Management’s recommendations for strengthening the policy on the performance-based allocation of Asian Development Fund (ADF) resources were approved by the Board of Directors in December 2004. These recommendations were based on an extensive review of lessons learned in implementing the policy from 2001 to 2004 and on the experiences of other multilateral development banks. The revised policy will strengthen the link between country performance and the allocation of ADF resources, will elevate the role that governance plays in evaluating performance, and will require close engagement with borrowing countries. Shifting the allocation of ADF resources to a biennial cycle and providing greater operational flexibility in the timing of the use of ADF resources will ensure a better alignment of performance-based allocations with other business processes, particularly country programming. The revised policy will guide the allocation of resources from 2005 onward and now includes explicit eligibility and assessment criteria for allocations for postconflict countries and subregional projects. The policy also provides for limited allocations for poorly performing countries to be judged on a case-by-case basis.