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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONSThe following discussion should be read in conjunction with the financial statements and the notes thereto ofRabobank Group incorporated by reference in this Offering Circular. As of 2005, the financial statementshave been prepared in accordance with the International Financial Reporting Standards as adopted by theEuropean Union (“IFRS”). The financial data in the (sub) paragraphs in this chapter marked with anasterisk (*) has not been directly extracted from the audited financial statements but instead is unaudited andderived from the accounting records of Rabobank Nederland, unless otherwise stated.Business overview*Rabobank Group is an international financial service provider operating on the basis of cooperative principles.It comprises 152 independent local Rabobanks and their central organisation Rabobank Nederland and itssubsidiaries. Rabobank Group operates in 46 countries. Its operations include domestic retail banking,wholesale and international retail banking, asset management and investment, leasing and real estate. It servesapproximately 9.5 million clients around the world. In the Netherlands, its focus is on all-finance services and,internationally, on food & agri. Rabobank Group entities have strong relationships due to Rabobank’scooperative structure.Rabobank Nederland has the highest credit rating awarded by the international rating agencies S&P (AAAsince 1981) and Moody’s (Aaa since 1981). In terms of Tier I capital, Rabobank Group is among the world’s25 largest financial institutions (source: The Banker).Rabobank Nederland, the local Rabobanks and certain subsidiaries in Rabobank Group are linked through a“cross-guarantee system”. The cross-guarantee system provides for intra-group credit support amongRabobank Nederland, all local Rabobanks and certain of Rabobank Group’s subsidiaries that are the otherparticipating institutions. Under the cross-guarantee system, funds are made available by each participatinginstitution if another participant suffers a shortfall in its funds. If a participating institution is liquidated andhas insufficient assets to cover its liabilities, the other participating institutions are liable for its debts. Formore details, see “Rabobank Group Structure — Internal liability (cross-guarantee system)”.The independent local Rabobanks make up Rabobank Group’s cooperative core business. Clients can becomemembers of their local Rabobank. In turn, the local Rabobanks are members of Rabobank Nederland, thesupralocal cooperative organisation that advises and supports the banks in their local services. RabobankNederland also supervises the operations, sourcing, solvency and liquidity of the local Rabobanks. With nearly1,100 branches and more than 3,000 cash-dispensing machines, the local Rabobanks form a dense bankingnetwork in the Netherlands. In the Netherlands, the local Rabobanks serve approximately 7.5 million Dutchclients, both private and corporate, offering a comprehensive package of financial services.Rabobank Nederland is the holding company of a number of specialised subsidiaries in the Netherlands andabroad. Rabobank International is Rabobank Group’s wholesale bank and international retail bank.Factors affecting results of operationsGeneral market conditions*Rabobank Group’s results of operations are affected by a variety of market conditions, including economiccycles, fluctuations in stock markets, interest rates and increased competition. The financial crisis, whichstarted in the second half of 2007, has affected banks particularly in respect of funding, due to the liquidityshortage. See “Impact of the financial crisis” below. In the Netherlands, competition for savings is likely to252