213800SKPWJOLQCQVX80-2025-12-31-T01

1 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Strategic report

For the year ended 31 December 2025

The Directors present their Strategic report for BOS (Shared Appreciation Mortgages) No. 2 plc (''the Company'') for the year ended

31 December 2025.

Principal activities

The principal activity of the Company was to originate and finance mortgage lending. In 1997 the Company issued £105,600,000 fixed rate

notes on the London Stock Exchange (the ''Notes''). Following a business restructure on 28 February 2011 the terms of the Notes were

modified. The notes bear a zero rate of interest until August 2027. Under the business restructure, the interest rate applicable to the Notes

will increase to 0.50% fixed from August 2027 until 2072 when the Notes become due. The Notes are secured on the mortgage portfolio. The

capital appreciation arising on the sale of mortgage holder’s property is shared between the mortgage holder and the Company as set

out in the original loan agreements.

The activities of the Company are conducted primarily by reference to a series of transaction documents under the offering circular for

BOS (Shared Appreciation Mortgages) No. 2 plc (the ''Programme Documentation''). The Company is required to pay its entire share of the

capital appreciation received from the borrowers to both the Note holders and the swap provider, in line with the priority of payments set

out in the Programme Documentation.

Business structure

The Company is a subsidiary undertaking of Bank of Scotland plc (incorporated in Scotland) within Lloyds Banking Group (''the Group'').

Business review

No new mortgage loans have been originated and no new loan notes have been issued by the Company since 1997.

The profit for the financial year amounted to £311,125 (2024: loss of £281). Total equity at 31 December 2025 amounted to £1,897,613 (2024:

£1,586,488).

The Company has recognised a significant profit during the current year, compared to a small loss during the prior year. This can be

principally attributed to a significant increase in other operating income of £656,590 (2024: £400), which is following the write-down of

accrued liabilities no longer expected to be settled, offset by higher operating expenses in the current year of £189,613 (2024: £74,826),

higher net fair value losses of £157,692 (2024: £85,575) and lower net interest income of £105,549 (2024: £159,627).

Changes in valuation methodology

The Company has recognised higher net fair value losses during the year mainly due to a change in the fair valuation of its mortgage

portfolio, the Notes and interest rate swap instrument, which has been driven by updated model assumptions and a revision in the

methodology used to fair value these financial instruments. The Company has aligned its methodology, around assumptions used, with

those of similar lifetime products measured at fair value in the Group.

The key changes to the assumptions used in the valuation are as follows:

• alignment around the risk-free rate used for discounting expected cash flows, by using the market driven Overnight Index Swap (“OIS”)

rates instead of the Group’s economic forecasts for Bank of England base rates, whilst continuing to include the margin that a Halifax

Branded standard variable rate mortgage earns as effective spread.

• alignment around using the Prudential Regulatory Authority’s deferment rate for projecting future house price increases rather than the

Group’s economic forecasts around the Halifax House Price Index (“HPI”).

• aligning the expected cash flow frequency to the Company’s quarterly waterfalls from annual expected basis.

• introducing an estimated repayment period to the valuation, based on experience to date which indicates customers tend to use the

maximum permitted time of up to 16 months to settle their loans when due, which was previously not considered. The current

repayment period used in the model at 31 December 2025 is 16 months based on historical experience.

• moving from a total portfolio basis to a customer account level basis as part of the fair value calculation, including taking into account

both the gender and actual age of the customers, including the youngest age where joint customers, for use with the mortality tables

to estimate future cash flows, in contrast to average age for all customers at portfolio level in previous years.

Management judgement has been applied to the timing of repayment for deceased customers and where customer tracing activities

are ongoing.

These enhancements to the methodology, as well as updates to existing assumptions around indexed movements in the Halifax HPI,

probabilities around litigation and dilapidation rates on redemptions of the mortgages based on actual experience, amongst other

adjustments have all had an impact on the net fair value losses recognised in the current year. The impact in the fair value of the

Company’s financial instruments following the enhancements to the methodology, as well as sensitivities around the underlying

assumptions used in the calculation for both years, can be found in note 3.2.

The mortgage portfolio is subject to the economic factors relating to the housing market (see ''Credit risk'' below). The net interest income

is determined by a margin earned between the interest received on the mortgage portfolio and the interest paid to the Note holders.

2 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Strategic report (continued)

For the year ended 31 December 2025

Business review (continued)

Litigation

In January 2021, a litigation claim was brought by, or on behalf of, a number of customers against Bank of Scotland plc and certain of its

subsidiary undertakings that had issued shared appreciation mortgages, including the Company. The claim was issued in the County

Court under the unfair relationship provisions of the Consumer Credit Act 1974.

On 23 January 2024, the Claimants and Bank of Scotland plc (together with the other Defendants, including the Company) agreed a

commercial settlement of this litigation, with no admission of liability. The terms of the settlement agreement are confidential. There are

no changes to the mortgages, or to their terms and conditions.

Since the settlement, the Company has continued to receive a number of new pre‑action claims. However, the Directors have concluded

that no provision is required in respect of these matters in the Company’s financial statements at this time. In reaching this conclusion,

the Directors considered the contractual arrangements between Bank of Scotland plc and the Company, noting that Bank of Scotland plc

bore the costs of the previous settlement and would meet any associated costs or liabilities (if any) arising from future claims. No

reimbursement will be made by the Company to Bank of Scotland plc for such costs or liabilities. Further information on the background

to these claims can be found in note 17.

Key performance indicators

There is a board meeting held quarterly that is responsible for assessing the risk of irregularities, whether caused by fraud or error in

financial reporting, and ensuring that processes are in place for the timely identification of internal and external matters with a potential

effect on financial reporting. This meeting analyses and discusses the trends for the quarter and identifies any issues or required

changes. Any such issues are then reported, further discussed, and collectively agreed. There were no significant issues impacting the

Company in the current or previous year.

The key performance indicators used by management in assessing the performance of the Company are the monitoring of the fair value

movement and the mortgage redemptions during the year, together with the trigger event around the credit rating of the Company’s

bank account provider. These have been identified by management as key drivers in the performance of the Company. More details of

the fair value movement is in note 4 and details for the redemptions are in note 9.

The Company has made all necessary payments on the Notes in accordance with the scheduled repayment dates for the years ended

31 December 2025 and 31 December 2024.


KPI	2025	2024	Analysis
Mortgage fair value movement (£)	(1,114,318)	4,826,182	The fair value loss in the current year, in contrast to the gain in the previous year, is principally from the enhancements to the model methodology previously discussed as well as annual updates to the underlying assumptions such as indexation, discount rates amongst others. The loss in the current year is principally from the introduction of the contractual repayment period assumption in the new model methodology, where customers have up to 16 months to settle, which has extended the expected receipt of discounted cash flows, resulting in a reduction in the carrying amount on Balance sheet.
Mortgage redemptions (£)	(7,199,368)	(12,651,860)	Decrease in redemptions during the current year is in line with the expectations as there were fewer redemptions than during the previous year. Movements on redemptions can be erratic and can depend on multiple factors such as mortality rate, amounts due based on the loan-to-value of customer borrowing influencing share of appreciation rights due, plus other property factors such as geographical location and dilapidation of property. All these factors can impact both the value and frequency of redemptions during a financial year.
Bank of Scotland plc - credit rating	A-1	A-1	The Programme Documentation stipulates that the bank account provider must have a minimum S&P credit rating of A-1. Bank of Scotland plc, the bank account provider, has held a short-term rating at the minimum level throughout the current year and previous year.

Future outlook

The Company's balance sheet will continue to reduce over the life of the mortgages issued as the Company has not issued any further

advances since 1997 and there is no intention to issue new business in the future.

Cash will continue to be received from mortgage redemptions. The mortgage loans are lifetime mortgages and will remain on Balance

sheet until the last customer has redeemed its loan advance. However, as appreciation depends on housing prices, there is an element of

uncertainty about how much appreciation share will be received.

3 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Strategic report (continued)

For the year ended 31 December 2025

Economic environment

In 2025, the UK economy experienced modest growth alongside persistent inflation pressures. Elevated input costs and continued global

uncertainty limited business investment. Technological developments, including increased adoption of artificial intelligence, supported

incremental productivity gains; however, challenges such as new US trade tariffs, geopolitical tensions including ongoing conflict in both

Eastern Europe and the Middle East and ongoing supply chain disruption continued to weigh on economic activity.

Globally, recovery remained uneven, with inflation and differing monetary policy paths contributing to variable demand conditions. As a

result, many UK businesses maintained a cautious approach to investment and expansion.

Consistent with the Group’s purpose of Helping Britain Prosper and its commitment to supporting customers, the Group continued to

assist those most affected by developments in the economic environment.

The Directors’ assessment suggests that performance of the mortgage portfolio should continue to be satisfactory. Despite the pressures

in the UK economy, it is expected that there will be limited impact on mortgage holders’ ability to service their loans as the mortgage

loans bear a zero-rate of interest. There has been no material impact on the Company as of the Strategic report date. The situation will

continue to be monitored and the Servicer, Bank of Scotland plc, will continue to adopt appropriate forbearance measures on behalf of

the Company.

Principal risks and uncertainties

The majority of the Company's assets and liabilities have been classified as financial instruments in accordance with International

Financial Reporting Standards (“IFRS”) 9 ''Financial Instruments''. The Company's financial instruments comprise a mortgage portfolio with

an embedded derivative (Financial assets held at fair value through profit or loss (''Financial assets at FVTPL'')), cash liquid resources, non-

interest bearing loan notes with an embedded derivative (Financial liabilities designated at fair value through profit or loss (''Financial

liabilities at FVTPL'')), an interest rate swap instrument (Derivative liability) and various other receivables and payables that arise directly

from its operations.

The Company's policy is that no trading in financial instruments is undertaken.

The principal risks arising from the Company's financial instruments are credit risk, market risk, including other price risk and interest rate

risk, and, liquidity risk. These and other risks which may affect the Company's performance are detailed below. Further analysis of the risks

facing the Company on its financial instruments is provided in note 15.

Credit risk

Credit risk arises on the individual loans within the mortgage loan portfolio which are in turn secured on the underlying UK residential

properties. The performance of these loans is therefore influenced by the economic background and the UK housing market; however,

with a maximum loan-to-value of the original advances being 25.00% and with the mortgage portfolio having a weighted average

current loan-to-value of 4.80% at 31 December 2025 (2024: 4.82%), the credit exposure is considered to be low as the value is payable on

the earlier of death of the customer or the sale of the property.

The terms of the mortgage portfolio agreement given by Bank of Scotland plc in respect of the mortgages require Bank of Scotland plc to

repurchase any mortgage which is found to be in breach of warranty; however, there is a clause in the agreement that allows the

trustees to retain ownership if they choose. Bank of Scotland plc will repurchase any mortgages that are found or held not to be valid,

binding and enforceable. There have been no such repurchases in the current year or the previous year. In such an event the total value

of the outstanding loan and any accrued interest will be covered by Bank of Scotland plc, the Note holders will not receive the benefit of

any future payments of appreciation amounts or partial repayment of appreciation amounts in respect of the mortgages repurchased.

Market risk

Market risk is the risk of financial losses to the Company from factors related to the market in which it operates. The Company's market is

the UK residential housing market. The key risks related to this market are other price risk and interest rate risk.

Other price risk

Under the terms of the Notes the Company is obligated to pay the Note holders the return on the shared appreciation that has accrued

during the life of the mortgage loan at the rate implicit in the specific mortgage loan agreement as and when repaid by the mortgage

loan customer. Shared appreciation is subject to the movement in the market value of the property which is dependent upon house price

inflation, as measured by the Halifax House Price Index (''HPI'').

However, the Company itself is not impacted by price risk as the risk of returns on the Notes being below initial expectations lies with the

Note holder and there are no guarantees within the terms of the Notes for expected increases in value.

4 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Strategic report (continued)

For the year ended 31 December 2025

Principal risks and uncertainties (continued)

Interest rate risk

Interest rate risk exists where interest rates on assets and liabilities are set on different bases or reset at different times. The Company

minimises its exposure to interest rate risk by aligning the interest rate characteristics of its assets and liabilities wherever possible. When

a complete match is not achievable, the Company uses derivative financial instruments to mitigate any residual interest rate risk. The

Company has a swap agreement to generate income to cover necessary expenses in light of the mortgages bearing a zero coupon;

however, there is no interest rate risk as the swap agreement earns income at a fixed coupon rate. The fair value of the interest rate swap

is reflected in the statement of financial position and the movement in fair value is recognised in the statement of comprehensive

income.

Liquidity risk

All liabilities of the Company, with the exception of the Notes, are paid from receipts of funds earned on its bank deposits, the swap

agreement with the external provider and the letter of credit issued by Bank of Scotland plc.

The Company entered into an interest rate derivative with an external swap provider to manage the liquidity of the Company. The

purpose of the swap was to provide a more stable cash flow to the Company by paying over the portion of the capital appreciation on

the mortgage loans not due to investors, in return for a fixed interest receipt.

The Company has an unconditional and irrevocable 364-day revolving letter of credit provided by Bank of Scotland plc and UBS. The

letter of credit is for a maximum aggregate principal amount of £1,165,000 to assist the Company should it not be able to meet its

obligations under the Notes. This agreement expires on the earlier of when the Notes being redeemed in full or on the last business day

falling in August 2072. The reliance on this facility is therefore dependent upon the creditworthiness of Bank of Scotland plc, which

currently has a short-term rating from Standard and Poor's (S&P) of A-1 (2024: S&P short-term rating: A-1).

The Company has not drawn on the letter of credit since inception.

The extent to which the Company can meet its obligations to repay the Notes will be dependent upon the receipt of funds earned on the

mortgage portfolio, the income earned on the interest rate swap instrument and the letter of credit issued by Bank of Scotland plc. To the

extent that this income does not provide sufficient funds to cover the repayment of the Note principal, the Note holders have no claim on

the assets of Bank of Scotland plc.

In accordance with the Programme Documentation the Company is obligated to make payments to meet third party expenses. To

mitigate this risk the Directors hold quarterly board meetings to review the performance of the Company and ensure that the Company

is in a position to meet all necessary payments.

Operational risk

Bank of Scotland plc has been appointed to act as account bank and servicer of the mortgage book on behalf of the Company. The

Company uses Bank of New York Mellon to provide all corporate services in respect of the Notes in issue.

The Company is exposed to the risk of failure to comply with changes to applicable statutory and regulatory requirements. To mitigate

such risks the Company undertakes systematic horizon scanning to identify and ensure compliance with any future changes.

Section 172(1) of the Companies Act 2006

In accordance with the Companies Act 2006 (the "Act"), for the year ended 31 December 2025, the Directors provide the following

statement to confirm that they have had regard to the matters set out in Section 172(1) of the Act, when performing their duty to promote

the success of the Company under Section 172(1).

The Company is a wholly owned subsidiary of Bank of Scotland plc, within the Group. Consequently the Directors further acknowledge

that the activities taken with regard to the Company's strategy have been closely aligned to that of the Group, which is to achieve both

long-term and sustainable returns, central to which is ensuring engagement with stakeholders, and considering in all instances the long-

term implications of decisions made, acting at all times to maintain the highest possible standards of conduct.

Further information on the Group's strategy around Section 172(1) can be found in Lloyds Banking Group plc’s Annual report and accounts

2025 on pages 30 to 31. Further details of how to obtain access to the Lloyds Banking Group plc’s Annual report and accounts 2025 can be

found in note 20.

Further, in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, the Directors

also confirm that they have both engaged with and had regard to the interest of key stakeholders, in their duties as directors of the

Company.

5 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Strategic report (continued)

For the year ended 31 December 2025

Section 172(1) of the Companies Act 2006 (continued)

Key stakeholders

The Directors confirm that there has been regular engagement with all key stakeholders of the Company, as well as confirm that they

have treated all key stakeholders fairly in their activities, to ensure that there has been appropriate use of knowledge and expertise when

making business decisions around the long-term strategy of the Company and its activities during the year. For example key Group

business and functional service providers are represented and provide expert advice at Board meetings of the Company; holders of the

Company’s notes receive regular information in relation to cash flows due; and customers of the Company receive contact, engagement

and support consistent with that provided to other customers of the wider Group.

Customers and clients

The Directors have ensured that the Company, as part of the Group, continues to work towards the Group's strategy for treating all

customers fairly. To ensure the Directors truly understand the needs of their customers, every opportunity has been taken to consider

direct customer feedback and related management information as part of the Directors' strategic decision-making process. The

Directors have worked to ensure the business of the Company is undertaken in line with the objectives of the Group, with the Directors

regularly reviewing customer complaints to understand areas where improvements can be made. The Group regularly benchmarks

amongst its customers the performance of itself and its subsidiaries, including the Company, and uses this insight along with a range of

internal and external research to ensure ongoing improvement in customer experience.

Regulators and government

The Company and its directors are satisfied that there is a strong, open and transparent relationship with relevant regulators and other

authorities and liaise regularly as part of the Group to ensure the business is aligned to the evolving regulatory framework. Key areas of

focus have included ensuring robust prudential standards and supervision arrangements are in place, ensuring the fair treatment of

customers, adapting to changes in regulatory requirements, recovery, and resolution for the UK’s withdrawal from the European Union.

The approach of the Group, including that of the Company, to managing regulatory change is discussed further on page 13, plus pages

152 to 153 of Lloyds Banking Group plc’s Annual report and accounts 2025.

Society and the environment

The Directors acknowledge that they have performed all of their duties as directors in accordance with the strategy of the Group around

the Company's impact on its society and the environment, through engagement with representatives of the wider Group’s mortgages

business. Further details can be found within Lloyds Banking Group plc’s annual report and accounts 2025.

As approved by the board of directors and signed on behalf of the board:

Zack Ellis

Director

DATE: 29 April 2026

6 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Directors' report

For the year ended 31 December 2025

The Directors present their annual report and audited financial statements for the Company for the year ended 31 December 2025.

General information

The Company is a public limited company, limited by shares, incorporated, registered and domiciled in England and Wales (registered

number: 03149607).

Registered office

The Company’s registered office is Trinity Road, Halifax, HX1 2RG.

Company Secretary

The Company secretary is Alyson Elizabeth Mulholland.

Employees

The Company had no employees during the year ended 31 December 2025 (2024: nil). None of the Directors received any emoluments

from the Company in the current or previous year.

Dividends

No dividends were paid or proposed during the year ended 31 December 2025 (2024: £nil).

Events after the Balance sheet date

There are no events after the Balance sheet date requiring disclosure in these financial statements.

Going concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least

12 months from the date of approval of the accounts. Thus they continue to adopt the going concern basis of accounting in preparing the

annual financial statements. Further details regarding the adoption of the going concern basis can be found in the note 1 to the financial

statements.

Corporate governance

The Directors have been charged with governance in accordance with the Programme Documentation describing the structure and

operation of the transaction. The governance structure of the Company is such that the key policies have been predetermined at the

time of issuance and the operational roles have been assigned with their roles strictly governed by the Programme Documentation.

The Programme Documentation provides for procedures that have been designed for safeguarding assets against unauthorised use or

disposition; for maintaining proper accounting records; and for the reliability and usefulness of financial information used within the

business or for publication. Such procedures are designed to manage rather than eliminate the risk of failure to achieve business

objectives whilst enabling them to comply with the regulatory obligations.

Due to the nature of the securities which have been issued, the Company is largely exempt from the requirements of the Financial

Conduct Authority pertaining to the Disclosure and Transparency Rules (DTR) as detailed in DTR 7.1 Audit Committees and 7.2 Corporate

Governance statements (save for the rule DTR 7.2.5 requiring a description of the features of the internal control and risk management

systems), which would otherwise require the Company respectively, to have an audit committee in place and include a corporate

governance statement in the report of the Directors. The Directors are therefore satisfied that there is no requirement for an audit

committee or a supervisory body entrusted to carry out the functions of an audit committee or to publish a corporate governance

statement.

From the perspective of the Company, the daily operational internal controls and risk management systems are integrated with those of

Lloyds Banking Group plc, the Company’s ultimate controlling party. Therefore additional information may be found in section ''Internal

Control'' of Lloyds Banking Group plc’s Annual report and accounts 2025, which does not form part of this report. Details of where to get

access to Lloyds Banking Group plc’s Annual report and accounts 2025 can be found in note 20.

Information included in the Strategic report

The disclosures for Future outlook, Principal risks and uncertainties and Key performance indicators can be found in the Strategic report

on pages 1 to 5.

7 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Directors' report (continued)

For the year ended 31 December 2025

Streamlined energy and carbon reporting ("SECR")

The Company has taken an exemption from SECR, in its own Directors’ Report as it is included within the Group SECR report given in Lloyds

Banking Group plc’s Annual report and accounts 2025, available on the Lloyds Banking Group plc website, details of which can be found in

note 20. Due to the nature of the Company the Directors are of the opinion that climate change has a negligible impact.

Directors

The Directors of the Company during the year, and up to the date of signing the financial statements, were:

Carolyne Emily Gregory

Jacques Lodewickus Bezuidenhout (appointed 11 August 2025)

Tanya Marie Foxe(resigned 11 June 2025)

Zack Ellis(appointed 22 May 2025)

None of the Directors has any beneficial interest in the ordinary share capital of the Company. None of the Directors has any interest in

any material contract or arrangement with the Company either during or at the end of the year (2024: none).

Directors’ indemnities

Lloyds Banking Group plc has granted to the Directors of the Company a deed of indemnity which constitutes ‘qualifying third party

indemnity provisions’ for the purposes of the Companies Act 2006. The deed was in force during the whole of the financial year and at the

date of approval of the financial statements or from the date of appointment in respect of any Director who joined the board during the

financial year. Directors no longer in office but who served on the board of the Company at any time in the financial year had the benefit

of this deed on indemnity during that period of service. The deed for existing Directors is available for inspection at the registered office of

Lloyds Banking Group plc, details of which can be found in note 20. In addition the Group has in place appropriate Directors and Officers

Liability Insurance cover which was in place throughout the financial year.

Statement of Directors' responsibilities in respect of the financial statements

The Directors are responsible for preparing the Directors’ and Strategic Reports and the financial statements in accordance with

applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared

the Company’s financial statements in accordance with United Kingdom adopted international accounting standards in conformity with

the requirements of the Companies Act 2006. Under company law, the Directors must not approve the financial statements unless they

are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that

period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether the financial statements comply with United Kingdom adopted international accounting standards in conformity with

the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the financial statements;

and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in

business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's

transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that

the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in

other jurisdictions.

8 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Directors' report (continued)

For the year ended 31 December 2025

Auditor and disclosure of information to auditor

In accordance with Section 418 of the Companies Act 2006, in the case of each Director in office at the date the Directors’ report is

approved:

• so far as the Directors are aware, there is no relevant audit information of which the Company’s auditor is unaware; and

• the Directors have taken all the steps that they ought to have taken as a Director in order to make themself aware of any relevant audit

information and to establish that the Company’s auditor is aware of that information.

Deloitte LLP is deemed to be re-appointed as auditor under section 489 of the Companies Act 2006.

As approved by the board of directors and signed on behalf of board by:

Zack Ellis

Director

DATE: 29 April 2026

9 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Statement of comprehensive income

For the year ended 31 December 2025


	Note	2025	2024
		£	£

Interest receivable and similar income		105,549	159,627
Net interest income		105,549	159,627

Net fair value movements on financial assets at fair value through profit or loss	4	(8,313,686)	(7,825,678)
Net fair value movements on financial liabilities at fair value through profit or loss	4	7,289,420	6,683,692
Net fair value movements on interest rate derivative at fair value through profit or loss	4	866,574	1,056,411
Other operating income	5	656,590	400
Operating expenses	6	(189,613)	(74,826)
Profit / (loss) before tax		414,834	(374)

Taxation	7	(103,709)	93
Profit/(loss) for the financial year, being total comprehensive income/(expense)		311,125	(281)

The Company operates in a single business segment and all of the Company's activities are in the UK.

The accompanying notes are an integral part of the financial statements.

10 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Balance sheet

As at 31 December 2025


	Note	2025	2024
		£	£
Assets
Cash and cash equivalents	8	2,817,114	2,134,740
Financial assets held at fair value through profit or loss	9	40,491,209	48,804,895
Current tax asset		-	3,987
Deferred tax asset	10	7,786	11,680
Total assets		43,316,109	50,955,302

Liabilities
Bank overdraft	8	400	340
Trade and other payables	11	1,115,497	1,009,696
Financial liabilities designated at fair value through profit or loss	12	33,740,244	41,029,664
Current tax liability		99,815	-
Derivative liability	13	6,462,540	7,329,114
Total liabilities		41,418,496	49,368,814

Equity
Share capital	14	50,001	50,001
Retained earnings		1,847,612	1,536,487
Total equity		1,897,613	1,586,488
Total liabilities and equity		43,316,109	50,955,302

The accompanying notes are an integral part of the financial statements.

The financial statements were approved by the board of directors on 29 April 2026 and were signed on behalf of the board by

Zack Ellis

Director

DATE: 29 April 2026

11 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Statement of changes in equity

For the year ended 31 December 2025


	Share capital	Retained earnings	Total equity
	£	£	£

Balance at 1 January 2025	50,001	1,536,487	1,586,488
Profit for the year, being total comprehensive income	—	311,125	311,125
Balance at 31 December 2025	50,001	1,847,612	1,897,613


	Share capital	Retained earnings	Total equity
	£	£	£

Balance at 1 January 2024	50,001	1,536,768	1,586,769
Loss for the year, being total comprehensive expense	–	(281)	(281)
Balance at 31 December 2024	50,001	1,536,487	1,586,488

The accompanying notes are an integral part of the financial statements.

12 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Cash flow statement

For the year ended 31 December 2025


		2025	2024
	Note	£	£

Cash flows from operating activities
Profit/(loss) before tax		414,834	(374)

Adjustments for:
Interest receivable and similar income		(105,549)	(159,627)
Net fair value movements on financial assets at fair value through profit or loss	9	1,114,318	(4,826,182)
Net fair value movements on financial liabilities at fair value through profit or loss	12	(1,719,034)	4,358,912
Net fair value movements on interest rate derivative at fair value through profit or loss		24,781	788,555
		(270,650)	161,284
Changes in operating assets and liabilities:
Net decrease in Swap interest receivable		646	1,618
Net increase/(decrease) in Trade and other payables		105,801	(222,447)
Cash used in operations		(164,203)	(59,545)
Tax received		3,987	9,996
Net cash flows used in operating activities		(160,216)	(49,549)

Cash flows from investing activities
Repayment on mortgage portfolio	9	705,987	1,238,877
Shared appreciation rights received	9	6,493,381	11,412,983
Bank interest received		105,549	159,627
Net cash flows generated from investing activities		7,304,917	12,811,487

Cash flows from financing activities
Swap interest received		94,934	110,398
Repayment of borrowings	12	(635,712)	(1,257,696)
Shared appreciation rights paid to Note holders	12	(4,934,674)	(9,784,908)
Shared appreciation rights paid to swap holders		(986,935)	(1,956,982)
Net cash flows used in financing activities		(6,462,387)	(12,889,188)

Net increase/(decrease) in Cash and cash equivalents		682,314	(127,250)
Cash and cash equivalents at start of year		2,134,400	2,261,650
Cash and cash equivalents at end of year		2,816,714	2,134,400

Cash and cash equivalents per the Cash flow statement comprise:
Cash at bank		2,817,114	2,134,740
Bank overdraft		(400)	(340)
Cash and cash equivalents	8	2,816,714	2,134,400

The Cash flow statement has been presented using the indirect method.

The accompanying notes are an integral part of the financial statements.

13 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements

For the year ended 31 December 2025

Note 1.Basis of preparation

The financial statements of the Company have been prepared in accordance with United Kingdom adopted international accounting

standards in conformity with the requirements of the Companies Act 2006.

The financial statements are presented in Sterling which is the Company's functional and presentation currency and have been

prepared on the historical cost basis (except for financial assets and financial liabilities classified and measured at fair value through

profit or loss ("FVTPL") in accordance with IFRS 9.)

In preparation of these financial statements the Balance sheet has been arranged in order of liquidity.

The following new IFRS pronouncement is relevant to the Company and has been adopted within these financial statements. However,

the adoption of this pronouncement did not have a material impact.

The IASB has issued an amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates, effective 1 January 2025. This amendment

has not had a significant impact on the Company.

Details of those pronouncements which will be relevant to the Company but which were not effective at 31 December 2025 and which

have not been applied in preparing these financial statements are given in note 19.

As at 31 December 2025 the Company is showing a net assets position in the financial statements. The Company has continued to

perform in line with the Programme Documentation. There are certain items included in the Programme Documentation as referred to in

the annual report and financial statements in KPIs (Strategic Report) and explained in the note on Management of risk. In the course of

their regular monitoring of these KPIs and review of risk, the Directors are confident that these will have no issues for the period of at least

twelve months from when the financial statements are authorised for issue, despite the current adverse environment. The Directors have

also considered the credit enhancement features of the transaction in terms of the mortgage portfolio agreement (revolving letter of

credit) given by Bank of Scotland plc (see note 15.1), together with the limited recourse nature of the issued notes.

The Directors are satisfied that the Company, will continue to have access to adequate liquidity and capital resources for the foreseeable

future and, accordingly, the financial statements have been prepared on a going concern basis, taking into account:

• There is a net asset position of £1,897,613 (2024: £1,586,488).

• The Company has continued to perform in line with the Programme Documentation.

• The Company will continue to be able to repay its liabilities as they fall due through its liquid assets and/or its ability to drawdown on

additional funding available.

• The credit enhancement features of the transaction and the limited recourse nature of the issued notes.

• The bank account provider, Bank of Scotland plc, has maintained a minimum S&P credit rating of A-1, which is required per the

Programme Documentation.

• The early redemption threshold of 20% has not been reached at year end and until the date of signing of financial statements and is not

expected to be reached within the next 12 months. Notwithstanding, the Company has no intention of exercising the early redemption

within the next 12 months.

Note 2.Material accounting policies

The material accounting policies applied in the preparation of these financial statements are set out below. These policies have been

consistently applied in both years presented, unless otherwise stated.

Note 2.1Interest receivable

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in

profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognised in profit or loss includes

interest earned on the financial asset and is included in the ‘Net fair value movements on financial assets and liabilities at fair value

through profit or loss’ line item.

Bank interest income is recognised in the period in which it is earned.

Note 2.2Fees and commissions

Fees and commissions receivable relate to incremental fees received on redemption for the continuing servicing of the mortgage

portfolio and are recognised when the mortgage loan has been settled.

Note 2.3Financial instruments

The Company's financial instruments comprise a mortgage portfolio with an embedded derivative, cash liquid resources, non-interest

bearing loan notes with an embedded derivative, an interest rate swap instrument and various other receivables and payables that arise

directly from its operations.

14 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 2.Material accounting policies (continued)

Note 2.3Financial instruments (continued)

Note 2.3.1 Cash and cash equivalents

The Company holds bank accounts with Bank of Scotland plc, its parent. These accounts are held in the Company's name and meet the

definition of cash and cash equivalents. The use of certain accounts is restricted by a detailed priority of payments set out in the

Programme Documentation. As the cash and Bank overdrafts can only be used to meet certain specific liabilities and are not available to

be used with discretion, it is viewed as restricted cash.

These bank accounts are classified as financial assets held at amortised cost in accordance with IFRS 9 and income is recognised using

the effective interest method.

For the purposes of the Balance sheet and Cash flow statement, Cash and cash equivalents includes bank balances with an original

maturity of less than three months and Bank overdrafts.

Note 2.3.2 Lifetime Mortgage portfolio

The Company has a lifetime mortgage portfolio. The contract for these loans contains a share appreciation receivable clause where the

customer has to share any appreciation in the property value with the company as per an agreed rate. The shared appreciation

receivable is considered as an embedded derivative, however, the Company has made an accounting policy choice to not un-bundle

the contract and to account for the whole amount of the lifetime mortgage (including both the shared appreciation receivable

(embedded derivative) and the loan (host contract)), as one instrument and to recognise this at fair value on origination and subsequent

measurements.

Note 2.3.3 Embedded derivatives

Certain derivatives are embedded within other non-derivative host financial instruments to create a hybrid instrument. The economic

characteristics and risks of the embedded derivatives are closely related to the economic characteristics and risks of the host

instrument. The hybrid instrument is measured at fair value, and the embedded derivative is not separated from the host instrument with

changes in fair value of the embedded derivative recognised in the Statement of comprehensive income in accordance with IFRS 9.

The capital appreciation arising on the sale of a mortgage holder's property is shared between the mortgage holder and the Company

as set out in the original loan agreement. The Company pays its entire share of the appreciation to the Note holders and swap provider.

The economic characteristics and risks of the shared appreciation rights receivable and payable are viewed as being closely related to

those arising on the mortgages and Notes, respectively. There is uncertainty regarding the timing of any future shared appreciation, and

therefore the shared appreciation rights receivable and payable have been valued with the mortgages and Notes at fair value through

profit or loss using discounted cash flow valuation techniques. Further details can be found in note 3.2 below.

Note 2.3.4 Derivatives

IFRS 9 requires all derivative financial instruments to be recognised initially at fair value on the Balance sheet and to be re-measured to

fair value at subsequent reporting dates. Where the value of the derivative is positive, it is carried as a derivative asset and where

negative, as a derivative liability.

The Company uses a derivative financial instrument to provide an interest flow for the Company. In accordance with its treasury policy,

the Company does not hold or issue derivative financial instruments for trading purposes.

The gain or loss on re-measurement of the interest rate swap to fair value has been recognised immediately in net fair value gains and

losses on derivatives in the Statement of comprehensive income.

The fair value of the swap is the estimated amount that the Company would receive or pay to terminate the swap at the Balance sheet

date, taking into account HPI forecasts, past actual sales and the expected future net cash flows based on average mortgage balances

and a yield curve discounted back to present value.

15 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 2.Material accounting policies (continued)

Note 2.3.5 Mortgage-backed fixed rate notes

The Company’s loan notes comprise mortgage-backed fixed rate notes (the “Notes”) that have been issued in the UK market. The interest

rate payable on the Notes up to and including the interest period ending in the quarter to 31 August 2027 is 0.00% per annum. Thereafter,

the interest rate payable on the Notes will be 0.50% per annum until 2072 when the Notes are due to redeem.

The Notes are considered a lifetime liability with a legal maturity of 2072, and the terms of the Notes closely aligned to the terms of the

mortgage portfolio which have the same maturity date and on which the Notes are secured upon. The Notes contain a share

appreciation payable clause whereby the Note holders receive all the share appreciation receivable that the Company receives from the

customers on its mortgage portfolio. The share appreciation payable in the contract of the Notes is considered as an embedded

derivative and the Company has elected to not un-bundle the contract and embedded derivative of the Notes, but to treat them as one

instrument and to recognise this at fair value on origination and subsequent measurements.

Note 2.4Taxation

Tax expense comprises current and deferred tax. Current and deferred tax are charged or credited in the Statement of Comprehensive

Income except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period, outside

the Statement of Comprehensive Income (either in other comprehensive income, directly in equity, or through a business combination),

in which case the tax appears in the same statement as the transaction that gave rise to it.

Current tax is the amount of corporate income taxes expected to be payable or recoverable based on the profit for the period as

adjusted for items that are not taxable or not deductible, and is calculated using tax rates and laws that were enacted or substantively

enacted at the balance sheet date.

Current tax includes amounts provided in respect of uncertain tax positions when management expects that, upon examination of the

uncertainty by His Majesty's Revenue and Customs (HMRC) or other relevant tax authority, it is more likely than not that an economic

outflow will occur. Provisions reflect management's best estimate of the ultimate liability based on their interpretation of tax law,

precedent and guidance, informed by external tax advice as necessary. Changes in facts and circumstances underlying these

provisions are reassessed at each balance sheet date, and the provisions are re-measured as required to reflect current information.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in

the balance sheet. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance

sheet date, and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax liabilities are generally recognised for all taxable temporary differences but not recognised for taxable temporary

differences arising on investments in subsidiaries where the reversal of the temporary difference can be controlled and it is probable that

the difference will not reverse in the foreseeable future. Deferred tax liabilities are not recognised on temporary differences that arise

from goodwill which is not deductible for tax purposes.

Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible

temporary differences can be utilised, and are reviewed at each balance sheet date and reduced to the extent that it is no longer

probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. In certain cases where forecast

profits are not expected to be sufficient to support the recognition of a deferred tax asset on a standalone entity basis, further

consideration has been given to the availability of UK group relief with connected companies to support the recognition.

Deferred tax assets and liabilities are not recognised in respect of temporary differences that arise on initial recognition of assets and

liabilities acquired other than in a business combination. Deferred tax is not discounted.

The Company has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to

Pillar 2 income taxes currently required by IAS 12 ‘Income Taxes’.

Note 2.5Capital management

The Company is not subject to externally imposed capital requirements in the current and prior year, except for the minimum

requirement under Companies Act 2006. The Company manages its ordinary share capital in order that there is sufficient capital, in the

opinion of the Directors, to support the transactions and level of business undertaken by the Company.

Note 3.Critical accounting judgements and key sources of estimation uncertainty

The preparation of the financial statements necessarily requires the exercise of judgement both in the application of accounting policies

and in the selection of assumptions used in the calculation of estimates. These judgements and estimates are reviewed on an ongoing

basis and are continually evaluated based on historical experience and other factors.

The following are considered the most critical judgements and estimates made by the Directors in the process of applying the

Company's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

16 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 3.Critical accounting judgements and key sources of estimation uncertainty (continued)

Note 3.1Critical accounting judgements

Litigation

The Company continues to receive a number of new pre‑action claims. However, the Directors have concluded that no provision is

required for these claims in the Company’s financial statements at this time. In forming this view, the Directors noted that Bank of

Scotland plc bore the costs of the previous settlement and, having considered the contractual arrangements between Bank of Scotland

plc and the Company, expect that Bank of Scotland plc would meet any associated costs or liabilities (if any) arising from any future

claims. No reimbursement will be made by the Company to Bank of Scotland plc for such costs or liabilities.

Taking this into account, the Directors have used their judgement and considered any implications of the last settled claim by assessing

the likelihood of various legal outcomes and the potential impact on the Company’s assets and liabilities. The outcome of this

assessment is discussed in more detail per note 3.2 below.

Customer status

The fair value model also considers the status of whether a customer is deceased and the time for expected settlement, as well as where

customer tracing activities are on-going. As repayment timing may extend beyond the contractual settlement period for such

customers. A judgement is made in respect of the timing of expected future cashflows. Refer to note 3.2 below.

Note 3.2Key sources of estimation uncertainty and judgements

Fair value of financial assets and financial liabilities

Fair value is defined as the value at which assets, liabilities or positions could be closed out or sold in a transaction with a willing and

knowledgeable counterparty.

The embedded derivative and the host contract are reported within Financial assets at FVTPL and Financial liabilities at FVTPL,

respectively, for the mortgage assets and the Note liabilities.

Further information on the accounting policies are discussed in notes 2.3.2, 2.3.3 and 2.3.4.

The shared appreciation clauses within the lifetime mortgage portfolio and the Notes have not been valued because they are not

separated from the host contract.

Changes in model valuation methodology

During the year, the Company has updated its valuation methodology for its financial assets and liabilities measured at fair value

through profit or loss, to align the methodology with that of similar lifetime products within the Group, as discussed earlier in Business

review in the Strategic report.

The fair values of the embedded derivative and the host contract continue to be calculated by discounting expected cash flows at an

appropriate market rate for both an equivalent lifetime product in the Group, plus a margin for a regular standard variable mortgage

product. In addition, the fair value includes an estimate of future property growth, together with an estimated dilapidation rate which has

been determined based upon actual impact to date from previous redemption activity.

The fair value calculation also continues to factor in mortality rates for expected cash flow purposes, which are used by the Group's

insurance division and sourced from industry-wide metrics. The model continues to estimate the average age for determining the

expected mortality rates, but has streamlined this to now include account level information by taking into account the actual age and

the actual gender of the customers rather than previously estimating an average age for all customers and applying this across the

portfolio of assets or liabilities. However, it is the underlying assumptions that have been updated for consistency as well as streamlining

of the underlying calculation, but the basic methodology for calculating discounted expected cash flows to get to an estimated fair value

is unchanged from previous valuations in its core principles. The valuation now considers the contractual repayment period that is

included in the terms of the mortgage agreement, which allows customers up to 16 months to settle all amounts due under the loan

agreement. Management judgement has been applied to the timing of repayment for deceased customers and where customer tracing

activities are ongoing.

17 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 3.Critical accounting judgements and key sources of estimation uncertainty (continued)

Note 3.2Key sources of estimation uncertainty and judgements (continued)

Fair value of financial assets and financial liabilities (continued)

Impact of valuation model estimation changes

The table below highlights the impact on the valuations of the company’s financial assets and liabilities at fair value through profit or loss,

following the changes to the assumptions and methodology as previously discussed:


As at 31 December 2025	Valuation per revised model methodology		Valuation per historic model methodology	Impact of changes to model methodology
	£		£	£	%

Financial assets held at fair value through profit or loss	40,491,209		45,309,551	(4,818,342)	(10.6)
Financial liabilities designated at fair value through profit or loss	(33,740,244)		(37,847,388)	4,107,144	(10.9)
Derivative liability	(6,462,540)		(7,057,336)	594,796	(8.4)
	288,425	288,425	404,827	(116,402)	(28.8)


As at 31 December 2024	Valuation per revised model methodology	Valuation per historic model methodology	Impact of changes to model methodology
	£	£	£	%

Financial assets held at fair value through profit or loss	47,282,384	48,804,895	(1,522,511)	(3.1)
Financial liabilities designated at fair value through profit or loss	(39,683,065)	(41,029,664)	1,346,599	(3.3)
Derivative liability	(7,219,570)	(7,320,573)	101,003	(1.4)
	379,749	454,658	(74,909)	(16.5)

Dilapidation

The table below shows the impact on the Company's financial instruments carried at fair value from a decrease ('favourable') or increase

('unfavourable') of 1% in the dilapidation rate of 19.03% (2024: 20.85%):


	Favourable	Unfavourable	Favourable		Unfavourable
	2025	2025	2024		2024
	£	£	£	£	£

Financial assets held at fair value through profit or loss	642,708	(642,708)	761,461		(761,461)
Financial liabilities designated at fair value through profit or loss	(535,590)	535,590	(634,551)		634,551
Derivative liability	(107,118)	107,118	(126,910)		126,910

Property growth rate

Following the changes to the model methodology in the current year, the Company uses the Group’s forecast for the risk free rate (OIS),

plus the margin that a standard variable rate mortgage earns, less the PRA’s deferment rate to estimate the future property growth when

estimating the discounted cash flows expected over the life of the mortgage loans and the Notes, for the appreciation rights in the

embedded derivative of the mortgage assets and the Note liabilities (the ‘net property growth rate’). For 2024 and previous periods, the

Company used projected HPI forecasts produced by the Group. At 31 December 2025, the forecast for property growth estimated an

increase of 2.69% in house prices in the first 12 months to 31 December 2026, followed by increases in house prices of between 2.53% and

3.70% over the estimated life of the mortgage loans and the Notes after 2026.

18 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 3.Critical accounting judgements and key sources of estimation uncertainty (continued)

Note 3.2Key sources of estimation uncertainty and judgements (continued)

Fair value of financial assets and financial liabilities (continued)

Property growth rate (continued)

The table below shows the impact on the Company's financial instruments carried at fair value from an increase ('favourable') or

decrease ('unfavourable') in the net property growth rate (2024: HPI forecast rates) by 1% (2024: 1%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2025	2025	2024	2024
	£	£	£	£

Financial assets held at fair value through profit or loss	2,898,776	(2,587,326)	4,060,664	(3,740,884)
Financial liabilities designated at fair value through profit or loss	(2,415,647)	2,156,105	(3,383,886)	3,117,404
Derivative liability	(483,129)	431,221	(676,778)	623,480

Discount factor

Following the changes to the model methodology in the current year, the Company discounts expected cash flows using OIS rates and

continues to apply the standard variable rate margin that a Halifax branded mortgage adds to any variable rate mortgage for spread.

For 2024 and prior periods, the expected cash flows were discounted using the Group’s economic forecast for the Bank of England base

rates, but still applying the standard variable rate margin that Halifax branded mortgages.

The current SONIA rate was 3.73% at 31 December 2025 and the OIS forecast rates ranged from 3.53% to 4.71%. For 2024, the Bank of England

base rate was 4.75% at 31 December 2024 and the Group’s forecast had rates ranging from between 4.75% to 3.50%. The discount rates

used in the valuation, including the margin, ranged from 7.03% to 8.20% (2024: 8.24% to 6.99%) over the estimated life of the mortgage loans

and Notes.

The table below shows the impact on the Company's financial instruments carried at fair value from an decrease ('favourable') or

increase ('unfavourable') in the discount factor forecast rates by 1% (2024: 1%):


	Favourable	Unfavourable	Favourable	Unfavourable
	2025	2025	2024	2024
	£	£	£	£

Financial assets held at fair value through profit or loss	3,452,938	(3,079,151)	3,587,020	(3,261,313)
Financial liabilities designated at fair value through profit or loss	(2,922,520)	2,606,919	(3,040,565)	2,764,812
Derivative liability	(512,161)	455,600	(529,576)	480,719

Mortality rate

Following the changes to the model methodology in the current year, the company now uses the customer’s actual age for determining

a mortality rate as part of the expected cash flow calculation, in contrast to an average age for all customers at portfolio level in previous

years. The average age of the customers in the prior year was 87 years. The table below shows the impact on the Company's financial

instruments carried at fair value from an increase ('favourable') or decrease ('unfavourable') in the mortality rate by changing the actual

age of a customer at account level by 1 year (2024: average age at portfolio level by 1 year):


	Favourable	Unfavourable	Favourable	Unfavourable
	2025	2025	2024	2024
	£	£	£	£

Financial assets held at fair value through profit or loss	693,378	(780,494)	924,303	(948,294)
Financial liabilities designated at fair value through profit or loss	(586,618)	660,450	(782,919)	803,013
Derivative liability	(116,276)	130,943	(159,583)	163,682

19 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 3.Critical accounting judgements and key sources of estimation uncertainty (continued)

Note 3.2Key sources of estimation uncertainty and judgements (continued)

Fair value of financial assets and financial liabilities (continued)

Litigation claims

As discussed in note 3.1, the Directors have used their judgement and considered the wider implication of the last litigation claim by

assessing the likelihood of various legal outcomes and the impact such would have on the Company’s assets and liabilities valued at fair

value through profit or loss. The table below shows the impact on the Company’s financial instruments carried at fair value from a

decrease (‘favourable’) or increase (‘unfavourable) of 1% (2024: 1%) in the probability of there being a litigation claim in the future:


	Favourable	Unfavourable	Favourable		Unfavourable
	2025	2025	2024		2024
	£	£	£	£	£

Financial assets held at fair value through profit or loss	198,268	(198,268)	237,895		(237,895)
Financial liabilities designated at fair value through profit or loss	(198,268)	198,268	(237,895)		237,895
Derivative liability	–	–	—		—

Customer repayment period

As part of the changes to the model methodology in the current year, as previously discussed, the valuation now considers the

repayment period that is included in the terms of the mortgage agreement, which allows customers up to 16 months to settle all amounts

due under the loan agreement. Based on experience to date the majority of customers use the maximum permitted time to settle their

loans when due,which the valuation assumes as part of the calculation. The table below shows the impact on the Company's financial

instruments carried at fair value from a decrease ('favourable') or increase ('unfavourable') in the number of months taken by customers

to settle their loans by reducing or increasing the current model estimate of 16 months by 3 months:


	Favourable	Unfavourable
	2025	2025
	£	£

Financial assets held at fair value through profit or loss	740,622	(730,287)
Financial liabilities designated at fair value through profit or loss	(626,446)	617,715
Derivative liability	(107,098)	105,597

Judgement applied to the timing of repayments for deceased customers

Given the nature of the loan portfolios and the requirement for management to undertake customer‑tracing activities, significant

judgement is applied in assessing the expected timing of repayment for deceased customers. Repayments in certain cases are

expected to occur beyond the contractual settlement period of 16 months reflecting the additional time which may be required to resolve

matters. Management reflects this judgement through an adjustment to the model estimate of the repayment period for deceased

customers, rather than through changes to expected contractual cash flows. This approach is considered to best reflect the impact of

extended repayment timelines on fair value.

If the estimated repayment period is increased by 12 months for all deceased customers, this would decrease the fair value of the

mortgage assets by £511,571, decrease the fair value of the loan notes in issue by £434,205 and decrease the fair value of the derivative

liability by £76,293. In contrast, if the estimated repayment period is decreased by 12 months for all deceased customers, this would

increase the fair value of the mortgage assets by £539,670, increase the fair value of the loan notes in issue by £458,054 and increase the

fair value of the derivative liability by £80,484.

Judgement applied where tracing activities are on-going

Management periodically verify the status of customers. As at the reporting date whilst verification had been recently complete for the

majority, this had not been completed for all customers. In circumstances where management is undertaking verification of a

customer’s status (including as to whether they are deceased) based on tracing activities, judgement is applied for the purposes of the

valuation. Average life expectancy/mortality data published by the Office for National Statistics (“ONS”) are used to inform customer

classification within the valuation model. Customers assessed as being above the relevant average mortality age are treated as likely to

be deceased with an extended repayment period. The valuation is sensitive to this classification. If all customers for which tracing

activities are on-going were classified as deceased, the fair value of the mortgage assets would increase by £144,709, with the

corresponding fair value of the loan notes in issue increasing by £122,831 and the fair value of the derivative liability increasing by £27,763.

Conversely, the classification of all such customers as alive would result in the fair value of the mortgage assets increasing by £164,387,

with the corresponding fair value of the loan notes in issue increasing by £137,612 and the fair value of the derivative liability increasing by

£3,319.

20 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 3.Critical accounting judgements and key sources of estimation uncertainty (continued)

Note 3.2Key sources of estimation uncertainty and judgements (continued)

Fair value of financial assets and financial liabilities (continued)

Fair value assessment of litigation

The Company has carried out a probability-based assessment for a variety of potential legal outcomes and determined, as part of this

assessment, that the fair value of these mortgage assets has a carrying amount of £40,491,209 at 31 December 2025 (2024: £48,804,895).

The Company has loan notes in issue that are classified as financial liabilities measured at FVTPL. The fair value of these loan notes in

issue is intrinsically linked to the fair value of the mortgage assets. Accordingly, based on this assessment, the Company has determined

that the fair value of the loan notes in issue has a carrying amount of £33,740,244 at 31 December 2025 (2024: £41,029,664). This

assessment has had £nil impact on the Company’s result for either the current year or the previous year.

Note 4.Net fair value movements on financial assets and liabilities at fair value through profit or loss


	2025	2024
	£	£

Fair value movement on Financial assets at FVTPL	(8,313,686)	(7,825,678)
Fair value movement on Financial liabilities at FVTPL	7,289,420	6,683,692
Fair value movement on interest rate derivative	866,574	1,056,411
	(157,692)	(85,575)

Included in the fair value movement on Financial assets at FVTPL are unrealised losses of £1,114,318 (2024: unrealised gains of £4,826,182),

included in the fair value movement on Financial liabilities at FVTPL are unrealised gains of £1,719,034 (2024: unrealised losses of £4,358,912),

and included in the fair value movement on interest rate derivative are unrealised losses of £24,781 (2024: unrealised losses of £788,555).

These relate to fair value movements impacted by changes in the assumptions during the year. Further details on these underlying

assumptions and their sensitivities can be found in note 3.2.

During the current year, the valuation methodology was changed to include a new assumption around the 16 month repayment period

which customers are entitled to when settling their mortgage loans and the actual experience of customers utilising this in full,

contributing for the larger gross fair value movements in the current year compared to the previous year. The amount of the effect for

future periods is impractical to assess.

Note 5.Other operating income


	2025	2024
	£	£

Fee income	200	400
Release of accrued liabilities	656,390	—
	656,590	400

The release of accrued liabilities relates to unsubstantiated balances that are no longer expected to be settled and have been written

down in the current year.

Note 6.Operating expenses


	2025	2024
	£	£

Intercompany fees	26,821	17,168
Administration fees	95,002	8,100
Audit fees	67,790	49,558
	189,613	74,826

Audit fees relate to the statutory audit. Fees of £56,492 (2024: £41,298), net of VAT, are payable to Deloitte LLP with respect to the current

year. There are no fees payable to the auditors and their associates for services other than the statutory audit (2024: none).

21 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 6.Operating expenses (continued)

The Company has no employees (2024: none). The Directors are employed by other companies within the Group and none of the

Directors received any emoluments from the Company in the current or previous year.

Note 7.Taxation

Note 7.1Analysis of tax (expense)/credit for the year


	2025	2024
	£	£
UK corporation tax
Current tax on taxable (profit)/loss for the year	(99,815)	3,987
Current tax (expense)/credit for the year	(99,815)	3,987

UK Deferred tax
Origination and reversal of timing differences	(3,894)	(3,894)
Deferred tax expense for the year	(3,894)	(3,894)
Total tax (expense)/credit for the year	(103,709)	93

Corporation tax is calculated at a rate of 25% (2024: 25.%) of the taxable loss for the year.

Note 7.2Factors affecting the tax (expense)/credit for the year

A reconciliation of the (expense)/credit that would result from applying the standard UK corporation tax rate to the profit/(loss) before tax

to the actual tax (expense)/credit for the year is given below:


	2025	2024
	£	£

Profit/(loss) before tax	414,834	(374)
Tax (expense)/ credit thereon at UK corporation tax in the UK of 25% (2024: 25%)	(103,709)	93


Current tax (expense)/credit for the year	(103,709)	93


Effective rate	25.00%		25.00%

The Company has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to

Pillar 2 income taxes currently required by IAS12 Income Taxes. No provision for Pillar 2 current tax is required in respect of this period.

Note 8.Cash and cash equivalents


	2025	2024
	£	£

Cash at bank	2,817,114	2,134,740
Bank overdraft	(400)	(340)
Cash and cash equivalents per the Cash flow statement	2,816,714	2,134,400

The Company holds bank accounts with Bank of Scotland plc. The use of the accounts is restricted by a detailed priority of payments set

out in the Programme Documentation. As the cash can only be used to meet certain specific liabilities and is not available to be used with

discretion, it is viewed as restricted cash. The accounts are held in the Company's name and meet the definition of cash and cash

equivalents.

21 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 9.Financial assets held at fair value through profit or loss


	Note	2025	2024
		£	£

At 1 January		48,804,895	56,630,573

Principal mortgage redemptions during the year		(705,987)	(1,238,877)
Fair value adjustment		(1,114,318)	4,826,182
Shared appreciation receivable movements in the year		(6,493,381)	(11,412,983)
	4	(8,313,686)	(7,825,678)

At 31 December		40,491,209	48,804,895

The mortgage loans advanced by the Company have no fixed maturity date but would terminate on the earlier of, the date of sale of the

property, or the death of the mortgage account holder. All mortgage loans are considered to be due after one year as the maturity

cannot be reasonably determined.

As the shared appreciation rights receivable are intrinsically linked to the maturity of the mortgage loans which have no fixed maturity,

the balance is considered to be due after one year.

Note 10.Deferred tax asset


	2025	2024
	£	£

At 1 January	11,680	15,574
Expense for the year	(3,894)	(3,894)
At 31 December	7,786	11,680

The deferred tax expense in the year comprises the following temporary differences:
Other temporary differences	(3,894)	(3,894)

Deferred tax asset comprises:
Other temporary differences	7,786	11,680

At the Balance sheet date, a deferred tax asset of £7,786 (2024: £11,680) has been recognised based on the expectation that the Company

will be able to benefit from group relief with connected parties.

Note 11.Trade and other payables


	2025	2024
	£	£

Shared appreciation payable	937,772	366,000
Note redemption payable	108,775	38,500
Accruals	68,950	605,196
	1,115,497	1,009,696

All amounts are unsecured, non-interest bearing and due within 12 months of the Balance sheet date.

22 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 12.Financial liabilities designated at fair value through profit or loss

This note provides information about the contractual terms of the Company's non interest-bearing loans and borrowings. For more

information about the Company's exposure to interest rate risk and the fair value of its financial instruments, see note 15.


	Note	2025	2024
		£	£

At 1 January		41,029,664	47,713,356

Principal note repayments during the year		(635,712)	(1,257,696)
Fair value adjustment		(1,719,034)	4,358,912
Shared appreciation payable movements in the year		(4,934,674)	(9,784,908)
	4	(7,289,420)	(6,683,692)

At 31 December		33,740,244	41,029,664


	2025	2024
	£	£
Non-current liabilities
Notes	3,760,640	4,479,599
Shared appreciation payable	29,979,604	36,550,065
	33,740,244	41,029,664

At 31 December	33,740,244	41,029,664

The mortgage-backed fixed rate Notes are due to redeem in 2072. The interest rate payable on the Notes up to and including the interest

period ending in the quarter to 31 August 2027 is 0.00% per annum. Thereafter, the interest rate payable on the Notes will be 0.50% per

annum until 2072 when the Notes are due to redeem. At the end of the year the Notes, as rated by S&P, had a rating of A+ (2024: rating of

A+).

The Notes carry, in addition to interest, rights to receive certain amounts calculated by reference to the value of shared appreciation

proceeds received from redeemed mortgages. The Notes are subject to mandatory part-redemption from time to time based on the

level of redeemed mortgages and can be redeemed in full, in certain circumstances, at the option of the Company. The Notes are

secured on the mortgage portfolio, the bank accounts and certain other assets of the Company.

The Company is contractually obliged to pay to the Note holders any amounts received from mortgage customers for the shared

appreciation other than the portion due to the swap holder. As the shared appreciation rights payable are intrinsically linked to the

amounts received following maturity of the mortgage loans which have no fixed maturity, the balance is considered to be non-current.

Note 13.Derivative liability


	2025	2024
	£	£

Notional	6,335,925	7,165,045

Amounts payable to swap provider	6,462,540	7,329,114

The derivative liability represents the element of the shared appreciation rights payable to the swap provider in return for a fixed income

on the outstanding mortgage balance each payment cycle.

In the same way that the Company is contractually obliged to pay any relevant amounts received from mortgage customers for the

shared appreciation receipts to the Note holders, the Company is contractually obliged to pay a proportion of all amounts it receives to

the swap provider as part of the swap agreement.

As the shared appreciation rights payable are intrinsically linked to the amounts received following maturity of the mortgage loans which

have no fixed maturity, the balance is considered to be non-current. The fair value movement in the year is £866,574 (2024: £1,056,411).

23 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 14.Share capital


	2025	2024
	£	£
Allotted, authorised and fully paid
50,000 (2024: 50,000) ordinary shares of £1 each	50,000	50,000

1 (2024: 1) deferred share of £1	1	1

Total share capital	50,001	50,001

The Company is a directly held subsidiary undertaking of Bank of Scotland plc.

The £1 deferred share is held by Deutsche Trustee Company Limited.

The holder of the ordinary shares is entitled to receive dividends as declared by the Company.

The deferred share carries no entitlement to any dividend or to any share in any surplus assets of the Company on a winding-up, other

than the right to be repaid the amount of any paid-up share capital thereon. The right to be repaid any paid-up share capital in the

deferred share shall be deferred until after all paid-up share capital has been first repaid on all other classes of issued share capital in

the Company.

The deferred share carries the right to receive notice of all general meetings of the Company but does not carry the right to attend, speak

or vote at a general meeting unless a resolution is to be proposed abrogating, varying or modifying any of the rights or privileges of the

holder of the deferred share, or for the winding up or administration of the Company under the Insolvency Act 1986, or for the entry by the

Company with any other party into a merger, reconstruction, scheme of arrangement or amalgamation of or affecting the Company, in

any of which cases such holder shall have the right to attend such general meeting and shall be entitled to speak and vote. Whenever

the holder of the deferred share is entitled to vote at a general meeting, such holder shall have one vote and on a poll such number of

votes as is equal to 34.00% of the number of votes attached to all other issued shares of the Company.

Note 15.Management of risk

The principal risks arising from the Company's financial instruments are credit risk, market risk, including other price risk and interest rate

risk, and liquidity risk. Considerable resource is given to maintaining effective controls to manage, measure and mitigate these risks.

Further detailed analysis of the risks facing the Company in relation to its financial instruments is provided below.

The Company's exposure to risk on its financial instruments and the management of such risk is largely determined at the inception of

the securitisation transaction. The Company's activities and the role of each party to the transaction are clearly defined and

documented.


31 December 2025		Carrying value
31 December 2025	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	8		2,817,114
Financial assets held at fair value through profit or loss	9	40,491,209
Bank overdraft	8				400
Trade and other payables	11				1,115,497
Financial liabilities designated at fair value through profit or loss	12			33,740,244
Derivative liability	13			6,462,540

24 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 15.Management of risk (continued)


31 December 2024		Carrying value
31 December 2024	Note	Financial assets		Financial liabilities
		FVTPL	Amortised cost	FVTPL	Amortised cost
Cash and cash equivalents	8		2,134,740
Financial assets held at fair value through profit or loss	9	48,804,895
Bank overdraft	8				340
Trade and other payables	11				1,009,696
Financial liabilities designated at fair value through profit or loss	12			41,029,664
Derivative liability	13			7,329,114

Note 15.1 Credit risk

Credit risk is the risk of financial loss arising from a customer's failure to settle financial obligations as they fall due.’

Credit risk arises on the individual loans within the mortgage portfolio which are in turn secured on the underlying UK residential

properties. The performance of these loans is therefore influenced by the economic background and the UK housing market. Mortgage

loans are no longer offered by the Company but the maximum loan-to-value of the original advances was 25.00% and the credit risk is

considered to be low as the customer is required to pay back principal and share appreciation on sale or death whichever is earlier and

also considerations for interest receipts.

The terms of the mortgage portfolio agreement given by Bank of Scotland plc in respect of the mortgages require Bank of Scotland plc to

repurchase any mortgage which is found to be in breach of warranty. Bank of Scotland plc will repurchase any mortgages that are found

or held not to be valid, binding and enforceable. Although in such an event the total value of the outstanding loan will be covered by Bank

of Scotland plc, the Note holder will not receive the benefit of any future payments of appreciation amounts or partial repayment of

appreciation amounts in respect of the mortgages repurchased.

In terms of the shared appreciation in all other circumstances, in accordance with the Programme Documentation, amounts received by

the Company from the borrower are required to be paid over to both the Note holders and the swap provider, in line with the priority of

payments.

There were no interest arrears at 31 December 2025 (2024: £nil). All accounts in the mortgage portfolio had a maximum loan-to-value of

25.00%. Credit risk is considered to be low. There are no properties in possession or bad debts within the Company (2024: none). The

current loan-to-value is 4.80% (2024: 4.82%).

The maximum exposure to credit risk arising on the Company's financial assets at the reporting date is disclosed in the table below.


	Note	Carrying amount	Maximum exposure	Carrying amount	Maximum exposure
		2025	2025	2024	2024
		£	£	£	£
Assets held at amortised cost:
Cash and cash equivalents	8	2,817,114	2,817,114	2,134,740	2,134,740

Assets held at fair value:
Financial assets held at fair value through profit or loss	9	40,491,209	40,491,209	48,804,895	48,804,895
Total Assets		43,308,323	43,308,323	50,939,635	50,939,635

Note 15.2 Market risk

Market risk is the risk of financial losses to the Company from factors related to the market in which it operates. The Company's market is

the UK residential housing market. The key risks related to this market are other price risk and interest rate risk.

25 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 15.Management of risk (continued)

Note 15.2 Market risk (continued)

Note 15.2.1 Other price risk

Under the terms of the Notes the Company is obliged to pay the Note holders the return on the shared appreciation that has accrued

during the life of the mortgage loan at the rate implicit in the specific mortgage loan agreement as and when repaid by the mortgage

loan customer. Shared appreciation is subject to the movement in the market value of the property which is dependent upon house price

inflation, as measured by the HPI. Further information on the sensitivity around HPI can be found in note 3.2.

However, the Company itself is not impacted by price risk as the risk of returns on the Notes being below initial expectations lies with the

Note holder and there are no guarantees within the terms of the Notes for expected increases in value.

Note 15.2.2 Interest rate risk

Interest rate risk exists where interest rates on assets and liabilities are set on different bases or reset at different times. The Company

minimises its exposure to interest rate risk by aligning the interest rate characteristics of its assets and liabilities wherever possible. When

a complete match is not achievable, the Company uses derivative financial instruments to mitigate any residual interest rate risk. The

Company has a swap agreement to generate income to cover necessary expenses in light of the mortgages bearing a zero coupon;

however, there is no interest rate risk as the swap agreement earns income at a fixed coupon rate. The fair value of the interest rate swap

is reflected in the statement of financial position and the movement in fair value is recognised in the statement of comprehensive

income.

Note 15.3 Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so only at an unacceptably

high cost.

The Company has an unconditional and irrevocable 364-day revolving letter of credit provided by Bank of Scotland plc. The letter of

credit is for a maximum aggregate principal amount of £1,165,000 (2024: £1,165,000) to assist the Company should it not be able to meet its

certain obligations under the Notes. The reliance on this facility is therefore dependent upon the creditworthiness of Bank of Scotland plc,

which currently has a short-term rating from Standard and Poor's (S&P) of A-1 (2024: S&P short-term rating: A-1).

The Company has not drawn on the letter of credit since inception.

The ability of the Company to meet its obligations to repay the Notes is dependent upon the receipt of funds earned on the mortgage

portfolio and the letter of credit issued by Bank of Scotland plc. To the extent that this income does not provide sufficient funds to cover

the interest due on the Notes or the repayment of the Notes, the Note holders have no claim on the assets of Bank of Scotland plc.

For the year ended 31 December 2025, the liquidity table reflects the expected discounted cash payment profile of the Notes, based on

the Company’s current modelling assumptions. These assumptions incorporate mortality rates sourced from industry‑wide datasets and

align the timing of Note repayments with the expected maturity profile of the underlying mortgage loans.

In contrast, for the year ended 31 December 2024, the liquidity table presented the undiscounted contractual cash payments, assuming

the early redemption threshold would be reached by step-up date in August 2027 and the Notes would be settled to avoid the increase in

interest rate from 0% to 0.5% at the step-up date.

The revised 2025 presentation reflects an updated assessment by management of the likely settlement profile of the Notes. Management

has concluded that the early redemption threshold per the Programme Documentation is not expected to be met before the step‑up

date, nor is it expected to be met in the longer term. As a result, management no longer expects the Notes to be settled at the step‑up

date, which had been the assumption in the 2024 liquidity table analysis. Instead, management now considers that the Notes are more

likely to be settled in line with the expected maturity profile of the underlying mortgage loans, which is reflected in the 2025 liquidity table

analysis.

While the Company considers this the most likely outcome at the Balance sheet date and at the date of signing these financial

statements, it will continue to assess whether the early‑redemption threshold has been met on a regular basis.

26 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 15.Management of risk (continued)

Note 15.3 Liquidity risk (continued)


2025	Carrying amount	Contractual repayment value	Not later than one month	Later than one month but not later than three months	Later than three months but not later than one year	Later than one year and not later than five years	Later than five years
	£	£	£	£	£	£	£
Principal
Financial liabilities designated at fair value through profit or loss	33,740,244	33,740,244	-	8,657,310	2,660,915	10,960,113	11,461,906
Derivative liability (swap)	6,462,540	6,470,436	-	1,511,538	420,528	1,773,899	2,764,471
Trade and other payables	1,115,497	1,115,497	–	1,115,497	–	–	–
Bank overdraft	400	400	400	–	–	–	–

Interest
Interest payable to Note holders	-	99,081	–	–	–	47,771	51,310

	41,318,681	41,425,658	400	11,284,345	3,081,443	12,781,783	14,277,687


2024	Carrying amount	Contractual repayment value	Not later than one month	Later than one month but not later than three months	Later than three months but not later than one year	Later than one year and not later than five years	Later than five years
	£	£	£	£	£	£	£

Principal
Financial liabilities designated at fair value through profit or loss	41,029,664	41,029,664	–	–	–	41,029,664	–
Derivative liability (swap)	7,329,114	7,558,495		(24,667)	(75,370)	7,658,532	-
Trade and other payables	1,009,696	1,009,696	–	1,009,696	–	–	–
Bank overdraft	340	340	340	–	–	–	-

Interest
Interest payable to Note holders	—	-	-	–	–	–	-

	49,368,814	49,598,195	340	985,029	(75,370)	48,688,196	-

Note – the repayment of principal and associated shared appreciation is contractually due when the mortgage loan becomes due on

either the date of sale of the property or on the death of the customer.

Note 15.4 Fair values

The financial instruments below are analysed by valuation method. The different levels are defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or

indirectly (that is derived from prices (level 2)).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

27 BOS (SHARED APPRECIATION MORTGAGES) NO. 2 PLC (REGISTERED NUMBER: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 15.Management of risk (continued)

Note 15.4 Fair values (continued)

Financial assets and liabilities carried at fair value


	2025	2024
	£	£
	Level 3	Level 3

Financial assets held at fair value through profit or loss	40,491,209	48,804,895
Financial liabilities designated at fair value through profit or loss	(33,740,244)	(41,029,664)
Derivative liability	(6,462,540)	(7,329,114)

The management discusses the significant inputs to the valuation model on a quarterly basis with a model governance committee,

which review and approves any changes.

The shared appreciation rights receivable and mortgage portfolio as a whole (financial assets at FVTPL), plus the shared appreciation

rights payable and loan notes as a whole (financial liabilities at FVTPL), together with the interest rate swap (derivative liability), are

measured at fair value. The fair value has been calculated by discounting expected cash flows at an appropriate market rate for both an

equivalent lifetime product in the Group, plus a margin for a regular standard variable mortgage product.

In addition, the fair value includes an estimate of future property growth using the Group’s forecast for the risk free rate (OIS), plus margin

that a standard variable rate mortgage earns, less the PRA’s deferment rate to estimate the future property growth, together with an

estimated dilapidation rate which has been determined based upon actual impact to date from previous redemption activity. The fair

value calculation also factors in mortality rates, based on the actual age and gender of the customers, which are used by the Group's

insurance division and sourced from industry-wide metrics. For this reason, in accordance with IFRS 13 Fair value measurement (''IFRS 13''),

the fair value measurement is considered to be Level 3 in the fair value hierarchy.

The fair value also includes the adjustment for any future litigation risk. Please refer to note 3 for further details.

There has been no change in the valuation technique from last year and there has been no transfer between levels during either the

current year or the previous year.

Financial assets and liabilities carried at amortised cost

Cash and cash equivalents and Trade and other payables are recognised at amortised cost. The fair value of these assets and liabilities

is considered to be a close approximation to amortised cost due to the short-term nature of these assets and liabilities.

Note 16Related parties

The Company is a subsidiary undertaking of Bank of Scotland plc and ultimately Lloyds Banking Group plc.

The Company receives bank interest from Bank of Scotland plc on its bank deposits. Bank of Scotland plc administers the mortgage

portfolio on behalf of the Company, for which quarterly service fees are paid. No dividend was paid during the year (2024: £nil).

During the year Bank of Scotland plc agreed settlement, on the Company’s behalf, with those customers who had been party to a claim

issued in the County Court against Bank of Scotland plc and its subsidiaries, including the Company. Further information on the claim and

the settlement can be found in Note 3.1 and Note 17.

During the year the Company undertook the following transactions with companies in the Group:


	Parent	Parent
	2025	2024
	£	£
Statement of comprehensive income
Income
Interest receivable and similar income	105,549	159,627

Expenses
Operating expenses	(26,821)	(17,168)

28 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 16Related parties (continued)



	Parent	Parent
	2025	2024
Balance sheet
Assets
Cash and cash equivalents	2,817,114	2,134,740

Liabilities
Bank overdraft	(400)	(340)

The key management personnel during the year were the Directors, as set out in the Directors’ Report.

Note 17Contingent liabilities

Tax matters

The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased

trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief

claim. The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal

concluded in favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having

reviewed the Tribunal's conclusions and having taken appropriate advice the Group has appealed to the Upper Tier Tax Tribunal, and

does not consider this to be a case where an additional tax liability will ultimately fall due. If the final determination of the matter by the

judicial process is that HMRC's position is correct, management believes that this would result in an increase in the Company's current tax

liabilities of approximately £1,224,000 (including interest). The appeal has been listed for hearing in March 2027, however final conclusion

of the judicial process may not be for several years.

Litigation

During the ordinary course of business the Company is subject to complaints and threatened or actual legal proceedings (including

class or group action claims) brought by, or on behalf of, customers as well as legal and regulatory reviews, challenges, investigations

and enforcement actions.

In those instances where it is concluded that it is more likely than not that a payment will be made, a provision is established to

management's best estimate of the amount required at the relevant balance sheet date. In some cases it will not be possible to form a

view, for example because the facts are unclear or because further time is needed properly to assess the merits of the case, and no

provisions are held in relation to such matters. In these circumstances, specific disclosure in relation to a contingent liability will be made

where material. Following the agreement reached on the last known claim, as discussed further below, the Company is not aware of any

further such matters where it expects the final outcome would have a material adverse effect on its financial position, operations or cash

flows.

The Company continues to receive a number of new pre‑action claims. However, the Directors have concluded that no provision is

required for these claims in the Company’s financial statements at this time. In reaching this conclusion, the Directors noted that Bank of

Scotland plc bore the costs of the previous settlement and, having considered the contractual arrangements between Bank of Scotland

plc and the Company, expect that Bank of Scotland plc would meet any associated costs or liabilities (if any) arising from any future

claims. No reimbursement will be made by the Company to Bank of Scotland plc for such costs or liabilities.

Note 18Events after the Balance sheet date

There are no events after the Balance sheet date requiring disclosure in these financial statements.

Note 19Future accounting pronouncements

There are a number of new accounting pronouncements issued by the IASB with an effective date of 1 January 2027, including IFRS 18

Presentation and Disclosure in Financial Statements which replaces IAS 1 Presentation of Financial Statements. While many of the existing

requirements of IAS 1 Presentation of Financial Statements are retained, IFRS 18 Presentation and Disclosure in Financial Statements

introduces additional disclosure obligations in relation to the structure of the income statement, management-defined performance

measures, and the aggregation and disaggregation of financial information. IFRS 18 will have no impact on the Company’s net profit as it

impacts neither recognition nor measurement. The new standard will impact the presentation of the Company’s results as it requires that

operating, investing and financing activities are presented separately. There will also be a change in the Group’s cash flow statement as

IFRS 18 requires that the first line of the cash flow statement is operating profit rather than profit before tax.

29 BOS (Shared Appreciation Mortgages) No.2 plc (Registered number: 03149607)

Notes to the financial statements (continued)

For the year ended 31 December 2025

Note 19Future accounting pronouncements (continued)

IFRS 19 Subsidiaries without Public Accountability: Disclosures is being assessed and is not expected to have a significant impact on the

Company. IFRS 19 has yet to be endorsed for use in the UK.

The IASB has issued its annual improvements and a number of amendments to the IFRS Accounting Standards effective 1 January 2026,

including Amendments to IFRS 9 Financial Instruments and Amendments to IFRS 7 Financial Instruments Disclosures. These improvements

and amendments are not expected to have a significant impact on the Company.

Note 20Parent undertaking and controlling party

The Company’s immediate parent company is Bank of Scotland plc (incorporated in Scotland).

The Company regarded by the Directors as the Ultimate parent company and controlling party is Lloyds Banking Group plc, which is also

the parent undertaking of the largest group of undertakings for which group financial statements are drawn up. The registered office of

Lloyds Banking Group plc is The Mound, Edinburgh, EH1 1YZ.

Bank of Scotland plc is the parent undertaking of the smallest such group of undertakings to consolidate these financial statements. The

registered office of Bank of Scotland plc is The Mound, Edinburgh, EH1 1YZ.

Copies of the consolidated financial statements for both companies may be obtained from Group Secretariat, Lloyds Banking Group plc,

33 Old Broad Street, London EC2N 1HZ or downloaded via www.lloydsbankinggroup.com.