Bancolombia 20F/A 2008 Annual report (foreign) (amended)

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 2009

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F/A

AMENDMENT NO. 1

(Mark One)


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-32535

BANCOLOMBIA S.A.

(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

Republic of Colombia
(Jurisdiction of incorporation or organization)

Carrera 48 # 26-85, Avenida Los Industriales
Medellín, Colombia
(Address of principal executive offices)

Juan Esteban Toro Valencia, Investor Relations Manager
Carrera 48 # 26-85, Medellín, Colombia
Tel. +5744041837, Fax. + 574 4045146, e-mail: juatoro@bancolombia.com
(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registeredpursuant to Section 12(b) of the Act.


Title of each Class		Name of each exchange on which registered
American Depositary Shares		New York Stock Exchange
Preferred Shares		New York Stock Exchange*


*		Bancolombia’s preferred shares are not listed for trading directly, but only in connection with its American Depositary Shares, which are evidenced by American Depositary Receipts, each representing 4 preferred shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act.
Not applicable
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Not applicable
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the
period covered by the annual report.


Common Shares			509,704,584
Preferred Shares			278,122,419

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yesþ Noo

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934

Yeso Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filerþ	Accelerated filero	Non-accelerated filero	Smaller reporting companyo
		(Do not check if a smaller reporting company)

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAPo		International Financial Reporting Standards as issued by the International Accounting Standards Boardo		Otherþ

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow:

Item 17o Item 18þ

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Noþ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the precedent 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yeso Noo

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yeso Noo

EXPLANATORY NOTE

This Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) amends the Bank’s annual report on Form 20-F for the year ended December 31, 2008, filed with the Securities and Exchange Commission (the “SEC”) on June 30, 2009 (the “original filing”). The Bank is filing this Amendment No. 1 to include under Item 18 the report relating to the financial statements of Banagrícola S.A. and its subsidiaries as of December 31, 2007 audited by PriceWaterhouseCoopers, S.A. The report by PriceWaterhouseCoopers, S.A. was included in the annual report on Form 20-F for the year ended December 31, 2007 but was inadvertently omitted from the original filing.

Additionally, the Bank amends Item 19 of the original filing by including as exhibits 15.1, 15.2 and 15.3 consents by independent registered public accounting firms to the incorporation by reference of their reports to the registration statement in Form F-3 No. 333-142898, and by adding updated CEO and CFO certifications as exhibits 12.1, 12.2, 13.1 and 13.2.

The revisions mentioned above appear on the following pages or exhibits:

ITEM 18. FINANCIAL STATEMENTS

Page F-5 (Report of independent registered public accounting firm)

ITEM 19. EXHIBITS


12.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
12.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
15.1		Consent of PriceWaterhouseCoopers Ltda.
15.2		Consent of Deloitte & Touche Ltda.
15.3		Consent of PriceWaterhouseCoopers, S.A.

Except for the certifications, this Amendment No. 1 speaks as of the filing date of the original filing. Other than set forth above, this Amendment No. 1 does not, and does not purport to, amend, update or restate any other information or disclosure included in the original filing or reflect any events that have occurred after the filing date of the original filing. This amendment should be read in conjunction with the Bank’s filings made with the SEC subsequent to the original filing, as information in such reports and documents may update or supersede certain information contained in this amendment. This amendment retains the page numbering of the original filing for ease of reference.

PART III

FINANCIAL STATEMENTS

ITEM 18. FINANCIAL STATEMENTS

Reference is made to pages F- 1 through F — 120.

ITEM 19. EXHIBITS

The following exhibits are filed as part of this Annual Report.


1⁽²⁾		English Translation of Corporate by-laws (estatutos sociales) of the registrant, as amended on March 01, 2007.
2⁽¹⁾		The Deposit Agreement entered into between Bancolombia and The Bank of New York, as amended on January 14, 2008.
4.1.⁽⁴⁾		English Summary of the Stock Purchase Agreement entered into between Bancolombia S.A., the other shareholders named therein and Stratton Spain S.L. on June 6, 2008.
7.⁽⁴⁾		Selected Ratios’ Calculation
8.1⁽⁴⁾		List of Subsidiaries
11.⁽³⁾		English translation of the Ethics Code of the registrant, as amended on June 23, 2008.
12.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
12.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
15.(a)⁽³⁾		English Translation of Corporate Governance Code (Código de Buen Gobierno) of the registrant, as amended on June 23, 2008.
15.1		Consent of PriceWaterhouseCoopers Ltda.
15.2		Consent of Deloitte & Touche Ltda.
15.3		Consent of PriceWaterhouseCoopers, S.A.

⁽¹⁾ Incorporated by reference to the Registration Statement in Form F-6, filed by Bancolombia on January 14, 2008.

⁽²⁾ Incorporated by reference to the Bank’s Annual Report on Form 20-F for the year ended December 31, 2006 filed on May 10, 2007.

⁽³⁾ Incorporated by reference to the Bank’s Annual Report on Form 20-F for the year ended December 31, 2007 filed on July 8, 2008.

⁽⁴⁾ Incorporated by reference to the Bank’s Annual Report on Form 20-F for the year ended December 31, 2008 filed on June 30, 2009.

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Dated: July 24, 2009

BANCOLOMBIA S.A.

By:   /s/ JAIME ALBERTO VELÁSQUEZ BOTERO
        Name: Jaime Alberto Velásquez Botero
        Title: Chief Financial Officer

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page

*Reports of Independent Registered Public Accounting Firms*		F-2

*Consolidated Balance Sheets* As of December 31, 2007 and 2008		F-6

*Consolidated Statements of Operations* As of December 31, 2006, 2007 and 2008		F-8

*Consolidated Statements of Stockholders’ Equity* As of December 31, 2006, 2007 and 2008		F-10

*Consolidated Statements of Cash Flows* As of December 31, 2006, 2007 and 2008		F-11

*Notes to Consolidated Financial Statements*		F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of Bancolombia S. A.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Bancolombia S. A. and its subsidiaries (the “Bank”) at December 31, 2008, and the consolidated results of operations and cash flows for the year then ended in conformity with accounting principles generally accepted in Colombia and the special regulations of the Superintendency of Finance, collectively “Colombian GAAP” . Also in our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Bank’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in “Management’s Report on Internal Control Over Financial Reporting” appearing under Item 15. Our responsibility is to express opinions on these financial statements and on the Bank’s internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and auditing standards generally accepted in Colombia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 2 (d) to the consolidated financial statements, the Bank changed the manner in which it presents increases and decreases in deposits within its consolidated statement of cash flows prepared under Colombian GAAP, effective January 1, 2008.

F-2

Accounting principles generally accepted in Colombia and the special regulations of the Superintendency of Finance, collectively “Colombian GAAP”, vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 31 to the consolidated financial statements.

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

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

/s/ PricewaterhouseCoopers LTDA
Medellin, Colombia
June 30, 2009

F-3

Deloitte & Touche Ltda.
Edificio Corficolombiana
Calle 16 Sur No 43 A-49 Pisos 9 y 10
A.A 404
Nit 860.005.813-4
Medellin
Colombia

Tel: 57(4) 313 56 54
Fax: 57(4) 313 93 43
www.deloitte.com/co

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of BANCOLOMBIA S.A.:

We have audited the accompanying consolidated balance sheets of Bancolombia SA and subsidiaries (the “Bank”) as of December 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2007. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on the financial statements based on our audits.

We did not audit the consolidated financial statements of Banagrícola, S.A. (a consolidated subsidiary acquired by the Bank on May 16, 2007) and its subsidiaries, which statements reflect total assets and income before taxes constituting 16.30% and 15.30%, respectively, of the related consolidated totals for the year ended December 31, 2007. Those statements, prepared in accordance with the accounting standards prescribed by the Superintendence of Financial System of EI Salvador, were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Banagrícola, S.A. and its subsidiaries on such basis of accounting, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements (including the Bank’s conversion of the amounts in the financial statements of Banagrícola S.A. and its subsidiaries, prepared in conformity with accounting standards prescribed by the Superintendence of Financial System of El Salvador, to amounts in conformity with accounting principles generally accepted in Colombia and the regulations of the Colombian Superintendency of Finance (collectively “Colombian GAAP”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”)). An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Bancolombia S.A. and subsidiaries as of December 31, 2007, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007, in conformity with Colombian GAAP.

Colombian GAAP vary in certain significant respects from U.S. GAAP. Information relating to the nature and effect of such differences is presented in Note 31 to the consolidated financial statements.

As discussed in Notes 2(d), 2(ab), 31(q) and 31(x) to the consolidated financial statements, the accompanying 2007 and 2006 financial statements have been retrospectively adjusted for the changes in accounting practices relating to presentation of increases and decreases in deposits within its consolidated statements of cash flows and to certain transactions in its statements of operations, operations discontinued in 2008 and disclosures in the composition of reportable segments, respectively.

/s/ Deloitte & Touche Ltda.
Medellin, Colombia

July 7, 2008 (June 25, 2009 for the effects of certain restatements for the correction of errors discussed on Note 31(y) and June 26, 2009 as to the effects of the retrospective adjustments discussed in Notes 2(d), 2(ab), 31(q) and 31(x) to the consolidated financial statements)

F-4

PRICEWATERHOUSECOOPERS

Ave Samuel Lewis y

Calle 55 E

Apartado 0819-05710

El Dorado Panamá R. P.

Teléfono (507) 206-9200

Fax (507) 264-5527

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Banagrícola, S.A.

We have audited the accompanying consolidated balance sheets of Banagrícola, S.A. and its subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholder’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banagrícola, S.A. and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting standards prescribed by the Superintendence of Financial System of El Salvador as described in Note 2.

As described in Note 2, the accompanying consolidated financial statements have been prepared in conformity with accounting standards for controlling entities issued by the Superintendence of Financial Systems of El Salvador, which is a comprehensive basis of accounting other than International Financial Reporting Standards.

/s/ PriceWaterhouseCoopers

June 28, 2008

Panama, Republic of Panama

F-5

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars)


									2008⁽¹⁾
	Notes		2007			2008			(Unaudited)
									U.S. Dollar
*Assets*

Cash and cash equivalents:
Cash and due from banks		4	Ps	3,618,619		Ps	3,870,927		US$	1,725,328
Overnight funds				1,609,768			1,748,648			779,397

Total cash and cash equivalents				5,228,387			5,619,575			2,504,725


Investment securities:		5
Debt securities:				5,596,051			6,840,596			3,048,951
Trading				1,916,012			2,385,564			1,063,279
Available for sale				1,954,593			2,000,588			891,691
Held to maturity				1,725,446			2,454,444			1,093,981
Equity securities:				253,747			503,861			224,578
Trading				93,125			331,398			147,709
Available for sale				160,622			172,463			76,869
Allowance				(75,547	)		(66,181	)		(29,498	)

Total investment securities, net				5,774,251			7,278,276			3,244,031


Loans and financial leases:		6
Commercial loans				23,397,058			28,068,731			12,510,633
Consumer loans				6,593,211			7,532,649			3,357,409
Small business loans				129,900			143,122			63,792
Mortgage loans				2,883,628			3,391,326			1,511,562
Financial leases				4,698,827			5,506,742			2,454,433
Allowance for loans and financial leases losses		7		(1,457,151	)		(2,134,360	)		(951,315	)

Total loans and financial leases, net				36,245,473			42,508,210			18,946,514


Accrued interest receivable on loans and financial leases:
Accrued interest receivable on loans and financial leases				431,863			559,981			249,592
Allowance for accrued interest losses		7		(33,303	)		(54,323	)		(24,213	)

Total interest accrued, net				398,560			505,658			225,379


Customers’ acceptances and derivatives		8		196,001			272,458			121,438
Accounts receivable, net		9		716,106			828,817			369,416
Property, plant and equipment, net		10		855,818			1,171,117			521,984
Operating leases, net		11		488,333			726,262			323,705
Foreclosed assets, net		15		32,294			24,653			10,988
Prepaid expenses and deferred charges		12		137,901			132,881			59,227
Goodwill		14		977,095			1,008,639			449,565
Other assets, net		13		580,642			1,093,850			487,544
Reappraisal of assets		16		520,788			612,683			273,082

Total assets			Ps	52,151,649		Ps	61,783,079		US$	27,537,598


Memorandum accounts		25	Ps	182,209,139		Ps	219,171,533		US$	97,687,872

F-6

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars)


									2008⁽¹⁾
	Notes		2007			2008			(Unaudited)
									U.S. Dollar

*Liabilities and Stockholders’ Equity*

Deposits
Non-interest bearing:			Ps	5,804,724		Ps	5,723,460		US$	2,551,028
Checking accounts				5,300,864			5,289,918			2,357,792
Other				503,860			433,542			193,236
Interest bearing:				28,569,426			34,660,940			15,448,874
Checking accounts				1,567,411			2,011,132			896,390
Time deposits				14,304,727			18,652,738			8,313,791
Savings deposits				12,697,288			13,997,070			6,238,693

Total deposits				34,374,150			40,384,400			17,999,902


Overnight funds				2,005,490			2,564,208			1,142,904
Bank acceptances outstanding				55,208			56,935			25,377
Interbank borrowings		17		1,506,611			2,077,291			925,878
Borrowings from development and other domestic banks		18		3,344,635			3,870,634			1,725,197
Accounts payable				1,714,418			1,688,402			752,545
Accrued interest payable				286,627			400,902			178,688
Other liabilities		19		503,433			589,501			262,749
Long-term debt		20		2,850,730			3,643,486			1,623,953
Accrued expenses		21		218,860			255,183			113,739
Minority interest				92,217			135,292			60,301

Total liabilities				46,952,379			55,666,234			24,811,233


Stockholders’ equity		22, 24
Subscribed and paid in capital:				460,684			460,684			205,334
Nonvoting preferred shares				151,422			151,422			67,492
Common shares				309,262			309,262			137,842
Retained earnings:				4,446,527			5,265,664			2,346,981
Appropriated		23		3,359,604			3,975,021			1,771,723
Unappropriated				1,086,923			1,290,643			575,258
Reappraisal of assets		16		319,646			448,511			199,908
Gross unrealized net loss on investments				(27,587	)		(58,014	)		(25,858	)

Total stockholders’ equity				5,199,270			6,116,845			2,726,365


Total liabilities and stockholders’ equity			Ps	52,151,649		Ps	61,783,079		US$	27,537,598


Memorandum accounts		25	Ps	182,209,139		Ps	219,171,533		US$	97,687,872

The accompanying notes, numbered 1 to 31, form an integral part of these Consolidated Financial Statements.


(1)		See note 2 (c).

F-7

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2006, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars, except per share data)


	Note		2006			2007⁽²⁾			2008				2008⁽¹⁾ (Unaudited)
													U.S. Dollar
Interest income:
Loans			Ps	2,312,525		Ps	3,707,751		Ps	4,999,520			US$	2,228,358
Investment securities				273,197			416,644			431,589				192,365
Overnight funds				43,863			115,324			106,208				47,338
Financial leases				384,147			570,689			776,426				346,064

Total interest income				3,013,732			4,810,408			6,313,743				2,814,125


Interest expense:
Checking accounts				32,676			39,076			39,257				17,497
Time deposits				459,513			816,688			1,256,742				560,148
Saving deposits				264,381			461,437			589,718				262,846

Total interest expense on deposits				756,570			1,317,201			1,885,717				840,491

Interbank borrowings				94,872			109,843			74,792				33,335
Borrowings from development and other domestic banks				180,507			274,484			344,900				153,727
Overnight funds				100,876			131,127			166,129				74,046
Long-term debt				113,404			169,435			281,803				125,604

Total interest expense				1,246,229			2,002,090			2,753,341				1,227,203


Net interest income				1,767,503			2,808,318			3,560,402		��		1,586,922


Provision for loan, accrued interest losses and other receivables, net		7		(266,107	)		(707,865	)		(1,263,405	)			(563,118	)
Recovery of charged-off loans				70,746			89,997			108,143				48,201
Provision for foreclosed assets and other assets				(44,353	)		(60,531	)		(46,297	)			(20,635	)
Recovery of provisions for foreclosed assets and other assets				89,532			81,364			68,392				30,483

Total net provisions				(150,182	)		(597,035	)		(1,133,167	)			(505,069	)

Net interest income after provisions for loans and accrued interest losses				1,617,321			2,211,283			2,427,235				1,081,853


Fees and other services income:
Commissions from banking services				162,273			279,528			238,918				106,489
Electronic services and ATMs fees				85,049			80,711			86,070				38,363
Branch network services				62,403			104,601			104,010				46,359
Collections and payments fees				74,708			130,421			157,281				70,102
Credit card merchant fees				8,150			39,191			32,215				14,359
Credit and debit card annual fees				238,898			293,583			446,647				199,077
Checking fees				60,083			67,438			67,963				30,292
Warehouse services				72,494			—			—				—
Fiduciary activities				62,114			69,200			98,799				44,036
Pension Plan Administration				—			82,453			87,826				39,145
Brokerage fees				67,034			62,493			54,742				24,399
Check remittance				11,040			22,762			26,148				11,655
International operations				34,281			43,643			47,962				21,377

F-8

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2006, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars, except per share data)


	Note		2006			2007⁽²⁾			2008			2008⁽¹⁾ (Unaudited)
												U.S. Dollar
Total fees and other service income			Ps	938,527		Ps	1,276,024		Ps	1,448,581		US$	645,653


Fees and other service expenses				(70,866	)		(116,453	)		(134,939	)		(60,144	)

Total fees and income from services, net				867,661			1,159,571			1,313,642			585,509


Other operating income:
Foreign exchange gains, net				58,008			27,584			113,584			50,626
Forward contracts in foreign currency				45,073			141,930			142,431			63,484
Gains (losses) on sales of investments on equity securities				75,697			(15,034	)		92,125			41,061
Gains on sale of mortgage loans				14,371			50,377			41,080			18,310
Dividend income				21,199			18,968			39,586			17,644
Revenues from commercial subsidiaries				40,323			101,148			101,730			45,343
Insurance income				—			8,013			13,948			6,217
Communication, postage, rent and others				16,762			17,572			105,958			47,226

Total other operating income				271,433			350,558			650,442			289,911

Total operating income				2,756,415			3,721,412			4,391,319			1,957,273


Operating expenses:
Salaries and employee benefits				690,117			835,150			928,997			414,067
Bonus plan payments				35,771			84,226			125,393			55,889
Compensation				6,375			23,463			23,539			10,492
Administrative and other expenses		27		882,182			1,070,845			1,268,982			565,603
Deposit security, net				67,813			49,113			52,151			23,244
Donation expenses				22,596			15,375			26,653			11,880
Depreciation		10		104,553			122,835			141,133			62,905
Merger expenses				35,779			—			—			—
Goodwill amortization				25,814			70,411			73,149			32,604

Total operating expenses				1,871,000			2,271,418			2,639,997			1,176,684

Net operating income				885,415			1,449,994			1,751,322			780,589


Non-operating income:
Other income				194,589			93,294			172,550			76,909
Minority interest				(6,352	)		(13,246	)		(18,511	)		(8,251	)
Other expense				(149,243	)		(81,236	)		(140,662	)		(62,695	)

Total non-operating (expense) income		28		38,994			(1,188	)		13,377			5,963


Income before income taxes				924,409			1,448,806			1,764,699			786,552
Income tax expense		21		(174,880	)		(361,883	)		(474,056	)		(211,294	)

Net income			Ps	749,529		Ps	1,086,923		Ps	1,290,643		US$	575,258


Earnings per share			Ps	1,030		Ps	1,433		Ps	1,638		US$	0.73

The accompanying notes, numbered 1 to 31, form an integral part of these Consolidated Financial Statements.


(1)		See Note 2 (c).

(2)		The consolidated statement of operations for the year 2007 was modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes.

F-9

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Years ended December 31, 2006, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars, except share data)


	Non Voting Preferred Shares				Voting Common Shares				Retained Earnings						Surplus					Total
																	Gross unrealized
																	gain or loss on
									Appro-			Unappro-			Reappraisal		investments			Stockholders'
	Number		Par Value		Number		Par Value		priated			priated			of assets		available for sale			equity

*Balance at December 31, 2005*		218,122,421	Ps	121,422		509,704,584	Ps	309,262	Ps	1,765,998		Ps	946,881		Ps	110,479	Ps	123,248		Ps	3,377,290
Net income		—		—		—		—		—			749,529			—		—			749,529
Transfer to appropriated retained earnings		—		—		—		—		946,881			(946,881	)		—		—			—
Valuation of investments		—		—		—		—					—			30,214		(111,149	)		(80,935	)
Dividends declared		—		—		—		—		(369,736	)		—			—		—			(369,736	)
Other		—		—		—		—		(29,536	)		—			—		—			(29,536	)

*Balance at December 31, 2006*		218,122,421		121,422		509,704,584		309,262		2,313,607			749,529			140,693		12,099			3,646,612
Net income		—		—		—		—		—			1,086,923			—		—			1,086,923
Transfer to appropriated retained earnings		—		—		—		—		749,529			(749,529	)		—		—			—
Issuance of preferred and common shares		59,999,998		30,000		—		—		897,612			—			—		—			927,612
Valuation of investments		—		—		—		—					—			178,953		(39,686	)		139,267
Dividends declared		—		—		—		—		(403,164	)		—			—		—			(403,164	)
Other		—		—		—		—		(197,980	)		—			—		—			(197,980	)

*Balance at December 31, 2007*		278,122,419		151,422		509,704,584		309,262		3,359,604			1,086,923			319,646		(27,587	)		5,199,270
Net income													1,290,643					—			1,290,643
Transfer to appropriated retained earnings										1,086,923			(1,086,923	)				—			—
Issuance of preferred and common shares		—		—														—			—
Valuation of investments																128,865		(30,427	)		98,438
Dividends declared										(447,486	)							—			(447,486	)
Other										(24,020	)							—			(24,020	)

*Balance at December 31, 2008*		278,122,419	Ps	151,422		509,704,584	Ps	309,262	Ps	3,975,021		Ps	1,290,643		Ps	448,511	Ps	(58,014	)	Ps	6,116,845


*Balance at December 31, 2008⁽¹⁾(Unaudited)*			US$	67,492			US$	137,842	US$	1,771,723		US$	575,258		US$	199,908	US$	(25,858	)	US$	2,726,365

The accompanying notes, numbered 1 to 31, form an integral part of these Consolidated Financial Statements.


(1)		See note 2 (c).

F-10

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2006, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars)


	2006			2007			2008			2008⁽¹⁾

Cash flows from operating activities:

Net income	Ps	749,529		Ps	1,086,923		Ps	1,290,643		US$	575,258

Adjustments to reconcile net income to net cash used by operating activities:
Depreciation		104,553			122,835			193,151			86,090
Amortization		42,905			110,076			120,581			53,745
Minority interest		(251	)		43,328			43,075			19,199
Provision for loan, accrued interest and accounts receivable losses		600,273			1,268,241			2,113,431			941,986
Provision for foreclosed assets		22,044			35,783			19,461			8,674
Provision for losses on investment securities and equity investments		12,200			7,313			7,379			3,289
Provision for Property, Plant and Equipment		914			2,925			2,853			1,272
Provision for other assets		1,600			7,914			7,250			3,231
Reversal of provision for investments		(27,593	)		(20,722	)		(14,125	)		(6,296	)
Reversal of provision for loans and accounts receivable		(334,082	)		(560,241	)		(849,166	)		(378,485	)
Reversal of provision for foreclosed assets		(54,298	)		(52,995	)		(46,352	)		(20,660	)
Reversal of provision for other assets		(880	)		(244	)		(2,308	)		(1,029	)
Reversal of provision for Property, Plant and Equipment		(6,845	)		(7,537	)		(6,468	)		(2,883	)
Realized and unrealized (gain) loss on derivative financial instruments		15,449			(117,653	)		(129,689	)		(57,804	)
Unrealized gain on investment securities		(159,249	)		(355,190	)		(624,860	)		(278,509	)
Foreclosed assets donation		20,888			10,708			7,321			3,263
(Increase) decrease in customers’ acceptances		(47,520	)		79,225			54,958			24,496
(Increase) in accounts receivable		(38,311	)		(344,052	)		(302,521	)		(134,838	)
(Increase) in other assets		(187,584	)		(1,336,181	)		(669,543	)		(298,425	)
(Decrease) Increase in accounts payable		(253,531	)		822,201			88,259			39,338
(Decrease) Increase in other liabilities		(72,270	)		115,735			86,069			38,362
(Increase) in loans and financial leases		(6,182,386	)		(13,087,618	)		(7,443,105	)		(3,317,498	)
Increase in deposits⁽²⁾		4,831,484			11,157,682			6,010,250			2,678,854
(Decrease) Increase in estimated liabilities and allowances		(10,875	)		98,876			36,323			16,190


Net cash used by operating activities		(973,836	)		(912,668	)		(7,133	)		(3,180	)


Cash flows from investing activities:
Proceeds from sales of Property, Plant and Equipment		53,218			15,280			28,827			12,849
Proceeds from sales of foreclosed assets		61,791			71,811			37,326			16,637
(Purchases) of Property, Plant and Equipment		(230,992	)		(590,568	)		(765,652	)		(341,262	)
Sales (Purchases) of investment securities		2,815,501			232,424			(902,846	)		(402,411	)


Net cash provided by (used) investing activities		2,699,518			(271,053	)		(1,602,345	)		(714,187	)

F-11

BANCOLOMBIA S.A. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2006, 2007 and 2008

(Stated in millions of Colombian pesos and thousands of U.S. Dollars)


	2006			2007			2008			2008⁽¹⁾

Cash flows from financing activities:

Dividends declared		(369,736	)		(403,163	)		(447,486	)		(199,451	)
Payment of long-term debt		(628,964	)		(477.893	)		(256,906	)		(114,507	)
Placement of long-term debt		283,354			2,025,921			1,049,662			467,850
Increase (decrease) in overnight funds		(322,868	)		998,445			558,718			249,029
Increase (decrease) in interbank borrowings and borrowings from domestic development banks		(411,124	)		1,334,820			1,096,678			488,805
Issuance of preference and common shares		—			30,000			—			—
Retained earnings		—			897,612			—			—


Net cash (Used) provided by financing activities		(1,449,338	)		4,405,742			2,000,666			891,726


Increase in cash and cash equivalents		276,344			3,222,021			391,188			174,359
Cash and cash equivalents at beginning of year		1,730,022			2,006,366			5,228,387			2,330,366


Cash and cash equivalents at end of year	Ps	2,006,366		Ps	5,228,387		Ps	5,619,575		US$	2,504,725


Supplemental disclosure of cash flows information:
Cash paid during the year for:
Interest	Ps	1,238,419		Ps	1,905,585		Ps	2,639,069		US$	1,176,271
Income taxes	Ps	161,967		Ps	122,477		Ps	214,679		US$	95,686

See accompanying notes to consolidated financial statements.


(1)		See note 2 (c).

(2)		The consolidated cash flow for the years ended 2006 and 2007 was modified due to reclassifications made particularly in deposits of the financial activities for operating activities, with the purpose of improving the presentation of comparative information. Amounts previously presented for operating activities were (5,757,800) and (12,149,575); for investing activities were 2,651,998 and (191,828); for financing activities were 3,382,146, and 15,563,424; for the years ended in 2006 and 2007, respectively.

F-12

BANCOLOMBIA S.A. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(1) Organization and Background

Bancolombia S.A., is a private commercial bank incorporated under Colombian law on January 24, 1945. On April 3, 1998, Banco Industrial Colombiano S.A. merged with Banco de Colombia S.A. and the surviving entity was renamed Bancolombia S.A. The registered office and business address of Bancolombia S.A. is in Medellín, Colombia. Bancolombia S.A. and its subsidiaries are defined as the Bank.

On July 30, 2005, Conavi Banco Comercial y de Ahorros S.A. (“Conavi”) and Corporación Financiera Nacional y Suramericana S.A. (post-spin off) (“Corfinsura”) were merged into Bancolombia S.A. (the “Conavi/Corfinsura merger”). The Conavi/Corfinsura merger was approved at Bancolombia S.A.’s ordinary shareholders’ meeting held on March 28, 2005 and was also duly approved at the annual shareholder meetings of Conavi and Corfinsura, respectively. The Superintendency of Finance approved the transaction on July 19, 2005. The Conavi/Corfinsura merger was formalized and registered in the Commercial Registry of the Medellín Chamber of Commerce on August 1, 2005. As a result of the Conavi/Corfinsura merger, Bancolombia S.A. acquired the entire property, rights and obligations of Conavi and Corfinsura, entities which were dissolved without being liquidated.

Bancolombia S.A.’s business purpose is to carry out all operations, transactions, acts and services inherent to the banking business, through banking establishments that carry its name and according to all applicable legislation.

Bancolombia S.A also has an agency in Miami, Florida, United States of America and a representation office in Madrid, Spain.

In May 2007, Bancolombia S.A. through its subsidiary Bancolombia Panamá S.A. acquired 89.15% of Banagrícola S.A. (“Banagrícola”). Banagrícola’s shareholders agreed to sell 16,817,633 of the total 18,865,000 outstanding shares. The purchase price was US$ 47.044792 per share for a total of US$ 791,182. Simultaneously with the acquisition, the Bank had signed an agreement with Bienes y Servicios S.A (BYSSA), former major Banagrícola’s shareholder, which included a call and written put option. The options were exercised in December 2007 and as a consequence the Bank acquired the shares representing 9.59% of interest in Banagríola. Bancolombia Panamá S.A. has continued purchasing shares from Banagrícola’s minority shareholders and at December 31, 2008 held an interest of 99.12% of Banagrícola’s total shareholder’s equity.

Banagrícola is a holding company with several subsidiaries dedicated to banking, commercial and consumer activities, insurance, pension funds and brokerage, among which are Banco Agrícola S.A. in El Salvador and Banco Agrícola (Panamá) S.A. in Panama. The acquisition of Banagrícola intends to place the Bank as one of several key players in Central America boosting its income generation and also diversifying its loan portfolio mix, reducing risk and exposure concentration.

The consolidated financial statements includes the assets, liabilities, earnings, contingent accounts and memorandum accounts of the Bank in which they hold, directly or indirectly, 50% or more of the outstanding voting shares (the “Subsidiaries”). Bancolombia S.A. has the following subsidiaries making up the Bancolombia Group, which is currently registered as a corporate group:

F-13

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Participation

percentage

Entity

Location

Business

Dec-2007

Dec-2008

Leasing Bancolombia S.A.

Colombia

Leasing

100

Fiduciaria Bancolombia S.A.

Colombia

Trust

98.81

Fiduciaria GBC S.A.⁽¹⁾

Peru

Trust

—

98.82

Bancolombia Panamá S.A.

Panama

Banking

100

Bancolombia Caymán

Cayman Islands

Banking

100

Sistema de Inversiones y Negocios S.A.

Panama

Investments

100

Sinesa Holding Company Ltd.

British Virgin Islands

Investments

100

Future Net Inc.

Panama

E-commerce

100

Banca de Inversión Bancolombia S.A. Corporación Financiera

Colombia

Investment banking

100

Inversiones Valsimesa S.A.⁽²⁾

Colombia

Investments

71.75

—

Inmobiliaria Bancol S.A.

Colombia

Real estate broker

99.09

99.06

Fundicom S.A.⁽³⁾

Colombia

Metals engineering

79.90

—

Valores Simesa S.A.

Colombia

Investments

71.75

70.75

Todo UNO Colombia S.A.

Colombia

E-commerce

89.92

Compañía de Financiamiento Comercial S.A. Sufinanciamiento

Colombia

Financial services

99.99

Renting Colombia S.A.

Colombia

Operating leasing

90.30

80.50

Renting Perú S.A.C.

Peru

Operating leasing

90.39

80.63

RC Rent a Car S.A.

Colombia

Car rental

90.80

81.51

Catital Investments SAFI S.A. (CI)⁽⁴⁾

Peru

Trust

—

80.63

Fondo de Inversión en Arrendamiento Operativo Renting Perú⁽⁴⁾

Peru

Car Rental

—

80.63

Transportes Empresariales de Occidente Ltda.⁽⁴⁾

Colombia

Transportation

—

80.30

Patrimonio Autónomo Renting Colombia⁽³⁾

Colombia

Investments

100

—

Suleasing International USA, Inc.

USA

Leasing

100

Suleasing Internacional do Brasil Locacao de Bens S.A.⁽²⁾

Brazil

Leasing

100

—

Inversiones CFNS Ltda.

Colombia

Investments

100

Valores Bancolombia S.A.

Colombia

Securities brokerage

100

Suvalor Panamá S.A.

Panama

Securities brokerage

100

Bancolombia Puerto Rico Internacional, Inc

Puerto Rico

Banking

100

Multienlace S.A.⁽³⁾

Colombia

Contact center

98.20

—

Inversiones IVL S.A.

Colombia

Investments

98.25

Factoring Bancolombia S.A

Colombia

Financial services

99.99

Patrimonio Autónomo CV Sufinanciamiento

Colombia

Loan management

100

Banagrícola S.A.

Panama

Investments

98.90

99.12

Banco Agrícola Panamá S.A.

Panama

Banking

98.90

99.12

Inversiones Financieras Banco Agrícola S.A.

El Salvador

Investments

98.08

98.38

Banco Agrícola S.A.

El Salvador

Banking

96.00

96.72

Arrendadora Financiera S.A.

El Salvador

Leasing

96.02

96.73

Credibac S.A. de CV

El Salvador

Credit card services

96.01

96.72

Bursabac S.A. de CV

El Salvador

Securities brokerage

98.08

98.38

AFP Crecer S.A.

El Salvador

Pension fund

98.32

98.60

Aseguradora Suiza Salvadoreña S.A.

El Salvador

Insurance company

94.70

95.81

Asesuisa Vida S.A.

El Salvador

Insurance company

94.70

95.80

FCP Colombia Inmobiliaria⁽⁴⁾

Colombia

Real estate broker

—

64.12


(1)		Company created in 2008.

(2)		Company liquidated in 2008.

(3)		Company sold in 2008.

(4)		Company acquired in 2008.

F-14

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(2) Summary of significant accounting Policies

(a) Basis of Presentation

For the preparation and disclosures of financial statements, the Bank follows generally accepted accounting principles in Colombia and the special regulations of the Superintendency of Finance, collectively “Colombian GAAP”.

For consolidated purposes, accounting policies relating to the application of adjustments for inflation were aligned with those established by the Superintendency of Finance for the Bank. By means of External Circular 014 issued April 17, 2001 by the Superintendency of Finance, the application of inflation adjustments was discontinued for accounting purposes as of January 1, 2001.

The financial statements of foreign subsidiaries were adjusted in order to adopt uniform accounting practices as required by Colombian GAAP.

Intercompany operations and balances are eliminated upon consolidation.

The Bank holds the majority voting rights in the companies: Prosicol E.U, Forum S.A, Industrias Kapitol S.A, Urbanización Sierras del Chicó Ltda, Chicó Oriental No.2. Ltda. which were not included in the Consolidated Financial Statements due to the fact that these are either being wound up, subject to litigation proceedings or are currently at a non-productive stage.

(b) Translation of Foreign Currency Transactions and Balances

Translation of financial statements in foreign currency

The balance sheet accounts are translated to pesos using the exchange rate applicable at the end of the year, (except equity accounts which are translated at the historical exchange rate), This at December 31, 2008, December 31, 2007 and December 31, 2006 came to Ps 2,243.59, Ps 2,014.76 and Ps 2,357.98 per US$ 1, respectively and for the income accounts the average exchange rate was used. Exchange differences originated in the balance sheet accounts are recorded as “Cumulative Translation Adjustments” in the Stockholders equity and are eliminated in the consolidation process.

Transactions in foreign currency on the part of the Bank and its local Subsidiaries

Transactions and balances in foreign currency are translated by the Bank and its Subsidiaries to pesos using the market exchange rates applicable on the corresponding dates, as established by the Superintendency of Finance. The exchange rates at December 31, 2008, December 31, 2007 and December 31, 2006 was that stated above.

Exchange rate differences arising from adjustments remeasurement of assets and liabilities denominated in foreign currency are recorded on the Consolidated Statements of Operations.

F-15

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(c) Convenience Translation to U.S. Dollars

The Bank maintains its accounting records and prepares its financial statements in Colombian pesos. The U.S. Dollar amounts presented in the financial statements and accompanying notes have been converted from peso figures solely for the convenience of the reader at the exchange rate of Ps 2,243.59 per US$ 1, which is the exchange rate, calculated on December 31, 2008, the last business day of the year, by the Superintendency of Finance. This translation may not be construed to represent that the Colombian peso represents or has been, or could be converted into, U.S. Dollars at that or any other rate.

(d) Cash and Cash Equivalents

The statement of cash flows was prepared using the indirect method. These cash flows were calculated by taking the net differences in the balances shown on the consolidated balance sheet on December 31, 2008 and 2007. Cash and cash equivalents consist of cash and due from banks and all highly liquid investments with an original maturity of three months or less at the date of acquisition.

On January 1, 2008, the Bank modified the manner in which presents increases and decreases in deposits within its consolidated statements of cash flows. Previously classified as cash flows from financing activities, the Bank now presents such increases and decreases in deposits as cash flows from operating activities. This change is permitted under Colombian GAAP and enhances the comparability of the Bank with financial institutions reporting under International Financial Reporting Standards. The Bank elected to retroactively reflect this presentation change and adjust its historical consolidated statements of cash flows for the years ended December 31, 2006 and 2007, for comparative purposes. Amounts previously reported within cash flows from operating activities were (5,757,800) and (12,149,575); and within cash flows from financing activities were 3,382,146 and 15,563,424, for the years ended December 31, 2006 and 2007, respectively.

(e) Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with Colombian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual losses could differ from those estimated.

(f) Real Value Unit Rate (UVR)

The operations that the Bank carries out with regard to mortgage loans linked to theUnidad de Valor Real (the “Real Value Unit” or “UVR”) are adjusted on a daily basis according to the daily value of the UVR, as published by the Central Bank. The values assigned by the Central Bank to the UVR, in Colombian pesos, on December 31, 2007 and 2008, were Ps 168.4997 and Ps 181.6907, respectively. The UVR rate corresponds to the monthly variance of the IPC (Colombian Consumer Index Price) during the calendar month immediately prior to the month for which the UVR rate is being calculated. In light of the above, the annualized UVR rate increased at December 31, 2007 and 2008 was 2.95% and 3.83%, respectively.

F-16

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(g) Money Market Operations

Money market operations include: Interbank funds, securities and under repurchase aggrement and securities purchased under agreement to resell.

Repos

Long Position: These are securities that are acquired by the Bank and its Subsidiaries in exchange for a sum of money (with or without a discount) assuming, at the moment the arrangement is made, the obligation of returning to the counterpart title to securities of the same type and characteristics, the same day or at a later date without at any time exceeding the term of one (1) year and at a pre-determined price or amount.

Short Position: These are securities that are transferred in exchange for a sum of money, assuming, at the moment the arrangement is made, the obligation of purchasing from the counterpart title to securities of the same type and characteristics, the same day or at a later date without at any time exceeding the term of one (1) year and at a pre-determined price or amount.

Simultaneous Operations

Long Position: These are securities that are acquired in exchange for a sum of money assuming at the moment the arrangement is made, the obligation of returning to the counterpart title to securities of the same type and characteristics, the same day or at a later date without at any time exceeding the term of one (1) year and at a pre-determined price or amount.

Short Position: The short position with regard to a simultaneous operation is when a person transfers the title to securities in exchange for a sum of money, assuming, at the moment the arrangement is made, the obligation of purchasing from the counterpart title to securities of the same type and characteristics, the same day or at a later date without at any time exceeding the term of one (1) year and at a pre-determined price or amount.

(h) Investment Securities

1. Classification

The investments are classified as “trading”, “available for sale” and “held to maturity”.

Trading Securities

Trading investments are those acquired mainly for obtaining profits from fluctuations in short-term prices and are accounted for at fair value.

Held to Maturity

Investments “held to maturity” are debt securities acquired with the stated purpose an legal, contractual, financial and operarational capacity to hold them until maturity, and are measured at amortized cost. They may not be used for liquidity operations unless they are mandatory investments entered into on the primary market and provided that the counterparty for the operation is the Colombian Central Bank, the General Treasury Direction of Colombia, institutions overseen by the Superintendency of Finance or, in exceptional cases, as determined by the Superintendency of Finance.

Available for Sale

These are the investments which do not fall into either of the other two classifications, for which the investor has the stated intention and legal, contractual, financial, and operational capacity to hold them for at least one year from the date of classification.

This classification covers equity investments with low exchange turnover or which are unquoted and those held as parent or controlling stockholder of the issuer. There is no one-year minimum holding period required for sale.

F-17

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

2. Recognition

Investments are recorded initially at their acquisition cost. Subsequent measurement depends on the classification:

2.1. Debt Securities

Debt securities are valued daily and the result is recorded daily. The Bank determines the market value of trading debt securities and available for sale debt securities by using the prices, reference rates and margins that the Infoval (entity created as provider market prices by Bolsa de Valores de Colombia, Stock Exchange) calculates and publishes daily.

Investments in debt securities held to maturity are accounted for at amortized cost through measure based on internal rate of return calculated on the purchase date.

2.2 Equity Securities

Equity investments are recorded based on the level of exchange volume at the time of valuation, as follows:

•

High-volume: they are recorded based on the daily weighted average trading price published by Infoval.

•

Medium-volume: they are recorded based on the average price published by the stock exchange, being the weighted average trading price on the last five days on which securities are traded.

•

Low volume and unquoted: They are recorded under the intrinsic value method, through investor’s equity share value increases or decreases calculated based on the most recent audited financial statements that are not older than three months from the valuation date, or more recent statements, if available.

2.3 Securities Denominated in Foreign Currency or in UVR

Foreign exchange gains or losses resulting from investment securities conversion are recorded as net foreign exchange in the consolidated statements of operations.

3. Recording

Investments are measured depending on the classification and must be recorded initially at their purchase cost. The subsequent measurement is recorded as follow:

F-18

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

3.1 Trading Investments

The difference between current and previous fair value is adjusted to the value of the investment and is recorded in the consolidated statement of operations.

3.2 Investments Held to Maturity

Investments held to maturity are accounted for at historical cost plus accrued interest using the effective interest rate method. The effective interest rate is the internal rate of return calculated at the time of purchase of investment.

Interest accruals are recorded as interest income on investment securities.

3.3 Investments Available for Sale

3.3.1 Debt Securities

Changes in fair value are accounted for as decrease or increase of investment and are excluded from earnings and reported in other comprehensive income until realized. Changes in present value based on internal return rate are accounted for as earnings.

3.3.2 Equity Investments

Changes to equity investments are recorded in accordance with the investment trading volume, as follows:

3.3.2.1 Investments in Securities with Low Volume or Unquoted Securities

If the value of the investment that is updated with the investor’s stake exceeds the recorded value of the investment, the difference primarily affects the provision or the devaluation up until it has been used up and any excess will be recorded as a valuation surplus by making a contra entry to the asset appreciation account.

If the value of the investment that is updated with the investor’s stake is less than the recorded value of the investment, the difference primarily affects the investment’s valuation surplus until it has been used up and any excess will be recorded as a devaluation of the respective investment in equity and as a balancing entry to the asset devaluation account.

When dividends or earnings are distributed in kind, including those resulting from the capitalization of the equity revaluation account, the portion that was accounted for as valuation surplus should be recorded as income with a charge against the investment, and said valuation surplus should be reversed. When dividends or earnings are distributed in cash, the amount recorded in valuation surplus should be accounted for as income, that valuation surplus should be reversed, and the dividend excess amount should be recorded as a lesser value of the investment.

F-19

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

3.3.2.2 Investment in Securities with High or Medium Volume

The update of the market value of these securities is recorded as unrealized gains or losses on investments, within the equity accounts, crediting or debiting the investment securities.

Dividends or profits distributed in kind or in cash, including those from capitalizing the equity revaluation account, must be recorded as dividend income up to the amount corresponding to the investor over profits or equity revaluation that the issuer has recorded since the investment acquisition date, charged to accounts receivable.

4. Impairment test

The prices of trading and available for sale debt securities that do not have fair value, those classified as held to maturity and the price for equity securities with low or minimum volume or that are unquoted must be adjusted on each valuation date, based on their credit risk classification.

Debt securities issued or guaranteed by the Republic of Colombia or the Colombian Guarantee Fund for Financial Institutions (“Fogafin”) or issued by the Central Bank are not subject to impairment analisys.

4.1 Securities Issued Abroad or with External Ranking

Securities that are rated by a rating firm acknowledged by the Superintendency of Finance or securities issued by entities that are rated by those rating firms cannot be recorded for an amount that exceeds the following percentages of their nominal value, net of amortization as of the valuation date:

Long Term

Max. Amount

Short Term

Max. Amount

Ranking

BB+, BB, BB-

Ninety (90

)

Ninety (90

)

B+, B, B-

Seventy (70

)

Fifty (50

)

CCC

Fifty (50

)

5 and 6

Zero (0

)

DD, EE

Zero (0

)

F-20

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Impairment of investments classified as held to maturity, with a determinable fair value, are recorded for the difference between the carrying value and such fair value.

4.2 Securities from Issuances or Issuers without any External credit and Equity Securities

These securities are rated and classified according to the methodology defined by the Bank. The securities are categorized as “A” except when there is a risk associated to them, in which are rated from category B to E. The maximum value, as defined by the Superintendency of Finance, at which these investments are recorded, according to their category is:


	*Max. Registered*
*Category*	*Amount %*⁽¹⁾	*Investment Characteristics*
B Acceptable risk, greater than normal	Eighty (80)	Present factors of uncertainty that could affect the capacity to continue adequately fulfilling debt service and weaknesses that could affect their financial situation.

C Appreciable risk	Sixty (60)	Present medium-high probabilities of non-fulfillment of timely payments of capital and interest in their financial situation that may compromise the recovery of the investment.

D Significant risk	Forty (40)	Present non-fulfillment of agreed terms of the security and material deficiencies in their financial situation, the probability of recovering the investment is highly doubtful.

E Unrecoverable	Zero (0)	Recovery highly improbable.


(1)		Based on the net nominal amount as of the valuation date for debt securities or the acquisition cost, net of allowances for equity securities.

F-21

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(i) Loans and Financial Lease

Loans and financial lease are recorded at their outstanding principal, net of any unearned income. The group grants mortgage, commercial, consumer and small business loans to customers. A substantial portion of the loan portfolio is represented by commercial loans throughout Colombia.

The Bank has securitized performing housing loans indexed to UVR’s and at a fixed rate. The difference between the book value of the securitized portfolio and the value received is recorded in the results for the year at the moment the operation is carried out.

Suspension of Accruals

The Superintendency of Finance established that interest, income for UVR, lease payments and other items of income cease to be accrued in the statement of operations and begin to be recorded in memorandum accounts until effective payment is collected, after a loan is in arrears for more than 2 months for mortgage and consumer loans and 3 months for commercial loans. However, the Bank adopted a policy, in which all loans of any type, with the exception of mortgage loans that are more than 30 days past due, cease to accumulate interest on the statement of operations and instead are recorded in the memorandum accounts until such time the client proceeds with their payment. For those interests the Bank has recorded allowance for 100%, since the suspension of accruals.

Evaluation by credit risk categories

The Bank analyzes on an ongoing basis the credit risk to which its loan portfolio is exposed considering the terms of the corresponding obligations as well as the level of risk associated with the borrower. This risk evaluation is based on information relating to the historical performance data, the particular characteristics of the borrower, collaterals, debt service with other entities, macroeconomic factors, financial information, etc. For consumer, mortgage and small business loans analysis are performed in basis of the past due days of the loan.

For commercial loans, following minimum credit risk classifications are assigned, according to the financial situation of the debtor and/or the past due days of the obligation; additionally all significant counterparty relationships as well as loans under special supervision are reviewed in detail every six months:


*Category*		*Qualitative factors*
A —Normal Risk		Loans and financial leases in this category are appropriately serviced. The debtor’s financial statements or its projected cash flows, as well as all other credit information available to the Bank, reflect adequate paying capacity.

B —Acceptable Risk, Above Normal		Loans and financial leases in this category are acceptably serviced and guaranty protected, but there are weaknesses which may potentially affect, on a transitory or permanent basis, the debtor’s paying capacity or its projected cash flows, to the extent that, if not timely corrected, would affect the normal collection of credit or contracts.

F-22

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


*Category*		*Qualitative factors*
C —Appreciable Risk		Loans and financial leases in this category represent insufficiencies in the debtors’ paying capacity or in the project’s cash flow, which may compromise the normal collection of the obligations.

D —Significant Risk		Loans and financial leases in this category are deemed uncollectible. They are considered default loans.

E — Unreciveravility

Allowance for loan losses

Allowance for loan losses are established based on the parameters issued by the Superintendency of Finance.

The Bank adopted the Reference Models Commercial and Consumer, MRC and MRCO, respectively, issued by the Superintendency of Finance for its commercial and consumer loans, respectively, whose application became mandatory as of July 2007, for commercial loans and as of July 2008, for consumer loans. Those models were not applied for Banagrícola subsidiary, duly approved by Superintendence of Finance, which adopted the guidance effective to December 31, 2006.

According to the reference models the allowance for loan losses is stated through the calculation of the Expected Loss:

Expected Loss= [Probability of default] x [Exposition to default] x [Loss given default]

Probability of Default (PD)

This corresponds to the probability of the debtors within a specific portfolio of commercial loans or segment and classification for consumer loans, defaulting on their obligations in a period of twelve (12) months. The probability of default is defined by Superintendency of Finance.

Exposition to default

With regard to the MRC and MRCO Reference Models, the exposure value of an asset is understood to mean the current balance of the principal, interest, interest receivable accounts and other receivables regarding consumer and retail loan obligations.

The Loss Given Default (LGD)

This is defined as the economic deterioration sustained by a company should any of the events of default. The LGD for debtors classified in the default category depends on the type of collateral and would suffer a gradual increase in the provision according to the amount of days lapsing after being classified in said category. For this purpose 100% of the collateral value is considered to cover the principal amount.

In 2007 the Bank applied the minimal criteria for LGD defined by Superintendency of Finance, for type of collateral, past due days after default and rates. In 2008 the LGD rates used were the same defined by Superintendence of Finance, but the minimal past due days after default became more exigent in order to have a better coverage of the default portfolio.

F-23

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The impact caused in June 2008 upon applying the Reference Model on the Bank’s Consumer Loan portfolio was to increase individual provisions by Ps 33,030 with respect to the methodology used during the previous year, which required provisions to be maintained based on minimum percentages applied with regard to different portfolio ratings; this increase was partially covered with the general provision which was reversed in the amount of Ps 37,000.

The Bank also sets up other provisions for specific commercial clients besides the minimum provisions required by the Superintendency of Finance bearing in mind specific risk factors affecting clients, including: macroeconomic or industry and any other factors that could indicate early impairment. At December 31, 2008, additional provisions were recorded totaling Ps 186,866 (2007 — Ps 79,420).

For mortgage and small business loans in compliance with instructions issued by the Superintendency of Finance, the Bank must maintain at all times individual provisions corresponding to minimum percentages which might differ if the loan has any collateral (up to seventy per cent 70% of the collateral value is considered, to cover the principal). There is no reference models issued for this type of loans.

Similar to the commercial and consumer portfolio, for mortgage and small business, the Bank has adopted a special policy of maintaining an additional provision, for loans pertaining to the credit risk categories C, D and E, regardless of the value of the collateral.

Valuation of mortgage collateral for allowance purposes

The value of the collateral posted by the Bank is established based on parameters issued by the Superintendency of Finance:

In the case of mortgage collateral consisting of property to be used for housing purposes, the market value shall be the initial appraisal value of the collateral duly adjusted according to the housing price index published by the National Planning Department. The value shall be updated at least on a quarterly basis, using the aforementioned index.

In the case of mortgage collateral consisting of property different than housing, the market value shall be the appraisal value of the property given over in guarantee when the loan was issued or the new appraisal value as subsequently calculated on a periodic basis.

General Allowance

The Bank sets up a general provision corresponding to one per cent (1%) of the total value of mortgage and small business loans.

By virtue of applying the MRCO and MRC Reference Models during the years 2008 and 2007, current rules and regulations allowed for the general provision pertaining to retail and commercial loans issued up to the moment said models were applied, to be assigned as part of the individual provisions that were initially required.

The general provision, however, may be increased if approved by the general shareholders meeting, and is updated on a monthly basis according to the increases or decreases in the loan portfolio.

In the case of companies belonging to Banagricola and its subsidiaries, the instructions prior to External Circular 039 of 2007 were applied, that is to say, a general provision was set up corresponding to a minimum of one per cent (1%) on the total amount of the gross loan portfolio.

F-24

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Charge-Offs

Biannually in June and December, the Bank writes off debtors classified as “unrecoverable”, based on the following criteria: Provision of 100% of all amounts past due (capital, interest and other items); 180 days past due for consumer and small business loans, 360 days past due for commercial loans, if they are not restructured, and 1620 days past due for mortgage loans.

The recovery of charged-off loans is accounted for as income in the Consolidated Statements of Operations.

Restructured Loans

Loans are restructured when the Bank, because of economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

For the loans restructured as indicated above or using other restructuring methods which include the capitalization of interest recorded in memorandum accounts or balances written off, including capital, interest and other items, the amounts capitalized are recorded as deferred income in other liabilities and they are amortized in proportion to the amounts actually collected and the income recorded on cash basis.

(j) Derivatives

Derivatives

The Bank records the amount of agreements between two or more parties to purchase or sell assets at a future date, whose compliance or settlement is agreed upon more than two business days following the operation initiation date, in order to provide or obtain hedging, in the terms defined by competent authorities. Therefore, these agreements create reciprocal and unconditional rights and obligations. Derivatives are recorded as assets and liabilities by at fair value on net basis including derivatives which fair value is a liability. Operations are formalized by contract or letter of intent. The Bank has contracts for forwards, for options, swaps and futures.

Currency derivatives are designed to cover exchange exposure risks on structural or traded open positions by setting up a reciprocal operation or synthetic coverage for up to the maximum exposures allowed by the regulation and control agencies.

Changes in the fair value of such contracts are recognized in the consolidated statement of operations.

The difference between rights and obligations is recorded daily as income or expense from forward contracts in foreign currency, as the case may be.

Forward Contracts

Up to December 31, 2007, the fair values of forward contracts were determined based on interest rate differentials obtained from the market between the currencies therein involved.

As of December 31, 2008, the fair value is determined lossed on forward point quotes (PIPS, stated in Colombian pesos per US dollar) as recorded each day at the close of the forward market, and as published by active market brokers and which represent quoted starting prices.

F-25

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Swap Contracts

The fair value of swap contracts is determined using the discounted cash flow method at the interest rates applicable for each flow. Interest rate curves are drawn up for each operation based on information sourced from Bloomberg and Infoval.

Option Contracts

Options are appraised as stipulated by the Superintendency of Finance using the Black-Scholes/Merton method which is the model commonly used on an international level.

Spot Transactions

These are operations that are recorded with a term for their respective clearance equal to the date on which the operation is recorded or up to three (3) business days beginning on the day after the operation was conducted.

(k) Foreclosed Assets

The Bank records the assets received in guarantee of credits unpaid using the following criteria:

•

The initial carrying value recorded is the value specified in the court award or the one agreed upon by the debtors.

•

When foreclosed assets are not in conditions to be immediately disposed of, their cost increases with all those expenses required in order to get such assets ready for sale.

•

If the proceeds of the sale are more than the settlement value agreed upon with the debtor, that difference is recorded as accounts payable to the debtor. If the proceeds of sale are expected to be insufficient to cover the outstanding debt, the difference must be immediately recorded on the statement of operations as a non-operating expense.

•

Moveable assets received in payment corresponding to investment securities are valued by applying the criteria indicated in this note under letter (g) Investments, but taking into account provision requirements for the periods referred to below.

•

The profits obtained from a credit sale are deferred over the life of the credit, and are realized as the obligation is paid off.

•

When the commercial value of the property is lower than its book value, a provision is recorded for the difference.

•

Reappraisals of foreclosed assets are recorded as memorandum accounts.

F-26

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Legal term for the sale of Foreclosed Assets

Institutions must sell the foreclosed assets, in a period no later than two years after the foreclosing date, except when upon the board of directors’ request, the Superintendency of Finance extends the term. However, in any event the extension may not exceed an additional period of two years.

Provisions for Foreclosed Assets

The Superintendency of Finance requires a provision equal to 30% for real estate, 35% per other foreclosed assets of the carrying value of the asset at the time of receipt which must be made in proportional monthly installments within the first year following its receipt. This provision will increase an additional 30% and 35%, respectively in proportional monthly installments within the second year following receipt of the asset. Once the legal term for sale has expired without authorization to extend, the provision must be 80% and 100%, respectively of the value upon receipt. In case the term extension is granted, the remaining 20% and 0%, respectively of the provision may be constituted within said term.

Also, it is the Bank’s policy, in the case of foreclosed assets that remain for more than 5 years in the Bank’s possession to increase the provision up to 100% of its value in books. Foreclosed assets under sale agreement are excluded from this practice.

(l) Loan Fees

Loan origination and commitment fees, as well as direct loan origination and commitment costs, are recorded in the consolidated statement of operations as incurred.

(m) Property, Plant and Equipment

This account records tangible assets acquired or leased assets, constructed or in the process of importation or construction and permanently used in the course of the Bank’s business which have a useful life exceeding one year. Property and equipment is recorded at the cost of acquisition, including direct and indirect costs and expenses incurred up to the time that the asset is in a usable condition and the inflation adjustment recorded until 2001.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. The annual depreciation rates for each asset item are:


Buildings	5	%
Equipment, furniture and fittings	10	%
Computer equipment	20	%
Vehicles	20	%
Monitors, laptops and CPU’s	33	%

The individual net book value of buildings (cost less accumulated depreciation) is compared against fair values taken from independent professional appraisals. If the fair value is higher, the difference is recorded as a “Reappraisal of Assets” with credit on the “Surplus for Reappraisal of Assets” in the Stockholders’ Equity; otherwise, the difference is charged to expenses as provision for other assets of the period. Appraisals must be made at least every three years.

F-27

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(n) Prepaid Expenses, Deferred Charges

Amortization of prepaid expenses and deferred charges is calculated from the date which they contribute to the generation of income, based on the following factors:

Prepaid Expenses

Prepaid expenses include mainly the following monetary items: interest, amortized monthly during the period prepaid; insurance, over the life of the policy; rent, over the period prepaid; equipment maintenance, over the life of the contract; and other prepaid expenses over the period in which services are received or costs and expenses are incurred.

Deferred Charges

	•		Software is amortized over a maximum of three years.

	•		Stationery is expensed when consumed.

	•		The discount on the issuing of long-term debt is amortized over the term of the redemption. of these same and on straight-line basis.

	•		Contributions and affiliations are amortized over the period prepaid.

The Bank does not record deferred charges corresponding to studies and projects, institutional advertising and publicity. Disbursements made in connection with these items are recorded directly on the statement of operations as administrative and other expenses.

(o) Intangible Assets

Goodwill

The value of the goodwill acquired shall be determined once the Bank effectively obtains control over the acquired entity by the difference between the price paid and the book value of the net assets acquired. Goodwill must be allocated to each of the business segments, which must be fully identified in the records.

Up to December 31, 2007 goodwill was amortized using the exponential method. Under this method the charge for amortization is increased exponentially every year.

Since January, 2008, the straight-line method has been used to amortized goodwill, since the Bank considers this method provides a better association between the revenues and expenses corresponding to this investment.

The effect on amortization at December 31, 2008 as a result of using this new method is broken down as follows:


Amortization using the Straight-Line Method	$	43,823
Amortization using the Exponential Method		22,269

Greater amortized balance	$	21,554

Goodwill allocated to different business segments is tested for impairment annually, comparing fair value with book value of the business segments.

In the case of goodwill acquired by the Bank and its subsidiaries before the date when the new regulation came into full force, the amortization term was maintained in five years and ten years and three years for goodwill recorded in the subsidiaries Banagrícola S.A. and Inversiones Financieras Banagrícola S.A., respectively.

F-28

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(p) Operating Leases

In the normal course of the operations the subsidiaries Leasing Bancolombia S.A. and Renting Colombia S.A. lease different assets under operating leasing arrangements.These assets are recorded at cost.

Depreciation for these assets is applied over either the asset’s useful life or the term of the leasing agreement, whichever period is the shortest.

General provision of 1% of the book value of these assets shall be recorded.

Leased assets by the subsidiary Renting Colombia S.A. are mainly vehicles which depreciation is calculated on a straight-line basis in a five years term, less their residual values.

Since 2008, the net book value of these assets established by homogeneus groups is compared against their relative fair values based on the present value of future rental payments and their residual values discounted by the internal rate return established in the contract. If the fair value is higher, the difference is recorded as a “Reappraisal of Assets” in the balance sheet with the corresponding credit recorded in “Surplus for Reappraisal of Assets” in the Stockholders’ Equity; otherwise, the difference is charged to expenses as provision for other assets.

This treatment is different from that applied during the previous year when the methodology of technical appraisals was used. The change in the accounting estimate reflected a more reasonable value given the conditions of the business. Such change increased the Stockholders’ Equity by Ps 87,927.

(q) Reappraisals

This account records reappraisals of property and equipment, real state, available for sale investments with low exchange volume or which are unquoted.

Valuations are subject to the accounting policy for each type of asset.

(r) Deferred Income

This account records deferred income and income received in advance in the course of business. Amounts recorded in this account are amortized over the period to which they relate or in which the services are rendered or the money is collected in the case of profits obtained from the sale of goods sold on credit.

The capitalization of yields on restructured loans that have been recorded in memorandum accounts or as charge — off loan balances are included in this category as indicated in Note 2 (h) Loans and Financial Lease.

F-29

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(s) Deferred Tax

Deferred income taxes are generally recognized for timing differences for commercial and manufacturing subsidiaries. For financial companies, the Superintendency of Finance has restricted inclusion of timing differences related to the amortization of fiscal losses and the excess of presumed income over ordinary income as a deferred tax asset.

(t) Retirement Pensions

The Bank applies the provisions in Decree 1517 of 1998, which requires a distribution of charges to amortize the actuarial calculation by 2010. As of December 31, 2008, the Bank has amortized the total actuarial liability.

(u) Estimated labor liabilities

Estimated labor liabilities are recorded based on applicable legislation and current labor agreements. Since 2008, the Bank recorded a provision for seniority and service bonuses for a total of Ps 35,350.

(v) Other Accrued Expenses

The Bank records provisions to cover estimated liabilities, such as fines, sanctions, litigations and lawsuits, provided that:

	•		The Bank has acquired a right, and therefore has an obligation; and

	•		The provision is probable, justifiable, quantifiable and verifiable.

This account also records estimates for taxes and labor expenses.

(w) Recognizing financial income, costs and expenses

Financial income and expenses are recognized on an accrual basis.

The loans origination costs are recorded on the income accounts when these are incurred and the corresponding revenues when these are collected. The Bank does not implement a policy of collecting commissions on the origination of the loans, and those that it collects from credit cards are recorded on the income accounts using the accrual method.

All profits obtained from credit sales of foreclosed assets are recorded as revenues when the value of the credit is collected.

F-30

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(x) Memorandum Accounts

Contingent accounts record operations in which the Bank acquires rights or assumes obligations conditioned by possible or remotes future events. Also include financial income accrued since the moment in the balance sheet cease to accrue on the income accounts with regard to the loan portfolio and financial leasing operations.

Contingencies including fines, sanctions, litigation and lawsuits are evaluated by the Legal Department and its legal counsel. Estimating loss contingencies necessarily implies exercising judgment and is therefore subject to opinion. In estimating loss contingencies regarding pending legal proceedings against the Bank, legal counsel evaluates, among other aspects, the merits of the case, the case law of the courts in question and the current status of the individual proceedings.

If this evaluation reveals the probability that a material loss has occurred and the amount of the liability can be estimated, then this is duly recorded in the financial statements. If the evaluation reveals that a potential loss is not probable however the outcome either is uncertain or probable but the amount of the loss cannot be estimated, then the nature of the corresponding contingency is disclosed in a note to the financial statements along with the probable estimated range of the loss. Loss contingencies that are estimated as being remote are, generally speaking, not disclosed.

Memorandum accounts record third party operations whose nature does not affect the financial situation of the Bank. Contingent and memorandum accounts are included in the caption memorandum accounts of the balance sheet. This also includes tax memorandum accounts that record figures for drawing up tax returns, all those internal control or management information accounts and reciprocal transactions carried out between the Parent Company and its Subsidiaries.

(y) Net Income per Share

Under Colombian GAAP to determine net income per share, the Bank uses the weighted average of Preferred and Common Shares outstanding during the accounting period. During years ended on December 31, 2008, 2007 and 2006 the Bank’s weighted average of Preferred and Common Shares outstanding was 787,827,003, 758,313,771 and 727,827,005, respectively.

(z) Insurance reserves

Mathematical reserves

Mathematical reserves on long-term individual life insurance are calculated based on mortality tables, technical interest and actuarial formulas for each type of insurance. In calculating these reserves the mean reserve and deferred premiums are deducted.

The technical rate of interest is an interest rate agreed upon with the insured party as part of the policy, the purpose of which is to recognize a minimum rate of return on the reserves held, which are funds in favor of the insured party. This rate is used for establishing tariffs so that the price to be paid for the insurance covers said rate of return.

This rate does not directly relate to prevailing market conditions with regard to bank borrowing rates, even though these are considered when establishing these rates, thereby ensuring that our life insurance products can compete with other savings plans. This is called a “technical” rate of interest because it forms part of a technical note and not a market rate.

Deferred premiums

In the case of short-duration contracts, the deferred premiums are calculated based on a percentage of the net retained premium for each type insurance contract. .

F-31

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Reserves for incurred but not reported claims

The reserve for incurred but not reported claims (“IBNR”) is calculated as the average value of their payments made over the last three (3) years on claims not reported for prior years.

Underwriter costs

Underwriter costs on premimums are recorded when are incurred.

Salvage and recovery

This item records all those revenues received from salvaging goods subject to claims for which the insurance company has paid its clients the corresponding indemnities.

(aa) Business Combination

Upon a business combination, the Colombian purchase method of accounting requires that (i) the purchase price be allocated to the acquired assets and liabilities on the basis of their book value, (ii) the statement of income of the acquiring company for the period in which a business combination occurs include the income of the acquired company as if the acquisition had occurred on the first day of the reporting period and (iii) the costs directly related to the purchase business combination not be considered as a cost of the acquisition, but deferred and amortized over a reasonable period as determined by management.

The pooling of interest method of accounting requires the aggregate of the shareholder’s equity of the entities included in the business.

The Conavi and Corfinsura acquisition was accounted for using the pooling of interests method in accordance with the methodology suggested by the Superintendency of Finance. The Sufinanciamiento, Comercia (now Factoring Bancolombia), Sutecnología and Banagrícola acquisition was accounted for using the purchase method under Colombian GAAP.

(ab) Reclassifications

The Bank has changed certain accounting policies during the year 2008 in order to provide more relevant information. The changes resulted in reclassification in the statement of operations for the year 2007 for comparative purposes. No such changes were made for 2006 because they were not material for comparative purposes. The changes in accounting policies are as follows:

	•		Certain service fees were reclassified from commissions from banking services to credit and debit card annual fees and gains on sale of mortgage loans.

	•		Certain securitization fees classified in administrative and other expenses and certain expenses on sale of mortgage loan classified in other expenses (Non-operating income) were reclassified to gains on sale of mortgage loans.

	•		The results relating to the residual interest on securitizations were reclassified from other income (Non-operating income) to gains on sale of mortgage loans.

(3) Transactions in Foreign Currency

The Colombian Superintendency of Finance defines limits on the amount of foreign-currency assets and liabilities. As of December 31, 2007 and 2008, the Bank was in compliance with these limits.

Substantially all foreign currency holdings are in U.S. Dollars. The consolidated foreign currency assets and liabilities, converted to US$, of the Bank at December 31, 2007 and 2008 were as follows:


	*2007*			*2008*

*Assets:*
Cash and due from banks	US$	709,099		US$	644,166
Overnight funds		746,919			216,416
Investment securities		802,648			778,977
Loans, net		5,116,185			5,458,269
Customers’ acceptances and derivatives		(659,910	)		(291,705	)
Accounts receivable		91,158			94,319
Property, Plant and equipment		68,392			73,337
Other assets		667,486			763,870

Total foreign currency assets	US$	7,541,977		US$	7,737,649

F-32

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2007*		*2008*

*Liabilities:*
Deposits		4,823,721		4,908,454
Bank acceptances outstanding		20,971		25,377
Borrowings from development and other domestic banks		279,768		294,107
Interbank borrowings		747,787		925,878
Other liabilities		1,321,228		1,337,292

Total foreign currency liabilities		7,193,475		7,491,108

Net foreign currency asset position	US$	348,502	US$	246,541

At December 31, 2007 and 2008, the Bank (unconsolidated) net foreign currency asset position amounted to US$ 668,030 and US$ 165,873, respectively; which meet the legal requirements.

At December 31, 2007 and 2008, foreign currency of foreign subsidiaries represents 82.63% and 83.19%, respectively, of the consolidated assets in foreign currency and 80.45% and 78.65%, respectively, of the consolidated liabilities in foreign currency.

(4) Cash and Due From Banks

The balances of cash and due from banks consisted of the following:


	*2007*			*2008*

*Colombian peso denominated*:
Cash	Ps	1,554,035		Ps	1,933,033
Due from the Colombian Central Bank		521,113			415,617
Due from domestic banks		96,016			63,843
Remittances of domestic negotiated checks in transit		19,019			13,305
Allowance for cash and due from banks		(229	)		(116	)

Total local currency		2,189,954			2,425,682


*Foreign currency:*
Cash		215,124			268,442
Due from the Colombian and El Salvador Central Bank		564,779			658,022
Due from foreign banks		546,012			449,868
Remittances of foreign negotiated checks in transit		102,750			68,978
Allowance for cash and due from banks		—			(65	)

Total foreign currency		1,428,665			1,445,245


Total cash and due from banks	Ps	3,618,619		Ps	3,870,927

The Bank had restricted amounts in cash and time deposits with the Colombian Central Bank amounted toPs 2,634,108 andPs 3,628,511 at December 31, 2007 and 2008, respectively. The restriction, which is prescribed by the Colombian Central Bank, is based on a percentage of deposits maintained at the Bank by its customers.

F-33

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(5) Investment Securities

Investment in trading securities consisted of the following:


	*2007*			*2008*

Trading Securities

*Colombian peso denominated:*
Colombian government	Ps	938,768		Ps	1,654,423
Colombian Central Bank		19			1
Government entities		368,419			165,944
Financial institutions		338,693			489,731
Corporate bonds		67,814			50,651
Equity securities⁽¹⁾		69,718			305,606

Total local currency denominated		1,783,431			2,666,356


*Foreign currency denominated:*
Colombian government		125,868			3,901
Foreign government		6,087			494
Government entities		12,876			—
Financial institutions		49,442			19,815
Corporate bonds		8,026			604
Equity securities⁽¹⁾		23,407			25,792

Total foreign currency denominated		225,706			50,606

Total trading securities		2,009,137			2,716,962

Allowance for trading securities		(8,023	)		(8,885	)

Total trading securities, net	Ps	2,001,114		Ps	2,708,077


(1)		Equity securities include participation in collective portfolios and funds.

The foreign currency denominated securities issued or secured by the Colombian government are bonds denominated in U.S. Dollars, purchased at par value, with annual average interest rates of 5.73% and 5.41% for 2007 and 2008, respectively.

As of December 31, 2007 and 2008, the Bank had pledged investments securities amounting toPs 1,277,453 andPs 1,150,798, respectively as collateral to secure lines of credit at international banks, domestic development banks and other financial institutions.

The Bank soldPs 218,683,534 andPs 312,587,379 of investment securities during the years ended December 31, 2007 and 2008, respectively.

Investment available for sale securities consisted of the following:


Available for sale - Debt Securities	*2007*		*2008*

*Colombian peso denominated:*
Colombian government	Ps	549,007	Ps	484,037
Government entities		29,729		20,759
Financial institutions		660,622		661,618
Other		26,185		15,531

Total local currency denominated		1,265,543		1,181,945

F-34

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


Available for sale - Debt Securities	*2007*		*2008*

*Foreign currency denominated:*
Colombian government		82,408		55,041
El Salvador Central Bank		39,658		26,537
Government entities		156,364		142,936
Foreign government		379,467		594,129
Financial institutions		31,153		—

Total foreign currency denominated		689,050		818,643

Total Available for sale — Debt securities		1,954,593		2,000,588


Allowance for available for sale securities		—		(224	)

Total available for sale securities, net	Ps	1,954,593	Ps	2,000,364


	*Participation*						*Participation*
	*percentage at*						*percentage at*
Available for sale — equity securities	*December 31, 2007*			*2007*			*December 31, 2008*			*2008*

Todo Uno Services		47.04	%	Ps	47,998			47.04	%	Ps	53,449
Bolsa de Valores de Colombia		5.87	%		8,578			10.00	%		19,784
Sociedad Administradora de Fondos de Pensiones y de Cesantías Protección S.A.		23.44	%		19,481			23.44	%		19,481
Titularizadora Colombiana S.A.		21.25	%		17,308			21.25	%		17,308
Promotora La Alborada⁽¹⁾		25.81	%		14,001			0.00	%		—
Metrotel Redes		28.42	%		10,568			28.42	%		10,568
Concesiones Urbanas S.A.		33.33	%		8,449			33.33	%		8,450
Urbanización Chicó Oriental No. 2 Ltda.		86.45	%		7,848			86.45	%		7,848
Depósito Centralizado de Valores de Colombia Deceval S.A.		13.58	%		4,209			15.78	%		4,738
Cadenalco S.A. Titularización		3.33	%		4,378			3.33	%		4,555
Redeban Red Multicolor		20.36	%		4,396			20.36	%		4,396
VISA Inc⁽²⁾		0.00	%		—			0.01	%		4,377
Concesiones CCFC S.A.		25.50	%		4,358			25.50	%		4,358
Banco Latinoamericano de exportaciones BLADEX S.A.		0.27	%		2,618			0.27	%		2,813
Other					6,432						10,338

Total equity securities					160,622						172,463

Allowance for equity securities					(53,717	)					(45,254	)

Total equity securities, net				Ps	106,905					Ps	127,209


(1)		These securities were sold during 2008.

(2)		During 2007, Visa International Service Association, Visa U.S.A. Inc., Visa Europe Limited and Visa Canada Association, developed a restructuring program, in consequence, Visa International recognized economic rights to Bancolombia forPs 4,377.

F-35

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Dividends received from equity investments amounted toPs 21,199,Ps 18,968 andPs 39,586 for the years ended December 31, 2006, 2007 and 2008, respectively.

The equity investments were classified as Category “A”, except for the following:

2007

2008

Valuation

Category

allowance

Category

allowance

Todo Uno Services

34,849

36,469

Urbanización Chicó Oriental No. 2 Ltda.

7,848

Urbanización Sierras del Chicó Ltda.

203

Industria Colombo Andina Inca S.A.

300

Sociedad Promotora Siderúrgica Colombiana E.U.

427

Promotora La Alborada

9,897

—

Oikos Títulos de Inversión en Circulación

186

—

Others

53,717

45,254

Investment in held to maturity securities consisted of the following:


Held to Maturity Securities	*2007*			*2008*

*Colombian peso denominated:*
Colombian government	Ps	525,368		Ps	495,346
Colombian Central Bank		145			—
Government entities		47,765			422,427
Financial institutions		423,056			706,356
Corporate bonds		41,710			27,494

Total Colombian-Peso denominated		1,038,044			1,651,623


*Foreign currency denominated:*
El Salvador Central Bank		546,552			643,730
Government entities		853			1,581
Foreign government		64,929			93,157
Financial institutions		72,374			49,310
Other		2,694			15,043

Total foreign currency denominated		687,402			802,821

		1,725,446			2,454,444

Allowance for Maturity securities		(13,807	)		(11,818	)

Total Held to Maturity securities, net	Ps	1,711,639		Ps	2,442,626

F-36

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The maturity and yield of securities issued by Colombian Government Peso-denominated, as of December 31, 2008, were as follow:


*Maturity*	*Balance*		*Yield*⁽¹⁾

One year or less	Ps	711,301		9.47	%
After one year through five years		1,475,623		6.39	%
After five years through ten years		377,114		2.63	%
After ten years		69,768		7.42	%

Total	Ps	2,633,806		6.71	%


(1)		Calculated using internal return rate (IRR) as of December 31, 2008.

(6) Loans and Financial Leases

Loan portfolio and financial lease contracts were classified, in accordance with the provisions of the Superintendency of Finance, as follow:

December 31, 2007


*Classification*	*Mortgage*		*Commercial*		*Consumer*		*Small loan*		*Financial leases*		*Total*

“A” Normal Risk	Ps	2,729,470	Ps	22,060,695	Ps	6,056,276	Ps	114,274	Ps	4,436,788	Ps	35,397,503
“B” Acceptable Risk		78,228		677,279		225,934		4,065		149,516		1,135,022
“C” Appreciable Risk		35,067		157,559		81,695		2,047		23,717		300,085
“D” Significant Risk		13,793		380,711		123,025		1,328		85,177		604,034
“E” Unrecoverable		27,070		120,814		106,281		8,186		3,629		265,980

Total loans and financial leases	Ps	2,883,628	Ps	23,397,058	Ps	6,593,211	Ps	129,900	Ps	4,698,827	Ps	37,702,624

December 31, 2008


*Classification*	*Mortgage*		*Commercial*		*Consumer*		*Small loan*		*Financial leases*		*Total*

“A” Normal Risk	Ps	3,146,863	Ps	25,590,760	Ps	6,799,419	Ps	123,648	Ps	4,989,406	Ps	40,650,096
“B” Acceptable Risk		123,284		1,464,256		287,316		6,160		335,816		2,216,832
“C” Appreciable Risk		63,246		304,088		137,291		2,899		69,033		576,557
“D” Significant Risk		20,269		552,306		193,538		2,396		103,383		871,892
“E” Unrecoverable		37,664		157,321		115,085		8,019		9,104		327,193

Total loans and financial leases	Ps	3,391,326	Ps	28,068,731	Ps	7,532,649	Ps	143,122	Ps	5,506,742	Ps	44,642,570

F-37

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Promissory notes documenting loans amounting toPs 1,601,926 andPs 1,919,046 at December 31, 2007 and 2008, respectively, have been duly endorsed to development banks, as required by applicable laws.

The following table represents a summary of restructured loans:


	*2007*			*2008*

Ordinary restructurings	Ps	849,522		Ps	736,391
Extraordinary restructurings		1,265			—
Under law 550		72,519			79,980
Under law 617		151,883			133,007
Creditor agreement proceedings		4,092			1,959
Performance Agreement		1,165			918
Interest and other receivables items		16,164			16,224

Restructured loans		1,096,610			968,479

Allowances for loan losses		(211,779	)		(370,049	)

Restructured loans, net	Ps	884,831		Ps	598,430

(7) Allowance for Loans, Financial Leases and Accrued Interest Losses

The following table sets forth an analysis of the activity in the allowance for loans and financial leases losses:


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	705,882		Ps	834,183		Ps	1,457,151
Balance at beginning of period (Factoring Bancolombia)		5,625			—			—
Balace at beginning of period (Banagrícola’s subsidiaries)⁽¹⁾		—			147,357			—
Provision for loan losses		568,679			1,203,543			1,986,710
Charge-offs		(136,789	)		(186,273	)		(547,860	)
Effect of difference in exchange rate		(1,210	)		(25,441	)		45,604
Reversals of provisions		(308,004	)		(516,218	)		(807,245	)

Balance at end of year	Ps	834,183		Ps	1,457,151		Ps	2,134,360

Ratio of charge-offs to average outstanding loans		0.63	%		0.60	%		1.36	%


(1)		Includes allowance for loan losses of Banco Agrícola, Banco Agrícola (Panamá), Arrendadora Financiera, Credibac, Aseguradora Suiza Salvadoreña and Asesuisa Vida.

Recoveries of charged-offs loans are recorded separately in the consolidated statement of operations.

The following table sets forth the activity in the allowance for accrued interest losses:


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	8,655		Ps	11,644		Ps	33,303
Balance at beginning of period (Factoring Bancolombia)		481			—			—
Balance at beginning of period (Conavi, Corfinsura and subsidiaries)		—			—			—
Provision		14,825			35,543			58,721
Charge-offs		(4,126	)		(3,167	)		(12,782	)
Recoveries		(8,159	)		(10,507	)		(25,581	)
Effect of changes in exchange rate		(32	)		(210	)		662

Balance at end of year	Ps	11,644		Ps	33,303		Ps	54,323

F-38

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(8) Customers’ Acceptances and Derivatives

The Bank’s rights and commitments from derivatives operations were as follows:


	*2007*			*2008*

*Customer Acceptances*
Current	Ps	53,890		Ps	55,925
Overdue		1,319			1,010

Total		55,209			56,935


*Derivatives*
(Fair value of derivatives instruments)

*Spot Transactions, net*
Foreign exchange rights contracts bought		15,527			971
Foreign exchange rights contracts sold		10,575			6,880
Investment securities rights bought (local currency)		78,381			—
Investment securities rights sold (local currency)		67,322			—

Total rights		171,805			7,851


Foreign exchange commitments contracts bought		(15,433	)		(974	)
Foreign exchange commitments contracts sold		(10,656	)		(6,795	)
Investment securities commitments bought (local currency)		(77,898	)		—
Investment securities commitments sold (local currency)		(67,495	)		—

Total obligations		(171,482	)		(7,769	)

Total Spot Transactions, net		323			82


*Forward Contracts*
Foreign exchange rights contracts bought		3,211,826			3,590,438
Foreign exchange rights contracts sold		4,462,834			4,465,948
Investment securities rights bought (local currency)		643,016			—
Investment securities rights sold (local currency)		275,637			10,820
Other rights		300			8,927

Total rights		8,593,613			8,076,133


Foreign exchange commitments contracts bought		(3,243,867	)		(3,462,854	)
Foreign exchange commitments contracts sold		(4,399,430	)		(4,522,433	)
Investment securities commitments bought (local currency)		(643,308	)		—
Investment securities commitments sold (local currency)		(274,938	)		(13,045	)

Total obligations		(8,561,543	)		(7,998,332	)

Total⁽¹⁾		32,070			77,801


*Futures Contracts*
Foreign exchange rights contracts bought		30,117			42,824
Foreign exchange rights contracts sold		10,036			12,729
Investment securities rights bought (local currency)		863			2,276

F-39

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2007*				*2008*

Investment securities rights sold (local currency)		5,611				5,654
Other rights		599				7,682

Total rights		47,226				71,165


Foreign exchange commitments contracts bought		(30,117	)			(42,824	)
Foreign exchange commitments contracts sold		(10,036	)			(12,729	)
Investment securities commitments bought (local currency)		(863	)			(2,067	)
Investment securities commitments sold (local currency)		(5,611	)			(5,859	)
Other commitments		(603	)			(7,859	)

Total obligations		(47,230	)			(71,338	)

Total Future Contracts		(4	)			(173	)


*Swaps*
Foreign exchange right contracts		3,129,471				4,465,747
Interest rate rights contracts		155,589				422,005
Foreign exchange commitments contracts		(3,024,895	)			(4,338,883	)
Interest rate commitments contracts		(153,625	)			(399,395	)

Total Swaps		106,540				149,474


*Options*				��
Foreign exchange call options		(1,062	)			7,070
Foreign exchange put options		(141	)			(8,210	)
Caps		3,066				(10,521	)

Total Options		1,863				(11,661	)


Total customer acceptances and derivatives	Ps	196,001			Ps	272,458


(1)		Includes forward contracts known in Colombia as “operaciones carrusel”.

The Bank currently has an investment portfolio in local and foreign currencies that allows it to offer foreign exchange and interest rate coverage to its clients. By using derivatives, the Bank hedges exchange risk protects its foreign-currency investment portfolio. These derivatives help protect the Bank against exchange-rate fluctuation and increases the predictability of the Bank’s yield on foreign-currency investments.

The Bank’s derivatives policy is to maintain active and passive positions with clients with the intent to reduce interest rate and exchange rate risk as much as possible. Within the amount of credit granted to the Bank’s clients there is a portion for the management of derivatives. For this reason, the Bank never carries out any operation of this type unless the client has the capacity to obtain a credit from the Bank.

Under the rules of the Superintendency of Banking, Bancolombia’s derivatives portfolio is market to market daily. Unrealized gains and losses are expressed in the statement of operations.

For forwards contracts, the average cost of rights and commitments relating to the purchase of financial instruments is 5.73% with a maturity of 3 days and the average yield from rights and commitments relating to the sale of investment securities is 5.68% with a maturity of 4 days.

The average yield from rights and commitments relating to the sale of foreign currency is 4.19% annually with a maturity of 50 days. The average yield from rights and commitments relating to the purchase of foreign currency is (7.49%) annually with an average maturity of 33 days.

The rates and maturities indicated for forward contracts are the same as the futures contracts.

F-40

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(9) Accounts Receivable

Accounts receivable consisted of the following:


	*2007*⁽²⁾			*2008*⁽²⁾

Credit card compensation	Ps	275,765		Ps	258,945
Overnight funds sold		2,394			194
Commissions		46,527			51,064
Sierras del Chicó y Chicó Oriental		4,467			4,584
Sale of Bank’s equity investments⁽¹⁾		49,744			—
Renting		63			641
Advances to contractors and fees		149,438			241,068
Commitment seller		19,289			33,282
Dividends		2,008			9,084
Treasury operations pending of paid by the customers		2,500			21,878
Services and properties sells		24,017			23,482
Employee advances		5,835			6,803
Deposit security receivable (“Fogafin”)		23,342			32,323
Insurance premium receivables		32,525			55,538
Taxes		10,447			19,638
Other credit card receivable		11,219			7,264
International operations		10,234			26,801
Accounts receivables in branches		25,846			4,730
Other receivables		54,850			87,816

Total accounts receivable		750,510			885,135
Allowance for accounts receivable losses		(34,404	)		(56,318	)

Accounts receivable	Ps	716,106		Ps	828,817

The changes in allowance for accounts receivable are as follows:


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	30,984		Ps	22,215		Ps	34,404
Balance at beginning of period (Banagrícola’s subsidiaries)⁽³⁾		—			2,787			—
Provision for uncollectible amounts		17,621			28,536			68,997
Charge-offs		(5,573	)		(7,052	)		(16,481	)
Effect of exchange rate		557			(459	)		1,247
Reversal of provision and recoveries		(21,374	)		(11,623	)		(31,849	)

Balance at end of year	Ps	22,215		Ps	34,404		Ps	56,318


(1)		Includes sales of Lab Investment & Logistic and Abocol and affiliate.

(2)		Includes all accounts receivable except those originated for interest loans.

(3)		Includes allowance for accounts receivable losses of Banco Agrícola, Aseguradora Suiza Salvadoreña and Asesuisa Vida.

F-41

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(10) Property, Plant and Equipment

Property, Plant and equipment consisted of the following:


	*2007*			*2008*

*Property, Plant and Equipment*
Land	Ps	136,369		Ps	152,688
Buildings		421,666			816,547
Furniture, equipment and fixtures		261,029			274,692
Computer equipment		543,041			503,426
Vehicles		13,034			9,773
Construction in progress		122,606			6,604
Machinery and equipment		17,293			—
Equipment in — transit⁽¹⁾		157,341			180,435

Total		1,672,379			1,944,165
Less accumulated depreciation		(806,567	)		(768,592	)
Allowance		(9,994	)		(4,456	)

Property, Plant and equipment, net	Ps	855,818		Ps	1,171,117


(1)		Includes goods being imported to be allocated to leasing.

Property, Plant and equipment depreciation expense for the years ended December 31, 2006, December 31, 2007 and December 31, 2008, amounted toPs 95,921,Ps 104,442 andPs 98,301, respectively.

(11) Operating Leases

Operating leases where the Bank or any of its subsidiaries act as lessors consisted of the following:


	*2007*⁽¹⁾			*2008*

*Operating Leases*
Machinery and equipment	Ps	5,650		Ps	32,721
Vehicles		482,440			571,669
Furniture, equipment and fixtures		15,271			17,947
Computer equipment		97,259			150,800
Real estate		1,711			126,007

Total		602,331			899,144
Rents		15,690			22,746
Less accumulated depreciation		(126,080	)		(189,161	)
Allowance		(3,608	)		(6,467	)

Operating Leases, net	Ps	488,333		Ps	726,262


(1)		As of December 31, 2007, includes Sutecnología operating leases since the beginning of the year. Sutecnología merged with Leasing Bancolombia, on December 2007.

Operating lease depreciation expense for the years ended December 31, 2006, 2007 and 2008, amounted toPs 8,632,Ps 18,393 andPs 42,832, respectively.

F-42

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(12) Prepaid Expenses and Deferred Charges

At December 31, 2007 and 2008 prepaid expenses and deferred charges consisted of the following:


	*2007*		*2008*

*Prepaid expenses:*
Insurance premiums	Ps	11,636	Ps	11,565
Software licenses		10,499		8,887
Other		1,597		1,554

Total prepaid expenses		23,732		22,007


*Deferred charges:*
Studies and projects		10,058		7,391
Computer programs		25,329		38,761
Leasehold improvements		8,898		5,427
Stationery and supplies		1,618		1,852
Discounts on securities sale		12,918		11,544
IT implementation fees and licences		—		9,102
Banagrícola acquisition costs		38,033		20,751
Facilities		8,082		6,880
Commisions		2,700		5,663
Other		6,533		3,503

Total deferred charges	Ps	114,169	Ps	110,874

Total prepaid expenses and deferred charges	Ps	137,901	Ps	132,881

(13) Other Assets

At December 31, 2007 and 2008 other assets consisted of the following:


	*2007*		*2008*

*Other assets:*
Value added tax deductible and withholding taxes	Ps	14,486	Ps	46,294
Investment in Trust		10,978		6,090
Deposits		23,842		162,174
Assets to place in lease contracts		502,260		831,633
Inventory		7,906		1,841
Joint venture		8,329		10,659
Other		12,841		35,159

Total other assets	Ps	580,642	Ps	1,093,850

F-43

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(14) Goodwill

The movements in goodwill are as follows:


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	50,959		Ps	40,164		Ps	977,095
Additions derived from the acquisition of Factoring Bancolombia by Bancolombia		15,019			—			—
Additions derived from the acquisition of Banagrícola by Bancolombia Panamá		—			881,434			1,786
Reclassifications		—			—			(1,325	)
Other Additions⁽¹⁾		—			132,154			3,329
Amortization		(25,814	)		(70,411	)		(73,009	)
Effect of change in exchange rate		—			(6,246	)		100,763

Balance at end of year	Ps	40,164		Ps	977,095		Ps	1,008,639


(1)		Other Additions as of December 31,2007, corresponds to: a) The balance at beginning of year of the goodwill derived from the acquisition of Inversiones Financieras Banco Agricola (IFBA) and Banco Agricola by Banagricola and the goodwill derived from the acquisition of Banco Agricola by Inversiones Financieras Banco Agricola in the total amount ofPs 74,521; b) the additions to the goodwill derived from the acquisition of IFBA and Banco Agricola by Banagricola in the amount ofPs 30,052 and the additions to the goodwill derived from the acquisition of Banco Agricola by IFBA in the amount ofPs 24,436 during the year 2007 and c) the goodwill derived from the acquisition of Sutecnologia by Leasing Bancolombia in the amount ofPs 3,145.

		Other Additions as of December 31, 2008, corresponds to: a) the additions to the goodwill derived from the acquisition of IFBA, Banco Agricola and Aseguradora Suiza Salvadoreña by Banagricola in the amount ofPs 704; the additions to the goodwill derived from the acquisition of Banco Agricola by IFBA in the amount ofPs 2,401 and the additions to the goodwill derived from the acquisition of Capital Investment SAFI by Renting Peru in the amount ofPs 224 during the year 2008.

Goodwill derived from acquisition of Banagricola S.A. by segments was as follows:


			*Goodwill pending to*
*Segments*	*Goodwill*		*amortize*

Corporate	Ps	216,947	Ps	206,304
Retail		629,340		598,466
Mortgage		130,950		124,526
Insurance		30,172		28,692
Pensions		35,527		33,784

	Ps	1,042,936	Ps	991,772

At December 31, 2008, Goodwill derived from acquisition of Banagricola S.A. was tested for imparment comparing the book value ofPs 1,264,093 with the fair value ofPs 2,385,312 using discounted cash flow and multiples methodology. As a result, the Bank concluded that there was no impairment of goodwill.

F-44

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(15) Foreclosed Assets

Foreclosed assets consisted of the following:


	*2007*			*2008*

Equity securities	Ps	58,906		Ps	54,573
Real estate		166,992			143,181
Other assets		8,218			6,726

Total		234,116			204,480
Allowance		(201,822	)		(179,827	)

Total foreclosed assets, net	Ps	32,294		Ps	24,653

The following is a summary of equity securities classified as foreclosed assets:


	*2007*		*2008*

Chicó Oriental Número 2 Ltda.	Ps	14,202	Ps	14,202
Urbanización Sierras del Chicó Ltda.		11,703		11,703
Procampo trust		7,044		7,044
Enka de Colombia		6,965		3,366
Lote2C Chisa trust		4,480		4,624
Pizano S.A.		3,663		3,663
Convertible Securities Pizano S.A.		3,221		3,221
Fibra Tolima trust		1,572		1,572
Calima Resort trust		1,485		1,485
Fiduciario ADM-Ceylán trust		1,209		—
BIMA trust		675		675
Clinica Shaio trust		—		456
Líneas Agromar trust		209		209
Other		2,478		2,353

Total	Ps	58,906	Ps	54,573

The changes in allowance for foreclosed assets are as follows:


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	205,176		Ps	174,393		Ps	201,822
Balance at beginning of year 2007 (Aseguradora Suiza, Banco Agrícola)		—			70,612			—
Balance at beginning of the year (Factoring Bancolombia, Conavi, Corfinsura and subsidiaries)		2,370			—			—
Provision		22,037			35,298			19,725
Charge-offs		(978	)		(23,866	)		(128	)
Recovery of provisions		(54,298	)		(52,995	)		(48,717	)
Reclassifications		91			5,244			133
Effect of changes in exchange rates		(5	)		(6,864	)		6,992

Balance at the end of year	Ps	174,393		Ps	201,822		Ps	179,827

F-45

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(16) Reappraisal of Assets

The following table describes reappraisals of assets:


	*2007*			*2008*

Asset revaluations, net	Ps	520,788		Ps	612,683
Less: proportional equity revaluations		(167,069	)		(116,194	)
Less: minority interests		(34,073	)		(47,978	)

Total equity revaluations	Ps	319,646		Ps	448,511

The proportional equity revaluations refer to the acquisition of investment in Banca Inversión Bancolombia S.A., Leasing Bancolombia S.A., Fiduciaria Bancolombia S.A., Sufinanciamiento S.A., Valores Bancolombia S.A., Factoring Bancolombia S.A., Inversiones Financieras Banco Agrícola S.A. and some of the affiliates of the entities mentioned above, calculated on acquisition date. Consolidation rules require this value to be unchanged while the investment is held or no new acquisitions are made.

(17) Interbank Borrowings

Interbank borrowings, primarily denominated in U.S. Dollars, at December 31, are summarized as follows:


	*2007*		*2008*

*Foreign banks*
Short-term	Ps	454,878	Ps	489,897
Long-term		1,051,733		1,587,394

Total	Ps	1,506,611	Ps	2,077,291

For the purposes of this classification, short-term interbank borrowings, obtained from other banks for liquidity purposes, are unsecured and generally have maturities ranging from 90 to 180 days.

As of December 31, 2007 and 2008, interest rates on U.S. dollar denominated short-term borrowings from foreign banks averaged 5.28% and 4.71%, respectively.

For long-term interbank borrowings, the average interest rate was 5.86% and 4.43% in 2007 and 2008, respectively.

Maturities of interbank borrowings for the end of the year 2008 were as follows:


	*2008*

2009	Ps	1,491,094
2010		155,070
2011		112,977
2012		2,297
2013 and thereafter		315,853

	Ps	2,077,291

F-46

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(18) Borrowings from Development and other domestic banks

The Colombian government has established programs to promote the development of specific sectors of the economy. These sectors include foreign trade, agriculture, tourism and many other industries. These programs are under the administration of the Colombian Central Bank and various government entities.

These loans generally bear interest from 3% to 6% above the average rates paid by domestic banks on short-term Time Deposits. Loan maturities vary depending on the program (ranging from one to ten years). The bank funds approximately 0% to 15% of the total loan balance, with the reminder being provided by the respective government agencies. Loans to customers are in the same currency and maturity as the borrowings from the agencies.

As of December 31, 2007 and 2008, borrowings from domestic development banks received from certain Colombian Goverment Agencies consisted of the following:


	*2007*		*2008*

Banco de Comercio Exterior de Colombia (“Bancoldex”)	Ps	1,190,028	Ps	1,424,287
Fondo para el Financiamiento del Sector Agropecuario (“Finagro”)		631,940		821,490
Findeter		1,035,910		1,112,559
Other		486,757		512,298

Total	Ps	3,344,635	Ps	3,870,634

Interest rates on borrowings from development and other domestic banks averaged 9.8% and 11.0% in 2007 and 2008, respectively, in local currency 4.5% and 2.0% in 2007 and 2008, respectively, in foreign currency. Maturities at December 31, 2008 were as follows:


2009	Ps	970,428
2010		626,984
2011		541,455
2012		538,074
2013 and thereafter		1,193,693

Total	Ps	3,870,634

(19) Other Liabilities

Other liabilities consisted of the following:


	*2007*		*2008*

Unearned income	Ps	33,779	Ps	40,086
Accrued severance Law 50, net of advances		21,028		22,044
Accrued severance pre-Law 50, net of advances to employees ofPs 10,160 andPs 11,775 and in 2007 and 2008, respectively		13,669		14,980
Accrued payroll and other severance benefits		48,308		90,517
Accrued pension obligations net of deferred cost		110,669		111,759
Negative goodwill		4,604		758
Deferred interest on restructured loans		45,956		37,026
Deferred tax liability		64,183		120,327
Advances		52,200		47,232
Insurance reserves		67,229		82,903
Deferred profit on sales of assets		12,787		5,869
Deferred paid standby letters		3,965		310
Other		25,056		15,690

Total	Ps	503,433	Ps	589,501

F-47

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Unearned income fundamentally consists of prepayments of interest by customers.

In accordance with the Colombian Labor Code, employers must pay retirement pensions to employees who fulfill certain requirements as to age and time of service. However, the Social Security Institute and other private funds have assumed the pension obligation for the majority of the Bank’s employees.

Pension obligation

The following is an analysis of the Bank’s pension obligations:


	*Projected*
	*pension*
	*liability*			*Deferred cost*			*Net*

*Balance at December 31, 2006*	Ps	99,085			—		Ps	99,085


Adjustment per actuarial valuation		25,736			(25,736	)		—
Benefits paid		(12,652	)		—			(12,652	)
Settlement due to sale of Almacenar		(1,500	)		—			(1,500	)
Pension Expense		—			25,736			25,736


*Balance at December 31, 2007*		110,669			—			110,669


Adjustment per actuarial valuation		12,261			(12,261	)		—
Benefits paid		(11,171	)		—			(11,171	)
Pension Expense		—			12,261			12,261


*Balance at December 31, 2008*	Ps	111,759			—		Ps	111,759

In compliance with Colombian law, the present value of the obligation for pensions was determined on the basis of actuarial calculations. The significant assumptions used in the actuarial calculations were the following:


	*2006*			*2007*			*2008*

Discount rate		16.53	%		14.05	%		12.43	%
Future pension increases		10.55	%		8.83	%		7.63	%

(20) Long-Term Debt

Companies are authorized by the Superintendency of Finance to issue or place ordinary bonds or general collateral bonds.

F-48

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The scheduled maturities of long term-debt at December 31, 2008 are as follows:


2009	Ps	726,179
2010		659,545
2011		392,489
2012		168,152
2013		470,886
2014 and thereafter		1,226,235

Total	Ps	3,643,486

Long-term debt consists of bonds issued by Bancolombia (unconsolidated), Banco Agrícola S.A., Leasing Bancolombia, Sufinanciamiento S.A. and by Renting Colombia S.A.

On September 26, 2007, Bancolombia commenced a local public offering of the first issuance of Bancolombia’s Ordinary Notes (Bonos Ordinarios Bancolombia). Bancolombia successfully completed the issuance for an aggregate principal amount ofPs 400,000.

During 2008, Bancolombia S.A. successfully completed the issuance and offering of Bancolombia Ordinary Notes for an aggregate principal amount ofPs 600,000. This issuance and offering is the second of multiple and successive issuances of global Bancolombia Ordinary Notes which are limited to an aggregate principal amount ofPs 1,500,000.

(21) Accrued Expenses

Accrued expenses consisted of the following:


	*2007*		*2008*

Income tax payable	Ps	39,548	Ps	45,367
Fines and sanctions⁽¹⁾		92,395		53,641
Labor obligations		24,303		71,933
FICAFE contingency⁽²⁾		48,772		58,973
Accrued expenses Almacenes Éxito		1,203		4,871
Other		12,639		20,398

Total	Ps	218,860	Ps	255,183


(1)		See Note 26(d).

(2)		As a result of Banagrícola’s acquisition, the Bank for the year ended December 31, 2008, has established an allowance available to absorb probable losses inherent in the FICAFE investment, booked through its subsidiary, Banco Agrícola S.A. FICAFE investment consists of fiduciary’s certifications, issued by the Fund of Enviromental Preservation of Coffee-producing lands established by the Salvadorian government.

Income tax

a. The basis for determining income tax may not be lower than 3% of the taxpayer’s net worth or equity on the last day of the immediately preceding fiscal year.

b. Sporadic earnings are separated from ordinary income and these are taxed at the previously mentioned rates. Sporadic earnings include those obtained from divesting fixed assets held for two years or more as well as liquidating companies also held for more than two years.

F-49

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

c. Income in Colombia is taxed at the following rates:


	*Income tax rate -*			*Income tax rate -*			*Income tax rate - 2008*
Company	*2006*			*2007*			*onwards*

*Companies governed by tax stability agreements:*
Bancolombia, Leasing Bancolombia, Banca de Inversión, Fiduciaria Bancolombia		37	%		36	%		35	%
Subsidiaries not governed by tax stability agreements		35	%		34	%		33	%

The tax effect for all those companies governed by tax stability agreements consists of being entitled until the year 2010, inclusive, to an exemption with regard to any new national taxes or rates that should apply to these, pursuant to Article 240 — 1 of the Colombian Tax Statute (which was repealed by Article 134 of Law 633 passed December 20, 2000). For this reason, in 2008 and 2007, the Parent Company as well as all of its subsidiaries who had entered into tax stability agreements did not pay any financial transaction tax, wealth tax or income surtax.

d. In the case of companies domiciled in Panama and belonging to the Bancolombia Group (Bancolombia Panama and Subsidiaries, Banagrícola and Banco Agrícola Panama) income tax is governed by the Panamanian Tax Code. Profits obtained by the aforementioned companies are not subject to income tax in Panama.

e. Subsidiaries that were incorporated in El Salvador pay income tax on revenues obtained within the country, according to the Income Tax Law of El Salvador, contained in Legislative Decree No. Nº134 issued December 18, 1991, which came into full force and effect as of January 1, 1992. The income tax rate in El Salvador is 25%.

f. The subsidiary Bancolombia Puerto Rico, according to the law governing the International Banking Center is 100% exempt from income, property and municipal taxes, providing its income is obtained from international banking activities, pursuant to said law.

g. A special deduction equal to 40% of all investments made in fixed assets does not represent any taxable income for shareholders or partners. According to applicable legislation, fixed assets subject to this deduction must be depreciated for tax purposes using the straight-line method and are not entitled to any audit benefit even upon complying with all that contained in the tax code. Should these assets cease to be used to produce income or are divested before the end of their useful lives, fiscal revenue should be recorded on recovering the proportion of the deduction corresponding to the asset’s remaining useful life when sold or otherwise transferred. Senior Management considers that the assets for which said deduction was obtained shall be used as part of the Bank’s normal course of business and therefore shall not be sold off before the end of their useful life. For this reason no provision has been set up for any possible reimbursed deductions.

h. The Parent Company has no plans in the short term to bring into Colombia all those accumulated profits, nor reserves obtained through its foreign subsidiaries, Bancolombia Panamá and Bancolombia Puerto Rico, and which were duly recorded in its consolidated financial statements. At December 2008, said profits totaledPs 641,628 and should these be brought into Colombia, these would be subject to income tax calculated at the rate applicable for this same year.

F-50

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The following is a reconciliation of taxable income before income taxes:


	*2006*			*2007*			*2008*

Income before income taxes	Ps	924,409		Ps	1,448,806		Ps	1,764,699
Adjustments for consolidation purposes, net		159,103			653,554			412,456
Difference between net operating loss carry-forwards and presumed income		20,879			91,947			9,874
Non-deductible provisions, costs and expenses		177,966			236,274			195,190

Non-taxable or exempt income		(636,915	)		(1,064,598	)		(744,589	)
Difference between monetary correction for tax purposes and for financial reporting purposes		(62,776	)		—			—
Excess of accrued income over valuation income		6,652			(23,142	)		(78,648	)
Amortization of excess of presumed income over ordinary income and amortization of net operating loss carry forwards		(102,352	)		(65,391	)		(15,433	)
Difference between profit on sale of assets for tax purposes and for financial reporting purposes		—			154			(29,847	)
Valuation derivatives effect		(33,075	)		(35,380	)		(86,314	)
Special tax deduction for Investment in Real Productive Assets		(21,254	)		(177,036	)		(203,272	)
Other		(66,281	)		(57,513	)		(10,866	)


Taxable income	Ps	366,356		Ps	1,007,674		Ps	1,213,250

Statutory tax rate		37.21	%		33.58	%		34.32	%

Estimated current income tax	Ps	136,307		Ps	338,364		Ps	416,381
Deferred income tax expense (benefit)		38,573			23,519			57,675

Total	Ps	174,880		Ps	361,883		Ps	474,056

Income taxes for the years ended December 31, 2007 and 2008 are subject to review by the tax authorities. The Bank management and its legal advisors believe that no significant liabilities in addition to those recorded will arise from such a review.

The following tables present the estimated amortizations of losses that can be recorded and the excess of presumed income over ordinary income and the fiscal years they expired:


	*Fiscal Losses to amortize*
	*Capital*		*Fiduciaria*		*Fondo de*		*Renting*		*Inmobiliaria*		*Inversiones*		*RC Rent*		*Renting*		*Todo Uno*
	*Investment*		*GBC*		*Inversión*		*Perú*		*Banacol*		NL		*A Car*		*Colombia*		*Colombia*		*Total*
2010		—		—		—		—		—	Ps	15		—		—		—	Ps	15
2011		—		—		—		—		—		—		—		—		28		28
2012		—		—		—		—		49		—		—		—		126		175
2013		—		—		—		—		—		—		—		—		—		—
With no maximum expiry date		76		505		506		3,088		—		—		1,887		100,066		—		106,128

	Ps	76	Ps	505	Ps	506	Ps	3,088	Ps	49	Ps	15	Ps	1,887	Ps	100,066	Ps	154	Ps	106,346

F-51

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*Excess of presumed income over ordinary income*
	*Inversiones CFNS*		*Renting Colombia*		*Factoring*		*RC Rent a Car*		*Banca de Inversión*		*Bancolombia*		*Total*
2009	Ps	—	Ps	1,851	Ps	—	Ps	—	Ps	—	Ps	42,569	Ps	44,420
2010		—		2,350		—		—		—		—		2,350
2011		—		3,012		—		—		—		—		3,012
2012		—		1,686		595		—		282		—		2,562
2013		104		4,333		72		43		3,570				8,122

	Ps	104	Ps	13,232	Ps	666	Ps	43	Ps	3,852	Ps	42,569	Ps	60,466

(22) Subscribed and Paid-in Capital

Subscribed and paid-in capital consisted of the following:


	*2006*		*2007*		*2008*

*Authorized shares*		1,000,000,000		1,000,000,000		1,000,000,000


*Issued and outstanding:*
Common shares with a nominal value ofPs 500 (in pesos)		509,704,584		509,704,584		509,704,584
Preference shares with a nominal value ofPs 500 (in pesos)		218,122,421		278,122,419		278,122,419

Pursuant to Colombian law, capital adequacy for banks is required to be not less than 9% of their total credit risk weighted assets and credit contingencies. Under Decree 1720 of 2001, the calculation of capital adequacy must incorporate market risk in addition to the credit risk. This risk for capital adequacy requirement was covered 100% in 2007 and 2008. Calculations are made each month on an unconsolidated basis and in June and December on consolidated accounts which include the Bank’s financial Subsidiaries in Colombia and abroad.

As of December 31, 2007 and 2008 the Bank’s capital adequacy ratio consolidated was 12.67% and 11.24%, respectively.

The consolidated financial statements are prepared for the presentation to the stockholders, but are not taken as a basis for the distribution of dividends or appropriation of profits. Dividends are distributed based on the Bank’s non-consolidated financial statements.

(23) Appropriated Retained Earnings

Pursuant to Colombian law, 10% of the net income of the Bank and its Colombian subsidiaries in each year must be appropriated through a credit to a “legal reserve fund” until its balance is equivalent to at least 50% of the subscribed capital. This legal reserve may not be reduced to less than the indicated percentage, except to cover losses in excess of undistributed earnings.

Appropriated retained earnings consist of the following:


	*2006*		*2007*		*2008*

Legal reserve⁽¹⁾	Ps	1,405,733	Ps	1,172,799	Ps	2,172,068
Additional paid — in capital		268,005		1,165,617		1,165,617
Other reserves		639,869		1,021,188		637,336

Total	Ps	2,313,607	Ps	3,359,604	Ps	3,975,021


(1)		Includes legal reserve and net income from previous years.

F-52

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Reserve for Country Risk

Banco Agrícola S.A., Aseguradora Suiza Salvadoreña S.A. and Asesuisa Vida S.A record, in their financial statements, reserves for country risk.

Reserves for country risk are set up to cover the placement of funds abroad. This risk is attributed to the place of domicile of the debtor or the party who is obliged to pay, from whom a return on the invested funds is to be obtained, except when the controlling company is jointly responsible and/or when the guarantor is domiciled in a country with an investment rating.

Institutions that place or commit funds in other countries use the sovereign risk ratings for the country in question in order to determine the country risk. Said ratings are issued by well-known international risk rating agencies for long-term obligations.

Any increase in these reserves gives rise to a debit to the appropriated retained earnings account — profits from prior years — and a credit in the restricted equity account - profits from prior years. Drops in the reserves cause a reverse effect in the books.

(24) Dividends Declared

The dividends are declared and paid to shareholders based on the adjusted uncosolidated net income from previous year. The dividends were paid as indicated below:


	*2007*⁽²⁾	*2008*	*2009*
Preceding year’s unconsolidated earnings	Ps 582,365	Ps 804,261	Ps 1,043,669

Dividends in cash (in Colombian pesos)	Ps 532 per share payable in four quarterly installments ofPs 133 per share from April 2007 on 509,704,584 and 218,122,421 common and preferred shares, respectively	Ps 568 per share payable in four quarterly installments ofPs 142 per share from April 2008 on 509,704,584 and 278,122,419 common and preferred shares, respectively	Ps 624 per share payable in four quarterly installments ofPs 156 per share from April 2009 on 509,704,584 and 278,122,419 common and preferred shares, respectively

	AdditionallyPs 266 per share payable on 59,999,998 preferred shares issued in June and July 2007

Total dividends declared	Ps 403,164	Ps 447,486	Ps 491,604

Dividends payable at December 31⁽¹⁾	Ps 111,842	Ps 119,701


(1)		The amount of the dividends payable at December 31, is recorded as accounts payable in the Consolidated Balance Sheets.

(2)		The amount disclosed as Total Dividends Declared in the table for 2007 differs from those disclosed in the annual report of 2006, because Bancolombia S.A. paid dividends on 59,999,998 preferred shares issued during 2007.

F-53

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(25) Memorandum Accounts

Memorandum accounts were composed of the following:


	*2007*		*2008*

*Trust:*
Investment trusts	Ps	39,609,384	Ps	42,676,646

*Commitments:*
Unused credit card limits	Ps	4,703,942	Ps	5,724,199
Civil demands against the Bank		874,107		782,444
Issued and confirmed letters of credit		1,354,921		1,890,574
Uncommitted lines of credit		865,706		628,066
Bank guarantees		1,258,448		1,634,057
Approved credits not disbursed		1,467,745		1,382,560
Nation account payable (546 law)		30,371		28,914
Other		124,195		942,686

Total	Ps	50,288,819	Ps	55,690,146

Other memorandum accounts:


	*2007*		*2008*

*Memorandum accounts receivable:*
Tax value of assets	Ps	30,481,070	Ps	41,397,910
Assets and securities given in custody		3,411,382		4,940,276
Assets and securities given as a collateral		3,300,348		2,602,771
Trading investments in debt securities		1,692,960		2,002,743
Written-off assets		1,439,114		1,999,111
Quotas of leasing to receive		5,977,221		7,423,863
Investments held to maturity		1,058,280		1,638,282
Adjustments for inflation of assets		162,724		127,934
Accounts to receive yields trading investments in debt titles		103,286		241,556
Investments available for the sale in debt titles		1,379,980		1,256,763
Remittances sent for collection		26,103		50,919
Amortized debt securities investment		788,610		1,009,394
Other memorandum account receivable		4,304,690		6,897,263

Total	Ps	54,125,768	Ps	71,588,785


*Memorandum accounts payable:*
Assets and securities received as collateral		25,815,805		29,553,409
Qualification commercial loans		23,711,631		28,494,632
Assets and securities received in custody		4,816,267		5,395,677
Tax value of shareholders’ equity		4,673,067		6,308,371
Qualification consumer loans		6,573,200		7,513,317
Adjustment for inflation of equity		892,909		891,452
Qualification small business loans		131,913		145,518
Merchandise in owned warehouses		65		—
Qualification financial leasing		4,749,309		5,583,028
Qualification operating leasing		491,941		732,768
Qualification mortgage loans		2,803,165		3,324,627
Other memorandum account payable		3,135,280		3,949,803

Total	Ps	77,794,552	Ps	91,892,602

Total memorandum accounts	Ps	182,209,139	Ps	219,171,533

F-54

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(26) Commitments and Contingencies⁽¹⁾

For the years ended December 31, 2007 and 2008, the Bank registered allowances for probable contingencies ofPs 92,395 andPs 53,641, respectively. The detail of the contingencies was as follows:

The Bank

Contingencies Covered by FOGAFIN:

During the privatization process of Banco de Colombia (which merged with and into the Bank in 1998), completed on January 31, 1994, Fogafin made a commitment to assume the cost of contingent liabilities resulting from events that occurred before the date when the stock was sold, which should be claimed within the five (5) subsequent years. Fogafin’s guarantee covers eighty percent (80%) of the firstPs 10,000, not considering allowances, and thereafter, one hundred percent (100%), all annually adjusted according to the consumer price index.

At December 31, 2007 and 2008, the civil contingencies covered by the guarantee amounted to approximatelyPs 997 andPs 266, respectively, with allowances at the same dates amounting toPs 166 andPs 166. Labor contingencies remain the same as 2008: contingencies amounted toPs 70 and allowances amounted toPs 35.

Legal Processes

At December 31, 2007 and 2008, other than the litigation discussed under (a) above, there were labor-related claims against the Bank amounting to approximatelyPs 16,590 andPs 17,168, respectively (the final result of such litigations is not predictable due to the nature of the obligations). The allowances for contingencies on those dates amounted toPs 8,946 andPs 8,932, respectively.

At December 31, 2007 and 2008, there were ordinary civil lawsuits, group actions, and civil actions within criminal and executive proceedings against the Bank with total claims for approximatelyPs 644,953 andPs 611,003, respectively and with allowances on the same dates ofPs 30,456 andPs 31,917, respectively.

Allowances are recorded based on the likelihood of the losses and when proceedings are ruled in the first instance against the Bank or based on the opinion of management the proceedings are not likely to result in an unfavorable ruling.

F-55

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Contingencies against the Bank greater toPs 5,000, as of December 31, 2008, are:


			*Actual*
	*Initial*		*Exposure at*
*Process*	*Exposure*		*December 31, 2008*		*Allowance*		*Likelihood*

Civil Lawsuit from Jaime Gilinski and Others	Ps	357,000	Ps	357,000		—	Remote
Inversiones C.B. S.A.		12,468		40,806		—	Remote
Editorial Oveja Negra Ltda. and Jose Vicente Katerain		10,240		9,635		—	Remote
Costrucc.Rojas Jiménez & CÍA. S. EN C.		6,277		6,277		—	Remote
Ordinary process Gloria Amparo Zuluaga Arcila		1,400		5,784		—	Remote
Arbitration process CAJANAL vs Bancolombia		34,026		34,026		—	Remote
Almacenar S.A.		92,048		30,902		20,000	Probable
Carlos Julio Aguilar and Other		25,232		30,210		—	Remote
Invico Ltda, Dalia Bibliowicz Kaplan, Bella Bibliowicz Kaplan y Anniel Admiran Bibliowoicz Processes		5,000		6,601		3,500	Probable
Class action Maria Elena Urina against Barranquilla City “Municipio de Barranquilla” and Bancolombia		6,467		6,467		—	Remote
Ordinary process Ramón Orlando Pardo Osorio and Oceano Films OP Ltda. US 3000000		5,402		6,820		—	Remote

Inversiones C.B. S.A.

In 1997, Conavi granted a loan ofPs 6,000 to Inversiones C.B S.A. for the purpose of building a real estate project. This loan was scheduled to be paid out to the borrower in periodic installments based on the progress of said project, this amongst other terms and conditions.

Given the fact that construction work grounded to a halt and the builder fell into arrears, Conavi suspended the payment of the loan, which in the opinion of the plaintiffs gave rise to consequential damages. The claim filed by the plaintiffs states that the Bank must pay Inversiones C.B S.A. certain sums of money including loss of profits and corresponding interest, the opportunity cost of capital, the value of the project’s liabilities as well as monetary correction.

This contingency is considered to be quite remote, since the Parent Company paid out the loan according to the terms and conditions agreed upon, and the plaintiffs were at fault in assigning the funds together with other external causes such as the project’s lack of feasibility and the crisis prevailing within the construction sector, all of which contributed to the failure of the project in question.

Cajanal S.A. EPS (in the process of being wound up)

On April 26, 2000 Cajanal S.A. EPS and Bancolombia S.A. signed “Agreement No 2 for Providing Contribution Collection Services”, by virtue of which the Parent Company became responsible for collecting contributions to the Comprehensive Social Healthcare System. According to the claim lodged by the plaintiff, Bancolombia S.A. failed to comply with certain clauses contained in this Agreement and must therefore pay compensation for the consequential damages incurred.

F-56

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Both parties have disputed whether Bancolombia acted according to that stipulated both in the agreement as well as according to applicable law, upon complying with certain garnishments ordered by judges of the Republic of Colombia and making available to different administrative offices of the courts the amounts that had been deposited in the checking and savings accounts belonging to Cajanal S.A. EPS, containing social security funds. The Bank considered that such writs of garnishments had to be complied with and without objection. Arguments include the statute of limitations with regard to the case, the absence of causation between the conduct of Bancolombia and the consequential damages claimed, the absence of any damages incurred by Cajanal S.A. EPS and negligence on the part of the plaintiff company.

Sale of Almacenar

In December 2006, the Bank’s subsidiary Almacenes Generales de Deposito Almacenar S.A. was spun off to create two additional companies, Inversiones IVL S.A. and LAB Investment Logistics S.A. Subsequently in 2007, the Parent Company sold its shares in LAB Investment Logistics S.A. and Almacenar S.A., pledging to cover any contingencies caused before the date on which these were sold, and which would only become apparent after the transaction was completed. In particular, the Parent Company, undertook to cover any losses incurred by Almacenar as a result of a fire that broke out in May 2005 in its warehouse located in the Salomia district in Cali.

As a result of this fire, a lawsuit has been filed against Almacenar by Industrias del Maíz S.A., Cadbury Adams and Pfizer S.A., and/or the insurance companies representing the rights of these.

The legal proceedings filed by Industrias del Maíz S.A. and Pfizer S.A. have now been concluded by the transaction contracts that have been signed, and the corresponding amounts of money have been recognized by the insurance company, Compañía Suramericana de Seguros S.A., based on an all-risk insurance policy in force covering material damage and loss of profits.

The proceedings initiated by Seguros Comerciales Bolívar S.A., in representation of Cadbury Adams. are still pending, in which a total ofPs 30,901 is being claimed. However, the claimed compensation for merchandise based on selling prices or the loss of profits are not the responsibility of the depository. For this contingency, the Parent Company shall have at its disposal thePs 11,467 that remains from the compensation payable on the part of Suramericana de Seguros as well as a provision ofPs 20,000.

Sierras del Chicó Ltda. and Chicó Oriental No. 2 Ltda.

According to the terms and conditions contained in a guarantee agreement for contingent liabilities entered into by the Parent Company and the Fondo Nacional de Garantías FOGAFÍN (the Colombian National Guarantee Fund) on January 18, 1994, said Fund called for an arbitration panel to be set up for the purpose of the Parent Company handing over the rights held by the former Banco de Colombia in the companies Sierras del Chicó Ltda. and Chicó Oriental No. 2 Ltda. at December 31, 1993.

Should the Parent Company be ordered to transfer said rights, the Fund must recognize, based on the existing contract between the parties “...the value of said ownership interest as recorded in the books of the Parent Company at December 31, 1993, together with all applicable adjustments for inflation as provided for by law and that should accrue up to the moment these are transferred to the Fund.....” Furthermore, the Parent Company is claiming the payment of all those expenses incurred while said assets were held.

Given the fact that in the event of an unfavorable ruling, this would imply having to sell the asset, it was not considered necessary to set up a provision for such contingency.

As part of these arbitration proceedings, which are being heard by the Center for Arbitration and Conciliation, attached to the Chamber of Commerce of Bogotá, the following arbiters Gilberto Peña Castrillón, Jorge Pinzón Sánchez and Eduardo Zuleta Jaramillo were appointed by mutual agreement.

F-57

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Contingencies Related to the Purchase of 51% of Former Banco de Colombia S.A. (“Banco de Colombia”) Stock and Later Merger with Banco Industrial Colombiano (“BIC”, now Bancolombia)

The Gilinski Case

See Item 8. Financial Information — A.2. Legal Proceedings.

Arbitration Proceedings — HSBC Fiduciary

In May 2008, HSBC Fiduciary requested the Chamber of Commerce of Bogota the installation of an Arbitration Tribunal in order to settle the disputes arising from the trust guarantee and payment agreement entered on March 30, 1998 between Isaac Gilinski, Jaime Gilinski and other foreign companies as trustors and Bancolombia as beneficiary; the trust guarantee intended to manage and hold in safekeeping all those assets handed over to guarantee and pay the existing amounts; the funds owed by the trustors for compensations for flaws contained in the declarations and guarantees issued by these, enclosed in the promissory bill of sale of shares held by Banco de Colombia and its modifications. The value of the goods as guarantee is US$ 30 million.

The dispute is a result of the application submitted by the trustors to the HSBC Fiduciary for the purpose of liquidating the trust fund and restitute the funds. This was subsequently objected by the Bank, based on pending claims filed against the sellers and guaranteed by the trust, especially the contingency in favor of the Bank, derivated from the decision issued by the Arbitration Tribunal iniciated by Bancolombia against Isaac Gilinski and others.

National Tax and Customs Agency (“DIAN”)

Special Requirement

On December 27, 2007, the Bank received a special requirement by the Tax Administration of Medellin (“Administracion de Impuestos de Medellin”) regarding the income tax (“impuesto de renta”) of the year 2006, in whichPs 79,013 are discussed.

On September 23, 2008 the aforementioned tax authorities issue an official tax settlement corresponding to Review No. 900005.

The Bank and its tax advisors considered that the procedure of the income tax return of 2006 followed was in compliance with the applicable rules and regulations and on November 20, 2008 it filed for a reconsideration of the official review settlement, which was approved by the Colombian Tax Authorities (DIAN) by means of an official decision given in 2008.

Industry and Commerce Tax corresponding to 2006

Special requirement No. 2008EE336858 was issued on September 23, 2008 by the Bogotá District Council for the second two-month period of 2006, stipulating a total ofPs 3,039 in tax owing and a fine ofPs 4,863.

This requirement was contested December 19, 2008, requesting that the requirement be revoked given the lack of grounds and an arithmetic error in the corresponding settlement.

On November 27, 2008 special requirement No.2008EE597337 was received for the third, fourth, fifth and sixth two-monthly periods of 2006. This requirement stated an amount ofPs 5,236 in tax owing and a fine ofPs 8,377. This requirement was subsequently contested requesting that the requirement be revoked given the lack of grounds and an arithmetic error in the corresponding settlement.

F-58

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Pro Senior Citizen Stamp Tax for fiscal years 2005 and 2006

On June 24, 2008 two official review settlements Nos. 001-08 and 002-08 were received for the third, fourth, fifth and sixth two-monthly periods of 2005 as well as the first, second, third and fourth two-monthly periods of 2006, respectively, from the Barranquilla District Council, claiming stamp tax owing in the amount ofPs 85 and a fine ofPs 137.

On October 23, 2008, proceedings were filed to revoke and re-establish rights with regard to the official review settlements. This claim has yet to be ruled upon. The provision set up for this contingency with regard to the Industry and Commerce tax return come toPs 149.

Pro Senior Citizen Stamp Tax for fiscal years 2005 and 2007

On July 01, 2008 special requirement No. 0123-08 was received for the fifth and sixth two-monthly periods of 2006 and the first, second, third, fifth and sixth two-monthly periods of 2007; from the Barranquilla District Council, claiming tax owing ofPs 119 and a fine ofPs 190.

On September 18, 2008 the Parent Company contested this special requirement based on the same terms on which it filed proceedings to revoke and reestablish the right for the two-monthly periods of 2005 and 2006.

Fiduciaria Bancolombia S.A.

a. Silvania Trust — Seven proceedings are underway in the civil courts of the Bogota Circuit and in an Arbitration Court which ruled in favor of the Trust Company. All of the proceedings arise from Fiducolombia S.A.’s role (now Fiduciaria Bancolombia S.A.) as trustee in the guarantee mercantile trust agreement entered into on December 1, 1993, with Gallego Inmobiliaria S.A. and the appraisal of the property made by Vector (appraisal company).

Two of the aforementioned proceedings were terminated due to the statue of limitations. However, on December 11, 2003, a new ordinary proceeding was initiated against Fiducolombia (currently Fiduciaria Bancolombia S.A.), following a legal action filed during the month of September 2003. One of these proceedings has produced first and second instant rulings in favor of the Fiduciary, and the Fiduciary is currently awaiting the results of an appeal lodged by the plaintiff. The Ninth Civil Circuit Court ordered all those remaining processes relating to the proceedings initiated against Tarazona Bermudez, to be heard following this same procedural vein, and currently there is an expert opinion pending on the part of the Agustin Codazzi Institute in order to proceed to grant a first instance ruling. This process was transmitted to the Court for the corresponding ruling in August 2008.

The legal counsel in charge of this case considers that a favorable ruling is possible.

b. Invico Ltda. has a lawsuit pending against the Bank and Fiducolombia S.A. (now Fiduciaria Bancolombia S.A.) in the Sixth Court of the Civil Circuit of Bogota(Juzgado Sexto Civil del Circuito de Bogota). The plaintiff seeks a ruling declaring that the Bank and Fiducolombia S.A. (now Fiduciaria Bancolombia S.A.) must exercise the alternate right contained in Article 1948 of the Civil Code, in reference to the land lot denominated “La Granjita”, pursuant to the trust mandate. The claims amounted toPs 4,000. On January 17, 2002, the court issued a ruling dismissing a defense presented by Fiduciaria Bancolombia S.A. and ordered it to pay the court fees. The discovery stage has finalized and Fiduciaria Bancolombia S.A. has presented its final legal conclusions on September 17, 2007. Since that date, the ruling is pending.

F-59

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

c. Invico Ltda. has a suit pending against the Bank and Fiducolombia S.A. (currently Fiduciaria Bancolombia S.A.) in Civil Circuit Court 6 of Bogota. The plaintiff seeks a ruling declaring that the Bank and Fiducolombia S.A. (now Fiduciaria Bancolombia S.A.) must exercise the alternate right contained in Article 1948 of the Civil Code, in reference to the land lot denominated “La Granjita”, pursuant to the trust mandate. The claims amounted toPs 4,000. On January 17, 2002, the court issued a ruling dismissing an exception that was filed and ordered the filing party to pay costs. The discovery stage has finalized and the Trust Company has presented its legal conclusions on September 17, 2007. The judge ruled against the Fiduciary who lodged an appeal within the term legally provided for such. Having been admitted by the Court, this case is still being heard.

The legal counsel in charge of this case considers that a favorable ruling is highly possible.

d. With regard to the Fopep Consortium there are two labor proceedings filed by John Freddy Bustos Lombana, who claims that he acted as attorney and assistant manager in two different agreements and therefore demands the payment of salary and other employment benefits. He is also claiming indemnification alleging that his resignation was a consequence of an insinuation made by the Manager of the Consortium. In one of the proceedings, a ruling in the first instance was given in favor of the Trust Company. This was subsequently appealed and a second instance ruling is pending. In the other proceedings, first and second instance rulings were given in favor of the Trust Company, which were subsequently upheld on appeal.

The legal counsel in charge of these proceedings considers that favorable rulings are moderately possible.

e. With regard to the “Santa Sofía” Trust, there are two different types of proceedings being conducted:

A class action filed by the co-owners of the Santa Sofia Housing Estate against the Bogota Mayor’s Office, Fiducolombia S.A. (now Fiduciaria Bancolombia S.A.) and others, claiming that the deterioration to the property was caused by flaws in the terrain, and therefore no building permit should have been issued. The judge ordered evidence to be heard as requested by the parties. The legal counsel in charge of these proceedings considers that favorable rulings are moderately possible.

Criminal proceedings against the Trust Company’s Legal Representative, based on the action filed by the co-owners of the Santa Sofia Housing Estate, claiming alleged Illegal Squatting and Fraud with regard to the urban development of the real estate project. These proceedings are still being heard although the judge has ordered the investigation stage to be wound up Possibilities of success, occording to information supplied by legal counsel: Moderate.

Ordinary process of major quantity of extracontractual civil responsibility. The plaintiff claims civilian and jointly responsibly from Fiduciary Bancolombia S.A. and other defendants and, consequently order them to pay the price of the property, including its improvements. The Trusty Company answered the complaint and presented as defense the following: “the nonexistence of responsibility for corporate purpose different from the invoked” and the “nonexistence of responsibility for lack of contractual or extracontractual bond”. The judge hearing the case has ordered the case to be closed given the tacit withdrawal of the action on the part of the plaintiff. Possibilities of success, according to information provided by legal counsel are: High.

f. There are currently two executive proceedings that were filed by Mr. Eugenio Segura Villarraga seeking payment of three checks that were countermanded according to instructions given by the Bank. Mr Segura Villarraga claims that the checks were drawn as a result of an unlawful act. These proceedings are currently suspended.

F-60

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

g. There is a criminal court case against one of the Trust Company’s legal representatives regarding the Chisa Lote 2C Trust filed by Carmela Guardo and Joaquín Atencio Niño claiming misrepresentation of facts in a public deed, procedural fraud, perturbation of ownership and fraud with regard to a court ruling by virtue of a public deed establishing the boundaries of a plot of land, signed by the Trust Company on behalf of the Trust. These proceedings are at a pre-trial stage where evidence is collected.

Previously the joining of actions, the Attorney General’s Office No. 19 foreclosure the criminal investigation regarding the crimes of fraud to judicial award, invasion of lands and disturbance to the possession (Attorney General’s Office No. 19, Bogotá), and continued for the crimes of fraud in public document and procedural fraud (Attorney General’s Office No. 10, Bogotá). This case was concluded given the preclusion of the investigation.

The Trust Company’s management considered the contingency that this proceeding represents no liability.

h. The Trust Management Agreement No. 255 entered into by the Consorcio Fisalud (made up of Fiduciaria Bancolombia S.A., Fiduciaria La Previsora S.A. and Fiducafe S.A.) and the Colombian Ministry of Social Protection is currently subject to an arbitration award being granted. Three arbiters were appointed and an Arbitration Panel set up. The arbitration hearing was suspended until January 2008 on the grounds of a possible conciliation between the parties. No assessment has been given to the legal counsel in charge of the case. At December, 2008, Fiduciaria Bancolombia had set up a provision in the amount of $ 4,257 to cover any eventual contingency as a result of these arbitration proceedings as well as for the winding up of the consortium itself.

i. A contract lawsuit filed by the Colombian Ministry of Social Protection against the Fidufosyga Consortium on the grounds of 4 events of default: 1. The renewal of a role in a parent company bank on the part of the fiduciaries forming part of the consortium. 2. A compensation process that was never carried out according to that stipulated by applicable law and the terms and conditions of the contract. 3. Claims and recoveries on the part of ECAT. 4. Failure to present a work plan within the term requested. The legal counsel representing the Fiduciary and the Consortium presented a counter-memorial to dismiss the procedure taken since the proper means would be an arbitration hearing. The judge admitted the Fiduciary’s arguments and concluded the proceedings.

j. Ordinary proceedings filed by Álvaro Navarro T & Cía. S. en C. against Fiduciaria Bancolombia S. A., in which the plaintiff claims that Public Deed No. 5496 drawn up before Notary Public No. 3 of the Circuit of Cartagena should be revoked. According to said Public Deed, title to the ownership of the property held in trust was given over in the form of payment to the beneficiaries: Banco del Pacifico (currently being wound up), BIC S. A. now known as Bancolombia S. A. and Bancafé S. A. As a result of the above, the restitution of the above mentioned property was claimed along with the payment of consequential damages which the plaintiff estimates atPs 10, per month, as of the date on which the property was given over in the form of payment until it was restituted. The Fiduciary contested this lawsuit and notice of such is to be served on the respondents.

Possibilities of success according to information supplied by legal counsel: High.

k. Administrative Action No. 230-11504 filed by the Colombian Superintendency of Companies against the Fiduciary claiming an alleged breach of exchange regulations due to failure to submit Form No. 15, by means of which the companies receiving the foreign investment must update information regarding the recording of these investments for the period beginning January 1st and ending December 31, 2005, date on which the Trust Company Fiduciaria Bancolombia S. A. Sociedad Fiduciaria held no recorded foreign investment. The Fiduciary responded to this requirement within the term legally provided for such and are still pending a decision on the part of the Colombian Superintendency of Companies.

F-61

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

l. Administrative Action No. 230-15875 filed by the Colombian Superintendency of Companies against the Fiduciary claiming an alleged breach of exchange regulations due to tfailure to submit Form No. 15, by means of which the companies receiving the foreign investment must update information regarding the recording of these investments for the period beginning January 1st and ending December 31, 2006, date on which the Trust Company Fiduciaria Bancolombia S. A. Sociedad Fiduciaria held no recorded foreign investment.

Leasing Bancolombia S.A.

According to the opinion of the lawyers involved, claims against the Company do not represent any loss contingency that could affect its future results, except for all those processes filed against EXXON — Mobil de Colombia, the “Proteger” Foundation and Alexandra Milena Díaz for which provisions were set up for the amounts ofPs 1.061,Ps 5 andPs 5, respectively.

Compañía de Financiamiento Comercial Sufinanciamiento S.A.

The Company has proceedings against it, in which the claim is estimated inPs 5.756, those proceedings are classified as remote.

Additionally, the Company recorded contingencies with tax audit entities which are classified as remote.

Valores Bancolombia S.A.

The Company is currently contesting an ordinary contractual civil liability case which is being heard by the Civil Circuit Court No. 2 in Medellin. Evidence is still being heard for this case, as ordered by the Court by means of Court Order issued November 22, 2007. In the opinion of Valores Bancolombia’s Company Secretary and the external lawyer in charge of this process, the probability of an unfavorable ruling against this brokerage firm is remote, however, should the court find against Valores Bancolombia this could well represent a maximum value ofPs 20.

Factoring Bancolombia S.A.

Factoring Bancolombia S.A. is currently party in the following proceedings:

a. Three summons by the Central Bank to all the financial entities regarding the lawsuits of debtors of commitments agreed by the Sistema UPAC, before the administrative tribunals of the departments of Nariño, Sucre and Cauca.

There should not be any contingency with regard to these processes because Factoring has not had credit transactions under the UPAC System.

b. Process (“proceso verbal de acción de reivindicatoria”) by Mr. Jairo Buriticá Burbano against FES S.A, actino on behalf of the trusty Comoderna S.A, Banco Santander S.A, Corporación Financiera Colombiana S.A, Banco de Bogotá and Factoring Bancolombia S.A Compañía de Financiamiento Comercial.

Factoring Bancolombia S.A. was notified of this process, on December 5, 2007. To date, evidence is still being heard.

F-62

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

AFP Crecer S.A

a. As of December 31, 2008, the entity has an administrative process PA-337-2004 for a supposed loss of US$ 34 regarding the liquidation of Eurobonds 2032. Nevertheless, it was presented to the Superintendency of Pensions the arguments and evidence of discharge reject the administrative processes and to justify that the transactions were done with the purpose of preserving the interests of the members. The Superintendence of Pensions issued resolution A-AF-DO-072-2005 imposing a fine for US$ 1; on February 28, 2005 Crecer S.A filed an appeal, which has been admitted thereby temporarily suspending the effects of the above mentioned resolution, At December 31, 2008 and at the time of publication of these financial statements the status of this appeal remains unchanged.

b. According to resolution N º PA-016-2006 notified on February 13, 2006, the Superintendency of Pensions (“Superintendencia de Pensiones”) impose a fine of US$ 29 to AFP Crecer S.A, for omitting to gave information regarding some commitments in a term of 5 days. On February 16, 2006, AFP Crecer S.A filed an appeal of rectification before the Superintendency of Pensions arguing that they have given the information required. This appeal was admitted on February 17, 2006, temporarily suspending the effects of the abovementioned resolution, and consequently, opening to the evidence stage. On March 6, 2006 the Superintendency of Pensions declares that there is no place to rectifying the appealed resolution and ordered AFP Crecer S.A to pay the correspondent fine in the term specified on the “Ley del Sistema de Ahorro para Pensiones”. On March 31, 2006 AFP Crecer S.A filed an action before the Contencious Adminitrative Court (“Sala de lo Contencioso Administrativo”) of the Supreme Court of Justice against this resolution, which was admitted on May 31, 2006, which order the temporarily suspension of the appealed decisions, which do not making the fin imposed effective until is not a definitive award. On February 26, 2008, the Court gave notice of its ruling dated November 30, 2007 by means of which it declared the legitimacy of the resolutions issued by the Superintendency of Pensions with regard to the fine imposed and the absence of any grounds for an appeal remedy. On March 1, 2008, a fine of US$ 29 (thousand) was paid and the Superintendency of Pensions was duly informed for the corresponding legal purposes and the consequent conclusion of the proceedings.

c. According to resolution N º A-AF-DO-330-2004 issued on November 9, 2004, the Superintendency of Pensions ordered AFP Crecer S.A to calculate correctly the value of the complementary certificate of transfer, corresponding to the months of October and November of 2003, pursuant to the requirements of the above mentioned resolution, in order to compare the original value and establish the amount to return to the State and effect the corresponding refund with its own funds, without affecting the CIAP of the pensioned members.

On September 27, 2007, AFP Crecer S.A requested the rectification of resolution N º A-AF-PE-195-2007 and comply the procedure for the complementary payment for insufficient in the amount of the certificate of transfer and refund of payments in excess, established by theReglamento para la Emision y Pago del Certificado de Traspaso.Pursuant to resolution A — AF — DO — 243 — 2007, of December 10, 2007, the Superintendency of Pensions solved unfounded the request of AFP Crecer S.A. regarding the admission of the rectification request. As of the date of the financial statements, AFP Crecer S.A is studying the further steps.

F-63

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

On January 28, 2008, Administrative Process PA-008-2008 was initiated, by means of which the Superintendency of Pensions claimed an alleged breach on the part of AFP Crecer, S. A. of the aforementioned resolutions, and a sanction based on Clause 2 of Article 234 of the Law of the Savings System for Pensions. Also, it granted an audience to AFP Crecer, S. A., in order for the latter to exercise its right to a defense and to present any evidence it considered necessary. On February 8 and March 8 2008, AFP Crecer, S. A. filed a request for all charges to be dropped this based on the corresponding legal grounds.. On April 23, 2008, the Board of Directors of AFP Crecer, S. A. voluntarily decided to give back to ISSS and INPEP, using its own funds, the contribution corresponding to the aforementioned complementary transfer certificates dated May 8, 2008. AFP Crecer, S. A. paid ISSS a total of USD 608 (thousand) and on June 11, 2008 paid INPEP USD 266 (thousand) (for a total of USD 874 (thousand) and gave due notice to the Colombian Superintendency of Pensions for the corresponding legal purposes. On September 29, 2008, the Colombian Superintendency of Pensions issued a resolution by means of which it considered that, amongst other matters, all that that stipulated in Resolution A-AF-DO-330-2004 had been duly complied with and therefore there were no grounds for imposing a fine on AFP Crecer, S. A. since it had effectively returned to the aforementioned Pension Institutes both the principal and the interest paid in excess on the transfer certificates issued.

d. At December 31, 2008, the Company continues with Administrative Process No. PA-002-2008, notice of which was served on February 2 2008, since it allegedly published pension information without having obtained due authorization from the Colombian Superintendency of Pensions. On March 8, 2008, a hearing was held and AFP Crecer, S.A. requested the Superintendency of Pensions to drop the charges based on the corresponding legal grounds. At December 31, 2008 and at the time these financial statements are published the Company continues to await the corresponding resolution.

Banco Agrícola S.A

As of December 31, 2007 and 2008, Banagrícola has the following judicial or administrative litigations:

a. At December 31, 2007, a claim for damages had been filed before the Fifth Commercial Court of San Salvador against the Bank for an alleged responsibility in handling executive commercial proceedings on the part of Banco Agrícola, S. A. against a client in 1989. The amount claimed totaled US$ 220,000 (thousand). The Bank filed an action for the enforcement of rights before the Civil Division of the Supreme Court of Justice, for the purpose of the case being heard before a Civil Court Judge. This action for the enforcement of rights was admitted by the Court thereby giving rise to suspending the previously filed claim. On December 5, 2008, the Supreme Court of Justice ruled that there were grounds for the action for the enforcement of rights as requested by the Bank on December 15, 2008, the Fifth Commercial Court of San Salvador ruled that there was a jurisdiction exception, thereby upholding the right of the plaintiff to file his complaint before a court of competent jurisdiction. Formal notice of this was received by the Bank on January 6, 2009. The Bank’s legal counsel believes that this process does not represent any risk for Banco Agrícola, S.A.

b. BA has filed two appeals under contentious administrative law against the Internal Tax Authorities before the Supreme Court of Justice, based on the complementary settlement of tax on the transfer of personal property and the providing of services (VAT), corresponding to the fiscal years of 2002 and 2003; the amount being claimed through both proceedings comes to US$ 4,261 (thousand) plus accrued interest. The Bank’s Senior Management together with its legal counsel believe that the final rulings on these two cases shall not have any significant effect on the Bank’s financial position or the results of its operations.


(1)		For more information of Commitments, see “Note 31. Differences Between Colombian Accounting Principles for Banks and U.S. GAAP- r) Guarantees”.

F-64

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(27) Administrative and Other Expenses

Administrative and other expenses consisted of the following:


	*2006*		*2007*⁽²⁾		*2008*

Public services	Ps	53,512	Ps	69,857	Ps	70,680
Advertising		63,214		68,222		88,003
Industry and trade, property, vehicle and other taxes		129,141		147,684		193,628
Communication, postage and freight		52,403		85,042		104,902
Insurance		29,635		23,366		29,054
Security services		27,292		33,655		31,752
Amortization of deferred charges		40,692		61,143		73,541
Rental expenses		62,182		70,949		61,026
Maintenance and repairs		123,169		164,590		147,441
Contributions and membership fees		17,115		31,971		32,989
Temporary services		31,316		18,379		40,192
Travel expenses		22,840		21,999		22,124
Professional fees		59,506		79,599		155,000
Call center services		26,404		26,617		32,321
Information processes outsourcing		22,731		38,383		46,746
Warehouse expenses		11,777		—		—
Software⁽¹⁾		24,041		32,175		8,804
Joint venture SUFI — Almacenes Exito S.A. Expense		10,950		14,333		31,481
Operational expenses related with consortium		9,138		10,198		12,115
Electronic processing data		4,934		3,575		4,663
Public relation		2,052		2,799		2,455
Other⁽¹⁾		58,138		66,309		80,065

Total	Ps	882,182	Ps	1,070,845	Ps	1,268,982


(1)		The amount disclosed in the table for 2007 differs from those disclosed in the annual report of 2007, because they were reclassificated for comparative purposes with the information of 2008.

(2)		The administrative and other expenses were modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes. Amounts reclassified as discussed in Note 2(ab).

(28) Non-Operating Income (Expenses)

The following table summarizes the components of the Bank’s non-operating income and expenses:


	*Year ended December 31,*
	*2006*			*2007*⁽³⁾			*2008*
	(Ps million)
*Non-operating income (expenses):*
Other income⁽¹⁾	Ps	194,589		Ps	93,294		Ps	172,550
Minority interest		(6,352	)		(13,246	)		(18,511	)
Other expenses⁽²⁾		(149,243	)		(81,236	)		(140,662	)

Total non-operating income (expenses), net	Ps	38,994		Ps	(1,188	)	Ps	13,377


(1)		For 2008 and 2007, includes gains on sale of foreclosed assets, property, plant and equipment and other assets, securitization residual benefit, insurance contracts sale and rent. For 2006, includes recovery of deferred tax liability ofPs 98,788 million recorded in 2005 by the Bank.

(2)		Other expenses include operational losses and losses from the sale of foreclosed assets, property, plant and equipment and payments for fines, sanctions, lawsuits and indemnities.

F-65

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


(3)		Non-operating income (expenses), net for the year ended 2007 was modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes. Amounts reclassified as discussed in Note 2(ab).

(29) Related Party Transactions

Significant balances and transactions with related parties were as follows:

2006


							*Shareholders with*
							*participating stock*
	*Shareholders with*						*lower than 10% of*
	*participating stock*						*the Bank’s capital*
	*equal to or higher*						*and with operations*
	*than 10% of Bank’s*		*Non-consolidated*		*Bank’s officers and*		*higher than 5%*
	*capital*		*investments*		*board of directors*⁽¹⁾		*technical equity*

*Balance Sheet*
Investment securities⁽¹⁾		—		737		—		—
Loans		10,610		90,783		36,231		—
Customer’s acceptances and derivatives		—		2		—		107,640
Accounts receivable		89		8,632		4,108		—

Total	Ps	10,699	Ps	100,154	Ps	40,339	Ps	107,640


Deposits⁽¹⁾		632		107,389		8,656		287,000
Overnight funds		—		448		—		—
Accounts payable		6		477		2,274		—
Bonds		—		610		—		35,300

Total	Ps	638	Ps	108,924	Ps	10,930	Ps	322,300


*Transactions*
*Income*
Dividends received		—		11,206		—		—
Interest and fees		899		29,639		3,339		—
Other		—		2		—		—

Total	Ps	899	Ps	40,847	Ps	3,339		—


*Expenses*
Interest		49		6,703		6,642		22,400
Fees		—		—		156		—
Other		—		—		18		—

Total	Ps	49	Ps	6,703	Ps	6,816	Ps	22,400


(1)		The data presented herein for 2005 exclude the transactions with the Qualifying Special Purpose Entity — QSPE of Titularizadora Colombiana S.A. and Deceval S.A. and therefore differ from corresponding data presented in previous years.

F-66

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

2007


							*Shareholders with*
							*participating stock*
	*Shareholders with*						*lower than 10% of*
	*participating stock*						*the Bank’s capital*
	*equal to or higher*						*and with operations*
	*than 10% of Bank’s*		*Non-consolidated*		*Bank’s officers and*		*higher than 5%*
	*capital*		*investments*		*board of directors*		*technical equity*

*Balance Sheet*
Investment securities		—		75,546		—		—
Loans		390		80,231		40,393		—
Customer’s acceptances and derivatives		624		23,065		—		2,339
Accounts receivable		19		11,678		488		—

Total	Ps	1,033	Ps	190,520	Ps	40,881	Ps	2,339


Deposits		789		184,127		2,164		480,095
Bonds		—		3,000		—		74,567

Total	Ps	789	Ps	187,127	Ps	2,164	Ps	554,662


*Transactions*
*Income*
Dividends received		—		3,635		—		—
Interest and fees		53		234		61		—

Total	Ps	53	Ps	3,869	Ps	61		—


*Expenses*
Interest		345		8,881		521		35,424
Fees		—		—		439		—

Total	Ps	345	Ps	8,881	Ps	960	Ps	35,424

2008


							*Shareholders with*
							*participating stock*
	*Shareholders with*						*lower than 10% of*
	*participating stock*						*the Bank’s capital*
	*equal to or higher*						*and with operations*
	*than 10% of Bank’s*		*Non-consolidated*		*Bank’s officers and*		*higher than 5%*
	*capital*		*investments*		*board of directors*		*technical equity*

*Balance Sheet*
Investment securities		—		54,331		—		—
Loans		15		21,979		8,020		296,715
Customer’s acceptances and derivatives		9,496		—		—		—
Accounts receivable		8		1,377		136		6,968

Total	Ps	9,519	Ps	77,687	Ps	8,156	Ps	303,683


Deposits		31,766		110,715		4,176		1,213,832
Bonds		1,947		—		—		94,667

Total	Ps	33,713	Ps	110,715	Ps	4,176	Ps	1,308,499

F-67

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

2008

Shareholders with

participating stock

Shareholders with

lower than 10% of

participating stock

the Bank’s capital

equal to or higher

and with operations

than 10% of Bank’s

Non-consolidated

Bank’s officers and

higher than 5%

capital

investments

board of directors

technical equity

Transactions

Income

Dividends received

—

9,737

—

Interest and fees

9,532

4,004

3,420

26,240

Total

9,532

13,741

3,420

26,240

Expenses

Interest

455

42,114

2,923

98,727

Fees

—

892

Total

455

42,116

3,815

98,730

(30) Subsequent Events

In 2008, the Colombian Superintendency of Finance issued external circulars 025, 030, 044 and 063 (the “2008 External Circulars”) establishing new guidelines for the valuation of derivatives and structured products to be followed by entities under its supervision. External circular 025 amended chapter XVIII of the Circular Básica Contable y Financiera In accordance with the 2008 External Circulars, Bancolombia modified the methodology by which it values its portfolio of derivatives and structured products. As a result of this change, Bancolombia’s balance sheet and financial results have been impacted as follows: A reduction ofPs 135,000 (approximately US$ 56,600) in the carrying value of derivatives will be recorded in 2009, resulting in a reduction on income that will be amortized daily, in equal installments, during the first six months of 2009.

Bancolombia S.A. announces the public offer of subordinated ordinary notes.

On March 3, 2009 the Bank announced the local public offering of tranche 1 of Subordinated Ordinary Notes. This offering of Subordinated Ordinary Notes (“the First Subordinated Ordinary Notes Offering”) is the first offering of multiple and successive issuances of Subordinated Ordinary Notes up to an aggregate principal amount ofPs 1,000,000.

Subordinated Ordinary Notes were offered in the First Subordinated Ordinary Notes Offering for an aggregate principal amount ofPs 300,000. The Bank may increase the offering principal amount of Subordinated Ordinary Notes byPs 100,000, for a total amount of up toPs 400,000.

The First Subordinated Ordinary Notes Offering has been rated AA + by Duff & Phelps de Colombia S.A.

The First Subordinated Ordinary Notes Offering was announced on page 7A of the March 3, 2009 edition of the Colombian newspaper “La Republica”.

F-68

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Bancolombia S.A. announces mortgage securization

On March 5, 2009 Bancolombia S.A. (“The Bank”) (NYSE: CIB) announces that it sold mortgage loans in Pesos, to Titularizadora Colombiana S.A. (“Titularizadora”) amounting to approximatelyPs 218,800. These mortgage loans will be secured by Titularizadora through the issuance of mortgage-backed securities. The purpose of this transaction is to continue the transfer of Bank’s mortgage loans to the capital markets.

Bancolombia S.A. announces a decision by the Colombian Attorney general’s office

On April 21, 2009, the Colombian Attorney General’s Office (Fiscal Delegado ante la Corte Suprema de Justicia) delivered an order (“preclusion order”) barring a criminal investigation of the president of Bancolombia, Mr. Jorge Londoño Saldarriaga, and others. This investigation was related to the acquisition by Bancolombia (formerly Banco Industrial Colombiano S.A.) of Banco de Colombia S.A. and their subsequent merger.

The decision rendered by the Colombian Attorney General’s Office bars (i) the investigation of Mr. Jorge Londoño Saldarriaga regarding the alleged aiding and abetting of the crimes of willful misconduct and willful neglect by a public officer (prevaricato por acción and prevaricato por omisión) and (ii) the investigation of the members of the board of directors of Banco Industrial Colombiano S.A. in office at the time of the merger with Banco de Colombia S.A. regarding the alleged aiding and abetting of the crimes of willful misconduct and willful neglect by a public officer (prevaricato por acción and prevaricato por omisión), procedural fraud and fraud.

This order also bars the investigation of the members of the board of directors of the Central Bank of the Republic of Colombia and certain officers of the Colombian Superintendency of Finance.

F-69

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

(31) Differences Between Colombian Accounting Principles for Banks and U.S. GAAP

The Bank’s financial statements are prepared in accordance with generally accepted accounting principles and practices prescribed by the Superintendency of Finance and other legal provisions (“Colombian GAAP”). These principles and regulations differ in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”), the principal differences between Colombian GAAP and U.S. GAAP and the effect on consolidated net income and consolidated stockholders’ equity are presented below, with an explanation of the adjustment.

The following is a summary of the adjustments to consolidated net income and consolidated stockholders’ equity.

a) Reconciliation of consolidated net income:


	*2006*			*2007*			*2008*

*Consolidated net income under Colombian GAAP*	Ps	749,529		Ps	1,086,923		Ps	1,290,643
a) Deferred income taxes		(132,003	)		(91,280	)		83,358
b) Employee benefit plans		10,320			18,127			(18,463	)
c) Fixed Assets		(104	)		(151	)		14,496
e) Allowance for loans losses, financial leases losses, foreclosed assets and other receivables		195,549			(69,809	)		(338,799	)
f) Loan origination fees and costs		16,798			7,241			(26,942	)
g) Interest recognition on non-accrual loans		2,377			6,832			(78	)
h) Deferred charges		(3,130	)		7,192			24,455
i) Investment securities & derivatives		(36,235	)		(9,190	)		(141,392	)
j) Investments in unaffiliated companies		(1,545	)		(968	)		(359	)
k) Investments in affiliates		6,598			13,321			33,815
l) Lessor accounting		(1,703	)		709			(1,294	)
m) Business combinations
m.i) Goodwill		22,642			82,075			55,603
m.ii) Intangible assets		(88,248	)		(42,063	)		(106,133	)
m.iii) Fair value adjustments to assets and liabilities acquired		186,546			(6,860	)		18,254
n) Securitization performing and non-performing loans		4,717			19,702			(3,417	)
o) Foreign currency translation adjustment		7,853			13,115			(30,370	)
p) Minority interest		4,793			(7,965	)		(1,638	)
r) Guarantees		(3,571	)		(2,549	)		(4,672	)
s) Insurance Contracts		—			(4,945	)		505
u) Equity tax		—			(3,813	)		2,348

*Consolidated net income under U.S. GAAP*	Ps	941,183		Ps	1,015,644		Ps	849,920


*Net income from continuing operations*	Ps	988,926		Ps	1,071,031		Ps	772,684
*Income (Loss) from operations and disposal of discontinued Operations*	Ps	(47,743	)	Ps	(55,387	)	Ps	77,236

F-70

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

b) Reconciliation of Stockholders’ Equity:


	*2007*			*2008*

*Consolidated stockholders’ equity under Colombian GAAP*	Ps	5,199,270		Ps	6,116,845
a) Deferred income taxes		(108,876	)		(51,897	)
b) Employee benefit plans		4,507			(22,131	)
c) Fixed assets		38,538			53,034
d) Revaluation of assets		(319,646	)		(393,308	)
e) Allowance for loans losses, financial leases losses, foreclosed assets and other receivables		561,442			229,439
f) Loan origination fees and costs		77,772			50,830
g) Interest recognition on non-accrual loans		15,217			15,139
h) Deferred charges		(11,291	)		(26,690	)
i) Investment securities & derivatives		(163,559	)		(238,595	)
j) Investments in unaffiliated companies		(14,266	)		(14,625	)
k) Investments in affiliates		50,496			84,311
l) Lessor accounting		937			(357	)
m) Business combinations
m.i) Goodwill		276,217			242,843
m.ii) Intangible assets		487,691			468,546
m.iii) Fair value adjustments to assets and liabilities acquired		(171,222	)		(99,314	)
n) Securitization performing and non-performing loans		30,270			30,493
p) Minority interest		(6,595	)		(8,233	)
r) Guarantees		(6,120	)		(10,792	)
s) Insurance contracts		(3,228	)		(2,723	)

		738,284			305,970

*Consolidated stockholders’ equity under U.S. GAAP*	Ps	5,937,554		Ps	6,422,815

c) Supplemental Consolidated Condensed Financial Statements under U.S.GAAP:

The presentation of balance sheet and income statement under U.S. GAAP differs from Colombian GAAP due to the acquisition of Banagrícola in 2007. As a result, we are presenting the summarized consolidated financial statements under U.S.GAAP for years ended December 31, 2006, 2007 and 2008:

Supplemental Consolidated Condensed Balance Sheets


	*2007*			*2008*

Assets:
Cash and due from banks	Ps	5,285,089		Ps	5,641,204
Trading account		2,287,673			3,255,259
Investment securities, net		2,361,663			3,266,001
Loans		35,340,990			41,628,902
Financial lease		4,699,764			5,839,524
Allowance for loans, financial leases losses and other receivables		(1,072,307	)		(2,188,949	)
Premises and equipment, net		1,922,999			2,461,649
Other assets		3,054,437			3,763,132

Total assets	Ps	53,880,308		Ps	63,666,722

F-71

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2007*		*2008*

Liabilities and Stockholders’ Equity:
Deposits		34,356,264		40,381,664
Short term debt		1,195,849		1,454,322
Long term debt		7,330,902		9,003,090
Other liabilities		4,996,708		6,257,069
Minority interest		63,031		147,762
Shareholders’ equity		5,937,554		6,422,815

Total Liabilities and Stockholders’ equity	Ps	53,880,308	Ps	63,666,722

Supplemental Consolidated Condensed Statements of Operations


	*2006*^{(1) (2)}			*2007*⁽¹⁾			*2008*⁽¹⁾

Total interest income	Ps	3,261,024		Ps	4,762,967		Ps	6,274,359
Total interest expense		(1,280,932	)		(1,986,746	)		(2,788,891	)

Net interest income		1,980,092			2,776,221			3,485,468
Provision of loans, leases and other receivables		(1,722	)		(678,930	)		(1,476,368	)

Net interest income after provision of loans, leases and other receivables		1,978,370			2,097,291			2,009,100
Other income		1,151,124			1,608,703			2,066,927
Other expenses		(1,940,694	)		(2,185,319	)		(2,941,328	)

Income before income taxes		1,188,800			1,520,675			1,134,699
Income tax expense		(199,874	)		(449,644	)		(362,015	)

Net income from continued operations		988,926			1,071,031			772,684
Discontinued Operations		(47,743	)		(55,387	)		77,236

Net income	Ps	941,183		Ps	1,015,644		Ps	849,920


(1)		Prior periods were reclassified due to discontinued operations of Multienlace S.A., Suinternal do Brasil Locacao de Bens S.A., PA Renting Colombia, Inversiones Valsimesa, Fundiciones y Componentes Automotores.

(2)		Prior periods were reclassified due to discontinued operations of Almacenar and their Subsidiaries.

Supplemental Consolidated Condensed Statements of Cash Flows⁽¹⁾


	*2006*			*2007*			*2008*

Net income	Ps	941,183		Ps	1,015,644		Ps	849,920
Adjustments to reconcile net income to net cash used by operating activities		2,811,272			2,058,680			569,760

Net cash used by operating activities		3,752,455			3,074,324			1,419,680
Net cash (used) provided in investing activities		(7,121,607	)		(9,139,513	)		(9,101,689	)
Net cash provided by financing activities		3,677,955			9,566,743			7,977,416

Increase in cash and cash equivalents	Ps	308,803		Ps	3,501,554		Ps	295,407

Effect of exchange rate changes on cash and cash equivalents		2,067			(257,357	)		60,708

Cash and cash equivalents at beginning of year		1,730,022			2,040,892			5,285,089

Cash and cash equivalents at end of year	Ps	2,040,892		Ps	5,285,089		Ps	5,641,204


(1)		This consolidated statement of cash flow includes the following non cash transactions: Ps 4,050 related to restructured loans that were transferred to foreclosed assets and foreign exchange gain of Ps 88,783.

F-72

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Supplemental Consolidated Condensed Changes in Stockholders’ Equity


	*2006*			*2007*			*2008*

Balance at beginning of year	Ps	4,125,996		Ps	4,549,018		Ps	5,937,554
Shares issued at market value		—			927,612			—
Net income		941,183			1,015,644			849,920
Dividends declared		(369,736	)		(403,164	)		(447,486	)
Other comprehensive income (loss)		(116,229	)		(113,681	)		53,993
Other movements		(32,196	)		(37,875	)		28,834

Balance at end of year	Ps	4,549,018		Ps	5,937,554		Ps	6,422,815

Supplemental Consolidated Statement of Comprehensive Income


	*2006*			*2007*			*2008*

Net Income	Ps	941,183		Ps	1,015,644		Ps	849,920
*Other comprehensive income, net of tax:*
Unrealized gain or (loss) on securities available for sale		(146,925	)		(34,731	)		23,281
Pension liability		(2,217	)		(10,130	)		(5,314	)
Foreign currency translation adjustments		(7,853	)		(68,820	)		36,026

Other comprehensive income (loss)		(156,995	)		(113,681	)		53,993

Comprehensive income	Ps	784,188		Ps	901,963		Ps	903,913

Other comprehensive income (loss)

2006


	*Before-Tax*			*(Tax Expense)*		*Net-of-tax*
	*Amount*			*or Benefit*		*Amount*

Unrealized gain or (loss) on securities available for sale	Ps	(232,271	)	Ps	85,346	Ps	(146,925	)
Additional pension liability		(3,487	)		1,270		(2,217	)
Foreign currency translation adjustment		(7,853	)		—		(7,853	)

Other comprehensive income (loss)	Ps	(243,611	)	Ps	86,616	Ps	(156,995	)

2007


	*Before-Tax*			*(Tax Expense)*		*Net-of-tax*
	*Amount*			*or Benefit*		*Amount*

Unrealized gain or (loss) on securities available for sale	Ps	(51,632	)	Ps	16,901	Ps	(34,731	)
Additional pension liability		(14,672	)		4,542		(10,130	)
Foreign currency translation adjustment		(68,820	)		—		(68,820	)

Other comprehensive income (loss)	Ps	(135,124	)	Ps	21,443	Ps	(113,681	)

F-73

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

2008


	*Before-Tax*			*(Tax Expense)*			*Net-of-tax*
	*Amount*			*or Benefit*			*Amount*

Unrealized gain or (loss) on securities available for sale	Ps	39,570		Ps	(16,289	)	Ps	23,281
Additional pension liability		(8,175	)		2,861			(5,314	)
Foreign currency translation adjustment		36,026			—			36,026

Other comprehensive income (loss)	Ps	67,421		Ps	(13,428	)	Ps	53,993

Accumulated other comprehensive income


	*Unrealized*
	*Gains (Losses)*						*Foreign*			*Accumulated*
	on			*Pension*			*Currency*			*Other*
	*Securities, net of*			*Liability, net of*			*Translation*			*Comprehensive*
	*taxes*			*taxes*			*Adjustment*			*Income*
Beginning balance for 2006		68,491			(29,922	)		(10,312	)		28,257
Current-period change		(146,925	)		(2,217	)		(7,853	)		(156,995	)
Effects of adoption FAS 158		—			40,766			—			40,766

Ending balance for 2006	Ps	(78,434	)	Ps	8,627		Ps	(18,165	)	Ps	(87,972	)

Beginning balance for 2007	Ps	(78,434	)	Ps	8,627		Ps	(18,165	)	Ps	(87,972	)
Current-period change		(34,731	)		(10,130	)		(68,820	)		(113,681	)

Ending balance for 2007	Ps	(113,165	)	Ps	(1,503	)	Ps	(86,985	)	Ps	(201,653	)

Beginning balance for 2008		(113,165	)		(1,503	)		(86,985	)		(201,653	)
Current-period change		23,281			(5,314	)		36,026			53,993
Prior years adjustments		773			(582	)		—			191

Ending balance for 2008		(89,111	)		(7,399	)		(50,959	)		(147,469	)

Summary of significant differences and required U.S. GAAP disclosures

a)Deferred income taxes:

Under Colombian GAAP, deferred income taxes are generally recognized for timing differences (not temporary differences as in SFAS No. 109) for commercial and manufacturing subsidiaries. For financial institutions, the Superintendency of Finance has restricted the inclusion of timing differences related to the amortization of fiscal tax losses and the excess of presumed income over ordinary income as a deferred tax asset.

F-74

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Under U.S. GAAP, deferred tax assets or liabilities must be recorded for all temporary differences between the financial and tax bases of assets and liabilities. A valuation allowance is provided for deferred tax assets to the extent that it is more likely than not that they will not be realized. During 2007 and 2008, the Bank calculated deferred income taxes based on the tax benefits received upon the acquisition of certain property and equipment in accordance to EITF 98-11 — Accounting for Acquired Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business Combinations.

Income tax expense under U.S. GAAP is comprised of the following components for the years ended at December 31, 2006, 2007 and 2008:


	*2006*		*2007*		*2008*

Current income tax expense	Ps	136,307	Ps	338,364	Ps	416,381
Deferred income tax (benefit) expense		71,788		114,799		(25,683	)

Total	Ps	208,095	Ps	453,163	Ps	390,698


	*2006*		*2007*		*2008*

Continuing operation income tax	Ps	199,874	Ps	449,644	Ps	362,015
Discontinued operation income tax		8,221		3,519		28,683

Income tax	Ps	208,095	Ps	453,163	Ps	390,698

Temporary differences between the amounts reported in the financial statements and the tax bases for assets and liabilities result in deferred taxes. Deferred tax assets and liabilities at December 31, 2007 and 2008 were as follows:


	*2007*			*2008*

*Deferred tax assets and liabilities*

*Deferred tax assets:*
Accrual of employee benefits		—		Ps	7,746
Allowance for loan losses		28,527			90,798
Fixed assets		135,192			117,740
Tax losses and excess of presumed income over ordinary income		23,465			50,939
Allowance for foreclosed assets		17,965			16,574
Accrued expenses		33,779			42,341
Excess of accrued income over valuation income		3,625			533
Business combination		21,971			9,949
Unrealized gain on investment securities		61,909			46,844
Deferred interest on restructured loans		20,421			1,949
Forward, future and swaps effect		—			465
Other		20,731			46,750

Total gross deferred tax assets		367,585			432,628
Less valuation allowance		(9,491	)		(63,114	)

Net deferred tax asset	Ps	358,094		Ps	369,514


*Deferred tax liabilities:*
Accrual of employee benefits	Ps	1,577			—
Fixed assets		31,978			186,899
Allowance for loan losses		130,448			85,630
Allowance for foreclosed assets		26,308			21,358
Loan origination fees and cost		24,795			17,567
Forward, future and swaps effect		49,994			22,879
Inflation adjustments		76,090			12,818
Business Combination		24,842			23,041
Intangible assets		134,233			123,012
Excess of accrued income over valuation income		11,790			28,119
Securitization		10,595			10,673
Unrealized gain on investment securities		—			1,538
Other		7,813			7,644

Total deferred liabilities		530,463			541,178

Net deferred asset (liability)	Ps	(172,369	)	Ps	(171,664	)

F-75

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The valuation allowance for deferred tax assets as of December 31, 2007 and 2008 was Ps 9,491 and Ps 63,114, respectively. The net change in the total valuation allowance for the year ended December 31, 2007 was a decrease of Ps 10,217 and for the year ended December 31, 2008 was an increase of Ps 53,622. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal over an entity level of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2008. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

The 37% income tax nominal rate for years, 2006, 36% for year 2007 and 35% for year 2008 differs from 18.12%, 30.85% and 35.22% effective tax rate for years 2006, 2007 and 2008, due to the following:


	*2006*			*2007*			*2008*

Income before tax U.S. GAAP⁽¹⁾	Ps	1,149,278		Ps	1,468,807		Ps	1,240,619

Income tax as per statutory rate		425,233			528,771			434,217
Foreign profits taxed at other rates		—			(162,428	)		(13,492	)
Foreign profits exempt from tax		—			121,689			(45,544	)
Non-deductible items / provisions		77,002			72,868			59,596
Non-taxable income		(197,587	)		(139,882	)		(114,236	)
Other		(111,820	)		42,363			16,535
Increase (decrease) in tax valuation allowance		15,267			(10,217	)		53,622

Income tax	Ps	208,095		Ps	453,163		Ps	390,698


(1)		It represents continuing operation and discontinued operation.

For years ended December 31, 2006, 2007 and 2008, non-taxable income includes off shore subsidiaries’ income tax, dividend income tax, gain on sales of stocks tax, interest income over mortgage securities tax, interest income on VIS housing loans tax and recoveries of deductible items tax.

As of December 31, 2008, the Bank intended to capitalize the results from its off-shore Subsidiaries. Accordingly, no deferred income tax liability was recorded for the undistributed profits of Bancolombia Panamá and its subsidiaries, Bancolombia Puerto Rico and Suleasing Internacional and its subsidiaries. The undistributed profits in such Subsidiaries were Ps 641,628 at December 31, 2008.

F-76

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

FIN 48

The Bank adopted the provisions of Interpretation 48 — Accounting for uncertainty in income taxes (“FIN 48”) in 2007. The interpretation clarifies the accounting and reporting for uncertainty in income taxes recognized by the Bank and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Bank records interest and penalties, when necessary, related to the probable losses in other expenses in the statements of operations.

The adoption of FIN 48 did not have impact on the Bank’s financial position, and there are no unrecognized tax benefits. Furthermore, the Bank did not have interest and penalties recognized in the balance sheet as of December 31, 2007 and 2008.

The Bank is not aware of positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will be significantly increased or decreased within 12 months of the reporting date.

The open tax years of the major companies of the Bancolombia Group are as follows:


*Company*		*Open tax year*

LOCAL SUBSIDIARIES

Bancolombia		2006 – 2008

Leasing Bancolombia		2006 – 2008

Factoring Bancolombia		2006 – 2008

Fiduciaria Bancolombia		2006 and 2008

Banca de Inversión		2006 – 2008

Valores Bancolombia		2006 – 2008

Sufinanciamiento		2006 – 2008

Renting Colombia		2006 – 2008

FOREIGN SUBSIDIARIES

Banco Agrícola		2006 – 2008

b)Employee benefit plans:

U.S. GAAP requires the recognition of pension costs based on actuarial computations under a prescribed methodology which differs from that used under Colombian GAAP. For purposes of U.S. GAAP reconciliation, the transition obligation calculated at the date the Bank adopted SFAS 87 is being amortized from January 1, 1989, for a period of 18 years for the pension plan and 27 years for the severance plan.

There are not plan assets under the employee benefit plan.

F-77

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Pension Plan

In 1967, the Social Security Institute assumed the pension obligation for the majority of the Bank’s employees; however, employees who had more than ten years of service prior to that date, continued participating in the Bank’s non-contributory unfunded defined benefit pension plan. Under this plan, benefits are based on length of service and level of compensation. As of December 31, 2008, there were nearly 895 participants covered by the Plan.

The measurement for pension plan obligations differs from Colombian GAAP to U.S. GAAP basically due to the fact that Colombia GAAP requires calculation of the estimated liability using the actuarial methodology and projection rates given by the law, the actuarial assumptions, based on nominal discount, salary and pension increase rates, and the method of computing the net periodic pension costs. For U.S. GAAP purposes, actuarial valuation of pension plan are performed annually using the projected unit credit method in accordance with SFAS 87.

Severance obligation

Under Colombian labor regulations, employees are entitled to receive one month’s salary for each year of service. This benefit accumulates and is paid to the employees upon their termination or retirement from the Bank; however, employees may request advances against this benefit at any time. In 1990, the Colombian government revised its labor regulations to permit companies, subject to the approval of the employees, to pay the severance obligation to their employees on a current basis. Law 50 from 1990, also enabled each worker freely to choose which pension fund would manage the amount accrued during the year of his/her severance pay. This amount must be transferred by headquarters to the pension funds no later than the following year.

Under U.S. GAAP, a curtailment is an event that significantly reduces the expected years of future service of present employees or eliminates, for a significant number of employees, the accrual of defined benefits for some or all of their future services. Consequently, this modification reduces the projected benefit obligation. Such a reduction is used to reduce any existing unrecognized prior service cost, and the excess, if any, is amortized on the same basis as the cost of benefit increases.

As of December 31, 2008 there were 1,548 participants remaining in the original severance plan.

Until December 31, 2006, the pension plan and severance obligation included employees from the Bank and Almacenar S.A. As a result of the sale of Almacenar S.A., dated February 2007, 16 of Almacenar’s employees who participated in the pension plan and 22 employees who participated in Severance plan were not included in the calculation. The Bank does not maintain any pension or severance obligation with Almacenar’s employees after the date of sale.

Upon to the merger, Conavi/Corfinsura did not have a defined benefit plan for their employees and they were not entitled to join the Bank’s defined benefit plan.

Retirement Premium Pension Plan

Under Colombian labor regulations, employers and employees are entitled to negotiate other compensations than benefit plans stated by the law by means of private agreements. As result of the agreement, for employees who are entitled to enjoy their pension assumed by Pension Funds, the Bank recognizes an additional liability as a premium for once and only at the moment of the retirement date. Calculation of premium pension plan varies from Colombian GAAP to U.S. GAAP, because the latter is performed using actuarial valuations over a long-term period, while Colombian GAAP is prepared over the remaining years of the remaining private agreement’s extension.

F-78

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Disclosure and calculation of differences under U.S. GAAP


	*2006*			*2007*			*2008*

*Components of net periodic benefit cost*
Service cost	Ps	4,277		Ps	3,447		Ps	5,039
Interest cost		18,477			16,950			21,831
Amortization of prior service cost		135			131			1,217
Amortization of net transition obligation (Assets)		1,017			978			789
Amortization of net (gain) or loss		(401	)		(3,470	)		(3,412	)
Recognition of pension premium⁽¹⁾		—			—			23,534

Adjustment to be recognized
Net periodic pension cost under U.S. GAAP		23,505			18,036			48,998
Net periodic pension cost under Colombian GAAP		33,825			36,163			30,535

Difference to be recognized under U.S. GAAP	Ps	10,320		Ps	18,127		Ps	(18,463	)


(1)		As of December 31, 2008, the Bank recognized accumulated reserves of prior years for pension premium plan using the actuarial methodology required by SFAS 87 and SFAS 106.

The combined costs for the above mentioned benefit plans, determined using U.S. GAAP, for the years ended December 31, 2006, 2007 and 2008, are summarized below:


	*2006*			*2007*			*2008*

*Change in project benefit obligation*
Unfunded benefit obligation at beginning of year	Ps	133,498		Ps	111,587		Ps	119,831
Recognition of pension premium⁽¹⁾		—			—			25,399
Service cost		4,277			3,447			5,039
Interest cost		18,477			16,950			21,831
Actuarial (gain)/loss		(21,552	)		(655	)		5,593
Effect of settlements⁽²⁾		—			(1,741	)		—
Cost of plan amendment⁽³⁾		—			13,056			—
Benefits paid		(23,113	)		(22,812	)		(23,635	)

Unfunded benefit obligation at end of year	Ps	111,587		Ps	119,832		Ps	154,058


Accrued benefit cost under Colombian GAAP		(112,639	)		(124,339	)		(131,927	)

Difference to be recognized under U.S. GAAP Stockholders’ equity	Ps	1,052		Ps	4,507		Ps	(22,131	)


(1)		As of December 31, 2008, the Bank recognized reserves for pension premium plan using the actuarial methodology required by SFAS 87 and SFAS 106.

(2)		The effect of curtailment/settlement is related to the sale of Almacenar S.A.

(3)		Due to the retroactive effect of sentence 862/2006, Bancolombia was required to recognize pension benefit increases ranging from about 1% to more than 400% to approximately 123 retirees and beneficiaries. The increase in the Project Benefit Obligation as of December 31, 2007 due to this plan amendment is treated as prior service cost.

F-79

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Under U.S. GAAP, Bancolombia S.A. applies the provisions of SFAS 87, as amended by SFAS 132, “Employers’ Disclosures about Pensions and Other Post-retirement Benefits” and SFAS 132(R), “Employers’ Disclosure about Pension and Other Post-retirement Benefits, an amendment to FASB Statements No. 87, 88 and 106”. Bancolombia adopted effective December 31, 2006 SFAS 158, in respect of its defined benefits pension plans, detailed in Note 31 of the Consolidated Financial Statements.


	*2007*			*2008*

*Net Amount Recognized in the Consolidated Balance Sheet at December 31*
Statement of Financial Position
Noncurrent Assets	Ps	(6,194	)	Ps	(2,489	)
Current Liabilities		13,441			14,831
Noncurrent Liabilities		112,585			141,716

Amount Recognized in Financial Position	Ps	119,832		Ps	154,058


Accumulated Other Comprehensive Income Net Actuarial Gain (Loss)	Ps	12,452		Ps	2,460
Net Prior Service (Cost)/Credit		(13,350	)		(12,118	)
Net Transition (Obligation) Asset		(1,415	)		(1,412	)

Total at December 31, 2008		(2,313	)		(11,070	)

Deferred income tax		810			3,671

Accumulated other comprehensive Income	Ps	(1,503	)	Ps	(7,399	)

The changes in the Accumulated other comprehensive Income taking place during the year 2007 and 2008, are described as follows:


	*2007*			*2008*

*Increase or (decrease) in Accumulated Other Comprehensive Income*

Recognized during year — Transition Obligation/(Asset)	Ps	979		Ps	789
Recognized during year — Prior Service Cost/(Credit)		131			1,217
Recognized during year — Net Actuarial Losses/(Gains)		(3,381	)		(6,417	)
Occurring during year — Prior service cost		(13,056	)		—
Occurring during year — Net Actuarial (Losses)/Gains		655			(2,588	)
* Recognition of pension premium		—			(1,176	)

Accumulated other comprehensive Income in current year	Ps	(14,672	)	Ps	(8,175	)

The Bank expects the following amounts in other comprehensive income to be recognized as components of net periodic pension cost during 2009:


Net transition obligation/(asset)	Ps	304
Net prior service cost		1,217
Net loss/(gain)		(2,587	)

Total	Ps	(1,066	)

The economic assumptions adopted are shown below in nominal terms. Those assumptions used in determining the actuarial present value of pension obligation and the projected pension obligations for the plan years, were as follows:


	*2006*			*2007*			*2008*

Discount rate		8.68	%		9.25	%		9.75	%
Rate of compensation increases		6.07	%		6.00	%		7.00	%
Rate of pension increases		4.50	%		5.00	%		5.50	%

F-80

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Estimated Future Benefit Payments

The benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:


	*Pension*		*Other*
	*Benefits*		*Benefits*⁽¹⁾

2009		12,993		13,591
2010		12,895		7,816
2011		12,572		11,332
2012		12,573		15,285
2013		12,445		19,078
Years 2014 - 2018		65,328		106,545


(1)		Includes Expected future benefit payments for Retirement premium pension plan and Leaving Indemnity plan.

c)Fixed assets:

The following table shows the adjustments for each item:


	*Net Income*
	*2006*			*2007*			*2008*
*Items*
Inflation adjustment		(104	)		(151	)		(1,914	)
Capitalization of Interest Cost		—			—			15,862
Assets available for sale		—			—			548

Total		(104	)		(151	)		14,496


	*Stockholders’equity*
	*2007*		*2008*
*Items*
Inflation adjustment		38,538		36,624
Capitalization of Interest Cost		—		15,862
Assets available for sale		—		548

Total		38,538		53,034

Inflation adjustment

The consolidated financial statements under Colombian GAAP were adjusted for inflation based on the variation in the IPC for middle income-earners, from January 1, 1992, to December 31, 2000. The adjustment was applied monthly to non-monetary assets, equity (except for the revaluation surplus and exchange adjustment), contingent accounts and memorandum accounts.

Financial statements are adjusted for inflation under U.S. GAAP when an entity operates in a hyperinflationary environment. The U.S. GAAP adjustment represents the cumulative inflation adjustment on the Bank’s non-monetary assets for inflation occurring prior to January 1, 2001, less depreciation expense.

Capitalization of Interest Cost

Under U.S. GAAP, the Bank has capitalized interest costs incurred during the construction of the new headquarters in Medellín. The capitalized interest will be amortized on a straight-line basis over the estimated useful life of the asset starting in January 2009. Under Colombian GAAP, the interest costs were recorded as expenses in the Bank’s statement of operations.

F-81

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Real estate in use and for sale

- Real Estate In Use

In the case of all real estate recorded under Colombian GAAP, their book values are compared with their commercial appraisal values to determine whether a provision should be set up or their values increased. If the appraisal is lower than the corresponding book value, then a provision is recorded, if higher then the corresponding book value is increased to the appraisal value.

Under U.S. GAAP, these assets are subject to recognition of an impairment loss if the book values of those assets is lower than their future undiscounted cash flows and an impairment loss is recorded for the difference between the carrying amount and the fair value of the assets.

- Real estate held for sale

According to Colombian GAAP, these assets are recorded similarly to real estate in use.

Under U.S. GAAP, long held assets classified as held for sale to be recorded at the long of the book value less estimated costs to sell less and are not subject to depreciation.

d) Revaluation of assets

In accordance with Colombian GAAP, reappraisals of a portion of the Bank’s premises and equipment, equity investments and other non-monetary assets are made periodically and recorded in offsetting accounts which are shown in the balance sheet under the asset caption “reappraisal of assets” and the stockholders’ equity in the balance sheet caption “Surplus from reappraisals of assets”. The last revaluation was made in December 2008. Under U.S. GAAP, reappraisals of assets are not permitted and thus balances are reversed.

e) Allowance for loan losses, financial leases, foreclosed assets and other receivables

As established by the Superintendency of Finance, the methodology for evaluating loans under Colombian GAAP, as discussed in Note 2 (i), is based on their inherent risk characteristics and serves as a basis for recording loss allowances based on loss percentage estimates. Under both Colombian GAAP and U.S. GAAP, the loan loss allowance is determined and monitored on an ongoing basis, and is established through periodic provisions charged to operations. Under Colombian GAAP troubled debt restructuring loans have the same characteristics than under U.S. GAAP.

Under U.S. GAAP, the Bank considers loans to be impaired when it is probable that all amounts of principal and interest will not be collected according to the contractual terms of the loan agreement. The allowance for significant impaired loans including troubled debt restructuring loans are assessed based on the present value of estimated future cash flows discounted at the current effective loan rate or the fair value of the collateral in the case where the loan is considered collateral-dependent. An allowance for impaired loans is provided when future cash flows discounted at their original effective rate or collateral fair value is lower than book value.

F-82

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

In addition, if necessary, a specific allowance for loan losses is established for individual loans, based on regular reviews of individual loans, recent loss experience, credit scores, the risk characteristics of the various classifications of loans and other factors directly influencing the potential collectibility and affecting the quality of the loan portfolio.

To calculate the allowance required for smaller-balance impaired loans and unimpaired loans, historical loss ratios are determined by analyzing historical losses. Loss estimates are analyzed by loan type and thus for homogeneous groups of clients. Such historical ratios are updated to incorporate the most recent data reflecting current economic conditions, industry performance trends, geographic or obligor concentrations within each portfolio segment, and any other pertinent information that may affect the estimation of the allowance for loan losses.

Many factors can affect the Bank’s estimates of allowance for loan losses, including volatility of default probability, migrations and estimated loss severity.

Credit losses relating to loans, which may be for all or part of a particular loan are deducted from the allowance. The related loan balance is charged off in the year in which the loans are deemed uncollectible. Recoveries of loans and trade receivables previously charged off are credited to the allowance when received.

In addition, for U.S. GAAP purposes, the Bank maintains an allowance for credit losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees granted, standby letters of credit and other financial instruments. The allowance is recorded as a liability. The Bank follows the same methodology described for allowance for loans losses, but including an estimated probability of drawdown by the borrower.

The following summarizes the allowance for loan and financial lease losses under Colombian GAAP and U.S. GAAP:


	*2007*		*2008*

*Allowance for loans, financial lease losses and foreclosed assets under Colombian GAAP*
Allowance for loans and financial lease losses	Ps	1,457,151	Ps	2,134,360
Allowance for accrued interest and other receivables		67,707		110,641
Allowance for foreclosed assets		201,822		179,827

	Ps	1,726,680	Ps	2,424,828


*Allowance for loan losses under U.S. GAAP*

Allowance for loans, financial lease, accrued interest losses and other related receivables⁽¹⁾		1,055,697		2,089,940
Allowance for foreclosed assets		109,541		105,449

	Ps	1,165,238	Ps	2,195,389

Difference to be recognized as an adjustment to Colombian GAAP stockholders’ equity	Ps	561,442	Ps	229,439


(1)		For 2008, The Allowance for loans, financial lease, accrued interest losses and other related receivables under U.S.GAAP differs in Ps 99,009 from the amount of Ps 2,188,949 registered in the Supplemental Consolidated Condensed Balance Sheets on the line: Allowance for loans, financial leases losses and other receivables. This difference corresponds to the following lines that impact the allowance for loan losses under U.S.GAAP and are included in these reconciliation lines: Lessor accounting Ps 3,744; Securitization non-performing and performing loans Ps 21,928; Business Combinations Ps 59,636 and Interest recognition on non-accrual loans Ps 13,701.

F-83

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2006*		*2007*			*2008*⁽¹⁾
*Difference recognized in net income under U.S.GAAP*
Allowance for loans, financial lease losses and other receivables	Ps	193,596	Ps	(45,780	)	Ps	(314,101	)
Allowance for foreclosed assets		1,953		(24,029	)		(24,698	)

	Ps	195,549	Ps	(69,809	)	Ps	(338,799	)


(1)		For 2008, the difference of Ps 332,003 between the reconciliations for the years 2007, Ps 561,442, and 2008, Ps 229,439, that are recognized as adjustments to Colombian GAAP stockholders’ equity is different from the difference recognized in net income under U.S.GAAP (Ps 338,799) in the amount of Ps 6,796 due to the comprehensive income derived from the reconciliation of foreclosed assets of Banco Agrícola and Asesuisa.

An analysis of the activity in the allowance for loans and financial lease losses under U.S. GAAP during the year ended December 31, 2006, 2007 and 2008 is as follows:


	*2006*			*2007*			*2008*

Provision at the beginning of the period	Ps	581,645		Ps	507,641		Ps	1,055,697
Provision for credit losses⁽¹⁾		1,765			678,967			1,466,085
Foreign Currency translation and other adjustments		(685	)		(29,129	)		47,512
Charge-offs		(145,829	)		(191,779	)		(577,123	)
Recoveries of charged-off loans		70,745			89,997			108,143
Reclassifications		—			—			(10,374	)

Provision at the end of the period	Ps	507,641		Ps	1,055,697		Ps	2,089,940


Gross Loans and financial leases		24,645,574			37,702,624			44,642,570

Provision at the end of the period as a percentage of gross loans		2.06	%		2.80	%		4.68	%

Provision for credit losses as percentage of gross loans		0.01	%		1.79	%		3.28	%


(1)		For 2008, the provision for credit losses differ in Ps 10,283 from the amount of Ps 1,476,368 registered in the Supplemental Consolidated Condensed Statements of Operations on the line: Provision of loans, leases and other receivables. This difference corresponds to: a) The amount of Ps 16,586 to the following lines that impact the allowance for loan losses under U.S.GAAP and are included in this reconciliations lines: Lessor accounting Ps 1,294; Securitization non-performing and performing loans Ps 5,318; Business Combinations Ps 8,968 and Interest recognition on non-accrual loans Ps 1,006. b) Reclassifications of recoveries of charged-offs loan in the amounts of Ps 13,726 from Discontinued operations and (Ps 20,029) from Securitization.

The recorded investments in impaired loans were approximately Ps 1,676,770 and Ps 2,680,199 for the years ended December 31, 2007 and 2008, respectively, and the related allowance for loan losses on those impaired loans totaled Ps 327,980 and Ps 1,069,136, respectively.

The average recorded investments in impaired loans were approximately Ps 1,241,224 and Ps 2,178,484 for the years ended December 31, 2007 and 2008, respectively, and the related allowance for loan losses on those impaired loans totaled Ps 279,559 and Ps 698,558, respectively.

The interest income that would have been recorded for impaired loans in accordance with the original contractual terms amounted to Ps 458,710 for the year ended 2008.

For the years ended December 31, 2006, 2007 and 2008, the Bank recognized interest income of approximately Ps 14,133, Ps 26,592 and Ps 89,917, respectively, on such impaired loans.

The small balances-homogeneous loans evaluated under SFAS 5 methodology amounted to Ps 41,962,372 at December 31, 2008.

F-84

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Foreclosed assets

Under Colombian GAAP, the Bank must design and adopt its own internal models for the calculation of provisions for foreclosed assets allowing the Bank to estimate the expected loss for all types of assets. For real estate, the provision is equal to 30% of the value of the asset at the time of receipt and must be constituted in proportional monthly installments within the first year following receipt. This provision will increase an additional 30% in proportional monthly installments within the second year following receipt of the asset. Once the legal term for sale has expired without authorization to extend, the provision must be 80% of the value upon receipt. In case the term extension is granted, the remaining 20% of the provision may be constituted within said term.

For moveable assets, the provision is equal to 35% of the value of the asset at the time of acquisition and must be constituted in proportional monthly installments within the first year following receipt. Said provision must be increased and additional 35% within the second year following receipt of the asset. Once the legal term for sale has expired without authorization to extend, the provision must be 100% of the book value of the asset prior to provisions. In case the term extension is granted, the remaining 30% of the provision may be constituted within said term.

Under U.S. GAAP, personal and real property received as payment or settlement on a loan is recorded at the lower at is carrying amount or fair value less cost to sell. Gains or losses from the realization of foreclosed assets are included in the statement of operations. Assets received lieu of payment that are not expected to be sold within a year recorded as fixed assets.

f) Loan origination fees and costs

Under Colombian GAAP, the Bank recognizes commissions (origination fees) on loans, lines of credit and letters of credit when collected and records related direct costs when incurred. For U.S. GAAP, under SFAS No.91, “Accounting for Non-refundable Fees and Costs Associated with Origination or Acquiring Loans and Initial Direct Costs of Leases”, loan origination fees and certain direct loan origination costs are deferred and recognized over the life of the related loans as an adjustment of yield.

g) Interest recognition — non-accrual loans

For Colombian GAAP purposes, the Bank established that commercial, consumer and small business loans that are past due more than thirty days and mortgages that are past due more than 60 days will stop accruing interest in the statement of operations and their entries will be made in memorandum accounts until such time that the customer does proceed to cancel.

For U.S. GAAP purposes accrual of interest income is discontinued once a loan becomes more than 90 days past due While the loan is on non-accrual status is generally recognized as income on a cash basis unless collection of principal is doubtful, in which case, cash collections are applied against unpaid principal balance.

h) Deferred charges

The Bank has deferred certain pre-operating expense, and other charges, which are expenses as incurred under U.S. GAAP.

F-85

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The cost of issuance of shares and bonds is recorded by the Bank as a deferred charge and amortized on a monthly basis over a term of three (3) years. Nevertheless, under U.S. GAAP, the cost of issuance of bonds must be amortized during the period of maturity of the issue, and the cost of issuance of shares must be recorded as less value of the additional paid in capital.

Under Colombian GAAP, the Bank accounted for improvements on leased property on the statement of operation as expenses. Under U.S. GAAP, leasehold improvements are recorded as a deferred charge and amortized on a monthly basis over the term of the contract.

i) Investment securities and Derivatives

Investment Securities:

The Superintendency of Finance requires the Bank to classify investment securities into “trading”, “held to maturity”, and “available for sale” categories. According to this guidance, an investment will be classified as “trading” when the Bank acquires it for the purpose of selling it in the near term, as “held to maturity” when the Bank has the intention and ability to hold it to maturity, and as “available for sale” when the investment is not classified either trading or held to maturity.

Under U.S. GAAP, investment in equity securities that have readily determinable market values and debt securities are accounted for as follows:

	•		Debt and equity securities that are purchased and held principally for the purpose of selling them in the short term are classified as “trading” securities and are reported at fair value, with gains and losses included in earnings.

	•		Debt and equity securities not classified as either “held to maturity” or “trading” securities are classified as “available for sale” securities and are reported at fair value, with unrealized gains and losses excluded from earnings and reported net of taxes, as a separate component of stockholders’ equity. Any loss in value of an investment considered other than temporary is recognized in earnings.

The difference between fair value and the amortized cost of these securities is amounted to Ps 16,431 and Ps 10,612 at December 31, 2007 and 2008, respectively.

The Colombian Government offers to the holders of certain securities issued by the Colombian Government to exchange short term by long term securities in 2006, as a part of Government’s plan to restructure the maturity of its internal debt. The Bank swapped securities, previously classified as held-to-maturity under Colombian GAAP, by securities with a longer term at cost plus accrued and unpaid interest and classified them as trading under Colombian GAAP. The Bank did not intend to hold the new securities until the new maturity date. Under US GAAP, the Bank reclassified the remaining securities previously classified as held-to-maturity, to available-for-sale and recorded the difference between the carrying value and the market value, in other comprehensive income. The swap of the securities was authorized by the Superintendency of Finance and therefore under Colombian GAAP, the Bank did not have to change the classification of its remaining held-to-maturity portfolio.

Foreign Exchange Gains and Losses on Debt Securities Available For Sale

Under Colombian GAAP, movements resulting from changes in foreign currency exchange rates on available for sale debt securities are reflected in the consolidated statements of operations. Under U.S. GAAP, EITF 96-15, Accounting for the Effects of Changes in Foreign Currency Exchange Rates on Foreign-Currency-Denominated Available-for-Sale Debt Securities, changes in the fair value of available for sale debt securities as a result of changes in foreign currency exchange rates is reflected in shareholders’ equity.

F-86

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The carrying amounts, gross unrealized gains and losses and approximate fair value of debt securities classified as available for sale under U.S. GAAP are shown below:


			*Gross*		*Gross*
			*unrealized*		*unrealized*			*Cost*
	*Fair value*		*gains*		*losses*			*basis*

*Available for sale — Debt securities*
December 31, 2007
Securities issued or secured by Colombian government	Ps	1,035,891	Ps	2,216	Ps	(158,816	)	Ps	1,192,491
Securities issued or secured by the Central Bank		586,284		59		(155	)		586,380
Securities issued or secured by government entities		232,840		389		(5,444	)		237,895
Securities issued or secured by financial entities		166,920		2,991		(728	)		164,657
Securities issued or secured by foreign governments		444,405		3,200		(1,593	)		442,798
Other investments		56,946		173		(440	)		57,213

Total	Ps	2,523,288	Ps	9,028	Ps	(167,176	)	Ps	2,681,434


			*Gross*		*Gross*
			*unrealized*		*unrealized*			*Cost*
	*Fair value*		*gains*		*losses*			*basis*

*Available for sale — Debt securities*
December 31, 2008
Securities issued or secured by Colombian government	Ps	942,994	Ps	1,529	Ps	(117,012	)	Ps	1,058,477
Securities issued or secured by government entities		435,515		96		(10,868	)		446,287
Securities issued or secured by other financial entities		407,369		16,132		(820	)		392,057
Securities issued or secured by foreign governments		684,404		7,494		(36,854	)		713,764
Securities issued or secured by the El Salvador Central Bank		669,629		4		(723	)		670,348
Other investments		47,795		2,686		(446	)		45,555

Total	Ps	3,187,706	Ps	27,941	Ps	(166,723	)	Ps	3,326,488

Gross

unrealized

Cost

Fair value

gains

losses

basis

Available for sale — Equity securities

December 31, 2007

Inmobiliaria Cadenalco

4,377

1,886

—

2,491

Bolsa de Valores de Colombia

4,877

174

—

4,703

Total

9,254

2,060

—

7,194

Gross

unrealized

Cost

Fair value

gains

losses

basis

Available for sale — Equity securities

December 31, 2008

Inmobiliaria Cadenalco

4,552

2,065

—

2,487

Bolsa de Valores de Colombia

16,082

2,299

—

13,783

Total

20,634

4,364

—

16,270

F-87

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The scheduled maturities of debt securities at December 31, 2008 were as follows:


	*Available for sale*
	*Amortized*		*Fair*
	*cost*		*value*

Due in one year or less	Ps	1,734,249	Ps	1,726,937
Due from one year to five years		780,465		738,643
Due from five years to ten years		569,972		501,198
Due more than ten years		241,802		220,928

Total	Ps	3,326,488	Ps	3,187,706

The Bank is not required under Colombian GAAP to disclose the proceeds from the sale of investment securities or the gains or losses resulting from such sales. As a result, it is not feasible to obtain that information for U.S. GAAP purposes.

Unrealized Losses Disclosure

Investments that have been in a continuous unrealized loss position for less than 12 months are:


			*Gross*
			*unrealized*			*Cost*
	*Fair value*		*losses*			*basis*

*Available for Sale*
December 31, 2008
Securities issued or secured by Colombian government	Ps	65,155	Ps	(2,044	)	Ps	67,199
Securities issued or secured by government entities		407,868		(6,213	)		414,081
Securities issued or secured by other financial entities		18,294		(220	)		18,514
Securities issued or secured by foreign governments		128,832		(24,675	)		153,507
Securities issued or secured by the El Salvador Central Bank		649,624		(685	)		650,309
Other investments		13,517		(66	)		13,583

Total	Ps	1,283,290	Ps	(33,903	)	Ps	1,317,193

Investments that have been in a continuous unrealized loss position for 12 months or longer are:


			*Gross*
			*unrealized*			*Cost*
	*Fair value*		*losses*			*basis*

*Available for Sale*
December 31, 2008
Securities issued or secured by Colombian government	Ps	847,474	Ps	(114,968	)	Ps	962,442
Securities issued or secured by government entities		27,318		(4,655	)		31,973
Securities issued or secured by other financial entities		10,970		(600	)		11,570
Securities issued or secured by foreign governments		40,565		(12,179	)		52,744
Securities issued or secured by the El Salvador Central Bank		19,146		(38	)		19,184
Other investments		10,658		(380	)		11,038

Total	Ps	956,131	Ps	(132,820	)	Ps	1,088,951

F-88

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The amount of realized gain or loss on trading securities included in earnings during 2007 and 2008 was Ps 229,725 and Ps 491,879, respectively.

For Colombian GAAP and U.S. GAAP purposes, the Bank conducts regular reviews to assess whether other than temporary impairment exists. A number of factors are considered in performing an impairment analysis of securities. Those factors include:

	a.		the length of time and the extent to which the market value of the security has been less than cost;

	b.		the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer (such as changes in technology that may impair the earnings potential of the investment, or the discontinuance of a segment of a business that may affect the future earnings potential); or

	c.		the intent and ability of the Bank to retain its investment in the issuer for a period of time that allows for any anticipated recovery in market value.

The Bank also takes into account changes in global and regional economic conditions and changes related to specific issuers or industries that could adversely affect these values.

The Bank has determined that unrealized losses on investments at December 31, 2008 are temporary in nature based on its ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery and the results of its review conducted to identify and evaluate investments that have indications of possible impairments.

The substantial majority of the investments in an unrealized loss position for 12 months or more are primarily securities issued or secured by the Colombian Government, denominated in pesos andUnidad de Valor Real(the “Real Value Unit” or “UVR”). These securities were issued with a stated interest rate and average mature in less than eight years. All of the unrealized losses on these securities resulted from current economic conditions affecting the international markets, and fluctuations on interest rates. Unrealized losses may decline as interest rates fall below the purchased yield and as the securities approach maturity. Since the Bank has the ability and intent to hold the securities until recovery of the carrying value, which could be maturity, the unrealized loss is considered temporary.

As of December 31, 2008, 730 available for sale securities presented gross unrealized losses.

Unrealized Losses Disclosure for derivative instruments:

U.S. GAAP requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Under Colombian GAAP the Bank accounts for a portion of their swaps contracts at their cost basis and the fair value of the asset and liability leg of the derivatives are recorded as rights and commitments separately in the balance sheet see “Note 8. Customers’ Acceptances and Derivatives”. As of December 31, 2007 and 2008, the Bank did not apply hedge accounting for any of its derivatives instruments under U.S. GAAP.

F-89

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Balance sheet classification:

Under Colombian GAAP, the Bank’s derivative instruments are grouped and presented net as either an asset or a liability.

U.S. GAAP restricts the ability to offset where the right of set-off exists between two parties (that is, where a debtor-creditor relationship exists). Typically, under U.S. GAAP, financial assets and liabilities can be offset and the net amount reported in the balance sheet when (a) each of two parties owes the other determinable amounts, (b) the reporting party has the right to set off the amount owed with the amount owed by the other party and (c) the right to setoff is enforceable by law.

Consequently, certain assets and liabilities are presented gross in the U.S. GAAP condensed balance sheet, with no effect on net income or shareholders’ equity. See note 31(t) for gross presentation of derivative instruments in accordance with U.S. GAAP and net presentation under Colombian GAAP.

The following table is a summary of the adjustments to consolidated net income and consolidated stockholders’ equity as a result of differences between Colombian GAAP and U.S. GAAP:


	*2006*			*2007*			*2008*

Investments	Ps	(45,682	)	Ps	2,453		Ps	28,978
Derivatives		20,516			(1,627	)		(162,055	)
Changes in foreign currency exchange rates		(11,069	)		(10,016	)		(8,315	)

	Ps	(36,235	)	Ps	(9,190	)	Ps	(141,392	)


	*2007*			*2008*

Investments	Ps	(161,777	)	Ps	(74,759	)
Derivatives		(1,782	)		(163,837	)

	Ps	(163,559	)	Ps	(238,596	)

j) Investment in unaffiliated companies.

Under Colombian GAAP stock dividends are recorded as income, under U.S. GAAP dividends paid in the form of additional shares of common stock are not recorded as income. Instead, the costs of the shares previously held are allocated equitably to the total shares held after receipt of the stock dividend. When any shares are later disposed of, a gain or loss is determined on the basis of the adjusted cost per share.

k) Investments in affiliates.

Under Colombian GAAP, investment in affiliates are recorded as available for sale at cost with changes in fair value recorded in shareholders’ equity.

Under U.S. GAAP, an investment in non-marketable equity securities is recorded using the equity method when the investor can exercise significant influence or the cost method is used when significant influence cannot be exercised.

F-90

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

l) Lessor accounting

Certain of the Bank’s subsidiaries, lease assets to third parties under non-cancelable lease arrangements. These lease arrangements involve machinery and equipment, computer equipment, automobile and furniture and fixtures and their terms range between three and five years.

Under Colombian GAAP, for financial entities, leases are classified as either financial leases or operating leases. Goods provided through leases to third parties with a purchase option are recorded in the loan portfolio. Goods provided through operating leases are recorded as property, plant and equipment. For both types of leasing, the initial measurement represents the value to be financed of the good given in leasing (that is, the acquisition or construction cost) and the value of the improvement and expenses that can be capitalized, which represent a greater value of the lease operation to be financed.

Under U.S. GAAP, a net investment in direct financing leases would be established in an account representing the present value of the minimum lease payments plus the unguaranteed residual value accruing to the benefit of the lessor.

In addition, certain of the Bank’s subsidiaries. Renting Colombia, Arrendadora Financiera and Leasing Bancolombia applied a specific provision of Colombian GAAP for leases. Under this regulation, leases are classified as operating leases, even if the contracts were signed with a purchase option. Under U.S. GAAP, certain contracts are classified as financial leasing after applying the criteria established in SFAS 13.

The following lists the components of the net investment in direct financial leases as of December 31, 2007 and 2008:


	*2007*			*2008*

Total minimum lease payments to be received	Ps	6,057,324		Ps	7,373,767
Less: Allowance for uncollectibles⁽¹⁾		(95,047	)		(138,776	)

Net minimum lease payments receivable		5,962,277			7,234,991
Estimated residual values of leased property		369,183			605,645
Less: Unearned income		(1,671,907	)		(2,139,888	)

Net investment in direct financial leases	Ps	4,659,553		Ps	5,700,748


(1)		The allowance for uncollectibles is registered in the Supplemental Consolidated Condensed Balance Sheets (See “Note 31. Differences Between Colombian Accounting Principles for Banks and U.S. GAAP — c) Supplemental Consolidated Condensed Financial Statements under U.S.GAAP — Supplemental Consolidated Condensed Balance Sheets — Allowance for loans, financial leases losses and other receivables”).

The following schedule shows the future minimum lease payments to be received on direct financial leases and operating leases for each of the next five years and thereafter.


*Year Ended December 31,*	*Financial leases*		*Operating Leases*
2009	Ps	478,956	Ps	150,060
2010		863,154		129,197
2011		1,364,750		98,971
2012		1,299,374		49,110
2013		1,306,811		6,442
Later years, through 2014		2,060,722		1,573

Total minimum future lease payments to be received	Ps	7,373,767	Ps	435,353

F-91

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Business combinations

Purchase method of accounting

In regard to a business combination, the purchase method of accounting under U.S. GAAP requires that (i) the purchase price be allocated to the identifiable acquired assets and liabilities on the basis of fair market value, (ii) the statement of operations of the acquiring company for the period in which a business combination occurs include the income of the acquired company after the date of acquisition, and (iii) the costs directly related to the purchase of a business combination be included as a cost of the acquisition and, therefore, recorded as a component of goodwill.

In regard to a business combination, the purchase method of accounting under Colombian GAAP requires that (i) the purchase price be allocated to the acquired assets and liabilities on the basis of their book value, (ii) the statement of income of the acquiring company for the period in which a business combination occurs include the income of the acquired company as if the acquisition had occurred on the first day of the reporting period and (iii) the costs directly related to the purchase business combination not be considered as a cost of the acquisition, but deferred and amortized over a reasonable period as determined by management.

Each of the Banagrícola S.A. and Factoring Bancolombia acquisitions were accounted for using the purchase method under Colombian GAAP, in accordance with the methodology suggested by the Superintendency of Finance.

Banagrícola S.A.

In May 2007, Bancolombia Panamá S.A. acquired 89.15% of Banagrícola S.A. (“Banagricola”). Banagrícola’s shareholders agreed to sell 16,817,633 of the total 18,865,000 outstanding shares. The purchase price was US$0.04704479 per share for a total of US$ 791,182.

Simultaneously with the acquisition, the Bank had signed an agreement with Bienes y Servicios S.A (BYSSA), formerly Banagrícola major shareholder, which included a call and written put option. The options were exercised in December 2007 and as a consequence the Bank acquired the shares representing 9.59% of interest in Banagrícola for an aggregate purchase price of approximately US$ 87,700 (US$ 0.04845024 per share).

Bancolombia Panamá S.A. continued purchasing shares from Banagrícola’s minority shareholders and at December 31, 2007 held an interest of 98.90% of Banagrícola’s total shareholder’s equity.

During 2008, Bancolombia Panamá S.A. acquired 0.21% of Banagrícola S.A. (“Banagricola”). The purchase price was of approximately US$ 1,912. The excess of purchase price amounted to US 1,313 was assigned to all other segments. With this acquisition Bancolombia Panamá S.A. at December 31, 2008 held an interest of 99.12% of Banagrícola’s total shareholder’s equity.

The consolidated statements of operations and the consolidated statement of cash flow under U.S. GAAP for the year ended December 31, 2007 includes the operations of Banagrícola S.A. and its subsidiaries since June 1, 2007.

For Colombian GAAP purposes the results of operations of the acquired entities were included in the consolidated statements of operations of Banagrícola S.A. and its subsidiaries since January 1, 2007.

F-92

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The following tables summarize the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.


	*Fair value of assets acquired and liabilities*
	*assumed under U.S. GAAP from Banagrícola*
	*during 2007*
*Total Purchase Price*	Ps	1,816,219

Assets acquired		7,072,642
Premises and equipment, net		188,500
Liabilities assumed		6,457,732

*Net Assets Acquired*	Ps	803,410

Excess of cost over the fair value of acquired net assets		1,012,809
Intangible Assets		365,849

*Goodwill*	Ps	646,960

The following unaudited pro forma information for 2006 and 2007 reflects the consolidated results of operations as if the acquisition of Banagrícola had occurred at the beginning of each year presented and includes the amortization of intangibles, as appropriate. The unaudited pro forma financial information presented is not necessarily indicative of the results of operations that might have occurred, had the transaction been completed at the beginning of the year specified, and does not purport to represent what the consolidated results might be for any future period.


	*2006*

U.S. GAAP Net income	Ps	1,114,121
Revenues		2,918,628
Earnings per share	Ps	2,186


	*2007*

U.S. GAAP Net income	Ps	1,147,510
Revenues		3,822,759
Earnings per share	Ps	2,251

Factoring Bancolombia acquisition

On May 8, 2006, the Bank acquired 9,803,685 shares of Comercia S.A., (now Factoring Bancolombia S.A. Compañía de Financiamiento Comercial) equivalent to 55.61% of its outstanding shares, from Textiles Fabricato Tejicóndor S.A. by means of a transaction duly authorized by the Superintendency of Finance. The value paid by the Bank was Ps 24,610.

On June 30, 2006, the Bank acquired an additional stake of 6,868,409 shares of Comercia S.A., equivalent to 38.96% of its outstanding shares, from Textiles Fabricato Tejicóndor S.A. by means of a transaction duly authorized by the Superintendency of Finance. The value paid by the Bank was Ps 17,241.

Under U.S. GAAP, the results of Comercia S.A.’s, operations have been included in the consolidated financial statements since that date. For Colombian GAAP purposes the results of operations of the acquired entity were included in the consolidated statements of operations of the combined entity since January 1, 2006.

F-93

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The acquisition of Factoring Bancolombia will allow the Bank to complement its portfolio of products improving commercial financing activities.

The aggregate purchase price was Ps 37,101 paid in cash. The excess of purchase price amounted to Ps 15,054 and Ps 7,267 was assigned to customers relationships intangible asset (the triangular line), while the remaining Ps 7,787 was assigned to goodwill. The resulting goodwill under U.S. GAAP was allocated to the retail segment.

The following tables summarize the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.


	*Fair value of assets acquired and liabilities*
	*assumed under U.S. GAAP from Comercia*
	*as of April 30, 2006*
*Total Purchase Price, Net of Cash*	Ps	37,101

Assets acquired		161,407
Premises and equipment, net		3,756
Liabilities assumed		143,116

*Net Assets Acquired*	Ps	22,047

Excess of cost over the fair value of acquired net assets		15,054
Intangible Asset		7,267

*Goodwill*	Ps	7,787

m.i) Goodwill

Under U.S. GAAP, from January 1, 2002, the Bank no longer amortizes goodwill, but it is subject to an annual impairment test.

Under SFAS 142, the goodwill impairment analysis is done in two steps. The first step requires a comparison of the fair value of the individual reporting unit to its carrying value including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not to be impaired and no further analysis is necessary. If the carrying value of the reporting unit exceeds the fair value, there is an indication of potential impairment and a second step of testing is performed to measure the amount of impairment, if any, for that reporting unit.

When required, the second step of testing involves calculating the implied fair value of goodwill for each of the affected reporting units. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit determined in step one over the fair value of the net assets and identifiable intangibles as if the reporting unit were being acquired. If the amount of the goodwill allocated to the reporting unit exceeds the implied fair value of the goodwill in the pro forma purchase price allocation, an impairment charge is recorded for the excess. An impairment charge recognized cannot exceed the amount of goodwill allocated to a reporting unit and cannot be reversed subsequently even if the fair value of the reporting unit recovers.

F-94

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Under Colombian GAAP, goodwill derived from business combinations effective before October 2006, was amortized over a maximum period of ten years. In business combinations that occurred after October 2006, the resulting goodwill is recorded as a deferred charge and amortized on a monthly basis on the administrative and other expenses account over a term of twenty (20) years, unless the supervised entity voluntarily selects a shorter period of amortization. Up to December 31, 2007 goodwill was amortized using the exponential method. Under this method the charge for amortization is increased exponentially every year. Since January, 2008, the straight-line method has been used to amortized goodwill, since the Bank considers this method provides a better association between the revenues and expenses corresponding to this investment.

Under Colombian GAAP, in the case of goodwill acquired by the Bank and its subsidiaries before the date when the new regulation came into full force in year 2007, the amortization term was maintained in five years, ten years, three years for goodwill recorded in the subsidiaries Banagrícola S.A. and Inversiones Financieras Banagrícola S.A., respectively as permitted by Superintendency of Finance at the acquisition date.

For purposes of the impairment goodwill test under FAS 142, derived from acquisition of Banagricola, management has considered to Banco Agricola, AFP Crecer and Aseguradora Suiza Salvadoreña as single reporting unit each one, taking into account the nature of the products and services of these subsidiaries, the methods used to provide their services, the regulatory environment in El Salvador, and the manner in which the subsidiaries operate their business and their operations.

Under U.S. GAAP, the Bank has performed the required impairment test of each reporting segment’s goodwill and concluded that there was no impairment of goodwill. Accordingly, the Bank reversed the amortization of goodwill from Colombian GAAP.

The activity of the goodwill and intangible assets under U.S. GAAP during the years ended December 31, 2006, 2007 and 2008 is as follows:


	*2006*		*2007*		*2008*

*Goodwill U.S. GAAP*
Balance at beginning of year	Ps	569,748	Ps	577,535	Ps	1,382,159
Reclassifications		—		132,243		(40,690	)
Additions		7,787		636,186		2,947
Foreign currency adjustment		—		36,195		77,914

Balance at end of year	Ps	577,535	Ps	1,382,159	Ps	1,422,330

Goodwill under Colombian GAAP		34,371		973,699		1,008,089

Difference to be recognized under U.S. GAAP^{(1) (2)}	Ps	543,164	Ps	408,460	Ps	414,241


(1)		For 2007 this adjustment is reflected in the line goodwill of the reconciliation of stockholders equity for Ps 276,217 and as part of the line revaluation of assets for Ps 132,243.

(2)		For 2008 this adjustment is reflected in the line goodwill of the reconciliation of stockholders equity for Ps 242,843 and as part of the line revaluation of assets for Ps 171,398.

F-95

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Goodwill under U.S. GAAP by segments was as follows:


	*December 31,*		*December 31,*		*December 31,*
	*2006*		*2007*		*2008*

Corporate and Governmental Banking		254,233		333,661		399,583
Retail and Small Business Banking		186,989		657,496		694,508
Treasury		—		122,446		—
Offshore Commercial Banking		31,534		31,534		31,534
Leasing		54,238		54,238		54,238
All other segments⁽¹⁾		50,541		182,784		242,467


Total Goodwill⁽²⁾	Ps	577,535	Ps	1,382,159	Ps	1,422,330


(1)		This segment includes trust, brokerage, insurance, pensions, construction banking and corporate headquarters.

(2)		The Bank has modified the distribution of the goodwill by segments in order to be consistent with the segments presented in the note w) Segment Disclosure.

m.ii) Intangible Assets

m.ii.1) Banagrícola S.A

Under U.S. GAAP Ps 365,849 of acquired intangible assets, Ps 15,092 was assigned to registered brands that are not subject to amortization and Ps 177,451 was assigned to brands, deposits, customers relationship and others. The acquired intangible assets subject to amortization have a weighted-average useful life of approximately 12 years.

The following are the descriptions for each intangible asset valued. A detailed breakdown of intangibles values is showed above in the goodwill and intangible assets section:

Customer relationships and contractual agreements

Corresponds to the relationships that the Bank has established with its customers through contracts, those customer relationships would arise from contractual rights. Therefore, customer contracts and the related customer relationships are intangible assets that meet the contractual-legal criterion.

Intangibles are calculated based on the expected gains to be provided from these relations for a specific period of time.

Brands

The royalty savings method determines the brand value based on the savings a company generates as a result of not having to pay for a license to use such brand. The value of the asset is calculated based on the following assumptions:

•

The present value of the brand is determined based on its potential to generate future cash flow.

•

The royalty stream that the business would hypothetically earn from its brand can be reasonably estimated (it assumes that future royalties can in some way be predicted).

•

Cash flows are discounted in order to arrive to a present value.

•

Capital costs and rates of return can be properly estimated.

•

The royalty stream that the business would hypothetically earn during the final year of the period in question can be considered a perpetuity.

F-96

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The value of the brand is equal to the sum of the net present value of the after-tax savings a company generates during the period in question as a result of not having to pay for a license to use such brand plus the net present value of the after-tax savings a company would generate in perpetuity after the last year of the period in question.

Core Deposit Intangibles (CDI)

Core Deposit Intangible (“CDI”) values were determined by using the alternative funding method, which estimates the net present value of the cost difference or “spread” between the cost of using the CDI and the cost of an alternative source of funding under current market conditions.

The deposits of Banco Agrícola S.A and Banco Agrícola Panamá S.A include the following categories of checking accounts, saving deposits and time deposits:

•

Retail banking

•

Commercial banking

•

Offshore commercial banking.

m.ii.2) Factoring Bancolombia acquisition

The excess of purchase price amounted to Ps 15,054 and Ps 7,267 was assigned to customers relationships intangible asset (the triangular line), while the remaining Ps 7,787 was assigned to goodwill. The resulting goodwill was allocated to the retail segment.

The activity of the Bank’s intangible assets during the years ended December 31, 2007 and 2008 is as follows:


	*2007*			*2008*

*Intangible Assets*
Balance at beginning of year	Ps	142,099		Ps	487,691
Additions		365,849			—
Reclassifications⁽¹⁾		—			45,951
Amortization		(42,063	)		(79,578	)
Impairment		—			(26,555	)
Foreign currency translation adjustment^{(2) (3)}		21,806			41,037

Balance at end of year	Ps	487,691		Ps	468,546


(1)		It corresponds to the recognition of the brand of Banco Agrícola from goodwill to intangible of finite life as a result of the initial decision of the Bank’s management.

(2)		The foreign currency translation adjustment for the amortization expense amounts Ps 4,858.

(3)		The foreign currency translation adjustment related to the carrying amount is Ps 45,620.

F-97

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Intangible assets were as follows:

December 31, 2007

December 31, 2008

Gross carrying

Accumulated

Gross carrying

Accumulated

amount

amortization

Impairment

amount

amortization

Impairment

Non-Amortizable intangible assets

30,407

—

26,555

—

26,555

Amortizable intangible assets

520,781

63,222

—

616,204

147,658

The following table shows the intangible assets gross carrying amount, detailed with their respective useful lives:


			*Weight useful life*
	*December 31, 2008*		*(months)*

Brands	Ps	79,813		60
Service asset		6,206		169
Asset management		30,004		125
Benefit associated to Loans		77,354		201
Core Deposits		135,587		151
Customer relationship Conavi and Corfinsura		22,400		105
Customer relationship Factoring Bancolombia		7,267		48
Customer relationship Conglomerado Banagrícola		199,134		159
Value of business acquired		80,115		120
Others		4,879		105

*TOTAL*	Ps	642,759

The estimated aggregate amortization expense for intangible assets for the next five fiscal years is as follows:


*Fiscal year ending*	*Aggregate amortization*
*December 31,*	*expense*
2009	Ps	71,798
2010		66,392
2011		61,712
2012		49,040
2013		39,172

*Total*	Ps	288,114

The Bank has performed the required impairment test of intangible assets, concluding that except for the brands of Asesuisa Vida and Asesuisa S.A., AFP Crecer and Bursabac S.A. de C.V., there was no impairment in the remaining intangible assets.

F-98

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

As of December 31, 2008, the Bank has tested for impairment the brands that were no subject to amortization the prior fiscal year (Asesuisa Vida and Asesuisa S.A., AFP Crecer and Bursabac S.A. de C.V.) using the methodology to be applied to indefinite-lived intangible and concluded that was necessary change the estimated useful life of the above mentioned brands from indefinite to finite, because at the end of the fiscal year did not exist the causes and circumstances that support the brands like lived intangible. As a result of this change, the brands registered an impairment loss of Ps 26,555.

m.iii) Fair value of assets and liabilities acquired

Under U.S. GAAP the primary financial statements allocate the fair value adjustments to each of the respective assets and liabilities.

The following is a detail of the adjustments to the Stockholders’ Equity related to Banagrícola S.A. and Factoring Bancolombia business combination:

Fair value of fixed and foreclosed assets

The difference between the fair value of fixed and foreclosed assets and their book value is adjusted by the effect of the depreciation and by the effect of sales and written - offs.

Fair value of Time Deposits, long- term debt and loans

The difference between the fair value of loans, Time Deposits and long term debt and their book value is adjusted by the effect of the amortization of the discount or the premium during the estimated average life of these assets and liabilities.

Securitization of non-performing loans

Under U.S. GAAP securitization of non performing loans carried out by Banco Agrícola S.A., does not meets the definition criteria of transfers of financial assets by sale. The adjustment corresponds to the recognition of a secured borrowing under U.S. GAAP which under Colombian GAAP is not accounted for.

n) Securitization

Transfers of financial assets

The Bank securitizes performing and non-performing mortgages loans using different securitization vehicle.

Under Colombian GAAP, the securitization of performing and non-performing mortgage loans, is recorded as sales of financial assets and therefore, securitized loans have been removed from the Bank’s balance sheet. Additionaly, the Bank recognizes in the income statement at the moment of the operation the difference between the book value of the securitized portfolio and the value received.

Under U.S. GAAP, there are two key accounting determinations that must be made relating to securitizations. A decision must be made as to whether a transfer would be considered a sale under U.S. GAAP, resulting in the transferred assets being removed from our consolidated balance sheet with a gain or loss recognized. Alternatively, the transfer would be considered a secured borrowing, resulting in recognition of a liability in our consolidated balance sheet. The second key determination to be made is whether the securitization vehicle must be consolidated and included in our consolidated balance sheet or whether such securitization vehicle is sufficiently independent that it does not need to be consolidated.

F-99

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

If the trust’s activities are sufficiently restricted to meet certain accounting requirements in order to be considered a qualifying special-purpose entity (QSPE), the trust is not consolidated by the seller of the transferred assets. Additionally, under FASB Interpretation No. 46(R), if trusts other than QSPEs meet the definition of a variable interest entity (VIE), we must evaluate whether we are the primary beneficiary of the trust and, if so, must consolidate it.

For U.S. GAAP purposes, since the activities of these vehicles are not sufficiently restricted to meet certain accounting requirements in order to be considered a QSPE, these vehicles were deemed variable interest entities in accordance with FIN 46(R) and therefore, in those cases where the Bank holds the majority of the residual interests in these vehicles, the Bank concluded to be the primary beneficiary, as the party that expects to absorb the majority of the expected losses of such vehicles.

The Bank had no significant transfers of loans in securitization transactions accounted for as sales in accordance with U.S. GAAP as of the fiscal years ended December 31, 2007 and 2008, and did not retain any significant interests associated with loans transferred in securitizations for those years.

The table below presents the assets and liabilities of VIEs which have been consolidated on the Banks’s balance sheet at December 31, 2008, and the Bank’s allowance for loan losses resulting from its involvement with consolidated VIEs as of December 31, 2008.

The allowance for loan losses represents the management’s estimate of probable losses inherent in the portfolio.

Allowance for

Assets

Liabilities

loan losses

1,882,256

873,056

16,045

The Bank did not provide any additional financial support to these VIEs or others during 2008. Further, the Bank does not have any contractual commitments or obligations to provide additional financial support to these VIEs or others.

F-100

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Retained Interests in the Securitization vehicles

Under Colombian GAAP retained interests in the securitization vehicles are not recognized.

For U.S. GAAP purposes, retained interests in those securitization vehicles that are not subject to consolidation during the fiscal year ended December 31, 2008, as the Bank was not considered to be the primary beneficiary in accordance with FIN 46(R), should be recognized and recorded at fair value, as available-for-sale or trading securities in accordance with FAS 115. To determine their fair values of these securities, the Bank discounted the estimated future cash flows of these securities.

For securities classified as available-for-sale, unrealized gains or losses over the amortized cost basis are charged to equity through Other Comprehensive Income, unless unrealized losses are deemed to be other than temporary, in which case they are charged to the Statement of Operations.

Securities held for the purpose of selling them in the short term are classified as “trading” and are reported at fair value, with gains and losses included in earnings.

For U.S. GAAP purposes, the amortized cost, unrealized gain/loss and fair value of financial trusts qualifying for sale treatment but are not subject to consolidation as of December 31, 2008, are as follows:

Net Unrealized

Fair

Amortized Cost

Gain/(Loss)

Value

Available for Sale Securities

243,502

14,864

258,366


	*Fair*
	*Value*
*Trading Securities*	Ps	30,179

As of December 31, 2007, all the securitization vehicles were consolidated for U.S. GAAP purposes.

o) Foreign currency translation adjustment

For Colombian GAAP purposes, the translation adjustments resulting in the conversion of foreign currency statements was included in the determination of net income.

Under U.S. GAAP, according to SFAS No. 52 and SFAS No. 130, the translation adjustments shall be reported as a component of stockholders’ equity, in other comprehensive income.

F-101

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

p) Minority Interest

The minority interest corresponds to the proportional adjustments to the shareholders equity and net income originated by the subsidiaries where the Bank holds less than 100% of participation.

q) Discontinued Operations

On February 26, 2007, in a transaction duly authorized by the Superintendency of Finance, Bancolombia sold to LAB Investment & Logistics S.A. and Portal de Inversiones S.A. 91.08% of its direct interest and 3.79% of its indirect interest, held through Banca de Inversión Bancolombia S.A. Corporación Financiera, in Almacenar S.A. The transaction price amounted to approximately Ps 11,719.

On April 30, 2007, in a transaction duly authorized by the Superintendency of Finance, Bancolombia sold to LAB Investment & Logistics S.A. and Portal de Inversiones S.A., 3.57% of its direct interest in Almacenar S.A. The transaction price amounted to approximately Ps 2,050. The Bank registered in 2007 a loss on sale of this investment for Ps 14,064.

On June 9, 2008, Bancolombia sold to Stratton Spain S.L 94.90% of its direct interest and 3.32% of its direct interest held through Banca de Inversión Bancolombia S.A. and Fiduciaria Bancolombia S.A. in Multienlace S.A. The transaction price amounted to Ps 105,882.

On July 24, 2008, Bancolombia liquidated 100% of its direct interest held through Suleasing Internacional USA Inc. and Bancolombia Panamá S.A. in Suinternal Do Brasil Locacao de Bens S.A. The Bank registered in 2008 a loss on sale of this investment for Ps 11.

On September 18, 2008, Bancolombia liquidated 71.75% of its direct interest held through Banca de Inversión Bancolombia S.A. in Inversiones Valsimesa S.A. The Bank registered in 2008 a gain on sale of this investment for Ps 5,310.

On November 19, 2008, Bancolombia sold to Mitsubishi Corporation 100% of its direct interest held through Banca de Inversión Bancolombia S.A. in P.A. Renting Colombia. The Bank registered in 2008 a gain on sale of this investment for Ps 2,988.

On December 22, 2008, Bancolombia sold to Corporation Delta Codelta. 80% of its direct interest held through Banca de Inversión Bancolombia S.A., Inmobiliaria Bancol S.A. and Valores Simesa S.A. in Fundiciones y Componentes Automotores. The Bank registered in 2008 a gain on sale of this investment for Ps 13,692.

The results of the discontinued operations under U.S. GAAP were as follows:


	*2006*			*2007*			*2008*

Profit (losses) from discontinued operations before income taxes	Ps	(39,522	)	Ps	(51,868	)	Ps	105,919
Income taxes (benefit) expense		8,221			3,519			28,683

Profit (losses) from discontinued operations	Ps	(47,743	)	Ps	(55,387	)	Ps	77,236

r) Guarantees

In order to meet the needs of its customers, the Bank issues financial standby letters of credit and bank guarantees. At December 31, 2007 and 2008, outstanding letters of credit and bank guarantees issued by the Bank totaled Ps 2,613,369 and Ps 3,524,631, respectively.

F-102

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The table below summarizes, at December 31, 2007 and 2008, all of the Bank’s guarantees where the Bank is the guarantor. The maximum potential amount of future payments represents the notional amounts that could be lost under the guarantees if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts bear no relationship to the anticipated losses on these guarantees and greatly exceed anticipated losses.

Maximum potential amount of

Expire within one year

Expire after one year

Total amount outstanding

future payments

2007

2008

2007

2008

2007

2008

2007

2008

Financial standby letters of credit

1,007,038

1,577,231

347,883

313,343

1,354,921

1,890,574

1,354,921

1,890,574

Bank guarantees

992,467

1,106,968

265,981

527,089

1,258,448

1,634,057

1,258,448

1,634,057

Total

1,999,505

2,684,199

613,864

840,432

2,613,369

3,524,631

2,613,369

3,524,631

Financial standby letters of credit include guarantees of payment of credit facilities, promissory notes and trade acceptances.

Bank guarantees are performance guarantees that are issued to guarantee a customer’s tender bid on a construction or systems installation project or to guarantee completion of such projects in accordance with contract terms. They are also issued to support a customer’s obligation to supply specified products, commodities, or maintenance or warranty services to a third party.

The maximum potential payments represent a “worse-case scenario’’, and do not necessarily reflect expected results. The Bank does not hold collaterals over the guarantees issued.

Under U.S. GAAP, effective January 1, 2003, the Bank adopted FASB interpretation No. 45 “Guarantor’s Accounting and Disclosures Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others”. As of December 31, 2007 and 2008, the Bank recognized Ps 12,736, and Ps 10,895 as a liability for the fair value of the obligations assumed at its reception. Such liabilities are being amortized over the expected term of the guarantee.

s) Insurance contracts

Under U.S. GAAP reserves for individual and group Life insurance are computed on the basis of interest rates, mortality tables, including a margin for adverse deviations. For the year 2008 and 2007, reserve discount rate was 4.5%, based on the Bank’s own profitability experience.

Under Colombian GAAP, there are no reserves for adverse deviations.

t) Estimated Fair Value of Financial Instruments

Fair value of financial instruments

Effective January 1, 2008, the Bank adopted SFAS 157 — Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair-value measurements. As a result of the adoption of SFAS 157, the Bank has made some amendments to the techniques applied in measuring the fair value in order to include considerations about own credit and counterparty risk.

F-103

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The framework for measuring fair value under Colombian GAAP is substantially consistent with SFAS 157, except for considerations about own credit risk, counterparty risk and valuation of collaterals.

Fair-Value Hierarchy

SFAS 157 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain bonds issued by government or its entities, corporate debt securities and derivative contracts.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain retained residual interests in securitizations, asset-backed securities (ABS), highly structured or long term derivative contracts and certain collateralized debt obligations (CDO) where independent pricing information was not able to be obtained for a significant portion of the underlying assets.

The Bank considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets.

Determination of Fair Value

For assets and liabilities carried at fair value, the Bank measures such value using the procedures set out below. The Bank did not choose to measure financial instruments and certain other items at fair value based on the SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”.

When available, the Bank generally uses quoted market prices to determine fair value and classifies such items in Level 1. In some cases where a market price is available, the Bank will make use of acceptable practical expedients (mid-market pricing or other pricing conventions) to calculate fair value.

Where available, the Bank may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The frequency and size of transactions and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations would be classified as Level 2.

F-104

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

If quoted market prices are not available, fair value is based upon internally developed valuation techniques such as discounted cash flows, pricing models and similar methodologies that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

Fair-value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent price providers or non-bidding brokers. Price providers and non-bidding brokers’ valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.

The estimated fair value based upon internally developed valuation techniques could vary if other valuation methods or assumptions were used. The bank believes its valuation methods are appropriate and consistent with other market participants. Nevertheless, the use of different valuation methods or assumptions, including imprecision in estimating unobservable market inputs, to determine the fair value of certain financial instruments could result in different estimates of fair value at the reporting date and the amount of gain or loss recorded for a particular instrument. Most of the valuation models are not significantly subjective, because they can be tested and, if necessary, recalibrated by the internal calculation of and subsequent comparison to market prices of actively traded securities, where available.

Financial instruments that are classified as trading, or available-for-sale, and all derivatives, are stated at fair value. The fair value of such financial instruments is the estimated amount at which an asset could be sold or a liability transferred in a current transaction between willing parties, other than in a forced or liquidation sale.

The following section describes the valuation methodologies used by the Bank, including an indication of the level in the fair-value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models as well as any significant assumptions.

1. Fair value measurement on a recurring and non-recurring basis (SFAS 157)

Investment securities

a) Debt securities:

When available, the Bank uses quoted market prices to determine the fair value and such items are classified in Level 1 of the fair value hierarchy. For securities not traded or over the counter, the Bank generally determines fair value utilizing internal valuation and standard techniques. These techniques include determination of expected future cash flows which are discounted using curves of the applicable currencies and interest. The interest and foreign exchange curves are generally observable market data and reference yield and exchange curves derived from quoted interest and exchange rates in appropriate time bandings, which match the timings of the cash flows and maturities of the instruments. Fair-value estimates from internal valuation techniques are verified and tested by independent personnel.

Price providers compile prices from various sources and may apply matrix pricing for similar securities where no price is observable. If available, the Bank may also use quoted prices for recent trading activity of assets with similar characteristics to the security. These securities priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security, a quoted price is stale or prices from independent sources vary, a security is generally classified as Level 3.

The Bank has credit linked notes issued by financial institution including embedded derivatives to credit risks relating to the Colombian Government. The Bank has elected to measure these credit linked notes at fair value through income statement based on SFAS 155. The Bank determines the fair value using the appropriate derivative valuation methodology (described below) given the nature of the embedded risk profile. Such instruments are classified in Level 3.

F-105

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

b) Equity securities

When available, the Bank uses quoted market prices to determine the fair value and such items are classified in Level 1 of the fair value hierarchy and in trading category.

Derivatives

Derivatives entered into by the Bank are executed over the counter and so are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. For over the counter derivatives those trades in liquid markets are valued using industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-base observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies. In addition, these estimates consider assumptions for our own credit risk and the respective counterparty credit risk.

The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign exchange rates, the spot price of the underlying volatility, credit curves and correlation of such inputs. The item is placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and items with longer tenors are generally less observable.

When appropriate, valuations are adjusted for various factors such as liquidity, bid / offer spreads and credit considerations.

Credit Valuation Adjustment

Under Colombian GAAP, the measurement of the fair value of derivatives does not include the credit valuation adjustment “CVA”. Under US GAAP, beginning January 1, 2008 with the adoptions of FAS 157 the Bank is measuring the effects of the credit risk of its counterparties and its own creditworthiness in determining fair value of the swap derivatives.

Counterparty credit-risk adjustments are applied to derivatives when the Bank’s position is an active and own credit risk is incorporated when the position is a liability. The Bank attempts to mitigate credit risk to third parties which are international banks by entering into netting master agreements. When assessing the impact of credit exposure, only the net counterparty exposure is considered at risk; due to the offsetting of certain same-counterparty positions and the application of cash and other collateral. The Bank generally calculates the asset’s credit risk adjustment for derivatives transacted with international financial institutions by incorporating indicative credit related pricing that is generally observable in the market (“CDS”). The credit risk adjustment for derivatives transacted with non-public counterparties is calculated by incorporating unobservable credit data derived from internal credit qualifications to the financial institutions and corporate companies located in Colombia. The Bank has recognised Ps 4,050 earning as an increase of the associated asset as a result of counterparty credit-risk.

A hundred basis points reduction in our own credit spreads when determining the fair value of the liabilities associated with derivative contracts, could result in an increase of the associated liability of approximately Ps 4,599. These sensitivity analyses do not represent management’s expectations of the changes in our own credit risk, but are provided as hypothetical scenarios to assess the sensitivity of the fair value of those liabilities to changes in credit spreads.

F-106

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

A hundred basis points increase in the counterparty credit spreads when determining the fair value of the assets associated with derivative contracts, could result in a reduction of the associated asset of approximately Ps 4,942. These sensitivity analyses do not represent management’s expectations of the changes in the counterparties credit risk, but are provided as hypothetical scenarios to assess the sensitivity of the fair value of those liabilities to changes in credit spreads.

The process of determining credit risk spreads requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.

Impaired loans measured at fair value

The Bank, as a practical expedient, measured certain impaired loan based on the fair values of the collaterals. The fair values were determined using internal valuation techniques. These techniques include basically a matrix pricing using recent activities of collaterals with similar characteristics. The key inputs to the matrix depend upon the type of collateral and include property price index (per region, size, type etc.), physical conditions and expected selling costs. In certain cases, the Bank may also use experts to validate the prices obtained using the matrix.

Asset-backed securities

The Bank invests in asset-backed securities which the underlying assets correspond to mortgages issued by financial institutions. The Bank does not have a significant exposure to sub-prime securities. The asset-backed securities are denominated Debt Investment Portfolio (“TIPS”) and can be classified either as trading or available for sale. These asset-backed securities have different vintages and are generally classified as AA+ by credit ratings. The Bank does not expect significant changes in those ratings.

Fair values were estimated using discounted cash flow using models which the main key economic assumptions used are estimates of prepayment rates and resultant weighted average lives of the securitised mortgage portfolio, probability of default and interest rate curves. These items are classified as Level 3.

2. Fair value disclosures

FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments (“SFAS 107”) requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of financial position, for which it is practicable to estimate fair value. The financial instruments below are not recorded at fair value on a recurring and nonrecurring basis:

Short-term financial instruments

Short-term financial instruments are valued at their carrying amounts included in the consolidated balance sheet, which are reasonable estimates of fair value due to the relatively short period to maturity of the instruments. This approach was used for cash and cash equivalents, accrued interest receivable, customers’ acceptances, accounts receivable, accounts payable, accrued interest payable and bank acceptances outstanding. These instruments would generally be classified as Level 1 or 2 if required.

Deposits

The fair value of Time Deposits was estimated based on the discounted value of cash flows using the appropriate discount rate for the applicable maturity. Fair value of deposits with undefined maturities represents the amount payable on demand as of the balance sheet date. These instruments would generally be classified as Level 2 if required.

F-107

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Interbank borrowings and borrowings from development and other domestic banks

Short-term interbank borrowings and borrowings from domestic development banks have been valued at their carrying amounts because of their relatively short-term nature. Long-term and domestic development bank borrowings have also been valued at their carrying amount because they bear interest at variable rates. These instruments would generally be classified as Level 1 or 2 if required.

Long term debt

The fair value of long-term debt, which comprises bonds issued by Bancolombia and its subsidiaries, was estimated substantially based on quoted market prices. Certain bonds which are nonpublic trading, issued basically by Sufinanciamiento S.A., were determined based on the discounted value of cash flows using the rates currently offered for deposits of similar remaining maturities and its own creditworthiness. These instruments would generally be classified as Level 1 or 2 if required.

Items Measured at Fair Value on a Recurring Basis

The following table present for each of the fair-value hierarchy levels the Bank’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2008 based on the supplemental consolidated condensed balance sheets.


	*Fair value measurements using*
	*Level 1*			*Level 2*			*Level 3*			*Gross inventory*			*Net balance*
Assets
Trading account	Ps	1,098,091		Ps	1,437,272		Ps	79,391		Ps	2,614,754		Ps	2,614,754
Investment securities
Debt securities		891,755			1,215,553			967,517			3,074,825			3,074,825
Equity securities		16,082			4,552			—			20,634			20,634
Derivatives		—			303,680			4,518,725			4,822,405			4,822,405

Liabilities
Derivatives		—			(271,972	)		(4,498,747	)		(4,770,719	)		(4,770,719	)
	Ps	2,005,928		Ps	2,689,085		Ps	1,066,886		Ps	5,761,899		Ps	5,761,899

% total		34.81	%		46.67	%		18.52	%

The Bank’s derivative instruments classified in level 3 grouped and presented net, amounts to Ps 19,978.

The table below presents reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2008.


	*Trading account*			*Available for sale*			*Derivatives*

Balance as of January 1, 2008	Ps	112,541		Ps	626,356		Ps	208,874

*Total gain or losses (realised / unrealised):*
Included in earnings		12,987			70,979			5,298
Included in other comprehensive income					(1,013	)
Purchase, issuance and settlements		(46,137	)		271,195			(192,833	)
Transfer in to/(out) of Level 3								(1,361	)
Balance as of December 31, 2008	Ps	79,391		Ps	967,517		Ps	19,978

F-108

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The following table present for each of the fair-value hierarchy levels the bank’s assets and liabilities that are measured at fair value on a nonrecurring basis at December 31, 2008 based on the supplemental consolidated condensed balance sheets.

Fair value measurements using

Total gain

Year end 31/12/2008

Level 1

Level 2

Level 3

(losses)

Collateralized loans

200,730

(79,054

)

SFAS 107 Disclosures

The table below presents the disclosures required by SFAS 107 to all assets and liabilities based on the supplemental consolidated condensed balance sheets:


	*December 31, 2007*				*December 31, 2008*
	*Colombian*				*Colombian*
	*GAAP*		*Estimated*		*GAAP*		*Estimated*
	*Amount*		*Fair Value*		*Amount*		*Fair Value*
*Financial assets*
Cash and due from banks	Ps	5,228,387	Ps	5,228,387	Ps	5,619,575	Ps	5,619,575
Investment securities, net		5,774,251		4,562,689		7,278,276		7,203,517
Loans and accrued interest receivable on loans, net		36,644,033		38,954,179		43,013,868		41,499,564
Customers’ acceptances		55,208		55,208		56,935		56,935
Derivatives, net⁽¹⁾		140,797		139,015		215,523		51,686

*Financial liabilities:*
Deposits	Ps	34,558,995	Ps	34,654,832	Ps	18,652,738	Ps	18,872,980
Overnight funds		2,020,366		2,020,366		2,573,591		2,573,591
Bank acceptances outstanding		55,208		55,208		56,935		56,935
Interbank borrowings		1,525,894		1,525,894		2,100,428		2,100,428
Borrowings from development and other domestic banks		3,371,003		3,371,003		3,905,021		3,905,021
Long term debt		2,866,462		3,675,395		3,675,613		3,665,997


(1)		Under Colombian GAAP, the Bank’s derivative instruments are grouped and presented net. For U.S. GAAP purposes, the amount presented includes derivative assets for Ps 4,822,405 and Ps 282,953, derivative liabilities Ps. (4,770,719) and (143,398) for years ended in 2008 and 2007, respectively.

u) Paid-in capital

In accordance with Colombian GAAP, paid-in capital in excess of par value of shares issued is credited to a legal reserve. Under U.S. GAAP, capital in excess of par value is credited to paid-in capital.

v) Equity tax

Pursuant the Law 1111 of 2006, for the years 2007 through 2010, companies and individuals, who the January 1, 2007 hereinafter possess liquidity equity over Ps 3,000, are subject to equity tax.

Under Colombian GAAP, equity tax is allowed to be recorded as a decrease of Appropriated retained earnings.

Under U.S. GAAP, equity tax is recorded directly on statements of operations.

w) Earnings per share

Under Colombian GAAP, earnings per share (“EPS”) are computed by dividing net income by the weighted average number of both common and preference shares outstanding for each period presented.

F-109

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

U.S. GAAP requires dual presentation of basic and diluted EPS for entities with complex capital structures, as well as a reconciliation of the basic EPS computation to the diluted EPS computation. Basic EPS is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted EPS assumes the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. For the years ended December 31, 2006, 2007 and 2008, the Bank had a simple capital structure. Therefore, there was no difference between basic or diluted EPS for these years.

The following table summarizes information related to the computation of basic EPS for the years ended December 31, 2006, 2007 and 2008(in millions of pesos, except per share data):


	*2006*			*2007*			*2008*

U.S. GAAP consolidated net income	Ps	941,183		Ps	1,015,644		Ps	849,920
Less preferred share dividends		116,041			157,974			173,548

Income attributable to common stockholders		825,142			857,670			676,372


Income from continuing operations attributable to common shareholders		872,885			913,057			599,135

Income (loss) from operations and disposal of discontinued operations		(47,743	)		(55,387	)		77,236

Income attributable to common shareholders		825,142			857,670			676,372

Weighted average number of common shares outstanding used in basic EPS calculation(in millions)		510			510			510
Basic and Diluted earnings per share (U.S. GAAP):
Income from continuing operations		1,712.53			1,791.35			1,174.77
Income (loss) from operations and disposal of discontinued operations		(93.66	)		(108.67	)		151.44

Income attributable to common shareholders	Ps	1,618.87		Ps	1,682.68		Ps	1,326.21

x) Segments Disclosure

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly used by the finance vice president (the chief operating decision maker) in deciding how to allocate resources and assessing performance.

The Bank has strategically organized its operations into six major business segments based on its market segmentation, customer’s needs and trading partners. Additionally, the Bank manages and measures the performance of its operations through these business segments using an internal profitability reporting system.

The Bank does not have any individual external customer which represents 10% or more of the enterprise’s revenues.

For this Annual Report, the Bank performed a review of its business segments and has changed the presentation of segment information. According to The Chief Operating Decision Maker, the major changes correspond to the aggregation of construction banking, corporate headquarters, brokerage and manufacturing segments into a category called “All other Segments”. The information for 2007 and 2006 has been restated to reflect these changes.

Banagrícola and its subsidiaries were allocated to each segment based on market segmentation, customer’s meeds and trading partners. The segments retail banking, commercial banking and off-shore commercial banking include most of the operations of Banagrícola and its subsidiaries.

F-110

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The following presents information on reported operating segment profit or loss, and segment assets:


	*2006*⁽²⁾
				Corporate
	Retail and Small			and						Offshore
	Business			Governmental						Commercial					All other
	Banking			Banking			Treasury			Banking			Leasing		Segments			Total

Revenues from external customers	Ps	547,311		Ps	169,871			—		Ps	130		Ps	38,515	Ps	222,699		Ps	978,526
Revenues (expenses) from transactions with other operating segments of the Bank		—			60,861			—			12,493			12,691		73,058			159,103
Interest income		1,201,392			864,665			343,496			495,222			437,977		274,651			3,617,403
Interest expense		265,393			339,072			246,058			123,286			254,752		123,645			1,352,206
Net interest revenue		935,999			525,593			97,438			371,936			183,225		151,006			2,265,197
Depreciation and amortization expense		26,888			29,804			8,956			988			10,237		57,044			133,917
Provision for loan losses		130,613			(50,742	)		(30,134	)		13,316			51,741		87,978			202,772
Administrative and other expense		1,029,375			286,855			65,064			9,099			68,689		280,414			1,739,496
Income tax expense or benefit		33,707			36,694			6,629			—			36,475		61,373			174,878
Other income or expense, net		(568	)		(116,209	)		—			(223,056	)		12,138		84,564			(243,131	)
Segment profit before distribution of income (expense) for treasury funds		262,159			337,505			46,923			138,100			79,427		44,518			908,632
Distribution of income (expense) for treasury funds⁽¹⁾		77,399			(40,964	)		(8,089	)		—			—		(28,346	)		—

Segment profit	Ps	339,558		Ps	296,541		Ps	38,834		Ps	138,100		Ps	79,427	Ps	16,172		Ps	908,632

Segments assets	Ps	10,142,901		Ps	10,858,235		Ps	3,090,780		Ps	4,216,594		Ps	4,528,718	Ps	5,418,802		Ps	38,256,030

F-111

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2007*^{(2) (3)}
				Corporate
	Retail and Small			and						Offshore
	Business			Governmental						Commercial				All other
	Banking			Banking			Treasury			Banking		Leasing		Segments			Total
Revenues from external customers	Ps	801,924		Ps	179,491		Ps	(2,302	)	Ps	11,858	Ps	84,086	Ps	261,692		Ps	1,336,749
Revenues (expenses) from transactions with other operating segments of the Bank		(10,844	)		25,309			10,655			148,783		1,345		317,738			492,986
Interest income		2,019,666			1,385,482			507,934			299,067		624,606		424,687			5,261,442
Interest expense		501,024			449,711			552,969			205,806		392,740		42,497			2,144,747
Net interest revenue		1,518,642			935,771			(45,035	)		93,261		231,866		382,190			3,116,695
Depreciation and amortization expense		52,538			41,949			10,083			20,819		24,369		85,421			235,179
Provision for loan losses		421,576			187,766			(14,634	)		19,271		108,538		26,111			748,628
Administrative and other expense		1,351,951			313,805			35,186			10,786		77,778		309,496			2,099,002
Income tax expense or benefit		109,999			89,947			52,370			—		35,990		73,577			361,883
Other income or expense, net		43,610			14,313			21			18,067		61,258		(59,098	)		78,171
Segment profit before distribution of income (expense) for treasury funds		417,268			521,417			(119,666	)		221,093		131,880		407,917			1,579,909
Distribution of income (expense) for treasury funds⁽¹⁾		(102,762	)		(188,467	)		362,750			—		—		(71,521	)		—

Segment profit	Ps	314,506		Ps	332,950		Ps	243,084		Ps	221,093	Ps	131,880	Ps	336,396		Ps	1,579,909

Segment assets	Ps	18,453,289		Ps	16,412,411		Ps	3,806,189		Ps	6,847,345	Ps	5,898,303	Ps	7,745,272		Ps	59,162,809

F-112

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)


	*2008*⁽²⁾
				Corporate
	Retail and Small			and						Offshore
	Business			Governmental						Commercial				All other
	Banking			Banking			Treasury			Banking		Leasing		Segments			Total
Revenues from external customers	Ps	913,333		Ps	206,529		Ps	14,244		Ps	5,303	Ps	245,739	Ps	318,071		Ps	1,703,219
Revenues (expenses) from transactions with other operating segments of the Bank		(11,117	)		57,992			(5,175	)		38,642		8,427		167,611			256,380
Interest income		2,730,204			1,839,523			602,931			260,652		848,623		1,024,001			7,305,934
Interest expense		602,384			674,548			779,047			214,825		561,778		119,748			2,952,330
Net interest revenue		2,127,820			1,164,975			(176,116	)		45,827		286,845		904,253			4,353,604
Depreciation and amortization expense		51,882			43,625			8,565			57,415		99,022		52,134			312,643
Provision for loan losses		802,255			330,148			(11,261	)		16,001		143,234		38,352			1,318,729
Administrative and other expense		1,595,323			370,408			67,334			12,035		157,656		369,750			2,572,506
Income tax expense or benefit		125,978			118,522			74,679			—		35,553		118,561			473,293
Other income or expense, net		67,372			27,171			(123	)		19,464		54,975		(257,868	)		(89,009	)
Segment profit before distribution of income (expense) for treasury funds		521,970			593,964			(306,487	)		23,785		160,521		553,270			1,547,023
Distribution of income (expense) for treasury funds⁽¹⁾		(140,439	)		(227,935	)		532,594			—		—		(164,220	)		—

Segment profit	Ps	381,531		Ps	366,029		Ps	226,107		Ps	23,785	Ps	160,521	Ps	389,050		Ps	1,547,023

Segment assets	Ps	20,533,592		Ps	20,968,208		Ps	3,285,957		Ps	7,508,606	Ps	7,131,928	Ps	10,674,799		Ps	70,103,090


(1)		These costs are calculated based on the funds that segments use or provide. Those do not have an impact in the final result.

(2)		The methodology used for segment disclosure was changed for purposes of comparability. The segments Retail and Small Business Banking were combined in a single segment. The segments Corporate Banking and Governmental Banking were also combined in a single segment.

(3)		The segment disclosure was modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes.

F-113

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The following is a reconciliation of reportable segment’s revenues, profit or loss and assets, to the Banks’ consolidated totals:


	*2006*			*2007*⁽⁴⁾			*2008*

*Revenues*
Revenues for reportable segments⁽¹⁾	Ps	4,755,032		Ps	7,091,177		Ps	9,265,533
Non-operating income⁽²⁾		(372,237	)		(161,201	)		(596,387	)
Elimination of intersegment revenues		(159,103	)		(492,986	)		(256,380	)

Total revenues for reportable segments⁽³⁾	Ps	4,223,692		Ps	6,436,990		Ps	8,412,766


*Profit or Loss*
Segment Profit	Ps	908,632		Ps	1,579,909		Ps	1,547,023
Elimination of inter-segment profits		(159,103	)		(492,986	)		(256,380	)

Net income	Ps	749,529		Ps	1,086,923		Ps	1,290,643


*Assets*
Segments Assets	Ps	38,256,030		Ps	59,162,809		Ps	70,103,090
Elimination of inter-segment assets		(3,767,334	)		(7,011,160	)		(8,320,011	)

Consolidated total	Ps	34,488,696		Ps	52,151,649		Ps	61,783,079


(1)		Total revenues for reportable segments includes Revenues from external customers, revenues and expenses from transactions with other operating segments of the same enterprise and interest income.

(2)		Non-operating income represents other income classified as revenue for segment reporting purposes.

(3)		Total revenues for reportable segments include interest, fees, other services and other operating income.

(4)		The segment disclosure for the year ended 2007 was modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes.

The following summarizes the Bank’s revenues and long-lived assets attributable to Colombia and other foreign countries:


	*As of December 31,*
	*2007*⁽²⁾					*2008*
				*Long*					*Long*
*Geographic Information*	*Revenues*			*Term - Assets*⁽¹⁾		*Revenues*			*Term - Assets*⁽¹⁾
Colombia	Ps	5,540,069		Ps	1,202,108	Ps	7,558,997		Ps	1,718,190
Panama and Cayman Islands		515,749			10,242		260,282			10,476
Puerto Rico		51,765			164		39,191			238
Perú		357			6,706		8,319			22,453
El Salvador		774,026			143,658		759,587			148,422
USA		48,010			115		42,770			199


Total		6,929,976			1,362,993		8,669,146			1,899,978
Eliminations of intersegment operations		(492,986	)		11		(256,380	)		2,674

Total, net	Ps	6,436,990		Ps	1,363,004	Ps	8,412,766		Ps	1,902,652


(1)		Included foreclosed assets, net, and property, plant and equipment, net.

(2)		The segment disclosure for the year ended 2007 was modified to reflect certain reclassifications made in commissions from banking services and other services, administrative and other expenses and other income that conform to the presentation of 2008 figures, in order to provide a better basis of comparison with respect to 2008 figures regarding the gains on the sale of mortgage loans. No such changes were made for 2006, as the reclassifications would not have a material impact on the figures for that period, and accordingly, would not be material for comparative purposes.

F-114

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

The segments reported embrace the following activities:

Corporate and governmental Banking:This segment provides commercial banking products and services to local and international companies, from both the public and private sectors with annual sales of more than Ps15,000 million. They lead their own respective markets, which makes them highly sophisticated in terms of processes, operations and projects. The Chief Operating Decision Maker defined Corporate and Governmental banking as operating segment.

Retail and small business banking:The Bank’s Retail Banking segment provides a wide range of financial products and services to individuals and SMEs. (firms that are not part of the Corporate and governmental segment) in Colombia and El Salvador. Bancolombia’s Personal and SME Banking Division attends a wide range of clients with different needs, goals and lifestyles. The Chief Operating Decision Maker defined Retail and Small business banking as operating segment.

Treasury:This segment is responsible for the management of the Bank’s proprietary trading activities, liquidity, and distribution of products and services to its client base in Colombia. In addition, Bancolombia’s Economic Research Department makes part of this division. Aditional information on Bancolombia’s treasury products can be found in section “Item 4. Information on the Company — B.5 Products and services”.

Offshore Commercial Banking:This segment summarizes the operations of the following Bancolombia subsidiaries: Bancolombia Panama S.A., Bancolombia Cayman, Bancolombia Puerto Rico Internacional Inc. and Banco Agrícola (Panama) S.A. provide a complete line of offshore banking services to Colombian and Salvadorian customers, including loans to private sector companies, trade financing, lease financing, financing for industrial projects as well as a complete portfolio of cash management products, such as checking accounts, international collections and payments, and PC Banking. Through these Subsidiaries, the Bank also offers investment opportunities in U.S. Dollars, savings and checking accounts, time deposits, and investment funds to its high net worth clients and private banking customers.

Leasing:This segment summarizes the operations of the following Bancolombia subsidiaries offer financial and operational leases: Leasing Bancolombia S.A., Renting Colombia S.A., Renting Perú S.A., Tempo Rent a Car, Capital Investment Safi S.A, Suleasing Internacional Inc, and Arrendadora Financiera S.A.

With our cross border or international leasing operations we provide financial leasing services from abroad offering very special features to our clients in Colombia as well as in Central America, Mexico and Brazil.

All other segments: This segment summarizes the following operations:

Investment Banking. Banca de Inversión Bancolombia specializes in providing investment banking services to corporate customers in areas such as mergers and acquisitions, project finance, issuances of debt and equity securities and syndicated loan transactions.

Brokerage and Asset Management. Valores Bancolombia, Suvalor Panama and Bursabac provide brokerage and asset management services. It provides its customers with domestic and international investment alternatives.

Trust, Pension Fund and Insurance. The Bank offers, through its subsidiaries Fiduciaria Bancolombia S.A., Fiduciara GBC S.A, funds designed to provide customers with the opportunity to diversify their investments.

F-115

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Through its branch network, Bancolombia and Banco Agrícola offer various insurance products (Bancassurance). On the other hand, Asesuisa and Asesuisa Vida offer insurance products for individuals and corporations, covering a wide range of risks and exposures in El Salvador.

AFP Crecer S.A. is a pension fund manager that manages both voluntary and mandatory contributions through individual savings accounts for the elderly, common disability and surviving pensions, as established under the SAP. The SAP and other regulations issued by the Superintendency of Pensions of El Salvador regulate the products and services that AFP Crecer S.A. provides.

In addition, the operations of the following subsidiaries are part of the other segment: Sistema de Inversiones y negocios S.A., Sinesa Holding Company Limited, Future Net, Inmobiliaria Bancolombia, Valores Simesa, Todo1 Colombia, Inversiones CFNS, Tempo LTDA, Inversiones IVL, Banagricola (The holding), Inversions Financieras Bancoagricola S.A. and Transportes Empresariales de Occidente Ltda.

y) Restatement of US GAAP Condensed Financial Information

On June 29, 2009, the Bank filed an amendment on Form 20-F/A to its annual report on Form 20-F for the year ended December 31, 2007, filed with the SEC on July 8, 2008 to reflect the restatements described below. For the years ended 2006 and 2007, the Bank reviewed certain of its service agreements with vehicles used to securitize the Bank’s performing loans and reconsidered the analysis under SFAS 140 and concluded that such vehicles did not meet the definition of a qualified special-purpose entity under SFAS 140. Consequently, the Bank restated the Supplemental Consolidated Condensed Balance Sheets, Supplemental Consolidated Condensed Statements of Operations and the Supplemental Consolidated Condensed Statements of Cash Flows in order to consolidate the vehicles in which the Bank is the primary beneficiary under FIN 46R — Consolidation of Variable Interest Entities (Revised). In addition, the Bank restated the Supplemental Consolidated Condensed Statements of Cash Flows to correct errors related to (i) for the fiscal years ended on December 31, 2005, 2006 and 2007, the inappropriate classification of the changes in the loan portfolio as operating activities rather than investing activities, (ii) for the years ended December 31, 2005 and 2007, clerical errors in the elimination and reclassification of cash flows related to the different accounting treatment for business combinations under Colombian GAAP and U.S. GAAP, (iii) for the fiscal years ended on December 31, 2006 and 2007, the presentation of the effects of exchange rate changes on cash and cash equivalents. In addition, as noted above, the restatement relating to the treatment of vehicles used to securitize the Bank’s performing loans also affected the Supplemental Consolidated Condensed Statements of Cash Flows for the years ended December 31, 2006 and 2007.

z) Recent U.S. GAAP Pronouncements

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, “Accounting for Transfers of Financial Assets (an amendment of FAS 140)” (SFAS 166). SFAS 166 amends the guidance on transfers of financial assets in order to address practice issues highlighted most recently by events related to the economic downturn. The amendments include: (1) eliminating the qualifying special-purpose entity concept, (2) a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, (3) clarifications and changes to the derecognition criteria for a transfer to be accounted for as a sale, (4) a change to the amount of recognized gain or loss on a transfer of financial assets accounted for as a sale when beneficial interests are received by the transferor, and (5) extensive new disclosures. Calendar year-end companies will have to apply SFAS 166 to new transfers of financial assets occurring from January 1, 2010. The Bank is currently analyzing the effect that SFAS No.166 will have on its U.S.GAAP disclosures and financial information.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS 167). SFAS 167 represents a significant change to the previous accounting rules. The standard include: (1) Eliminates the scope exception for qualifying special-purpose entities, (2) eliminates the quantitative model for determining which party should consolidate and replaces it with a qualitative model focusing on decision-making for an entity’s significant economic activities, (3) requires a company to continually reassess whether it should consolidate an entity subject to FIN 46(R), (4) requires an assessment of whether an entity is subject to the standard due to a troubled debt restructuring, and (5) requires extensive new disclosures. SFAS 167 is effective for the Bank’s first reporting period beginning after November 15, 2009. The Bank is currently analyzing the effect that SFAS No.167 will have on its U.S.GAAP disclosures and financial information.

In May 2009, the FASB issued Statement of Financial Accounting Standards No. 165, “Subsequent Events” (SFAS No.165). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 provides (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009 and shall be applied prospectively. The Bank is currently analyzing the effect that SFAS No.165 will have on its U.S.GAAP disclosures and financial information.

F-116

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

In April 2009, the FASB issued FASB Staff Position (FSP) No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”. FSP 141R-1 addresses application issues regarding initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This FSP applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Bank will apply FSP 141R-1 for acquisitions consummated on or after January 1, 2009.

In April 2009, the FASB issued FSP No. FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for the financial statements for interim and annual periods ending after June 15, 2009. The Bank is currently analyzing the effect that FSP FAS 157-4 will have on its U.S.GAAP disclosures and financial information.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”). FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance for investments in debt securities to make the guidance more operational and also to improve the presentation and disclosure of other-than-temporary impairments on both debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP FAS 115-2 and FAS 124-2 are effective for the Bank’s financial statements for the year ending December 31, 2009. The Bank is currently analyzing the effect that FSP FAS 115-2 and FAS 124-2 will have on its U.S.GAAP disclosures and financial information.

In February 2009, the FASB issued SFAS No. 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13”. This FSP amends SFAS 157 to exclude FASB Statement No. 13, “Accounting for Leases” (“SFAS 13”), and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. This FSP is effective upon the initial adoption of SFAS 157. The adoption of SFAS 157-1 did not have a material impact on the consolidated statements of income and consolidated balance sheets.

In December 2008, the FASB issued FSP No. FAS 132(R)-1 “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 is effective for the financial statements for the year ending December 15, 2009. Management is currently evaluating the impact the FSP FAS 132(R)-1 would have on the Bank’s financial statement and U.S.GAAP disclosures.

In December 2008, the FASB issued FSP No. SFAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” (“FSP SFAS 140-4 and FIN 46(R)-8”). FSP SFAS 140-4 and FIN 46(R)-8 amends Statement of Financial Accounting Standards (SFAS) No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a replacement of FASB Statement No. 125” (SFAS 140) to require public entities to provide additional disclosures about transferors’ continuing involvements with transferred financial assets. It also amends FASB Interpretation (FIN) No. 46 (revised December 2003) “Consolidation of Variable Interest Entities — an interpretation of ARB No. 51” (FIN 46R) to require public enterprises, including sponsors that have a variable interest in a VIE, to provide additional disclosures about their involvement with VIEs. The expanded disclosure requirements for FSP FAS 140-4 and FIN 46(R)-8 are effective for the Bank’s financial statements for the year ending December 31, 2008. The adoption of FSP FAS 140-4 and FIN 46(R)-8 did not impact the Bank’s financial condition and results of operations.

F-117

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

In October 2008, the FASB issued FSP No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”). FSP 157-3 clarifies how SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) should be applied when valuing securities in markets that are not active. The results of adoption of FSP 157-3, effective September 30, 2008, were included in Note 31 (t) — Estimated Fair Value of Financial Instruments.

In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (“FSP 133-1”). FSP 133-1 requires expanded disclosures about credit derivatives and guarantees. The expanded disclosure requirements for FSP 133-1 were effective for the Bank’s financial statements for the year ending December 31, 2008 and are included in Note 31 (i) — Investment securities and derivatives and in Note 31 (r) — Guarantees. The adoption of FSP 133-1 did not impact the Bank’s financial condition and results of operations.

In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles”. The adoption of SFAS 162 did not have a material impact on the consolidated statements of income and consolidated balance sheets.

In April 2008, the FASB issued FSP No. SFAS 142-3, “Determination of the Useful Life of Intangible Assets”. (“FSP SFAS 142-3”) amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years; early adoption is prohibited. The Bank is currently analyzing the effect that FSP SFAS 142-3 will have on its U.S.GAAP disclosures and financial information, for acquisitions consummated on or after January 1, 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”) which requires expanded qualitative, quantitative and credit-risk disclosures about derivatives and hedging activities and their effects on the Bank’s financial position, financial performance and cash flows. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Bank is currently analyzing the effect that SFAS 161 will have on its U.S.GAAP disclosures and financial information.

In February 2008, the FASB issued FSP No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (“FSP 140-3”). FSP 140-3 requires that an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously with, or in contemplation of, the initial transfer be evaluated together as a linked transaction under SFAS 140, unless certain criteria are met. FSP 140-3 is effective financial statements issued for fiscal years beginning after November 15, 2008 (for the Bank’s financial statements for the year beginning on January 1, 2009). The Bank is currently analyzing the effect that FSP No. FAS 140-3 will have on its U.S.GAAP disclosures and financial information.

F-118

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

In December 2007, the FASB issued Statement No. 141 R (“SFAS 141 R”) “Business Combination” — Revised 2007 -.SFAS 141 R replaces FASB Statement No. 141, “Business Combinations”. SFAS 141 R retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. It requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. SFAS 141 R also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with this Statement). This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Bank is currently analyzing the effect that SFAS 141 R will have on its U.S.GAAP disclosures and financial information.

In December 2007, the FASB issued Statement No. 160 (“SFAS 160”) “Non-controlling Interests in Consolidated Financial Statements —an amendment of ARB No. 51” ,which amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement also changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation and treats all of those transactions as equity transactions if the parent retains its controlling financial interest in the subsidiary. A parent recognizes a gain or loss in net income when a subsidiary is deconsolidated. A parent deconsolidates a subsidiary as of the date the parent ceases to have a controlling financial interest in the subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends) and earlier adoption is prohibited. The Bank is currently analyzing the effect that SFAS 160 will have on the Bank’s U.S.GAAP disclosures and financial information.

In November 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 109 “Written loan commitments recorded at fair value through earnings” (“SAB 109”). SAB 109 clarifies that consistent with the guidance in SFAS 156 “Accounting for servicing of Financial Assets” and SFAS 159 “The Fair Value Option for Financial Assets and Liabilities”, the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that accounted for at fair value through earnings. SAB 109 is effective from January 1, 2008. The adoption of SAB 109 did not impact the Bank’s financial condition and results of operations.

In February 2007, the FASB issued Statement No. 159 (“SFAS 159”) “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS 159 creates a fair value option under which an entity may irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities on a contract-by-contract basis, with changes in fair value recognized in earnings as these changes occur. SFAS 159 is effective as of the beginning of the first fiscal year beginning after November 15, 2007. The Bank did not elect to measure to measure eligible items at fair value under SFAS 159 and therefore it did not impact the Bank’s financial condition and results of operations.

F-119

BANCOLOMBIA S.A. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Stated in millions of Colombian pesos and thousands of U.S. dollars. Except for the Representative Market Rate)

Recent Colombian GAAP Pronouncements:

On June 03, 2009, at its last session, bill 203/2008 (initially bill 165/2007, approved by the same commission but in the House of Representative of Colombian Congress) was duly approved, by means of which the accounting, reporting and information assurance principles and standards that are generally accepted in Colombia were regulated, indicating the competent authorities, the procedure by which said principles and standards are to be issued and determining the corresponding oversight authorities. This bill, which is about to be passed, brings the currently generally accepted accounting principles in Colombia in line with International Financial Reporting Standards.

In June 2008, the Colombian Superintendency of Finance published External Circular No. 025 titled “Subrogation of instructions regarding derivatives and structured products as contained in Chapter 18 of the Basic Accounting and Financial Circular as well as the issuance of the transition regime applying to said instruments and products”, for the purpose of adjusting its rules and regulations as well as issuing instructions as a result of the integral reform made to the rules and regulations governing operations carried out with derivatives and structured products, as promulgated by the National Government by means of Decrees 1796, 1797 and 1121 of 2008. That contained in the External Circular No. 025 is used on a prospective basis for purpose of appraising the value of derivatives and structured products occurring or traded as of July 23, 2008 and all the other rules and regulations therein contained that shall come into full force and effect as of July 1, 2008. The stipulations contained in External Circular 025 affect the appraisal of derivatives and structured products on the Bank’s financial statements for the year ending December 31, 2008, and are included in Note 31 (t) — Estimated Fair Value of Financial Instruments.

F-120

EXHIBIT INDEX


12.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
12.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.1		CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
13.2		CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2009.
15.1		Consent of PriceWaterhouseCoopers Ltda.
15.2		Consent of Deloitte & Touche Ltda.
15.3		Consent of PriceWaterhouseCoopers, S.A.

Bancolombia (CIB) 20-F/A2008 FY Annual report (foreign) (amended)