BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC Annual report and accounts 2025 Member of Lloyds Banking Group 1  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Strategic report For the year ended 31 December 2025 The Directors present their Strategic report for BOS (Shared Appreciation Mortgages) No. 3 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 1998 the Company issued £46,560,000 fixed rate notes on the London Stock Exchange  (the ''Notes''). The interest payable on the Notes is set at 4.50% per annum until February 2028. Thereafter, the interest rate applicable to the Notes will be 5.50% per annum until 2073 when the Notes become due. The Notes are secured on the mortgage portfolio. 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 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. 3 plc (the ''Programme Documentation''). The Company is required to pay its entire share of the capital appreciation received from the borrowers to the Note holders 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 1998. The loss for the financial year amounted to £28,931 (2024: profit £118,242). Total equity at 31 December 2025 amounted to £3,144,130 (2024: £3,173,061). The Company has recognised a small loss during the year, compared to a profit in the prior year. This can principally be attributed to reduced net interest income of £70,354 (2024: £265,726), increased net fair value losses of £83,437 (2024: losses of £31,300), and increased operating expenses of £113,594 (2024: £76,920). 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 and the Notes, 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). These factors did not have any significant bearing on the Company's arrears levels (see note 15.1). 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. 3 PLC (REGISTERED NUMBER: 03331871) 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 for the fair value movement is in note 5 and details for the redemptions are in note 10. 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 (£) | (2,404,032) | 508,639 | The fair value loss in the current year, in contrast to the smaller 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 (£) | (2,218,474) | (1,385,931) | Increase in redemptions from 2024 is in line with the expectations as the average age of the customer increases year on year, which in turn increases mortality rates of customers and redemption activity. 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 1998 and there is no intention to issue new business in the future. Cash will continue to be received from mortgages redemptions and interest income generated from the mortgage portfolio. 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. 3 PLC (REGISTERED NUMBER: 03331871) 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 fixed-rate of interest and are interest-only products until the full loan becomes due on the earlier of death of the customer or the sale of the property. 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, interest-bearing loan notes with an embedded derivative (Financial liabilities designated at fair value through profit or loss (''Financial liabilities at FVTPL'')) 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 75.00% and with the mortgage portfolio having a weighted average current loan-to-value of 16.20% at 31 December 2025  (2024: 15.95%), 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 monthly interest is considered a low credit risk as it is a short term receivable. 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. Interest rate risk Interest rate risk exists where assets and liabilities have interest rates set under a different basis or which reset at a different time. The Company minimises its exposure to interest rate risk by ensuring that the interest rate characteristics of assets and liabilities are similar. 4  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Strategic report (continued) For the year ended 31 December 2025 Principal risks and uncertainties (continued) 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 Company holds a reserve account of £1,401,561 to assist the Company should it not be able to meet its obligations. The reliance on this facility is therefore dependent upon the creditworthiness of Bank of Scotland plc. The rating requirement under the Programme Documentation for the Reserve Account to remain with Bank of Scotland plc is a short term rating with Standard and Poor's (S&P) of A-1 (2024: S&P short-term rating: A-1). The Company has not drawn on this facility since inception. The extent to which the Company can meet its obligations to pay interest and ultimately repay the Notes will be 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 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 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. 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 the 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. 5  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Strategic report (continued) For the year ended 31 December 2025 Section 172(1) of the Companies Act 2006 (continued) 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 page 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. 3 PLC (REGISTERED NUMBER: 03331871) 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: 03331871). 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 reporting 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. 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. 7  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Directors' report (continued) For the year ended 31 December 2025 Streamlined energy and carbon reporting (“SECR”) (continued) 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) Zack Ellis(appointed 22 May 2025) Tanya Marie Foxe(resigned 11 June 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 the Directors 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. 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 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. The Directors are responsible for the maintenance and integrity of the corporate and financial information of the Company included on the parent company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors’ confirmations Each of the Directors, as listed in the Directors’ report, confirm that, to the best of their knowledge: •  the Company’s financial statements, which have been prepared in accordance with United Kingdom adopted international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and •  the Strategic report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. 8  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 report is approved: • so far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware; and • the Directors have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. Deloitte LLP are 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. 3 PLC (REGISTERED NUMBER: 03331871) Statement of comprehensive income For the year ended 31 December 2025 | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Note | 2025 | | 2024 | | | | £ | | £ | | | | | | | | Interest receivable and similar income | | 110,069 | | 128,137 | | Net interest (expense)/income on financial assets and liabilities at fair value through profit or loss | 4 | (39,715) | | 137,589 | | Net interest income | | 70,354 | | 265,726 | | | | | | | | Net fair value movements on financial assets at fair value through profit or loss | 5 | (4,622,506) | | (877,292) | | Net fair value movements on financial liabilities at fair value through profit or loss | 5 | 4,539,069 | | 845,992 | | Other operating income | 6 | 88,103 | | 150 | | Operating expenses | 7 | (113,594) | | (76,920) | | (Loss) / profit before tax | | (38,574) | | 157,656 | | Taxation | 8 | 9,643 | | (39,414) | | (Loss) / profit for the financial year, being total comprehensive (expense) / income | | (28,931) | | 118,242 | 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. 3 PLC (REGISTERED NUMBER: 03331871) Balance sheet As at 31 December 2025 | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Note | 2025 | | 2024 | | | | £ | | £ | | Assets | | | | | | Cash and cash equivalents | 9 | 2,585,475 | | 2,431,201 | | Trade and other receivables | | - | | 19,674 | | Financial assets held at fair value through profit or loss | 10 | 16,673,638 | | 21,296,144 | | Total assets | | 19,259,113 | | 23,747,019 | | | | | | | | Liabilities | | | | | | Bank overdraft | 9 | 551 | | 801 | | Trade and other payables | 11 | 183,521 | | 39,049 | | Financial liabilities designated at fair value through profit or loss | 12 | 15,895,339 | | 20,434,408 | | Deferred tax liability | 13 | 30,144 | | 45,215 | | Current tax liability | | 5,428 | | 54,485 | | Total liabilities | | 16,114,983 | | 20,573,958 | | | | | | | | Equity | | | | | | Share capital | 14 | 50,001 | | 50,001 | | Retained earnings | | 3,094,129 | | 3,123,060 | | Total equity | | 3,144,130 | | 3,173,061 | | Total liabilities and equity | | 19,259,113 | | 23,747,019 | 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. 3 PLC (REGISTERED NUMBER: 03331871) 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 | | 3,123,060 | | 3,173,061 | | Loss for the year, being total comprehensive expense | – | | (28,931) | | (28,931) | | Balance at 31 December 2025 | 50,001 | | 3,094,129 | | 3,144,130 | | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | Share capital | | Retained earnings | | Total equity | | | £ | | £ | | £ | | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | Balance at 1 January 2024 | 50,001 | | 3,004,818 | | 3,054,819 | | Profit for the year, being total comprehensive income | – | | 118,242 | | 118,242 | | Balance at 31 December 2024 | 50,001 | | 3,123,060 | | 3,173,061 | The accompanying notes are an integral part of the financial statements. 12  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Cash flow statement For the year ended 31 December 2025 | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | 2025 | | 2024 | | | Note | £ | | £ | | | | | | | | Cash flows from operating activities | | | | | | Profit before tax | | (38,574) | | 157,656 | | | | | | | | Adjustments for: | | | | | | Interest receivable and similar income | | (110,069) | | (128,137) | | Net interest income on financial assets at fair value through profit or loss | 4 | 39,715 | | (137,589) | | Net fair value movements on financial assets at fair value through profit or loss | 10 | 2,404,032 | | (508,639) | | Net fair value movements on financial liabilities at fair value through profit or loss | 12 | (2,437,090) | | 541,672 | | | | (141,986) | | (75,037) | | Changes in operating assets and liabilities: | | | | | | Net decrease / (increase) in Trade and other receivables | | 19,674 | | (19,674) | | Net increase / (decrease) in Trade and other payables | | 144,473 | | (577,008) | | Cash generated from / (used in) operations | | 22,161 | | (671,719) | | Tax paid | | (54,485) | | (44,230) | | Net cash flows used in operating activities | | (32,324) | | (715,949) | | | | | | | | Cash flows from investing activities | | | | | | Repayments on mortgage portfolio | 10 | 575,876 | | 434,680 | | Income earned on mortgage portfolio | 4 | 285,105 | | 485,568 | | Shared appreciation rights received | 10 | 1,642,598 | | 951,251 | | Bank interest received | | 110,069 | | 126,404 | | Net cash flows generated from investing activities | | 2,613,648 | | 1,997,903 | | | | | | | | Cash flows from financing activities | | | | | | Repayment of borrowings | 12 | (544,752) | | (434,680) | | Interest paid on borrowings | | (326,944) | | (347,979) | | Shared appreciation rights paid to Note holders | 12 | (1,555,104) | | (951,251) | | Net cash flows used in financing activities | | (2,426,800) | | (1,733,910) | | | | | | | | Net increase / (decrease) in Cash and cash equivalents | | 154,524 | | (451,956) | | Cash and cash equivalents at start of year | | 2,430,400 | | 2,882,356 | | Cash and cash equivalents at end of year | | 2,584,924 | | 2,430,400 | | | | | | | | Cash and cash equivalents per the Cash flow statement comprise: | | | | | | Cash at bank | | 2,585,475 | | 2,431,201 | | Bank overdraft | | (551) | | (801) | | Cash and cash equivalents | 9 | 2,584,924 | | 2,430,400 | 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. 3 PLC (REGISTERED NUMBER: 03331871) 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 pronouncements is relevant to the Company and have been adopted within these financial statements. However, the adoption of these pronouncements 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 the terms of the mortgage portfolio agreement (a reserve account held by the company), 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 £3,144,130 (2024: £3,173,061). • 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 Company has met the early redemption threshold of 20% outstanding loan notes. 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 and interest payable 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 2.2  Fees 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, interest- bearing loan notes with an embedded derivative and various other receivables and payables that arise directly from its operations. 14  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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. 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  Interest-bearing loan notes The Company’s interest-bearing loan notes comprise mortgage-backed fixed rate notes (the “Notes”) that have been issued in the UK market. The Notes are considered a lifetime liability with a legal maturity of 2073, 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. 15  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 2  Material accounting policies (continued) Note 2.4Taxation (continued) 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 IAS12 Income Taxes. Note 2.5  Capital 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. Note 3.1  Critical 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 repayment period for such customers. A judgement is made in respect of the timing of expected future cashflows. Refer to note 3.2 below. Note 3.2  Key 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. 16  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 3.2  Key sources of estimation uncertainty and judgements (continued) Fair value of financial assets and financial liabilities (continued) 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, and 2.3.3. 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. There are no other derivative financial instruments. 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. Impact of valuation model 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 | 16,673,638 | | 20,578,673 | | (3,905,035) | | (19.0) | | Financial liabilities designated at fair value through profit or loss | (15,895,339) | | (19,753,133) | | 3,857,794 | | (19.5) | | | | | | | | | | | | 778,299 | | 825,540 | | (47,241) | | (5.7) | | | | | | | | | | | As at 31 December 2024 | | | | | | | | | | £ | | £ | | £ | | % | | | | | | | | | | | Financial assets held at fair value through profit or loss | 18,710,224 | | 21,296,144 | | (2,585,920) | | (12.1) | | Financial liabilities designated at fair value through profit or loss | (17,877,664) | | (20,434,408) | | 2,556,744 | | (12.5) | | | 832,560 | | 861,736 | | (29,176) | | (3.4) | | | | | | | | | | 17  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 3.2  Key sources of estimation uncertainty and judgements (continued) Fair value of financial assets and financial liabilities (continued) 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 | 180,065 | | (180,065) | | 248,853 | | (248,853) | | Financial liabilities designated at fair value through profit or loss | (180,065) | | 180,065 | | (248,853) | | 248,853 | 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. 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 | 1,363,110 | | (1,161,329) | | 1,327,062 | | (1,222,555) | | Financial liabilities designated at fair value through profit or loss | (1,363,110) | | 1,161,329 | | (1,327,062) | | 1,222,555 | 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%. The Bank of England base rate was 3.75% at 31 December 2025 and the Group’s forecast had rates ranging from between 4.75% to 3.50%.  The discount rate used in the valuation, including the margin, ranges 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 | 1,792,965 | | (1,532,260) | | 1,466,707 | | (1,336,991) | | Financial liabilities designated at fair value through profit or loss | (1,742,834) | | 1,487,673 | | (1,423,461) | | 1,296,942 | 18  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 3.2  Key sources of estimation uncertainty and judgements (continued) Fair value of financial assets and financial liabilities (continued) 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 | 266,615 | | (285,325) | | 261,152 | | (272,137) | | Financial liabilities designated at fair value through profit or loss | (272,507) | | 292,169 | | (268,252) | | 279,121 | 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 | 48,100 | | (48,100) | | 65,892 | | (65,892) | | Financial liabilities designated at fair value through profit or loss | (48,100) | | 48,100 | | (65,892) | | 65,892 | Customer repayment period As part of the changes to the model methodology in the current year, as previously discussed, 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. 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 | | | | | 282,019 | | (277,747) | | Financial liabilities designated at fair value through profit or loss | | | | | (277,283) | | 273,076 | Judgement applied to the timing of recoveries 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. 19  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 3.2  Key sources of estimation uncertainty and judgements (continued) Fair value of financial assets and financial liabilities (continued) Judgement applied to the timing of recoveries for deceased customers (continued) 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 £55,446 and decrease the fair value of the loan notes in issue by £54,186. 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 £58,162 and increase the fair value of the loan notes in issue by £56,840. 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. 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 £16,673,638 at 31 December 2025 (2024: £21,296,144). 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 £15,895,339 at 31 December 2025 (2024: £20,434,408). This assessment has had £nil impact on the Company’s result for either the current year or the previous year. Note 4  Net interest (expense)/income on financial assets and liabilities at fair value through profit or loss | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | Interest receivable on Financial assets at FVTPL | 285,106 | | 485,568 | | Interest payable on Financial liabilities FVTPL | (324,821) | | (347,979) | | | (39,715) | | 137,589 | Note 5  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 | (4,622,506) | | (877,292) | | Fair value movement on Financial liabilities at FVTPL | 4,539,069 | | 845,992 | | | (83,437) | | (31,300) | Included in the above fair value movement is a decrease of £2,404,032 (2024: increase of £508,639) towards the financial assets held at fair value through profit or loss and a decrease of £2,437,090 (2024: increase of £541,672) towards the financial liabilities held at fair value through profit or loss is attributable to the change in unrealised gains or losses for those financial assets and financial liabilities held at fair value through profit or loss. 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 settlement lag 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. 20  BOS (SHARED APPRECIATION MORTGAGES) NO. 3  PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 6  Other operating income | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | Release of accrued liabilities | 87,803 | | — | | Fee income | 300 | | 150 | | | 88,103 | | 150 | Note 7  Operating expenses | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | Intercompany fees | 18,525 | | 15,688 | | Administration fees | 30,725 | | 24,544 | | Audit fees | 64,344 | | 36,688 | | | 113,594 | | 76,920 | Audit fees relate to the statutory audit. Fees of £53,620 (2024: £30,573), 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). 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 8  Taxation 8.1  Analysis of tax credit/(expense) for the year | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | UK corporation tax | | | | | Current tax on taxable profit for the year | (5,428) | | (54,485) | | Current tax expense for the year | (5,428) | | (54,485) | | | | | | | UK Deferred tax | | | | | Origination and reversal of timing differences | 15,071 | | 15,071 | | Deferred tax credit for the year | 15,071 | | 15,071 | | Total tax credit/(expense) for the year | 9,643 | | (39,414) | Corporation tax is calculated at a rate of 25% (2024: 25%) of the taxable profit for the year. 8.2  Factors affecting the tax credit/(expense) for the year A reconciliation of the credit/(expense) that would result from applying the standard UK corporation tax rate to the (loss)/profit before tax to the actual tax credit/(expense) for the year is given below: | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | (Loss) / profit before tax | (38,574) | | 157,656 | | Tax credit/(expense) thereon at UK corporation tax rate of 25.00% (2024: 25.00%) | 9,643 | | (39,414) | | Tax credit/(expense) on profit on ordinary activities | 9,643 | | (39,414) | | Effective rate | 25.00 % | | 25.00 % | 21  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 8  Taxation (continued) 8.2  Factors affecting the tax credit/(expense) for the year (continued) 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 9  Cash and cash equivalents | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | Cash at bank | 2,585,475 | | 2,431,201 | | Bank overdraft | (551) | | (801) | | Cash and cash equivalents per the Cash flow statement | 2,584,924 | | 2,430,400 | 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. Included in this balance is reserve account of £1,401,561. Note 10  Financial assets held at fair value through profit or loss | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Note | 2025 | | 2024 | | | | £ | | £ | | | | | | | | At 1 January | | 21,296,144 | | 22,173,436 | | Principal mortgage redemptions during the year | | (575,876) | | (434,680) | | Fair value adjustment | | (2,404,032) | | 508,639 | | Shared appreciation receivable movements in the year | | (1,642,598) | | (951,251) | | | 5 | (4,622,506) | | (877,292) | | At 31 December | | 16,673,638 | | 21,296,144 | 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 11  Trade and other payables | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | Shared appreciation payable | 87,494 | | — | | Note redemption payable | 31,124 | | — | | Accruals | 64,903 | | 39,049 | | | | | | | | 183,521 | | 39,049 | All amounts are due within 12 months of the Balance sheet date. 22  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 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 | | 20,434,408 | | 21,280,400 | | Accrued interest | | (2,123) | | (1,733) | | Principal note repayments during the year | | (544,752) | | (434,680) | | Fair value adjustment | | (2,437,090) | | 541,672 | | Shared appreciation payable movements in the year | | (1,555,104) | | (951,251) | | | 5 | (4,539,069) | | (845,992) | | | | | | | | At 31 December | | 15,895,339 | | 20,434,408 | | | | | | | | --- | --- | --- | --- | --- | | | | | | | | | | 2025 | | 2024 | | | | £ | | £ | | Non-current liabilities | | | | | | Notes | | 5,367,923 | | 6,369,760 | | Shared appreciation payable | | 10,501,234 | | 14,036,342 | | | | 15,869,157 | | 20,406,102 | | Current liabilities | | | | | | Interest payable to Note holders | | 26,182 | | 28,306 | | | | | | | | At 31 December | | 15,895,339 | | 20,434,408 | The mortgage-backed fixed rate Notes are due to redeem in 2073. The interest rate payable on the Notes up to and including the interest period ending in the quarter to 28 February 2028 is 4.50% per annum. Thereafter, the interest rate payable on the Notes will be 5.50% per annum until 2073 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. 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. 23  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 13  Deferred tax liability | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | | | | | At 1 January | (45,215) | | (60,286) | | Credit for the year | 15,071 | | 15,071 | | At 31 December | (30,144) | | (45,215) | | The deferred tax credit in the year comprises the following temporary differences: | | | | | Other temporary differences | 15,071 | | 15,071 | | Deferred tax liability comprises: | | | | | Other temporary differences | (30,144) | | (45,215) | 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 on the next page. 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. 24  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 15  Management of risk (continued) | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | 31 December 2025 | | Carrying value | | | | | | | Note | Financial assets | | | Financial liabilities | | | | | | FVTPL | Amortised cost | | FVTPL | Amortised cost | | | Cash and cash equivalents | 9 | | 2,585,475 | | | | | | Financial assets held at fair value through profit or loss | 10 | 16,673,638 | | | | | | | Bank overdraft | 9 | | | | | 551 | | | Trade and other payables | 11 | | | | | 183,521 | | | Financial liabilities designated at fair value through profit or loss | 12 | | | | 15,895,339 | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | 31 December 2024 | | Carrying value | | | | | | | Note | Financial assets | | | Financial liabilities | | | | | | FVTPL | Amortised cost | | FVTPL | Amortised cost | | | Cash and cash equivalents | 9 | | 2,431,201 | | | | | | Financial assets held at fair value through profit or loss | 10 | 21,296,144 | | | | | | | Bank overdraft | 9 | | | | | 801 | | | Trade and other payables | 11 | | | | | 39,049 | | | Financial liabilities designated at fair value through profit or loss | 12 | | | | 20,434,408 | | | 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 75.00% 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 the Note holders in line with the priority of payments. In terms of arrears management, the Company has engaged Bank of Scotland plc as servicer of the loans in the portfolio to help reduce the risk of loss. The servicer is required to monitor repayments on the mortgage loans in accordance with its usual credit policies. The total value of interest arrears at 31 December 2025 was £152,702 (2024: £146,667). All accounts in the mortgage portfolio had a maximum loan-to-value of 75.00% and those accounts in interest arrears had a current loan-to-value ratio of less than 40.00%. 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 16.20% (2024: 15.95%). 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 | 9 | 2,585,475 | | 2,585,475 | | 2,431,201 | | 2,431,201 | | | | | | | | | | | | Assets held at fair value: | | | | | | | | | | Financial assets held at fair value through profit or loss | 10 | 16,673,638 | | 16,673,638 | | 21,296,144 | | 21,296,144 | | Total Assets | | 19,259,113 | | 19,259,113 | | 23,727,345 | | 23,727,345 | 25  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 15  Management of risk (continued) 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. 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 assets and liabilities have interest rates set under a different basis or which reset at a different time. The Company minimises its exposure to interest rate risk by ensuring that the interest rate characteristics of assets and liabilities are similar. Both the mortgage portfolio and the Notes issued by the Company are exposed to fair value interest rate risk as they carry fixed interest rates. 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 holds a reserve account of £1,401,561 to assist the Company should it not be able to meet its obligations. The reliance on this facility is therefore dependent upon the creditworthiness of Bank of Scotland plc. The rating requirement under the Programme Documentation for the Reserve Account to remain with Bank of Scotland plc is a short term rating with Standard and Poor's (S&P) of A-1 (2024: S&P short-term rating: A-1). The Company has not drawn on this facility 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 structure continued to the earliest possible contractual maturity date set out in the Programme Documentation. The revised presentation for 2025 reflects a change in management’s view of the likely settlement profile of the Notes. This is because the option underwritten in the Programme Documentation has been met around the early redemption threshold of 20% outstanding loan notes and the interest step‑up date is approaching in February 2028. During the year, the Company undertook an assessment of the risks and rewards associated with an early settlement of the Notes ahead of the interest rate step‑up. Following this assessment, the Company now considers that continuing to allow the Notes to amortise in line with the expected mortgage repayments, rather than assuming settlement at the earliest contractual maturity date, represents the most realistic expectation of future cash flows at the Balance sheet date and at the date of signing the financial statements. Management will continue to review this position regularly up to the step‑up date, taking into account market conditions and the cost‑benefit of early settlement. This ongoing assessment will determine whether it is preferable to redeem the Notes at the earliest contractual maturity date or to retain them and incur the higher post‑step‑up interest rate in August 2027, as permitted under the Programme Documentation. 26  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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 | 15,869,157 | | 15,869,157 | | – | | 2,109,717 | | 714,709 | | 3,392,807 | | 9,651,924 | | Trade and other payables | 183,521 | | 183,521 | | - | | 183,521 | | – | | – | | – | | Bank overdraft | 551 | | 551 | | 551 | | – | | – | | – | | – | | Interest payable | | | | | | | | | | | | | | | Interest payable to Note holders | 26,182 | | 2,283,193 | | – | | 69,061 | | 195,217 | | 897,336 | | 1,121,579 | | | 16,079,411 | | 18,336,423 | | 551 | | 2,362,299 | | 909,926 | | 4,290,143 | | 10,773,503 | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | | | | | | 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 | 20,406,102 | | 20,406,102 | | – | | – | | – | | 20,406,102 | | - | | Trade and other payables | 39,049 | | 39,049 | | - | | 39,049 | | – | | – | | – | | Bank overdraft | 801 | | 801 | | 801 | | – | | – | | – | | – | | Interest payable | | | | | | | | | | | | | | | Interest payable to Note holders | 28,306 | | 1,084,957 | | – | | 82,176 | | 251,095 | | 751,686 | | - | | | 20,474,258 | | 21,530,909 | | 801 | | 121,225 | | 251,095 | | 21,157,788 | | - | 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). Financial assets and liabilities carried at fair value. | | | | | | --- | --- | --- | --- | | | | | | | | 2025 | | 2024 | | | £ | | £ | | | Level 3 | | Level 3 | | | | | | | Financial assets held at fair value through profit or loss | 16,673,638 | | 21,296,144 | | Financial liabilities designated at fair value through profit or loss | (15,895,339) | | (20,434,408) | 27  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) 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) The management discusses the significant inputs to the valuation model on 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), are both measured at fair value. The fair value has been calculated by discounting expected cash flows at an appropriate market rate 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 rate, 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 16  Related 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 | 110,069 | | 128,137 | | | | | | | Expenses | | | | | Operating expenses | (18,525) | | (15,688) | | | | | | | | | | | | --- | --- | --- | --- | | | | | | | | Parent | | Parent | | | 2025 | | 2024 | | Balance sheet | £ | | £ | | Assets | | | | | Cash and cash equivalents | 2,585,475 | | 2,431,201 | | | | | | | Liabilities | | | | | Bank overdraft | (551) | | (801) | The key management personnel during the year were the Directors, as set out in the Directors’ Report. 28  BOS (SHARED APPRECIATION MORTGAGES) NO. 3 PLC (REGISTERED NUMBER: 03331871) Notes to the financial statements (continued) For the year ended 31 December 2025 Note 17  Contingent 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 £143,000 (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 18  Events after the Balance sheet date There are no events after the Balance sheet date requiring disclosure in these financial statements. Note 19  Future accounting developments 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. 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 20  Ultimate parent undertaking 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.