LIBOR-Based Loan Products

Rebate for LIBOR-Based Loans

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1. The lending rates on ADB’s LIBOR-based loans (LBL) are determined by adding a spread to the six-month LIBOR in each currency. The spread is fixed in the loan agreement and is equal to ADB’s basic lending spread prevailing at the time of the loan signing, regardless of the loan currency. The current basic lending spread is 60 basis points. The fixed spread on LBLs does not take into account that ADB, because of its high credit standing, could fund its LBLs at a cost lower than the six-month LIBOR (i.e., sub-LIBOR funding cost margin). To maintain the principle of automatic cost pass-through pricing, ADB will return the actual sub-LIBOR funding cost margin to the borrower through a rebate. On the other hand, a surcharge could arise if ADB’s funding cost is above the six-month LIBOR.

2. The rebate or surcharge (expressed as a percentage per annum) is determined by calculating the average of the funding cost margin below or above the LIBOR in each currency for all borrowings funding the LBLs of the same currency during a semester. ADB shall credit the amount of the rebate to the borrower, and such rebate shall be applied against the interest payable by the borrower on the next interest payment date. In the case of a surcharge, ADB shall charge the amount of the surcharge to the borrower, and such surcharge shall be added to the interest payable by the borrower on the next interest payment date. These average funding cost margins for ADB’s LBLs are adjusted on 1 January and 1 July each year.

3. For the US dollar LBL, the average funding cost margin below the six-month US LIBOR of outstanding borrowings for the period of 1 January to 30 June 2002 was 0.36 percent. Accordingly, a rebate of 0.36 percent will be applied to those loans that were billed with a rate of LIBOR + 0.6 percent during that period.

4. For the Japanese yen LBL, the average funding cost margin below the six-month JPY LIBOR of outstanding borrowings for the period of 1 January to 30 June 2002 was 0.16 percent. Accordingly, a rebate of 0.16 percent will be applied to those loans that were billed with a rate of LIBOR + 0.6 percent during that period.

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