uses historical and hypothetical scenario analysis to assess how the total OCR would respond to significant changes in asset values. Because of the high quality of ADB’s investments, scenario analysis suggests the impact to the liquidity portfolio from historical stress scenarios is generally limited. ADB monitors VaR, ES, and duration, and performs stress testing to manage market risk in the liquidity portfolio. The major currencies of the ELP bear the majority of ADB’s market risk including the US dollar, yen, euro, and pound sterling, and represented 86% of the ELP NAV.

3. Liquidity Risk

Liquidity risk can arise if ADB is unable to raise funds to meet its financial and operational commitments. ADB maintains core liquidity to safeguard against a liquidity shortfall in case its access to the capital markets is temporarily denied. The overriding objective of the liquidity policy is to enable ADB to obtain the most cost-efficient funding under both normal and stressed situations and manage liquidity optimally to achieve its development mission. The prudential minimum liquidity is set at 12-month liquidity coverage and it is 100% of ADB’s one-year net cash requirement. This represents the minimum amount of eligible liquidity necessary for ADB to continue operations even if access to capital markets is temporarily denied. Maintaining the prudential minimum liquidity level is designed to enable ADB to cover net cash requirements for 12 months without borrowing. The liquidity levels and cash requirements are monitored periodically in accordance with ADB’s liquidity policy. Refer to Prudential Minimum Liquidity section under E. Liquidity Management for additional information.

4. Operational Risk

ADB defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. ADB manages its operational risks based on a framework endorsed by the Risk Committee and approved by the President. The framework enables ADB to implement an approach that focuses on identifying, assessing, and managing operational risks. Risks with an elevatedresidual exposure are managed by implementing mitigation actions or controls, by transferring them (e.g., insurance, for mitigating low-frequency high-severity operational risks), or by making conscious decision to accept a risk if mitigations are not possible under a cost-benefit perspective.

Key components of ADB’s operational risk management approach include: (i) employing the Operational Risk Self Assessment in its key business areas; (ii) defining quantitative and qualitative risk appetite statements for selected operational risk domains; (iii) collecting data provided by risk metrics and events (e.g., incidents) for monitoring and to enable active risk management ; and (iv) promoting risk awareness through the issuance of a monthly operational risk e-Newsletter and presentations to internal and external stakeholders on the application of the methodologies. Within ADB, risk management and other independent control functions work together to embed a strong operational risk management culture and framework.

ADB regularly reports and performs analysis on its most relevant operational risks. They are rated in terms of likelihood of their occurrence and the impact to the organization. Processes and internal controls related to the most relevant risks are continuously strengthened and monitored to reduce the likelihood and impact of these operational risks.

5. Capital Adequacy

ADB’s capital adequacy framework (CAF) aims to ensure that large risk events will not lead to a downgrade of ADB’s AAA rating or to an erosion of investor confidence. The framework is designed to protect the risk-bearing capacity of ADB without relying on callable capital, and to maintain ADB’s ability to lend even during crises.

ADB reviews its CAF every three years to ensure it is benchmarked against best practices and aligned with the evolution of ADB’s operations. In September 2023, the Board of Directors approved the proposed enhancements to three aspects of the CAF: risk appetite, risk measurement and financial planning. The enhancements to the CAF are significant given the challenges faced both in Asia and the Pacific and globally, including climate change, pandemic impacts, and others.

Under the CAF, ADB holds capital to protect against eight material risk types: credit risk in the operations portfolio, equity investment risk, interest rate risk, treasury credit risk, operational risk, pension risk, currency risk, and countercyclical lending buffer. ADB uses a capital utilization ratio (CUR) as the key metric in measuring capital adequacy. The CUR is the ratio of the total economic capital used (numerator) to usable equity (denominator). ADB plans its operations in consideration of its risk-bearing capacity, by ensuring that the capital utilization ratio does not exceed 90% in the base case. In addition, ADB is managing its capital by risk transfers and exposure exchanges with peer MDBs. These mechanisms reduce concentration risk and lower capital utilization. As of 31 December 2023, ADB was adequately capitalized and reported CUR of 70.0% (83.9% – 31 December 2022).

6. Asset and Liability Management

ADB has an asset and liability management policy framework that guides all financial policies related to asset and liability management including liquidity, investments, and equity management. The objectives of the asset and liability management are to safeguard ADB’s net worth and capital adequacy, promote steady growth in ADB’s risk-bearing capacity, and define financial policies to undertake acceptable financial risks. The aim is to provide resources for developmental lending at the lowest and most stable funding cost to borrowers, along with the most reasonable lending terms, while safeguarding ADB’s financial strength. ADB’s asset and liability management aims to safeguard net worth from foreign exchange rate risks, protect net interest margin from fluctuations in interest rates, and provide sufficient liquidity to meet the needs of ADB operations.

G. Internal Control over Financial Reporting

ADB assessed the effectiveness of its internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission for its 2023 financial statements. ADB applied a risk-based evaluation framework for the assertion of the effectiveness of internal control over financial reporting for OCR and Special Funds, except for the ADB Institute (ADBI). The scope included a review of business processes for financial reporting and the IT general controls. ADB staff across several departments and offices were responsible for: (i) identifying and testing key controls, and (ii) assessing and evaluating the design and operating effectiveness of the key controls.

The financial reporting processes and controls continue to operate under a hybrid work set-up. ADB systems are accessible remotely in the hybrid environment allowing transactions to be processed, reviewed, and approved through the relevant systems supported by IT controls necessary to prepare the financial statements.

The effectiveness of ADB’s Internal control over financial reporting has been audited by its external auditor, as stated in their respective reports, which expressed an unmodified opinion on the effectiveness of ADB’s internal control over financial reporting for OCR and Special Funds (except for ADBI) as of 31 December 2023.

H. Critical Accounting Policies and Estimates

Significant accounting policies are disclosed in Note B of the OCR financial statements. The preparation of the financial statements requires estimates, judgments and assumptions on certain transactions. These estimates, which are based on judgment and available information, are considered critical because they have material impact, or have the potential to have a material impact on the reported balances in the financial statements. ADB believes that the estimates, judgments and assumptions made are reasonable based on historical experience, current trends and available information at the time they were made. Actual results may differ and could have a material impact on the financial statements.

Fair value of financial instruments. Under statutory reporting, ADB carries selected financial instruments and derivatives, as defined by ASC Topics 815 and 825, on a fair value basis. ADB follows a fair value hierarchy that gives highest priority to quoted prices in active markets for identical assets and liabilities (Level1), next priority to observable market inputs or market corroborated data (Level 2), and the lowest priority to unobservable inputs without market corroborated data (Level 3). These are discussed in Note B of OCR’s financial statements. Financial instruments include embedded derivatives that are valued and accounted for in the balance sheet as a whole. Fair values are usually based on quoted market prices. If market prices

are not readily available, fair values are usually determined using market-based pricing models incorporating market data.

The pricing models used to determine the fair value are generally based on discounted cash flow models. For level 3 equity investments at fair value, pricing models include discounted cash flows, net asset value, and comparable valuations incorporating inputs such as equity multiples. ADB reviews the pricing models to assess whether the assumptions are appropriate and produce results that reflect the reasonable valuation of the financial instruments. In addition, the fair values derived from the models are subject to ongoing internal and external verification and review. The models use market-sourced inputs, such as interest rates, exchange rates, and option volatilities.

Changes in the pricing models used and selection of inputs for the valuation of level 3 financial instruments may involve some judgement and could significantly impact the fair value of the financial instruments in the balance sheet and the unrealized gains or losses in the statement of income and expenses. ADB believes that the estimates of fair values are reasonable.

Allowance and liability for credit losses . ADB adopts the CECL model in measuring the allowance for credit losses. CECL mainly focuses on the credit loss model for financial assets measured at amortized cost, which are represented by loans and held-to-maturity other debt securities for ADB. CECL also requires measuring credit losses for off-balance sheet commitments such as undisbursed loan and held-to-maturity other debt securities commitments and guarantees, in which ADB is exposed to credit risk. ADB records a liability for credit losses on off-balance sheet exposures for the undisbursed commitments. The provision for credit losses is based on expected losses over the remaining lifetime of loans, guarantees, and held-to-maturity other debt securities. The measurement of allowance and liability for credit losses includes significant judgments based on relevant information about past events, current conditions, and reasonable and supportable forecasts. For further details, refer to Current expected credit loss under Loans section and to Note B of OCR Financial Statements.

In determining the allowance and liability for credit losses, ADB considers various factors including default rates, credit ratings and macroeconomic forecasts. Changes in assumptions and forecasts could significantly affect the allowance and liability for credit losses. ADB believes that the assumptions used in making the estimates are reasonable and the allowance and liability for credit losses are adequate.

Pension and other postretirement benefits. ADB provides staff pension and postretirement medical benefits for all eligible staff members that have not reached the normal retirement age. Net periodic benefit costs are allocated between OCR and the Asian Development Fund (ADF) based on the agreed cost-sharing methodology. The underlying actuarial assumptions used to determine the benefit obligations and funded status associated with these plans are based on market interest rates, past experience, and Management’s best estimate of future benefit changes and economic conditions. In deriving the pension and postretirement benefit obligations and funded status, ADB considers the discount rate as the most significant input. Change in this assumption could significantly affect the benefit obligations and funded status at the end of reporting period. For further details, refer to Note Q of OCR Financial Statements.

III. SPECIAL FUNDS

ADB is authorized by its Charter to establish and administer Special Funds. These are the ADF, Technical Assistance Special Fund (TASF), Japan Special Fund (JSF), Asian Development Bank Institute (ADBI), Regional Cooperation and Integration Fund (RCIF), Climate Change Fund (CCF), Asia Pacific Disaster Response Fund (APDRF), and Financial Sector Development Partnership Special Fund (FSDPSF). Financial statements for each Special Fund are prepared in accordance with US GAAP.

A. Asian Development Fund

The ADF is ADB’s largest Special Fund and main source of grant resources for supporting ADB’s poorest and most vulnerable DMCs. Established in 1974, the ADF initially provided loans on concessional terms to ADB’s lower income DMCs. ADF grants were introduced in 2005 to reduce debt burdens in ADB’s poorest DMCs. Beginning in 2017 and following the merger of ADF lending with OCR, ADF is now focused exclusively on grants, while concessional lending is provided through the concessional OCR window. ADF resources mainly come from contributions from donor partners, mobilized through periodic replenishments, and allocations from the net income of OCR. The ADF has been replenished 12 times and received contributions from 36 donor regional and nonregional partners. The 13th replenishment for the ADF 14 cycle that covers 2025–2028 is ongoing and is expected to conclude in May 2024.

ADF 13 Replenishment. In November 2020, the Board of Governors adopted a resolution for the 12[th] replenishment of the ADF (ADF 13) and the seventh regularized replenishment of the TASF. The $4.1 billion replenishment provides grant financing to eligible recipients from 2021 to 2024.[12] The ADF 13 became effective on 8 June 2021. As of 31 December 2023, ADB received all instruments of contributions from 32 donors totaling $2,361 million including qualified contributions amounting to $317 million. Donors agreed to allocate $517 million to TASF out of the total replenishment.[13]

Contributed resources. During 2023, $357 million of donor contributions (excluding TASF portion) was made available for operational commitments. Contributions not yet available for operational commitments comprise: (i) unpaid contributions; (ii) contributions received but are withheld due to pro-rata exercise; (iii) contributions received in advance; and (iv) unamortized discounts on accelerated notes encashment.

Liquidity management. ADF manages its liquidity assets under two tranches to enable the optimal use of financial resources. The main objective of the first tranche is to ensure adequate liquidity is available to meet expected cash requirements. The second tranche comprises the prudential minimum liquidity the ADF should hold to meet unexpected demands and liquidity for future commitments. This approach ensures that liquidity is managed transparently and efficiently.

Commitment authority. The commitment authority available for future commitments comprises the resources available to the ADF for its future activities in the form of grants. These resources are derived principally from donor contributions, and internal resources. The balance of the commitment authority available for commitment as of 31 December 2023 was $1,204 million ($770 million – 2022) equivalent (Table 22).

12 2020. Board of Governors’ Resolution No. 408: Twelfth Replenishment of the Asian Development Fund and Seventh Regularized Replenishment of the Technical Assistance Special Fund. Manila.

13 US dollar equivalent based on exchange rates in Board of Governors’ Resolution No. 408.

Table 22: Asian Development Fund Commitment Authority 31 December 2023

($ million)

31 December 2023 ($ million)
Item	Amount
Carryover of ADF 12 Commitment Authority	281
Other sources from ADF 12a	337
ADF 13 contributions	1,148
ADF 12 contributionsb	99
ADF IX contributionsc	1
Grant savings and cancellations	632
Income from liquidity investment	160
OCR net income transfer	877
Resources available for regular ADF	3,535
ADF 13 Commitmentsd	(2,056)
Administrative expensese	(276)
ADF Commitment Authority Available for Future Commitments	1,204

Notes: Numbers may not sum precisely because of rounding. Numbers are valued at exchange rates as of 31 December 2023.

a Resources earmarked for ADF 13 includes the ADF 12 set-asides for Disaster Response Facility and reserves for changes in debt distress (ADB. 2020. Twelfth Replenishment of the Asian Development Fund and Seventh Regularized Replenishment of the Technical Assistance Special Fund . Manila)
b Represents payments from Indonesia and the United States.
c Payment from the United States including the corresponding prorated amounts released by Germany and Türkiye.
d Includes commitment under the Private Sector Window.

e Represents ADF's share in the administrative expenses for 2021, 2022 and 2023.

In May 2023, the Board of Governors approved the transfer of $292 million to the ADF as part of OCR’s 2022 net income allocation ($292 million – 2022). In addition, $632 million from grant savings and cancellations were included in the commitment authority. This resulted from Management’s continued assessment of opportunities to free committed resources through cancellations of unused grant balances.

During 2023, deposited installments under ADF 13 amounted to $445 million, ADF 13 encashment totaled $419 million, and about $121 million was transferred to the TASF.[14]

Investments for liquidity purpose. The ADF investment portfolio totaled $4,458 million at the end of 2023 compared to $4,285 million at the end of 2022.[15] As of 31 December 2023, about 6% of the portfolio was invested in time deposits (3% – 2022) and 94% in fixed-income securities (97% – 2022). The rate of return on ADF investments, excluding unrealized gains and losses, was 2.7% (1.9% – 2022).

Operations. During the year ended 31 December 2023, 31 grants totaling $770 million were committed[16] (35 grants totaling $932 million – 2022) while 30 grants (30 – 2022) became effective resulting in a total Grants expense of $142 million ($827 million – 2022), net of $555 million ($18 million – 2022) undisbursed grants that were reversed as reduction in grant expenses.

Sovereign cofinancing for ADF grants. In 2023, a total of $94 million in sovereign loan and grant cofinancing was committed for 11 ADF-financed projects totaling $160 million.

14 ADF 13 encashment included encashment of promissory notes and cash payments. US dollar equivalent based on exchange rates as of 31 December 2023.

15 Includes securities purchased under resale arrangements.

16 Includes three grants amounting to $12 million under the private sector window.

B. Technical Assistance Special Fund

The TASF is an important source of financing for ADB’s TA activities. The TASF supports project preparation, policy advice, capacity development, and research and development in ADB developing member countries. The funds resources consist of regularized replenishments and direct voluntary contributions by members, allocations from the net income of OCR, and revenue from investments and other sources. The TASF provides a stable and predictable funding source and acts as a catalyst for mobilizing funding from other TA sources.

TASF Seventh Regularized Replenishment. In November 2020, as part of the ADF 13 replenishment, the donors agreed to allocate $517 million of the total replenishment size as the seventh regularized replenishment of TASF. The replenishment will cover TA financing for 2021 to 2024.

Contributed resources. As of 31 December 2023, $461 million donor contributions allocated to TASF under ADF 12 has been fully received. Total of $348 million of donor contributions have been received out of the $517 million set-aside for TASF under ADF 13.

At the end of 2023, cumulative TASF resources (Table 23) totaled $4,071 million, of which $3,858 million was committed, leaving an uncommitted balance of $213 million ($285 million – 2022).

Table 23: Technical Assistance Special Fund Cumulative Resources as of 31 December 2023 and 2022 ($ million)

($ million)
Item	2023	2022
Regularized Replenishment
Contributions	2,128	2,090
Allocations from OCR Net Income	1,609	1,519
Direct Voluntary Contributions	91	91
Income from Investment and
Other Sources	246	262
Transfers from the TASF to the ADF	(3)	(3)
Total	4,071	3,958

( ) = negative, ADF = Asian Development Fund, OCR = ordinary capital resources, TASF = Technical Assistance Special Fund. Note: Numbers may not sum precisely because of rounding.

In May 2023, the Board of Governors approved the transfer of $90 million to the TASF as part of OCR’s 2022 net income allocation ($90 million – 2022).

Operations. For the year ended 31 December 2023, net TA expenses amounted to $235 million ($218 million – 2022), comprising $235 million for 156 TA projects and 122 supplementary TA ($218 million for 165 TA projects and 109 supplementary TA – 2022) made effective during the year, net of $16 million ($19 million – 2022) undisbursed amounts that were reversed as reduction in TA expenses. The undisbursed TA, net of TA advances, amounted to $742 million as of 31 December 2023 ($700 million – 2022).

Investments for liquidity purpose . As of 31 December 2023, the total investment portfolio amounted to $744 million ($699 million – 2022). About 35% of the portfolio was invested in time deposits and 65% in fixed-income securities (23% in time deposits and 77% in fixed-income securities – 2022). Total revenue from investments for the year ended 31 December 2023 amounted to $39 million ($-20 million – 2022). The rate of return on TASF investments was 5.2 % (-2.9% – 2022).

C. Japan Special Fund

The JSF was established in March 1988 when the Government of Japan and ADB entered into an agreement whereby the Government of Japan made an initial contribution of JPY 2.5 billion with ADB as the administrator. The purpose of JSF is to help ADB’s DMCs restructure their economies in light of changing global environment and to broaden their investment opportunities.

Contributed resources. As of 31 December 2023, the cumulative fund resources of JSF totaled $1,013 million, of which $901 million had been used, leaving an uncommitted balance of $112 million ($110 million – 2022).

Operations. During the year ended 31 December 2023, there were two TA projects totaling $4 million that became effective (two TA projects totaling $4 million – 2022). The balance of undisbursed TA as of 31 December 2023 amounted to $8 million ($4 million – 2022).

Investments for liquidity purpose. As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $115 million ($109 million – 2022).

D. Asian Development Bank Institute

ADBI was established in 1996 as a subsidiary body of ADB, whose objectives are to identify effective development strategies and capacity improvements for sound development management in the DMCs. Its operating costs are met by ADBI, and it is administered in accordance with the Statute of the ADBI.

During 2023, committed contributions to ADBI totaled $13 million ($12 million – 2022). As of 31 December 2023, cumulative contributions committed to ADBI amounted to ¥36 billion, A$2 million, and $18 million (about $351 million equivalent). Of the total contributions received, $267 million had been utilized by the end of 2023 ($260 million – 2022) mainly for research and capacity-building activities, including: (i) organizing symposia, forums, and training sessions; (ii) preparing research reports, publications, and websites; and (iii) financing associated administrative expenses. For the year ended 31 December 2023, total expenses of ADBI totaled $15 million ($13 million – 2022). The balance of net assets without donor restrictions (excluding property, furniture, and equipment and lease liability) available for future projects and programs was about $24 million ($26 million – 2022).

Investments for liquidity purpose. As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $11 million ($11 million – 31 December 2022).

E. Regional Cooperation and Integration Fund

Established in February 2007 as a special fund under the Regional Cooperation and Integration Financing Partnership Facility, the RCIF aims to enhance regional cooperation and integration in Asia and the Pacific by financing TA projects that support greater and higher quality connectivity between economies, expand global and regional trade and investment opportunities, and increase and diversify regional public goods.

Contributed resources. As of 31 December 2023, cumulative RCIF resources totaled $106 million, of which $105 million had been used, leaving an uncommitted balance of $1 million ($4 million – 2022).

Operations . During the year ended 31 December 2023, three TA projects and two supplementary TA totaling to $4 million (nine TA projects and 14 supplementary TA totaling $10 million – 2022) that became effective, and undisbursed amounts of $0.5 million ($1 million – 2022) were reversed

as reduction in TA expense. The balance of undisbursed TAs, net of TA advances as of 31 December 2023 amounted to $21 million ($30 million – 2022).

Investments for liquidity purpose. As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $20 million ($31 million – 2022).

F. Climate Change Fund

The CCF was established in April 2008 to facilitate greater investments in DMCs to effectively address the causes and consequences of climate change. CCF supports investments on (i) adaptation; (ii) clean energy; and (iii) reducing emissions from deforestation and forest degradation (REDD+) and land use management by providing resources through TA, grant components of investment projects, and direct charges.

Contributed resources. As of 31 December 2023, cumulative CCF resources totaled $104 million, of which $89 million had been used, leaving an uncommitted balance of $15 million ($15 million – 2022).

Operations. During the year ended 31 December 2023, one TA project and three supplementary TA totaling $2 million (seven TA projects and one supplementary TA totaling $5 million – 2022) became effective, and $0.4 million undisbursed amounts were reversed as a reduction in TA expense ($1 million – 2022). The balance of undisbursed grants and TA, net of advances as of 31 December 2023 amounted to $17 million ($21 million – 2022).

Investments for liquidity purpose . As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $30 million ($34 million – 2022).

G. Asia Pacific Disaster Response Fund

The APDRF was established in April 2009 to provide timely incremental grant resources to DMCs affected by disasters triggered by natural hazards. Quick-disbursing grants of up to $3 million are available to DMCs affected by a major disaster, and augment humanitarian aid provided by other development partners.

In September 2021, a second window under the APDRF was established to finance experts to provide speedy post-disaster technical support for the preparation of post-disaster needs assessments, recovery plans, and post-disaster projects, including emergency assistance loan. The second window will not finance any technical support needs arising during post-disaster project implementation and will not be available should the fund’s balance fall below $6 million.

In May 2020, the Government of Japan (GoJ) contributed $75 million―valid for 2 years―to APDRF which was earmarked for ADB’s response to the COVID-19 pandemic. In July 2023, the GoJ requested ADB to transfer the unused balance of its contribution to the Japan Fund for Prosperous and Resilient Asia and the Pacific (JFPR). ADB will facilitate the requested fund transfer to JFPR.

Contributed resources. As of 31 December 2023, cumulative fund resources totaled $184 million, of which $137 million had been used, leaving an uncommitted balance of $47 million ($49 million – 2022). The net assets without donor restrictions as of 31 December 2023 amounted to $20 million ($21 million – 2022).

Operations. For the year ended 31 December 2023, three grants totaling $5 million (four grants totaling $7 million – 2022) were committed. During the year, three grants totaling $5 million (four grants totaling $7 million – 2022) became effective, and $23 thousand undisbursed amounts

were reversed as a reduction in grant expenses ($0.2 million – 2022). The balance of undisbursed grants, net of grant advances as of 31 December 2023 amounted to $0.7 million ($12 thousand – 2022).

Investments for liquidity purpose. As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $38 million ($34 million – 2022).

H. Financial Sector Development Partnership Special Fund

The FSDPSF was established in January 2013 to strengthen regional, subregional, and national financial systems in Asia and the Pacific. With the approval of the Finance Sector Directional Guide in November 2022, the FSDPSF will support the six areas of operational focus: (i) enhancing support to emerging areas such as SDG-aligned financing, including green and blue financing; (ii) promoting long-term finance and quality infrastructure; (iii) leveraging digital technology to deliver financial services for financial inclusion; (iv) expanding financing to MSMEs and women; (v) establishing frameworks for disaster and epidemic risk financing; and (vi) strengthening the finance sector foundation.

Contributed resources. As of 31 December 2023, cumulative fund resources totaled $31 million, of which $26 million had been used, leaving an uncommitted balance of $5 million ($5 million – 2022).

In 2023, the Government of Luxembourg committed contribution equivalent to $2 million ($3 million – 2022).

Operations. During the year ended 31 December 2023, there were three TA projects and six supplementary TA totaling $3 million that became effective (five TA projects and five supplementary TA totaling $2 million – 2022), and $0.3 million undisbursed amounts were reversed as a reduction in TA expense ($0.7 million – 2022). The balance of undisbursed TA as of 31 December 2023 amounted to $8 million ($7 million – 2022).

Investments for liquidity purpose. As of 31 December 2023, the total investment portfolio, which was in time deposits, amounted to $8 million ($6 million – 2022).

IV. TRUST FUNDS AND COFINANCING UNDER ADMINISTRATION

Trust funds and project-specific loans and grants are key instruments to mobilize and channel financial resources from external sources to finance TA and components of investment projects. They play an important role in complementing ADB’s own resources. Multilateral, bilateral, public and private sector partners have cumulatively contributed about $11,337 million in grants and loans to ADB operations. In 2023, ADB fully-administered sovereign cofinancing commitments amounted to $333 million, composed of $233.7 million for 21 investment projects and $99.6 million for 76 TA projects. Nonsovereign cofinancing commitments that are ADB-administered amounted to $839 million for 30 projects and 3 TAs, consisting of $261 million official cofinancing, $301 million B-loans, and $277 million risk transfers. By the end of 2023, ADB was administering 48 trust funds, comprising 27 stand-alone trust funds, and 21 trust funds established under financing partnership facilities. Additional contributions from external partners amounted to $846 million in 2023, comprising $657 million in new contributions and replenishments to existing trust funds and $189 million in additional allocation from global funding initiatives. Additional allocations from global funding initiatives comprised of $120 million from the Green Climate Fund, $25 million from the Global Environment Facility, $19 million from the Climate Investment Funds, $10 million from the Global Agriculture and Food Security Program, $3 million from the Women Entrepreneurs Finance Initiative, and $12 million from the Pandemic Prevention, Preparedness and Response Trust Fund or Pandemic Fund, a new global fund accessed by ADB which provides

a dedicated stream of additional, long-term funding for critical pandemic prevention and response actions through investments and technical support.

Table 24 shows the commitments and replenishments provided by financing partners to existing trust funds in 2023.

Table 24: Schedule of Commitments and Replenishments	Table 24: Schedule of Commitments and Replenishments
from Financing Partners to Trust Funds during 2023
	($ million)
Financing partner	Trust fund	Amount
United Kingdom	Community Resilience Partnership Program Trust Fund,	269.5
	Ocean Resilience and Coastal Adaptation Trust Fund,
	United Kingdom-ASEAN Catalytic Green Finance Facility
	Trust Fund, Urban Resilience Trust Fund
Republic of Korea	Republic of Korea e-Asia and Knowledge Partnership Fund,	100.0
	Nonsovereign Revolving Trust Fund
Japan	Domestic Resource Mobilization Trust Fund, Japan Fund for	88.1
	Prosperous and Resilient Asia and the Pacific, Japan Fund
	for the Joint Crediting Mechanism, Japan Scholarship
	Program, Leading Asia's Private Infrastructure Fund
European Union	European Union-ASEAN Catalytic Green Finance Facility	58.5
	Trust Fund
Global Energy	GEAPP Energy Access and Transition Trust Fund	35.0
Alliance for People
and Planet LLC
Sweden	Clean Energy Fund, Climate Action Catalyst Fund	28.4
New Zealand	Energy Transition Mechanism Partnership Trust Fund	25.0
Netherlands	Water Resilience Trust Fund	20.0
Nordic	Ocean Resilience and Coastal Adaptation Trust Fund	9.3
Development Fund
Bill & Melinda	Sanitation Financing Partnership Trust Fund	8.0
Gates Foundation
Germany	Clean Energy Fund	7.6
Spain	Water Innovation Trust Funda	4.4
United States	Nonsovereign Revolving Trust Fund	3.0
Australia	ASEAN Australia Smart Cities Trust Fund	0.6
	TOTAL	657.4

a Originally the Multi-donor Trust Fund, the name change took effect in September 2023.

Japan Fund for Prosperous and Resilient Asia and the Pacific. The Government of Japan established the original JFPR in May 2000 to provide grants for projects supporting poverty reduction and related social development activities that add value to projects financed by ADB. In 2010, the JFPR expanded its scope of grant assistance to provide TA grants to support capacity building efforts in DMCs. In September 2021, ADB Board of Directors approved the enhanced and renamed JFPR to help ADB’s DMCs achieve resilient recovery from the crisis, by enhancing preparedness for the next crisis and building a sustainable society and the foundation for a prosperous future while bolstering vulnerable groups through the established priority areas. At the end of 2023, the JFPR received $1.05 billion in cumulative contributions from the Government of Japan including the $75 million COVID-19 Window which was created in 2020 to help DMCs strengthen their capacity to contain the spread of the COVID-19 pandemic. Total project commitments since 2000 amounted to $1.1 billion for 223 grant projects and 332 TA projects, of which $43 million was committed under the COVID-19 window.

Table 25: Schedule of Cumulative Contributions from External Sources Administered by Asian Development Bank as of 31 December 2023

($ million)

	as of 31 December 2023 ($ million)
Item	Amount Item Multilateral Partners	Amount
Bilateral Partners
Australia Austria Belgium Canada People's Republic of China Denmark European Community Finland France Germany India Ireland Italy Japan Korea, Republic of Luxembourg Netherlands New Zealand Norway Portugal Singapore Spain Sweden Switzerland Taipei,China United Kingdom United States Sub-Total	1,097.5 ADB Ventures Investment Fund 1 26.6 ADB Ventures Investment Fund 2 5.4 Asian Infrastructure Investment Bank 419.4 Association of Southeast Asian Nations 90.0 Cities Alliance 32.3 Clean Technology Fund 540.4 Commonwealth Secretariat 67.8 GEF/Least Developed Countries Fund 45.3 GEF/Special Climate Change Fund 163.5 Global Agriculture and Food Security Program 0.9 Global Environment Facility 18.1 Global Partnership for Education Fund 2.2 Global Road Safety Facility 2,633.8 Global Road Safety Partnership 275.1 Green Climate Fund 8.3 427.9 104.8 International Fund for Agricultural Development 254.0 Islamic Financial Services Board 0.6 Nordic Development Fund 1.6 Pandemic Prevention, Preparedness and Response Trust Fund 50.6 Partnership for Market Readiness 265.0 Public Private Infrastructure Advisory Facility 71.5 Strategic Climate Fund 1.5 Trust Fund for Forest 1,347.0 United Nations Development Programme 478.4 Other 8,429.5 Sub-Total International Federation of Red Cross and Red Crescent Societies	13.0 4.0 74.0 0.6 0.5 877.6 0.0 40.3 11.8 86.9 295.9 16.5 0.5 0.2 779.6 1.0 0.5 72.7 11.2 0.3 1.3 452.8 13.2 0.4 0.8 1.5
		2,757.1
	Private Partners
	Bill and Melinda Gates Foundation Bloomberg Family Foundation Inc. Credit Suisse Education Above All Foundation ENECO Energy Trade B.V. Global Energy Allicance for People and Planet LLC Goldman Sachs Charitable Gift Fund Hewlett Foundation JPMorgan Chase Foundation Korea Energy Agency Korean Energy Management Corporation Korea Venture Investment Corp. POSCO The OPEC Fund for International Development The Rockefeller Foundation Other Sub-Total Grand Total	28.1 12.50 0.1 37.1 1.3 35.0 12.5 0.3 1.4 0.4 0.2 10.0 1.8 3.5 5.0 1.2
		150.3
		11,337.0

Notes: 0.0 = Amount less than $0.05 million. Numbers may not sum precisely because of rounding. Excludes capital contributions to Credit Guarantee and Investment Facility (CGIF).

Appendix

ORDINARY CAPITAL RESOURCES CONDENSED MANAGEMENT REPORTING (Non-GAAP measure) BALANCE SHEETS As of 31 December 2023 and 2022 ($ million)

	($ million)
Item	2022 Statutory Reporting Basis Adjustmentsa Management Reporting Basis Management Reporting Basis 2023
Due from banks Investments for liquidity purpose Securities transferred under repurchase agreements Securities purchased under resale arrangements Loans outstanding — operations Equity investments — operations Other debt securities — operations Derivative Assets Borrowings Investments for liquidity purpose Loans — operations Accrued interest receivable Other assets	998 – 998 2,256 47,250 – 47,250 45,294
	– – – 987 643 – 643 98 150,986 – 150,986 144,325
	1,583 (292) 1,291 1,221 519 – 519 622
	53,838 1,239 55,077 53,049 22,943 (475) 22,468 24,813 19,502 (433) 19,069 17,485
	1,795 – 1,795 1,336
	1,354 26 1,380 905
TOTAL	301,411 65 301,476 292,391
Borrowings and accrued interest Derivative Liabilities Borrowings Investments for liquidity purpose Loans — operations Payable under securities repurchase agreements Payable for swap related and other collateral Accounts payable and other liabilities	143,265 6,317 149,582 141,307
	62,933 (5,259) 57,674 56,504 21,448 (302) 21,146 24,111
	17,105 426 17,531 15,841 – – – 988 393 – 393 148
	973 – 973 772
Total Liabilities	246,117 1,182 247,299 239,671
Paid-in capital Net notional maintenance of value receivable Ordinary reserve Special reserve Surplus Cumulative revaluation adjustments account Unallocated net incomeb Accumulated other comprehensive loss	7,113 26 7,139 7,081 (1,532) – (1,532) (1,483) 46,535 2 46,537 45,820 531 – 531 503
	1,065 – 1,065 1,065
	975 (975) – –
	910 513 1,423 1,099
	(303) (683) (986) (1,365)
Total Equity	55,294 (1,117) 54,177 52,720 301,411 65 301,476 292,391
TOTAL

– = nil, ( ) = negative.

a Unrealized gains or losses from fair value adjustments associated with certain financial instruments, share of unrealized gain or loss from equity method investments, and nonnegotiable and noninterest-bearing demand obligations on account of subscribed capital.

b After appropriation of guarantee fees to the Special Reserve.

GOVERNANCE AND ADMINISTRATION

The Charter provides that ADB shall have a Board of Governors, a Board of Directors, a President, one or more Vice-Presidents and such other officers and staff as may be considered necessary. All the powers of ADB are vested in the Board of Governors, which consists of one Governor and one Alternate appointed by each member. The Board of Governors holds an annual meeting, and such other meetings as may be provided for by the Board of Governors or called by the Board of Directors.

The responsibility for the direction of the general operations of ADB rests with the Board of Directors, the members of which serve full-time at ADB’s principal office. The Board of Directors has 12 members, of whom eight are elected by the Governors representing regional members and four are elected by the Governors representing non-regional members. The Board of Governors has delegated to the Board of Directors all its powers except those whose delegation are expressly prohibited by the Charter. Each Director is entitled to cast the number of votes that are counted toward his or her election, which votes need not be cast as a unit. Directors hold office for a term of two years and may be reelected. Each Director appoints an Alternate Director to act in such Director’s absence.

Matters before the Board of Governors or the Board of Directors are decided by a majority of the voting power of the members represented at the meeting, except in certain cases provided in the Charter in which a higher percentage is required.

The President, who must be a national of a regional member, is elected by the Board of Governors. The President is elected for a 5-year term and may be reelected. The President is the Chairman of the Board of Directors but has no vote except a deciding vote in the case of an equal division of votes. The President is the legal representative of ADB. The President is the chief of the staff of the ADB and conducts, under the direction of the Board of Directors, the current business of ADB. The President is responsible for the organization, appointment and dismissal of the officers and staff, in accordance with regulations adopted by the Board of Directors.

The Vice-Presidents are appointed by the Board of Directors on the recommendation of the President. ADB currently has six Vice-Presidents. Each Vice-President holds office for such term, exercises such authority and performs such functions in the administration of ADB as may be determined by the Board of Directors. In the absence or incapacity of the President, the ranking Vice-President (otherwise and usually known as the most senior vice-president) exercises the authority and performs the functions of the President.

The Board of Directors has established an Audit and Risk Committee, a Budget Review Committee, a Board Compliance Review Committee, a Development Effectiveness Committee, an Ethics Committee, and a Human Resources Committee. The President, in consultation with the Board of Directors, appoints the members and designates the chair of the committees. Efforts are made to have balanced representation in committees taking into consideration the economic and geographic diversity of the members of ADB. Except for the Ethics Committee which has five members, all Board committees have six members.

Audit and Risk Committee

The Audit and Risk Committee was established to assist the Board of Directors in carrying out its responsibilities as they relate to ADB’s financial reporting and audits, including internal controls and risk management.

The Audit and Risk Committee assists the Board of Directors in overseeing ADB’s finances, accounting, internal control and risk management, anticorruption and integrity including cybersecurity, artificial intelligence (AI), business continuity and organizational resilience and how these are managed, and proper accountabilities are enforced. It is tasked to ensure that ADB’s financial reporting and audits, including internal control and risk management, are adequate and efficient.

Budget Review Committee

The Budget Review Committee was established to enhance the effectiveness of the Board of Directors in discharging its responsibilities in connection with the approval of the annual administrative budget and the supervision over budgetary efficiency and prudence.

The Budget Review Committee reviews the proposed annual administrative budget, taking into account the mid-year review of the current administrative budget; reviews the proposed special capital expenditure; guides strategic alignment of budgetary resources and oversees budgetary prudence and cost control; and considers any other aspect of the administrative budget as the President may request and reports its findings to the Board of Directors.

Board Compliance Review Committee

The Board Compliance Review Committee was established under ADB’s Accountability Mechanism Policy. The committee’s responsibilities include: (i) clearing the Compliance Review Panel’s (CRP) proposed terms of reference for compliance review, (ii) reviewing the CRP’s draft reports, (iii) deciding and adjusting the CRP monitoring time frames, (iv) reviewing and endorsing the work plan and budget of the CRP and the Office of the CRP, (v) overseeing the selection and appointment of CRP members, in consultation with the ADB President, (vi) engaging in dialogue with ADB Management, in case of a borrowing member’s refusal of a CRP site visit, on the reasons behind such refusal, should this adverse situation arise, and (vii) serving as the Board of Directors’ focal point for the CRP’s communication and dialogue with the Board on the Accountability Mechanism.

Development Effectiveness Committee

The Development Effectiveness Committee was established to assist the Board of Directors in carrying out its responsibility of ensuring that ADB’s programs and activities achieve development effectiveness. Development effectiveness is assessed through ADB’s operations evaluation. The Development Effectiveness Committee focuses increasingly on broader evaluations at the country, sector, thematic, and policy levels.

The Development Effectiveness Committee is expected to satisfy itself that ADB’s operations evaluation activities are adequate and efficient. In this regard, the responsibilities that the Development Effectiveness Committee carries out on behalf of the Board of Directors are as follows: (i) recommend to the Board of Directors, jointly with the President, the person to be considered by the Board of Directors for appointment as Director General of ADB’s Independent Evaluation Department (IED), subject to the terms and conditions approved by the Board of Directors; (ii) advise IED in the preparation of an annual IED work program that the Development Effectiveness Committee can endorse to the Board of Directors for approval; (iii) advise IED in the preparation of an annual budget proposal that the Development Effectiveness Committee can endorse for review by the

Budget Review Committee; (iv) review all IED reports and discuss selected major reports, as well as Management responses to any report; (v) monitor and evaluate the the actions taken by ADB on the recommendations in the IED reports accepted by Management and endorsed by the Development Effectiveness Committee to the Board of Directors; (vi) report to the Board of Directors on selected development effectiveness issues that have a significant bearing towards the achievement of ADB’s overarching goal of poverty reduction, and make recommendations on such issues to the Board of Directors; (vii) monitor and report to the Board of Directors on the implementation of its decisions; (viii) review the annual report on evaluation activities; and (ix) review the annual report on loan and technical assistance portfolio performance.

Ethics Committee

The Ethics Committee was created to address matters of ethics that may arise under the Code of Conduct adopted by the Board of Directors on 21 November 2006, and which was most recently amended on 14 January 2020. The provisions of the Code of Conduct apply to all members of the Board of Directors (Directors, Alternate Directors, and temporary Alternate Directors) and to the President.

The Ethics Committee shall consider: (i) requests from Directors, Alternate Directors or the President for guidance concerning possible actual or potential conflicts of interest, or other ethical aspects of conduct in respect of Directors, Alternate Directors or the President, and provide advice in response thereto; and (ii) allegations of misconduct against Directors, Alternate Directors or the President that relate to the performance of official duties or actions that affect their performance of official duties, whether such actions are taken prior to, during, or, with respect to any applicable restrictions on future employment or disclosure of information, subsequent to their terms of service as Directors, Alternate Directors or President, and make recommendations to the Board of Directors with respect thereto.

Human Resources Committee

The Human Resources Committee is a means by which the Board of Directors can provide guidance on human resources management. Its primary responsibility includes reviewing, monitoring and making recommendations to the Board of Directors on ADB’s human resources strategies and policies.

Board of Directors

Set forth below are the members of the Board of Directors of ADB, their Alternates, and the members they represent as of 2 April 2024:

members they represent as of 2 April 2024:	members they represent as of 2 April 2024:
Executive Directors Alternate Executive Directors		Members Represented
Sangmin Ryu	Damien Horiambe	Republic of Korea; Papua New Guinea; Sri Lanka; Taipei,China; Uzbekistan; Vanuatu; Viet Nam
Charlotte Justine Sicat	Noor Ahmed	Kazakhstan; Maldives; Marshall Islands; Mongolia; Pakistan; Philippines; Timor- Leste
Donald Bobiash	Ernesto Braam	Canada; Denmark; Finland; Ireland; The Netherlands; Norway; Sweden
Rachel Thompson	Lisa Wright	Australia, Azerbaijan; Cambodia; Georgia; Hong Kong, China; Kiribati; Federated States of Micronesia; Nauru; Palau; Solomon Islands; Tuvalu
Made Arya Wijaya	Llewellyn Roberts	Armenia; Cook Islands; Fiji; Indonesia; Kyrgyz Republic; New Zealand; Niue; Samoa; Tonga
Weihua Liu	Xia Lyu	People’s Republic of China
Chantale Wong	Moushumi Khan	United States
Supak Chaiyawan	Nurussa’adah Muharram	Brunei Darussalam; Malaysia; Nepal; Singapore; Thailand
Bertrand Furno	Alberto Cerdán	Belgium; France; Italy; Portugal; Spain; Switzerland
Vikas Sheel	Nim Dorji	Bangladesh; Bhutan; India; Lao People’s Democratic Republic; Tajikistan; Turkmenistan
Roger Fischer	Yves Weber	Austria; Germany; Luxembourg; Türkiye; United Kingdom
Shigeo Shimizu	Keiko Takahashi	Japan

Principal Officers

The principal officers of ADB are as follows:

President Masatsugu Asakawa Vice-President (Administration and Corporate Management) Bruce Gosper Vice-President (Finance and Risk Management) Roberta Casali Vice-President (Sectors and Themes) Fatima Yasmin Vice-President (East and Southeast Asia, and the Pacific) Scott Morris Vice-President (Market Solutions) Bhargav Dasgupta Vice-President (South, Central and West Asia) Yingming Yang Managing Director General Woochong Um The Secretary Asel Djusupbekova General Counsel Thomas M. Clark Director General, Budget, People and Management Systems Yasuto Watanabe Department Director General, Central and West Asia Department Eugenue Zhukov Director General, East Asia Department Muhammad Ehsan Khan Emmanuel Jimenez

Director General, Central and West Asia Department Director General, East Asia Department Director General, Independent Evaluation Department Director General, Information Technology Department Director General, Pacific Department Director General, Private Sector Operations Department

Stephanie Hung Leah Gutierrez Suzanne Gaboury

Director General, Procurement, Portfolio, and Financial	Aman Trana
Management Department
Director General, South Asia Department	Takeo Konishi
Director General, Southeast Asia Department	Winfried Wicklein
Director General, Strategy, Policy and Partnerships Department	Tomoyuki Kimura
Director General, Climate Change and Sustainable Development	Bruno Carrasco
Department
Chief Economist and Director General, Economic Research and	Albert Francis Park
Development Impact Department
Director General, Corporate Services Department	Lakshmi Menon
Director General and Group Chief, Sectors Group	Ramesh Subramaniam
Principal Director, Department of Communications and	Bernard Woods
Knowledge Management
Treasurer	Pierre Van Peteghem
Controller	Helen Hall
Auditor General	Yuko Keicho
Head, Office of Anticorruption and Integrity	Johannes Versantvoort
Head, Office of Risk Management	Stephen L. O’Leary
Head, Office of Markets Development and Public-Private	F. Cleo Kawawaki
Partnership
Head, Office of Safeguards	Nianshan Zhang
Head, Transformation Office	Bobur Alimov

THE CHARTER

The Charter is ADB’s governing constitution. It establishes the status, immunities, exemptions, and privileges of ADB, describes its purposes, capital structure and organization, authorizes the operations in which it may engage and prescribes limitations on the carrying out of those operations. The Charter also contains, among other things, provisions with respect to the admission of additional members, increases of the authorized capital stock, the terms and conditions under which ADB may make or guarantee loans, the use of currencies held by it, the withdrawal and suspension of members, and the suspension and termination of ADB’s operations.

Under the Charter, membership in ADB is open to (i) members and associate members of the United Nations Economic and Social Commission for Asia and the Pacific, and (ii) other regional countries and non-regional developed countries which are members of the United Nations or of any of its specialized agencies. Within the foregoing limitations, new members may be admitted upon the affirmative vote of two-thirds of the total number of Governors representing not less than three-fourths of the total voting power of the members.

The Charter provides that no new membership subscription shall be authorized which would have the effect of reducing the aggregate of capital stock held by regional members below 60% of the total subscribed capital stock. Although any member may withdraw from ADB by delivering written notice, any such member remains liable for all direct and contingent obligations to ADB to which it was subject at the date of delivery of such notice, including its obligations in respect of callable capital. No member has withdrawn from ADB since its establishment.

The Charter may be amended only by resolution of the Board of Governors approved by a vote of two-thirds of the total number of Governors representing not less than three-fourths of the total voting power of the members. The unanimous agreement of the Board of Governors is required for the approval of any amendment modifying the right to withdraw from ADB, the pre-emptive rights to purchase capital stock or the limitation on liability of members. The Charter provides that any question of interpretation or application of its provisions arising between any member and ADB or between two or more members of ADB, shall be submitted to the Board of Directors for decision. Where the Board of Directors has given a decision relating to interpretation of application of the Charter, any member may require that the question may be referred to the Board of Governors, whose decision shall be final.

LEGAL STATUS, PRIVILEGES, AND IMMUNITIES

The Charter contains provisions which accord to ADB legal status and certain immunities and privileges in the territories of each of its members. Certain provisions are summarized below.

ADB has full juridical personality with capacity to contract, to acquire and dispose of immovable and movable property and to institute legal proceedings. Unless it chooses to waive such immunity, ADB is immune from every form of legal process, except in cases arising out of or in connection with the exercise of its powers to borrow money, to guarantee obligations or to buy and sell or underwrite the sale of securities. In such cases where immunity does not apply, actions may be brought against ADB in a court of competent jurisdiction in the territory of a country in which it has its principal or a branch office, has appointed an agent for accepting service or notice of process, or has issued or guaranteed securities. No action against ADB may be brought by its members or persons acting for, or deriving claims from, its members.

The Governors, Alternate Governors, Executive Directors, Alternate Executive Directors, officers and employees of ADB, including experts performing missions for it, are immune from legal process for acts performed by them in their official capacity, except when ADB waives such immunity.

The property and assets of ADB are immune from all forms of seizure, attachment or execution before the delivery of final judgment against it. Such property and assets are also immune from search, requisition, confiscation, expropriation or any other form of taking or foreclosure by executive or legislative action. Moreover, property and assets of ADB are free from restrictions, regulations, controls and moratoria of any nature to the extent necessary to carry out the purpose and functions of ADB effectively, and subject to the provisions of the Charter. The archives of ADB are inviolable.

ADB and its assets, property, income and its operations and transactions are exempt from all taxation and from all customs duties. ADB is also exempt from any obligation for the payment, withholding or collection of any tax or duty.

AUDIT FEES

Deloitte & Touche LLP, Singapore (D&T) served as ADB’s independent auditors for the financial years 2023 and 2022. ADB incurred $2.7 million for financial year 2023 ($2.7 million for 2022) in professional fees for audit and audit-related services of D&T and $1.5 million for financial year 2023 ($0.2 million for 2022) for non-audit services of other D&T offices worldwide pertaining to ADB’s technical assistance projects and staff consulting services. No services for financial information systems design and implementation were rendered by D&T to ADB during 2023 and 2022.

D&T also provided audit services to the Asian Development Bank Institute, an organization affiliated with ADB, for which an amount of $31.9 thousand for financial year 2023 ($30.3 thousand for 2022) was incurred. This is in line with ADB’s Principles for Selection of External Auditor approved by the Board of Directors.

INDEX TO FINANCIAL STATEMENTS ORDINARY CAPITAL RESOURCES

Page Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . 64 Independent Auditor's Report on Internal Control over Financial Reporting . . . . . . . . . . . . 65 Independent Auditor's Report on Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Balance Sheet – 31 December 2023 and 2022 OCR-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Statement of Income and Expenses for the Years Ended 31 December 2023 and 2022 OCR-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Statement of Comprehensive Income for the Years Ended 31 December 2023 and 2022 OCR-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Statement of Changes in Equity for the Years Ended 31 December 2023 and 2022 OCR-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Statement of Cash Flows for the Years Ended 31 December 2023 and 2022 OCR-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Summary Statement of Loans - Operations – 31 December 2023 and 2022 OCR-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Summary Statement of Borrowings – 31 December 2023 and 2022 OCR-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Statement of Subscriptions to Capital Stock and Voting Power – 31 December 2023 OCR-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Notes to Financial Statements – 31 December 2023 and 2022 OCR-9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

These financial statements were noted by ADB’s Board of Directors on 9 April 2024. They are subject to the approval of ADB’s Board of Governors at the ADB’s Annual Meeting in Tbilisi, Georgia to be held on 2 to 5 May 2024.

ORDINARY CAPITAL RESOURCES MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Asian Development Bank ("ADB") is responsible for designing, implementing, and maintaining effective internal control over financial reporting. ADB's internal control over financial reporting is a process designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with generally accepted accounting principles in the United States of America.

ADB's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of ADB; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of ADB are being made only in accordance with authorizations of management and directors of ADB; and (iii) provide reasonable assurance regarding prevention, or timely detection and correction, of unauthorized acquisition, use, or disposition of ADB's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ADB's management assessed the effectiveness of ADB's internal control over financial reporting as of 31 December 2023, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that ADB's internal control over financial reporting is effective as of 31 December 2023.

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Masatsugu Asakawa
President
Roberta Casali
Vice-President (Finance and Risk Management)
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Helen Hall Controller

12 March 2024

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ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES BALANCE SHEET 31 December 2023 and 2022 Expressed in Millions of US Dollars

BALANCE SHEET 31 December 2023 and 2022 Expressed in Millions of US Dollars
A S S E T S
DUE FROM BANKS (Notes C and R) INVESTMENTS FOR LIQUIDITY PURPOSE (Notes D, J, O, and R) Government or government-related obligations Time deposits Other securities SECURITIES TRANSFERRED UNDER REPURCHASE AGREEMENTS (Notes D, E, and R) SECURITIES PURCHASED UNDER RESALE ARRANGEMENTS (Notes D and R) LOANS OUTSTANDING — OPERATIONS (OCR-6, Notes A, F, J, R, T, and U) (Including net unamortized loan origination costs of $229 – 2023 and $210 – 2022) Sovereign Regular Concessional Nonsovereign Less—allowance for credit losses EQUITY INVESTMENTS — OPERATIONS (Notes A, H, R, T, and U) OTHER DEBT SECURITIES — OPERATIONS (Notes I, R, and U) Less—allowance for credit losses ACCRUED INTEREST RECEIVABLE Investments for liquidity purpose Loans — Operations Other debt securities — Operations DERIVATIVE ASSETS (Notes J, L, and R) Borrowings Investments for liquidity purpose Loans — Operations OTHER ASSETS Property, furniture, and equipment (Note K) Swap related and other collateral (Notes J and R) Miscellaneous (Notes D, G, P, and R)	998 $ 31,252 $ 5,449 10,549 47,250 – 643 113,034 32,546 145,580 6,058 151,638 652 150,986 1,583 523 4 519 225 1,561 9 1,795 53,838 22,943 19,502 96,283 269 393 692 1,354 2023	2022
		2,256 $ 34,090 $ 5,388 5,816 45,294 987 98 106,943 31,646 138,589 6,471 145,060 735 144,325 1,438 627 5 622 170 1,156 10 1,336 50,070 25,323 18,043 93,436 254 148 464 866
TOTAL	301,411 $	290,658 $

The accompanying Notes are an integral part of these financial statements (OCR-9).

OCR-1

LIABILITIES AND EQUITY

BORROWINGS (OCR-7, Notes J, L, and R) DERIVATIVE LIABILITIES (Notes J, L, and R) Borrowings Investments for liquidity purpose Loans — Operations PAYABLE UNDER SECURITIES REPURCHASE AGREEMENTS (Notes E and R) ACCOUNTS PAYABLE AND OTHER LIABILITIES Swap related and other collateral (Notes J and R) Accrued pension and postretirement medical benefit costs (Note Q) Liability for credit losses on off-balance sheet exposures (Notes F, G, and I) Miscellaneous (Notes D, G, K, P, and R) TOTAL LIABILITIES EQUITY (OCR-4) Capital stock (OCR-8, Note M) Authorized and subscribed (SDR106,391) Less—“callable” shares subscribed (SDR101,060) “Paid-in” shares subscribed (SDR5,331) Less—discount Nonnegotiable, noninterest-bearing demand obligations on account of subscribed capital Net notional amounts required to maintain value of currency holdings (Note M) Ordinary reserve (Note N) From ADF assets transfer (Notes A and N) From retained earnings Special reserve (Note N) Surplus (Note N) Cumulative revaluation adjustments account (Note N) Net income after appropriation (OCR-4, Note N) Accumulated other comprehensive loss (Note N) TOTAL EQUITY		2023		2022
	30,748 $ 15,787	62,933 $ 21,448 17,105	30,748 $ 15,070	63,564 $ 24,212 15,189	131,571 $ 102,965 988 920
		393 276 139 558		148 168 104 500
		142,741 135,588		141,589 134,494	236,444
		7,153 14		7,095 14

				54,214
TOTAL		301,411 $		290,658 $

OCR-2

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF INCOME AND EXPENSES For the Years Ended 31 December 2023 and 2022 Expressed in Millions of US Dollars

REVENUE From loans — operations (Notes F, J, and O) Sovereign – Regular 6,358 $ Sovereign – Concessional 673 Nonsovereign 494 From investments for liquidity purpose (Notes D, J, and O) Interest From equity investments — operations (Note O) From guarantees — operations (Note N) From other debt securities — operations (Note O) From other sources—net (Notes O and S) Total EXPENSES (Note O) Borrowings and related expenses (Notes J and L) Administrative expenses (Notes K, N, and Q) Release of provision (Provision) for credit losses—net (Notes F, G, and I) Other expenses Total NET REALIZED (LOSSES) GAINS (Note O) From investments for liquidity purpose (Notes D, J, and N) From equity investments — operations (Note N) From other debt securities — operations From borrowings (Note J) Total NET UNREALIZED (LOSSES) GAINS (Notes H, J, L, and O)		7,525 $ 2,312 62 28 48 64 10,039 $ (7,913) (680) 66 (24) (8,551) (39) 24 – 0 (15) (535) 2023		2022
	6,358 $ 673 494		2,348 $ 667 304	3,319 $ 1,095 27 31 37 56 4,565 $ (2,640) (775) (7) (19) (3,441) (54) 71 1 1 19 1,026

NET INCOME		938 $		2,169 $

Note: 0 = less than $0.5 million.

The accompanying Notes are an integral part of these financial statements (OCR-9).

OCR-3

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF COMPREHENSIVE INCOME For the Years Ended 31 December 2023 and 2022 Expressed in Millions of US Dollars

NET INCOME (OCR-2) Other comprehensive income (loss) (Note N) Unrealized holding gains (losses): From investments for liquidity purpose From equity investments — operations From other debt securities — operations From borrowings Postretirement benefit liability adjustments Currency translation adjustments	938 $ 658 $ (4) (1) 48 701 $ (173) (25) 503 2023	2022	2022
		2,169 $ (1,809) $ (18) (8) 919 (916) $ 1,265 (520) (171)

COMPREHENSIVE INCOME	1,441 $		1,998 $

The accompanying Notes are an integral part of these financial statements (OCR-9).

OCR-4

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF CHANGES IN EQUITY For the Years Ended 31 December 2023 and 2022 Expressed in Millions of US Dollars

			Nonnegotiable,	Nonnegotiable,													Accumulated	Accumulated
				Noninterest-									Cumulative		Net Income			Other
				bearing	Net Notional								Revaluation			After		Compre-
	Capital			Demand	Maintenance		Ordinary		Special				Adjustments			Appro-		hensive
		Stock		Obligations		of Value	Reserve		Reserve		Surplus			Account		priations		Loss		Total
Balance, 31 December 2021	$	7,447	$	(66)	$	(1,565)	$	45,040	$	472	$	1,065	$	403	$	693	$	(634)	$	52,855
Comprehensive income (loss)
(OCR-3, Note N)																2,169		(171)		1,998
Appropriation of guarantee
fees (Note N)										31						(31)				–
Encashment of demand
obligations				22																22
Change in USD value		(366)		5		82														(279)
Allocation of prior year
income (Note N)								778						(467)		(311)				–
Allocation of prior year
income to Special Funds
(Note N)																(382)				(382)
Balance, 31 December 2022		7,081		(39)		(1,483)		45,818		503		1,065		(64)		2,138		(805)		54,214
Comprehensive income (loss)
(OCR-3, Note N)																938		503		1,441
Appropriation of guarantee
fees (Note N)										28						(28)				–
Encashment of demand
obligations				13																13
Change in USD value		58		1		(49)														10
Allocation of prior year
income (Note N)								716						1,039		(1,755)				–
Allocation of prior year
income to Special Funds
(Note N)																(382)				(382)
Balance, 31 December 2023	$	7,139	$	(26)	$	(1,532)	$	46,535	$	531	$	1,065	$	975	$	910	$	(303)	$	55,294

USD = United States dollar. Note: Numbers may not sum precisely because of rounding. The accompanying Notes are an integral part of these financial statements (OCR-9).

OCR-5

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF CASH FLOWS For the Years Ended 31 December 2023 and 2022 Expressed in Millions of US Dollars

CASH FLOWS FROM OPERATING ACTIVITIES Interest and other charges received on loans — operations Interest received on investments for liquidity purpose Interest received from securities purchased under resale/ repurchase agreement Interest and other charges received on other debt securities — operations Dividends received on equity investments — operations Interest and other financial expenses paid Administrative expenses paid Others—net Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Sales of investments for liquidity purpose Maturities of investments for liquidity purpose Purchases of investments for liquidity purpose Receipts from securities purchased under resale arrangements Payments for securities purchased under resale arrangements Principal collected on loans — operations Loans — operations disbursed Derivatives—net Change in other collateral Property, furniture, and equipment acquired Sales of equity investments — operations Purchases of equity investments — operations Maturities of other debt securities — operations Purchases of other debt securities — operations Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from new borrowings Borrowings redeemed Issuance expenses paid Demand obligations of members encashed Derivatives—net Change in swap related collateral Resources transferred to Special Funds Net Cash Provided by Financing Activities Effect of Exchange Rate Changes on Due from Banks Net Decrease in Due from Banks Cash at Beginning of Period Due from Banks Swap Related and Other Collateral Total Cash at End of Period Due from Banks Swap Related and Other Collateral Total RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income (OCR-2) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (Release of provision) Provision for credit losses Net realized losses (gains) Gains on equity method investments Net unrealized losses (gains) Change in accrued revenue from loans — operations, investments for liquidity purpose, other debt securities — operations, and other swaps Change in accrued interest on borrowings and swaps, and other expenses Change in pension and postretirement benefit liability Others—net Net Cash Provided by Operating Activities	2023 6,777 $ 1,855 41 49 58 (6,902) (729) 72 1,221 2,429 320,286 (324,312) 208,391 (208,936) 10,400 (16,548) 956 16 (51) 77 (142) 184 (81) (7,331) 55,210 (49,251) (25) 13 (712) 232 (382) 5,085 12 (1,013) 2,256 148 2,404 $ 998 393 1,391 $ 938 $ (215) (66) 15 (49) 535 (858) 1,031 (173) 63 1,221 $	2022
		2,220 $ 873 4 39 36 (1,375) (646) 58
		1,209
		5,202 319,503 (330,700) 75,710 (75,265) 9,035 (18,425) 1,701 15 (40) 88 (197) 202 (62)
		(13,233)
		50,135 (38,376) (33) 22 (877) (502) (382)
		9,987
		(50)
		(2,087)
		3,848 643
		4,491 $
		2,256 148
		2,404 $
		2,169 $ (22) 7 (19) (15) (1,026) (1,238) 61 1,264 28
		1,209 $

The accompanying Notes are an integral part of these financial statements (OCR-9).

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES SUMMARY STATEMENT OF LOANS — OPERATIONS 31 December 2023 and 2022 Expressed in Millions of US Dollars

31 December 2023 and 2022 Expressed in Millions of US Dollars
Borrowers/Guarantors	Loans Outstanding	Not Yet Effective1 Effective2 Undisbursed Committed Loans		Loans Approved Not Yet Committed3	Total Loans	Percent of Total Loans
		Effective1
Afghanistan Armenia Azerbaijan Bangladesh Bhutan Cambodia China, People's Republic of Cook Islands Fiji Georgia India Indonesia Kazakhstan Kiribati Kyrgyz Republic Lao People's Democratic Republic Maldives Marshall Islands Micronesia, Federated States of Mongolia Myanmar Nepal Pakistan Palau Papua New Guinea Philippines Samoa Solomon Islands Sri Lanka Tajikistan Thailand Timor-Leste Tonga Turkmenistan Tuvalu Uzbekistan Vanuatu Viet Nam Regional Fair value adjustment on concessional loans Allowance for credit losses Unamortized loan origination cost—net TOTAL – 31 December 2023	534 $ 969 2,235 15,330 484 2,346 19,643 106 623 2,633 25,033 13,627 2,025 20 723 997 114 30 36 2,149 822 2,995 15,421 147 2,515 15,028 62 80 6,594 274 2,179 171 22 538 2 6,600 55 7,986 431 151,579 (170) (652) 229 (593) 150,986 $	– $ 95 45 5,115 122 1,062 6,485 0 28 649 6,752 2,122 251 – 215 153 51 – – 674 1,677 1,904 3,392 22 821 4,480 – 51 850 3 40 411 0 24 – 2,158 1 1,363 8 41,024 – – – – 41,024 $	– $ 139 – 642 5 100 1,470 – – – 1,443 1,457 – – 40 45 8 – – 155 351 100 1,150 – 35 1,716 – 10 – – – – – – – 565 – 80 – 9,511 – – – – 9,511 $	– $ – – 170 – 10 204 – – – 1,390 40 372 – – 65 – – – 154 – 160 – – – 38 – – – – 150 – 3 – – 64 – – 158 2,978 – – – – 2,978 $	534 $ 1,203 2,280 21,257 611 3,518 27,802 106 651 3,282 34,618 17,246 2,648 20 978 1,260 173 30 36 3,132 2,850 5,159 19,963 169 3,371 21,262 62 141 7,444 277 2,369 582 25 562 2 9,387 56 9,429 597 205,092 (170) (652) 229 (593) 204,499 $	0.26 0.59 1.11 10.36 0.30 1.71 13.56 0.05 0.32 1.60 16.88 8.41 1.29 0.01 0.48 0.61 0.08 0.01 0.02 1.53 1.39 2.52 9.73 0.08 1.64 10.37 0.03 0.07 3.63 0.14 1.16 0.28 0.01 0.27 0.00 4.58 0.03 4.60 0.29
						100.00

Note: 0 = less than $0.5 million.

1 Refer to the unwithdrawn portions of effective loans as of 31 December 2023 and 2022. Of the undisbursed balances, ADB has made irrevocable commitments to disburse regular and concessional sovereign amounts totaling $711 million ($848 million – 2022).

2 Refer to approved loans which loan agreements have been signed but conditions to effectiveness specified in loan regulations and loan agreements are not yet completed as of 31 December 2023 and 2022.

OCR-6

	Loans Outstanding	Not Yet Effective2 Undisbursed Committed Loans Effective1	Not Yet Effective2 Undisbursed Committed Loans Effective1	Loans Approved Not Yet Committed3	Total Loans
		Effective1
Sovereign Loans Regular Concessional Nonsovereign Loans Allowance for credit losses TOTAL – 31 December 2023 Sovereign Loans Regular Concessional Nonsovereign Loans Allowance for credit losses TOTAL – 31 December 2022	113,034 $ 32,546 6,058 151,638 (652) 150,986 $ 106,943 $ 31,646 6,471 145,060 (735) 144,325 $	9,251 28,705 $ 10,946 1,373 41,024 29,712 $ – 41,024 $ 1,595 40,558 – 40,558 $	7,615 $ 1,896 – 9,511 – 9,511 $ 6,423 $ 2,129 – 8,552 – 8,552 $	1,988 $ 313 677 2,978 – 2,978 $ 678 $ 79 833 1,590 – 1,590 $	151,342 $ 45,701 8,108
					205,151 (652)
					204,499 $
					143,756 $ 43,105 8,899
					195,760 (735)
					195,025 $

	MATURITY OF LOANS OUTSTANDING AS OF 31 DECEMBER 20234	MATURITY OF LOANS OUTSTANDING AS OF 31 DECEMBER 20234
	Total 2028 Five Years Ending 31 December 2033 2038 2043 2048 over 2048 31 December 2024 2025 2026 2027 11,065 11,181 11,104 11,929 $ 11,531 Amount Twelve Months Ending	Amount 49,013 30,072 11,759 3,400 525 151,579 $

SUMMARY OF CURRENCIES RECEIVABLE ON LOANS OUTSTANDING — OPERATIONS4	SUMMARY OF CURRENCIES RECEIVABLE ON LOANS OUTSTANDING — OPERATIONS4	SUMMARY OF CURRENCIES RECEIVABLE ON LOANS OUTSTANDING — OPERATIONS4
Currency 2023 2022 Australian dollar 11 $ 12 $ Azerbaijan manat 12 – Baht 493 529 Canadian dollar 29 31 Chinese yuan 471 561 Danish krone 7 7 Euro 9,850 9,232 Indian rupee 192 202 Kazakhstan tenge 263 193 Korean won 8 8 Lari 232 129 New Zealand dollar 79 82	Currency	2023	2022
	Norwegian krone Philippine peso Pound sterling Ringgit Special drawing rights Swedish krona Swiss franc Togrog US dollar Uzbekistan Sum Yen Total	22 12 57 1 20,120 11 30 16 113,503 26 6,134 151,579 $	26 18 57 2 21,280 12 29 4 106,827 29 5,766
			145,036 $

3 Refer to loans approved which loan agreements have not been signed as of 31 December 2023 and 2022.
4 Excluding fair value adjustment on concessional loans, allowance for credit losses, and net unamortized loan origination cost.

The accompanying Notes are an integral part of these financial statements (OCR-9).

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES SUMMARY STATEMENT OF BORROWINGS 31 December 2023 and 2022 Expressed in Millions of US Dollars

Currency	Borrowings	Borrowings	Swap Arrangements2	Swap Arrangements2	Net Currency Obligation	Net Currency Obligation
	Outstanding1		Net Payable	(Receivable)
	2023	2022	2023	2022	2023	2022
Armenian dram Australian dollar Azerbaijan manat Brazilian real Botswana pula Canadian dollar Chilean peso Chinese yuan Colombian peso Egyptian pound Euro Georgian lari Ghana cedi Hong Kong dollar Hungarian forint Indian rupee Indonesian rupiah Japanese yen Kazakhstan tenge Mexican peso Mongolian togrog New Zealand dollar Nigerian naira Norwegian krone Pakistan rupee Peruvian sol Philippine peso Polish zloty Pound sterling Russian ruble South African rand Swedish krona Swiss franc Turkish lira Ukraine hryvnia United States dollar Total	– $ 8,933 13 172 10 4,499 57 2,036 821 12 6,425 245 8 2,333 203 440 159 465 270 112 16 4,768 7 592 10 80 – 367 11,501 12 425 898 767 37 42 96,530 143,265 $	7 $ 8,019 – 104 14 3,197 30 2,283 49 – 8,496 130 16 1,432 96 440 143 641 205 219 4 4,961 – 761 20 27 192 387 10,258 92 545 1,055 547 75 67 87,059	– $ (9,075) – (174) (10) (4,553) (58) (1,513) (825) (12) 1,410 – (8) (2,333) (209) 1 – 234 – (114) – (4,765) (7) (593) – (80) – (367) (11,583) (12) (435) (915) (783) (46) (42) 45,962	– $ (8,014) – (105) (14) (3,216) (30) (1,775) (50) – (1,692) – (18) (1,431) (99) 1 – (333) – (220) – (4,928) – (760) – (27) – (384) (10,346) (89) (555) (1,063) (559) (58) (67) 49,326	– $ (142) 13 (2) 0 (54) (1) 523 (4) 0 7,835 245 0 0 (6) 441 159 699 270 (2) 16 3 0 (1) 10 0 – 0 (82) 0 (10) (17) (16) (9) 0 142,492	7 $ 5 – (1) 0 (19) 0 508 (1) – 6,804 130 (2) 1 (3) 441 143 308 205 (1) 4 33 – 1 20 0 192 3 (88) 3 (10) (8) (12) 17 0 136,385
		131,571 $	9,095 $	13,494 $	152,360 $	145,065 $

Notes: 0 = less than $0.5 million.

1 Includes accrued interest and commission. Reported at fair value except for unswapped borrowings which are reported at principal amount net of unamortized discount/premium.

2 Include currency and interest rate swaps. At 31 December 2023, the remaining maturity based on first call date of swap agreements ranged from less than one year to 27 years (less than one year to 28 years – 2022). Approximately 73.80% (71.67% – 2022) of the swap receivables and 73.79% (70.94% – 2022) of the payables are due within the next five years.

OCR-7

MATURITY STRUCTURE OF BORROWINGS OUTSTANDING AS OF 31 DECEMBER 2023[3]

Twelve Months Ending 31 December 2024 2025 2026 2027 2028	Amount
	30,904 $ 25,217 26,604 18,775 17,873

Five Years Ending 31 December 2033 2038 2043 over 2043 Total	Amount
	21,598 $ 2,130 152 12
	143,265 $

INTEREST RATE SWAP ARRANGEMENTS AS OF 31 DECEMBER 2023

Notional Amount	Average Rate(%)	Average Rate(%)
	Receive	Pay
		Floating4
35 $ 507 574 101 93,000 14 7 8,455 102,693 $	2.64 2.97 1.40 6.06 2.32 2.45 4.00 5.71	(0.32) 1.95 2.91 6.74 5.36 (0.31) (0.33) 5.33

3 Bonds with put and call options were considered maturing on the first put or call date.
4 Represents average current floating rates, net of spread.
5 Consists of dual currency swaps with interest receivable in Australian dollar and interest payable in Japanese yen.
6 Accreted pay leg notional amounts to $220 million equivalent.
7 Consists of dual currency swaps with interest receivable in US dollar and interest payable in Japanese yen.

The accompanying Notes are an integral part of these financial statements (OCR-9).

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER 31 December 2023

Expressed in Millions of US Dollars

31 December 2023 Expressed in Millions of US Dollars
MEMBERS	SUBSCRIBED CAPITAL		VOTING POWER
	Number of Percent Shares of Total	Par Value Of Shares1	Number of Percent Votes of Total
		Total Callable Paid-in
REGIONAL Afghanistan Armenia Australia Azerbaijan Bangladesh Bhutan Brunei Darussalam Cambodia China, People’s Republic of Cook Islands Fiji Georgia Hong Kong, China India Indonesia Japan Kazakhstan Kiribati Korea, Republic of Kyrgyz Republic Lao People’s Democratic Republic Malaysia Maldives Marshall Islands Micronesia, Federated States of Mongolia Myanmar Nauru Nepal New Zealand Niue Pakistan Palau Papua New Guinea Philippines Samoa Singapore Solomon Islands Sri Lanka Taipei,China Tajikistan Thailand Timor-Leste Tonga Turkmenistan Tuvalu Uzbekistan Vanuatu Viet Nam	3,585 0.034 48.1 41.7 6.4 31,671 0.298 424.9 403.6 21.3 614,220 5.773 8,240.8 7,828.7 412.1 47,208 0.444 633.4 601.6 31.7 108,384 1.019 1,454.2 1,381.4 72.7 660 0.006 8.9 8.3 0.6 37,386 0.351 501.6 476.5 25.1 5,250 0.049 70.4 64.6 5.9 684,000 6.429 9,177.0 8,718.0 459.0 282 0.003 3.8 3.6 0.2 7,218 0.068 96.8 92.0 4.8 36,243 0.341 486.3 461.9 24.4 57,810 0.543 775.6 736.8 38.8 672,030 6.317 9,016.4 8,565.5 450.9 578,100 5.434 7,756.2 7,368.3 387.9 1,656,630 15.571 22,226.5 21,114.9 1,111.6 85,608 0.805 1,148.6 1,091.1 57.5 426 0.004 5.7 5.4 0.3 534,738 5.026 7,174.4 6,815.6 358.8 31,746 0.298 425.9 404.6 21.3 1,476 0.014 19.8 18.6 1.2 289,050 2.717 3,878.1 3,684.1 194.0 426 0.004 5.7 5.4 0.3 282 0.003 3.8 3.6 0.2 426 0.004 5.7 5.4 0.3 1,596 0.015 21.4 20.3 1.1 57,810 0.543 775.6 736.8 38.8 426 0.004 5.7 5.4 0.3 15,606 0.147 209.4 198.9 10.5 163,020 1.532 2,187.2 2,077.8 109.4 150 0.001 2.0 1.9 0.1 231,240 2.174 3,102.5 2,947.3 155.2 342 0.003 4.6 4.4 0.2 9,960 0.094 133.6 127.0 6.7 252,912 2.377 3,393.2 3,223.6 169.7 348 0.003 4.7 4.4 0.3 36,120 0.340 484.6 460.4 24.2 708 0.007 9.5 9.0 0.5 61,560 0.579 825.9 784.6 41.3 115,620 1.087 1,551.2 1,473.7 77.6 30,402 0.286 407.9 387.4 20.4 144,522 1.358 1,939.0 1,842.0 97.0 1,050 0.010 14.1 13.4 0.7 426 0.004 5.7 5.4 0.3 26,874 0.253 360.6 342.5 18.1 150 0.001 2.0 1.9 0.1 71,502 0.672 959.3 911.3 48.0 708 0.007 9.5 9.0 0.5 36,228 0.341 486.1 454.5 31.5		42,699 0.321 70,785 0.532 653,334 4.913 86,322 0.649 147,498 1.109 39,774 0.299 76,500 0.575 44,364 0.334 723,114 5.437 39,396 0.296 46,332 0.348 75,357 0.567 96,924 0.729 711,144 5.347 617,214 4.641 1,695,744 12.751 124,722 0.938 39,540 0.297 573,852 4.315 70,860 0.533 40,590 0.305 328,164 2.468 39,540 0.297 39,396 0.296 39,540 0.297 40,710 0.306 96,924 0.729 39,540 0.297 54,720 0.411 202,134 1.520 39,264 0.295 270,354 2.033 39,456 0.297 49,074 0.369 292,026 2.196 39,462 0.297 75,234 0.566 39,822 0.299 100,674 0.757 154,734 1.164 69,516 0.523 183,636 1.381 40,164 0.302 39,540 0.297 65,988 0.496 39,264 0.295 110,616 0.832 39,822 0.299 75,342 0.567
Total Regional(Forward)	6,744,135 63.390 $ 90,484.0 $ 85,944.6 $ 4,539.4		8,660,721 65.124

OCR-8

MEMBERS	SUBSCRIBED CAPITAL	SUBSCRIBED CAPITAL	VOTING POWER
	Number of Percent Shares of Total	Par Value Of Shares1	Number of Percent Votes of Total
		Total Callable Paid-in
Total Regional(Forward)	6,744,135 63.390 $ 90,484.0 $ 85,944.6 $ 4,539.4		8,660,721 65.124
NONREGIONAL Austria Belgium Canada Denmark Finland France Germany Ireland Italy Luxembourg Netherlands	36,120 0.340 484.6 460.4 24.2 36,120 0.340 484.6 460.4 24.2 555,258 5.219 7,449.7 7,077.2 372.6 36,120 0.340 484.6 460.4 24.2 36,120 0.340 484.6 460.4 24.2 247,068 2.322 3,314.8 3,149.1 165.8 459,204 4.316 6,161.0 5,852.9 308.1 36,120 0.340 484.6 460.3 24.3 191,850 1.803 2,574.0 2,445.3 128.7 36,120 0.340 484.6 460.3 24.3 108,882 1.023 1,460.8 1,387.8 73.1		75,234 0.566 75,234 0.566 594,372 4.469 75,234 0.566 75,234 0.566 286,182 2.152 498,318 3.747 75,234 0.566 230,964 1.737 75,234 0.566 147,996 1.113
Norway	36,120 0.340 484.6 460.4 24.2		75,234 0.566
Portugal Spain Sweden Switzerland	36,120 0.340 484.6 460.3 24.3 36,120 0.340 484.6 460.4 24.2 36,120 0.340 484.6 460.4 24.2 61,950 0.582 831.2 789.6 41.6		75,234 0.566 75,234 0.566 75,234 0.566 101,064 0.760
Türkiye	36,120 0.340 484.6 460.4 24.2		75,234 0.566
United Kingdom United States	216,786 2.038 2,908.6 2,763.1 145.5 1,656,630 15.571 22,226.5 21,114.9 1,111.6		255,900 1.924 1,695,744 12.751
Total Nonregional	3,894,948 36.610 52,257.3 49,643.8 2,613.5		4,638,114 34.876
TOTAL	10,639,083 100.000 $ 142,741.4 $ 135,588.5 $ 7,152.9		13,298,835 100.000

Note: Numbers may not sum precisely because of rounding.

1 The authorized capital stock of the ADB has a par value of $10,000 in terms of US dollars of the weight and fineness in effect on 31 January 1966. Pending ADB's selection of the appropriate successor to the 1966 dollar, the par value of each share is SDR 10,000 for financial reporting purposes. Exchange rate at 31 December 2023 was $1.34167. (Notes B and M)

The accompanying Notes are an integral part of these financial statements (OCR-9).

OCR-9

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES NOTES TO FINANCIAL STATEMENTS 31 December 2023 and 2022

NOTE A—NATURE OF OPERATIONS, TRANSFER OF ADF LOANS AND OTHER ASSETS TO OCR, AND LIMITATIONS ON LOANS, GUARANTEES AND EQUITY INVESTMENTS

Nature of Operations

The Asian Development Bank (ADB), a multilateral development bank, was established in 1966 with its headquarters in Manila, Philippines. ADB and its operations are governed by the Agreement Establishing the Asian Development Bank (the Charter). Its purpose is to foster economic development and co-operation in Asia and the Pacific region and to contribute to the acceleration of the process of economic development of the developing member countries (DMCs) in the region, collectively and individually. Since 1999, ADB’s corporate vision and mission has been to help DMCs reduce poverty in the region. This was reaffirmed under the long-term corporate strategy to 2030—Strategy 2030. Under Strategy 2030, ADB’s vision is to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. ADB will continue to prioritize the region’s poorest and most vulnerable countries.

ADB conducts its operations through the ordinary capital resources (OCR) and Special Funds (See Note S). Mobilizing financial resources, including cofinancing, is another integral part of ADB’s operational activities, where ADB, alone or jointly, administers on behalf of donor’s funds provided for specific uses.

ADB’s OCR operations comprise loans, equity investments, investment in other debt securities, and guarantees. ADB finances its ordinary operations through borrowings, paid-in capital, and reserves.

ADB is immune from taxation pursuant to Chapter VIII, Article 56, Exemption from Taxation , of the Charter.

Transfer of ADF Loans and Other Assets to OCR

On 1 January 2017, ADB transferred loans and other assets totaling $30,812 million from the Asian Development Fund (ADF) to OCR in accordance with the Board of Governors’ Resolution No. 372 authorizing the termination of ADF’s lending operations. From then on, concessional lending to lowerincome countries continued from the OCR.

The transferred ADF assets comprised loans including accrued interest totaling $27,088 million and liquid assets totaling $3,724 million. Except for the $64 million return of set-aside resources, the rest of the transferred assets was treated as a contribution from ADF to OCR and recognized as a one-time income of $30,748 million in OCR, which has been allocated to ordinary reserves on 1 January 2017, following the adoption of the Board of Governors’ Resolution No. 387 dated 15 March 2017. The contribution part amounting to $30,748 million and the fair value adjustment on the loans amounting to $281 million were recognized as one-time loss of $31,029 million in ADF (See Note N).

The proportionate share of ADF donors in the transferred assets as of 1 January 2017, taking into account the value of paid-in donor contributions that have been made available for operational commitments which are deemed by ADB to be applied for the transferred assets, was determined in accordance with Article V of the Regulations of the Asian Development Fund. Under Board of Governors’ Resolution No. 372, the proportionate share of an ADF donor will be taken into account in the event of the withdrawal of that donor from ADB and ADB's repurchase of its shares, and in the theoretical termination of ADB operations and liquidation of its assets. The value of each donor’s paid-in contributions was fixed in US dollars based on the SDR value of each donor contribution as of 1 January 2017. This was then used to determine the sources of funds in the transferred assets, as summarized in the following table.

OCR-9

continued

Source of Funds in ADF $ million %	Source of Funds in ADF	$ million %
Donor Contributions
Australia $ 2,213 7.18	Malaysia	24 0.08
Austria 257 0.83	Nauru	0 0.00
Belgium 231 0.75	Netherlands	716 2.32
Brunei Darussalam 17 0.06	New Zealand	157 0.51
Canada 1,889 6.13	Norway	266 0.86
China, People's Republic of 84 0.27	Portugal	79 0.26
Denmark 242 0.79	Singapore	18 0.06
Finland 180 0.58	Spain	432 1.40
France 1,270 4.12	Sweden	436 1.42
Germany 1,679 5.45	Switzerland	359 1.17
Hong Kong, China 93 0.30	Taipei,China	90 0.29
India 24 0.08	Thailand	15 0.05
Indonesia 14 0.05	Türkiye	114 0.37
Ireland 79 0.26	United Kingdom	1,440 4.67
Italy 1,099 3.57	United States	4,060 13.18
Japan 11,197 36.34	Subtotal	29,309 95.13
Kazakhstan 4 0.01	OCR Net Income Transfers	1,439 4.67
Korea,Republic of 484 1.57	Set-Aside Resources	64 0.20
Luxembourg 47 0.15	Total	$ 30,812 100.00

0 = about $0.3 million, 0.00 = 0.001%.

Limitations on Loans, Guarantees, and Equity Investments

Article 12, paragraph 1 of the Charter provides that the total amount of outstanding loans, equity investments, and guarantees made by ADB shall not exceed the total of ADB’s unimpaired subscribed capital, reserves, and surplus, exclusive of the special reserve. ADB’s policy on lending limitations limits the total amount of disbursed loans, disbursed equity investments and related prudential buffer, and the maximum amount that could be demanded from ADB under its guarantee portfolio, to the total amount of ADB’s unimpaired subscribed capital, reserves and surplus exclusive of the special reserve. As of 31 December 2023, the total of such loans (including other debt securities), equity investments and related prudential buffers, and guarantees aggregated approximately 80.2% (77.9% – 2022) of the total subscribed capital, reserves, and surplus exclusive of the special reserve.

Article 12, paragraph 3 of the Charter provides that equity investments shall not exceed 10% of the unimpaired paid-in capital actually paid up at any given time together with reserves and surplus, exclusive of the special reserve. As of 31 December 2023, such equity investments represented approximately 3.3% (3.3% – 2022) of the paid-in capital, reserves, and surplus, as defined.

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Presentation of the Financial Statements

The financial statements of OCR are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).

Functional Currencies and Reporting Currency

The functional currencies of OCR comprise the currencies of all members and special drawing right (SDR) as these are the currencies of the primary economic environments in which ADB operates. The reporting currency is the United States (US) dollar, and the financial statements are reported in US dollars.

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Translation of Currencies

ADB adopts the use of daily exchange rates for accounting and financial reporting purposes. This allows transactions in currencies other than the US dollar to be translated to the reporting currency using exchange rates applicable at the time of transactions. At the end of each accounting month, assets, liabilities, and capital are translated to US dollar using the applicable exchange rates. The translation adjustments, other than those relating to the non-functional currencies, are charged or credited to Accumulated translation adjustments and reported in EQUITY as part of Accumulated other comprehensive loss (Note N).

Valuation of Capital Stock

The authorized capital stock of ADB is defined in Article 4, paragraph 1 of the Charter “in terms of US dollars of the weight and fineness in effect on 31 January 1966” (1966 dollar) and the value of each share is defined as 10,000 1966 dollars. The capital stock had historically been translated into the current US dollar (ADB’s unit of account) on the basis of its par value in terms of gold. From 1973 until 31 March 1978, the rate arrived at on this basis was $1.20635 per 1966 dollar. Since 1 April 1978, at which time the Second Amendment to the Articles of Agreement of the International Monetary Fund (IMF) came into effect, currencies no longer have par values in terms of gold. Pending ADB’s selection of the appropriate successor to the 1966 dollar, the capital stock has been valued for purposes of these financial statements in terms of the SDR at the value in US dollars as determined by the IMF, with each share valued at SDR10,000.

As of 31 December 2023, the value of the SDR in terms of the US dollar was $1.341670 ($1.330840 – 2022) giving a value for each share of ADB’s capital equivalent to $13,416.70 ($13,308.40 – 2022).

Derivative Financial Instruments

ADB reports all derivative transactions in accordance with Accounting Standards Codification (ASC) 815, “Derivatives and Hedging.” ADB has elected not to define any qualifying hedging relationships, not because economic hedges do not exist, but rather because the application of ASC 815 hedging criteria does not make fully evident ADB’s risk management strategies. All derivative instruments are reported at fair value (FV) and changes in FV have been recognized in net income. ADB records derivatives in the Balance Sheet as either assets or liabilities, consistent with the legal rights and way the instruments are settled. Individual interest rate swaps are recorded on a net basis, while all other swaps, including cross currency and foreign exchange (FX) swaps, are recorded on a gross basis.

ADB classifies the cash flows related to nonhedging derivatives in the Statement of Cash Flows in accordance with the nature of the derivative instrument and how it is used in the context of ADB’s operations. Payment for and receipts from derivatives could either be Cash Flows for Investing Activities or Cash Flows from Financing Activities.

Investments for Liquidity Purpose

All investment securities and time deposits held by ADB are considered to be available for sale (AFS) and are reported at FV. Unrealized gains and losses are reported in EQUITY as part of Accumulated other comprehensive loss. Realized gains and losses are reported in the Statement of Income and Expenses under NET REALIZED GAINS From investments for liquidity purpose and are measured by the difference between amortized cost and the net proceeds of sales using the specific identification method for internally managed investment portfolio and the weighted average cost method for externally managed investment portfolio.

Interest income on investment securities and time deposits is recognized as earned and reported net of amortization of premiums and discounts.

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Securities Transferred Under Repurchase Agreements and Securities Purchased Under Resale Arrangements

Transfer of financial assets are accounted for as sales when control over the transferred assets has been relinquished. Otherwise, the transfers are accounted for as repurchase/resale agreements and collateralized financing arrangements. Under repurchase agreements, securities transferred are recorded as assets and reported at FV and cash received as collateral is recorded as a liability. ADB monitors the FV of securities transferred under repurchase agreements and the received collateral. Under resale arrangements, securities purchased are recorded as assets and are not re-pledged.

Loans — Operations

ADB’s loans are made to or guaranteed by members, with the exception of nonsovereign loans. Loan interest income and loan commitment fees are recognized on accrual basis. In line with ADB’s principle of cost passthrough pricing in regular sovereign loan, the funding cost margin is passed on to Flexible Loan Product (FLP) loan and London interbank offered rate (LIBOR)-based loan (LBL) borrowers as a surcharge or rebate.

It is the policy of ADB to place loans in non-accrual status if the principal, interest, or other charges with respect to any such loans is overdue by more than 180 days or in case of loans that are not yet overdue by more than 180 days, when there is expectation that loan service payment will not be collected when they become due, at the point when such information is known. Once a loan to a borrower is placed in nonaccrual status, all other overdue loans to the same borrower will be placed in non-accrual status. On the date a borrower’s loans are placed into non-accrual status, unpaid interest and other charges accrued are deducted from the revenue of the current period. Interest on non-accruing loans is included in revenue only to the extent that payments have actually been received by ADB. Accordingly, loans are reinstated to accrual status when all the principal, interest and other charges due on the loan have been collected. ADB maintains a position of not taking part in debt rescheduling agreements with respect to sovereign loans. In the case of nonsovereign loans, ADB may agree to debt rescheduling only after alternative courses of action have been exhausted.

ADB levies a commitment charge on the undisbursed balance of effective regular sovereign and nonsovereign loans. Unless otherwise provided by the loan agreement, the charges take effect commencing on the 60th day after the loan signing date and are credited to loan income. Front-end fees have been eliminated for sovereign loans negotiated on or after 1 October 2007. However, for loans under contingent disaster financing, the borrower will pay, in lieu of commitment charges, a front-end fee of 0.25% or 0.10% of the committed loan amount depending on contingent disaster financing option, which are deferred and amortized over the life of the loans. Loans under Small Expenditure Financing Facility carries a front-end fee of 0.15% of the facility amount.

ADB charges front-end fees for nonsovereign loans, which are deferred and amortized over the life of the loans after offsetting deferred direct loan origination costs.

ADB offers loans to its concessional sovereign borrowers at fixed (1.0%, 1.5% or 2.0%) interest rates with repayment over periods ranging from 24 to 40 years. Concessional sovereign loans are not subject to commitment charges.

Allowance for Credit Losses

ADB records an allowance for credit losses over the remaining lifetime of financial assets measured at amortized cost (including loans and held-to-maturity [HTM] debt securities). In addition, a liability is recorded for off-balance sheet credit exposures for undisbursed loan commitments and financial guarantees over the contractual period. ADB estimates the expected credit losses based on relevant information about past events, current conditions, and reasonable and supportable forecasts. The expected credit losses are measured as the product of exposure at default (EAD), probability of default (PD), and loss given default

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(LGD). When loans are considered impaired, they are individually reviewed and assessed to determine the expected credit losses using appropriate methods, including discounted cash flow method.

The allowance for credit losses and liability for credit losses on off-balance sheet exposures such as guarantees and undisbursed commitments for loans, and HTM debt securities, are reviewed quarterly, and the amount necessary to adjust the allowance and liability for credit losses is reported as Provision (Release of provision) for credit losses in the Statement of Income and Expenses under EXPENSES. ADB elects not to record the allowance on accrued interest receivables as it reverses the accrued interest of the loans under non-accrual status in accordance with its non-accrual policy. Partial or full write-off of financial assets will be deducted from the allowance. Expected recoveries of amounts previously written-off or expected to be writtenoff are recognized as a negative allowance which does not exceed the aggregate of amounts previously written off and expected to be written off.

ADB uses risk transfer contracts between ADB and third parties such as insurance companies or banks, where the third parties agree to assume a portion of the credit risk in a loan, HTM debt security, or guarantee provided by ADB. A recovery asset related to the risk transfer contracts is recognized at the time of recording of expected credit losses for the loans, HTM debt securities, and guarantees. The recovery asset is reviewed quarterly, and the amount to adjust the recovery asset is reflected in Provision (Release of provision) for credit losses.

When an available-for-sale (AFS) debt security’s fair value is lower than amortized cost, ADB recognizes impairment losses in earnings if ADB has the intent to sell the debt securities or if it is more likely than not that ADB will be required to sell the debt securities before recovery of the amortized cost. When ADB intends to hold and is not required to sell the debt securities, ADB will evaluate to determine if a credit loss exists. Portion of the decline in fair value below amortized cost basis due to credit-related factors will be recognized as an allowance for credit losses with a related charge to Provision for credit losses.

For certain financial assets, such as Due from Banks, Securities Purchased under Resale Arrangements, and Swap related and other collateral, no expected loss is determined based on the credit quality.

Guarantees

ADB provides guarantees under its sovereign and nonsovereign operations. Guarantees are regarded as outstanding when the underlying financial obligation of the borrower is incurred. ADB would be required to perform under its guarantees if the payments guaranteed were not made by the debtor, and the guaranteed party called the guarantee by demanding payments from ADB in accordance with the term of the guarantee.

For guarantees issued and modified on or after 1 January 2003, ADB recognizes at the inception of a guarantee, a liability for the stand-by obligation to perform on guarantees. A front-end fee on guarantees received is deferred and amortized over the term of the guarantee contract. The unamortized balance of the deferred guarantee fee income, and the unamortized balance of the obligation to stand ready, are included in ACCOUNTS PAYABLE AND OTHER LIABILITIES – Miscellaneous on the Balance Sheet. ADB also records a liability for the expected credit losses over the contractual period in ACCOUNTS PAYABLE AND OTHER LIABILITIES – Liability for credit losses on off-balance sheet exposure on the Balance Sheet.

ADB entered into an exposure exchange agreement (EEA) with another multilateral development bank (MDB). The EEA provides for the simultaneous exchange of credit risk coverage for potential non-accrual events on the exchanged sovereign exposures. In case of non-accrual events, the party providing protection would pay the other counterparty principal or interest for any period the covered exposure is in non-accrual. The EEA transaction is treated as an exchange of two separate financial guarantees (guarantee provided and guarantee received). Under the EEA, (i) ADB provides a guarantee for the sovereign exposures received from the counterpart MDB (ADB as a seller of protection), and (ii) ADB will receive a guarantee for the sovereign exposures transferred to the counterpart MDB (ADB as a buyer of protection).

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Collateral

ADB requires collateral from individual swap counterparties in the form of approved liquid securities or cash to mitigate its credit exposure to these counterparties. ADB records the cash in OTHER ASSETS with a corresponding obligation to return the cash in ACCOUNTS PAYABLE AND OTHER LIABILITIES. Collateral received in the form of liquid securities is disclosed in Note J and not recorded on OCR’s Balance Sheet.

Equity Investments — Operations

Investments in equity securities (except those accounted for under equity method) are reported at FV, with changes in FV reported in the Statement of Income and Expenses under NET UNREALIZED GAINS (LOSSES).

Realized gains and losses are reported in the Statement of Income and Expenses under NET REALIZED GAINS from equity investments – operation and are measured by the difference between cost and sales proceeds. Previously recognized unrealized gains and losses are reversed upon sale of investments.

ADB applies the equity method of accounting to investments where it has the ability to exercise significant influence such as in limited liability partnerships and certain limited liability companies that maintain a specific ownership account for each investor in accordance with ASC 323-30, “Partnerships, Joint Ventures, and Limited Liability Entities” and direct equity investment that fall under the purview of ASC 323, “Investments— Equity Method and Joint Ventures.”

Variable Interest Entities

ADB complies with ASC 810, “Consolidation.” ASC 810 requires an entity to consolidate and provide disclosures for any Variable Interest Entity (VIE) for which it is the primary beneficiary. An entity is subject to the ASC 810 VIE Subsections and is considered a VIE if it (i) lacks equity that is sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) if holders of the equity investment at risk lack decision-making rights about the entity’s activities that most significantly impact the entity’s economic performance; or (iii) do not have the obligation to absorb the expected losses or the right to receive the residual returns of the entity proportionally to their voting rights. ASC 810 defines the primary beneficiary as the entity that both has the (i) power to direct the activities that most significantly impact the economic performance of the VIE and the (ii) obligation to absorb losses or the right to receive residual returns of the entity. As of 31 December 2023 and 2022, ADB did not identify any VIE where ADB was the primary beneficiary, requiring consolidation in OCR financial statements.

ADB’s variable interests can arise from equity investments, loans, guarantees, and other contractual agreements that change with the changes in the FV of the VIE’s net assets exclusive of variable interests. ADB is required to disclose information about its involvement in VIEs where ADB holds significant variable interest (See Note T).

Other Debt Securities — Operations

Investments in other debt securities may be classified as HTM or AFS based on the intent and ability of ADB to hold these securities to maturity. HTM securities are reported at amortized cost while AFS are reported at FV.

Interest income on other debt securities is recognized as earned and reported, net of amortization of applicable premiums and discounts. In cases where front-end fees are collected, the fees are deferred and amortized over the life of the security after offsetting deferred direct origination costs.

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Property, Furniture, and Equipment

Land is stated at cost and is not amortized. Buildings and improvements, and office furniture and equipment are stated at cost and depreciated over estimated useful lives on a straight-line basis. Maintenance, repairs, and minor betterments are charged to expense.

Operating Leases

Right-of-use asset mainly pertains to lease of real properties such as offices, buildings and parking lots in field offices. ADB does not have any finance lease. Right-of-use asset is derived from the lease liability, which is the present value of future lease payments using the applicable discount rate, adjusted by prepaid rent and deferred rent. Operating lease expenses are recognized on a straight-line basis.

ADB determines whether a contract contains a lease if the contract conveys the right to control the use of identified property, furniture or equipment for a period of time in exchange for a consideration. ADB has included renewal options in determining the lease term when it is reasonably certain that the renewal option will be exercised. ADB uses its incremental borrowing rate as the discount rate in determining the present value of future lease payments.

Borrowings

Borrowings provide funds for ADB’s operations. ADB diversifies its funding sources across markets, instruments, and maturities. In conjunction, ADB uses currency and interest rate swaps for asset and liability management.

ADB elected to record and report at FV all borrowings that are swapped or are intended to be swapped in the future and selected floating-rate borrowings. This election allows ADB to apply a consistent accounting treatment between borrowings and their related swaps. Changes in FV are reported in the Statement of Income and Expenses under NET UNREALIZED GAINS (LOSSES). ADB measures the portion of the FV change related to ADB’s own credit spread and presents the amount separately in Accumulated other comprehensive loss.

Remaining borrowings continue to be reported at amortized cost. Discounts, premiums and issuance costs associated with new borrowings are deferred and amortized over the period during which the borrowing is outstanding.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurement” defines FV as the price that would be received to sell an asset or paid to transfer a liability at measurement date in an orderly transaction among willing participants with an assumption that the transaction takes place in the entity’s principal market, or in the absence of principal market, in the most advantageous market for the asset or liability. The most advantageous market is the market where the sale of the asset or transfer of liability would maximize the amount received for the asset or minimize the amount paid to transfer the liability. The FV measurement is not adjusted for transaction cost.

Fair Value Hierarchy

ASC 820 establishes a FV hierarchy that gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), next priority to observable market inputs or market corroborated data (Level 2), and the lowest priority to unobservable inputs without market corroborated data (Level 3).

The FVs of ADB’s financial assets and liabilities are categorized as follows:

Level 1: FVs are based on unadjusted quoted prices for identical assets or liabilities in active markets.

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Level 2: FVs are based on quoted prices for similar assets or liabilities in active markets or markets that are not active; or valuation models for which significant inputs are obtained from market-based data that are observable.

Level 3: FVs are based on prices or valuation models for which significant inputs to the model are unobservable.

Accounting Estimates

The preparation of the financial statements requires Management to make reasonable estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the end of the year and the reported amounts of revenues and expenses during the year. The actual results could differ from those estimates. Judgments have been used in the valuation of certain financial instruments, the determination of the adequacy of the accumulated provisions for losses on loans and other exposures (irrevocable commitments and guarantees), the determination of net periodic cost from pension and other postretirement benefits plans, and the present value of benefit obligations.

Accounting and Reporting Developments

In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2022-02, “Financial Instruments—Credit Losses (Topic 326)—Troubled Debt Restructuring and Vintage Disclosures” . The amendment eliminates the accounting guidance for loan modifications considered as troubled debt restructurings in Subtopic 310-40, Receivables—Troubled Debt Restructuring by Creditors , and requires an entity to determine whether a loan modification represents a new loan or a continuation of an existing loan under the guidance provided in Subtopic 310-20, Receivables— Nonrefundable Fees and Other Costs . The amendment also enhances existing disclosure requirements, introduces new requirements related to loan modifications for borrowers experiencing financial difficulty and requires disclosure of current-period gross write-offs by year of origination for financial receivables in the vintage disclosures. The update took effect for ADB on 1 January 2023. The adoption of this ASU did not have a material impact on OCR’s financial statements.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820)—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” . The amendment clarifies what contractual sale restrictions of an equity security are inconsistent with the unit of account of the equity security, and, therefore, should not be considered in measuring the fair value. It also clarifies that an entity cannot, as a separate unit of account, recognize and measure certain contractual sale restrictions. The amendments also require certain disclosures for equity securities subject to contractual sales restrictions. The update is effective for ADB on 1 January 2024. The adoption of this ASU will not have a material impact on OCR’s financial statements.

In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848) —Deferral of the Sunset Date of Topic 848,” with immediate effectivity to extend the optional relief provided in Topic 848 for eligible contracts and transactions affected by reference rate reform from 31 December 2022 to 31 December 2024. ADB has adopted the provisions of Topic 848, and as provided by the Update, will continue monitoring and assessing contract modifications for the use of the optional expedients and exceptions provided as we continue to amend the remaining nonsovereign LBLs and LIBOR-based swaps. ADB does not expect the adoption of this Update to have a significant impact on the financial statements.

In October 2023, the FASB issued ASU 2023-06, “ Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative ”. This Update incorporates certain disclosures requirements referred to by the SEC in its final rule in August 2018 that overlap or are incremental to those in GAAP and introduces technical corrections and clarifications. The SEC intends to eliminate the related disclosure requirements from its existing regulations when the amendments in GAAP are issued to avoid duplication. The effective date of each amendment will be the date on which the SEC’s removal of that related disclosure from its regulations becomes effective, with early adoption prohibited. ADB does not expect the adoption of this Update to have a material impact on the financial statements.

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In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ”. This Update expands reportable segment disclosure requirements by primarily requiring public entities to disclose significant expenses for reportable segments in both interim and annual reporting periods. In addition, it now requires public entities with a single reportable segment to provide all segment disclosures under Topic 820. The amendments in this Update are effective for fiscal years beginning after 15 December 2023, and interim periods within fiscal years beginning after 15 December 2024. Early adoption is permitted. ADB is evaluating the disclosure requirements in the ASU and does not expect the adoption of this Update to have a material impact on the financial statements.

Statement of Cash Flows

For the purposes of the Statement of Cash Flows, ADB considers that its cash and cash equivalents are limited to (i) DUE FROM BANKS, which consist of current accounts in banks used for operational disbursements, receipt of funds from encashment of members’ promissory notes, and clearing accounts; (ii) swap related collateral, which are cash collateral received by ADB from swap counterparties to mitigate ADB’s credit exposure to these counterparties; and (iii) other collateral.

On the face of the cash flow statement, Swap related and other collateral are presented as a separate line item from DUE FROM BANKS as part of beginning and ending balances of total cash. The movements during the period in the swap related collateral account is classified as cash flow from financing activities and other collateral account is classified as cash flow from investing activities.

NOTE C—RESTRICTIONS ON USE OF CURRENCIES OF MEMBERS

In accordance with Article 24, paragraphs 2(i) and (ii) of the Charter, the use by ADB or by any recipient from ADB of certain currencies may be restricted by members to payments for goods or services produced and intended for use in their territories. As of 31 December 2023 and 2022, no member has restricted the use by ADB or by any recipient from ADB.

NOTE D—INVESTMENTS FOR LIQUIDITY PURPOSE

The main investment management objective is to maintain security and liquidity. Subject to these parameters, ADB seeks the highest possible return on its investments. Investments are governed by the Investment Authority approved by the Board of Directors.

ADB enters into currency and interest rate swaps, and forward rate agreements. Exposure to interest rate risk may be adjusted within defined bands to reflect changing market conditions. These adjustments are made through the purchase and sale of securities.

ADB may engage in securities lending of government or government-related obligations and corporate obligations, for which ADB receives a guarantee from the securities custodian and a fee. Transfers of securities by ADB to counterparties are not accounted for as sales as the accounting criteria for the treatment of a sale have not been met. These securities are available to meet ADB’s obligation to counterparties. Included in investments as of 31 December 2023 were securities transferred under securities lending arrangements of government or government-related obligations and corporate obligations totaling $101 million ($118 million – 2022).

ADB records time deposits on the settlement dates and all other investment securities on the trade date. As of 31 December 2023, there were $251 million unsettled sales and uncollected maturities ($70 million – 2022) included under OTHER ASSETS – Miscellaneous and $94 million unsettled purchases ($94 million – 2022) included under ACCOUNTS PAYABLE AND OTHER LIABILITIES – Miscellaneous.

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The currency composition of the investment portfolio as of 31 December 2023 and 2022 expressed in US dollars is as follows:

($ million)
Currency US dollar Yen Won Euro Yuan Australian dollar Others Total	2023 $ 23,769 12,231 3,471 2,400 1,312 1,139 2,928 $ 47,250	2023	2022

			$ 20,284
			13,673
			5,404
			1,010
			1,015
			789
			3,119
			$ 45,294

The FV and amortized cost of the investments by contractual maturity at 31 December 2023 and 2022 are as follows:

($ million)

($ million)
		2023			2022
			Amortized			Amortized
	Fair Value		Cost			Cost

Due in one year or less	$ 14,959		$ 14,990	$ 17,542		$ 17,576
Due after one year through five years	29,623 1,736 221		30,438 1,864 220	24,184 2,724 169		25,273
Due after five years through ten years						3,140
Due after ten years through fifteen years						171
Due after fifteen years	711		794	675		771
Total	$ 47,250		$ 48,306	$ 45,294		$ 46,931

Additional information relating to investments for liquidity purpose in government or government-related obligations and other securities classified as AFS are as follows:

($ million)

($ million)
	Amortized	Gross Unrealized
	Cost	Gains	Losses	Fair Value
31 December 2023
Government or government-related obligations	$ 32,100 9,010 1,748 $ 42,858	$ 44 41 5 $90	$ (892) (148) (107)	$ 31,252 8,903 1,646
Other securities
Corporate obligations
Asset/Mortgage-backed securities
Total			$(1,147)	$ 41,801

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continued
($ million)
	Amortized	Gross Unrealized Gains Losses
	Cost	Gains		Fair Value
31 December 2022
Government or government-related obligations	$ 35,337	$ 19	$ (1,266)	$ 34,090
Other securities
Corporate obligations	4,491	1	(248)	4,244
Asset/Mortgage-backed securities	1,716	1	(145)	1,572
Total	$ 41,544	$ 21	$(1,659)	$39,906
			2023	2022
For theyear ended 31 December:
Change in net unrealized gains and losses from prior year			$ 581 2,429 4 (43)	$ (1,714)
Proceeds from sales Gross gain on sales Gross loss on sales				5,202
				12
				(66)

The table below shows the gross unrealized losses and fair value of investments with unrealized losses aggregated by investment category and length of time that individual securities had unrealized loss position as of 31 December 2023 and 2022. There were 185 government or government-related obligations (97 – 2022), 794 corporate obligations (511 – 2022), and 172 asset-backed/mortgage-backed securities (89 – 2022) that have been in continuous losses for over one year representing 45.17% (31.66% – 2022) of the total investments.

investments.
($ million)
	One year	or less	Over on	e year	Total
	Fair	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized
	Value					Losses
2023
Government or government- related obligations	$ 8,893 2,433 208 $11,534	$ 25 12 1 $38	$17,733 2,603 1,005 $21,341	$ 867 136 106 $ 1,109	$26,626 5,036 1,213 $32,875	$ 892 148 107
Other securities Corporate obligations
Asset/Mortgage-backed securities
Total						$ 1,147

2022
Government or government- related obligations	$13,771 2,437 844	$ 601 89 50	$12,265 1,428 646	$ 665 159 95	$26,036 3,865 1,490	$ 1,266
Other securities Corporate obligations						248
Asset/Mortgage-backed securities						145
Total	$17,052	$ 740	$14,339	$ 919	$31,391	$ 1,659

As of 31 December 2023, ADB had the intent to hold and was not required to sell the AFS debt securities of which the fair value is lower than amortized cost. ADB also assessed and determined that the decline of fair value below the amortized cost basis of the AFS securities was not due to credit-related factors.

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Fair Value Disclosure

The fair value of INVESTMENTS FOR LIQUIDITY PURPOSE and related financial assets as of 31 December 2023 and 2022 are as follows:

($ million)
		Fair Value Measurements
	Total	Level 1	Level 2	Level 3
2023
Investments for liquidity purpose
Government or government-related obligations	$ 31,252 5,449 10,549 –	$ 28,597 – 7,311 –	$ 2,655 5,449 3,238 –	$ – – –
Time deposits
Other securities
Securities transferred under repurchase agreements				–
Securities purchased under resale
arrangements	643	–	643	–
Total at fair value	$ 47,893	$ 35,908	$ 11,985	$ –

2022
Investments for liquidity purpose
Government or government-related obligations	$ 34,090 5,388 5,816 987	$ 30,642 – 4,174 987	$ 3,448 5,388 1,642 –	$ – – –
Time deposits
Other securities
Securities transferred under repurchase agreements				–
Securities purchased under resale
Arrangements	98	–	98	–
Total at fair value	$ 46,379	$ 35,803	$ 10,576	$ –

If available, active market quotes are used to assign fair values to investment securities and related financial assets. These include most government or government-related obligations and corporate obligations. Investments and related financial assets where active market quotes are not available are categorized as Level 2 or Level 3, and valuations are obtained from independent valuation services, custodians, and asset managers, and are based on discounted cash flow model using market observable inputs, such as interest rates, foreign exchange rates, basis spreads, cross currency rates, and volatilities, and unobservable inputs, such as option adjusted spreads, and other techniques. Time deposits are reported at cost, which approximates FV.

NOTE E—SECURITIES TRANSFERRED UNDER REPURCHASE AGREEMENTS

ADB has entered into Global Master Repurchase Agreements (GMRA) in which ADB agrees to transfer securities under repurchase agreements. The agreements provide for the right of a party to terminate if any of the specified default and termination events occur and include provisions to offset the sum due from one party against the sum due from the other. All securities transferred under repurchase agreements are investment grade government or government-related securities. ADB monitors periodically the FV of securities transferred against the amount of cash received under the agreement and the counterparty credit exposure against approved limits. ADB only deals with counterparties that meet the required credit rating and have signed a GMRA or its equivalent.

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As of 31 December 2023, there are no outstanding amount of PAYABLE UNDER SECURITIES REPURCHASE AGREEMENTS. The gross amounts of PAYABLE UNDER SECURITIES REPURCHASE AGREEMENTS subject to enforceable master netting agreements as of 31 December 2022 are summarized below.

($ million)
	(a) Gross amount of liabilities presented in the balance sheet $ 988	(b) Gross amounts not offset in the balance sheet Financial instruments Collateral pledged $ 987 $ –	(c)= (a)– (b)
			Net amount
		Financial instruments $ 987
			$ 1
2022 Payable under securities repurchase agreement

The contractual maturity of payable under securities repurchase agreements as of 31 December 2022 are summarized below:

summarized below:	summarized below:
($ million)
Remaining contractual maturity of the agreements
1-30 Days		31-90 Days	> 90 Days	Total

2022
Payable under securities repurchase agreement
Government or government-related obligations	$ 327	$ 661	$ –	$ 988

Gross amount of recognized liabilities for repurchase agreements disclosed above				988

Amounts related to agreements not included in offsetting disclosure				$ –

NOTE F—LOANS — OPERATIONS

ADB offers sovereign and nonsovereign loans. Sovereign loans consist of regular loans and concessional loans.

ADB’s available loan products are the Flexible Loan Product (FLP) and the local currency loan (LCL) product. The FLP is the primary loan product for sovereign regular OCR and nonsovereign operations.

ADB provides sovereign regular OCR borrowers of FLP loans with options to manage their interest rate and exchange rate risks, while providing low intermediation risk to ADB. Borrowers may request a conversion of all or any portion of the principal amount of the loan through: (i) currency conversion to an approved currency of all or any portion of the principal amount of the loan whether unwithdrawn or withdrawn and outstanding; (ii) an interest rate conversion of all or any portion of the principal amount of the loan withdrawn and outstanding; and (iii) establishment of an interest rate cap or an interest rate collar on a floating rate applicable to all or any portion of the principal amount of the loan withdrawn and outstanding.

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ADB offers LCLs to sovereign and nonsovereign borrowers in different local currencies which ADB can intermediate. ADB responds to the evolving financial needs of borrowers to reduce their currency mismatch in DMCs.

In addition to the FLP loans and LCLs, ADB offers sovereign concessional OCR loans to eligible DMCs. Concessional loans represent the concessional financing to DMCs with (i) per capita gross national income below the International Development Association (IDA) operational cut-off; (ii) least developed countries with per capita gross national income above the IDA operational cut-off; and (iii) per capita gross national income above the IDA operational cut-off with limited or lack of creditworthiness.

Summary statement of loans as of 31 December 2023 which include loans outstanding, undisbursed committed loans, and loans approved not yet committed are shown in OCR-6. The carrying amounts of loan outstanding by loan products as of 31 December 2023 and 2022 are as follows:

($ million)
	Sovereign Loans	Nonsovereign Loans	Total
2023			$ 116,961 1,720 222 32,506
Flexible loan product	$ 112,391 194 222 32,506 145,313 (271) 267 (4) $ 145,309	$ 4,570 1,526 – – 6,096 (381) (38) (419) $ 5,677
Local currency loans
Pool-based single currency loans (US$)
Concessional loansa
			151,409
			(652) 229
Allowance for credit losses
Unamortized direct loan origination cost (front-end fee)—net
			(423)
Loans Outstanding			$ 150,986
			$ 106,968 4,279 1,666 324 31,613
2022
Flexible loan product	$ 106,282 – 118 324 31,613 138,337 (309) 252 (57) $ 138,280	$ 686 4,279 1,548 – – 6,513 (426) (42) (468) $ 6,045
LIBOR-based loans
Local currency loans
Pool-based single currency loans (US$)
Concessional loansa
			144,850
			(735) 210
Allowance for credit losses
Unamortized direct loan origination cost (front-end fee)—net
			(525)
Loans Outstanding			$ 144,325

a Net of $170 million fair value adjustment ($186 million – 2022).

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Prepayments

During 2023, ADB received prepayments for 21 loans (32 loans – 2022) amounting to $321 million ($714 million – 2022), of which $70 million ($40 million – 2022) was for regular sovereign loans, and $251 million was for nonsovereign loans ($674 million – 2022).

Past Due Loans

An analysis of the age of the recorded loans outstanding that are past due as of 31 December 2023 and 2022 is as follows:

($ million)

($ million)
	Overdue Loan Service Payments
							Total
	1-90 Days		91-180 Days		> 180 Days		Past Due		Current			Total
2023
Sovereign loans	$	1 2	$ – 4		$ – 15		$ 1 21		$ 112,806 32,655		$	112,807 32,676
Regular
Concessional
Subtotal		3		4		15		22		145,461		145,483
Nonsovereign loans		4		4		59		67		6,029		6,096
Total	$	7	$	8	$	74		$ 89		$ 151,490		151,579
Fair value adjustment	on	concessional loans										(170)
Allowanceforcreditlosses												(652)
Unamortized loan origination cost—net												229
Loans Outstanding											$	150,986

2022
Sovereign loans	$ 0 2 2 15 $ 17		$ – 3 3 7 $ 10		$ – 7 7 57 $ 64		$ 0 12 12 79 $ 91		$ 106,724 31,787		$	106,724 31,799
Regular
Concessional
Subtotal									138,511 6,434			138,523 6,513
Nonsovereign loans
Total									$144,945			145,036 (186) (735) 210
Fair value adjustment	on concessional loans
Allowanceforcreditlosses
Unamortized loan origination cost—net
Loans Outstanding											$	144,325

0 = less than $0.5 million.

Note: The amount of accrued interest excluded from the amortized cost basis in the above table is $1,561 million ($1,156 million – 2022).

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Loans in Non-Accrual Status

The following table provides a summary of financial information related to loans in non-accrual status:

($ million)

			2023	2022
As of 31 December:
	Amortized cost basis of loans in non-accrual statusa
	Sovereign
	Regular	$	–	$ –
	Concessional		528	525
	Nonsovereign		134	180
	Total	$	662	$ 705
	Loans past due for more than 90 days not in non-accrual status	$
	Sovereign
	Regular		–	$ –
	Concessional		–	–
	Nonsovereign		–	1
	Total	$	–	$ 1

For the years ended 31 December:

	Sovereign
	Regular			$ –
	Concessional			–
	Nonsovereign			8
	Total	$ 4		$ 8

a A loan loss provision has been recorded against each of the loans in non-accrual status.

Fair Value Adjustment on Concessional Loans

On 1 January 2017, concessional loans from ADF were transferred to OCR at FV. The FV of the ADF loan was approximated by the nominal value of the loan outstanding amount adjusted for credit risk, which was measured by the expected loss of the ADF loan portfolio based on ADB credit risk management framework.

The FV adjustment of concessional loans transferred was $281 million. The FV adjustment is recognized as income over the life of the loans based on the maturity structure of the transferred loans and as the loan service payments are received. As of 31 December 2023, the unamortized balance of the FV adjustment on concessional loans was $170 million ($186 million – 2022).

Credit Quality Information

ADB is exposed to credit risks in the loan portfolio if a borrower defaults or its creditworthiness deteriorates. Credit risks represent the potential loss due to possible nonperformance by borrowers under the terms of the contract. ADB manages credit risk for lending operations by monitoring creditworthiness of the borrowers and the capital adequacy framework.

ADB monitors credit quality of the loans by assigning a risk rating to each loan on an internal scale from 1 to 14 with 1 denoting the lowest expectation of credit risk and 14 denoting that the borrower has defaulted. The rating scale corresponds to the rating scales used by international rating agencies. For sovereign loans, ADB has a process of assigning internal ratings to provide more accurate inputs for risk measurements. For

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nonsovereign loans, each transaction is reviewed and assigned a rating based on a methodology that is broadly aligned with the rating approach of international rating agencies. The risk ratings are used to monitor the credit quality in the portfolio.

The amortized cost basis by origination year and internal risk rating for loans as of 31 December 2023 and 2022 is as follows:

($ million)
	31 December 2023
	Private
	Origination Year sector
Risk Class Risk Rating	2023 2022 2021 2020 2019 Prior programs Total
Sovereign Loans:
Low credit risk 1–5 (AAA to BBB–)	$2,265 $3,204 $ 5,967 $12,157 $ 5,196 $44,894 $ – $ 73,683 940 676 2,105 1,651 1,730 20,129 – 27,231 572 1,516 963 2,607 1,632 12,283 – 19,573 981 2,112 1,768 2,069 2,568 15,595 – 25,093
Medium credit risk 6–8 (BB+ to BB–)
Significant credit risk 9–11 (B+ to B–)
High credit risk 12–14 (CCC+to D)
Total Sovereign Loans	4,758 7,508 10,803 18,484 11,126 92,901 – 145,580
	– 281 – 213 13 1,186 8 1,701 169 396 296 292 221 805 36 2,215 72 104 173 19 414 749 122 1,653 39 – 12 – 23 415 – 489
Nonsovereign Loans:
Low credit risk 1–5 (AAA to BBB–)
Medium credit risk 6–8 (BB+ to BB–)
Significant credit risk 9–11 (B+ to B–)
High credit risk 12–14 (CCC+to D)
Total Nonsovereign Loans	280 781 481 524 671 3,155 166 6,058
Total	$5,038 $8,289 $11,284$19,008 $11,797$96,056 $ 166 $151,638

Note: The amount of accrued interest excluded from the amortized cost basis in the above table is $1,561 million.

($ million)

		31 December 2022
		Private
		Origination Year sector
Risk Class Risk Rating		2022 2021 2020 2019 2018 Prior programs Total
Sovereign Loans:
Low credit risk 1–5 (AAA to BBB–)		$ 668 $ 5,328 $12,524 $ 4,145 $ 5,144 $42,483 $ – $ 70,292 426 1,893 1,421 1,296 1,481 19,094 – 25,611 1,220 752 2,680 1,581 1,966 10,871 – 19,070 2,051 1,492 1,790 2,546 839 14,898 – 23,616
Medium credit risk 6–8 (BB+ to BB–)
Significant credit risk 9–11 (B+ to B–)
High credit risk 12–14 (CCC+to D)
Total Sovereign Loans		4,365 9,465 18,415 9,568 9,430 87,346 –$138,589
		152 47 190 23 – 1,216 – 1,628 330 205 469 227 528 588 36 2,383 41 216 24 466 474 407 146 1,774 3 20 – 24 90 549 – 686
Nonsovereign Loans:
Low credit risk 1–5 (AAA to BBB–)
Medium credit risk 6–8 (BB+ to BB–)
Significant credit risk 9–11 (B+ to B–)
High credit risk 12–14 (CCC+to D)
Total Nonsovereign Loans		526 488 683 740 1,092 2,760 182 6,471
Total		$ 4,891 $ 9,953$19,098$10,308$10,522 $90,106 $ 182$145,060

Note: The amount of accrued interest excluded from the amortized cost basis in the above table is $1,156 million.

No loans were written off in 2023.

ADB’s private sector programs include the Trade and Supply Chain Finance and Microfinance programs. No private sector programs were converted to term loans for the year ended 31 December 2023. For the year ended 31 December 2022, one private sector programs guarantee amounting to $17 million was converted to term loan. The converted loan was fully repaid in 2022.

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ADB’s internal risk ratings are reviewed at least annually for sovereign and nonsovereign exposures and may be revised based on the availability of new/updated information. ADB’s internal risk ratings are mapped into the corresponding PD for sovereign and nonsovereign borrowers based on ADB’s risk rating model.

As of 31 December 2023, ADB’s loan and guarantee portfolios had a significant concentration of credit risk to Asia and the Pacific region. The credit exposure determined based on FV amounted to $153,665 million ($146,560 million – 2022).

Allowance for Credit Losses

The allowance for credit losses is estimated over the remaining contractual term (lifetime) of the loan and recorded at signing of the loan agreement. EAD for the outstanding principal balances over the remaining lifetime is estimated based on the contractual amortization schedule and projected prepayments considering historical experience. Estimating the lifetime expected loss is broken down into two periods: reasonable and supportable period which is based on reasonable forecasts of future credit quality; and the reversion and post-reversion period which is based on historical loss experience.

Credit quality and default probabilities are estimated to move in conjunction with the credit cycle as such, expected losses from default move in line with credit trends and current economic conditions. A reasonable and supportable period of three years is used, based on the availability of macroeconomic variables, while a reversion period of four years is used, based on the cyclical credit upturns and downturns of the economy.

Sovereign loans have credit risk that a sovereign borrower or guarantor will default on its loan or guarantee obligations. ADB’s sovereign regular OCR loan operations have experienced no loss of principal. Sovereign borrowers that previously had delayed payments eventually repaid and returned their loans to accrual status. Nonsovereign loans have credit risk that a borrower will default on loan or guarantee obligations for which ADB does not have recourse to a sovereign entity. While the balance of nonsovereign loans is smaller than the sovereign loans, the credit risks could be larger.

In estimating the PD, ADB considered past events such as historical default frequencies as reported by multilateral development banks and international rating agencies, current risk rating, and reasonable and supportable forecasts of macroeconomic factors such as nominal GDP, per capita GDP, budget balance, international reserves, and others. Sovereign PD is based on sovereign borrowers’ historical default data to multilateral development banks. Sovereign LGD is calculated based on non-accrual data from the historical default experiences. Nonsovereign PD and LGD are published by leading international rating agencies. PDs for sovereign loans, and PDs and LGDs for nonsovereign loans are updated annually.

For sovereign LGD, ADB has a different loss experience compared with commercial lenders in a sovereign default event as evidenced in its historical non-accrual events. Historically, the sovereign loans put under non-accrual status were eventually fully repaid and ADB has not written off any sovereign loans except for those under the Heavily Indebted Poor Countries Initiative (HIPC) launched by the IDA and IMF. However, ADB does not charge interest on overdue interest payments during the arrears period. Therefore, LGD for sovereign loans is calculated as the estimated time value of money loss from the expected delay in loan service payments.

When loans are considered impaired, they are individually reviewed and assessed to determine the expected credit losses using appropriate methods, including discounted cash flow method.

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Rollforward of the Allowance for Credit Losses

The changes in the allowance for credit losses on loans outstanding for the years ended 31 December 2023 and 2022, are as follows:

($ million)

			2023			2022
	Sovereign		Nonsovereign		Sovereign	Nonsovereign
	Loans		Loans	Total	Loans	Loans	Total

Beginning balance $ 309 (Release of provision) Provision (38)			$ 426 (45)	$ 735 (83)	$ 222	$ 475	$ 697
					87	(49)	38
Ending balance		$271	$381	$652	$309	$426	$735

For the year ended 31 December 2023, one nonsovereign loan was modified and restructured through deferral of principal repayments, reduction of interest rates and waiver of other charges. This resulted to restructuring of the loan into a continuation of the existing term loan and optionally convertible debentures. For the year ended 31 December 2022, there were no loan modifications for borrowers facing financial difficulties.

Liability for Credit Losses

ADB recognizes expected credit losses for undisbursed loan commitments as these cannot be cancelled by ADB unconditionally. EAD for undisbursed commitments is estimated based on projected disbursements, prepayments, cancellations considering historical experience, and contractual amortization schedule. The credit losses are determined based on the same methodology that is used for loans. As of 31 December 2023, the amount of liability for credit losses on undisbursed loan commitments was $82 million ($65 million – 2022) and reported under ACCOUNTS PAYABLE AND OTHER LIABILITIES – Liability for credit losses on off-balance sheet exposures in the Balance Sheet.

Fair Value Disclosure

ADB does not sell its sovereign loans. As of 31 December 2023 and 2022, all loans are carried at amortized cost.

The carrying amount and FV of loans outstanding at 31 December 2023 and 2022 are as follows:

($ million)

	2023	2023	2022	2022
	Carrying Value	Fair Value	Carrying Value	Fair Value
Sovereign – Regular	$ 112,938 32,371 5,677 $ 150,986	$ 113,520 32,371 5,728 $ 151,619	$ 106,827	$ 106,614
Sovereign – Concessional			31,453	31,453
Nonsovereign			6,045	6,022
Total			$ 144,325	$ 144,089

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The FV hierarchy of ADB loans as of 31 December 2023 and 2022 is as follows:

($ million)
	2023	2022
Level 1	$ – – 151,619	$ –
Level 2		–
Level 3		144,089
Total fair value	$ 151,619	$ 144,089

Cofinancing

ADB functions as lead lender in cofinancing arrangements with other participating financial institutions who also provide funds to ADB’s sovereign and nonsovereign borrowers. In such capacity, ADB provides loan administration services, which include loan disbursements and/or loan collections. The participating financial institutions have no recourse to ADB for their outstanding loan balances. These loans are not recorded in OCR’s Balance Sheet.

Loans administered by ADB on behalf of participating institutions during the years ended 31 December 2023 and 2022 are as follows:

($ million)

	2023		2022
		No. of		No. of
	Amount	Loans	Amount	Loans
Sovereign loans Nonsovereign loans Total	$ 4,552 2,896 $ 7,448	65 88	$ 4,440	60
			2,485	74
		153	$ 6,925	134

NOTE G—GUARANTEES — OPERATIONS

ADB provides project guarantees and guarantees under its private sector programs. While counterguarantees from the host government are required for all sovereign guarantees, guarantees for nonsovereign projects may be provided with or without a host government counter-guarantee. ADB also seeks risk-sharing arrangements that set ADB’s net exposure under a guarantee at the lowest level required to mobilize the necessary financing while maintaining a participation that is meaningful to its financing partners. A counterguarantee takes the form of a counter-guarantor’s agreement to indemnify ADB for any payment it makes under the guarantee. In the event that a guarantee is called, ADB has the contractual right to require payment from the counter-guarantor, on demand, or as ADB may otherwise direct.

Tenors of guarantees are subject to risk considerations and market conditions. They should normally not exceed the maximum tenor of ADB’s ordinary capital resources lending operations, as may be adjusted from time to time, and there is no minimum tenor. In some cases however, guarantees may be for short tenors if the underlying obligations are short term, such as trade-related products.

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The maximum potential exposure and outstanding amounts of these guarantee obligations as of 31 December 2023 and 2022 covered:

($ million)
	2023		2022
	Maximum		Maximum
	Potential	Outstanding	Potential	Outstanding
	Exposure	Amount	Exposure	Amount
Project		$ – 3,889 3,889
Sovereign
with counterguarantee without counterguaranteea Nonsovereign	$ 33 4,012		$ 22 3,073	$ –
				2,930
	4,045		3,095	2,930
	87 87
with counterguarantee		39	96	44
without counterguarantee		41	92	44
	174	80	188	88
Subtotal	4,219	3,969	3,283	3,018
	788 789
Private Sector Programs
Nonsovereign
with counterguarantee		788	842	842
without counterguarantee		789	1,111	1,111
Subtotal	1,577	1,577	1,953	1,953
Total	$ 5,796	$ 5,546	$ 5,236	$ 4,971

a Including exposure exchange agreement amounting to $3,500 million ($2,500 million – 2022).

The maximum potential exposure represents the undiscounted future payments that ADB could be required to make, inclusive of standby portion for which ADB is committed but not currently at risk. The outstanding amount represents the guaranteed amount utilized under the related loans, which have been disbursed and outstanding as of the end of the year, exclusive of the standby portion.

As of 31 December 2023, there are no credit guarantee that has collateral from a counter-guarantor (one credit guarantee with nonsovereign counter-guarantee had collateral from a counter-guarantor – 2022).[1]

ADB entered into an EEA with other MDBs which is recognized as financial guarantees in the financial statements. As of 31 December 2023, outstanding amount of guarantee provided under EEA amounted to $3.5 billion ($2.5 billion – 2022).

As of 31 December 2023, a total liability of $207 million ($167 million – 2022) relating to standby ready obligations for nine credit risk guarantees (eight – 2022) and one political risk guarantees (one – 2022) is reported in ACCOUNTS PAYABLE AND OTHER LIABILITIES – Miscellaneous on the Balance Sheet for all guarantees issued after 31 December 2002. Of this amount, $172 million ($130 million – 2022) pertains to EEA.

Credit Quality Information

For guarantees, each transaction is reviewed and assigned a rating based on the same methodology as the loans, that is broadly aligned with the rating approach of international rating agencies (See Note F). The risk ratings are used to monitor the credit quality of guarantees.

1 ADB provides two primary guarantee products – a credit guarantee and a political risk guarantee. ADB’s credit guarantee is designed as credit enhancements for eligible projects to cover risks that the project and its commercial cofinancing partners cannot easily absorb or manage on their own. ADB also provides political risk guarantees to cover specifically defined political risks such as expropriation, currency inconvertibility or non-transfer. Reducing these risks can make a significant difference in mobilizing private sector financing for projects.

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Liability for Credit Losses

ADB recorded a liability for estimated expected credit losses on off-balance sheet credit exposures over the contractual lifetime of guarantees. The credit losses are estimated based on the same methodology that is used for loans (See Note F). The liability for credit losses on off-balance sheet exposures for guarantees is reviewed quarterly, and the amount to adjust the liability is recorded in the Statement of Income and Expenses as Provision for credit losses.

As of 31 December 2023, a liability of $54 million ($38 million – 2022) for the expected credit losses from guarantees have been included in ACCOUNTS PAYABLE AND OTHER LIABILITIES – Liability for credit losses on off-balance sheet exposures in the Balance Sheet.

Fair Value Disclosure

As of 31 December 2023 and 2022, all of ADB’s future guarantee receivables and guarantee liabilities are classified as Level 3 within the FV hierarchy.

Future guarantee receivables and guarantee liabilities are stated at discounted present value using significant unobservable inputs such as discount rates applicable to individual guarantee contracts that are internally determined and are classified under Level 3. An increase (decrease) in discount rates generally results in a decrease (increase) in the FV of the guarantees.

The valuation technique and significant unobservable quantitative input for guarantee receivables/ guarantee liabilities classified as Level 3 as of 31 December 2023 and 2022 are summarized below:

	Unobservable		Range (Average)a	Range (Average)a
Valuation Technique	Inputs		2023	2022
Discounted cash flows Discount rates			2.22% to 3.04% (2.38%) 2.22% to 4.43% (2.61%)

a Average represents the arithmetic average of the unobservable inputs.

The following table presents the changes in the carrying amounts of ADB’s Level 3 future guarantee receivable/liability for the years ended 31 December 2023 and 2022:

($ million)
	2023	2022
Balance, 1 January	$ 167 84 (44) $ 207	$ 92 110 (35)
Issuances
Amortization
Balance, 31 December		$ 167

Note: There were no realized/unrealized gains and losses included in earnings and other comprehensive income.

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NOTE H—EQUITY INVESTMENTS — OPERATIONS

ADB’s equity investments may be in the form of direct equity investments (e.g. common, preferred, or other capital stock) or through private equity funds.

Breakdown of equity investments as of 31 December 2023 and 2022 are as follows:

($ million)
	2023	2022
Equity method	$ 1,165 418	$ 1,040 398
Fair value method
Total	$ 1,583	$ 1,438

Additional information relating to equity investments reported at FV as of 31 December 2023 and 2022 are as follows:

($ million)
2023	2022
As of 31 December
Cost $ 357 $ 390 Fair value 418 398 Gross unrealized gains 123 87 Gross unrealized losses (62) (79) For the years ended 31 December: Net unrealized gains (losses) 54 (3) Net realized gains 24 71 Net gains 78 68

As of 31 December 2023, approved equity investments that have not been committed/signed amounted to $151 million ($110 million – 2022) and committed/signed equity investments that have not been disbursed amounted to $492 million at 31 December 2023 ($536 million – 2022).

Fair Value Disclosure

ADB’s equity investments reported at FV as of 31 December 2023 were $418 million ($398 million – 2022). Equity investments with readily determinable market prices are valued using quoted prices in active markets and are classified as Level 1. Equity investments valued using inputs other than quoted prices within Level 1 that are observable, such as prices of recent investments, are classified as Level 2. Equity investments valued with financial models using unobservable inputs are classified as Level 3.

The FV hierarchy of ADB’s equity investments at FV as of 31 December 2023 and 2022 is as follows:

($ million)
	2023	2022

Level 1	$ 62	$ 91
Level 2	116 240	113 194
Level 3
Total equity investments at fair value	$ 418	$ 398

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The valuation techniques and significant unobservable inputs for equity investments classified as Level 3 as of 31 December 2023 and 2022 are presented below.

Valuation Technique	Fair Value ($ million) Unobservable Inputs Range (Weighted Average)a	Fair Value ($ million) Unobservable Inputs Range (Weighted Average)a	Fair Value ($ million) Unobservable Inputs Range (Weighted Average)a
2023
Discounted cash flow	$ 22 Discount rate 15.20% – 18.70% (17.92%) 128 Price-to-book multiples EV/EBITDA 0.50x – 2.10x (1.00x) 5.80x – 17.10x (14.03x) 90 Discount (40%) $ 240
Comparable valuations
Net asset value


2022
Discounted cash flow
Comparable valuations	82 Price-to-book multiples EV/EBITDA 0.50x – 0.90x (0.70x) (5.80x)
Net asset value	53	Discount	(40%)
Other techniques	34
	$ 194

EV/EBITDA = enterprise value/earnings before interest, taxes, depreciation, and amortization. WACC = weighted average cost of capital. a Unobservable inputs were weighted by the relative fair value of the instruments.

An increase (decrease) in the discount rate, independently, will decrease (increase) the FV of equity investments. Conversely, significant increase (decrease) in price-to-book multiples, price-to-earnings multiples and EV/Revenue will generally increase (decrease) the FV of the equity investments. The valuation technique used for four Level 2 and two Level 3 equity investments was changed in 2023 (one Level 2 and three Level 3 – 2022) to reflect a more relevant FV measurement.

The following table presents the changes in the carrying amounts of ADB’s Level 3 equity investments for the years ended 31 December 2023 and 2022:

($ million)

($ million)	($ million)
	Equity investments	under FV Method
	2023	2022

Balance, beginning of year	$ 194 38 2 (8) (37) 50 1 $ 240 $ 50	$ 194 3 4 (5) (30) 34 (6)
Transfer into Level 3
Disbursement
Divestment
Reclassified out of Level 3
Total unrealized gains (losses) Included in earningsa
Included in other comprehensive lossb
Balance,end ofyear		$ 194
		$ 34
The amount of total gains for the year included in earnings attributable to the change in unrealized gains or losses relating to assets still held at reporting datea

a Included in net unrealized gains (losses) (OCR-2). b Included in accumulated translation adjustments (Note N).

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NOTE I—OTHER DEBT SECURITIES — OPERATIONS

($ million)
	2023	2022
Available for sale Held-to-maturity Allowance for credit losses Total	$ 65	$ 40
	458	587
	523 (4)	627 (5)
	$ 519	$ 622

The amortized cost and FV of the outstanding other debt securities by contractual maturity as of 31 December 2023 and 2022 are presented below:

($ million)
	2023		2022
	Amortized Cost $ 65 411 52 $ 528	Fair Value $ 83 399 45 $ 527	Amortized Cost $ 183 375 73 $ 631	Fair Value
Due in one year or less				$ 204
Due after one year through five years				370
Due after five years through ten years				58
Total				$ 632

Credit Quality Information

For HTM debt securities, each transaction is reviewed and assigned a rating based on the same methodology as the loans, that is broadly aligned with the rating approach of international rating agencies (See Note F). The risk ratings are used to monitor the credit quality of HTM debt securities.

The amortized cost basis by origination year and internal risk rating for HTM debt securities as of 31 December 2023 and 2022 is as follows:

($ million)
	31 December 2023
	Origination Year
Risk Class Risk Rating	2023 2022 2021 2020 2019 Prior Total

Low credit risk 1-5 (AAA to BBB–)	$ – $ 12 $ – $ – $ – $ – $ 12 – 28 52 57 184 102 423 7 7 – – 9 – 23 – – – – – – –
Medium credit risk 6-8 (BB+ to BB–)
Significant credit risk 9-11 (B+ to B–)
High credit risk 12-14 (CCC+to D)
Total	$ 7 $ 47 $ 52 $ 57 $193 $102 $458

Note: The amount of accrued interest excluded from the amortized cost basis in the above table is $9 million.

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($ million)

				2022
			Origination Year
Risk Class	Risk Rating	2022	2021 2020 2019	2018	Prior	Total

Low credit risk	1-5 (AAA to BBB–)	$ –	$ – $ – $ –	$ –	$ –	$ –
Medium credit risk	6-8 (BB+ to BB–)	–	60 76 215	229	–	580
Significant credit risk	9-11 (B+ to B–)	–	– 4 3	–	–	7
High credit risk	12-14 (CCC+to D)	–	– – –	–	–	–
Total		$ –	$60 $80 $218	$229	$ –	$587

Note: The amount of accrued interest excluded from the amortized cost basis in the above table is $10 million.

Internal risk ratings of HTM debt securities are updated annually and may be revised based on the availability of new/updated information. Internal risk ratings are mapped into the corresponding probability of default for issuers of HTM debt securities based on ADB’s risk rating model.

Allowance for Credit Losses

Expected credit loss is measured as the product of the EAD, the PD, and the LGD. EAD for HTM debt securities are based on amortized costs. Recognition and measurement of expected credit loss for HTM debt securities follows the same assumptions, procedure and timing as expected credit loss for loans (See Note F).

Rollforward of the Allowance for Credit Losses

The changes in the allowance for credit losses on outstanding other debt securities during the years ended 31 December 2023 and 2022 are as follows:

($ million)
	2023	2022

Balance, beginning of year	$ 5 (1) $ 4	$ 12 (7)
Release of provision
Balance, end of year		$ 5

Past Due Status and Non-Accrual Status

ADB places HTM debt securities in non-accrual status when the principal, interest, or other charges are overdue by more than 180 days or in case of securities that are not yet overdue by more than 180 days, when there is expectation that interest and other charges will not be collected when they become due, at the point when such information is known. Interest on non-accruing HTM debt securities is included in revenue only to the extent that payments have been received by ADB.

As of 31 December 2023 and 2022, there are no HTM debt securities that are past due or in non-accrual status.

Liability for Credit Losses

ADB recorded a liability for estimated expected credit losses on off-balance sheet credit exposures over the undisbursed portion of HTM debt securities. The credit losses are estimated based on the same methodology that is used for loans (See Note F). The liability for credit losses on off-balance sheet exposures for HTM debt securities is reviewed quarterly, and the amount to adjust the liability is recorded in net income as Provision for credit losses.

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As of 31 December 2023, the amount of liability for credit losses on undisbursed HTM debt securities commitments was $3 million ($1 million – 2022) and reported under ACCOUNTS PAYABLE AND OTHER LIABILITIES – Liability for credit losses on off-balance sheet exposures in the Balance Sheet.

Fair Value Disclosure

The hierarchy of FV of ADB’s other debt securities as of 31 December 2023 and 2022 is as follows:

($ million)
	2023	2022

Level 1	$ 55	$ 39
Level 2	10 462	– 593
Level 3
Total at fair value	$ 527	$ 632

There is no AFS other debt security classified as Level 3 as of 31 December 2023 and 2022.

Additional information relating to other debt securities classified as AFS are as follows:

($ million)
2023		2022
As of 31 December Amortized cost $ 70 Fair value 65 Gross unrealized gains 0 Gross unrealized losses (5) For the year ended 31 December Change in net unrealized gains or losses from prior year (1)		$ 44 40 0 (4) (8)

0 = less than $0.5 million.

NOTE J—DERIVATIVE INSTRUMENTS

ADB uses derivative instruments such as interest rate swaps, currency swaps, and foreign exchange swaps and forwards for asset and liability management of individual positions and portfolios. The FV of outstanding currency and interest rate swap agreements is determined at the estimated amount that ADB would receive or pay to terminate the agreements using market-based valuation models. The basis of valuation is the present value of expected cash flows based on market data.

Included in DERIVATIVE ASSETS/DERIVATIVE LIABILITIES – Borrowings are interest rate and currency swaps that ADB has entered into for the purpose of hedging specific borrowings. The terms of ADB’s interest rate swap, and currency swap agreements usually match the terms of particular borrowings. Included in DERIVATIVE ASSETS/DERIVATIVE LIABILITIES – Investments for liquidity purpose are interest rate, currency, FX swaps, and forward contracts that ADB has entered into for the purpose of hedging specific investments. Included in DERIVATIVE ASSETS/DERIVATIVE LIABILITIES – Loans – Operations are interest rate and currency swaps that ADB has entered into for the purpose of hedging specific loans or a portfolio of loans. The loan related swaps were executed to better align the composition of certain outstanding loans with funding sources and future requirements.

Future dated derivatives as of 31 December 2023 amounted to $391 for derivative assets ($349 thousand – 2022) and $3 thousand for derivative liabilities ($411 thousand – 2022).

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Fair Value Disclosure

The FV hierarchy of ADB’s derivatives and the balance sheet location as of 31 December 2023 and 2022 are as follows:

($ million)
	Balance Sheet		Fair Value Measurements
	Location	Total	Level 1	Level 2	Level 3
2023 Assets Borrowings related derivatives Currency swaps Interest rate swaps Investments related derivatives Currency swaps Interest rate swaps Foreign exchange swaps Foreign exchange forward Loans related derivatives	Derivative Assets - Borrowings Derivative Assets - Investments for liquidity purpose Derivative Assets	$ 53,587 251 17,567 294 4,911 171
			$ – – – – – –	$ 51,504 251 17,567 294 4,911 171

					$ 2,083
					0

					–
					–
					–
					–

- Loans —
Currency swaps Interest rate swaps	Operations	19,209 293	– –	19,209 293	–
					0
Total assets at fair value		$ 96,283	$ –	$ 94,200	$ 2,083
Liabilities Borrowings related derivatives Derivative Liabilities Currency swaps - Borrowings Interest rate swaps Investments related derivatives Derivative Liabilities Currency swaps - Investments for liquidity purpose Interest rate swaps Foreign exchange swaps Foreign exchange forward Loans related derivatives Derivative Liabilities Currency swaps - Loans — Operations Interest rate swaps		$ 57,687 5,246 16,017 181 5,082 168 16,989 116	$ – – – – – – – –	57,687 5,245 16,017 181 5,082 168 16,076 116


					$ –
					1

					–
					–
					–
					–

					913
					0
Total liabilities at fair value		$101,486	$ –	$100,572	$ 914

0 = less than $0.5 million.

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($ million)
	Balance Sheet		Fair Value Measurements
	Location	Total	Level 1	Level 2	Level 3
2022 Assets Borrowings related derivatives Derivative Assets Currency swaps - Borrowings Interest rate swaps Investments related derivatives Derivative Assets Currency swaps - Investments for liquidity purpose Interest rate swaps Foreign exchange swaps Foreign exchange forward Loans related derivatives Derivative Assets Currency swaps - Loans — Operations Interest rate swaps		$ 49,933 137 17,091 366 7,717 149 17,677 366
Assets Borrowings related derivatives Currency swaps Interest rate swaps Investments related derivatives Currency swaps Interest rate swaps Foreign exchange swaps Foreign exchange forward Loans related derivatives Currency swaps Interest rate swaps			$ – – – – – – – –	$ 47,477 137 17,091 366 7,717 149 17,677 366

					$ 2,456
					–

					–
					–
					–
					–

					–
					–
Total assets at fair value		$ 93,436	$ –	$ 90,980	$ 2,456
Liabilities Borrowings related derivatives Derivative Liabilities Currency swaps - Borrowings Interest rate swaps Investments related derivatives Derivative Liabilities Currency swaps - Investments for liquidity purpose Interest rate swaps Foreign exchange swaps Foreign exchange forward Loans related derivatives Derivative Liabilities Currency swaps - Loans — Operations Interest rate swaps		$ 56,790 6,774 15,531 247 8,292 142 15,045 144	$ – – – – – – – –	$ 56,790 6,773 15,531 247 8,292 142 13,920 144


					$ –
					1

					–
					–
					–
					–

					1,125
					–
Total liabilities at fair value		$102,965	$ –	$101,839	$ 1,126

ADB uses discounted cash flow models in determining FV of derivatives. Market inputs, such as yield curves, FX rates, cross currency basis spreads, yield basis spread, interest rates and FX volatilities and correlation are obtained from market data providers and brokers and applied to the models. ADB has a process to validate the appropriateness of the models and inputs in determining the hierarchy levels. This involves evaluating the nature of rates and spreads to determine if they are indicative and binding.

The valuation technique and quantitative information on significant unobservable inputs used in valuing ADB’s derivative instruments classified as Level 3 as of 31 December 2023 and 2022 are presented below:

Valuation	Unobservable	Range (Weighted Average)a	Range (Weighted Average)a
Technique	Inputs	2023	2022
Discounted cash flows	Basis swap spreads	-11.11% to 11.34% (-1.4%)	-0.32% to 15.67% (0.64%)
aUnobservable inputs were weighted by the relative fair value of the instruments.

A significant increase (decrease) in the basis swap spread will generally decrease (increase) the FV of derivatives.

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The following tables present the changes in the carrying amounts of ADB’s Level 3 derivative assets and derivative liabilities for the years ended 31 December 2023 and 2022:

($ million)
	Borrowings related derivatives		Loans related derivatives
	Assets	Liabilities	Assets	Liabilities
2023
Balance, beginning of year	$ 2,456 176 2 310 (861) $ 2,083 $ 130	$ (1) (0) 0 – – $ (1) $ (0)	$ – 0 – – – $ 0 $ 0	$ (1,125) (8) (3) (82) 305
Total realized/unrealized (losses) gains
Included in earningsa
Included in other comprehensive lossb
Issuances
Maturities/Redemptions
Balance,end ofyear				$ (913)
The amount of total gains (losses) for the year included in earnings attributable to the change in net unrealized gains or lossesa relating to assets/liabilities still held at the reportingdate				$ (12)

2022
Balance, beginning of year	$ 2,912 (141) (228) 939 (1,026)	$ (0)	$ – – – – –	$ (1,261)
Total realized/unrealized (losses) gains		(1) 0 – –
Included in earningsa				45
Included in other comprehensive lossb				76
Issuances				(152)
Maturities/Redemptions				167
Balance,end ofyear	$ 2,456	$ (1)	$–	$ (1,125)
The amount of total (losses) gains for the year included in earnings attributable to the change in net unrealized gains or lossesarelating to assets/liabilities still
held at the reportingdate	$ (132)	$ (1)	$–	$ 45

0 = less than $0.5 million.

a Included in net unrealized (losses) gains (OCR-2).

b Included in accumulated translation adjustments (Note N).

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Effect of Derivative Instruments on the Statement of Income and Expenses

ADB reports changes in the FV of its derivative instruments as part of net unrealized gains and losses in its Statement of Income and Expenses while all interest income, expenses, and related amortization of discounts, premiums, and fees are reported as part of revenue and expenses. These are summarized below:

($ million)
Location of Gain (Loss) recognized in	Amount of Gain (Loss) recognized in Income (Expenses) on Derivatives
Income (Expenses) on Derivatives	2023	2022
Borrowings related derivatives
Currency swaps Borrowing and related expenses	$ (1,350) (3) 1,613 (2,986) 2,018	$ 21
Net Realized (Losses) Gains		(12)
Net Unrealized (Losses) Gains		(3,386)
Interest rate swaps Borrowing and related expenses		(285)
Net Unrealized(Losses)Gains		(6,358)
	$ (708)	$ (10,020)
Investments related derivatives	$ 753 (233) 51 (17) 314 0 0
Currency swaps Revenue from investments for liquidity purpose		$ 295
Net Unrealized (Losses) Gains		129
Interest rate swaps Revenue from investments for liquidity purpose		13
Net Unrealized (Losses) Gains		116
Foreign exchange swaps Revenue from investments for liquidity purpose		129
Net Unrealized (Losses) Gains		(1)
Foreign exchange forwards Net Unrealized(Losses)Gains		1
	$ 868	$ 682
Loans related derivatives	$ 710 (339) 33 (62)
Currency swaps Revenue from Loans ─ Operations		$ 275
Net Unrealized (Losses) Gains		432
Interest rate swaps Revenue from Loans ─ Operations		29
Net Unrealized(Losses)Gains		1
	$342	$737

0 = less than $0.5 million.

Counterparty Credit Risks

ADB undertakes derivative transactions with its eligible counterparties and transacts in various financial instruments as part of liquidity and asset/liability management purposes that may involve credit risks. For all investment securities and their derivatives, ADB manages credit risks by following the policies set forth in the Investment Authority and other risk management guidelines . ADB has a potential risk of loss if the derivative counterparty fails to perform its obligations. In order to reduce credit risk, ADB transacts with counterparties eligible under ADB’s swap guidelines which include a requirement that the counterparties have at least a credit rating of A– or higher and generally requires entering into master swap agreements which contain legally enforceable close-out netting provisions for all counterparties with outstanding swap transactions. The reduction in exposure as a result of these netting provisions can vary as additional transactions are entered into under these agreements. The extent of the reduction in exposure may therefore change substantially within a short period of time following the balance sheet date.

Counterparty credit risk is also mitigated by requiring counterparties to post collateral based on specified credit rating driven thresholds. As of 31 December 2023, ADB had received collateral of $569 million ($304

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million – 2022) in connection with the swap agreements. Of this amount, $362 million ($133 million – 2022) is included under swap related and other collateral in the balance sheet.

ADB has entered into several agreements with its derivative counterparties under the International Swaps and Derivatives Association (ISDA) Master Agreement and the Master Agreement of the National Association of Financial Market Institutional Investors. The agreements provide for the right of a party to terminate the derivative transaction if any of the various events of default and termination events specified occur. Events of default include failure to pay and cross default. Termination events include the situation where (i) the long term unsecured and unsubordinated indebtedness of ADB or the counterparty ceases to be rated at the minimum credit rating level negotiated with the relevant counterparty, or (ii) such indebtedness ceases to be rated by any international credit rating agencies. If ADB’s counterparties are entitled under the agreements to terminate their derivative transactions with ADB, ADB will be required to pay an amount equal to its net liability position with each counterparty (in the case of counterparties who have entered into the ISDA Master Agreement absent of local market constraints) and an amount equal to its gross liability position with each counterparty (in the case of counterparties without enforceable netting agreement). By end of 2022, the local market constraints in some of ADB’s derivative counterparties have been removed making all netting agreements enforceable.

ADB has elected not to offset any derivative instruments by counterparty in the balance sheet. Gross amounts of DERIVATIVE ASSETS and DERIVATIVE LIABILITIES not offset in the balance sheet that are subject to enforceable master netting arrangements as of 31 December 2023 and 2022 are as follows: (See Note E for PAYABLE UNDER SECURITIES REPURCHASE AGREEMENTS.)

($ million)
	2023		2022
	Derivative assets $ 96,283 (95,958) (321) $4	Derivative liabilities	Derivative assets	Derivative liabilities
Gross amount presented in the balance sheet		$ (101,486)	$ 93,436	$ (102,964)

Gross amounts not offset in the balance sheet
		95,958 –
Financial instruments			(93,292)	93,292
Collateral receiveda			(143)	–
Net amountb		$ (5,528)	$1	$ (9,672)

a Includes cash and securities collateral used to cover positive marked-to-market exposures.

b ADB is not required to post collateral to counterparties when it is in a net liability position.

NOTE K—PROPERTY, FURNITURE, AND EQUIPMENT

Property, furniture and equipment includes (i) land; (ii) buildings and improvements; (iii) office furniture and equipment; and (iv) right-of-use asset. Breakdown as of 31 December 2023 and 2022 is as follows:

($ million)
	2023	2022
Land	$ 10 122 86 51	$ 10
Buildings and improvements		122
Office furniture and equipment		72
Right-of-use asset		50
Total	$ 269	$ 254

Changes during 2023 and 2022, as well as information pertaining to accumulated depreciation, of buildings and improvements, office furniture and equipment are as follows:

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($ million)
	2023		2022
	Buildings	Office	Buildings	Office
	and	Furniture and	and	Furniture and
	Improvements	Equipment	Improvements	Equipment
Cost:
Balance, 1 January	$ 319	$ 317	$ 302	$ 297
Additions during the year	14	38	17	21
Disposals during the year	(0)	(4)	(0)	(1)
Balance, 31 December	333	351	319	317

Accumulated Depreciation:
Balance, 1 January	(197)	(245)	(185)	(224)
Depreciation during the year	(14)	(24)	(12)	(22)
Disposals during the year	0	4	0	1
Balance, 31 December	(211)	(265)	(197)	(245)
Net Book Value, 31 December	$ 122	$86	$ 122	$ 72

0 = less than $0.5 million.

In 1991, under the terms of an agreement with the Philippines (Government), ADB returned the former headquarters (HQ) premises, which had been provided by the Government. In accordance with the agreement as supplemented by a memorandum of understanding, ADB was compensated $23 million for the return of these premises. The compensation is in lieu of being provided premises under the agreement and accordingly, is deferred and amortized over the estimated life of the current HQ building as a reduction of occupancy expense. HQ depreciation for the year ended 31 December 2023 amounted to $5 million ($5 million – 2022), net of amortization of the compensation for the former HQ building. As of 31 December 2023, the unamortized deferred compensation balance (included in ACCOUNTS PAYABLE AND OTHER LIABILITIES – Miscellaneous) was $2 million ($3 million – 2022).

Right-of-use asset mainly pertains to lease of real properties such as offices, buildings and parking lots in field offices. As of 31 December 2023, lease liability amounted to $46 million and is recorded as part of Miscellaneous under ACCOUNTS PAYABLE AND OTHER LIABILITIES ($43 million – 2022).

In 2023, operating lease cost amounted to $15 million ($13 million – 2022), while weighted average remaining lease term is 8.09 years (8.62 years – 2022), and weighted average discount rate is 2% (2% – 2022).

The maturity analysis on an undiscounted basis of ADB’s operating lease liabilities as of 31 December 2023 are as follows:

Year ending 31 December 2024 2025 2026 2027 2028 Later years	$ million
	$ 12 9 8 4 3 15

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NOTE L—BORROWINGS

The key objective of ADB’s borrowing strategy is to raise funds at the most stable and lowest possible cost for the benefit of its borrowers. ADB uses financial derivative instruments in connection with its borrowing activities to increase cost efficiency, while achieving risk management objectives. Currency and interest rate swaps enable ADB to raise operationally needed currencies in a cost-efficient way and to maintain its borrowing presence in the major capital markets. Interest rate swaps are used to reduce interest rate mismatches arising from lending and liquidity operations.

The carrying amounts of ADB’s outstanding borrowings as of 31 December 2023 and 2022 are as follows:

($ million)
	2023	2022
At Amortized cost	$ 2,459 140,806	$ 4,563
At Fair value		127,008
Total	$ 143,265	$ 131,571

Fair Value Disclosure

Plain vanilla borrowings are valued using discounted cash flow methods with market-based observable inputs such as yield curves, FX rates, and credit spreads. On some borrowings, significant unobservable input is also used such as derived credit spread. Structured borrowings issued by ADB are valued using financial models that discount future cash flows and simulated expected cash flows. These involve the use of pay-off profiles within the realm of accepted market valuation models such as Hull-White and BlackScholes. The model incorporates market observable inputs, such as yield curves, FX rates, credit spreads, interest rates and FX volatilities and correlation.

ADB reports borrowings that are swapped or are intended to be swapped in the future and selected floatingrate borrowings at FV. Changes in FV are reported in the Statement of Income and Expenses under NET UNREALIZED (LOSSES) GAINS. ADB measures the portion of the FV change due to instrument-specific credit risk and presents the amount separately in Accumulated other comprehensive loss account.

The FV hierarchy of ADB’s outstanding borrowings reported at amortized cost and FV as of 31 December 2023 and 2022 are as follows:

($ million)
	2023	2022
At Amortized cost	$ – 2,075 505
Level 1		$ –
Level 2		4,378
Level 3		299
Sub-total	2,580	4,677
	– 133,773 7,033
At Fair value
Level 1		–
Level 2		120,035
Level 3		6,973
Sub-total	140,806	127,008
Total borrowings at fair value	$ 143,386	$ 131,685

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For borrowings carried at FV, the quantitative information on significant unobservable input used for valuation as of 31 December 2023 and 2022 are presented below:

	Unobservable	Range (Weighted Average)a	Range (Weighted Average)a
Valuation Technique	Inputs	2023	2022
Discounted cash flows Derived credit spreads -0.77% to 15.13% (-0.1%) -4.72% to 7.94% (-0.02%) aUnobservable inputs were weighted by the relative fair value of the instruments.

A significant increase (decrease) in credit spreads generally decreases (increases) the FV of the borrowings.

The following table presents the changes in the carrying amounts of ADB’s Level 3 borrowings reported at FV for the years ended 31 December 2023 and 2022:

($ million)
	2023	2022
Balance, beginning of year	$ 6,973 273 (92) 1,834 (1,955)	$ 6,966
Total (gains) losses - (realized/unrealized)
Included in earningsa		(141)
Included in other comprehensive incomeb		(514)
Issuances		2,316
Maturities/Redemptions		(1,654)
Balance,end ofyear	$ 7,033	$ 6,973

The amount of total losses (gains) for the year included in earnings attributable to the change in net unrealized gains or lossesa
relatingto liabilities still held at the reportingdate	$ 175	$ (171)
	$ (14)
The amount of total gains for the year included in other comprehensive income attributable to the change in net unrealized gains or lossescrelating to liabilities still held at the reporting date		$ (15)

a Included in net unrealized (losses) gains (OCR-2).

b Included in unrealized holdings gains from borrowings and accumulated translation adjustments (Note N). c Included in unrealized holding gains from borrowings (Note N).

Refer to OCR-7 for Summary Statement of Borrowings.

NOTE M—CAPITAL STOCK AND MAINTENANCE OF VALUE OF CURRENCY HOLDINGS

Capital Stock

The authorized capital stock of ADB totaling 10,639,083 shares, was fully subscribed by members. Of the subscribed shares, 10,105,947 are “callable” and 533,136 are “paid-in”. The “callable” share capital is subject to call by ADB only as and when required to meet ADB’s obligations incurred on borrowings of funds for inclusion in its OCR or on guarantees chargeable to such resources. The “paid-in” share capital has been received, partly in convertible currencies and partly in the currency of the subscribing member which may be convertible. In accordance with Article 6, paragraph 3 of the Charter, ADB accepts nonnegotiable, noninterestbearing demand obligations in satisfaction of the portion payable in the currency of the member, provided such currency is not required by ADB for the conduct of its operations. Nonnegotiable, noninterest-bearing demand obligations received on demand amounted to $26 million ($39 million – 2022).

As of 31 December 2023, ADB’s shareholders consist of 68 members, 49 from the region and 19 from outside the region (OCR-8).

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Maintenance of Value of Currency Holdings

Prior to 1 April 1978, the effective date of the Second Amendment to the IMF Articles, ADB implemented maintenance of value (MOV) in respect of holdings of member currencies in terms of 1966 dollars, in accordance with the provisions of Article 25 of the Charter and relevant policies approved by the Board of Directors. Since then, settlement of MOV has been put in abeyance.

In as much as the valuation of ADB’s capital stock and the basis of determining possible MOV obligations are still under consideration, notional amounts have been calculated provisionally in terms of the SDR as receivable from or payable to members in order to maintain the value of members’ currency holdings. The notional MOV amounts of receivables and payables are offset against one another and shown as net notional amounts required to maintain value of currency holdings in the EQUITY portion of the Balance Sheet. The carrying book value for such receivables and payables approximates its FV.

The net notional amounts as of 31 December 2023 consisted of (i) the net increase of $764 million ($751 million – 2022) in amounts required to maintain the value of currency holdings to the extent of matured and paid-in capital subscriptions due to the increase in the value of the SDR in relation to the US dollar during the period from 1 April 1978 to 31 December 2023 and (ii) the net increase of $768 million ($731 million – 2022) in the value of such currency holdings in relation to the US dollar during the same period. Receivable and payable to members are as follows:

($ million)
Notional MOV Receivables Notional MOV Payables Total	2023 $ 1,627 (95) $ 1,532	2022

		$ 1,581
		(98)
		$ 1,483

NOTE N—RESERVES

Ordinary Reserve and Net Income

Under the provisions of Article 40 of the Charter, the Board of Governors shall determine annually what part of the net income shall be allocated, after making provision for reserves, to surplus and what part, if any, shall be distributed to the members.

In May 2023, the Board of Governors approved the following with respect to ADB’s 2022 net income of $2,138 million, after the appropriation of guarantee fees of $31 million to the Special Reserve: (i) the following adjustments be made to the net income amount to determine the allocable net income: $1,039 million representing adjustments for the net unrealized gains for the year ended 31 December 2022, be added to the cumulative revaluation adjustments (CRA) account; (ii) $716 million be allocated to the Ordinary Reserve; (iii) $292 million be allocated to the ADF; and (iv) $90 million be allocated to the Technical Assistance Special Fund (TASF).

In May 2022, the Board of Governors approved the following with respect to ADB’s 2021 net income of $693 million, after the appropriation of guarantee fees of $37 million to the Special Reserve: (i) the following adjustments be made to the net income amount to determine the allocable net income: $467 million representing adjustments for the net unrealized losses for the year ended 31 December 2021, be added from the CRA account; (ii) $778 million be allocated to the Ordinary Reserve; (iii) $292 million be allocated to the ADF; and (iv) $90 million be allocated to the TASF.

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Allocation of One-Time Income from ADF Assets Transfer

On 15 March 2017, the Board of Governors approved the allocation of the one-time income of $30,748 million from ADF assets transfer to OCR ordinary reserve effective 1 January 2017, pursuant to Resolution No. 387 (See Note A).

Cumulative Revaluation Adjustments Account

In May 2002, the Board of Governors approved the allocation of net income representing the cumulative net unrealized gains (losses) on derivatives, as required by ASC 815 to a separate category of Reserves – CRA account. Beginning 2008, the unrealized portion of net income from equity investments accounted for under equity method is also transferred to this account.

As part of 2022 net income allocation following the Resolution of the Board of Governors in May 2023, the net unrealized gains on financial instruments of $1,026 million and the net unrealized losses on equity method investments of $13 million were transferred to the CRA account.

As part of 2021 net income allocation following the Resolution of the Board of Governors in May 2022, the net unrealized losses on financial instruments of $601 million and the net unrealized gains on equity method investments of $134 million were transferred to the CRA account.

Special Reserve

The Special Reserve includes commissions on loans and guarantee fees received which are required to be set aside pursuant to Article 17 of the Charter to meet liabilities on guarantees. For the year ended 31 December 2023, guarantee fees amounting to $28 million ($31 million – 2022) were appropriated to Special Reserve.

Surplus

Surplus represents funds for future use to be determined by the Board of Governors.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) has two major components: net income (loss) and other comprehensive income (loss) comprising gains and losses affecting equity that, under US GAAP, are excluded from net income (loss). Other comprehensive income (loss) includes items such as translation adjustments for functional currencies; pension and post-retirement liability adjustment; and unrealized gains and losses on financial instruments classified as AFS, equity investments under equity method and fair value changes of borrowings related to ADB’s own credit spread.

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The changes in Accumulated Other Comprehensive Loss balances for the years ended 31 December 2023 and 2022 are as follows:

($ million)
Balance, 1 January 2023 Other comprehensive (loss) income before reclassifications Amounts reclassified from accumulated other comprehensive loss Net current-period other comprehensive (loss) income Balance, 31 December 2023 Balance, 1 January 2022 Other comprehensive (loss) income before reclassifications Amounts reclassified from accumulated other comprehensive loss Net current-period other comprehensive (loss) income Balance, 31 December 2022	Accumulated Translation Adjustments	Unrealized Holdin	g (Losses) Gains Pension/ Accumulated Other Debt Postretirement Other Securities — Liability Comprehensive Operations Borrowings Adjustments Loss
		Investments Equity for liquidity investments— purposea Operations
	$ 83	$ (1,715) $ (12)	$ (4) $ 448 $ 395 $ (805)
	(25) –	610 (4) 48 –	(1) 48 (147) 481 – – (26) 22
	(25)	658 (4)	(1) 48 (173) 503
	$58	$ (1,057) $(16)	$(5) $ 496 $ 221 $ (303)
	$ 603	$ 94 $ 6	$ 4 $ (471) $ (870) $ (634)
	(520)	(1,792) (18)	(8) 919 1,185 (234)
	–	(17) –	– – 80 63
	(520)	(1,809) (18)	(8) 919 1,265 (171)
	$ 83	$ (1,715) $(12)	$(4) $ 448 $ 395 $ (805)

Note: Numbers may not sum precisely because of rounding. a Includes securities transferred under repurchase agreements.

The reclassifications of Accumulated Other Comprehensive Loss to Net Income for the years ended 31 December 2023 and 2022 are presented below:

($ million)
Amounts Reclassified from Accumulated Other Comprehensive Lossa Accumulated Other Comprehensive Loss Components 2023 2022 Unrealized Holding (Losses) Gains Investments for liquidity purpose $ (48) $ 17 Pension/Postretirement Liability Adjustments Actuarial losses 26 (80) Total reclassifications for the year $ (22) $ (63) aAmounts in parentheses indicate debits to net income.		Affected Line Item in the Statement of Income and Expenses
		NET REALIZED (LOSSES) GAINS From investments for liquidity purpose Administrative expenses

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NOTE O—INCOME AND EXPENSES

Revenue

REVENUE from loan operations for the years ended 31 December 2023 and 2022 is summarized as follows:

($ million)
	Interest	Commitment charge	Other, neta	Total
2023	$ 6,330 675 487 $ 7,492 $ 2,313 669 296 $ 3,278	$ 47 – 4 $ 51	$ (19) (2) 3 $ (18)
Sovereign – Regular				$ 6,358 673 494
Sovereign – Concessional
Nonsovereign
Total				$ 7,525

2022b
Sovereign – Regular		$ 50	$ (15)	$ 2,348
Sovereign – Concessional		–	(2)	667
Nonsovereign		1	7	304
Total		$51	$(10)	$3,319

a Includes amortized front-end fees and loan origination costs, risk participation charges, and other loan-related income and/or expenses.

The average yield on the loan portfolio during the year was 4.7% (2.6% – 2022).

REVENUE from investments for liquidity purpose for the year ended 31 December 2023 was $2,312 million ($1,095 million – 2022). This comprises interest income including interest earned from securities transferred under repurchase agreements, and securities purchased under resale arrangements. The return on the average investments held during the year was 3.9% (2.6% – 2022) excluding unrealized gains and losses on investments, and 5.2% (-1.1% – 2022) including unrealized gains and losses on investments.

REVENUE from equity investment operations for the year ended 31 December 2023 amounted to $62 million ($27 million – 2022). This comprises gains from equity method investments totaling $49 million ($15 million – 2022) and dividend and other income and expenses from equity investments totaling $13 million ($12 million – 2022).

REVENUE from other debt securities for the year ended 31 December 2023 was $48 million consisting mostly of interest income ($37 million – 2022).

REVENUE from other sources for the year ended 31 December 2023 was $64 million ($56 million – 2022). This included income received as administration fees for projects and/or programs totaling $25 million ($29 million – 2022), transaction advisory service fee of $2 million ($1 million – 2022) and other miscellaneous income totaling $37 million ($26 million – 2022).

Expenses

Borrowings and related expenses for the year ended 31 December 2023 amounted to $7,913 million ($2,640 million – 2022). These consist of interest expense and other related expenses such as amortization of issuance costs, discounts, and premiums. The average cost of borrowings outstanding after swaps was 5.2% (1.6% – 2022).

Total depreciation expense incurred for the year ended 31 December 2023 amounted to $38 million ($34 million – 2022).

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Administrative expenses for the year ended 31 December 2023 were allocated between OCR and the ADF in proportion to the relative volume of operational activities. Of the total administrative expenses of $757 million ($876 million – 2022), $77 million ($101 million – 2022) was accordingly charged to the ADF.

For the year ended 31 December 2023, net release of provision for credit losses amounted to $66 million ($7 million net provision for credit losses – 2022).

Net realized (losses) gains

Net realized losses for the year ended 31 December 2023 was $15 million ($19 million net realized gains – 2022). This included losses on sale of investments for liquidity purpose totaling $39 million ($54 million losses – 2022) and gains on sale of equity investments of $24 million ($71 million gains on sale of equity investments and $2 million gains on redemption of other debt securities and borrowings – 2022).

Net unrealized (losses) gains

The following table provides information on the unrealized gains or losses included in income for the years ended 31 December 2023 and 2022:

($ million)
Fair value changes from: Borrowings and related derivatives Loans related derivatives Investments related derivatives Equity investments Reclassification of unrealized gains on divested equity investment Translation adjustments in non-functional currencies Total	2023 $ 49 (401) (250) 63 (9) 13	2022

		$ 355
		432
		245
		61
		(63)
		(4)
	$(535)	$ 1,026

NOTE P—RELATED PARTY TRANSACTIONS

At 31 December 2023 and 2022, ADB had the following net receivables from and payable to ADF, external funded trust funds under ADB administration (Trust Funds), other Special Funds, and employee benefit plans consisting of the Staff Retirement Plan (SRP), the Retiree Medical Plan Fund (RMPF), and the Defined Contribution (DC) plan. These are included in Miscellaneous under OTHER ASSETS and ACCOUNTS PAYABLE AND OTHER LIABILITIES:

($ million)
	2023	2022
Amounts receivable from:
Asian Development Fund	$ 26 1 5 9	$ 29
Other Special Funds		1
Trust Funds and Others—net		10
Employee Benefit Plans		9
Total	$41	$49

See Note S for additional information relating to Special Funds and other funds.

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NOTE Q—STAFF PENSION AND POSTRETIREMENT MEDICAL BENEFITS

Staff Retirement Plan

ADB has a defined pension benefit plan called the SRP. Every employee, as defined under the SRP, shall, as a condition of service, become a participant from the first day of service, provided the employee has not reached the normal retirement age at that time, which is 60 for staff on board before 1 October 2017; 62 for staff who joined on or after 1 October 2017 but before 1 October 2021; and 65 for staff who joined on or after 1 October 2021. The plan applies also to members of the Board of Directors who elect to join. Retirement benefits are based on an annual accrual rate, length of service and the highest average remuneration observed over 2 consecutive years during eligible service for staff on board before 1 October 2017. For staff hired on or after 1 October 2017, the salary basis for a pension is the highest average three years remuneration, capped at $113,897 as of 31 December 2023 ($109,306 – 2022) adjusted each year in line with the structural increase in US dollar salary scales of International Staff based at headquarters. The plan assets are segregated in a separate fund. The costs of administering the plan are absorbed by ADB, except for fees paid to the investment managers and related charges, including custodian fees, which are borne by the SRP.

Participants hired prior to 1 October 2006 are required to contribute 9 1/3% of their salary to the plan while those hired on or after 1 October 2006 are not required to contribute. The annual pension accrual rate is 2.95% for staff hired prior to 1 October 2006 and 1.5% for those hired on or after 1 October 2006. ADB’s contribution is determined at a rate sufficient to cover that part of the costs of the SRP not covered by the participants’ contributions.

Participants hired before 1 October 2017 may make Discretionary Benefit (XB) contributions. Such contributions earn a prescribed interest crediting rate and benefits are payable to the Participants who reach retirement age or upon termination of employment.

In October 2017, ADB introduced a DC Plan. Participants hired on or after 1 October 2017 may contribute up to 40% of salary into the DC Plan. ADB will make additional contributions to a participant’s DC account equal to 20% of the participant’s salary above the predefined threshold. ADB will match participant’s contributions at a ratio of $1 to each $8 (1:8), capped at 12% of salary. For the year ended 31 December 2023, ADB contributed $8 million to the DC Plan ($7 million – 2022).

Expected Contributions

ADB’s contribution to the SRP varies from year to year, as determined by the Pension Committee, which bases its judgment on the results of annual actuarial valuations of the assets and liabilities of the plan. ADB is expected to contribute $87 million for 2024 based on a budgeted contribution of 27% of salary.

ADB’s staff members are expected to contribute $32 million representing participants’ mandatory contribution of $5 million and discretionary contributions of $27 million.

Investment Strategy

Contributions in excess of current benefits payments are invested in international financial markets and in a variety of investment vehicles. The SRP employs 12 external asset managers and 1 global custodian who are required to operate within the guidelines established by the SRP’s Investment Committee. The investment of these assets, over the long term, is expected to produce returns higher than short-term investments. The investment policy incorporates the plan’s package of desired investment return and tolerance for risk, taking into account the nature and duration of its liabilities. The SRP’s assets are diversified among different markets and different asset classes. The use of derivatives for speculation, leverage or taking risks is avoided. Selected derivatives are used for hedging and transactional efficiency purposes.

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The SRP’s investment policy is periodically reviewed and revised. The SRP's long-term target asset-mix implemented in 2023 is 50% global equity, 20% liability-hedging asset, 20% global real estate, and 10% global credit.

For the year ended 31 December 2023, the net return on the SRP assets was 13.84% (-15.44% – 2022). ADB expects the long-term rate of return on the assets to be 6.25% (6.25% – 2022).

Assumptions

The assumed overall rate of return takes into account long-term return expectations of the underlying asset classes within the investment portfolio mix, and the expected duration of the SRP’s liabilities. Return expectations are forward looking and, in general, not much weight is given to short-term experience. Unless there is a drastic change in investment policy or market environment, as well as in the liability/benefit policy side, the assumed average long-term investment return on the SRP’s assets is expected to remain on average broadly the same, year to year. The discount rate used in determining the benefit obligation is selected in reference to the rates of return on high-quality bonds.

Post-Retirement Group Medical Insurance Plan

ADB adopts a cost-sharing arrangement for the Post-Retirement Group Medical Insurance Plan (PRGMIP). Under this plan, ADB is obligated to pay 75% of the PRGMIP premiums for retirees, which includes retired members of the Board of Directors, and their eligible dependents who elected to participate.

The RMPF holds the assets in trust that will fund the accumulated obligations of the PRGMIP. The income of RMPF consists of ADB’s contributions and investment earnings; it does not have any component attributable to participants’ share of PRGMIP costs. The insurance premium paid by ADB for the PRGMIP is considered ADB’s contribution to the fund. The costs of administering the RMPF are absorbed by ADB, while investment management and custodian fees are paid from the RMPF.

The SRP Pension Committee is responsible for the overall financial management of the RMPF and is assisted by the SRP Investment Committee.

Expected Contribution

ADB’s expected contribution to the RMPF is based on the recommendation of the SRP Pension Committee. For 2024, ADB is expected to contribute $6 million.

Investment Strategy

The RMPF employs six external asset managers and one global custodian who are required to operate within the guidelines established by the SRP’s Investment Committee. The investment of these assets, over the long term, is expected to produce returns higher than short-term investments. Similar to SRP, the investment policy incorporates the RMPF’s package of desired investment return and tolerance for risk, taking into account the nature and duration of its liabilities. The RMPF’s assets are diversified among different markets and asset classes. The use of derivatives for speculation, leverage or taking risks is avoided. Selected derivatives are used for hedging and transactional efficiency purposes.

The RMPF’s long-term target asset-mix implemented in 2023 is 55% global equity, 20% global fixed income and inflation-linked bonds, 15% global real estate, and 10% global credit. For the year ended 31 December 2023, the net return on the RMPF assets was 15.89% (-16.48% – 2022).

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Assumptions

The overall long-term rate of return is 6.25% per annum (6.25% – 2022), similar to the SRP.

The following table sets forth the funded status of pension and postretirement medical benefits at 31 December 2023 and 2022:

($ million)
	Pension Benefits		Postretirement Medical Benefits
	2023	2022	2023	2022
Change in plan assets:
Fair value of plan assets at
beginning of year	$ 3,805 527 83 35 (192) $4,258 $ 4,111 64 242 35 470 (192) $4,730 $(472) $ (472) $110 5.30 6.25 4.75 5.30	$ 4,566 (706) 79 35 (169) $ 3,805 $ 5,871 124 196 35 (1,946) (169) $4,111 $ (306) $ (306) $ (95) 5.90 6.25 4.75 5.40	$ 469 74 7 – (7) $ 543 $ 331 12 22 – (11) (7) $ 347 $ 196 $196 $ (331) 5.70 6.25 N/A N/A	$ 562 (93) 6 – (6)
Actual return on plan assets
Employer's contribution
Plan participants' contributions
Benefits paid
Fair value of plan assets at				$469
end of year
				$ 576 27 24 – (290) (6)
Change in projected benefit obligation:
Projected benefit obligation
at beginning of year
Service cost
Interest cost
Plan participants' contributions
Actuarial losses (gains)
Benefitspaid
Projected benefit obligation at				$ 331
end of year
				$ 138
Funded status
				$138
Amounts recognized in the
Balance sheet as Accrued pension and
postretirement medical benefit costs
				$ (299)
Amounts recognized in the
Accumulated other comprehensive
loss as Pension/Postretirement
liability adjustments (Note N)
				6.50 6.25 N/A N/A
Weighted-average assumptions
as of 31 December (%)
Discount rate
Expected return on plan assets
Rate of compensation increase
varies with age and averages
Interest crediting rate

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The accumulated benefit obligation of the pension plan as of 31 December 2023 was $4,518 million ($3,923 million – 2022). The actuarial loss of $470 million for pension benefit obligation was mainly due to the change in discount rates and actuarial gain of $11 million for postretirement medical benefit obligation was mainly due to lower claim costs assumption.

For measurement purposes, a 6.5% annual rate of increase in the per capita cost of covered postretirement medical benefits was assumed for the valuation as of 31 December 2023 (6.5% – 2022). The rate was assumed to decrease gradually to 5% by 2029 and remain at that level thereafter.

The following table summarizes the benefit costs associated with pension and postretirement medical benefits for the year ended 31 December 2023 and 2022:

($ million)

($ million)
Pension Benefits 2023 2022 Components of net periodic benefit cost: Service cost $ 63 $ 124 Interest cost 242 196 Expected return on plan assets (257) (227) Amortization of prior service credit (Note N) (5) (5) Recognized actuarial loss(gain) (Note N) 0 85 Net periodic benefit cost $ 43 $ 173	Postretirement Medical Benefits
2023 Components of net periodic benefit cost: Service cost $ 63 Interest cost 242 Expected return on plan assets (257) Amortization of prior service credit (Note N) (5) Recognized actuarial loss(gain) (Note N) 0 Net periodic benefit cost $ 43	2023	2022
	$ 12 22 (32) – (21) $(19)
		$ 27 24 (27) – –
Recognized actuarial loss(gain) (Note N)
Net periodic benefit cost		$ 24

0 = less than $0.5 million. Note: Certain reclassifications were made in 2022 to conform with current year’s presentation.

All components of the net periodic benefit cost are included in “administrative expenses” in the statement of income and expenses, based on the allocation methodology described in Note O.

Estimated Future Benefits Payments

The following table shows the benefit payments expected to be paid in each of the next five years and subsequent five years. The expected benefit payments are based on the same assumptions used to measure the benefit obligation at 31 December 2023.

($ million)

		Postretirement
Year Pension Benefits		Medical Benefits
2024	$ 229 249 263 282 297 1,667	$ 8
2025		9
2026		10
2027		11
2028		12
2029–2033		79

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Fair Value Disclosure

The FV of the SRP’s and RMPF’s assets measured on a recurring basis as of 31 December 2023 and 2022 is shown below:

($ million)
		Fair Value Measurements
2023	Total	Level 1	Level 2	Level 3
*Staff Retirement Plan*
Cash and cash equivalents	$ 39 1,742 1,084 464 922 10 7 1 (11) $ 4,258 $ 10 383 48 25 68 8 1 (1) 1 $ 543	$ – 1,742 871 318 884 – – 1 – $ 3,816 $ – 383 48 24 61 2 1 (1) – $ 518	$ 39 – 213 146 36 10 7 0 (11) $ 440 $ 10 – – 1 7 6 – (0) 1 $ 25	$ – – – – 2 – – – –
Common/preferred stocks
Investment funds
Government or government-
related securities
Corporate debt securities
Mortgage/Asset-backed securities:
Mortgage-backed securities
Collateralized mortgage obligations
Derivatives
Other asset/liabilitiesa—net
Total fair value of SRP assets				$ 2
				$ – – – – 0 – – – –
*Retiree Medical Plan Fund*
Cash and cash equivalents
Common/preferred stocks
Investment funds
Government or government-
related securities
Corporate debt securities
Mortgage-backed securities
Short term investments
Derivatives
Other asset/liabilitiesa—net
Total fair value of RMPF assets				$–

0 = less than $0.5 million. a Incudes receivables and liabilities carried at amounts that approximate fair value.

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($ million)
		Fair Value Measurements
2022	Total	Level 1	Level 2	Level 3
*Staff Retirement Plan*	$ 32 711 2,096 422 473 35 7 38 (14) 5 $ 3,805 $ 8 140 198 54 52 15 3 (2) 1 $ 469	$ – 711 1,972 324 465 1 0 19 (3) – $ 3,489 $ – 140 198 54 52 2 3 0 – $ 449	$ 32 – 124 98 8 34 7 19 (11) 5 $ 316 $ 8 – – 0 – 13 – (2) 1 $ 20
Cash and cash equivalents				$ – – – – – – – – – –
Common/preferred stocks
Investment funds
Government or government-
related securities
Corporate debt securities
Mortgage/Asset-backed securities:
Mortgage-backed securities
Collateralized mortgage obligations
Short term investments
Derivatives
Other asset/liabilitiesa—net
Total fair value of SRP assets				$–
				$ – – – – – – – – –
*Retiree Medical Plan Fund*
Cash and cash equivalents
Common/preferred stocks
Investment funds
Government or government-
related securities
Corporate debt securities
Mortgage-backed securities
Short term investments
Derivatives
Other asset/liabilitiesa—net
Total fair value of RMPF assets				$–

0 = less than $0.5 million. a Incudes receivables and liabilities carried at amounts that approximate fair value. The FV of the SRP Investments including equity securities, fixed income securities and derivatives are provided by independent pricing providers. Equity securities include common and preferred stocks and mutual funds. Fixed income securities include government or government-related securities, corporate obligations, asset and mortgage-backed securities, and short-term investments. Derivatives include futures, swaps and currency forward contracts.

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There were no SRP and RMPF Level 3 investments during the years ended 31 December 2022. The following table presents the changes in the carrying amounts of SRP and RMPF Level 3 investments for the year ended 31 December 2023.

($ million)
	Corporate debt securities
	SRP	RMPF
Balance, beginning of the year	$ –	$ –
Total unrealized losses included in Net increase in net assets available for benefits	(0)	(0)
Purchases	2	0
Balance,end of theyear	$ 2	$ 0

Total unrealized losses included in income related to financial assets still held at the reportingdate	$ (0)	$ (0)
0 = less than $0.5 million.

NOTE R—OTHER FAIR VALUE DISCLOSURES

The carrying amounts and FVs of ADB’s financial instruments as of 31 December 2023 and 2022 are summarized below:

($ million)
2023		2022
Carrying Amount	Fair Value	Carrying Amount	Fair Value
On-balance sheet financial instruments:
ASSETS:
Due from banks $ 998 Investments for liquidity purpose (Note D) 47,250 Securities transferred under repurchase agreements (Note E) – Securities purchased under resale arrangements (Note D) 643	$ 998 47,250 – 643	$ 2,256	$ 2,256
		45,294	45,294
		987	987
		98	98
Loans outstanding — operations (Note F) 150,986 151,619 144,325 144,089 Equity investments — operations carried at fair value (Note H) 418 418 398 398 Other debt securities — operations (Note I) 519 527 622 632 Derivative assets - borrowings (Note J) 53,838 53,838 50,070 50,070 Derivative assets - investments for liquidity purpose (Note J) 22,943 22,943 25,323 25,323 Derivative assets - loans — operations (Note J) 19,502 19,502 18,043 18,043 Swap related and other collateral (Note J) 393 393 148 148 Future guarantee receivable (Note G) 207 207 167 167 LIABILITIES: Borrowings (Note L) 143,265 143,386 131,571 131,685 Derivative liabilities - borrowings (Note J) 62,933 62,933 63,564 63,564 Derivative liabilities - investments for liquidity purpose (Note J) 21,448 21,448 24,212 24,212 Derivative liabilities - loans — operations (Note J) 17,105 17,105 15,189 15,189 Payable under securities repurchase agreements (Note E) – – 988 988 Swap related and other collateral (Note J) 393 393 148 148 Guarantee liability (Note G) 207 207 167 167
		622	632
		50,070	50,070
		25,323	25,323
		18,043	18,043
		148	148
		167	167


		131,571	131,685
		63,564	63,564
		24,212	24,212
		15,189	15,189
		988	988
		148	148
		167	167

As of 31 December 2023 and 2022, ADB has no assets or liabilities measured at FV on a non-recurring basis.

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NOTE S—SPECIAL AND OTHER FUNDS

ADB’s operations include special operations, which are financed from Special Funds resources. The OCR and Special Funds resources are at all times used, committed, and invested entirely separately from each other. The Board of Governors may approve allocation of the net income of OCR to Special Funds, based on the funding and operational requirements of the funds. The administrative and operational expenses pertaining to the OCR and Special Funds are charged to the respective Special Funds. The administrative expenses of ADB are allocated amongst OCR and Special Funds and are settled regularly.

In addition, ADB, alone or jointly with donors, administers on behalf of the donors, including members of ADB, their agencies and other development institutions, projects/programs supplementing ADB’s operations. Such projects/programs are funded with external funds administered by ADB and with external funds not under ADB’s administration (referred as trust funds). ADB charges administrative fees for external funds administered by ADB. The trust funds are restricted for specific uses including technical assistance to borrowers and for regional programs, grants for projects, and loans. The responsibilities of ADB under these arrangements range from project processing to project implementation including the facilitation of procurement of goods and services. These funds are held in trust by ADB and are held in a separate investment portfolio. The assets of trust funds are not commingled with ADB’s resources, nor are they included in the assets of ADB.

Special Funds and trust funds are not included in the assets of OCR. The net assets as of 31 December 2023 and 2022 are summarized below:

($ million)
	2023		2022
	Total Net		Total Net
	Assets	No.	Assets	No.
Special Funds
Asian Development Fund	$ 1,947 213 112 26 1 15 47 5	1 1 1 1 1 1 1 1	$ 1,168 285 110	1
Technical Assistance Special Fund				1
Japan Special Fund				1
Asian Development Bank Institute			27	1
Regional Cooperation and Integration Fund			4 15 49 5	1
Climate Change Fund				1
Asia Pacific Disaster Response Fund				1
Financial Sector Development PartnershipSpecial Fund				1
Subtotal	2,366 3,433 $ 5,799	8	1,663 3,115 $ 4,778	8
		162 170		161
Trust funds and project specific cofinancing
Total				169

During the year ended 31 December 2023, a total of $17 million ($15 million – 2022) was recorded as compensation for administering projects/programs. The amount has been included in REVENUE From other sources—net.

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NOTE T—VARIABLE INTEREST ENTITIES

ADB has identified investments in 40 (40 – 2022) VIEs which are not consolidated by ADB but in which it is deemed to hold significant variable interests at 31 December 2023. These non-consolidated VIEs are mainly (i) operating entities where the total equity invested is considered insufficient to finance its activities without additional subordinated financial support and (ii) private equity funds, where the equity at risk holders lack decision making rights. These VIEs are in the finance, energy, and transport sectors.

ADB’s involvement in these non-consolidated VIEs includes loans, guarantees, and equity investments. Based on the most recent available data from these VIEs at 31 December 2023, the assets of these nonconsolidated VIEs totaled $7,015 million ($6,086 million – 2022).

The table below shows the carrying value of ADB interests in the non-consolidated VIEs and the maximum exposure to loss of these interests. For guarantees, the maximum exposure is the notional amount of such guarantee, less any counter-guarantee.

($ million)
2023 Loans — Operations Equity Investments — Operations Guarantees — Operations Total 2022 Loans — Operations Equity Investments — Operations Guarantees — Operations Total	Carrying Value of ADB's Variable Interests $ – 664 – $ 664	Committed but Undisbursed $ – 367 – $ 367	Maximum Exposure to Loss
			$ – 1,031 –
			$ 1,031
	$ 54 563 – $617	$ – 377 – $377

			$ 54
			940
			–
			$994

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NOTE U—SEGMENT REPORTING

Based on an evaluation of OCR’s operations, Management has determined that OCR has only one reportable segment since OCR does not manage its operations by allocating resources based on a determination of the contribution to net income from individual borrowers.

The following table presents the outstanding balance and associated revenue of OCR’s loan, guarantees, other debt securities, and equity investments by geographic region, as of and for the years ended 31 December 2023 and 2022:

($ million)

($ million)
	2023		2022
	Outstanding Balance $ 25,608 19,712 15,694 15,384 15,071 13,704 8,462 44,999 $ 158,634		Outstanding
Country	Balance	Revenue	Balance	Revenue
India	$ 25,608 19,712 15,694 15,384 15,071 13,704 8,462 44,999	$ 1,464 1,114 550 641 845 817 306 1,926	$ 24,571	$ 615
People’s Republic of China			19,782	466
Bangladesh			14,283	263
Pakistan			15,268	317
Philippines			13,631	306
Indonesia			12,730	304
Viet Nam			8,927	160
Others			42,164	983
Total		$ 7,663	$ 151,356	$3,414

Revenue comprises income from loans, guarantees, other debt securities, and equity investments, and excludes net realized/unrealized gains and losses.

For the year ended 31 December 2023, sovereign loans to three members (two – 2022) generated more than 10 percent of revenue which amounted to $1,359 million, $1,043 million, and $840 million ($517 million and $417 million – 2022).

NOTE V—SUBSEQUENT EVENTS

ADB has evaluated subsequent events after 31 December 2023 through 12 March 2024, the date these Financial Statements are available for issuance. During this period, ADB has raised additional borrowings of approximately $17,026 million in various currencies.

AI assistant

ASIAN DEVELOPMENT BANK — Management Reports 2024

64443_rns_2024-05-01_8b3c72e8-bdfc-4556-b1b0-89b77ecc275d.pdf

INFORMATION STATEMENT

AVAILABILITY OF INFORMATION

SUMMARY INFORMATION (As of 31 December 2023, unless otherwise indicated)

USE OF PROCEEDS

EXECUTIVE SUMMARY

I. OVERVIEW

II. ORDINARY CAPITAL RESOURCES

A. Basis of Financial Reporting

B. Overall Financial Results

Table 2: Details of Net Unrealized Gains (Losses) for the Years Ended 31 December

Table 3: Selected Financial Data

C. Operating Activities

1. Loans

Table 4: OCR Loans Outstanding by Modality as of 31 December 2023 and 2022 ($ million)

Table 5: Summary of Allowance for Credit Losses and Liability for Credit Losses on Off-Balance Sheet Exposures as of 31 December 2023 and 2022 ($ million)

Table 6: OCR Loan Commitments for the Years Ended 31 December

Table 7: OCR Loan Disbursements and Repayments for the Years Ended 31 December

Table 8: OCR Loans Outstanding by Product as of 31 December 2023 and 2022

($ million)

Table 10: Sovereign Concessional OCR Loan Terms as of 31 December 2023

2. Equity Investments

3. Guarantees

4. Other Debt Securities

5. Syndications

6. Transaction Advisory Services

7. Debt Management Products

D. Funding Resources

1. Equity

Table 13: Details of Equity as of 31 December 2023 and 2022

2. Borrowings

Figure 5: Effect of Swaps on Interest Rate Structure of Borrowings as of 31 December 2023

E. Liquidity Management

1. Liquidity Portfolio

2. Prudential Minimum Liquidity

3. Contractual Cash Obligations

F. Risk Management

1. Credit Risk

Table 21: Total Risk Exposure as of 31 December 2023 and 2022

Figure 9: Nonsovereign Country Exposure[a ] as of 31 December 2023 and 2022

2. Market Risk

3. Liquidity Risk

4. Operational Risk

5. Capital Adequacy

6. Asset and Liability Management

G. Internal Control over Financial Reporting

H. Critical Accounting Policies and Estimates

III. SPECIAL FUNDS

A. Asian Development Fund

Table 22: Asian Development Fund Commitment Authority 31 December 2023

B. Technical Assistance Special Fund

C. Japan Special Fund

D. Asian Development Bank Institute

E. Regional Cooperation and Integration Fund

F. Climate Change Fund

G. Asia Pacific Disaster Response Fund

H. Financial Sector Development Partnership Special Fund

IV. TRUST FUNDS AND COFINANCING UNDER ADMINISTRATION

Table 25: Schedule of Cumulative Contributions from External Sources Administered by Asian Development Bank as of 31 December 2023

ORDINARY CAPITAL RESOURCES CONDENSED MANAGEMENT REPORTING (Non-GAAP measure) BALANCE SHEETS As of 31 December 2023 and 2022 ($ million)

GOVERNANCE AND ADMINISTRATION

Audit and Risk Committee

Budget Review Committee

Board Compliance Review Committee

Development Effectiveness Committee

Ethics Committee

Human Resources Committee

Board of Directors

Principal Officers

THE CHARTER

LEGAL STATUS, PRIVILEGES, AND IMMUNITIES

AUDIT FEES

INDEX TO FINANCIAL STATEMENTS ORDINARY CAPITAL RESOURCES

ORDINARY CAPITAL RESOURCES MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES BALANCE SHEET 31 December 2023 and 2022 Expressed in Millions of US Dollars

LIABILITIES AND EQUITY

ASIAN DEVELOPMENT BANK—ORDINARY CAPITAL RESOURCES STATEMENT OF INCOME AND EXPENSES For the Years Ended 31 December 2023 and 2022 Expressed in Millions of US Dollars

OCR-3

ASIAN DEVELOPMENT BANK Management Reports 2024