i 

ii 

iii 

The Bank maintains an internet site atwww.grupobancolombia.com. In addition, certain of the Bank’s Subsidiaries referred to in this Annual Report maintain separate internet sites. For example, Banco Agrícola maintains an internet site atwww.bancoagricola.com. Information included on or accessible through Bancolombia’s internet site or the internet site of any of the Subsidiaries of the Bank is not part of this Annual Report.iv 

PART I

Not applicable.

Not applicable.

The selected consolidated financial data as of December 31, 20122015 and 2011, and for each of the three fiscal years in the period ended December 31, 2012 set forth below has been derived from the Bank’s audited consolidated financial statements included in this Annual Report. The selected consolidated financial data as of December 31, 2010, 2009 and 2008,2014, and for each of the two fiscal years in the period ended December 31, 20092015 set forth below havehas been derived from the Bank’s audited consolidated financial statements for the respective periods, which are notConsolidated Financial Statements under IFRS included herein.in this Annual Report.

The selected consolidated financial data should be read in conjunction with the Bank’s consolidated financial statements,Consolidated Financial Statements, related notes thereto, and the reports of the Bank’s independent registered public accounting firms.

Differences Between Colombian banking GAAP and U.S. GAAP Results

The Bank’s consolidated financial statements have been prepared in accordance with Colombian banking GAAP, which are the accounting principles and policies that are summarized in “Note 2. Summary of Significant Accounting Policies” to the Bank’s Financial Statements included in this Annual Report. These accounting principles and policies differ in some significant respects from U.S. GAAP.

Consolidated net income attributable to the controlling interest under U.S. GAAP for the year ended December 31, 2012 was COP 1,633,563 million (compared with COP 1,043,636 million for fiscal year 2011 and COP 1,544,761 million for fiscal year 2010). A reconciliation of consolidated net income and consolidated stockholders’ equity under U.S. GAAP is included in “Note 31. Differences between Colombian Accounting Principles for Banks and U.S. GAAP” to the Financial Statements included in this Annual Report.

CONSOLIDATED BALANCE SHEETSTATEMENT OF FINANCIAL POSITION

See ―“Item 8. Financial Information – A. Consolidated Statements and Other Financial Information – A.3. Dividend Policy”, for information about the dividends declared per share in both pesos and U.S. dollars during the fiscal years ended December 31, 2012, 2011, 2010, 20092015 and 2008.

2014.

SELECTED RATIOS

Exchange Rates

On March 27, 2013,31, 2016, the Representative Market Rate was COP 1,832.203,000.63 per USDU.S. dollar 1.00. The Federal Reserve Bank of New York does not report a rate for pesos; the SFC calculates the Representative Market Rate based on the weighted average of the buy/sell foreign exchange rates quoted daily by certain financial institutions, including Bancolombia, for the purchase and sale of U.S. dollars.

The following table sets forth the low and high peso per U.S. dollar exchange rates and the peso/U.S. dollar representative market rate on the last day of the month, for each of the last six months:

Source: SFC.

The following table sets forth the peso/U.S. dollar representative market rateRepresentative Market Rate on the last day of the year and the average peso/U.S. dollar representative market rate (calculated by using the average of the Representative Market Rates on the last day of each month during the year) for each of the five most recent financial years.

Source: SFC.

Not applicable.

Not applicable.

Investors should consider the following risks and uncertainties, and the other informationfactors presented in this Annual Report. In addition, the factorsinformation referred to below, as well as all other information presented in this Annual Report, should be considered by investors when reviewing any forward-looking statements contained in this Annual Report, in any document incorporated by reference in this Annual Report, in any of the Bank’s future public filings or press releases, or in any future oral statements made by the Bank or any of its officers or other persons acting on its behalf. If any of the following risks occur, the Bank’s business, results of operations and financial condition, its ability to raise capital and its ability to access funding could be materially and adversely affected. These risk factors should not be considered a complete list of potential risks that may affect Bancolombia.

Risk Factors Relating to Colombia and Other Countries Where the Bank Operates.

Changes in economic and political conditions in Colombia, and El Salvador, Panama, Guatemala or in the other countries where the Bank operates may adversely affect the Bank’s financial condition and results of operations.

The Bank’s financial condition, results of operations and asset quality are significantly dependent on the macroeconomic and political conditions prevailing in Colombia, El Salvador, Panama, Guatemala and the other jurisdictions in which the Bank operates. Accordingly, decreases in the growth rate, periods of negative growth, increases in inflation, changes in policy, or future judicial interpretations of policies involving exchange controls and other matters such as (but not limited to) currency depreciation, inflation, interest rates, taxation, banking laws and regulations and other political or economic developments in or affecting Colombia, El Salvador or the othersuch jurisdictions where the Bank operates may affect the overall business environment and may in turn impact the Bank’s financial condition and results of operations.

In particular, the Governmentsgovernments of Colombia, Panama, Guatemala and El Salvador have historically exercised substantial influence on their economies, and their policiesthey are likely to continue to implement policies that will have an important effectimpact on Colombianthe business and Salvadorianresults of operations of the entities in such countries (including the Bank), market conditions and prices and rates of return on securities of local issuers (including the Bank’s securities). Potential changes in laws, public policies and regulations may cause instability and volatility in Colombia, Panama, Guatemala and itsEl Salvador, and their respective markets.

Future developments in Governmentgovernment policies could impair the Bank’s business or financial condition or the market value of its securities.

The economies of the countries wherein which the Bank operates are vulnerable to external effects that could be caused by significant economic difficulties experienced by their major regional trading partners or by more general “contagion”contagion effects, which could have a material adverse effect on such countries economic growth in these countries and their ability to service their public debt.

A significant decline in the economic growth or a sustained economic downturn of any of Colombia’s, or El Salvador’s, Panama’s or Guatemala’s major trading partners (i.e., the European Union, the United States, China Venezuela and Ecuadorother Latin American countries for Colombia and the United States and European Union for El Salvador)Salvador and Panama) could have a material adverse impact on Colombia’s, and El Salvador’s, Guatemala’s and Panama’s balance of trade and remittances inflows, resulting in lower economic growth.

Deterioration in the economic and political situation of neighboring countries could affect the national stability or the Colombian economy of Colombia, Panama, El Salvador and Guatemala by disrupting Colombia’stheir diplomatic or commercial relationships with theseneighboring countries. PoliticalAny future tensions between Colombia and Venezuela in recent years have produced lower trade levels that have adversely impacted economic activity. Although relations with Venezuela have improved significantly with the current Government, the possibility of any further resurgence in tensions between the two countries may cause political and economic uncertainty, instability, market volatility, lowerlow confidence levels and higher risk aversion by investors and market participants that may negatively affect economic activity in Colombia and El Salvador.any of those jurisdictions.

A contagion effect, in which an entire region or class of investment is disfavored by international investors, could negatively affect Colombia and El Salvador or other economies where the bankBank operates, (i.e., Panama, Cayman Islands, Peru and Puerto Rico), as well as the market prices and liquidity of securities issued or owned by the Bank.

Any additional taxes resulting from changes to tax regulations or the interpretation thereof in Colombia, El Salvador, Panama, Guatemala or other countries wherein which the Bank operates, could adversely affect the Bank’s consolidated results.

Uncertainty relating to tax legislation poses a constant risk to the Bank. Changes in legislation, regulation and jurisprudence can affect tax burdens by increasing tax rates and fees, creating new taxes, limiting stated expenses and deductions, and eliminating incentives and non-taxed income. Notably, the Colombian and Salvadorian Governmentsgovernments have significant fiscal deficits that may result in future tax increases. Additional tax regulations could be implemented that could requirerequiring the Bank to make additional tax payments and negatively affecting its results of operations and cash flow. In addition, national or local taxing authorities may not interpret tax regulations in the same way that the Bank does. Differing interpretations could result in future tax litigation and associated costs.

Exchange rate volatilityfluctuations may adversely affect the Colombian economy, the market price of ourthe Bank’s ADSs, and the dividends payable to holders of the Bank’s ADSs.

Colombia has adopted a floating exchange rate system. The Colombian Central Bank maintains the power to intervene in the exchange market in order to consolidate or dispose of international reserves, and to control any volatility in the exchange rate. From time to time, including during 2015, there have been significant fluctuations in the exchange rate between the Colombian peso and the U.S. dollar. Unforeseen events in the international markets, fluctuations in interest rates, volatility of the oil price in the international markets, or changes in capital flows, may cause exchange rate instability that could generate sharp movements in the value of the peso. Given that a portion of ourthe Bank’s assets and liabilities are denominated in, or indexed to, foreign currencies, especially the U.S. dollar, sharp movements in exchange rates may negatively impact the Bank’s results. In addition, exchange rate fluctuations may adversely impact the value of dividends paid to holders of the Bank’s ADSs as well as the market price and liquidity of ADSs.

Colombia has experienced several periods of violence and instability and such instabilitythat could affect the economy and the Bank.

Colombia has experienced several periods of criminal violence over the past four decades, primarily due to the activities of guerilla groups and drug cartels. In response, the Colombian Government has implemented various security measures and has strengthened its military and police forces by creating specialized units, and currentlygovernment is in the process of negotiating a peace treaty with the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia or “FARC”) (FARC). Despite these efforts, drug-related crime and guerilla activity continue to exist in Colombia. These activities, their possible escalation and the violence associated with them may have a negative impact on the Colombian economy or on the Bank in the future. The Bank’s business or financial condition and the market value of the Bank’s securities and any dividends distributed by it, could be adversely affected by rapidly changing economic and social conditions in Colombia and by the Colombian Government’sgovernment’s response to such conditions.

Risk Factors Relating to the Bank’s Business and the Banking Industry

Our financial results may be negatively affected by changes to accounting standards.

We report our results and financial position in accordance with IFRS as issued by the International Accounting Standards Board (IASB). Changes to IFRS or interpretations thereof may cause our future reported results and financial position to differ from current expectations, or historical results to differ from those previously reported due to the adoption of accounting standards on a retrospective basis. Such changes may also affect our regulatory capital and ratios. We monitor potential accounting changes and when these are finalized by the IASB, we determine the potential impact and disclose significant future changes in our financial statements. Currently, there are a number of issued but not yet effective IFRS changes, as well as potential IFRS changes, some of which could be expected to impact our reported results, financial position and regulatory capital in the future. For example, IFRS 9, when fully adopted, will require us to record loans at inception net of expected losses instead of recording credit losses on an incurred loss basis.

Our financial results may be negatively affected by changes to assumptions supporting the value of our goodwill.

The goodwill that we have recognized on the respective balance sheets of our operating segments is tested for impairment at least annually. Our impairment test in respect of the assets recognized as of December 31, 2015 indicated that our respective goodwill balances are not impaired. The impairment test is based on assumptions regarding estimated earnings, discount rates and long-term growth rates impacting the recoverable amount of each segment and on estimates of the carrying amounts of the segments to which the goodwill relates. If the estimated earnings and other assumptions in future periods deviate from the current outlook, the value of the goodwill in any one or more of our businesses may become impaired in the future, giving rise to losses in the income statement.

Changes in banking laws and regulations in Colombia and in other jurisdictions wherein which the Bank operates could adversely affect the Bank’s consolidated results.

Changes in banking laws and regulations, or in their official interpretation, in Colombia and in other jurisdictions wherein which the Bank operates, may have a material effect on the Bank’s business and operations. Since banking laws and regulations change frequently, they could be adopted, enforced or interpreted in a manner that may have an adverse effect on the Bank’s business.

Although Bancolombia currently complies with applicable capital requirements, there can be no assurance that future regulation will not change or require Bancolombia or its subsidiaries to seek additional capital. Moreover, regulators in other jurisdictions have not reached consensus as to the appropriate level of capitalization for financial services institutions. Regulators in the jurisdictions wherein which Bancolombia operates may alter the current regulatory capital requirements to which Bancolombia is subject and thereby require equity increases that could dilute existing stockholders, lead to required asset sales or adversely impact the return on stockholders’ equity and/or the market price of the Bank’s common and preferred shares.

In 2012, a new regulation relating to capital adecquacy requirements (Decree 1771 of 2012) was issued. For further details on the changes set forth in the new regulations, see“Item 4. Information on the Company – B. Business Overview - B.8 Supervision and Regulation - capital adecquacy requirements”.

BankingFurthermore, banking laws and regulations accounting standards and corporate disclosure applicable tomay create new types of financial entities whose services could compete with the segments or services offered by the Bank, and, therefore, its subsidiaries differ from those in the United States and other countries.

While many of the policies underlying Colombian banking regulations are similar to those underlying regulations applicable to banks in other countries, including those in the United States, Colombian regulations can differ in a number of material respects. For example, capital adequacy requirements for banks under Colombian regulations differ from those under U.S. regulations and may differ from those in effect in other countries. The Bank prepares its annual audited financial statements in accordance with Colombian banking GAAP, which differs from U.S. GAAP and International Financial Reporting Standards (“IFRS”). Thus, Colombian financial statements and reported earnings may differ from those of companies in other countriesresults in these and other respects. Some of the differences affecting earnings and stockholders’ equity include, but are not limited to the accounting treatment for restructuring, loan origination fees and costs, equity tax, securitization, fair value adjustment in debt securities, deferred income taxes and the accounting treatment for business combinations. Moreover, under Colombian banking GAAP, allowances for non-performing loans are computed by establishing each non-performing loan’s individual inherent risk using criteria established by the SFC that differ from those used under U.S. GAAP. See “Item 4. Information on the Company – E. Selected Statistical Information – E.4. Summary of Loan Loss Experience – Allowance for Loan Losses”.

The Colombian Government is currently undertaking a review of present regulations relating to accounting, audit, and information disclosure, with the intention of seeking convergence with international standards. Nevertheless, current regulations continue to differ in certain respects from those in other countries. In addition, theresegments or services may be less publicly available information about the Bank than is regularly published by or about U.S. issuers or issuers in other countries and any changes in those regulations would become effective in 2015.adversely affected.

The Bank is subject to regulatory inspections, examinations, inquiries or audits in Colombia and in other countries wherein which it operates, and any sanctions, fines and other penalties resulting from such inspections and audits could materially and adversely affect the Bank’s business, financial condition, results of operations and reputation.

The Bank is subject to comprehensive regulation and supervision by the banking authorities of Colombia, El Salvador, Guatemala, Panama and the other jurisdictions in which the Bank operates. These regulatory authorities have broad powers to adopt regulations and impose other requirements affecting or restricting virtually all aspects of the Bank’s capitalization, organization and operations, including the imposition of anti-money laundering measures and the authority to regulate the terms and conditions of credit that can be appliedextended by banks. In the event of non-compliance with applicable regulations, the Bank could be subject to fines, sanctions or the revocation of licenses or permits to operate its business. In Colombia, for instance, in the eventif the Bank encounters significant financial problems or becomes insolvent or in danger of becoming insolvent, banking authorities would have the power to take over the Bank’s management and operations. In addition, the supervisory authorities of Colombia and El Salvador have reached an agreement for consolidated supervision which allows them to perform transnational inspection processes. Any sanctions, fines and other penalties resulting from non-compliance with regulations in Colombia, El Salvador, Guatemala, Panama and in the other jurisdictions wherein which the Bank operates could materially and adversely affect the Bank’s business, financial condition, results of operations and reputation.

An increase in constitutional public interest actions (acciones populares), class actions (acciones de grupo) and other legal actions involving claims for significant monetary awards against financial institutions may affect the Bank’s businesses and results of operations.

Under the Colombian Constitution, individuals may initiate constitutional public interest or class actions to protect their collective or class rights, respectively. Colombian financial institutions, including the Bank, have experienced a substantial increase in the aggregatehigh number of these actions. The great majority of such actions have been related to fees, financial services and interest rates, and their outcome is uncertain. Pursuant to lawLaw 1425 of 2010, monetary awards for plaintiffs in constitutional actions or class actions were eliminated as of January 1, 2011. Nevertheless, individuals continue to have the right to initiate these actions against the Bank.

Future restrictions on interest rates or banking fees could negatively affect the Bank’s profitability.

In the future, regulations in the jurisdictions where the Bank operates could impose limitations regarding interest rates or fees charged by the Bank. Any such limitations could materially and adversely affect the Bank’s results of operations and financial situation.

In the past, there have been disputes in Colombia among commercial businesses, payment service providers and banks regarding credit card interbank exchange fees (tarifa interbancaria de intercambio). Although such disputes have been resolved, the Superintendency of Industry and Commerce and mayhas the authority to initiate new investigations relating to such fees. This possibilityAny new investigations may lead to requirements that the Bank applies additional decreases, which in turn could impact the Bank’s financial results.

Furthermore, pursuant to article 62 of lawLaw 1430 of 2010 Congress granted the GovernmentColombian government has power and authority to establish and define criteria and formulas applicable to the calculation of banking fees and charges and define maximum limits. In 2011, the government used such authority to define maximum limits to banking fees and charges. On December 20, 2011 the Government used the authority granted by law 1430 of 2010 and enacted Decree 4809 of 2011 in which it set forth caps to the bank fees that may be charged on ATM withdrawals through ATMs outside their ownof each bank’s respective networks. Currently, there is a regulatory initiative that eliminates fees that banks may charge on ATM withdrawals.

Currently, an initiativeAdditionally, in past years, there have been regulatory initiatives regarding banking fees. Although such initiatives were not approved by Congress in the past, there are new initiatives pursuing similar restrictions on banking fees. If a law regarding banking fees is being discussed in Congress,enacted, the Bank might be prohibited from charging for certain services or types of transactions to its clients, which could have a negative effect on our results of operations and has been approved in its first debate out of four needed for it to become a law. If the law were enacted banks would need to cease charging transactional and service fees from those individuals whose income is equal or under two SMMLV, provided that this benefit would only apply to one savings account per individual. However, the likelihood of this initiative becoming a law is uncertain given that there have been two similar unsuccessful initiatives discussed in Congress in recent years.financial condition.

In addition, recent Law 1555 of 2012 prohibits prepayment penalties for loans worth less than 880 SMMLV, (mortgageand prepayment of mortgage loans are excluded).is allowed with no penalties without regard to the amount of the loan.

Further limitsAlso, In December 2015, Congress enacted a law that orders banks to transfer funds in inactive bank accounts to an education financing public entity. In case the accountholder withdraws its funds, banks must pay them with its own funds, and then request reimbursement from the education financing public entity.

Colombian tax haven regulation could adversely affect the Bank’s business and financial results.

Decree 1966 of 2014 modified by Decree 2095 of 2014, designates 37 jurisdictions as tax havens for Colombian tax purposes (although neither Panama nor other countries in which the Bank operates, were included on this list). As a result of the tax haven regulation the Bank’s clients who are residents in such jurisdictions would be subject to (i) higher withholding tax rates including a higher withholding rate on interest and dividends derived from investments in the Colombian securities market, (ii) the transfer pricing regime and its reporting duties, (iii) enhanced ability on the part of Colombian authorities to qualify a conduct as abusive under tax regulations, (iv) non-deductibility of payments made to such residents or regulations regarding banking feesentities located in tax havens, unless the required tax amount has been withheld and uncertainties with respect thereto,(v) additional information disclosure requirements, any of which could have a negative effectimpact on ourBancolombia’s business and financial results.

In order to avoid Panama’s designation as a tax haven, Colombia and Panama signed a memorandum of understanding which establishes that both countries will negotiate a treaty for the avoidance of double taxation. This treaty is expected to include provisions regarding the exchange of information between Colombian and Panamanian tax authorities. The deadline for execution of the treaty was September 30, 2015, which was extended to November 30, 2015, but as of date there is no known consequence for not executing such treaty within the deadline. Failure to execute a treaty, or the designation of Panama as a tax haven, could result in a negative impact on the Bank’s customer base and, therefore, a potential negative impact on the Bank’s results of operations and financial condition.

The Bank and most of its subsidiariesSubsidiaries are subject to the U.S. Foreign Account Tax Compliance Act of 2010.

Bancolombia and most of its subsidiaries are considered foreign financial institutions (“FFIs”) under the Foreign Account Tax Compliance Act of 2010 (“FATCA”) (see “Item 4. Information on the Company – B. Business Overview – B.8. Supervision and Regulation – International regulations applicable to Bancolombia and its subsidiaries”). Given the size and the scope of our group’sthe Bank’s international operations, we intend to take all necessary steps to comply with FATCA (including entering into agreements with the U.S. tax authority)authorities and transmitting the reports).

However, if the GroupBank cannot enter into such agreements or satisfy the requirements thereunder, certain payments to Bancolombia or its subsidiariesSubsidiaries may be subject to withholding under FATCA. The possibility of such withholding and the need for accountholders and investors to provide certain information may adversely affect our results of operations and financial condition. In addition, entering into agreements with the IRS, and compliance with the terms of such agreements and with FATCA and any regulations or other guidance promulgated thereunder or any legislation promulgated under an intergovernmental agreement (“IGA”) may increase our compliance costs. We are currently in the process of estimating the costs and commercial impact of implementing FATCA compliance on a group widegroup-wide level. Because legislationLegislation and regulations implementing FATCA and the related IGAs in the countries where we operatein which the Bank operates remain under development, and the IGAs remain under development,reporting dates vary depending on the jurisdiction. As a result, the future impact of this law onand the Bancolombia Groupaccuracy of the first reports of the Bank and its Subsidiaries is still uncertain.

The Bank is subject to credit risk, and estimating exposure to credit risk involves subjective and complex judgments.

A number of our products expose the Bank to credit risk, includingrisk. These products include loans, financial leases, lending commitments and derivatives.

The Bank estimates and establishes reserves for credit risk and potential credit losses. This process involves subjective and complex judgments, including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans. This process is also subject to human error as the Bank’s employees may not always be able to assign an accurate credit rating to a client, which may result in the Bank’s exposure to higher credit risk than indicated by the Bank’s risk rating system. The Bank may not be able to timely detect these risks before they occur, or due to limited resources or available infrastructure, the Bank’s employees may not be able to effectively implement its credit risk management system, which may increase its exposure to credit risk. Moreover, the Bank’s failure to continuously refine its credit risk management system may result in a higher risk exposure for the Bank, which could materially and adversely affect its results of operations and financial position.

Overall, if the Bank is unable to effectively control the level of non-performing or poor credit quality loans in the future, or if its loan loss reserves are insufficient to cover future loan losses, the Bank’s financial condition and results of operations may be materially and adversely affected.

In addition, the amount of the Bank’s non-performing loans may increase in the future as a result of factors beyond the Bank’s control, such as changes in the income levels of the Bank’s borrowers, increases in the inflation rate or an increase in interest rates, the impact of macroeconomic trends and political events affecting Colombia and other jurisdictions wherein which the Bank operates or has exposure (especially Panama, El Salvador and Guatemala) or events affecting specific industries. Any of these developments could have a negative effect on the quality of the Bank’s loan portfolio, causingrequiring the Bank to increase provisions for loan losses and resulting in reduced profits or in losses.

The Bank is subject to credit risk with respect to its non-traditional banking businesses including investing in securities and entering into derivatives transactions.

Non-traditional sources of credit risk can arise from, among other things: investing in securities, of third parties, entering into derivative contracts under which counterparties have obligations to make payments to the Bank, and executing securities, futures, currency or commodity trades from the Bank’s proprietary trading desk that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries. Any significant increases in exposure to any of these non-traditional risks, or a significant decline in the credit quality or the insolvency of any of the counterparties, could materially and adversely affect the Bank’s results of operations and financial position.

The Bank is exposed to risks associated with the mortgage loan market.

BancolombiaThe Bank is a leader in the Colombian mortgage loan market.markets in which it operates. Colombia’s mortgage loan market is highly regulated and has historically been affected by various macroeconomic factors.factors, as have the mortgage loan markets of Panama, Guatemala and El Salvador. Although during the past years interest rates have decreased during recent years, periods of sustained high interest rates have historically discouraged customers from borrowing and have resulted in increased defaults in outstanding loans and deterioration in the quality of assets.

The Bank is subject to concentration of default risks in its loan portfolio. Problems with one or more of its largest borrowers may adversely affect its financial condition and results of operations.

As of December 31, 2012,2015, the aggregate outstanding principal amount of the Bank’s 25 largest credit exposures, on a consolidated basis, represented approximately 11.92%14.04% of the Bank’s loan portfolio, and noportfolio. No single exposure represented more than 1%3% of the loan book. Also, 100%book, all of those loans were corporate loans and 100%all of these relationships were classified as “A”. However, problems with one or more of the Bank’s largest borrowers could materially and adversely affect its results of operations and financial position, see “Item 4. Information on the Company – E. Selected Statistical Information – E.3. Loan Portfolio – Borrowing Relationships”.

The value of the collateral or guarantees securing the outstanding principal and interest balance of the Bank’s loans may not be sufficient to cover such outstanding principal and interest. In addition, the Bank may be unable to realize the full value of the collateral or guarantees securing the outstanding principal and interest balance of its loans.

The Bank’s loan collateral primarily includes real estate, assets pledged in financial leasing transactions and other assets that are located primarily in Colombia, and El Salvador, Panama and Guatemala, the value of which may significantly fluctuate or decline due to factors beyond the Bank’s control. Such factors include market factors, environmental risks, natural disasters, macroeconomic factors and political events affecting the local economy. Any decline in the value of the collateral securing the Bank’s loans may result in a reduction in the recovery from collateral realization and may have an adverse impact on the Bank’s results of operations and financial condition. In addition, the Bank may face difficulties in enforcing its rights as a secured creditor. In particular, timing delays and procedural problems in enforcing against collateral and local protectionism may make foreclosures on collateral and enforcement of judgments difficult, and may result in losses that could materially and adversely affect the Bank’s results of operations and financial position.

The Bank is subject to market risk.

The Bank is directly and indirectly affected by changes in market conditions. Market risk, or the risk of losses in positions arising from movements in market prices, is inherent in the products and instruments associated with our operations, including loans, deposits, securities, bonds, long-term debt, short-term borrowings, proprietary trading in assets and liabilities and derivatives. Changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, changes in the implied volatility of interest rates and foreign exchange rates, among others.

The Bank is subjectBank’s results of operations are sensitive to fluctuations in interest rates, which may materially and adversely affect its results of operations and financial condition.rates.

The Bank holds a substantial portfolio of loans and debt securities that have both fixed and floating interest rates. Therefore, changes in interest rates could adversely affect our net interest margins as well as the pricesvalue of these securities. Increases in interest rates may reduce the market value of the Bank’s debt securities, leading to smaller gains or larger losses on these investments. Sustained high interest rates have historically discouraged customers from borrowing and have resulted in increased delinquencies in outstanding loans and deterioration in the quality of assets. On the other hand, decreases in interest rates may cause margin compression and lower net interest income as the Bank usually maintains more assets than liabilities at variable rates. Decreasing interest rates also may trigger loan prepayments which could negatively affect the Bank’s net interest income. Generally, in a declining interest rate environment, prepayment activity increases, reducing the weighted average maturity of the Bank’s interest earning assets and adversely affecting its operating results. Prepayment risk also has a significant adverse impact on our earnings from our credit card and collateralized mortgage obligations, since prepayments could shorten the weighted average life of these portfolios, which may result in a mismatch in funding or in reinvestment of the prepayment proceeds at lower yields.

The Bank’s income from its proprietary trading activities is highly volatile.

The Bank’s trading income is highly volatile. The Bank derives a portion of its profits from its proprietary trading activities and any significant reduction in its trading income could adversely affect the Bank’s results of operations and financial position.activities. The Bank’s trading income is dependent on numerous factors beyond its control, such as the general market environment, overall market trading activity, interest rate levels, fluctuations in exchange rates and general market volatility. A significant decline in the Bank’s trading income, or the incurrence of a trading loss, could adversely affect the Bank’s results of operations and financial position.

The Bank has significant exposure to sovereign risk, and especially Colombian risk, and the Bank’s results could be adversely affected by decreases in the value of its sovereign debt securities.

The Bank’s debt securities portfolio is primarily composed of sovereign debt securities, including securities issued or guaranteed by the Colombian Government. Therefore, the Bank’s results are exposed to credit, market, and liquidity risk associated with sovereign debt. As of, December 31, 2012,2015 the Bank’s total debt securities represented 11.66%5.0% of its total assets, and 54.27% of these securities were issued or backed by the Colombian Government.assets. A significant decline in the value of the securities issued or guaranteed by the Colombian Government could adversely affect the Bank’s debt securities portfolio and consequently the Bank’s results of operations and financial position.

The Bank is subject to market, operational and structural risks associated with its derivative transactions.

The Bank enters into derivative transactions for hedging purposes and on behalf of its customers. The Bank is subject to market and operational risks associated with these transactions, including basis risk (the risk of loss associated with variations in the spread between the asset yield and the funding and/or hedge cost) and credit or default risk (the risk of insolvency or other inability of the counterparty to a particular transaction to perform its obligations thereunder). In addition, the market practice and documentation for derivative transactions is less developed in the jurisdictions wherein which the Bank operates as compared to other more economically developed countries, and the court systems in such jurisdictions have limited experience in dealing with issues related to derivative transactions. As a result, there are increased operating and structural risks associated with derivatives transactions in these jurisdictions.

In addition, the execution and performance of derivatives transactions depend on the Bank’s ability to develop adequate control and administrative systems, and to hire and retain qualified personnel. Moreover, the Bank’s ability to adequately monitor, analyze and report these derivative transactions depends, to a great extent, on its information technology systems. These factors may further increase the risks associated with these transactions and could materially and adversely affect the Bank’s results of operations and financial position.

The Bank is subject to operational risks.risks and losses.

The Bank’s businesses are dependent on the ability to process a large number of transactions efficiently and accurately. Operational risks and losses can result from fraud, employee errors, technological failures and failure to properly document transactions or to obtain proper internal authorization, failure to comply with regulatory requirements, breaches of conduct of business rules, equipment failures, natural disasters or the failure of external systems. The Bank’s currentlyBank has adopted procedures may not be effective in controllingto prevent and manage each of the operational risks, faced bybut there can be no assurance that our procedures will be sufficient to prevent losses resulting from these risks.

In addition, the Bank.Bank’s businesses are exposed to risk from potential non-compliance with policies, employee misconduct or negligence and fraud, which could result in regulatory sanctions and serious reputational or financial harm. In recent years, a number of financial institutions have suffered material losses due to the actions of employees and third parties. The precautions the Bank takes to prevent and detect employee and third-party misconduct may not always be effective.

The Bank’s businesses rely heavily on data collection, processing and storage systems, the failure of which could materially and adversely affect the effectiveness of its risk management, reputation and internal control system as well as its financial condition and results of operations.

All of the Bank’s principal businesses are highly dependent on the ability to timely collect and process a large amount of financial and other information at its various branches across numerous markets, at a time when transaction processes have become increasingly complex with increasing volume. The proper functioning of financial control, accounting or other data collection and processing systems is critical to the Bank’s businesses and to its ability to compete effectively. A partial or complete failure of any of these primary systems could materially and adversely affect the Bank’s decision-making process, its risk management and internal control systems, the quality of its service, and the Bank’s ability to respond on a timely basis to changing market conditions. If the Bank cannot maintain an effective data collection and management system, its business operations, financial condition, reputation and results of operations could be materially and adversely affected. The Bank is also dependent on information systems to operate its website, process transactions, respond to customer inquiries on a timely basis and maintain cost-efficient operations. The Bank may experience operational problems with its information systems as a result of system failures, viruses, computer hackers or other causes. Any material disruption or slowdown of its systems could cause information, including data related to customer requests and other client information, to be lost, compromised, or to be delivered to the Bank’s clients with delays or errors, which could reduce demand for the Bank’s services and products, resultresulting in additional costs for the Bank and potentially fines and penalties by regulators which could materially and adversely affect the Bank’s results of operations and financial position.

The Bank is subject to cyber securitycyber-security risk.

The bank is subject to cyber securitycyber-security risk, which includes the unauthorized access to privileged information, technological assaults on the infrastructure of the Bank with the aim of stealing information, committing fraud or interfering with regular service, and the interruption of the Bank’s services to some of its clients or users due to the exploitation and materialization of these vulnerabilities. Cyber-security risks for financial institutions have significantly increased because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties.

The risk methodology used byBank’s business is highly dependent on the Bank allows for the evaluationsecurity and efficacy of residual risk,our infrastructure, computer and has resulted in a low leveldata management systems, as well as those of risk of potential cyber-attacks. service providers, and others with whom we interact.

The controls that the Bank has implemented in order to anticipate, identify, and offset these threats, have been effective thus far in maintaining cyber securitycyber-security risk at a low level. These controls include the existence of perimeter defenses, security backups, special 24/7 teams and continuous security tests (including ethical hacking among others), However, we can give no assurance that the low level of risk experienced thus far will continue in the future. Any failure by the Bank to detect cyber securityor present cyber-security risk in a timely manner could result in a negative impact on the Bank’s results of operations and financial condition.position, or in problems with information, including data related to customers to be lost, compromised, or to be delivered to the Bank’s clients with delays or errors. 

Any failure to effectively improve or upgrade the Bank’s information technology infrastructure and management information systems in a timely manner could adversely affect itsthe Bank’s competitiveness, financial condition and results of operations.

The Bank’s ability to remain competitive will depend in part on its ability to upgrade the Bank’s information technology infrastructure on a timely and cost-effective basis. The information available to and received by the Bank’s management through its existing information systems may not be timely and sufficient to manage risks or to plan for and respond to changes in market conditions and other developments in its operations. The Bank is currently undertaking a project to update its information technology platform (“IT platform”) that will result in significant changes in the following areas:its treasury and credit cards, customer management, products and distribution channels, financial management and accounting and human resources.card operations. Any failure to effectively improve or upgrade the Bank’s information technology infrastructure and information management systems in a timely and cost-effective manner could materially and adversely affect the Bank’s competitiveness, financial condition and results of operations.

The occurrence of natural disasters in the regions wherein which the Bank operates could impair its ability to conduct business effectively and could impact the Bank’sits results of operations.

The Bank is exposed to the risk of natural disasters such as earthquakes, volcanic eruptions, tornadoes, tropical storms, floods, wind and hurricanes in the regions where it operates. In the event of a natural disaster, unanticipated problems with the Bank’s disaster recovery systems could have a material adverse effect on the Bank’s ability to conduct business in the affected region, particularly if those problems affect its computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. In addition, if a significant number of the Bank’s local employees and managers werebecame unavailable indue to a natural disaster, the event of a disaster, itsBank’s ability to effectively conduct business could be severely compromised. In addition, the Bank’sBank may face added credit risk if its clients located in the affected region may be severely impacted and mayare not be able to continue paying themake timely payment on outstanding loans or other obligations they have withto the Bank. A natural disaster or multiple catastrophic events could have a material adverse effect on the Bank’s business and results of operations in the affected region.

Acquisitions and strategic partnerships may not perform in accordance with expectations or may disrupt the Bank’s operations and adversely affect its profitability.

An element of the Bank’s business strategy is to identify and pursue growth-enhancing strategic opportunities. The Bank may base assessments of potential acquisitions and partnerships on assumptions with respect to operations, profitability and other matters that may subsequently prove to be incorrect. Futureincorrect, and any future acquisitions, investments and alliances including the pending acquisition of a minority interest in Banco Agromercantil and the pending acquisition of HSBC Bank Panama (see “Item 4. Information on the Company. – A. History and development of the company – Recent Developments”), may not produce the anticipated synergies or perform in accordance with the Bank’s expectations andwhich could adversely affect its operations and profitability.

The Bank’s concentration in and reliance on short-term deposits may increase its funding costs.

The Bank’s principal source of funds areis short-term deposits, which on a consolidated basis represented a share of 74.3%70.58% of total liabilities at the end of 20122015 compared to 68.6% and 72.4%71.65% at the end of 2011 and 2010, respectively.2014. Because the Bank relies primarily on short-term deposits for its funding, in the event of a sudden or unexpected shortage of funds in the banking systemsystems and money markets wherein which the Bank operates, the Bank may not be able to maintain its current level of funding without incurring higher costs or selling assets at prices below their prevailing market value.value.

The Bank’s policies and procedures may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could damage the Bank’s reputation and expose the Bank to fines and other liabilities.

The Bank is required to comply with applicable anti-money laundering, anti-terrorism laws and other regulations. These laws and regulations require the Bank, among other things, to adopt and enforce “know your customer” policies and procedures and to report suspicious and large transactions to the applicable regulatory authorities. While the Bank has adopted policies and procedures aimed at detecting and preventing the use of its banking network for money laundering activities and by terrorists and terrorist-related organizations and individuals generally, such policies and procedures have in some cases only been adopted only recently and may not completely eliminate instances where itthe risk that the Bank may be used by other parties to engage in money laundering and other illegal or improper activities. To the extentIf the Bank may failfails to fully comply with applicable laws and regulations, the relevant Government agencies to which it reports have the power and authority to imposemay face fines and other penalties, including restrictions on the Bank.its ability to conducts business. In addition, the Bank’s business and reputation could suffer if customers use the Bank for money laundering or illegal or improper purposes.

The Bank is subject to increasing competition which may adversely affect its results of operations.

The Bank operates in a highly competitive environment and increased competitive conditions aremanagement expects competition to be expectedincrease in the jurisdictions where the Bank operates. Intensified merger activity in the financial services industry produces larger, better capitalized and more geographically diverse firms that are capable of offering a wider array of financial products and services at more competitive prices. The Bank’s ability to maintain its competitive position depends mainly on its ability to fulfill new customers’ needs through the development of new products and services and the Bank’s ability to offer adequate services and strengthen its customer base through cross-selling. The Bank’s business will be adversely affected if the Bank is not able to maintain efficient service strategies. In addition, the Bank’s efforts to offer new services and products may not succeed if product or market opportunities develop more slowly than expected or if the profitability of opportunities is undermined by competitive pressures.

Downgrades in our credit ratings would increase our cost of borrowing funds and make our ability to raise new funds, attract deposits or renew maturing debt more difficult.

Our credit ratings are an important component of our liquidity profile.profile, and our ability to successfully compete depends on various factors, including our financial stability as reflected by our credit ratings. A downgrade in our credit ratings would increase our cost of raising funds from other banks or in the capital markets or of borrowing funds. Due to regulatory or internal policies, certain Colombian institutional investors are only permitted to purchase debt securities that are rated “AAA” by Colombian credit rating agencies. Purchasemarkets. Purchases of our securities by theseinstitutional investors could be prohibitedreduced if we suffer a decline in our local credit rating.ratings. Our ability to renew maturing debt could bebecome restricted and the terms for such renewal more expensive if our credit rating were to decline. Our lenders and counterparties in derivative transactions are sensitive to the risk of a credit rating downgrade. A downgrade in our credit rating may adversely affect perception of our financial stability and our ability to raise deposits, which could make us less successful when competing for deposits and loans in the market place. Our ability to successfully compete depends on various factors, including our financial stability as reflected by our credit ratings.

A new insolvency law in Colombia may limit our ability to collect and enforce claims against non-merchants.

On June 12, 2012, Congress enacted Law 1564 of 2012 which provides insolvency protection for non-merchant individuals. In addition, on December 21, 2012, the Ministry of Justice and Law issued Decree 2677 of 2012 to regulate certain aspects set forth in Law 1564. Under the new insolvency regulations, once a non-merchant individual has ceased paying its debts, such individual can initiate a voluntary insolvency proceeding before a notary public or mediator to reach an agreement with its creditors. The terms of any agreement reached with a group of creditors (two or more) that represents more than 50% of the total amount of the claims will be mandatorily applicable to all relevant creditors.

As a result of these agreements, the Bank may not be able to recover the total amount of its claims. The increased debtor protections contemplated by this law, including an automatic stay for a maximum of 90 days, could also make it more difficult for us to enforce debt and other monetary obligations, which could have an adverse impact on our results of operations and financial condition.

The Central Bank may impose requirements on our (and other Colombian residents’) ability to obtain loans in foreign currency.

The Central Bank may impose certain mandatory deposit requirements in connection with foreign currency-denominatedcurrency denominated loans obtained by Colombian residents, including the Bank. AlthoughBank, although no such mandatory deposit requirement is currently in effect, a mandatory deposit requirement was set at 40% in 2008 after the Colombian peso appreciated against foreign currencies. Although weeffect. We cannot predict or control future actions by the Central Bank in respect of such deposit requirements, which may involve the establishment of a different mandatory deposit percentage, and the use of such measures by the Central Bank may be a disincentive for the Bankraise our cost of raising funds and reduce our clients to obtain loans denominated in a foreign currency.financial flexibility.

Risks Relating to the Preferred Shares and the American Depositary Shares (“ADSs”).ADSs.

Preemptive rights may not be available to holders of ADRs.American Depositary Receipts (“ADRs”) evidencing ADSs.

The Bank’s by-laws and Colombian law require that, whenever the Bank issues new shares of any outstanding class, it must offer the holders of each class of shares (including holders of ADRs) the right to purchase a number of shares of such class sufficient to maintain their existing percentage ownership of the aggregate capital stock of the Bank. These rights are called preemptive rights. United States holders of ADRs may not be able to exercise their preemptive rights through The Bank of New York Mellon, which acts as depositary (the “Depositary”) for the Bank’s ADR facility, unless a registration statement under the Securities Act is effective with respect to such rights and class of shares or an exemption from the registration requirement thereunder is available. The Bank is obligated to file a registration statement or find a corresponding exemption only if it determines to extend the rights to holders of the ADRs. Although the Bank is not obligated to, it intends to consider at the time of any rights offering the costs and potential liabilities associated with any such registration statement, the benefits to the Bank from enabling the holders of the ADRs to exercise those rights and any other factors deemed appropriate at the time, and will then maketimebefore it makes a decision as to whether to file a registration statement. Accordingly, the Bank mightmay in some cases decide not to file a registration statementstatement. For example, in some cases. In connection with its recent rights offering in January 2012, the Bank did not file such a registration statement.

ToUnder the extent holders of ADRs are unable to exercise these rights because a registration statement has not been fileddeposit agreement between the Bank and no exemption from the registration requirement under the Securities Act is available, the Depositary, may attemptonly the Depositary is entitled to sell the holders’exercise preemptive rights, and distribute the net proceeds from that sale, if any,Depositary has no obligation to such holders. The Depositary, after consulting withmake available preemptive rights to holders of ADRs. If the Bank will haveoffers or causes to be offered to the holders of any deposited securities, including preferred shares of the Bank, any rights to subscribe for additional preferred shares of the Bank or any rights of any other nature, the Depositary has discretion as to the procedure forto be followed in making preemptivesuch rights available to theany holders of ADRs or in disposing of such rights on behalf of any holders of ADRs and making anythe net proceeds available to such holders.holders of ADRs. If by the terms of anysuch rights offering or for any other reason, the Depositary is unable or choosesmay not toeither make thosesuch rights available to any holderholders of ADRs or dispose of such rights and if it is unable or for any reason chooses notmake the net proceeds available to sell those rights,such holders of ADRs, then the Depositary maywill allow the rights to lapse. Whenever the rights are sold or lapse, the equity interests of the holders of ADRs will be proportionately diluted.

The Bank’s preferred shares have limited voting rights.

The Bank’s corporate affairs are governed by its by-laws and Colombian law. Under the Bank’s by-laws and Colombian law, the Bank’s preferred stockholders may have fewer rights than stockholders of a corporation incorporated in a U.S. jurisdiction. Holders of the Bank’s ADRs and preferred shares are not entitled to vote for the election of directors or to influence the Bank’s management policies. Under the Bank’s by-laws and Colombian corporate law, holders of preferred shares (and, consequently, holders of ADRs) have no voting rights in respect of preferred shares, other than in limited circumstances as described in “Item 10. Additional Information – B. Memorandum and Articles of Association – Description of Share Rights, Preferences and Restrictions – Voting Rights – Preferred Shares”.

Holders of the Bank’s ADRs may encounter difficulties in the exercise of dividend and voting rights.

Holders of the Bank’s ADRs may encounter difficulties in the exercise of some of their rights with respect to the shares underlying ADRs. If the Bank makes a distribution to holders of underlying shares in the form of securities, the Depositary is allowed, in its discretion, to sell those securities on behalf of ADR holders and instead distribute the net proceeds to the ADR holders. Also, under some circumstances, ADR holders may not be able to vote by giving instructions to the depositaryeven in those limited instances in which the preferred shares represented by the ADRs have the power to vote.vote, under some circumstances, ADR holders may not be able to vote by giving instructions to the depositary. This may occur if ADR holders do not receive from the Depositary a notice of meeting sufficiently prior to the instruction date to ensure that the Depositary will vote the preferred shares represented by the ADRs in accordance with instructions received from such holders. There are no circumstances in which holders of ADRs may vote in a way other than by providing instructions to the Depositary.

Relative illiquidity of the Colombian securities markets may impair the ability of an ADR holder to sell preferred shares.

The Bank’s common and preferred shares are listed on the Colombian Stock Exchange, which is relatively small and illiquid compared to stock exchanges in major financial centers. In addition, a small number of issuers represent a disproportionately large percentage of market capitalization and trading volume on the Colombian Stock Exchange. A liquid trading market for the Bank’s securities might not develop on the Colombian Stock Exchange. A limited trading market could impair the ability of an ADR holder to sell preferred shares (obtained upon withdrawal of such shares from the ADR facility) on the Colombian Stock Exchange in the amount and at the price and time such holder desires, and could increase the volatility of the price of the ADRs.

American Depositary Receipts (“ADRs”)ADRs do not have the same tax benefits as other equity investments in Colombia.

Although ADRs represent Bancolombia’s preferred shares, they are held through a fund of foreign capital in Colombia which is subject to a specific tax regulatory regime. Accordingly, the tax benefits applicable in Colombia to equity investments, in particular those relating to dividends and profits from sale, are not applicable to ADRs, including the Bank’s ADRs. For more information see “Item 10. Additional Information. –E. Taxation –Colombian Taxation”.

Due to the fact that Bancolombia and its subsidiaries have adopted IFRS for the first time, the selected financial data have been prepared in accordance with IFRS and presented for the two most recent financial years.

Bancolombia is Colombia’s leading financial institution, with a presence in other jurisdictions such as Panama, El Salvador, Puerto Rico, Guatemala, the Cayman Islands, Peru and the United States,Peru, providing a wide range of financial products and services to a diversified individual, corporate, and Governmentgovernment customer base throughout Colombia, Latin America and the Caribbean region.

Bancolombia is a stock company (sociedad comercial por acciones, de la especie anónima)domiciled in Medellín, Colombia and operates under Colombian laws and regulations, mainly the Colombian Commercial Code, of Commerce and the Financial Statute - Decree 663 of 1993 and Decree 2555 of 2010.

Bancolombia was incorporated in Colombia in 1945, under the name Banco Industrial Colombiano S.A. or “BIC”, and is incorporated until 2044. In 1998, the Bank merged with Banco de Colombia S.A., and changed its legal name to Bancolombia S.A. On July 30, 2005, Conavi and Corfinsura merged with and into Bancolombia, with Bancolombia as the surviving entity. Through this merger, Bancolombia gained important competitive advantages as Conavi and Corfinsura were two of the top financial institutions in the Colombian market at the time. Conavi, a mortgage bank in Colombia and one of the strongest in retail operations, significantly increased the Bank’s participation and know-how in these specific markets. On the other hand, Corfinsura, then the largest financial corporation in Colombia and highly regarded for its expertise in handling large and mid-sized corporate credit and financial services, its investment bank and its modern and diversified treasury department,banking which materially strengthened Bancolombia’s multi-banking franchise.

In May 2007, Bancolombia PanamáPanama acquired Banagrícola, which controls several subsidiaries, including Banco Agrícola in El Salvador, and is dedicated to banking, commercial and consumer activities and brokerage. Through its first international acquisition, Bancolombia gained a leadership position in the Salvadorian market.

In October 2013, Bancolombia Panama acquired a 40% interest in Grupo Agromercantil, the parent company of Banco Agromercantil de Guatemala, and certain other companies dedicated to securities brokerage, insurance, and other financial businesses. Bancolombia Panama acquired an additional 20% interest on December 30, 2015.

Also in October 2013, Bancolombia acquired a 100% percent interest in the ordinary voting shares, and 1,325,780 preferred shares of Banistmo, a Panamanian banking entity and its subsidiaries involved in the securities brokerage, trust, consumer finance, and leasing businesses.

Since 1995, Bancolombia has maintained a listing on the NYSE, where its ADSs are traded under the symbol “CIB”, and on the Colombian Stock Exchange, where its preferred shares are traded under the symbol “PFBCOLOM”. Since 1981 Bancolombia’s common shares have been traded on the Colombian Stock Exchange under the symbol “BCOLOMBIA”. See “Item 9. The Offer and Listing”.

Bancolombia has grown substantially over the years, both through organic growth and acquisitions.

As of December 31, 2012,2015, Bancolombia had, on a consolidated basis:

COP 97,916192,973 billion in total asset;assets;

COP 66,739140,372 billion in total net loans and financial leases;advances to customers;

COP 64,159121,802 billion in total deposits;deposits from customers; and

COP 11,60719,279 billion in stockholders’ equity.equity attributable to the owners of Bancolombia S.A.

Bancolombia’s consolidated net income attributable to equity holders of Bancolombia S.A. for the year ended December 31, 20122015 was COP 1,7022,519 billion, representing an averagea return on average equity of 15.97%13.62% and an averagea return on average assets of 1.92%1.53%.

The address and telephone numbers of the Bank’s headquarters are as follows: Carrera 48 # 26-85, Medellín, Colombia; telephone + (574) 404-1837. Our agent for service of process in the United States is Puglisi & Associates, presently located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

RECENT DEVELOPMENTS

Notes public offeringImplementation of IFRS

According to the adoption schedule of IFRS in Colombia, the Bank began preparing its year-end comparative financial statements and its interim financial information under IFRS from the years ending at December 31, 2015 and 2014 onwards, considering the opening statement of financial position as of January 1, 2014.

Disposal of Seguros Banistmo

On February 23, 2015, Banistmo entered into an agreement with Suramericana S.A., whereby Banistmo agreed to sell, and Suramericana S.A. agreed to buy 100% of the outstanding capital of Seguros Banistmo S.A., an insurance company incorporated under the laws of Panama. The transaction closed on August 31, 2015, after obtaining all the authorizations required by the authorities and the satisfaction of the relevant condition precedents. In consideration for the shares, Suramericana S.A. paid Banistmo a total purchase price of USD 96 million.

Strengthening of the organizational structure

On April 24, 2015 Bancolombia announced the following changes in its organizational structure:

The Corporate Innovation and Digital Transformation Vice-Presidency was created. Its objective is to project innovation and digital banking at its clients’ service. Juan Carlos Mora Uribe, who previously acted as Vice President of Corporate Services, assumed this Vice-Presidency and will act in that capacity until he assumes as CEO of Bancolombia.

The Corporate Services Vice-Presidency now consolidates under the same management team the corporate procedures, technology services and human resources. Augusto Restrepo Gómez, who acted as Vice President of Human Resources, assumed this Vice-Presidency. The Human Resources Vice-Presidency has been integrated into the Corporate Service Vice-Presidency.

Disposal of 50% stake in Compañía de Financiamiento Tuya S.A.

On June 30, 2015 Bancolombia, Fondo de Empleados of Grupo Bancolombia - FEBANC and Fundacion Bancolombia acting as sellers; and Almacenes Éxito S.A. and Almacenes Éxito Inversiones S.A.S acting as buyers, entered into a purchase and sale agreement whereby the sellers will transfer to the buyers their 50% interest in Compañía de Financiamiento Tuya S.A., a financial institution located in Colombia through which sellers and buyers have developed a commercial alliance for financing business growth and the strengthening of consumer credit.

The purchase price will be determined at the closing and will equal the sum of: (i) fifty percent (50%) of the sum of the following accounts of Tuya S.A. Compañía de Financiamiento according to the most recent financial statements before the closing (a) equity, (b) capital stock, and (c) additional paid-in capital; and (ii) one thousand five hundred million Colombian pesos (COP 1,500 million).

The sale is subject to certain conditions, including, among others, receipt of the required regulatory approvals by the SFC. Closing is expected to ocurr in the second half of 2016.

Renewal of the term of the program of senior and subordinated notes

On August 10, 2015, Bancolombia renewed the term of the program of senior and subordinated notes of up to an aggregate principal amount of COP 3 billion that may be offered in the Colombian market, which was initially established in 2012. Consequently, the new term of the program will be valid until August 10, 2018.

Acquisition of control of Grupo Agromercantil

On September 11, 2015, Bancolombia Panama entered into an agreement with BAM Financial Corporation for the acquisition of an additional 20% interest of the common stock in Grupo Agromercantil. With this acquisition, Bancolombia Panama owns a controlling stake of 60% in Grupo Agromercantil. The transaction was completed on December 30, 2015, when Bancolombia Panama paid a purchase price of USD 151.5 million to the sellers. Such amount may be adjusted pursuant to the agreement.

Changes to the corporate governance code

On September 11, 2012, Bancolombia issued USD 1.2 billion22, 2015, the board of its 5.125% Subordinated Notes due 2022 in a U.S. registered public offering. Of the aggregate principal amount, USD 50 million were placed in the Asian market hours, and USD 1.15 billion were placed in the international markets. The 10-year maturity and 5.125% Subordinated Notes priced at 99.421%.

Disposition of Asesuisa

On September 27, 2012, Bancolombia completed the sale of Asesuisa, an insurance company in the Republic of El Salvador. After obtaining all the required authorizations from the regulators in Colombia and El Salvador, Banagrícola S.A. and Inversiones Financieras Banco Agrícola S.A., subsidiariesdirectors of Bancolombia sold to Seguros Suramericana S.A., a Panamanian company linked to Grupo de Inversiones Suramericana, 97.03% of its shares of capital stock of Asesuisa. The total amount received by Banagrícola S.A. and Inversiones Financieras Banco Agrícola S.A. was USD 98 million. This transaction was completed pursuantapproved an update to the Purchasecorporate governance code. The main adjustments relate to: (i) procedures for the exercise of shareholders’ rights at the shareholders’ meeting; (ii) principles and Sale agreement entered into in 2011.policies related to the organizational structure of Bancolombia; (iii) adoption of policies and guidelines for transactions between Bancolombia and affiliates; (iv) new responsibilities for the committees that assist board of directors; (v) heightened eligibility requirements for the members of the board of directors; and (vi) new guidelines related to Bancolombia’s control structure.

Exchange Offer

On October 10, 2012, Bancolombia announced the resultsDisposal of the private offer to exchange any and all of its outstanding Subordinated Notes due 2017 for Subordinated Notes due 2022, pursuant to an offering memorandum dated September 10, 2012. An aggregate principal amount of USD 200 million of subordinated notes due 2017, representing 50.12% of the USD 400 million aggregate outstanding principal amount of such notes, was tendered and accepted pursuant to the offer.

Acquisition of Interbolsa S.A. SCB Contract Positions on Public BondsUFF Móvil S.A.S.

On November 6, 2012 Interbolsa S.A. Sociedad Comisionista de Bolsa,30, 2015 Bancolombia announced that, in accordance with the evolution of its mobility strategy, it entered into an agreement for the sale of its equity participation in UFF Móvil S.A.S, a brokerage firm, assignedvirtual mobile operating company located in Colombia. The transaction closed on the same date. Bancolombia sold its 80.59% stake, which was held through Inversiones CFNS S.A.S. and BIBA Inmobiliaria S.A.S., to Bancolombia S.A. its outstanding contractual positions linked toMVNO Holdings LLC, a company established under the performance of public bonds. The face valuelaws of the assigned outstanding contractual positions totaled approximately COP 1.6 trillion. The net market valueState of the underlying public bonds was COP 113,400 million. Bancolombia is responsible for the settlementFlorida, United States. 

Sale of the outstanding buy/sell contracts entered into by Interbolsa’s proprietary trading desk. The assignment does not include client positions. This transaction was executed with the prior approval of the SFC which exercises administrative control over the stock brokerage firm as its Colombian regulator, as well as with the consideration of Bancolombia Group’sminority interest in contributing to the stability of the Colombian stock market.

Opening of Branch in Panama

On November 22, 2012, Bancolombia announced the opening of its new branch in Panama. Through this branch Bancolombia will provide Panamanian corporate clients with specialized credit and investment services. The branch in Panama will coexist with Bancolombia’s subsidiary, Bancolombia Panamá S.A., which has been operating with an international banking license in Panama for more than 40 years providing certain financial services to non-Panamanian clients.

Acquisition of Grupo Agromercantil Holding

On December 18, 2012, Bancolombia, through its subsidiary Bancolombia Panamá and BAM Financial Corporation (BFC) entered into a stock purchase agreement, pursuant to which Bancolombia Panamá will purchase from BFC a 40% of the capital stock of the Panamanian company Grupo Agromercantil Holding. Grupo Agromercantil Holding owns the financial conglomerate Grupo Financiero Agromercantil of Guatemala, which includes Banco Agromercantil BAM of Guatemala, Mercom Bank Ltd, an offshore bank based in Barbados, and Seguros Agromercantil of Guatemala, among others. Agromercantil has total assets of approximately USD 2,233 million. Bancolombia Panamá will pay a total of USD 216 million to BFC for the 40% interest. Following the transaction, BFC will continue to hold 60% of the capital stock of Grupo Agromercantil Holding. Completion of the transaction is subject to regulatory approvals in Colombia, Guatemala, Barbados and Panama and the satisfaction of other conditions. Bancolombia Panamá and BFC entered into a shareholders agreement the enforceability of which is subject to the completion of the transaction and that provides, among other things, for the acquisition by Bancolombia Panamá of a controlling interest in Grupo Agromercantil Holding in the medium term.

Legal proceeding against Banco Agrícola in El Salvador

On December 19, 2012 a decision was issued by the courts of El Salvador in a lawsuit against Banco Agrícola granting damages to the plaintiff in an amount of USD 366 million for the alleged failure of Banco Agrícola to return certain assets that were attached in a debt collection lawsuit. The judicial decision was appealed by Banco Agrícola on December 21, 2012 and the request for appeal has been accepted. In the event that the appeal is not favorable to Banco Agrícola it could further appeal the matter through an extraordinary recourse (recurso de casacion) to the civil chamber of the Supreme Court of Justice of El Salvador. Management, considering the advice of Banco Agricola's external legal counsel, believes that the appeal will be favorable to Banco Agrícola and any contingency derived from this lawsuit is deemed remote.

Purchase of HSBC Bank (Panama)CIFIN S.A.

On February 19, 20139, 2016, Bancolombia S.A. entered into an agreement with HSBC Holdings plc’s Latin American holding company, HSBC Latin America Holdings (UK) LimitedTransUnion Netherlands II B.V., for the sale by Bancolombia of its minority stake in Cifin S.A (“HSBC”Cifin”), which amounted to acquire HSBC Bank (Panama) S.A. (“HSBC Panama”). The agreement provides for14.2% of the outstanding shares. Cifin is a provider of financial, credit, commercial information and services. Bancolombia to pay total cash consideration of USD 2.1 billion, subject to certain customary adjustments based upon estimated net asset value at completion of USD 700 million, in exchange for 100% ofsold 106,504 common shares and 90.1% of preferredCifin for a total amount of COP 629,563.37 per share. The shares of HSBC Panama. The transaction is alignedin CIFIN sold by Bancolombia, together with Bancolombia’s strategythe stakes sold by the other shareholders party to expand its international operations by investingthe sale agreement, represented in the growing, solid and profitable market of Panama, where it has been present for over 40 years. The agreement provides for the acquisition of HSBC Panama’s subsidiaries, including its securities, trust, consumer finance businesses and an insurance company. The transaction will not include the subsidiaries of HSBC Panamaaggregate a 71% stake in Colombia (HSBC Colombia S.A. and HSBC Fiduciaria S.A.), which are being sold to a third party by HSBC as part of a previously announced transaction. The transaction is expected to close during the third quarter of 2013, subject to receipt of required regulatory approvals and other customary closing conditions.Cifin.

Pursuant to the terms of the agreement, HSBC has agreed to enter into a transitional services agreement to provide certain customary transitional services to Bancolombia for a period of time after closing.

Wind-down of Bancolombia’s Miami AgencyChange in Chief Executive Officer

On March 5, 2013,7, 2016, Carlos Raul Yepes Jimenez resigned as Chief Executive Officer of Bancolombia announced its decision to wind-downand the business and operationsboard of its agency in Miami, Florida. This decision was mainly based on the strategy to focus our international operations on other markets. The wind-down process is expected to be completed by the third quarter of 2013.directors appointed Juan Carlos Mora Uribe as his replacement.

PUBLIC TAKEOVER OFFERS

During 2012,In 2015, and as of the date of this Annual Report, there have been no public takeover offers by third parties with respect to the Bank’s shares or by the Bank in respect to another company’s shares.

CAPITAL EXPENDITURES AND DIVESTITURES

During the past three years, Bancolombia has made significant capital expenditures aimed at increasing the Bank’s productivity, footprint and cost efficiency. These expenditures include the improvements made to the Bank’s information technology platform and those related to new ATMs and branches.

During 2012,2015, total capital expenditures amounted to COP 154294 billion. Such investments were mainly focused on an IT Platform renewal projectIT-related projects (COP 9744 billion), the expansion of the Bank’s branch and ATM network (COP 1233 billion), the purchase of hardware for the expansion, updating and replacing current IT equipmentfixed assets (COP 2514 billion), and other investments, such as an anti-fraud systemmiscellaneous projects, including new software modules, upgrade of web contents, automation of reports and fixed assetsconstruction of data centers (COP 20203 billion).

In September 2010, the Board of Directors authorized Bancolombia to proceed with negotiations with Grupo de Inversiones Suramericana S.A. and Protección S.A. Sociedad Administradora de Fondos de Pensiones y Cesantías regarding the sale of Bancolombia’s ownership interests, held through foreign subsidiaries, in AFP Crecer, Asesuisa and Asesuisa Vida in El Salvador. The stock purchase agreements were executed in January 2011. The AFP Crecer transaction was authorized by regulators in El Salvador and Colombia and was closed in the second half of 2011. The Bank recognized a pre-tax gain on sale of investments of equity securities of COP 138 billion in connection with the AFP Crecer transaction. The Asesuisa and Asesuisa Vida transaction was authorized by regulators in El Salvador and Colombia and closed in the second half of 2012. The Bank recognized a pre-tax gain on sale of investments of equity securities of COP 81 billion in connection with the Asesuisa and Asesuisa Vida transaction.

Bancolombia received USD 104 million for the sale of AFP Crecer and USD 98 million for the sale of Asesuisa and Asesuisa Vida.

In 2012, Bancolombia invested USD 150 million in Sura Asset Management España S.L., a holding company that owns pension plan management institutions in Latin America. Investments in other companies during 2012 amounted COP 85 billion.

In 2012,2015, Bancolombia funded its capital expenditures with its own resources and plans to continue to fund those currently in progress in the same manner.

During 2011, total capital expenditures amounted to COP 197 billion. Such investments were mainly focused on an IT Platform renewal project (COP 107 billion), the expansion of the Bank’s branch and ATM network (COP 41 billion), the purchase of hardware for the expansion, updating and replacing current IT equipment (COP 36 billion), and other investments, such as an anti-fraud system and fixed assets (COP 13 billion).

During 2010, total capital expenditures amounted to COP 297 billion. Such investments were mainly focused on the IT Platform renewal project (COP 124 billion), the expansion of the Bank’s branch and ATM network (COP 69 billion), the purchase of hardware for the expansion, updating and replacing of current IT equipment (COP 32 billion), and other investments, such as an anti-fraud system and fixed assets (COP 77 billion).

During 2013,2016, the Bank expects to invest approximately COP 160385 billion as follows: COP 99 billion in connection with the IT Platform renewal project, COP 1542 billion in connection with the expansion of the Bank’s branch and ATM network, COP 750 billion in connection with the purchase of hardware for the expansion, updating and replacement of the current IT equipment, and COP 3982 billion in connection with other investments, such as an anti-fraud systemfixed assets and fixed assets.COP 211 billion in connection with strategic projects, including a new datacenter for the Bank’s operation in El Salvador. These figures represent only an estimate and may change according to the continuing assessment of the Bank’s project portfolio. No assurance can be given, however, that all such capital expenditures will be made and, if made, that such expenditures will be in the amounts currently expected.

The following table summarizes the Bank’s capital expendituresacquisitions and divestitures in interests in other companies for the years ending December 31, 2012, 20112015 and 2010:2014: